Opinion
NOT TO BE PUBLISHED
San Francisco City & County Super. Ct. No. CGC-07-463981.
RUVOLO, P. J.
I.
Introduction
Nam Chung Cho, Kyung Chae Park and Chu Hyuk Yoon appeal from the trial court’s order granting Thornton, Taylor, Becker & Shinn’s special motion to strike under Code of Civil Procedure section 425.16, the anti-SLAPP (strategic lawsuit against public participation) statute. We affirm.
Statutory references are to the Code of Civil Procedure unless otherwise indicated. Section 425.16 provides, “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).)
II.
Facts and Procedural History
Thornton, Taylor, Becker & Shinn (the Thornton law firm) brought the underlying lawsuit on behalf of Sure Building Products, Inc.; Delta Building Products, Ltd.; and Omega Roof, Inc. (plaintiff companies) against TCC Steel, a Korean steel manufacturer; Dongyang America Corporation, its United States subsidiary; and numerous individual corporate agents, arising from the sale of allegedly defective steel products. (Sure Building Products, Inc. et al. v. TCC Steel et al. (Super. Ct. S.F. City and County, 2006, No. CGC 06-451766).) The case centered on a roofing product manufactured by TCC Steel called Suscop, which was made of stainless steel plated with copper. Suscop was marketed to plaintiff companies as offering the attractiveness of copper combined with the lightweight strength and durability of steel, with “strong anti-corrosive” qualities. However, less than two years after installation, significant defects in the product were reported. The copper veneer corroded away in a fraction of the warrantied period, exposing the underlying stainless steel substrate. Far more serious, salt and moisture combined to cause a chemical reaction between the two metals that lead to perforation through the stainless steel.
On May 22, 2009, the plaintiff companies filed a motion to augment the record on appeal to include documents filed in this case. (See Cal. Rules of Court, rule 8.155(a)(1).) No opposition to this motion was filed. On June 16, 2009, we granted plaintiff companies’ motion to augment “[w]ithout any determination of relevance.” (Ruvolo, P. J.) We now find these documents relevant to the issues before us on appeal.
The plaintiff companies that had purchased and distributed Suscop alleged numerous causes of action against TCC Steel, the main defendant in the action, and the other defendants, including product liability, breach of warranty, intentional misrepresentation, suppression of fact, and negligent misrepresentation. Among the various individuals named as defendants were TCC Steel corporate officers Nam Chung Cho, Kyung Chae Park and Chu Hyuk Yoon (individual defendants). At all relevant times the individual defendants held high-level positions at TCC Steel; Nam Chung Cho was the executive managing director, Kyung Chae Park was the vice chairman, and Chu Hyuk Yoon was the executive vice president.
The individual defendants were part of the team for TCC Steel involved in negotiating and selling Suscop to the plaintiff companies. The plaintiff companies alleged that the individual defendants could be held personally liable under an alter ego theory, claiming there was such a unity of interest between TCC Steel and the individual defendants “such that the separate personalities of the corporation and the individuals no longer exist....” It was alleged that the individual defendants respected virtually no corporate formalities in the operation of TCC Steel and that the individual defendants exercised complete management and control of TCC Steel for their own benefit, commingling TCC Steel assets with their own, including using TCC Steel assets to buy themselves houses. It was further alleged that the individual defendants “... failed to reveal and suppressed the fact that SUSCOP had defects” in order to induce plaintiff companies to purchase Suscop.
The individual defendants brought a series of demurrers claiming, among other things, that “[e]ach of the causes of action fails to allege facts establishing that recognition of the separate corporate entity defendant (TCC STEEL) as the liable party would sanction a fraud or promote injustice.” Moreover, the individual defendants claimed there were no facts alleged that they participated in any of TCC Steel’s alleged wrongdoing. Thereafter, the original complaint went through numerous amendments, in part, as a response to the court’s repeated sustaining of demurrers and motions to strike with leave to amend. On March 13, 2007, the court sustained a demurrer and motion to strike with leave to amend as to all causes of action asserted against the individual defendants.
After the court’s ruling, the plaintiff companies purposefully omitted the individual defendants from the fourth and fifth amended complaints. Subsequently, plaintiff companies sought leave to rename and reallege causes of action for fraud and misrepresentation against the individual defendants in their fifth amended complaint. The trial court denied this request, and dismissed the individual defendants from the underlying action with prejudice. The case proceeded to a jury trial against TCC Steel and the other named defendants resulting in a judgment for plaintiff companies.
Plaintiff companies claim the individual defendants were dropped from the action in an effort to “simplify the litigation” by reducing the number of individual defendants in the case. The individual defendants claim they were dropped from the action because plaintiff companies realized they would be unable to prove a case against them. We do not weigh in on this dispute because it is irrelevant to the ultimate resolution of this appeal.
On June 5, 2007, the individual defendants filed a malicious prosecution complaint naming plaintiff companies as defendants. In conducting discovery for their malicious prosecution action, the individual defendants claimed that they “concluded that the attorneys representing the Underlying Plaintiffs... named TCC[] [Steel]’s individual corporate officers without having any factual basis for their allegations.” Consequently, on June 2, 2008, the individual defendants added the Thornton law firm as a defendant to their malicious prosecution action.
The Thornton law firm filed a special motion to strike under section 425.16, claiming the individual defendants’ malicious prosecution action against it was a SLAPP suit “in the purest form.” It was claimed that the pursuit of the underlying causes of action against the individual defendants, on behalf of the Thornton law firm’s clients, was a protected activity. It was further claimed that the individual defendants could not demonstrate a probability they would prevail on the merits of their malicious prosecution action. The individual defendants opposed the anti-SLAPP motion, asserting they could establish the elements of malicious prosecution because the Thornton law firm “frivolously named them [as individual defendants] without any basis for their claims, for the sole purpose of trying to gain settlement leverage against TCC [Steel].”
On December 29, 2008, the trial court granted the Thornton law firm’s special motion to strike, finding the individual defendants failed to demonstrate a probability that they would prove the Thornton law firm acted with malice in filing and prosecuting the complaint against them––an essential element in proving their malicious prosecution action. The individual defendants filed a timely notice of appeal. (§ 425.16, subd. (i).)
III.
Discussion
A. Overview of the Anti-SLAPP Statute
The anti-SLAPP statute is aimed at curbing “lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” (§ 425.16, subd. (a).) Protection is extended to “any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law,” and to any “conduct in furtherance of the exercise of the constitutional right of petition....” (§ 425.16, subd. (e)(2), (4).) The Legislature commands that the provisions of the anti-SLAPP statute “be construed broadly.” (§ 425.16, subd. (a); Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735 (Jarrow Formulas).)
In ruling on a defendant’s special motion to strike under section 425.16, the trial court engages in a two-step process. “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute. (§ 425.16, subd. (b)(1).)” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon Enterprises).)
Once the defendant establishes the anti-SLAPP statute applies, the burden shifts to the plaintiff to demonstrate “a probability of prevailing on the claim.” (Equilon Enterprises, supra, 29 Cal.4th at p. 67.) “[T]he plaintiff ‘must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.’ [Citations.] In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant [citation]; though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. [Citation.]” (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821, original italics (Wilson).)
The trial court’s ruling on a motion under section 425.16 is subject to our independent, de novo review. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 (Soukup); Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1245.)
On appeal, the individual defendants point out several instances where they claim the trial court applied an “incorrect standard” or where the trial court’s reasoning “was flawed.” However, as individual defendants admit, we do not review the trial court’s decision for an abuse of discretion, but consider the matter de novo. Consequently, these arguments have no bearing on whether or not the anti-SLAPP motion was properly granted.
B. The Malicious Prosecution Cause of Action Falls Within the Purview of the Anti-SLAPP Statute
The individual defendants’ malicious prosecution action against the Thornton law firm arises from the filing and prosecution of the underlying lawsuit in which they were named as defendants. The filing and prosecution of a lawsuit are acts in furtherance of a person’s right of petition or free speech and, therefore, constitute protected activity under the anti-SLAPP statute. (§ 425.16, subd. (e)(1), (2).) Accordingly, the Thornton law firm has met its threshold burden of demonstrating the malicious prosecution action arises from protected activity. (Jarrow Formulas, supra, 31 Cal.4th at p. 735 [“By definition, a malicious prosecution action alleges that the defendant committed a tort by filing a lawsuit.”]; HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212-213 (HMS Capital).)
C. The Individual Defendants Did Not Establish a Probability They Would Prevail on Their Malicious Prosecution Action
Once the first component of an anti-SLAPP motion is satisfied, the burden shifts to the plaintiff, the individual defendants herein, to establish a probability of prevailing on the merits of their malicious prosecution action against the Thornton law firm. (HMS Capital, supra, 118 Cal.App.4th at p. 213.) “In an action for malicious prosecution, the plaintiff must establish that the prior underlying action (1) was commenced by or at the direction of the defendant, or the defendant continued to prosecute it after discovering it lacked probable cause, and it was pursued to a legal termination in plaintiff’s favor; (2) was brought without probable cause; and (3) was initiated with malice. [Citations.]” (Ibid.) [T]he elements of the tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim.” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 872 (Sheldon Appel).)
1. Favorable Termination in Underlying Action
“The basis of the favorable termination element [of a malicious prosecution cause of action] is that the resolution of the underlying case must have tended to indicate the malicious prosecution plaintiff’s innocence. [Citations.]” (HMS Capital, supra, 118 Cal.App.4th at p. 214.) Although the issue is not free from doubt, we conclude that the individual defendants have satisfied this first element of their action for malicious prosecution. (See Fuentes v. Berry (1995) 38 Cal.App.4th 1800, 1808 [“a voluntary dismissal, even one without prejudice, may be a favorable termination which will support an action for malicious prosecution.”]; Robbins v. Blecher (1997) 52 Cal.App.4th 886, 893-894).
2. Probable Cause
To meet their burden in opposing the anti-SLAPP motion, the individual defendants had to present a prima facie case addressing the second element of malicious prosecution, i.e., that the Thornton law firm had no probable cause to file the case against them.
In determining whether there was probable cause to institute the action the court must “make an objective determination of the ‘reasonableness’ of the defendant’s conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable.” (Sheldon Appel, supra, 47 Cal.3d at p. 878; Wilson, supra, 28 Cal.4th at p. 824.) Our Supreme Court has explained, “ ‘Probable cause may be present even where a suit lacks merit. Favorable termination of the suit often establishes lack of merit, yet the plaintiff in a malicious prosecution action must separately show lack of probable cause. Reasonable lawyers can differ, some seeing as meritless suits which others believe have merit, and some seeing as totally and completely without merit suits which others see as only marginally meritless. Suits which all reasonable lawyers agree totally lack merit––that is, those which lack probable cause––are the least meritorious of all meritless suits. Only this subgroup of meritless suits present[s] no probable cause.’ [Citations.]” (Jarrow Formulas, supra, 31 Cal.4th at p. 743, fn. 13.)
“Presence or lack of such probable cause is to be determined as a matter of law and by an objective standard. [Citation.] The test to be used by the court is whether ‘any reasonable attorney would have thought the claim tenable.’ [Citation.]” (Copenbarger v. International Ins. Co. (1996) 46 Cal.App.4th 961, 964; see also Sheldon Appel, supra, 47 Cal.3d at p. 875.)
The individual defendants argue that the Thornton law firm was without probable cause in initiating and pursuing the underlying lawsuit against them. They argue they were wrongfully sued because there was neither evidence of a unity of interest between them and TCC Steel, nor was the Thornton law firm able to uncover any evidence that any of the “corporate officers and directors actually knew about the problems with Suscop when TCC Steel sold the product.” They claim that “[e]ven after two and a half years of litigation,” the Thornton law firm was still unable to “provide a shred of evidence” that the individual defendants “did anything that would lead a reasonable attorney to believe that... causes of action [could be pursued] against them personally.”
In discussing the alter ego doctrine, which is the primary theory of liability pursued against the individual defendants in the underlying action, it has been explained that “ ‘where a corporation is used by an individual or individuals, or by another corporation, to perpetrate fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, a court may disregard the corporate entity and treat the corporation’s acts as if they were done by the persons actually controlling the corporation. [Citations.] [¶] In general, the two requirements for applying the alter ego doctrine are that (1) there is such a unity of interest and ownership between the corporation and the individual or organization controlling it that their separate personalities no longer exist, and (2) failure to disregard the corporate entity would sanction a fraud or promote injustice. [Citations.]... The issue is not so much whether the corporate entity should be disregarded for all purposes or whether its very purpose was to defraud the innocent party, as it is whether in the particular case presented, justice and equity can best be accomplished and fraud and unfairness defeated by disregarding the distinct entity of the corporate form. [Citations.]’ [Citation.]” (Robbins v. Blecher, supra, 52 Cal.App.4th at p. 892.)
The appellate court in Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, stated, “ ‘[t]he law as to whether courts will pierce the corporate veil is easy to state but difficult to apply.’ [Citation.] Because it is founded on equitable principles, application of the alter ego ‘is not made to depend upon prior decisions involving factual situations which appear to be similar.... “It is the general rule that the conditions under which a corporate entity may be disregarded vary according to the circumstances of each case.” ’ [Citations.]” (Id. at p. 1248.) Consequently, “[t]here is no litmus test to determine when the corporate veil will be pierced; rather the result will depend on the circumstances of each particular case.” (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300.)
With these legal standards in mind, we must decide whether any reasonable attorneys would have thought that the claims brought against the individual defendants were tenable. (Sheldon Appel, supra, 47 Cal.3d at p. 875.) Under the facts submitted by the parties, we must answer in the affirmative.
When the Thornton law firm filed the underlying lawsuit naming the individual defendants as parties, it had reason to believe that the primary defendant, TCC Steel was a “family business” created and controlled primarily by the Sohn family, with the individual defendants being part of the small group of TCC Steel officers and directors that ran the company. TCC Steel is a South Korean company, with its assets almost solely in South Korea, and the individual defendants are also residents of South Korea. This, of course, made the Thornton law firm’s task in determining the corporate structure and the relationship between the corporation and its corporate officers all the more difficult.
In discussing the potential purchase and marketing of Suscop, the individual defendants personally met with representatives from the plaintiff companies. During this process, the individual defendants “behaved with the apparent authority of the most powerful officers and directors of TCC [Steel]....” In their negotiations with the plaintiff companies, the individual defendants encouraged them to purchase, market, and distribute Suscop as a roofing product. During the course of their negotiations, the individual defendants never disclosed any failures, complaints, or problems with Suscop or any similar products.
However, after the defects in Suscop came to light, the plaintiff companies learned that TCC Steel had previously made another copper-plated product, called Copper Lite, which had been used as a roofing product in South Korea, and which had experienced deterioration within two years of installation. In addition, discovery revealed that TCC Steel’s internal research and design reports acknowledged that the copper coating of Suscop would actually perforate due to galvanic corrosion if the copper coating was scratched and the stainless steel substrate was exposed to the elements. Whether the individual defendants had knowledge of the prior problems with Suscop, and whether they actively acquiesced in, or aided and abetted in any fraud perpetrated on the plaintiff companies were viable theories of liability clearly put at issue by the facts possessed by the Thornton law firm.
The individual defendants’ sworn declarations that they were not aware of any problems with Suscop at the time they negotiated the sale with plaintiff companies fail to negate a finding that the lawsuit against them was filed with probable cause because they do not relate at all to what the Thornton law firm knew or should have known when it filed and maintained the lawsuit. (See Morrison v. Rudolph (2002) 103 Cal.App.4th 506, 514, overruled in part on other grounds in Zamos v. Stroud (2004) 32 Cal.4th 958, 973.) The individual defendants also ask that we draw an inference of lack of good faith belief in the viability of the complaint from the fact that various individuals deposed from the plaintiff companies were unfamiliar with the theories of recovery being pursued by their counsel, the Thornton law firm. The fact that a client may not be intimately aware of the legal theories being pursued on his or her behalf may point out better communication is needed, but it by no means mandates an inference of lack of probable cause to believe that the theory is a tenable one.
Moreover, in applying the equitable alter ego doctrine, where no single set of factors is determinative and the circumstances where the doctrine will be utilized varies from case to case, we conclude the Thornton law firm had probable cause to pursue the theory that the individual defendants had alter ego liability and that the “fiction of separate existence of TCC [Steel] as an entity distinct from [i]ndividual [d]efendants would permit an abuse of the corporate privilege and would sanction fraud and injustice.”
3. Malice
In addition to showing the Thornton law firm lacked probable cause to file the action against the individual defendants, the individual defendants where likewise required to produce evidence the attorneys were motivated by malice when they filed the complaint against them. The individual defendants’ showing in this regard fell woefully short.
The malice element of a cause of action for malicious prosecution “relates to the subjective intent or purpose with which the defendant acted in prosecuting the prior action. [Citations.]” (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494, original italics (Downey Venture).) For purposes of a malicious prosecution claim, malice “is not limited to actual hostility or ill will toward the plaintiff. Rather, malice is present when proceedings are instituted primarily for an improper purpose.” (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1157.) “Suits with the hallmark of an improper purpose” include, but are not necessarily limited to, “those in which: ‘ “... (1) the person initiating them does not believe that his claim may be held valid; (2) the proceedings are begun primarily because of hostility or ill will; (3) the proceedings are initiated solely for the purpose of depriving the person against whom they are initiated of a beneficial use of his property; (4) the proceedings are initiated for the purpose of forcing a settlement which has no relation to the merits of the claim.” ’ [Citation.]” (Id. at p. 1157.)
The individual defendants have proffered no additional evidence supporting their assertion that the Thornton law firm acted maliciously in naming them as defendants in the underlying action, relying entirely on the purported lack of probable cause in doing so. As our Supreme Court has noted, “ ‘Merely because the prior action lacked legal tenability, as measured objectively... without more, would not logically or reasonably permit the inference that such lack of probable cause was accompanied by the actor’s subjective malicious state of mind.’ [Citation.]” (Jarrow Formulas, supra, 31 Cal.4th at p. 743, quoting Downey Venture, supra, 66 Cal.App.4th at p. 498.) Put another way, “[a] lack of probable cause is a factor that may be considered in determining if the claim was prosecuted with malice..., but the lack of probable cause must be supplemented by other, additional evidence. [Citation.]” (HMS Capital, supra, 118 Cal.App.4th at p. 218.) Consequently, we agree with the trial court that the individual defendants have failed to make a prima facie showing that the Thornton law firm acted with malice.
IV.
Disposition
The judgment is affirmed. Thorton is awarded its costs on appeal.
We concur: REARDON, J., SEPULVEDA, J.