Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from an Order of the Superior Court of Los Angeles County. No. BC 360007, Joanne O’Donnell, Judge.
Lin M. Meyer for Defendant and Appellant Christian Bradley Call.
Manatt, Phelps & Phillips, Barry S. Landsberg, Chad S. Hummel and Joanna S. McCallum for Plaintiff and Respondent Digital Domain, Inc.
ZELON, J.
Defendant Christian Bradley Call appeals from an order denying his special motion to strike plaintiff Digital Domain’s complaint for breach of fiduciary duty and breach of the duty of loyalty. Digital alleged that during the acquisition of Digital by a third party, Call attempted to poison the attitude of Digital’s employees towards the new owner of Digital, and encouraged Digital’s current executives to ask for higher salaries or to leave Digital. The trial court denied Call’s special motion to strike Digital’s complaint under Code of Civil Procedure section 425.16 because Call’s conduct was not protected activity within the meaning of the statute. Digital cross-appeals the trial court’s denial of its request for attorneys’ fees, and both parties seek sanctions on appeal. We affirm the trial court’s order, dismiss the cross-appeal, and deny the motions for sanctions.
All statutory references herein, unless otherwise noted, are to the Code of Civil Procedure.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Because we conclude that Call’s conduct was not protected activity under section 425.16 and therefore do not reach the issue of whether Digital would prevail on the merits of its claims, we briefly recite the facts underlying the allegations of Digital’s complaint.
1. Digital Domain’s Complaint for Breach of Loyalty and Breach of Fiduciary Duty.
Digital’s complaint alleged that from August 1996 through August 16, 2006, Call worked at Digital, mostly recently as its President and Chief Operating Officer (COO). Digital terminated Call’s employment on August 16, 2006. During Call’s employment, an entity known as Wyndcrest DD Holdings, Inc. (Wyndcrest) purchased Digital. Digital alleged that during the acquisition and thereafter, Call “systematically [attempted] to poison[] the attitude of [Digital’s] employees towards the new owner . . . by disseminating within [Digital] a number of outlandish and damaging theories concocted by him concerning the new owner’s alleged intentions with respect to [Digital].” In particular, during the acquisition, Call approached several Digital employees and encouraged them to negotiate higher compensation packages in order to best exploit their leverage with the new owner, and actively encouraged several key employees to leave Digital.
In September 2005, Wyndcrest commenced negotiations to buy Digital, and the merger was completed on May 12, 2006.
2. Call’s Special Motion to Strike Digital’s Complaint.
Call filed a special motion to strike, contending that Digital’s complaint was in response to his post-termination whistleblower and wage claim with the Labor and Workforce Development Agency (Labor Agency), which constituted protected activity under section 425.16.
Call’s declaration in support of his motion stated that he served as COO from December 2002 until his termination from Digital. On August 16, 2006, Call sent an email to Carl Stork, CEO of Digital, expressing his belief that Stork and other principals of Digital intended to falsify financial projections of Digital to secure financing to eliminate their personal guarantees of purchase notes tendered in connection with Wyndcrest’s purchase of Digital in May 2006.
Call’s email stated in part that, “John [Textor] initially painted a very rosy picture of my long-term future at [Digital] and talked at length with me about the contributions that Wyndcrest would be making to [Digital]. [Those] contributions . . . justified a capital raise at a $75M valuation for an acquisition of DD at a valuation of only $34.5M, thereby creating free equity for Wyndcrest and its principals.
John Textor was a member of the board of directors and a principal of Wyndcrest, and became co-chairman of the board of Digital.
“That you dismiss my and the other executives’ inquiries about largely unsupportable revenue projections submitted to secure funding is stunning. You express that in exercising our fiduciary responsibilities, we are ‘too conservative’ when it comes to disclosures and other transactional matters. Yet on July 7th you instructed [others] and me to arbitrarily and falsely increase the revenue projections. . . . After I and others expressed our discomfort, you became increasingly hostile with me. Though you ultimately . . . agreed to reduce the projections, it was clear I had garnered your resentment as thereafter you began to undermine my authority with staff and eventually falsely accused me of resigning from my position.
“In every way you have met my reasonable inquiries and exercise of fiduciary obligations with hostility. . . .”
On August 16, 2006, Stork terminated Call’s employment with Digital.
On August 30, 2006, Call filed a whistleblower and wage claim with the Labor Agency. Call alleged that the principals of newly-acquired Digital retaliated against him for refusing to act as their puppet and to support the principals’ overstated revenue projections. Further, he alleged, these principals made false promises to him to induce him to sign a new employment contract, under which he forfeited already earned participation profits in certain software and severance and bonus monies from his pre-existing contract.
Call sent a copy of his Labor Agency claim to Digital, but Digital did not respond to his claim. After receiving a right to sue letter from the Labor Agency, Call had his attorney prepare a complaint for filing, and forward it to Digital without filing it; Call intended to use the complaint as a springboard to mediation.
On October 6, 2006, both Digital and Call filed their respective complaints.
Call’s complaint stated claims against Wyndcrest, Digital, Textor, Stork, and Jon Teaford for breach of written employment agreement, fraud in the inducement, breach of written employment and several agreements, breach of oral agreement, violations of the Labor Code, wrongful termination in violation of public policy, unfair business practices, and breach of the covenant of good faith and fair dealing. In April 2007, Digital filed a cross-complaint against Call alleging claims for breach of contract, specific performance, and breach of fiduciary duty.
3. Digital’s Opposition to Call’s Special Motion to Strike.
Digital argued that Call had failed to establish that he engaged in protected activity encompassed by section 425.16. First, Digital’s motivation in filing suit (allegedly to head off Call’s own complaint) was irrelevant; and second, Digital’s claims did not arise from any protected speech because they related to Call’s destructive behavior while employed at Digital, not to his complaints to the Labor Agency or his own complaint. Further, even if Call could establish that the complaint fell within section 425.16, Digital had met its burden of showing its claims had merit because Call used his position to further his own interests by urging key employees to seek higher compensation and to demand retention bonuses. Digital sought attorneys’ fees and costs.
Carl Stork, the CEO of Wyndcrest and new CEO of Digital, stated in his declaration that he was responsible for handling the ownership transition within Digital, for overseeing performance and strategy of the company, and assessing the skills and responsibilities of the executive staff. Stork intended to maintain continuity on the executive team, and viewed Call as the key executive in managing both the existing business of Digital and in the expansion of the company.
During his first week after the merger, Stork grew concerned about the lack of teamwork and communication among the executives. Stork interviewed all of the executives, and came to the conclusion that Digital’s upper management was dysfunctional, not working as a team, and had a great deal of frustration and dissatisfaction. He observed that there were no shared vision or goals, but instead there was distrust.
In July 2006, Digital retained an outside facilitator to conduct an offsite management conference to address these problems. Call was strongly opposed to the conference, and told Stork he believed the conference would become a forum for exposing dissent and dissatisfaction, and would undermine Call’s authority. Call threatened to resign if Stork held the conference. Stork believed that the executive team had many issues it needed to work through, and that by working together on their problems, Call would be a more effective leader.
Stork requested the team members to prepare for the conference; all of them did so by submitting an outline, except for Call. Some of the executives later told Stork that Call had advised them not to prepare for the conference because it would be a waste of time. During the conference, Call refused to participate in several of the discussions. Stork realized that Call was the source of significant frustration among the executive team because they felt Call withheld information from them, failed to support them, treated them in an arbitrary fashion, and did not operate in the best interests of the company.
On several occasions, Call complained to Stork about Textor and disparaged Textor. Stork later learned that Call had disparaged him to Textor.
After the conference, several members of management approached Stork and told him they would not remain, largely because of Call. Four of the five remaining executives advised Stork they were leaving. Stork tried to convince them to stay, and was required to give the executives significantly increased compensation and bonuses to induce them to remain. Stork learned that Call had told the executives that Stork and Textor were displeased with their performance, and that the executives should resign to negotiate better compensation. Stork contended Call’s statements were false, and that as a result, Digital had incurred increased compensation costs in the approximately amount of 54 to 76 percent. Those executives who chose to leave told Stork that they were doing so because they were concerned about the lack of teamwork on the executive staff, the stability, integrity and financial resources of the Wyndcrest ownership, and the lack of cooperation and support between Call and Wyndcrest. Stork learned the executives had relied on information they received from Call regarding the new ownership. Stork contended Call’s activities constituted a breach of his fiduciary duties and caused damage to Digital.
4. Call’s Reply and Evidentiary Objections.
Call argued that Digital had not established a breach of fiduciary duty claim based upon his alleged bad-mouthing, attempts to gain a promotion, gossiping, disclosure of his compensation, advising other members of the executive team to seek fair compensation, or disclosing his view that Stork or Textor were incompetent. He argued that under Civil Code section 47c, he was immunized for statements on matters of common interest and he was further immunized as a corporate officer raising concerns about the corporation. Call objected to substantial portions of Digital’s declarations.
The trial court denied the motion, finding that Call had not established that Digital’s complaint arose from any protected activity. The court observed that Call’s evidentiary showing consisted of evidence demonstrating Digital’s litigation tactics and motivation for suing him, but Digital’s subjective intent was not relevant under section 425.16 pursuant to City of Cotati v. Cashman (2002) 29 Cal.4th 69. Further, the court noted that Digital’s complaint was not based upon Call’s complaint to the Labor Agency or Call’s own complaint, but was limited to Call’s conduct while still employed at Digital.
The trial court also found that Digital did not meet its burden of showing that its claims had minimal merits because Call’s concerns about funding “are precisely the types of information that an officer or director has an obligation to raise,” and that there was no evidence Call used his position at Digital to further his own interests; rather Call was concerned about the funding and he wanted to improve his position within the company. The court sustained many of Call’s objections to Digital’s declarations on the grounds of hearsay, relevancy, and lack of foundation, and denied Digital’s motion for attorneys’ fees.
At the hearing, the court indicated that it went to prong two of the analysis in the event a reviewing court disagreed with its analysis of prong one.
DISCUSSION
I. CALL CANNOT DEMONSTRATE DIGITAL’S COMPLAINT ARISES FROM PROTECTED ACTIVITY.
Section 425.16 permits a court to strike any cause of action that arises from the defendant’s exercise of his or her constitutionally protected free speech rights or petition for redress of grievances. (§ 425.16, subd. (b)(1); Flatley v. Mauro (2006) 39 Cal.4th 299, 311-312.) In ruling on a special motion to strike brought under section 425.16, the trial court must engage in a two-step process. First, the court must determine whether defendant has made a threshold showing that the challenged cause of action “arises from” a protected activity. Second, if the defendant makes this showing, the trial court must determine whether the plaintiff has established a probability of prevailing on the claim. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733.) The burden is on the defendant on the first prong to show the action is within the statute; if the defendant succeeds, the burden shifts to the plaintiff to establish a probability of prevailing. (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 928.)
In making these determinations, the trial court considers the pleadings, and supporting and opposing affidavits. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) We review the trial court’s ruling on the motion to strike independently under a de novo standard. (Flatley v. Mauro, supra, 39 Cal.4th at p. 325.) We do not weigh credibility, but accept as true the evidence favorable to plaintiff and evaluate the defendant’s evidence only to determine whether it defeats the plaintiff’s evidence as a matter of law. (Ibid.)
Subdivision (e) of section 425.16 delineates the type of speech or petitioning activity protected. These acts include (1) written or oral statements made before a legislative, executive, or judicial proceeding; (2) written or oral statements made in connection with an issue under consideration or review by a legislative, executive, or judicial body; (3) written or oral statements made in the place open to the public or in a public forum in connection with an issue of public interest; or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest. (§ 425.16, subd. (e).) Thus, if the speech is made or the activity is conducted in an official proceeding authorized by law, it need not be connected to a public issue, but it is made or conducted apart from an official proceeding, then there is a public issue requirement. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1117.)
In addition, courts have not precisely defined the boundaries of a cause of action that “arises from” protected such activity. (§ 425.16, subd. (b).) City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 (Cotati) explained that “the statutory phrase ‘cause of action . . . arising from’ means simply that the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech. [Citation.] In the anti-SLAPP context, the critical point is whether the plaintiff’s cause of action itself was based on an act in furtherance of the defendant’s right of petition or free speech.” Navellier v. Sletten (2002) 29 Cal.4th 82 cautioned that the “anti-SLAPP statute’s definitional focus is not the form of the plaintiff’s cause of action but, rather, the defendant’s activity that gives rise to his or her asserted liability -- and whether that activity constitutes protected speech or petitioning.” (Id. at p. 92.) Thus, whether the plaintiff’s lawsuit intended to chill or actually chilled the defendant’s conduct is not relevant. (Equilon Enterprises, supra, 29 Cal.4th at p. 58; Cotati, supra, 29 Cal.4th at p. 75.)
Rather, whether the statute applies is determined from the “principal thrust” or gravamen of the plaintiff’s claim. (Martinez v. Metabolife International, Inc. (2003) 113 Cal.App.4th 181, 188.) For this reason, the sequence in which actions are filed is not determinative of whether a lawsuit is a prohibited suit. The mere fact that a lawsuit was filed after the defendant engaged in protected activity does not establish the complaint “arose from” protected activity under the statute because a cause of action may be triggered by protected activity without arising from it. (Cotati, supra, 29 Cal.4th at p. 77, 78.)
For purposes of applying the statute, we solely look to Digital’s complaint to determine whether it “arises from” a protected activity. Call argues that the uncontroverted evidence establishes Digital’s complaint arose from his protected petitioning activity in filing a claim with the Labor Agency and filing his complaint for wrongful termination, both of which were based upon his concerns with the inflated revenue projections used to obtain financing for the Wyndcrest acquisition. However, Digital’s complaint is directed at Call’s comments to his coworkers during and after the acquisition, conduct that was not undertaken in an official proceeding. Therefore, Call must show his conduct related to matters of public concern. (Kurwa v. Harrington, Foxx, Dubrow & Carter (2007) 146 Cal.App.4th 841, 848.)
Under Equilon and Cotati, the fact that Digital’s complaint may have been filed after Call’s Labor Agency claim and his complaint for wrongful termination does not dispose of the issue of whether Digital’s complaint “arises from” protected activity. We therefore disregard Call’s argument and evidence which is directed to the sequence of events surrounding the parties’ complaints.
Digital has requested that we consider, in connection with this appeal, its cross-complaint in Call’s action. Pursuant to that request, we have done so.
Although he tries to cloak his comments while he was employed at Digital with public interest significance, whether or not Wyndcrest’s principals acted improperly in structuring the financing is a purely private matter. Such conduct does not “impact[] a broad segment of society and/or . . . affect[] a community in a manner similar to that of a governmental entity.” (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 479 (Damon).) In Rivero v. American Federation of State, County and Municipal Employees (2003) 105 Cal.App.4th 913, while on disability, a supervisor was accused of theft, extortion and favoritism. Although the allegations were not substantiated, the employee was demoted and terminated when he refused to accept his new assignment. (Id. at p. 916.) The employee alleged the union disseminated three documents to union members discussing his suspension and termination, and alleged claims for libel and slander. (Id. at p. 915.) The court of appeal affirmed the trial court’s denial of the union’s special motion to strike the supervisor’s complaint on the ground that it did not concern a matter of public interest because (1) the plaintiff was not a person in the public eye, (2) the conduct alleged did not affect a large number of people beyond the direct participants; and (3) the matter did not concern a topic of widespread public interest. (Id. at p. 924.)
Here, Call, who is not a public figure, was not participating in an ongoing controversy, debate or discussion with a community group; rather, he was making private business-related commentary to a small group of individuals in a private setting. His statements concerning the Wyndcrest financing of a privately-held company, or whether Digital’s executive team should use their leverage as current employees to negotiate higher salaries, would not affect a large number of people beyond the employees of Digital. Although allegations of corporate fraud in general might be considered matters of public interest, those allegations relating to the acquisition of a private company are not, nor is his conduct in agitating his fellow executives to obtain higher pay. For these reasons, Call’s statements are not the type of speech section 425.16 protects.
Because we conclude Call has not established his conduct constitutes protected activity, we do not reach the second prong of the analysis. “Only a cause of action that satisfies both prongs of the anti-SLAPP statute i.e., that arises from protected speech or petitioning and lacks even minimal merit is a SLAPP, subject to being stricken under the statute.” (Navellier v. Sletten, supra, 29 Cal.4th at p. 89.)
The trial court sustained Call’s objections to substantial portions of Digital’s declarations based upon hearsay, foundation, relevance, lack of personal knowledge, and privilege. Because we do not reach the second prong of the analysis under section 425.16 to consider whether Digital has established a reasonable probability of prevailing on the merits, we need not consider whether the trial court erred in making its evidentiary rulings.
II. DIGITAL’S CROSS-APPEAL.
Digital contends the trial court erred in denying its request for attorneys’ fees as the prevailing party on the motion to strike. (§ 425.16, subd. (c).) That issue is not properly before us, because an order declining to award attorneys’ fees to a plaintiff who successfully opposes a motion to strike is not immediately appealable. (Doe v. Luster (2006) 145 Cal.App.4th 139, 150.) Such order would be appealable in connection with an appeal from a final judgment in the matter. (See American Humane Assn. v. Los Angeles Times Communications (2001) 92 Cal.App.4th 1095, 1102-1103.)
Recognizing our holding in Doe v. Luster, supra, Digital requests that if we decline to find jurisdiction over its cross-appeal, we treat the matter as a writ and consider the merits of its attorneys’ fees request. We decline to do so, as Digital has not demonstrated it is entitled to extraordinary writ relief. (Omaha Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1266, 1273-1274 [discussing conditions upon which writ relief will be granted].)
We have dismissed Digital’s cross-appeal by order dated September 23, 2008.
III. MOTIONS FOR SANCTIONS.
Call asks this court to sanction Digital in the amount of $30,000, alleging that Digital has misrepresented the factual record, and Digital requests that we sanction Call in the amount of $28,454 for bringing a frivolous appeal.
A court of appeal may impose monetary sanctions when it determines an appeal is frivolous. (Code Civ. Proc., § 907; Cal. Rules of Court, rule 8. 276(e); In re Marriage of Flaherty (1982) 31 Cal.3d 637.) An appeal is frivolous “when it is prosecuted for an improper motive to harass the respondent or delay the effect of an adverse judgment or when it indisputably has no merit when any reasonable attorney would agree that the appeal is totally and completely without merit.” (In re Marriage of Flaherty, supra, 31 Cal.3d at p. 650.) We deny the parties’ motions.
DISPOSITION
The order of the superior court denying Call’s motion to strike is affirmed. The parties’ motions for sanctions on appeal are denied. Each party is to bear its own costs on appeal.
We concur: PERLUSS, P. J., WOODS, J.