Opinion
A167860
05-02-2024
LINDA GARAVENTA COLVIS et al., Plaintiffs and Respondents, v. LOUISA BINSWANGER, as Trustee, etc., Defendant and Appellant.
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. MSP15-02131
SIMONS, J.
Louisa Binswanger (Trustee) appeals from the trial court's order denying her anti-SLAPP motion (Code Civ. Proc., § 425.16). We affirm.
All undesignated statutory references are to the Code of Civil Procedure.
Our recitation of the background facts reflects our standard of review, in which we "do not . . . weigh the evidence, but accept [the petitioners'] submissions as true and consider only whether any contrary evidence from the defendant establishes [her] entitlement to prevail as a matter of law." (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1067 (Park).)
Trustee is one of five adult siblings; the others are Silvio Garaventa, Jr., Marie Garaventa Adler, and respondents Joseph Garaventa and Linda Garaventa Colvis (we refer to respondents as Petitioners). When the siblings' surviving parent, Mary Garaventa, died in 2015, Trustee became the trustee of the family trust (Trust).
For convenience, we will refer to the nonparty family members by their first names. No disrespect is intended.
The terms of the Trust provide that, after payment of expenses and specific bequests, the balance of the Trust is to be distributed evenly among five subtrusts for the benefit of the five siblings and their children. The Trust's largest asset is its 70 percent interest in the family business (the Company). The five siblings each currently hold a 6 percent interest in the Company, but after the Trust is distributed, each will control a 20 percent interest.
Trustee controls the Trust's 70 percent majority share. As majority shareholder, Trustee has the ability to unilaterally take certain actions, including amending the Company bylaws and borrowing money. Trustee has used this position to expand the board of directors from five to seven, adding two of her allies to the board; and to require any future bylaws amendment be by a supermajority.
The Trust has not yet been distributed to the subtrusts. Trustee's explanation is that the Trust is currently on a repayment plan with the Internal Revenue Service (IRS) to pay approximately $14 million in estate taxes (hereafter referred to as the deferred IRS debt). The final payment on the deferred IRS debt is currently scheduled for 2030, and Trustee claims payment cannot be made sooner because the Trust does not have sufficient assets and because any loan taken out by the Company for this purpose would have a high interest rate.
The Trust provides distribution to the subtrusts is to take place after estate taxes and other expenses and specific distributions are paid.
The underlying amended petition (the Petition) seeks, as relevant here, (1) instructions directing Trustee to apply for a loan on behalf of the Company to repay the deferred IRS debt, and to refrain from using her position as majority shareholder in the Company for any other purpose without unanimous consent of the beneficiaries or court approval; and (2) in the alternative, an order removing Trustee, surcharging her, appointing a successor trustee, and directing the successor trustee to pursue all reasonable methods to repay the deferred IRS debt and to restore the Company's bylaws to their form before Trustee's amendments. The Petition alleges Trustee's stated reason for delaying Trust distribution is pretextual, and Trustee's true motivation is to maintain control of the Company, benefit herself and her allies, and disadvantage Petitioners.
Trustee filed an anti-SLAPP motion, arguing the Petition's claims arise in part from protected conduct, to wit, Trustee's litigation on behalf of the Trust. The trial court denied Trustee's anti-SLAPP motion, finding the claims did not arise from protected activity.
DISCUSSION
In the first step of litigating an anti-SLAPP motion," 'the moving defendant bears the burden of establishing that the challenged allegations or claims "aris[e] from" protected activity in which the defendant has engaged.'" (Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009 (Bonni).) "[W]hen a plaintiff has pleaded . . . a cause of action that rests on allegations of multiple acts, some of which constitute protected activity and some of which do not," "the moving defendant must identify the acts alleged in the complaint that it asserts are protected and what claims for relief are predicated on them. In turn, a court should examine whether those acts are protected and supply the basis for any claims. It does not matter that other unprotected acts may also have been alleged within what has been labeled a single cause of action; these are 'disregarded at this stage.' [Citation.] So long as a 'court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached' with respect to these claims." (Id. at p. 1010.)
The second anti-SLAPP step, in which the plaintiff must show "each claim that does arise from protected activity . . . has 'at least "minimal merit" '" (Bonni, supra, 11 Cal.5th at p. 1009), is not at issue in this appeal.
"A claim arises from protected activity when that activity underlies or forms the basis for the claim. [Citations.] Critically, '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.' [Citations.] . . . [T]he focus is on determining what 'the defendant's activity [is] that gives rise to his or her asserted liability-and whether that activity constitutes protected speech or petitioning.' [Citation.] 'The only means specified in section 425.16 by which a moving defendant can satisfy the ['arising from'] requirement is to demonstrate that the defendant's conduct by which plaintiff claims to have been injured [is protected activity] ....' [Citation.] In short, in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability." (Park, supra, 2 Cal.5th at pp. 1062-1063.) "Assertions that are 'merely incidental' or 'collateral' are not subject to section 425.16. [Citations.] Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute." (Baral v. Schnitt (2016) 1 Cal.5th 376, 394 (Baral).)
The basis for the Petition's claims for instructions and to remove Trustee is that Trustee breached her fiduciary duty to the beneficiaries of the Trust. The elements of a breach of fiduciary duty claim are "(1) the existence of a fiduciary relationship, (2) breach of that relationship, and (3) damage proximately caused by the breach." (Starr v. Ashbrook (2023) 87 Cal.App.5th 999, 1019-1020 &fn. 7 (Starr).) The relevant element here is breach, and we therefore focuses on "what actions by the defendant supply [that] element[] and consequently form the basis for liability." (Park, supra, 2 Cal.5th at p. 1063.)
Trustee argues the Petition alleges that Trustee "breached her fiduciary duty by not spending Trust funds responsibly" and this alleged breach is based "in part on the theory that [Trustee] initiated litigation or authorized funds to be spent on litigation." We disagree with Trustee's characterization of the alleged breach. The Petition's focus is on Trustee's refusal to take steps to distribute the Trust promptly, and on Trustee's exercise of her unilateral authority as majority shareholder in the Company. The Petition expressly alleges Trustee "has a fiduciary duty to distribute the Trust as quickly as possible and restore the corporate bylaws as they existed before the change." No comparable allegation is present as to her use or misuse of Trust funds. The nature of the alleged breach is underscored by the relief requested. (See Baral, supra, 1 Cal.5th at p. 395 ["When the Legislature declared that a 'cause of action' arising from activity furthering the rights of petition or free speech may be stricken unless the plaintiff establishes a probability of prevailing, it had in mind allegations of protected activity that are asserted as grounds for relief."].) The Petition seeks instructions directing Trustee to use her unilateral authority as majority shareholder in the Company "to apply for a loan on behalf of [the Company] to repay the Deferred [IRS] Debt" and "to never utilize [this majority shareholder authority] for any other purpose without (a) the unanimous consent of the beneficiaries, or (b) Probate Court approval," or similar instructions to any successor trustee. The Petition does not seek instructions directing any conduct with respect to the use of Trust funds. Thus, the conduct asserted as grounds for relief is Trustee's failure to distribute the Trust and the exercise of her majority shareholder authority in connection with the Company's bylaws.
Protected activity "under section 425.16 includes 'the filing, funding, and prosecution of a civil action.'" (Starr, supra, 87 Cal.App.5th at p. 1020.)
Contrary to Trustee's suggestion, the Petition's request that Trustee be precluded from using Trust funds to defend against the Petition pending its resolution is not a claim "arising from" protected activity, but instead is a request for a preliminary injunction based on the underlying alleged breaches. (See Doolittle v. Exchange Bank (2015) 241 Cal.App.4th 529, 546 ["Upon a sufficient showing, . . . [a petitioner] may seek a preliminary injunction, which . . . would allow the court to weigh the equities and enjoin the use of trust assets to defend a challenge upon a proper showing of likelihood of success."].)
We next turn to whether this alleged breach arises from any protected activity in the allegations identified by Trustee. First, Trustee points to allegations that Trustee's refusal to make distributions to Petitioners has restricted their ability to litigate against her. Trustee provides no authority that depriving others of funds they could use for litigation is protected activity, and we decline to so hold.
Second, Trustee points to allegations that she has paid substantial attorney fees from the Trust, and will continue to pay such fees as long as the Trust continues. For example, Trustee identifies allegations that "the total attorney's fees paid to Trust attorneys between 2015 and 2022 exceeds $6 million" and "the Trust will likely spend more than $7 million in trustee and attorney's fees" in the next 8 years. The Petition does not allege Trustee's use of Trust funds to pay attorney fees is a breach of her fiduciary duty; it does not even identify the matters on which the attorney fees were spent, much less allege the fees were a misuse of Trust assets. Instead, this conduct is alleged to support the Petition's assertion that the Trust will spend more money continuing its existence through 2030 than it would on high interest rates for a loan to repay the deferred IRS debt, and therefore Trustee's claimed reason for delaying Trust distribution is pretextual. The Petition's claims do not arise from these allegations. (See Park, supra, 2 Cal.5th at p. 1060 ["a claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted"].)
Third, Trustee relies on allegations that she has used the Trust's payment of attorney fees to benefit her allies. For example, Trustee identifies allegations that "millions of dollars in attorney's fees incurred by [Trustee] on behalf of the Trust has been paid to her son's law firm, Hanson Bridgett, LLP, who represent her as trustee" and if the Trust continues until 2030, Trustee "will likely pay her son's law firm an additional $4-5 million in Trust funds." Trustee also points to an allegation that the Trust retained a law firm representing Silvio as "a way for [Trustee] to use trust funds to reduce Silvio's attorney's fees" because he is her "ally." However, the Petition does not rely on Trustee's employment of attorneys that allegedly help her allies as evidence of breach. The Petition makes no specific allegations that this conduct constituted breach of Trustee's fiduciary duty, and the relief requested does not include an order directing Trustee or any successor trustee to terminate the Trust's relationships with these attorneys or seek any other relief targeting these relationships or the use of Trust funds. Instead, the Petition alleges this use of Trust funds to help Trustee's allies demonstrates why distributing the Trust "would be against her personal interest and motivations." The Petition's claims do not arise from these allegations.
Finally, Trustee points to allegations that she has been involved in litigation against Petitioners. For example, Trustee "waged trust-funded litigation" against Petitioners, and "the Siblings have been embroiled in years of litigation costing the Siblings millions of dollars in attorney's fees." While the Petition-in a footnote-refers to Trustee's litigation as an example of her "litany of abuses" against her siblings, the Petition does not allege any of this litigation was frivolous or in bad faith; indeed, the Petition is entirely devoid of any specifics about this litigation. We therefore see no basis to conclude the Petition is alleging Trustee's litigation against her siblings is an act of breach. Instead, this conduct is alleged as evidence of the animosity between the siblings, underlying Trustee's alleged motivation to delay Trust distribution in order to wrest control of the Company from Petitioners and disadvantage them by denying them the funds they will have available after distribution.
Trustee argues this case is akin to Sheley v. Harrop (2017) 9 Cal.App.5th 1147 (Sheley). In Sheley, a corporation that was majority owned by two stepdaughters sued the minority owner, their stepmother, alleging the stepmother and late father mismanaged the corporation. (Id. at pp. 11541155.) The stepmother filed a cross-complaint alleging the stepdaughters, (1) with respect to a breach of fiduciary duty claim, "breached their fiduciary duty to her by' . . . filing and maintaining a frivolous lawsuit against [her],'" among other acts; (2) with respect to a conversion claim," 'willfully, intentionally and wrongfully converted corporate assets . . . to their own use by, among other things, . . . wrongfully utilizing corporate assets to fund the above-captioned frivolous lawsuit brought in bad faith against [the stepmother];'" and, (3) with respect to a negligence claim, "breached the duty they owed to her 'by, among other things, . . . wrongfully depleting and wasting corporate assets to fund the instant litigation against [her] without any reasonable justification.'" (Id. at p. 1155, italics omitted.) The stepdaughters filed an anti-SLAPP motion, arguing the stepmother's claims arose in part from protected activity. (Id. at p. 1156.) The Court of Appeal agreed, reasoning, "Within each cause of action, [the stepmother] alleges conduct by [the stepdaughters] that is based on protected activity and as set forth in the cross-complaint, supports a claim for recovery. These are not allegations that merely provide context," but instead "arose out of activity that is protected, specifically filing, maintaining, and funding a lawsuit." (Id. at pp. 1167-1168.)
Trustee argues the Petition is akin to the cross-complaint in Sheley. We disagree. First, unlike the cross-complaint in Sheley, the Petition does not identify any particular lawsuits, much less allege they were frivolous or brought in bad faith. Second, while the Sheley cross-complaint expressly identified the stepdaughters' litigation activity as a breach of fiduciary duty, act of conversion, and breach of the duty of care, the Petition does not identify any litigation activity as an act constituting breach. Instead, the Petition's references to litigation conduct "merely provide context, without supporting a claim for recovery." (Baral, supra, 1 Cal.5th at p. 394.)
Because we find Sheley, supra, 9 Cal.App.5th 1147 distinguishable, we need not decide whether, as the parties dispute, this case is closer to Sheley or to Gaynor v. Bulen (2018) 19 Cal.App.5th 864, or whether, as Trustee argues, we should reject Gaynor's analysis.
In sum, the allegations challenged by Trustee's anti-SLAPP motion are either not protected activity or are not the actions forming the basis for the Petition's claims.
Because we conclude the Petition's claims do not arise from protected activity, we need not and do not decide Petitioners' alternative argument that Trustee's anti-SLAPP motion was untimely.
DISPOSITION
The order is affirmed. Petitioners shall recover their costs on appeal.
WE CONCUR: JACKSON, P. J., BURNS, J.