Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County. William F. Fahey, Judge. Los Angeles County Super. Ct. No. BC340625
Peter L. Weinberger & Associates and Doug Mastroianni for Plaintiff and Appellant.
Sheppard, Mullin, Richter & Hampton, Andre J. Cronthall, Fred R. Puglisi and Catherine La Tempa for Defendants and Respondents The Mega Life and Health Insurance Company, Transamerica Life Insurance Company and Healthmarkets, Inc.
Munger, Tolles & Olson, Cary B. Lerman and Robert L. Dell Angelo for Defendant and Respondent The National Association for the Self-Employed.
ARMSTRONG, J.
Charles Gardner sued PFL Life Insurance Company, the California Department of Insurance, Mega Life and Health Insurance Company, Healthmarkets, Inc., Transamerica Life Insurance Company, the National Association for the Self-Employed ("NASE"), and various individuals alleged to have been involved or associated with NASE or with one of the insurance companies named as defendants. On appeal, he contends that PFL and the Department of Insurance were wrongly dismissed, and that the court erred in granting Mega Life and Healthmarkets' and the NASE's special motion to strike under Code of Civil Procedure section 425.16, in denying reconsideration of the ruling, and in awarding fees under the statute. We affirm.
Actually, he sued United Insurance Companies Inc., which is now known as Healthmarkets, Inc.
Background
Only the briefest review of the facts is necessary for disposition of the issues raised in this appeal. In the second amended complaint at issue here, Gardner alleged that he was a member of the NASE, which represented itself as an independent association, which (among other member benefits) objectively evaluated insurance programs and used its bargaining leverage to negotiate discounts on coverage. NASE representatives told Gardner that after researching the insurance marketplace, the NASE had determined that the best coverage for him was group coverage offered by Mega Life, and also represented that his premiums would be calculated with regard to the entire group of NASE members. Based on these representations, Gardner purchased a health insurance policy. The policy was issued by PFL, but Mega Life and Transamerica later administered claims and collected premiums on the policy. Mega Life was alleged to be a Healthmarkets subsidiary.
On demurrer, Mega Life and Transamerica asserted that Transamerica had purchased PFL, and that Mega Life had assumed Gardner's certificate of insurance.
Gardner then alleged that the NASE was not independent, but was controlled by Healthmarkets and Mega Life. It performed no objective evaluation, but only offered insurance sold by subsidiaries of Healthmarkets. Gardner's policy and the other policies issued by Healthmarkets and the other defendants provided only illusory benefits. Further, after Gardner became sick and made claims, he was put into a category composed of sick insureds, rather than a group composed of all NASE members, and his premiums were significantly raised.
The causes of action were violation of the Consumers Legal Remedies Act, breach of contract, breach of the implied good faith covenant, fraud, breach of fiduciary duty, negligence, unfair business practices (Bus. & Prof. Code, § 17200, et seq.), and, as to the Department of Insurance, mandamus. In that cause of action, Gardner sought an order mandating the Department to revoke or rescind approval of the insurance policies issued by PFL, Healthmarkets, Mega Life, and Transamerica.
Mega Life and Transamerica jointly demurred to the second amended complaint. The demurrer was sustained as to the cause of action for mandamus, which named only the Department of Insurance as a defendant, and as to all causes of action against PFL, on the theory that it had changed its name to Transamerica Life Insurance Company.
Mega Life and the NASE jointly filed a special motion to strike (Code Civ. Proc., § 425.16) the sixth and seventh causes of action, which were for fraud and for breach of fiduciary duty. The motion was granted. Gardner's motion for reconsideration was denied, and Mega Life's and the NASE's motions for fees under Code of Civil Procedure section 416.25, subdivision (c) were granted.
Discussion
1. The rulings on demurrer
Mega Life and Transamerica demurred to all causes of action against PFL on the ground that it no longer existed as a legal entity, in that in November 2002, it changed its name to Transamerica Life Insurance Company. We find that the demurrer was properly sustained. The complaint alleged that PFL and Transamerica were Iowa corporations and that "Plaintiff is informed and believes and thereon alleges that PFL Life Insurance Company was merged out of existence and became Transamerica Life Insurance Company, or that PFL merely changed its name to 'Transamerica Life Insurance Company' while maintaining all of the assets and liabilities of PFL." Thus, Gardner himself alleged that PFL was not a proper party.
"A civil action can be maintained only against a legal person, i.e., a natural person or an artificial or quasi-artificial person, a nonentity is incapable of suing or being sued. Where a suit is brought against an entity which is legally nonexistent, the proceeding is void ab initio and its invalidity can be called to the attention of the court at any stage of the proceeding." (Oliver v. Swiss Club Tell (1963) 222 Cal.App.2d 528, 537-538, citations omitted.) Gardner could not maintain his suit against PFL.
What's more, he did not need to. Under Corporations Code section 1107, "Upon merger pursuant to this chapter the separate existence of the disappearing corporations ceases and the surviving corporation shall succeed, without other transfer, to all the rights and property of each of the disappearing corporations and shall be subject to all the debts and liabilities of each in the same manner as if the surviving corporation had itself incurred them."
The demurrer to the tenth cause of actions, against the Department of Insurance, was also brought by Mega Life and Transamerica. Gardner contends that those parties had no standing to demur. This is a question we may not consider on appeal. The Department of Insurance was never served with this action, and is not a party to this appeal. There is, moreover, no appealable order before us, and given that basic principles of due process prevent us from adjudicating the Department of Insurance's rights in its absence, this is not a case in which we choose to deem a ruling on demurrer, a judgment. (Conley v. Roman Catholic Archbishop (2000) 85 Cal.App.4th 1126, 1130.)
2. The Special Motion to Strike
The sixth cause of action was for breach of fiduciary duty and the seventh was for fraud. The defendants were the NASE, Healthmarkets, and Mega Life, and the factual allegations were that the NASE represented to Gardner that a portion of his dues would be spent on support for Federal legislation that would benefit self-employed people, but that it instead used the money to lobby for Federal legislation which would eliminate its members' rights to sue the NASE, Mega Life, or Healthmarkets for violation of state insurance, consumer protection, or tort law.
Mega Life and Healthmarkets and the NASE brought a joint special motion to strike the causes of action under Code of Civil Procedure section 425.16, the anti-SLAPP law. Under that statute, "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." (Code Civ. Proc., § 425.16, subd. (b)(1).)
"When a special motion to strike is filed, the initial burden rests with the defendant to demonstrate that the challenged cause of action arises from protected activity." (Brill Media Co., LLC v. TCW Group, Inc. (2005) 132 Cal.App.4th 324, 329.) "Section 425.16, subdivision (b)(1) requires the court to engage 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.) Whether Code of Civil Procedure section 425.16 applies is a legal question which we review independently on appeal. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999.)
Then, if the court finds such a showing has been made, it determines whether the plaintiff has demonstrated a probability of prevailing on the claim. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) Gardner staked his opposition to the motion on the first prong, and never attempted to show probability of prevailing on the merits, a position he continues on appeal.
"In deciding whether the initial 'arising from' requirement is met, a court considers 'the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.' (§ 425.16, subd. (b).)" (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) With the motion to strike, Mega Life submitted an affidavit to the effect that it was paid "a small administrative fee" by NASE, did not retain any portion of the dues paid by NASE members, did not use any portion of NASE dues for lobbying, and did not engage in the kind of lobbying described in the complaint. It had never lobbied to eliminate anyone's right to sue Mega Life, Healthmarkets or the NASE for violations of state consumer protection laws. Healthmarkets' affidavit stated that it did not receive any portion of the dues paid to the NASE by its members.
The NASE's affidavit was from its President, and it included representations that the NASE "promotes the interest of the self-employed and micro-business through legislative and regulatory advocacy," that the President met with legislators in Washington, testified at legislative hearings, and met with the Small Business Administration on regulatory matters, and that the NASE had not lobbied for legislation that would bar its members' legal claims, or any legislation or regulation that would harm its members. Its legislative priorities concerned such things as tax equality for small businesses, health insurance tax credits, and social security reform. The NASE also submitted copies of its membership application, its brochure, and its "benefits catalog," which includes discounts on travel, phone service, and the like.
The membership application includes the provision that, "I understand $7 of my dues are not tax deductible as a business expense as these monies are allocated for legislative advocacy . . . ."
Gardner did not submit evidence, but on appeal cites additional statements in the NASE materials, including the statements that the NASE gives its members a voice in Washington and is working for its members.
On this complaint and those facts, we find that the special motion to strike was properly granted. There is no doubt that lobbying is a protected activity under the statute. (DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562.) Gardner argues, however, that the cause of action does not "arise from" lobbying, but from the NASE's breach of contract with its members. Navellier v. Sletten, supra, 29 Cal.4th 82, considered, and rejected, a similar claim.
In that case, plaintiffs first filed federal court litigation against the defendant, Sletten. While that action was pending, the parties entered into a release which, inter alia, limited the types of claims that Sletten could file in the federal action. However, when the plaintiffs amended their federal complaint, Sletten filed counterclaims, two of which were dismissed based on the release. While the appeal was pending in the federal litigation, plaintiffs filed a state court action for fraud, alleging that Sletten had misrepresented his intention to be bound by the release, and breach of contract, alleging that by filing the counterclaims Sletten had breached the release. (Navellier v. Sletten, supra, 29 Cal.4th at pp. 86-87.)
Our Supreme Court concluded that Sletten's special motion to strike was well-taken, finding that that he "is being sued because of the affirmative counterclaims he filed in federal court. In fact, but for the federal lawsuit and Sletten's alleged actions taken in connection with that litigation, plaintiffs' present claims would have no basis. This action therefore falls squarely within the ambit of the anti-SLAPP statute's 'arising from' prong. (§ 425.16, subd. (b)(1).)" (Navellier v. Sletten, supra, 29 Cal.4th at p. 90.)
The counterclaim in Navellier v. Sletten was, like the lobbying activity here, "a 'statement or writing made before a . . . judicial proceeding.' (§ 425.16, subd. (e)(1))." (Navellier v. Sletten, supra, 29 Cal.4th at p. 90) Navellier v. Sletten held that it was that fact, not the breach of contract or fraud allegation, which controlled. The same must be said here. The causes of action are for breach of fiduciary duty and fraud, but they arise from protected conduct, and defendants are entitled to the benefit of the anti-SLAPP law.
We are not persuaded by Gardner's argument that the right to petition at issue in this case was not that of these defendants, but of NASE members. The argument is nothing more than the cause of action restated. It is an allegation the NASE (and Mega Life and Healthmarkets) lobbied against NASE members, not for them, in accord with the representation in the NASE membership agreement. The causes of action still arise from protected activity.
Nor are we persuaded by Gardner's argument that the order was erroneous at least as to Mega Life, since there were no "charging allegations" against Mega Life in the stricken causes of action, and that the causes of action are based on the NASE's petitioning activities, not Mega Life's.
The argument ignores the fact that the complaint repeatedly alleges that the NASE was controlled by Healthmarkets, that the NASE, Healthmarkets, and Mega Life were engaged in a conspiracy, that Healthmarkets put its officers on the NASE's board in order to "implement and direct" the NASE's fraudulent schemes, and so on. The sixth cause of action specifically alleges that "[t]he conduct of MEGA, NASE and [Healthmarkets] was fraudulent[,] . . ." and that the conduct described in the cause of action was "undertaken on behalf" of those defendants. The seventh cause of action alleges knowing false representations by all the defendants named in the cause of action, not just the NASE. Those allegations mean that Mega Life's and Healthmarkets' petitioning activities were implicated.
Gardner next argues that this case falls under one of the statutory exceptions to the anti-SLAPP statute under Code of Civil Procedure section 425.17, subdivision (b). This theory was not raised in the trial court, but Gardner argues that it should be considered because it concerns a pure issue of law. Citing Brill Media Co., LLC v. TCW Group, Inc., supra, 132 Cal.App.4th 324, he also argues that his failure to raise the issue below is of no moment, given that it was the moving defendants' burden to raise the issue.
We do not see that this is a pure question of law. Under Code of Civil Procedure section 425.17, subdivision (b), "Section 425.16 does not apply to any action brought solely in the public interest or on behalf of the general public if all of the following conditions exist: [¶] (1) The plaintiff does not seek any relief greater than or different from the relief sought for the general public or a class of which the plaintiff is a member. . . . [¶] (2) The action, if successful, would enforce an important right affecting the public interest, and would confer a significant benefit, whether pecuniary or nonpecuniary, on the general public or a large class of persons. [¶] (3) Private enforcement is necessary and places a disproportionate financial burden on the plaintiff in relation to the plaintiff's stake in the matter."
As the NASE argues, even if the first requirement could be evaluated based on the complaint, the second two cannot. Questions concerning the importance of a given right and the public interest, and of the necessity of private enforcement and financial burdens, are matters of fact. Because the matter was not raised in the trial court, those facts are not before us.
Nor do we agree that Brill Media, supra, exempts this question from the rule that arguments not asserted below will not be considered for the first time on appeal. (Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1488. fn 3.) "[A] litigant may not change his or her position on appeal and assert a new theory." (Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316.)
Brill Media held that the application of the Code of Civil Procedure section 425.17, subdivision (c) exception to the special motion to strike procedure is made as part of the "first prong" of the special motion to strike assessment, where the defendant has the burden to "demonstrate that the challenged cause of action is subject to the special motion to strike procedure." (Brill Media Co., supra, 132 Cal.App.4th at pp. 329-330.) Brill Media did not hold that a litigant may ignore a theory in the trial court, then raise it on appeal.
In any event, were we to consider the issue, we would find that the exception does not apply. Gardner did file this case as a class action, and sought damages for the class. However, in both subject causes of action, Gardner alleged that he had been personally damaged, and sought damages, and punitive damages, for himself on that account. "Because appellant alleges and seeks recovery of damages personal to himself, his claim fails to meet the first requirement set out in section 425.17, subdivision (b)." (Ingles v. Westwood One Broadcasting Services, Inc. (2005) 129 Cal.App.4th 1050, 1067.)
Finally, on this issue, Gardner argues the order must be reversed for public policy reasons. We have determined that the statute enacted by the Legislature applies to the causes of action, and are not at liberty to decide this appeal on any other basis.
Mega Life, Healthmarkets and the NASE were awarded attorney's fees on their special motion to strike. Gardner contends that those awards must be reversed, because the ruling on the merits must be. Since we do not reverse the order striking the causes of action, we do not reverse the attorney fees awards.
3. The motion for reconsideration/fourth amended complaint
After the court granted the special motion to strike, Gardner moved for reconsideration of that ruling and for a order vacating that ruling, and, in the event the court did not vacate the ruling, reconsideration based on a proposed fourth amended complaint. The trial court denied the motion, finding that Gardner had not presented new or different facts, circumstances, or law, and had otherwise failed to comply with Code of Civil Procedure section 1008.
Gardner contends that the ruling was in error, and that he presented new facts in that the fourth amended complaint, where he "clarified" that he was seeking no greater relief than other class members. He also contends that the amendments brought the complaint into compliance with Code of Civil Procedure section 425.17, subdivision (b). The amendments are not new facts, but a new legal theory which could have been presented at an earlier time -- not a ground for reconsideration under Code of Civil Procedure section 1008.
Moreover, we agree with the reasoning and result of Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, which held that a plaintiff has no right to amend a complaint after a special motion to strike has been made and the trial court has found that the cause of action is one arising from the right to petition or free speech. (Id. at p. 1073.)
Simmons reasoned that, "In enacting the anti-SLAPP statute, the Legislature set up a mechanism through which complaints that arise from the exercise of free speech rights 'can be evaluated at an early stage of the litigation process' and resolved expeditiously. [Citation.] Section 425.16 is just one of several California statutes that provide 'a procedure for exposing and dismissing certain causes of action lacking merit.' [¶] Allowing a SLAPP plaintiff leave to amend the complaint once the court finds the prima facie showing has been met would completely undermine the statute by providing the pleader a ready escape from section 425.16's quick dismissal remedy. Instead of having to show a probability of success on the merits, the SLAPP plaintiff would be able to go back to the drawing board with a second opportunity to disguise the vexatious nature of the suit through more artful pleading. This would trigger a second round of pleadings, a fresh motion to strike, and inevitably another request for leave to amend. [¶] By the time the moving party would be able to dig out of this procedural quagmire, the SLAPP plaintiff will have succeeded in his goal of delay and distraction and running up the costs of his opponent. [Citation.] Such a plaintiff would accomplish indirectly what could not be accomplished directly, i.e., depleting the defendant's energy and draining his or her resources. [Citation.] This would totally frustrate the Legislature's objective of providing a quick and inexpensive method of unmasking and dismissing such suits. [Citation.] [¶] We conclude the omission of any provision in section 425.16 for leave to amend a SLAPP complaint was not the product of inadvertence or oversight." (Simmons v. Allstate Ins. Co., supra, 92 Cal.App.4th at pp. 1073-1074; see also Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049 [holding that plaintiff could not avoid hearing on SLAPP motion by filing amended pleading, and citing Simmons with approval]; Navellier v. Sletten (2003) 106 Cal.App.4th 763, 772-773 ["a plaintiff cannot use an eleventh-hour amendment to plead around a motion to strike under the anti-SLAPP statute"]; Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 613 [plaintiff cannot avoid appellate review of ruling on special motion to strike by filing an amended pleading].)
Gardner argues that Simmons is wrongly decided, in that it did not discuss Code of Civil Procedure section 473, subdivision (a), which gives court authority to allow amendments to pleadings. Citing People v. Superior Court (Romero) (1996) 13 Cal.4th 497, he argues that the court's power to allow amendments cannot be eliminated "absent a clear legislative direction." We see nothing in Code of Civil Procedure section 473 or in Romero which indicates that Simmons was wrongly decided.
In the cited portion of Romero, the Supreme Court held that in criminal cases, "the statutory power to dismiss in furtherance of justice has always coexisted with statutes defining punishment and must be reconciled with the latter. (See Stats. 1850, ch. 119, § 629, p. 323.) For this reason, we will not interpret a statute as eliminating courts' power under [Penal Code] section 1385 absent a clear legislative direction to the contrary." (People v. Superior Court (Romero), supra, 13 Cal.4th at p. 518.) We know of no parallel concerns applicable to civil continuances.
With Code of Civil Procedure section 473, the Legislature gave courts broad powers with respect to amendments. For the reasons expressed in Simmons, the Legislature did not give courts power to allow plaintiffs to amend their complaints after rulings under the anti-SLAPP statute, in an attempt to plead around that statute.
Gardner also argues that the Legislature could not deprive the courts of the power to allow amendments. Here, he relies on the doctrine of separation of powers (Cal. Const., art. III, § 3) and again cites Romero, characterizing the court's discretion to allow amendment to a complaint under Code of Civil Procedure section 473 as a "core judicial function." We are unpersuaded. The Legislature may, and can, enlarge and limit a trial court's discretion to control civil litigation without running afoul of the separation of powers doctrine. The anti-SLAPP statute itself is but one example. Gardner has simply advanced no reason why we should find that the doctrine bars this particular limit on the court's discretion, and we can see none.
Disposition
The appealed-from rulings are affirmed. Respondents to recover costs on appeal.
I concur: TURNER, P. J.
MOSK, J., Concurring and Dissenting
I dissent with respect to the granting of the anti-SLAPP motion as to the Sixth and Seventh causes of action. Whether Code of Civil Procedure section 425.17 renders the anti-SLAPP statute inapplicable to the pleaded claims is an issue of law that can be considered for the first time on appeal. (See Major v. Silna (2005) 134 Cal.App.4th 1485, 1493, fn. 4; Ingels v. Westwood One Broadcasting Services, Inc. (2005) 129 Cal.App.4th 1050, 1065.) It should be noted that appellant did raise the application of section 425.17 in a motion for reconsideration, from the denial of which he also appeals. Moreover, the division has held that part of defendants’ initial burden to establish that the conduct is protected by section 425.16 is the burden to show that the complaint is not exempt under section 425.17, subdivision (c) [commercial speech]. (Brill Media Co., LLC v. TCW Group, Inc. (2005) 132 Cal.App.4th 324, 330.) That holding should apply to section 425.17, subdivision (b), the provision in issue in this case. In view of this principle and our de novo review of a decision under the anti-SLAPP motion (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3), we should review the issue.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
The anti-SLAPP statute has been extended so that routine lawsuits are thrown out of court on a summary procedure shortly after the complaint is filed. Accordingly, it seems that appellate courts should not employ hypertechnical grounds to avoid review of motions granting a motion to strike under the anti-SLAPP statute.
The allegations of the operative complaint appear to be covered by section 425.17, subdivision (b). “The three conditions of Code of Civil Procedure section 425.17, subdivision (b)(1) through (3) mirror the three elements for determining the eligibility for a fee award under the private attorney general doctrine as codified in section 1021.5.” (Blanchard v. DIRECTV, Inc. (2004) 123 Cal.App.4th 903, 914.)
The named plaintiff in this class action does not seek “any relief greater than or different from the relief sought for the . . . class of which the plaintiff is a member. (§ 425.17, subd. (b)(1).) As this is a class action, plaintiff seeks the same remedy on behalf of the class members as he does for himself. Plaintiff specifically alleges that he “was injured by the same fraudulent representations and omissions, and had his insurance premiums illegally increased like the rest of the class members.”
“The action, if successful, would enforce an important right affecting the public interest, and would confer a significant benefit, whether pecuniary or nonpecuniary, on the general public or a large class of persons.” (§ 425.17, subd. (b)(2).) This is a class action in which plaintiff seeks to recover for each member of the class of a portion of dues paid. The promotional material submitted in evidence by defendant, National Association of the Self-Employed (NASE), states that “[t]he negotiating power generated by our strength-in-numbers position is the true value of membership in the NASE.” It also says, “The NASE is the most experienced and largest small-business association of its kind.” Plaintiff alleges that purportedly NASE is a non-profit entity claiming 250,000-300,000 members paying $120 or $480 annually, plus extra amounts, thus generating $30,000,000 annually from membership dues. (See Beasley v. Wells Fargo Bank (1991) 235 Cal.App.3d 1383, 1417-1418 [Code of Civ. Proc., § 1021.5].)
“Private enforcement is necessary and places a disproportionate financial burden on the plaintiff in relation to the plaintiff’s stake in the matter.” (§ 425.17, subd. (b)(3).) The membership dues are $75 to a few hundred dollars, hardly enough for plaintiff to maintain an individual action. There is no indication that any government agency has intervened on behalf of the class or that private enforcement is not necessary.
As the sixth and seventh causes of action fulfill the requirements of section 425.17, subdivision (b), the anti-SLAPP motion should not have been granted. For that reason I dissent to that portion of the judgment. I concur as to the remainder of the majority opinion.
MOSK, J.