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Iron & Silk, Inc. v. Champion Arts, Inc.

Court of Appeals of California, First Appellate District, Division One.
Nov 25, 2003
No. A101502 (Cal. Ct. App. Nov. 25, 2003)

Opinion

A101502.

11-25-2003

IRON & SILK, INC., Plaintiff and Respondent, v. CHAMPION ARTS, INC., et al., Defendants and Appellants.


We have before us the second appeal in this action, which was spawned from a dispute that followed the sale of a Kung Fu academy from defendants to plaintiff. This appeal was taken from the trial courts denial of a SLAPP motion to dismiss the action brought by defendants pursuant to Code of Civil Procedure section 425.16. We conclude that the trial court erred by failing to examine each cause of action of plaintiffs complaint individually to determine whether the allegations primarily challenge the exercise of protected activities as defined in section 425.16, subdivision (e)(2), and reverse the judgment.

All further statutory references are to the Code of Civil Procedure.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

Much of the recitation of the background information is taken directly from our prior opinion in this case (Iron & Silk, Inc. v. Champion Arts, Inc., et al. (May 29, 2003, A099583) [nonpub. opn.]).

Defendant Tat-Mau Wong (Wong), a Kung Fu expert, is the president and sole owner of the common stock of two California corporations, Choy Lay Fut Kung Fu Institute, Inc. (Choy Lay Institute) and Champion Arts, Inc. (Champion Arts). The Choy Lay Institute operated three Kung Fu academies, including one in Concord, California. Champion Arts was formed to franchise Kung Fu academies under the trade name "Tat Wong Kung Fu Academies." Evelina Deocares-Lengyel was an employee of the Choy Lay Institute and became program director for the Concord Academy in 1997. After preliminary negotiations, Wong proposed to sell the Concord Academy to Deocares-Lengyel under a franchise agreement with his wholly owned corporation, Champion Arts. Evelina Deocares-Lengyel and her husband Andre organized the plaintiff corporation, Iron & Silk, Inc. (plaintiff or Iron & Silk), of which they are the sole owners, to undertake the purchase of and thereafter operate the Concord Academy.

On October 31, 2000, Iron & Silk separately executed an Asset Purchase Agreement and a Franchise Agreement with Champion Arts, Inc., which called for the payment by plaintiff of a purchase price of $35,000 and a franchise fee of $25,000. The Asset Purchase Agreement provided for the assignment to Iron & Silk of the lease for the Concord Academy location and existing student instruction contracts with the Choy Lay Institute, among other assets. The Deocares-Lengyels assumed management and control of the Concord Academy and operated it under the Franchise Agreement between Champion Arts and Iron & Silk. A series of disputes between Wong and the Deocares-Lengyels ensued, however: the Deocares-Lengyels complained that Wong continued to exercise an inordinate degree of control over the daily operations of the business; Champion Arts protested that the Deocares-Lengyels failed to operate the Concord Academy in accordance with the obligations and procedures specified in the Franchise Agreement. Default notices were sent by defendants to Iron & Silk between November 2001, and February 2002.

On February 15, 2002, Iron & Silk filed a complaint for damages and equitable relief against Wong, the Choy Lay Institute and Champion Arts that alleged causes of action for violation of the California Franchise Investment Law, the Unfair Competition Law, fraud and deceit, breach of contract, and for equitable relief. Before the complaint was served, on March 21, 2002, the Deocares-Lengyels and Wong participated in a private mediation conference. At the close of the conference, a settlement was memorialized in a four-paragraph memorandum signed by Wong, Evelina Deocares-Lengyel, and counsel for both parties, which purported to be "a full and final settlement of all claims arising out of their franchise relationship and the civil action." According to the settlement agreement, Iron & Silk was to pay defendants a total sum of $93,500, payable in a $25,000 lump sum payment made in cash or cashiers check upon the execution of a final settlement agreement, and 24 monthly payments of $2,854.17 thereafter; as security for the monthly payments, upon any delinquency in payment of over 60 days Champion Arts was given the right to immediate possession of the premises of the Concord Academy and a security interest in the assets of the business; the franchise relationship of the parties was terminated, with the exception of specified post termination obligations; Iron & Silk was granted permission to operate the Concord Academy under a new name, without any connection to Wong or Champion Arts; and, plaintiff agreed to dismiss the civil action with prejudice.

Iron & Silk filed a first amended complaint on April 29, 2002, which sought rescission of the settlement agreement and alleged new causes of action for breach of fiduciary duty, intentional interference with contractual relations, and intentional interference with prospective economic relationships. Named as additional defendants in the pleading were an employee of the Choy Lay Institute, Michele Harris, and three instructors at the Concord Academy, Pedro Luiz Barbosa, Brian Yee, and Michael Lee. The amended complaint alleged that before, during and after the mediation conference Wong and Harris embarked upon a campaign to lure away three key employees — Barbosa, Yee, and Lee — and customers of Iron & Silk to a new martial arts academy they planned to open in Concord. Plaintiff also filed an application for a preliminary injunction to prevent defendants from contacting any of Iron & Silks employees or students, or conducting business activity in the "Concord area in competition with plaintiff," which the trial court denied on May 2, 2002.

Defendants responded by filing a motion to enforce the settlement agreement pursuant to Code of Civil Procedure section 664.6, and to enter a judgment dismissing the action with prejudice. After a hearing on June 20, 2002, the trial court granted the motion for dismissal, but also granted plaintiff the opportunity to file a new action seeking damages for the defendants conduct undertaken after the date of the mediation conference. In a formal order granting the motion to enforce the settlement agreement filed July 2, 2002, the court refrained from addressing "any issues" related to plaintiffs right to assert "claims in another proceeding for conduct by Defendants occurring after the execution of the settlement agreement." The court also retained jurisdiction over the action "to enforce the terms of the settlement agreement," and ordered entry of a judgment of dismissal. The judgment of dismissal recited that "Plaintiff Iron & Silk, Inc. and its owners Evelina Lengyel and Andre Lengyel" had agreed to settle "the above-entitled cause pursuant to Code of Civil Procedure section 664.6," and ordered that the action be "dismissed in its entirety with prejudice."

In a prior appeal, we found that the signed memorandum formulated at the mediation conference on March 21, 2002, constitutes an enforceable settlement agreement under Code of Civil Procedure section 664.6, and affirmed the judgment of dismissal. We further concluded, however, that "the broad language of the judgment of dismissal must be construed as dismissing the action with prejudice only so far as it pertained to the settlement agreement," and agreed with the trial court that the settlement memorandum did not bar "Plaintiffs right to assert claims based on the Defendants actions occurring after the memorandum was executed." (Slip Opn. p. 8.)

Plaintiff filed a new complaint for damages and equitable relief on July 17, 2002, that included causes of action for fraud, negligent misrepresentation, unfair competition, intentional interference with contractual relations, intentional interference with prospective economic relationships, and defamation, along with a request for an injunction to prohibit interference by defendants with the business operations of Iron & Silk. Plaintiff repeated allegations that "before, during and after" the negotiations that culminated in the settlement agreement, defendants "engaged in a continuing and secretive campaign to lure away plaintiffs existing employees and instructors, as well as plaintiffs existing customers," from the Concord Academy "to a new kung fu academy that defendants were planning to open in the immediate Concord area." The "numerous tortious and wrongful acts" committed by defendants were described in the pleading to include: contacting plaintiffs employees to attempt to induce them to leave their employment with Iron & Silk and "become employees of defendants planned new academy in Concord;" attempting to persuade plaintiffs students or their parents to breach their martial arts instruction contracts with plaintiff and "enter into new contracts" with defendants by misrepresenting that an "unsigned" and invalid settlement agreement granted students the right to "escape their obligations under their contracts with Iron & Silk;" presenting to students of Iron & Silk an invalid "unsigned draft" of a preliminary injunction order with the unsupported and erroneous claim that it declared the student contracts unenforceable; encouraging "groundless litigation against Iron & Silk by its students;" making unfounded statements to Iron & Silk students that the Concord Academy "would no longer offer instruction in the Choy Lay Fut style of kung fu" as a result of the settlement agreement; falsely advising students and employees of Iron & Silk that the owners of the company "had concealed revenue" in "violation of its obligations under the franchise agreement with Champion Arts;" disseminating other false, defamatory and malicious information about plaintiffs and those associated with the Concord Academy; and, taking actions "in direct competition with Iron & Silks Concord Academy."

Further allegations were made that at the beginning of April 2002, defendants sent letters to students of the Concord Academy with "misrepresentations" that the academy is "no longer affiliated with its instructors," and advising the students to contact the defendants for further information. Defendants website contained open letters to Iron & Silk students from instructors Yee and Lee with notification that they had "left the Concord Academy" and "would be teaching classes with the Tat Wong organization in the Concord area." A reference was also made on the website to an "upcoming message" from Barbosa, who then still worked for the Concord Academy as chief instructor, but submitted his resignation soon thereafter.

The complaint added that plaintiff signed the settlement agreement "under the mistaken impression" created during the course of settlement negotiations that defendants "intended to use good faith and reach a resolution of the dispute underlying the action." Instead, "as a result of defendants tortious actions and misrepresentations" plaintiff lost revenue and sustained other damages due to cancellation of student contracts, failure of students to make "required payments under those contracts," and initiation of small claims court actions against Iron & Silk by students. Plaintiff asserts that defendants "ultimate goal" is to drive "plaintiff out of business," as indicated by a statement made by Wong to one of the Concord Academys former instructors.

Defendants answered the complaint and filed a cross-complaint against Iron & Silk and the Deocares-Lengyels for breach of the settlement agreement, breach of the franchise agreement, conversion, misappropriation of trade secret information, and unfair business practices. On October 18, 2002, defendant filed a SLAPP motion to dismiss plaintiffs action. After plaintiff submitted opposition, a hearing on the motion was held on January 16, 2003. The court exercised discretion to hear the SLAPP motion "even though it was untimely filed." While the court acknowledged that "some of the alleged wrongful acts may fall within the protection of the anti-SLAPP statute," the motion was denied on the ground that "the most important acts," primarily the " `luring away of Plaintiffs instructors, do not." This appeal followed.

DISCUSSION

Defendants argue that the trial court erred by "finding that Iron & Silks lawsuit did not arise from protected activity under the anti-SLAPP statute." Defendants position is that, as the trial court affirmed, at least some of the alleged wrongful acts "fall within the protection of the anti-SLAPP statute," as statements made in connection with an issue under consideration in a judicial proceeding or an issue of public interest pursuant to section 425.16, subdivision (e). Therefore, the argument proceeds, the trial court erred by denying the SLAPP motion in its entirety rather than finding "the entire complaint fails under the anti-SLAPP statute," or at least by failing to segregate the claims by plaintiff that "avoid application" of the SLAPP law and those that do not.

"Under section 425.16, `[w]hen a lawsuit arises out of the exercise of free speech or petition, a defendant may move to strike the complaint. [Citation.] Subdivision (b)(1) of section 425.16 provides in pertinent part: `A cause of action against a person arising from any act of that person in furtherance of the persons 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. In order to encourage participation in matters of public significance, section 425.16 specifies in subdivision (a) that the statute `shall be construed broadly. In Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1121-1122 [81 Cal.Rptr.2d 471, 969 P.2d 564], our high court noted `that the broad construction expressly called for in subdivision (a) of section 425.16 is desirable from the standpoint of judicial efficiency . . . . " (Governor Gray Davis Com. v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 456.)

"Section 425.16 articulates a `two-step process for determining whether an action is a SLAPP. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88 [124 Cal.Rptr.2d 530, 52 P.3d 703]; see also Paul for Council v. Hanyecz (2001) 85 Cal.App.4th 1356, 1364 .) ` "First, the court decides whether the defendant has made a threshold prima facie showing that the defendants acts, of which the plaintiff complains, were ones taken in furtherance of the defendants constitutional rights of petition or free speech in connection with a public issue. [Citation.] If the court finds that such a showing has been made, then the plaintiff will be required to demonstrate that `there is a probability that the plaintiff will prevail on the claim. [Citations.] The defendant has the burden on the first issue, the threshold issue; the plaintiff has the burden on the second issue. [Citation.]" [Citation.] [Citations.] `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. [Citation.]" (Governor Gray Davis Com. v. American Taxpayers Alliance, supra, 102 Cal.App.4th 449, 456.)"

`Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." [Citation.]" (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1231-1232.) "On appeal we review independently whether the complaint against the appellant arises from appellants exercise of a valid right to free speech and petition and if so, whether the respondent established a probability of prevailing on the complaint." (Governor Gray Davis Com. v. American Taxpayers Alliance, supra, 102 Cal.App.4th 449, 456.)

The trial court in the present case found that defendants failed to make the requisite prima facie showing that the defendants acts were taken in furtherance of constitutional rights of petition or free speech, and did not reach the second prong of the anti-SLAPP statute. (See Paul for Council v.Hanyecz, supra, 85 Cal.App.4th 1356, 1365.) "When moving to strike a cause of action under the anti-SLAPP statute, a defendant that satisfies its initial burden of demonstrating the targeted action is one arising from protected activity faces no additional requirement of proving the plaintiffs subjective intent. [Citation.] Nor need a moving defendant demonstrate that the action actually has had a chilling effect on the exercise of such rights." (Navellier v.Sletten, supra, 29 Cal.4th 82, 88, citing Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)

Subsection (e) of section 425.16 defines "`act in furtherance of a persons right of petition or free speech under the United States or California Constitution in connection with a public issue" to include: "(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) 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; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or 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." "To satisfy the `arising from test, it need only be `demonstrate[d] that the defendants conduct by which plaintiff claims to have been injured falls within one of the four categories described in [section 425.16,] subdivision (e). " (Yu v. Signet Bank/Virginia (2002) 103 Cal.App.4th 298, 316, quoting from Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th 53, 66.)

"The phrase `arising from in section 425.16, subdivision (b)(1), has been interpreted to refer to `the act underlying the plaintiffs cause or `the act which forms the basis for the plaintiffs cause of action and that such act must have been one done in furtherance of the right of petition or free speech. `In short, the statutory phrase "cause of action . . . arising from" means simply that the defendants act underlying the plaintiffs 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 plaintiffs cause of action itself was based on an act in furtherance of the defendants right of petition or free speech. [Citation.] [Citation, italics in original.]" (Gallimore v. State Farm Fire & Casualty Ins. Co. (2002) 102 Cal.App.4th 1388, 1397-1398; see also Kajima Engineering & Construction, Inc. v.City of Los Angeles (2002) 95 Cal.App.4th 921, 928-929; Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1089-1090.)

We agree with the trial court that despite the preexisting litigation between the parties, not all of the alleged wrongful conduct on the part of the defendants falls within the scope of the threshold definition of protected acts. The "arising from" requirement is not satisfied by showing that the challenged suit merely followed in time, or even that it was in response to or motivated by, the conduct which the suit challenges. "[T]he mere fact an action was filed after protected activity took place does not mean it arose from that activity." (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th 53, 66.) "Moreover, that a cause of action arguably may have been `triggered by protected activity does not entail it is one arising from such." (Navellier v. Sletten, supra, 29 Cal.4th 82, 89.) Thus, the chronological sequence of events whereby the defendants conduct followed the March 2002 mediation, the settlement agreement that was derived from it, and the subsequent judicial enforcement of the settlement agreement, does not compel the finding, as defendants seem to suggest, that the alleged acts were necessarily in furtherance of a statement made in connection with an issue under consideration before a judicial body.

We also find nothing in any of the alleged wrongful conduct that directly implicates a "public issue" or an "issue of public interest" within the meaning of clauses (3) and (4) of section 425.16, subdivision (e). " `The definition of "public interest" within the meaning of the anti-SLAPP statute has been broadly construed to include not only governmental matters, but also private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity. " (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist., supra, 106 Cal.App.4th 1219, 1233, quoting Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 479.) "[E]xamples of matters of public interest may include activities of private entities that may impact the lives of many individuals." (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1007-1008.) "Cases construing the term `public forum as used in section 425.16 have noted that the term `is traditionally defined as a place that is open to the public where information is freely exchanged. [Citation.]" (Id., at p. 1006.) Defendants conduct and statements transpired in a limited and private rather than a widespread, public context, and impacted only the students of the Concord Academy and their parents rather than a broad segment of the community. (Commonwealth Energy Corp. v. Investor Data Exchange, Inc. (2003) 110 Cal.App.4th 26, 34.)

Nor did defendants make any statement or writing "before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law," to qualify as protected acts pursuant to clause (1) of the statute. (Italics added.) None of the alleged acts and statements were made to judicial officials, or occurred within the confines of an appearance in a judicial proceeding. (Cf. ComputerXpress, Inc. v. Jackson, supra, 93 Cal.App.4th 993, 1009.)

We turn to the sole remaining category of protected acts for statements made "in connection with an issue under consideration or review" by a judicial body as provided in section 425.16, subdivision (e)(2). (Italics added.) "For the second clause, all that is needed is that the statement or writing be 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. " (Braun v. Chronicle Publishing Co. (1997) 52 Cal.App.4th 1036, 1043.) "A cause of action arising from litigation activity may appropriately be the subject of a section 425.16 motion." (Shekhter v. Financial Indemnity Co . (2001) 89 Cal.App.4th 141, 151.) " `[P]lainly read, section 425.16 encompasses any cause of action against a person arising from any statement or writing made in, or in connection with an issue under consideration or review by, an official proceeding or body. [Citation.]" (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734.) A defendant moving under section 425.16 to strike a cause of action arising from a statement made in connection with an issue under consideration in a legally authorized official proceeding within the meaning of clause (2) of subdivision (e) "need not separately demonstrate that the statement concerned an issue of public significance." (Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th 1106, 1123, fn. omitted; Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1416.) "Under the plain terms of the statute it is the context or setting itself that makes the issue a public issue: all that matters is that the First Amendment activity take place in an official proceeding or be made in connection with an issue being reviewed by an official proceeding." (Braun v. Chronicle Publishing Co., supra, at p. 1047.) "The statutes definitional focus is not on the form of the plaintiffs cause of action but rather the defendants activity giving rise to his or her asserted liability and whether that activity" itself was "based on" acts undertaken in connection with an issue under consideration in the litigation. (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist., supra, 106 Cal.App.4th 1219, 1232; see also Navellier v. Sletten, supra, 29 Cal.4th 82, 89-90, 92.)

Although plaintiffs complaint does not in its entirety fall within the scope of section 425.16, subdivision (e)(2), we conclude that some of the allegations are based upon statements and conduct connected to the issues raised in the litigation between the parties initiated by plaintiffs complaint, which comes within the meaning of a judicial proceeding authorized by law in section 425.16, subdivision (e)(2). (Sipple v. Foundation for Nat. Progress (1999) 71 Cal.App.4th 226, 237-238, italics added.) The fraud and negligent misrepresentation causes of action are based fundamentally upon allegations of statements and "omissions of material facts" by defendants specifically related to the settlement agreement and the obligations or status of the parties under it, particularly as to the operation of the Concord Academy by Iron & Silk. One of the primary allegations that supports the misrepresentation actions is intimately connected to the judicial action: that defendants professed the intent to exercise good faith to resolve the dispute according to the terms of the settlement agreement, but failed to do so, and instead acted to undermine the business of Iron & Silk. The second cause of action for unfair business practices correspondingly focuses upon deceptive and misleading statements made by defendants to plaintiffs students and employees "surrounding the preliminary settlement agreement."

We disagree with plaintiffs position that the mediation and resulting settlement agreement did not constitute "judicial proceedings" under section 425.16, subdivision (e)(2). Much more than mediation transpired in the present case. The mediation and settlement agreement resulted from a formal complaint filed by plaintiff. After the settlement was reached, plaintiff filed an amended complaint that requested rescission of the settlement agreement, asserted new causes of action, and applied for a preliminary injunction. Plaintiff then appealed unsuccessfully from the trial courts enforcement of the settlement agreement and dismissal of the amended complaint.

The causes of action for defamation, interference with contractual relations, and interference with prospective economic relationships do not expressly refer to the prior complaint, the mediation that proceeded from it, or the terms of the resulting settlement agreement. But in support of all of these causes of action, plaintiff incorporated and relied upon factual allegations that to induce students and employees to breach contracts with Iron & Silk defendants made false statements about the prior litigation between the parties and the terms of the settlement agreement or plaintiffs rights under it, all of which occurred within the context of issues raised in the judicial proceeding. Without the prior suit and settlement agreement, some of plaintiffs claims and allegations would have no basis.

Persuasive to us in resolving the present appeal is the recent decision in Navellier v. Sletten, supra, 29 Cal.4th 82, where the trustee of an investment fund, Sletten, filed an anti-SLAPP motion to strike a lawsuit against him by the company that managed the fund. The management company had previously sued the trustee in federal court, and the parties resolved that action with a settlement agreement that included the trustees execution of a release. The trustee later challenged the validity of that release in counterclaims he filed in the federal action. The management companys state court action was based on allegations that the trustee committed fraud in misrepresenting his intention to be bound by the release, and committed breach of contract by filing counterclaims in the federal action. (Id., at p. 87.) Both causes of action were found by the court to fall "squarely within the plain language of the anti-SLAPP statute." (Id., at p. 90.) The court concluded that, "Slettens negotiation and execution of the Release, therefore, involved `statement[s] or writing[s] made in connection with an issue under consideration or review by a . . . judicial body (§ 425.16, subd. (e)(2)), i.e., the federal district court, and his arguments respecting the Releases validity were `statement[s] or writing[s] made before a . . . judicial proceeding (id., subd. (e)(1)), i.e., the federal action." (Ibid.) In the present case, the allegations included by plaintiff in each cause of action of defendants misrepresentations and violation of the settlement agreement similarly seek to impose liability for acts undertaken in connection with issues considered and resolved in the prior judicial action. (Id., at p. 95; see also Shekhter v. Financial Indemnity Co., supra, 89 Cal.App.4th 141, 153; Braun v. Chronicle Publishing Co., supra, 52 Cal.App.4th 1036, 1045.)

Thus, plaintiffs causes of action contain elements of both protected and nonprotected conduct. That plaintiff also included in its causes of action allegations of defendants tortious acts and breach of contractual obligations outside the confines of the judicial dispute does not necessarily remove the case from the reach of an anti-SLAPP motion. We must not entertain any "false dichotomy between actions that target `the formation or performance of contractual obligations and those that target `the exercise of the right of free speech. [Citation.] A given action, or cause of action, may indeed target both. As the facts in this lawsuit illustrate, conduct alleged to constitute breach of contract may also come within constitutionally protected speech or petitioning." (Navellier v. Sletten, supra, 29 Cal.4th 82, 92.)

Where, as here, some but not all of the alleged wrongful acts satisfy the "arising from requirement" of the statute, the approved procedure is to independently consider and segregate each cause of action, but not the individual allegations. "[S]ection 425.16, subdivision (b)(1) states, `A cause of action against a person . . . shall be subject to a special motion to strike . . . . (Italics added.) The express language of section 425.16, subdivision (b)(1) allows a single cause of action to be stricken. The fact that other claims remain does not bar a trial judge from granting a section 425.16 special motion to strike." (Shekhter v. Financial Indemnity Co., supra, 89 Cal.App.4th 141, 150.) The statute requires separate consideration of each cause of action, but the court has no authority under section 425.16 to strike particular allegations. (See ComputerXpress, Inc. v. Jackson, supra, 93 Cal.App.4th 993, 1004;Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073; M. G. v. Time Warner, Inc. (2001) 89 Cal.App.4th 623, 627-628; Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 308; Shekhter v. Financial Indemnity Co., supra, at p. 150.)

The proper treatment of "mixed" causes of action — that is, a section 425.16 motion directed against a cause of action that includes references to both protected and nonprotected activity — takes into account that a plaintiff should not be able to shield a cause of action challenging protected free speech or petitioning activity from a special motion under section 425.16 by the tactic of adding extraneous allegations of nonprotected activity. (Fox Searchlight Pictures, Inc. v. Paladino, supra, 89 Cal.App.4th 294, 308.) "[A] plaintiff cannot frustrate the purposes of the SLAPP statute through a pleading tactic of combining allegations of protected and nonprotected activity under the label of one `cause of action. " (Ibid ., fn. omitted.) Application of an anti-SLAPP motion to a cause of action if at least one alleged essential act was in furtherance of the defendants First Amendment rights is also consistent with the language of section 425.16, subdivision (b), that authorizes the motion to be directed to "[a] cause of action against a person arising from any act of that person in furtherance of the persons [First Amendment rights]." (Italics added.) Further, a defendant who has brought an anti-SLAPP motion is not required to prove that the purpose of the cause of action was to chill the defendants rights of free speech and petition. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th 53, 57, 68.) Thus, a defendant may move to strike a cause of action under section 425.16 if at least one of the predicate acts was an act in furtherance of the defendants right to petition or free speech. (Fox Searchlight Pictures, Inc. v. Paladino, supra, at p. 308.) But in all cases, the "arising from" requirement means that at the very least the plaintiffs cause of action must itself be "based on an act in furtherance" of the defendants protected conduct. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78, 79.) When allegations of nonprotected activity are merely collateral or immaterial to a claim challenging primarily the exercise of the rights of free speech or petition, they may be disregarded in determining whether the cause of action arises from protected activity. (See Fox Searchlight Pictures, Inc. v. Paladino, supra, at p. 308.)

Here, the trial court failed to separate the individual causes of action in ruling upon the threshold element of the anti-SLAPP motion, and instead erroneously considered the complaint as a whole. The court also failed to properly evaluate the allegations within each cause of action to determine whether nonprotected activity was incidental or fundamental to the cause of action. In addition, the trial courts finding that the "most important" act was the "luring away" of plaintiffs instructors by defendants failed to differentiate the resulting damage to plaintiff from the crucial inquiry directed at the defendants alleged wrongful acts. The loss of instructors and students may have been the primary harm caused to the plaintiff or embodied the essence of the plaintiffs claims, but was not an act of the defendants for purposes of an anti-SLAPP motion. "`Considering the purpose of the [anti-SLAPP] provision, expressly stated, the nature or form of the action is not what is critical but rather that it is against a person who has exercised certain rights [citation]." (Navellier v. Sletten, supra, 29 Cal.4th 82, 93, quoting Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 652.)

We note that the filing of small claims court actions against Iron & Silk by former students were also not the acts of the defendants.

DISPOSITION

Accordingly, the judgment is reversed and the case is remanded to the trial court with directions to examine the allegations of the complaint in accordance with the views expressed herein to determine whether each cause of action is predicated upon a significant act in furtherance of the defendants right of free speech in connection with an issue under consideration in the judicial action between the parties, even if those causes of action are also based in part on activity that is not so protected. If the court finds that for any cause of action defendant has met the threshold SLAPP requirement, the burden then shifts to plaintiff to establish that there is a probability of prevailing on the merits of the claim.

Costs are awarded to defendants.

We concur: Stein, Acting P. J., Margulies, J.


Summaries of

Iron & Silk, Inc. v. Champion Arts, Inc.

Court of Appeals of California, First Appellate District, Division One.
Nov 25, 2003
No. A101502 (Cal. Ct. App. Nov. 25, 2003)
Case details for

Iron & Silk, Inc. v. Champion Arts, Inc.

Case Details

Full title:IRON & SILK, INC., Plaintiff and Respondent, v. CHAMPION ARTS, INC., et…

Court:Court of Appeals of California, First Appellate District, Division One.

Date published: Nov 25, 2003

Citations

No. A101502 (Cal. Ct. App. Nov. 25, 2003)