Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County, No. 30-2008-00113703 Sheila Fell, Judge.
McGuinnes & Associates, Joseph G. McGuinnes and Jeffrey S. Flashman, for Defendants and Appellants.
Murtaugh Meyer Nelson & Treglia, Michael J. Murtaugh and David Davidson, for Plaintiff and Respondent.
OPINION
BEDSWORTH, ACTING P. J.
Dillon Consulting Engineers, Inc., and Michael Dillon (collectively Dillon) appeal from an order denying their motion to strike the complaint filed against them by Ware Malcomb, pursuant to Code of Civil Procedure section 425.16 – the “anti-SLAPP” law. The trial court denied the motion based upon its determination the anti-SLAPP law did not apply, as the protected speech or petitioning activity alleged in the complaint – i.e, Dillon’s direct communication to governmental authorities of his decision to rescind his engineering approval of design documents created in connection with Ware Malcomb’s construction project – was merely “incidental” to Ware Malcomb’s alleged causes of action based upon his breach of professional duties and contract.
Code of Civil Procedure section 425.16 creates a summary procedure whereby the defendant in a lawsuit which alleges liability based upon the defendant’s protected speech or petitioning activity – a potential “Strategic Lawsuit Against Public Participation” or SLAPP action – can test the merits of that suit, and have it dismissed if the court determines the plaintiff cannot demonstrate a prima facie case for liability. The anti-SLAPP law does not, however, create any legal immunity for speech or petitioning activity, or “prohibit liability” based thereon, as Ware Malcomb seems to contend. The statute is merely a mechanism for expeditiously disposing of those claims which are revealed to have no merit under other existing laws.
We affirm the order. The causes of action asserted by Ware Malcomb against Dillon were all based upon the allegations that Dillon entered into an agreement to provide the engineering services necessary for the design phase of the project, and that he was aware those services included producing design documents which were “signed and sealed under Mr. Dillon’s license.” His alleged rescission of that signature and seal, which apparently rendered those documents worthless in the context of the construction permitting process, was accomplished by notification to Ware Malcomb itself – the party with whom Dillon had contracted to perform the engineering services – and did not require any notification to “third parties.” The fact that Dillon chose to additionally notify third parties of his decision (a fact not actually alleged in the complaint) was merely incidental to each of the causes of action alleged.
FACTS
Ware Malcomb was retained to provide architectural services for the construction of a multi-story commercial building in the City of AlisoViejo. In 2006, Dillon submitted a proposal to provide engineering services to Ware Malcomb in connection with the “smoke control” aspect of that project. The proposed engineering services were divided into two phases – design phase services for $41,000, and construction phase services for an additional $54,000.
Ware Malcomb ultimately hired Dillon for the design phase, and worked with Dillon to create design documents that were then submitted to the relevant governmental authorities for purposes of obtaining permits. The design documents, which bore Dillon’s signature and seal as engineer, were approved by the authorities, whereupon Dillon was paid his full contract price.
However, when the project proceeded to the construction phase, Ware Malcomb elected to work with a different engineering firm in connection with the smoke control system, and did not hire Dillon for that phase of the project. Thereafter, a dispute arose concerning whether the new engineer’s intended methods of fulfilling its construction phase duties were appropriate. Essentially, Dillon took the position the new engineer could not be allowed to deviate from what Dillon himself would have done during the construction phase, because “[a]s the special inspector, he is required to inspect in accordance with the documents produced by the engineer of record for the system he is inspecti[ng]....” Dillon claimed that as “engineer of record” for the smoke control system, he was required to “maintain control of the elements of [his] design, the verification and compliance therewith and the ability to exercise independent judgment in the discharge of these duties.” Dillon contended he could not “perform these duties under the prevailing circumstances.”
When Ware Malcomb did not acquiesce to Dillon’s demand the new engineer act in accordance with Dillon’s directions during the construction phase, Dillon informed Ware Malcomb by letter that he was “formally rescinding [his] seal and signature on all engineering documents furnished to date.”
The letter, which was incorporated by reference into the complaint, also states that Dillon is “notifying... other interested parties that [he was] withdrawing as engineer of record for the smoke control system....” The letter reflects that it was copied to, among others, the City of Aliso Viejo and the Orange County Fire Authority. However, the complaint itself does not allege that Dillon actually did notify those “interested parties,” and does not rely upon any such notification as an element of any cause of action.
Ware Malcom alleges that Dillon’s rescission of his signature and seal on the design documents was unwarranted and improper, and amounted to both a breach of his professional obligations and a breach of the contract entered into between the parties.
Allegedly as a result of Dillon’s improper rescission, the design documents he had signed and sealed (and for which he had already been paid), were rendered worthless and would no longer be relied upon by the permitting authorities. Consequently, Ware Malcomb was required to pay the new engineer a separate fee of $18,000 “to redo the Project’s fire and life safety engineering design-phase services and documents that Dillon Corporation had already been paid for and provided, but had rescinded.” Moreover, as an alleged result of Dillon’s rescission, the project was delayed for some time while those new design documents were prepared and approved.
Despite Dillon’s rescission of his signature and seal on the design documents, he retained the entire fee he had been paid to prepare those documents for submission to the permitting authorities.
Ware Malcomb filed a complaint against Dillon, alleging causes of action for malpractice, breach of contract, breach of fiduciary duty, and money had and received, based upon the facts described above. Dillon responded by filing a motion to strike the complaint as a SLAPP action, pursuant to Code of Civil Procedure section 425.16. According to Dillon, the “complaint revolves entirely around one contention, that [Dillon] ‘rescind[ed] his seal and signatures on all Design Documents that had already been accepted and approved by the Civil Authorities....’ (Complaint ¶ 10.) The manner in which this rescission was accomplished was by the sending of a correspondence to the appropriate agencies stating that the signatures and seal could no longer be relied upon.”
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Dillon asserted the complaint was subject to the anti-SLAPP law, arguing “[s]uch publication is protected by... section 425.16 [because it is] one that was made in an official proceeding (i.e., the determination of whether to approve plans and allow occupancy of a building) and involves the public interest (a 242,000 square-foot corporate headquarters in Aliso Viejo.)”
The trial court was not persuaded. It reasoned that “[e]ven assuming that there is a public interest involved, the fact that Defendant communicated the rescission to officials as well as to Plaintiff is not the crux of this case; it is Plaintiff’s contention that it paid Defendant for documents with seals, that the rescission thus constituted a breach and that [Plaintiff] incurred monetary damages because it had to retain another entity to provide the same services for which it had already paid Defendant. [¶]... [I]n this case, any connection with protected activities is peripheral or incidental, as it is Defendant’s alleged failure to meet its contractual obligations that underlies this case.”
DISCUSSION
Our review of an order denying a motion to strike a complaint as a SLAPP suit is de novo. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999, [“Whether section 425.16 applies and whether the plaintiff has shown a probability of prevailing are both reviewed independently on appeal.”]; Jespersen v. Zubiate-Beauchamp (2003) 114 Cal.App.4th 624, 629.)
Section 425.16, subdivision (b)(1), requires a two-step process for determining whether a defendant’s motion to strike should be granted. “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.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)
Then, only if the court finds that such a showing has been made, the burden shifts to plaintiff to demonstrate “there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1); DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562, 567-568.)
Consequently, in this case, Dillon had the initial burden of establishing the causes of action against it arose out of an “act... in furtherance of [its] right of petition or free speech under the United States or California Constitution in connection with a public issue....” (§ 425.16, subd. (b)(1).)
Section 425.16, subdivision (e), specifically defines an “act in furtherance of a person’s 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.”
However, it is not enough that some protected activity be merely implicated in the allegations of the complaint. “[A] defendant in an ordinary private dispute cannot take advantage of the anti-SLAPP statute simply because the complaint contains some references to speech or petitioning activity by the defendant. (See Paul v. Friedman [(2002)] 95 Cal.App.4th [853,] 866, [‘[t]he statute does not accord anti-SLAPP protection to suits arising from any act having any connection, however remote, with an official proceeding’].) We conclude it is the principal thrust or gravamen of the plaintiff’s cause of action that determines whether the anti-SLAPP statute applies ([City of] Cotati [v. Cashman] 29 Cal.4th [69,] 79), and when the allegations referring to arguably protected activity are only incidental to a cause of action based essentially on nonprotected activity, collateral allusions to protected activity should not subject the cause of action to the anti-SLAPP statute.” (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188.)
Thus, as the moving party, Dillon had the burden of establishing that the allegation of protected activity – i.e., his notification to governmental authorities of his rescission – was not merely incidental to the causes of action alleged by Ware Malcomb in this case. In our view, the trial court did not err in rejecting the assertion.
First, as we have already noted above, Ware Malcomb did not even allege in its complaint that Dillon had communicated his rescission decision directly to the government entities. That purported fact is merely reflected in the text of Dillon’s rescission letter to Ware Malcomb, which is incorporated by reference into the complaint. However, the complaint itself neither alleges that Dillon’s claim of notifying the governmental entities is true, nor relies upon that claim as part of the basis of any cause of action. Instead, the complaint alleges that Dillon accomplished his rescission, and thus rendered his contractual performance retroactively worthless, simply by communicating that decision to Ware Malcomb. Because Ware Malcomb does not actually rely on Dillon’s purported communication to the governmental entitles in support of any of its causes of action, it would be difficult to construe that communication as other than incidental to those causes of action.
But even if we pretended that Ware Malcomb’s complaint had actually alleged, as true, that Dillon also communicated his rescission decision to the governmental entities, we would affirm the court’s decision in any event. Although Dillon asserts his notification to third parties was the key to each of Ware Malcomb’s claims, because “[t]he manner in which this rescission was accomplished was by the sending of a correspondence to the appropriate agencies stating that the signatures and seal could no longer be relied upon” (italics added), we cannot agree.
Because the contract at issue in this case, which required that Dillon provide design documents bearing his signature and seal, was between Ware Malcomb and Dillon; and it was Ware Malcolm, rather than Dillon, which had applied for the permits and was responsible for dealing with the governmental authorities; the manner in which Dillon would accomplish a rescission of his services would be by notification to Ware Malcomb itself, not to those governmental entities. “[T]o effect a rescission a party to the contract must, promptly upon discovering the facts which entitle him to rescind... [¶]... Give notice of rescission to the party as to whom he rescinds.” (Civ. Code, § 1691, subd. (a), italics added.) It would be the obligation of Ware Malcomb, the party actually responsible for obtaining the permits, and which had proffered Dillon’s signature and seal to the permitting authorities as part of that process, to keep those authorities apprised of relevant developments affecting the validity of that permitting process.
We acknowledge Dillon’s assertion that his rescission of the signature and seal on the design documents could not qualify as a rescission of the contract itself, since the contract had been fully performed prior to that time. We do not, however, find the assertion persuasive. By rescinding his signature and seal, Dillon knowingly put Ware Malcomb in essentially the same position it would have been in if Dillon had never affixed his signature and seal to the documents in the first place – except at a more disruptive point in the construction process. Moreover, there is certainly no prohibition against effecting a rescission even after the contract in question has been performed and payment received. As set forth in Civil Code section 1691, the two requirements of a rescission are (1) giving notice; and (2) “Restor[ing] to the other party everything of value which he has received from him under the contract or offer to restore the same upon condition that the other party do likewise, unless the latter is unable or positively refuses to do so.” (Civ. Code, § 1691, subd. (b).) Thus, rescission is available, in appropriate circumstances, not only to cancel an executory contract, but also to unwind a contract to the extent of its performance. It is the fact that Dillon gave notice of rescission, without offering to restore the value he had received, which forms part of Ware Malcomb’s complaint in this case.
Dillon’s decision to directly notify those governmental authorities of its rescission decision, rather than rely upon Ware Malcomb’s obligation to keep the authorities apprised, may reflect a concern that Ware Malcomb could not be trusted to fulfill its obligation in that regard – but that concern does not transform the additional notifications into a necessary aspect of the rescission itself. Thus, it appears that Dillon’s purported conduct of communicating its rescission directly to the governmental authorities would qualify as “merely incidental” to Ware Malcomb’s cause of action based upon rescission.
And finally, even if the notification to the governmental authorities were viewed as “[t]he manner in which this rescission was accomplished,” (italics added), that would still be insufficient to elevate that notification into “petitioning activity.” As noted in McConnell v. Innovative Artists Talent & Literary Agency, Inc. (2009) 175 Cal.App.4th 169, 177, the mere fact defendant’s alleged wrongful act was communicated in a letter is not sufficient to compel application of the anti-SLAPP law.
In McConnell, the court recognized that the misconduct, and the communication of it, are not necessarily the same thing. “McConnell’s claims do not arise from Harris’s letter, but from Harris’s action ‘temporarily modif[ying]’ McConnell’s and Press’s job duties, effectively precluding them from engaging in any of the ordinary activities of a talent agent. The fact that these ‘modifications’ to McConnell’s job duties were reduced to writing does not convert them from conduct affecting the conditions of employment to protected free speech activity.”
Here, as in McConnell, the alleged liability is based upon the underlying act – in that case it was the restriction of job duties, and in this case Dillon’s rescission of the signature and seal – which was then reduced to writing as a means of implementing the decision.
Moreover, as cogently stated in Wang v. Wal-Mart Real Estate Business Trust (2007) 153 Cal.App.4th 790, 804 “[t]here is no bright-line rule that all cases involving developments and applications for public permits always involve the type of petitioning conduct protected by the anti-SLAPP statutory scheme.” Instead, when the wrongful act at issue is merely a contractual dispute between two parties involved in a construction project which, just by its very nature, would invoke the approvals of public entities, the connection to that approval process may be viewed as merely incidental to the specific cause of action alleged. In Wang, plaintiffs, who had sold parcels of property to Wal-Mart, sued it and others for breach of contract and fraud, contending that plaintiffs’ remaining parcels of property had been wrongfully deprived of street access through defendants’ actions in planning and developing the store on the purchased parcels. Wal-Mart argued its alleged liability arose out of a development carried out in accordance with a permit application approved by the city, and thus arose from “petitioning” activity.
The Wang court was unpersuaded. “We believe that a fair reading of the allegations about the acts underlying the plaintiffs’ causes of action leads to a conclusion that plaintiffs are relying on acts that Wal-Mart carried out in furtherance of its economic interests in implementing the contractual agreement.... The requests to governmental authorities for approval of land use planning items were made only in conjunction with the principal business transaction. The overall thrust of the complaint challenges the manner in which the parties privately dealt with one another, on both contractual and tort theories, and does not principally challenge the collateral activity of pursuing governmental approvals. (Wang v. Wal-Mart Real Estate Business Trust, supra, 153 Cal.App.4th at p. 809, italics added.)
The instant case is similar to Wang. Ware Malcomb’s claims against Dillon arise out of the parties’ private, contractual dispute about the manner in which the construction phase inspections would be carried out. The governmental authorities played no part in that dispute. It was only when Dillon’s demand that the inspections be carried out in accordance with his direction went unheeded, that the dispute culminated in Dillon’s rescission of his performance under the parties’ agreement. And only after that rescission did the governmental authorities become involved in the problem at all. As in Wang, the complaint is based upon how the parties dealt with each other, and turns on whether Dillon breached an obligation created by their private agreement, not on any petitioning activity.
A similar analysis is applied in cases where the alleged liability arises out of the defendant’s participation in litigation. Although litigation itself is inherently “petitioning” activity, not every breach of duty which occurs in connection with litigation falls within the protection of the anti-SLAPP law. Instead, courts will look at whether the acts alleged were wrongful in and of themselves – as in the case of malicious prosecutions, abuses of process, and the like – or were wrongful only because they evidenced the breach of some other preexisting duty. The former are subject to the anti-SLAPP law, while the latter may not be. (See Kolar v. Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532.) Thus, in Benasra v. Mitchell Silberberg & Knupp LLP (2004) 123 Cal.App.4th 1179, the court concluded section 425.16 did not apply to a former client’s suit against a law firm for breach of its duty of loyalty. That breach occurred when the law firm, which had previously represented the plaintiff, chose to represent the plaintiff’s opponent in an arbitration proceeding.
Despite the fact that pursuit of arbitration proceedings does qualify as “petitioning” activity under the anti-SLAPP law, the Benasra court nonetheless rejected the defendant’s argument that the claims against it arose out of that petitioning activity. (Benasra v. Mitchell Silberberg & Knupp LLP, supra, 123 Cal.App.4th at pp. 1186-1187.) Instead, the court concluded the claims were actually based on the duties imposed by rule 3-310(C) of the State Bar Rules of Professional Conduct and that “a breach of a duty of loyalty based on violation of these rules occurs whether or not confidences are actually revealed in the adverse action.” (Benasra v. Mitchell Silberberg & Knupp LLC, supra, 123 Cal.App.4th at p. 1187.) As the court explained: “The breach occurs not when the attorney steps into court to represent the new client, but when he or she abandons the old client.... In other words, once the attorney accepts a representation in which confidences disclosed by a former client may benefit the new client due to the relationship between the new matter and the old, he or she has breached a duty of loyalty. The breach of fiduciary duty lawsuit may follow litigation pursued against the former client, but does not arise from it. Evidence that confidential information was actually used against the former client in litigation would help support damages, but is not the basis for the claim.... [Plaintiffs’] claim is not based on ‘filing a petition for arbitration on behalf of one client against another, but rather, for failing to maintain loyalty to, and the confidences of, a client.’” (Id. at p. 1189; see also United States Fire Ins. Co. v. Sheppard, Mullin, Richter & Hampton (2009) 171 Cal.App.4th 1617; Freeman v. Schack (2007) 154 Cal.App.4th 719, 732 “[In our view, plaintiffs’ allegations concerning Schack’s filing and settlement of the Hemphill litigation are incidental to the allegations of breach of contract, negligence in failing to properly represent their interests, and breach of fiduciary duty arising from his representation of clients with adverse interests.”].)
Here, the causes of action alleged in Malcomb’s complaint were each based on the allegation that Dillon had improperly rescinded his performance under the parties’ contract, not upon his decision to directly notify the governmental authorities of that rescission. The fact that he did so – which was not even alleged as part of the complaint – was merely incidental to Ware Malcomb’s claims, and thus was an insufficient basis to bring the complaint within the purview of the anti-SLAPP law.
In light of our conclusion that the complaint does not arise out of protected activity, we need not, and do not, address whether Ware Malcomb satisfied its burden of showing a likelihood it will prevail on the merits of its causes of action arising out of Dillon’s rescission of his signature and seal on the documents.
Respondent’s motion to take judicial notice, filed August 28, 2009, is DENIED.
The order denying Dillon’s special motion to strike is affirmed. Ware Malcomb is to recover its costs on appeal.
WE CONCUR: O’LEARY, J., FYBEL, J.