Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Appeal from an order of the Superior Court of Orange County, Ct. No. 07CC07753, Gregory H. Lewis, Judge.
Arnold & Porter, Ronald L. Johnston, Brian K. Condon and Charles C. Cavanagh, for Cross-defendant and Appellant.
Locke Lord Bissell & Liddell, William S. Davis, Mitchell J. Popham, Nina Huerta and Cory Baskin, for Cross-complainant and Respondent.
OPINION
BEDSWORTH, ACTING P. J.
Nikken, Inc., appeals from an order that denied its special motion to strike a cause of action for interference with prospective economic advantage in Robert Proctor’s cross-complaint. It argues the claim was based on conduct protected by the litigation privilege. We agree and reverse with directions to enter an order striking the cause of action.
FACTS
Nikken is a marketing company that sells wellness, nutrition, and fitness products through a network of exclusive distributors that have agreed not to market competing products. Proctor is a provider of training and personal motivation services, which are offered through training programs and written training materials.
The facts are drawn from the pleadings and evidence offered by the parties on the special motion to strike.
On April 30, 2004, Proctor entered into an agreement with Nikken to provide it with training and personal motivation services and written training materials. These included Proctor’s “Lead the Field” training materials, developed for Nikken, which Nikken purchased from Proctor and resold to its distributors. The agreement was for a one-year term, renewable automatically unless either party gave notice of cancellation 90 days prior to the end of the then current term. Section 6 (“Confidentiality”) prohibited Proctor from disclosing Nikken’s confidential information during the term of the agreement, using it to the company’s detriment, or allowing others to use it. Section 7 (“Noninterference and Non-Compete”) provided Proctor would not interfere with Nikken’s business or compete with it by offering a similar training program to a competitor for two years following termination of the agreement.
On October 30, 2006, Proctor wrote to Nikken’s president (Bob Richards). In Proctor’s view, the letter terminated the parties’ agreement, but it was not so understood by Nikken. Between the time Nikken responded on February 26, 2007 and July 9, 2007, the parties exchanged further correspondence that staked out their respective positions and threatened litigation. Basically, Nikken believed the agreement remained in force, and Proctor was in breach because he had entered into a contract with a competitor known as Diamond Tree, used its confidential information to benefit Diamond Tree, and solicited Nikken’s distributors to market Diamond Tree’s products. Proctor’s view was he had terminated the Nikken agreement because of the latter’s breach, and he was free to move on and attempt to mitigate his financial losses. Suffice it to say that which view is correct remains to be decided at trial.
Nikken filed an action against Proctor on July 10, 2007. It alleged, among other things, that Proctor went to work for Diamond Tree while under contract to Nikken and used Nikken’s confidential information and trade secrets to solicit its distributors on behalf of Diamond Tree. Causes of action were set out for breach of contract, breach of the covenant of good faith and fair dealing, unfair competition, misappropriation of trade secrets, and interference with contract.
Proctor responded with the instant cross-complaint. He set out causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition, and interference with prospective economic advantage. The interference claim alleged Proctor started to discuss a business relationship with Diamond Tree in December 2006. In February 2007, “Nikken began a campaign of threats of litigation and disparagement in an attempt to thwart [that relationship]. Nikken wrote numerous letters to Proctor, threatening litigation. Nikken also threatened Cho [president of Diamond Tree] and Diamond Tree with litigation. Further, Nikken . . . published numerous damaging statements about Proctor, claiming that he was acting in an unlawful and/or unethical manner.” The putative result was interference with Proctor’s anticipated business relationship with Diamond Tree.
Nikken moved to strike the interference cause of action under the anti-SLAPP statute. Nikken’s position was that the cause of action was based on prelitigation communications protected by the litigation privilege. As supporting evidence, Nikken offered copies of its correspondence with Proctor. Proctor did not offer any evidence in opposition. The trial court denied the motion upon concluding the gist of the claim was that Nikken had threatened third parties with litigation, and such conduct was not protected activity.
Nikken also moved to strike Proctor’s unfair competition cause of action, and the motion was granted as to that claim. No appeal was taken from that ruling.
I
Nikken argues Proctor’s interference claim is based on prelitigation communications with Proctor and Diamond Tree that are protected by the litigation privilege. We agree.
Code of Civil Procedure section 425.16 provides a cause of action that arises from “any act . . . in furtherance of the . . . right of petition or free speech” is subject to a special motion to strike, unless the plaintiff establishes a probability he will prevail on the merits. (§ 425.16, subd. (b)(1).) Acts in furtherance of the right of petition or free speech includes “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.” (§ 425.16, subd. (e)(2).)
All subsequent references are to the Code of Civil Procedure unless otherwise indicated.
Statements protected by the litigation privilege are also protected speech under section 425.16. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115.) A communication is within the privilege if made in “any . . . judicial proceeding.” (Civ. Code, § 47 subd. (b).) “To be privileged under [Civil Code] section 47, a statement must be ‘reasonably relevant’ to pending or contemplated litigation. [Citations.]” (Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1266.) A distinction is drawn between statements made prior to litigation and those made after it has been commenced. “A prelitigation communication is privileged only when it relates to litigation that is contemplated in good faith and under serious consideration. [Citations.]” (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1251.) This showing may be implied where there was an ongoing dispute between parties, “the specter of litigation loomed over all communications between the parties,” and “messages [were sent] concerning the subject of the dispute and threatening appropriate action . . . .” (Rohde v. Wolf (2007) 154 Cal.App.4th 28, 36-37.)
The litigation privilege is absolute, and it protects a defendant from all tort liability save malicious prosecution. (Silberg v. Anderson (1990) 50 Cal.3d 205, 215-216.) Where allegedly wrongful conduct is privileged, a plaintiff cannot prevail on his claims and a special motion to strike must be granted. (See, e.g., Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1065 [“Because the trial court correctly found that there was no reasonable probability Rusheen’s abuse of process claims would prevail on the ground Cohen’s allegedly wrongful conduct was privileged [citation], it properly granted the anti-SLAPP motion [citation] . . . .”].)
Applying this standard, we find the letters to Proctor are privileged and cannot support the interference claim. In them, Nikken set out its claims and the factual basis for them, demanded Proctor cease conduct Nikken found objectionable, and threatened legal action if the demand was not met. Nikken’s letters are “classic prelitigation demand letter[s] . . . that the litigation privilege is intended to protect since it represents the first step toward litigation and the purpose of the litigation privilege is to provide ‘the utmost freedom of access to the courts without rear of being harassed subsequently by derivative tort actions. [Citations.]” (Aronson v. Kinsella (1997) 58 Cal.App.4th 254, 270.) There can be no doubt that litigation was contemplated in good faith and under serious consideration by Nikken, since its final letter of the exchange (dated July 9, 2007) was followed the next day by an action against Proctor. The letters to Proctor are privileged.
The alleged litigation threats against Diamond Tree and Cho (collectively, Diamond Tree) are equally privileged. We may reasonably infer from Nikken’s correspondence with Proctor that it took the same position with Diamond Tree, namely, that any dealings between Proctor and Diamond Tree would be a breach of the Nikken/Proctor contract, and Proctor was prohibited from using Nikken’s confidential information or soliciting its distributors on behalf of Diamond Tree. Such demands were related to Nikken’s contemplated litigation against Proctor, since the same acts formed the basis for both sets of prelitigation communications. Put otherwise, any communications to Diamond Tree were aimed at putting a stop to its doing this business with Proctor. So any litigation threats made to Diamond Tree are also protected by the litigation privilege.
Proctor argues Nikken cannot assert the litigation privilege because it failed to offer evidence of the content of its communications with Diamond Tree. No supporting authority is offered, so we deem the point waived. Moreover, there was evidence of those communications. It may be inferred Nikken raised with Diamond Tree the same objections to its doing business with Proctor as it had in correspondence with the latter. This inference from the evidence is sufficient to support the privilege claim.
In a related point, Proctor contends prelitigation communications with Diamond Tree were unprivileged because there was no evidence Nikken was contemplating litigation against that company. He points out Diamond Tree was never sued, nor was its deposition noticed. But that reflects a misunderstanding of the law. Demand letters are privileged even when sent to third parties against whom litigation is not contemplated, so long as they are related to litigation seriously contemplated against someone. (See, e.g., Neville v. Chudacoff, supra, 160 Cal.App.4th 1255, 1266-1268 [attorney’s letter to company’s customers, warning against doing business with former employee in breach of employment and confidentiality agreement, held privileged in former employee’s defamation action against attorney]; Rohde v. Wolf, supra, 154 Cal.App.4th 28, 36-37 [voicemail message left with real estate broker by attorney for one party to real estate dispute, which accused the other party of conspiracy, held privileged in other party’s defamation action against the attorney]; Aronson v. Kinsella, supra, 58 Cal.App.4th 254, 270 [attorney’s letter to former employee’s new company, demanding deletion of language in its business plan that exaggerated accomplishments of employee at former company, held privileged in former employee’s libel action against attorney].) So Nikken’s failure to sue Diamond Tree is not fatal to its privilege claim.
Proctor also argues the litigation privilege does not extend to communications with a third party, but only to those with a party to the ultimate litigation, so the Diamond Tree threats were not privileged. This is really just another way of restating the point just addressed, and it is no better the second time around. The settled law is that the litigation privilege applies to litigation warnings to a third party who is not sued, as reflected in the authorities cited in the preceding paragraph. So the Diamond Tree communications were privileged where, as here, they were reasonably related to Nikken’s contemplated litigation against Proctor.
Finally, Proctor asserts the interference claim was based only on Nikken’s communications with Diamond Tree. He reasons that must be so because the tort lies only to redress wrongful conduct directed at a third party, not conduct aimed at the plaintiff. We cannot agree.
To begin with, the argument is at odds with the pleadings. Proctor’s cross-complaint alleged that “Nikken wrote numerous letters to Proctor, threatening litigation” as part of its attempts to interfere with his budding relationship with Diamond Tree. Having alleged the wrongful conduct included Nikken’s letters to him, Proctor cannot now disavow his pleading to avoid a special motion to strike.
The point is equally mistaken on the law. The subject tort is not confined to situations where defendant’s wrongful conduct is directed at a third party, and the authorities cited for this proposition do not support it. Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, addressed the wrongfulness element of interference with prospective economic advantage. The court held a plaintiff must plead and prove not only knowing interference with prospective economic advantage, but also that the conduct was wrongful apart from the interference itself. (Id. at p. 393.) Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, held the intent requirement of the tort is satisfied by pleading the defendant knew the interference was substantially certain to occur as a result of his acts, and a specific intent to disrupt a transaction is not required. (Id. at p. 1153.) So neither the facts, nor the law, support Proctor’s argument the interference claim was based only on Nikken’s communications with Diamond Tree.
Since the interference claim is based on Nikken’s prelitigation communications with Proctor and Diamond Tree that are protected by the litigation privilege, the special motion to strike should have been granted.
II
Proctor argues the motion was properly denied because the interference claim is based on commercial speech that is exempted from the reach of the anti-SLAPP statute. We disagree.
This point was raised below but it was not addressed by the trial court, perhaps because it denied the motion for other reasons.
Section 425.17, subdivision (c) provides, in relevant part, that section 425.16 does not apply “to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services . . . arising from any statement or conduct by that person if both of the following conditions exist:
“(1) The statement or conduct consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services . . . .
“(2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer . . . .”
It has observed that section 425.17 was intended to apply to cases against a business arising out of its commercial speech or conduct. (Brill Media Co., LLC v. TCW Group, Inc. (2005) 132 Cal.App.4th 324, 342), and the party moving to strike under the anti-SLAPP statute bears the burden of establishing section 425.17 does not apply. The cases generally hold this is part of showing a cause of action is based on protected speech (id. at pp. 330-331; Sunset Millennium Associates, LLC v. LHO Grafton Hotel, L.P. (2006) 146 Cal.App.4th 300, 312), but that issue is currently before the Supreme Court. (Simpson Strong-Tie Co. Inc. v. Gore (2008) 162 Cal.App.4th 737, review granted July 30, 2008, S164174.)
Our conclusion is that section 425.17 does not apply. Nikken’s communications with Proctor and Diamond Tree were not made to an actual or potential buyer of its goods or services, or to someone likely to repeat the statements to a buyer, as required by section 425.17, subdivision (c)(2). According to the allegations of the complaint and cross-complaint, Nikken sells two types of products to its distributors – wellness products and training materials. The products were such things as nutritional supplements and air purifiers, and the training materials consisted of a written training program entitled “Lead the Field” that Nikken purchased from Proctor and resold to the distributors. There is no allegation or evidence either Proctor or Diamond Tree were buyers of Nikken products. Nor is there any evidence either was likely to repeat Nikken’s litigation threats to Nikken distributors, who were the buyers of Nikken products. Accordingly, the commercial speech exception to the anti-SLAPP statute does not apply and the interference cause of action was properly stricken.
Proctor does not address this particular issue. Instead, after quoting section 425.17, subdivisions (c)(1) and (c)(2), he simply asserts that “Nikken’s . . . statements . . . were made . . . in such a context.” Perhaps this is an implicit concession the commercial speech exception does not apply. In any event, it is not a legal argument nor anything that might change our minds. Section 425.17 is inapplicable.
Since Proctor’s cause of action for interference with prospective economic advantage was based on statements protected by the litigation privilege, the special motion to strike it should have been granted. The order appealed from is reversed to the extent it denied the motion as to this cause of action, and the matter is remanded with directions to enter a new order that strikes this cause of action. Nikken is entitled to costs on appeal.
WE CONCUR: O’LEARY, J., MOORE, J.