MP: Cross-Defendants, Farsighted Enterprise, Inc., Jintian Ye, Shawn Wan
RP: Cross-Complainants, Goodwill Windows & Doors, Inc., Xiaoyue Lu, and
Jun Zhao Lu

STATEMENT OF FACTS IN CROSS-COMPLAINT:
The Cross-Defendants received a court order against Goody Windows in 2012 and began to use the order to harass the Cross-Complainant, Goodwill Windows. The Cross-Defendants brought 7 to 8 US Marshals onto the Cross-Complainants’ factory even though they knew it was the wrong location and that Goody Windows differed from Goodwill Windows. The workers for the Cross-Defendants took personal property, stole confidential business techniques, and disrupted the Cross-Complainants’ business. Further, the Cross-Defendants made false statements regarding the Cross-Complaints’ business, e.g., it is not licensed, it has business violations, and its products are poor.

CAUSES OF ACTION IN CROSS-COMPLAINT:
1) Trade Libel
2) Trespass to Land
3) Intentional Interference with Prospective Economic Advantage
4) Abuse of Process

RELIEF REQUESTED:
1. Strike Cross-Complaint under CCP section 425.16
2. Demurrer to Cross-Complaint

DISCUSSION:
This hearing concerns the Cross-Defendants’ demurrer and motion to strike the pleadings under CCP section 425.16, which is the anti-SLAPP statute. An anti-SLAPP motion takes precedence over all other proceedings. Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1109, 1115-1118. Accordingly, the following analyzes the motion to strike first.

1. Motion to Strike under CCP section 425.16
The Cross-Defendants seek to strike the entire Cross-Complaint under CCP section 425.16. CCP section 425.16 permits the Court to strike causes of action arising from an act in furtherance of the defendant’s right of free speech in connection with a public issue, unless the plaintiff establishes that there is a probability that the plaintiff will prevail on the claim.
The defendant bears the initial burden of showing that the claims fall within the class of suits subject to a motion to strike under CCP section 425.16, i.e., that plaintiff’s claim is based on an act of defendant in furtherance of his right to free speech. Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal. App. 4th 294, 304. Under CCP section 425.16(b)(2), the Court may consider the pleadings and supporting affidavits in making its determination. A defendant meets his initial burden by demonstrating that the act underlying the plaintiff’s case fits one of the categories identified in section 425.16(e). City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78. Subdivision (e) defines the protected acts as the following:

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; or
4) 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.

If the defendant meets this initial burden, the plaintiff then has the burden of demonstrating a probability of prevailing on the claim. Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 741. The plaintiff satisfies this burden by demonstrating that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. Id. Under CCP section 425.16(b)(2), a plaintiff may use affidavits to meet the plaintiff’s burden.

a. Cross-Defendant’s Burden
As noted above, the Cross-Defendants have the initial burden of demonstrating that the Cross-Defendants’ acts in the Cross-Complaint fits into one the categories identified in section 425.16(e). The Cross-Defendants argue that the causes of action in the Cross-Complaint are all based their statements made in connection with an issue under consideration by a judicial body, i.e., a patent infringement case.
In order to determine whether a cause of action is subject to a SLAPP motion, the Court examines the principal thrust or gravamen of the plaintiff’s cause of action. Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal. App. 4th 510, 519-520. The critical consideration for section 425.16 analysis is whether the cause of action is based on the defendant’s protected free speech or petitioning activity. Feldman v. 1100 Park Lane Associates (2008) 160 Cal. App. 4th 1467, 1478-1479. The anti-SLAPP statute’s definitional focus is not the form of the plaintiff’s cause of action but, rather, the defendant’s activity that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning. Id.

The following is based on facts in the declaration of Jintian Ye, who is a Cross-Defendant and the President of Cross-Defendant, Farsighted Enterprise, Inc. The Cross-Complainants and Cross-Defendants are competitors in the market of manufacturing vinyl windows. After the Cross-Defendants discovered that the Cross-Complainants were selling a window that infringed on the Cross-Defendants’ patent, the Cross-Defendants filed a lawsuit in federal court for patent infringement (see complaint in CV11 0309 R AJWx in untabbed exhibit A to moving papers).
A judgment was entered on January 4, 2012 in favor of Farsighted Enterprise, Inc. that awarded $827,738.46 against Goody Windows and Doors, that found that Goody Windows and Doors had infringed on the patents, and that issued a permanent injunction barring Goody Windows and Doors from infringing on the patent (see copy of judgment in untabbed exhibit B to moving papers). Further, the judgment ordered Goody Windows and Doors to surrender any leftover infringing products within 14 days. The Cross-Defendants obtained a writ of execution that permitted them to enforce the judgment by entering the place of business of Goody Windows and Doors to take the infringing commercial goods (see copy of writ in untabbed exhibit C to moving papers).
Mr. Ye states in paragraph 4 that he discovered that Goody Windows & Doors had fraudulently transferred its assets to Goodwill Windows. Mr. Ye states that he filed a state action, which is the pending case. Mr. Ye states that Goodwill Windows operates from the same location as Goody Windows & Doors and that it is listed in the yellow pages as Goodwill Windows & Doors, Inc. aka Goody Windows. Further, the moving papers indicate that both businesses do business under the same Chinese name “Gu-Di”.

The following review of the Cross-Complaint reveals that each claim is based on the Cross-Defendants’ acts in furtherance of free speech and the Cross-Defendants’ enforcement of the judgment:

1) The first cause of action for trade libel alleges in paragraphs 24 and 25 that the Cross-Defendants made false statements regarding the business of Goodwill Windows by publishing communications orally and over the radio media. This falls under section 425.16(e)(2) because it is a communication made in connection with the issues regarding Goodwill Windows under consideration by judicial bodies in the federal court and in the state court, e.g., whether there was a fraudulent transfer of assets to avoid the judgment in the federal case. Further, it falls under section 425.16(e)(3) because these acts are oral statements made in a public forum, i.e., over the public airwaves, in connection with an issue of public interest, i.e., whether Goodwill Windows is engaged in fraudulent conduct or infringing on patents.
2) The second cause of action for trespass to land alleges in paragraph 30 that the Cross-Defendants entered the Cross-Complainants’ factory and made harassing comments and interfered with workflow. This falls under section 425.16(e)(2) because the communications were made in connection with the issues regarding Goodwill Windows under consideration by judicial bodies in the federal court and in the state court.
3) The third cause of action for intentional interference with prospective economic advantage is based on allegations in paragraph 36 that the Cross-Defendants knowingly disseminated false information about the Cross-Complainants. This falls under section 425.16(e)(2) because the communications were made in connection with the issues regarding Goodwill Windows under consideration by judicial bodies in the federal court and in the state court.
4) The fourth cause of action for abuse of process alleges in paragraphs 39 and 40 that the Cross-Defendants used a civil lawsuit against the Cross-Complaints to collect money. This falls under section 425.16(e)(4) because it is conduct in furtherance of the right to petition, i.e., the right to enforce a judgment obtained by petitioning the Court for relief from the patent infringement.

This analysis of the causes of action in the Cross-Complaint reveal that they are based on the Cross-Defendants’ protected free speech or petitioning activity.

In their opposition, the Cross-Complaints assert that the Cross-Defendants’ conduct was commercial speech. There is no discussion of legal authority. There is no definition of commercial speech. There is no attempt to analyze the pleadings. There is no attempt whatsoever to support the argument by applying a legal principle to the allegations in the Cross-Complaint.
In addition, the argument is fundamentally flawed because the US Supreme Court has held that commercial speech, which is speech proposing a commercial transaction, is protected by the First Amendment. Ohralik v. Ohio State Bar Ass’n (1978) 436 U.S. 447, 455. Since the speech is protected by the First Amendment, even if the Cross-Defendants were engaged in commercial speech, they are engaging in protected conduct under CCP section 425.16 because they are engaged in protected free speech activity.
Finally, the argument is incorrect because, as discussed above, a review of the pleadings reveals no commercial speech, i.e., the Cross-Defendants were not engaged in communications to propose a commercial transaction. Instead, the speech concerns the issues under consideration by judicial bodies in the federal and state courts, e.g., the Cross-Complainants are engaged in patent infringement or the Cross-Complainants are involved in fraudulent transfers to avoid the federal judgment.

Therefore, the Cross-Defendants have met their initial burden of demonstrating that the Cross-Defendants’ acts in the Cross-Complaint fit into the categories identified in CCP section 425.16(e). This shifts the burden to the Cross-Complainants.

b. Cross-Complainants’ Burden
The Cross-Complainants have the burden of demonstrating a probability of prevailing on their claims. Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 741. The Cross-Complainants can satisfy this burden by demonstrating that the Cross-Complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. Id.
The Cross-Complainants filed untimely opposition papers on December 2, 2013. A review of the untimely opposition papers reveal that they fail to meet the burden. The Cross-Complainants did not proceed through each cause of action and demonstrate through citations to legal principles and the allegations in the Cross-Complainant that they have pleaded sufficient facts to state each, separate cause of action.
Further, the Cross-Complainants did not proceed through each cause of action and direct the Court to the specific fact that establishes each essential element in their causes of action. This is grounds to find that they failed to meet their burden because the Cross-Complainants are required to make a prima facie showing of facts that would sustain a favorable judgment, if the evidence submitted by the Cross-Complainants is credited.
The Cross-Complainants provided the declaration of Jun Zhao Lu. The declaration provides a narrative of events that occurred on August 2, 2012 when the Cross-Defendants arrived at the Cross-Complainants’ factory with the US Marshals. The declaration lacks the facts needed to establish a prima facie cause for each cause of action. For example, the third cause of action for intentional interference with prospective economic advantage has the following elements:

1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff;
2) the defendant’s knowledge of the relationship;
3) intentional and wrongful acts on the part of the defendant designed to disrupt the relationship;
4) actual disruption of the relationship; and
5) economic harm to the plaintiff proximately caused by the acts of the defendant.
Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1153-1154.

The tort protects the expectation that a relationship eventually will yield the desired benefit and not the more speculative expectation that a potentially beneficial relationship will arise. Id. at 1164.

The declaration of Jun Zhao Lu does not identify any economic relationship with a specific third party. It does not include facts showing that the Cross-Defendants knew of the relationship. It does not identify the intentional and wrongful acts designed to disrupt the relationship. It does not provide facts showing an actual disruption of the relationship. It does not identify the economic harm caused by the disruption. This is insufficient to make a prima facie showing.
Instead, it consists of conclusions devoid of facts, e.g., the trespass and false statement “cause our company big loss for both current condition and our potential customers (sic).” Further, it includes inadmissible hearsay from unknown third parties, e.g., “I heard from my customer saying employees of Value Windows told their customers Goodwill Windows would shut down and Value Windows already have our property (sic).” There are no facts identifying the customer and no facts in a declaration from the customer that made this statement. This is insufficient to make a prima facie showing because it cannot be used to sustain a favorable judgment.

Therefore, the Court will grant the Cross-Defendants’ motion to strike the Cross-Complaint under CCP section 425.16 because the claims in the Cross-Complaint are based on the Cross-Defendants’ protected free speech or petitioning activity and the Cross-Complainants have failed to demonstrate a probability of prevailing on their claims. Since this is a SLAPP motion, the Court may not grant leave to amend. Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073. Instead, the Cross-Complaint is struck under CCP section 425.16.

2. Demurrer
In light of the granting of the motion to strike the entire Cross-Complaint under the anti-SLAPP statute, CCP section 425.16, the Court will take the demurrer off calendar as moot.

RULING:
1. Grant motion to strike the Cross-Complaint under CCP section 425.16.
2. Take demurrer off calendar.