Case Name: E.A. Davidovits & Co., Inc., et al. v. SKW San Jose, LLC, et al.
Case No.: 2018-CV-335446

The Special Motion to Strike Portions of the Cross-Complaint by Plaintiffs and Cross-Defendants E.A. Davidovits & Co., Inc. and Edward A. Davidovits

Factual and Procedural Background

The Complaint

The operative Complaint sets forth claims for breach of contract along with causes of action for quasi-contract, common counts, and promissory fraud.

According to the Complaint, plaintiffs E.A. Davidovits & Co., Inc. and Edward A. Davidovits (collectively, “EAD”) entered into multiple contracts with defendants SKW San Jose LLC, SKW Capital Management LLC, and Sid Weiner (collectively, “SKW”) for architectural, engineering, construction and other services related to real property. (Complaint at ¶¶ 9-20.) Such contracts include the Design Build Agreement, Put and Call Option Agreement, Agreement for Construction Services, and Indemnity Agreement. (Ibid.) EAD alleges SKW breached these agreements by failing to make payments under the contracts and therefore seek damages and other relief.

The Cross-Complaint

SKW filed the operative Cross-Complaint against EAD alleging claims for breach of contract, negligence, and unfair competition (“UCL”).

According to the Cross-Complaint, SKW alleges EAD breached the Design Build Agreement by improperly charging for coordination and related activities with the City of San Jose, by overcharging for architectural and other plans, blueprints, and related fees and costs, and by overcharging for “Construction Services.” (Cross-Complaint at ¶ 22.) EAD also allegedly breached the Agreement for Construction Services by improperly charging SKW for material, work, and services in excess of the “Stipulated Lump Sum” of $3,133,449, by submitting and overcharging for proposed “additive change orders” and other additional costs. (Id. at ¶ 23.) With respect to negligence, SKW claims the conduct and services of EAD fell below the standard of care applicable to those working in the industry. (Id. at ¶ 35.) Finally, as to the UCL cause of action, SKW alleges EAD, as a result of their unlawful, unfair, and fraudulent conduct, continue to receive and benefit from overpayments that rightfully belong to SKW and which must be restored and returned to them. (Id. at ¶ 41.) SKW thus seeks actual damages, injunctive relief, and other relief.

Special Motion to Strike Portions of the Cross-Complaint

Currently before the Court is EAD’s special motion to strike portions of the Cross-Complaint. (Code Civ. Proc., § 425.16) EAD also submitted a request for judicial notice in conjunction with the motion. SKW filed written opposition. EAD filed reply papers.

Request for Judicial Notice

In support of the motion, EAD requests judicial notice of the following: (1) Cross-Complaint (Exhibit A); (2) Complaint (Exhibit B); (3) Ex Parte Application for Right to Attach Order and Temporary Protective Order filed on September 28, 2018 (Exhibit C); (4) Memorandum of Law in Support of Plaintiff, Edward A. Davidovits’ Ex Parte Application for Writ of Attachment and Temporary Protective Order, filed on September 28, 2018 (Exhibit D); (5) Protective Order entered in this action on September 28, 2018 (Exhibit E); and (6) Request for Dismissal Without Prejudice to the Sixth Cause of Action in the Complaint, filed on October 2, 2018 (Exhibit F). The Court may take judicial notice of these exhibits as records of the superior court under Evidence Code section 452, subdivision (d). (See Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].) In addition, there is no opposition to the request for judicial notice which appears relevant to issues raised in the motion. (See Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [judicial notice is confined to those matters which are relevant to the issue at hand].)

Accordingly, the request for judicial notice is GRANTED.

Legal Standard

Code of Civil Procedure section 425.16 provides for a “special motion to strike” when a plaintiff’s claims arise from certain acts constituting the exercise of the constitutional rights of freedom of speech and petition for the redress of grievances, “unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Code Civ. Proc., § 425.16, subds. (a) & (b)(1).)

“Consistent with the statutory scheme, ruling on an anti-SLAPP motion involves a two-step procedure. First, the moving defendant must identify ‘all allegations of protected activity’ and show that the challenged claim arises from that activity. [Citations.] Second, if the defendant makes such a showing, the ‘burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated.’ [Citation.] Without resolving evidentiary conflicts, the court determines ‘whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment.’ [Citation.]” (Bel Air Internet, LLC v. Morales (2018) 20 Cal.App.5th 924, 934.)

First Prong: Protected Activity

“A defendant meets his or her burden on the first step of the anti-SLAPP analysis by demonstrating the acts underlying the plaintiff’s cause of action fall within one of the four categories spelled out in [Code of Civil Procedure] section 425.16, subdivision (e).” (Collier v. Harris (2015) 240 Cal.App.4th 41, 50-51 (Collier).) That section provides that 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 includes: (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 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.” (Code Civ. Proc., § 425.16, subd. (e).) “These categories define the scope of the anti-SLAPP statute by listing acts which constitute 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.’” (Collier, supra, at p. 51, citing Code Civ. Proc., § 425.16, subd. (e).)

“A claim arises from protected activity when that activity underlies or forms the basis for the claim. [Citations.] Critically, ‘the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.’ [Citations.] ‘[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute.’ [Citations.] Instead, the focus is on determining what ‘the defendant’s activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.’ [Citation.]” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062-1063 (Park).)

“[A] claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted.” (Park, supra, 2 Cal.5th at p. 1060.) To determine whether the speech constitutes the wrong itself or is merely evidence of a wrong, “in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by defendant supply those elements and consequently form the basis for liability.” (Id. at p. 1063.)

“In deciding whether the ‘arising from’ requirement is met, a court considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’” (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 670.) “[I]f the defendant does not demonstrate this initial prong, the court should deny the anti-SLAPP motion and need not address the second step.” (Baharian-Mehr v. Smith (2010) 189 Cal.App.4th 265, 271 (Baharian-Mehr).)

EAD moves to strike the following portions of the Cross-Complaint: (1) paragraph 12 in its entirety; (2) paragraph 13 in its entirety; (3) the statement “as well as its overstated and unsupported Mechanic’s Lien” in paragraph 18; and (4) paragraphs 38 and 40 to the extent they incorporate the aforementioned allegations in paragraphs 12, 13 and 18. EAD primarily argues the recording of a mechanic’s lien, as alleged in the Cross-Complaint with respect to the UCL cause of action, constitutes protected activity.

Neither party disputes that the recording of a mechanic’s lien, in and of itself, is a protected action. For example, with respect to the litigation privilege codified in Civil Code section 47, subdivision (b) (see Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1058 [communications within the protection of the litigation privilege are equally entitled to the benefits of section 425.16]), the filing of a mechanic’s lien is clearly authorized by law and is related to an action to foreclose. (Frank Pisano & Associates v. Taggart (1972) 29 Cal.App.3d 1, 25.) Here, EAD argues the recording of a mechanic’s lien constitutes pre-litigation activity and thus qualifies as protected conduct. (See Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1268 [if a statement concerns the subject of the dispute, and is made in anticipation of litigation contemplated in good faith and under serious consideration, then the statement may be petitioning activity protected by section 425.16]; see Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532, 1537 [anti-SLAPP protection “applies not only to the filing of lawsuits, but extends to conduct that relates to…litigation, including statements made in connection with or in preparation of litigation”].)

In support, the moving papers attach a declaration from plaintiff and cross-defendant Edward A. Davidovits stating that he prepared a Mechanic’s Lien for $723,609.82 for improvements on real property as agreed by SKW. (Davidovits Decl. at ¶ 2.) He further contends on September 21, 2018, the same day the Mechanic’s Lien was recorded, that he retained plaintiffs’ counsel to, among other things, file this action to foreclose on the Mechanic’s Lien. (Id. at ¶ 3.) The aforementioned action is the operative Complaint which included a cause of action for foreclosure of mechanic’s lien before EAD dismissed the claim on October 2, 2018. (See Request for Judicial Notice at Exhibit F.)

But the actual dispute here is whether the UCL cause of action actually arises from the recording of the mechanic’s lien. EAD argues the UCL claim is based, at least in part, on the recording of the mechanic’s lien and thus the paragraphs and allegations cited should be stricken. The Court declines to strike paragraph 12 as it alleges only factual information and does not even mention the recording of a mechanic’s lien. While paragraph 13 refers to the recording of a mechanic’s lien, the allegations do not appear to be connected to any particular cause of action. The Court therefore declines to strike paragraph 13 of the Cross-Complaint.

EAD further moves to strike the portion of paragraph 18 which provides “as well as its overstated and unsupported Mechanic’s Lien” along with paragraphs 38 and 40 to the extent they incorporate this statement. The relevant portion of paragraph 18 states:

“By EAD’s demand presented to escrow, as well as its overstated and unsupported Mechanic’s Lien, EAD [sic] is breached the Construction Contract, and also interfered with and threatened to prevent the sale of the Subject Property, causing great damage to Cross-Complainants.”

(Cross-Complaint at ¶ 18.)

This allegation in paragraph 18 is incorporated by reference into the UCL cause of action by paragraphs 38 and 40. EAD thus asserts the UCL claim is based on the recording of the mechanic’s lien and therefore these paragraphs should be stricken. This argument is not persuasive since, as the opposition argues, the UCL claim specifically seeks restitution from EAD based on overpayments they received. (Cross-Complaint at ¶ 41; see Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144 [through the UCL, a plaintiff may obtain restitution against unfair or unlawful practices].) The overpayments originate allegedly from misrepresentations by EAD regarding the cost of actual work on the projects. (Cross-Complaint at ¶¶ 20-21.)

It is true that SKW incorporates allegations related to the recording of a mechanic’s lien into its claim under the UCL. SKW however, in seeking restitution under the UCL, is not pursuing such relief based on the recording of a mechanic’s lien but instead for alleged overpayments received by EAD. Consequently, the UCL cause of action does not arise from protected activity. If anything, allegations regarding the mechanic’s lien appear to be merely incidental to non-protected activity and/or included for factual context. (See Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188 [when the allegation 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]; see also Baral v. Schnitt (2016) 1 Cal.5th 376, 394 [“Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.”].)

Since EAD fails to satisfy the first prong of the motion, the Court does not need to address whether SKW can establish a probability of success on the merits. (Baharian-Mehr, supra, 189 Cal.App.4th at p. 271.)

Disposition

The special motion to strike portions of the Cross-Complaint is DENIED.

SKW’s request for attorney’s fees and costs shall be made by way of a noticed motion and attorney declaration to support entitlement to and an amount of fees and costs. (Code Civ. Proc., § 425.16, subd. (c); Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131 [prevailing plaintiff may recover attorney’s fees and costs where special motion to strike is frivolous or solely intended to cause unnecessary delay].)

The Court will prepare the Order.