Case Number: KC066333    Hearing Date: September 04, 2014    Dept: J

Re: Ellen Reinhardt, etc. v. Alexandra Haley, etc., et al. (KC066333)

(1) SPECIAL MOTION TO STRIKE CROSS-COMPLAINT; (2) MOTION TO STRIKE PUNITIVE DAMAGES FROM CROSS-COMPLAINT

Moving Party: Plaintiff and Cross-Defendant Ellen Reinhardt

Respondent: Defendant and Cross-Complainant Alexandra Haley

POS: Moving OK; Opposing OK; Reply OK

Plaintiff alleges that Defendants are unfairly competing and damaging Plaintiff’s business by using Plaintiff’s confidential and proprietary trade secret information, including Plaintiff’s customer list, pricing models and otherwise using Plaintiff’s proprietary information to solicit Plaintiff’s customers. Plaintiff commenced this action on 9/18/13. The operative Second Amended Complaint, filed on 2/25/14, asserts causes of action for:

1. Misappropriation of Trade Secrets
2. Intentional Misrepresentation
3. Fraudulent Concealment
4. Breach of Written Contract
5. Conversion
6. Intentional Interference with Existing Business Relationships
7. Interference with Prospective Economic Advantage

On 7/7/14, Cross-Defendant Alexandra Haley filed a Cross-Complaint against Plaintiff Ellen Reinhardt and Rosanne Dudart for:

1. Breach of Oral Contract
2. Defamation Per Se
3. Slander
4. Unfair Competition (Bus & Prof C § 17200)
5. Unfair Competition (Bus & Prof C § 17200)
6. Unfair Competition (Bus & Prof C § 17200)
7. Intentional Interference with Prospective Economic Advantage
8. Abuse of Process
9. Intentional Interference with Prospective Economic Advantage

Trial is set for 3/10/15.

(1) SPECIAL MOTION TO STRIKE CROSS-COMPLAINT:

Cross-Defendant Ellen Reinhardt moves pursuant to CCP § 425.16 to strike each cause of action in the Cross-Complaint on the ground that the allegations of the Cross-Complaint arise out of Cross-Defendant’s protected speech, and it is not probable that Cross-Complainants Alexandra Haley and Law of Mirrors, Inc. (collectively “Haley”) will prevail in their cross-claims.

Plaintiff/Cross-Defendant’s Evidentiary Objections:

Declaration of Alexandra Haley:

1-3. Overruled
4. Sustained
5-7. Overruled
8-15. Sustained

Affidavit of Kristina Murray:

16. Sustained

Letter of JoAn D. Kunselman:

17. Sustained

In ruling on a defendant’s special motion to strike, the trial court uses a “summary-judgment-like procedure at an early stage of the litigation.” (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192.) This is a two-step process. First, the defendant must show 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.” (CCP §425.16(b)(1).) Second, if the defendant carries that burden, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the claim. (CCP §425.16(b)(3).) The defendant has the burden on the first issue and the plaintiff on the second. (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 928.)

PROTECTED ACTIVITY

The anti-SLAPP statute applies to causes of action “arising from any 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.” (CCP § 425.16(b)(1) (brackets added).)

First Cause of Action for Breach of Oral Contract:

The Cross-Complaint alleges that Haley worked as a non-exclusive independent contractor for Patricia Gross, the former owner of the business now known as Claremont Colonic & Nutrient Resource Clinic (“CCNRC”) (CC ¶ 14); as an independent contractor, Haley provided clients with colonics, and other holistic/wellness services including detoxification (Ibid.); while working for Ms. Gross, on or about March 15, 2010, Haley purchased the rights to own and numerous documents developed and used by Ms. Gross in the holistic health/wellness industry (collectively “Consult and Action Plan”) (Id. ¶ 17); both Haley and Ms. Gross agreed and understood that Haley’s clients belong to and were owned by Haley, including both the clients that Haley had independently solicited, as well as the clients that had been assigned to her by Ms. Gross (Id. ¶¶ 18-19); at some time in 2010, Ms. Gross sold the business to Cross-Defendant Reinhardt (Id. ¶ 20); thereafter Reinhardt and Haley had an oral agreement, whereby Haley would continue to work as a non-exclusive independent contractor for CCNRC, pursuant to the same terms as she had previously worked for Ms. Gross (Id. ¶ 21); Haley continued to provide services for CCNRC and was paid per service (Id. ¶ 22); Haley fully performed pursuant to the oral contract until April of 2013, when she provided her two week notice (Id. ¶ 26); thereafter Reinhardt breached the oral contract with Haley, by denying that Haley had any right whatsoever or interest in Haley’s client list, and by attempting to keep Haley’s clients for her own business (Id. ¶ 28); and that as a result, Haley has been damaged (Id. ¶ 29).

The gravamen of the breach of oral contract cause of action is based on Reinhardt’s breach of the oral contract with Haley. A breach of a contract, by itself, is not an exercise of a defendant’s constitutional right to “free speech” or “right of petition” and hence not a protected activity under CCP § 425.16. (Applied Business Software Inc. v. Pacific Mortg. Exch., Inc. (2008) 164 Cal.App.4th 1108, 1117; Personal Court Reporters, Inc. v. Rand (2012) 205 Cal.App.4th 182, 190–191—statute inapplicable to allegations incidental to causes of action for breach of contract and common counts based on nonprotected activity.)

Cross-Defendant, in the moving papers, contends that the first cause of action for breach of contract is subject to the anti-SLAPP statute because it arises from an issue that has been and is under consideration by this court. However, the mere fact that the lawsuit was filed after defendant’s activity took place does not establish that the lawsuit “arose from” a protected activity for purposes of the anti-SLAPP statute. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 77; Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) Nor is it enough to show that the action was “triggered by” or filed in response to or in retaliation for a party’s exercise of free speech rights. A cause of action may be “triggered by” protected activity without necessarily “arising from” that activity. (City of Cotati v. Cashman, supra, 29 Cal.4th at 77—defendant’s act underlying plaintiff’s cause of action must itself have been act in furtherance of right of petition or free speech.) In essence, simply because the Cross-Complaint involves issues that are also the subject of the Complaint filed herein does not mean that the Cross-Complaint “arises” from protected activity. The motion is denied as to the first cause of action.

Second Cause of Action for Defamation Per Se, Third Cause of Action for Slander, Sixth Cause of Action for Unfair Business Practices and Seventh Cause of Action for Interference with Prospective Economic Advantage:

The Cross-Complaint alleges that on or about February 26, 2013, Roseanne Dudart made false statements to a third party about Haley, and the business that Haley planned to open (CC ¶ 31); Specifically, Dudart made statements that Haley would be opening up a storefront to distribute medical marijuana, that Haley used marijuana, and that her business was being financed by drug dealers and was a front for drug dealers (Id ¶ 32); Dudart made these statements at the request of Reinhardt, and pursuant to Reinhardt’s instructions (Id. ¶ 33); Reinhardt later made statements to third parties who were members of the Claremont Chamber of Commerce, that Haley’s business was a front for drug dealers (Id. ¶ 34); on the date of Haley’s business’ grand opening, Reinhardt made statements to third parties that Haley was opening up a business as a front to sell marijuana, and was financed by drug dealers (Id. ¶ 36); on another occasion, Reinhardt made statements to a third party that Haley’s business was funded by the Mafia (Id. ¶ 37); the third parties who heard the statements, understood that Reinhardt and Dudart meant that Haley had committed a crime, or was intended to commit a crime (Id. ¶ 38); and that as a result, Haley was harmed (Id. ¶¶ 38-41). [The court has sustained the evidentiary objections to such statements that were not directly overheard by Haley.] The third, sixth and seventh causes of action are essentially based on the same allegations as the second cause of action. (See CC ¶¶ 43-49, 82-84, 91-95.)

Unlike statements made before a public body, statements and writings in a public place or forum are protected under the anti-SLAPP statute only if they are made “in connection with an issue of public interest.” (CCP § 425.16(e)(3).) Public interest” within the meaning of the anti-SLAPP statute includes “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.” (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 479; Kurwa v. Harrington, Foxx, Dubrow & Canter, LLP (2007) 146 Cal.App.4th 841, 846.)

A statement or activity has been held “in the public interest” when it involves: a person or entity in the public eye; conduct that could affect large numbers of people beyond the direct participants; or a topic of widespread interest. (Rivero v. American Fed. of State, County & Mun. Employees, AFL–CIO (2003) 105 Cal.App.4th 913, 924; Carver v. Bonds (2005) 135 Cal.App.4th 328, 343.) The court set forth five guiding principles to assist in determining what constitutes an issue of public interest under § 425.16; “(1) public interest does not equate with mere curiosity; (2) a matter of public interest should be a matter of concern to a substantial number of people, not to a relatively small, specific audience; (3) there should be some degree of closeness between the statements at issue and the asserted public interest; (4) the focus of the speaker’s conduct should be the public interest rather than an effort to ‘gather ammunition’ for a private controversy; and (5) those charged with defamation cannot, by their own conduct, create their own defense by making the claimant a public figure.” (Olaes v. Nationwide Mut. Ins. Co. (2006) 135 Cal. App. 4th 1501.)

For example, the fact that the defendant accuses the plaintiff of criminal conduct does not make the accusation a matter of public interest when the plaintiff is a private individual. (Weinberg v Feisel (2003) 110 Cal.App.4th 1122, 1132, 1135; see also Albanese v. Menounos (2013) 218 Cal.App.4th 923, 936—alleged slander of celebrity hair stylist arising out of private dispute between stylist and client not in “public interest.”) Similarly, the conduct alleged in these causes of action does not rise to the level of matters of public interest. The motion is denied as to the second, third, sixth and seventh causes of action.

The Fourth Cause of Action for Unfair Business Practices:

The fourth cause of action alleges that Cross-Defendants have engaged in an unfair business practice (CC ¶ 58); specifically, at some unknown date on or after March 15, 2011, Reinhardt, or an unknown third party working for Reinhardt and at Reinhardt’s request and direction, allegedly signed Haley’s name to a written contract (Id. ¶ 60); Haley only discovered that the written contract existed sometime in September of 2013, when Reinhardt filed a lawsuit against her, sought an injunction against Haley and submitted the written contact the court affixed to a signed declaration (Id. ¶ 63); and that Reinhardt is attempting to use this contact to achieve an advantage over Haley, to prevent Haley from honestly competing with Reinhardt, and to slander Haley’s reputation in the community (Id. ¶ 66).

The gravamen of the fourth cause of action is the alleged forgery of Haley’s signature on the contract and thus, not subject to the anti-SLAPP statute.

Cross-Defendant contends that the “use and presentation” of an allegedly forged document submitted to the court in this case falls squarely within the anti-SLAPP statute because it is based on statement or writings made before or in connection with a judicial proceeding and act taken in furtherance of the right to petition. However, the gravamen of the fourth cause of action is based on the Reinhardt’s alleged act of forging Haley’s signature on a contract, not the use and presentation of the contract in Reinhardt’s application for restraining order and injunctive relief. The motion is denied as to the fourth cause of action.

The Fifth Cause of Action for Unfair Business Practices:

The fifth cause of action alleges that Bus & Prof C § 16600 renders void contracts in restraint of trade (Id. ¶ 73); the contract prohibits Haley from forever competing with Reinhardt in any business to provide health services (Id. ¶ 74); and that the contract is so broad as to effectively prohibit Haley from practicing her chosen profession (Id. ¶ 77).

The fifth cause of action involves the enforceability of the independent contractor agreement between the parties and therefore, is not subject to the anti-SLAPP statute.

Cross-Defendant contends that this court has already determined in connection with one of Haley’s unsuccessful demurrers that the agreement is enforceable and does not violate California Bus & Prof C § 16600 (Motion, Annigian Decl., Exh. 3); and thus, this cause of action is either an attempt to re-litgate an issue that was pending before the court, or is attempting to raise an issue that involves a matter of public policy and interest. However, the issue of whether the contract violates Bus & Prof C § 16600 was not previously addressed by the court. The court only found that “Bus & Prof C §16600 does not invalidate an employee’s agreement not to disclose his or her former employer’s confidential customer lists or other trade secrets or not to solicit those customers,” and that “a covenant not to compete may be enforced to the extent ‘necessary to protect the employer’s trade secrets.’” (Motion, Annigian Decl., Exh. 3) Further, the validity of the contract between the parties is not an issue of public interest. The motion is denied as to the fifth cause of action.

Eighth Cause of Action for Abuse of Process:

The eighth cause of action alleges that Reinhardt filed for a restraining order seeking to stop Haley from operating her business (CC ¶ 100); in conjunction with filing for seeking a permanent injunction, Reinhardt submitted a declaration to the court, whereby she attached thereto and produced to the court a copy of a written contract allegedly signed by Haley (Id. ¶ 101); in fact the written contract had never been signed by Haley (Id. ¶102); and that Reinhardt altered the evidence by falsifying Haley’s signature and adding it to the document before presenting it to the court by way of an exhibit to her sown declaration (Id. ¶ 102).

The eighth cause of action is based on Reinhardt’s petitioning activity, i.e., an application for a restraining order and injunction. Thus, the eighth cause of action falls within the scope of CCP § 425.16.

Haley, in opposition, contends that because the use of forged evidence is fraudulent and criminal and thus, not protected under CCP § 425.16. Speech or petitioning activity that is “illegal as a matter of law” is not constitutionally protected and defendant therefore cannot use the anti-SLAPP statute to avoid liability. (Flatley v. Mauro (2006) 39 Cal.4th 299, 320; Novartis Vaccines & Diagnostics, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2006) 143 Cal.App.4th 1284, 1296–1297.) However, Haley’s abuse of process claim is based on Reinhardt’s application for a restraining order and injunction, which is not “illegal as a matter of law.”

Ninth Cause of Action for Intention Interference with Prospective Economic Advantage:

The ninth cause of action alleges that Reinhardt disrupted Haley’s relationship with her clients (CC ¶ 109); specifically, Reinhardt told certain who called to book an appointment for services with Haley, that Haley was not available to provide the services, and that Reinhardt would be one to provide the services (Id. ¶ 110); and that on other occasions, Reinhardt informed Haley’s clients that they had no right to choose to book their appointment with Haley, or choose Haley to provide them with services (Id. ¶111). The alleged acts disrupting Haley’s relationship with her clients are not protected under the anti-SLAPP statute. The motion is denied as to the ninth cause of action.

PROBABILITY OF SUCCESS:

Plaintiff (here, Cross-Complainant) now has the burden of proof to establish a probability that the plaintiff will prevail on whatever claims are asserted against the defendant. (CCP § 425.16(b).) The plaintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment. (Premier Med. Mgmt. Systems, Inc. v. California Ins. Guar. Ass’n (2006) 136 Cal.App.4th 4464, 476.) The burden is on plaintiff to produce evidence that would be admissible at trial—i.e., to proffer a prima facie showing of facts supporting a judgment in plaintiff’s favor. (Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.)

The “probability of prevailing” is tested by the same standard governing a motion for summary judgment, nonsuit, or directed verdict. I.e., in opposing a SLAPP motion, it is plaintiff’s burden to make a prima facie showing of facts that would support a judgment in plaintiff’s favor. (Taus v. Loftus (2007) 40 Cal.4th 683, 714—a “summary-judgment-like procedure”; Bergman v. Drum (2005) 129 Cal.App.4th 11, 18—because same standards apply, denial of anti-SLAPP motion was “law of the case,” defeating later summary judgment motion.)

The court does not weigh credibility or comparative strength of the evidence. The court considers defendant’s evidence only to determine if it defeats plaintiff’s showing as a matter of law. (Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 699–700—“We do not weigh credibility, nor do we evaluate the weight of the evidence… [W]e accept as true all evidence favorable to the plaintiff.”)

Eighth Cause of Action for Abuse of Process:

A cause of action for abuse of process requires the following elements: (1) the ulterior motive or purpose of the defendant in using the process, and (2) willful act in an unauthorized use of the process. (Rusheen v. Cohen (2006) 37 Cal. 4th 1048, 1057.)

The CC § 47(b) “litigation privilege” provides absolute immunity for “publications” or “broadcasts” made in the course of a “judicial proceeding.” (CC § 47(b).) Even fraudulent, perjurious and malicious “publications” and “broadcasts” are absolutely privileged so long as they are (1) required or permitted by law, (2) made in a judicial or quasi-judicial proceeding, (3) by litigants or other participants authorized by law, (4) to achieve the objects of the litigation, and (5) have some connection or logical relation to the action. (Action Apt. Ass’n, Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241.) Publications “permitted by law” include any category of publication permitted by law, even though the specific publication is not permitted by law. For example, courtroom testimony, a notice of lis pendens, a declaration of service or a letter intended to be submitted into evidence are all categories of communications “permitted by law” and protected by the privilege even though their specific contents are not “permitted by law” (as where the testimony is perjurious, the notice or declaration contains false statements, or the letter violates confidentiality laws). (Jacob B. v. County of Shasta (2007) 40 Cal.4th 948, 958–959.)

Haley submits evidence that Reinhardt falsely signed her name to a written contract; Reinhardt used this falsified document to obtain an injunction; and that Reinhardt has actively engaged in a campaign to damage Haley personally and professionally. (CC ¶¶11, 13.)

However, Haley cannot establish a probability of prevailing on the merits because the action taken by Reinhardt was privileged pursuant to CC §47(b) because the alleged false declaration in support of Reinhardt’s application for the restraining order and injunctive relief was based on: (1) permitted by law, (2) made in a judicial proceeding, (3) by a litigant, (4) to achieve the object of the litigation, and (5) have relation to the action. Thus, the special motion to strike as to the eighth cause of action, only, is granted.

(2) MOTION TO STRIKE PUNITIVE DAMAGES FROM CROSS-COMPLAINT:

Cross-Defendant also moves to strike punitive damages allegations and prayer in the second, third, eighth, and ninth causes of action from the Cross-Complaint on the grounds that Cross-Complaint fails to allege facts to support punitive damages.

The court may strike out any irrelevant, false, or improper matter inserted in any pleading and strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (CCP § 436.)

In order to plead punitive damages, a plaintiff must plead allegations of fraud, malice, or oppression with sufficient particularity. (Hilliard v. AH Robbins Co. (1983) 148 Cal.App.3d 374, 392.) “Fraud” means “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (CC § 3294(c)(3).) “Malice” means “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (CC § 3294(c)(1).) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. (CC § 3294(c)(2).)

The Cross-Complaint alleges adequate facts to support fraud, malice and/or oppression, i.e., Reinhardt slandered Haley’s name and business by stating that the business was a “front to sell illegal marijuana,” “financed by drug dealers,” and “funded by drug money” and “the Mafia,” and lied to Haley’s clients in an attempt to steal her clients. Thus, the motion to strike the punitive damages allegations and prayer in the second, third and ninth causes of action from the Cross-Complaint is denied. The motion as to the eighth cause of action is deemed moot based on the court’s tentative to grant the special motion to strike.