17-CIV-05074 JAMES WONG, et al. vs. AARON WONG, et al.

JAMES WONG ERIC J. SIDEBOTHAM

AARON WONG WENDY C. KROG

Motion for order striking plaintiff’s complaint

TENTATIVE RULING:

The parties in the instant case are identified as follows:

“Husband’s Estate” and Husband-Aligned Parties

· James & Irene Wong (representatives of Estate of Alan Wong)

· James & Irene Wong (successor trustees of Alan Wong Revocable Trust)

· Maggie Chan

· Mona Wong

“Wife’s Estate” and Wife-Aligned Parties

· Aaron Wong & Tianqui Liu (representatives of Estate of Sylvia Tang)

· Aaron Wong & Tianqui Liu (co-trustees of the Sylvia Tang Trust)

· Asian Square, Inc.

The Special Motion to Strike Plaintiffs’ Complaint brought by defendants Aaron Wong and Tianqui Liu (in their representative capacities) is denied. The Request for Judicial Notice brought by plaintiffs James and Irene Wong (in their representative capacities) is granted. The request for costs and attorney fees under C.C.P. § 425.16(c) is denied.

Request for Judicial Notice. The Husband’s Estate requests judicial notice of prior filings in the family law divorce case (FAM0102412) and the Asian Square Litigation (CIV 529052). This request is made pursuant to Evidence Code § 452(d). As these are all court filings, the Court grants this request. In addition, because the entirety of both of those prior cases bears on the context of the instant case, the Court, on its own motion, takes judicial notice of the entire record and files in both of those cases—CIV 529052 and FAM 0102412.

Factual Background. Alan Wong (Husband) and Sylvia Tang (Wife) married in Dec 30, 1999. It appears that the couple owned an interest in a company called “Asian Square, Inc.” (Asian Square), which owns and operates commercial real estate in San Jose upon which the Grand Century Mall has been constructed.

In January 2009, Husband, allegedly in his capacity as President of Asian Square, took out a loan in the amount of $5M. The loan was allegedly secured by real property owned by Asian Square, and Husband allegedly used the loan money for his own personal benefit with Wife allegedly having no part in procuring or benefitting from the loan.

In December 2011, Husband and Wife divorced. As part of that divorce the parties entered into an marital settlement agreement (MSA) whereby:

· Husband agreed to transfer all of his interest—both the assets and the liabilities—in Asian Square to Wife (this transfer was characterized as an “equalizing payment”); and

· the parties agreed that “[i]f either party fails to perform or his or her respective obligations under this Agreement, and the other is thereby required to incur legal fees and accounting fees, or other fees or costs, then either party shall be entitled to apply to any court of competent jurisdiction for recovery of such fees or costs against the other party.

MSA, ¶ 6.1. Husband died in June 2013. Wife died in August 2013.

In February 2014, Asian Square received a foreclosure notice related to nonpayment of certain liabilities, which included the loan described above. To avoid further financial issues, the Wife’s Estate paid off the liability with its own funds. Then, in June 2014, the Wife’s Estate sued the Husband’s Estate—essentially seeking reimbursement of the pay-off money. That lawsuit was Asian Squares, Inc. v. Wong, et al. (CIV529052).

In that lawsuit (the “Asian Squares Litigation”), Asian Squares (which is aligned with the interests of the Wife’s Estate) filed six different versions of its complaint, and over the course of those amendments, the defendants included all of the entities or individuals who are now plaintiffs in the instant case—i.e. the Husband’s Estate and/or Husband-aligned entities.

In May 2017, the court hearing the Asian Square Litigation sustained a demurrer to the remaining causes of action in the Fifth Amended Complaint without leave to amend, and a judgment of dismissal was entered in that action in June 2017. Asian Squares appealed that case in August 2017, and it is currently remains on appeal.

Having prevailed in the Asian Squares Litigation, the defendants to that case filed the instant action against the Wife’s Estate seeking, pursuant to the terms of the marital settlement agreement, indemnification for the attorney fees incurred in defending against the Asian Squares Litigation.

Notably, the instant action does not name Asian Squares (which was the actual plaintiff that brought the underlying Asian Squares Litigation) as the defendant. Instead, it is names the Wife’s Estate (i.e. the personal representatives of the Wife’s Estate) because it is suing for indemnification under the marital settlement agreement—an agreement to which the Wife was a party, but Asian Squares was not.

Presently before the Court is a special motion to strike (i.e. an anti-SLAPP motion) brought by the Wife’s Estate.

Merits of Motion.

Anti-SLAPP motions are evaluated through a two-step process. Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims “aris[e] from” protected activity in which the defendant has engaged. {Citations.} If the defendant carries its burden, the plaintiff must then demonstrate its claims have at least “minimal merit.” {Citations.}

Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061. In Park, the California Supreme Court noted that “care [should be taken] to respect the distinction between activities that form the basis for a claim and those that merely lead to the liability-creating activity or provide evidentiary support for the claim.” Id. at 1064. As examples:

· When the basis of the claim does not lead to the liability-creating activity. When challenging the validity of a decision by a county pension board, it is appropriate to distinguish between the deliberations and the vote, on the one hand, and the ultimate action taken by the board, on the other. Id. at 1064, citing San Ramon Valley Fire Protection Dist. v. Contra Costa County Employee’s Retirement Assn. (2004) 125 Cal.App.4th 343. The former (deliberations and voting) are protected activity. However, when challenging a governmental action, it is not the deliberations or votes that give rise to the legal claim challenging such action—it is the ultimate decision or action taken by the governmental body that gives rise to the legal claim. This is an example of when the basis of the claim does not lead to the liability-creating activity.

· When the protected activity only provides evidentiary support for the legal claim. “Prelitigation communications or prior litigation may provide evidentiary support for the complaint without being a basis for liability.” Id. at 1064, citing Graffiti Protective Coatings, Inc. v. City of Pico Rivera (2010) 181 Cal.App. 1207, 1214-1215. Thus, when a company sued a city for terminating its government contract and awarding a new contract to a rival without engaging in a competitive biding process, “communications by the city preceding its decision might be helpful in establishing what events led to the change in contract, [but] the contractor’s claims were not based on them” they were based on “the award of a new contract in… violation of laws regulating competitive bidding.” Id. at 1064, citing Graffiti Protective Coatings, Inc. v. City of Pico Rivera (2010) 181 Cal.App.4th 1207, 1214-1215.

While the distinction to be made is nuanced, it applies to the instant case. Specifically, on the facts of the instant case, the Husband’s Estate is not suing the Wife’s Estate because the Wife’s Estate (or an aligned party) filed a lawsuit. Husband’s Estate is suing Wife’s Estate because it incurred legal fees defending an action in which the complaining party (Asian Square) sought to hold it (the Husband’s Estate) responsible for liabilities of Asian Square. When Husband agreed to transfer his interest in Asian Square to Wife, Husband and Wife agreed to the following terms:

[Husband] shall transfer to [Wife]… the following:

(a) 100% of his 48.5% interest in Asian Square, Inc…., subject to all liabilities attendant thereto, for which [Wife] shall assume sole and separate responsibility and shall indemnify and hold [Husband] harmless from any liabilities attendant thereto.

MSA, ¶ 1.7 (emphasis added). Therefore, it is not the fact that Asian Square or any other Wife-aligned entity chose to engage in a protected activity that gave rise to the claim being made by the Husband’s Estate—it is the fact that a liability of the company that was transferred to the Wife caused the Husband’s Estate to incur expenses. Therefore, the Wife’s Estate has failed to meet its burden of showing that the instant litigation arises from a protected activity.

Because anti-SLAPP analysis involves a two-step process (see Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061) and because the Wife’s Estate has failed to meet its burden on the first prong, the Court declines to address the “minimal merits” analysis required under the second prong.

Costs and Attorney Fees. Under C.C.P. § 425.16(c),

… in any action subject to subdivision (b), a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs. If the court finds that a special motion to strike is frivolous or is solely intended to cause unnecessary delay, the court shall award costs and reasonable attorney’s fees to a plaintiff prevailing on the motion, pursuant to Section 128.5.

Since the Husband’s Estate (i.e. plaintiff) is the prevailing party for the reasons set forth above, costs and attorney fees are only awardable if the anti-SLAPP motion is either: (1) frivolous, or (2) intended to cause unnecessary delay. The Court does not find the arguments made by the Wife’s Estate to be frivolous or solely intended to cause unnecessary delay. As such, the request for costs and attorney fees under C.C.P. § 425.16(c) is denied.