Filed 4/13/20 Ultrra v. AboveGEM, Inc. CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

ULTRRA,

Plaintiff and Respondent,

v.

ABOVEGEM, INC. et al.,

Defendants and Appellants.

H046325

(Santa Clara County

Super. Ct. No. CV325900)

Defendants AboveGEM, Inc. and Oliver Wang, co-founder of AboveGEM, appeal from the order denying their special motion to strike the complaint of plaintiff Ultrra (Code Civ. Proc., § 425.16). They contend that all of Ultrra’s causes of action arose from pre-litigation communications which constituted protected activity under the statute and Ultrra could not prevail on the merits as to any of its causes of action. We affirm the order.

I. Factual and Procedural Background
II.
We draw the facts from the pleadings and the supporting declarations submitted in the trial court. Ultrra is a “direct sales” organization, which provides a support system, including a personalized Web site, business tools and training, and other resources, to a network of customers to assist them in building their businesses. In October 2016, defendants began marketing their software products to Ultrra. AboveGEM claimed that its software was specifically designed for companies like Ultrra and made several representations to Ultrra regarding the capability of its software to meet Ultrra’s needs. After defendants provided Ultrra with marketing materials which state that their new software system was “finished” and “stable,” Ultrra and AboveGEM entered into a software licensing agreement (contract) in November 2016.

Defendants represented that the software would be “fully functioning” by January 1, 2017. However, Ultrra discovered that AboveGEM had not completed a product fit for use by Ultrra. Ultrra documented the problems with the software and had discussions with Wang about them. Ultrra disputed the invoices sent by defendants for four months and gave defendants more than eight months to rectify the problems. After defendants failed to rectify the problems, Ultrra stopped paying the monthly fee of $2,500 to defendants in November 2017.

Paragraph 24 of the complaint stated: “On or about March 13, 2018, Defendants wrote to Plaintiff, ‘As of Feb 28, 2018, Ultrra owes a total of $10,574.38, including late charge and interest. I regret to inform you that unless we receive payment in full by Mar 26, AboveGEM will have to turn off Ultrra’s system and turn the outstanding invoices over to a collection agency and/or our attorney. In the event of reactivation, the reactivation fee will be $1,500.’ AboveGEM suddenly added late charge interest[] and fees, even though nowhere in the contract, nor included in previous invoices does it show any type of late fee could be assessed and how much it would be. As would become clear, Defendants were extorting money and punishment to prevent Plaintiff from pursuing his claims for damages he had advised Defendants of in February, and they would be using denial of any access to the website to coerce payment of this alleged money due.” Ultrra further alleged that “Defendants’ threat to ‘turn off’ the system” constituted a “further breach” of the contract and was “independently wrongful for several reasons.” Citing to the contract, Ultrra alleged that there was “no right to ‘turn-off’ the system if the invoices [were] disputed,” defendants could not terminate the contract without providing notice to Ultrra, and Ultrra was entitled to access to its content for 60 days after the termination of the contract.

On March 20, 2018, Ultrra wrote to defendants and warned them against denying access to Ultrra to its own content. Ultrra wanted defendants to agree that the system would not be turned off on the following day. Ultrra’s e-mail concluded: “ ‘If we do not receive such retraction, we shall have no choice but to take appropriate steps to pursue all remedies, including pursuing this as a criminal as well as a civil matter, including the seeking of a TRO in the form the contract[] specifies in the contract to enjoin you from ‘turning-off’ the system before further order of the Court.’ ”

On April 2, 2018, defendants began denying access to Ultrra to its own content, which violated the terms of the contract that Ultrra would have 60 days to transition to another vendor if the contract was properly terminated. Since the Web site was unavailable, neither Ultrra nor its distributors were able to conduct business.

On April 3, 2018, Ultrra wrote to Wang that unless Ultrra had access to its Web site, it would file a complaint and apply for an injunction. Defendants refused to restore access “while the parties discussed a transition to another software platform and a potential resolution of their dispute.”

On April 4, 2018, Ultrra filed its complaint for damages and injunctive relief. The complaint alleged five causes of action: intentional interference with contractual relations and prospective economic advantage; fraud; “trespass/conversion”; negligence; and breach of contract and warranty. The cause of action for breach of contract was brought against only AboveGEM while the remaining causes of action were brought against both AboveGEM and Wang. On the same day, Ultrra gave notice of its application for a temporary restraining order.

On June 8, 2018, defendants filed a special motion to strike the complaint under section 425.16. Defendants argued that paragraph 24 of the complaint, which described the March 13, 2018 e-mail from Wang to Ultrra in which he threatened to cut off Ultrra’s access to its own data, arose from protected activity, that is, pre-litigation communications. Defendants further argued that since all of the causes of action depended upon the allegations of protected activity in paragraph 24, these causes of action arose from protected activity.

Following a hearing, the trial court denied the motion “for failure to meet the initial burden to establish that the targeted claims, in this case every cause of action alleged in the Complaint, are based on their protected activity, specifically a March 13, 2018 email sent by Defendant Wang in his capacity as ‘AboveGEM’s Co-Founder.’ ” The trial court reasoned: “Here, while the Complaint (at para. 24) quotes a portion of the March 13, 2018 email and that paragraph, like many of the general allegations, is incorporated by reference into each cause of action, it is not apparent from the Complaint or any of the evidence submitted by Defendants that the March 13, 2018 email (even if it is assumed for purposes of argument to be protected activity) is itself the ‘wrong complained of’ and is the basis of any of the Complaint’s causes of action. It is instead clear from the Complaint that Plaintiff’s claims are based on an alleged series of action (and the parties’ dispute over them) that began in later 2016 and early 2017 and continued through the filing of the Complaint on April 4, 2018.”

 

II. Discussion

Section 425.16, subdivision (b)(1) provides that “[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” This statute sets forth “ ‘a two-step process for determining whether an action is a SLAPP. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. . . . If the court finds that such a showing has been made, it must then determine whether the plaintiff has demonstrated a probability of prevailing on the claim.’ [Citation.] ‘Only a cause of action that satisfies both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under the statute.’ ” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 278-279 (Soukup).)

A defendant satisfies the “arising from” requirement “ ‘by demonstrating that the act underlying the plaintiff’s cause fits one of the categories [of protected activity] spelled out in section 425.16, subdivision (e)’. . . .” (§ 425.16, subd. (b)(1); Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) These categories include “any written . . . statement or writing made in connection with an issue under consideration or review by a . . . judicial body . . . .” (§ 425.16, subd. (e)(2).)

“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.] ‘The only means specified in section 425.16 by which a moving defendant can satisfy the [“arising from”] requirement is to demonstrate that the defendant’s conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) . . . .’ [Citation.]” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062-1063.)

“In making its determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (§ 425.16, subd. (b)(2).) Our standard of review is de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.)

Defendants contend that “each of the five causes of action is supported by the Complaint’s Paragraph 24, which arises from protected activity (i.e., pre-litigation communications that were alleged to be independently actionable).” The March 13, 2018 e-mail stated that if Ultrra did not pay its past-due balance, AboveGEM would “turn off Ultrra’s system” and pursue legal action. Defendants also point out that they intended at that time to file a civil action if Ultrra did not pay its past-due balance.

This argument has no merit since this e-mail did not give rise to defendants’ asserted liability. The first cause of action for intentional interference with contract relations and prospective economic advantage was based on defendants’ act in turning off Ultrra’s access to its content, thereby interfering with Ultrra’s contracts with third parties. The second cause of action for fraud was based on defendants’ fraudulent misrepresentations of fact which induced Ultrra to enter into the contract with defendants. The third cause of action for trespass or conversion was based on defendants’ intentional, unauthorized, and wrongful interference with Ultrra’s possessory interest in its computer system, including the content. The fourth cause of action for negligence was based on defendants’ breach of their duty to carry out the terms of the contract. The fifth cause of action for breach of contract and warranty was based on AboveGem’s failure to carry out the terms of the contract, including delivering a system that accomplished the functions promised, operating software in a commercially reasonable manner, delivering support services, delivering working reports, and providing access to the software and content after the termination of the contract. Though the complaint incorporated defendants’ March 13, 2018 e-mail, it was not defendants’ threat to turn off Ultrra’s access to the system that gave rise to their liability under any of the causes of action. Instead, it was defendants’ act in turning off Ultrra’s access, their misrepresentations to Ultrra regarding the capability of the software, and their failure to comply with the terms of the contract that gave rise to defendants’ liability.

Defendants’ reliance on Rohde v. Wolf (2007) 154 Cal.App.4th 28 (Rohde) is misplaced. In that case, there was an ongoing dispute between a brother and a sister regarding the distribution of their deceased father’s assets. (Id. at p. 32.) The sister’s attorney threatened to file an action against the brother and set forth the grounds for the lawsuit. (Ibid.) Thereafter, it was agreed that certain real property would be sold and both sides were to be kept informed of any developments regarding the sale. (Id. at p. 33.) The brother’s attorney eventually learned that the sister had instructed the listing agent not to send certain information to him. (Ibid.) The brother’s attorney left voice mail messages in which he accused the listing agent of engaging in a conspiracy with the sister to deprive the brother of his interest in one of the assets and that he would file an action to protect his interests. (Id. at p. 33.) Shortly thereafter, the sister filed a defamation action against the brother’s attorney and alleged that the voice mail messages to the listing agent defamed her and constituted slander per se. (Id. at p. 34.) The brother’s attorney filed a motion to strike the slander per se action. (Ibid.) The Court of Appeal held that the voice mail messages were pre-litigation communications that were protected by section 425.16. Rohde is readily distinguishable from the present case. Unlike in Rohde, here, the e-mail message was not the basis for defendants’ liability.

We conclude that the trial court did not err when it denied defendants’ special motion to strike Ultrra’s complaint. Our conclusion makes it unnecessary for us to consider whether Ultrra demonstrated a probability of prevailing on its complaint. (Dyer v. Childress (2007) 147 Cal.App.4th 1273, 1284.)

III. Disposition
IV.
The order denying the motion to strike the complaint is affirmed. Ultrra is awarded its costs on appeal.

 

_______________________________

Mihara, J.

WE CONCUR:

______________________________

Premo, Acting P. J.

______________________________

Bamattre-Manoukian, J.

Ultrra v. AboveGEM, et al.

H046325