2017-00223790-CU-BC

USI Insurance Services National, Inc. vs. Thomas R. Hucik

Nature of Proceeding: Motion to Strike (SLAPP) Cross-Complaint

Filed By: Fitzgerald, Chad R.

Plaintiffs and cross-defendants USI Insurance Services National, Inc. (“USI National”) and USI Insurance Services LLC’s (“USI”) (collectively, “Plaintiffs”) special motion to strike is GRANTED.

Overview

This action arises from defendant and cross-complainant Thomas Hucik’s (“Hucik”) employment with Wells Fargo Insurance Services USI, Inc. (“WFIS”). Hucik began working for WFIS selling surety bonds on December 1, 2010. At that time, Hucik also entered into a purchase agreement with WFIS for the sale of his book of business, which included an agreement that Hucik would not compete with WFIS for two years after his termination. Thereafter, on November 30, 2017, Plaintiffs acquired WFIS. Plaintiffs contend this acquisition of WFIS included Hucik’s purchase agreement.

Hucik resigned from USI on December 4, 2017. The next day, Hucik began working for co-defendant and cross-complainant InterWest. Hucik solicited clients to join him at InterWest.

Plaintiffs filed their complaint on December 14, 2017, alleging among other things, breach of contract and misappropriation of trade secrets. Plaintiffs requested a temporary restraining order (“TRO”) and preliminary injunction. On December 21, 2017, the Court granted the TRO preventing Hucik and InterWest from selling surety bonds to clients who were serviced by Hucik while he was at WFIS until the OSC hearing scheduled for January 12, 2018, regarding Plaintiffs’ request for a preliminary injunction. The TRO specifically enumerated 21 entities subject to the Order. The TRO was modified on January 9, 2018, to exclude “any of those clients enumerated above who had an insurance brokerages relationship with InterWest Insurance Services, LLC, that predated Hucik’s employment by InterWest for insurance products other than those offered by Hucik to those enumerated clients.” (ROA 27.) On January 12, 2018, the Court granted Plaintiffs’ motion for preliminary injunction.

On December 22, 2017, Plaintiffs sent an email to 21 current and prospective clients of InterWest and Hucik regarding the Court’s TRO Order and attaching a copy of the Order. That email is the subject of Hucik and InterWest’s Cross-Complaint, which is the subject of this instant special motion to strike.

As a result of Plaintiffs’ email, Hucik and InterWest filed a Cross-Complaint on January 2, 2018, against Plaintiffs alleging intentional and negligent interference with prospective economic relations, misrepresentation, and unfair business practices. Hucik and InterWest allege Plaintiffs’ email misrepresented the contents of the Court’s TRO Order. Specifically, Hucik and InterWest allege Plaintiffs misrepresented the Order by instructing the clients that they must disassociate with Hucik and InterWest and that Hucik and InterWest may not sell them any type of insurance product for an indefinite period. (Cross-Complaint at ¶ 16.) Hucik and InterWest also contend Plaintiffs misrepresented the Court’s Order by stating WFIS had brought the lawsuit against them. (Cross-Complaint at ¶¶ 16, 26.) They further contend the email created an inference that Hucik and InterWest had breached a contract and broken the law.

Plaintiffs now move to strike Hucik and InterWest’s entire Cross-Complaint pursuant to the anti-SLAPP statute at Code of Civil Procedure section 425.16.

Legal Standards

“The anti-SLAPP statute is aimed at curbing lawsuits brought primarily to chill the valid exercise of constitutional rights of freedom of speech and petition for the redress of grievances.” (City of Alhambra v. D’Ausilio (2011) 193 Cal.App.4th 1301, 1305 [citation and additional quotation marks omitted].) In ruling on the motion, the Court follows a two-step analysis. First, the defendant (or cross-defendant) must make a prima facie showing that the plaintiff’s (or cross-complainant’s) causes of action arise from protected free-speech or petition activity within the meaning of Code of Civil Procedure section 425.16. (See Digerati Holdings, LLC v. Young Money Entert., LLC (2011) 194 Cal.App.4th 873, 883-884.) The “principal thrust or gravamen” of the claim determines whether section 425.16 applies. (See Dyer v. Childress (2007) 147 Cal.App.4th 1273, 1279.)

At the same time, however, the Court may strike a portion of a cause of action arising from protected activity while refusing to strike other portions. (See Cho v. Chang (2013) 219 Cal.App.4th 521, 523, 527; accord City of Colton v. Singletary (2012) 206 Cal.App.4th 751, 773-774.) Where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 425.16 unless the protected conduct is merely incidental to the unprotected conduct. (See Burrill v. Nair (2013) 217 Cal.App.4th 357, 379-381.)

In deciding whether the defendant (or cross-defendant) has met this initial burden, the Court considers the pleadings, declarations, and matter of which it may take judicial notice. (Governor Gray Davis Com. v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 458-459.)

If the defendant (or cross-defendant) makes a sufficient showing, then the burden shifts to the plaintiff (or cross-complainant) to show a reasonable probability that he will prevail and thus receive a judgment in his favor. (See ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999 [citation omitted].) To meet this responsive burden, the plaintiff (or cross-complainant) must produce admissible evidence supporting inferences that the elements of the causes of action are present. (See Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 822; Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 1153, 1166.) The Court does not weigh evidence that the parties produce or make credibility determinations. (See Midland Pac. Bldg. Corp. v. King (2008) 157 Cal.App.4th 264, 271; Hall v. Time Warner, Inc. (2007) 153 Cal.App.4th 1337, 1346.)

Only a cause of action that satisfies both prongs of the anti-SLAPP statute–i.e., that arises from protected speech and lacks even minimal merit is a SLAPP, subject to being stricken under the statute. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 819-820.)

Discussion

Plaintiffs contend the allegations in the Cross-Complaint arise from protected activity as the email falls within the parameters of Code of Civil Procedure section 425.16, subsection (e)(2). Section 425.16, subsection (e)(2) identifies one of the four categories of “protected activity” as “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[.]”

Plaintiffs contend their email constitutes protected activity because it was made in connection with a court proceeding as it related to substantive issues in the proceeding (the TRO) and is directed to persons who have some potential interest in the proceeding (the specific clients/entities named in the TRO). In support, Plaintiffs cite to Contemporary Services Corp. v. Staff Pro Inc. (2007) 152 Cal.App.4th 1043. In Contemporary Services, the Court of Appeal found an e-mail sent by defendants to customers was protected under the anti-SLAPP statute because it constituted a litigation update, which described the parties’ contentions and court rulings, and was directed to clients who had some involvement in the parties’ litigation. (Contemporary Services, supra, 152 Cal.App.4th at 1055.) The Court explained “Both section 425.16 and Civil Code section 47 are construed broadly, to protect the right of litigants to ‘ “the utmost freedom of access to the courts without [the] fear of being harassed subsequently by derivative tort actions.” ’ [Citations.] Thus, it has been established for well over a century that a communication is absolutely immune from any tort liability if it has ‘ “some relation” ’ to judicial proceedings.” (Ibid., citing to Healy v. Tuscany Hills Landscape & Recreation Corp. (2006) 137 Cal.App.4th, 1, 5-6 [“Because one purpose of the letter was to inform members of the association of pending litigation involving the association, the letter is unquestionably ‘in connection with’ judicial proceedings [citation] and bears ‘ “some relation” ’ to judicial proceedings”].)

Similarly, here, Plaintiffs sent an email to the 21 entities specifically named in the TRO informing them of the Court’s Order and paraphrasing its contents. These 21 entities, although non-parties to the litigation, have an interest in the proceeding as the Court’s TRO Order specifically restricted them from being serviced by Hucik or InterWest. Although, as Hucik and InterWest point out, the Court’s Order did not require Plaintiffs to email these businesses, this is not determinative as to whether the speech was made in connection with the underlying court proceeding. Further, as noted above, the anti-SLAPP statute is to be construed broadly.

In opposition, Hucik and InterWest contend section 425.16, subsection (e)(2) does not protect unfair business practices or interference with business relations or prospective economic advantage. In support, Hucik and InterWest cite to Flately v. Mauro (2006)

39 Cal.4th 299. However, Flately is distinguishable. In Flately the subject communications consisted of numerous letters and calls where the defendant threatened to accuse the plaintiff of numerous crimes and disgrace him in the public media unless he paid a large sum of money. (Flately, supra, 39 Cal.4th at 328-330.) Specifically, the defendant lawyer sent letters to the plaintiff threatening to go public with a rape allegation unless plaintiff paid a “settlement” of $100,000,000. The Court found the conduct was not constitutionally protected because the evidence conclusively established criminal extortion as a matter of law. (Ibid.) Flately made clear its conclusion that the defendant’s conduct “constituted criminal extortion as a matter of law [was] based on the specific and extreme circumstances of this case.” (Id. at 332, fn. 16.) Flately held that “where a defendant brings a motion to strike under section 425.16…but either the defendant concedes, or the evidence conclusively establishes, that the assertedly protected speech or petition activity was illegal as a matter of law, the defendant is precluded from using the anti-SLAPP statute to strike the plaintiff’s action.” (Id. at 320.) “Illegal” pursuant to Flately means criminal, not simply violative of a statute. (Mendoza v. ADP Screening & Selection Services, Inc. (2010) 182 Cal.App.4th 1644, 1654.) Here, Hucik and InterWest have not alleged Plaintiffs’ conduct was criminal, Plaintiffs do not concede the illegality of their conduct, and such illegality has not been conclusively established.

Hucik and InterWest further contend the email falls within the commercial exemption to the Anti-SLAPP statute set forth in section 425.17, subsection (c). Section 425.17(c) provides, in pertinent part: “Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services … arising from any statement or conduct by that person if both of the following conditions exist: (1) The statement or conduct consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services, or the statement or conduct was made in the course of delivering the person’s goods or services. (2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual buyer or customer … .”

“The legislative history indicates this legislation [Civil Code section 425.17(c)] is aimed squarely at false advertising claims and is designed to permit them to proceed without having to undergo scrutiny under the anti-SLAPP statute.” (Demetriades v. Yelp, Inc.

(2014) 228 Cal.App.4th 294, 309.) Further, the commercial speech exemption must be narrowly construed. (Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 22.)

This Court is not persuaded the conduct of Plaintiffs upon which Hucik and InterWest base their claims is “purely commercial” so as to preclude Plaintiffs from availing themselves to the protections of the anti-SLAPP statute. The majority of the email concerns information regarding the litigation, the Court’s recent TRO Order, and how that order affects the email recipients. Plaintiffs’ email does not make a statement of fact about Hucik or InterWest’s business operation, goods, or services. Although Plaintiffs’ email communicated that USI is happy to assist with the client with its insurance needs, that statement was made in connection with the Court’s TRO Order that temporarily restricted those clients from purchasing insurance from Hucik and InterWest.

As Plaintiffs have satisfied the first prong of the anti-SLAPP statute by showing the Cross-Complaint arises out of protected activity, the Court next determines whether Plaintiff has demonstrated a probability of prevailing on the claim. (Peregrine Funding, Inc. v Sheppard Mulling Richter & Hampton LLP (2005)133 Cal.App.4th 658, 672-673.)

Although it is not their burden, Plaintiffs contend Hucik and InterWest cannot meet this burden because the email is protected by the litigation privilege set forth in Civil Code section 47(b)(2). If accurate, this would preclude Hucik and InterWest from establishing a prima facie case. Plaintiffs contend the email is privileged because it was sent by them in connection with the TRO to achieve the objects of the litigation and it has a connection or logical relation to the action. The Civil Code section 47(b)(2) privilege “applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) While Plaintiffs’ email was related to a judicial proceeding, it was not made “in a judicial proceedings” and Plaintiffs have not provided any legal authority that an email to non-parties concerning litigation, but not made during or in a judicial proceeding, constitutes a statement made “in a judicial proceeding.” Further, Plaintiffs argument that the email was made to “enforce the judgment” is not persuasive as the TRO was not a “judgment.”

Accordingly, the Court is not persuaded the absolute litigation privilege applies to the email.

The Cross-Complaint alleges causes of action for intentional and negligent interference with prospective economic relations, misrepresentation, intentional interference with contractual relations, and unfair business practices.

Hucik and InterWest contend they have a probability of prevailing on all of their causes based on the following. Plaintiffs’ email stated the clients cannot associate with Hucik and InterWest, even though the Court’s Order does not specifically prevent Hucik and InterWest from associating with these clients. The Court’s Order does not prevent Huck and InterWest from selling insurance to clients InterWest had prior to Hucik coming to work for it, yet Plaintiffs improperly sent an email to Intech Mechanical, which InterWest had serviced for many years prior to Hucik’s employment. (Declaration of Keith Schuler in Support of Ex Parte Application for an OSC re Preliminary Injunction and TRO (ROA 13), ¶ 7.) Hucik and InterWest also argue Basic Resources, a surety client of Hucik for more than 20 years, decided to go to Andreini and Company instead of InterWest after receiving Plaintiffs’ email because of the threatening nature of the contents. (Declaration of Jeff Reed (“Reed Decl.”) at ¶ 5.) The Court finds this evidence is insufficient to demonstrate a probability of success.

In order to prove intentional or negligent interference with prospective economic advantage, Hucik and InterWest must show they and the clients who were emailed were in an economic relationship that probably would have resulted in an economic benefit to them, that Plaintiffs knew of the relationship, that Plaintiffs engaged in conduct that was wrongful by some legal measure other than the fact of the interference itself, that Plaintiffs intended to disrupt the relationship, the relationship was disrupted, Hucik and InterWest were harmed, and Plaintiffs’ conduct was a substantial factor in causing the harm. (CACI 2202; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153-1154.) Hucik and InterWest have failed to meet their burden. Hucik and InterWest provide evidence only as to two clients who received the email – Intech Mechanical and Basic Resources. As to Basic Resources, there is no evidence Plaintiffs’ conduct was a substantial factor in causing the harm. No evidence has been presented that Basic Resources was a client of InterWest prior to Hucik’s employment. Therefore, the Court’s TRO Order is the cause of any interference with this relationship, not Plaintiffs’ email. As to Intech Mechanical, which was purportedly exempt from the TRO as a former client of InterWest, Hucik and InterWest have not provided any evidence the relationship was actually disrupted due to Plaintiffs’ email.

The elements to state the cause of action for intentional interference with contractual relations are (1) a valid contract between Hucik and InterWest and a third party; (2) Plaintiffs’ knowledge of this contract; (3) Plaintiffs’ intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126, internal citations omitted.) Hucik and InterWest have failed to meet their burden to establish a probability of success as to this cause of action. They have failed to offer any evidence as to the existence of a valid contract between them and a third party or resulting damage caused by Plaintiffs’ email.

Lastly, a cause of action for misrepresentation involves allegations that Plaintiffs made

a misrepresentation to Hucik or InterWest that Plaintiffs knew was false and intended Hucik and InterWest to rely on. Hucik and InterWest do not allege Plaintiffs made a misrepresentation to them. Rather, Hucik and InterWest contend Plaintiffs made misrepresentations to third parties – their current and prospective clients. This is insufficient to establish a prima facie cause of action for misrepresentation.

Hucik and InterWest’s request to continue the hearing to conduct limited discovery is DENIED.

Section 425.16, subsection (g), provides “All discovery proceedings in the action shall be stayed upon the filing of a notice of motion made pursuant to this section. The stay of discovery shall remain in effect until notice of entry of the order ruling on the motion. The court, on noticed motion and for good cause shown, may order that specified discovery be conducted notwithstanding this subdivision.”

“If the plaintiff makes a timely and proper showing in response to the motion to strike, that a defendant or witness possesses evidence needed by plaintiff to establish a prima facie case, the plaintiff must be given the reasonable opportunity to obtain that evidence through discovery before the motion to strike is adjudicated.” (Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995) 37 Cal.App.4th 855, 868, [application of the anti- SLAPP statute did not violate Plaintiffs due process rights because Plaintiff had not sought to take discovery].) The trial court may also continue hearing on the motion to strike so that any discovery it authorizes may be completed. ( Ibid.)

The Court notes Hucik and InterWest did not move for this relief by way of a properly noticed motion or seek ex parte relief. They request this relief at the conclusion of their opposition papers in a brief paragraph, wherein they state “If this court finds insufficient evidence to support any or all [of] Cross-Defendants’ [sic] claims, Cross-Complainants respectfully ask this Court to stay its ruling for limited discovery.” That is not the standard by which relief to conduct limited discovery is granted. It is not dependent on whether or not the Court is inclined to grant the motion. Nonetheless, Hucik and InterWest have also failed to establish good cause for permitted limited discovery.

In determining whether good cause exists to allow discovery, the Court should focus its inquiry on whether the defendant (or cross-defendant) controls evidence that plaintiff (or cross-complainant) needs to make this prima facie case in response to the special motion to strike. “Surely the fact [that] evidence necessary to establish the plaintiffs prima facie case is in the hands of the defendant or a third party goes long way toward showing good cause for discovery.” (Garment Workers Center v. Superior Court (2004) 117 Cal.App.4th 1156, 1162.) Other relevant factors to determine whether good cause exists to lift the discovery ban include: (a) “whether the information the Plaintiff seeks to obtain through formal discovery proceedings is readily available from other sources or can be obtained through informal discovery”; (b) “the Plaintiffs need for discovery in the context of the issues raised in the [anti-] SLAPP motion,” and (c) the relative circumstances of the parties and the importance of freezing discovery to protect the Defendant. (Garment Workers Center, supra, 117 Cal.App.4th at 1161-1162.)

Hucik and InterWest have failed to make a sufficient showing of good cause. They claim in one sentence that there is good cause for the hearing to be continued so they can depose Plaintiffs to determine their intent to misrepresent the Court’s Order and

unfairly compete. Hucik and InterWest contend Plaintiffs claim they did not have an intent to make a misrepresentation and, as a result, they should be permitted to depose Plaintiffs as to this claim. The Court is not persuaded this is a necessary element to any of Hucik or InterWest’s claims, and has Hucik or InterWest have not set forth any authority or argument as to why testimony regaridng Plaintiffs intent is necessary to establish any of their prima facie claims.

For the foregoing reasons, Plaintiffs’ motion is GRANTED as Plaintiffs have demonstrated this action “arises from” conduct protected by Code of Civil Procedure section 425.16(e) and Hucik and InterWest have failed to show a reasonable probability that they will prevail and thus receive a judgment in their favor.

Plaintiffs may seek fees pursuant to CCP § 425.16(c)(1) by way of a separately noticed motion.