Opinion
E065191 E065892
12-11-2017
JOHNRE CARE, LLC, et al., Plaintiffs and Appellants, v. REBECCA SICAT et al., Defendants and Respondents. CARLOS BRAIN, Plaintiff and Appellant, v. REBECCA SICAT et al., Defendants and Respondents.
The Law Offices of Edward P. Kerns and Edward P. Kerns for Plaintiffs and Appellants JohnRe Care, LLC, JohnRe Management, LLC, and Carlos Brain. Emilio Law Group, Daniel G. Emilio, Laurie M. Cortez and Justin G. Schmidt for Defendants and Respondents Rebecca and Johnny Sicat.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. RIC1509818) OPINION APPEAL from the Superior Court of Riverside County. Sunshine S. Sykes, Judge. Reversed. The Law Offices of Edward P. Kerns and Edward P. Kerns for Plaintiffs and Appellants JohnRe Care, LLC, JohnRe Management, LLC, and Carlos Brain. Emilio Law Group, Daniel G. Emilio, Laurie M. Cortez and Justin G. Schmidt for Defendants and Respondents Rebecca and Johnny Sicat.
Carlos Brain, a minority owner of plaintiffs and appellants JohnRe Care, LLC, and JohnRe Management, LLC, brought a derivative action on behalf of the two companies. Defendants and respondents Johnny Sicat and Rebecca Sicat jointly own 75 percent of both companies. The complaint alleged seven causes of action, all relating to the Sicats' activities in running the companies and the businesses operated by the companies. The Sicats filed a special motion to strike, or anti-SLAPP motion (Code Civ. Proc., § 425.16, hereafter section 425.16), arguing that the suit was an effort to interfere with their right of petition in an unrelated suit brought by Brain for involuntary dissolution of JohnRe Care and JohnRe Management. The trial court granted the motion. Plaintiffs appealed, arguing that the instant suit does not arise from the Sicats' right to petition within the meaning of section 425.16. We agree, and we will reverse the order, as well as the related judgment for attorney fees and costs.
The subsequent judgment for attorney fees and costs was separately appealed in Brain v. Sicat et al., case No. E065892. By an order dated August 3, 2016, we consolidated the two appeals for purposes of briefing, argument, and decision. By an order dated September 7, 2016, we dismissed the appeal in case No. E065892 as to JohnRe Management, LLC, and JohnRe Care, LLC, because neither entity is named in the judgment from which that appeal was taken. Because the order granting the section 425.16 order was separately appealed from, JohnRe Care, LLC, and JohnRe Management, LLC, remain plaintiffs for purposes of the appeal in case No. E065191. We will sometimes refer to the companies as "plaintiffs," and we will refer to Brain and the Sicats by name.
FACTUAL AND PROCEDURAL HISTORY
In January 2014, Brain filed an action in Riverside County Superior Court for the dissolution and winding up of affairs of JohnRe Care, LLC, and JohnRe Management, LLC. The complaint alleged that the management of the companies was deadlocked or subject to internal dissention, or that those in control have been guilty of mismanagement or abuse of authority. (Brain v. JohnRe Care, LLC, Riv. County case No. MCC1400132.) The companies filed an answer, which included notification that the Sicats, the majority interest holders in the companies, had elected to purchase Brain's interest in the companies, pursuant to Corporations Code section 17707.03, subdivision (c).
Corporations Code section 17707.03 provides: "(a) Pursuant to an action filed by any manager or by any member or members of a limited liability company, a court of competent jurisdiction may decree the dissolution of a limited liability company whenever any of the events specified in subdivision (b) occurs.
"(b)(1) It is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.
"(2) Dissolution is reasonably necessary for the protection of the rights or interests of the complaining members.
"(3) The business of the limited liability company has been abandoned.
"(4) The management of the limited liability company is deadlocked or subject to internal dissension.
"(5) Those in control of the limited liability company have been guilty of, or have knowingly countenanced, persistent and pervasive fraud, mismanagement, or abuse of authority.
"(c)(1) In any suit for judicial dissolution, the other members may avoid the dissolution of the limited liability company by purchasing for cash the membership interests owned by the members so initiating the proceeding, the 'moving parties,' at their fair market value. In fixing the value, the amount of any damages resulting if the initiation of the dissolution is a breach by any moving party or parties of an agreement with the purchasing party or parties, including, without limitation, the operating agreement, may be deducted from the amount payable to the moving party or parties; provided, that no member who sues for dissolution on the grounds set forth in paragraph (3), (4), or (5) of subdivision (b) shall be liable for damages for breach of contract in bringing that action.
"(2) If the purchasing parties elect to purchase the membership interests owned by the moving parties, are unable to agree with the moving parties upon the fair market value of the membership interests, and give bond with sufficient security to pay the estimated reasonable expenses, including attorney's fees, of the moving parties if the expenses are recoverable under paragraph (3), the court, upon application of the purchasing parties, either in the pending action or in a proceeding initiated in the superior court of the proper county by the purchasing parties, shall stay the winding up and dissolution proceeding and shall proceed to ascertain and fix the fair market value of the membership interests owned by the moving parties.
"(3) The court shall appoint three disinterested appraisers to appraise the fair market value of the membership interests owned by the moving parties, and shall make an order referring the matter to the appraisers so appointed for the purpose of ascertaining that value. The order shall prescribe the time and manner of producing evidence, if evidence is required. The award of the appraisers or a majority of them, when confirmed by the court, shall be final and conclusive upon all parties. The court shall enter a decree that shall provide in the alternative for winding up and dissolution of the limited liability company, unless payment is made for the membership interests within the time specified by the decree. If the purchasing parties do not make payment for the membership interests within the time specified, judgment shall be entered against them and the surety or sureties on the bond for the amount of the expenses, including attorney's fees, of the moving parties. Any member aggrieved by the action of the court may appeal therefrom.
"(4) If the purchasing parties desire to prevent the winding up and dissolution of the limited liability company, they shall pay to the moving parties the value of their membership interests ascertained and decreed within the time specified pursuant to this section, or, in the case of an appeal, as fixed on appeal. On receiving that payment or the tender of payment, the moving parties shall transfer their membership interests to the purchasing parties.
"(5) For the purposes of this section, the valuation date shall be the date upon which the action for judicial dissolution was commenced. However, the court may, upon the hearing of a motion by any party, and for good cause shown, designate some other date as the valuation date.
"(6) A dismissal of any suit for judicial dissolution by a manager, member, or members shall not affect the other members' rights to avoid dissolution pursuant to this section.
"(d) Nothing in this section shall be construed to limit the remedies otherwise available to a court of competent jurisdiction over the dissolution."
The parties agreed to retain the Mentor Group to appraise the value of Brain's interest in the companies. Upon completion of the appraisal, the Sicats tendered an offer to purchase Brain's interest. Brain did not accept the offer, and the Sicats filed a motion to confirm the valuation, as provided for in Corporations Code section 17707.03, subdivision (c). Brain objected to confirmation on various grounds, including what was apparently a long-standing contention that the Sicats were concealing pertinent business records from him, in violation of the companies' operating agreements, and were acting in furtherance of their own financial interests, to the detriment of the companies. Brain stated in the objection that he intended to file a suit for breach of fiduciary duty in order to compel the Sicats to produce the pertinent records.
We take judicial notice (Evid. Code, § 452, subd. (d)) that on February 3, 2017, judgment was entered in Brain v. JohnRe Care, LLC (Riv. County case No. MCC1400132). Brain filed a notice of appeal in that case on April 4, 2017 (case No. E068045). That appeal remains pending.
After Brain, on behalf of plaintiffs, filed the suit underlying the instant appeal, the Sicats filed their anti-SLAPP motion. In the motion, they asserted, based on Brain's own statements, that the suit was filed for the purpose of interfering with their statutory right to buy him out or of affecting the outcome of the other litigation. Brain did not dispute that assertion. Rather, he affirmed that his intention in filing the instant suit was to obtain documents that would afford the appraisers the ability to make an accurate valuation of the businesses, in light of the Sicats' alleged depredations. He also asserted that section 425.16 does not apply because the instant lawsuit did not "arise" from the earlier litigation or from the Sicats' exercise of their right of petition.
The trial court granted the motion and granted the Sicats' subsequent motion for attorney fees and costs. Plaintiffs and Brain filed timely notices of appeal from both the order granting the section 425.16 motion and the judgment for attorney fees and costs.
LEGAL ANALYSIS
Standard of Review
An order denying a special motion to strike under section 425.16 is an appealable order. (Code Civ. Proc., §§ 425.16, subd. (i), 904.1, subd. (a)(13).) Our review is de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.)
Overview of Section 425 .16
Section 425.16 provides, inter alia, 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 Constitution or the 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." (§ 425.16, subd. (b)(1).) "As used in this section, '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 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 . . . ." (Id., subd. (e).)
Section 425.16 posits 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. (§ 425.16, subd. (b)(1).) 'A defendant meets this burden by demonstrating that the act underlying the plaintiff's cause fits one of the categories spelled out in section 425.16, subdivision (e)' [citation]. 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. (§ 425.16, subd. (b)(1); [citation].)" (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) Both prongs must be satisfied in order for the action to be deemed a SLAPP suit. (Id. at pp. 88-89.)
Plaintiffs' Causes of Action Do Not Arise from Defendants' Protected Conduct
The dispositive question raised in this appeal is whether any of the causes of action in the current lawsuit "arise" from the Sicats' petitioning activity, specifically their attempt to exercise their right to buyout Brain's interest in the companies pursuant to Corporations Code section 17707.3, as they contend.
We first address the Sicats' contention that plaintiffs have waived this assertion by failing to raise it in the trial court. This is simply not true. Plaintiffs' opposition to the motion initially dealt with Brain's motivation for filing the lawsuit, which he openly stated was to compel the Sicats to produce documents material to the valuation of the company and of Brain's interest in the company. However, the opposition also contended that section 425.16 does not apply because the acts alleged in the complaint did not arise from protected activity. Moreover, even if the contention that section 425.16 does not apply because the litigation did not arise from protected activity had not been argued below, a new theory based on uncontroverted facts appearing in the record and pertaining solely to a question of law can be raised for the first time on appeal. (In re Marriage of Priem (2013) 214 Cal.App.4th 505, 510-511; Ward v. Taggart (1959) 51 Cal.2d 736, 742.) Here, the material facts are not disputed, and the application of section 425.16 to those facts is a question of law. (Crocker National Bank v. City and County of San Francisco (1989) 49 Cal.3d 881, 888 [application of statute to undisputed facts is a question of law].)
We now turn to the merits of the contention. In a trio of cases decided in 2002, the California Supreme Court addressed the meaning of the phrase "arising from" as used in section 425.16. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53; City of Cotati v. Cashman (2002) 29 Cal.4th 69; Navellier v. Sletten, supra, 29 Cal.4th 82.) In those cases, the court held that the "the 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." (Navellier, at p. 89.) "Moreover, that a cause of action arguably may have been 'triggered' by protected activity does not entail that it is one arising from such. [Citation.]" (Ibid.) Indeed, a suit may be in "response to, or in retaliation for" protected activity without necessarily arising from it. (City of Cotati, at p. 78.) "In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity." (Navellier, at p. 89.) The court reiterated that holding more recently in Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057. There, the court stated:
"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; final italics added in Park.] In short, 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." (Park, at pp. 1062-1063.)
Here, the complaint alleged six torts, all of which were based on the allegations that the Sicats breached their duty of loyalty to the companies and their members by "self-dealing, failure to account, misuse of [the companies'] assets, conversion of [the companies'] assets, approving and paying unreasonable and exorbitant salaries and perquisites to themselves and other family members and friends without approval of a majority of disinterested managers and members, and other acts of disloyalty as set forth in the Corporations Code and the Operating Agreement." The seventh cause of action, for declaratory relief, also incorporated the above allegations and sought a declaration of the parties' rights and duties under the operating agreements. There is not a single allegation that is based on the Sicats' exercise of their right of speech or petition. Accordingly, the Sicats did not meet their burden of establishing the first prong of section 425.16.
Contrary to the Sicats' contention, it is irrelevant that the lawsuit was motivated by Brain's desire to interfere with their exercise of their statutory right to buy out his interest in the companies. Section 425.16 applies only to "unsubstantiated causes of action arising from protected speech or petitioning, without regard to the subjective intent of the plaintiff." (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at pp. 59-60.) As noted above, a suit may be in "response to, or in retaliation for" protected activity without necessarily arrising from it. (City of Cotati v. Cashman, supra, 29 Cal.4th at p. 78.)
The Sicats rely on Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628. In that case, the court held that the history of litigation between the parties may be relied upon to demonstrate that the current suit is not legitimate but is instead an effort to squelch the defendant's exercise of the rights of free expression or petition. (Id. at p. 645.) Although the Supreme Court quoted that case with approval in some respects in Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th 53, it ultimately disapproved it to the extent that it held that a litigant's subjective intent is relevant to determining whether a suit is a SLAPP. (Equilon, at pp. 67-68 & fn. 5.) --------
DISPOSITION
The order granting the section 425.16 motion and the judgment entered on April 4, 2016, are reversed. The cause is remanded for further proceedings.
Costs on appeal are awarded to plaintiff and appellant Carlos Brain.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKINSTER
Acting P. J. We concur: MILLER
J. CODRINGTON
J.