Opinion
A168383
05-01-2024
YEUNG CHI SHING HOLDING (DELAWARE), INC., et al., Plaintiffs and Appellants, v. YEUNG BING KWONG KENNETH et al., Defendants and Respondents.
NOT TO BE PUBLISHED
(Alameda County Super. Ct. No. 22-CV-006213)
BROWN, P. J.
This case is one of many filed among family members and related entities regarding a family-owned business in Hong Kong, China, and its subsidiaries in the United States. Here, Yeung Chi Shing Holding (Delaware) Inc. (YCSD), YCS Nevada, Inc. (YCS Nevada), and Hayward 1900, Inc. (Hayward 1900) brought various claims against defendants Yeung Bing Kwong Kenneth (Kenneth), Lee Chun Kit (Lee), Prestige Holdings, Ltd. (Prestige Holdings), and Commercial Triumph, Ltd. (Commercial Triumph) for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and unjust enrichment. YCSD also brought a malicious prosecution claim arising from a 2018 shareholder derivative suit filed in federal court (the federal action).
Given that Yeung is the family name used by many people and entities involved, we, like the parties, refer to Yeung Bing Kwong Kenneth as Kenneth and Lee Chun Kit as Lee. By doing so, we intend no disrespect.
This is an appeal from the trial court's grant of defendants' anti-SLAPP motion (Code Civ. Proc., § 425.16). Because plaintiffs have not established that the trial court erred in granting the motion, we affirm.
All further statutory references are to the Code of Civil Procedure unless otherwise stated.
BACKGROUND
The Federal Action and the Corporate Inspection Demands
In December 2018, Kenneth filed a complaint in federal court against YCSD, Mt. Oscar (a Hong Kong-based company and a Yeung family corporate affiliate), and others in Kenneth's family who served as directors of YCSD and/or Mt. Oscar. Kenneth's second amended complaint, which joined as plaintiffs Kenneth's companies, Prestige Holdings and Commercial Triumph, alleged that the defendants were engaged in an "earnings stripping and tax evasion scheme." Specifically, the federal action challenged an agreement pursuant to which Mt. Oscar performed real estate advisory services for YCSD's assets in the United States. The complaint alleged shareholder derivative claims based on the alleged improper real estate advisory services agreement, including state law claims and two federal claims for violation of the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. § 1961 et seq.). Kenneth, a former director of Mt. Oscar and YCSD, also brought an individual claim for wrongful removal from YCSD's board of directors and a claim seeking a judicial declaration that he was not liable for the actions of other directors.
According to plaintiffs' complaint in this state court action, shortly after filing the federal action, "Kenneth and his close associate, Lee, engaged in a coordinated effort to obtain confidential information from YCSD and its subsidiaries, purportedly based on their status as corporate directors."Specifically, in February 2019, Lee submitted to YCS Nevada and Hayward 1900 a director's demand to inspect corporate records requesting, among other documents, corporate governance documents, financial statements, and meeting minutes. That same month, Kenneth also submitted to YCSD a director's demand to inspect corporate records, requesting similar documents. After the demands were submitted, but before Kenneth served the federal complaint, Kenneth, Lee, YCSD, and YCSD's subsidiaries discussed the propriety of the demands. In April 2019, YCSD informed Kenneth and Lee that they were not directors, and they were not authorized to review the corporate records.
The complaint in this state court action alleges that YCS Nevada and Hayward 1990 are subsidiaries of YCSD.
YCSD, joined by Mt. Oscar and the individual defendants in the federal action, moved to dismiss the derivative claims in the operative second amended complaint on the ground that Kenneth and his companies were not adequate representatives to bring the shareholder derivative claims under Federal Rule of Civil Procedure 23.1 (Rule 23.1). Using the eight-factor test to assess adequacy of representation announced in Larson v. Dumke (9th Cir. 1990) 900 F.2d 1363, 1367, the district court granted the motion and dismissed the derivative claims, finding that Kenneth and his companies were inadequate representatives to prosecute the derivative claims under Rule 23.1.
Rule 23.1(a) states, "This rule applies when one or more shareholders or members of a corporation or an unincorporated association bring a derivative action to enforce a right that the corporation or association may properly assert but has failed to enforce. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right of the corporation or association."
With the federal derivative claims dismissed, the district court concluded that it lacked subject-matter jurisdiction over the lawsuit. In light of "the gravity of the allegations in the second amended complaint," however, the court granted leave to amend to allow the substitution in of an appropriate plaintiff. The court ordered that failure to file a third amended complaint would result in "a sua sponte dismissal without prejudice of this matter for lack of subject-matter jurisdiction effective February 24, 2020." A third amended complaint was not filed, and the federal court dismissed the case without prejudice.
This Litigation
After the dismissal of the federal action, YCSD, YCS Nevada, and Hayward 1900 brought this lawsuit in state court. Plaintiffs alleged that, after the death of Kenneth's parents and brother, Kenneth engaged in years of meritless litigation, principally in Hong Kong, attempting to gain control of the family business. With the federal action, plaintiffs alleged, Kenneth expanded his scheme into the United States. YCSD asserted claims for malicious prosecution against Kenneth, Prestige Holdings, and Commercial Triumph; aiding and abetting breach of fiduciary duty against Lee; and breach of fiduciary duty and unjust enrichment against Kenneth. YCS Nevada and Hayward 1900 asserted a claim for breach of fiduciary duty against Lee and a claim for aiding and abetting breach of fiduciary duty against Kenneth. The breach of fiduciary duty claims arose from the director inspection demands; plaintiffs alleged that Kenneth and Lee used information derived from their position as directors to harm plaintiffs and made the demands for improper purposes.
Defendants filed a special motion to strike the complaint under section 425.16. Defendants argued that plaintiffs' claims failed as a matter of law - YCSD's malicious prosecution claim because there was no favorable termination of the federal action, and the fiduciary duty claims because they were covered by the litigation privilege and because plaintiffs could not establish breach or damages as a matter of law.
Plaintiffs filed a motion to lift the automatic discovery stay, arguing that they had good cause to conduct limited discovery to gather evidence not in their possession that they needed to oppose the anti-SLAPP motion. Plaintiffs specifically claimed to need discovery: (1) to establish the elements of malicious prosecution; (2) to "build the factual picture" showing that the inspection demands were made for Kenneth's personal gain, rather than to gather information about Mt. Oscar's duties under the real estate advisory services agreement or any other issue connected to the federal action; (3) to determine whether Kenneth knew he was not a director when he made his inspection demand; and (4) to establish that the inspection demands were not "necessary or useful step[s] in the litigation process." With respect to the element of favorable termination for malicious prosecution, YCSD made it clear that it sought only targeted discovery to determine whether Kenneth "took any actions to maintain the prior federal action."
Defendants opposed plaintiffs' request for discovery, arguing that plaintiffs' claims were deficient as a matter of law and the deficiency could not be cured. Specifically, defendants argued that YCSD's malicious prosecution claim failed because the federal action was dismissed based on Kenneth's lack of standing and did not terminate on the merits, and the breach of fiduciary duty claims failed because they were barred by the litigation privilege and because YCSD failed to allege damages.
On the discovery motion, the trial court ruled, "Plaintiffs have shown good cause to conduct limited discovery on their claims for malicious prosecution, breach of fiduciary duties, aiding and abetting the breach of a fiduciary duty, and unjust enrichment. The Court will restrict the discovery to that information which is not equally available to [p]laintiffs - i.e., [p]laintiffs[] may not conduct formal discovery into documents and communications between [d]efendants and [p]laintiffs." However, the court stayed its order until it heard the section 425.16 motion, so that the court could first determine whether plaintiffs' claims survived as a matter of law. If the court determined plaintiffs' claims were viable as a matter of law, it would continue the hearing on the anti-SLAPP motion to allow plaintiffs to conduct depositions of Kenneth and Lee and to request certain documents.
The court ruled that plaintiffs could request documents between Kenneth and Lee, from January 1, 2018 to the present, concerning: (1) Kenneth's or Lee's belief, if any, that they were entitled to corporate materials from plaintiffs in February 2019, given that Kenneth had already filed the federal action; (2) how Kenneth or Lee reasonably believed such inspection demands were a necessary or useful step in the federal litigation process; and (3) Kenneth's or Lee's knowledge about their respective removals as directors of YCSD, YCS Nevada, and Hayward 1900.
After briefing and argument on the section 425.16 motion, the trial court determined that plaintiffs' claims were legally deficient, and discovery could not cure the deficiency. With respect to the malicious prosecution claim, the court found section 425.16 protected the filing of the federal action, but, as a matter of law, YCSD could not establish the required element of favorable termination of the federal action. The court observed that the federal court dismissed the derivative claims because "Kenneth lacked standing to prosecute the case because he was an inadequate representative." The court recognized, "There is no reasonable reading of the federal court's decision that suggests the court concluded or even opined that [p]laintiffs were innocent of the alleged misconduct." It continued, "Further, because . . . [plaintiffs] lacked standing to prosecute the federal action given [Kenneth's] involvement in the alleged 'earning[s] stripping and tax evasion scheme,' the Court is unpersuaded by [p]laintiffs' argument that discovery would yield information that would support their contention that [d]efendants effectively voluntarily abandoned the federal action."
Regarding the breach of fiduciary duty claims, the trial court ruled that these claims arose from protected activity. Specifically, the court determined that plaintiffs could not escape their complaint's allegations that the inspection demands were made to conduct informal discovery in the federal action, hence the anti-SLAPP statute protected the demands as statements made in furtherance of that litigation. The court then found that the breach of fiduciary duty claims lacked minimal merit because plaintiffs had not established either their contention that Kenneth or Lee breached their fiduciary duties by using confidential information to make the inspection demands or recoverable damages. The court therefore granted defendants' motion, and plaintiffs timely appealed.
DISCUSSION
I. Anti-SLAPP Principles and the Standard of Review
"A SLAPP suit is one in which a plaintiff 'seeks to chill or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances. [Citation.]' [Citation.] SLAPP suits may be disposed of summarily by a special motion to strike under section 425.16, which is 'a procedure where the trial court evaluates the merits of the lawsuit using a summary-judgment-like procedure at an early stage of the litigation.' [Citation.] The statute provides: '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).) The Legislature has directed that the language of the statute be 'construed broadly.' " (Maleti v. Wickers (2022) 82 Cal.App.5th 181, 200 (Maleti).)
An" '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, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." (§ 425.16, subd. (e).)
"A motion to strike under section 425.16, subdivision (b)(1) is analyzed and resolved by 'the court . . . engag[ing] in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant's burden is to demonstrate 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," as defined in the statute. [Citation.] If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based."' [Citation.]
"To meet this burden under the second prong of the statute, '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 if the evidence submitted by the plaintiff is credited." [Citations.]' [Citations.] The plaintiff must show that its claim has 'at least "minimal merit." '" (Maleti, supra, 82 Cal.App.5th at p. 201.)
Review of an order granting or denying a motion to strike under section 425.16 is de novo. (Maleti, supra, 82 Cal.App.5th at p. 201.) We neither"' "weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law." [Citation.]' [Citation.] In performing our de novo review, we' "conduct[ ] an independent review of the entire record. [Citations.]"' [Citation.] '[O]ur review is conducted in the same manner as the trial court in considering an anti-SLAPP motion.' [Citation.] We review the trial court's decision, not its rationale." (Id. at pp. 201-202.) "An appellant still bears the' "burden of affirmatively demonstrating error." '" (Balla v. Hall (2021) 59 Cal.App.5th 652, 671.)
II. Malicious Prosecution
YCSD challenges the trial court's ruling with respect to the malicious prosecution claim. YCSD contends that it established a prima facie case of favorable termination, or the trial court erred in ruling on the claim as a matter of law because the inquiry involved a factual question and YCSD should have been allowed to engage in the discovery it sought. For the reasons set forth post, we reject YCSD's arguments.
As the parties concede, YCSD's malicious prosecution claim arises from protected activity, so the first step of the anti-SLAPP analysis is satisfied. (Maleti, supra, 82 Cal.App.5th at p. 202 [malicious prosecution suit arises out of protected activity].)
At the second step of the analysis, we assess whether YCSD met its burden of establishing a probability of prevailing on its claim. (§ 425.16, subd. (b)(1).) To establish a claim for malicious prosecution, a plaintiff must plead and prove that the prior action: (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in the plaintiff's favor; (2) was brought without probable cause; and (3) was initiated with malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965-966.)
A. Principles Governing Favorable Termination
To establish a malicious prosecution claim, the termination of the underlying suit must reflect on the defendant's innocence. (Maleti, supra, 82 Cal.App.5th at p. 203.)"' "The theory underlying the requirement of favorable termination is that it tends to indicate the innocence of the accused, and coupled with the other elements of lack of probable cause and malice, establishes the tort [of malicious prosecution]." [Citations.]' [Citation.] The malicious prosecution plaintiff need not prove 'that the prior proceeding was favorably terminated following trial on the merits. However, termination must reflect on the merits of the underlying action. [Citation.]' [Citation.] Thus, it is important to recognize that to establish the tort, favorable termination means more than showing simply that the plaintiff' "prevailed in an underlying action .... If the termination does not relate to the merits - reflecting on neither innocence of nor responsibility for the alleged misconduct - the termination is not favorable in the sense it would support a subsequent action for malicious prosecution." '" (Id. at p. 204.)
To determine whether a favorable termination occurred, the court looks at the judgment as a whole in the previous action. (Maleti, supra, 82 Cal.App.5th at p. 204.) Where that action is terminated other than on the merits, in determining whether there is a favorable termination, the court must examine the reasons for termination to see if the disposition reflects the opinion of the court or the prosecuting party that the action would not succeed. (Id. at p. 213.)
The termination of a case by voluntary dismissal or failure to prosecute is generally presumed to be favorable termination unless a contrary reason for the dismissal is proved to a jury. (Minasian v. Sapse (1978) 80 Cal.App.3d 823, 827-828; Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1400 (Sycamore Ridge).) "This is because' "[a] dismissal for failure to prosecute . . . does reflect on the merits of the action [and in favor of the defendant] . . . . The reflection arises from the natural assumption that one does not simply abandon a meritorious action once instituted." '" (Sycamore Ridge, at p. 1400.) This sort of dismissal "may be an implicit concession that the dismissing party cannot maintain the action and may constitute a decision on the merits." (Eells v. Rosenblum (1995) 36 Cal.App.4th 1848, 1855.)
On the other hand, terminations based upon procedural or technical grounds, such as where the court lacks subject-matter jurisdiction or the action is barred by the statute of limitations, do not constitute favorable termination. (Lackner v. LaCroix (1979) 25 Cal.3d 747, 751 [statute of limitations]; Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 882 [subjectmatter jurisdiction].) Similarly, a dismissal for lack of standing is not a termination on the merits. (Hudis v. Crawford (2005) 125 Cal.App.4th 1586, 1590-1592 [after granting leave to file first amended complaint, court dismissed action at demurrer stage where plaintiffs lacked standing to sue for elder abuse because they were not deceased's successors in interest]; see Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1150 [stating in dicta that dismissal due to lack of standing to bring representative claim is not favorable termination on merits]; Citizens of Humanity, LLC v. Ramirez (2021) 63 Cal.App.5th 117, 131-132 [reasoning that voluntary dismissal based on determination of inadequacy of representation prior to class certification is not favorable termination on merits].)
B. Analysis
As an initial matter, we reject YCSD's contention that the trial court's order must be reversed solely because favorable termination is always a factual question. Favorable termination is for the court to decide, and appellate review is de novo. (Sierra Club Foundation v. Graham, supra, 72 Cal.App.4th at p. 1149; CACI No. 1501 [court decides favorable termination as a matter of law, but jury may be required to find preliminary facts before court's legal determination]; see also Hudis v. Crawford, supra, 125 Cal.App.4th at pp. 1590-1592 [ruling on demurrer that termination for lack of standing is not favorable termination].) Favorable termination presents a factual question only when there is a conflict regarding the circumstances of termination, at which point the determination of the reasons underlying the dismissal or failure to prosecute is a question of fact. (Sycamore Ridge, supra, 157 Cal.App.4th at p. 1399; Fuentes v. Berry (1995) 38 Cal.App.4th 1800, 1808.) Thus, the pertinent inquiry in this appeal is whether YCSD established, or could establish with the discovery it sought below, facts supporting a reasonable inference that the disposition reflects the opinion of the federal court or the prosecuting party that the action lacked merit. (Maleti, supra, 82 Cal.App.5th at p. 213.)
With respect to the federal court, YCSD does not dispute the trial court's finding that the dismissals did not reflect the federal court's opinion on the merits, and YCSD does not argue that dismissals under Rule 23.1 and for lack of subject-matter jurisdiction reflect on the merits of a plaintiff's suit.
As noted previously, the cases would not support such an argument. (Cantu v. Resolution Trust Corp., supra, 4 Cal.App.4th at p. 882 [dismissal for lack of subject-matter jurisdiction is not favorable termination]; see Sierra Club Foundation v. Graham, supra, 72 Cal.App.4th at p. 1150 [stating in dicta that dismissal due to lack of standing to bring representative claim is not favorable termination]; Hudis v. Crawford, supra, 125 Cal.App.4th at pp. 1590-1592 [dismissal due to lack of standing is not favorable termination]; see Citizens of Humanity, LLC v. Ramirez, supra, 63 Cal.App.5th at pp. 131132 [voluntary dismissal based on determination of inadequacy of representation prior to class certification is not favorable termination].)
Instead, YCSD argues - unpersuasively - that it has stated or could state a prima facie case of favorable termination because the dismissal was a result of Kenneth's "voluntary abandonment" or "failure to prosecute." YCSD's theory is that the federal court granted leave to file an amended complaint with a new plaintiff, Kenneth did not do so, and he may have made no effort to do so. It also notes that Kenneth did not appeal the federal ruling. But the authorities that YCSD cites to support its claim are distinguishable and do not entitle YCSD to reversal.
YCSD relies principally on Area 55, LLC v. Nicholas &Tomasevic, LLP (2021) 61 Cal.App.5th 136 (Area 55, LLC). There, the plaintiffs (collectively, Area 55) sued attorneys and a law firm for malicious prosecution, and, in granting the attorneys' and law firm's section 425.16 anti-SLAPP motion, the trial court determined that the plaintiffs had failed to establish a prima facie case of favorable termination. (Area 55, LLC, at pp. 149-150.) The 2010 lawsuit underlying the malicious prosecution claim was a putative class action brought by the attorneys against Area 55. The first class action representative therein abandoned his claim by not listing it in a bankruptcy schedule, the second class action representative and counsel did not diligently prepare for trial (causing prejudice to Area 55), and trial could not be held before expiration of the five-year statute (§ 583.310). (Area 55, LLC, at pp. 146-149.) The trial court dismissed the class action for delay in prosecution pursuant to section 583.410. (Area 55, LLC, at p. 154.) Reversing the section 425.16 ruling in the malicious prosecution action, the appellate court found that Area 55 stated a prima facie case of favorable termination, given the evidence showing failure to prosecute and the assumption that one does not simply abandon a meritorious action once instituted. (Area 55, LLC, at pp. 154-161.)
The remaining authorities cited by YCSD likewise involved circumstances where the plaintiff in the underlying lawsuit simply stopped prosecuting the case or dismissed it of his or her own volition. (MacDonald v. Joslyn (1969) 275 Cal.App.2d 282, 285-286 [defendant filed underlying contest of his father's will and then voluntarily dismissed his contest]; Sycamore Ridge, supra, 157 Cal.App.4th at pp. 1392-1394 [defendant in malicious prosecution action filed multiple individual claims against plaintiff in underlying lawsuit and later voluntarily dismissed them]; Minasian v. Sapse, supra, 80 Cal.App.3d at p. 825 [tort claims dismissed for failure to prosecute where cross-complainant did nothing to prosecute claims for two years].)
In contrast to Area 55, LLC and the authorities described ante, this case does not involve a plaintiff who "simply abandon[ed]" his action in the trial court before the lawsuit reached a resolution in court. (Area 55, LLC, supra, 61 Cal.App.5th at p. 155.) Instead, the federal court undisputedly determined that Kenneth, Prestige Holdings, and Commercial Triumph could not prosecute the shareholder derivative claims. As the trial court here recognized, YCSD could not show voluntary abandonment when Kenneth, Prestige Holdings, and Commercial Triumph lacked the ability to litigate the derivative claims.
Further, even if discovery established that Kenneth did not attempt to find someone else to file a third amended complaint, it is not reasonable to assume from such evidence that he believed the derivative claims lacked merit. The "natural assumption" that one "does not simply abandon a meritorious action once instituted" itself presumes the plaintiff has control over the claims asserted and the ability to prosecute them. (Area 55, LLC, supra, 61 Cal.App.5th at p. 155.) Indeed, the Area 55, LLC court itself acknowledged the important distinction between a plaintiff who lacks the ability to bring dismissed claims and one who initially had that ability but later simply elected to stop prosecuting his or her claims. (Id. at pp. 163-164.) The latter circumstances, unlike those present here, support a reasonable inference of termination on the merits. (Ibid.)
Similarly, YCSD does not convince us that evidence showing that Kenneth failed to appeal or even that he failed to consider an appeal of the federal court's ruling can establish termination on the merits. First, YCSD cites no authority to support this position. Second, the federal court's ruling did not address the merits. Accordingly, even if Kenneth did not consider appealing that non-substantive ruling, it is not reasonable to infer from those circumstances that he held the opinion that, if pursued, his action would result in a decision in favor of YCSD on the merits.
Because YCSD cannot show a prima facie case of favorable termination, even with the discovery it sought, we affirm the trial court's ruling with respect to YCSD's malicious prosecution claim.
III. Breach of Fiduciary Duty Claims
Plaintiffs next challenge the trial court's ruling on the breach of fiduciary duty claims.
Plaintiffs do not contest the disposition of their aiding and abetting breach of fiduciary duty or unjust enrichment claims in their appellate briefing, so they have forfeited any claim of error with respect to these claims.
At the first step of the anti-SLAPP analysis, YCS Nevada and Hayward 1900 challenge the trial court's determination that section 425.16 protected Lee's inspection demand because he made his request in furtherance of the federal action. They claim that this ruling was erroneous because they must be allowed to pursue discovery regarding whether Lee seriously and in good faith contemplated litigation against YCS Nevada and Hayward 1900 when he sent his demand. We disagree.
YCSD does not challenge the court's determination that section 425.16 protected Kenneth's inspection demand.
YCS Nevada and Hayward 1900 do not bear their burden of establishing error in the trial court's ruling, which is presumed to be correct. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852; Balla v. Hall, supra, 59 Cal.App.5th at p. 671.) Courts have concluded by analogy to the litigation privilege that section 425.16 protects prelitigation statements only where they are made in connection with proposed litigation under serious consideration and contemplated in good faith. (Pech v. Doniger (2022) 75 Cal.App.5th 443, 462-463.) But the trial court did not rule that the inspection demand was a protected prelitigation communication. Instead, citing plaintiffs' allegations that Lee worked in concert with Kenneth to conduct informal discovery in the federal action, the court found that section 425.16 protected the demand because "Lee's requests were made in furtherance of the [already filed] federal litigation." The federal complaint was filed before Lee served his inspection demand, so authority addressing when section 425.16 protects prelitigation communications does not assist YCS Nevada and Hayward 1900 in establishing error.
Some courts have recently questioned in dicta whether the good faith requirement should be imported into the first step of the anti-SLAPP analysis. (Pech v. Doniger, supra, 75 Cal.App.5th at p. 463.)
Similarly, YCS Nevada and Hayward 1900 do not establish a ground for reversal with the suggestion in a footnote in their opening brief that Lee's inspection demand must have been a "necessary or useful step in the litigation process and must serve its purposes" to fall within the scope of section 425.16, subdivision (e). The "necessary or useful step" element is a litigation privilege requirement, but plaintiffs do not cite any authority finding that this element is incorporated into section 425.16, subdivision (e), nor do they provide reasoned argument supporting such incorporation. (See Flatley v. Mauro (2006) 39 Cal.4th 299, 323 [while courts have "looked to the litigation privilege as an aid in construing the scope of section 425.16 subdivision (e)(1) and (2)," "the two statutes are not substantively the same"].) In any event, we need not decide the merits of this potential claim because it is forfeited: "An appellant cannot bury a substantive legal argument in a footnote and hope to avoid waiver of that argument." (SEIU-USWW v. Preferred Building Services, Inc. (2021) 70 Cal.App.5th 403, 408, fn. 3.)
Plaintiffs discuss the "necessary and useful" element of the litigation privilege in their reply brief as a rebuttal to defendants' claim that the breach of fiduciary duty claims lack minimal merit because the litigation privilege applies. Apart from in the above-referenced footnote, however, plaintiffs do not separately argue in their opening brief that the "necessary and useful" element is part of the first step of the anti-SLAPP analysis.
Aside from the authorities discussed ante, YCS Nevada and Hayward 1900 do not discuss section 425.16, subdivision (e)'s language or cite any additional authority to support their assertion that Lee's inspection demand falls outside the scope of section 425.16. As such, they do not meet their appellate burden of establishing that the trial court committed error when it found that section 425.16 protected Lee's inspection demand.
Moving to the second step of the anti-SLAPP analysis, YCSD, YCS Nevada, and Hayward 1900 fail to show a probability of success on the merits of their breach of fiduciary duty claims. Plaintiffs argue that the court erred in finding that they had not made a prima facie showing of damages, and they claim that they established compensable damages based on the payment of attorney's fees and the use of corporate resources. Again, however, plaintiffs fail to establish cause to reverse the judgment.
Regarding attorney's fees, plaintiffs have waived any claim that such fees are recoverable as damages. The trial court determined that plaintiffs failed to cite authority supporting the recovery of attorney's fees as damages, and it ruled that attorney's fees were not recoverable as damages here. Apart from the bare assertion that attorney's fees are recoverable in this case as damages, plaintiffs' opening brief fails to provide reasoned argument or any citation to supporting authority. Plaintiffs also do not respond to any of defendants' arguments that attorney's fees are not recoverable as damages. A judgment is presumed correct, and the appellant bears the burden of providing argument and legal authority demonstrating error. (Benach v. County of Los Angeles, supra, 149 Cal.App.4th at p. 852.) "This burden requires more than a mere assertion that the judgment is wrong." (Ibid.) Where, as here, an issue is not appropriately raised and supported, we "treat the issue as abandoned." (Ibid.)
Regarding the use of corporate resources, plaintiffs were required to present evidence sufficient to sustain a judgment awarding them monetary damages. (Pech v. Doniger, supra, 75 Cal.App.5th at p. 456; Civ. Code, §§ 3281, 3282, 3333.) Citing their opposition brief below, plaintiffs claim to have submitted "multiple fact declarations from company management about the waste of time and resources, and disruptions caused by the inspection demands." But plaintiffs' brief referenced only one paragraph from a declaration of Wayne Costa, an officer and director of YCS Nevada and Hayward 1900, wherein Costa stated, "Beyond the costs associated with responding to these inspection demands, YCSD, YCS Nevada, and Hayward 1900 also had to divert significant internal resources in order to respond to these demands." Costa did not provide any facts describing the nature of the diverted internal resources, or the monetary value thereof, if any. As such, there is nothing in the record to support a judgment awarding monetary compensation for the alleged diversion of corporate resources.
Civil Code section 3281 provides: "Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages." Civil Code section 3282 provides: "Detriment is a loss or harm suffered in person or property." Civil Code section 3333 provides: "For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not."
DISPOSITION
The judgment is affirmed.
WE CONCUR: STREETER, J., GOLDMAN, J.