Opinion
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. HG08396040
Haerle, J.
I. INTRODUCTION
Julian Attree (Attree) appeals from an order granting a special motion to strike several causes of action from his complaint pursuant to section 425.16 of the Code of Civil Procedure (section 425.16), the anti-SLAPP statute. We hold that the causes of action that were stricken from Attree’s complaint do not arise from protected activity under section 425.16. Therefore, the order granting the special motion to strike must be reversed.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. The Complaint
When ruling on a special motion to strike, “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).) Attree’s version of the facts is set forth in his July 1, 2008, complaint against Jimex, Inc. (Jimex) and Tai Choi (Choi), hereafter defendants.
1. The Share Purchase Agreement
Attree owns the trademark “COLD TECH,” which has been used by his company, IAD Technologies, Inc. (IAD), since at least 1995. IAD manufactures and sells food refrigeration equipment. Prior to September 11, 2003, Attree discovered that defendants were using the trademark “COLD TECH” in Jimex’s business. Jimex is in the same business as IAD and Choi is the majority shareholder, chairman of the board of directors, owner and alter ego of Jimex.
On September 11, 2003, Attree demanded that defendants stop using the “COLD TECH” trademark. In late 2004, Attree and Choi agreed to resolve their trademark dispute by having IAD license its trademark to Jimex, and having Attree acquire an ownership interest in Jimex. The parties agreed to document their “deal” in a “share purchase agreement.”
In March 2005, Attree forwarded a proposed share purchase agreement to defendants, which was consistent with the parties’ discussions. The agreement consisted of three parts: (1) A license agreement, pursuant to which IAD would license the “COLD TECH” trademark to Jimex for a period of one year, in exchange for 5 percent of Jimex stock. The license would have an automatic one-year renewal until cancelled by IAD, at which time IAD’s 5 percent interest in Jimex would be returned to Jimex. (2) A purchase agreement, pursuant to which Attree would buy 5 percent of Jimex for an amount to be determined based on Jimex financial records. (3) An option agreement, pursuant to which Attree could purchase an additional 31 percent of Jimex stock.
During the next several months, Attree and his attorney made repeated requests that Choi execute the share purchase agreement. Choi found excuses for putting off signing or simply ignored these requests. Although Choi never did sign the agreement, Attree relied on the agreement when he entered into several business transactions with the defendants.
2. Attree’s Investment in Jimex
During the first quarter of 2005, Attree invested $200,000 in Jimex. Attree made this investment at Choi’s insistence and because it was “consistent with the understanding reflected in the share purchase agreement.” Attree “was informed” that, by making this investment, he was purchasing 5 percent of Jimex for $200,000.
At the end of the 2005 calendar year, Jimex delivered 889 shares to Attree, informing him that the shares constituted 10 percent of the company. Attree understood, pursuant to the terms of the share purchase agreement, that he had purchased half these shares, a 5 percent interest in the company, for $200,000, and that the other half were transferred to him pursuant to the license agreement that was documented in the share purchase agreement that Choi had yet to sign.
Attree purchased Jimex stock in reliance on representations by Choi that proved to be false. Choi represented that Jimex would issue new shares for Attree to purchase in order to infuse new capital into the corporation, but Attree later discovered that half the stock that was transferred to Attree was previously held in Choi’s name. Choi also represented that he and the president of Jimex, a man named Yong Kim (Kim), were the only shareholders of Jimex. Choi said that Kim owned a 10 percent interest in the company but that, after Attree made his investment, Jimex would purchase back some of Kim's shares and reduce his ownership interest to 3 or 4 percent. Attree subsequently learned that Jimex had several additional shareholders and that Kim, who has a pending lawsuit against the defendants, presently claims a 10 percent ownership of Jimex.
When Attree invested $200,000 in Jimex, he believed that the price he paid for each share he purchased was approved by the Jimex board of directors, that it was a fair and equitable price, and that it was consistent the price that Choi and Kim had paid for their shares. Attree later discovered the following facts that Choi failed to disclose: (1) Kim paid $63 per share for his stock; (2) Choi paid a total of $100 for his majority interest in Jimex; (3) Choi’s wife paid $100 per share for her stock; (4) Jimex’s several additional shareholders paid amounts ranging from $20 per share to $250 per share for their stock.
3. Attree’s Investment in Seryung
In late 2004 and early 2005, Choi talked to Attree about investing in and purchasing refrigerator equipment from a Korean manufacturer called Seryung. Choi told Attree that he owned Seryung, a stable, viable company with an initial capitalization of $700,000. Choi also represented that Attree could acquire a 28 percent ownership interest by investing $200,000 in the company and that he and Attree would be the sole shareholders. Choi agreed to provide Attree with timely, accurate and complete financial information about Seryung.
In June 2005, Attree agreed to invest $200,000 in Seryung. At Choi’s direction, Attree made a partial payment by transferring $20,000 to Jimex and $80,000 to a bank in Korea. Attree paid Choi the remaining $100,000 in July 2005.
In July 2005, Attree’s attorney wrote to Choi’s attorney to request additional information about Seryung and also suggested ways to structure and document the parties’ “deal.” Choi’s attorney responded that the parties would take a trip to Korea where they could document their deal. Later, Choi’s attorney disclosed that Seryung had been “set up” as a company but had not yet issued shares and that the parties should plan to draft a shareholder’s agreement in Korea so that it would be governed by Korean law.
On October 31, 2005, Attree wrote to defendants to request a date for signing the parties’ outstanding agreements, including the Jimex shareholder agreement, a trademark licensing agreement and the Seryung shareholder agreement, which Attree offered to have his attorney prepare. Choi did not respond to this request.
In mid to late 2005, Attree purchased approximately $500,000 worth of products from Seryung to market to his customers in Canada. Later in 2005, Choi asked Attree to invest an additional $150,000 in Seryung. Attree made the additional investment some time during the later part of 2005.
Attree became concerned about quality control issues at Seryung and continued to request better communication with Seryung and the defendants. Eventually, Choi arranged for Kim, who was the president of both Jimex and Seryung, to meet with Attree in Canada. After further discussions, the parties agreed that Attree, Choi and Kim would meet in Korea at Seryung and then travel together to Vietnam to discuss a potential new venture.
The three men arrived in Vietnam in the Spring of 2006. They discussed a proposal to close Seryung in Korea and to move its operations to a factory that would be opened in Vietnam. Choi told Attree that the money Attree had invested in Seryung would be transferred to the proposed Vietnamese corporation. Choi also asked Attree to make an additional investment in the Vietnamese company and to make an unsecured loan to the new venture. Attree questioned why Seryung was being closed, and said that if he invested additional money in the proposed Vietnamese operation he wanted a 51 percent interest and complete control. Attree also offered to go to Vietnam to run the company for a period of time. Choi was offended by Attree’s comments and became hostile.
At some time during 2006, Attree learned that defendants “shut down” Seryung. Attree alleged, on information and belief, that Seryung and all of its equipment was transferred to a company in Vietnam. Defendants failed to keep Attree informed about any details regarding Seryung or a new company in Vietnam. Defendants repeatedly ignored Attree’s requests for information and for documentation of their business agreements. They never provided him with stock certificates and/or a shareholder agreement pertaining to Seryung. Further, Attree never received any payment of interest, dividend or even regular financial information for his investment in Seryung.
4. Repudiation of the Share Purchase Agreement
At a meeting in July 2006, Choi claimed, for the first time, that he had “purchased” the COLD TECH trademark from IAD by giving Attree an “additional” 5 percent interest in Jimex. Such a purchase had never been contemplated by the parties nor even discussed and Choi knew that the parties had agreed only to a license and that defendants had not purchased the trademark.
In September 2006, Attree again requested that Choi sign the share purchase agreement and provided him with documentation which showed that defendants had agreed to its material terms during their discussions at the time the agreement was drafted in March 2005.
By letter dated September 21, 2006, Choi advised Attree that he never agreed to the share purchase agreement. Choi also claimed that the parties had agreed that the party that was going to keep the trademark would pay the other party $200,000. Choi took the position that Attree agreed that Choi could keep the trademark by accepting the additional 5 percent ownership in Jimex.
On some date in September 2006, Attree demanded that the defendants cease using any form of the COLD TECH trademark or face suit. In response, Choi signed over all right, title, and interest in the COLD TECH trademark to Attree.
5. Attree’s Causes of Action
Attree alleged or attempted to allege 17 causes of action in his complaint.
The first and third cause of action are for breach of an oral and implied contract which, essentially, mirrors the terms of the share purchase agreement, which Choi never signed and ultimately repudiated. For clarity sake, we will refer to this alleged contract as the Jimex deal. By using this term, we make no judgment as to the substantive validity of Attree’s allegation that a contract was formed.
The second and fourth causes of action are for breach of an oral and implied contract relating to Attree’s investment in Seryung. We will distinguish this alleged contract by referring to it as the Seryung deal.
The fifth cause of action is for breach of the covenant of good faith and fair dealing which respect to both the Jimex and Seryung deals.
The sixth and seventh causes of action allege fraud based on a theory of intentional misrepresentation. The sixth cause of action relates to misrepresentations made in connection with the Jimex deal and the seventh cause of action relates to the Seryung deal.
The eighth and ninth causes of action are based on fraud theories relating to both the Jimex and Seryung deals. The eight cause of action is for concealment, the ninth is for negligent misrepresentation.
The tenth and eleventh causes of action seek relief for constructive fraud. The tenth cause of action is alleged against Jimex and relates to the Jimex deal, while the eleventh cause of action is alleged against Choi and relates to both the Jimex and Seryung deal.
The twelfth cause of action seeks damages for securities fraud and relates to both the Jimex and Seryung deals.
The thirteenth cause of action seeks an accounting from both defendants and apparently pertains to both the Jimex and Seryung deals. The remaining four causes of action seek a return of all money Attree invested with defendants (at least $550,000) based on theories of unjust enrichment, money had and received, money paid and money lent.
B. Defendants’ Special Motion to Strike
On August 18, 2008, defendants filed a special motion to strike the first, third, fifth, sixth, eighth, ninth, tenth and twelfth causes of action, each of which relate, at least in part, to the Jimex deal. Defendants argued that the anti-SLAPP statute applies to these causes of action because they arise out of statements that defendants allegedly made in an effort to settle a pending action before the United States Patent and Trademark Office (PTO), a fact Attree failed to mention in his lengthy complaint. According to defendants, “communications made in connection with actual or potential litigation [are] protected by Code of Civil Procedure section 425.16(e)(2)” (citing Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1263-1264).
Defendants supported their motion with the declaration of Julius Choi (Julius), the adult son of defendant Choi and an “employee” of Jimex. Through his declaration, Julius provided the following relevant information: In 1999, the PTO issued Jimex a trademark with respect to its use of the Cold Tech mark. In September 2003, IAD filed a PTO proceeding against Jimex to cancel its Cold Tech trademark. Prior to the exchange of “pre-litigation demand letters,” neither Jimex nor Choi had any contact with IAD or Attree. In late 2004 and early 2005 Jimex and IAD participated in negotiations to settle the PTO proceeding, but these discussions floundered. On January 17, 2006, Jimex filed a PTO “non-contestability” proceeding, the purpose of which was to obtain a declaration that Jimex’s ownership of the Cold Tech mark was uncontestable and superior to the rights of anyone including IAD.
Defendants also submitted, and sought judicial notice of: (1) A September 26, 2003, Petition for Cancellation that IAD filed with the PTO in IAD Technologies, Inc. v. Jimex Corporation, Reference Number 4061-003; (2) IAD’s December 2, 2004, motion to extend the pre-trial discovery period in the PTO proceeding on the ground that the parties were engaged in “settlement discussions’; and (3) a January 17, 2006, Declaration of Use and Uncontestability filed on behalf of Jimex.
C. Attree’s Opposition
On October 6, 2008, Attree filed his opposition to the special motion to strike, arguing, among other things, that the causes of action pertaining to the Jimex deal did not arise from or relate to activity protected by the anti-SLAPP statute. In support of his opposition, Attree filed his own declaration along with declarations by his Canadian counsel, Frederick Caplan, and his American counsel, Gordon Troy.
Although Attree does not say so in his complaint, IAD is a Canadian Corporation.
In his declaration, Attree admitted that IAD filed a petition with the PTO to cancel the Jimex registration of the COLD TECH trademark. Attree further explained, however, that during subsequent discussions he and Choi both realized that they could create a “win-win” situation for their respective companies by entering into a long-term business relationship. Attree could become a shareholder of Jimex, and help expand its market into Canada and, if Jimex assigned its infringing trademark to IAD, IAD could authorize Jimex to use the trademark under a license. The parties entered into an agreement designed to accomplish these goals.
Through their respective declarations, both of Attree’s attorneys shared their understanding that, although the trademark issue brought the parties together, that dispute essentially became dormant once the parties elected to enter into a global business relationship. In this regard, attorney Troy noted, among other things, that when the PTO granted IAD’s request to suspend the cancellation proceeding for six months, it expressly noted that “the parties are working on a global business relationship.” In his declaration, attorney Caplan stated that he drafted the share purchase agreement which “contemplated a global business relationship between the parties, going far beyond simply the ownership and use of the trademark.” Caplan also stated that it was not until September 25, 2006, after Choi advised Attree that he had never agreed to the terms of the share purchase agreement, that Caplan sent a demand that defendants cease and desist using the Cold Tech trademark and that if they did not do so by a certain date, IAD and Attree would commence a trademark infringement action. According to Caplan, Jimex assigned the disputed trademark to IAD at the end of September 2006.
D. The Trial Court’s Order
A hearing on the special motion to strike was held before the Honorable Winifred Smith on October 17, 2008. The transcript of that hearing, if one was made, is not a part of the record on appeal. In any event, the court issued an order that same day which states, in part: “The tentative ruling is affirmed as follows: The Special Motion of Defendants Jimex, Inc., and Tai Choi (“Defendants”) to Strike is GRANTED. The Court notes that Defendants have met their initial burden of demonstrating that Plaintiff’s Complaint contains causes of action arising from an act in furtherance of Defendants’ right of petition or free speech (See Code Civ. Proc. § 425.16, subd. (b)(1), (e)) Moreover, Plaintiff Julian Attree (‘Plaintiff’) has failed to establish a probability that he will prevail on his claims. (See CCP 425.16, subd. (b)(1).) Put another way, Plaintiff has not demonstrated by competent evidence a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by him is credited. (See Wilson v. Parker (2002) 28 Cal.4th 811, 821.)”
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
III. DISCUSSION
A. The Anti-SLAPP Statute
“ ‘A SLAPP suit—a strategic lawsuit against public participation—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.] The Legislature enacted... section 425.16—known as the anti-SLAPP statute—to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights. [Citation.]’ [Citations.]” (Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, 1477.)
Section 425.16, subdivision (b)(1), states: “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.”
Applying this anti-SLAPP statute is a two step process. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89 (Navellier).) First, the court must decide whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. “ ‘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).’ ” (Id. at p. 88.)
In the present case, defendants contend their conduct falls into the following two categories of protected activity set forth in section 425.16, subdivision (e): “(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....” A defendant moving to strike a cause of action arising from a statement that falls within one of these categories “need not separately demonstrate that the statement concerned an issue of public significance.” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123.)
If a court determines that the defendant has made the required showing that the cause of action arises out of protected activity, then the court’s second step is to “determine whether the plaintiff has demonstrated a probability of prevailing on the claim. [Citations.]” (Navellier, supra, 29 Cal.4th at p. 88.) 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.]” (Id. at pp. 88-89.)
“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.” (Navellier, supra, 29 Cal.4th at p. 89.) A trial court’s rulings on a section 425.16 special motion to strike are subject to de novo review. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055.)
B. Analysis
We turn, then, to the threshold consideration, i.e., whether the defendants carried their burden of proving that the causes of action that are the subject of their special motion to strike arise from the defendants’ activity in furtherance of free speech or petitioning rights.
As discussed above, defendants moved to strike eight causes of action from Attree’s complaint, all of which relate to the Jimex deal. The first, third and fifth causes of action are contract claims pursuant to which Attree seeks rescission of an alleged oral contract, the terms of which are reflected in the draft Share Purchase Agreement. The remaining causes of action seek to hold defendants liable for fraud based on theories of intentional misrepresentation, concealment, negligent misrepresentation, constructive fraud and violations of the securities law.
Defendants contend that all of these contract and fraud claims arise out of activity that is protected by section 425.16, subdivision (e)(1), which pertains to “any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law.”
To support this contention, defendants rely on evidence that IAD filed a petition before the PTO to cancel Jimex’s Cold Tech trademark before the present action was filed. Undoubtedly, the act of filing the cancellation petition was protected activity under subdivision (e)(1). However, this protected activity was engaged in by IAD, not by the defendants. As noted above, defendants also presented evidence of a January 17, 2006, Declaration of Use and Uncontestability that Julius Choi allegedly filed with the PTO on behalf of Jimex. The filing of this document, which also pre-dates the present action, was a protected act as well. (§ 425.16, subd. (e)(1).)
However, “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, supra, 29 Cal.4th at p. 89.) Instead, the defendant must show that the challenged causes of action are actually based on the defendants’ protected free speech or petitioning activity. (Ibid.) Here defendants do not contend that any cause of action in Attree’s complaint has anything whatsoever to do with the defendants’ act of filing the Declaration of Use and Uncontestability, or with any other document they filed or statement they allegedly made before the PTO.
Instead, defendants rest on one very general argument: that all of the causes of action that relate to the Jimex deal arise out of the PTO cancellation proceeding because they are based on defendants’ efforts to settle that proceeding. In making this argument, defendants do not identify a single allegation in Attree’s complaint that references a statement by defendants about the PTO cancellation proceeding generally, or the settlement of that proceeding in particular. Nor have defendants produced any evidence regarding alleged discussions to settle that proceeding.
In this regard, we note that Julius Choi stated in his declaration that settlement discussions occurred between counsel, but he did not purport to have any personal knowledge about the content of those alleged discussions. We also note that the record contains a declaration by James Kim, defendants’ counsel in the court below and in this appeal. In his declaration, Kim refers to the written draft of the Share Purchase Agreement that is discussed in Attree’s complaint as a draft settlement agreement. However, as best we can determine, that very lengthy document makes no reference to the PTO cancellation proceeding.
Though defendants never acknowledge this gaping hole in their theory, they do attempt to patch it by broadly construing the issue under consideration at the PTO cancellation proceeding. As noted above, subdivision (e)(2) of section 425.16 covers “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....” Defendants contend that the issue under consideration in the PTO action was the parties’ trademark dispute and, therefore, defendants efforts to resolve that dispute by negotiating the Jimex deal are protected activity. This contention, which is at the heart of every argument defendants make on appeal, rests on two false propositions: (1) that the so-called trademark dispute and the PTO cancellation proceeding are one in the same, and (2) that settlement “efforts” is a category of conduct protected by the anti-SLAPP statute.
The defendants cannot use the broadly construed “trademark dispute” to expand the scope of protection they may claim in connection with the PTO cancellation proceeding. The pleadings and evidence show that Attree discovered that Jimex was using a trademark that he believed was not sufficiently distinguishable from a mark that IAD had been using for a longer period of time. This “trademark dispute” led to several distinct events. Attree contacted defendants and demanded that they cease and desist using the Cold Tech mark. IAD filed the PTO cancellation petition. Furthermore, as defendants emphasize, this trademark dispute brought these parties together, since they had no prior connection. In this sense, the trademark dispute spawned the parties’ entire business relationship. One product of that relationship was the Jimex deal, and one express purpose of the Jimex deal was to resolve the underlying trademark dispute.
This evidence shows that the same underlying dispute gave rise to the PTO cancellation proceeding and to the parties’ business relationship. But it does not establish that defendants’ negotiations in connection with the Jimex deal arose out of the PTO proceeding. City of Cotati v. Cashman (2002) 29 Cal.4th 69 (City of Cotati), illustrates this point. In that case, the city filed a declaratory relief action regarding the constitutionality of a mobile home park rent stabilization ordinance. Defendants, mobile home park owners, moved to strike the complaint pursuant to section 425.16, on the ground that the city's action was filed in response to a federal court declaratory relief action that the owners had filed regarding the same ordinance.
The City of Cotati court held that section 425.16 did not apply to the city’s action. The court noted, among other things, that the fact that the city’s action was filed shortly after the owners’ filed their federal suit was insufficient to trigger application of the anti-SLAPP statute because the “mere fact an action was filed after protected activity took place does not mean it arose from that activity.” (City of Cotati, supra, 29 Cal.4th. at pp. 76-77.) Furthermore, allegations that the city’s action was filed “in response to” or was “triggered by” the filing of the federal action were also insufficient because the city’s subjective motivations were irrelevant. (Id. at p. 78.) The pertinent question was whether the city’s cause of action arose out of the owners’ protected speech or petition. The court found that it did not because the evidence showed that the city’s action and the owner’s federal action arose out of the same underlying controversy regarding the validity of the rent control ordinance. In reaching this conclusion, the court expressly rejected as fallacious the notion that “since the two lawsuits reference the same underlying controversy, the second arose out of the first.” (Id. at p. 80, fn. 5.)
City of Cotati confirms a point we made earlier in our discussion: the mere fact that the PTO cancellation proceeding was filed before the Jimex deal was negotiated does not mean that the causes of action pertaining to the Jimex deal arose out of the PTO proceeding. This case also illustrates that defendants cannot establish that the Jimex deal arose out of the PTO proceeding by tracing both events back to the same underlying trademark dispute. Rather, to carry their burden, defendants must establish a direct link between the causes of action that are the subject of their motion and the PTO action.
City of Cotati also highlights the second, independent flaw in defendants’ general theory that their so-called “efforts” to settle the parties’ dispute are protected activity. We note for the record that we seriously question defendants’ claim that the purpose of the Jimex deal was to settle the PTO proceeding. In any event, even if defendants could persuade us that their subjective motivation was to settle the PTO action, that motivation is irrelevant. (City of Cotati, supra, 29 Cal.4th at p. 78.) Defendants cannot use vague references to alleged settlement efforts to circumvent the express statutory requirement that they establish that the causes of action arise out of protected speech or petitioning activity. (Ibid.; see also Applied Business Software, Inc. v. Pacific Mortgage Exchange, Inc. (2008) 164 Cal.App.4th 1108, 1116 (Applied Business Software) [defendants must show that “the activity on which the plaintiff's cause of action is based was itself an act of the defendant taken in furtherance of the defendant’s right of petition or free speech....”].)
The record before us indicates that the purpose of the Jimex deal was to forge an ongoing business relationship between these parties and that, once the parties went into business together, nobody paid attention to the PTO proceeding.
Thus, in this context, for defendants to acquire the protection of section 425.16, subdivision (e)(2), they must show that each challenged cause of action seeks to impose liability on them for statements that they allegedly made (as opposed to generalized settlement efforts) in connection with an issue that was actually under consideration in the PTO proceeding (not just with the broader trademark dispute underlying the entire business relationship).
To identify the issue under consideration at the PTO cancellation proceeding, we look to the petition that IAD filed to initiate that proceeding. Pursuant to that petition, IAD sought to cancel the Jimex trademark because it was too similar to a mark that IAD had used for a longer period of time. The petition did not address, in any way, the Jimex deal or the global relationship contemplated by that deal. Rather, the sole issue submitted to the PTO was whether Jimex had a valid trademark. Therefore, to claim the protection of section 425.16, subdivision (e)(2), defendants must show that the causes of action they challenge are based on statements they made regarding the PTO proceeding itself or the only issue under consideration at that proceeding, i.e., whether the Jimex trademark was valid.
As discussed earlier, the contract claims relating to the Jimex deal are based on allegations that defendants breached an oral agreement, the terms of which are reflected in the draft Share Purchase Agreement. These causes of action do not arise from activity protected by section 425.16, subdivision (e)(2), because they do not seek to impose liability on defendants for any statements they allegedly made regarding the pending PTO proceeding or the validity of the Jimex trademark. In fact, these contract claims do not seek to impose liability on defendants for any statements at all. Attree does allege that defendants made promises and representations which gave rise to the oral contract. However, he does not allege that defendants did anything wrong by making these promises and entering into the alleged agreement. Rather, his contract claims are based on allegations that defendants breached the parties’ agreement by failing to perform their obligations under the Jimex deal.
In contrast to the contract claims, the fraud causes of action that relate to the Jimex deal do seek to impose liability on defendants for alleged misrepresentations that induced Attree to perform his obligations under the Jimex deal. However, Attree does not allege that he was fraudulently induced by any false statement regarding (1) the validity of the Jimex trademark, or (2) any other aspect of the PTO cancellation proceeding. Instead, all of the allegedly false representations relate to the future global business relationship or partnership that the parties allegedly agreed to undertake.
Defendants focus on allegations in the complaint to the effect that Choi made representations and/or promises to Attree that he would settle the trademark dispute by entering into the Jimex deal. Construing these allegations as the basis of each of the causes of action relating the Jimex deal, defendants take the position that Attree is attempting to impose liability on them for statements they made to settle the parties’ trademark dispute. Furthermore, defendants contend, “[c]ourts have long held that one type of communication protected by subsection (e)(2) is communication to settle a legal proceeding like the [PTO] proceeding here.”
First, as we have already explained, the contract claims are not “based” on an alleged promise to settle the trademark dispute. To the extent that such a promise constitutes a term of the alleged agreement, Attree does not seek to impose liability on defendants for making that promise, but rather for breaching it. Applied Business Software, supra, 164 Cal.App.4th 1108, illustrates our point. In that case, a licensor filed a federal copyright infringement action against a licensee which was settled pursuant to an agreement that the licensee would not use the licensor’s software. Subsequently, the licensor brought a second action alleging that the licensee had breached the settlement agreement and continued to use the licensor’s software. The licensee moved to strike the second action as a SLAPP suit.
The Applied Business Software court held that the anti-SLAPP statute did not apply at all. (164 Cal.App.4th at pp. 1117-1119.) The court reasoned that, although the act of entering into the settlement agreement during the pendency of the federal case was a protected activity, the alleged breaching conduct was not protected speech or petitioning activity. In the present case, in contrast to Applied Business Software, the oral contract alleged in Attree’s complaint did not settle a pending proceeding. In any event, to the extent the alleged contract can be construed as an agreement to settle the trademark dispute, Attree does not allege that defendants did anything wrong by entering into that agreement. Indeed, the premise of these contract claims is that the agreement is valid and enforceable.
Defendants contend that the contract claims relating to the Jimex deal are analogous to claims that were stricken by the court in Navarro v. IHOP Properties, Inc. (2005) 134 Cal.App.4th 834 (Navarro). Defendants have misread the facts of Navarro. Although, the Navarro plaintiff initially attempted to plead contract and fraud claims, she subsequently dismissed her contract claims and the only cause of action that the Navarro court addressed was a claim for fraud.
A second problem with this version of defendants’ argument is that defendants do not identify a single allegation in Attree’s complaint that references a communication to settle the PTO proceeding. Instead, defendants continue to ignore the substantive distinction between the underlying trademark dispute and the very limited PTO cancellation proceeding. Thus, even if we find that the challenged fraud claims are partially based on allegations that Choi promised to settle the trademark dispute, the permeation of that trademark dispute that manifested itself in the Jimex deal had absolutely nothing whatsoever to do with the substantive content of the PTO proceeding. As we have already explained above, defendants simply cannot use the underlying trademark dispute which gave rise to every interaction between these parties to manufacture a connection between the Jimex deal and the PTO cancellation proceeding.
The third flaw in defendants’ argument is that the string of cases they cite as legal authority only reinforce our conclusion that the causes of action at issue in this case do not arise from protected activity. (See GeneThera, Inc. v. Troy & Gould Professional Corp. (2009) 171 Cal.App.4th 901 (GeneThera); Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400 (Dowling); Navellier, supra, 29 Cal.4th 82.)
In both GeneThera, supra, 171 Cal.App.4th 901, and Dowling, supra, 85 Cal.App.4th 1400, plaintiffs attempted to hold an attorney liable for damages caused by statements the attorney made while settling an unrelated lawsuit. The Genathera plaintiffs claimed they were damaged by the very act of conveying a settlement offer to a co-defendant of the plaintiff in the unrelated action. (GenaThera, supra, 171 Cal.App.4th at p. 908.) In Dowling, supra, 85 Cal.App.4th 1400, the plaintiff sought to hold an attorney liable for misrepresentation and emotional distress allegedly caused by statements the attorney made while negotiating a stipulated settlement of an unlawful detainer action that the plaintiffs had filed against the attorney’s clients. (Id. at p. 1420.) These cases are factually and legally inapposite from the case before us today. Attree’s breach of contract and fraud claims arise out of a failed business relationship, and do not seek to impose liability on defendants for statements they made to settle prior litigation.
In Navellier, supra, 29 Cal.4th 82, an investment fund manager filed an action for fraud and breach of contract against the trustee of one of the funds under its management. The evidence showed that the plaintiff had previously filed a federal action against the trustee, that the parties had entered into an agreement to settle part of the federal action, and that the trustee had executed a release of liability in favor of the plaintiff as part of the settlement. Notwithstanding this agreement, however, the trustee proceeded to file counterclaims against the plaintiff in the federal action. In its state court complaint, plaintiff alleged that the trustee fraudulently represented his intent to be bound by the release and that he breached the settlement agreement by filing his counterclaims in the federal action. (Id. at pp. 85-87.)
The Navellier court held that both causes of action in the state court case arose out of protected activity. (Navellier, supra, 29 Cal.4th at pp. 90-91.) The contract claim was based on allegations that the trustee breached the settlement agreement in the federal action by filing a counterclaim and “[a] claim for relief filed in a federal district court indisputably is a ‘statement or writing made before a... judicial proceeding’ (§ 425.16, subd. (e)(1)).” (Id. at p. 90.) Further the fraud claim was based on the trustee’s alleged negotiation, execution and repudiation of the release which constituted a writing made “in connection with an issue under consideration or review by a... judicial body” (§ 425.16, subd. (e)(2)). The validity of that release was an issue under consideration in the federal action because it was the basis for the plaintiff’s motion to dismiss the trustee’s counterclaims in the federal action. (Navellier, supra, 29 Cal.4th at p. 90.)
Again, we see no similarity between the present case and the protected speech and petitioning activity that gave rise the claims at issue in Navellier, supra, 29 Cal.4th at page 90. Here, Attree does not allege that defendants breached their contract with him by filing any document with or making any statement to the PTO. Further, the defendants’ allegedly fraudulent representations pertain to the negotiation of the Jimex deal which was not the subject of the PTO cancellation proceeding.
In all three of these cases, the plaintiffs attempted to hold the defendants liable for harm allegedly caused by statements defendants made to formally settle a pending official proceeding. In the present case, there is simply no cause of action, among the many that defendants challenge, which seeks to impose liability on them for any statement they allegedly made the subject of which was the settlement of the PTO cancellation proceeding. As explained above, that proceeding was an offshoot of the same trademark dispute that gave rise to the business dealings which are the subject of the present action. The evidence shows that the PTO proceeding essentially went dormant once the parties made the unfortunate decision to go into business together.
Defendants cite Neville v. Chudacoff, supra, 160 Cal.App.4th at pages 1263-1264, for the proposition that “communications in connection with anticipated litigation are considered to be ‘ “ ‘under consideration or review by a... judicial body.’ ” ’ [Citation.]” Again, defendants do not discuss the facts of Neville which are not at all similar to the case before us. The Neville plaintiff sued the attorney who represented his former employer, alleging that he was defamed by a letter the attorney sent to several of the employer’s customers. All of the allegedly defamatory statements directly related to the employer’s claims against the plaintiff for breach of contract and misappropriation of trade secrets. The Neville court found that the attorney’s letter was protected speech and petitioning activity notwithstanding the fact that the employer did not actually file suit until after the letter was written. The court reasoned that the communication was “preparatory to or in anticipation of the bringing of an action or other official proceeding....” ’ ” (Id. at p. 1268.)
The rule applied in Neville simply does not apply here. Defendants do not identify a single alleged misrepresentation by Choi that can reasonably be construed as a communication preparatory to or in anticipation of trademark litigation. Indeed, no such litigation ever ensued. Rather, the present action pertains to the parties’ global business relationship, and all of the claims that are the subject of the special motion to strike in this case relate to the negotiation of that long-term business relationship, not to a pending or anticipated trademark action.
We hold that the defendants have failed to establish that any one of the causes of action that was the subject of the special motion to strike arose out of activity that is protected by the anti-SLAPP litigation. Therefore, the burden never shifted to Attree to show a probability of prevailing on his claims. We, thus need not address the trial court’s rulings with respect to the second prong of section 425.16.
IV. DISPOSITION
The order granting defendants’ special motion to strike is reversed and the case remanded to the trial court for further proceedings consistent with this opinion. Costs on appeal are awarded to appellant.
We concur: Kline, P.J., Lambden, J.