Opinion
D074766
11-22-2019
TODD A. MIKLES et al., Plaintiffs and Respondents, v. DENNIS DIERENFIELD, Defendant and Appellant.
Catanzarite Law Corporation, Kenneth J. Catanzarite, and Eric V. Anderton for Defendant and Appellant. Adam T. Kent for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 37-2018-00016403-CU-BC-CTL) APPEAL from an order of the Superior Court of San Diego County, Joel R. Wohlfeil, Judge. Affirmed. Catanzarite Law Corporation, Kenneth J. Catanzarite, and Eric V. Anderton for Defendant and Appellant. Adam T. Kent for Plaintiffs and Respondents.
Todd Mikles (Mikles); Market Tower Partners, LLC (Market Tower Partners); Sovereign Capital Management Group, Inc.; Sovereign Strategic Mortgage Fund, LLC; Daymark Realty Advisors, Inc.; Daymark Properties Realty, Inc.; and William White (collectively, Plaintiffs) sued Dennis Dierenfield individually and as trustee as the Dennis Dierenfield Living Trust (Dierenfield). Plaintiffs alleged Dierenfield released certain claims against Plaintiffs, then turned around and pursued the released claims, in violation of the parties' written agreement, by filing a putative class action complaint and pursuing claims against Plaintiffs in court and in arbitration. Dierenfield filed an anti-SLAPP motion, arguing Plaintiffs' claims arose from protected activity—Dierenfield's filing and pursuit of claims in a judicial proceeding—and thus should be stricken pursuant to Code of Civil Procedure section 425.16. The trial court agreed that Plaintiffs' claims arose from protected activity but denied Dierenfield's motion, concluding Plaintiffs demonstrated their action had at least minimal merit. Based on our independent review of the record, we agree that, although Plaintiffs' claims arise from protected activity, Plaintiffs have demonstrated their claims have the minimal merit necessary to proceed. We thus affirm the order denying Dierenfield's anti-SLAPP motion.
SLAPP is an acronym for "strategic lawsuit against public participation." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57.) All statutory references are to the Code of Civil Procedure unless otherwise noted.
FACTS
Dierenfield, in his capacity as trustee of the Dennis Dierenfield Living Trust, was the sole member of NNN 1818 Market Street 17, LLC, referred to as "TIC 17," which owned a 2.5% interest in certain real property and improvements located on Market Street in Philadelphia, Pennsylvania (the Market Street property). Dierenfield and other investors purchased their interests in the Market Street property in 2006 in a private placement securities offering. The investors agreed to various agreements, including a property management agreement pursuant to which Plaintiffs and their affiliates served as the property and asset managers for the property. The parties agreed to submit disputes arising out of or related to these agreements to private arbitration.
The Market Street property is described as a "one million foot square trophy office property" in Philadelphia.
In April 2014, Dierenfield sold his interest in the Market Street property to plaintiff Market Tower Partners. To effect the sale, the parties entered into a "Membership Interest Purchase Agreement" (purchase agreement) pursuant to which Market Tower Partners purchased TIC 17 for $540,000. The purchase agreement included a broad, mutual release of "known and unknown" claims related to the Market Street property—including claims related to "the operation and management of the [Market Street property]." The purchase agreement also included a covenant not to sue. The parties agreed to submit disputes regarding the purchase agreement to "the state and federal courts located in San Diego, California," and expressly "waive[d] any right to object to the jurisdiction or venue of the courts in San Diego County, California."
Mikles, the president of Market Tower Partners, executed the purchase agreement on its behalf. He also "[a]cknowledged and [a]greed" to the agreement on behalf of Sovereign Capital Management Group, Inc., as its CEO.
In 2016, Dierenfield filed a putative class action complaint against Plaintiffs and others alleging Plaintiffs, as the Market Street property and asset managers, breached their fiduciary duties by receiving excessive and unlawful commissions, property management fees, and asset management fees (2016 action). The complaint alleged additional breaches of fiduciary duty including unreasonable capital calls and the wrongful transfer of $20,000,000 from property operating accounts to accounts controlled by Mikles. The complaint was filed on behalf of individuals and entities with ownership interests in the Market Street property as well as those who were "wrongly induced to sell" their previously held ownership interests. The superior court ordered these claims to arbitration pursuant to arbitration clauses in the parties' agreements, including the property management agreements. Dierenfield continued to pursue his claims in arbitration.
Additional entities other than Plaintiffs named as defendants in the 2016 action were NNN Realty NNNRI, LLC; Gregory Canyon Ltd.; and Western Alliance Bank. The case was titled Dierenfield et al. v. Mikles et al., San Diego Superior Court case no. 37-2016-00018180.
Dierenfield filed a demand to arbitrate his claims with the American Arbitration Association (AAA) in May 2017. In the demand, in lieu of providing a description of the dispute or stating claims for damages, Dierenfield simply referred to the allegations and prayer for relief in his 2016 complaint. In March 2018, the arbitrator denied without prejudice a request by Mikles and others to file a dispositive motion.
In April 2018, Plaintiffs filed the instant action against Dierenfield, asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. Plaintiffs alleged Dierenfield breached the purchase agreement by pursuing settled and released claims via the 2016 action. Specifically, Plaintiffs alleged the claims asserted in the 2016 action were encompassed within the purchase agreement's broad release and covenant not to sue.
Dierenfield moved to strike Plaintiffs' complaint pursuant to Code of Civil Procedure section 425.16. Dierenfield argued that Plaintiffs' causes of action arose from protected activity because they were based on Dierenfield's claims made in a judicial proceeding. Dierenfield further argued that the Plaintiffs would be unable to establish a probability of prevailing because the purchase agreement's release did not contain a waiver of Civil Code section 1542 and thus did not release unknown claims such as those asserted in the 2016 action. Dierenfield also argued that Plaintiffs' claims were compulsory counterclaims to the 2016 action, and had to be asserted, if at all, in the compelled arbitration which followed the 2016 action.
Dierenfield also filed a notice of related case, identifying his 2016 action and describing its status as "dismissed pending arbitration."
Civil Code section 1542 provides in relevant part: "A general release does not extend to claims that the . . . releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the . . . released party."
In response, Plaintiffs argued that their action did not arise from a protected activity because the thrust of their claims was predicated on Dierenfield's pursuit of his claims in private arbitration following the dismissal of his court action, and, unlike civil litigation, private arbitration is not protected by the anti-SLAPP statute. Plaintiffs alternatively argued that Dierenfield waived protection of the anti-SLAPP statute by releasing his claims in the purchase agreement. Finally, Plaintiffs relied on language from the purchase agreement—including its choice of law provision applying Delaware law—to argue that, even if their claims were premised on protected activity, the action possessed more than minimal merit necessary to proceed because Dierenfield's prior claims were encompassed within the purchase agreement's broad release. In response to Dierenfield's argument that their claims could be pursued only as counterclaims in arbitration, Plaintiffs argued their claims arose not under the property management agreement or other agreements governing operation of the Market Street property, which contained arbitration clauses, but under the purchase agreement, which included a consent to jurisdiction and venue in federal and state courts in San Diego county and which had no arbitration provision.
In reply, Dierenfield reiterated that Plaintiffs' claims arose from protected activity—the filing of his 2016 lawsuit. He further argued Plaintiffs could not establish a probability of prevailing because the claims he brought in his 2016 action are not subject to the release. In particular, Dierenfield argued the purchase agreement's choice of law provision favoring Delaware law was not enforceable because Plaintiffs had not demonstrated that a reasonable basis existed for the application of Delaware law, but that under either Delaware or California law, the release did not encompass unknown claims. He further argued the release was procured by fraud. Finally, Dierenfield reiterated his position that Plaintiffs' claims could be pursued only as counterclaims in arbitration.
After a motion hearing, the trial court denied Dierenfield's motion to strike. The trial court agreed that Plaintiffs' claims arose from protected activity because they were premised on Dierenfield's initiation of a civil lawsuit. The trial court concluded, however, that Plaintiffs established a probability of prevailing on their claims by making a prima facie showing that the purchase agreement's release was sufficiently broad, on its face, to potentially encompass the claims Dierenfield asserted in his 2016 lawsuit.
DISCUSSION
I.
Bankruptcy Stay
Before addressing the merits of the appeal, we first address the effect, if any, of the pending bankruptcy of Daymark Realty Advisors, Inc. and Daymark Properties Realty, Inc. (the Daymark entities), plaintiffs in the trial court. Prior to filing a brief on appeal, respondents notified this court that the Daymark entities had filed for protection under Chapter 11 of the United States Bankruptcy Code and opined that "this matter should be stayed as to" the Daymark entities. Respondents sought instruction "regarding the filing of a brief in this proceeding given the pending bankruptcy . . . ."
We notified the parties that the bankruptcy stay does not appear to apply to this appeal. (See 11 U.S.C. § 362, subd. (a)(1) [stay of proceedings under section 362 of the Bankruptcy Code applies to actions "against the debtor," not to actions initiated by the debtor]; Shah v. Glendale Federal Bank (1996) 44 Cal.App.4th 1371, 1375; see id. at p. 1377 ["whether an action is 'against the debtor' within the meaning of section 362 [subd.] (a)(1) is determined by the debtor's status at the inception of the action; regardless whether the debtor is the appellant or the respondent"].) We requested that the parties advise this court if future events in the bankruptcy proceedings may impact the appeal.
When respondents subsequently filed their brief, they indicated, under a heading stating "Bankruptcy Stay for Daymark Respondents," that the brief was filed only on behalf of Mikles; Market Tower Partners; Sovereign Capital Management Group, Inc.; Sovereign Strategic Mortgage Fund, LLC; and William White. Respondents have not advised this court of subsequent events in the bankruptcy proceedings impacting this appeal.
The Daymark entities—plaintiffs in the trial court—have not established that the pending bankruptcies stay this proceeding. The Daymark entities' failure to file a responsive brief does not preclude this court from resolving the merits of the appeal. (See California Rules of Court, rule 8.220(a)(2) [in the event of the failure to file a respondent's brief, the court may decide the appeal on the record, the opening brief, and any oral argument by the appellant].) We therefore proceed to the merits of the appeal.
II.
Anti-SLAPP
A. Applicable Law
Section 425.16, subdivision (b)(1) provides in relevant part: "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."
"A court evaluates an anti-SLAPP motion in two steps. 'Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims "aris[e] from" protected activity in which the defendant has engaged. [Citations.] If the defendant carries its burden, the plaintiff must then demonstrate its claims have at least "minimal merit." ' [Citation.] If the plaintiff fails to meet that burden, the court will strike the claim." (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 884.)
"At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached. There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff's showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken. Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing." (Baral v. Schnitt (2016) 1 Cal.5th 376, 396 (Baral).)
"We review de novo the grant or denial of an anti-SLAPP motion." (Park v. Bd. of Trustees of California State University (2017) 2 Cal.5th 1057, 1067.) "We are not bound by the court's findings and conduct an independent review of the entire record. If the trial court's decision is correct on any theory, we must affirm the order." (San Diegans for Open Government v. Har Construction, Inc. (2015) 240 Cal.App.4th 611, 622.)
B. Analysis
1. Plaintiffs' Claims Arise from Protected Activity
The parties do not dispute that asserting claims in a judicial proceeding is protected activity under the statute. (§ 425.16, subds. (b)(1), (e); see Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735 [filing cross-complaint in judicial proceeding constitutes a protected petition to the judicial branch]; Navellier v. Sletten (2002) 29 Cal.4th 82, 90 (Navellier) ["A claim for relief filed in federal district court indisputably is a 'statement or writing made before a . . . judicial proceeding.' "].) Private contractual arbitration, however, is not protected activity under the statute. (Mission Beverage Co. v. Pabst Brewing Co., LLC (2017) 15 Cal.App.5th 686, 703 (Mission Beverage).)
Plaintiffs contend their claims do not arise from the protected activity of pursuing civil litigation because the superior court action was dismissed and Dierenfield pursued the released claims in arbitration. It was this arbitration proceeding—not a protected activity—that was the only action pending when Plaintiffs filed their breach of contract action; the judicial action was over. Plaintiffs contend that the sequence of filing their lawsuit after protected activity has occurred is not determinative, and further contend a breach of contract itself is not protected activity. Plaintiffs' focus on the pendency of the arbitration, versus the civil litigation, is misplaced.
What is determinative during the first step of the anti-SLAPP analysis is "whether the cause of action is based on the defendant's protected free speech or petitioning activity." (Navellier, supra, 29 Cal.4th at p. 89, citing City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 [in deciding whether a cause of action arises from protected activity, "the critical point is whether the plaintiff's cause of action itself was based on an act in furtherance of the defendant's right of petition or free speech"].) "Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute." (Baral, supra, 1 Cal.5th at p. 394.) Similarly, "[i]f the mention of protected activity is 'only incidental to a cause of action based essentially on nonprotected activity,' then the anti-SLAPP statute does not apply." (Baharian-Mehr v. Smith (2010) 189 Cal.App.4th 265, 272.)
Here, the complaint alleges "Dierenfield initiated a lawsuit in San Diego Superior Court . . . against the [r]eleased [p]arties based on the [c]laims released in the [purchase agreement]"; and "Dierenfield has breached, and continues to breach, the [purchase agreement] and the implied covenant of good faith and fair dealing in the [purchase agreement] by pursuing the released claims against the [r]eleased [p]arties." The breach of contract claim and the breach of implied covenant claim similarly are based on allegations relating to the filing of the civil lawsuit. As to the breach of contract claim, the complaint alleges that, "[b]y initiating or otherwise participating in the Superior Court [c]omplaint and the AAA [d]emand, and pursuing the [c]laims against the [r]eleased [p]arties in those proceedings, Dierenfield breached the [purchase agreement] . . . ." As to the breach of implied covenant claim, the complaint alleges that "[b]y initiating or otherwise participating in the Superior Court [c]omplaint and the AAA [d]emand, and pursuing the [c]laims against the [r]eleased [p]arties in those proceedings, Dierenfield breached the [purchase agreement] . . . and unfairly interfered with the [r]eleased [p]arties' right to receive the benefits of the [purchase agreement] . . . ." These allegations demonstrate that Plaintiffs' claims are based on Dierenfield's actions in both the judicial proceeding and in the private arbitration. (Navellier, supra, 29 Cal.4th at p. 89.) Thus, Plaintiffs' claims stem from allegations of both protected and unprotected activity.
"When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded . . . ." (Baral, supra, 1 Cal.5th at p. 396.) The allegations of protected activity are subject to a motion to strike, provided they are not merely incidental or collateral to Plaintiffs' claims. (Id. at p. 394 [allegations of protected activity that are " 'merely incidental' " or " 'collateral,' " i.e., that "merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute"].) Allegations of protected activity here—pursuing claims in a judicial proceeding—are not merely incidental or collateral to Plaintiffs' complaint. Rather, they support Plaintiffs' claims for relief and are integral to both causes of action. Plaintiffs allege Dierenfield's filing of the 2016 action in superior court constituted a breach of contract and a breach of the implied covenant of good faith and fair dealing. Thus, Plaintiffs seek relief based on allegations arising from activity protected by the statute—the filing and pursuit of claims in a judicial proceeding. Dierenfield has made the threshold showing under section 425.16 that the claims arise from protected activity. (Baral, at p. 384.) The burden thus shifts to Plaintiffs to demonstrate the causes of action have minimal merit (id. at p. 385), which we conclude Plaintiffs have done.
2. Probability of Prevailing
The second step of the anti-SLAPP analysis consists of "a 'summary-judgment-like procedure.' " (Baral, supra, 1 Cal.5th at p. 384.) At this stage, "[t]he court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff's evidence as true, and evaluates the defendant's showing only to determine if it defeats the plaintiff's claim as a matter of law." (Id. at pp. 384-385.) "[C]laims with the requisite minimal merit may proceed." (Navellier, supra, 29 Cal.4th at p. 94.)
At this second stage of the anti-SLAPP analysis, Plaintiffs may not rely only on the allegations in their complaint. (See HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212 (HMS Capital) ["In opposing an anti-SLAPP motion, the plaintiff cannot rely on the allegations of the complaint, but must produce evidence that would be admissible at trial."].) However, Plaintiffs' burden at this stage "is a low one." (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 793 ["a plaintiff's burden at the second anti-SLAPP step is a low one, requiring only a showing that a cause of action has at least 'minimal merit within the meaning of the anti-SLAPP statute' "].)
a. Plaintiffs Demonstrated Their Claims Have Minimal Merit
As noted, Plaintiffs' complaint asserts two causes of action: breach of contract and breach of the implied covenant of good faith and fair dealing. The elements of a cause of action for breach of contract are (1) the contract, (2) plaintiffs' performance (or excuse for nonperformance), (3) defendant's breach, and (4) the resulting damages to plaintiff. (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391 (Coles).) A breach of the implied covenant of good faith and fair dealing is also a breach of the contract, but a specific provision of the contract is not necessary to the claim because the covenant of good faith and fair dealing is implied by law in every contract. (See Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244 (Thrifty Payless).)
Plaintiffs' complaint alleged Dierenfield, individually and in his capacity as trustee, breached the purchase agreement by filing the 2016 action and arbitration demand and pursuing claims that were released in the purchase agreement. Plaintiffs alleged they were damaged by Dierenfield's breach because they were forced to defend against the released claims, incurring attorney fees. Plaintiffs did not rely solely on these allegations in their complaint in opposing Dierenfield's anti-SLAPP motion. (HMS Capital, supra, 118 Cal.App.4th at p. 212.) Rather, Plaintiffs relied on the purchase agreement, the allegations in Dierenfield's 2016 complaint and his arbitration demand, and attorney declarations submitted in opposition to the motion. For purposes of our review, we accept as true all evidence favorable to Plaintiffs and do not compare the weight of the evidence or resolve conflicting factual claims. (Baral, supra, 1 Cal.5th at p. 384.)
The purchase agreement contains a broad release of claims. Dierenfield agreed to release the Plaintiffs from "any and all liabilities" related to the Market Street property, whether "known or unknown, matured or unmatured, contingent or otherwise, foreseen or unforeseen, which have or allegedly have existed, occurred, happened, arisen or transpired." In full, the release provided:
"Each of [Dierenfield] and [TIC 17], on its own behalf and on behalf of their respective . . . agents, . . . hereby knowingly, unconditionally, voluntarily, fully and irrevocably grants this general release and releases, remises, and forever discharges each of the present and former agents . . . of [Market Tower Partners], Sovereign Capital Management Group, Inc., Todd A. Mikles, Daymark Realty, Inc. and Daymark Properties Realty, Inc. (hereinafter individually and collectively, the 'Buyer Released Parties') of and from any and all liabilities . . . now accrued or which may hereafter accrue, without limitation of law, equity or otherwise, that relate to the transactions contemplated by this [purchase agreement], to the [Market Street property], the sale of tenant in common interest, the operation and management of the [Market Street property], or anything arising from the co-tenancy, based in whole or in part on any facts, conduct, activities, transactions, events or occurrences known or unknown, matured or unmatured, contingent or otherwise, foreseen or unforeseen, which have or allegedly have existed, occurred, happened, arisen or transpired (collectively, the 'Claims')."
The purchase agreement also included a "covenant not to sue" which provided, "Each of [Market Tower Partners], [Dierenfield], and [TIC 17] . . . hereby warrants and covenants, recognizing that the truth of such warranty and covenant is material to the above consideration having passed, that none of them shall directly or indirectly solicit, encourage, consult, advise, support or in any way participate in the commencement and/or prosecution of any [c]laims released in this [s]ection 4.9 against the [b]uyer [r]eleased [p]arties or the [s]eller [r]eleased [p]arties, respectively."
Notwithstanding Dierenfield's agreement to release the "[b]uyer [r]eleased [p]arties" from liability in connection with "the operation and management of the [Market Street property]," Dierenfield proceeded to file the 2016 putative class action complaint against the same entities, alleging breaches of fiduciary duties related to the operation and management of the Market Street property. Although Dierenfield's 2016 complaint does not expressly mention the purchase agreement, it acknowledges that Dierenfield owned TIC 17, referenced the April 2014 purchase of Market Street property interests by Market Tower Partners, and indicated that TIC 17 was "acquired by [Mikles] and/or [Market Tower Partners]." His complaint purports to include, as class members, those who were induced to sell their interests in the Market Street property.
Plaintiffs describe allegations in Dierenfield's 2016 action and statements made by counsel in the anti-SLAPP motion papers as "judicial admissions." This is not accurate. "Facts established by pleadings as judicial admissions ' "are conclusive concessions of the truth of those matters, are effectively removed as issues from the litigation, and may not be contradicted, by the party whose pleadings are used against him or her." ' " (Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 746.) "A judicial admission is effective (i.e., conclusive) only in the particular case. An admission in the pleadings in one case is merely an evidentiary admission in another case." (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 453, p. 586.) Statements in motion papers are not "judicial admissions" because motions are not pleadings within the meaning of Code of Civil Procedure section 422.10. (See Myers, at p. 747.) Thus, facts established by Dierenfield's 2016 complaint are evidentiary admissions. (Id. at p. 746.)
Plaintiffs' counsel filed a declaration in support of Plaintiffs' opposition to Dierenfield's anti-SLAPP motion. Counsel's declaration attested that Dierenfield initiated "released claims" against Plaintiffs in San Diego Superior Court and continued to pursue those claims in arbitration after they were compelled to arbitrate. Counsel explained that he filed, on behalf of all Plaintiffs, a motion to compel arbitration of Dierenfield's claims based on the "broad agreement to arbitrate contained within the [property management agreement]." That motion was granted and Dierenfield's superior court action was dismissed. Counsel's declaration further explained that, after the superior court compelled Dierenfield's claims to arbitration, Dierenfield initiated an arbitration proceeding and pursued the same, released claims. Counsel's declaration also referenced his hourly billing rate.
Together, the purchase agreement, Dierenfield's 2016 complaint and arbitration demand, and Plaintiffs' counsel's declaration establish all the required elements of Plaintiffs' claims for breach of contract and breach of the implied covenant of good faith and fair dealing: the contract (the purchase agreement), Plaintiffs' performance (i.e., the consummated sale of Dierenfield's former interest in the Market Street property to Market Tower Partners), Dierenfield's breach (pursuit of claims that fall within the scope of the release) and resulting damages (attorney fees incurred in defending against the released claims). (Coles, supra, 2 Cal.App.5th at p. 391 [elements of breach of contract claims]; Thrifty Payless, supra, 218 Cal.App.4th at p. 1244 [elements of breach of implied covenant claims].)
Dierenfield contended before the trial court that claims asserted in his 2016 complaint were outside the scope of the purchase agreement's broad release. In particular, Dierenfield argued the release did not include a waiver of Civil Code section 1542 and only encompassed claims he knew of at the time he executed the release. The trial court rejected this argument. Applying California law, the court concluded the purchase agreement's release was sufficiently broad to potentially encompass the release of unknown claims, including those asserted in Dierenfield's 2016 action. We agree with the trial court and conclude that, whether analyzed under Delaware or California law, the purchase agreement's release of claims is sufficiently broad to encompass the claims Dierenfield sought to pursue through the 2016 action and subsequent arbitration.
The purchase agreement provided that it would "be interpreted and enforced under the laws of the state of Delaware." The trial court rejected Plaintiffs' argument that Delaware law should apply to interpret the purchase agreement, indicating Plaintiffs had not addressed Delaware's relationship with the parties or transaction to substantiate whether Delaware has a substantial relationship to the parties or their transaction or whether there is any other reasonable basis for the parties' choice of law. (See Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 916.) The purchase agreement reflects that Market Tower Partners and TIC 17 are both Delaware limited liability companies. Arguably, this forms a reasonable basis for the parties' choice of law. (Nedlloyd Lines B. V. v. Superior Court (1992) 3 Cal.4th 459, 467 [" 'If one of the parties resides in the chosen state, the parties have a reasonable basis for their choice.' "].) In any event, as we discuss post, we would uphold the trial court's decision whether the release is analyzed under California or Delaware law.
As already noted, Civil Code section 1542 provides that "[a] general release does not extend to claims that the . . . releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the . . . released party." In California, a "comprehensive" release intending to encompass unknown claims may include an explicit waiver of Civil Code section 1542. (Perez v. Uline, Inc. (2007) 157 Cal.App.4th 953, 959.) However, even absent a reference to Civil Code section 1542, a release of unknown claims is binding so long as it is " 'clear, explicit and comprehensible,' " such that the agreement, read as a whole, " ' "clearly notif[ies] the prospective releasor . . . of the effect of signing the agreement." ' " (Skrbina v. Fleming Companies (1996) 45 Cal.App.4th 1353, 1368 (Skrbina).) Similarly, under Delaware law, a release is binding if the overall language of the document reflects that the parties intended the release to encompass a claim. (Seven Investments, LLC v. AD Capital, LLC (Del. 2011) 32 A.3d 391, 396 (Seven Investments).) " '[W]here the language of the release is clear and unambiguous, it will not lightly be set aside.' " (Ibid.)
By its terms, the release in the purchase agreement encompassed "any and all liabilities . . . now accrued or which may hereafter accrue . . . that relate to the transactions contemplated by this [a]greement, to the [Market Street property] [p]roject . . . , the operation and management of the [Market Street property] [p]roject . . . , based in whole or in part on . . . events or occurrences known or unknown, matured or unmatured, . . . foreseen or unforeseen . . . ." This release is sufficiently clear, explicit, and comprehensible to potentially encompass both known and unknown claims, including the claims asserted in Dierenfield's 2016 action, whether the release is analyzed under California or Delaware law. (Skrbina, supra, 45 Cal.App.4th at p. 1368; Seven Investments, supra, 32 A.3d at p. 396.)
Having independently reviewed the record, we conclude Plaintiffs have demonstrated their claims are "legally sufficient and factually substantiated." (Baral, supra, 1 Cal.5th at p. 396.) Plaintiffs have demonstrated the minimal merit necessary to proceed. (Id. at p. 385.)
b. Dierenfield Waived His Evidentiary Objections
On appeal, for the first time, Dierenfield contends Plaintiffs "failed to submit any admissible evidence in support of their breach of contract and breach of covenant of good faith and fair dealing causes of action." We reject this argument.
Copies of the purchase agreement, Dierenfield's 2016 complaint, and his arbitration demand were attached to Plaintiffs' complaint. (Evid. Code, §§ 255, 260.) These documents are evidence, and " 'in reviewing the trial court's order denying the [anti-SLAPP] motion, we consider all the evidence presented by the parties.' " (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291, fn. 17 (Soukup).)
See Evidence Code section 140 [" 'Evidence' means testimony, writings, material objects, or other things . . . that are offered to prove the existence or nonexistence of a fact."].
In its tentative ruling denying Dierenfield's motion to strike, the trial court expressly found that Dierenfield "does not object to the admissibility of [the purchase agreement]." At the hearing on the motion, Dierenfield's counsel indicated he "[had] read the tentative," yet made no comment contesting this finding and raised no objection to the admissibility of the purchase agreement or to the trial court's consideration of that document as evidence, even after the trial court indicated it would admit it as evidence.
Beyond merely failing to object to the admissibility of these documents in the trial court, Dierenfield referenced and discussed them at length in his motion to strike and in his reply. He did not dispute entering into the purchase agreement or refute that the transaction contemplated in the purchase agreement was fully performed. Rather, he argued the release should not be construed to encompass unknown claims, and further argued the release was procured by fraud and as such was unenforceable. He argued that Plaintiffs' claims had to be pursued, if at all, as counterclaims in the pending arbitration. At no point in the trial court proceedings did Dierenfield contend Plaintiffs had not submitted sufficient evidence to meet their burden to oppose the anti-SLAPP motion or object that the proffered evidence lacked foundation. Dierenfield also failed to object or otherwise challenge the validity, authenticity, or admissibility of the documents attached to Plaintiffs' complaint.
Our Supreme Court has emphasized that the second step of the anti-SLAPP analysis is "a 'summary-judgment-like procedure.' " (Baral, supra, 1 Cal.5th at p. 384, quoting Taus v. Loftus (2007) 40 Cal.4th 683, 714.) At summary judgment, evidentiary objections not raised in the trial court are deemed waived. (See Code Civ. Proc., § 437c, subd. (b)(5); Reid v. Google, Inc. (2010) 50 Cal.4th 512, 531-532.) This is consistent with the general rule that failure to timely raise an objection to inadmissible evidence waives the objection. (Evid. Code, § 353, subd. (a); People v. Armstrong (1991) 232 Cal.App.3d 228, 233, fn. 6 [failure to properly assert evidentiary objection in trial court constitutes waiver and bars consideration of evidentiary objections on appeal].) "Evidence admitted without objection may be considered for any purpose by the trier of fact and in support of the judgment." (Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2018) ¶ 8:3282; Cal. Law Revision Com. com., 29B pt. 1A West's Ann. Evid. Code (2011 ed.) foll. §140, p. 27 ["Thus, when inadmissible [evidence] is admitted without objection, this definition makes it clear that it constitutes evidence that may be considered by the trier of fact."].) These principles apply equally in the context of anti-SLAPP motions. (Soukup, supra, 39 Cal.4th at p. 291, fn. 17 [evidentiary objections are waived if no ruling is obtained at the hearing on an anti-SLAPP motion].)
Based on this record and Plaintiffs' failure to object, we conclude Dierenfield forfeited any evidentiary objections on appeal by failing to raise them in the trial court. (Mission Beverage, supra, 15 Cal.App.5th at p. 711 [defendant forfeited contention on appeal that evidence was insufficient to show a probability of prevailing on the merits of breach of contract claim, as required to survive anti-SLAPP motion to strike, where defendant failed to object to the evidence on that basis before the trial court].) We therefore reject Dierenfield's argument that Plaintiffs' supporting evidence was insufficient to establish a probability of prevailing on their claims.
c. Dierenfield Has Not Established Plaintiffs' Claims Were Required to Be Brought in Arbitration
Dierenfield contends Plaintiffs' claims for breach of the release were compulsory counterclaims and were required to be brought, if at all, in the arbitration of Dierenfield's breach of fiduciary duty claims first asserted in the 2016 action. We reject Dierenfield's arguments.
Dierenfield has not sought to compel the present action to arbitration. (§ 1281.2.)
California procedure requires "related cause[s] of action" to be asserted in a cross-complaint at the time of serving the party's answer to a complaint. (§ 426.30, subd. (a).) Dierenfield has not established this procedural rule applied to his 2016 action, where the Plaintiffs (as defendants in Dierenfield's 2016 action) did not file an answer in superior court. While we have not found any California cases on point, federal courts have held that a compulsory counterclaim under Federal Rules of Civil Procedure, rule 13(a), is only required where the party seeking to assert the claim has served a responsive pleading in the case. (See, e.g., U.S. v. Snider (6th Cir. 1985) 779 F.2d 1151, 1157; Lawhorn v. Atlantic Refining Co. (5th Cir. 1962) 299 F.2d 353, 356-357; Martino v. McDonald's System, Inc. (7th Cir. 1979) 598 F.2d 1079, 1082.) Given the similarity between the federal rule and section 426.30, subdivision (a) (requiring a party to allege in a cross-complaint a related cause of action which he has against the plaintiff "at the time of serving his answer to the complaint"), we find the federal authorities persuasive and conclude the compulsory cross-complaint statute does not bar Plaintiffs' action. Moreover, under section 426.30, subdivision (b)(2), the requirement to file a cross-complaint does not apply if "[t]he person who failed to plead the related cause of action did not file an answer to the complaint against him." Because Plaintiffs did not file answers to the complaints against them in the 2016 action, there appears to be no basis for invoking section 426.30.
Although Dierenfield refers to counterclaims, we use the term cross-complaint. (See § 428.80.) Section 426.30 provides in full: "(a) Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded. [¶] (b) This section does not apply if either of the following are established: [¶] (1) The court in which the action is pending does not have jurisdiction to render a personal judgment against the person who failed to plead the related cause of action. [¶] (2) The person who failed to plead the related cause of action did not file an answer to the complaint against him."
See Federal Rules of Civil Procedure, rule 13(a) ["A pleading must state as a counterclaim any claim that—at the time of its service—the pleader has against an opposing party if the claim: [¶] (A) arises out of the transaction or occurrence that is the subject matter of the opposing party's claim; and [¶] (B) does not require adding another party over whom the court cannot acquire jurisdiction."], italics added.
Even if this rule did apply, we would conclude the causes of action asserted in the 2016 litigation and in the underlying complaint are not "related" within the meaning of section 426.10, subdivision (c). A "related cause of action" "arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint." (§ 426.10, subd. (c).)
Here, the parties' claims arise from different events. Dierenfield's claims—asserted both in the 2016 civil litigation and the arbitration—involved the operation and management of the Market Street property. Specifically, Dierenfield alleged that Plaintiffs breached their fiduciary duties owed under the property management agreement and other agreements, which contain arbitration provisions. The present action does not arise from those agreements involving the operation and management of the Market Street property. Plaintiffs' claims instead arise from a separate and independent agreement between the parties, i.e., the purchase agreement governing the sale of Dierenfield's Market Street property ownership interest. Unlike the property operations and management agreements, the purchase agreement which Dierenfield allegedly breached does not contain an arbitration provision. Rather, the purchase agreement states "any action or proceeding regarding this [a]greement" will be resolved in "the state and federal courts located in San Diego County, California." Given the different agreements and different bases underlying the relevant claims at issue, Dierenfield has not established that Plaintiffs' claims asserted in the present action are "related" to the 2016 action within the meaning of section 426.10, subdivision (c). (See, e.g., ZF Micro Devices, Inc. v. TAT Capital Partners, Ltd. (2016) 5 Cal.App.5th 69, 83-84 (ZF Micro Devices) [even where the claims involve the same parties and concern the same subject matter, if they are only "loosely 'related,' " i.e., do not involve a " ' "duplication of time and effort . . . [based upon there being] factual or legal issues relevant to both claims," ' " they are not "related" for purposes of section 426.10, subd. (c)]; Currie Medical Specialties, Inc. v. Bowen (1982) 136 Cal.App.3d 774, 777 [whether claims have a logical relationship is determined by whether the claims "involve common issues of law and fact," an "overlap of issues," and a common transaction].)
Dierenfield points out that Plaintiffs raised the purchase agreement's release as an affirmative defense in the arbitration, purportedly illustrating that Plaintiffs' claims "are indisputedly [sic] related to the claims pending in [a]rbitration." We disagree. As we have noted, at best this establishes the claims might be "loosely 'related.' " (ZF Micro Devices, supra, 5 Cal.App.5th at pp. 83-84.) Moreover, Dierenfield has failed to establish Plaintiffs' claims are encompassed within the arbitration provisions of the property management and operations agreements at issue in his 2016 complaint. From the limited record here, it appears the arbitration provisions in those agreements generally encompassed claims arising out of or related to those agreements. Plaintiffs' claims do not arise out of or relate to the property management or operations of the Market Street property; they relate to Dierenfield's alleged breach of the purchase agreement. Dierenfield therefore has failed to identify any sound legal or factual basis for concluding Plaintiffs' claims had to be asserted in arbitration. (See Rice v. Downs (2016) 248 Cal.App.4th 175, 185 [notwithstanding California's strong public policy favoring arbitration, " ' "there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate" ' "].) This is particularly true given that the purchase agreement—which was entered into after the prior agreements and contains an integration clause stating it "supersede[s] all prior agreements . . . between the parties"—specifically provides that all disputes shall be resolved by the courts located in San Diego. (See Publicis Communication v. True North Communications (7th Cir. 1997) 132 F.3d 363, 366 ["If the parties promise to litigate a dispute only in a particular forum, a party to the contract cannot seek to bar the litigation in that forum because the claim was not presented in some other forum."].)
Because we conclude Dierenfield has not shown Plaintiffs' claims are subject to arbitration under the property management agreement, we decline to address Dierenfield's arguments regarding the extent to which the property management agreement's arbitration provision might be enforceable against non-signatories.
Because Dierenfield has failed to establish the claims at issue were required to be brought in arbitration, Dierenfield's additional argument based on the AAA arbitration rules lacks merit. The rule Dierenfield cites in favor of compulsory arbitration simply provides that, "[a]ny new or different claim or counterclaim . . . shall be made in writing and filed with the AAA . . . . After the arbitrator is appointed, however, no new or different claim may be submitted except with the arbitrator's consent." (AAA Commercial Arbitration Rules (2013) rule R-6(b).) Nothing in this procedural rule requires Plaintiffs' claims for breach of the purchase agreement—which contains no arbitration provision—to be raised in the arbitration of Dierenfield's breach of fiduciary duty claims arising out of the property management and operations agreements.
We also reject Dierenfield's contention that Plaintiffs are "judicially estopped from denying arbitration under the [property management agreement]." " ' "Judicial estoppel precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position. [Citations.] The doctrine's dual goals are to maintain the integrity of the judicial system and to protect parties from opponents' unfair strategies. [Citation.] Application of the doctrine is discretionary." ' [Citation.] The doctrine applies when '(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.' " (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986-987.) Plaintiffs did not take inconsistent positions here. Plaintiffs have not denied arbitration under the property management agreement. They have denied arbitration only under the purchase agreement, which, as discussed, does not contain an agreement to arbitrate. The doctrine of judicial estoppel does not apply. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183 [" 'The gravamen of judicial estoppel is not privity, reliance, or prejudice. Rather, it is the intentional assertion of an inconsistent position that perverts the judicial machinery.' "].)
DISPOSITION
The order denying Dierenfield's anti-SLAPP motion is affirmed. Plaintiffs are entitled to recover their costs on appeal.
GUERRERO, J. WE CONCUR: HUFFMAN, Acting P. J. AARON, J.