Filed 6/29/22 Jones v. Coombs Tree Farms CA1/4

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

Before us is an appeal and a cross-appeal from an order granting in part and denying in part an anti-SLAPP motion under section 425.16 of the Code of Civil Procedure.[1] Finding no merit to the appeal or the cross-appeal, we shall affirm.

I.

In 2019, Judith Jones sued her two brothers, Bart and Malcolm (“Mac”) Coombs and Coombs Tree Farms, Inc. (CTF), a family-owned company in which all three siblings are shareholders.[2] CTF was cofounded in the 1970’s by Malcolm (“Mal”) Coombs and his son, Rogan Coombs, respectively the grandfather and father of Judith, Bart, and Mac. Mal Coombs passed away in 2001. When he was still alive, Mal began a process of transferring CTF shares in equal percentages to Judith, Bart, and Mac. Following Mal’s death, Rogan took control of the company and continued the process of transferring CTF shares to his three children in equal percentages.

Shortly after Rogan died in 2008, Judith, Bart, and Mac learned that, unbeknownst to them, Rogan had gifted all of his shares of CTF’s stock (26.39%) to a non-family member, Richard Munoz. The three siblings sued Munoz over the validity of this gift, and Munoz countersued. The Munoz litigation was eventually settled in 2012 pursuant to an arrangement under which (i) Munoz would assign his shares back to CTF; (ii) all prior share certificates would be cancelled; (iii) Judith, Bart, and Mac would become equal one-third owners of all outstanding CTF shares; and (iv) new share certificates would be issued memorializing the equal ownership arrangement. The terms of the settlement and the actions CTF would take to implement it were ratified and agreed by all three siblings at a shareholders meeting on October 13, 2013, as confirmed by a set of meeting minutes for that day.

But there was a complication: Unbeknownst to Judith and Bart until the accuracy of CTF’s shareholder ledger came to be an issue in the wake of the Munoz settlement, “[a]pproximately thirty . . . years ago”, Rogan arranged for the issuance of a small amount of stock—25 shares out of 6,625—to Mac’s son, Prescott. And Mac eventually purchased those 25 shares for $10,000, which left him with a fractionally larger ownership share in CTF than his two siblings held (33.58% versus 33.21% respectively for Judith and Bart). According to Judith, Mac verbally agreed at the 2013 shareholders’ meeting to equalize the share percentages, but after the meeting he added a new condition that he be paid $10,000 to “reimburse” him for the money he paid to purchase his son’s shares. The $10,000 was not paid; there was no resolution of Mac’s demand for it; as a result, share certificates memorializing the equal share ownership percentages were not issued; and CTF’s federal tax filings continued to report unequal share ownership percentages for Judith, Bart, and Mac.

Adding a further layer of complication in the years following the Munoz settlement, a dispute arose over the management of CTF among Judith, Mac, and Bart. Judith, who was in need of cash to support herself and pay for her health needs, felt CTF was being operated in a way that was deliberately designed to generate very little income. Eventually, she requested that she be bought out, but her request was ignored. In 2019, Judith sued Mac, Bart, and CTF (collectively the Coombs Defendants) for breach of fiduciary duty and various other claims. Among these claims was one for involuntary dissolution of CTF. But at a mediation in 2020, Judith discovered that, because she owned less than a third of the outstanding shares, she had no standing to seek involuntary dissolution.[3]

During the mediation, all parties acknowledged the applicability of the mediation privilege. Written settlement offers were exchanged, but the three siblings were unable to agree on settlement terms, so the action continued. By that point in time, new share certificates in accord with the terms of the Munoz settlement still had not been issued, and the $10,000 Mac demanded following the 2013 shareholders’ meeting still had not been paid. In an apparent effort to clear the way for equalizing new share certificates to be issued, Judith, through her counsel, tendered a $10,000 check to Mac in the course of the mediation, along with settlement terms she proposed in response to a settlement proposal from Mac and Bart. Ultimately, however, after the negotiations reached impasse, Mac’s counsel returned Judith’s check uncashed.

On December 20, 2020, following the unsuccessful mediation, Judith filed a second amended verified petition. The second amended petition is the operative pleading here. In it, Judith alleges four causes of action: (1) breach of oral contract, (2) involuntary dissolution, (3) breach of fiduciary duty, and (4) partition. Of these four causes of action, only the first two are pertinent to this appeal. In the first cause of action, Judith alleges that, in 2013, she and her brothers reached an oral agreement to equalize their respective percentage of shares and that Mac breached it. According to Judith, after agreeing to equalize the number of shares at the October 2013 shareholders meeting, Mac began insisting on being paid $10,000 in order to reimburse him for the purchase price of the 25 shares he bought from his son. In the second cause of action, Judith makes no specific reference to the 2013 oral agreement to equalize the number of shares, or to the $10,000 payment Mac demanded. She simply alleges that, “as previously promised,” she is entitled to 33 and one-third of the shares of CTF and that she seeks the remedy of involuntary dissolution of the Coombs Defendants because they “have engaged in persistent unfairness towards Plaintiff by refusing to take any action to cause CTF to earn a profit and/or to generate revenues and by refusing to distribute to Plaintiff any dividends or other revenue from the company.”

In response to Judith’s second amended petition, the Coombs Defendants brought a SLAPP motion. By this motion, the Coombs Defendants asked the court to strike the first and second causes of action on the ground that each is founded upon anti-SLAPP protected conduct (i.e., Judith’s tender of the $10,000 payment to Mac in exchange for equalization of share ownership and Mac’s refusal to accept that tender) and that Judith cannot show minimal merit to either cause of action, primarily because all communications and conduct in connection with the mediation are privileged. (Evid. Code, §§ 1119, subds. (b)–(c), 1152, 1154; Civ. Code, § 47, subd. (b).) With her opposition to the Coombs Defendants’ SLAPP motion, Judith submitted her own declaration detailing the background of share ownership in CTF; the events surrounding the Munoz litigation; communications with her brothers, and with corporate counsel for CTF about obtaining new share certificates following the Munoz litigation; her dissatisfaction with the management of CTF; her attempt to obtain a buy-out from her brothers; and her tender of $10,000 to Mac in an effort to address the issue of equalization of shares.[4]

On May 20, 2021, the trial court granted the Coombs Defendants’ SLAPP motion with respect to the first cause of action, but denied it with respect to the second cause of action. The court explained: “The acts by [Mac] which Plaintiff complains constituted breach of contract occurred during settlement negotiations. Plaintiff tendered the $10,000 to [Mac] in express ‘response to the settlement proposal made by [Defendants];’ it was by her own words a ‘counteroffer’ and ‘compromise.’ [Citation omitted.] Thus [Mac’s] rejection of the $10,000 was a rejection of a settlement offer and conduct occurring during settlement negotiations.” But the court reached a different result with respect to the second cause of action, explaining as follows: “Plaintiff’s involuntary dissolution claim is based on her alleged ownership of one third of the shares of CTF and Defendants’ alleged refusal to engage in CTF’s business and turn a profit. It alleges her one-third ownership by reference to events occurring well before any mediation or settlement negotiations. None of those events had anything to do with those negotiations. [¶] Plaintiff’s breach of contract cause of action arises from protected activity. Plaintiff’s involuntary dissolution cause of action does not.”[5]

The Coombs Defendants timely appealed, and Judith filed a timely cross-appeal.

II.

A.

The heart of the anti-SLAPP statute is section 425.16, subdivision (b)(1), which provides: “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).) Section 425.16, subdivision (b)(1) does not provide a form of immunity, “insulat[ing] defendants from any liability for claims arising from the protected rights of petition or speech.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral).) Rather, the statute “only provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity.” (Ibid.; see Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009 (Bonni).)

Litigation of an anti-SLAPP motion involves a two-step process. First, “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.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061 (Park).) Second, for each claim that does arise from protected activity, the plaintiff must show the claim has “at least ‘minimal merit.’ ” (Ibid.) If the plaintiff cannot make this second-step showing, the court will strike the claim. At the first step of the analysis, courts are to “consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability.” (Park, supra, 2 Cal.5th at p. 1063.) The defendant’s burden is to identify the acts each challenged cause of action rests upon and to show how those acts are protected under a statutorily defined category of protected activity. (Wilson v. Cable News Network (2019) 7 Cal.5th 871, 884; see Bonni, supra, 11 Cal.5th at p. 1009.)

Four categories of “protected activity” are set forth in section 425.16, subdivision (e), which defines an “ ‘ ‘act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue.’ ’ ” (Area 51 Productions, Inc. v. City of Alameda (2018) 20 Cal.App.5th 581, 593 (Area 51 Productions).) Two of these categories are implicated here: Claims that arise out of the filing of a suit arise from protected activity for purposes of the anti-SLAPP statute under section 425.16, subdivisions (e)(1) and (e)(2), each of which encompasses petitioning activity before courts or otherwise in connection with judicial proceedings. The same is true of discussions that precede the filing of a suit: “ ‘[J]ust as communications preparatory to or in anticipation of the bringing of an action or other official proceeding are within the protection of the litigation privilege of Civil Code section 47, subdivision (b) [citation], . . . such statements are equally entitled to the benefits of section 425.16.’ ” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115.) Settlement negotiations while a suit is pending are likewise protected; they involve communications in connection with a matter pending before or under consideration by an official body. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89; see Bonni, supra, 11 Cal.5th at p. 1024.)

“Sometimes, a challenged cause of action or causes of action will arise from both protected and unprotected activity.” (Area 51 Productions, supra, 20 Cal.App.5th at p. 593.) At both steps of the anti-SLAPP analysis, that requires a surgical, claim-by-claim analysis in which we distinguish protected conduct from unprotected conduct. (See Bonni, supra, 11 Cal.5th 995, 1010.) In conducting this analysis, we do not generalize about the “gravamen” or “essence” of a challenged cause of action. (Bonni, supra, 11 Cal.5th at p. 1011.) Rather, “[c]ourts deciding an anti-SLAPP motion . . . must consider the claim’s elements, the actions alleged to establish those elements, and whether those actions are protected.” (Id. at p. 1015; see, e.g., id. at pp. 1015–1026 & fn. 4 [conducting detailed, claim-by-claim analysis of the specific acts alleged in a hospital peer review case alleging 16 different categories of conduct in support of three causes of action].) “ ‘[A] claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted.’ ” (Bonni, supra, at p. 1014, quoting Park, supra, 2 Cal.5th at p. 1060.)[6]

“Under Baral, ‘[w]hen relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at [the first step of the anti-SLAPP analysis]. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.’ ” (Area 51 Productions, supra, 20 Cal.App.5th at p. 595.) At the second step of the analysis, “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.” (Ibid.)

B.

All three siblings appeal the court’s order granting in part and denying in part the Coombs Defendants’ motion to strike. Judith, via her cross-appeal, attacks the order striking her first cause of action on the ground that it is not based on protected conduct, and that, even if it is, at the second step of the anti-SLAPP analysis, the court incorrectly concluded that she failed to make a showing of minimal merit. The Coombs Defendants, for their part, argue that the court was correct to strike the first cause of action, but that the court erred by refusing to strike the second cause of action. According to them, the second cause of action was founded on the same protected conduct that doomed the first cause of action. Without proof of breach of the alleged 2013 oral agreement—which, according to the Coombs Defendants, rests on privileged conduct and communications at the mediation in 2020—they argue that Judith cannot establish she was a one-third owner of CTF and thus cannot sustain her claimed right to the remedy of involuntary dissolution.

We find no merit to the Coombs Defendants’ appeal or to Judith’s cross-appeal and conclude the trial court was correct to strike the first cause of action while refusing to strike the second cause of action. In analyzing the first cause of action, the court properly focused on the specific conduct that plaintiff alleges gives rise to liability for breach of contract. Judith attempts to argue that her tender of the $10,000 and Mac’s rejection of it is merely evidence of breach of contract, and is therefore not protected conduct. We do not agree. Mac’s rejection of the $10,000 tender forms the basis of the breach element of her oral contract theory in the first cause of action. (Park, supra, 2 Cal.5th at p. 1061.) Moving to the second step of the analysis, it is true, as Judith argues, that there can be circumstances in which communications or activities preceding a mediation and simply repeated or referenced in such a proceeding are not privileged (e.g., Lappe v. Superior Court (2014) 232 Cal.App.4th 774, 784–785 [“under Evidence Code section 1120, a writing that is otherwise admissible or subject to discovery outside of a mediation does not ‘become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation or a mediation consultation’ ”]), but that is not the case here. The tender of $10,000 was made in direct response to a settlement offer and therefore was central to the negotiating activity during the 2020 mediation.

We also conclude that the trial court was correct to distinguish the second cause of action from the first and deny the motion to strike the involuntary dissolution cause of action. In support of their appeal, the Coombs Defendants emphasize that, in pleading the second cause of action, Judith incorporated all of the same factual allegations upon which she alleged the first cause of action and thus that her dissolution claim cannot succeed for the same reason her breach of contract claim cannot succeed. What they overlook is that the court was dealing with a “mixed cause of action” here, and thus it correctly disregarded the stricken allegation of protected activity. (Baral, supra, 1 Cal.5th at p. 384.) The question here is whether, after disregarding the factual allegations concerning Judith’s tender of the $10,000 at step one of the anti-SLAPP analysis, did the court correctly conclude Judith presented sufficient evidence at step two to minimally support her allegation that she is a one-third shareholder of CTF?

We agree with the trial court that she did. The Coombs Defendants assume that the only theory Judith may proceed upon is one in which a contractual commitment by Mac to equalize the share percentages was breached during the mediation in 2020. But the declaration Judith presented in support of her second cause of action traces her alleged one-third share ownership to events that long preceded the mediation. She points out that the theory of her second cause of action for involuntary dissolution is not identical to the theory of her first cause of action for breach of contract. At issue in the second cause of action, she argues, is CTF’s statutory obligation to issue new share certificates based on the Munoz settlement terms. In Judith’s view, Mac’s insistence on being paid $10,000, was a unilateral condition, imposed by him after CTF had already agreed to settle on those terms, and after its shareholders had unanimously ratified the settlement, consistent with the intentions of Mal and Rogan Coombs to give Rogan’s children equal ownership shares. In other words, the second cause of action pleads entitlement to an equal, one-third share percentage on the ground that, in accordance with the Munoz settlement, CTF was obligated to restore the status quo ante intended all along by its founders. Under this theory, the “as promised” alleged in the second cause of action refers to words and conduct from her father and grandfather that she understood to be tantamount to a “promise,” not to an agreement that Mac breached at the mediation.

The Coombs Defendants insist that, whether the right to one-third share ownership alleged in the second cause of action is analyzed as a matter of contractual duty or statutory duty, Judith still cannot succeed with that cause of action because it will always be premised on an alleged preexisting contract, as confirmed by the fact that she traces her one-third ownership to a promise that was made to her long ago that is now legally unenforceable. But the Coombs Defendants’ attack on the validity of Judith’s second cause of action rests on their incomplete statement of the background facts. In her responding brief, Judith correctly takes them to task for failing to give a full accounting of the events surrounding the Munoz litigation and settlement. After narrowly characterizing the nature of Judith’s second cause of action, the Coombs Defendants argue her theory of liability is legally invalid because (i) there was no consideration for any commitment to equalize shares in 2013; (ii) it is based on an unenforceable “agreement to agree”; and (iii) in any event, even if the alleged commitment to equalize shares is enforceable, a breach of it is no longer actionable due to the expiration of the statute of limitations.

We need not address, and we express no view, about the Coombs Defendants’ various arguments attacking as legally unsupportable what they characterize as Judith’s second cause of action. We are not reviewing the denial of a summary judgment motion or the overruling of a demurrer. For purposes of analyzing minimal merit at step two of an anti-SLAPP motion, we accept the evidence presented in Judith’s declaration as sufficient to meet her step two burden. (Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 947 [“evidence may be considered at the anti-SLAPP motion stage if it is reasonably possible the evidence set out in supporting affidavits, declarations or their equivalent will be admissible at trial”].) Because we cannot rule out the possibility that she can prove her entitlement to new share certificates without reference to anything that happened at the mediation, or to any contractual commitment that Mac made, she is entitled to proceed on her second cause of action as pleaded.[7]

DISPOSITION

The order of May 20, 2021, granting in part and denying in part the Coombs Defendants’ SLAPP motion is affirmed. The parties shall bear their own costs on appeal.

STREETER, Acting P. J.

WE CONCUR:

BROWN, J.

NADLER, J.*

[1] All further statutory references are to the Code of Civil Procedure unless otherwise specifically designated.

[2] For clarity and economy of expression, we will sometimes refer to the parties, and to relatives of the parties who have roles in the factual background here, by their first names. We mean no disrespect.

[3] Corporations Code section 1800, subdivision (a) (“A verified complaint for involuntary dissolution of a corporation on any one or more of the grounds specified in subdivision (b) may be filed in the superior court of the proper county by any of the following persons: [¶] . . . [¶] (2) A shareholder or shareholders who hold shares representing not less than 33⅓ percent of (i) the total number of outstanding shares (assuming conversion of any preferred shares convertible into common shares) or (ii) the outstanding common shares or (iii) the equity of the corporation, exclusive in each case of shares owned by persons who have personally participated in any of the transactions enumerated in paragraph (4) of subdivision (b), or any shareholder or shareholders of a close corporation.”).

[4] Along with their reply, the Coombs Defendants submitted a set of objections to Judith’s declaration, including an objection that the declaration was executed outside of California (Judith lives in Mexico) and that she failed to acknowledge the applicability of California law to the content of the declaration.

[5] In response to the Coombs Defendants’ evidentiary objections, Judith submitted an amended declaration, which the trial court accepted for filing, correcting what the court described as “the material problem in her original declaration that it was executed outside the state of California and lacked a statement acknowledging the applicability of California law to its contents.” The court found that all of the Coombs Defendants’ remaining objections were not material to the disposition of the motion and on that basis declined to rule on them.

[6] “It is indeed easy to confuse a defendant’s alleged injury-producing conduct with the unlawful motive the plaintiff is ascribing to that conduct. This confusion will be less likely to occur, however, if on the first step of the anti-SLAPP inquiry the court’s focus remains squarely on the defendant’s activity that gave rise to its asserted liability, and whether that activity constitutes protected speech or petitioning, rather than on any motive the plaintiff may be ascribing to the activity.” (Tuszynska v. Cunningham (2011) 199 Cal.App.4th 257, 271, disapproved on other grounds, Park, supra, 2 Cal.5th at p. 1071.)

[7] The Coombs Defendants make a half-hearted effort to attack the trial court’s handling of their evidentiary objections. Without developing the argument or making it a separate ground of assigned error, the Coombs Defendants contend in a one-sentence footnote in their opening brief that the court “erroneously overruled” their evidentiary objections to Judith’s declaration. Actually, the only evidentiary objection the court ruled upon—which it resolved implicitly by accepting Judith’s amended declaration for filing—was the objection that Judith executed her declaration out of state and failed to acknowledge the applicability of California law. The court declined to reach the remainder of the Coombs Defendants’ objections on the ground that they were not material to the disposition of the anti-SLAPP motion.

In the absence of any specific argument as to why this mode of handling the Coombs Defendants’ evidentiary objections was an abuse of discretion, we deem their claim of “erroneous overrul[ing]” of the objections to be forfeited.

* Judge of the Superior Court of California, County of Sonoma, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.