Filed 5/16/22 Monteiro v. Gordon CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of San Bernardino County. John M. Pacheco, Judge. Affirmed.

Larson, Stephen G. Larson, Paul A. Rigali and John S. Lee for Defendant and Appellant.

Cotchett, Pitre & McCarthy, Niall P. McCarthy, Sarvenaz J. Fahimi and Bethany M. Hill for Plaintiffs and Respondents.

Plaintiffs and respondents Mike Monteiro and Manuel Monteiro, who do business as Endeavor Gold Dairy, a general partnership (Endeavor) sued defendant and appellant Craig Gordon, who does business as Gordon Hay, Inc. Dairy #1 and Gordon Hay, Inc. Dairy #3 (Gordon).[1] There were two causes of action: (1) concealment; and (2) an unlawful, unfair, or fraudulent business act (Bus. & Prof. Code, § 17200). Gordon responded with an anti-SLAPP motion (Code Civ. Proc., § 425.16)[2] and a demurrer. The trial court denied the anti-SLAPP motion and sustained the demurrer with 20 days leave to amend. On appeal, Gordon contends the trial court erred by denying the anti-SLAPP motion. We affirm.

FACTUAL AND PROCEDURAL HISTORY

A. COMPLAINT

The facts in this subsection are taken from the allegations in Endeavor’s complaint. Pursuant to state regulations, there are two prices dairy producers can receive for milk: a quota price and an overbase price. The quota price is higher than the overbase price. In order to receive the quota price, a dairy producer needs a milk pool quota (MPQ). An MPQ is an asset. Dairy producers buy and sell MPQs but are generally prohibited from selling MPQs for 24 months after purchasing them. For many dairy producers, their MPQs are one of their most valuable assets. MPQs are used to secure loans, and MPQs are often sold when dairy producers retire, in order to fund their retirements.

Endeavor owns and operates a dairy farm and is headquartered in Tulare, California. Gordon is in the business of dairy farming and is headquartered in Chino. A broker approached Endeavor about purchasing Gordon’s MPQs. On January 8, 2018, Endeavor and Gordon entered into a contract in which Endeavor agreed to purchase MPQs from Gordon for $713,454.20. The sale was effective February 1, 2018.

The Quota Implementation Program (QIP) is the state’s quota system, which causes MPQs to have value. Stop QIP is a group comprised of 30 dairy producers “that [are] seek[ing] to invalidate the QIP.” In other words, Stop QIP is campaigning to end the governmental quota system that causes MPQs to have value. Craig Gordon (Craig), who is “the owner of Gordon Hay, Inc.,”[3] is the leader of Stop QIP. The Stop QIP campaign became public in November 2018. The Stop QIP website, which was published after February 2018, reflects that Stop QIP has been seeking to end the quota system since August 30, 2017.

Gordon did not disclose Craig’s efforts to end the QIP at the time of selling the MPQs to Endeavor. Endeavor was unaware of Craig’s efforts to end the quota system when purchasing Gordon’s MPQs in January 2018.

In fall 2018, a dairy publication, The Milkweed, wrote about Craig’s efforts to circulate a petition seeking to terminate the QIP. In January 2020, Stop QIP filed an administrative petition with the California Department of Food and Agriculture seeking to terminate the quota system. Stop QIP filed a parallel complaint and petition for writ of mandate in Sacramento County Superior Court. Craig’s efforts to terminate the quota system “brought the value of [MPQs] significantly down.” In January 2018, the average price of an MPQ was $528. In March 2020, the average price of an MPQ was $158.

Endeavor’s first cause of action was for concealment. Endeavor alleged, “[Gordon] disclosed only the facts that were beneficial to [it] during the time leading up to the finalizing of the negotiations and Agreement of January 8, 2018. Defendant intentionally failed to disclose other facts, and failed to disclose to [Endeavor] complete and accurate information about [Craig’s] intent and efforts to end the quota program.” Endeavor alleged it was unaware that, in January 2018, Craig was secretly leading “an effort to end the quota program, thus, attempting to sell [Gordon’s] [MPQs] as quickly as possible to reap the monetary benefits before the [MPQs] would be rendered greatly reduced in value.”

Endeavor’s second cause of action alleged an unlawful, unfair, or fraudulent business act. (Bus. & Prof. Code, § 17200.) In the second cause of action, Endeavor alleged that Gordon “fail[ed] to disclose to Endeavor complete and accurate information about the [MPQs], including [Craig’s] intent and efforts to end [the QIP].”

B. ANTI-SLAPP MOTION

Gordon responded to the complaint by filing an anti-SLAPP motion. As to the first prong of the anti-SLAPP analysis—protected activity—Gordon asserted Endeavor’s harm was allegedly caused by Craig’s “later petitioning efforts seeking reform of the ‘quota’ system. These efforts consist of participating in a petition to a state agency [citation], and initiating administrative and legal proceedings in pursuit of regulatory change [citation]. Thus, the entirety of [Endeavor’s] alleged injury is tied to this protected activity, which according to the Complaint resulted in the general decline in value of [MPQs] due to the prospect that the regulatory framework governing [MPQs] might be amended.”

C. OPPOSITION

Endeavor opposed the anti-SLAPP motion. As to the protected activity prong of the analysis, Endeavor asserted “[T]he ‘gravamen’ of the Complaint relates to [Gordon] concealing facts when [it] sold [its] [MPQs] to [Endeavor] in January of 2018, not the petitioning activities.” Endeavor explained, “[Endeavor] allege[s] that [Gordon] did not disclose [Craig’s] plan and efforts to end [the quota system] when [Gordon] sold [MPQs] to [Endeavor].” Endeavor asserted, “The petitioning activities are not being attacked in the instant case—rather, only [Gordon’s] shady business practices in a private sale.” In regard to damages, Endeavor contended it was “damaged because the asset was dramatically decreased in value due to the Stop QIP effort of [Craig].”

D. REPLY

In its reply to the opposition, Gordon asserted that Endeavor admitted its damages were caused by Craig’s petitioning activity. Specifically, but for Craig’s petitioning activity, Endeavor’s MPQs would not have lost value. Thus, Gordon argued that Endeavor’s admission meant the first prong of the anti-SLAPP analysis was met.

E. RULING

The trial court denied the anti-SLAPP motion. The trial court found Endeavor’s claims did not arise from protected activity. The trial court concluded, “[T]he crux of [Endeavor’s] claims is that Gordon concealed [Craig’s] efforts to advocate for the elimination of the QIP.” The court wrote, “Gordon fails to explain how or why [its] alleged failure to provide certain information during the negotiations with [Endeavor] should be considered protected activity under Section 425.16.” The court continued, “Similarly, the subsequent petition circulated by the Stop QIP campaign, the civil lawsuit, and the administrative complaint also did not have anything to do with Gordon’s sale of [its MPQs to Endeavor]. . . . [W]hile those activities are clearly protected under Section 425.16, they were not undertaken ‘in connection with’ Gordon’s negotiation of the terms of the Agreement with [Endeavor]. Instead, the Stop QIP petition, the lawsuit, and the administrative complaint serve as evidence that Gordon’s failure to disclose to [Endeavor] [Craig’s] . . . activities pertaining to the dairy pool quotas amounted to concealment that may have been fraudulent in the context of the Agreement negotiations.” Because the trial court found Gordon did not meet the first prong of the anti-SLAPP analysis, the court did not address the merits of the second prong.

DISCUSSION

A. ANTI-SLAPP LAW

“Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by section 425.16. [Citation.] If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384-385.) We apply the de novo standard of review. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.)

B. PROTECTED ACTIVITY

1. LAW

Protected activity includes “any written or oral statement or writing made before a legislative, executive, or judicial proceeding.” (§ 425.16, subd. (e)(1).) “To determine whether a claim arises from protected activity, courts must ‘consider the elements of the challenged claim and what actions by the defendant supply those elements.’ ” (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 884.)

2. CONCEALMENT

“As with all fraud claims, the necessary elements of a concealment/suppression claim consist of ‘ “(1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.” ’ ” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1185-1186.)

“It has long been the rule in equity where rescission of a contract is sought on the grounds of fraud that nondisclosure to the vendee may render the contract vulnerable to rescission. Certainly this is especially true where a seller is possessed of knowledge not available to his vendee relative to the item offered for sale which he knew would have caused the vendee not to buy had the latter been possessed of the information. [Citations.] The same rule has been adopted where the action is brought at law for damages resulting from deceit.” (Cohen v. Citizens Nat. Trust & Sav. Bank (1956) 143 Cal.App.2d 480, 483-484; see also Civ. Code, § 1572, subd. (3).)

As to the element of concealment, Endeavor alleged that Gordon failed to disclose information about the Stop QIP campaign during negotiations for the MPQ sale and at the time Endeavor purchased Gordon’s MPQs. Specifically, Endeavor alleged that Gordon “disclosed only the facts that were beneficial to [Gordon] during the time leading up to the finalizing of the negotiations and Agreement of January 8, 2018. [Gordon] intentionally failed to disclose other facts, and failed to disclose to [Endeavor] complete and accurate information about [Craig’s] efforts to end the quota program.”

In regard to the element of knowledge, Endeavor alleged that Craig is the leader of Stop QIP and that Stop QIP began campaigning in August 2017. The implication is that Gordon was aware of the Stop QIP campaign in August 2017, which was prior to the January 2018 MPQ sale to Endeavor. As to the element of intent to defraud, Endeavor alleged that Gordon “intentionally failed to disclose” information about Stop QIP to Endeavor. Thus, there is an allegation of intentional concealment.

In regard to justifiable reliance, Endeavor alleged that (1) Stop QIP’s website “became public after the sale” of Gordon’s MPQs to Endeavor; (2) Endeavor could not have discovered information about the Stop QIP campaign “through any reasonable diligence”; and (3) if Endeavor had known about Stop QIP, then it “would not have entered into the Agreement on January 8, 2018.” The foregoing allegations reflect that Endeavor had no means of discovering the Stop QIP campaign on its own, and thus was justified in relying upon Gordon’s withholding of information concerning Stop QIP.

The final element of concealment is damages. “One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received.” (Civ. Code, § 3343, subd. (a).) In other words, if Endeavor is entitled to damages, then Endeavor will receive the difference between the amount it paid for the MPQs and the actual value that the MPQs had on the day of the sale.

In sum, the concealment cause of action arises from Gordon allegedly withholding information about Stop QIP during the MPQ transaction. Withholding information during a private commercial transaction is not petitioning activity. (Code Civ. Proc., § 425.16, subd. (e).) Accordingly, the concealment cause of action does not arise from protected activity.

Gordon contends, “[T]he sole injury alleged in the Complaint is the reduction in the [MPQ’s] market value caused by [Craig’s] petitioning activity.” If Endeavor were to prevail on the concealment cause of action, its damages would be measured on the day of the sale, i.e., the amount paid by Endeavor minus the actual value of the MPQs. (Civ. Code, § 3343, subd. (a).) The allegations about the loss in MPQs’ value following Craig’s petitioning activity are essentially surplusage.

Gordon contends the concealment cause of action arises from protected activity because the information allegedly concealed by Gordon was Craig’s intent to petition. Endeavor is not seeking to punish Craig for petitioning, nor is Endeavor trying to stop Craig from petitioning. Rather, Endeavor is asserting Gordon should have shared information about the Stop QIP campaign with Endeavor so that Endeavor could have made an informed decision about purchasing the MPQs. In other words, the concealment cause of action does not arise from the petitioning activity; the cause of action arises from the failure to share information with Endeavor during a private commercial transaction.

3. BUSINESS AND PROFESSIONS CODE SECTION 17200

“[T]o state a claim under [Business and Professions Code section 17200] one need not plead and prove the elements of a tort. Instead, one need only show that ‘members of the public are likely to be deceived’ ” by “ ‘ “anything that can properly be called a business practice.” ’ ” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266-1267.) Damages are not available for a Business and Professions Code section 17200 violation; however, a plaintiff can collect restitution. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144; Bus. & Prof. Code, § 17203.) Restitution is measured by “the price paid minus the value actually received.” (In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 796).

The alleged business practices in the Business and Professions Code section 17200 cause of action are the negotiations pertaining to the MPQ sale and the sale itself. The alleged fraud is the withholding of information pertaining to Stop QIP. The restitution would be the difference between the amount Endeavor paid for the MPQs and the actual value of the MPQs on the day of the sale. Thus, the Business and Professions Code section 17200 cause of action arises from the alleged withholding of information during a private commercial transaction; it does not arise from petitioning activity. (Code Civ. Proc., § 425.16, subd. (e).)

Gordon contends, “[T]he injury-producing conduct was [Craig’s] petitioning activity, rather than the mere concealment of an intent to petition. [Citation.] This is necessarily so because the alleged concealment, standing alone, caused no injury. [Citation.] Had [Craig] never petitioned, the decline in [MPQs] would never have occurred.” The alleged concealment might have caused injury because if the information that Gordon allegedly knew regarding plans to frustrate the MPQ market had been widely known, then the actual value of the MPQs on the day of the sale might have been less. (See In re Vioxx Class Cases (2009) 180 Cal.App.4th 116, 131 [“there must be evidence of the actual value of what the plaintiff received”].) Accordingly, the concealment, standing alone, may have caused an injury. In sum, the Business and Professions Code section 17200 cause of action does not arise from protected activity.

C. PROBABILITY OF PREVAILING

We have concluded that the causes of action do not arise from protected activity. Therefore, we need not address the probability of prevailing prong.

DISPOSITION

The order is affirmed. Respondent is awarded costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

MILLER

Acting P. J.

We concur:

CODRINGTON

J.

SLOUGH

J.

[1] We question the accuracy of these names because an individual cannot use “Inc.” in a fictitious business name. (See Bus. & Prof. Code, § 17910.5, subd. (a) [“No person shall adopt any fictitious business name which includes ‘Corporation,’ ‘Corp.,’ ‘Incorporated,’ or ‘Inc.’ unless that person is a corporation organized pursuant to the laws of this state or some other jurisdiction.”].) Nevertheless, the names as they appear in this opinion are how they appear on both the complaint and the special motion to strike, so we will not seek to correct them.

[2] All subsequent statutory references will be to the Code of Civil Procedure unless otherwise indicated.

[3] We use Craig Gordon’s first name for the sake of clarity. No disrespect is intended. We use “Craig” when referring to the individual, Craig Gordon, because it appears that it was the individual who engaged in petitioning activity. We use “Gordon” when referring to the corporation that sold the MPQs, i.e., Gordon Hay, Inc. Dairy #1 and Gordon Hay, Inc. Dairy #3. (Bus. & Prof. Code, § 17910.5, subd. (a).)