Victory Holding Corp. v. Sharp
Filed 5/17/06 Victory Holding Corp. v. Sharp CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
VICTORY CAPITAL HOLDING CORP., Cross-Complainant and Respondent, v. GEORGE A. SHARP, Cross-Defendant and Appellant. | D046790 (Super. Ct. No. GIC840172) |
APPEAL from an order of the Superior Court of San Diego County, Linda Quinn, Judge. Reversed with directions.
George A. Sharp filed a lawsuit against Victory Capital Holding Corp. (Victory) for an employment-related claim. Victory cross-complained and -- based on " statements" Sharp disseminated regarding his lawsuit -- alleged causes of action for intentional interference with contractual relations, intentional interference with prospective economic advantage, trade libel, and unfair business practices. Sharp brought a motion to strike the cross-complaint under the anti-SLAPP (Strategic Lawsuit Against Public Participation) statute. (Code Civ. Proc., § 425.16.)[1] The trial court denied Sharp's motion because it found his statements were not constitutionally protected.
Sharp contends: (1) Victory cross-complained because he exercised his constitutional right of free speech, and thus the trial court erred by not shifting the burden to Victory to prove its probability of prevailing on the merits of its cross-complaint;
(2) the cross-complaint, on its face, failed to show Victory's likelihood of prevailing on each cause of action; and (3) Victory failed to establish a probability of prevailing as to each cause of action to overcome his anti-SLAPP motion. We reverse with instructions to grant the special motion to strike.
FACTUAL AND PROCEDURAL BACKGROUND
In December, 2004, Sharp filed a complaint against his former employer, Victory, which acquires small to medium-sized companies and provides management teams to develop them. The complaint set out action for breach of contract causes of, fraud, and negligent misrepresentation. Specifically, Sharp alleged Victory hired him as CEO in December 2003, and agreed to pay him a base salary of $60,000 annually and issue him one million traded shares of its common stock and certain specified options. However, in April 2004, Victory, in breach of the contract, unlawfully terminated him and withheld three-month's severance pay.
Sharp supports both the fraud and negligent misrepresentation causes of action by alleging Victory induced him to accept the CEO position by falsely promising to provide him the necessary information to perform his duties, and achieved increased trading volume when it publicly announced his hire. Sharp further alleged Victory made additional misrepresentations regarding compensation that prevented Sharp from announcing his resignation or leaving Victory.
Sharp issued three press releases regarding his lawsuit on a website, Yahoo! Financial News. A January 31, 2005 press release stated in relevant part, " The [c]omplaint also accuses the defendants of making false representations to Mr. Sharp in order to induce him accept [sic] the position of CEO. The complaint states that these representations were made in order to induce Mr. Sharp to accept the position and enable the defendants to issue a press release in hopes of increasing the trading volume of Victory shares."
On February 15, 2005, Sharp issued another press release that stated in pertinent part, " In an SEC Filing of December 23, 2004, Victory indicated its Principal Executive Office to be at 8560 West Sunset Boulevard, 3rd Floor, West Hollywood, California. This address proves to be offices of Keller Williams Realty, a significant real estate brokerage concern. Mr. Sharp stated, 'While there were past news releases of a customer-vendor relationship, apparently there is or was an undisclosed relationship between Keller Williams and Victory, either as landlord and tenant or as business partners of some sort. Whatever that relationship may be, I am hoping that Keller Williams will be able to disclose the whereabouts of Michael Osborn who we have not been able to serve with his summons as of yet; as well as provide other information pertinent to the action.' " Sharp sent this press release to a Victory shareholder by electronic mail that same day.[2]
On February 18, 2005, Victory cross-complained. On February 24, 2005, Sharp's attorney, David J. Harter, issued a press release stating that on that same day Sharp filed a motion for an injunction to block a merger between Victory and Magnesium Automotive Group (MAG) pending resolution of Sharp's civil action. It also stated that the motion " demonstrates the substantial likelihood of the plaintiff prevailing at the time of trial." Victory never merged with MAG.
On March 17, 2005, Sharp's attorney deposed John Fullenkamp, Victory's sole officer and employee. The next day, Sharp forwarded a copy of the deposition transcript by electronic mail to another individual.[3]
On April 18, 2005, Sharp filed his anti-SLAPP motion and claimed, " [t]he cross-complaint is based on two press releases alleged to have been issued by [Sharp] relating to events occurring in conjunction with this litigation." Sharp argued Victory's cross-complaint arose from his exercise of his free speech rights, and it failed to make a prima facie case regarding each cause of action.
The trial court denied Sharp's motion because it " fails to establish . . . Sharp's initial burden, e.g., the motion fails to establish that the statements giving rise to [Victory's] cross-complaint involve the exercise of free speech in connection with a public issue. [¶] Instead, it appears those statements may be part of . . . Sharp's litigation strategy, not from the exercise of free speech." Given that the court did not find Sharp's speech was protected, it did not analyze whether Victory demonstrated its probability of prevailing on the merits of its cross-complaint. The court denied Sharp's request for attorney fees and costs.
DISCUSSION
I.
The anti-SLAPP statute allows a party to file a special motion to strike causes of action " arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue." (§ 425.16, subd. (b)(1).) In determining whether to grant defendant's anti-SLAPP motion, the court " engage[s] in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. . . . If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. . . . [I]n making these determinations[, the court] considers 'the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.' " (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) We apply our independent judgment to each prong, and rule on the motion de novo. (Thomas v. Quintero (2005) 126 Cal.App.4th 635, 645.)
Sharp met his initial burden of showing Victory sued him for protected speech. The distinction the trial court drew between statements that " may be part of . . . litigation strategy, [but] not from the exercise of free speech" is not found in section 425.16, subdivision (e), which enumerates the categories of protected activity. We note that neither the parties nor the trial court specified, with reference to the anti-SLAPP statute, the section that grounded the analysis of whether Sharp's statements were in furtherance of protected speech. The closest explanation of the precise ground for the motion came from Sharp at the hearing on the trial court's tentative ruling denying his motion. Sharp stated, " [Victory] is a publicly traded company of a matter of interest, a public interest." [4] We do not resolve this case on the basis of those sections of the anti-SLAPP statute that respectively deal with " any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest;" or " any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." (§ 425.16 subd. (e)(3) and (4).)
Rather, we rely on the section of the statute that states, " any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law." (§ 425.16, subd. (e)(2), emphasis added.) This section grants protection " regardless of whether the speech concerned an issue in litigation or an issue of public interest." (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 103.) The purpose of subdivision (e)(2) is to protect free discussion of matters pending in official proceedings. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1118.)
" Filing a lawsuit is an exercise of one's constitutional right of petition, and statements made in connection with or in preparation of litigation are subject to section 425.16." (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908.) Here, Victory's cross-complaint rested exclusively and entirely on unspecified " statements" made by Sharp and his attorney in relation to Sharp's lawsuit, and Sharp's publication of Fullenkamp's deposition transcript by electronic mail. Such conduct fell squarely within the ambit of section 425.16 subdivision (e)(2); therefore, all of Victory's cross-claims are subject to the statute. (Shekter v. Financial Indemnity Co. (2001) 89 Cal.App.4th 141, 153; Vogel v. Felice (2005) 127 Cal.App.4th 1006, 1016.)
II.
A.
Sharp's statements qualified as protected speech made in connection with litigation; accordingly, the trial court erred in not shifting the burden to Victory to demonstrate, based on competent admissible evidence, the probability it would prevail on the merits of each of its causes of action. (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 646, disapproved on other grounds in Equilon Enterprises v. Consumer Cause, Inc., supra,29 Cal.4th at p. 67.) Based on our review, Victory did not satisfy its burden.
A plaintiff, to make a showing of probability of prevailing on the merits, " must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." (Matson v. Dvorak (1995) 40 Cal.App.4th 539, 548; accord, Rosenaur v. Scherer (2001) 88 Cal.App.4th 260, 274.) " In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant (§ 425.16, subd. (b)(2)); though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant's evidence supporting the motion defeats the plaintiff's attempt to establish evidentiary support for the claim." (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) " An assessment of the probability of prevailing on the claim looks to trial, and the evidence that will be presented at that time." (Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1497; Kashian, supra, 98 Cal.App.4th at p. 906.) Here, we need not evaluate the sufficiency of Victory's pleading because we address the claims on the merits.
B.
We analyze Victory's two interference claims together because these torts have similar elements: A claim for interference with contractual relationship requires a valid contract between the plaintiff and a third party, defendant's knowledge of this contract, intentional acts by a defendant designed to induce the disruption of the contractual relationship and actual disruption of the contractual relationship resulting in damage. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55.) A claim for intentional interference with prospective economic advantage includes the same elements, but involves an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff and the additional element that the defendant's action must have been wrongful apart from the interference itself. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153-1154; Mann v. Quality Old Time Service, Inc., supra, 120 Cal.App.4th at p. 109.) The contract must be " in force and effect at the time of the breach that the actor has caused. (A-Mark Coin Co. v. General Mills, Inc. (1983) 148 Cal.App.3d 312, 321.)
Victory supported both interference claims with the same conclusory statement in its cross-complaint: " At all times mentioned in this complaint, Sharp had actual knowledge that Victory had valid, contractual relationships with its customers. Despite that knowledge, Sharp intentionally disseminated statements about Victory for the purpose of interfering with Victory's contractual relations with customers." Victory failed to provide any evidence, much less admissible evidence, of any such contractual relationships. Although Fullenkamp was deposed in his capacity as the person most knowledgeable regarding Victory, when he was asked at his deposition if the company had any customers, he never answered the question.[5] Fullenkamp's declaration also is devoid of evidence regarding any contracts. We conclude, as a threshold matter, Victory failed to establish the existence of any contract or any customers.
Fullenkamp's declaration shifted the focus from Victory's " relationship with customers" mentioned in its cross-complaint to the single potential business entity with whom Fullenkamp had assertedly proposed an acquisition that never was consummated. He declared, " While the case was pending, I negotiated the acquisition of [MAG]. The acquisition was to be completed within 60 days." He added, " I personally spoke to the founder of [MAG] who told me that his company was not going to complete the acquisition because of the Plaintiff's statements." These statements were objected to as hearsay, and would be inadmissible at trial because they were asserted for the truth of the matter stated. (Evid. Code, § 1200.)[6]
Even if Fullenkamp's averments in his declaration were admissible, they would be unavailing regarding any of the causes of action in the cross-complaint because Victory's loss alleged therein was its " valid, contractual relationships with its customers." Victory did not allege any failed acquisition of a company. " While courts should not be technical in the matter of pleading, a plaintiff should not be permitted to base [the] entire complaint on one theory, and then later adopt another theory which is not even hinted at in the pleading." (Love v. Gulyas (1948) 87 Cal.App.2d 608, 615.)
Victory's claim of intentional interference with prospective economic advantage fails under the above analysis, but also because neither at trial nor on appeal has Victory argued, much less demonstrated with reference to legal authority, that Sharp's purported interference was independently wrongful. An act is not independently wrongful merely because defendant acted with an improper motive. (Korea Supply Co. v. Lockheed Martin Corp., supra, at p. 1158) Rather, an act is independently wrongful if it is proscribed by some constitutional statutory, regulatory, common law, or other determinable legal standard. (Ibid.) Absent reasoned analysis showing that it could meet this standard, Victory does not met its burden under section 425.16. (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 865 [appellate court will not consider points unsupported by citation to pertinent authority].)
C.
Victory did not demonstrate a probability of prevailing on its trade libel cause of action. " Trade libel is defined as an intentional disparagement of the quality of [plaintiff's] property [or business], which results in pecuniary damage to plaintiff." (Nichols v. Great American Ins. Companies (1985) 169 Cal.App.3d 766, 773.) Plaintiff must prove there was " (1) a publication; (2) which induces others not to deal with plaintiff; and (3) special damages." (Ibid.) A plaintiff, to prove special damages, " may not rely on a general decline in business arising from the falsehood, and must instead identify particular customers and transactions of which it was deprived as a result of the libel." (Mann v. Quality Old Time Service, Inc., supra, 120 Cal.App.4th at p. 109.)
" To constitute trade libel, a statement must be false. [Citation.] Since mere opinions cannot by definition be false statements of fact, opinions will not support a cause of action for trade libel. [Citation.] [¶] In most cases, whether a statement is fact or opinion is a question of law. [Citation.] To decide whether a statement is fact or opinion, a court must put itself in the place of an average reader and determine the natural and probable effect of the statement, considering both the language and the context. [Citation.] However, where a statement is ambiguous or susceptible of an innocent meaning, it is incumbent upon the plaintiff to plead the facts showing its defamatory meaning." (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010-1011.)
Victory alleged it " had an economic relationship with customers, with the probability of future economic benefit to Victory. Sharp knew of these relationships, and intentionally disrupted the relationships by disseminating false and unprivileged information about Victory. [¶] As a result, Victory suffered economic harm because the customers ceased to do business with the company. Cross-complainant is informed and believes that the lost business will amount to more than $10 million."
Victory based its trade libel claim on three statements identified in its opposition to the motion to strike. First Victory argued, " In a press release, [Sharp] falsely said that Victory and its principals made 'false representations' in order to induce him to accept a position with Victory." This statement is conclusory, and Victory did not demonstrate with any evidence the falsity of Sharp's representations or, conversely, the truth of Victory's representations to him. Second, Victory argued, " In an email to Victory's shareholders, [Sharp] falsely said that Victory had used 'an empty storefront' for its business address and suggested that the company never had a real address." Again, Victory merely asserts that Sharp's statement is false, but does not demonstrate with admissible evidence that it is so. Third, Victory states, " In another press release, [Sharp's] attorney falsely said [Sharp] had a 'substantial likelihood of prevailing at the time of trial' for fraud and misrepresentation." This statement of opinion, by definition, cannot support a claim for trade libel. (ComputerXpress, Inc. v. Jackson, supra, 93 Cal.App.4th 993 at p. 1010.)
Separately, Victory failed to demonstrate the probability it would prevail on the merits of the trade libel claim because, as we discussed, it has not established it had customers; therefore, it could not prove Sharp committed libel by disrupting Victory's existing relationship with customers. Moreover, Victory has not demonstrated it is likely to prevail on the element of special damages; the calculation in the cross-complaint is based on information and belief that " the lost business will amount to more than $10 million." A plaintiff may not rely on the unsupported allegations in its complaint. (Mann v. Quality Old Time Service, Inc., supra, 120 Cal.App.4th at pp. 109-110.) At any rate, averments in a declaration made on information and belief are not admissible. (Evans v. Unkow, supra,38 Cal.App.4th at p. 1498.)
D.
To prevail under Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), " plaintiff must establish that the [business] practice is unlawful (i.e., is forbidden by law), unfair (i.e., harm to victim outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public)." (Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.) " Unfair competition" has been defined as " anything that can properly be called a business practice and that at the same time is forbidden by law." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) This statute requires ongoing activity and " imposes strict liability. It is not necessary to show that the defendant intended to injure anyone." (Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 520.) Section 17204 states an action for unfair business practices shall be brought " by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition."
The cross-complaint alleged: " Sharp knew that Victory's business depended on public perceptions. With that knowledge, Sharp intentionally published false and unprivileged information about Victory to injure the value of its business. [¶] In addition, Sharp intended to harm consumers who had stock in Victory by intentionally publishing false and misleading statements about the company. [¶] As a result, Victory suffered economic harm because the consumers lost confidence in the company, causing stock values to decrease and devaluing the company. Cross-complainant is informed and believes that the company will lose a business value of more than $10 million."
What we have stated in a related context applies here: " [Victory] does not explain with any reasoned argument or authority how [Sharp's] actions were unlawful, unfair or fraudulent business acts or practices within the meaning of the unfair competition law.
[Citation.] It is not for us to make [Victory's] arguments for it, and consequently we do not consider the point." (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1244.)
III.
We agree with Sharp he is entitled to recover attorneys' fees under section 425.16, subd. (c).) The attorneys' fees amount on appeal shall be determined by the trial court. (Shekter v. Financial Indemnity Co., supra, 89 Cal.App.4th at p. 154.)
DISPOSITION
The order denying the Code of Civil Procedure section 425.16 motion is reversed. The trial court is directed to grant the special motion to strike. The trial court's denial of George A. Sharp's attorney fees request under Code of Civil Procedure, section 425.16(c) is reversed, and the court is directed to rule on the merits of his request for attorney fees, including those incurred on appeal. George A. Sharp is awarded costs on appeal.
O'ROURKE, J.
WE CONCUR:
NARES, Acting P. J.
AARON, J.
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[1] All statutory references are to the Code of Civil Procedure unless otherwise stated.
[2] Although Victory alleges Sharp circulated the electronic mail with the attached press release to more than one investor, the record shows such correspondence was between Sharp and " Dany," a " Foreign Shareholder."
[3] Fullenkamp averred in a declaration that accompanied Victory's opposition to Sharp's motion: " Plaintiff's attorney has used discovery in this case to disparage the company. After the first day of my deposition, they disseminated embarrassing information from the deposition on the Internet." Victory claims in its reply brief that " Sharp's attorney circulated a copy of the deposition transcript to shareholders with embarrassing information about the company." The record shows Sharp's attorney sent the transcript by electronic mail to Sharp alone, who forwarded it to " beaconcapital@sbcglobal.net," a person or entity not identified in the record.
[4] Sharp referred to cases like N.Y. Times Co. v. Sullivan (1964) 376 U.S. 254, which deal with speech on public issues, in its memorandum of points and authorities in support of its motion to strike. Sharp, in his opening brief, also attempts to prove that his statements were made both in preparation for litigation and regarding matters of public interest.
[5] This exchange took place at Fullenkamp's deposition:
" Q [Sharp's counsel] What is the business of Victory?
" A [Fullenkamp] Victory is a holding company.
" Q Does it have customers?
" [Fullenkamp's counsel] Objection, vague and ambiguous as to the meaning of the word 'customers.' You can answer if you know.
" [Fullenkamp] Define 'customers'
" By [Sharp's counsel]:
" Q Are you aware that you have sued George Sharp for interfering with Victory's contractual relations with its customers?
" [Fullenkamp's counsel]: Objection, assumes a legal conclusion, facts not in evidence. You may answer if you want.
" [Fullenkamp]: I don't have a legal background to be able to answer that.
" Q What is the source of revenue for Victory?"
Immediately after this question, Fullenkamp's attorney requested a discussion off the record. Back on record, exhibits were labeled and the deposition ended.
[6] As Sharp points out in his reply brief, Fullenkamp avers Victory's acquisition of MAG was derailed by Sharp's press release that referred to Sharp's injunction; however, logically, Victory cannot rely on that press release as evidence in support of its cross-complaint because Victory filed its cross-complaint approximately one week before Sharp's press release.
