York v. Costanzo

Filed 10/12/07 York v. Costanzo CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION ONE

APPEAL from an order of the Superior Court of Los Angeles County. John Shepard Wiley, Jr., Judge. Affirmed.

Murray & Budzyn, Vernon E. Murray and James S. Link for Defendant and Appellant.

Kulik, Gottesman, Mouton & Siegel and Donald S. Gottesman for Plaintiffs and Respondents.

_____

Plaintiffs James York, Gary Gray, and Maria Behunin are partners in a dissolved partnership suing two of the partnerships partners, Ralph Costanzo and Gerard G. Adams, Jr., for an accounting and for damages for misappropriation of partnership funds. The trial court denied Costanzos special motion to strike (Code Civ. Proc.,  425.16) the second cause of action for breach of fiduciary duty, rejecting Costanzos assertions that the gravamen of the cause of action was protected litigation activity and that plaintiffs could not establish a probability of prevailing.^[1] We affirm the order because the trial court correctly determined that the gravamen of the action is defendants alleged misuse of partnership funds and that plaintiffs made a prima facie showing of facts supporting a judgment in their favor.

BACKGROUND

We obtain the background facts from the complaint as well as the evidence offered by the parties because in determining whether the cause of action arose from protected activity under section 425.16, we are not limited to a consideration of the complaint, but we consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. ( 425.16, subd. (b).) (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (Navellier).)

Miller-Adams Properties, Ltd. (Partnership), was a California limited partnership formed in January 1984 for the purpose of acquiring and operating five apartment buildings with a total of 42 residential units. The Partnership agreement provided that the Partnership would terminate in January 2004. The last two of the apartment buildings owned by the Partnership were sold in July 2004 and the net proceeds, $1.3 million, were  and still are being held by Stewart Title of California, Inc. (Stewart Title). At the time this action was filed in December 2006, the Partnership interests were held by five general partners and two limited partners. The general partners and their interests were as follows: Gerard G. Adams (Senior), 20 percent; Gerard G. Adams, Jr. (Junior), 16â…” percent; Teofilo Esguerra, 20 percent; Maria Behunin, 20 percent; and Ralph Costanzo, 10 percent. The limited partners were Gary Gray and James York, each with a 6â…” percent interest.

The Partnerships business was managed and controlled by Junior, who was the managing general partner under the Partnership agreement. Junior was assisted by Costanzo, an accountant. Both Junior and Costanzo worked together in the same building. In August 2002, in connection with work by Yorks accountant, York learned that some Partnership funds may have been disbursed for non-partnership purposes. After attempts to obtain information about Partnership disbursements proved fruitless, in September 2003, York, Gray, Behunin, Senior, and Seniors son Arthur Adams (Arthur), as trustee of Seniors family trust, commenced an arbitration proceeding before the American Arbitration Association (AAA) to obtain an accounting of Partnership financial affairs, and an arbitrator was appointed. Junior, Costanzo and Esguerra were the respondents in the arbitration. The Partnership agreement provided that [a]ny dispute or controversy arising under, out of, in connection with or in relation to this Agreement, and any amendments thereof, or the breach thereof, or in connection with the dissolution of the Partnership shall be determined and settled by arbitration . . . .

In the arbitration proceeding, the respondents filed summary adjudication motions in February 2005, which motions were denied in May 2006. During the course of the arbitration, York discovered that approximately $900,000 in Partnership funds had been loaned or disbursed to Junior, Costanzo, and third parties associated with them for purposes unrelated to the acquisition, ownership, or operation of the Partnerships apartment buildings. Less than $200,000 of these loans or disbursements had been repaid and there was no supporting documentation for other questionable and substantial disbursements.

Barry Charles, a certified public accountant retained to assist plaintiffs in December 2004, reviewed all Partnership records available to him, including general and subsidiary ledgers, canceled checks, bank statements, invoices, and tax returns. According to Charles, the Partnership records revealed substantial disbursements of Partnership funds which did not appear to have any Partnership-related purpose, including over $500,000 to Junior; $25,000 to Costanzo; over $100,000 to Juniors girlfriend; over $23,000 to Juniors brother-in-law; and over $200,000 to three companies owned or controlled by Junior or Costanzo. Of the almost $900,000 in disbursements, at least $750,000 were characterized in the Partnerships accounting ledgers as loans, but less than $200,000 of the loans were repaid and the Partnership had no promissory note or loan agreement evidencing the loans and no documentation showing any Partnership-related purpose of the loans. In February 2005, Costanzo and Junior filed summary adjudication motions in the arbitration proceeding, which were denied by the arbitrator in May 2006.

Meanwhile, pending the arbitration, Arthur, in his capacity of trustee of his parents trust (The Gerard and Maria Adams Revocable Living Trust dated December 4, 2002, referred to herein as the Adams Family Trust), filed a petition in the superior court in Riverside County on April 5, 2005, seeking a determination that the trust was irrevocable because the trustors (his parents) were incompetent and that Seniors interest in the Partnership belonged to the trust. (No. RIP 088230.)

In the verified Riverside County petition, Arthur declared as follows. In 2002, two properties owned by the trust went into foreclosure because of mismanagement by Junior. Because of the foreclosure and because of the trustors belief that Junior had abused the trust they had placed in him to manage their assets during the previous 25 years, the trustors disinherited Junior. Beginning in early 2003, Arthur attempted to get Junior to acknowledge the Adams Family Trusts ownership of the assets and to obtain information about the value of the trusts assets managed by Junior. The arbitration filed in September 2003 was part of this process. Junior fiercely opposed the arbitration and Arthur was unable to obtain an accounting pertaining to the Partnership. Arthur also claimed that Junior continued to mismanage and abuse the finances of the trust, as evidenced by his recent attempt to have his father and mother sign a settlement agreement for significantly less than the value of the Trustors assets under the direct or indirect control of [Junior]. . . . This action was taken by [Junior] despite the fact he was aware of his parents dementia as well as their lack of legal representation.

Neither York, Gray, Behunin, nor the Partnership were parties to the Riverside County proceeding (hereinafter, the Riverside Probate Proceeding). In October 2005, a judge in the Riverside Probate Proceeding issued an order appointing John Kennedy, retired judge, as a referee to determine all remaining issues in this proceeding, including but not limited to . . . claims made in Behunin v. Adams (AAA Arbitration No. 72-180-00949-03 ARC) . . . . The order appointing the referee referred to a written Stipulation for Settlement pursuant to section 664.6 in which the trustors, Arthur as trustee, Junior, Costanzo, and others named in the settlement agreement agreed to the appointment of Kennedy as referee.

York, Gray, and Behunin were not parties to the settlement agreement and were not provided with a copy of it. York, Gray, and Behunin neither appeared in, nor participated in any manner in, the Riverside Probate Proceeding. Nevertheless, in March 2006, in the First Interim Findings by Referee, the Second Interim Findings and Order of Referee, and the referees First Interim Order, the referee purported to make an accounting of the Partnerships financial affairs and then charged the Partnership accounts of York, Gray, and Behunin.

The referee found, among other things, that in 1991, after a refinance of some unspecified Partnership property as to which Senior held a note secured by a trust deed which was paid off in the refinance, Senior left approximately $429,000 of his funds in the Partnership account. The referee found that in 1991 and 1992, 18 checks were written on the Partnership account constituting loans and/or investments of [Seniors] funds, which loans were repaid in 1992. The referee thus concluded that [m]ost of the transactions which Barry Charles [plaintiffs CPA] asserts were made without an apparent partnership purpose were made with [Seniors] $429,000 left in the business from the 1991 refinance.

The referee stated that he had reviewed the documents in the arbitration matter involving the Partnership and he found that the claims made against Costanzo and Junior in the arbitration were barred by the statute of limitations and that Costanzos and Juniors claims of laches and unclean hands were valid. The referee was aware of the summary adjudication motions then pending before the arbitrator and stated that while he felt a responsibility to give deference to those proceedings, it is necessary for [him], in order to comply with the [order of reference], to make findings on the Summary Judgment Motions . . . in order to determine the validity of and the amount of the Adams Family Trust claims against, and interest in, [the Partnership]. In the Second Interim Findings and Order, the referee stated that an additional reason why he should undertake a full accounting of [the Partnership] was because [s]ixty-six and two-thirds . . . percent of the partners are parties to this proceeding and have requested that I do so, and the Partnership agreement allows sixty-five . . . percent of the partners to terminate the Partnership and order the distribution of assets.^[2]

Accordingly, without any evidentiary hearing in the Riverside Probate Proceeding, but based only upon a review of the books and records [of the Partnership], as well as the preliminary accounting and back up material prepared by Ralph Costanzo, the referee found that there was no evidence of any gross negligence, willful misconduct or breach of fiduciary duty by Ralph Costanzo, and that (a) no evidence developed from any documentation . . . showing that [Junior] diverted any significant funds to himself; (b) he appears to be insolvent at the present time . . . ; (c) during the real estate downturn of the early 90s, the limited partners in the various entities were either unable or unwilling to invest further funds, resulting in short sales . . . ; and (d) his judgment to save the remaining [Partnership] property has generated $1,285,000 for distribution to the partners.

The referee further found that the settlement agreement among the parties to the Riverside Probate Proceeding required the Adams Family Trust to pay Costanzos and Juniors attorney fees and costs incurred in the arbitration proceeding. The fees and costs totaled over $659,000. The referee then interpreted a provision of the Partnership agreement as requiring that the Partnership pay the $659,000 of attorney fees and costs to the Adams Family Trust. The referee thus charged the Adams Family Trusts claim for attorneys fees against the Partnership capital accounts of Gray, York, and Behunin according to their respective interests in the Partnership. In a final order and judgment signed by the referee and filed in the Riverside Probate Proceeding in September 2006, the Adams Family Trust was awarded over $785,000 against the Partnership.^[3]

After the referee issued the foregoing orders in April 2006, Junior and Costanzo argued in the arbitration proceedings that the referees findings and accounting were binding on the claimants in the arbitration. In May 2006, the arbitrator rejected these arguments and denied Juniors and Costanzos summary adjudication motions.^[4] Because Junior and Costanzo failed to pay their share of the arbitration fees  about $10,000 the arbitration proceeding was suspended on several occasions beginning in January 2006. A final order suspending the proceedings was issued by the arbitrator in October 2006.

Asserting that Junior and Costanzo waived their right to arbitrate the dispute with plaintiffs pursuant to the arbitration clause in the Partnership agreement, plaintiffs filed the instant action in December 2006. The complaint contained two causes of action, the first for an accounting and winding up of the Partnership affairs and the second for damages and injunctive relief for breach of fiduciary duty. Both causes of action were based on the same factual allegations regarding the arbitration proceeding, the Riverside Probate Proceeding, and the plaintiffs claims that Junior and Costanzo wrongfully took and disbursed to others over $1.4 million of the Partnerships funds without a legitimate Partnership purpose and that they sold two of the Partnerships apartment buildings at prices below their fair market values.

The second cause of action also alleged that, as general partners, Junior and Costanzo breached their fiduciary duties by, among other things, using the Riverside Probate Proceeding as a means to bypass the Arbitration and create a false accounting of Partnership affairs based upon their version of events pursuant to a procedure which did not require evidentiary hearings or sworn testimony and in which there were no adverse parties (i.e., adverse to the interests of Junior and Costanzo). Plaintiffs alleged that as a result of Junior and Costanzos breach of fiduciary duties, they incurred attorney fees in excess of $25,000 in the arbitration proceeding in order to oppose Juniors and Costanzos contentions that the referees findings in the Riverside Probate Proceeding were binding on the arbitrator. Plaintiffs also sought injunctive relief to prevent Junior and Costanzo from obtaining writs of execution against Partnership assets in the Riverside Probate Proceeding and seizing Partnership funds held by Stewart Title.

In December 2006, plaintiffs applied for a preliminary injunction to enjoin defendants from withdrawing Partnership funds from Stewart Title pending the trial. On January 23, 2007, the trial court issued an order granting plaintiffs application and enjoined defendants from withdrawing or disbursing any of the Partnership funds maintained by Stewart Title without the written consent of all partners of the Partnership.

On January 25, 2007, Costanzo filed a special motion to strike the second cause of action on the ground that the conduct alleged therein is litigation activity under section 425.16 and protected by the litigation privilege under Civil Code section 47, subdivision (b).^[5] In opposition to the motion, plaintiffs argued that the motion should be denied because that part of the second cause of action alleging the misuse of Partnership funds is outside the scope of section 425.16 and there was evidence to substantiate that claim, including the declarations of York, Barry Charles, and Donald Gottesman, plaintiffs attorney and the claimants attorney in the arbitration proceeding after July 2004. Plaintiffs also maintained that the litigation privilege did not apply to their claims based on the misuse of Partnership funds and based on defendants breach of the forum selection clause of the Partnership agreement. In connection with the latter claim, plaintiffs explained that [t]he gravamen of this portion of the claim is that Junior and Costanzo breached the Partnership Agreements arbitration provision, not only by repeatedly causing a suspension of proceedings, but also by obtaining a purported accounting of Partnership affairs in a Riverside court proceeding without Plaintiffs participation. . . . There can be no doubt that such conduct constituted a breach of Section 33 of the Partnership Agreement, which required the partners to submit to binding arbitration before the AAA in Los Angeles [a]ny dispute or controversy arising under, out of, in connection with or in relation to the Partnership Agreement.

In his reply memorandum, Costanzo claimed that plaintiffs could not avoid operation of section 425.16 and the litigation privilege with a slick argument that the entirety of the first cause of action is incorporated into the second cause of action converting it into a contract claim, and that in any event there is no cognizable cause of action for breach of contract for failing to arbitrate.

After a hearing on February 27, 2007, the court denied the motion. The court ruled that it did not need to reach the first prong under section 425.16, because assuming the cause of action fell within section 425.16, plaintiffs presented evidence demonstrating a probability of success on the nonlitigation aspects of the breach of fiduciary duty that is alleged, that is to say just the supposed looting of the Partnership . . . . Costanzo appealed from the order denying the motion.

DISCUSSION

Plaintiffs admit that the second cause of action is a mixed claim, based on activity subject to section 425.16 (Costanzos involvement in the Riverside Probate Proceeding) as well as activity not subject to section 425.16 (Costanzos misappropriation of Partnership funds). Costanzo contends that the gravamen of plaintiffs second cause of action is litigation activity and that the non-litigation allegations in the second cause of action are mere pleading surplusage. Thus, Costanzo concludes, the cause of action is subject to section 425.16 and also is privileged under Civil Code section 47, which constitutes a defense to the cause of action and precludes the ability of plaintiffs to establish a probability of prevailing on the cause of action. As we explain below, we disagree with Costanzos characterization of the pleading and conclude that the trial court properly denied his special motion to strike.

A. Standard of Review and the Arising From Requirement

We review de novo the trial courts ruling by conducting an independent review of the entire record. (Brown, supra, 137 Cal.App.4th at p. 1124.) We independently determine whether the opposing partys cause of action against the moving party arises from the moving partys exercise of a valid right of free speech or petition and if so, whether the opposing party has established a probability of prevailing on the cause of action. (Governor Gray Davis Com. v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 456.)

Although a partys litigation-related activities constitute act[s] in furtherance of a persons right of petition or free speech, it does not follow that any claims associated with those activities are subject to the anti-SLAPP statute. To qualify for anti-SLAPP protection, the moving party must demonstrate the claim arises from those activities. A claim arises from an act when the act forms the basis for the plaintiffs cause of action . . . . [Citation.] [T]he arising from requirement is not always easily met. [Citation.] A cause of action may be triggered by or associated with a protected act, but it does not necessarily mean the cause of action arises from that act. (City of Cotati[, supra,] 29 Cal.4th 69, 7778 . . . .) (Kolar v. Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532, 1537 (Kolar).)

Thus, [t]he anti-SLAPP statutes definitional focus is not the form of the plaintiffs cause of action but, rather, the defendants activity that gives rise to his or her asserted liability  and whether that activity constitutes protected speech or petitioning. (Navellier, supra, 29 Cal.4th at p. 92.)

For example, in City of Cotati, the Supreme Court held that a special motion to strike should not have been granted in a state court declaratory relief action filed in response to a federal declaratory relief action between the same parties, raising the same issues in connection with the validity of a mobile home park rent stabilization ordinance. The court reasoned that the actual controversy giving rise to both actions  the fundamental basis of each request for declaratory relief  was the same underlying controversy respecting Citys ordinance. Citys cause of action therefore was not one arising from Owners federal suit. Accordingly, Citys action was not subject to a special motion to strike. (City of Cotati, supra, 29 Cal.4th at p. 80, fn. omitted.)

Similarly, in Benasra v. Mitchell Silberberg & Knupp LLP (2004) 123 Cal.App.4th 1179 . . . , the court determined the anti-SLAPP statute did not apply to a former clients suit against a law firm for breach of loyalty. There, the law firm, who previously represented the plaintiff, represented the plaintiffs opponent in an arbitration proceeding. Although pursuit of arbitration proceedings is a protected activity, the court nonetheless held the breach of loyalty claim did not arise from that activity, reasoning: The breach occurs not when the attorney steps into court to represent the new client, but when he or she abandons the old client. . . . In other words, once the attorney accepts a representation in which confidences disclosed by a former client may benefit the new client due to the relationship between the new matter and the old, he or she has breached a duty of loyalty. The breach of fiduciary duty lawsuit may follow litigation pursued against the former client, but does not arise from it. Evidence that confidential information was actually used against the former client in litigation would help support damages, but is not the basis for the claim. . . . [T]heir claim is not based on filing a petition for arbitration on behalf of one client against another, but rather, for failing to maintain loyalty to, and the confidences of, a client. [Citation.] (Kolar, supra, 145 Cal.App.4th at pp. 15381539.)

B. Multiple Factual Theories or Mixed Causes of Action

Where both constitutionally protected and unprotected conduct is implicated by a cause of action, a plaintiff may not immunize a cause of action challenging protected free speech or petitioning activity from a special motion under section 425.16 by the artifice of including extraneous allegations concerning nonprotected activity. (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 308 . . . .) Thus, when allegations of nonprotected activity are incidental or collateral to a plaintiffs claim challenging primarily the exercise of the rights of free speech or petition, they may be disregarded in determining whether the cause of action arises from protected activity. Conversely, if the allegations of protected activity are only incidental to a cause of action based essentially on nonprotected activity, the mere mention of the protected activity does not subject the cause of action to an anti-SLAPP motion. (See Paul v. Friedman (2002) 95 Cal.App.4th 853, 866 . . . [anti-SLAPP statute does not provide protection to suits arising from any act having any connection, however remote, with [protected conduct]].) (Scott v. Metabolife Internat., Inc. (2004) 115 Cal.App.4th 404, 414415.)

The apparently unanimous conclusion of published appellate cases is that where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 425.16 unless the protected conduct is merely incidental to the unprotected conduct. (Mann v. Quality Old Time Service, Inc. [(2004) 120 Cal.App.4th 90, 103 (Mann)].) (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 672 (Peregrine Funding).) And [w]here a cause of action refers to both protected and unprotected activity and a plaintiff can show a probability of prevailing on any part of its claim, the cause of action is not meritless and will not be subject to the anti-SLAPP procedure. (Mann, supra, 120 Cal.App.4th at p. 106.)

Stated differently, the anti-SLAPP procedure may not be used like a motion to strike under section 436, eliminating those parts of a cause of action that a plaintiff cannot substantiate. Rather, once a plaintiff shows a probability of prevailing on any part of its claim, the plaintiff has established that its cause of action has some merit and the entire cause of action stands. Thus, a court need not engage in the time-consuming task of determining whether the plaintiff can substantiate all theories presented within a single cause of action and need not parse the cause of action so as to leave only those portions it has determined have merit. (Mann, supra, 120 Cal.App.4th at p. 106.)

C. Gravamen of Plaintiffs Cause of Action

Applying the foregoing principles, we conclude that a fair reading of plaintiffs complaint reveals that the non-protected activity of misappropriation of Partnership funds, and not protected litigation activity, is the gravamen or main thrust of the second cause of action. In other words, if all references in the pleading to the Riverside Probate Proceeding were removed, a fair reading of the remaining allegations of the complaint is that the conduct underlying the plaintiffs claims involves misappropriating funds and failing to provide an accurate accounting of the Partnership affairs. Misappropriation or misuse of Partnership funds is not mere surplusage or collateral to the main focus of the lawsuit.

Costanzo argues that the gravamen of the breach of fiduciary duty claim is litigation activity because the second cause of action, in addition to incorporating all of the previous allegations, adds allegations seeking damages for, among other things, the attorney fees plaintiffs incurred in the arbitration proceeding to oppose Costanzos attempt to bind plaintiffs to the findings in the Riverside Probate Proceeding. Costanzo maintains that the vague reference to a purported breach of fiduciary duty that does not arise from protected activity is collateral in the second cause of action. Plaintiffs cannot even express facts giving rise to a duty or damage allegedly suffered therefrom. The protected activity must be considered the gravamen of the second cause of action.

That plaintiffs sought an element of damage (attorney fees incurred in the arbitration proceeding) that has a connection to the Riverside Probate Proceeding does not shift the gravamen of their claim away from that of misappropriation of Partnership funds and into the realm of litigation activity.

Costanzos reliance on Peregrine Funding is misplaced. In Peregrine Funding, investors who lost money in a Ponzi scheme sued the attorney for the owner of the investment company. The attorney had written letters containing negligent or reckless legal advice which the attorney knew were intended to be used to solicit investors, and had represented the owner and some funding entities in an action against them by the Securities and Exchange Commission (SEC) for violation of the federal securities laws. The attorney conceded on appeal from the denial of an anti-SLAPP motion that the former conduct (based on the letters) did not concern any protected petitioning activity, and the court determined that the causes of action at issue in this case are mixed in that they are based on both protected and unprotected activity. (Peregrine Funding, supra, 133 Cal.App.4th at p. 672.) Nevertheless, the court concluded that both of plaintiffs claims are based in significant part on [the defendants] protected petitioning activity in the SEC litigation (id. at p. 675), and that the plaintiffs did not establish a likelihood of prevailing because their claims were barred by either the defense of unclean hands or the statute of limitations (id. at pp. 681682, 687).

In explaining its conclusion that the principal thrust or gravamen of the plaintiffs complaint was protected activity, the Peregrine Funding court noted that the allegations of classic petitioning activity were not merely incidental because the complaint alleged that the plaintiffs suffered substantial losses due to the attorneys conduct in delaying resolution of the SEC investigation and lawsuit and its legal strategies opposing early provisional relief. (Peregrine Funding, supra, 133 Cal.App.4th at p. 673.) [E]stablishing a cause of action requires proof of causation and damages in addition to liability. Where, as here, a cause of action alleges the plaintiff was damaged by specific acts of the defendant that constitute protected activity under the statute, it defeats the letter and spirit of section 425.16 to hold it inapplicable because the liability element of the plaintiffs claim may be proven without reference to the protected activity. (Peregrine Funding, at p. 674.)

Unlike the situation in Peregrine Funding, the specific acts of wrongdoing here  Costanzos misappropriation of Partnership funds  are not merely incidental or collateral to plaintiffs claims, but constitute the gravamen of the claims. Peregrine Funding is not dispositive.

Another case cited by Costanzo, Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464 (Premier Medical), is of no help to him. There, the plaintiffs were Premier Medical, a medical management company, and five physicians affiliated with it who treated injured employees and then sought to recover for their services by prosecuting lien claims before the Workers Compensation Appeals Board (WCAB). The insurers and the California Insurance Guarantee Association (CIGA) filed petitions to consolidate several pending proceedings involving Premier Medicals liens before the WCAB, alleging that Premier Medical and its affiliate physicians were unlawfully practicing medicine, illegally referring business, and making improper and excessive charges. The WCAB granted consolidation and stayed enforcement of all liens. In the superior court, Premier Medical filed a complaint against CIGA, several insurance companies, and other entities, asserting various tort and statutory causes of action based on the allegations that the defendants collectively conspired to contest, delay, and avoid payment of the bills and liens. In opposition to the defendants special motion to strike, Premier Medical argued that the complaint was not based on the defendants handling of claims through the workers compensation system, but on anticompetitive activity involving encouraging third parties not to honor settlements previously reached between Premier Medical and parties not covered by the WCAB stay.

The court rejected Premier Medicals argument because there is no allegation in the complaint that defendants conspired to stop third parties from honoring settlements of Plaintiffs liens and claims. (Premier Medical, supra, 136 Cal.App.4th at p. 475.) The court distinguished the review of an anti-SLAPP motion from the review of a demurrer, where the rules of liberal construction might suggest that Plaintiffs be allowed to amend their complaint to allege the claims regarding the impact of defendants conspiracy on third-party settlement payments. On review of an anti-SLAPP motion to strike, however, the standard is akin to that for summary judgment or judgment on the pleadings. We must take the complaint as it is. (Id. at p. 476.) Confining its review to the conduct alleged in the complaint, the court concluded that the gravamen of Plaintiffs action arises from the activity of defendants in litigating lien claims through the workers compensation process. This includes communications preceding the filing of the petitions for consolidation. The entire complaint falls within the scope of section 425.16. (Premier Medical, at p. 477.) The court went on to conclude that the defendants established that they were immune from suit under the Noerr-Pennington doctrine, and that the defendants special motion to strike should have been granted. (Premier Medical, at pp. 478479.)

Premier Medical did not involve mixed claims, which is the situation presented here. And putting aside the analysis in Premier Medical relating to the issue of leave to amend, we note that in this case no party contends that the complaint fails to contain allegations pertaining to all theories of recovery and plaintiffs do not seek leave to amend.

Accordingly, Costanzo has failed to establish that the gravamen of the second cause of action is protected litigation activity and not the misappropriation of Partnership funds. And because Costanzos briefs fail to address the issue of whether plaintiffs made a prima facie showing of facts supporting a judgment in their favor on the unprotected activity alleged in the second cause of action, Costanzo has not met his burden of showing the denial of his motion was error. We thus affirm the order.

DISPOSITION

The order is affirmed. Respondents James York, Gary Gray, and Maria Behunin are entitled to costs on appeal.

NOT TO BE PUBLISHED.

MALLANO, Acting P. J.

We concur:

ROTHSCHILD, J.

JACKSON, J.^*

Publication courtesy of San Diego free legal advice.

Analysis and review provided by Santee Property line attorney.

^[1]Unspecified statutory references are to the Code of Civil Procedure. Section 425.16 is known as the anti-SLAPP statute, an acronym for strategic lawsuit against public participation. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 7172, & fn. 1 (City of Cotati).)

^[2]We interpret the referees language to mean that the parties to the Riverside Probate Proceeding (Senior, Junior, Esguerra, and Costanzo) together held a 66â…” percent interest in the Partnership.

^[3]The complaint alleged that the referees findings were not approved by a Riverside County Superior Court judge or commissioner, and our record does not contain any judgment approving such finding signed by a superior court judge.

^[4]At an arbitration hearing in August 2006, the arbitrator remarked that Judge Kennedy [the referee] says clearly he did not do an audit. He looked at and reviewed the detailed accounting prepared by Mr. Costanzo and Mr. Murray [Costanzos attorney], and he worked from that. He did not do an audit . . . . [] . . . He took the records that were given to him, the volumes of books, he looked at them and he made his report. [] He didnt go behind transactions as . . . might be appropriate in a hearing.

^[5]Section 425.16 provides in pertinent part: A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim. (Subd. (b)(1).)

It is beyond dispute the filing of a complaint is an exercise of the constitutional right of petition and falls under section 425.16. [Citation.] Section 425.16 may also apply to conduct that relates to such litigation. [Citation.] Courts have adopted a fairly expansive view of litigation-related conduct to which section 425.16 applies. (A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1125 (Brown).)

Civil Code section 47 provides in pertinent part that [a] privileged publication or broadcast is one made: [] . . . [] (b) In any . . . (2) judicial proceeding . . . . The litigation privilege is absolute and applies regardless whether the communication was made with malice or the intent to harm. (Brown, supra, 137 Cal.App.4th at p. 1126.)

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