Filed 8/9/17 Macpherson Oil Company v. Smoot CA5




NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

MACPHERSON OIL COMPANY,

Plaintiff, Cross-defendant and Respondent,

v.

JUDITH SMOOT, as Trustee, etc. et al.,

Defendants, Cross-complainants and Appellants.

F072307

(Super. Ct. Nos. CV278292 & CV279824)


OPINION

APPEAL from an order of the Superior Court of Kern County. David R. Lampe, Judge.
Law Offices of Jack A. Draper and Jack A. Draper II for Defendants, Cross-complainants and Appellants.
Bright and Brown, James S. Bright, Maureen J. Bright, Brian L. Becker; Clifford & Brown and Grover H. Waldon for Plaintiff, Cross-defendant and Respondent.
-ooOoo-
Appellant, Judith Smoot, as trustee of the Luise Smoot Family Trust (Trust), challenges the trial court’s denial of her motion to strike certain causes of action alleged against her by respondent, Macpherson Oil Company (Macpherson), as a strategic lawsuit against public participation (SLAPP) under Code of Civil Procedure section 425.16.
The Trust owns a parcel of land subject to a 1926 oil and gas lease. Macpherson purchased this lease from the previous lessee in December 2012.
The underlying lawsuit is the second action filed by Macpherson against Smoot based on Smoot’s conduct under the 1926 lease. In its first amended complaint, Macpherson states three causes of action for declaratory relief and one cause of action for breach of contract.
In her section 425.16 motion, Smoot argued that two of Macpherson’s causes of action stemmed from Smoot’s court filings, related discovery responses, and pre-litigation default/demand letters and thus arose from protected activity.
The trial court correctly concluded that Macpherson’s causes of action did not arise from protected activity. Thus, the order denying the motion to strike will be affirmed.
BACKGROUND
Macpherson filed its original complaint in July 2013. Macpherson alleged two causes of action for declaratory relief to resolve disputes as to the ongoing rights and obligations of Smoot, as lessor, and Macpherson, as lessee, under the 1926 oil and gas lease. Macpherson sought to establish that it did not need to bury its pipelines below “plow depth” under the lease as demanded by Smoot and that it was properly calculating certain royalty payments. Macpherson also alleged a cause of action for breach of the 1926 lease asserting that “Smoot’s bad faith demand that Macpherson bury all of its pipelines currently on the surface” of the leased land interfered with the benefits Macpherson was entitled to under the lease.
Smoot filed a cross-complaint and a first amended cross-complaint against Macpherson and National Petroleum Associates (NPA). NPA is the successor lessee of the 1926 lease. Macpherson is NPA’s sole general partner. According to Smoot, Macpherson acts as the operator of NPA’s oil and gas facilities.
In her first amended cross-complaint, Smoot alleges that Macpherson wrongfully “slant drilled” “trespass wells” under the land subject to the 1926 lease from locations outside the boundaries of the leased land. Smoot notes that Macpherson calls these objected to wells “horizontal” oil wells. Smoot further alleges that, by misallocating oil production between the land outside the leased land’s boundaries and the leased land, Macpherson is in breach of the 1926 lease.
Smoot further alleges Macpherson is obligated to drill offset wells as to each of the “trespass wells” under the 1926 lease and, despite Smoot’s requests, has not done so. Therefore, Smoot claims, Macpherson is in breach. Smoot further contends that Macpherson has refused to comply with Smoot’s request that it bury an above ground pipeline.
Smoot additionally claims that Macpherson breached a surface lease entered into by the parties’ predecessors in 1950. The purpose of this surface lease was the placement of an oil dehydration plant on open ground. According to Smoot, Macpherson removed all the dehydration equipment from this parcel and converted the plant to a tank farm, gathering facility, and pumping station in violation of the 1950 lease. Smoot alleges Macpherson further breached the 1950 lease when it failed to pay the required yearly rental of $600 in 2010, 2011, and 2012.
Based on the above, Smoot alleged various causes of action, including breach of both the 1926 lease and the surface lease and rescission of the surface lease. Smoot also sought declaratory relief.
Thereafter, Macpherson filed its first amended complaint. In addition to the complaint’s declaratory relief causes of action regarding burial of the pipelines and the calculation of royalties, Macpherson stated a new declaratory relief cause of action regarding the dehydration facility. Macpherson also restated its breach of contract cause of action.
Smoot responded to the first amended complaint by filing a section 425.16 motion to strike the third and fourth causes of action. The third cause of action seeks declaratory relief regarding the dehydration plant and the fourth cause of action alleges breach of the 1926 lease. Smoot argued that these two causes of action stated claims arising out of Smoot’s court filings and other protected litigation activities. Smoot noted that the allegations referred to assertions Smoot made in her first amended cross-complaint and in a demurrer.
The trial court denied Smoot’s motion. The court concluded that Macpherson’s claims did not arise from protected conduct.
DISCUSSION
1. The anti-SLAPP statute.
Section 425.16 was enacted in 1992 to provide a procedure to expeditiously resolve “nonmeritorious litigation meant to chill the valid exercise of the constitutional rights of freedom of speech and petition in connection with a public issue.” (Sipple v. Foundation for Nat. Progress (1999) 71 Cal.App.4th 226, 235.) This type of suit, referred to under the acronym SLAPP, or strategic lawsuits against public participation, is generally brought to obtain an economic advantage over the defendant, not to vindicate a legally cognizable right of the plaintiff. (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 927.)
When served with a SLAPP, the defendant may immediately move to strike the complaint under section 425.16. To evaluate this motion, the trial court must engage in a two-step process. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76 (City of Cotati).)
The court first decides whether the defendant has made a threshold showing that the challenged cause of action is one “arising from” protected activity. (City of Cotati, supra, 29 Cal.4th at p. 76.) The moving defendant must demonstrate that the act or acts of which the plaintiff complains were taken “in furtherance of the [defendant’s] right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue .…” (§ 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon Enterprises).)
A cause of action arises from protected activity only when that activity itself underlies or forms the basis for the claim. (Park v. Board of Trustees of the California State University (2017) 2 Cal.5th 1057 (Park).) An action does not arise from protected activity merely because the plaintiff filed the action after that activity took place. (Equilon Enterprises, supra, 29 Cal.4th at p. 66.) “Arising from” does not mean in response to. (City of Cotati, supra, 29 Cal.4th at p. 77.) A cause of action that arguably may have been “triggered” by protected activity is not necessarily one arising from such. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (Navellier).) Rather, “the focus is on determining what ‘the defendant’s activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.’” (Park, supra, 2 Cal.5th at p. 1063.) The trial court must distinguish between (1) protected activity that is mere evidence related to liability and (2) protected activity that is the basis for liability. (Graffiti Protective Coatings, Inc. v. City of Pico Rivera (2010) 181 Cal.App.4th 1207, 1214-1215.)
“In short, in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by defendant supply those elements and consequently form the basis for liability.” (Park, supra, 2 Cal.5th at p. 1063.) A court must take care to respect the distinction between activities that form the basis for the claim and those that merely lead to the liability-creating activity or provide evidentiary support for the claim. (Id. at p. 1064.)
The court moves on to the second step of the analysis only after the defendant has shown that the challenged cause of action arose from protected activity. If the defendant satisfies this burden, the court then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. (Navellier, supra, 29 Cal.4th at p. 88.)
The appellate court independently reviews the questions of whether the action is a SLAPP suit and whether the plaintiff has shown a probability of prevailing. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999.)
2. The challenged causes of action did not arise from protected activity.
Macpherson’s third cause of action alleges that an actual controversy exists regarding the legal rights and duties of the parties with respect to the oil dehydration plant and the 1950 surface lease. Specifically, Macpherson requests a judicial declaration on whether it is using the land subject to the 1950 lease for a dehydration plant and whether the 1950 and 1926 leases permit Macpherson to operate the plant as it is currently doing.
In her section 425.16 motion, Smoot noted that Macpherson’s first amended complaint referred to allegations in Smoot’s first amended cross-complaint. Specifically, Macpherson alleged:
“[Smoot] asserts in her first amended cross-complaint in this action that such surface lease has terminated because Macpherson purportedly does not use the subject property for dehydration plant purposes or purposes incidental thereto any longer because Macpherson does not use heat and/or chemicals for the purpose of dehydrating the oil to sales specifications at the location of the [North Round Mountain Dehydration Facility]. [Smoot] therefore seeks a declaration that such 1950 surface lease has terminated.”
This allegation provides the basis for Macpherson’s third cause of action for declaratory relief.
Smoot argues that, because Macpherson relies on Smoot’s first amended cross-complaint to state its third cause of action, the cause of action arises from her right of petition and therefore is a “SLAPP count.” However, the basis for Macpherson’s claim is not Smoot’s filing of a cross-complaint. Rather, Macpherson premises its declaratory relief cause of action on Smoot’s position that Macpherson is in breach of the 1950 surface lease. The fact that Smoot’s first amended cross-complaint provides evidence of her position does not mean that protected activity forms the basis for Macpherson’s claim. The first amended cross-complaint does nothing more than provide evidence supporting Macpherson’s request for declaratory relief. In other words, while the first amended cross-complaint may have triggered the third cause of action, the act of filing of that cross-complaint did not give rise to the declaratory relief claim. Accordingly, Macpherson’s third cause of action does not arise from protected activity.
Macpherson’s fourth cause of action alleges that Smoot breached the 1926 lease by demanding, in bad faith, that Macpherson bury all its pipelines and asserting, in bad faith, that the horizontal wells are improper and require offset wells. Macpherson contends that Smoot has taken these positions with the intent to interfere with Macpherson’s rights to receive the benefits of the 1926 lease and has thereby breached the covenant of good faith and fair dealing. To support its claim, Macpherson refers to the content of demand letters sent by Smoot, Smoot’s demurrer to Macpherson’s complaint, Smoot’s cross-complaints, and Smoot’s discovery responses.
As with the third cause of action for declaratory relief, Smoot argues that Macpherson based its breach of contract claim on her protected litigation-related activities. However, Smoot has again failed to distinguish between activities that form the basis for the claim from those that merely provide evidentiary support for the claim. Smoot’s having sent demand letters, responded to discovery, and filed pleadings, i.e., protected activity, is not what underlies Macpherson’s breach of contract claim. Rather, Macpherson relies on the content of the letters, discovery responses and pleadings to provide evidence of Smoot’s positions regarding the duties and obligations of the parties under the 1926 lease. Thus, Macpherson’s fourth cause of action does not arise from protected activity.
Because Smoot failed to make a threshold showing that the challenged causes of action arise from protected activity, we need not decide whether Macpherson has demonstrated a probability of prevailing on those claims on the merits.
As part of her argument that Macpherson has not demonstrated a probability of prevailing on the merits, Smoot alleges certain procedural defects that she asserts will defeat Macpherson’s third and fourth causes of action as a matter of law. According to Smoot, Macpherson lacks standing to pursue these causes of action because NPA, not Macpherson, is the lessee of the property involved. Smoot further argues that the litigation privilege bars the third and fourth causes of action. However, since Smoot failed to make the threshold showing required for the first step of the analysis, we will not rule on these claims.
Nevertheless, one of Smoot’s alleged procedural defects is clearly without merit. Thus, we will address Smoot’s argument to foreclose an unnecessary use of judicial resources.
Smoot argues that, by amending its complaint, Macpherson violated the compulsory cross-complaint rule and thus the first amended complaint’s third and fourth causes of action are barred. According to Smoot, Macpherson was required to file a cross-complaint to Smoot’s first amended cross-complaint.
Section 426.30, subdivision (a), provides that, “if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action” against the plaintiff, that party “may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” (Italics added.) Thus, by its terms, section 426.30, subdivision (a), only bars bringing a related cause of action not asserted in a cross-complaint in a separate action. There is no prohibition against a plaintiff amending its own complaint to add causes of action in response to a cross-complaint. In fact, under California law, courts must liberally grant leave to amend pleadings. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 939.)
The purpose of the compulsory cross-complaint statute is to prevent “‘piecemeal litigation’” and a “‘multiplicity of actions.’” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 959.) The statute provides for settlement of all claims between the parties arising out of the same transaction in a single action. It prevents a party, by either negligence or design, from withholding issues and litigating them in successive actions. (Ibid.)
Amending the complaint has the same effect. The parties will still settle their conflicting claims in one action. Accordingly, it serves no purpose to require a plaintiff to respond to a defendant’s cross-complaint with a second cross-complaint rather than seek leave to amend its original complaint. Macpherson amended its complaint with leave of court. Thus, the compulsory cross-complaint statute does not affect this action.
DISPOSITION
The order is affirmed. Respondent is awarded its costs on appeal.


LEVY, Acting P.J.
WE CONCUR:


POOCHIGIAN, J.


SMITH, J.