Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-00184/USCOURTS-cand-3_09-cv-00184-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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DISTRICT 

COURT

For the Northern District of California

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

UNITED STATES DISTRICT COURT

Northern District of California

NEWPORT BUILDERS, INC., a Nevada

Corporation,

Plaintiff,

v.

NORTH BAY CONSTRUCTION, INC., a

California corporation,

Defendant.

_____________________________________/

No. C 09-0184 SBA (MEJ)

ORDER DENYING PLAINTIFF’S

MOTION FOR ATTORNEY’S FEES 

(DKT. #79)

I. INTRODUCTION

Before the Court is Plaintiff’s Motion for Attorney’s Fees. (Dkt. #79.) Pursuant to Civil

Local Rule 7-1(b), the Court finds this matter suitable for disposition without oral argument and

hereby VACATES the February 25, 2010 hearing. After consideration of the parties’ papers,

relevant legal authority, and good cause appearing, the Court ORDERS as follows.

II. BACKGROUND

 All relevant facts are taken from the July 14, 2009 Order Denying Defendant’s Motion to

Strike Plaintiff’s First Amended Complaint, issued by the Honorable Saundra Brown Armstrong, the

presiding judge in this matter. (Dkt. #71.) Newport Builders, Inc. (“Plaintiff”) is the general partner

of Newport Builders LP, a limited partnership; North Bay Construction, Inc. (“Defendant”) was

previously a limited partner with an equity stake in Newport Builders LP. Id. at 2:16-19. A lawsuit

was filed in Superior Court for the County of Sonoma against Newport Builders LP for dissolution

of partnership of Fountainview Investors, in which Newport Builders LP was the general partner. 

(Order 2:13-15, 2:23-3:1, Dkt. #71; Lenzi Decl. ¶ 4, Dkt. #43.) Several cross-complaints were filed

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California Code of Civil Procedure section 425.16 provides a procedure for a court “to

dismiss at an early stage non-meritorious 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’l Progress, 71 Cal. App. 4th 226, 235 (1999). This type of nonmeritorious

litigation is referred to under the acronym “SLAPP,” or Strategic Lawsuit Against Public

Participation. Id. The archetypal SLAPP complaint is a “generally meritless suit[ ] brought by large

private interests to deter common citizens from exercising their political or legal rights or to punish

them for doing so.” Wilcox v. Sup. Ct., 27 Cal. App. 4th 809, 816 (1994). “California enacted

section 425.16 to provide a procedural remedy to resolve such a suit expeditiously.” Dowling v.

Zimmerman, 85 Cal. App. 4th 1400, 1414 (2001) (internal quotation marks and citation omitted). 

When a plaintiff brings a SLAPP complaint, the defendant may move to strike the complaint

under section 425.16. “Analysis of an anti-SLAPP motion to strike involves a two-step process.” 

Kearney v. Foley & Lardner LLP, 566 F.3d 826, 836 (9th Cir. 2009). First, the defendant must

make an initial prima facie showing that the plaintiff’s suit arises from an act in furtherance of

defendant’s right of petition or free speech. Braun v. Chronicle Publishing Co., 52 Cal. App. 4th

1036, 1042-43 (1997). Second, “[i]f the court determines that the defendant has met this burden, it

must then determine whether the plaintiff has demonstrated a probability of prevailing on the

merits.” Kearney, 566 F.3d at 836-837; Damon v. Ocean Hills Journalism Club, 85 Cal. App. 4th

468, 474 (2000). If the plaintiff is unable to provide the factual and legal support for the challenged

cause of action, the complaint should be stricken. Code Civ. P § 425.16(b); Dowling, 85 Cal. App.

4th at 1417. In reviewing a motion under section 425.16, “the trial court is required to consider the

pleadings and the supporting and opposing affidavits stating the facts upon which the liability or

defense is based.” Church of Scientology v. Wollersheim, 42 Cal. App. 4th 628, 646 (1996). 

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against Defendant in the state court action, but it was eventually dismissed from each crosscomplaint. Id. at 3:3-12. Though no longer a party, Defendant became involved in settlement

negotiations between the remaining parties, namely Plaintiff and other parties against whom crosscomplaints had been filed. Id. at 3:14-15. Defendant offered to sell its interest in Newport Builders

LP to both of the remaining parties, unbeknownst to them, and planned to make the deal with

whichever party acted first. Id. at 3:15-19. When Plaintiff learned that Defendant entered into the

deal with the other party, it filed this lawsuit. Id. at 3:23-24. Plaintiff’s complaint alleges six state

law causes of action: (1) breach of partnership agreement; (2) breach of the covenant of good faith

and fair dealing; (3) breach of oral contract; (4) intentional interference with prospective economic

advantage; (5) dissociation of limited partnership; and (6) dissolution and winding up of limited

partnership. (Pl’s First Amended Complaint (“FAC”), Dkt. #5.) In response, Defendant filed an

anti-SLAPP motion to strike under California Code of Civil Procedure section 425,16.1 (Def.’s

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Mot., Dkt. #31; Order 3:27-4:4, Dkt. #71.) In its motion, Defendant argued that the conduct at issue

is based on communication of a settlement offer, which Defendant contended constitutes “protected

activity” for which it cannot be held liable. (Def.’s Mot. 1:10-13, Dkt. #32.)

On July 14, 2009, Judge Armstrong denied Defendant’s special motion to strike. (Dkt. #71.) 

Judge Armstrong held that the record before her demonstrated that Defendant’s communications

constituted a proposed business deal, rather than an offer to settle its own claims. (Order 7:5-6, Dkt.

#71.) Judge Armstrong further held that Defendant’s offer was made while the parties to the

underlying lawsuit were in settlement discussions to resolve their own dispute, and this did “not

cloak Defendant’s communications under the auspices of protected activity.” Id. at 7:8. Judge

Armstrong found that any connection between Defendant and the parties to the settlement

negotiations “was, at best, tangential to the litigation, and otherwise too attenuated to establish that

Defendant was engaged in protected activity.” Id. at 7:8-11. 

On October 14, 2009, Plaintiff filed a motion seeking an award of attorney’s fees pursuant to

California Code of Civil Procedure section 425.16(c), based on Judge Armstrong’s denial of

Defendant’s motion to strike. (Dkt. #79.) Defendant filed its Opposition on January 7, 2010, (Dkt.

#98), and Plaintiff filed its Reply on January 14, 2010. (Dkt. #101.) 

III. DISCUSSION

In its motion, Plaintiff argues that it is entitled to attorney’s fees pursuant to section

425.16(c) because of Defendant’s “lack of any relevant authority that would bring its actions under

the umbrella of constitutionally protected activity.” (Pl’s Mot. 5:4-5, Dkt. #79.) Plaintiff further

contends that Defendant failed to provide sufficient relevant evidence to support its special motion

to strike, and that Defendant offered no plausible factual basis to support its motion (Pl’s Mot. 5:19-

22, 8:18-19, Dkt. #79). Defendant responds that it properly filed its motion because it reasonably

believed that the anti-SLAPP legislation would shield its involvement in the settlement discussions. 

(Def.’s Mot. 3:5-6, Dkt. #98.) Additionally, Defendant argues that its motion was proper because it

had a substantial interest in the outcome of the dispute and was drawn into the settlement

discussions by the parties to the underlying lawsuit. Id. at 4:10-15.

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A. Legal Standard

California Code of Civil Procedure section 425.16(c) provides that where “the court finds

that a special motion to strike is frivolous or is solely intended to cause unnecessary delay, the court

shall award costs and reasonable attorney's fees to a plaintiff prevailing on the motion, pursuant to

section 128.5.” California Code of Civil Procedure section 128.5(a) requires an award of fees

incurred “as a result of bad-faith actions or tactics that are frivolous or solely intended to cause

unnecessary delay.” Frivolous is defined as “totally and completely without merit or for the sole

purpose of harassing an opposing party.” Cal. Civ. Proc. Code § 128.5(b). An action is frivolous

when “any reasonable attorney would agree such motion is totally devoid of merit.” American

Dental Ass’n v. Khorrami, 2004 WL 3486524, at *4 (C.D. Cal., August 16, 2004) (citing Moore v.

Shaw, 116 Cal. App. 4th 182, 199 (2004)). “Under section 128.5, the moving party must establish

two elements: (1) the action or tactic is objectively frivolous, and (2) the action was brought for an

improper purpose, i.e., subjective bad faith.” Id. at 3. The court in American Dental Association

noted the following guidelines for applying the two-part test laid out by section 128.5: “(a) an action

that is simply without merit is not by itself sufficient to incur sanctions; (b) an action involving

issues that are arguably correct, but extremely unlikely to prevail should not incur sanctions; and (c)

sanctions should be used sparingly in the clearest of cases to deter the most egregious conduct.” Id.

(citing In re Marriage of Flaherty, 31 Cal.3d 637, 650-51 (1982). 

B. Application to the Case at Bar

1. Whether Defendant’s Motion Was Objectively Frivolous

Plaintiff argues that it is entitled to an award of attorney’s fees “[g]iven the complete lack of

any legal authority to support the motion, and the complete lack of any factual basis to satisfy the

first prong of the anti-SLAPP analysis[.]” (Pl’s Mot. 8:24-9:1, Dkt. #79.) Plaintiff argues that it is

entitled to attorney’s fees because Judge Armstrong found that Defendant failed to meet the prima

facie burden of proof required to show that the conduct giving rise to Plaintiff’s complaint arose

from protected activity. Id. at 4:13-16. Plaintiff further argues that Defendant’s failure to discuss

how its conduct was protected activity shows that Defendant’s motion was frivolous, arguing that no

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reasonable attorney would conclude that Defendant’s arguments had merit, id. at 5:13-18, and

because “the vast majority of [Defendant’s] motion had nothing at all to do with establishing that

[Defendant’s] conduct was constitutionally protected.” Id. at 5:20-22. Additionally, Plaintiff argues

that because the motion focused on false and irrelevant arguments, Defendant’s motion was brought

for an improper purpose, to harass Plaintiff. Id. at 9:3-5, 9:15-16. 

In response, Defendant argues that its counsel “reasonably interpreted the law and believed

fully in its application to the facts of this case[.]” (Def.’s Opp’n 2:5-9, Dkt. #98.) Defendant further

argues that it reasonably believed that the anti-SLAPP legislation would shield its involvement in

the settlement discussions. Id. at 3:5-6. Defendant argues that it was drawn into continued

settlement discussions at the insistence of the parties, that it had a substantial interest in the outcome

of the dispute in that it was the only limited partner in Newport Builders LP with a guaranteed

priority distribution, and that its desire that the dispute be resolved was not independent of the

parties’ desire for resolution. (Def.’s Mot. 4:10-15, Dkt. #98.) 

In its motion to strike, Defendant likened its “significant participation” in the settlement

discussions to that of one of the defendants in GeneThera v. Troy & Gould Prof. Corp., 171 Cal.

App. 4th 901 (2009). (Def.’s Mot. to Strike 9:15-18, Dkt. #32.) In GeneThera, the California Court

of Appeal granted the defendant’s motion to strike, holding that an attorney’s communication of a

settlement offer on behalf of his client constituted protected activity under the anti-SLAPP statute. 

GeneThera, 171 Cal. App. 4th at 908. In its motion to strike, Defendant argued that Plaintiff’s

complaint was identical to the plaintiff’s complaint in GeneThera, and the only difference in facts is

that the participant in settlement discussions there was a non-party attorney, while here, the

participant was a former party and limited partnership member with a material interest in the

outcome of the settlement discussions. (Def.’s Mot. to Strike 10:15-17, Dkt. #32.) In her July 14

order, Judge Armstrong held that Defendant’s involvement in the settlement discussions “was, at

best, tangential to the litigation, and otherwise too attenuated to establish that Defendant was

engaged in protected activity.” (Order 7:7-11, Dkt. #71.) Judge Armstrong noted that the protected

activity in GeneThera was the attorney’s act of communicating a settlement offer on behalf of its

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client, and that no such communication occurred in this case. Id. at 6:25-27. She found that

Defendant was not acting as legal counsel and was not communicating a settlement offer on

anyone’s behalf, and that Defendant had no claims of its own to settle as it had previously been

dismissed from the underlying case. Id. at 6:27- 7:1-2. Judge Armstrong held that Defendant’s

voluntary involvement in the settlement discussions was not, by definition, protected activity. Id. at

7:2-4. However, Judge Armstrong did not find that Defendant’s motion to strike was totally and

completely without merit; she merely found that Defendant’s reliance on GeneThera was misplaced. 

(Order 6:25, Dkt. #71.) 

In the case at bar, it cannot be said that Defendant’s arguments were so frivolous that “any

reasonable attorney would agree such motion is totally devoid of merit.” American Dental Ass’n,

2004 WL 3486524, at *4. Defendant’s argument attempts to place its activity under the holding of

another case, and may be a stretch, but it arguably has merit. Further, Plaintiff has not shown that

Defendant’s motion was brought for the sole purpose of harassing Plaintiff. Thus, the Court finds

that Defendant’s motion was not objectively frivolous, and that sanctions are not merited, as

“sanctions should be used sparingly in the clearest of cases to deter the most egregious conduct.” Id.

2. Whether Defendant’s Motion Was Filed in Bad Faith

Even if the Court were to find that Defendant’s motion was objectively frivolous, it does not

rise to the level of subjective bad faith. Plaintiff argues that the Court should infer bad faith because

Defendant “failed altogether to make a plausible factual argument that its conduct was protected

activity,” and thus frivolously filed its motion. (Pl’s Mot. 12:10-15, Dkt. #79.) However, as

discussed above, the Court finds that Defendant’s motion was not objectively frivolous. Further,

because Defendant’s attempted analogy to GeneThera had some merit, it cannot be said that

Defendant acted in bad faith or that its actions were “for the sole purpose of harassing an opposing

party.” Cal. Civ. Proc. Code § 128.5. Accordingly, the Court DENIES Plaintiff’s motion for

attorney’s fees under 425.16(c). 

3. Plaintiff’s Rule 11 Argument

In the alternative, Plaintiff seeks sanctions under Federal Rule of Civil Procedure (“Rule”)

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11, arguing that “at least ninety percent of [Defendant’s] motion to dismiss and supporting

‘evidence’ was devoted to irrelevant arguments.” (Pl.’s Mot. 9:21-24, Dkt. #79.) However, a

motion for sanctions under Rule 11 “must be made separately from any other motion.” Fed. R. Civ.

P. 11(c)(2). As Plaintiff seeks sanctions under Rule 11 as part of its motion under section 425.16, its

request is not properly before this Court.

IV. CONCLUSION

Based on the foregoing, the Court hereby DENIES Plaintiff’s Motion for Attorney’s Fees

under 425.16(c). 

IT IS SO ORDERED.

Dated: February 23, 2010 ______________________________

Maria-Elena James 

Chief United States Magistrate Judge 

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