1

Filed 1/10/23 Gradetech v. City of San Jose CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or 

ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

GRADETECH, INC.,

Plaintiff and Appellant,

v.

CITY OF SAN JOSE,

Defendant and Respondent.

 A165825

 (Santa Clara County Super. Ct.

 No. 18CV325319)

Plaintiff Gradetech, Inc. (Gradetech) sued defendant City of San Jose 

(City) in a single-count complaint alleging breach of contract. Gradetech’s 

suit seeks to recover compensation for multiple cost overages arising from 

Gradetech’s construction of a freestyle bike park. The City cross-complained, 

asserting that Gradetech’s claims for cost overages were false claims within 

the meaning of the False Claims Act (Gov. Code, §§ 12650 & 950 et seq.), and 

certain municipal code sections. The City also asserted several breach of 

contract causes of action and two claims for declaratory relief. 

Gradetech responded by filing a special motion to strike the entire 

cross-complaint under Code of Civil Procedure section 425.16 (anti-SLAPP 

statute). The trial court partially denied and partially granted the motion,
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and found it moot as to several causes of action the City withdrew. The trial 

court also denied both parties’ motions for attorneys’ fees.

Gradetech now appeals the partial denial of its anti-SLAPP motion, as 

well as the denial of its motion for attorneys’ fees. It argues the trial court 

erroneously found certain attorney demand letters it sent the City in advance 

of its lawsuit were merely prerequisites to being compensated under the 

terms of the contract; if the trial court had properly construed these letters, 

Gradetech argues, it would have understood them to be protected speech 

under the anti-SLAPP statute. 

We affirm in part and reverse and remand in part. The trial court 

properly found the City’s breach of contract cross-claims arose out of 

Gradetech’s performance of the contract, not the litigation process itself, and 

thus those claims properly survived the anti-SLAPP motion. But the same is 

not true of the City’s cross-claims arising out of Gradetech’s attorney demand 

letters. Those letters were protected speech under the anti-SLAPP statute 

because they were prepared and sent in contemplation of the litigation that 

Gradetech filed shortly after sending them. We reverse the trial court’s order 

denying the anti-SLAPP motion as to the claims arising out of the attorney

demand letters and remand for the trial court to determine whether the City 

can prevail at the second step of the anti-SLAPP analysis by demonstrating 

that its cross-claims predicated upon these letters possess the requisite 

minimal merit to proceed. In light of our disposition, we vacate the trial 

court’s ruling on attorneys’ fees.

BACKGROUND

A. The Project

The City and Gradetech executed a $2,208,300 contract (the Contract) 

to construct the Lake Cunningham Bike Park Construction Project (the 
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Project), effective March 28, 2016. The City’s briefing explains that this 

Project called for “precision sculpting of hills, curves, grades, jumps, and 

other park features.” The City further explains that these features require 

precision construction because of the “physics” involved: these graded 

features must “sequentially lead[] one into the other” in a particular fashion 

in order to permit bike riders of different experience levels to safely navigate 

the park and its features. 

The contract dispute underlying this case arose after Gradetech 

incurred multiple cost and time overages in constructing the Project. The 

City emphasizes that the Contract called for 215 days but the Project was not 

completed for 540 days. The City offers that the delay and cost overages were 

attributable to Gradetech’s lack of experience in designing bike parks. 

Gradetech counters that the delay and cost overages it sustained were 

attributable to significant “change in quantities”1 of the movable earth 

involved: according to its brief, a surveying company “concluded the Project’s 

dirt jumps quantities more than doubled . . . .” As a result of this change in 

volume, Gradetech contended it was entitled to additional compensation. 

B. The September and November Demand Letters and the

Government Code Claim

Gradetech expressed its view that it was entitled to additional 

compensation, and that the conditions precedent in the Contract which 

entitled it thereto were met,2 by means of several letters it sent the City 

toward the end of 2017. We describe these letters in detail because they 

1 The Contract, subject to multiple conditions precedent, entitles

Gradetech to additional compensation when changes to the Project cause “a 

significant change in quantities.” 

2 See footnote 7, post.
4

comprise the “protected” activity Gradetech claims the City retaliated against 

through its filing of its cross-complaint. 

On September 22, 2017, counsel for Gradetech sent the City a letter 

notifying it of a potential claim for overages (September letter). Gradetech 

sought $587,795.07 arising from “additional earthwork and grading 

operations to change jump dirt grades that were already to grades shown on 

the plans in the contract documents.” The total amount sought was 

$587,795.07, consisting of $494,830.57 for “work”; $74,224.50 for “15% 

markup”; and $18,740 for “survey, etc.” Gradetech emphasizes this letter 

was sent by legal counsel and that it states: “This letter is prepared in 

advance of potential litigation . . . .”

Then, on November 15, 2017, Gradetech sent another letter to the City 

(November letter). This letter repeated the same claim for $587,795.07 in 

cost overage and sought additional compensation in the amounts of 

$102,042.36, $131,132.94, $593,674, and $439,141.06. The November letter 

likewise advised the City that it was sent “in advance of potential litigation.” 

This letter also contained a certification made under penalty of perjury by 

Gradetech’s president that he “thoroughly reviewed the attached claim . . . 

and know[s] its contents, and said claim is made in good faith; the supporting 

data is truthful and accurate; [and] that the amount requested accurately 

reflects the contract adjustment for which the contractor believes the owner 

is liable . . . .”

3

Finally, on January 23, 2018, Gradetech submitted a verified claim for 

money damages against the City under Government Code section 905 et seq.4

3 We will hereafter refer to the September letter and the November 

letter collectively as the attorney demand letters.

4 The California governmental liability statutes make all public entities 

in California liable in tort insofar as declared by statute. (3 Witkin, Cal. 
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and San Jose Municipal Code sections 1.20.010 through 1.20.240 

(Government Code claim). The Government Code claim was entitled “Notice 

of Claim and Claim by Gradetech, Inc.” and was certified by Gradetech’s 

president under the penalty of perjury, using the same language as in his 

certification in the November letter. It stated that “[t]he claim concerns . . . 

the contract balance for the work completed in connection with the 

construction of Lake Cunningham Bike Park, as well as for increased 

quantities on the project, potential change orders, the re-grading of jumps,

and right-of-way delay.” The 45-day statutory period for the City to respond 

lapsed and thus the Government Code claim was rejected, in the City’s 

words, “by operation of law.”5

C. Gradetech’s Complaint

Gradetech filed suit against the City on March 21, 2018, asserting a

single cause of action for breach of contract. It alleged that the

City did not compensate Gradetech for design changes that caused a 

significant change in quantities of earth; for multiple City demanded regrading costs; for delays caused by the City; for assessing liquidated damages 

for delays caused by the City; and for failing to pay the Contract balance. 

The complaint sought compensatory damages, attorneys’ fees, and costs. 

Procedure (6th ed. 2022) Actions, § 244.) “Liability is, however, subject to a 

procedural condition precedent, i.e., the timely filing of a written claim in 

proper form with the proper officer or body. (See [Gov. Code,] §§ 905, 

905.2.).” (Ibid.) “[T]he purpose of these statutes is to provide the public 

entity sufficient information to enable it to adequately investigate claims and 

to settle them, if appropriate, without the expense of litigation . . . .” (Ibid.)

5 Government Code section 912.4, subdivision (a), provides in pertinent 

part: “The board shall act on a claim . . . within 45 days after the claim has 

been presented.”
6

D. The City’s Cross-complaint

On January 31, 2020, the City requested leave to file a cross-complaint. 

The trial court granted the City’s request, finding as follows: “The court 

GRANTS the City’s motion for leave to file a cross-complaint. The allegations 

made by the City seem logically related to the allegations in Gradetech’s 

complaint, which makes the City’s proposed cross-claims compulsory.” 

The City duly filed its cross-complaint on June 18, 2020, and asserted 

16 causes of action. Eleven claims asserted violations of the False Claims 

Act,6 six of which arose from statements made in the attorney demand 

letters, and five of which arose from statements made in the Government 

Code claim. The City also asserted these latter five claims for payment 

constituted violations of San Jose Municipal Code sections 1.20.010 through 

1.20.240 for similar reasons. 

The cross-complaint also asserted three contract causes of action, 

including breach of contract; breach of the implied covenant of good faith and 

fair dealing; and breach of the implied duty to perform with reasonable care

(collectively, the breach of contract causes of action).

Finally, the cross-complaint asserted two claims for declaratory relief: 

cause of action No. 15 sought a declaration that Gradetech’s breach of 

contract claim was an “impermissible cause of action,” and cause of action 

No. 16 sought a declaration that Gradetech’s method of proving damages 

failed for various reasons. The City sought compensatory damages of about 

$500,000; treble damages and penalties under the False Claims Act; costs; 

declaratory relief; and attorneys’ fees and costs. 

6 The False Claims Act creates civil liability for submitting false claims 

to public entities. (See generally, 5 Witkin, Summary of Cal. Law (11th ed. 

2022) Torts, § 884.) 
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E. Gradetech’s Anti-SLAPP Motion

Gradetech responded to the City’s cross-complaint on August 28, 2020,

by filing a special motion to strike pursuant to Code of Civil Procedure 

section 425.16. Gradetech argued that the City’s cross-claims arose directly

from protected speech made by means of the attorney demand letters and 

Government Code claim, and that the cross-claims also lacked the requisite 

minimal merit to proceed. (See Code Civ. Proc., § 425.16, subd. (b)(1) et seq.) 

Gradetech sought attorneys’ fees under Code of Civil Procedure section 

425.16, subdivision (c)(1).

The City opposed the motion by arguing that Gradetech failed to meet 

the anti-SLAPP test because none of the City’s causes of action arose from an 

act in furtherance of the right to petition or free speech and because the 

City’s causes of action have at least minimal merit. The City also opposed 

Gradetech’s request for attorneys’ fees and sought attorneys’ fees itself. 

F. The Trial Court’s Ruling

On December 15, 2020, the trial court granted the anti-SLAPP motion 

in part, denied it in part, and found it moot in part. 

As to the first six causes of action alleging False Claims Act liability 

arising from the attorney demand letters, the trial court rejected Gradetech’s 

argument that such letters were sent in advance of potential litigation and 

therefore protected under Code of Civil Procedure section 425.16. First, 

relying on Kajima Engineering and Construction, Inc. v. City of Los Angeles

(2002) 95 Cal.App.4th 921 (Kajima), the trial court found that the attorney 

demand letters “were merely the first submissions by Gradetech to attempt 

to fulfill the requirements for claims for payment arising out of the parties’ 
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agreement as set forth in Section 9-1.07B of the Standard Specifications.”7 

Because filing such submissions “is a prerequisite to making a Government 

7 Certain regulations promulgated by the City that are applicable to 

public works projects, entitled “Standard Specifications,” were incorporated 

by reference into the Contract. Section 9-107B of the Standard Specifications 

governs completion and payment of the Project and provides, in pertinent 

part: 

“If the work is deemed acceptable to the [City’s] Engineer in the 

Engineer’s sole discretion, after acceptance by the Engineer, the 

Engineer will make a proposed final estimate in writing of the total 

amount payable to the Contractor [Gradetech] . . . . Within 30 days 

after said proposed final estimate has been submitted to the 

Contractor, the Contractor shall submit to the Engineer written 

approval of said proposed final estimate or a written statement of all 

claims the Contractor has arising under or by virtue of the 

contract . . . .

“On the Contractor’s approval, or if the Contractor files no claim 

within said period of 30 days, the Engineer will issue a final estimate in 

writing in accordance with the proposed final estimate submitted to the 

Contractor and within 30 days thereafter the City will pay the entire 

sum so found to be due. Such final estimate and payment thereon shall 

be conclusive and binding against both parties to the contract on all 

questions relating to the amount of work done and the compensation 

payable therefor . . . .

“If the Contractor within said period of 30 days files claims, the 

Engineer will issue a semifinal estimate in accordance with the 

Proposed final estimate submitted to the Contractor and within 30 days 

thereafter the City will pay the sum so found to be due . . . .

“The Engineer will make the final determination of any claims 

which remain in dispute after completion of claim review . . . .

“Upon final determination of the claims, the Engineer shall then 

make and issue the Engineer’s final estimate in writing and within 30 

days thereafter the City will pay the entire sum, if any, found due 

thereon. Such final estimate shall be conclusive and binding against 

both parties to the contract on all questions relating to the amount of 

work done and the compensation payable therefor . . . .”
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Code claim or filing a lawsuit,” the trial court determined that Gradetech did 

not have a “legally viable claim” when it sent the attorney demand letters 

and thus, Gradetech could not have sent the letters in anticipation of 

litigation. Under Bailey v. Brewer (2011) 197 Cal.App.4th 781, 789–790 

(Bailey), this fact implied that the first prong of the anti-SLAPP statute was 

not met.8

Second, relying on Church of Scientology v. Wollersheim (1996) 42 

Cal.App.4th 628, 651 (Wollersheim), the trial court found that because the 

City’s cross-complaint was compulsory, it necessarily arose out of the same 

“ ‘transaction, occurrence, or series of transactions or occurrences as the cause 

of action which the plaintiff alleges in his complaint.’ ” In other words, the 

trial court found the City’s cross-complaint was not targeting Gradetech’s 

lawsuit (which would be protected speech; see post) but was instead targeting 

Gradetech’s conduct that gave rise to lawsuit in the first place, i.e., “the bid, 

contract and construction related to the subject construction project,” and the 

allegedly fraudulent claims for payment predicated thereupon.

The City withdrew its five False Claims Act causes of action arising 

from the Government Code claim.9 The trial court therefore found the antiSLAPP motion moot as to the Government Code claim causes of action.

8 As discussed more fully, post, a successful anti-SLAPP motion must 

satisfy a two-prong test. First, the cross-defendant-movant must establish 

that the claim it seeks to strike “aris[es] from any act of that person in 

furtherance of the person’s right of petition or free speech under the United 

States Constitution or the California Constitution in connection with a public 

issue.” (Code Civ. Proc., § 425.16, subd. (b)(1).) If this prong is met, the 

burden shifts to the plaintiff who must then demonstrate “a probability that 

the plaintiff will prevail on the claim.” (Ibid.) 

9 Gradetech’s briefing on appeal notes that although the City stated in 

open court it was withdrawing these claims “with prejudice,” its actual filing 

made to withdraw these claims, submitted several months later after this 
10

As to the City’s three breach of contract causes of action (Nos. 12–14), 

the trial court likewise held they arose out of Gradetech’s performance under 

the Contract and not the litigation process itself. The trial court thus denied 

the anti-SLAPP motion as to these causes of action because the first prong of 

the anti-SLAPP statute was not met.

However, the trial court granted Gradetech’s anti-SLAPP motion with 

respect to the 15th and 16th causes of action seeking declaratory relief. 

Specifically, the trial court found that the 15th and 16th causes of action for 

declaratory relief were based on protected conduct “because they are based 

entirely on the manner in which Gradetech asserts its claim in the 

underlying complaint,” satisfying the first prong of the anti-SLAPP analysis. 

The trial court then turned to the second prong, i.e., whether the City, now 

carrying the burden of proof, could establish a probability of prevailing on the 

merits as to these two claims. (Code Civ. Proc., § 425.16, subd. (b)(1).) The 

trial court found against the City on this prong, concluding the declaratory 

relief causes of action lacked “minimal merit” because the City’s briefing on 

these points was conclusory and lacked analysis. The trial court struck the 

15th and 16th causes of action as a SLAPP.

The trial court then denied Gradetech’s request for attorneys’ fees and 

costs, finding that its success in striking the final two causes of action did not 

amount to receiving a “practical benefit” from bringing its anti-SLAPP 

motion because “the bulk of the City’s claims remain.” The striking of the 

City’s two claims for declaratory relief was of little import, the trial court 

reasoned, and the “deletion” of the False Claims Act claims based on 

appeal was filed, states that the claims were withdrawn “without prejudice.” 

(We hereby grant Gradetech’s motion, dated November 23, 2021, to augment 

the record on appeal pursuant to California Rules of Court, rule 8.155(a)(1).) 

We discuss the discrepancy further, post, at pages 24–25.
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statements made in the Government Code claims would not “materially limit 

discovery or affect the prospects of settlement.” 

Gradetech timely appealed. The City did not appeal. 

DISCUSSION

In this appeal, Gradetech challenges the trial court’s denial of its antiSLAPP motion with respect the six cross-causes of action arising from the 

attorney demand letters and the three breach of contract causes of action. 

Gradetech further contends the trial court abused its discretion in denying its 

motion for attorneys’ fees and costs.

I. Standard of Review and Background Law

A. Standard of Review

We review a trial court’s ruling on an anti-SLAPP motion de novo. 

(ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999.) 

B. The Special Motion to Strike under the Anti-SLAPP Statute

“An anti-SLAPP motion seeks to strike a ‘[s]trategic lawsuit against 

public participation.’ ” (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 

871, 882, fn. 2.) Trial courts evaluate an anti-SLAPP motion in two steps. At

the first step, the court determines whether the moving party has established 

“ ‘that the challenged allegations or claims “aris[e] from” protected activity’ ” 

in which the moving party was engaged. (Id. at p. 884.) 

Code of Civil Procedure section 425.16, subdivision (e), establishes four 

categories of protected activities, including the one on which Gradetech relies: 

“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.” (Code Civ. Proc., § 425.16, 

subd. (e)(2), italics added.) Our Supreme Court has recognized that 

“ ‘communications preparatory to or in anticipation of [litigation] . . . are 
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equally entitled to the benefits of [Code of Civil Procedure] section 425.16,’ ”

subdivision (e)(2). (Briggs v. Eden Council for Hope & Opportunity (1999) 19 

Cal.4th 1106, 1115; see also Flatley v. Mauro (2006) 39 Cal.4th 299, 321–

322.) Thus, “if a statement ‘concern[s] the subject of the dispute’ and is made 

‘in anticipation of litigation “contemplated in good faith and under serious 

consideration,” ’ [citations] then the statement may be petitioning activity 

protected by [Code of Civil Procedure] section 425.16.” (Neville v. Chudacoff

(2008) 160 Cal.App.4th 1255, 1268; see also Bailey, supra, 197 Cal.App.4th at 

pp. 789–790.) 

If the moving party successfully makes the showing required in step 

one, then the burden shifts to the non-moving party at step two to show the 

merit of the challenged cause of action by establishing a probability of 

success. (Code Civ. Proc., § 425.16, subd. (b)(1); Wilson v. Cable News 

Network, Inc., supra, 7 Cal.5th at p. 884.) 

Step two of the anti-SLAPP analysis requires the non-moving party to 

“demonstrate that his or her claim has at least minimal merit, [otherwise] 

the trial court should deem the cause of action a SLAPP and should strike it.” 

(Laker v. Board of Trustees of California State University (2019) 32 

Cal.App.5th 745, 760, italics added.) In making this determination, the court 

does not resolve evidentiary conflicts, but determines whether the nonmoving party’s showing would be sufficient to sustain a favorable judgment if 

accepted by the trier of fact. (Id. at p. 768.) The court considers the moving 

party’s evidence only to determine if it defeats the non-moving plaintiff’s 

showing as a matter of law. (Soukup v. Law Offices of Herbert Hafif (2006) 

39 Cal.4th 260, 291.) We must “ ‘accept as true the evidence favorable to the 

plaintiff . . . .’ ” (Ibid.)
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C. The False Claims Act

The California False Claims Act permits the recovery of civil penalties 

and treble damages from any person who “[k]nowingly presents or causes to 

be presented [to the state or any political subdivision] a false . . . claim for 

payment or approval.” (Gov. Code, § 12651, subd. (a)(1).) A plaintiff must 

allege that the person had actual knowledge of the falsity of the information, 

acted in deliberate ignorance of its truth or falsity, and/or acted in reckless 

disregard of its truth or falsity. (Id., § 12650, subd. (b)(2); see also Rothschild 

v. Tyco Internat. (US), Inc. (2000) 83 Cal.App.4th 488, 494–495.) The false 

statement or claim must also be material, which depends on “ ‘ “whether the 

false statement has a natural tendency to influence agency action or is 

capable of influencing agency action.” ’ ” (City of Pomona v. Superior Court

(2001) 89 Cal.App.4th 793, 802.)

D. Relevant Contract Duties

The elements for breach of contract are the existence of the contract, 

performance or excuse for nonperformance, breach, and damages. (Oasis 

West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820–821.) “ ‘Every 

contract imposes upon each party a duty of good faith and fair dealing in its 

performance and its enforcement.’ ” (Foley v. Interactive Data Corp. (1988) 

47 Cal.3d 654, 683.) “ ‘ “Accompanying every contract is a common-law duty 

to perform with care, skill, reasonable expedience, and faithfulness the thing 

agreed to be done, and a negligent failure to observe any of these conditions is 

a tort, as well as a breach of the contract.” ’ ” (Holguin v. Dish Network LLC

(2014) 229 Cal.App.4th 1310, 1324.) 

II. The Anti-SLAPP Motion

Gradetech contends the trial court misconstrued the attorney demand 

letters as merely prerequisites to filing a claim for payment with the City 
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because they were in fact bona fide first steps in initiating its lawsuit against 

the City, protected by the anti-SLAPP statute. Gradetech next insists that 

had the trial court reached the second step of the anti-SLAPP analysis, it 

would have found the City’s False Claim Act claims arising from the attorney 

demand letters to lack “minimal merit.” Gradetech repeats these arguments 

with respect to the breach of contract causes of action, there citing a different 

letter it sent the City prior to sending the attorney demand letters. Finally, 

Gradetech contends attorneys’ fees were erroneously denied because its antiSLAPP motion in fact accomplished a “practical benefit” in its litigation 

against the City. 

The central dispute between the parties is what the City’s crosscomplaint’s causes of action “arise from.” This debate can be clarified and 

resolved through review of Kajima, as well as two subsequent California 

Supreme Court decisions. We therefore review these decisions before 

proceeding to analyze whether the trial court’s ruling was correct.

A. “Arising From”

In Kajima, a government contractor (Kajima) sued the City of Los 

Angeles for breach of contract, alleging it had not been paid for work overages 

it incurred on a government works project. (Kajima, supra, 95 Cal.App.4th at 

pp. 924–925.) The city cross-claimed, alleging breach of contract and breach 

of the implied covenant of good faith and fair dealing in connection with 

Kajima’s bidding and work on the project. (Id. at p. 925.) The city later 

amended its cross-complaint to add 19 additional causes of action against 

Kajima and its two parent companies. (Ibid.) Kajima responded by filing a

special motion to strike the entire cross-complaint under the anti-SLAPP 

statute, contending it was filed in retaliation for Kajima’s exercise of its First 

Amendment right to petition for redress of grievances, i.e., for having filed 
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the complaint against the city. (Kajima, at p. 925.) The trial court denied 

the anti-SLAPP motion as to all causes of action except one: a claim that the 

filing of the complaint itself was a violation of the False Claims Act. (Kajima,

at pp. 925–926.)

A panel of the Second District Court of Appeal affirmed, concluding the 

trial court did not err in denying the motion as to the other causes of action, 

which targeted Kajima’s allegedly fraudulent conduct as to its bidding, 

billing, and work processes. (Kajima, supra, 95 Cal.App.4th at pp. 929–930.) 

The appellate court noted, “[i]t is only the 12th cause of action struck by the 

trial court that mentions Kajima’s specific act in filing the underlying 

complaint in this action.” (Id. at p. 930.) Because the City did not allege any 

causes of action based upon Kajima’s filing of its lawsuit against the City—

except for the False Claims Act violation—the fact that its cross-complaint 

may have been filed in retaliation for Kajima’s complaint was irrelevant to 

the special motion to strike. (Kajima, at p. 929.) “Kajima wrongly focuses on 

the City’s filing of the amended cross-complaint as a supposed act of 

retaliation without demonstrating, as it must under the anti-SLAPP statute, 

that the amended cross-complaint ‘alleges acts in furtherance of [Kajima’s] 

right of petition or free speech . . . .’ ” (Ibid.) The appellate court explained it 

is not sufficient to show that the challenged cross-complaint implicates or 

involves the same transaction or subject matter as the complaint. (Id. at p. 

933.) Rather, pursuant to the plain language of the anti-SLAPP statute 

itself, the challenged complaint must have arisen out of the litigation process 

itself. (Kajima, at p. 933.) Put differently: “We publish this opinion . . . to 

emphasize that a cross-complaint or independent lawsuit filed in response to, 

or in retaliation for, threatened or actual litigation is not subject to the antiSLAPP statute simply because it may be viewed as an oppressive litigation 
16

tactic. No lawsuit is properly subject to a special motion to strike under 

[Code of Civil Procedure] section 425.16 unless its allegations arise from acts 

in furtherance of the right of petition or free speech.” (Kajima, at p. 924, 

italics added.)

Shortly after Kajima was decided, our Supreme Court published a pair 

of cases in which it examined in additional detail the “arising from” 

requirement. We now turn to those cases. In City of Cotati v. Cashman

(2002) 29 Cal.4th 69 (City of Cotati), the city and some of the city’s property 

owners had a dispute concerning whether a rent-control ordinance was 

constitutional. (Id. at p. 72.) The owners sued the city in federal court, 

seeking declaratory relief on the question. (Id. at pp. 72–73.) Later, the city 

sued the owners in state court, also seeking declaratory relief on the question 

but in what the city perceived to be a more favorable forum. (Ibid.) The 

owners brought an anti-SLAPP motion against the city in the state court 

action, and the trial court granted the motion. (Id. at pp. 72–73.) After the 

appellate court reversed, the Supreme Court granted review and concluded 

that the city’s state court action did not qualify as a SLAPP because it did not 

satisfy the “arising from” requirement. (Id. at p. 79.) Rather, the city’s 

lawsuit simply sought declaratory relief concerning the same underlying 

controversy—the constitutionality of the city’s ordinance. (Id. at p. 80.) The 

Supreme Court noted that the city’s complaint repeatedly referred to the 

“underlying subject matter” of the prior federal action, i.e., the validity of the 

ordinance, but contained “no reference to the action itself.” (Id. at p. 77.) It

cautioned that “[t]o construe ‘arising from’ in [Code of Civil Procedure]

section 425.16, subdivision (b)(1) as meaning ‘in response to,’ as [the antiSLAPP movants] have urged, would in effect render all cross-actions 

potential SLAPP’s. We presume the Legislature did not intend such an 
17

absurd result.” (Ibid.) The court continued: “California courts rightly have 

rejected the notion ‘that a lawsuit is adequately shown to be one “arising 

from” an act in furtherance of the rights of petition or free speech as long as 

suit was brought after the defendant engaged in such an act, whether or not 

the purported basis for the suit is that act itself.’ ” (Ibid., italics added.)

Next, in Navellier v. Sletten (2002) 29 Cal.4th 82 (Navellier), disputes 

arose regarding the management of an investment fund. (Id. at p. 85.) The 

original organizers of the fund sued an independent trustee of the fund in 

federal court. (Ibid.) A settlement agreement was reached with regard to 

one of the claims, and the independent trustee signed a release of his claims 

in connection with the execution of the settlement agreement. (Id. at p. 86.) 

The original organizers filed an amended complaint reflecting the partial 

settlement of their claims, and the independent trustee responded by filing 

counterclaims against the original organizers. (Ibid.) Relying on the release, 

the original organizers successfully moved for summary judgment on several 

of the counterclaims. (Id. at pp. 86–87.) The original organizers 

subsequently sued the independent trustee in state court for fraud (“in 

misrepresenting his intention to be bound by the Release”) and breach of 

contract (“by filing counterclaims in the federal action”). (Id. at p. 87.) 

Relying on the plain language of Code of Civil Procedure section 425.16, our 

Supreme Court held that the state court action “arose from” protected 

activity. (Navellier, at pp. 90–91.) In so holding, the court explained that the 

“arising from” inquiry is not merely a function of determining whether “a 

cause of action arguably may have been ‘triggered’ by protected activity . . . .” 

(Id. at p. 89.) Instead, “the critical consideration is whether the cause of 

action is based on the defendant’s protected free speech or petitioning 

activity.” (Ibid.) 
18

B. The Breach of Contract Causes of Action Do Not Arise from

Protected Activity 

The cross-complaint’s 12th through 14th causes of action allege breach 

of contract, breach of the implied covenant of good faith and fair dealing, and 

breach of the implied duty to perform with reasonable care. The trial court 

denied the anti-SLAPP motion as to these causes of action at the first step of 

the anti-SLAPP analysis.

Gradetech challenges the trial court’s ruling as to the breach of 

contract causes of action by highlighting it submitted “a written Notice of 

Potential Claim on September 1, 2016, just when the consultant commenced 

his field fit and design changes.” The purpose of this notice, Gradetech 

explains, was to notify the City it had performed “additional work beyond 

Contract requirements for additional earthwork and grading operations to 

change jump dirt grades that were already to grades shown on the plans in 

the Contract Documents.” Gradetech concludes that this notice was an act of

protected speech which triggered the retaliatory SLAPP cross-complaint.

Applying Kajima, City of Cotati, and Navellier to the facts of this case 

readily yields the result that the trial court correctly ruled on the anti-SLAPP 

motion with respect to the breach of contract causes of action. 

With respect to its contract claims, the cross-complaint alleged that 

Gradetech refused to construct the bike park features in the precise sequence 

required by the City’s bike park designer; refused to follow the City’s design 

requests thereby causing multiple delays; failed to ensure the Project had a 

competent superintendent at the site in violation of the Contract’s terms; 

failed to maintain records to keep an inventory of soil on the site and how 

much was used for each bike park feature as required by the Contract; either 

untimely or never submitted its contractual claims or their supporting 
19

information; and performed unapproved extra work in violation of the 

Contract and sought payment for it.

As discussed, ante, our Supreme Court in Navellier has taught that to 

determine what activity gave rise to a cross-complaint subject to an antiSLAPP motion, a court does not look merely to whether “a cause of action 

arguably may have been ‘triggered’ by protected activity,” but instead, a court 

examines what the “cause of action is based on.” (Navellier, supra, 29 Cal.4th

at p. 89, italics added.) Otherwise, finding protected speech whenever a 

communication “triggers” a counter-claim risks “render[ing] all cross-actions 

potential SLAPP’s,” a result our Supreme Court held in City of Cotati would 

be “absurd.” (City of Cotati, supra, 29 Cal.4th at p. 77.) The breach of 

contract causes of action are explicitly based upon Gradetech’s allegedly 

deficient conduct that preceded and gave rise to its liability under the 

Contract. Indeed, the breach of contract causes of action nowhere even 

mention the “Notice of Potential Claim on September 1, 2016” that Gradetech 

emphasizes comprise the protected activity which invited a SLAPP by the 

City.

Because allegedly failing to perform under a government works 

contract is not a form of protected speech under the anti-SLAPP statute, the 

trial court correctly denied Gradetech’s anti-SLAPP causes of action as to the 

breach of contract causes of action.

C. The Attorney Demand Letter Causes of Action Arise from

Protected Activity

The cross-complaint’s first through sixth causes of action allege that 

Gradetech violated the False Claims Act when it sought compensation for its 

deficient performance under the Contract by means of the attorney demand 

letters. The trial court denied Gradetech’s anti-SLAPP motion as to these 

cross-causes of action at step one of the anti-SLAPP analysis, finding they 
20

were not protected speech but merely the first step in the government claims 

submission process.

Gradetech contends this was error by arguing that the attorney 

demand letters themselves are the acts the cross-complaint’s attorney 

demand letter causes of action are based upon; that the relevant causes of 

action explicitly target those letters; and that they were plainly sent in 

anticipation of litigation. It argues that regardless of whether additional 

contractual steps remained in order for them to sue under the Contract, the 

Standard Specifications, and the Government Code, a lawsuit was inevitable; 

and that the content of the attorney demand letters “went beyond the 

‘submission of contractual claims for payment in the regular course of 

business.’ ” Thus, Gradetech concludes, the City’s attorney demand letter 

causes of action were a SLAPP.

The City demurs, insisting that multiple steps remained pursuant to 

the Contract and the City’s Standard Specifications before Gradetech could 

commence suit, and because multiple steps remained, under Bailey, supra, 

197 Cal.App.4th at page 790, “[Gradetech did not] have a good faith belief in 

a legally viable claim.” Specifically, the City writes, “[b]ecause Gradetech 

had not yet submitted the claims information required by Standard 

Specifications sections 9-1.04 and 9-1.07B concerning any of the five items 

described in Gradetech’s November letter, no legally viable claim existed 

when the letters were written.” 

Bailey is inapposite here, and the City takes the phrase “legally viable 

claim” out of context. In Bailey, a panel of the Second District Court of 

Appeal examined whether pre-litigation cease and desist letters from the 

party’s attorney were protected petitioning activity under the anti-SLAPP 

statute. (Bailey, supra, 197 Cal.App.4th at p. 792.) The appellate court 
21

proceeded to hold that because the cease and desist letters “related to 

proposed litigation barred by the doctrine of res judicata, such statements did 

not relate to litigation ‘contemplated in good faith and under serious 

consideration,’ ” reasoning that “no reasonable plaintiff could have believed in 

good faith that the contemplated litigation was legally viable.” (Id. at 

pp. 793, 795, italics added.) The appellate court emphasized that its holding 

turned on whether the plaintiff’s claim was being brought in good faith: “The 

question before us is whether Brewer’s statements of intent to litigate claims 

previously resolved against him could have been contemplated in good faith.” 

(Id. at p. 794.) But crucially, the appellate court explicitly limited its holding: 

“In reaching this conclusion, we note that our ruling is a narrow one. It 

applies only in cases where the proponent of the contemplated litigation has 

been barred from relitigating the contemplated claims under the doctrine of 

res judicata.” (Id. at p. 795.) The City makes no res judicata argument here, 

and thus the narrow Bailey exception does not apply. 

The City also argues that reversing the trial court’s ruling as to the 

attorney demand letter causes of action leads to unacceptable results. If 

Gradetech’s interpretation of the anti-SLAPP statute were correct, the City 

argues, a government contractor could immunize itself from False Claims Act 

liability for fraudulent claims submissions simply by sending attorney

drafted letters prior to being sued by the governmental unit with whom it 

contracted. To see why, this argument continues, assume that Gradetech in 

fact failed to perform under the Contract. By sending the attorney demand 

letters, it would insulate itself from False Claims Act liability because any 

counterclaim predicated thereupon would be arising from its attorney drafted 

letters, and not from its deficient conduct. It is unclear, the City’s argument 
22

concludes, how the City could ever defeat an anti-SLAPP motion if 

Gradetech’s argument is taken to its logical conclusion.

This argument fails to appreciate that we are reviewing only the first of 

two showings that must be made for the City’s attorney demand letter causes 

of action to be stricken as SLAPPs. True, we conclude that the attorney 

demand letters are so closely connected to Gradetech’s lawsuit against the 

City that they should not be construed to fall outside judicial petitioning 

activity. (See Code Civ. Proc., § 425.16, subd. (e)(2).) But that does not mean 

the City’s attorney demand letter causes of action are thereby stricken as a 

SLAPP. Instead, the anti-SLAPP analysis merely moves to the second step 

whereupon the City, now carrying the burden of proof, must demonstrate 

that these causes of action possess “minimal merit.” (Navellier, supra, 

29 Cal.4th at p. 93 [“[a]s our emerging anti-SLAPP jurisprudence makes 

plain, the statute poses no obstacle to suits that possess minimal merit”].) 

Indeed, the Navellier court appeared to rebut just such reductio ad absurdum

argument here advanced by the City: “[C]ontrary to the protestations of 

plaintiffs’ counsel at oral argument, the anti-SLAPP statute neither 

constitutes—nor enables courts to effect—any kind of ‘immunity’ for breach of 

a release or of other types of contracts affecting speech. When a ‘ “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” ’ [citation], it is not subject to being stricken as a SLAPP. 

In so providing, we have observed, the Legislature ‘weighed an appropriate 

concern for the viability of meritorious claims against the concern “to 

encourage participation in matters of public significance” ’ [citation].” 

(Navellier, at pp. 93–94.) 
23

Gradetech correctly emphasizes the attorney demand letters 

conspicuously indicated they were being sent in advance of potential 

litigation; they were each sent by an attorney and on law firm letterhead;

each letter began with the statement “[t]his law firm represents [Gradetech]

in connection with the City’s Lake Cunningham Bike Park”; and just two 

months after the November letter, Gradetech served its Government Code 

claim (the necessary next step for filing a lawsuit). Gradetech duly filed suit 

less than two months after that. As to the City’s insistence that the Contract 

and the Standard Specifications required multiple conditions precedent prior 

to Gradetech being compensated under the Contract, “[t]he merits of [a 

substantive claim] should play no part in the first step of the anti-SLAPP 

analysis. [Citation.] The first step only determines whether [Code of Civil 

Procedure] section 425.16’s procedural protection applies[.]” (City of Costa 

Mesa v. D’Alessio Investments, LLC (2013) 214 Cal.App.4th 358, 371.) 

The Legislature expressly commanded that the scope of the antiSLAPP statute “shall be construed broadly.” (Code Civ. Proc., § 425.16, 

subd. (a).) That mandate, together with the content, presentation, and 

timing of the attorney demand letters, leads us to find they are sufficiently 

connected to Gradetech’s lawsuit itself that they constitute protected speech 

under the anti-SLAPP statute. The trial court therefore erroneously denied 

Gradetech’s anti-SLAPP motion as to the attorney demand letter causes of 

action at the first step of the anti-SLAPP analysis.

10

10 We observed, ante, that the trial court relied upon Wollersheim, 

supra, 42 Cal.App.4th at page 651 as an independent basis for ruling that the 

attorney demand letter causes of action were not SLAPPs because it had 

earlier ruled that the City’s cross-complaint was “compulsory.” The City 

makes this argument on appeal, instead citing Kajima, supra, 95 Cal.App.4th 

at page 934, wherein Kajima invokes Wollersheim, at page 651 for the same 

proposition, i.e., that “ ‘[a] compulsory cross-complaint on a “related cause of 
24

The trial court did not reach the second step of the anti-SLAPP 

analysis. Although we may do so in the first instance (see, e.g., Hecimovich v. 

Encinal Sch. Parent Teacher Org. (2012) 203 Cal.App.4th 450, 468), we elect 

not to do so here and express no view of whether the City’s claims possess the 

requisite minimal merit to proceed. We likewise vacate the trial court’s 

determination denying attorneys’ fees, leaving that issue for determination 

after the trial court decides the anti-SLAPP second step.

Finally, we return to the issue of the discrepancy between the City’s 

representation to the trial court—that it would dismiss the five False Claims 

Act causes of action arising from Gradetech’s Government Code claims with 

prejudice—and its conduct in filing a dismissal without prejudice, months 

after its contrary representation to the trial court. In its reply brief, 

Gradetech requested for the first time that this court make adverse findings 

against the City, and award Gradetech attorneys’ fees, because of what 

Gradetech characterizes as the City’s duplicitous conduct in apparently 

reserving the ability to refile these claims. At oral argument, Gradetech 

clarified that it is merely requesting that this court take the City’s conduct 

into account, including with respect to whether Gradetech should recover its 

action” against the plaintiff (Code Civ. Proc., § 426.30, subd. (a)) would 

rarely, if ever, qualify as a SLAPP suit arising from petition activity.’ ” We 

recognize our determination with respect to the attorney demand letter 

causes of action places this case among the “rarely, if ever” camp the 

Wollersheim court stated would infrequently meet the first prong of the antiSLAPP statute. But Wollersheim articulated no rule barring compulsory 

cross-complaints from qualifying as SLAPPs. To the extent it did, it would be 

incorrect because “[t]he anti-SLAPP statute’s definitional focus is not the 

form of the plaintiff’s cause of action but, rather, the defendant’s 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.)
25

attorneys’ fees for litigating its anti-SLAPP motion. The City at argument 

attributed the without-prejudice filing to a paperwork error. We believe that 

these arguments are best directed to the trial court in the first instance, 

which may consider them as part of the totality of circumstances in resolving 

the attorneys’ fees determination.

DISPOSITION

The trial court’s December 15, 2020 order is affirmed with respect to 

causes of action Nos. 12, 13, and 14 of the City’s cross-complaint. The trial 

court’s December 15, 2020 order is reversed with respect to the first through 

sixth causes of action in the City’s cross-complaint. The trial court’s ruling on 

attorneys’ fees is vacated. The matter is remanded for the trial court to 

conduct further proceedings consistent with this opinion. 

Each party shall bear its own costs on appeal.
26

_________________________

Van Aken, J.*

We concur:

_________________________

Richman, Acting P.J.

_________________________

Miller, J.

Gradetech, Inc. v. City of San Jose (A165825)

* Judge of the San Francisco Superior Court, assigned by the Chief 

Justice pursuant to article VI, section 6 of the California Constitution.