Filed 7/17/15 West Hills Research and Development, Inc. v. Wyles CA2/8

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

WEST HILLS RESEARCH AND 

DEVELOPMENT, INC.,

Plaintiff and Respondent,

v.

TERRENCE M. WYLES,

Defendant and Appellant.

 B255768

 (Los Angeles County

 Super. Ct. No. BC516417)

APPEAL from an order of the Superior Court of Los Angeles County. Holly E. 

Kendig, Judge. Affirmed. 

Law Offices of James P. Wohl, James P. Wohl and Niall A. Fordyce for 

Defendant and Appellant. 

Loeb & Loeb, Daniel Platt and William Brody for Plaintiff and Respondent. 

__________________________
2

West Hills Research and Development, Inc. (West Hills) sued Terrence M. Wyles 

for misappropriation of its trade secrets. Wyles moved to strike the complaint under the 

anti-SLAPP statute (Code Civ. Proc., § 425.16) 1 and appeals the trial court’s denial of 

his motion. Because Wyles fails to demonstrate the activity about which West Hills 

complains is protected under the anti-SLAPP statute, we affirm the order denying the 

special motion to strike.

FACTS

West Hills is a medical products company which developed a series of bandage 

products intended to instantly relieve pain from burn injuries. West Hills holds 

international patent applications in connection with these products. Wyles is an attorney 

licensed to practice in Colorado. On October 12, 2012, West Hills hired Wyles as its inhouse counsel specializing in intellectual property. West Hills terminated Wyles on 

April 5, 2013. 

On July 26, 2013, West Hills sued Wyles, alleging a dozen causes of action, 

including breach of loyalty, breach of confidence, misappropriation of trade secrets, 

intentional interference with economic advantage, negligent interference with economic 

advantage, computer fraud and abuse, conversion, and unfair competition. In addition, 

West Hills sought declaratory judgment and injunctive relief along with money damages 

for Wyles’ alleged misconduct. The gravamen of West Hills’ complaint rests on the 

allegation that Wyles stole its trade secrets to set up a competing business after he was 

terminated. 

Wyles moved to strike the complaint on the ground it sought to chill his right of 

petition under the SLAPP statute in connection with issues under consideration or review 

by a judicial body. (§ 425.16.) In support of the anti-SLAPP motion, Wyles submitted a 

declaration accusing West Hills’ senior officers of embezzling over $2 million from the 

company during the course of his employment. These officers included the chief 

executive, Carl Freer, his wife, Ericka Freer, and another officer, James Hunt, who 

 

1 All further section references are to the Code of Civil Procedure unless otherwise 

specified.
3

replaced Freer as the CEO. Wyles also implicated a partner at the law firm, Loeb & 

Loeb,2 Allen Sussman, of participating in the misconduct. 

Wyles asserted he gathered proof of the embezzlement and was anonymously sent 

bank records which documented the fraud. From these documents, he drafted an 

executive summary entitled, Aluminaid3 Gross Fiscal Malfeasance to disseminate to 

other executives and board members of the company. In his declaration, he stated he 

intended to report the activity to the police and tax authorities as well as initiate a 

shareholders derivative action. Wyles was a shareholder of the company as part of his 

compensation package and thus had standing to file a derivative action. He believed he 

was fired as a result of his whistleblowing activities. Wyles argued the conduct 

underlying West Hills’ complaint is protected by the privilege set forth in Civil Code 

section 47, subdivision (b), covering pre-litigation communications. 

In his declaration, Wyles also denied misappropriating West Hills’ trade secrets. 

With respect to West Hills’ allegation that Wyles “improperly access[ed] Aluminaid’s 

servers and download[ed] emails and files that contained confidential and proprietary 

information, including Trade Secrets,” Wyles stated that “matter is untrue and [he] only 

accessed time sensitive government documents in connection with [his] role as Chief InHouse Counsel.” Wyles similarly denied he failed to return West Hills’ trade secrets 

documents, for which he had the only copy, or deleting emails that contained trade 

secrets. 

However, Wyles admitted in a second declaration he retained documents after his 

termination from West Hills and has refused to “turn over the documents for which 

Sussman has threatened to report me to the Colorado State Bar . . . .” He claimed that 

these documents include financial information which show “embezzlement, tax fraud and 

possible money laundering.” He asserted he informed David Warnock, the company’s 

CFO and also a shareholder, of his “plan to file an action.” He stated, “I followed up 

 

2 Loeb & Loeb represents West Hills in this appeal and at the trial level.

3 West Hills is formerly known as Aluminaid. It is also the name of the product 

sold by West Hills. The parties frequently refer to West Hills as Aluminaid. 
4

upon [the derivative action] after being terminated. The action was not only envisioned, 

but it was the subject of my reports to my superiors, and was fleshed out as to damages 

by way of the Executive Summary.” Wyles also submitted a sworn declaration by Joesph 

Sandoval, a former West Hills’ director, who corroborated Wyle’s story about the 

embezzlement and misappropriation of company funds. 

West Hills opposed the motion to strike on the ground the conduct underlying its 

complaint—the misappropriation of its trade secrets—lacks any connection with the 

purported financial misconduct Wyles accused West Hills’ executives of perpetrating. 

Sussman submitted a declaration showing he demanded Wyles return all files, records, 

and property of West Hills as well as submit a report of the status of all pending matters. 

Wyles refused. 

West Hills also submitted documents which showed it sought help from the 

Colorado State Bar and the Colorado Supreme Court to recover the documents and 

information it accuses Wyles of misappropriating. In response to the Colorado Supreme 

Court’s inquiry, Wyles submitted a thumbdrive containing some 14,000 files that appear 

to be Wyles’ work for Carl Freer’s various companies, including Aluminaid. West Hills 

contended these files include its trade secrets. Wyles also confirmed to the Colorado 

Supreme Court that he returned all confidential documents to West Hills, but kept copies 

of these materials “in order to respond to Aluminaid’s claims, to preserve the evidence 

for the benefit of Aluminaid shareholders, and in order to preserve evidence of 

Aluminaid’s illegal conduct in order to prevent the continuation of that conduct.” 

West Hills also submitted a sworn declaration from Tom Brady, who is a fire 

captain with the Los Angeles County Fire Department and who is also a consultant for 

West Hills’ products. Brady described Wyles and Sandoval’s attempts to recruit him to 

join their new venture, which they said would take over West Hill’s operations and 

patents. Brady further recounted seeing an agreement between the new venture and one 

of West Hills’ chief competitors. Wyles and Sandoval told Brady that Freer had left the 

country with company funds. 
5

In his second declaration, Wyles denied any attempts to form a competing 

business or disclose confidential information to a third party. Instead, he asserted the 

purported confidential information was disclosed in patent applications submitted in 

2013, prior to his termination. 

The trial court denied Wyles’ anti-SLAPP motion in its entirety, finding Wyles 

failed to show the misappropriation of trade secrets was protected activity under Code of 

Civil Procedure section 425.16. Wyles appealed the trial court’s ruling on April 18, 

2014. 

On August 6, 2014, West Hills sought to recover its attorney fees in the amount of 

$223,767.40. The trial court took judicial notice of a complaint filed on August 12, 2014, 

by Wyles in Colorado State Court against Aluminaid and West Hills, among others. 

The complaint alleged nine causes of action, including breach of employment contract, 

wrongful termination, libel and slander, and shareholder derivative liability. The attorney 

fees motion was denied by the trial court, who found the anti-SLAPP motion was not 

filed frivolously. West Hills did not appeal the trial court’s denial of its attorney fees 

motion.

DISCUSSION

Wyles challenges the trial court’s denial of his anti-SLAPP motion on the ground 

his activities in preparation for filing his shareholder derivative lawsuit undeniably 

constitute protected pre-litigation communication under Civil Code section 47(b). 

Wyles believes the trial court erred by failing to address this argument. Wyles asserts all 

12 of West Hills’ causes of action are at least partly based on his intention to file a 

derivative action since West Hills expressly incorporated all of its previous allegations 

into each cause of action, including those relating to the derivative lawsuit. We disagree. 

I. Applicable Law and Standard of Review

The anti-SLAPP statute provides a special procedure for striking meritless causes 

of action which seek to chill the exercise of a defendant’s First Amendment rights. 

(Code Civ. Proc., § 425.16, subd. (a).) “The statute requires two steps for striking a 

cause of action. In the first step, the court is tasked with determining whether the 
6

defendant has made a threshold showing that the challenged cause of action is one 

‘arising from protected activity.’ In this step, the moving defendant must demonstrate 

that the acts upon which the plaintiff’s claim is based were taken in furtherance of the 

defendant’s right of petition or free speech under the federal or state Constitution. If the 

court finds this threshold showing has been made by the defendant, the court must then 

determine whether the plaintiff has demonstrated a ‘probability of prevailing’ on his or 

her claim. [Citation.])” (Gerbosi v. Gaims, Weil, West & Epstein, LLP (2011) 193 

Cal.App.4th 435, 443 (Gerbosi).) 

A court must “examine the principal thrust or gravamen of a plaintiff’s cause of 

action to determine whether the anti-SLAPP statute applies . . . .” (Ramona Unified 

School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 519–522.) “A cause of action arises

from protected activity if ‘the defendant’s acts underpinning the plaintiff's cause of action 

involve[s] an exercise of the right of petition or free speech.’ [Citation.]” (Tuszynska v. 

Cunningham (2011) 199 Cal.App.4th 257, 266.) Section 425.16, subdivision (e) defines 

such conduct to include: “(1) any written or oral statement or writing made before a 

legislative, executive, or judicial proceeding, or any other official proceeding authorized 

by law, (2) 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, (3) any written or oral statement or writing made 

in a place open to the public or a public forum in connection with an issue of public 

interest, or (4) any other conduct in furtherance of the exercise of the constitutional right 

of petition or the constitutional right of free speech in connection with a public issue or 

an issue of public interest.” 

Clauses (1) and (2) of Code of Civil Procedure section 425.16, subdivision (e), 

parallel the litigation privilege provided in Civil Code section 47, subdivision (b). 

(Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 650, disapproved on 

other grounds by Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68, 

fn. 5.) Accordingly, activity which is privileged under Civil Code section 47 subdivision 

(b) is also protected activity under the anti-SLAPP statute. (Wang v. Hartunian (2003) 
7

111 Cal.App.4th 744, 751.) The privilege articulated under Civil Code section 47

subdivision (b) applies to any communication (1) made in judicial or quasi-judicial 

proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the 

objects of the litigation; and (4) that have some connection or logical relation to the 

action. (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) This privilege is extended to 

communications made outside the courtroom and to steps taken prior to trial or related 

proceedings. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057.)

The second prong of the anti-SLAPP analysis, requiring the plaintiff show a 

probability of prevailing, presents a low burden. This is because the plaintiff need only 

show a reasonable probability of prevailing, not by a preponderance of the evidence. 

(Gerbosi, supra, 193 Cal.App.4th at p. 446.) For this reason, a court must apply a 

“summary-judgment-like” test. (Taus v. Loftus (2007) 40 Cal.4th 683, 714, overruled on 

other grounds by Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 1212.) 

Thus, we do not reweigh the evidence, but accept as true all evidence favorable to the 

plaintiff and evaluate the defendant’s evidence only to determine if it has defeated the 

evidence submitted by the plaintiff as a matter of law. (Mann v. Quality Old Time 

Service, Inc. (2004) 120 Cal.App.4th 90, 105–106; Robles v. Chalilpoyil (2010) 181 

Cal.App.4th 566, 573–574 (Chalilpoyil).) 

We review an order denying an anti-SLAPP motion de novo, employing the same 

two-step procedure the trial court did. (PrediWave Corp. v. Simpson Thacher & Bartlett 

LLP (2009) 179 Cal.App.4th 1204, 1218.) If the trial court’s decision denying an antiSLAPP motion is correct on any theory applicable to the case, we may affirm the order 

regardless of the correctness of the grounds on which the lower court reached its 

conclusion. (Robles v. Chalilpoyil, supra, 181 Cal.App.4th at pg. 573.)

II. The Gravamen of the Complaint Does Not Implicate Protected Activity

Here, the gravamen of the complaint rests on West Hills’ allegations that Wyles 

improperly accessed its trade secrets to form a competing venture. This conduct forms 

the basis for all the causes of action in West Hill’s complaint, except for the fifth and 

sixth causes of action, which are discussed separately. An examination of each of the 
8

causes of action illustrates that pre-litigation activity is not the basis for West Hills’ 

complaint. Wyles has failed to meet his burden of showing that the challenged conduct 

arises from protected activity.

West Hills defines the term trade secrets as “patented products, engineering and 

scientific research data, financial information, financial plans, marketing plans and 

research, private customer information, pricing formulae, cost information, financial 

structure, operational data, business plans and strategies [].” In its complaint, West Hills 

alleges Wyles improperly accessed its computers and converted its computer files 

containing trade secrets without its consent (first cause of action), disclosed West Hills’ 

trade secrets to third parties (second cause of action), misappropriated its trade secrets 

(third and fourth causes of action), committed computer fraud by accessing its network 

after he was terminated and obtaining its trade secrets to unfairly compete with it 

(seventh cause of action), deleted trade secret information from West Hills’ servers

(eighth cause of action), and took possession of its confidential information (ninth cause 

of action). 

In the tenth cause of action, West Hills alleges Wyles’ attempts to form a 

competing business constituted unfair competition under Business and Professions Code 

section 17200. As a result, West Hills seeks a judicial determination that Wyles “has no 

ownership interest in the intellectual property and proprietary information” in its eleventh 

cause of action for declaratory relief. Finally, West Hills seeks to enjoin Wyles from 

disclosing any of West Hills’ trade secrets in its twelfth cause of action for injunctive 

relief. None of these causes of action relate to a shareholder derivative lawsuit. That 

West Hills may have included a standard paragraph repeating and incorporating by 

reference its other allegations into each cause of action does not change the primary 

thrust of these causes of action. (Kajima Engineering & Construction, Inc. (2002) 95 

Cal.App.4th 921, 932 [“to strike an entire complaint based simply on the incorporation of 

prior allegations would unnecessarily expand the anti-SLAPP statute . . . .”].)
9

The evidence submitted with the papers further support our conclusion. Wyles 

admits in his declaration he retained West Hills’ documents after his termination and has 

refused to “turn over the documents for which Sussman has threatened to report me to the 

Colorado State Bar . . . .” Although he asserts these documents contain financial 

information which he used to support his embezzlement claims, Wyles does not deny 

trade secret documents are also included in the cache. Indeed, Hunt’s declaration lists 

some of the trade secret documents Wyles has in his possession, including a confidential 

business plan, drafts of a patent application that are privileged and confidential, a 

confidential technical product description, and confidential agreements with potential 

partners. These documents extend far beyond the financial documents necessary for a 

shareholder derivative lawsuit based on financial malfeasance. Moreover, Wyles’ alleged 

attempt to set up a competing business is not protected activity under the anti-SLAPP 

statute and has nothing to do with the shareholder derivative lawsuit. 

In short, Wyles fails to demonstrate his purported shareholder derivative lawsuit is 

the primary basis for West Hills’ complaint. Any reference to the derivative lawsuit is 

ancillary to the primary thrust of the allegations. (Paul v. Friedman (2002) 95 

Cal.App.4th 853, 866 [“[t]he statute does not accord anti-SLAPP protection to suits 

arising from any act having any connection, however remote, with an official 

proceeding”]; Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188 

[“collateral allusions to protected activity should not subject the cause of action to the 

anti-SLAPP statute.”].)

In any case, Wyles’ alleged misappropriation of West Hill’s confidential 

information and attempt to set up a competing business, even if done in anticipation of 

litigation, is not protected conduct under Civil Code section 47. First, Civil Code section 

47 protects communications, not actions. (Westlake Community Hosp. v. Superior Court 

(1976) 17 Cal.3d 465, 482 [section 47’s privilege attached only to statements or 

publications made in connection with judicial proceedings].) It is clear that the conduct 

complained of is the act of misappropriating trade secrets, not any communications made 

by Wyles in connection with a judicial proceeding. Neither is the attempt to form a 
10

competing business a communication. Even if we view Wyles’ preparation of the 

executive summary as a communication, there is no indication it was drafted in 

anticipation of a judicial proceeding. Instead, the summary specifically identifies issues 

which require further investigation, and makes no mention of possible litigation. Second, 

wrongful conduct undertaken to obtain evidence in anticipation of litigation is not 

privileged under Civil Code section 47. (Kimmel v. Goland (1990) 51 Cal.3d 202, 211-

212.) 

This case is different from the case cited by Wyles, Fox Searchlight Pictures, Inc. 

v. Paladino (2001) 89 Cal.App.4th 294 (Paladino). There, the defendant was in-house 

counsel for the plaintiff. She was told she was terminated because the film project she 

worked on “did not go well.” (Id. at p. 298.) She believed she was terminated for her 

frequent use of pregnancy leave and decided to file a wrongful termination suit. She sent 

a copy of the complaint to the plaintiff for its review for any potential trade secret 

disclosures. The plaintiff responded by suing the employee for breach of contract and 

breach of the duty of loyalty because she kept its confidential documents and disclosed 

confidential matters and trade secrets to her attorneys. (Id. at p. 299.) The plaintiff 

described the confidential documents as “information about the way Fox structures 

business transactions and legal advice rendered in connection with a film project which 

was the subject of ongoing litigation.” (Id. at p. 299.) 

The trial court’s denial of the employee’s anti-SLAPP motion was reversed on 

appeal. The employee’s actions fell within the activity protected by the anti-SLAPP 

statute. The appellate court reasoned that it could not say, as a matter of law, that the 

employee’s failure to return the allegedly confidential material was not an act in 

furtherance of the preparation and prosecution of her wrongful termination suit. (Id. at 

p. 308.) 

Although the facts in Paladino bear superficial similarities to those in this case, it 

is markedly different. In Paladino, the purported confidential information was relevant 

to the employee’s wrongful termination lawsuit. The employee was told she was 

terminated because her film “did not go well.” The confidential material contained 
11

information about “legal advice rendered in connection with a film project,” presumably 

the one on which the employee worked. By contrast, the trade secret material Wyles 

allegedly kept does not relate to the shareholder derivative lawsuit at all, having nothing 

to do with financial malfeasance. 

III. West Hills Has Shown a Probability of Prevailing on the Fifth and Sixth 

Causes of Action

In the fifth and sixth causes of action for both intentional and negligent 

interference with economic advantage, West Hills alleges Wyles disrupted its economic 

relationship with its investors as a result of “Wyles’ attempt to organize a shareholder 

legal action adverse to West Hills and its management . . . .” But for Wyles’ activities, 

West Hills claims there was a reasonable probability it would have raised approximately 

$4.5 million in necessary funding. West Hills submitted a declaration from Joe Marten, 

who is the CEO of Aluminaid Pte. Ltd., located in Singapore. He stated he considered 

making a $5 million capital investment in West Hills in 2013, but he “decided the risk of 

making such a large investment in West Hills’ U.S. operations was too high, especially 

while Mr. Wyles was seeking to compete with and damage the company.” “Specifically, 

[Marten] heard that Mr. Wyles had accused Mr. Freer of stealing company money and 

absconding to Singapore. [Marten] also learned that, among other things, Mr. Wyles was 

attempting to compete with West Hills’ business and considered himself an inventor, in 

control of the technology at the core of West Hills’ business.” 

According to Wyles, he knew Marten and corresponded with him in connection 

with his role as in-house counsel. However, Wyles’ discussion with Marten involved 

other companies owned by Freer, not West Hills or Aluminaid. Wyles also denied 

knowing about the purported investment Marten was interested in making in West Hills. 

The record shows that in 2013, when Marten was considering making an 

investment in West Hills, Wyles had yet to file any shareholder derivative lawsuit. 

Neither had he taken any concrete steps to do so. However, Wyles told Warnock of his 

plan to file such an action. To the extent it was Wyles’ statements regarding a potential 
12

derivative lawsuit which comprise West Hills’ fifth and sixth causes of action, it appears

to constitute protected activity under the anti-SLAPP statute. 

However, we conclude these two causes of action need not be stricken because 

West Hills has shown a probability of prevailing. The elements necessary to prove 

intentional interference with prospective economic advantage are: “ ‘(1) an economic 

relationship between the plaintiff and some third party, with the probability of future 

economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship;

(3) intentional acts on the part of the defendant designed to disrupt the relationship; 

(4) actual disruption of the relationship; and (5) economic harm to the plaintiff 

proximately caused by the acts of the defendant.’ [Citations.]” (Westside Center 

Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507, 521-522.)” “ ‘The tort 

of negligent interference with economic relationship arises only when the defendant owes 

the plaintiff a duty of care.’ [Citation.]” (LiMandri v. Judkins (1997) 52 Cal.App.4th 

326, 348, italics omitted.) Thus, the elements for negligent interference mirror those of 

intentional interference with the exception that the third element requires the defendant 

owes a duty of care to the plaintiff and negligently breaches that duty. (Lange v. TIG Ins. 

Co. (1998) 68 Cal.App.4th 1179, 1187.) 

West Hills has presented a prima facie case of intentional and negligent 

interference with economic advantage. There is no dispute Wyles knew of Marten; he 

had been corresponding with him. Wyles was also privy to West Hills’ financial 

circumstances. Indeed, Hunt believed that “Wyles was aware of [Marten’s] potential 

investment and would have been aware that West Hills was attempting to find additional 

investments of this nature.” Marten’s declaration sets forth his intention to invest in West 

Hills, which was disrupted by Wyles’ conduct. This evidence is sufficient to surmount 

the low hurdle presented by the second prong of the anti-SLAPP statute. The trial court’s 

denial of Wyles’ special motion to strike as to these two causes of action was proper. 
13

DISPOSITION

The order denying Wyles’ special motion to strike under Code of Civil Procedure 

section 425.16 is affirmed. West Hills is awarded its costs on appeal.

BIGELOW, P. J.

We concur:

RUBIN, J.

GRIMES, J.