Court Opinion

ID: 9840462
Source: CourtListenerOpinion
Date Created: 2023-09-18 18:03:39.268529+00
Date Added: 2024-06-11T10:46:32.736922
License: Public Domain

Filed 9/18/23 Sherlock v. Austin CA4/1

                   NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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                 COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                       DIVISION ONE

                                              STATE OF CALIFORNIA

AMY SHERLOCK, as Guardian ad                                                 D081109
litem, etc. et al.,

          Plaintiffs and Appellants,
                                                                             (Super. Ct. No. 37-2021-
          v.                                                                 00050889-CU-AT-CTL)

GINA AUSTIN et al.,

          Defendants and Respondents.

          APPEAL from a judgment of the Superior Court of San Diego County,
James A. Mangione, Judge. Affirmed.
          Law Office of Andrew Flores and Andrew Flores, in pro. per., and for
Plaintiffs and Appellants.
          Pettit Kohn Ingrassia Lutz & Dolin, Douglas A. Pettit, Kayla R. Sealey,
and Annie F. Fraser for Defendants and Respondents.

          Amy Sherlock, her minor children T.S. and S.S., and Andrew Flores
(collectively, plaintiffs) brought a civil lawsuit against Gina Austin and her
law firm, the Austin Legal Group (collectively, Austin), as well as a litany of
other individuals who are involved with operating and advising cannabis
businesses in San Diego, alleging a wide-ranging conspiracy to monopolize
the cannabis market. In response, Austin brought a special motion to strike

under Code of Civil Procedure section 425.161, asserting the plaintiffs’ claims
against Austin arose from petitioning activity and that the plaintiffs could
not show a probability of prevailing on the merits of those claims. The trial
court agreed with Austin and granted the motion.
      The plaintiffs appeal the judgment that was entered in favor of Austin
shortly after the court’s order granting her motion to strike. They argue
Austin assisted her clients in filing false documents to obtain cannabis
business licenses and helped them evade tax obligations, and that this illegal
conduct is unprotected by the anti-SLAPP statute. In response, Austin
asserts that the allegations in the complaint that are at issue relate solely to
her role of assisting her clients in obtaining Conditional Use Permits (CUPs).
She contends this conduct is petitioning activity that is protected and that
the plaintiffs’ assertions of illegal activity are based only on conclusory
allegations that are unsupported by any facts in the record.
      As we shall explain, we agree with Austin that the plaintiffs have not
demonstrated the court erred by granting her anti-SLAPP motion and
subsequently entering judgment in her favor. Accordingly, the judgment is
affirmed.

1     Code of Civil Procedure section 425.16 is commonly referred to as the
anti-SLAPP (strategic lawsuit against public participation) statute. (Jarrow
Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 732, fn. 1.) Subsequent
undesignated statutory references are to the Code of Civil Procedure.
                                        2
              FACTUAL AND PROCEDURAL BACKROUND2
A. Plaintiffs’ Complaint
      Andrew Flores, who represents the plaintiffs in this action, filed the
First Amended Complaint (FAC) in San Diego Superior Court on behalf of

himself, Sherlock, and Sherlock’s two minor children.3 The FAC alleges a
conspiracy to monopolize the marijuana market in San Diego in violation of
the Cartwright Act (Bus. & Prof. Code, § 16720 et seq.), as well as claims for
conversion, civil conspiracy, declaratory relief, and unfair competition and
unlawful business practices (id., § 17200 et seq.).
      Three claims are asserted against Austin—violation of the Cartwright
Act, unfair competition and unlawful business practices, and civil conspiracy.
The FAC focuses on the acquisition of, and in one case application for CUPs
related to four properties: (1) 1210 Olive Street, Ramona, CA 92065 (the
Ramona property), (2) 8863 Balboa Avenue, Unit E, San Diego, California
92123 (the Balboa property), (3) 6176 Federal Blvd., San Diego, CA 92114
(the Federal property), and (4) 6859 Federal Blvd., Lemon Grove, CA 91945

2     Because we are reviewing the record on the court’s ruling on Austin’s
anti-SLAPP motion, we take the factual background from the allegations of
the operative complaint, as well as from evidence presented to the court for
purposes of the anti-SLAPP motion.

3      The FAC was not included in the appellate record. However, the
plaintiffs ask this court to take judicial notice of the FAC, as well as three
additional documents: this court’s opinion in Razuki v. Malan (Feb. 24, 2021,
D075028 [nonpub. opn.], arising from San Diego Superior Court Case No. 37-
2018-00034229-CU-BC-CTL (Razuki II)); a declaration Austin submitted in
the trial court in Razuki II; and a trial transcript from Geraci v. Cotton, San
Diego Superior Court Case No. 37-2017-00010073-CU-BC-CTL. On our own
motion, the record is augmented to include the FAC. (Cal. Rules of Court,
rule 8.155(a)(1).) We grant the request for judicial notice of Austin’s
declaration in Razuki II and otherwise deny the request.
                                        3
(the Lemon Grove property). The thrust of the complaint, as it relates to
Austin, is that she and the other defendants engaged in anticompetitive
conduct by submitting CUP applications to regulators that failed to disclose
the real owners of the marijuana dispensary operations, in violation of the
law.
       The FAC alleges that after the passing of Sherlock’s husband Michael
in 2016, Sherlock was defrauded by Michael’s business partners, Stephen
Lake and Bradford Harcourt, in their incipient medical marijuana business.
According to the FAC, Michael was granted the CUPs for the Ramona and
Balboa properties. The plaintiffs allege that after Michael’s death, Lake and
Harcourt falsely told Sherlock that her husband’s estate had no interest in
the business and forged Michael’s signature on documents to dissolve a
limited liability company, LERE, that Michael, Harcourt, and Lake had
established to hold real property for the business.
       According to the FAC, at some point after Michael’s death, the CUP for
the Ramona property was transferred to Harcourt, Lake, Eulenthias Duane
Alexander, and Renny Bowden. Harcourt allegedly transferred the CUP for
the Balboa property from Michael’s holding entity to his own holding entity,
San Diego Patients Cooperate Corporation, Inc. (SDPCC). The Balboa
property itself, which had been owned by LERE, was transferred to a limited
liability company (LLC) owned by Lake called High Sierra Equity, then to an
LLC owned by Salam Razuki called Razuki Investments, and finally to an
LLC owned by Ninus Malan called San Diego United Holdings Group.
       Much of the FAC focuses on the conduct of Razuki and Malan, and
Larry Geraci, who was represented by Austin in his efforts to obtain CUPs for
marijuana operations. According to the FAC, Harcourt and Lake transferred
the Balboa property to Razuki based on a proposed joint venture agreement

                                       4
to operate a dispensary at the property. The plaintiffs allege that after this
transfer, Razuki and Malan falsely represented to the City of San Diego that
they were also owners of the CUP for the property. Harcourt and SDPCC
sued Razuki alleging he had defrauded them of the CUP for the Balboa
property (San Diego Patients Cooperative Corporation, Inc. v. Razuki
Investments, LLC, San Diego Superior Court Case No. 37-2017-00020661-CU-
CO-CTL (Razuki I)).
      The FAC further alleges that Razuki sued Malan over their
partnership, Razuki II, and that Razuki was later arrested for attempted
murder after he hired an FBI informant to kill Malan. The FAC asserts that
in Razuki II, Razuki admitted he and Malan agreed that Malan would hold
title to cannabis assets without disclosing Razuki’s ownership because his
prior involvement in unlicensed commercial cannabis activities disqualified
him from obtaining a CUP. According to the FAC, in Razuki II, the court
appointed a receiver to manage the assets in dispute and approved the sale of
the Balboa property and its CUP to an entity called Prodigious Collective.
The plaintiffs allege Prodigious Collective then transferred ownership of

those assets to Allied Spectrum, Inc.4
      The allegations concerning Geraci primarily center on the Federal
property. The FAC states that “when Flores became the equitable owner of
the Federal Property, he began investigating Geraci” and uncovered “the
relationships between Geraci, Magagna, Razuki, Malan and Dave Gash via
Austin, who has represented all parties.” The plaintiffs allege that in 2016,

4     The FAC also asserts that Flores obtained information from an
investigative journalist who was told by an employee of Razuki that Austin
obtained “confidential information” about real property that qualified for
CUPs from her clients who were not members of the conspiracy. Austin then
allegedly provided that information to Razuki in order to assist him in
acquiring property.
                                         5
Geraci identified a property located at 6176 Federal Blvd. as a potential
location for a medical marijuana dispensary and began negotiations with the
property’s owner, Darryl Cotton, to purchase it.
      The FAC alleges that Geraci hired Austin, James Bartell (described in
the FAC as a political lobbyist), and Abhay Schweitzer (other documents in
the record reveal Schweitzer is an architect) to represent him in his
application to obtain a CUP for the Federal property from the City of San
Diego. The FAC alleges that, like Razuki, Geraci intentionally failed to use
his own name in the application because prior unlicensed cannabis activity
disqualified him from participating in the business. Specifically, the
plaintiffs assert that Geraci, Austin, Bartell, and Schweitzer prepared the
CUP application in the name of Geraci’s assistant, Rebecca Berry, falsely
representing that Berry would be the owner of the CUP, and obscuring
Geraci’s and Cotton’s ownership.
      The FAC alleges Cotton and Geraci reached an agreement on
November 2, 2016 for the sale of Cotton’s property and proposed marijuana
operations, and that Austin was tasked with preparing a final written
agreement for execution. However, because a final agreement was not
prepared, Cotton entered into an alternate agreement to sell the property and
his interest in the pending CUP application with a third party in the event

that the deal with Geraci was not finalized.5 This, in turn, prompted Geraci
to file suit against Cotton seeking to enforce Cotton’s oral agreement to enter
into a joint venture agreement with Geraci for the sale of the property and

5     The FAC alleges that before this agreement, Cotton approached
Christopher Williams as a partner for the CUP, but that Williams was told
by Austin, who was his attorney, that Cotton already had a final agreement
with Geraci for the Federal property, causing Williams to withdraw from the
negotiations. The FAC states that Williams was a plaintiff in this action, but
withdrew from the suit.
                                       6
the CUP, with Cotton to receive a portion of the proposed marijuana
operations profit on a monthly basis. (Geraci v. Cotton, San Diego Superior
Court Case No. 37-2017-00010073-CU-BC-CTL.) Cotton then counter-sued,
initially as a pro se litigant, alleging various causes of action, including that
Geraci and Berry had conspired to hide Geraci’s ownership interest because
he had been sued by the City of San Diego for operating and managing
unlicensed, unlawful, and illegal marijuana dispensaries that “would ruin
Geraci’s ability to obtain a CUP himself.”
      The plaintiffs allege that Cotton then obtained a litigation investor,
“Hurtado,” who initially retained Jessica McElfresh, who had previously
“represented Geraci, Razuki, and Malan in various legal matters” related to
cannabis operations. McElfresh then backed out of the representation, and
Hurtado hired two attorneys with the law firm of Finch, Thorton, and Baird
(FTB) to represent Cotton. The FAC alleges FTB, named as a defendant,
then worked to sabotage Cotton’s case. According to the plaintiffs, FTB filed
an amended cross-complaint removing Cotton’s allegation that Geraci was
unable to obtain a CUP. Further, they allege FTB failed to vigorously defend
Cotton against Geraci’s demurrer to Cotton’s cross claims and assert FTB
was loyal to Geraci because it shared clients with Geraci’s tax business. The
FAC also alleges that FTB wanted Cotton to sign a declaration stating he,
and not Geraci, was pursuing the CUP for the property. As a result of these
tactics, Cotton fired FTB.
      The FAC alleges that Austin testified at the bench trial in Geraci v.
Cotton that she was not aware of two judgments that had previously been
entered against Geraci for illegal marijuana operations, that she did not
remember why Geraci used Berry as the applicant for the CUP on Cotton’s
property, and that she did not know why he was not listed on the ownership

                                        7
disclosure statement for the application.6 According to the FAC, the judge in
Geraci v. Cotton ruled against Cotton, finding he had unlawfully interfered
with the CUP application for the property and that Geraci was not barred by
law from owning a CUP, and that the court also awarded Geraci damages.
      The FAC alleges that in March 2018, Aaron Magagna submitted a CUP
application for a property located at 6220 Federal Blvd., within 1000 feet of
the Federal property. According to the FAC, that CUP was approved by the
City of San Diego in October 2018. The plaintiffs assert this application was
submitted to prevent the approval of the CUP for the Federal property that
was submitted in Berry’s name in order to limit Geraci’s liability for the false
information contained in that application.
      The FAC alleges that prior to this CUP approval and the judgment in
the litigation between Cotton and Geraci, Alexander and Logan Stellmacher
visited Cotton and offered to purchase the Federal property. When Cotton
refused the offer, they attempted to coerce him to settle the litigation with
Geraci and then threatened they had the “ability to have the San Diego Police
Department raid the Federal Property and have Cotton arrested on
fabricated charges and planted drugs.” They also threatened to “have
dangerous individuals visit the Federal Property implying they would cause
bodily harm to Cotton.”
      The FAC also alleges that another potential investor in the Federal
property and in Cotton’s suit against Geraci, “Young,” was told by her lawyer

not to invest because the Berry CUP application would be denied.7 Young
was allegedly also told in a meeting with Cotton that he believed Magagna

6      The FAC also alleges that Austin attempted to avoid service of process
of a petition for writ of mandate filed by Cotton in his case against Geraci.
7      The FAC asserts that Young and Austin went to law school together
and were admitted to the bar the same year.
                                       8
was a co-conspirator of Geraci who was working to have the competing CUP
application approved. According to the FAC, Young asked Magagna if this
was true and he did not deny the allegation. The FAC alleges when Cotton
attempted to depose Young, her counsel prevented the deposition and then
Young moved to Palm Springs after being offered a job at a dispensary there,
whose owners were also clients of Austin.
      Another set of allegations concern Shawn Joseph Miller, who the
plaintiffs assert is another associate of Geraci. The FAC alleges Miller has a
criminal background and threatened Hurtado to try to coerce Cotton to settle
his litigation with Geraci. With respect to the Lemon Grove property, the
FAC alleges that Williams retained Austin to be his attorney for “cannabis
related matters,” but that Austin dissuaded Williams from pursuing the
property by falsely representing it would not qualify for a CUP. According to
the FAC, a CUP was awarded for the property thereafter.
B. Motion to Strike
      In response to the complaint, Austin filed an anti-SLAPP motion.
Therein, she asserted that the three claims against her in the FAC were
premised entirely on the protected conduct of petitioning the local land use
authority for CUPs on behalf of her clients. Further, the motion asserted
that the plaintiffs could not show a probability of prevailing on the claims
because they are barred by Civil Code section 1714.10 and the litigation
privilege. In addition, the motion asserted the Cartwright Act violation was
not viable because the plaintiffs failed to plead facts showing the defendants
had agreed to restrain trade.
      With respect to the claims under Business and Professions Code
section 17200 et seq., Austin asserted the plaintiffs could not show a
probability of prevailing as to her because the claims were premised on an

                                       9
alleged violation of Business and Professions Code section 26057. That
provision sets forth criteria for cannabis licensing agencies to consider, but
does not require those authorities to deny a license based on any particular
category, including if the applicant had been previously sanctioned for
unlicensed commercial cannabis activity. Finally, Austin asserted the
plaintiffs could not prevail on their civil conspiracy claim against her because
they had not pleaded any facts showing her agreement to join or acts in
furtherance of the conspiracy.
      In their opposition to the motion, the plaintiffs argued that their claims
were viable because Business and Professions Code section 26057 precluded
Razuki and Geraci from owning a cannabis business. According to the
plaintiffs’ interpretation of that statute, the provision required the regulator
to deny Geraci and Razuki’s CUP applications because they were previously
sanctioned for unlicensed medical marijuana operations. The plaintiffs also
asserted that the anti-SLAPP statute did not apply to their claims because
Austin’s petitioning activity, specifically failing to disclose the actual owners
of the cannabis operations, is illegal under Penal Code section 115 and
likewise exempted from the first amendment protection afforded by the
Noerr-Pennington doctrine because the petitioning activity was a sham
designed to monopolize the industry.
      The plaintiffs also argued Austin’s conduct was not subject to the pre-
filing requirements of Civil Code section 1714.10 because her efforts to secure
CUPs for her clients are not an “attempt to contest or compromise a claim or
dispute” as required by that statute and because the alleged conduct is
illegal. Similarly, the plaintiffs contended the litigation privilege could not be
used as a shield for Austin’s illegal conduct. Finally, they argued the alleged
conduct violated the UCL and the Cartwright Act because it was anti-

                                        10
competitive and unlawful. The plaintiffs did not submit any evidence to
support their opposition, instead relying solely on their legal arguments.
      In reply, Austin asserted there was no dispute that the alleged conduct
was petitioning activity protected under the anti-SLAPP statute. Further,
she argued the plaintiffs had failed to meet their burden to show a likelihood
of prevailing on their claims because they presented no evidence in support of
their assertion that Austin’s actions were illegal and failed to otherwise
establish how they could satisfy the elements of each cause of action.
      At the conclusion of a short hearing on the motion, the court confirmed
its tentative ruling finding that the allegations against Austin all involved
protected petitioning activity and that the plaintiffs had failed to meet their
burden to show a probability of prevailing on the claims. Shortly after, the
court entered judgment in favor of Austin.
                                 DISCUSSION
      The plaintiffs argue on appeal, as they did in the trial court, that
Austin’s conduct, which they describe as “filing applications with State and
City cannabis licensing agencies with false and fraudulent information,” is
illegal as a matter of law and thus not subject to the protections afforded by
section 425.16. In addition, the plaintiffs argue that even if the conduct is
protected petitioning activity, the trial court erred by finding that evidence
was required to meet their burden of showing a probability of prevailing
under the anti-SLAPP statute. As we shall explain, these arguments do not
support reversal of the judgment in favor of Austin.
                                        I
                                Legal Standards
      Section 425.16 sets a procedure for striking “lawsuits that are ‘brought
primarily to chill the valid exercise of the constitutional rights of freedom of

                                       11
speech and petition for the redress of grievances.’ ” (Kibler v. Northern Inyo
County Local Hospital Dist. (2006) 39 Cal.4th 192, 197.) Under
section 425.16, the “trial court evaluates the merits of the lawsuit using a
summary-judgment-like procedure at an early stage of the litigation.”
(Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192.)
Section 425.16 provides in pertinent part: “A cause of action against a person
arising from any act of that person in furtherance of the person’s right of
petition or free speech under the United States Constitution or the California
Constitution in connection with a public issue shall be subject to a special
motion to strike, unless the court determines that the plaintiff has
established that there is a probability that the plaintiff will prevail on the
claim.” (§ 425.16, subd. (b)(1).)
      Resolution of an anti-SLAPP motion “thus involves two steps. ‘First,
the court decides whether the defendant has made a threshold showing that
the challenged cause of action is one “arising from” protected activity.
[Citation.] If the court finds such a showing has been made, it then must
consider whether the plaintiff has demonstrated a probability of prevailing on
the claim.’ ” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811,
819‒820.) “ ‘Only a cause of action that satisfies both prongs of the anti-
SLAPP statute—i.e., that arises from protected speech or petitioning and
lacks even minimal merit—is a SLAPP, subject to being stricken under the
statute.’ ” (Id. at p. 820.)
      “A defendant satisfies the first step of the analysis by demonstrating
that the ‘conduct by which plaintiff claims to have been injured falls within
one of the four categories described in subdivision (e) [of section 425.16]’
(Equilon [Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53,] 66), and
that the plaintiff’s claims in fact arise from that conduct (Park v. Board of

                                       12
Trustees of California State University (2017) 2 Cal.5th 1057, 1063).” (Rand
Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 620.) Subdivision (e)
provides that an “ ‘act in furtherance of a person’s right of petition or free
speech under the United States or California Constitution in connection with
a public issue’ includes: (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.” (§ 425.16,
subd. (e).)
      “A defendant’s burden on the first prong is not an onerous one. A
defendant need only make a prima facie showing that plaintiff’s claims arise
from the defendant’s constitutionally protected free speech or petition rights.
(See Governor Gray Davis Com. v. American Taxpayers Alliance (2002) 102
Cal.App.4th 449, 456.) ‘ “The Legislature did not intend that in order to
invoke the special motion to strike the defendant must first establish [his or]
her actions are constitutionally protected under the First Amendment as a
matter of law.” [Citation.] “Instead, under the statutory scheme, a court
must generally presume the validity of the claimed constitutional right in the
first step of the anti-SLAPP analysis, and then permit the parties to address
the issue in the second step of the analysis, if necessary. [Citation.]
Otherwise, the second step would become superfluous in almost every case,

                                        13
resulting in an improper shifting of the burdens.” ’ ” (Optional Capital, Inc. v.
Akin Gump Strauss, Hauer & Feld LLP (2017) 18 Cal.App.5th 95, 112, italics
omitted.) However, if “the defendant concedes, or the evidence conclusively
establishes, that the assertedly protected speech or petitioning activity was
illegal as a matter of law, the defendant is precluded from using the anti-
SLAPP statute to strike the plaintiff’s action.” (Flatley v. Mauro (2006) 39
Cal.4th 299, 320 (Flatley).)
      For purposes of both prongs of an anti-SLAPP motion, “[t]he court
considers the pleadings and evidence submitted by both sides, but does not
weigh credibility or compare the weight of the evidence. Rather, the court’s
responsibility is to accept as true the evidence favorable to the plaintiff ….”
(HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212.)
With respect to the second prong, “in order to establish the requisite
probability of prevailing (§ 425.16, subd. (b)(1)), the plaintiff need only have
‘ “stated and substantiated a legally sufficient claim.” ’ [Citations.] ‘Put
another way, the plaintiff “must demonstrate that the 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.” ’ ” (Navellier v. Sletten (2002) 29 Cal.4th 82, 88–89.)
      “Review of an order granting or denying a motion to strike under
section 425.16 is de novo. [Citation.] [Like the trial court, we] consider ‘the
pleadings, and supporting and opposing affidavits ... upon which the liability
or defense is based.’ (§ 425.16, subd. (b)(2).)” (Soukup v. Law Offices of
Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.) Our de novo review “includes
whether the anti-SLAPP statute applies to the challenged claim.” (Thomas v.
Quintero (2005) 126 Cal.App.4th 635, 645.) “[W]e apply our independent
judgment to determine whether” the claim arises from acts done in

                                       14
furtherance of the defendants’ “right of petition or free speech in connection
with a public issue.” (Ibid.) “Assuming these two conditions are satisfied, we
must then independently determine, from our review of the record as a whole,
whether [the plaintiffs have] established a reasonable probability that [they
will] prevail on [their] claims.” (Ibid.)
                                            II
                                     Analysis
                                            A
                    First Prong of the Anti-SLAPP Analysis
      The plaintiffs do not challenge the trial court’s finding that their
allegations against Austin concern protected petitioning activity. Rather,
they argue that the anti-SLAPP statute does not apply to Austin’s conduct
because the activity, which they describe as “filing applications with State
and City cannabis licensing agencies with false and fraudulent information,”
is illegal as a matter of law. They make their argument in three parts.
      First, they assert that the alleged conduct is illegal because the CUP
applications prepared by Austin contained false information, in violation of
Penal Code sections 115 and 118. Next, the plaintiffs contend, without
making any connection to Austin, that Razuki and Malan’s cannabis
operations are illegal as a matter of law because those defendants evaded
their tax obligations. Finally, the plaintiffs assert that Austin’s conduct was
illegal because Business and Professions Code section 26057 strictly
precludes regulators from granting CUPs to applicants who have been
sanctioned in the prior three years for engaging in “unauthorized commercial
cannabis activities.” (Bus. & Prof. Code, § 26057, subd. (a).) None of these
arguments support reversal of the judgment entered in favor of Austin.

                                        15
      As an initial matter, as Austin points out in her brief, the plaintiffs
make two new arguments that were not presented in the trial court. They
assert for the first time on appeal that Austin’s conduct was not protected by
the anti-SLAPP statute because it violated Penal Code section 118 and
because Razuki and Malan evaded their tax obligations. “Failure to raise
specific challenges in the trial court forfeits the claim[s] on appeal. ‘ “ ‘[I]t is
fundamental that a reviewing court will ordinarily not consider claims made
for the first time on appeal which could have been but were not presented to
the trial court.’ Thus, ‘we ignore arguments, authority, and facts not
presented and litigated in the trial court. ... “Appellate courts are loath to
reverse a judgment on grounds that the opposing party did not have an
opportunity to argue and the trial court did not have an opportunity to
consider.” ’ ” (Premier Medical Management Systems, Inc. v. California Ins.
Guarantee Assn. (2008) 163 Cal.App.4th 550, 564.) Because these arguments
were not presented in the trial court, we decline to consider them for the first
time here.
      The plaintiffs have also not established that the trial court erred by
finding that Austin’s conduct was unprotected by the anti-SLAPP statute
because it was illegal, as a matter of law, under either Penal Code section 115
or Business and Professions Code section 26057. Penal Code section 115
states, “[e]very person who knowingly procures or offers any false or forged
instrument to be filed, registered, or recorded in any public office within this
state, which instrument, if genuine, might be filed, registered, or recorded
under any law of this state or of the United States, is guilty of a felony.” If
Austin (or her law firm) had conceded that she submitted false
documentation to the regulatory authorities or some evidence in the record
conclusively established such conduct, we might agree with plaintiffs that

                                         16
Austin’s alleged conduct fell outside the protection of section 425.16. (See
Flatley, supra, 39 Cal.4th at p. 320.)
      However, no such concession or conclusive evidence exists in this case.
In her unrebutted declaration in support of the anti-SLAPP motion, Austin
states that she was not involved in the CUP applications for the Ramona or
the Lemon Grove properties and that the application she prepared for the
Federal property was abandoned when the CUP for the neighboring property
was granted. Further, she states that her involvement in the CUP
application for the Balboa Property was limited to helping Michael Sherlock’s
attorney with the initial application.
      In response to this evidence, the plaintiffs point to one statement by
Austin in a declaration submitted in Razuki II, which was not submitted in
the trial court in this case. In the declaration, Austin states that “[t]he
Bureau of Cannabis Control (“BCC”) requires all owners[, as the term is
defined by regulation,] to submit detailed information to the BCC as part of
the licensing process.” The plaintiffs contend this statement shows Austin
knew that she was required to disclose Geraci’s and Razuki’s ownership
interests, and that she knowingly failed to do so.
      Even if this evidence had been before the trial court, it does not show
Austin knowingly filed a false CUP application for the Federal property (or
any other property); indeed, the plaintiffs do not describe Austin’s role in the
applications at all, instead making only a bare accusation that she submitted
false information. Austin’s declaration in the Razuki II case establishes only
that Austin was aware of regulatory disclosure requirements. It does not
show that her involvement in the various CUP applications constituted
unlawful conduct that falls outside of anti-SLAPP protection. (See Contreras
v. Dowling (2016) 5 Cal.App.5th 394, 399 [“Bare allegations of aiding and

                                         17
abetting or conspiracy do not suffice to remove these acts from the protection
of the statute.”] (Contreras).) Further, the plaintiffs provided no evidentiary
support to counter Austin’s statement that she had no involvement in the
CUP applications for the Ramona property or the Lemon Grove property and
that her only involvement in the Balboa property CUP application was to
assist Michael Sherlock. In sum, the plaintiffs have not shown any conduct
that was illegal as a matter of law under Penal Code section 115.
      Plaintiffs’ argument that the alleged conduct is illegal as a matter of
law because it violates Business and Professions Code section 26057 is also
not persuasive. They contend the statute flatly precludes regulators from
issuing a license to someone who has previously engaged in unlawful
commercial cannabis activity, and that Razuki and Geraci have both run
afoul of this rule. The statute, however, gives the regulator discretion to deny
licensure. It does not mandate denial. The provision, which was initially
adopted by the electorate in 2016 under Proposition 64, is part of “a
comprehensive regulatory structure in which every marijuana business is
overseen by a specialized agency with relevant expertise.” (Control, Regulate
and Tax Adult Use of Marijuana Act, 2016 Cal. Legis. Serv. Prop. 64.)
      The law requires state licensure of all marijuana businesses by the
State’s Department of Cannabis Control. To this end, subdivision (a) of
Business and Professions Code section 26057 states that the department
“shall deny an application if either the applicant, or the premises for which a
state license is applied, do not qualify for licensure under this division.”
Subdivision (b), in turn, states that “[t]he department may deny the
application for licensure or renewal of a state license if any of the following
conditions apply,” and lists ten conditions that can form a basis for the
denial. Relevant here, subdivision (b)(7) allows for denial of a license if “[t]he

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applicant, or any of its officers, directors, or owners, has been sanctioned by
the department, the Bureau of Cannabis Control, the Department of Food
and Agriculture, or the State Department of Public Health or a city, county,
or city and county for unauthorized commercial cannabis activities, has had a
license suspended or revoked under this division in the three years
immediately preceding the date the application is filed with the department.”
      The plaintiffs argue that subdivision (a) of Business and Professions
Code section 26057 mandates the denial of a license if one of the conditions
set forth in subdivision (b) of the statute exists. However, the plain language
of the statutes does not support this interpretation. Rather, the provision the
conditions are found in, subdivision (b), states clearly that the existence of
one of the listed conditions “may” support denial of an application for
licensure. Thus, denial is permissive, not mandatory. Further, even if the
statute required the state agency to deny licensure, the plaintiffs have not
explained how this would make Austin’s conduct (i.e. assisting with a CUP
application that was never granted) illegal as a matter of law.
      Accordingly, these arguments do not support reversal of the trial
court’s finding that Austin’s conduct falls within the protection afforded by
the anti-SLAPP statute.
                                        B
                  Second Prong of the Anti-SLAPP Analysis
      The plaintiffs also argue that the trial court erred by “finding that
[they] presented no evidence” that Austin and her firm filed CUP applications
without disclosing the actual owners of the property, conduct they call the
“Strawman Practice.” Specifically, they assert that “Austin did not dispute
and admitted that ALG undertakes the Strawman Practice” and therefore no
evidence was required to support this fact. In addition, they repeat their

                                       19
argument that Austin’s alleged conduct was illegal as a matter of law and,
quoting Lewis & Queen v. N.M. Ball Sons (1957) 48 Cal.2d 141 (Lewis), assert
the trial court had a “ ‘duty to ascertain the true facts’ ” regardless of their
evidentiary submissions.
      The plaintiffs’ contention that Austin admitted she acted illegally is not
supported by the record before this court. As Austin points out in her
briefing, the plaintiffs do not provide any citation to the record to support
their assertion that she conceded any illegal conduct. It is the plaintiff’s
burden to show a probability of prevailing on the merits of their claims once
the defendant has shown the alleged conduct is protected by the anti-SLAPP
statute. Because the plaintiffs have provided no support for their assertion
that Austin conceded the illegality of her conduct, we have no basis to reverse
the trial court’s judgment on this ground. (See Hill v. Affirmed Housing
Group (2014) 226 Cal.App.4th 1192, 1200 [argument on appeal deemed
abandoned by failure to present relevant factual analysis and legal
authority].)
      The plaintiffs additional arguments related to the second prong of the
anti-SLAPP analysis also do not provide a basis for reversal. As discussed in
the preceding section, the plaintiffs have not shown Austin’s alleged conduct
is illegal as a matter of law. And their argument that the trial court had an
independent duty to ascertain the truth of the allege conduct misstates the
law. The anti-SLAPP statute places the burden on the plaintiffs to show a
probability of prevailing on the merits of their claims. (See Contreras, supra,
5 Cal.App.5th at p. 405 [“ ‘ “[T]he plaintiff ‘must demonstrate that the
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.’ ” ’ ”].) This procedure is not akin to the analysis at

                                         20
issue in Lewis, which involved a plaintiff subcontractor attempting to enforce
an illegal contract it made with the defendant. (Lewis, supra, 48 Cal.2d at
pp. 147‒148.)
      In Lewis, the California Supreme Court rejected the plaintiff’s
argument that the defendant’s admission in its answer that plaintiff had
furnished certain equipment under the contract prevented the trial court
from reaching the issue of the contract’s illegality. (Lewis, supra, 48 Cal.2d
at pp. 147‒148.) In its holding, the court stated, “[w]hatever the state of the
pleadings, when the evidence shows that the plaintiff in substance seeks to
enforce an illegal contract or recover compensation for an illegal act, the court
has both the power and duty to ascertain the true facts in order that it may
not unwittingly lend its assistance to the consummation or encouragement of
what public policy forbids.” (Ibid.) Contrary to the plaintiffs’ argument, this
statement concerning the illegality of a contract has no bearing on whether
the plaintiffs here met their burden on the second step of the anti-SLAPP

analysis.8
      The plaintiffs have failed to show the trial court erred in finding they
had not met their burden to show a probability of prevailing on their claims
against Austin.

8      The plaintiffs’ reply brief contains several new arguments, including an
assertion that Austin’s contracts with her clients are illegal and
unenforceable under Lewis and similar cases. This argument, and the
plaintiffs’ other new contentions, are not tethered to the anti-SLAPP analysis
at issue and consist of unsupported assertions of wrongdoing. These
arguments are forfeited and our discussion of the issues is limited
accordingly. (See High Sierra Rural Alliance v. County of Plumas (2018) 29
Cal.App.5th 102, 111, fn. 2 [“New arguments may not be raised for the first
time in an appellant’s reply brief.”].)
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                             DISPOSITION
     The judgment is affirmed. Respondents are awarded their costs of
appeal.

                                                       McCONNELL, P. J.

WE CONCUR:

HUFFMAN, J.

CASTILLO, J.

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