Court Opinion

ID: 2798645
Source: CourtListenerOpinion
Date Created: 2015-05-05 16:33:47.939504+00
Date Added: 2024-06-11T11:29:28.735160
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

THE BASEBALL CLUB OF TACOMA,                     NO. 71792-8-1
a Washington limited liability company,
                                                 DIVISION ONE
                       Respondent,

                v.

SDL BASEBALL PARTNERS, LLC, a                                                      O

Nevada limited liability company,                                                  (J
ROBERT J. SCHLEGEL and
ROBERT K. SCHLEGEL,                              PUBLISHED OPINION

                      Appellants,                FILED: May 4, 2015

                and

MIKALTHOMSENand
AARON ARTMAN,
                       Respondents.

       Lau, J. —After purchasing the Tacoma Rainiers minor league baseball team from

SDL Baseball Partners LLC (SDL),1 The Baseball Club of Tacoma (TBCOT) filed a

complaint alleging, among other things, breach of contract and fraud. SDL filed several

counterclaims and third party claims. TBCOT responded with a special motion to strike

           We refer to SDL Baseball Partners LLC and the Schegels as SDL in this
opinion.
71792-8-1/2

these claims under Washington's anti-SLAPP statute.2 The trial court granted the

motion, concluding that the counterclaims and third party claims "tread" on TBCOT's

complaint. But because the thrust or gravamen of SDL's counterclaims and third party

claims relies primarily on alleged prelitigation conduct—rather than TBCOT's

complaint—we conclude that TBCOT failed to establish that SDL's counterclaims were

"based on" protected activity and reverse and remand with instructions to reinstate

SDL's counterclaims and third party claims.

                                            FACTS

       This case involves a contract dispute. In 2010, SDL Baseball Partners LLC,

Robert J. Schlegel, and Robert K. Schlegel, decided to sell the Tacoma Rainiers3 and

assets related to the team and stadium. The Baseball Club of Tacoma, led by Mikal

Thomsen (third party defendant below), offered to buy the team, and the parties signed

a purchase and sale agreement on January 31, 2011. Under the agreement, the

purchase price included a $16,500,000 payment to be made at closing and a

percentage of the Rainiers' earnings before interest, taxes, depreciation, and

amortization in the first four fiscal years with the option to extend for an additional fifth

year. These additional payments are known as "Earn-Out" payments.

       The agreement also stated that TBCOT "shall rely" on SDL's financial

statements, "which need not be audited." Clerk's Papers (CP) at 511. SDL represented

the truth and accuracy of those statements and warranted that they had been prepared

in conformity with generally accepted accounting principles (GAAP). The agreement

      2 Washington Act Limiting Strategic Lawsuits Against Public Participation.
      3The "Tacoma Rainiers" is a minor league baseball team that plays in the Pacific
Coast League and is the Triple-A affiliate of the Seattle Mariners.
                                              -2-
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required that SDL reimburse TBCOTfor any damages resulting from "any breach of any

representation or warranty made in . . . this Agreement." CP at 396.

       After acquiring the Rainiers, TBCOT discovered alleged accounting errors and

errors in SDL's financial statements. For instance, TBCOT claimed that SDL failed to

prepare their financials in conformity with GAAP, as represented in the purchase

agreement, and financial statements misrepresented the financial performance of the

business.

       TBCOT filed suit against SDL in July 2012, alleging breach of contract, breach of

implied duty of good faith and fair dealing, fraud, and negligent misrepresentation. SDL

filed their initial answer and counterclaims in August 2012. The counterclaims

requested a declaratory judgment limiting TBCOT's remedy to the terms of the

agreement and alleging that TBCOT's fraud claim was frivolous and advanced without

reasonable cause under RCW 4.84.185. In September 2013, SDL filed an amended

answer and asserted affirmative defenses and counterclaims. SDL also alleged third

party claims against TBCOT officers Mikal Thomsen and Aaron Artman. SDL asserted

five new counterclaims in addition to the two previously alleged—breach of duty of good

faith and fair dealing, fraud (fraud in the inducement, fraud by omission), negligent

misrepresentation, civil conspiracy, and conversion.

       In February 2014, TBCOT and third party defendants filed a special motion to

strike SDL's counterclaims4 pursuant to RCW 4.24.525, Washington's anti-SLAPP

statute. TBCOT argued that SDL's "claims are based entirely on TBCOT's filing of this

       4In response to the special motion to strike, SDL voluntarily dismissed without
prejudice its counterclaim that TBCOT's fraud claim was frivolous.
71792-8-1/4

lawsuit. . . ," and because defendants could not show a probability of prevailing on their

claims, those claims should be dismissed. The trial court granted the motion to strike,

explaining that "the thrust of the counterclaims and third party complaints do tread on

protected activity, that being the filing of the lawsuit or the out of court complaints that

formed the basis for and are really part and parcel of the lawsuit."5 Report of

Proceedings (RP) (Mar. 14, 2014) at 22. The trial court dismissed SDL's counterclaims

and third party claims with prejudice. As required by statute,6 the trial court ordered

SDL to pay reasonable attorney fees, costs, and a $10,000 penalty to each of TBCOT,

Thomsen, and Artman. SDL appeals.

                                         ANALYSIS7

       Standard of Review

       We review a trial court's ruling on a special motion to strike pursuant to the anti-

SLAPP statute de novo. Alaska Structures. Inc. v. Hedlund. 180 Wash. App. 591, 597,

323P.3d 1082(2014).

        5 We note that the trial court did not have the benefit of our opinion in Alaska
Structures. Inc. v. Hedlund, 180 Wash. App. 591, 323, P.3d 1082 (2014), decided after its
ruling on the motion to strike.
        6 The anti-SLAPP statute requires courts to award litigation costs, attorney fees,
and $10,000 to any party that prevails on a special motion to strike. RCW
4.24.525(6)(a)(i)-(ii).
       7On January 20, 2015, the Washington Supreme Court heard oral argument in
Davis v. Cox. 180 Wash. App. 514, 325 P.3d 255 (2014). The principle issue, among
others, is the constitutional validity of the anti-SLAPP statute. The Supreme Court also
heard oral argument but stayed three additional anti-SLAPP cases pending a decision
in Davis: Dillon v. Seattle Deposition Reporters. LLC. 179 Wash. App. 41. 316 P.3d 1119
(2014), review granted. 180 Wash. 2d 1009, 325 P.3d 913 (2014), Akrie v. Grant. 178 Wn.
App. 506, 315 P.3d 567 (2014), review granted. 180 Wash. 2d 1008, 325 P.3d 913 (2014),
Hennev.Citv of Yakima. 177 Wash. App. 583, 313 P.3d 1188 (2013) review granted. 179
Wash. 2d 1022 (2014). and Alaska Structures, Inc. v. Hedlund. 180 Wash. App. 591, 323
P.3d 1082 (2014).
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       Applicability of the Anti-SLAPP Statute

       In response to "Strategic Lawsuits Against Public Participation" or "SLAPPs," the

legislature passed an anti-SLAPP statute aimed at promptly disposing of "lawsuits

brought primarily to chill the valid exercise of the constitutional rights of freedom of

speech and petition for the redress of grievances." Laws of 2010, ch. 118 § 1(a).

Whether a court strikes a claim under the statute depends on a two-step analysis. First,

the "moving party bringing a special motion to strike a claim . . . has the initial burden of

showing by a preponderance of the evidence that the claim is based on an action

involving public participation and petition." RCW 4.24.525(4)(b). A court reviews "the

pleadings, declarations, and other supporting documents to determine whether the

gravamen of the underlying claim is based on protected activity." Hedlund. 180 Wn.

App. at 597. Ifthe moving party fails to "make an initial prima facie showing that the

[non-moving party's] suit arises from an act in furtherance of the [moving party's] right of

petition," the motion to strike should be denied. Hedlund. 180 Wash. App. at 597.

Second, if the moving party is successful, "the burden shifts to the responding party to

establish by clear and convincing evidence a probability of prevailing on the claim. If

the responding party meets this burden, the court shall deny the motion." RCW

4.24.525(4)(b).

       As to the first step, SDL relies on Hedlund to argue that private contract disputes

are exempt from the anti-SLAPP statute. We disagree. Nevertheless, we conclude that

TBCOT failed to show that SDL's counterclaims "arisen from an act in furtherance of

[TBCOT's] right of petition." Hedlund. 180 Wash. App. at 597 (emphasis added).
71792-8-1/6

California courts have noted that a breach of contract claim can constitute protected

activity for purposes of the anti-SLAPP statute:

       [P]laintiffs strenuously insist that this is "a garden variety breach of
       contract and fraud claim" not covered by [the anti-SLAPP statute].. . .
       [W]e have declined to hold 'that [the anti-SLAPP statute] does not apply to
       events that transpire between private individuals'....

              . . . Nothing in the statute itself categorically excludes any particular
       type of action from its operation . . . [CJonduct alleged to constitute breach
       of contract may also come within constitutionally protected speech or
       petitioning. The 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.

Navellierv.Sletten. 29 Cal. 4th 82, 90-92, 52 P.3d 703, 124 Cal. Rptr. 2d 530
(2002).8

       Therefore, TBCOT's filing of a complaint in superior court is a protected action

under the statute. The statute protects an "action involving public participation and

petition," which is further defined as "[a]ny oral statement made, or written statement or

other document submitted, in a . . .judicial proceeding . . . ." RCW4.24.525(2)(a).

Further, "It is well established that filing a lawsuit is an exercise of a party's

constitutional right of petition." Chavez v. Mendoza. 94 Cal. App. 4th 1083, 1087, 114
Cal. Rptr. 2d 825 (2001). To hold that private contract disputes are exempt from the

anti-SLAPP statute contradicts the legislature's instruction that it be "construed liberally

to effectuate its general purpose of protecting participants . .. from an abusive use of

the courts." Laws of 2010, Ch. 118, §3.

       8 "Washington's 2010 anti-SLAPP statute was patterned after California's anti-
SLAPP statute. Thus, we can look to California cases for aid in interpreting the act."
Spratt v. Toft. 180 Wash. App. 620, 630-31, 324 P.3d 707 (2014) (footnote omitted).
                                              -6-
71792-8-1/7

      Although TBCOT's complaint is protected activity for purposes of the anti-SLAPP

statute, SDL may properly file legitimate counterclaims. See, e.g., Navellier. 29 Cal. 4th

at 92-93 ("That contract and fraud claims are not categorically excluded from the

operation of the anti-SLAPP statute does not mean .. . that Sletten therefore cannot be

sued . . . ."). The fundamental inquiry is whether SDL's counterclaims are "based on"

TBCOT's protected activity and therefore within the scope of the anti-SLAPP statute.

"To determine whether a pleaded cause of action falls within the ambit of Washington's

anti-SLAPP statutes, the trial court must decide whether the claim targets activity

involving public participation and petition. To properly do so, the trial court must focus

on the principal thrust or gravamen of the claim." Davis v. Cox. 180 Wash. App. 514, 523,

325 P.3d 255 (2014) (footnote omitted). In evaluating the thrust or gravamen of an

alleged SLAPP, we consider the pleadings and supporting and opposing affidavits,

viewing the facts and all reasonable inferences therefrom in the light most favorable to

the nonmoving party—in this case, SDL. Davis. 180 Wash. App. at 528. Here, the

specific nature of SDL's counterclaims indicates that the thrust or gravamen of the

claims does not target TBCOT's complaint. Rather, SDL properly asserts claims arising

from alleged prelitigation conduct related to the contract.

       In support of its special motion to strike, TBCOT relies primarily on SDL's

amended answer. In their amended answer, SDL alleged that the officers of TBCOT

complained about various aspects of the purchase transaction. For example, "[w]hen

the Team did not make as much money as Third Party Defendants expected, they

began to complain that they were misled about the Team's finances . . . ." CP at 117.
71792-8-1/8

TBCOT relied in particular on paragraphs 16 and 19 of the statement of facts underlying

SDL's counterclaims, which provide in part:

      Third Party Defendants [Thomsen and Artman, officers of TBCOT] have
      manufactured their complaints about the Team's finances and value in
      order to avoid paying Defendants the earn-out as required by the
      Purchase Agreement. Third Party Defendants' claims are part of a
      scheme orchestrated in order to set up Defendants and avoid paying the
      earn-out altogether. . . .

             ... In short, Third Party Defendants want to use Defendants as
      scapegoats with their investors, and they made sure when they bought the
      team that they structured the deal in a way that would allow them the
      opportunity and means to do just that.

CP at 118-19. TBCOT argues the "complaints" SDL identify in their amended answer

are all found in TBCOT's complaint. TBCOT therefore concludes, SDL's counterclaims

are "based on" TBCOT's protected petitioning activity.

      We disagree. The thrust or gravamen of SDL's counterclaims is based on

prelitigation conduct and any reference to TBCOT's complaint is merely incidental to

those claims. For example, SDL's first counterclaim seeks a declaratory judgment

limiting TBCOT's remedy in the action to the remedies described in the purchase

agreement. In Davis, members of a food cooperative sought a permanent injunction to

prevent cooperative directors from continuing a boycott of Israeli-made products and

divestment from Israeli companies. The directors moved successfully to strike the

members' complaint. To determine the principle thrust or gravamen of the members'

claim, we noted that consideration of the remedy sought is instructive. Because the

nonviolent elements of boycotts are protected by the First Amendment, we concluded

that the principle thrust of the members' lawsuit "is to make the Directors cease in

engaging in activity protected by the First Amendment." Davis, 180 Wash. App. at 530.
                                           -8-
71792-8-1/9

We also concluded the boycott was lawful and an issue of public concern. We affirmed

the trial court's order and concluded that the directors established that the members'

claims targeted protected activity. Unlike in Davis. SDL's claim for declaratory judgment

relief does not target TBCOT's petitioning activity. SDL sought to clarify the scope of

TBCOT's relief based on the agreement.

       SDL's other claims arise from alleged conduct independent from the litigation. In

its third counterclaim, SDL alleged that TBCOT "breached its duty of good faith and fair

dealing by operating the Acquired Business in a manner that effectively denies any

additional earn-out consideration to defendant SDL Baseball Partners, LLC." CP at

120. SDL supports this claim by alleging that TBCOT reduced marketing investments

and made excessive distributions to its members. The alleged conduct giving rise to

this claim occurred prior to the litigation. The claim relies on TBCOT's alleged deficient

performance of contractual obligations, not on TBCOT's filing of the complaint.

Similarly, SDL's counterclaims for fraud and misrepresentation are based on

prelitigation conduct. In support of its opposition to TBCOT's special motion to strike,

SDL submitted the declaration of Robert J. Schlegel.9 His allegations formed the basis

for these counterclaims.

       Third Party Defendants also made several representations to the
       Schlegels which the Schlegels relied on by rejecting other offers, selling
       the Team to TBCOT, and structuring the sale with a future "earn-out"
       provision. Third Party Defendants represented that SDL Partners would
       receive the "earn-out" payments on the terms set forth in the Purchase
       Agreement. Had Defendants known that Third Party Defendants never
       really ever intended to pay the "earn-out," they would not have sold the
       Team to TBCOT. Third Party Defendants also represented and
       Defendants expected that Third Party Defendants would run the Team

       9 Schlegel is an owner of SDL Partners.
                                            -9-
71792-8-1/10

       well, report financial information in good faith, not manipulate the financial
        books and records of the Team for their benefit, and deal with them in
       good faith and fairly. Defendants also relied on Third Party Defendants'
       representations that they would market the Team in order to promote
       ticket sales, but instead Third Party Defendants reduced the Team's
       marketing budget and marketing efforts, which further impaired the
       Schlegels' opportunity to receive their "earn-out" payments. All of these
       misrepresentations have damaged the Schlegels because they have
       received far less than what TBCOT and Third Party Defendants committed
       to pay, as well as what they led the Schlegels to believe would be paid.

CP at 204. Viewing the facts in the light most favorable to SDL, these allegations

demonstrate that the thrust or gravamen of SDL's counterclaims is based on alleged

representations made by TBCOT and TBCOT's subsequent performance of contractual

obligations. The counterclaims do not arise from TBCOT's protected petitioning activity,

but from conduct that allegedly occurred well before any contract litigation. This is

sufficient to survive a motion to strike pursuant to the anti-SLAPP statute. See, e.g.,

Navellier, 29 Cal. 4th at 93 ("[The anti-SLAPP statute] subjects to potential dismissal

only those actions in which the plaintiff cannot 'state[] and substantiatef] a legally

sufficient claim.'. . . [T]he statute poses no obstacle to suits that possess minimal

merit.").

        In fact, both the trial court and TBCOT's counsel correctly noted that at least

some of SDL's counterclaims could have been brought independently.10 RP (Mar. 14,

         10 SDL's act of filing its counterclaims is protected activity under the anti-SLAPP
statute because the "constitutional right of petition encompasses ... the basic act of
filing litigation." Navellier, 29 Cal. 4th at 90. We note that TBCOT's theory in this case
would endorse a race to the courthouse. For example, if SDL had filed a lawsuit first
alleging that TBCOT manipulated the level of earnings to avoid earn out payments
(under a breach of duty of good faith and fair dealing theory) and TBCOT
counterclaimed that through its lawsuit, SDL sought to avoid the result of its own
misrepresentation of finances and sale value, under TBCOT's standard, TBCOT would
be subject to anti-SLAPP consequences—having its counterclaims stricken and fees
                                            -10-
71792-8-1/11

2014) at 13-14. At oral argument before this panel, TBCOT suggested that whether

SDL's claims could be brought independently is irrelevant because the mere fact that

SDL brought these claims in reaction to TBCOT's complaint is itself evidence that the

counterclaims are based on protected petitioning activity. We disagree. "[T]he mere

fact that an action was filed after protected activity took place does not mean the action

arose from that activity for the purposes of the anti-SLAPP statute. Moreover, that a

cause of action arguably may have been 'triggered' by protected activity does not entail

that it is one arising from such." Navellier, 29 Cal. 4th at 89 (citation omitted).

       In sum, SDL's counterclaims are based on allegations that TBCOT made

misrepresentations during the negotiation process and failed to sufficiently perform its

contractual obligations. Accordingly, we conclude TBCOT failed to establish that SDL's

counterclaims "achieve the objective of a SLAPP suit—to interfere with and burden

[TBCOT's] exercise of [its] rights." Navellier. 29 Cal. 4th at 93. TBCOT's motion to

strike hinges almost entirely on SDL's mere references to TBCOT's complaint in SDL's

amended answer. A review of SDL's counterclaims indicate that these references are

incidental to the thrust of the counterclaims. These counterclaims encompass alleged

prelitigation conduct. As we explained in Dillon v. Seattle Deposition Reporters, LLC,

179 Wash. App. 41,316P.3d 1119(2014). review granted. 180Wn.2d 1009, 325 P.3d
913(2014):

and penalties imposed. Adoption of TBCOT's standard is contrary to the case authority
discussed above and renders any legitimate counterclaims subject to an anti-SLAPP
motion to strike. The unique remedies available under this statute are not merely
another weapon in the arsenal of litigation.
                                             -11-
71792-8-1/12

       "[A] defendant in an ordinary private dispute cannot take advantage of the anti-
       SLAPP statute simply because the complaint contains some references to
       speech or petitioning activity by the defendant.". . .
                      . . . [W]hen the allegations referring to arguably protected activity
              are only incidental to a cause of action based essentially on nonprotected
              activity, collateral allusions to protected activity should not subject the
               cause of action to the anti-SLAPP statute.

Dillon. 179 Wash. App. at 71-72 (guoting Martinez v. Metabolife Int'l. Inc.. 113 Cal. App.
4th 181, 188, 6 Cal. Rptr. 3d 494 (Cal. App. 2003)). Here, as in Dillon, the references to

TBCOT's complaint are collateral allusions irrelevant to the gravamen of SDL's

counterclaims.

       Because we conclude that under the circumstances here, TBCOT failed to meet

its initial burden of showing by preponderance of the evidence that SDL's counterclaims

are based on protected activity, we do not address the second prong—whether SDL

can show a probability of prevailing on their counterclaims by clear and convincing

evidence.11 Our ruling is limited to the conclusion that TBCOT fails to meet its initial

burden under the anti-SLAPP statute and does not preclude the trial court from

determining the sufficiency of SDL's counterclaims on appropriate motions including

summary judgment. See, e.g., Hedlund, 180 Wash. App. at 603. The trial court erred in

striking SDL's pleadings under the anti-SLAPP statute.

       Finally, the anti-SLAPP statute awards mandatory fees and costs to the

prevailing party. RCW 4.24.525(6). "[W]here a prevailing party is entitled to attorney

       11 TBCOT relies on Albergo v. Immunosvm Corp.. 2011 WL 197580 (S.D. Cal,
Jan. 20, 2011). There plaintiffs claimed they were induced to enter into contracts. They
filed suit alleging, among other claims, fraud and fraud in the inducement. Defendants
counterclaimed alleging four claims including fraud. Albergo is not persuasive. As
discussed above, under Washington law, the thrust or gravamen of SDL's
counterclaims relate to matters that implicate prelitigation conduct and any reference to
TBCOT's complaint is merely incidental to those claims.
                                            -12-
71792-8-1/13

fees below, they are entitled to attorney fees if they prevail on appeal." Sharbono v.

Universal Underwriters Ins. Co.. 139 Wash. App. 383, 423, 161 P.3d 406 (2007).

Because we reverse the trial court's order granting TBCOT's special motion to strike,

we also reverse the trial court's award of attorney fees, costs, and mandatory statutory

penalties.

                                     CONCLUSION

       We reverse and remand with instructions to reinstate SDL's counterclaims and

third party claims.

WE CONCUR:

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