Court Opinion

ID: 9409098
Source: CourtListenerOpinion
Date Created: 2023-07-14 21:04:27.471651+00
Date Added: 2024-06-11T17:20:48.665573
License: Public Domain

Filed 7/14/23 Fulfillco v. LC&K Investment CA1/3
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                DIVISION THREE

 FULFILLCO, INC.,
             Plaintiff and Appellant,                                    A165189
 v.
 LC&K INVESTMENT, LLC,                                                   (Alameda County
             Defendant and Respondent.                                   Super. Ct. No. HG21104667)

         Fulfillco, Inc. (plaintiff) sued LC&K Investment, LLC (defendant), and
the trial court later granted defendant’s special motion to strike the
complaint. (Code Civ. Proc., § 425.16; undesignated statutory references are
to this code.) Plaintiff appeals, and we affirm.
                                                  BACKGROUND
         In 2018, defendant leased its Union City warehouse to Conway
Ventures, Inc. (Conway) in exchange for monthly rent of $51,748.1
Paragraphs 12.2 and 12.3 of the lease authorized Conway to — under certain
conditions — assign the lease and sublease the property; if Conway failed to
pay rent, defendant could seek payment from the assignee or subtenant. In
2019, Conway assigned the lease to plaintiff, which began paying rent to
defendant. Soon thereafter, plaintiff entered into a written agreement with

        Our factual recitation is not intended to be exhaustive, but rather to
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place the issues before us in context.
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Choice Logistics, Inc. (Choice) whereby plaintiff would provide logistical
services — storage, warehousing, and transportation — for a fee. Choice
could terminate the agreement for any reason with 30-days’ notice.
      Around May 2020, plaintiff stopped paying rent. Several months later,
defendant filed an unlawful detainer action against plaintiff and Conway
seeking $545,337 in unpaid rent. (Choice eventually learned about the
lawsuit.) Plaintiff failed to answer the complaint, and defendant requested
entry of default; while waiting for the trial court to enter plaintiff’s default,
defendant learned of plaintiff’s agreement with Choice.2 Defendant believed
Choice was plaintiff’s subtenant, that the lease permitted it to collect rent
from a subtenant in the event of the tenant’s failure to pay rent, and that
plaintiff would continue failing to pay rent. Defendant was also “[l]ooking for
a way to mitigate its damages.”
      In January 2021, defendant’s counsel sent Choice a letter asserting
plaintiff and Conway had breached the lease by failing to pay more than
$500,000 in rent. The letter demanded Choice — as plaintiff’s sublessee —
send payments associated with its occupancy of the warehouse to defendant
under paragraph 12.3 of the lease. If Choice failed to do so, defendant would
seek to hold Choice liable for the payments. After receiving the letter, Choice
agreed to send payments to defendant. But when the trial court set aside
plaintiff’s default in the unlawful detainer action, Choice reneged on its
promise. In February, Choice terminated its agreement with plaintiff. Three
months later, defendant filed a lawsuit against plaintiff and Choice for
breach of contract stemming from the unpaid rent.

      2 The trial court entered plaintiff’s default in the unlawful detainer
action in February 2021.
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      This litigation followed. Plaintiff sued defendant for intentional and
negligent interference with contractual relations and tortious interference
with prospective economic advantage. The complaint alleged defendant’s
counsel induced Choice to breach its contract with plaintiff in January 2021
by falsely claiming Choice was plaintiff’s subtenant and demanding Choice
redirect payments to defendant. According to the complaint, defendant’s
counsel also interfered with, and disrupted, plaintiff’s business relationship
with Choice.
      Defendant filed a special motion to strike (§ 425.16). The motion
asserted plaintiff’s claims arose out of the January 2021 letter — a
communication made in anticipation of litigation — and the litigation
privilege barred plaintiff’s claims. In opposition, plaintiff argued the conduct
giving rise to the complaint was not protected speech; plaintiff also suggested
it had a probability of prevailing but did not counter the contention that the
litigation privilege barred the claims. In a supporting declaration, plaintiff’s
counsel stated Choice’s attorney told her Choice was concerned about the
unlawful detainer action defendant had filed against plaintiff and that
defendant’s counsel had “badgered” Choice to redirect its payments to
defendant. Plaintiff’s counsel later learned Choice had declined to renew its
agreement with plaintiff because it “did not want to become involved in a
dispute” with defendant. Plaintiff’s principal officer provided a declaration
referring to the letter and describing the “harm and damage” caused by
defendant’s “interference.”
      The trial court granted the special motion to strike. It first determined
defendant established the complaint arose out of protected activity — the
letter. As the court observed, defendant anticipated bringing litigation
against plaintiff for “default of the lease agreement”; before doing so,

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defendant endeavored to mitigate its damages by seeking payment from
Choice, which it believed was plaintiff’s subtenant. The court next concluded
plaintiff had not demonstrated a probability of prevailing because the
litigation privilege barred the claims.
                                  DISCUSSION
      Section 425.16 “provides a procedure for weeding out, at an early stage,
meritless claims arising from protected activity.” (Baral v. Schnitt (2016)
1 Cal.5th 376, 384.) Resolving a special motion to strike is a two-step
process. At the first step, the defendant must show the claim arises from
protected activity under the statute. (Ibid.) If the defendant makes this
showing, the burden shifts to the plaintiff to establish a probability of
prevailing on the merits. (Ibid.) We independently review the trial court’s
order granting a special motion to strike. (Park v. Board of Trustees of
California State University (2017) 2 Cal.5th 1057, 1067.)
      We begin by considering whether plaintiff’s claims arise out of acts in
furtherance of activity protected by section 425.16. (Monster Energy Co. v.
Schechter (2019) 7 Cal.5th 781, 788.) Oral and written statements or
writings “made before a . . . judicial proceeding,” and such statements and
writings “made in connection with an issue under consideration or review by
a . . . judicial body” constitute protected activity. (§ 425.16, subds. (e)(1), (2).)
Accordingly, numerous courts have held section 425.16, subdivision (e)
protects demand letters sent by attorneys in anticipation of litigation. (See
Malin v. Singer (2013) 217 Cal.App.4th 1283, 1293; Blanchard v. DIRECTV,
Inc. (2004) 123 Cal.App.4th 903, 918.) “A claim arises from protected activity
when that activity underlies or forms the basis for the claim.” (Park v. Board
of Trustees of California State University, supra, 2 Cal.5th at p. 1062.)

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      Here, it is undisputed the January 2021 letter to Choice was sent in
anticipation of defendant’s litigation against plaintiff and Choice. In support
of the special motion to strike, defendant offered evidence it intended to sue
plaintiff and Choice for breach of contract stemming from the unpaid rent,
and evidence the letter was an attempt to mitigate its damages before
initiating that litigation. Plaintiff’s claims undoubtedly arise out of the
letter. The complaint alleges defendant’s counsel induced Choice to breach
its contract with plaintiff by falsely claiming Choice was a subtenant and
demanding Choice redirect payments to defendant; the complaint also alleges
defense counsel interfered with — and disrupted — plaintiff’s business
relationship with Choice. Both the timing and nature of defendant’s alleged
interference coincide with the timing and content of the letter.
      In urging us to reach a contrary conclusion, plaintiff insists the
complaint doesn’t arise out of protected activity because it “says nothing
about” the letter. We are not persuaded. A plaintiff cannot avoid a special
motion to strike “by attempting, through artifices of pleading, to characterize
an action as a garden variety tort or contract claim when in fact the claim is
predicated on protected speech or petitioning activity.” (Hylton v. Frank E.
Rogozienski, Inc. (2009) 177 Cal.App.4th 1264, 1271–1272.) It is of no
moment that the complaint does not explicitly reference the letter. This case
is not like Central Valley Hospitalists v. Dignity Health (2018) 19 Cal.App.5th
203, 217–218 — not cited by plaintiff — where an unfair business practices
complaint “expressly alleged it was not based on any ‘wrongs or facts arising
from any peer review activities,’ ” and the declarations filed in opposition to
the special motion to strike clarified that the litigation concerned “business
torts,” rather than protected activity. (Id. at pp. 206, 211, 217–218, italics
added.)

                                        5
      Plaintiff’s second contention — that a trial court may not look beyond
the complaint when determining whether claims arise out of protected
activity — fares no better. “In deciding whether the arising from
requirement is met, a court considers the pleadings, and supporting and
opposing affidavits stating the facts upon which the liability or defense is
based. . . . Thus, the court is not limited to examining the allegations of the
complaint alone but rather considers the pleadings and the factual material
submitted in connection with the special motion to strike.” (Contreras v.
Dowling (2016) 5 Cal.App.5th 394, 408, internal quotation marks and
citations omitted; see also City of Cotati v. Cashman (2002) 29 Cal.4th 69,
79.) Plaintiff’s reliance on Alfaro v. Waterhouse Management Corp. (2022)
82 Cal.App.5th 26, 32 is not to the contrary. In sum, we conclude the claims
arise out of protected activity.
      We now turn to the second step of the special motion to strike
analysis — whether plaintiff has established a probability of prevailing on
its claims. At this stage, we examine whether plaintiff has stated “legally
sufficient” claims and “made a prima facie factual showing sufficient to
sustain” judgment in its favor. (Monster Energy Co. v. Schechter, supra,
7 Cal.5th at p. 788, internal quotation marks omitted.) Plaintiff cannot
satisfy its burden because the litigation privilege bars its claims. (Geragos v.
Abelyan (2023) 88 Cal.App.5th 1005, 1031.) The privilege is absolute, and it
“bars all tort cases of action except a claim of malicious prosecution.” (Ibid.)
As relevant here, the privilege applies to communications made by litigants
in judicial proceedings to achieve the objects of the litigation, so long as the
communications have a connection or logical relationship to that litigation.
(Ibid.) The privilege may apply to prelitigation communication relating “to
litigation . . . contemplated in good faith and under serious consideration.”

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(Id. at p. 1032.) An “ ‘attorney demand letter threatening to file a lawsuit if a
claim is not settled’ ” is a “ ‘classic example’ ” of a communication to “ ‘which
the privilege would attach.’ ” (Dickinson v. Cosby (2017) 17 Cal.App.5th 655,
682.)
        Defendant’s letter easily satisfies these criteria. Indeed, plaintiff
doesn’t argue otherwise. Instead, it contends the complaint arises out of
noncommunicative conduct — e.g., defendant’s act of “badgering” and
“interfering” with plaintiff’s contract with Choice. Merely relabeling the
letter and communications is insufficient to overcome the litigation privilege
(Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, 1486);
in any event, plaintiff fails to persuade us that badgering and interfering are
noncommunicative in this context. Plaintiff also suggests the litigation
privilege does not bar its claims because the complaint is not based on the
letter — according to plaintiff, the letter is merely “evidence of [defendant’s]
liability.” This argument misses the mark. As discussed above, plaintiff’s
claims are based on protected activity. Thus, the privilege applies.
        In sum, we conclude the trial court properly granted defendant’s special
motion to strike because plaintiff’s claims arise out of protected activity and
plaintiff failed to show a probability of prevailing. Having reached this
conclusion, we need not address defendant’s argument that plaintiff failed to
establish a probability of prevailing even if the litigation privilege is
inapplicable.
                                  DISPOSITION
        The order granting the motion to strike is affirmed. Defendant is
entitled to attorney fees and costs — including those incurred in this
appeal — in an amount to be determined by the trial court. (§ 425.16,
subd. (c)(1); Cal. Rules of Court, rule 8.278(a)(2).)

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                                _________________________
                                Rodríguez, J.

WE CONCUR:

_________________________
Fujisaki, Acting P. J.

_________________________
Petrou, J.

A165189

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