Court Opinion

ID: 2650800
Source: CourtListenerOpinion
Date Created: 2014-01-24 01:02:53.972621+00
Date Added: 2024-06-11T12:33:27.182233
License: Public Domain

Filed 1/23/14 First So. Capital Development v. Sheet Metal Workers’ Pension Plan etc. CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN

FIRST SOUTHERN CAPITAL                                               B239824
DEVELOPMENT CORP.,
                                                                     (Los Angeles County
         Plaintiff and Respondent,                                   Super. Ct. No. YC065531)

         v.

SHEET METAL WORKERS’ PENSION
PLAN OF SOUTHERN CALIFORNIA,
ARIZONA AND NEVADA et al.,

         Defendants and Appellants.

         APPEAL from an order of the Superior Court of Los Angeles County, Cary
Nishimoto, Judge. Affirmed.
         Gilbert & Sackman, Robert A. Cantore, Stephanie J. Joseph; Willis DePasquale,
Larry N. Willis, and Stephanie N. Rachel, for Defendants and Appellants.
         Law Office of Mark Mazda and Mark Mazda for Plaintiff and Respondent.

                                      ___________________________
       First Southern Capital Development Corporation (First Southern) sued The Sheet
Metal Workers’ Pension Plan of Southern California, Arizona and Nevada (Pension Plan)
for breach of contract, wrongful eviction and interference with prospective economic
relations, as well as several other claims. The trial court denied Pension Plan’s special
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motion to strike the complaint pursuant to Code of Civil Procedure section 425.16,
concluding First Southern had met its burden of demonstrating a probability of prevailing
on the merits. Because First Southern’s claims do not arise from protected activity within
the meaning of section 425.16, we affirm.
                 FACTUAL AND PROCEDURAL BACKGROUND
       1. The Lease, Asset Purchase Agreement and Efforts To Ascertain First
          Southern’s Creditworthiness
       Aviation Mortgage Partners, Inc., a retail mortgage originating firm, entered into a
five-year lease for space in a Manhattan Beach building owned by Pension Plan
commencing July 1, 2009. The lease was guaranteed by Aviation Mortgage’s
shareholders, Richard Thomas and Denise Thomas (husband and wife). Richard was the
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company’s president, and Denise the senior vice president. The lease provided it could
not be assigned without the prior written consent of the landlord, “which consent shall
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not be unreasonably withheld or delayed.” In the event of a merger or sale of assets,
however, the lease could be assigned if certain requirements were met including the
provision of “detailed financial information (including references) regarding the
creditworthiness and financial condition of the proposed assignee . . . and such other

1      Statutory references are to the Code of Civil Procedure.
2     Because the Thomases share a surname, we refer to them by their first names for
convenience and clarity. (See Callahan v. Gibson, Dunn & Crutcher LLP (2011)
194 Cal. App. 4th 557, 561, fn. 1.)
3      The prohibition-of-assignment clause further provided, “Landlord’s withholding
or delaying approval will be deemed reasonable if it is based on: . . . (x) Landlord’s good
faith analysis of the prospective assignee[’]s, sublessee’s or other transferee’s credit,
character and business or professional standing.”

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information and documentation as the Landlord may require” and execution of new lease
guarantees or “lease guarantor estoppel certificates, affirmations and agreements.”
       In the first quarter of 2010 First Southern agreed to purchase Aviation Mortgage’s
assets, including the office lease. First Southern and Aviation Mortgage signed an asset
purchase agreement in April 2010, and First Southern thereafter occupied the Manhattan
Beach premises and made the lease payments. In a May 13, 2010 email Richard
informed Melanie Shepherd, the building manager, he was in the “process[] of an ‘Asset
Sale’ of Aviation Mortgage” to First Southern, but would remain the company’s
president. The email stated, “In my agreement with [First Southern], they have agreed to
assume our lease. Please forward a list of any documents or paperwork you may need to
have them assume the lease.”
       Notwithstanding Richard’s email, the asset sale was in jeopardy. Correspondence
between Richard and First Southern executives in mid-May 2010 described the parties’
disagreement whether the Thomases had been fully compensated pursuant to the terms of
the asset purchase agreement. Around the same time First Southern requested that
Shepherd communicate directly with it to obtain its financial information, but Shepherd
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refused. On June 7, 2010 Shepherd requested from Richard two years of audited
financial statements for First Southern and completion of a lease application. According
to Shepherd, she received the information in early August 2010 and forwarded it to Chris
Sinfield, a leasing broker who had been retained to assist in evaluating First Southern’s
creditworthiness.
       During September and October 2010 Sinfield requested additional information
from Richard, including a completed lease application for Michael Jones, the majority
stockholder of First Southern. There was confusion among the various individuals
involved as to whether and when all the requested information had been transmitted, but
by November 10, 2010 Sinfield had reviewed First Southern’s 2009 tax return and

4       Although Pension Plan was accepting rent payments directly from First Southern,
Shepherd explained she had been advised by counsel to communicate only with the
lessee, Aviation Mortgage.

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concluded Pension Plan should retain a tenant risk assessment firm. After examining the
material provided about First Southern, the risk assessment firm determined additional
information was needed because of the “start-up” nature of First Southern and its lack of
financial history. During November and December 2010 the firm sought additional
information from First Southern including its business plan, a list of investors (and
amounts invested) and key executive biographies.
       2. The Unraveling of the Asset Purchase Agreement; the Temporary Restraining
          Order
       In late December 2010 Aviation Mortgage terminated the asset purchase
agreement. On December 30, 2010 Richard advised Shepherd that Aviation Mortgage
was withdrawing its request to assign the lease and would be serving First Southern with
a notice to vacate the premises. On December 31, 2010 the Thomases sent First Southern
chief financial officer Emile Auguste, Jr. a letter stating there was no binding agreement
between First Southern and Aviation Mortgage based on the concerns the Thomases had
identified in May 2010. They requested a time to discuss “an amicable separation.”
       On the morning of January 20, 2011 Richard requested Shepherd have the office
suite entry doors rekeyed and after-hours access cards reprogrammed to deny after-hours
access for Auguste and other First Southern personnel. Later that day the police were
called to the premises because of a physical altercation between Richard and Auguste.
On January 21, 2011 First Southern obtained a temporary restraining order against the
Thomases enjoining them from, among other things, using the name Aviation Mortgage
Partners dba Milestone Mortgage, soliciting First Southern’s employees, contacting First
Southern’s clients and entering the Manhattan Beach office premises. The Thomases and
their agents were also ordered to grant access to First Southern and its employees to the
Manhattan Beach premises.

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       3. The Unlawful Detainer Action
       Neither the Thomases nor First Southern paid rent or a pro rata share of building
expenses for January or February 2011. After serving notices to quit or pay rent to First
Southern and the Thomases, Pension Plan filed an unlawful detainer action on
February 15, 2011 naming both First Southern and Aviation Mortgage as defendants.
First Southern answered and alleged as affirmative defenses breach of the covenant of
quiet enjoyment, breach of the assignment provision of the lease and tortious interference
with First Southern’s contractual relations with the Thomases causing a breach of
contract between First Southern and Aviation Mortgage. Pension Plan moved in limine
to disallow First Southern’s affirmative defenses.
       At the outset of the bench trial on June 13, 2011, the court did not rule directly on
the motion in limine but explained unlawful detainer actions are summary in nature,
focusing on possession. After Shepherd testified rent had not been paid since December
and gave a brief synopsis of the events leading to the rekeying of the premises, the court
found the lease had been forfeited and awarded damages and attorney fees in the amount
of $120,728.94 in favor of Pension Plan. The court denied First Southern’s motion for
new trial.
       4. The Complaint
       On September 14, 2011 First Southern filed a verified, 88-page complaint with
90 exhibits against Pension Plan, Shepherd and others asserting causes of action for
breach of contract, breach of the implied covenant of quiet enjoyment, wrongful eviction,
negligence, breach of the implied covenant of good faith and fair dealing, civil
conspiracy, negligent and intentional interference with prospective economic relations,
interference with contract and business and declaratory relief. After laboriously
describing the timeline of events, First Southern summarized its theory of the case: The
Thomases had devised a plan to resell Aviation Mortgage to another banking firm after
First Southern’s substantial investment led to continual sales growth. The delay in
approving the lease assignment gave the Thomases the opportunity to execute their plan.

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Pension Plan agreed to accommodate the Thomases so it could recapture the space and
rent it at a higher rate.
       5. The Trial Court’s Orders Denying Pension Plan’s Special Motion To Strike
       In January 2012 Pension Plan moved to strike the complaint pursuant to section
425.16 on the ground it arose from its protected activity of prosecuting the unlawful
detainer action. In opposition First Southern argued the various causes of action in the
complaint arose from Pension Plan’s failure to timely approve assignment of the lease
and improper actions taken by Shepherd, including rekeying the office premises, not
Pension Plan’s unlawful detainer action. Relying on the complaint and the exhibits
attached to it, First Southern argued it had established a probability it would prevail on
the merits.
       At the conclusion of the hearing on February 21, 2012, the trial court denied
Pension Plan’s motion to strike. The court concluded First Southern’s causes of action
arose from Pension Plan’s protected activity of filing an unlawful detainer action. The
court explained, although certain allegations in the complaint described unprotected
activity, the protected activity (filing a lawsuit) was not merely incidental to the
unprotected activity and thus the causes of action were subject to section 425.16. The
court found, however, First Southern had “set forth numerous allegations as well as
evidence in the form of exhibits in its verified complaint to establish that it may prevail
on several different causes of action based on [First Southern’s] theory that [Pension
Plan] unreasonably withheld consent to the assignment of the lease . . . .”
                                       DISCUSSION
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       1. Section 425.16: The Anti-SLAPP Statute
       Section 425.16, subdivision (b)(1), provides, “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 or California Constitution in connection with a public

5       SLAPP is an acronym for “strategic lawsuit against public participation.” (Vargas
v. City of Salinas (2009) 46 Cal. 4th 1, 8, fn. 1.)

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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.” Pursuant to subdivision (e), 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.”
       In ruling on a motion under section 425.16, the trial court engages in a two-step
process. “First, the court decides whether the defendant has made a threshold showing that
the challenged cause of action is one arising from protected activity. The moving
defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains
were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the
United States or California Constitution in connection with a public issue,’ as defined in
the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it
then determines whether the plaintiff has demonstrated a probability of prevailing on the
claim. Under section 425.16, subdivision (b)(2), the trial court in making these
determinations considers ‘the pleadings, and supporting and opposing affidavits stating the
facts upon which the liability or defense is based.’” (Equilon Enterprises v. Consumer
Cause, Inc. (2002) 29 Cal. 4th 53, 67.)
              a. Step one of the two-part test and mixed causes of action
       The moving party’s burden on the threshold issue is to show “the challenged cause
of action arises from protected activity.” (Rusheen v. Cohen (2006) 37 Cal. 4th 1048,
1056; see Scalzo v. Baker (2010) 185 Cal. App. 4th 91, 98.) “[T]he statutory phrase ‘cause

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of action . . . arising from’ means simply that the defendant’s act underlying the
plaintiff’s cause of action must itself have been an act in furtherance of the right of
petition or free speech. [Citation.] In the anti-SLAPP context, the critical point is
whether the plaintiff’s cause of action itself was based on an act in furtherance of the
defendant’s right of petition or free speech. [Citations.] ‘A defendant meets this burden
by demonstrating that the act underlying the plaintiff’s cause [of action] fits one of the
categories spelled out in section 425.16, subdivision (e) . . . .’” (City of Cotati v.
Cashman (2002) 29 Cal. 4th 69, 78.) “If the defendant does not demonstrate this initial
prong, the court should deny the anti-SLAPP motion and need not address the second
step.” (Hylton v. Frank E. Rogozienski, Inc. (2009) 177 Cal. App. 4th 1264, 1271.)
       When a special motion to strike pursuant to section 425.16 challenges a cause of
action that involves both protected and nonprotected activity (sometimes referred to as a
“mixed” cause of action), “if the allegations of protected activity are only incidental to a
cause of action based essentially on nonprotected activity, the mere mention of the
protected activity does not subject the cause of action to an anti-SLAPP motion.” (Scott
v. Metabolife Internat., Inc. (2004) 115 Cal. App. 4th 404, 415; accord, World Financial
Group, Inc. v. HBW Ins. & Financial Services, Inc. (2009) 172 Cal. App. 4th 1561, 1574.)
On the other hand, if the allegations of nonprotected conduct are collateral to the
substance of the cause of action, their presence does not prevent the court from applying
the statute. As we explained in Fox Searchlight Pictures, Inc. v. Paladino (2001)
89 Cal. App. 4th 294, 308, “[A] plaintiff cannot frustrate the purposes of the SLAPP
statute through a pleading tactic of combining allegations of protected and nonprotected
activity under the label of one ‘cause of action.’” (Accord, Mann v. Quality Old Time
Service, Inc. (2004) 120 Cal. App. 4th 90, 103.)
       In applying section 425.16 to mixed causes of action, “it is the principal thrust or
gravamen of the plaintiff’s cause of action that determines whether the anti-SLAPP
statute applies [citation], and when 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-

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SLAPP statute.” (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal. App. 4th 181,
188; see Episcopal Church Cases (2009) 45 Cal. 4th 467, 477-478 [“This dispute
[involving ownership of property] and not any protected activity is ‘the gravamen or
principal thrust’ of the action. [Citation.] The additional fact that protected activity may
lurk in the background—and may explain why the rift between the parties arose in the
first place—does not transform a property dispute into a SLAPP suit.”].) That is, “the
cause of action is vulnerable to a special motion to strike under the anti-SLAPP statute
only if the protected conduct forms a substantial part of the factual basis for the claim.”
(A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006)
137 Cal. App. 4th 1118, 1125.)
       This analysis does not require an either-or determination or mean the gravamen of
a cause of action must be based only on protected activity or on nonprotected activity.
Rather, the proper statement of the rule, as articulated in Haight Ashbury Free Clinics,
Inc. v. Happening House Ventures (2010) 184 Cal. App. 4th 1539, 1551, footnote 7 is:
“[W]here the defendant shows that the gravamen of a cause of action is based on
nonincidental protected activity as well as nonprotected activity, it has satisfied the first
prong of the SLAPP analysis.” (Accord, World Financial Group, Inc. v. HBW Ins. &
Financial Services, Inc., supra, 172 Cal.App.4th at p. 1574.)
              b. Step two
       If the defendant establishes the statute applies, the burden shifts to the plaintiff to
demonstrate a “probability” of prevailing on the claim. (Equilon Enterprises v.
Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) In deciding the question of potential
merit, the trial court properly considers the pleadings and evidentiary submissions of both
the plaintiff and the defendant, but may not weigh the credibility or comparative strength
of any competing evidence. (Taus v. Loftus (2007) 40 Cal. 4th 683, 713-714; Wilson v.
Parker, Covert & Chidester (2002) 28 Cal. 4th 811, 821.) The question is whether the
plaintiff presented evidence in opposition to the defendant’s motion that, if believed by
the trier of fact, is sufficient to support a judgment in the plaintiff’s favor. (Zamos v.
Stroud (2004) 32 Cal. 4th 958, 965.) Nonetheless, the court should grant the motion “‘if,

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as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s
attempt to establish evidentiary support for the claim.’” (Taus, at p. 714; Wilson, at
p. 821; Zamos, at p. 965.)
              c. Standard of review
       The trial court’s rulings on a special motion to strike are subject to our
independent or de novo review. (Flatley v. Mauro (2006) 39 Cal. 4th 299, 325; accord,
Rusheen v. Cohen, supra, 37 Cal.4th at p. 1055.)
       2. The Causes of Action Do Not Arise from Protected Activity
       “There is no question that the prosecution of an unlawful detainer action is
indisputably protected activity within the meaning of section 425.16.” (Clark v. Mazgani
(2009) 170 Cal. App. 4th 1281, 1286 (Clark).) Nevertheless, consistent with the general
principles governing the scope of section 425.16, a complaint initiated after the
prosecution of an unlawful detainer action does not compel the conclusion the causes of
action arise from protected activity. For example, although an unlawful detainer action
may precede the termination of a tenancy, “[t]erminating a tenancy or removing a
property from the rental market are not activities taken in furtherance of the constitutional
rights of petition or free speech.” (Id. at pp. 1286-1287.) Thus, in Clark the court held a
tenant’s complaint for fraudulent eviction to evade a rent control ordinance did not arise
from acts taken by the landlord in furtherance of his right of petition: “[Tenant’s] action
against [landlord] is not based on [landlord’s] filing or service of the notices of intent to
evict, it is not based on anything [landlord] said in court or a public proceeding, and it is
not based on the fact that [landlord] prosecuted an unlawful detainer action against her.
The complaint is based on [landlord’s] allegedly unlawful eviction, in that she
fraudulently invoked the [rent stabilization ordinance] to evict [tenant] from her rent-
controlled apartment as a ruse to provide housing for her daughter, but never installed her
daughter in the apartment as required by that ordinance, and also that she failed to pay
[tenant’s] relocation fee.” (Clark, at p. 1288; see Department of Fair Employment &
Housing v. 1105 Alta Loma Road Apartments, LLC (2007) 154 Cal. App. 4th 1273, 1284
(1105 Alta Loma Apartments) [disability discrimination suit following unlawful detainer

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action did not arise from protected activity; action “was not an attack on any act
[landlord] committed during the rental property removal process or during the eviction
process itself”]); see also Marlin v. Aimco Venezia, LLC (2007) 154 Cal. App. 4th 154,
161-162 [tenants’ “suit is not based on the [landlords’] filing and serving of a notice [to
permanently remove a rental unit from the market] required under the Ellis Act, it is
based on the [tenants’] contention ‘[landlords] are not entitled to invoke or rely upon the
Ellis Act to evict plaintiffs from their home’”].)
       Like these cases, First Southern’s causes of action do not arise from Pension
Plan’s acts in furtherance of the filing or prosecution of the unlawful detainer action.
Rather, they are based on allegations Pension Plan deliberately delayed assignment of the
lease to First Southern by requesting additional financial information to purportedly
assess its creditworthiness when in actuality it was creating an opportunity for the
Thomases to execute their plan to take back Aviation Mortgage. Pension Plan’s
purported motive for participating in the scheme, which included changing the locks and
limiting First Southern’s access to the offices, was to recapture the office space and rent it
at a higher rate than provided in the Aviation Mortgage lease. Whether or not far-
fetched, the causes of action pleaded by First Southern arise from Pension Plan’s conduct
preceding the unlawful detainer action, not the unlawful detainer action itself. (See
Wallace v. McCubbin (2011) 196 Cal. App. 4th 1169, 1183 (Wallace) [for purposes of
§ 425.16, “an alleged act is incidental to a claim, and incidental to any unprotected
activity on which the claim is based, only if the act is not alleged to be the basis for
liability”].) The unlawful detainer action is incidental to any claims in the lawsuit, which
are based on nonprotected activity.
       Pension Plan urges us to ignore Clark and the other analogous cases—two of
which are from this division (Marlin and 1105 Alta Loma Apartments)—and follow the
more recent decision in Wallace, supra, 196 Cal. App. 4th 1169. In Wallace plaintiffs
Cheryl Wallace and John Owen, who leased an apartment together, filed a complaint
against their landlord and two neighbors after they were evicted following the neighbors’
repeated complaints Wallace’s service dog was aggressive. The complaint asserted

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causes of action including wrongful eviction, retaliatory eviction, breach of the covenant
of quiet enjoyment, negligent and intentional infliction of emotional distress and housing
discrimination. (Wallace, at p. 1178.) It alleged the defendants had engaged in a
“‘systematic campaign of harassment and intimidation against disabled tenants with
limited means, designed to force Plaintiffs from their home of four years’” because they
had a “‘prescribed service dog.’” (Ibid.)
       The trial court denied the defendants’ section 425.16 motion to strike the causes of
action for wrongful eviction and retaliatory eviction on the ground they did not arise from
protected activity because the gravamen of the complaint was the pattern of disability
discrimination designed to drive the plaintiffs from the home, not the filing of the
unlawful detainer action. (Among other acts alleged as part of the wrongful scheme, the
neighbors had reported to animal control that the dog was vicious and dangerous.)
(Wallace, supra, 196 Cal.App.4th at p. 1180.) The Court of Appeal reversed. With
respect to wrongful eviction, the court explained the cause of action was predicated on
the defendants’ attempts to recover possession of the apartment in violation of San
Francisco’s rent stabilization ordinance, which proscribes recovery unless “landlord’s
dominant motive pertains to at least one of the occurrences specified in the ordinance.
[Citation.] [¶] According to the complaint, the acts by which the defendants attempted to
recover possession of the apartment . . . at least included, [the landlord’s] service of his
three-day notice to quit and his filing of the unlawful detainer action. Indeed this is the
wrongdoing alleged in the complaint that is most obviously related to a wrongful eviction
claim.” (Id. at p. 1182.)
       At most Wallace is relevant only to First Southern’s claim for wrongful eviction.
(See Wallace, supra, 196 Cal.App.4th at p. 1192 [“anti-SLAPP motion was directed only
to the first and thirteenth causes of action, for wrongful eviction and retaliation, and not
to . . . causes of action for discrimination”].) But Wallace itself discusses why it is not
dispositive of the wrongful eviction cause of action in the case at bar. In distinguishing
1105 Alta Loma Apartments and other cases relied upon by the dispossessed tenants, the
Wallace court explained: “[U]nlike [1105 Alta Loma Apartments] and the other cases on

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which [tenants] rely, a three-day notice and an unlawful detainer action were the bases of
[tenant’s] first and 13th causes of action. These alleged acts did not merely precede or
trigger the lawsuit by [tenants]; nor were these acts alleged solely as evidence of other
wrongdoing that was the actual basis of the lawsuit.” (Wallace, at p. 1194.) Here, First
Southern’s cause of action for wrongful eviction is apparently predicated on the
allegations of an overarching scheme to force First Southern to abandon its right to use
and occupy the premise: “By doing the acts described in this complaint, Defendants have
wrongfully evicted Plaintiff from the premises.” Thus, the wrongful acts alleged were
Pension Plan’s failure to timely approve the assignment, continual requests for
information, rekeying the premises and causing disruption to First Southern’s business
operations, not the prosecution of the unlawful detainer action. Indeed, the three-day
notice to pay or quit was predicated on First Southern’s failure to pay rent, which it does
not dispute, not any manufactured controversy regarding assignment of the lease or
failure to provide requested financial information.
       Because none of the causes of action arises from protected activity within the
meaning of section 425.16, Pension Plan’s special motion to strike was properly denied.
                                     DISPOSITION
       The order is affirmed. First Southern is to recover its costs on appeal.

                                                  PERLUSS, P. J.

       We concur:

              ZELON, J.                           SEGAL, J.*

*       Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

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