Court Opinion

ID: 2682448
Source: CourtListenerOpinion
Date Created: 2014-07-09 23:01:15.728005+00
Date Added: 2024-06-11T13:12:45.622425
License: Public Domain

Filed 7/9/14 Nordhoff Way v. Walgreen CA2/8
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     SECOND APPELLATE DISTRICT

                                                 DIVISION EIGHT

NORDHOFF WAY, LLC,                                                   B249263

         Plaintiff, Cross-defendant and                              (Los Angeles County
         Appellant,                                                  Super. Ct. No. BC443562)

         v.

WALGREEN CO.,

         Defendant, Cross-complainant and
         Respondent.

         APPEAL from an order of the Superior Court of Los Angeles County.
Susan Bryant-Deason, Judge. Affirmed.

         Elkins Kalt Weintraub Reuben Gartside, Jeffrey K. Riffer and Julie Z. Kimball for
Plaintiff, Cross-defendant and Appellant.

         Willenken Wilson Loh & Delgado, Jason H. Wilson and W. Scott Norton for
Defendant, Cross-complainant and Respondent.

                                          _______________________
       Nordhoff Way, LLC, (Nordhoff) appeals from the trial court’s order denying
Nordhoff’s special motion to strike the first amended cross-complaint of Walgreen Co.
(Walgreens) as a Strategic Lawsuit Against Public Participation (a SLAPP). We affirm
because Walgreens’s cross-complaint did not target protected activity by Nordhoff.

                             FACTS AND PROCEEDINGS

       In June 2007, appellant Nordhoff and respondent Walgreens entered into a lease
for Walgreens to open a Walgreens store in Nordhoff’s shopping center in Northridge.
Under the lease, Walgreens’s duties as tenant included making certain improvements to
the property, including building out a 4,500 square foot “shop space” and painting the
parking lot. The build-out was more costly and took longer than Walgreens expected,
leading Walgreens to conclude that opening a store in the shopping center was not
economically sensible. Accordingly, while continuing to make its rent payments under
the lease, Walgreens exercised what it claimed was its right under paragraph 8(a)(i) of the
lease. That paragraph stated, “Subject to any express limitation set forth in this release,
[Walgreens] has the right (but not the obligation) to use the Leased Premises for any
lawful purpose not in violation of applicable law, matters of record, or any then existing
exclusive use restrictions [in or around the leasehold area].” Interpreting the paragraph as
permitting, but not obligating, Walgreens to open a store, Walgreens instead investigated
assigning the lease or subleasing the space.
       Nordhoff refused to consent to an assignment or sublease. In a letter dated
November 18, 2008, Nordhoff stated its objections. Nordhoff’s letter opened by noting
what Nordhoff perceived was Walgreens’s failure to fulfill its lease obligations. The
letter asserted that paragraph 14 of the lease required Walgreens to “open its fully staffed,
fixturized, stocked store within 120 days after the Rent Commencement Date.” The letter
further asserted Walgreens could not sublease the space until Walgreens had opened a
Walgreens’s store in the shopping center, stating “Walgreens is not permitted to sublease
the Leased Premises until such time as Walgreens has met its obligations under the Lease

                                               2
and opened the Lease Premises as a Walgreens store.” The letter “requested” that until
Walgreens opened its store, Walgreens compensate Nordhoff for uncollected rent from
prospective shopping center tenants who did not materialize because of Walgreens’s
failure to complete the build-out of the property. Nordhoff wrote that it “believes and
requests that Walgreens should pay to Landlord [Nordhoff] rent on the Shop Space as the
rental rate Landlord could otherwise achieve until such time as Walgreens completes
Walgreens’s obligations under the Lease and delivers the Shop Space to Landlord.”
       In 2009, Nordhoff was placed into receivership. In August 2010, the receiver filed
a complaint against Walgreens that stated a single cause of action for specific
performance. The receiver sought a judgment compelling Walgreens to finish the build
out and open a store.
       Walgreens thereafter sent a letter in April 2011 to Nordhoff stating that Nordhoff
had breached the lease by anticipatorily repudiating Walgreens’s right to sublet or assign
the lease. According to Walgreens, the lease gave “Walgreens clear rights to sublease the
leased premises even if it does not open a retail store.” In support, Walgreens pointed to
paragraph 8(a)(i) of the lease as its answer to Nordhoff’s reliance on paragraph 14.
Nordhoff had argued that paragraph 14 obligated Walgreens to open a store for at least
one day: “Tenant shall open for business for at lease one full day, fully staffed, fixturized
and stocked . . . on or before the date which is one hundred twenty (120) days following
the Rent Commencement Date . . . .” But, Walgreens noted, paragraph 8(a)(i) conversely
stated, “Subject to any express limitation set forth in this lease, [Walgreens] has the right
(but not the obligation) to use the Leased Premises for any lawful purpose not in violation
of applicable law, matters of record, or any then existing exclusive restrictions,” which
Walgreens interpreted as giving it the right to use the space for purposes other than a
Walgreens store. From Nordhoff’s refusal to consent to Walgreens subletting the space
without first opening a Walgreens store, Walgreens claimed Nordhoff had committed an
anticipatory breach of the lease. Walgreens concluded that Nordhoff’s unambiguous
refusal to permit a sublease “constitutes a present breach of contract and gives rise to an
immediate right of action; in other words, it is not necessary for Walgreens to wait until it

                                              3
has actually submitted a subtenant for consideration and [Nordhoff] refuses to tender
performance. [Nordhoff’s] words leave no room for any other interpretation.”
Walgreens demanded that Nordhoff cure its breach by unambiguously reaffirming
Walgreens’s right to sublease without first opening a store. Walgreens ended by stating
that “A failure to do so will result in a cross-complaint for damages in this action.”
       Nordhoff sold the shopping center in August 2012. Two months later, the receiver
assigned Nordhoff’s claims against Walgreens back to Nordhoff. Nordhoff filed a first
amended complaint several months later in January 2013, which superseded the
receiver’s original complaint for specific performance. Nordhoff’s first amended
complaint alleged that Walgreens’s duties under the lease included operating a Walgreens
store for at least one day in the shopping center and making certain improvements to the
property, including building out a 4,500 square foot shop-space and painting the parking
lot with striping for double-row parking. Nordhoff claimed that Walgreens’s breaches of
the lease had reduced the rent that Nordhoff collected from other tenants in the shopping
center. Nordhoff also alleged that Walgreens’s breaches had reduced the shopping
center’s sales price. Based on Walgreens’s acts, Nordhoff alleged a cause of action for
breach of contract and sought recovery of its “actual, compensatory, and consequential
damages.”
       Several days later, Walgreens filed its first amended cross-complaint. In an
introductory paragraph, Walgreens alleged “[t]his is a commercial lease case involving
commercial space that Walgreens leases in Northridge. In a heavily negotiated lease with
a sophisticated landlord, Walgreens negotiated three key rights: (1) Walgreens had the
right but not the obligation to use the leased space; (2) in addition to not using the space
at all, Walgreens could use the lease space in four other ways—including, but [sic]
limited to, assigning the lease at any time to one of its non-retail businesses; and
(3) Walgreens severely limited the remedies available at law to the landlord [Nordhoff] in
the lease’s remedies provision—thus eliminating consequential damages that [Nordhoff]
seeks in its First Amended Complaint.” In support of its claims, Walgreens’s first
amended cross-complaint recited paragraph 8(a) of the lease, which Walgreens

                                              4
interpreted as giving Walgreens the option, but not the obligation, to occupy the premises
with a Walgreens store; paragraph 14, which Walgreens interpreted as permitting it to
reassign the lease or sublet the space; and, paragraph 18, which Walgreens interpreted as
prohibiting Nordhoff’s recovery of consequential damages, such as reduced rent from
other shopping center tenants or a lower sales price for the shopping center.1 Relying on
the foregoing lease provisions, Walgreens alleged a cause of action for breach of contract
against Nordhoff based on Nordhoff’s failing to cooperate with Walgreens in
constructing the build-out; refusing to recognize Walgreens’s right to occupy the
premises; refusing to cooperate with Walgreens’s attempt to assign the lease or sublet the
property; and, demanding consequential damages. Walgreens also sought a declaratory
judgment affirming its interpretation of its contractual rights under the lease.
       Nordhoff specially moved to strike Walgreens’s cause of action for breach of
contract in Walgreens’s first amended cross-complaint. Nordhoff argued Walgreen’s
first amended cross-complaint was a SLAPP because “[t]he conduct comprising the
‘breaches’ asserted in Walgreen’s breach of contract claim is Nordhoff’s act of filing its
First Amended Complaint . . . .” According to Nordhoff, “Walgreens claims that
Nordhoff breached the lease by: (1) refusing to recognize Walgreen’s right not to use the
premises; (2) failing to recognize Walgreen’s assignment rights; and (3) seeking
consequential damages. Each of these claims, however, is premised on the allegations in
Nordhoff’s First Amended Complaint. Therefore, the anti-SLAPP statute applies.”
       Walgreens opposed Nordhoff’s special motion to strike. Walgreens argued that
Nordhoff’s complaint and Walgreens’s cross-complaint involved litigating their
conflicting interpretations of the lease. Nordhoff’s complaint charged Walgreens with

1      In August 2013, the trial court entered summary judgment for Walgreens based on
paragraph 18(a), which the court found barred Nordhoff’s recovery of consequential
damages. In the absence of a viable claim for damages, the court found Nordhoff could
not state a cause of action for breach of the lease and therefore dismissed Nordhoff’s first
amended complaint. Nordhoff has appealed from the court’s dismissal of its first
amended complaint, but does not discuss that appeal in its briefs here.

                                              5
the duty of opening a Walgreens store on the premises and making certain improvements
to the property. Walgreen’s cross-complaint, on the other hand, charged the reverse,
denying Walgreens was obligated to open a store and alleging Nordhoff breached the
lease by disregarding Walgreens’s contractual rights under the lease.
       The court denied Nordhoff’s motion to strike. Its minute order stated: “The court
finds that Nordhoff Way, LLC fails to sufficiently demonstrate that the 1st cause of
action in [Walgreens’] First Amended Cross-complaint arises from [Nordhoff’s]
protected activity. The court finds that the allegations of this cause of action arise from
conduct alleged to be a breach of the subject lease agreement. As such, Nordhoff Way,
LLC has failed to demonstrate that the 1st cause of action falls within the purview of the
anti-SLAPP statute.” In discussing its ruling during the hearing on the motion, the court
explained: “As far as this court is concerned, what we have here is a question as to
whether or not we have a breach of contract or whether we have an anticipatory breach
on the other side. We have a breach of contract case here is what we’ve got. How it
turns out, I don’t know. Got me. But that’s all this is, a big one. But it’s what it is.”
       Nordhoff appeals from the court’s denial of its motion to strike. (Code Civ. Proc.,
§ 425.16, subd. (i).)

                               STANDARD OF REVIEW

       We independently review denial of a special motion to strike a complaint or cross-
complaint as a SLAPP. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal. 4th 260,
269 fn. 3; Flatley v. Mauro (2006) 39 Cal. 4th 299, 325-326.)

                                       DISCUSSION

       The anti-SLAPP statute (Code Civ. Proc., § 425.16) permits expedited trial court
review of a complaint or cross-complaint before a lawsuit gets fully underway, and, when
appropriate, dismissal of a complaint or cross-complaint targeting a litigation opponent’s
exercise of freedom of speech or petition. (Nguyen-Lam v. Cao (2009) 171 Cal. App. 4th
858, 872; City of Santa Monica v. Stewart (2005) 126 Cal. App. 4th 43, 80.) The statute

                                              6
provides a procedural remedy to dispose of causes of action that seek to punish a person
for engaging in the valid exercise of constitutional rights. (Rusheen v. Cohen (2006)
37 Cal. 4th 1048, 1055-1056.) Subdivision (b)(1) of the statute states: “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 . . . .”
Subdivision (e) expands on the meaning of the phrase “in furtherance of” the right to
speech or petition. It states:
              “As used in this section, ‘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: . . . (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.”

       The moving party bears the burden of showing a complaint or, as here, a cross-
complaint, arises from free speech or petitioning activity protected by the anti-SLAPP
statute. (Zamos v. Stroud (2004) 32 Cal. 4th 958, 965; Navellier v. Sletten (2002)
29 Cal. 4th 82, 88-90 (Navellier); Ruiz v. Harbor View Community Assn. (2005)
134 Cal.App.4th at p. 1466.) The focus of analysis is whether the gravamen of the
complaint is “based” on the protected activity. (Scott v. Metabolife Intern. Inc. (2004)
115 Cal. App. 4th 404, 413-414.) That focus “disregard[s] the labeling of the claim
[citation] and instead ‘examine[s] the principal thrust or gravamen of a . . . cause of
action to determine whether the anti-SLAPP statute applies’ . . . . We assess the principal
thrust by identifying ‘[t]he allegedly wrongful and injury-producing conduct . . . that
provides the foundation for the claim.’ [Citation.] If the core injury-producing conduct
upon which the . . . claim is premised does not rest on protected speech or petitioning
activity, collateral or incidental allusions to protected activity will not trigger application
of the anti-SLAPP statute.” (Hylton v. Frank E. Rogozienski, Inc. (2009)
177 Cal. App. 4th 1264, 1271-1272, italics in original.)

                                               7
       Here, Nordhoff contends Walgreens filed its first amended cross-complaint in
response to Nordhoff’s lawsuit against Walgreens in which Nordhoff had, among other
things, sought consequential damages under its constitutionally protected right of
petition. According to Nordhoff, Walgreens’s first amended cross complaint was
therefore a SLAPP. Nordhoff’s brief succinctly summarizes its contention: “The anti-
SLAPP statute applies where the conduct giving rise to the cause of action is protected
activity. Here, [Nordhoff’s] filing of a First Amended Complaint is protected activity,
and thus [Walgreens’] breach of contract cause of action, based upon [Nordhoff’s] First
Amended Complaint, is improper under the anti-SLAPP statute.”
       Filing a lawsuit is protected activity under the constitutional right of petition.
(Navellier, supra, 29 Cal.4th at p. 90.) But a distinction exists between the litigation
process itself as protected activity, and the transaction or occurrence which spawned the
litigation. The thrust of Walgreens’s cause of action for breach of contract is that
Nordhoff breached the lease by refusing to let Walgreens sublet the space or assign the
lease without first opening a Walgreens retail store on the premises. Walgreens’s first
amended cross-complaint does not rest on Nordhoff having sued Walgreens (in other
words, the “litigation process”); it rests instead on the same set of underlying
circumstances alleged in Nordhoff’s complaint – namely, whether Walgreens’s failure to
open a retail store did, or did not, breach the lease.2 Because Nordhoff’s protected
activity – filing its lawsuit – is only incidental to Walgreens’s cause of action for breach
of contract, Walgreens’s cross-complaint is not a SLAPP subject to a special motion to
strike. (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005)
133 Cal. App. 4th 658, 672; Mann v. Quality Old Time Service, Inc. (2004)

2       At least two decisions have observed that a compulsory cross-complaint is rarely a
SLAPP. (See Kajima Engineering and Const., Inc. v. City of Los Angeles (2002)
95 Cal. App. 4th 921, 933-934 (Kajima); Church of Scientology v. Wollersheim (1996)
42 Cal. App. 4th 628, 651 disapproved on another point by Equilon Enterprises v.
Consumer Cause, Inc. (2002) 29 Cal. 4th 53, 68 fn.5 [“A compulsory cross-complaint on
a ‘related cause of action’ against the plaintiff would rarely, if ever, qualify as a SLAPP
suit arising from petition activity.”].)

                                              8
120 Cal. App. 4th 90, 103; contrast Navellier, at p. 90 [defendant “is being sued because of
the affirmative counterclaims he filed in federal court. In fact, but for [defendant’s]
federal lawsuit and [defendant’s] alleged actions taken in connection with that litigation,
plaintiffs’ present claims would have no basis.”].)
       The City of Alhambra v. D’Ausilio (2011) 193 Cal. App. 4th 1301, is instructive. In
that case, a former Alhambra city firefighter entered into a settlement agreement with the
city of Alhambra. As part of the settlement, he agreed to be banned for five years from
participating with the firefighter’s union in activities that ordinarily would be lawful first
amendment activities. During the five-year ban, he became involved in union activity
against the city. The city sued him for breaching the settlement agreement. He moved to
strike the city’s lawsuit as a SLAPP, but the appellate court found the lawsuit was not a
SLAPP. The appellate court explained, “The City did not sue appellant because he
engaged in protected speech; the City sued him because it believed he breached a contract
which prevented him from engaging in certain speech-related conduct and a dispute
exists as to the scope and validity of that contract.” (Alhambra, at pp. 1307-1308.)
“ ‘That a cause of action arguably may have been “triggered” by protected activity does
not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the
critical consideration is whether the cause of action is based on the defendant’s protected
free speech or petitioning activity.’ ” (Id. at p. 1307, italics in original; see also Kajima,
supra, 95 Cal.App.4th at p. 933 [recognizing distinction under SLAPP between a lawsuit
arising from the events underlying the complaint, which is not a SLAPP, compared to a
lawsuit suing targeting protected activity of the litigation process itself¸ which is often a
SLAPP].) Indeed, Nordhoff stipulated that Walgreen’s cross-complaint arose from their
lease when Nordhoff’s receiver asked the court’s leave for the receiver to restore control
of Nordhoff’s affairs to Nordhoff. The stipulation stated that the “action, including the
complaint and cross-complaint filed therein, arise out of and relate to that certain written
Amended and Restated Lease dated June 15, 2007 (the ‘Lease’) between Nordhoff Way,
as landlord, and Walgreens, as tenant.”

                                               9
       Walgreens’s scattered references in its first amended cross-complaint to
Nordhoff’s seeming effrontery in trying to recover consequential damages despite their
prohibition in the lease does not bring Walgreens’s cross-complaint within the ambit of a
SLAPP. The gravamen of Walgreen’s cross-complaint rests on Nordhoff’s purported
breach of the lease. That the lease, according to Walgreens (and the trial court’s entry of
summary judgment, see footnote 1), prohibits consequential damages does not mean the
thrust of Walgreen’s cross-complaint rests on Nordhoff’s attempt to recover
consequential damages by litigation. An award of consequential damages may arguably
breach the lease, but suing for breach of the lease does not make the suit a SLAPP;
holding otherwise lets the tail wag the dog. (See Raining Data Corp. v Barrenechea
(2009) 175 Cal. App. 4th 1363, 1369 [“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.”]; accord Martinez v.
Metabolife Internat., Inc. (2003) 113 Cal. App. 4th 181, 188 [in lawsuit alleging physical
injury from defective dietary supplement commercially advertised by defendant,
“commercial speech, although mentioned in the complaint, is largely unrelated to and
entirely distinct from the wrongful, injury-causing conduct . . . on which Plaintiffs’
claims are premised”].)
       Finally, because we hold that Walgreens’s cross-complaint is not a SLAPP, we
need not address in our review of Nordhoff’s SLAPP motion the probability of success of
Walgreens’s cross-complaint. (City of Cotati v. Cashman (2002) 29 Cal. 4th 69, 80-81;
City of Riverside v. Stansbury (2007) 155 Cal. App. 4th 1582, 1594.) “If the defendant
does not demonstrate this initial prong [that the complaint is a SLAPP suit], the court
should deny the anti-SLAPP motion and need not address the second step [of considering
the complaint’s probability of success].” (Hylton v. Frank E. Rogozienski, Inc., supra,
177 Cal.App.4th at p. 1271.) Thus we need not discuss Nordhoff’s arguments about the
merits of Walgreens’s claims, and in particular Nordhoff’s affirmative defense asserting
the litigation privilege

                                             10
                                    DISPOSITION

      The trial court’s order denying Nordhoff’s special motion to strike Walgreens’s
first amended cross-complaint is affirmed. Walgreens to recover its costs on appeal.

                                                RUBIN, J.
WE CONCUR:

                    BIGELOW, P. J.

                    FLIER, J.

                                           11