Court Opinion

ID: 2831154
Source: CourtListenerOpinion
Date Created: 2015-08-26 20:03:51.082377+00
Date Added: 2024-06-11T12:45:46.839804
License: Public Domain

Filed 8/26/15 Kaqilo, Inc. v.Chou CA2/1
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 ONE

KAQILO, INC., et al.,                                              B256243

         Plaintiffs and Respondents,                               (Los Angeles County
                                                                   Super. Ct. No. BC513541)
         v.

CINDY CHOU, et al.,

         Defendants and Appellants.

         APPEAL from an order of the Superior Court of Los Angeles County. Maureen
Duffy-Lewis, Judge. Affirmed in part, reversed in part, and remanded.
         Law Offices of Ray Hsu & Associates and Ray Hsu for Defendants and
Appellants.
         Law Offices of Paul P. Cheng, Paul P. Cheng and Peter Tran for Plaintiffs and
Respondents.
                                ___________________________________
       After a restaurant partnership soured, Kaqilo, Inc., Ren Yong Chen, and Mei Zhou
(collectively plaintiffs) sued Yaping Shen, Chinchung (C.C.) Chou, and Cindy Chou
(collectively defendants) for fraud, negligent misrepresentation, conspiracy, abuse of
process, and breach of fiduciary duty. Defendants moved to strike the complaint
pursuant to Code of Civil Procedure section 425.16, the anti-SLAPP statute, arguing the
lawsuit arose from Shen having earlier filed a wage claim with the Division of Labor
Standards Enforcement.1 The trial court denied the motion, finding the gravamen of the
complaint was not protected activity. We conclude the cause of action for abuse of
process arose from protected activity, but the others did not. Accordingly, we affirm in
part and reverse in part.
                                     BACKGROUND
       The parties in this case agree on few, if any, of the underlying facts. For purposes
of this motion we accept as true the facts plaintiffs set forth in their complaint. However,
because those facts give a confusing picture of the dispute, we will also reference some
allegations from defendants’ cross-complaint, Shen’s petition to the Division of Labor
Standards Enforcement, and the moving and opposing papers below. Nothing in this
opinion should be construed as a resolution of a disputed issue of fact or as a
determination that any facts are undisputed.
A.     Shen’s Labor Commission Claim
       On August 30, 2011, Shen filed a claim with the Department of Industrial
Relations, Division of Labor Standards Enforcement (DLSE), against Kaqilo, alleging
Kaqilo (1) failed to pay her for any hours she worked as a waitress at its dba, a restaurant
named P.P.Pop in Monterey Park, from February 16 to July 14, 2011, (2) failed to
provide meal or rest breaks, (3) failed to pay split shift premiums, and (4)
misappropriated her gratuities. She sought damages in the amount of $15,240 plus
penalties and interest. Kaqilo opposed Shen’s complaint, and the Labor Commissioner’s

       1
        Unspecified statutory references are to the Code of Civil Procedure. SLAPP is
an acronym for strategic lawsuit against public participation. (City of Cotati v.
Cashman (2002) 29 Cal.4th 69, 71-72 & fn. 1 (City of Cotati).)

                                               2
designee conducted a hearing on Shen’s claims on May 9, 2013, at which Shen, Chen and
Zhou testified. On July 1, 2013, the DLSE awarded Shen $57,129.38, expressly finding
she was an employee of plaintiffs’ business, not a partner in it.
B.     Plaintiffs’ Complaint
       On June 27, 2013, seven days after the DLSE hearing and four days before the
award to Shen, plaintiffs sued defendants, alleging Shen and C.C. Chou had approached
plaintiffs in 2011 with a proposal to partner in plaintiffs’ restaurant, promising “their
knowledge of the restaurant business would improve Kaqilo.” Shen was therefore a
partner in Kaqilo’s business, not an employee. Plaintiffs “were shocked to learn that C.C.
Chou and Shen” had filed a labor claim against them. (So far as we can discern on this
record, only Shen filed a DLSE claim, against only Kaqilo.)
       1.     Misrepresentation, “Conspiracy,” and Breach of Fiduciary Duty
       Plaintiffs allege Shen and C.C. Chou offered to help the business in exchange for a
50/50 division of the profits and liabilities and 50 percent of the outstanding shares of
Kaqilo stock, which would be conveyed to Cindy Chou, their daughter. Plaintiffs allege
Shen and C.C. Chou “tricked” them into making Cindy Chou a shareholder in Kaqilo
because they “intended to defraud plaintiffs as well as the government” and “were
embroiled in a lawsuit with their former employees.” After five or six unprofitable
months, Shen and C.C. Chou abandoned the business, after which Shen filed her labor
claim. Shen and C.C. Chou thereafter “refused to acknowledge their relationship in
Kaqilo,” and Cindy Chou “refused to acknowledge herself as a named shareholder in the
business, instead pushing off the responsibility onto her parents.” Plaintiffs allege
defendants “made a series of misrepresentations of material facts, with knowledge and
intent to defraud in order to get plaintiffs to agree to allow defendants to help run the
business.” Plaintiffs “justifiably relied on the misrepresentations by defendants by
accepting [their] proposal and working in good faith with [them],” and were “stunned”
and “shocked to learn that C.C. Chou and Shen filed a labor commissioner lawsuit
against” them. Plaintiffs repeat these facts three times in the complaint to support their

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causes of action for fraud, negligent misrepresentation, conspiracy, and breach of
fiduciary duty.2
       2.     Abuse of Process
       In their cause of action for abuse of process, plaintiffs allege Shen instituted the
DLSE claim “knowing full well that [she] was a shareholder in Kaqilo.” C.C. and Cindy
Chou were “aware of the actions of Shen and conspired with [her] in an intentional act to
pressure plaintiffs because of the underlying shareholder dispute between all parties.”
Plaintiffs allege the DLSE action was improper because it ran “in contravention to the
underlying purposes of the California Labor Commissioner.” Because of it, “defendants
are liable for damages in an amount according with proof.”
C.     Defendants’ Cross-Complaint
       Defendants filed a cross-complaint on August 20, 2013, in which they denied the
existence of any partnership or that they had abandoned plaintiffs’ business. As
amended, Shen and C.C. Chou alleged the business made over $500,000 a year, they
were its employees—specifically wait staff, and their employment was terminated when
they complained about not being paid.
D.     Special Motion to Strike
       On the same day they filed their cross-complaint, defendants also moved to strike
plaintiffs’ complaint pursuant to section 425.16, arguing all causes of action arose from
Shen’s DLSE petition. Plaintiffs opposed the motion, arguing their lawsuit arose from
the partnership dispute alleged in the complaint. In reply, defendants cited the several
references in plaintiffs’ complaint to Shen’s wage and hour claims, arguing each cause of
action arose from those claims.

       2
          We express no opinion as to the adequacy of plaintiffs’ allegations. Because
“conspiracy” is not a cause of action, we need not address it further. (See Applied
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511 [“Conspiracy
is not a cause of action, but a legal doctrine that imposes liability on persons who,
although not actually committing a tort themselves, share with the immediate tortfeasor a
common plan or design in its perpetration”]; Saunders v. Superior Court (1994) 27
Cal.App.4th 832, 845 [“conspiracy to commit a tort is not a separate cause of action from
the tort itself”].)

                                              4
       On April 3, 2014, the trial court denied defendants’ anti-SLAPP motion, giving no
reason, and awarded fees to neither side. Defendants appealed.
                                       DISCUSSION
A.     Legal Principles and Standard of Review
       Section 425.16 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 Constitution or the California Constitution in connection with a public issue
shall be subject to a special motion to strike, unless the court determines that the plaintiff
has established that there is a probability that the plaintiff will prevail on the claim.”
(§ 425.16, subd. (b)(1).) “‘[A]ct in furtherance of a person’s right of petition or free
speech . . . 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 . . . .” (Id., subd. (e).) Section 425.16 is to be
construed broadly. (Id., subd. (a).)
       A cause of action arising from the defendant’s litigation activity may be subject to
a special motion to strike. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.) Litigation-
related activity includes an administrative action in which the defendant exercises his or
her constitutionally guaranteed right to petition for grievances. (Briggs v. Eden Council
for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115.)
       We review the trial court’s ruling de novo (Grewal v. Jammu (2011) 191
Cal.App.4th 977, 988), using a two-prong approach (Equilon Enterprises v. Consumer
Cause, Inc. (2002) 29 Cal.4th 53, 67). We determine first whether the moving party has
made a threshold showing that the challenged cause of action arises from protected
activity. (Navallier v. Sletten, supra, 29 Cal.4th at p. 88.) If the moving party meets this
burden, we determine whether the opposing party has established a probability of
prevailing on the claim. (Ibid.) “Only a cause of action that satisfies both prongs of the

                                               5
anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even
minimal merit—is a SLAPP, subject to being stricken under the statute.” (Id. at p. 89.)
       Simply because a lawsuit was filed after protected activity took place does not
necessarily mean the action arose from the protected activity, even if the activity
triggered the suit. (City of Alhambra v. D’Ausilio (2011) 193 Cal.App.4th 1301, 1307.)
In determining whether the threshold “arising from” requirement is met, we look for “the
principal thrust or gravamen of plaintiff’s cause of action.” (Martinez v. Metabolife
Internat., Inc. (2003) 113 Cal.App.4th 181, 188.) “Although a party’s litigation-related
activities constitute ‘act[s] in furtherance of a person’s right of petition or free speech,’ it
does not follow that any claims associated with those activities are subject to the anti-
SLAPP statute. To qualify for anti-SLAPP protection, the moving party must
demonstrate the claim ‘arises from’ those activities. A claim ‘arises from’ an act when
the act ‘“‘forms the basis for the plaintiff’s cause of action’ . . . .”’ [Citation.] ‘[T]he
“arising from” requirement is not always easily met.’ [Citation.] A cause of action may
be ‘triggered by’ or associated with a protected act, but it does not necessarily mean the
cause of action arises from that act.” (Kolar v. Donahue, McIntosh & Hammerton (2006)
145 Cal.App.4th 1532, 1537.) Thus, “[t]he 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.” (Navallier v. Sletten, supra, 29 Cal.4th at p. 92.)
       An anti-SLAPP motion may challenge an individual cause of action in a plaintiff’s
complaint. (City of Colton v. Singletary (2012) 206 Cal.App.4th 751, 770.)
B.     The Gravamen of Plaintiffs’ Complaint
       1.     Three Causes of Action Arose From Unprotected Activity
       Defendants argue plaintiffs’ causes of action arose from Shen having filed a DLSE
wage claim, as no other rationale stated in the complaint would support them. Plaintiffs
argue their causes of action for fraud, negligent misrepresentation, and breach of
fiduciary duty arose from defendants’ failure to perform in accordance with an oral

                                               6
partnership agreement and their abandonment of the business, not from Shen’s wage
claim, even though each cause of action mentions the claim.
       Although the complaint was filed soon after the DLSE hearing on Shen’s wage
claim occurred, and mentions the DLSE action several times, plaintiffs’ causes of action
for fraud, negligent misrepresentation and breach of fiduciary duty allege an independent
basis for liability: Defendants’ misrepresentations with respect to a partnership and their
failure to perform partnership duties. The lawsuit thus arises from these torts, even if
Shen’s wage claim triggered it. It is of no moment that the complaint’s stated rationale
fails to establish liability, as the question under the first prong of the SLAPP analysis is
whether the complaint arose from protected activity, not whether it legally suffices. (See
Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123 [the
second prong of SLAPP analysis examines whether a claim is legally sufficient].)
       We conclude the trial court correctly found plaintiffs’ causes of action for fraud,
negligent misrepresentation and breach of fiduciary duty arose from unprotected activity.
We need not determine whether a probability exists that plaintiffs will prevail on them.
       2.     The Abuse of Process Cause of Action Arose From Protected Activity
       Defendants argue the cause of action for abuse of process is expressly based solely
on Shen’s wage claim. We agree. Plaintiffs allege defendants conspired to bring Shen’s
DLSE claim in an effort to “pressure plaintiffs because of the underlying shareholder
dispute between the parties.” Plaintiffs’ theory appears to be that defendants used Shen’s
wage claim to distract or delay them from filing a lawsuit regarding the partnership
dispute. Because plaintiffs alleged defendants used the claim for this improper purpose,
their cause of action for abuse of process is based directly on that claim. We therefore
proceed to the second prong of the anti-SLAPP analysis.
C.     Probability of Prevailing on the Merits
       Under the second prong of the anti-SLAPP analysis the burden shifts to the
plaintiffs, who must establish a probability of prevailing on their claims. (§ 425.16, subd.
(b)(1).) To establish a probability of prevailing, the plaintiffs “must demonstrate that the
complaint is both legally sufficient and is supported by a prima facie showing of facts

                                              7
sufficient to sustain a favorable judgment.” (Navallier, supra, 29 Cal.4th at pp. 88-89.)
We accept as true all “competent and admissible evidence.” (Tuchscher Development
Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1236.)
       Plaintiffs flatly fail to meet their burden. First, their abuse of process cause of
action is legally deficient. “To succeed in an action for abuse of process, a litigant must
establish that the defendant (1) contemplated an ulterior motive in using the process, and
(2) committed a willful act in the use of the process not proper in the regular conduct of
the proceedings.” (JSJ Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512,
1522.) “Process” is the “means of compelling a defendant to appear in court” or the
“means whereby a court compels compliance with its demands.” (Meadows v.
Bakersfield Sav. & Loan Ass’n (1967) 250 Cal.App.2d 749, 753.) The tort of abuse of
process arises when one uses “the machinery of the legal system for an ulterior motive.”
(Trear v. Sills (1999) 69 Cal.App.4th 1341, 1359.) “Because the purpose of the tort is ‘to
preserve the integrity of the court,’ it ‘requires misuse of a judicial process . . . .’
[Citation.] The tort therefore does not extend to misuse of administrative proceedings,
even those involving agencies with ‘“quasi-judicial” powers . . . .’” (ComputerXpress,
Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1014.) Shen’s DLSE claim involved
administrative, not court proceedings. It therefore cannot serve as the predicate for
plaintiffs’ cause of action for abuse of process.
       On the merits, plaintiffs’ argue their cause of action has a probability of prevailing
because there is evidence—Chen’s and Zhou’s testimony at the DLSE hearing—that
Shen was a Kaqilo partner, not a restaurant employee. Furthermore, plaintiffs argue, the
stock purchase agreement and defendants’ own declarations show Cindy Chow received
50 percent of Kaqilo stock four days before her parents started working for the restaurant,
but never worked there herself. Plaintiffs offer no explanation how these facts establish
defendants misused the DLSE proceedings for an improper purpose, and we can discern
none. The cause of action for abuse of process must therefore be stricken.

                                                8
                                     DISPOSITION
       The clerk of the superior court is ordered to vacate its order denying defendants’
special motion to strike and enter a new order granting the motion as to plaintiffs’ cause
of action for abuse of process and denying it otherwise. Each side is to bear its own costs
on appeal.
       NOT TO BE PUBLISHED.

                                                        CHANEY, Acting P. J.

We concur:

              LUI, J.

              MOOR, 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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