Case Name: Sukhdev Singh Aujla v. Sunny Bhullar

Case No.:  2015-1-CV-275568

This action arises from a dispute between former business partners over California real estate investments.  Currently before the Court is the special motion to strike filed by Plaintiff/Cross-Defendant Sukhdev Singh Aujla (“Plaintiff”) seeking to strike the first amended cross-complaint (“FACC”) filed by Defendant/Cross-Complainant Sunny Bhullar (“Defendant”).  The FACC was filed July 7, 2016, stating claims for 1) Fraud; 2) Breach of the Implied Covenant of Good Faith and Fair Dealing, and; 3) Declaratory Relief.

When a special motion to strike is filed, the initial burden rests with the moving party to demonstrate that the challenged pleading arises from protected activity.  ( Code Civ. Proc. “CCP” §425.16(e); Zamos v. Stroud (2004) 32 Cal.4th 958, 965.)  The moving party need only make a prima facie showing that the pleading “arises from” their constitutionally-protected free speech or petition activity.  (See Governor Gray Davis Committee v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 458-459.)  In determining whether the moving party has sustained his initial burden of proof, the court relies on the pleadings and declarations or affidavits.  (CCP §425.16(b).)

Once the moving party makes such a prima facie showing, the burden shifts to the opposing party to establish a “probability” that they will prevail on whatever claims are asserted against the moving party.  (See CCP §425.16(b).)  The opposing party must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment.  (Premier Med. Mgmt. Systems, Inc. v. California Ins. Guar. Ass’n (2006) 136 Cal.App.4th 464, 476.)  Whether a complaint could be amended to state a valid claim is immaterial; it is judged on its current form.  The burden is on the opposing party to produce evidence that would be admissible at trial—i.e., to proffer a prima facie showing of facts supporting a judgment in their favor.  (Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.)  This standard is the same as that governing a motion for summary judgment in that it is the plaintiff’s burden to make a prima facie showing of facts that would support judgment in plaintiff’s favor.  (Taus v. Loftus (2007) 40 Cal.4th 683, 714.)  The court does not weigh credibility or comparative strength of the evidence.  The court considers defendant’s evidence only to determine if it defeats plaintiff’s showing as a matter of law.  (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.)  Plaintiff must demonstrate that the claim is legally sufficient.  (Navellier v. Sletten (2002) 29 Cal.4th 82, 93; Grewal v. Jammu (2011) 191 Cal.App.4th 977, 989.)  Plaintiff must present sufficient evidence to satisfy the standard of proof under applicable law and to overcome any privilege or defense defendant has asserted.  (Christian Research Institute v. Alnor (2007) 148 Cal.App.4th 71, 84; Flatley v. Mauro (2006) 39 Cal.4th 299, 323.)

“A defendant meets his or her burden on the first step of the anti-SLAPP analysis by demonstrating the acts underlying the plaintiff’s cause of action fall within one of the four categories spelled out in [CCP] section 425.16, subdivision (e).”  (Collier v. Harris (2015) 240 Cal.App.4th 41, 50-51.)  That section provides that 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 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.”  (CCP §425.16(e).)  “These categories define the scope of the anti-SLAPP statute by listing acts which constitute 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.’”  (Collier, supra, at 51, citing CCP §425.16(e).)

The anti-SLAPP statute should be broadly construed and a plaintiff/cross-complainant cannot avoid operation of the anti-SLAPP statute 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 [internal citations omitted].)  “Accordingly, we disregard the labeling of the claim and instead ‘examine the principal thrust or gravamen of a plaintiff’s cause of action to determine whether the anti-SLAPP statute applies.’”  (Id. at 1272 [internal citation omitted].)  “We assess the principal thrust by identifying ‘[t]he allegedly wrongful and injury-producing conduct…that provides the foundation for the claim.’”  (Ibid. [citation omitted].)  “If the core injury-producing conduct upon which the plaintiff’s 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.”  (Ibid.)

Plaintiff has met his burden on the first step of the analysis, demonstrating that all three of the cross-claims alleged in the FACC arise from protected activity, the filing of Plaintiff’s initial complaint in this matter.

“[A] claim filed in response to, or in retaliation for, threatened or actual litigation is not subject to the anti-SLAPP statute simply because it may be viewed as an oppressive litigation tactic.  That a cause of action arguably may have been triggered by protected activity does not entail that it is one arising from such.  . . .  In short, the statutory phrase ‘cause 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.  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.”  (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78, emphasis added, internal citations omitted.)

The FACC’s first cause of action for fraud alleges that “[w]hen the parties entered into the Asset Purchase Agreements, Cross-Defendants Aujla and Singh represented to Bhullar that the agreements would be in full and final settlement of their interests relating to the Commercial Properties.   In fact, the Cross-Defendants had previously conspired to sue Bhullar for more money after the real estate market rebounded and after they had received payment under Asset Purchase Agreements.”  (FACC at 46-47.) These allegations make it clear that the act necessary to complete the purported fraud was the filing of the underlying complaint.  The “core injury-producing conduct” upon which the fraud is premised is clearly Plaintiff’s filing of the Complaint, which is protected activity under 425.16(e) as a written statement made before a judicial proceeding.

The FACC’s second cause of action for breach of the implied covenant of good faith and fair dealing not only fails to state sufficient facts in that it fails to allege that Defendant’s right to receive any specific benefit of the agreement actually made was frustrated[1], but it also can only be reasonably interpreted as predicated on the filing of Plaintiff’s Complaint.  The second cause of action (at 55) incorporates all prior allegations by reference and then alleges (at 59) on information and belief that “Aujla and Singh never intended to honor their obligations under the Asset Purchase Agreements, and entered into said agreements with the intent and purpose of waiting for the real estate market to rebound and waiting for payment under the Asset Purchase Agreements, then repudiating the agreements in an effort to secure more money from [ ] Bhullar.”

The FACC does not allege Breach of Contract or any other contract-related claim, so the alleged act of repudiation “to secure more money” can only be reasonably understood as referring to the filing of Plaintiff’s lawsuit.  The Opposition claims that “[l]ike his fraud cause of action, Bhullar’s cause of action for breach of the covenant . . . arises from Aujla’s 2012 negotiation and execution of a contract he never intended to honor, not the 2014 filing of his complaint.  Also, like the fraud cause of action, Bhullar’s damages for the breach were incurred when he paid Aujla $500,000 in 2013 and then sold the Ontario property at a substantial loss to fund the Aujla agreement.  Each of these actions occurred before, and are distinct from, Aujla’s filing of his complaint in 2014 . . .” Opp. at 9:18-24, internal citations to evidence omitted.

Not only does this argument still fail to identify any actual breach of the implied covenant, it does not make sense.  Defendant Bhullar was required to pay Plaintiff a total of $1.2 million by Dec. 31, 2013 under the Agreement he willingly signed.  (See Agreement at 2.)  Any payments made pursuant to the Agreement could not possibly constitute “damages” at the time they were made.  The only “breach” appears to be Bhullar’s subjective belief that the Purchase Agreement was a full settlement of any disputes between he and Aujla (a belief not supported by the language of the Agreement) was dispelled, and that occurred when the original complaint was filed.  That filing is the only possible “core injury-producing conduct,” because the claim otherwise fails to identify any proper breach of the implied covenant—a act by Aujla that frustrated Bhullar’s right to a specific contractual benefit or express promise of the Agreement.

The FACC’s third cause of action for declaratory relief can also only be reasonably understood as arising from the filing of Plaintiff’s original complaint.  It incorporates all prior allegations and states “Aujla has alleged that Bhullar materially misrepresented the value of Commercial Properties, including the Manteca Property, during the negotiation of Aujla’s buy-out in May 2012.  Aujla has also sought to rescind as a result of Bhullar’s alleged fraudulent representations . . .  Bhullar contends that nearly two years prior to the negotiation of the Aujla Agreement, the Bakersfield Investment Group lost their interests in the Manteca Property . . .  As a consequence, Aujla did not have an ownership in the Manteca Property in May 2012, and cannot an ownership interest in the Property via his rescission cause of action.  Accordingly, an actual, justiciable controversy now exists . . .” (FACC at 65-70.)

Like the second cause of action, this not only fails to state a proper claim, as a plaintiff/cross-complainant cannot establish the existence of actual, present controversy by pointing to the lawsuit in which he or she seeks declaratory relief (Cotati v. Cashman (2002) 29 Cal.4th 69, 79-80), but it does not make sense.  Defendant does not deny that it was he, not Plaintiff, who managed the investments (see Bhullar Opposing Dec. at 3 and 6) and the Agreement between Bhullar and Aujla states (“Recitals” at A) that “Seller” (Aujla) holds an 18% interest in the “Manteca Marketplace.”  If Bhullar believed Plaintiff had somehow lost that interest in 2010 (“two years prior”) why did he sign a May 4, 2012 Agreement stating otherwise?  In any event, Plaintiff only made his allegations and sought rescission for the first time in his Complaint and so the declaratory relief claim clearly arises from the filing of the Complaint.

When the burden shifts to Defendant he is unable to show a probability of prevailing on any of the three cross-claims.

Regarding the first cross-claim, fraud requires a) misrepresentation (false representation, concealment or nondisclosure); b) knowledge of falsity; c) intent to defraud/induce reliance; d) justifiable reliance; and e) resulting damage.  (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.)  “[F]raud must be pled specifically; general and conclusory allegations do not suffice.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)  The particularity requirement “‘necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’”  (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1615.)

Plaintiff (correctly) points out in his moving papers that, to begin with, Defendant cannot show a probability of prevailing because the claim is not pled with sufficient specificity.  The FACC’s first cause of action for fraud at 45-54 completely fails to allege the when, where, and how of the alleged “conspiring” of Plaintiff and cross-defendant Shinder Singh to “defraud” Defendant.   Plaintiff also points out that the language of the Purchase Agreement between Plaintiff and Defendant (attached as Ex. A to both the FAC and FACC) does not support the allegation in the FACC at 46 that it was “represented” to Defendant that the Agreements “would be in full and final settlement” of their disputes and therefore there is no evidence of intent to deceive.

Defendant does not acknowledge the lack of specificity in the fraud claim and argues that the three affidavits he has submitted, from himself and from Gurdial Singh Dosangh and Satnam Singh, provide support for all the essential elements of the claim.  This turns out not to be the case as none of Defendant’s evidence provides any support for his allegation that that it was misrepresented to him that the signing of the Purchase Agreement with Plaintiff was a full and final settlement of any disputes that they had or that he reasonably relied on such a misrepresentation.

As for the second cross-claim, the analysis is simple: Defendant Bhullar cannot show a probability of prevailing on his claim for breach if the implied covenant of good faith and fair dealing because he has not alleged sufficient facts to state a proper claim.  The claim as alleged in the FACC fails to identify any specific benefit(s) Defendant was entitled to under a specific contractual term, or allege how Plaintiff unfairly frustrated his right to receive those benefits.  There is no support in the language of the Agreement itself or the declarations submitted by Defendant (including his own) for Defendant’s claim that that the Agreement was meant as a full and final settlement of any and all disputes Plaintiff and Defendant had between them.

Turning to the third cross-claim, again the analysis is straightforward as the claim is not sufficiently pled.  To qualify for declaratory relief, a plaintiff/cross-complainant must demonstrate that his or her action presents two essential elements: (1) a proper subject of declaratory relief, and (2) an actual present controversy involving justiciable questions relating to the party’s rights or obligations.  (Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1582.)  As discussed above the only “actual present controversy” alleged in the FACC is Plaintiff’s allegation in the underlying Complaint that Defendant committed fraud.  Under the Cotati decision, a plaintiff/cross-complaint cannot establish the existence of actual, present controversy by pointing to the lawsuit in which he or she seeks declaratory relief, which is what Defendant is doing here.  (See Cotati, supra at 79-80.)

Even if a proper “actual present controversy” were alleged the “mere existence of a controversy is insufficient to overcome an anti-SLAPP motion against a claim for declaratory relief.  To defeat an anti-SLAPP motion, the plaintiff must also make a prima facie evidentiary showing to sustain a judgment in the plaintiff’s favor.”  (Mission Springs Water Dist. v. Verjil (2013) 218 Cal.App.4th 892, 909.)  Defendant cannot do so here both because the claim is inextricably intertwined with the other two claims (which he has not shown a probability of prevailing on) and because his explanation for the claim does not make sense.

Accordingly, Plaintiff’s special motion to strike all three cross-claims alleged in the FACC is GRANTED.

[1] “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.  The covenant thus cannot ‘be endowed with an existence independent of its contractual underpinnings.’  It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350.)  “The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. [Citation.] ‘The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.’ [Citation.] … ‘In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.’” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032.)