Case Number: 19STCP04926    Hearing Date: October 09, 2020    Dept: 86

GOLDFIELD v. DUGGER

Case Number: 19STCP04926

Hearing Date: October 9, 2020

[Tentative]       ORDER DENYING RESPONDENTS’ SPECIAL MOTION TO STRIKE THE PETITION

The introductory paragraph to the writ petition succinctly sets forth the gravamen of the petition:

“Respondents Zachary and Kelly Dugger have excluded Petitioner Goldfield from the affairs of The Run Travel, Inc. (“TRT”), even though he is and has at all times has [sic] been a 25% shareholder. They have refused him access to TRT’s books and records, have not provided tax returns or K-1s, have not given him annual (or any) financial reports or information and have failed and refused to provide documents or information on any annual or other meetings of TRT’s shareholders or directors.” (Pet., ¶ 1.)

Petitioner, Stephen Goldfield, alleges this failure by Respondents, Zachary Dugger and Kelly Dugger, to provide access to books and records of The Run Travel (TRT) violates the Corporations Code as well as the Nevada Revised Statutes (NRS).

Respondents move to strike the petition through Code of Civil Procedure section 425.16 (Section 425.16), a special motion to strike. Petitioner opposes the motion.

The motion is denied.

ALLEGATIONS IN THE PETITION

The petition allegations are straight-forward and uncomplicated:

Petitioner is a 25 percent shareholder of TRT, a Nevada corporation. Petitioner was the President of TRT from September 2014 to October 2017. After being ousted from his position, Respondent Zachary Dugger became a 45 percent shareholder of TRT and has had sole control of the business with this wife, Respondent Kelly Dugger.

Petitioner has made multiple requests of Respondents that they provide him with certain financial information for TRT. Despite the requests, Respondents have not provided any documents or information regarding shareholder or director meetings, have refused to provide financial statements or reports to Petitioner, and have not provided K-1s or tax returns. Petitioner concludes he has been “frozen out” of TRT.

Petitioner alleges Respondents have violated Corporation Code section 1601 and NRS section 78.257, subpart 1 through their actions. Petitioner requests a court order to compel statutory compliance so he may “inspect and copy [TRT’s] books and records pursuant to California and Nevada law . . . .” (Pet., Prayer ¶ 1.)

ANALYSIS

Section 425.16’s Special Motion to Strike:

Under the two-step analytical process of Section 425.16, the court first decides “whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. . . . 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.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) ‘[I]n making these determinations [the court] considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ (Ibid. [quoting Section 425.16, subd. (b)(2)].)

“ ‘In bringing a section 425.16 motion to strike, the defendant has the initial burden to make a prima facie showing that the plaintiff’s claims are subject to section 425.16. [Citation.] If the defendant makes that showing, the burden shifts to the plaintiff to establish a probability he or she will prevail on the claim at trial, i.e., to proffer a prima facie showing of facts supporting a judgment in the plaintiff’s favor.’ ” (Roberts v. Los Angeles County Bar Assoc. (2003) 105 Cal.App.4th 604, 613 [quoting Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.)

  1. Step One: Does the Cause of Action Arise from Protected Activity?

Subdivision (e) of Section 425.16 identifies four general categories of activities that constitute protected “ ‘act[s] 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.’ ” As relevant here and as used in Section 425.16, 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 . . . .” (§ 425.16, subd. (e).)

“[S]ection 425.16 requires every defendant seeking its protection to demonstrate that the subject cause of action is in fact one ‘arising from’ the defendant’s protected speech or petitioning activity.” (Equilon Enterprises v. Consumer Cause, Inc.supra, 29 Cal.4th at 66.)

Notwithstanding Section 425.16’s instruction the statute is to be “broadly construed” (Section 425.16, subd. (a)), “the ‘arising from’ requirement is not always easily met.” (Equilon Enterprises v. Consumer Cause, Inc.supra, 29 Cal.4th at 66.) “The trial court must . . . focus on the substance of the plaintiff’s lawsuit in analyzing the first prong of a special motion to strike.”  (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 669.) A defendant must show that his/her “conduct by which plaintiff claims to have been injured falls within” one of Section 425.16, subdivision (e)’s four categories or protected activity. (Equilon Enterprises v. Consumer Cause, Inc.supra, 29 Cal.4th at 66.)

For a cause of action to “arise from” protected activity, “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.” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.) “The 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.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 92.)  Section 425.16 applies to any claim arising from protected conduct, regardless of its label. (Ibid.)

In other words, “[i]n 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. Cashmansupra, 29 Cal.4th at 78 [emphasis added]. “[I]t is the principal thrust or gravamen of the plaintiff’s cause of action that determines whether the anti-SLAPP statute applies.” (Martinez v. Metabolife Intern., Inc. (2003) 113 Cal.App.4th 181, 188 [emphasis added].) Thus, the court must focus on the “defendant’s activity that gives rise to his or her asserted liability” and whether that activity “constitutes protected speech or petitioning.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 92.)

Here, in order to resolve the first step of the Section 425.16 analysis, Respondents argue facts outside of the petition demonstrate protected activity gives rise to this action. Those facts concern another lawsuit—one that predated this writ action—where Petitioner alleged an eleventh cause of action for “Access to Books and Records” (the Pre-Existing Lawsuit). (McKown Decl., ¶¶ 3-4; RJN Ex. B, ¶¶ 85-87.)

In the Pre-Existing Lawsuit, Petitioner propounded more than 1,200 discovery requests in the on three parties: Zachary Dugger, Scott Oshry (a shareholder of TRT) and TRT. (McKown Decl., ¶ 6.) Petitioner’s demand to Respondent Zachary Dugger and TRT included all financial, tax and administrative records of TRT. (McKown Decl., ¶¶ 7-8, Exs. A [Demands Nos. 113-138]), Ex. B [Demands Nos. 124-149].) Both Respondent Zachary Dugger and TRT produced all of TRT’s financial, tax and administrative records, including all books and records of TRT within their possession, custody, and control; Respondents represent there are no further records to produce. (Z. Dugger Decl., ¶¶ 5-6.)

Respondents assert this action is “retaliatory” based on the discovery responses and the discovery responses are protected. Therefore, they contend this lawsuit is based on their protected activity. The entirety of their argument is as follows:

“Petitioner’s claim that Respondents failed to provide him with access to the books and records of TRT directly arises from his Eleventh Cause of Action in the Pre-Existing Lawsuit and his subsequent dissatisfaction with Zachary Dugger’s production of those books and records in the Pre-Existing Lawsuit. Indeed, the claims asserted in this Petition are inextricably intertwined with the claims, discovery, and litigation conduct in the Pre-Existing Lawsuit. Petitioner is the one who elected to file suit for Respondent’s alleged failure to grant him access to TRT’s books and records, to make the demand through his pleading,[1] and then to make the demand through his discovery requests. Petitioner’s service of a duplicative demand letter after having asserted those claims and propounding document demands does not change the fact that Respondent’s alleged failure arises from the litigation activities in the Pre-Existing Lawsuit.” (Motion 6:22-7:2.)

Respondents’ “protected activity” analysis is misfocused and therefore unpersuasive. That Petitioner filed this action after he filed the Pre-Existing Lawsuit and after Respondents communicated their discovery responses therein—responses Petitioner purportedly found inadequate—does not establish this action “arose from” that protected petitioning (litigation) activity. (See City of Cotati v. Cashman, supra, 29 Cal.4th at 77; see also Personal Court Reporters, Inc. v. Rand (2012) 205 Cal.App.4th 182, 189 [collecting cases].)

Section 425.16 does not mean that “any claim asserted in an action which arguably was filed in retaliation for the exercise of speech or petition rights falls under section 425.16, whether or not the claim is based on conduct in exercise of those rights.” (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1002 [emphasis in original].) Instead, to fall under Section 425.16, the claim must be based on the exercise of speech or petition rights.

In short, it is not enough to show that the action was “triggered by”—or filed in response to or in retaliation for—a party’s exercise of free speech rights. Under Section 425.16, a cause of action may be “triggered by” protected activity without necessarily “arising from” that activity.” (City of Cotati v. Cashman, surpa, 29 Cal.4th at pp. 77–78; Episcopal Church Cases (2009) 45 Cal.4th 467, 477.)

Rather, the focus is as follows: “In order for a complaint to be within the anti-SLAPP statute, the ‘critical consideration . . . is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.’ [Citation.] To make that determination, we look to the ‘principal thrust or gravamen of the plaintiff’s cause of action.’ (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188; Dyer v. Childress (2007) 147 Cal.App.4th 1273, 1279.)” (Moriarty v. Laramar Management Corp. (2014) 224 Cal.App.4th 125, 133.)

Petitioner’s complaint here is a statutory violation. The gravamen of his petition is Respondents’ alleged failure to comply with Corporations Code section 1601 and NRS 78.257, subpart 1. Specifically, Petitioner contends Respondents violated his statutory rights when they failed to produce records and documents of TRT after Petitioner’s request outside of any litigation.[2] (Pet., ¶¶ 2-9, Prayer ¶ 1.)

Petitioner claim does not “arise from” Respondents discovery responses or prior litigation—it is in no way dependent such things. To the extent alternative avenues to accomplish his goal were unsatisfactory or insufficient, Petitioner was free to file another lawsuit to enforce his statutory rights. Nothing in Petitioner’s action here is about communicative conduct or petitioning activity. Petitioner believes he is entitled to certain inspection rights of books and records of TRT. Whether all of the documents were produced in connection with other litigation is of no consequence.

The court recognizes (as suggested in Respondents’ reply) the allegations do not exist in a vacuum. Nonetheless, the Pre-Existing Litigation and discovery responses at most are incidental to the thrust of Petitioner’s claim here. Petitioner seeks to enforce his statutory rights.

  1. Step Two: Probability of Success

Given the court’s findings with respect to the first part of the Section 425.16 analysis, the court need not address whether Petitioner can show a probability of prevailing on the claims.

CONCLUSION

For the foregoing reasons, the special motion to strike the Petition is denied.

IT IS SO ORDERED.

October 9, 2020                                                                     ________________________________

                                                                                                                   Hon. Mitchell Beckloff

                                                                                                                   Judge of the Superior Court

[1] The operative pleading in the Pre-Existing Lawsuit makes demand for access to TRT’s books and records.

[2] The court notes TRT has not been named as a respondent in this matter. Such failure would preclude judgment against it.