Harris v. Powerdrive Oil and Gas Company CA4/3 ( 2022 )

Filed 2/4/22 Harris v. Powerdrive Oil and Gas Company CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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
FOURTH APPELLATE DISTRICT
DIVISION THREE
STEPHEN T. HARRIS et al.,
Cross-complainants and Appellants, G059623
v. (Super. Ct. No. 30-2017-00933404)
POWERDRIVE OIL AND GAS OPINION
COMPANY LLC et al.,
Cross-defendants and Respondents.
Appeal from an order of the Superior Court of Orange County, Craig L.
Griffin, Judge. Affirmed.
Bewley, Lassleben & Miller, Leighton M. Anderson and David A. Brady
for Cross-complainants and Appellants.
Clifford & Brown, Donald T. Oldaker and John R. Szewczyk for Cross-
defendants and Respondents.
* * *
This is an appeal from the trial court’s decision to grant, in part, a special
motion strike under Code of Civil Procedure section 425.161 (the anti-SLAPP statute).
Cross-defendants, and respondents Powerdrive Oil & Gas Company LLC (PDOG) and
Powerdrive Energy Services Company (PDES) (collectively Powerdrive) moved to strike
a cause of action for breach of fiduciary duty from the second amended cross-complaint
filed by cross-complainants, and appellants Stephen T. Harris, HB-1, LLC, and HOC
Operating, LLC, also known as HOC of California, LLC (HOC) (collectively the HB-1
parties). The trial court struck five paragraphs from the second amended cross-complaint
set forth under the heading “Facts Common to All Claims,” claiming Powerdrive
committed “Fraud on the Court” through its earlier litigation conduct. These paragraphs
were incorporated by reference into the HB-1 parties’ breach of fiduciary duty claim.
The court granted the anti-SLAPP motion as to these five paragraphs only and awarded
Powerdrive $2,335 in attorney fees. The HB-1 parties now appeal.
Because the breach of fiduciary duty claim included exceedingly broad
language alleging that “[e]ach and every act” by Powerdrive “was in breach of their
fiduciary duties,” we must conclude that intentionally or not, the HB-1 parties managed
to include a claim of protected activity within that cause of action’s scope, thereby
triggering the anti-SLAPP statute. Because the alleged conduct, as the HB-1 parties
admit, was entirely based on court filings, it was barred by the litigation privilege. We
therefore affirm the order granting the anti-SLAPP motion in part. We also find no abuse
of discretion by the court in awarding Powerdrive attorney fees on the anti-SLAPP
motion.
1
Subsequent statutory references are to the Code of Civil Procedure unless otherwise
indicated.
2
I
FACTS
This case has a complex history, which we summarize as briefly as
possible. Up until 2006, Harris was the principal owner of two corporations, Energy
Development Corporation (Energy) and South Coast Oil Corporation (South Coast).
According to a declaration filed by Harris, these two corporations acquired, among other
things, old and disused oil wells in Huntington Beach. In 2006, Energy and South Coast
filed bankruptcy proceedings.
During those proceedings, Harris was contacted by Niclas Biornstad, a
representative for investor Madhukar Murarka, who was interested in investing to bring
the wells owned by Energy and South Coast back into operation. Eventually, they agreed
upon terms, and each party nominated legal entities to be the contracting parties. Harris
nominated HB-1, and Murarka formed and designated PDOG. HB-1 was designated as
the company to hold the joint venture assets in Huntington Beach, which was an area of
mutual interest (AMI) under the agreement the parties eventually executed. HB-2 LLC
(HB-2), which was not yet formed, was designated to hold assets in a second area of
mutual interest (AMI-2).
Paul Langland, Harris’s attorney and designated manager of HB-1, and
Murarka, on behalf of PDOG, signed a letter of agreement (the agreement) in November
2015. The agreement began: “[T]his letter sets forth the terms under which PowerDrive
Oil and Gas Company, LLC . . . shall become a share owner of HB 1 LLC . . . and HB
2 . . . through the acquisition, lease, and/or farm-in of: Bankruptcy estates, development
of lands and assets, oil fields, prospects, drill sites, mineral and surface ownership, oil
and gas leases, non-participating royalty and royalty interests, the drilling of oil, gas and
geothermal test wells, development wells, lateral extensions and redrills; for acquisition
or lease pipelines, equipment, trucks and trailers, rigs and oilfield tools (hereinafter shall
3
be referred to as ‘L&L’), within two Areas of Mutual Interest (herein referred to as ‘AMI
1’ and ‘AMI 2 . . .’).”
The specifics of the agreement are not something we need address here.
Other agreements between the parties followed. In June 2016, Powerdrive prevailed as
the successful bidder in a bankruptcy auction relating to South Coast and Energy,
spending approximately $2.2 million to acquire those company’s assets. The bankruptcy
court approved the sale.
Multiple disputes arose regarding the rights and duties of the parties. One
point of contention was Powerdrive’s insistence on an amendment to the agreement after
a competing party expressed interest in buying the assets of South Coast and Energy
during the bankruptcy proceedings. Harris characterized this amendment as “imposed”
on him “under duress.”
In 2017, Powerdrive filed a complaint against the HB-1 parties and others
alleging intentional fraud and concealment, breach of fiduciary duty, unfair competition,
trespass, conversion, trespass to chattels, interference with contract, interference with
prospective economic advantage, misappropriation of business opportunity, trade libel,
and breach of contract. The complaint sought specific performance of the agreement and
its amendment, declaratory relief, dissolution of the joint venture and accounting,
monetary damages, injunctive relief. The essence of the complaint was that Langland
and Harris, among others, had formulated a plan or conspiracy to cheat Powerdrive of the
benefits of its purchase of the assets of Energy and South Coast, and to undermine and
damage Powerdrive’s ownership’s interest.
Early in the case, Powerdrive sought injunctive relief to prevent the HB-1
parties from interfering with its operations while the case was pending. The court
ultimately granted the preliminary injunction.
The HB-1 parties filed an initial cross-complaint, which included a cause of
action for breach of fiduciary duty as the seventh cause of action. The same cause of
4
action appeared in HB-1’s amended cross-complaint and the operative second amended
cross-complaint.
In the second amended cross-complaint, for the first time, the HB-1 parties
included the following in the section of the cross-complaint entitled “Facts Common to
All Claims”:
“29. Fraud on the Court. In the Complaint in this action, and in sworn
testimony, PDOG and its agents or representatives have asserted that the demand for
amended terms of the Agreement were necessitated by a change in the amount of funds
needed to purchase the assets from the bankruptcy trustee. Those representations of fact,
as made to this Court in this action, have knowingly been false. In truth and in fact, the
negotiation record between Murarka and Harris includes the express proposal that the
Amendment would not be required if Harris would pay for Murarka’s legal bills to a
bankruptcy-law attorney of $100,000. Cross-defendants and each of them invented the
excuse regarding the funds needed to purchase the assets to conceal the bad faith refusal
to perform the original terms, which was asserted at the time of maximum leverage in
order to force a renegotiation of those terms.
“30. Plaintiffs, at Murarka’s direction and control, further engaged in a
fraud on the Court by mispresenting facts at the time of seeking equitable relief at the
outset of this case, including facts regarding their own intentions and purposes. The
Court’s first introduction to this case arose when both plaintiffs, each alleging an interest
in the subject matter of the action, sought interim equitable relief in the form of a TRO
and preliminary injunction expressly ‘to maintain a status quo that will protect all parties’
rights by enjoining [d]efendants from engaging in further destructive and unlawful “self-
help,” as [the parties] work through the issues framed by the complaint.’ Ex Parte
Application (etc.), dated July 31, 2017, at 5 . . . . That same application squarely
represented to this Court that the relief sought would not result in ‘significant legal harm’
to the [defendants], since ‘any amount [to which] defendants might be entitled . . . can be
5
calculated with certainty and . . . fully accounted for . . . .’ [Citation.] A supplemental
brief further argued that the parties were members of a joint venture to which fiduciary
duties applied, including duties not to compete with the joint venture. Plfs.’ Mem. of Pts.
& Auth. In Reply to Opp. (etc.), dated September 16, 2017, at 12, lines 3-8. The theory
of the complaint and the accompanying injunction application was that Harris, with the
assistance of others, was engaged in ‘destructive and unlawful “self-help”’ by acquiring
assets in derogation of PDOG’s purported exclusive right to hold and operate oil field
assets in the ‘Townlot’ fields of Huntington Beach.
“31. In reliance on those claims, the Court granted a preliminary injunction
against Harris and the other defendants, restraining them from ‘[i]nterfering with,
obstructing, hindering, preventing, harassing, or delaying [POG or PES] from accessing,
occupying, operating, maintaining and utilizing the surface of subsurface of [the land and
facilities associated with wells designated as SCOC ## 21 40, and 41].’ Order Granting
App. for Prelim. Inj., filed October 10, 2017, [¶] 11 A. Other provisions of the order
restrained Harris and others similarly from interference with PDOG’s or PDES’s
operation of other Huntington Beach wells, which were likewise subject to the joint
venture agreement.
“32. In effect, the Court relied for preliminary injunction purposes on the
representation and assurance that although Harris had been engaged in ‘self-help,’ PDOG
was willing in good faith to hold the assets for the benefit of tile joint venture ‘as [the
parties] work through the issues framed by the complaint.’ Ex Parte Application (etc.),
supra, at 5. Likewise, the Court presumably believed that the relief would not result in
‘significant legal harm’ to the Harris parties, since ‘[a]ny amount [to which] defendants
might be entitled . . . can be calculated with certainty and . . . fully accounted for . . . .’
Ex Parte Application (etc.), supra, at 18. But, those representations to the Court were
never honored by PDOG or PDES or by Murarka as their alter ego and Manager.
6
“33. Instead, plaintiffs actually used the Court’s process to secure sole and
undisputed control over assets contractually committed to the joint venture, intending (as
Murarka admitted at his deposition, see infra) to operate them for their own account.”
(Boldfacing and underlining omitted.)
These five paragraphs were incorporated by reference into the seventh
cause of action for breach of fiduciary duty (the fiduciary duty claim). In addition to
other motions, the Powerdrive parties moved to strike and the fiduciary duty claim in its
entirety, including the five paragraphs quoted above, pursuant to the anti-SLAPP statute.
Powedrive also sought $2,335 in attorney fees and costs.
Ultimately, the court granted the motion in part, striking paragraphs 29
through 33 but denying the motion as to the remaining parts of the cause of action. The
court also awarded $2,335 in attorney fees to Powerdrive.
II
DISCUSSION
The only issues in this appeal are whether the trial court properly struck
paragraphs 29 through 33 of the cross-complaint and awarded Powerdrive attorney fees
on its anti-SLAPP motion.
The Anti-SLAPP Statutory Framework and Standard of Review
The anti-SLAPP 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, 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).) The purpose of the anti-SLAPP statute is to dismiss
meritless lawsuits designed to chill the defendant’s free speech rights at the earliest stage
7
of the case. (See Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2,
disapproved on another ground in Equilon Enterprises v. Consumer Cause, Inc. (2002)
29 Cal.4th 53, 68, fn. 5.)
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.” (§ 425.16,
subd. (e).)
To determine whether an anti-SLAPP motion should be granted or denied,
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).)’” (Jarrow
Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733.)
If that threshold is met, courts then look to the second step, determining
whether the plaintiff has demonstrated a probability of prevailing on the merits. To do
so, the plaintiff must state and substantiate a legally sufficient claim (Briggs v. Eden
Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1122-1123), thereby
8
demonstrating the case has at least “‘“minimal merit.”’” (Cole v. Patricia A. Meyer &
Associates, APC (2012) 206 Cal.App.4th 1095, 1105.)
On appeal, “[w]e review an order granting an anti-SLAPP motion de novo,
applying the same two-step procedure as the trial court.” (Cole v. Patricia A. Meyer &
Associates, APC, supra, 206 Cal.App.4th at p. 1105.) In conducting our review, “[w]e
consider ‘the pleadings, and supporting and opposing affidavits . . . upon which the
liability or defense is based.’” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th
260, 269, fn. 3.) As the California Supreme Court has noted, by its plain language the
anti-SLAPP statute is to be “‘construed broadly’” to achieve its stated ends. (Equilon
Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at pp. 59-60.)
Protected Activity
The anti-SLAPP statute includes within its ambit “any written or oral
statement or writing made before a . . . judicial proceeding . . . (2) any written or oral
statement or writing made in connection with an issue under consideration or review by a
. . . judicial body . . . .” (§ 425.16, subd. (e).) The trial court noted in its order: “The
[cross-complaint’s] allegations in ¶¶ 29 -33 under the heading ‘Fraud on the Court’ claim
that [Powerdrive] made knowingly false representations to the court in the complaint in
this case and in seeking injunctive relief, and that [Powerdrive] ‘used the Court’s process
to secure sole and undisputed control over assets contractually committed to the joint
venture . . . for their own account.’ [The fiduciary duty claim] incorporates by reference
the ‘Fraud on the Court’ allegations and then alleges that by taking exclusive possession
of ‘assets belonging to the joint venture, cross-defendants converted them to their own
use,’ and thereafter ‘negligently or recklessly maintained and operated the assets,’
causing injury to the Cross-Complainants[’] interest. [The fiduciary duty claim] is thus
premised at least in part upon conduct of [Powerdrive] in seeking and obtaining
9
injunctive relief in this litigation, and the conduct constituting the protected activity is the
wrong complained of [sections] 425.16 (e)(1) and (2) thus apply here.”
The HB-1 parties admit paragraphs 29 through 33 “unquestionably referred
to litigation conduct,” but argue that neither the fiduciary duty claim nor any of its other
claims arose from anything Powerdrive said, in the form of communicative or petitioning
conduct, but from its actions. They correctly point out there is a distinction between
activities that form the basis for a claim and those that lead to the activity that created
liability or provide evidentiary support for it.
But their choice to incorporate litigation conduct into the fiduciary duty
claim is highly problematic. Paragraph 127, part of the fiduciary duty claim, alleged:
“Each and every act and practice of cross-defendants and each of them, including Roes
21through 100, inclusive, was in breach of their fiduciary duties to cross-complainants
and each of them.” (Italics added.) By including such a broad allegation, when they had
incorporated their claims of litigation misconduct by reference, the HB-1 parties opened
the door to this motion and closed it on any argument that the fiduciary duty claim did
not “arise” from those allegations, at least in part. There is no way to interpret “[e]ach
and every act” other than to include the claims of litigation misconduct among the acts
the HB-1 parties alleged were a breach of Powerdrive’s fiduciary duty.
Put another way, the claims of litigation misconduct formed part of the
basis for the fiduciary duty claim. “‘The elements of a cause of action for breach of
fiduciary duty are: (1) the existence of a fiduciary duty; (2) the breach of that duty; and
(3) damage proximately caused by that breach.’” (IIG Wireless, Inc. v. Yi (2018) 22
Cal.App.5th 630, 645-646.) A fiduciary relationship is “‘“any relation existing between
parties to a transaction wherein one of the parities is in duty bound to act with the utmost
good faith for the benefit of the other party.”’” (Wolf v. Superior Court (2003) 107 Cal.
App. 4th 25, 29-30.) Committing “Fraud on the Court” to gain an advantage over a joint
venturer could (absent the litigation privilege) state a claim for a breach of fiduciary duty.
10
The fiduciary duty claim may also allege other wrongs, but intentionally or not, due to its
overbroad language, it also managed to allege a claim about Powerdrive’s litigation
conduct by stating Powerdrive was dishonest with the court in its papers. Such conduct is
protected by section 425.16, subdivision (e)(1) and (2).
For the same reasons, we reject any claim that paragraphs 29 through 33
were “‘merely incidental,’” “‘collateral,’” or only “provide[d] context.” (Baral v. Schnitt
(2016) 1 Cal.5th 376, 394.) The trial court correctly found that the first prong of the anti-
SLAPP statute was met.
Minimal Merit
Once we determine that the anti-SLAPP statute applies, the burden then
shifts to the plaintiff to demonstrate a probability of prevailing “‘by showing that the
claim has “minimal merit.”’” (Gruber v. Gruber (2020) 48 Cal.App.5th 529, 537.) If the
plaintiff does so, the motion to strike under the anti-SLAPP statute must be denied. To
establish the requisite probability of prevailing, the plaintiff must state and substantiate a
legally sufficient claim. (Briggs v. Eden Council for Hope & Opportunity, supra, 19
Cal.4th at pp. 1122-1123.) “Put another way, the plaintiff ‘must demonstrate that the
complaint is both legally sufficient and supported by a sufficient prima facie showing of
facts to sustain a favorable judgment if the evidence submitted by the plaintiff is
credited.’” (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.)
The trial court concluded that the conduct described in paragraphs 29
through 33 was covered by the litigation privilege, and we agree. Indeed, the HB-1
parties spend less than a page of their opening brief in a half-hearted attempt to argue
otherwise. In their reply brief, the HB-1 parties return to the question of whether
paragraphs 29 through 33 formed the basis for a “claim” without addressing the litigation
privilege.
11
Powerdrive’s actions during litigation were protected by the litigation
privilege, Civil Code section 47, subdivision (b). As pertinent here, that section provides:
“A privileged publication or broadcast is one made: [¶] . . . [¶] (b) In any . . . (2)
judicial proceeding . . . .” (Civ. Code, § 47, subd. (b).) “The principal purpose of [Civil
Code] section 47[, subdivision (b),] is to afford litigants . . . the utmost freedom of access
to the courts without fear of being harassed subsequently by derivative tort actions.”
(Silberg v. Anderson (1990) 50 Cal.3d 205, 213.) “Although originally enacted with
reference to defamation [citation], the privilege is now held applicable to any
communication, whether or not it amounts to a publication [citations], and all torts except
malicious prosecution. [Citations.] Further, it applies to any publication required or
permitted by law in the course of a judicial proceeding to achieve the objects of the
litigation . . . .” (Id. at pp. 211-212.) It is beyond dispute that papers filed in support of a
motion are covered by the litigation privilege. Accordingly, the HB-1 parties did not
meet their burden to show minimal merit.
Attorney Fees
In its opening brief, the HB-1 parties argue that Powerdrive’s partial victory
of striking the five disputed paragraphs did not entitle it to the very minimal attorney fee
award of $2,335. In support of this claim, they cite two cases for the proposition that “an
exception” to the statutory language which states that a prevailing defendant “shall” be
awarded its attorney fees exists when the results of the motion were insignificant and did
not result in a practical benefit.
In support of this argument, they cite two cases. In the first, Richmond
Compassionate Care Collective v. 7 Stars Holistic Foundation (2019) 33 Cal.App.5th 38,
the court states: “A defendant who partially succeeds on an anti-SLAPP motion
generally is considered a prevailing party and is entitled to fees (and costs) unless the
results of the motion were so insignificant that defendant did not achieve any ‘practical
12
benefit’ from bringing the motion . . . .” (Id. at p. at 45.) The HB-1 parties quote this
part of the sentence, while leaving out the next part: “a determination that lies within the
‘broad discretion’ of the trial court.” (Ibid.) The quotation about “‘broad discretion’”
comes from the other case the HB-1 parties cite, Mann v. Quality Old Time Serv., Inc.
(2006) 139 Cal.App.4th 328. They quote that case without including the language about
the court’s discretion. The HB-1 parties do mention that “there is nothing in the record to
suggest that the trial judge exercised his discretion to determine that [Powerdrive] were
not the prevailing parties,” but this turns the standard of review on its head. Where a
decision is in the court’s discretion, it will only be overturned if an abuse of that
discretion is shown by the party challenging it. (Id. at pp. 340-341.) The HB-1 parties do
not offer any argument to support the contention that the trial court’s decision was an
abuse of its discretion, and we would not find such an abuse even if they had.
Accordingly, we find no error.
III
DISPOSITION
The order is affirmed. Powerdrive is entitled to its costs on appeal and may
file any appropriate motion for attorney fees on appeal in the trial court.
MOORE, ACTING P. J.
WE CONCUR:
FYBEL, J.
MARKS, J.*
*Judge of the Orange Super. Ct., assigned by the Chief Justice pursuant to article VI,
section 6 of the California Constitution.
13