Hidalgo v. Raheel CA2/2 ( 2014 )

Filed 1/15/14 Hidalgo v. Raheel CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 TWO
SILVIO HIDALGO, B240548
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC450323)
v.
SYED RAHEEL et al.,
Defendants and Respondents.
APPEAL from orders of the Superior Court of Los Angeles County. Mark V.
Mooney, Judge. Affirmed.
Rosen & Associates, Robert C. Rosen, John B. Wallace, and David Paul Bleistein
for Plaintiff and Appellant.
Foley & Lardner, Tami S. Smason and Sonia Salinas for Defendants and
Respondents.
Plaintiff and appellant Silvio Hidalgo (plaintiff) appeals from the trial court’s
orders granting special motions to strike, pursuant Code of Civil Procedure section
425.16,1 all of the causes of action asserted against defendants and respondents Syed
Raheel (Raheel) and Lifeforce Cryobank Sciences, Inc. (Lifeforce) (collectively
defendants) in this action for fraud, conspiracy to defraud, aiding and abetting fraud, and
aiding and abetting breach of fiduciary duty. Plaintiff also appeals from orders awarding
defendants their respective attorney fees and costs. We affirm the trial court’s orders.
BACKGROUND
Parties
Plaintiff was a shareholder of Cryobanks International, Inc. (Cryobanks), a private,
for-profit corporation that had approximately 150 shareholders. Raheel was a creditor of
Cryobanks who foreclosed on Cryobanks’s assets after Cryobanks defaulted on a loan.
Lifeforce acquired all of Cryobanks’s assets following Raheel’s foreclosure action.
Florida action and judgment
Raheel sued Cryobanks in a Florida foreclosure action (the Florida action) after
Cryobanks defaulted on a loan. A default judgment in the Florida action was issued
against Cryobanks and in favor of Raheel. Pursuant to that judgment, Cryobanks’s assets
were sold to Lifeforce for $100 at a public auction.
The instant action and Raheel’s anti-SLAPP motion
Plaintiff filed the instant action, initially alleging in his second amended complaint
a single cause of action against defendants for breach of fiduciary duty. Plaintiff alleged
that Raheel conspired with Cryobanks’s majority shareholder, Zubair Kazi (Kazi),2 “to
effectuate a collusive foreclosure sale which transferred all of [Cryobanks’s ] assets to
Raheel and/or his Lifeforce entities.” Plaintiff alleged that Kazi caused Cryobanks to
1 All further statutory references are to the Code of Civil Procedure, unless
otherwise stated. A special motion to strike is also referred as an anti-SLAPP motion.
2 Plaintiff also asserted various causes of action against Kazi, including breach of
contract, fraud, fraudulent inducement, misrepresentation, and breach of fiduciary duty.
Kazi is not a party to this appeal.
2
default on an alleged debt owed to Raheel and to default in the subsequent foreclosure
action brought by Raheel. Plaintiff further alleged that Kazi made no bid or appearance
at the foreclosure sale in order to allow Lifeforce to purchase Cryobanks’s assets for
inadequate consideration.
On October 12, 2011, Raheel filed his anti-SLAPP motion, in which he argued
that the single cause of action asserted against him arose out of his Constitutional rights
of freedom of speech and petition for redress of grievances. Raheel further argued that
plaintiff’s claim was barred by the doctrine of res judicata and that plaintiff lacked
standing to sue Raheel because his claimed loss -- the value of his investment in
Cryobanks -- could be recovered only by way of a shareholder derivative action.
Pursuant to a stipulation among the parties, plaintiff thereafter filed a third
amended complaint alleging additional causes of action against defendants for conspiracy
to defraud, aiding and abetting breach of fiduciary duty, and aiding and abetting fraud.
Raheel filed an amended notice of his anti-SLAPP motion, in which he stated that the
factual allegations underlying each of the causes of action in plaintiff’s third amended
complaint were substantively the same as those asserted in the second amended
complaint.
Plaintiff opposed the anti-SLAPP motion, arguing that section 425.16 did not
shield Raheel’s allegedly fraudulent acts, that Raheel’s motion was procedurally
defective, and that plaintiff could provide facts that would establish a reasonable
probability of prevailing on his claims. He offered the following facts in support of his
opposition: Kazi had “bragged about his plan to acquire [Cryobank’s] assets for himself
and a partner,” Kazi caused Cryobanks to default on the loan made by Raheel and to
default in Raheel’s subsequent foreclosure action, “Raheel requested and obtained
[Cryobank’s] default,” and “[Cryobank’s] assets were acquired at an uncontested
foreclosure sale for $100, at which Kazi did not bid.” Plaintiff also argued in his
opposition to the anti-SLAPP motion that he should be allowed to take discovery
necessary to establish his prima facie case against Raheel.
3
Following a hearing at which the parties presented argument, the trial court
granted Raheel’s anti-SLAPP motion. The trial court granted Raheel’s subsequent
motion for attorney fees and costs, awarding him a total of $15,833.38.
Lifeforce’s anti-SLAPP motion
On February 6, 2012, Lifeforce filed a demurrer to the third amended complaint
and an anti-SLAPP motion, which plaintiff opposed. The anti-SLAPP motion was heard
and granted on April 9, 2012. The trial court granted Lifeforce’s subsequent motion for
attorney fees and costs and awarded Lifeforce a total of $13,469.80.
The instant appeal
Plaintiff appeals from four trial court orders: (1) a January 13, 2012 order
granting Raheel’s anti-SLAPP motion; (2) an April 9, 2012 order granting Lifeforce’s
anti-SLAPP motion; (3) an April 12, 2012 order awarding attorney fees and costs to
Raheel; and (4) a September 5, 2012 order awarding attorney fees and costs to Lifeforce.
DISCUSSION
I. Section 425.16
Section 425.16 was enacted “to provide for the early dismissal of unmeritorious
claims filed to interfere with the valid exercise of the constitutional rights of freedom of
speech and petition for the redress of grievances. [Citation.]” (Club Members for an
Honest Election v. Sierra Club (2008) 45 Cal. 4th 309, 315 (Club Members).) As relevant
here, subdivision (b)(1) of 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.”
Determining whether section 425.16 bars a given cause of action requires a two-
step analysis. (Navellier v. Sletten (2002) 29 Cal. 4th 82, 88 (Navellier).) First, the court
must decide whether the party moving to strike a cause of action has made a threshold
showing that the cause of action “aris[es] from any act . . . in furtherance of the [moving
4
party’s] right of petition or free speech.” (§ 425.16, subd. (b)(1); Navellier, supra, at p.
88.) “‘A cause of action “arising from” [a] defendant’s litigation activity may
appropriately be the subject of a section 425.16 motion to strike.’ [Citations.] ‘Any act’
includes communicative conduct such as the filing, funding, and prosecution of a civil
action. [Citation.]” (Rusheen v. Cohen (2006) 37 Cal. 4th 1048, 1056 (Rusheen).) The
scope of the statute is broad. In authorizing the filing of a special motion to strike, the
Legislature “expressly provided that section 425.16 should ‘be construed broadly.’
[Citation.]” (Club Members, supra, 45 Cal.4th at p. 315.)
If the court finds that a defendant has made the requisite threshold showing, the
burden then shifts to the plaintiff to demonstrate a “probability that the plaintiff will
prevail on the claim.” (§ 425.16, subd. (b)(1); Navellier, supra, 29 Cal.4th at p. 88.) In
order to demonstrate a probability of prevailing, a party opposing a special motion to
strike under section 425.16 “‘“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.”’ [Citation.]”
(Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 741, fn. omitted.) “‘The
plaintiff’s showing of facts must consist of evidence that would be admissible at trial.
[Citation.]’” (Stewart v. Rolling Stone LLC (2010) 181 Cal. App. 4th 664, 679.)
“[D]eclarations that lack foundation or personal knowledge, or that are argumentative,
speculative, impermissible opinion, hearsay, or conclusory are to be disregarded.
[Citation.]” (Gilbert v. Sykes (2007) 147 Cal. App. 4th 13, 26.)
A trial court’s order granting a special motion to strike under section 425.16 is
reviewed de novo. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal. App. 4th 993, 999.)
II. The anti-SLAPP motions were properly granted
A. Arising from protected activity
The causes of action asserted against Raheel and Lifeforce arise from Raheel’s
filing and prosecution of the Florida action or the enforcement of the Florida judgment
and were therefore subject to a motion to strike under section 425.16. Filing a lawsuit is
an exercise of a party’s constitutional right of petition. (Briggs v. Eden Council for Hope
5
& Opportunity (1999) 19 Cal. 4th 1106, 1115; Chavez v. Mendoza (2001) 94 Cal. App. 4th
1083, 1087 (Chavez).) “‘“[T]he constitutional right to petition . . . includes the basic act
of filing litigation or otherwise seeking administrative action.”’ [Citations.]” (Briggs,
supra, at p. 1115.) Thus, “a cause of action arising from a defendant’s alleged improper
filing of a lawsuit may appropriately be the subject of a section 425.16 motion to strike.
[Citation.]” (Chavez, supra, at p. 1087.) An action to enforce a judgment is also a
protected activity under section 425.16. (Rusheen, supra, 37 Cal.4th at pp. 1063-1065.)
Each of the causes of action asserted against Raheel and Lifeforce include the
allegations that Raheel “foreclosed on [Cryobank’s] assets by filing a lawsuit in Florida”
and that he “formed [Lifeforce], which acquired [Cryobank’s] assets at a foreclosure sale
for $100.00” and that he “filed a case in California to enforce a sister state judgment.”
All of these alleged misdeeds arise out of the filing and prosecution of the Florida action
or enforcement of the judgment obtained in that action -- conduct that is protected under
section 425.16. (§ 425.16, subd. (b)(1); Rusheen, supra, 37 Cal.App.4th at p. 1065.)
Defendants accordingly met the threshold requirement of establishing that the causes of
action asserted against them arise from protected activity under section 425.16.
Plaintiff argues that his allegations that Raheel colluded with Kazi to
misappropriate Cryobanks’s assets removed his claims from the ambit of section 425.16
because “collusion” is illegal as a matter of law and therefore unprotected by the statute.
(See Flatley v. Mauro (2006) 39 Cal. 4th 299, 317 [anti-SLAPP statute “cannot be
invoked by a defendant whose assertedly protected activity is illegal as a matter of
law”].) Plaintiff cites no authority, however, that holds that “collusion” is an unprotected
activity under section 425.16 as a matter of law. His citation to case law from other
jurisdictions and to federal antitrust cases applying the Noerr-Pennington doctrine3 is
unpersuasive.
3 The Noerr-Pennington doctrine provides that there is no antitrust liability under
the Sherman Act for efforts to influence government that are protected by the First
Amendment right to petition for redress of grievances, even if the motive underlying
those efforts is anticompetitive. An exception to the doctrine arises when efforts to
6
A defendant whose assertedly protected activity may or may not be unlawful is
entitled to invoke the anti-SLAPP statute unless the activity is unlawful as a matter of
law. (Dwight R. v. Christy B. (2013) 212 Cal. App. 4th 697, 711.) An activity may be
deemed unlawful as a matter of law if the defendant does not dispute that the activity was
unlawful, or if uncontroverted evidence shows the activity was unlawful. (Ibid.)
Defendants here do not concede that they engaged in any unlawful activity, and there is
no uncontroverted evidence that Raheel and Lifeforce colluded with Kazi to
misappropriate Cryobanks’s assets. There is no evidence that Raheel’s foreclosure
action, a protected activity, was illegal as a matter of law. Plaintiff’s causes of action
come within the ambit of section 425.16.
B. Probability of prevailing
Because defendants’ actions to obtain and enforce a judgment were protected
activities under the anti-SLAPP statute, we must now determine whether plaintiff met his
burden of demonstrating a probability of prevailing on his causes of action. To do so,
plaintiff was required to present “competent and admissible evidence” showing he could
establish a prima facie case at trial. (Tuchscher Development Enterprises, Inc. v. San
Diego Unified Port Dist. (2003) 106 Cal. App. 4th 1219, 1236 (Tuchscher); Evans v.
Unkow (1995) 38 Cal. App. 4th 1490, 1496.) He failed to do so.
1. No prima facie showing
In his opposition to the anti-SLAPP motion, plaintiff argued that his “allegations if
proven and [his] evidence if accepted will show that Raheel was able to acquire
[Cryobank’s] assets for $100.00 because Kazi implemented Kazi’s Plan to acquire
[Cryobank’s] assets and Kazi accomplished Kazi’s Plan through Raheel’s foreclosure.”
The evidence plaintiff submitted in support of this allegation included declarations by
persons who stated that they personally knew Raheel to be a friend and business associate
of Kazi’s, and a declaration by a former Cryobanks shareholder stating that Kazi once
influence government are merely a sham; such efforts are not protected by the Noerr-
Pennington doctrine and are subject to antitrust liability. (Hi-Top Steel Corp. v. Lehrer
(1994) 24 Cal. App. 4th 570, 574-575.)
7
“spoke to me about his plan to acquire Cryobanks’s assets for himself and his partner,
Raheel but Kazi was not specific about how he intended to accomplish his plan.” This
evidence is insufficient to establish a probability of prevailing on plaintiff’s claims.
Raheel’s status as Kazi’s friend and business associate, and a hearsay statement
concerning an unspecified “plan” by Kazi to acquire Cryobanks’s assets4 is insufficient to
establish that Raheel conspired with Kazi to defraud plaintiff or to misappropriate
Cryobanks’s assets. Plaintiff offered no evidence or facts to show that Raheel and
Lifeforce conspired or colluded with Kazi for an unlawful purpose.
Plaintiff failed to meet his burden of demonstrating a probability of prevailing on
his claims. The trial court did not err by granting the anti-SLAPP motions.
2. Res judicata
Plaintiff failed to address defendants’ argument that his claims are barred under
the doctrine of res judicata. “‘Res judicata’ describes the preclusive effect of a final
judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the
same cause of action in a second suit between the same parties or parties in privity with
them.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal. 4th 888, 896.) “Claim
preclusion applies when ‘(1) the decision in the prior proceeding is final and on the
merits; (2) the present proceeding is on the same cause of action as the prior proceeding;
and (3) the parties in the present proceeding or parties in privity with them were parties to
the prior proceeding.’ [Citation.] Upon satisfaction of these conditions, claim preclusion
bars ‘not only . . . issues that were actually litigated but also issues that could have been
litigated.’ [Citation.]” (Planning & Conservation League v. Castaic Lake Water Agency
(2009) 180 Cal. App. 4th 210, 226.)
4 Because defendants did not raise a hearsay objection to this evidence, the trial
court could properly consider it in determining whether plaintiff met his burden of
demonstrating a probability of success on the merits. (Gallagher v. Connell (2004) 123
Cal. App. 4th 1260, 1266-1269.) The trial court nevertheless concluded that plaintiff had
failed to present any admissible evidence to establish a probability of prevailing on his
claims.
8
Plaintiff’s action is an attempt to relitigate claims that could have been litigated in
the Florida action. The third amended complaint alleges that Raheel claimed to be owed
money by Cryobanks; that the Florida action was the result of a collusive secret
agreement between Raheel and Kazi; and that Lifeforce acquired Cryobanks’s assets at a
substantial discount, to the detriment of plaintiff and other Cryobanks shareholders.
Cryobanks was a party to the Florida action. Plaintiff, as a shareholder of
Cryobanks, is considered to be in privity with Cryobanks for purposes of applying the
doctrine of res judicata. (See Gagnon Co. v. Nevada Desert Inn, Inc. (1955) 45 Cal. 2d
448, 453.) The conditions for applying the doctrine of res judicata are met in this case.5
C. Alleged procedural defects
Plaintiff argues that Raheel’s anti-SLAPP motion was procedurally defective
because it was filed before, and therefore rendered moot by, the third amended complaint.
This argument ignores the amended notice of special motion to strike Raheel filed in
response to the third amended complaint. That amended notice informed both plaintiff
and the trial court that there was no substantive difference between the factual allegations
contained in the second and third amended complaints for purposes of the anti-SLAPP
motion. The filing of the third amended complaint did not render Raheel’s anti-SLAPP
motion moot.
Plaintiff next argues the trial court erred by considering the second amended
complaint rather than the operative third amended complaint when ruling on Raheel’s
anti-SLAPP motion. Because the causes of action in both the second and third amended
complaints are based on the same alleged conduct by Raheel and Lifeforce, the purported
error, if any, was harmless.
5 Because we conclude that plaintiff failed to meet his burden of establishing a
probability of prevailing on his claims and that those claims are barred under the doctrine
of res judicata, we do not address defendants’ argument that plaintiff lacks standing to
bring a direct action for claims that can be asserted only by Cryobanks via a shareholder
derivative action.
9
D. Plaintiff’s discovery request
Plaintiff contends the trial court should have permitted him to take discovery with
respect to the alleged fraud before ruling on the anti-SLAPP motions. The filing of an
anti-SLAPP motion stays all discovery proceedings in an action. (§ 425.16, subd. (g).)
Notwithstanding the stay, a court may, upon the filing of a noticed motion and a showing
of good cause, order that specified discovery may be conducted. (Ibid.) Plaintiff did not
file a noticed motion requesting discovery, nor did he show that there was good cause for
such discovery. The trial court’s refusal to allow discovery was not an abuse of
discretion. (Tuchscher, supra, 106 Cal.App.4th at p. 1248.)
E. Attorney fees
Plaintiff’s challenge to the orders awarding defendants their attorney fees after
prevailing on their respective anti-SLAPP motions is based solely on the argument that
the anti-SLAPP motions were improperly granted. Defendants are entitled to reasonable
attorney fees and costs incurred in connection with their respective anti-SLAPP motions.
(§ 425.16, subd. (c).) Plaintiff has failed to establish any abuse of discretion by the trial
court in awarding such fees and costs. (Ketchum v. Moses (2001) 24 Cal. 4th 1122, 1130.)
DISPOSITION
The orders granting the special motions to strike and the orders awarding
defendants their respective costs and attorney fees are affirmed. Defendants are awarded
their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
____________________________, J.
CHAVEZ
We concur:
___________________________, P. J.
BOREN
___________________________, J.
ASHMANN-GERST
10