Sgromo v. Batt CA2/4 ( 2013 )

Filed 3/13/13 Sgromo v. Batt CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 FOUR
PETER SGROMO et al., B236555
Cross-complainants and Appellants, (Los Angeles County
Super. Ct. No. BC433012)
v.
WALTER BATT,
Cross-defendant and Respondent.
APPEAL from an order of the Superior Court of Los Angeles County, David L.
Minning, Judge. Affirmed.
Steven W. Kerekes and George Chakmakis for Cross-complainants and
Appellants.
Anderson, McPharlin & Conners, David T. DiBiase, Thomas J. Kearney, and
Jason W. Suh for Cross-defendant and Respondent.
This appeal was taken from an order granting a special motion to strike a second
amended cross-complaint under Code of Civil Procedure section 425.16, the anti-SLAPP
statute.1 We conclude that even if appellants have shown there is a reasonable
probability that they will prevail as to certain elements of their cross-claims, their failure
to provide any evidence as to damages is fatal to their appeal. (See Navellier v. Sletten
(2003) 106 Cal.App.4th 763, 775-776 (Navellier).)
BACKGROUND
The dispute underlying the complaint began when defendant Peter Sgromo
allegedly breached an oral partnership agreement with plaintiff James Parr. Sgromo
allegedly had promised Parr 50 percent of the profits from the sales of 3D toys and
products (products) that were designed and developed by Parr. Sgromo’s company, Wide
Eyes Marketing, Ltd., marketed the products through its confidential license and royalty
agreements with two toy companies, Learning Curve Brands, Inc. (Learning Curve) and
Imperial Toys, LLC (Imperial).
Claiming that Sgromo had wrongfully denied him his full share of the profits from
the sales of the products, Parr filed a complaint against Sgromo, Wide Eyes Marketing,
Learning Curve, and Imperial.2 Parr’s complaint alleged nine causes of action for:
(1) breach of oral and implied contract against Sgromo and Imperial (first cause of
1 SLAPP is the acronym for Strategic Litigation Against Public Participation. All
further statutory references are to the Code of Civil Procedure.
Section 425.16, subdivision (b)(1) 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.”
2 Both Imperial and Learning Curve have been dismissed from the action. Parr
entered a dismissal with prejudice as to Learning Curve on February 2, 2011, and a
dismissal without prejudice as to Imperial on January 4, 2012.
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action); (2) breach of contract against Learning Curve (second cause of action);
(3-5) common count against Sgromo (third cause of action), Learning Curve (fourth
cause of action), and Imperial (fifth cause of action); (6) intentional interference with
prospective economic advantage against Sgromo and Imperial (sixth cause of action);
(7) negligent interference with business relations against Imperial (seventh cause of
action); (8) unfair competition in violation of Business and Professions Code section
17200 against Sgromo, Imperial, and Learning Curve (eighth cause of action); and
(9) breach of the implied covenant of good faith and fair dealing against Sgromo,
Imperial, and Learning Curve (ninth cause of action).
The dispute underlying the cross-complaint began when Parr attached two
confidential documents—Wide Eyes Marketing’s confidential royalty agreement with
Learning Curve (royalty agreement) and Wide Eyes Marketing’s confidential draft
license agreement with Imperial (license agreement)—as exhibits to his complaint. In the
August 6, 2010 cross-complaint for breach of contract, intentional interference with
prospective economic advantage, and intentional interference with contractual relations,
cross-complainants Sgromo, Learning Curve, and Wide Eyes Marketing alleged that Parr
had breached the nondisclosure clause in Wide Eyes Marketing’s royalty agreement with
Learning Curve, which Parr had signed as a party.
In the operative second amended cross-complaint, the two remaining cross-
complainants (Sgromo and Wide Eyes Marketing) alleged claims for intentional
interference with prospective economic advantage and intentional interference with
contractual relations3 against Parr and his attorney, Walter Batt, who was added as a
cross-defendant. The second amended cross-complaint alleged that Parr and Batt
“intentionally and wrongfully attached” the confidential exhibits to the complaint in order
3 Learning Curve was dismissed from the complaint on February 2, 2011, and its
name does not appear on the second amended cross-complaint that was filed on May 9,
2011.
The breach of contract cross-claim was eliminated by an order sustaining a
demurrer without leave to amend.
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to alert Imperial to the difference in royalty rates and disrupt its business relationship
with Wide Eyes Marketing, which resulted in economic damages of over $89,000.
Batt filed a special motion to strike the second amended cross-complaint under the
anti-SLAPP statute. As to the first prong of the anti-SLAPP analysis, Batt argued that
because section 425.16 applies to statements made in connection with or in preparation of
litigation (citing Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908), the act of filing
the complaint and exhibits clearly constituted a protected litigation activity (citing G.R. v.
Intelligator (2010) 185 Cal.App.4th 606, 616). As to the second prong of the anti-
SLAPP analysis, Batt argued that Sgromo and Wide Eyes Marketing were incapable of
prevailing on the merits of their cross-claims, because those claims were barred, as a
matter of law, by the litigation privilege of Civil Code section 47: “A privileged
publication or broadcast is one made: . . . [¶] (b) In any . . . (2) judicial proceeding
. . . .”
On September 1, 2011, the trial court granted Batt’s special motion to strike on the
grounds that: (1) the cross-complaint’s allegations arose from a litigation activity that is
protected by the anti-SLAPP statute; and (2) Sgromo and Wide Eyes Marketing had
failed to demonstrate a likelihood of prevailing on their cross-claims against Batt. This
timely appeal followed.
DISCUSSION
I. Standard of Review
In deciding a special motion to strike, the superior court must engage in a two-step
process. “First, the court decides whether the [cross-]defendant has made a threshold
showing that the challenged cause of action is one arising from protected activity. The
moving [cross-]defendant’s burden is to demonstrate that the act or acts of which the
[cross-complainant] complains were taken ‘in furtherance of the [cross-]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. [Citation.] If the court finds such a
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showing has been made, it then determines whether the [cross-complainant] has
demonstrated a probability of prevailing on the [cross-]claim. Under section 425.16,
subdivision (b)(2), the trial court in making these determinations considers ‘the
pleadings, and supporting and opposing affidavits stating the facts upon which the
liability or defense is based.’” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29
Cal.4th 53, 67.) We review the superior court’s ruling independently under the de novo
standard of review. (Kajima Engineering & Construction, Inc. v. City of Los Angeles
(2002) 95 Cal.App.4th 921, 929.)
In this case, Sgromo and Wide Eyes Marketing concede that their cross-complaint
targets the type of petitioning activity that is protected by the anti-SLAPP statute, but
argue they are likely to prevail on the merits because the litigation privilege does not
apply to the voluntary breach of an express confidentiality agreement (ITT Telecom
Products Corp. v. Dooley (1989) 214 Cal.App.3d 307, 317-320), or the unauthorized
disclosure of a trade secret (Civ. Code, § 3426.11).
II. Analysis
Assuming for the sake of argument that Sgromo and Wide Eyes Marketing have
demonstrated that the litigation privilege does not bar their intentional interference
claims, they have not explained why a reversal is warranted in the absence of any
supporting evidence of damages. Damages are, of course, an essential element of both
intentional interference with prospective economic advantage (Korea Supply Co. v.
Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153) and intentional interference with
contractual relations (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d
1118, 1126). In support of their purported damages of over $89,000, Sgromo and Wide
Eyes Marketing relied exclusively upon the unverified allegations of their second
amended cross-complaint. Mere allegations, however, do not provide the evidentiary
showing that is required under the second prong of the anti-SLAPP analysis. (Navellier,
supra, 106 Cal.App.4th at pp. 775-776.)
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In Navellier, the appellate court faced an analogous situation in which the first
prong of the anti-SLAPP statute had been met, and the issue on appeal was whether the
plaintiffs had established a probability of prevailing on their fraud or breach of contract
claims as required by the second prong of the statute. In reversing the order denying the
defendants’ special motion to strike, the appellate court concluded that the plaintiffs had
failed to establish a probability of prevailing on either claim. As to the fraud claim, the
court held that it was barred by the litigation privilege. As to the breach of contract
claim, the court held that although the litigation privilege did not apply, the plaintiffs had
failed to provide any supporting evidence of damages. Because we find the court’s
analysis of the damages issue to be equally applicable here, we quote from the Navellier
opinion at length:
“A fundamental problem with these various claims is that there is no evidence in
the record of any damages from the breach of contract. Damages are, of course, a
necessary element of the breach of contract cause of action (BAJI No. 10.85), and proof
of that element is wholly lacking. Plaintiffs have taken the position that there was ‘no
requirement for [them] to come forward with evidence of damages’ because defendant
‘moved to strike solely on issues of law and did not contest or allege that there was no
evidence of damages.’ But where, as here, the motion to strike meets the ‘arising from’
prong of the anti-SLAPP test, the plaintiff must satisfy the second prong of the test and
‘establish evidentiary support for [its] claim.’ (Wilson v. Parker, Covert & Chidester
[(2002)] 28 Cal.4th [811,] 821 (italics added); see also Simmons v. Allstate Ins. Co.
[(2001)] 92 Cal.App.4th [1068,] 1073 [‘a SLAPP motion, like a summary judgment
motion . . . requires an evidentiary showing’]; Church of Scientology v. Wollersheim
(1996) 42 Cal.App.4th 628, 655, disapproved on another point in Equilon Enterprises v.
Consumer Cause, Inc. [(2002)] 29 Cal.4th [53,] 68, fn. 5 [claims must be supported ‘by
admissible evidence’].) That defendant raised legal issues in his motion did not relieve
plaintiffs of their burden of presenting a sufficient ‘showing of facts to sustain a favorable
judgment’ (Wilson v. Parker, Covert & Chidester, supra, at p. 821), and after plaintiffs’
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opposition was filed defendant could properly point to the failure to meet that burden,
regardless of any other theories he may have advanced in his original moving papers.
“The Supreme Court majority herein, in explaining that its decision would not
‘unduly burden plaintiffs alleging breach of an agreement not to sue,’ pointed out that
such an action ‘presumably would involve at a minimum the pleading and proof of the
alleged agreement.’ (Navellier v. Sletten [(2002)] 29 Cal.4th [82,] 94.) Plaintiffs did
undertake that ‘minimum’ pleading and proof with respect to the release in this case.
However, the majority went on to observe that a party in plaintiffs’ position would need
to substantiate its claims ‘by appending the alleged agreement to an affidavit stating the
facts upon which the defendant’s liability is based’ (ibid.), and plaintiffs presented no
affidavit or other evidence stating facts with respect to their alleged damages.
“Plaintiffs contend, citing DuPont Merck Pharmaceutical Co. v. Superior Court
(2000) 78 Cal.App.4th 562, that they should now be given an opportunity to produce the
requisite evidence. However, this precedent supports defendant, not plaintiffs. The
plaintiffs in DuPont were not granted leave to belatedly present evidence in opposition to
an anti-SLAPP motion; they argued that they had established a probability of success
because their complaint had survived a demurrer. The court rejected that argument,
stating that: ‘It would defeat the obvious purposes of the anti-SLAPP statute if mere
allegations in an unverified complaint would be sufficient to avoid an order to strike the
complaint. Substantiation requires something more than that. Once the court determines
the first prong of the statute has been met, a plaintiff must provide the court with
sufficient evidence to permit the court to determine whether “there is a probability that
the plaintiff will prevail on the claim.”’ (Id. at p. 568.) Here, plaintiffs have presented
nothing as to their damages on the breach of contract cause of action beyond the bare
allegations of their unverified complaint—an insufficient showing to survive the motion
to strike that cause of action. (Ibid.)” (Navellier, supra, 106 Cal.App.4th at pp. 775-
776.)
We conclude that the above analysis is dispositive of this appeal. Like the
plaintiffs in Navellier, cross-complainants provided no evidence or affidavits containing
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facts with respect to their alleged damages. In support of their purported damages of over
$89,000, Sgromo and Wide Eyes Marketing relied solely on the unverified allegations of
their second amended cross- complaint. As the court in Navellier explained, such bare
allegations are insufficient to avoid a special motion to strike. (Navellier, supra, 106
Cal.App.4th at pp. 775-776.) We therefore conclude that Sgromo and Wide Eyes
Marketing are incapable of showing that, in the absence of the trial court’s alleged errors,
they would have defeated the motion to strike.
DISPOSITION
The order granting the special motion to strike is affirmed. Respondent Walter
Batt is awarded his attorney fees and costs on appeal.4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
SUZUKAWA, J.
We concur:
WILLHITE, Acting P. J.
MANELLA, J.
4 Batt contends he is entitled to attorney fees for prevailing on appeal. He is correct.
(Gene Thera, Inc. v. Troy & Gould Professional Corp. (2009) 171 Cal.App.4th 901, 910.)
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