Sheley v. Harrop
9 Cal. App. 5th 1147
| Cal. Ct. App. | 2017Background
- Richard Sheley formed George's Pest Control, Inc.; after his 2011 death his daughters (Harrop, Richards) acquired 75% and Nancy Sheley (wife) owned 25%.
- The corporation (and later appellants as plaintiffs) sued Nancy alleging corporate misconduct; Nancy filed a cross-complaint asserting breach of fiduciary duty, conversion, negligence, and intentional infliction of emotional distress.
- Appellants moved to strike the cross-complaint under California's anti-SLAPP statute (Code Civ. Proc. § 425.16), arguing the claims arose from protected petitioning (filing/funding litigation).
- Trial court granted the anti-SLAPP motion as to the IIED claim but denied it as to the other three causes of action, finding substantial nonprotected allegations of mismanagement.
- On appeal, the court applied Baral: where a claim includes discrete allegations based on protected activity, those allegations can be struck unless the plaintiff shows a probability of prevailing on those specific claims.
- The Court of Appeal held portions of the breach, conversion, and negligence claims alleging that appellants filed/ funded a frivolous lawsuit were based on protected activity and must be struck because Nancy failed to factually substantiate that the underlying lawsuit was frivolous or brought in bad faith; the remainder of each claim survives.
Issues
| Issue | Plaintiff's Argument (Sheley) | Defendant's Argument (Harrop/Richards) | Held |
|---|---|---|---|
| Whether allegations that defendants filed and/or funded the underlying suit are protected activity under § 425.16 | Those allegations are incidental/context and the claims are fundamentally about mismanagement and withheld disbursements, not petitioning | Filing/funding litigation is protected petitioning conduct and triggers anti-SLAPP; such allegations are a material component of each claim | Filing and litigation-funding allegations are protected activity and subject to anti-SLAPP review (Baral governs parsing) |
| Whether mixed claims should be dismissed in whole if any part arises from protected activity | A plaintiff may defeat an anti-SLAPP motion by showing a probability of prevailing on any part of a cause of action (Mann rule) | Baral: court may strike particular claims based on protected activity; plaintiff must show probability of prevailing as to each challenged claim | Baral controls: court may strike discrete claims supported by protected activity; Mann disapproved |
| Whether Sheley established a probability of prevailing on claims that defendants filed/ funded a frivolous, bad-faith lawsuit (breach of fiduciary duty) | Sheley: fundraising/filing the suit was wrongful misuse of corporate assets and breaches fiduciary duty | Defendants: litigation-related acts are privileged/protected and Sheley produced no admissible evidence showing fraud, bad faith, or frivolousness | Sheley failed to factually substantiate frivolousness/bad faith; the litigation-based breach theory is stricken under § 425.16 |
| Whether conversion and negligence claims premised on funding the lawsuit survive anti-SLAPP review | Sheley: funding the suit was wrongful conversion and negligent depletion of corporate assets | Defendants: funding litigation is protected; Sheley provided no factual proof of bad faith or wrongful conversion | The conversion and negligence allegations that depend on funding a frivolous suit are struck for lack of factual/legal sufficiency; other non-litigation-based allegations remain |
Key Cases Cited
- Simpson Strong-Tie Co., Inc. v. Gore, 49 Cal.4th 12 (California 2010) (describing purpose and scope of anti-SLAPP statute)
- Baral v. Schnitt, 1 Cal.5th 376 (California 2016) (anti-SLAPP motions may target discrete claims grounded in protected activity; plaintiff must show probability of prevailing on each challenged claim)
- Navellier v. Sletten, 29 Cal.4th 82 (California 2002) (claim must be based on protected petitioning activity to trigger anti-SLAPP)
- Soukup v. Law Offices of Herbert Hafif, 39 Cal.4th 260 (California 2006) (filing lawsuits is protected petitioning activity)
- Taus v. Loftus, 40 Cal.4th 683 (California 2007) (examining challenged bases for liability individually in anti-SLAPP context)
- Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811 (California 2011) (anti-SLAPP procedural principles)
- Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP, 133 Cal.App.4th 658 (California Ct. App. 2005) (focus on whether defendant's underlying act was in furtherance of petitioning rights)
- Mann v. Quality Old Time Service, Inc., 120 Cal.App.4th 90 (California Ct. App. 2004) (court discussed but later disapproved rule that success on any part of a cause defeats anti-SLAPP)