VALUEROCK TN PROPERTIES, LLC, et al. v. PK II LARWIN SQUARE SC LP, et al.
G056634
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION THREE
Filed 6/28/19
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
VALUEROCK TN PROPERTIES, LLC,
et al.,
Plaintiffs and Respondents,
v.
PK II LARWIN SQUARE SC LP, et al.,
Defendants and Appellants.
G056634
(Super. Ct. No. 30-2016-00878748)
O P I N I O N
Appeal from an order of the Superior Court of Orange County, Craig L. Griffin, Judge. Affirmed.
Blackmar, Principe & Schmelter, Gerry C. Schmelter, Peter J. Attarian, Jr., and Timothy D. Principe for Defendants and Appellants.
O’Melveny & Myers, Marc F. Feinstein and Andrew J. Weisberg for Plaintiffs and Respondents.
* * *
In their original and first amended complaints, the plaintiffs alleged the landlord unreasonably withheld consent to the plaintiffs’ lease assignment request. While the litigation was pending, the plaintiffs made an amended lease assignment request, which the landlord similarly rejected. In their second amended complaint, the plaintiffs asserted the same five causes of action as before, but added allegations about the landlord’s refusal to consent to their amended assignment request.
The landlord filed an anti-SLAPP motion to strike the second amended complaint, contending the plaintiffs’ amended assignment request and the landlord’s response to that request were settlement communications and statements made in litigation, and therefore constituted protected activity. The trial court denied the motion, finding the landlord’s rejection of the amended assignment request was not a settlement communication or litigation-related conduct, but rather an ordinary business decision. We agree and affirm the order denying the anti-SLAPP motion.
I.
FACTS
The following facts are taken from the pleadings, the declarations, and other evidence submitted on the special motion to strike.
A. The Lease
Defendant PK II Larwin Square SC LP (Larwin) is the owner and landlord of Larwin Square, a community shopping center located in Tustin. Defendant Kimco
From 1978 until 2015, the anchor tenant for the Larwin Square shopping center was a Vons supermarket. Vons entered into a 30-year ground lease for the space in 1977 and later extended the lease term to 2021. The lease prohibited Vons from transferring or assigning the lease without the landlord’s prior written consent, but further provided the landlord’s “consent shall not be unreasonably withheld.”
B. The Assignment of the Lease to Haggen
In 2015, as part of the planned merger between Albertsons and Vons’ parent company, and per the divestiture terms imposed by the Federal Trade Commission, many Vons stores — including the Larwin Square store — were sold to Haggen, a small grocery chain in the Northwest.
In anticipation of the merger, Larwin approved the assignment of Vons’s Larwin Square lease to Haggen Opco South. In May 2015, Haggen notified Larwin that Vons was instead assigning the lease to a different Haggen entity, plaintiff Haggen Property Holdings III, LLC (HPH III). Larwin did not object to the change. A few months later, without Larwin’s knowledge or consent, HPH III “secretly” assigned the lease to plaintiff Haggen Property South, LLC (Propco).
Haggen operated a supermarket in Larwin Square for just a few months, from June to October 2015. The space has been vacant ever since, but Propco has continued to pay rent and other expenses for the premises.
C. The First Request for Larwin’s Consent to an Assignment to ValueRock
In February 2016, Propco sold its interest in the ground lease to plaintiff ValueRock Investment Partners, LLC (ValueRock IP), a commercial real estate investment firm. ValueRock IP in turn assigned its rights in the lease to its affiliate, plaintiff ValueRock TN Properties, LLC (ValueRock TN), a special purpose entity created to acquire the lease.
Propco complied in part. It provided general information about ValueRock and its leadership team, but it refused to provide detailed financial information on ValueRock TN because Kimco (Larwin’s parent), like ValueRock TN, was also a real estate investor and developer. As for ValueRock’s plans for the premises, Propco replied that while nothing in the ground lease required the space to be used as a grocery store, ValueRock’s conduct to date showed it was committed to bringing a grocery store to the shopping center.
In June 2016, ValueRock TN sent Larwin a letter demanding consent to the proposed assignment and threatened to sue Larwin for interference with prospective economic advantage. In response, Larwin once again asked for information to help it evaluate the proposed assignment, including the intended use of the premises and financial information on the prospective assignee and any proposed guarantors. After securing a nondisclosure agreement, ValueRock TN sent Larwin its organizational chart and current balance sheet, but it still refused to disclose any concrete plans or intentions for the premises, claiming that “[w]hile a grocery store operator would be the most likely subtenant,” it planned to “market the premises to a broad base of prospective retailers.”
In September 2016, Larwin stated it would consent to an assignment on three conditions: (1) ValueRock TN must prove it or its guarantor has a tangible net worth of at least $10 million; (2) Propco and ValueRock TN must agree the space would be used only as a grocery store and any change in use would require Larwin’s consent; and (3) any further assignments or subleases would require Larwin’s consent. ValueRock TN responded explaining why it believed those conditions were “unreasonable and therefore invalid.”
D. The Original and First Amended Complaints
In October 2016, ValueRock TN, ValueRock IP, and Propco filed a complaint and then a first amended complaint against Larwin and Kimco (collectively, Defendants), alleging Defendants had unreasonably withheld consent to the lease assignment. The first amended complaint asserted five causes of action: declaratory relief concerning the parties’ rights and obligations under the ground lease, breach of contract (the ground lease), breach of the implied covenant of good faith and fair dealing, intentional interference with contract (the ValueRock-Propco purchase agreement), and intentional interference with prospective economic advantage.
In the months that followed, the parties attempted to mediate the dispute, but those efforts were unsuccessful.
E. The Amended Request for Larwin’s Consent to an Assignment to ValueRock
In March 2018, while the litigation was pending, ValueRock TN, ValueRock IP, Propco, and HPH III (collectively, Plaintiffs) again requested Defendants’
In the letter communicating this proposal, Plaintiffs unequivocally stated the amended request was “not intended in any way to validate Larwin’s previous, unreasonable bases for withholding consent,” but instead was “made purely in the interest of securing agreement on the assignment to ValueRock.” Plaintiffs further specified the letter was “not a settlement communication and is not intended to release any claims for damages arising from Larwin and Kimco’s past refusal to consent to assignment of the Ground Lease.”
In response, Defendants insisted Plaintiffs’ amended request was “necessarily a settlement communication,” and stated they could not “appropriately consider a new request when the old one is still pending and in dispute.”
F. The Second Amended Complaint
In April 2018, the parties stipulated Plaintiffs could file a second amended complaint. The second amended complaint alleged the same five causes of action as the first amended complaint, but it added HPH III as a plaintiff and added allegations about Larwin’s denial of Plaintiffs’ amended request for consent. In other words, while the original and first amended complaints were based on Larwin’s denial of Plaintiffs’ original assignment request in 2016, Plaintiffs based the second amended complaint on Larwin’s denial of both the original request in 2016 and the amended request in 2018.
In response, Defendants filed an anti-SLAPP special motion to strike the second amended complaint, asserting the new allegations were based on settlement communications1 and statements made in litigation, which were acts encompassing their right of petition and thus constituted protected activity. Plaintiffs opposed the motion, asserting the amended request and Defendants’ response were simply business communications about the ground lease.
The trial court denied Defendants’ motion, explaining Defendants had not shown the allegations arose from an act in furtherance of their right of petition or free speech. The court acknowledged settlement communications and other statements made in litigation are protected activity under the anti-SLAPP statute, but it concluded the new allegations were based on Defendants’ decisions, not settlement communications.2 It explained it must strike a claim under the anti-SLAPP statute “if the speech itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted,” but “the new allegations in the [second amended complaint] point to speech as evidence of a decision which is an additional basis for alleged liability, rather than speech as a basis for liability itself.” The court also ruled Defendants’ motion was not frivolous and denied the parties’ respective requests for fees. Defendants timely appealed the court’s order.
DISCUSSION
Defendants contend the second amended complaint arises from protected activity under the anti-SLAPP statute because their refusal to consent to the amended assignment request was a settlement communication directly related to the central issue being litigated and because the second amended complaint purports to hold them liable for a position taken in litigation. None of these contentions have merit.
A. The Anti-SLAPP Statute Generally
In 1992, the Legislature enacted
When a party files a special motion to strike, the trial court must engage 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. . . . 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.) “Only a cause of action that satisfies both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under the statute.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.)
We review a trial court’s order denying an anti-SLAPP motion de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325 (Flatley).) We “consider the pleadings, and
B. Principles Guiding Step One of the Anti-SLAPP Analysis
Under step one of the anti-SLAPP analysis, courts evaluate whether the challenged claims “aris[e] from” protected activity. (
Protected activity thus includes the filing of lawsuits, and statements and pleadings made in or in preparation for civil litigation. (Rohde v. Wolf (2007) 154 Cal.App.4th 28, 35; Kolar v. Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532, 1537 (Kolar).) “Settlement discussions made in connection with litigation are [also] protected activity under the anti-SLAPP statute.” (Crossroads Investors, L.P. v. Federal National Mortgage Assn. (2017) 13 Cal.App.5th 757, 782 (Crossroads); see GeneThera, Inc. v. Troy & Gould Professional Corp. (2009) 171 Cal.App.4th 901, 907-908 [settlement offer made to colitigant in underlying action was protected activity and subject to motion to strike in subsequent litigation for alleged intentional interference with contractual relations and negligence].)
Although litigation-related activities constitute protected activity, “it does not follow that any claims associated with those activities are subject to the anti-SLAPP statute. To qualify for anti-SLAPP protection, the moving party must [also] demonstrate
Our Supreme Court recently addressed what “nexus . . . a defendant [must] show between a challenged claim and the defendant’s protected activity” to meet the “arising from” requirement. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1060 (Park).) The Court explained: “a claim is not subject to a motion to strike simply because it contests an action or decision that was arrived at following speech or petitioning activity, or that was thereafter communicated by means of speech or petitioning activity. Rather, a claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted.” (Ibid.) This requires courts to “‘distinguish between (1) speech or petitioning activity that is mere evidence related to liability and (2) liability that is based on speech or petitioning activity.’” (Id. at p. 1065.) “‘[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute.’” (Id. at p. 1063.) Courts must “respect the distinction between activities that form the basis for a claim and those that merely lead to the liability-creating activity or provide evidentiary support for the claim.” (Id. at p. 1064.) Courts must also “distinguish between the challenged decisions and the speech that . . . thereafter expresses them.” (Id. at p. 1067.)
Thus, for a defendant to meet the “arising from” burden, “it is not enough to establish that the action was filed in response to or in retaliation for a party’s exercise of the right to petition.” (Bergstein v. Stroock & Stroock & Lavan LLP (2015) 236 Cal.App.4th 793, 804 (Bergstein).) Moreover, the fact a cause of action “may have been triggered by protected activity” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 (Cashman)), or the “fact that protected activity may lurk in the background –and may
Instead, “the claim must be based on the protected petitioning activity.” (Bergstein, supra, 236 Cal.App.4th at p. 804; see Graffiti Protective Coatings, Inc. v. City of Pico Rivera (2010) 181 Cal.App.4th 1207, 1215.) In evaluating whether that requirement is met, courts consider “the principal thrust or gravamen of a plaintiff’s cause of action” (Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 519-520) and determine whether the acts underlying that cause of action were acts in furtherance of the right of petition or free speech (Cashman, supra, 29 Cal.4th at p. 78).
C. Application
Applying those principles here, we conclude Plaintiffs’ claims against Defendants are not based on any conduct in furtherance of Defendants’ right of petition or free speech. Instead, the gravamen of Plaintiffs’ second amended complaint is Defendants’ repeated refusal to consent to the proposed assignment to ValueRock TN.
As noted above, the ground lease prohibits the tenant from transferring or assigning the lease without the landlord’s prior written consent, but further provides the landlord’s “consent shall not be unreasonably withheld.” The principal thrust of the second amended complaint is that Defendants unreasonably withheld consent to Plaintiffs’ proposed assignment, first in 2016 when Defendants rejected the original assignment request, and then again in 2018 when Defendants rejected the amended assignment request, causing Plaintiffs to suffer damages. Defendants’ decision to withhold consent may have been reasonable under the circumstances; we express no opinion on that issue. We hold only that Plaintiffs’ claims are based on Defendants’ decision to withhold consent, not on Defendants’ litigation conduct or communications, and therefore their claims are not subject to anti-SLAPP protection. Simply put, an alleged breach of a contractual provision prohibiting a landlord from unreasonably
Defendants argue the second amended complaint purports to hold them liable for their actions in the litigation, but they overstate the causal nexus between Plaintiffs’ allegations in the second amended complaint and the parties’ litigation of the first amended complaint. Defendants correctly note the amended request and Defendants’ response to that request “relate directly to [the] central issue already in dispute in the litigation,” but the second amended complaint does not purport to hold Defendants liable for their conduct in the litigation. To be sure, Defendants withheld consent to the amended assignment request during the litigation, which presumably prompted the filing of the second amended complaint. But that is not to say the second amended complaint was based on Defendants’ litigation conduct.3 (Bergstein, supra, 236 Cal.App.4th at p. 804 [“it is not enough to establish that the action was filed in response to or in retaliation for a party’s exercise of the right to petition”].)
Relying on Crossroads, supra, 13 Cal.App.5th 757,4 which held that “[s]ettlement discussions made in connection with litigation are protected activity under
Plaintiffs’ amended assignment request explicitly stated it was “not a settlement communication,” and it specified that Larwin’s consent to the amended request would not result in the release of Plaintiffs’ “claims for damages arising from Larwin and Kimco’s past refusal to consent to assignment of the Ground Lease.” (Italics added.) At no point in the amended request did Plaintiffs offer to dismiss their claims or reduce the damages sought for Defendants’ refusal to consent to the original assignment request in exchange for Defendants’ consent to the amended assignment request. Although acceptance of the amended request may have mooted Plaintiffs’ declaratory relief claim on the original assignment request,5 it would not have resolved Plaintiffs’ remaining claims for breach of contract, breach of the implied covenant, intentional interference with contract, or intentional interference with prospective economic advantage, nor would it have eliminated Plaintiffs’ demand for damages on those claims. Thus, Defendants’ response to Plaintiffs’ amended request was not a protected settlement communication as Defendants contend. Even if we assume the parties’ earlier settlement
While the bankruptcy stay was in effect, Crossroads requested accountings from Fannie Mae under
Defendants also contend Plaintiffs drafted their amended assignment request to address defects in their claims that came to light during discovery, and thus Defendants’ response was protected activity. The only example Defendants provide to support this argument is that the amended assignment request proposed, among other terms, that Propco and HPH III would transfer all their rights in the lease to ValueRock TN “to address Larwin’s unfounded position that the assignment from HPH III to Propco . . . was not effective.” Defendants cite this proposed term as evidence the amended request aimed to address Defendants’ discovery responses, which stated Propco was not an approved assignee of the lease. But Defendants first alerted Propco of this alleged defect in the chain of assignments in mid-2016, months before Plaintiffs filed their original complaint, when Defendants told Propco that their records showed HPH III was the tenant, they had no record of any transfer to Propco, and the lease required the tenant to request landlord consent before making any assignment. Moreover, even if statements made in the litigation or Defendants’ discovery responses influenced or inspired the terms of the amended request, that alone would not trigger the anti-SLAPP statute because Plaintiffs’ claims are not based on those statements or responses.
In the end, the pending litigation does not alter Larwin’s existing contractual obligation under the lease not to unreasonably withhold consent to a proposed assignment, nor does it alter the parties’ business dispute about whether Defendants must consent to the proposed assignment. Defendants are not insulated from liability merely because they again refused consent to the lease assignment while the case was pending. That is not what the Legislature designed the anti-SLAPP statute to accomplish.
As for Plaintiffs’ request for attorney fees, Defendants’ anti-SLAPP motion was not frivolous, nor was their appeal. We therefore deny Plaintiffs’ request for fees. (See
III.
DISPOSITION
The order denying Defendants’ anti-SLAPP motion is affirmed. Plaintiffs shall recover their costs on appeal. (
ARONSON, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
GOETHALS, J.