Asher v. Morningside
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ASHER v. MORNINGSIDE COMMUNITY ASSOCIATION
Fourth Appellate District Division Two
(October 31, 2018) Unpublished Decision

COUNSEL
The Morningside Community Association, Randolph B. Zien, Jack W. Buckingham, Liza Ivins-Hazelrig, Ronald Kolar, Christ Norman and Wayne Pollard. Musick, Peeler & Garrett, David A. Tartaglio, Alejandro H. Aharonian, and Kenneth G. Katel for Defendants and Appellants 

The Club at Morningside, Rusty Goepel, Richard Cantlin and Greg Harris. Slovak Baron Empey Murphy & Pinkney, Shaun M. Murphy and Wendy S. Dowse for Plaintiffs and Respondents.

OPINION
RAMIREZ, P.J.

SUMMARY

Plaintiffs and respondents, homeowners in a residential desert community, challenge an amendment to their homeowners association's covenants, conditions and restrictions (CC&Rs) that added a $250 monthly assessment to cover the costs associated with the members-only golf and tennis club located within the community. Plaintiffs sued several defendants, including appellants The Morningside Community Association (Association) and its directors, Randolph B. Zien (erroneously sued as Randall B. Zien), Jack W. Buckingham, Liza Ivins-Hazelrig, Ronald Kolar, Chris Norman, and Wayne Pollard (the Association and its directors, collectively, will be referred to as Morningside Defendants); and the Club at Morningside (the Club), its directors, Rusty Goepel and Richard Cantlin, and its general manager, Greg L. Harris (the Club, its directors and its manager, collectively, will be referred to as Club Defendants). The defendants filed special motions to strike the action as a strategic lawsuit against public participation (anti-SLAPP motion) pursuant to Code of Civil Procedure section 425.16. The trial court denied the anti-SLAPP motions on the grounds plaintiffs' causes of action did not arise out of protected activity. We affirm.

Hal Asher, an individual; Alan Brimble, as Trustee of the Alan Brimble Trust dated 12-5-1990; Joseph Barraco, as Trustee of the Joseph A. Barraco Living Trust dated 6-25-2007; Richard Lyle Jones, Trustee of the Richard Lyle Jones Trust dated 12-5-1990; Stephen Bloom, an individual; Nancy Bloom, an individual; Susan Hatfield, as Trustee of the David E. Collier & Susan Hatfield 2003 Revocable Trust; Jay Cooper, as Trustee of the Jay A. Cooper and Linda R. Cooper Family Trust; Ronald Goldberg, an individual; Robert Hirsch, as Trustee of The Hirsch Family Trust Dated October 28, 1982; John T. Jacobus, an individual; Gloria Korngold, an individual; Ronald Lanstein, an individual; Sondra Lanstein, an individual; Howard P. Liszt, an individual; Roberta J. Liszt, an individual; William R. McKenzie, an individual; Danice W. McKenzie, an individual; John L. Renswick, as Trustee of the John L. Renswick Trust dated August 5, 2013; Theodore Schneider, an individual; Susan Schneider, an individual; John C. Schwarz, as Trustee of the John & Lynda Schwarz Trust of 2015; Lynda D. Schwarz, as Trustee of the John & Lynda Schwarz Trust of 2015; Lawrence Shapiro and Baillie Shapiro, as Trustees for the Shapiro Family Trust; Saul Share, an individual; Myra Share, an individual; Patricia E. Veiner, an individual; and Donald F. Yokaitis, as Trustee of the Donald F. Yokaitis 2013 Intervivos Family Trust.

"SLAPP" is an acronym for "strategic lawsuit against public participation." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 (Equilon).)

I. PROCEDURAL BACKGROUND AND FACTS

This is the second of two appeals in this case. We take judicial notice of Asher v. Peters & Freedman, LLP, case No. E067159, involving the first appeal. (Evid. Code, §§ 452, subd. (d), 459, subd. (a).) We also take judicial notice of Wright v. Peters & Freedman, LLP, case No. E067366; Wright v. The Morningside Community Association, case No. E067818, and Wright v. The Club at Morningside, case No. E067980, three appeals from a related case.

Plaintiffs are residents of the Morningside Community in Rancho Mirage, California. The Association manages the common areas of Morningside Community. Located within Morningside Community is the Club, a members only golf and tennis club. All residents are members of the Association; however, at the time relevant to this action, only 58 percent of the members of the Association were also members of the Club (Club/Association Members).

In 1983, CC&Rs for the Association were recorded. The CC&Rs provide for assessments on each residence in order to pay for common expenses, including maintenance of common areas, and facilities in Morningside. Separate from common areas are the property and facilities located within the Club. "The Club Property is completely independent of the Property and is for the exclusive use and enjoyment of persons holding (a) membership in The Club at Morningside, Inc., or (b) other rights of entitlement therein." Article 5 of the CC&Rs governs imposition of assessments against Association members, which "must be fixed at a uniform rate for all Lots." There are four types of assessments authorized: regular, special, reimbursement, and emergency. Regular assessments are used to "fund the Association's anticipated Common Expenses . . . ."

Due to the recession of 2008, golf course communities found it difficult to attract and retain members. The Club relied on member dues as its primary source of revenue, and as membership dropped, the Club asked the Association for financial assistance. By 2014, the Club did not have sufficient income or capital funds to "maintain itself as a first class golf club in the long term." By early 2015, the number of Club/Association Members dropped from 80 percent to 58 percent. The governing boards of both the Association and the Club worked together to consider strategies for long-term viability of the Club.

In March 2015, relying on the legal advice of David M. Peters, of Peters & Freedman, LLP (Peters Defendants), the Association's directors notified residents that it was considering a new assessment or fee (Proprietary Fee) on each residence in the amount of $250 per month. The funds generated by this new assessment would be held in a separate trust account to be disbursed to the Club, allowing it to use the funds to "cover maintenance expenses, including without limitation, a portion of The Club's landscaping costs, to assist in the financial viability of The Club." Payment by residents who were not Club members did not grant ownership interest or privileges in the Club or its property to those residents. Although the fee appeared to be facially neutral in that it would be assessed against all residents equally, Club/Association Members would receive a credit of 100 percent of the monthly payment towards Club dues. Adoption of the Proprietary Fee required an amendment to the CC&Rs approved by a majority of the residents.

Before the announcement of an election regarding the Proprietary Fee, the Club formed a volunteer committee to telephone Club/Association Members. In these phone calls, volunteers sought to determine the Club/Association Members' preferences regarding the Proprietary Fee concept, to answer questions, and to inform the Club/Association Members that passage of the Proprietary Fee concept would require sufficient affirmative votes to amend the CC&Rs. The Club polled its members, and in an email dated March 17, 2015, Club president Goepel advised: "As we have personally contacted almost all of our 210 member home owners, I can report that there is overwhelming support for this position [i.e., the Proprietary Fee concept]." From the polling data, the Club prepared a spreadsheet reflecting each member that had been contacted and his or her stated opinion, if any, regarding the Proprietary Fee. On the Club's spreadsheet, members "were grouped into 'yes,' 'no,' 'no preference,' and 'not sure' categories, or their equivalent, based on those members' stated opinions."

Because passage of the Proprietary Fee would result in residents who were not Club members subsidizing the Club, the Association's directors (who were also Club members) and the Club had a direct financial interest in the outcome of the election. The Association retained Mr. Peters as the inspector of elections.

On April 12, 2015, the Association informed its membership of the benefit package offered by the Club should the Proprietary Fee be approved. Any resident who joined the Club would get 100 percent credit of the amount of the Proprietary Fee applied towards Club dues, waiver of initiation fees for residents for 60 days following the election, credits toward initiation fees for subsequent purchasers of homes for two years following the election, and a new "Tennis Membership." During the campaign, both proponents and opponents of the Proprietary Fee campaigned.

The Club requested and obtained from the Association updates regarding which Club/Association Members had turned in their ballot packages. The Peters Defendants had supplied this information (ballot packages received) to the Association, including a list of members who had not voted. With that information, the Club reviewed its original list of Club/Association Members who were contacted in March 2015 to determine which of those members had not yet voted. A Club volunteer contacted those Club/Association Members to verify whether they had received a ballot package. Because several members were Canadian residents who had returned to Canada, their ballot packages had been sent to their Morningside residences. Those members were advised to contact the Association to request new ballot packages. Also, many of the Canadian members' balloting materials failed to include the correct postage amount for returning their ballot packages. They were advised to affix the correct postage. Two Club/Association Members submitted their ballot packages without signing the outer envelope; they were advised of this oversight and that they should request new ballot packages.

During oral argument, the Peters Defendants pointed out that the homeowners received ballot packages, consisting of an envelope within an envelope. The inside envelope, which contained the actual ballot with no identifying information, was placed inside the outside envelope, which required the voters' identity information and signature.

On May 19, 2015, the votes were tabulated and the amendment passed, receiving 63.5 percent of the residents' votes. That same day, the Association recorded the First Amendment to the CC&Rs.

On November 17, 2015, plaintiffs initiated this action to challenge the validity of the election results. After obtaining information from discovery, plaintiffs filed a first amended complaint (FAC) on July 28, 2016, adding the Peters Defendants, the Club's directors Goepel and Cantlin, and the Club's general manager Harris. The FAC restated the first six causes of action against the same defendants, and added five new causes of action: restitution (seventh cause of action against the Association); negligence (eighth cause of action against the Association and the Peters Defendants); breach of fiduciary duties (ninth cause of action against the Association, the Peters Defendants, the Club Defendants, Zien, and Norman); fraud and deceit (tenth cause of action against the Association, the Club Defendants, Zien, and Norman); and declaratory relief (eleventh cause of action against the Morningside Defendants).

On September 23, 2016, the Morningside Defendants moved to strike all of the causes of action in the FAC on the grounds that they "arise from acts by the Morningside Defendants in furtherance of their First Amendment rights in connection with the procedure and voting by members of the entire Morningside community that resulted in the adoption of the Proprietary Fee . . . ." On October 13, 2016, the Club Defendants moved to strike the fifth (constructive trust), ninth (breach of fiduciary duties) and tenth (fraud and deceit) causes of action on the grounds they "arise from protected activity and have no probability of success. The trial court denied both anti-SLAPP motions, concluding that plaintiffs' action did not arise from the protected activity.

II. DISCUSSION

The trial court found that both the Morningside Defendants and the Club Defendants failed to meet their burden of proving that plaintiffs' claims arose out of protected activity. On appeal, defendants argue that their actions concern protected speech and conduct under Code of Civil Procedure section 425.16, subdivision (e). As we explain, the trial court did not err in its decision because the claims in the FAC do not arise from constitutionally protected free speech or petitioning activities.

A. Anti-SLAPP Law.

"The anti-SLAPP statute does not insulate defendants from any liability for claims arising from the protected rights of petition or speech. It only provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity. Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by [Code of Civil Procedure] section 425.16. [Citation.]" (Baral v. Schnitt (2016) 1 Cal.5th 376, 384.) In determining whether a cause of action arises from protected activity, "'the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity.'" (Department of Fair Employment & Housing v. 1105 Alta Loma Road Apartments, LLC (2007) 154 Cal.App.4th 1273, 1284.) To determine whether this requirement is met, we consider "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (Code Civ. Proc., § 425.16, subd. (b)(2); see Equilon, supra, 29 Cal.4th at p. 67.)

Once the defendant has established that the challenged claim arises from protected activity, "the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success. [The California Supreme Court has] described this second step as a 'summary-judgment-like procedure.' [Citation.] The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff's evidence as true, and evaluates the defendant's showing only to determine if it defeats the plaintiff's claim as a matter of law. [Citation.] '[C]laims with the requisite minimal merit may proceed.' [Citation.]" (Baral v. Schnitt, supra, 1 Cal.5th at pp. 384-385.)

"Anti-SLAPP motions differ from summary judgment motions in that they are brought at an early stage of the litigation, ordinarily within 60 days after the complaint is served. ([Code Civ. Proc.,] § 425.16, subd. (f).) Discovery is stayed, absent permission from the court. ([Code Civ. Proc.,] § 425.16, subd. (g).) Thus, the defendant may test the sufficiency of the plaintiff's claims before incurring the costs and disruptions of ordinary pretrial proceedings.

We review an order granting or denying a motion to strike under Code of Civil Procedure section 425.16 de novo. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)

B. Analysis.

1. Plaintiffs' Allegations Do Not Arise from Protected Activity.

Under the first step of the anti-SLAPP analysis, the Morningside Defendants and the Club Defendants must show that (1) the FAC alleges protected speech or conduct, and (2) the relief is sought based on allegations arising from the protected activity. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062-1063 (Park).) We find that they fail to meet this burden.

Regarding the protected speech/conduct requirement, Code of Civil Procedure section 425.16, subdivision (e), provides that an "'act in furtherance of a person's right of petition or free speech'" includes, as relevant here, "(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." Petitioning activity may include oral or written statements made and conduct taken at board meetings and elections of a homeowners association. (Lee v. Silveira (2016) 6 Cal.App.5th 527, 540-545 (Lee); Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 475, 479.)

Regarding the '"arising from' requirement ([Code Civ. Proc.,] § 425.16, subd. (b)(1)), the defendant must show 'the defendant's act underlying the plaintiff's cause of action [was] itself' a protected act. [Citation.] '[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.' [Citation.] Instead, the focus is on determining what 'the defendant's activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.' [Citation.]" (Gaynor v. Bulen (2018) 19 Cal.App.5th 864, 877.)

In Park, supra, 2 Cal.5th at pages 1060-1062, the California Supreme Court decided that an assistant professor's action to recover damages for a university's denial of tenure due to national origin discrimination was not subject to an anti-SLAPP motion, despite the fact that there were several communications by the defendants that led up to the challenged decision. The Supreme Court explained the "arising from" requirement, stressing the need for courts to decide whether the protected activity was the alleged injury-producing act that established the basis for the plaintiff's claim. (Id. at pp. 1062-1063.) The Supreme Court stated that to satisfy the "arising from" requirement, the defendant must show that his or her conduct by which plaintiff claims to have been injured meets the statutory definition of protected activity, and "in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability." (Id. at p. 1063.) In short, courts must distinguish 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.)

To illustrate its point, the Park court compared two of its prior decisions: City of Cotati v. Cashman (2002) 29 Cal.4th 69 (City of Cotati), and Navellier v. Sletten (2002) 29 Cal.4th 82 (Navellier). (Park, supra, 2 Cal.5th at p. 1063.) In City of Cotati, a city initiated an action against the owners of mobilehome parks seeking a declaratory judgment that its rent control ordinance was constitutional. (City of Cotati, supra, at p. 72.) The city's suit was filed after the defendant owners brought a federal suit seeking declaratory relief invalidating the same ordinance. (Ibid.) In the state action, the defendant owners filed an anti-SLAPP motion alleging the city's claim arose from their protected activity of filing the federal suit. (City of Cotati, supra, at pp. 72-73.) The Supreme Court disagreed, explaining that since the constitutionality of the ordinance was the underlying dispute between the parties and the primary controversy in the city's state action, the city's claim did not arise from the owners' federal suit. (Id. at p. 80.)

"In contrast, in [Navellier], another case in which the defendant's protected activity was the prior filing of court claims, the prior claims were an essential part of the activity allegedly giving rise to liability. The Navellier plaintiffs sued for breach of contract and fraud, alleging the defendant had signed a release of claims without any intent to be bound by it and then violated the release by filing counterclaims in a pending action in contravention of the release's terms. Unlike in City of Cotati, the defendant was 'being sued because of the affirmative counterclaims he filed in federal court. In fact, but for the federal lawsuit and [the defendant's] alleged actions taken in connection with that litigation, plaintiffs' present claims would have no basis. This action therefore falls squarely within the ambit of the anti-SLAPP statute's "arising from" prong.' [Citation.]" (Park, supra, 2 Cal.5th at p. 1063.)

The Park court recognized that both City of Cotati and Navellier presented a situation wherein "the claim challenged as a SLAPP was filed because of protected activity," but pointed out that only one case, Navellier, involved a situation where the prior protected activity supplied the "elements of the challenged claim." (Park, supra, 2 Cal.5th at p. 1064.) Thus, the Supreme Court emphasized the need "to 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." (Ibid.; see San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees' Retirement Assn. (2004) 125 Cal.App.4th 343, 353-354, [the mere fact an action was filed after protected activity took place does not mean it arose from that activity; rather, the anti-SLAPP statute's definitional focus is on whether the defendant's activity giving rise to his or her asserted liability constitutes protected speech, petitioning or conduct]; Foothills Townhome Assn. v. Christiansen (1998) 65 Cal.App.4th 688, 695-696) [motion to strike denied where a private homeowners association sued a member to collect an assessment despite finding that the member's "alleged activities involved matters of sufficient public interest made in a sufficiently public forum to invoke the protection of [Code of Civil Procedure] section 425.16"], disapproved on other grounds in Equilon, supra, 29 Cal.4th at p. 58.)

Here, the FAC alleges causes of action for negligence, breach of fiduciary duty/conspiracy to violate election statutes, fraud/deceit restitution and declaratory relief against the Morningside Defendants, and causes of action for constructive trust, breach of fiduciary/duty/conspiracy, and fraud/deceit against the Club Defendants based on election related communications. These causes of action arise out of defendants' allegedly tortious conduct in secretly seeking, obtaining, and using confidential voter information during the voting period.

The Morningside Defendants moved to strike the FAC in its entirety, despite the fact that the FAC includes the same first six causes of action (breach of contract, breach of fiduciary duties, negligence, constructive fraud, constructive trust, and declaratory relief) alleged in the original complaint. However, as to those six causes of action, their anti-SLAPP motion is untimely because it was filed more than 60 days after service of the original complaint. (Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2018) 4 Cal.5th 637, 641, 645-646 [A defendant must move to strike a cause of action within 60 days of service of the earliest complaint that contains that cause of action; however, an "'amended complaint reopens the time to file an anti-SLAPP motion without court permission only if the amended complaint pleads new causes of action that could not have been the target of a prior anti-SLAPP motion, or adds new allegations that make previously pleaded causes of action subject to an anti-SLAPP motion.'"]; see Code Civ. Proc. § 425.16, subd. (f).) Our analysis therefore addresses only those causes of action newly alleged in the FAC, and to the extent the six causes of actions originally alleged include new allegations of election-related communications, we will address them if we find merit in the Morningside Defendants' arguments as to the new causes of action based on election-related communications.

The FAC alleges conspiracy between the defendants regarding the actions taken to amend the CC&Rs to add the Proprietary Fee. Because such actions encompass those leading up to, and including, the election regarding the Proprietary Fee, we consider the conduct of all defendants in determining whether the claims asserted in the FAC against the Morningside Defendants and the Club Defendants arise from protected activity.

Although defendants' conduct surrounding the election regarding the Proprietary Fee encompasses protected activity, it is not the protected activity from which plaintiffs' claims arise. The alleged actions were not about the Proprietary Fee in general, defendants' advocacy in favor of amending the CC&Rs, or anyone encouraging a member to get out and vote, but about the tortious actions that defendants employed to ensure the amendment of the CC&Rs and implementation of the new assessment. This case does not present "the same" situation as that presented in Lee, supra, 6 Cal.App.5th at page 540. In Lee, the minority board members of a homeowners association brought a declaratory relief action against the majority board members regarding the board's decision to renew the association's management contract. (Id. at pp. 530-531, 536.) The majority board members moved to strike the complaint on the grounds that it was "based on decisions and statements they made in duly noticed board meetings while conducting board business and, thus, involved acts or activities in furtherance of constitutionally protected activity within the meaning of the anti-SLAPP statute." (Id. at p. 531.) The Lee court agreed with the majority board members' argument, concluding that the "defendants were sued for exercising their First Amendment rights as a result of how they voted on subject matters pending before the board." (Id. at p. 545; see Schwarzburd v. Kensington Police Protection & Community Services Dist. Bd. (2014) 225 Cal.App.4th 1345, 1353, 1355 [board members sued not "simply because they voted, but based on how they voted and expressed themselves" regarding their vote to extend a meeting and their discussion and vote on a matter that was not properly noticed].)

We reject any effort to characterize all of defendants' activities as protected speech because they involve the Association's election and the right to solicit members' votes. The fact that the statements or representations to members may have been made in public forums in which defendants sought to garner the support of the members regarding the proposed amendment, or may have been of interest to a particular community, does not convert all of defendants' statements into acts "'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.'" (Code Civ. Proc., § 425.16, subd. (e).) Were we to accept such argument, every lawsuit concerning a private organization's business practices could be described broadly as involving governing conduct and would be barred under the anti-SLAPP statute, resulting in an evisceration of tort and the unfair business practices laws. (Jewett v. Capital One Bank (2003) 113 Cal.App.4th 805, 815.)

Similarly, the defendants' alleged misconduct surrounding the election on the Proprietary Fee may not be grouped with legitimate protected activity simply because it included "communications with voting Association members made in connection with a homeowners association election campaign . . . ." Nor is such result dictated by the cases cited by the Club Defendants involving the issue of when conduct involves the "public interest." (See Damon v. Ocean Hills Journalism Club, supra, 85 Cal.App.4th at pp. 479-480 [motion to strike granted where former manager of homeowners association sued the association for defamation over statements made about manager's policies because this controversy was "inherently political"]; see also Country Side Villas Homeowners Assn. v. Ivie (2011) 193 Cal.App.4th 1110, 1118 [homeowner's defamation complaint about a community association's management was a matter of public concern covered under Code of Civil Procedure section 425.16, subd. (e)(4)]; Ruiz v. Harbor View Community Association (2005) 134 Cal.App.4th 1456, 1470 [court granted anti-SLAPP motion against libel complaint aimed at attorney's letters to homeowners association regarding dispute over denial of homeowners' application to rebuild their house].) In these cases, motions to strike were granted where a complaint sought to suppress political and/or noncommercial speech through injunctive relief, or libel, slander and defamation claims. This is not the same situation. Again, the FAC is concerned with alleged misrepresentations and/or tortious actions taken by the defendants to manipulate the election to insure the implementation of the Proprietary Fee; it is not concerned with political or noncommercial speech. We look to the "pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based" (Code Civ. Proc., § 425.16, subd. (b)(2); see Equilon Enterprises, supra, 29 Cal.4th at p. 67) when determining whether plaintiffs' claims "arise from" protected activity. Here, the pleadings and the affidavits allege a conflict of interest on the part of each Association director who was also a member of the Club, misuse of confidential election information in order to manipulate election results, and misrepresentations that the election was carried out fairly and in accordance with the law. "In short the allegations, if proved, render this case not about protected activity but unprotected duplicity." (World Financial Group, Inc. v. HBW Ins. & Financial Services, Inc. (2009) 172 Cal.App.4th 1561, 1573.) The anti-SLAPP motion therefore was properly denied.

2. The Plaintiffs Have Demonstrated a Minimum Probability of Prevailing on Their Claims.

Because we conclude that the defendants did not meet their initial burden of establishing that the FAC "arises from" protected activity, we are not required to consider whether plaintiffs met their burden of establishing a probability of success on the merits. Nonetheless, as an alternative ground for our conclusion, we discuss the second prong of the anti-SLAPP analysis.

In order to show a probability of prevailing, plaintiffs must demonstrate that their causes of action have a "'"minimum level of legal sufficiency and triability,"'" i.e., "'"minimal merit."'" (Lanz v. Goldstone (2015) 243 Cal.App.4th 441, 457.) "'"As is true with summary judgment motions, the issues in an anti-SLAPP motion are framed by the pleadings. [Citation.] The plaintiff may not rely solely on its complaint, even if verified; instead, its proof must be made upon competent admissible evidence. [Citation.] In reviewing the plaintiff's evidence, the court does not weigh it; rather, it simply determines whether the plaintiff has made a prima facie showing of facts necessary to establish its claim at trial. [Citation.]" [Citation.]' [Citation.] 'When reviewing a ruling on a defendant's [Code of Civil Procedure] section 425.16 special motion to strike a complaint, we employ our independent judgment.' [Citation.]" (Oviedo v. Windsor Twelve Properties, LLC (2012) 212 Cal.App.4th 97, 109.) Applying this step, we conclude that plaintiffs have established the merits of their claims, and the anti-SLAPP motion was properly denied.

a. Further background facts.

Beginning in 2012, Zien, an Association director and the Club's finance committee member, proposed a $100 assessment fee on Association members to give to the Club. This proposal was abandoned when another Association director "disagree[d] completely with the makeup of the committee" addressing the issue, stating that it would "have to be made up of 3, non club member, homeowners," and asked, "How can the [Association] tell the population of Morningside what we jointly recommend when they were not represented equally?" Although the Association's directors were informed that homeowners' monthly dues in excess of $1,000 "may scare off many prospective buyers," the Morningside Defendants continued to propose large monetary gifts to the Club, special assessments (which would increase dues more than $l,000/month), and mandatory memberships, as a means of financially assisting the Club. In a June 2014 email to Goepel and Harris, Zien proposed raising the Association dues to $1,250 per month, with $200 per month going to the Club, and simultaneously the Club would inform its Club/Association Members that they will receive a $2,400 annual credit towards their Club dues. Zien commented, "If that program was in place today, the 150 non-member homeowners would support the club with an additional $360,000 a year and it wouldn't cost member homeowners anything."

In March 2015, the Association proposed a new assessment, the Proprietary Fee, which would be given to the Club and "dedicated to maintaining current landscaping standards." Concurrently, the Club offered an offsetting credit to its resident members in an amount equal to the Proprietary Fee: "The Proprietary Fee would be credited against any membership dues otherwise payable to the Club by any homeowner who is already or chooses to become a member of the Club."

The Association's directors discussed the election procedures and selected Mr. Peters as the inspector of elections, because at least one director thought it "certain [the directors] would be accused of rigging the election if the [Association] counted the votes." During the 30-day voting period, Mr. Peters supplied information to the Association's directors regarding the ballots received and cast. For example, on April 22, 2015, Norman (Association director and Club member) sent an email message to Michele Abdelnour (general manager of the Association), Zien and Harris (general manager of the Club), stating the following: "I just spoke with Dave Peters. Because I asked him for the list of who has voted he is sending it to me. If someone else asks him for it he will send it to them. Let's keep this absolutely between the four of us. Michele, you won't need to see it and I know you won't mention it. I will get it over to Greg and Randy as soon as I receive it. Greg, you will have to just ask people to call certain members without telling them you know they haven't voted." (Italics added.) On April 23, 2015, Harris asked Ms. Abdelnour to send a replacement ballot to Ray Yates, one of the members who did not sign his ballot.

On April 28, and May 1, 2015, Harris emailed Goepel, Cantlin, Zien, Norman, and Shelley Tratch (Zien's spouse) updated spreadsheets regarding the votes received. On April 28, he stated: "We have received 216 votes with 122 Yes votes, 86 no votes and 8 member votes that we are not sure of. That is a 56.5% yes rate which is too close for comfort!" On May 1, he stated: "There are now 266 ballots in with 157 yes votes and 2 yes votes that were not signed. 97 no votes. We are now at 59% yes votes of those sent back and need another 23 yes votes to pass the measure. There are 43 members who are 'yesses' whose ballots have not been received, 7 non-members or new members who have indicated they will vote yes and 14 members who are on the fence. The votes are there . . . we just need to go get them! WE are getting close." (Original capitalization.) Harris sent further updates on May 6, May 8, May 13, and May 15, 2015. In the May 13, 2015, update, Harris stated: "We still do not have the replacement ballots for Mr. Rosen and Stein so I will call them both tomorrow." In the May 15, 2015, update, he stated: "Mr. Goepel. I tried Mr. Stein twice yesterday and did not get a response. He seemed to respond promptly to your emails. Would you mind sending him another note reminding him that he did not sign his first ballot and needs to send the second one in? The Rotner's [sic] are contacting Mr. Rosen."

According to the correspondence between the Morningside Defendants and the Club Defendants, based on the information Mr. Peters provided, defendants determined and tabulated who had voted and how they voted during the voting period and before the ballots were officially counted and tabulated. The Morningside Defendants and Club Defendants were also informed that certain members had submitted unsigned ballot packages to the inspector of elections. These defendants then provided replacement ballot packages to those members so they could resubmit signed ballot packages during the voting period. Plaintiffs were not provided the same information, nor were they informed that defendants had received such information.

On May 22, 2015, Mr. Peters submitted his official report as inspector of the election. According to that report, the votes were counted and the ballots were tabulated on May 19, 2015, at 9:00 a.m.

b. The Morningside Defendants.

We consider the seventh through eleventh causes of action together, as they are based on the defendants' allegedly tortious conduct in secretly seeking, obtaining, and using confidential voter information during the voting period. If we conclude that plaintiffs have demonstrated a probability of prevailing on the merits of their claims for negligence (Association), breach of fiduciary duty/conspiracy to violate election statutes (Association, Zien, Norman), and fraud/deceit (Association, Zien, Norman), then it follows that they have also demonstrated a probability of prevailing on their claims for restitution (Association), and declaratory relief (Association, Zien, Buckingham, Ivins-Hazelrig, Kolar, Norman and Pollard).

The elements of a cause of action for negligence are: (1) the existence of the duty; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the negligence. (Tribeca Companies, LLC v. First American Title Ins. Co. (2015) 239 Cal.App.4th 1088, 1114.) The elements of a cause of action for breach of fiduciary duty are (1) the existence of a fiduciary relationship; (2) breach of fiduciary duty; and (3) damage proximately caused by the breach. (Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1509.) "The well-established common law elements of fraud which give rise to the tort action for deceit are: (1) misrepresentation of a material fact (consisting of false representation, concealment or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to deceive and induce reliance; (4) justifiable reliance on the misrepresentation; and (5) resulting damage. [Citations.]" (City of Atascadero v. Merrill Lynch, Peirce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 481-482.)

Regarding the fraud/deceit cause of action, the FAC contends that the Association, Zien and Norman specifically misled plaintiffs "into believing that at least the procedures used [to] cast, count, and tabulate the votes on the Proprietary Fee were carried out fairly and in accordance with the law governing association elections." Regarding the negligence/breach of fiduciary duties causes of action, the FAC alleges that the Association, Zien, and Norman had duties of trust and good faith, which required them to carry out the election with the highest degree of impartiality so as to ensure that it was conducted fairly in accordance with all applicable election laws, including those set forth in the Davis-Stirling Common Interest Development Act (the Act), Civil Code sections 4000 and 5100 et seq.

The Act's election provisions govern, inter alia, the "elections regarding assessments legally requiring a vote." (Civ Code, § 5100, subd. (a).) They require homeowners associations to select one or three "independent third party or parties as an inspector of elections." (Civ. Code, § 5110, subd. (a).) "An independent third party may not be a person, business entity, or subdivision of a business entity who is currently employed or under contract to the association for any compensable services unless expressly authorized by rules of the association . . . ." (Civ. Code, § 5110, subd. (b).) The inspectors of elections shall, among other duties, "[c]ount and tabulate all votes" (id., subd. (c)(5)); "[d]etermine the tabulated results of the election" (id., subd. (c)(7)); "[p]erform any acts as may be proper to conduct the election with fairness to all members . . . (id., subd. (c)(8)); and "perform all duties impartially, in good faith, to the best of the inspector of election's ability . . . ." (Id., subd. (d).)

The statutes set forth specific procedures for ensuring the secrecy of ballots, provide that ballot counting be conducted in public, and specify who shall retain custody of the sealed ballots until after the tabulation of the vote. (Civ. Code, §§ 5115, 5120, 5125; see also, Elections Code, §§ 3000-3026.) More precisely, "[n]o person, including a member of the association or an employee of the management company, shall open or otherwise review any ballot prior to the time and place at which the ballots are counted and tabulated. The inspector of elections, or the designee of the inspector of elections, may verify the member's information and signature on the outer envelope prior to the meeting at which ballots are tabulated. Once a secret ballot is received by the inspector of elections, it shall be irrevocable." (Civ. Code, § 5120, subd. (a), italics added.) An association member may initiate a civil action for a violation of the Act, and if the action is successful, a court may void the election results. (Civ. Code, § 5145, subd. (a).)

For purposes of reviewing the ruling on an anti-SLAPP motion, it is enough to focus on one act of alleged misconduct surrounding the election on the Proprietary Fee. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) The Morningside Defendants owe fiduciary and common law duties of care to the Association's members. (Ostayan v. Nordhoff Townhomes Homeowners Assn., Inc. (2003) 110 Cal.App.4th 120, 126-127.) As previously explained, "[n]o person . . . shall open or otherwise review any ballot prior to the time and place at which the ballots are counted and tabulated. . . . Once a secret ballot is received by the inspector of elections, it shall be irrevocable." (Civ. Code, § 5120, subd. (a), italics added.) Here, the Morningside Defendants may not have personally opened, or otherwise reviewed, the Proprietary Fee election ballot packages prior to the date and time at which they were to be counted and tabulated; however, they requested voting information, were provided this information, and used this information, prior to the date and time designated for counting and tabulating, with the intent of affecting the outcome of the election to insure the passage of the Proprietary Fee. In short, defendants invaded the sanctity of a voting process designed to prevent voter fraud.

The FAC alleges that the actions by the Morningside Defendants constitute a violation of the provisions of the Act. To support this allegation, plaintiffs offered the email exchanges between the Morningside Defendants and the Club Defendants, which evidence their knowledge of the vote count, unsigned ballot packages, and actions they took to increase the number of votes in favor of passing the Proprietary Fee. Norman's April 22, 2015, email: "I just spoke with Dave Peters. Because I asked him for the list of who has voted he is sending it to me. If someone else asks him for it he will send it to them. Let's keep this absolutely between the four of us. Michele, you won't need to see it and I know you won't mention it. I will get it over to Greg and Randy as soon as I receive it. Greg, you will have to just ask people to call certain members without telling them you know they haven't voted." (Italics added.) Given these undisputed communications (detailed previously), and the contents therein, it is reasonable to infer that the Morningside Defendants violated the Act, and intentionally suppressed the evidence regarding their secret actions to affect the election's outcome. Based on this showing, we conclude that plaintiffs have demonstrated a probability of prevailing on their causes of action.

The Morningside Defendants offer a number of arguments as to why the causes of action are neither legally nor factually sufficient, but none of them addresses the use of confidential voter information, or is persuasive.

The Morningside Defendants contend that plaintiffs are unable to show a probability of prevailing because their decision as Association directors are "protected by the business judgment rule of Corporations Code section 7231." They argue that they acted in good faith and in the best interests of the Association. However, under the business judgment rule, "'a director is not liable for a mistake in business judgment which is made in good faith and in what he or she believes to be in the best interests of the corporation, where no conflict of interest exists. [Citations.]'" (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 279.) Here, the evidence strongly suggests a conflict of interest: According to the Morningside Defendants, the Proprietary Fee (to be disbursed to the Club) was necessary to "cover maintenance expenses, including without limitation, a portion of The Club's landscaping costs, to assist in the financial viability of The Club." However, the Morningside Defendants knew that 58 percent of the residents (those who were also members of the Club) would not face an increase in their monthly expenses in the amount of the Proprietary Fee because they would receive a credit in Club dues in the same amount. Because the Morningside Defendants (with the exception of the Association) were Club members who stood to benefit economically from the imposition of the Proprietary Fee, they had a direct financial conflict of interest.

Moreover, it appears that the Morningside Defendants violated Civil Code section 5600, subdivision (b), which provides: "An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied." The reduction of Club dues for Club/Association members by $250 per month, at the same time as homeowners' monthly assessments increased by $250, means that instead of 100 percent of the Morningside residences facing a monthly increase in their expenses of $250, only 42 percent of the Morningside residences face this increase. In other words, Association members of Morningside Community would be required to pay an additional $3,000 per year, each, in assessments, while Club/Association members would pay no additional amount but would benefit from an additional $459,000 revenue to the Club which is for their exclusive use.

Finally, we conclude that plaintiffs have set forth a prima facie case of actual injury and entitlement to relief and damages. Plaintiffs have made a prima facie case that the election that approved the Proprietary Fee is invalid, that plaintiffs are entitled to a refund of all sums paid in connection with the Proprietary Fee, and that plaintiffs were compelled to retain legal counsel to protect their rights.

c. The Club Defendants.

The Club Defendants moved to strike the fifth (constructive trust), ninth (breach of fiduciary duty/conspiracy to violate election statutes), and tenth (fraud/deceit) causes of action in the FAC.

We consider the breach of fiduciary duty/conspiracy to violate election statutes and the fraud/deceit causes of action together, as they are based on the defendants' allegedly tortious conduct in secretly seeking, obtaining, and using confidential voter information during the voting period. If we conclude that plaintiffs have demonstrated a probability of prevailing on the merits of these claims, then it follows that they have also demonstrated a probability of prevailing on their claim for constructive trust.

The elements of the causes of action for breach of fiduciary and fraud/deceit were previously stated; however, "[c]onspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration. [Citation.] By participation in a civil conspiracy, a coconspirator effectively adopts as his or her own the torts of other coconspirators within the ambit of the conspiracy. [Citation.] In this way, a coconspirator incurs tort liability co-equal with the immediate tortfeasors." (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511.) "'"The elements of an action for civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of the common design. . . . In such an action the major significance of the conspiracy lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity."' [Citation.]" (Id. at p. 511.)

Regarding these causes of action, the FAC alleges that the Club, Goepel, Cantlin, and Harris conspired with the Morningside Defendants "to affect the outcome of the election and did so through conduct that violated the law as well as the most basic standards of fairness and decency . . . ." The FAC further alleges that the Association directors owed plaintiffs a fiduciary duty which they breached when they specifically misled plaintiffs "into believing that at least the procedures used [to] cast, count, and tabulate the votes on the Proprietary Fee were carried out fairly and in accordance with the law governing association elections."

As noted above, the Morningside Defendants owe fiduciary and common law duties of care to the Association's members (Ostayan v. Nordhoff Townhomes Homeowners Assn., Inc., supra, 110 Cal.App.4th at pp. 126-127), and they requested voting information, were provided this information, and used this information, prior to the date and time designated for counting and tabulating, with the intent of affecting the outcome of the election to insure the passage of the Proprietary Fee. However, the Morningside Defendants did not work alone. Rather, they worked with the Club Defendants who recruited volunteers to call the Club/Association Members prior to the election to determine how many would vote in favor of the Proprietary Fee, then follow up during the election time to confirm that they had voted.

The FAC alleges that the actions by the Club Defendants in working with the Morningside Defendants constitute a violation of the provisions of the Act. To support this allegation, plaintiffs offered the email exchanges between the Morningside Defendants and the Club Defendants, which evidence their knowledge of the vote count, unsigned ballot packages, and actions they took to increase the number of votes in favor of passing the Proprietary Fee. Norman's April 22, 2015, email: "I just spoke with Dave Peters. Because I asked him for the list of who has voted he is sending it to me. If someone else asks him for it he will send it to them. Let's keep this absolutely between the four of us. Michele, you won't need to see it and I know you won't mention it. I will get it over to Greg and Randy as soon as I receive it. Greg, you will have to just ask people to call certain members without telling them you know they haven't voted." (Italics added.) Given these undisputed communications (detailed in the previous subsection), and the contents therein, it is reasonable to infer that the Club Defendants conspired with the Morningside Defendants to violate the Act and intentionally suppress the evidence regarding their secret actions to affect the election's outcome. Based on this showing, we conclude that plaintiffs have demonstrated a probability of prevailing on both of their causes of action.

The Club Defendants argue that plaintiffs are unable to show a probability of prevailing because the Club Defendants are not fiduciaries, nonfiduciaries cannot conspire to breach a duty owed only by a fiduciary, and plaintiffs do not allege any misrepresentation of fact made by any Club Defendant. While the Club Defendants state the general rule that "'[a] nonfiduciary cannot conspire to breach a duty owed only by a fiduciary,'" "an exception to this rule exists when the participant acts in furtherance of its own financial gain." (Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1048.) Here, the Club Defendants were acting in furtherance of their own financial gain when they sought, obtained, and used voter information during the voting period. If the Proprietary Fee passed, then the monies paid would be deposited in a separate trust account for the Club to use in its sole discretion for any "maintenance expenses." If a homeowner failed to pay the Proprietary Fee, the Association could delegate the Club "[t]he right to collect any delinquent" amount directly from the homeowner. Moreover, because Association members of Morningside Community would pay an additional $3,000 per year in assessments, the Club and its members would benefit from an additional $459,000 revenue to the Club. Therefore, the Club had a relationship with the Association as a beneficiary of the Proprietary Fee. Such relationship may give rise to a duty to disclose any actions taken which directly benefited the Club. (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336-337.)

During oral argument, the Club Defendants argued that they are in a similar position as the defendant lawyers in Bergstein v. Stroock & Stroock & Lavan LLP (2015) 236 Cal.App.4th 793). In Bergstein, the plaintiffs sued the lawyers who represented the plaintiffs' adversaries in litigation based on the lawyers' use of documents wrongfully obtained from the plaintiffs. (Id. at p. 799.) The plaintiffs alleged that the lawyers "'solicited and received this confidential, privileged, and/or proprietary information'" from the plaintiffs' former attorney, and then used it to carry out a litigation attack against the plaintiffs. (Id. at pp. 799-800.) The trial court granted the lawyers' motion to strike the complaint. (Id. at p. 803.) The Court of Appeal affirmed. Regarding the first prong, the appellate court found that the specific acts of alleged wrongdoing were the lawyers' "conduct in receiving and using confidential information to prepare for and prosecute litigation against plaintiffs." (Id. at p. 813.) Because the core of the plaintiffs' claims involves "litigation activities," they "arise from protected activity within the meaning of the anti-SLAPP statute." (Id. at pp. 811, 813.) Regarding the second prong, the appellate court found that the litigation privilege shielded the lawyers from liability. (Id. at p. 816.) Bergstein does not assist the Club Defendants here, because this case does not involve a communication made in a judicial proceeding (or prior thereto) to achieve the object of the litigation. Rather, the Club Defendants worked with the other defendants in furtherance of their (Club Defendants) own financial gain. --------

As we concluded with the Morningside Defendants, plaintiffs have set forth a prima facie case of actual injury and entitlement to relief and damages. Plaintiffs have made a prima facie case that the Club Defendants conspired to affect the election, its results are invalid, plaintiffs were compelled to retain legal counsel to protect their rights, plaintiffs have incurred damages, and the Association and the Club are constructive trustees of the Proprietary Fees paid.

Based on the respective showings of the parties, we conclude that plaintiffs' claims possess at least minimal merit within the meaning of the anti-SLAPP statute. On this ground, we affirm the trial court's rulings.

III. DISPOSITION

The trial court's rulings are affirmed. Plaintiffs are awarded costs on appeal.

RAMIREZ

CODRINGTON, J. and SLOUGH, J., concur.

FootNotes


1. "SLAPP" is an acronym for "strategic lawsuit against public participation." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 (Equilon).)

2. This is the second of three appeals in this case. We take judicial notice of Wright v. Peters & Freedman, LLP, case No. E067366, involving the first appeal, and Wright v. The Club at Morningside, case No. E067980, involving the third appeal. (Evid. Code, §§ 452, subd. (d), 459, subd. (a).) We also take judicial notice of Asher v. Peters & Freedman, LLP, case No. E067159, and Asher v. The Morningside Community Association, case No. E067815, two appeals from a related case, Asher et al., v. The Morningside Community Association et al., Riverside Superior Court No. PSC1505335 (the Asher Action).

3. During oral argument, the Peters Defendants pointed out that the homeowners received ballot packages, consisting of an envelope within an envelope. The inside envelope, which contained the actual ballot with no identifying information, was placed inside the outside envelope, which required the voters' identity information and signature.

4. "Anti-SLAPP motions differ from summary judgment motions in that they are brought at an early stage of the litigation, ordinarily within 60 days after the complaint is served. ([Code Civ. Proc.,] § 425.16, subd. (f).) Discovery is stayed, absent permission from the court. ([Code Civ. Proc.,] § 425.16, subd. (g).) Thus, the defendant may test the sufficiency of the plaintiff's claims before incurring the costs and disruptions of ordinary pretrial proceedings."

5. The Association Defendants moved to strike the FAC in its entirety, despite the fact that the FAC includes the same eight causes of action (breach of fiduciary duty/conflict of interest, violations of the Davis-Sterling Act, fraud/deceit, negligence, conspiracy, intentional infliction of emotional distress, injunctive relief, and declaratory relief) alleged against them in the original complaint. However, as to those eight causes of action, their anti-SLAPP motion is untimely because it was filed more than 60 days after service of the original complaint. (Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2018) 4 Cal.5th 637, 640, 645-646 [a defendant must move to strike a cause of action within 60 days of service of the earliest complaint that contains that cause of action; however, an "`amended complaint reopens the time to file an anti-SLAPP motion without court permission only if the amended complaint pleads new causes of action that could not have been the target of a prior anti-SLAPP motion, or adds new allegations that make previously pleaded causes of action subject to an anti-SLAPP motion'"]; see Code Civ. Proc., § 425.16, subd. (f).) Our analysis therefore addresses only those causes of action newly alleged in the FAC. However, to the extent the eight causes of actions originally alleged include new allegations of election-related communications, we will address them if we find merit in the Morningside Defendants' arguments as to the new causes of action based on election-related communications.

6. The FAC alleges a conspiracy between the defendants regarding the actions taken to amend the CC&Rs to add the Proprietary Fee. Because such actions encompass those leading up to, and including, the election regarding the Proprietary Fee, we consider the conduct of all defendants, not just the Association Defendants, in determining whether the claims asserted in the FAC against the Association Defendants arise from protected activity.

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