Filed 11/19/15 Kammer v. Corwin CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
ROBERT J. KAMMER, D067190
Plaintiff, Cross-defendant and Respondent, (Super. Ct. No. v. 37-2014-0001790-CU-BC-CTL)
MERLYN A. CORWIN, Individually and as Personal Representative, etc.,
Defendant, Cross-complainant and Appellant;
MARK BAUM et al.,
Cross-defendants and Respondents.
APPEAL from orders of the Superior Court of San Diego County, Eddie C.
Sturgeon, Judge. Reversed and remanded.
Hosie Rice, Spencer Hosie, Anthony K. Lee and Darrell R. Atkinson for
Defendant, Cross-complainant and Appellant. Law Offices of James E. McElroy and James E. McElroy for Cross-defendants
and Respondents Mark Baum and Imprimis Pharmaceuticals, Inc.
Witham Mahoney & Abbott and Matthew M. Mahoney for Plaintiff, Cross-
defendant and Respondent Robert J. Kammer.
Merlyn A. Corwin (Merlyn), individually and as representative of her husband
Michael P. Corwin's (Michael) estate (Estate), filed a cross-complaint against Robert J.
Kammer, Sandy Greenberg, Mark Baum, and Imprimis Pharmaceuticals, Inc. (Imprimis)
to rescind the settlement agreement between Kammer and Merlyn. Michael had died
with unpaid debts to Kammer. Under the settlement agreement, Merlyn agreed to
transfer a substantial amount of her Imprimis stock to Kammer and to limit the sales of
her remaining Imprimis stock, in satisfaction of the outstanding debt owed to Kammer
and his release of claims against her and the Estate. Kammer was the chairman of
Imprimis's board of directors.
The basis of Merlyn's cross-complaint was that Kammer and other Imprimis
insiders engaged in a number of wrongful actions constituting securities fraud, undue
influence and duress, to acquire a substantial portion of her Imprimis stock and restrict
her from freely selling other Imprimis stock she owned; after she signed the settlement
agreement, the stock price significantly increased. Cross-defendants Kammer, Baum,
and Imprimis filed motions to strike the operative cross-complaint pursuant to Code of
2 Civil Procedure1 section 425.16, commonly referred to as the anti-SLAPP (strategic
lawsuit against public participation) statute, which the trial court granted. Merlyn
appeals, contending the misconduct of cross-defendants alleged in the cross-complaint
was not protected activity under section 425.16. We agree and reverse the orders
granting the anti-SLAPP motions.
FACTUAL AND PROCEDURAL BACKGROUND
A. Events Leading to the Operative Cross-complaint in This Case
1. Relevant Debts, Ownership of Imprimis Stock Shares, and Michael's Death
Beginning in 2010, Michael (or a company he controlled) borrowed money
evidenced by three notes (Notes), each for $100,000. The Notes were either initially or
eventually held by Kammer, a close personal friend of Michael. Under the 2010 "Javelin
Note," due in December 2012, Kammer loaned money to Michael's company, Javelin
Innovations, Inc. Michael personally guaranteed the Javelin Note, due in November
2014.
Under the 2011 "DermaStar Note," due on October 31, 2013, Kammer loaned
money to Michael to acquire a 10 percent ownership interest in DermaStar International,
LLC (DermaStar), a new company cofounded by Kammer. Michael's ownership interest
in DermaStar served as collateral for the DermaStar Note. The DermaStar Note's
collateral could not be transferred, encumbered, or otherwise impaired until that Note was
1 All further statutory references are to the Code of Civil Procedure unless otherwise specified.
3 paid in full. Subsequently, DermaStar dissolved and, pursuant to a dissolution
agreement, Michael's ownership interest in DermaStar was converted into approximately
295,000 shares of Imprimis stock. Imprimis is a publicly-traded pharmaceutical
company.
Finally, under the May 2013 "Honig Note," due on November 13, 2013, an
investor, Barry Honig, loaned money to Michael, who pledged all of his Imprimis stock
as collateral. Before the Honig Note matured, Kammer purchased it from Honig.
In May 2013, Michael was diagnosed with a life-threatening cancer, and he died
on October 29, 2013, despite undergoing a bone marrow transplant and grueling medical
treatment. Merlyn spent the last month of Michael's life in the hospital with him, and she
was devastated by his death. They had been married for 24 years and had two children
together, one of whom was still a minor. When Michael died, the Imprimis stock was
one of Merlyn's few liquid assets she could use to support her and her family.
2. Kammer and Other Cross-defendants' Activities
As pleaded in the operative cross-complaint, beginning in June 2013, Kammer
began working with Baum, Imprimis's Chief Executive Officer (CEO), and Greenberg, a
stock broker and consultant, to prevent the Corwins from freely selling their Imprimis
stock. Kammer, Baum, and Greenberg's ostensible purpose was to keep Imprimis's stock
price up by limiting the amount of shares for sale in the open market. Kammer separately
urged both Michael and Merlyn to sell a block of Imprimis shares to someone of
Kammer's choosing and presumably under his control, but neither agreed.
4 According to cross-defendants, Imprimis was a "thinly traded" public company,
which meant the daily trading volume was low. Baum had routinely used legal
agreements ("lock up and leak out") to regulate the amount of stock for sale to protect the
company's value and shareholders; a large shareholder's aggressive sales of stock could
destabilize Imprimis and reduce its stock value. One of Baum's duties, as CEO of a for-
profit corporation, was to maintain and build the company's value. After Michael's death,
Kammer and Baum were concerned that Merlyn would "dump[] large portions of her
stock" on the market to pay Michael's debts, and she held a large enough share position to
cause Imprimis's share price to drop "precipitously." Kammer and Baum also believed
that Michael had violated agreements to lock-up his Imprimis stock, including pledging
shares to Honig and his cousin Andrew. Consequently, in the days after Michael's death,
there was a flurry of communications between Kammer, Baum, Greenberg, and others,
regarding how to control the sale of Merlyn's Imprimis stock.
By November 5, 2013, Kammer had contacted Chris Ludmer, a lawyer and partner
of the firm Kaplan Ludmer, LLP. Kammer knew Ludmer through Ludmer's previous
representation of DermaStar (predecessor-in-interest to Imprimis) in litigation. Kammer
was owed money by Michael and he believed Michael had committed fraud by pledging
his Imprimis stock to others. In this regard, Ludmer contemplated litigation against
Merlyn and/or the Estate on behalf of Kammer.
Notwithstanding that the Estate owed money to him, on November 6, 2013,
Kammer acquired additional debt owed by the Estate—the Honig Note—for the declared
purpose of securing his collateral in the DermaStar Note. On the same day, Ludmer filed
5 a UCC financing statement (UCC Lien) to perfect Kammer's security interest in the
Corwins' shares of Imprimis stock. Ludmer contacted the Imprimis stock transfer agent
and placed a "stop transfer" order on the Corwins' Imprimis stock. Ludmer also notified
the stockbroker holding Corwins' shares: "[Y]ou may not sell or transfer any shares in
Imprimis held by the Estate of Michael Corwin, or by his wife, Merlyn Corwin. Dr.
Kammer has a perfected security interest in the shares previously owned by Michael
Corwin (now deceased)." As alleged, these actions were part of cross-defendants' plot to
restrict Merlyn's sales of Imprimis stock and to acquire her stock at below-market prices.
3. Kammer and Merlyn's Negotiations and Settlement
On November 7, 2013, Ludmer called Colin Kelley, probate attorney for Merlyn
and the Estate. Ludmer asserted claims on behalf of Kammer, threatened litigation, and
began discussing settlement. Also that day, Ludmer emailed Kelley a settlement demand
letter with terms that would require Merlyn to pay Kammer approximately $382,000 in
cash and agree to restrict her Imprimis stock sales to 10,000 shares per month, in
satisfaction of all the Notes and a general release of claims. As part of his client's
settlement demand, Ludmer wrote that if the parties did not reach an acceptable
settlement, Kammer would have "no choice but to collect on the [Imprimis] collateral"
and pursue other claims against the Estate. Over the next week, Ludmer and Kelley
exchanged and discussed settlement offers and terms.
On November 15, 2013, Ludmer made what would become the final settlement
offer on behalf of Kammer, including the statement that Kammer "will foreclose on the
notes and liquidate as much [Imprimis] stock as is required (at a much discounted price
6 as an affiliate)" if the offer was not accepted soon. The principal terms of the offer were:
(1) Merlyn would transfer 100,000 Imprimis shares to Kammer, (2) sell 75,000 more
shares to a designated buyer at $3.00 per share, and (3) sell her remaining shares at a rate
of no more than 10,000 per month. The threat of foreclosure was repeated in another
communication; a few days later, Merlyn agreed to Kammer's terms, which were then set
forth in a written settlement agreement (Settlement Agreement). In November 2013,
Imprimis stock was publicly trading in the range of $4.00 per share.
4. Postsettlement Agreement
Under the Settlement Agreement's terms, Merlyn was required to transfer 100,000
shares of Imprimis stock to Kammer immediately after she obtained ownership from the
Estate. Beginning in early December 2013, Imprimis's stock price began rising as a
result of the company's announcements regarding investment strategy, drug development
portfolio, and prospective revenues—information that cross-defendants were alleged to
possess before Merlyn signed the Settlement Agreement. By early January 2014, Merlyn
had acquired ownership of the 295,000 Imprimis shares through probate, but did not sign
transfer instructions. In late January 2014, the stock was publicly trading at around $8.00
per share.
B. The Operative Cross-complaint and Cross-defendants' Anti-SLAPP Motions
In February 2014, Kammer initiated a court action against Merlyn for specific
performance and breach of the Settlement Agreement, among other claims. Merlyn filed
a cross-complaint against Kammer and then a first amended cross-complaint to add
Imprimis as a cross-defendant. Kammer demurred to the first amended cross-complaint
7 on the primary ground that the litigation privilege, Civil Code section 47, subdivision (b),
barred Merlyn's claims. The court (Judge Meyer) overruled the demurrer, stating that
most of the allegedly wrongful statements were not subject to the litigation privilege
because they referred to "foreclosing" on the Notes, and there were factual disputes
regarding the threats of litigation.
In August 2014, Merlyn filed the operative second amended cross-complaint
(SACC), adding Baum and Greenberg as cross-defendants. The SACC asserts the
following groups of claims: (1) securities fraud under Corporations Code sections 25400
et seq. and 25500 et seq.; (2) fraud by concealment and misrepresentations; (3) rescission
and declaratory relief of rescission, based on fraudulent misrepresentations, concealment,
undue influence, economic duress, duress/menace, and incapacity; and (4) intentional
infliction of emotional distress. Subsequently, the case was reassigned to Judge
Sturgeon.
Kammer, Imprimis and Baum filed anti-SLAPP motions to strike the SACC,
which motions were granted by the court. Greenberg did not file an anti-SLAPP motion.
Merlyn appeals the orders granting cross-defendants' motions to strike.
DISCUSSION
A. The Anti-SLAPP Statute
A SLAPP suit—a strategic lawsuit against public participation—seeks to chill or
punish a party's exercise of constitutional rights to free speech and to petition the
government for redress of grievances. (Briggs v. Eden Council for Hope & Opportunity
(1999) 19 Cal.4th 1106, 1109, fn. 1.) The Legislature enacted section 425.16 to provide a
8 procedural remedy to more quickly dispose of lawsuits brought to chill the valid exercise
of constitutional rights. (Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995)
37 Cal.App.4th 855, 865.)
"Review of an order granting or denying a motion to strike under section 425.16 is
de novo." (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)
This court considers " 'the pleadings, and supporting and opposing affidavits . . . upon
which the liability or defense is based.' " (Ibid., citing § 425.16, subd. (b)(2).) The court
does not weigh or compare the evidence, but rather accepts as true the evidence favorable
to the plaintiff while evaluating the defendant's evidence " 'only to determine if it has
defeated that submitted by the plaintiff as a matter of law.' " (Soukup, at p. 269, fn. 3.)
The appellate court employs the same procedure as the trial court in determining how the
motion should have been decided. (Mendoza v. ADP Screening & Selection Services,
Inc. (2010) 182 Cal.App.4th 1644, 1651-1652.)
A court's consideration of an anti-SLAPP motion involves a two-pronged analysis.
(Episcopal Church Cases (2009) 45 Cal.4th 467, 477.) " 'First, the court decides whether
the defendant has made a threshold showing that the challenged cause of action is one
"arising from" protected activity.' " (Ibid., citing § 425.16, subd. (b)(1).) The "principal
thrust or gravamen" of the claim is what governs, not individual factual allegations.
(Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188.)
A challenged cause of action arises from activity protected by the statute when
" ' "the act underlying the plaintiff's cause" or "the act which forms the basis for the
plaintiff's cause of action" ' " was an act in furtherance of the defendant's right of petition
9 or free speech. (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002)
95 Cal.App.4th 921, 928-929.) " 'A defendant meets this burden by demonstrating that
the act underlying the plaintiff's cause fits one of the categories spelled out in section
425.16, subdivision (e).' " (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.)
Subdivision (e) of section 425.16 defines an " 'act 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' [as]: (1) any written or oral statement or writing made before a
legislative, executive, or judicial proceeding, or any other official proceeding authorized
by law, [or] (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[.]" (§ 425.16, subd. (e); Briggs v. Eden Council for
Hope & Opportunity, supra, 19 Cal.4th at p. 1113.)
If the defendant demonstrates that a cause of action falls within the anti-SLAPP
statute's protection, the burden then shifts to the plaintiff to prove that he or she has a
probability of prevailing on the merits. (Equilon Enterprises v. Consumer Cause, Inc.
(2002) 29 Cal.4th 53, 67.) The plaintiff must " 'state[] and substantiate[] a legally
sufficient claim.' " (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 741.)
This requires the plaintiff to " ' "demonstrate that the complaint is both legally sufficient
and supported by a sufficient prima facie showing of facts to sustain a favorable
judgment if the evidence submitted by the plaintiff is credited." ' " (Ibid.)
10 B. The SACC's Causes of Action Did Not Arise from Cross-defendants' Free Speech or Petitioning Activities
Our threshold task is to determine whether the basis for the causes of action
asserted in the SACC was an act or conduct in furtherance of cross-defendants' rights of
petition or free speech. (§ 425.16, subd. (e).) Merlyn contends that the gravamen of her
claims arose from business activities not protected under the anti-SLAPP statute, and
Ludmer's actions did not relate to any seriously contemplated litigation. Cross-
defendants respond that all of the acts are protected under the anti-SLAPP statute based
on application of the litigation privilege. They argue the claims in the SACC arose from
statements made by Ludmer, an attorney, during settlement negotiations, or actions taken
by Ludmer to achieve the objects of litigation. We analyze Baum and Imprimis's anti-
SLAPP motion separately from Kammer.
1. Baum and Imprimis
Merlyn's claims did not "arise from" Baum's or Imprimis's right of petition or free
speech. (§ 425.16, subd. (b)(1) [providing a motion to strike for "[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," italics added].) Even if we start from the premise that Ludmer
engaged in settlement negotiations with attorney Kelley, Ludmer did not assert any
claims by Baum or Imprimis against Merlyn or the Estate. It is undisputed that any
obligations owed by the Estate under the Notes were to Kammer, personally. There is
nothing in the record to support that Ludmer had any intention of initiating a lawsuit on
Baum's or Imprimis's behalf, and Baum's stated interest in the matter was limited to
11 maintaining Imprimis's stock price. Baum and Imprimis have not met their burden of
showing the causes of action asserted against them in the SACC arose from any acts in
furtherance of their rights of petition or free speech, and their anti-SLAPP motions should
have been denied.
2. Kammer
We next consider whether the acts by Kammer underlying Merlyn's claims were
done in furtherance of his right of petition or free speech. At the outset, we note that
statements covered by the litigation privilege are not necessarily also protected under the
anti-SLAPP statute. (Flatley v. Mauro (2006) 39 Cal.4th 299, 324-325 [attorney's
extortion letter offering settlement of proposed litigation was not entitled to anti-SLAPP
protection even though it might have been subject to litigation privilege].) "[T]he
litigation privilege and the anti-SLAPP statute are substantively different statutes that
serve different purposes." (Garretson v. Post (2007) 156 Cal.App.4th 1508, 1519
[purpose of litigation privilege is to guarantee access to courts and purpose of anti-
SLAPP statute is to protect the valid exercise of free speech and petition rights].)
Nevertheless, courts have used the litigation privilege as an aid in construing the scope of
section 425.16, subdivision (e), which may be appropriate when the purposes underlying
both statutes are achieved. (Flatley, supra, 39 Cal.4th at pp. 322-323; A.F. Brown
Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118,
1126.)
Here, the thrust of each of Merlyn's claims is that cross-defendants schemed to
control sales of her Imprimis stock and maintain or elevate stock prices. They allegedly
12 took improper actions to cloud title and restrict transfer of Merlyn's Imprimis stock, such
as filing the UCC Lien and placing a "stop transfer" order. Cross-defendants also
allegedly possessed, yet failed to disclose, material inside information that would
significantly impact market prices. As alleged in the SACC, these events occurred when
Merlyn was particularly vulnerable and exhausted from grief, causing her to agree to
transfer her stock at below-market prices. Based on our review of the pleadings and other
relevant documents, these activities related to private business transactions and did not
implicate protected activity under the anti-SLAPP statute. (Blackburn v. Brady (2004)
116 Cal.App.4th 670, 677 [fraud committed in "a purely business type event or
transaction" is not the type of protected activity contemplated under § 425.16, subd. (e)].)
Importantly, there was no need for Kammer to acquire additional debt owed by the
Estate in preparation for litigation on the existing debt owed by the Estate. Ludmer's
filing of a UCC Lien and issuing a "stop transfer" order of Merlyn's stock were done to
prevent the sales of Imprimis stock in the open market rather than to achieve any
litigation objective. (See Garretson v. Post, supra, 156 Cal.App.4th at p. 1522
[nonjudicial foreclosure proceedings, including giving notice of nonjudicial foreclosure,
were not protected conduct]; A.F. Brown Electrical Contractor, Inc. v. Rhino Electric
Supply, Inc., supra, 137 Cal.App.4th at p. 1128 [belief in legally viable claim and threat
to "pursue all available legal remedies" were insufficient to demonstrate that a lawsuit
was under serious consideration].) At the time Ludmer undertook these actions, no
litigation had been threatened.
13 Kammer has not established that the allegedly wrongful statements made by
Ludmer during settlement discussions—threats to imminently liquidate Merlyn's
Imprimis stock and the "thin" market for such stock—were "made in connection with an
issue under consideration or review by a . . . judicial body . . . ." (§ 425.16, subd. (e).) In
typical cases in which courts have extended anti-SLAPP protection to settlement
communications, the scope of issues under judicial review was evident because litigation
was pending. (See, e.g., Seltzer v. Barnes (2010) 182 Cal.App.4th 953, 963
[summarizing anti–SLAPP cases in the settlement negotiation context]; GeneThera, Inc.
v. Troy & Gould Professional Corp. (2009) 171 Cal.App.4th 901, 908 ["Both causes of
action in appellants' complaint are based on TG's communication of an offer to settle the
ongoing lawsuit, a matter connected with issues under consideration or review by a
judicial body."], italics added, fn. omitted.) At the time Ludmer's statements were made,
there was no pending lawsuit, and the challenged statements appear directed toward a
private transaction or restriction on sales of Merlyn's Imprimis stock rather than issues to
be considered by a judicial body.2 (See Edwards v. Centex Real Estate Corp. (1997) 53
Cal.App.4th 15, 36 (1997) [litigation privilege does not attach until litigation is imminent
and seriously contemplated, not merely threatened as a negotiating tactic].) Kammer has
2 Baum expressly directed Kammer and Ludmer to obtain a "lock up and leak out" agreement from Merlyn, and Ludmer was "on retainer" as Imprimis's outside counsel. As we have indicated, negotiating a business agreement with the mere threat of litigation lurking in the background does not implicate protected activity under the anti-SLAPP statute. 14 not established that the litigation privilege applies, and we are not persuaded Merlyn's
claims implicated protected activity under the anti-SLAPP statute.
Kammer has not met his burden of showing that the causes of action pleaded in
the SACC arose from protected conduct. Accordingly, the burden of showing a
probability of prevailing on her claims never shifted to Merlyn, and we have no need to
discuss the second prong of section 425.16.
DISPOSITION
The orders granting cross-defendants' anti-SLAPP motions are reversed, and the
case is remanded to the trial court with directions to vacate the orders and enter a new
order denying the motions. Appellant shall recover her costs on appeal.
McDONALD, J.
WE CONCUR:
HUFFMAN, Acting P. J.
AARON, J.