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Misappropriation of Funds Is Not ‘Protected Activity—C.A.
Justice Chaney Says Allegation That Moneys Were Siphoned From LLC to Fund Litigation Is Irrelevant
By a MetNews Staff Writer
The Court of Appeal for this district yesterday reversed an order granting an anti-SLAPP motion to the extent that it was based on allegations that a cross-defendant was funding litigation by siphoning funds from eight real esatate management companies he manages.
Mid-Wilshire attorney Roger A. S. Manlin, an owner of those limited liability companies (“LLCs”) sued co-owner Steven Milner, the managing member, for self-dealing; Milner cross-complained against Manlin for breaching fidicuary duties; and Manlin cross-complained against Milner and his lawyers—Hamburg, Karie, Edwards & Martin, and firm members Ann Lee and Gregg Martin alleging a diversion of funds from the LLCs to pay legal fees.
Los Angeles Superior Court Judge Robert B. Broadbelt granted a special motion to strike all four causes of action in Manlin’s cross-complaint pusuant to the the anti-SLAPP statute, Code of Civil Procedure §425.16.
“We conclude that appropriation of funds to finance litigation is not protected activity,” Justice Victoria Chaney of Div. One said in yesterday’s unpublished opion which partially reverses Broadbelt’s orders.
Appropriation of funds is not protected activity, irrespective of the purpose, she elaborated.
Chaney’s Opinion
In an opinion reversing the anti-SLAPP ruling as to three causes of action based on the alleged misappropriation, the jurist wrote:
“Here, cross-defendants allegedly breached fiduciary duties owed to Manlin and the LLCs by diverting the LLCs’ money. No element of Manlin’s claim depends on the purpose for that diversion, but only on the diversion itself and whether it constituted self-dealing. The diversion may have been to further some protected activity—for example to fund a political campaign or publish a newsletter or fund litigation—but that purpose does not convert Manlin’s suit to one arising from the protected activity.” She continued: “The protected use to which cross-defendants put the diverted funds may supply evidence of the selfishness of their self-dealing but does not convert the use itself into the basis for liability. Manlin’s complaint is based on the act of diverting funds from the LLC for selfish purposes. Manlin could have omitted allegations regarding funding lawsuits and still state the same claim.”
Hopeless Claim
The opinion affirms Broadbelt’s order striking the second cause of action which is based on Manlin’s refusal to “stipulate to continue any currently existing hearing date, response date, notice date, motion cut off date, or other date associated with the presently scheduled January 8, [2020] trial.”
Chaney said Milner’s alleged conduct amounted to “a failure to conduct litigation in a certain way.” While this “constitutes protected petitioning activity,” satisfying the first prong of §425.16, she wrote, Manlin cannot meet the second prong: showing a probability of prevailing on the merits.
The litigation privilege in Civil Code §47(b)—shielding a publication “[i]n any…judicial proceeding”—forecloses liability, the justice declared.
Discovery sanctions were properly imposed on Manlin, the opinion also finds.
The case is Manlin v. Milner, B313253.
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