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CALIFORNIA CORPORATE & SECURITIES LAW

Court Finds Lawsuit By Corporation Against Minority Shareholder Is “Protected Activity”

SLAPP is the initialization of the phrase “strategic lawsuit against public participation”.  A more informative description of SLAPP suits is found in Simpson Strong-Tie Co., Inc. v. Gore, 49 Cal.4th 12, 21 (2010):

“A SLAPP is a civil lawsuit that is aimed at preventing citizens from exercising their political rights or punishing those who have done so. ‘”While SLAPP suits masquerade as ordinary lawsuits such as defamation and interference with prospective economic advantage, they are generally meritless suits brought primarily to chill the exercise of free speech or petition rights by the threat of severe economic sanctions against the defendant, and not to vindicate a legally cognizable right.”‘

quoting Castillo v. Pacheco  150 Cal.App.4th 242, 249–250 (2007), quoting Sen. Com. on Judiciary, Analysis of Sen. Bill No. 1296 (1997–1998 Reg. Sess.) as amended May 12, 1997, pp. 1–2.).  SLAPP suits are subject to special motions to strike pursuant to Section 425.16 of the California Code of Civil Procedure.

The stereotypical example of a SLAPP suit is a large corporation suing an individual in an effort to stifle protest against a corporate project.  One, therefore, might not expect corporations to benefit from anti-SLAPP motion.  However, the California Court of Appeal yesterday found that a corporation’s lawsuit against a minority shareholder for conversion, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty constituted protected activity under California’s SLAPP statute.  Sheley v. Harrop, 2017 Cal. App. LEXIS 252 (2017).  However, this was not a case of pure protected activity as the Court found that each of the corporation’s causes of action contains allegations of both protected and unprotected activity, and that the protected activity is not merely incidental to the causes of action.

 

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