Directors’ Alleged Breach Of Fiduciary Duty Not Subject To Anti-SLAPP Statute

A SLAPP is a strategic lawsuit against public participation.  California enacted Code of Civil Procedure Section 425.16 as an antidote to SLAPP suits.  In general, a SLAPP is subject to a special motion to strike unless the court finds that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.  Since the statute’s enactment more than two decades ago, defendants have used it to bring an early end to a wide variety of litigation, including corporate litigation.  For example, two years ago I wrote an unsuccessful attempt by directors to use Section 425.16 to end a lawsuit against them brought by a director whom they had voted to remove.

Earlier this week, a California Court of Appeal similarly refused to strike a lawsuit filed against three directors of the board of directors of a homeowners association. Talega Maintenance Corp. v. Standard Pacific Corp., 2014 Cal. App. LEXIS 337 (Cal. Ct. App. 2014).  In an opinion penned by Justice Raymond J. Ikola, the Court of Appeal found that the plaintiff’s breach of fiduciary duty, constructive fraud, and negligence claims were principally based on the defendant directors’ withholding information and improperly directing the expenditure of funds.  The Court found that these did not fall under the penumbra of the Anti-SLAPP statute because they were not written or oral statements.  While recognizing that voting could in some circumstances constitute protected activity, the Court found that the vote was “merely incidental”.

Note that I eschew the term “SLAPP suit”, although it is a term used by the California courts.  See, e.g., Rusheen v. Cohen, 37 Cal.4th 1048 (2006).  I do so because I consider it to be a redundancy.  Because SLAPP is an initialization of strategic lawsuit against public participation, saying “SLAPP suit” is essentially the same as saying “strategic lawsuit against public participation suit”.


Topics:  Anti-SLAPP, Board of Directors, Directors, Fiduciary Duty, Standard Pacific

Published In: Business Torts Updates, Civil Procedure Updates, General Business Updates, Constitutional Law Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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