Motion to Strike Under Anti-SLAPP Statute Erroneously Granted in Connection With Conversion, Unjust Enrichment and Breach of Fiduciary Duty Claims

A motion to strike under California’s anti-SLAPP statute was filed in response to a lawsuit initiated by beneficiaries against a trustee and executor of an estate.  The United States Court of Appeals for the Ninth Circuit upheld the trial court’s dismissal of the beneficiaries’ claims that were directly related to the probate filings and proceedings but reversed the dismissal of their claims of conversion, unjust enrichment, and breach of fiduciary duty.  (Graham-Sult v. Clainos (--- F.3d ----, C.A.9 (Cal.), December 27, 2013).

Bill Graham (“Graham”) died testate in 1991 and left two trusts for his sons, Alexander Graham-Sult and David Graham.  Nicholas Clainos (“Clainos”) was the trustee of the trusts and the executor of the estate and Richard Greene (“Greene”) provided legal counsel to Clainos.  At the time of Graham’s death, he owned all shares of Bill Graham Enterprises, Inc. (“BGE”).  BGE was sold by the estate.  After the probate court entered its final order, Greene prepared and Clainos executed an “Assignment,” which transferred to BGE “any and all right, title and interest of [Graham] in any and all copyrights, tradenames, trademarks and servicemarks claimed by or registered in the name of [Graham].”  However the Assignment was backdated to August 1, 1995, which was seven days before the probate court entered the final order of distribution. 

Graham’s sons found the Assignment in 2008 and discovered that Graham had registered in his own name over 300 poster copyrights and the trademark “The Fillmore.”  Graham’s sons filed a lawsuit against Clainos, Greene, and other associated individuals and entities.  The defendants filed a special motion to strike pursuant to California’s anti-SLAPP statute.  Pursuant to the anti-SLAPP statute, a defendant can “file a ‘special motion to strike’ any ‘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 under the United States Constitution . . . in connection with a public issue.’”  An act in furtherance of the person’s right to petition includes any written or oral statement, or writing that is “made in connection with an issue under consideration or review by a . . . judicial body.”   The trial court concluded that all of the sons’ claims arose from protected activity because the basis for all of their claims involved Clainos performing his duties as the executor of Graham’s estate.  The court granted the defendants’ motion to strike and dismissed the sons’ claims.

The court of appeals disagreed with the trial court’s characterization of the sons’ complaint and concluded that their causes of action arose from different types of conduct.  The sons alleged Clainos breached his fiduciary duty when he made misleading statements and concealed information from them, engaged in self-dealing, and negligently characterized, valued and distributed Graham’s assets.  They alleged Greene aided and abetted Clainos.

Clainos’s activities are protected to the extent they involved making representations to the probate court and in preparing documents to be filed in probate court.  Also protected are statements made to the sons, who had an interest in the probate proceedings.  The sons’ claim of breach of fiduciary duty arose from protected activity.  Their claim against Greene for aiding and abetting Clainos’s breach of fiduciary duty also arose from protected activity.

The claim against Clainos for breach of trust arose from protected activity because all of the alleged bad acts involved probate court filings or activities that required probate court approval.  The claims alleging intentional and negligent misrepresentations in connection with the estate also arose from protected activity.  Their claims for fraud and concealment were based on the defendants’ failure to disclose information about the estate’s assets while the court was considering how the assets should be distributed.   The sons’ claim for promissory estoppel was based on Clainos’s promise that certain assets would be given to the sons.  The claim, therefore, involved statements to parties with an interest in the litigation.  These claims also arose from protected activity.

The sons alleged that Clainos converted items of property when he took possession of the property and then concealed the existence of the property.  Taking possession of property is not a protected activity.   The sons also alleged Clainos converted personal property by preparing and executing the Assignment.  Clainos executed the Assignment after the final order of distribution and therefore he did not execute the Assignment in connection with an issue that was under consideration by a judicial body.  Clainos’s activity related to the execution of the Assignment is not protected activity.  Also, the sons’ claim that Clainos misappropriated and converted estate assets does not involve a protected activity.

The court of appeals held that the trial court erred is dismissing the sons’ claims for conversion, unjust enrichment and breach of fiduciary duty.  Although the claim for breach of fiduciary duty against Clainos arose from protected activity, the court held that striking this claim was erroneous.  There is nothing in the record to suggest that the sons would not be successful on the merits of their claims that Clainos was involved in self-dealing, he failed to exercise due care in handling the assets of the estate, and that he secretly transferred intellectual property to an entity that a defendant purchased.