Khuc v. Peninsular Investments, Inc.

          ORDER DENYING DEFENDANTS' MOTION TO STRIKE PLAINTIFFS' SECOND AMENDED COMPLAINT [Re: ECF 53]

          BETH LABSON FREEMAN UNITED STATES DISTRICT JUDGE

         Plaintiffs Thuan Khuc and Dr Burrito, Inc. (collectively, “Plaintiffs”) bring this action arising out of a landlord-tenant dispute against Defendants Peninsular Investments, Inc., Lotus Hospitality, Inc., Ganendra Singh, and Sarmistha Patnaik (collectively, “Defendants”). Plaintiffs allege Defendants violated the Racketeer Influenced and Corrupt Organizations Act by “commit[ing] multiple related acts of coercing excessive rent payments and improperly subjecting Plaintiffs to the threat of eviction.” See, e.g. Second Amended Complaint (“SAC”) ¶ 88, ECF 52. Plaintiff Dr. Burrito also alleges the following violations of state law: breach of contract, breach of the covenant of good faith and fair dealing, and violation of the California Unfair Competition Law (“UCL”). SAC ¶¶ 96-112.

         Previously, Defendants filed a motion to dismiss and a motion to strike Plaintiffs’ FAC. ECF 23, 29. On March 25, 2016, the Court granted Defendants’ motion to dismiss with leave to amend and deferred ruling on the motion to strike to allow Plaintiffs the opportunity to amend their complaint. Order, ECF 23; see also Verizon Delaware, Inc. v. Covad Commc’n Co., 377 F.3d 1081, 1091 (9th Cir. 2004) (holding Fed.R.Civ.P. 15 requires allowing plaintiffs liberal leave to amend before granting an anti-SLAPP motion). Plaintiffs filed a SAC, and Defendants filed another motion to strike the SAC pursuant to California’s anti-SLAPP statute (Cal. Civ. P. § 425.16). Mot., ECF 53. For the reasons discussed below, the Court DENIES Defendants’ motion.

         I. BACKGROUND

         The following facts are pertinent to the pending motion.^[1] Plaintiff Khuc owns and operates iBagels Bakery & Café located at 266 E. Java Drive, Suite 2, Sunnyvale, CA. SAC ¶ 4, ECF 52. Plaintiff Khuc is also the President of Dr Burrito, Inc., which owns and operates a fast-food restaurant at 266 E. Java Drive, Suite 1, Sunnyvale, CA. SAC ¶ 5. Plaintiffs leased the premises for iBagels in 2007 and Dr Burrito in 2011. SAC ¶¶ 4, 5. Both leases were amended by subsequent addenda. Id.

         In 2014, Defendant Peninsular Investments, Inc. (“Peninsular”) and Lotus Hospitality, Inc. (“Lotus”) acquired ownership of the shopping center in which iBagels and Dr Burrito are located. Defendant Ganendra Singh is the President of Peninsular and Lotus, SAC ¶ 9, and Defendant Sarmistha Patnaik is Mr. Singh’s executive assistant, SAC ¶ 10. Plaintiff Dr Burrito claims its lease and addendum capped its rent at $2, 500 from May 15, 2013 to May 14, 2016. SAC ¶ 12. Pursuant to this lease, Dr Burrito paid a monthly rent of $2, 500 to its former landlord Mike Aktar during the relevant period. SAC ¶ 13. After Defendants acquired Moffett Plaza, Dr Burrito claims Defendants raised the monthly rent to $3, 400 in violation of the lease. SAC ¶ 15. Dr Burrito alleges that this conduct constitutes a breach to its lease and addendum, breach of the convent of good faith and fair dealing, and a violation of the UCL.

         II. LEGAL STANDARD

         “California law provides for the pre-trial dismissal of certain actions, known as Strategic Lawsuits Against Public Participation, or SLAPPs, that masquerade as ordinary lawsuits but are intended to deter ordinary people from exercising their political or legal rights or to punish them for doing so.” Makaeff v. Trump University, LLC, 715 F.3d 254, 261 (9th Cir. 2013) (internal quotation marks and citations omitted). Section 425.16 of the California Code of Civil Procedure, also referred to as the anti-SLAPP statute, provides in relevant part that:

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 under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.

Cal. Civ. P. Code § 425.16(b)(1).

         Resolution of an anti-SLAPP motion is a two-step process. Jarrow Formulas, Inc. v. LaMarche, 31 Cal.4th 728, 733 (2003). “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity.” Id. (quoting Equilon Enterprises v. Consumer Cause, Inc., 29 Cal.4th 53, 67 (2002). Second, “[i]f the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” Id. Under the second step, “the claim should be dismissed if the plaintiff presents an insufficient legal basis for it, or if, on the basis of the facts shown by the plaintiff, no reasonable jury could find for the plaintiff.” Makaeff, 715 F.3d at 261 (internal quotation marks and citation omitted).

         III. DISCUSSION

         A. Plaintiffs’ State Law Claims Do Not Arise From Protected Activity

         Defendants argue that the gravamen of Plaintiffs’ SAC is Defendants’ “contemplated unlawful detainer action.” Mot. 8, ECF 53. By suing Defendants for an allegedly threatened eviction action, service of notices to cure and pay rent or quit, and related privileged ...