Long Beach Unified School Dist. v. Margaret Williams, LLC ( 2019 )

Filed 12/31/19 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
LONG BEACH UNIFIED B290069
SCHOOL DISTRICT, (Los Angeles County
Super. Ct. No. NC060708)
Cross-complainant and
Appellant, ORDER MODIFYING
OPINION, DENYING
v. PETITION FOR
REHEARING
MARGARET WILLIAMS, LLC,
[NO CHANGE IN
Cross-defendant and JUDGMENT]
Respondent.
THE COURT*
It is ordered that the opinion filed December 9, 2019, be modified
as follows:
On page 20, line 18, the following footnote 7 [requiring
renumbering of all subsequent footnotes] is added after the period
following the word “protected”:
7 “Neither C.W. Howe Partners Inc. v. Mooradian (Dec. 19,
2019, B290665) ___Cal.App.5th___ [2019 Cal.App. LEXIS
1277] (C.W. Howe) nor Wong v. Wong (Dec. 13, 2019,
A154286) ___Cal.App.5th___ [2019 Cal.App. LEXIS 1252]
(Wong), each of which was published after the initial
publication of this opinion, calls for a different conclusion.
The C.W. Howe court, disagreeing with our analysis of the
first ground for our first-step holding, rejected indemnitors’
contention that cross-claims seeking defense and indemnity
in the indemnitors’ litigation arose from that underlying
litigation. (See C.W. Howe, supra, at pp. *17-*24.) But the
court proceeded to expressly distinguish its opinion from
ours on the second ground for our first-step holding, viz., our
conclusion that Williams LLC’s refusal to defend and
indemnify the District -- from which the District’s cross-
claims concededly arose -- was protected conduct in
furtherance of petitioning activity in connection with an
issue of public interest. (See id. at pp. *24, *25 [noting
indemnitors did not and could not “assert that their refusal
to honor the [indemnitees’] indemnity demand similarly
implicate[d] an issue of public interest”].)
Wong is distinguishable for the same reason. The
indemnitor there could not claim an issue of public interest
was at stake in the underlying litigation, in which a
corporation that owns and operates a shopping mall sought
recovery of allegedly misappropriated loan proceeds from the
estate of a former shareholder. (See Wong, supra, [2019
2
Cal.App. LEXIS 1252], at pp. *2-*5.) In any event, the Wong
court did not address whether the indemnitor’s refusal to
indemnify the indemnitee was protected conduct in
furtherance of petitioning activity in connection with an
issue of public interest. (See id. at pp. *7-*15.) Thus, Wong
is not authority on that issue. (See California Building
Industry Assn. v. State Water Resources Control Bd. (2018) 4
Cal.5th 1032, 1043 [“It is axiomatic that cases are not
authority for propositions that are not considered”].)”
The petition for rehearing is denied. The modification does not
change the judgment.
_________________________________________________________
*MANELLA, P. J. COLLINS, J. CURREY, J.
3
Filed 12/9/19 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
LONG BEACH UNIFIED SCHOOL B290069
DISTRICT, (Los Angeles County
Super. Ct. No. NC060708)
Cross-complainant and
Appellant,
v.
MARGARET WILLIAMS, LLC,
Cross-defendant and
Respondent.
APPEAL from orders of the Superior Court of Los
Angeles County, Dudley W. Gray, II, Judge. Affirmed.
Christen Hsu Sipes, Scott J. Sterling and Joshua D.
Watts; Bassi, Edlin, Huie & Blum, Fred M. Blum, Michael E.
Gallagher, Tiffany Wells-Fox, Lisa Stevenson, J. Kyle Gaines
and Barry D. Bryan for Cross-complainant and Appellant.
Schonbrun, Seplow, Harris & Hoffman and Wilmer J.
Harris for Cross-defendant and Respondent.
_____________________________________
INTRODUCTION
Long Beach Unified School District (the District)
appeals from the dismissal of its cross-complaint under Code
of Civil Procedure section 425.16, commonly known as the
anti-SLAPP statute. (See Wilson v. Cable News Network,
Inc. (2019) 7 Cal.5th 871, 880 (Wilson).) In 2006, the District
entered into a contract with respondent Margaret Williams,
LLC (Williams LLC), which had been formed by Margaret
Williams that year for the purpose of working for the
District. According to Williams, the District required her to
form a business entity to enter the contract, which was a
standardized form agreement with terms she could not
negotiate. For nearly a decade, Williams worked full-time
for the District, through her LLC, on construction
management and environmental compliance, including work
under the District’s agreement with a state agency to clean
up material at a school construction site contaminated with
arsenic. After a dispute arose between Williams and the
District about alleged violations of the cleanup agreement,
Williams was diagnosed with arsenic poisoning, and the
2
District terminated Williams LLC’s then-current contract,
1
which included an indemnity provision.
Williams and her LLC filed a lawsuit against the
District (the Underlying Action). Each plaintiff brought
claims alleging the termination was retaliatory, and
Williams brought claims alleging the District unlawfully
caused her arsenic poisoning. The District invoked the
indemnity provision to demand that Williams LLC defend
and indemnify the District in the Underlying Action. After
Williams LLC refused to defend the District against the
LLC’s own and Williams’s claims, the District filed a cross-
complaint alleging, inter alia, that this refusal breached the
contract. Williams LLC filed an anti-SLAPP motion to
strike the cross-complaint, arguing, inter alia, that the
District could not prevail on its cross-claims because the
indemnity provision is unconscionable. The trial court
granted the motion and struck the District’s cross-complaint.
1
In an indemnity contract, “one engages to save another
from a legal consequence of the conduct of one of the parties, or of
some other person.” (Civ. Code, § 2772; see also Rossmoor
Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal. 3d 622, 628
[“Indemnity may be defined as the obligation resting on one party
to make good a loss or damage another party has incurred”].)
Unless an indemnity contract provides otherwise, “[t]he person
indemnifying is bound, on request of the person indemnified, to
defend actions or proceedings brought against the latter in
respect to the matters embraced by the indemnity . . . .” (Civ.
Code, § 2778, subd. (4).)
3
On appeal, the District contends the trial court erred in
striking its cross-complaint under the anti-SLAPP statute.
In the alternative, it contends the trial court erred in
denying the District leave to include nine additional pages in
its brief opposing the anti-SLAPP motion.
Finding no error, we affirm. If enforced as the District
requested, the indemnity provision would require Williams
LLC to fund the District’s defense against the very litigation
the LLC and Williams brought against the District. The
District’s cross-complaint therefore arose from that litigation
or the LLC’s refusal to sabotage it -- each of which is
protected by the anti-SLAPP statute. Moreover, the District
sought to require the LLC not only to fund the District’s
defense, but also to reimburse the District for any award
secured by Williams or the LLC falling within the provision’s
broad scope. Such a bar to meaningful recovery embodies a
high degree of substantive unconscionability, sufficient --
when combined with the procedural unconscionability shown
through Williams LLC’s unrebutted evidence of adhesion,
oppression, and surprise -- to establish that the indemnity
provision is unconscionable. We limit the provision to avoid
an unconscionable result, rendering it inapplicable to claims
brought by Williams LLC and claims brought by Williams.
As a result of this limitation, the District fails to show error
in the dismissal of the District’s breach of contract and
declaratory relief claims. The District further fails to show
error in the dismissal of its other cross-claims, or in the
4
denial of its application for leave to file an oversized
opposition brief.
PROCEEDINGS BELOW
A. Williams LLC’s History with the District
Williams formed Williams LLC in 2006. The same
year, Williams LLC entered into a contract to work for the
District, as a consultant, on construction management and
environmental compliance. In a declaration submitted by
her LLC in support of its anti-SLAPP motion, Williams
stated that she formed her LLC as a requirement for
working for the District: “In order to work with the District,
I was directed by the Executive Facilities Planning Manager
to form a corporation or partnership. This was the only way
I could work for the District: I could not enter into a
contract with the District as an individual.” Further, the
District presented the contract “on a ‘you either sign or you
don’t work’ basis,” and Williams was “unable to negotiate the
terms.” The terms were standardized; the contract was “a
standard form contract given to all contractors before they
were allowed to perform any work for the District.” The
District has not submitted evidence that the terms of the
contract were negotiable. Nor has it submitted evidence that
Williams LLC was formed for any purpose other than to
meet the District’s requirements for Williams to work for it.
Williams worked full-time for the District, through her
LLC, for nearly a decade, during which she signed a new
contract between her LLC and the District in 2013.
5
Williams’s duties included overseeing environmental
compliance at a construction site for a school, the Newcomb
Academy (Academy). According to her declaration, Pinner
Construction (Pinner) -- the District’s general contractor at
the Academy site -- illegally brought contaminated material
onto the site in October 2013. Williams directed Linik
Corporation (Linik) -- the District’s construction supervisor
at the site -- to remove the contaminated material, but Linik
ignored her. Through the following year, Williams
attempted to resolve the problem by discussing it with two
District administrators, one of whom directed Williams to
oversee the site’s cleanup. In January 2015, the District and
the California Department of Toxic Substances Control
(DTSC) entered into a cleanup agreement requiring the
District to remove potentially hazardous material at the site.
The District designated Williams as its project manager for
the cleanup agreement.
Later that year, the District gave control over the
Academy site project (and all other projects affiliated with
Linik) to District employee Les Leahy and consultant Jerry
Vincent. According to Williams, Leahy and Vincent
deliberately interfered with her efforts to prevent continued
mishandling of the contaminated material. As a result,
while she was at the site between June 1 and 4, 2015, she
came into contact with arsenic.
In a declaration of his own, Leahy characterized the
dispute between Williams and Pinner as a “clash of
personalities” that impaired communication. On June 3,
6
2015, concerned with the “aggressive manner” in which
Williams communicated her concerns, he told Williams to
direct all communications to Pinner through himself or
Vincent.
The next day (June 4), Williams cancelled a meeting
with Vincent and announced that she would no longer work
on projects associated with Pinner or Linik. She also sent a
letter to District administrators, alleging that Leahy had
“completely neutralized” her on the Newcomb Academy
project, that her access to her District email account and a
facilities server had been disabled, and that Leahy had
refused to explain these events. She interpreted these
actions as constructive termination, explaining, “[M]y ability
to do my job has been completely eliminated by these
actions, and the ability to run my business impacted. I
cannot even contact my own company staff without getting
on the server and accessing my emails. I have worked in the
District for almost 10 years and everything is on that
computer, as it would be if I were a staff member in the
District, including important records for my company.”
Further alleging that the District had rebuffed her repeated
attempts to discuss these matters, she stated that she would
not allow Williams LLC employees to return to work until
the District clarified its recent actions. She and Williams
LLC’s employees did not return to work.
Three days later (June 7), Williams sent a report to
DTSC, asking for help in ensuring the District’s compliance
with the cleanup agreement and preventing danger at the
7
Academy site. Two days later (June 9), the District sent
Williams LLC a letter terminating its contract based on its
employees’ failure to return to work. Soon thereafter
(around June 12), Williams was rushed to a hospital due to
sudden illness and diagnosed with arsenic poisoning, which
she claims has caused her permanent neurological damage
and chronic pain.
According to Williams, she had worked full-time on
District projects in the near-decade between her formation of
her LLC and the District’s termination of its contract. As of
December 2017, when she executed her declaration, her LLC
had been a party to only one other contract -- a contract with
another school district for an “immaterial” profit. Her LLC
did not plan to form any other contracts. In his declaration,
Leahy alleged -- on information and belief -- that Williams
“and/or” her LLC had worked for two other school districts
before working for the District. The District submitted no
other evidence of Williams or her LLC working for anyone
but the District.
B. The Underlying Action and Tenders of Defense
2
Williams and her LLC brought the Underlying Action.
In their operative complaint, Williams and her LLC jointly
asserted a cause of action for retaliation under Government
2
Williams and her LLC also filed a related case against
Pinner, Linik, and a subcontractor, which has been consolidated
with the case against the District.
8
Code section 12653, alleging the District terminated
Williams LLC’s contract in retaliation for the efforts by
Williams and her LLC to stop Pinner and Linik from
violating environmental requirements. Williams LLC
separately brought causes of action for breach of contract
and breach of the covenant of good faith and fair dealing --
both similarly premised on the District’s termination of the
contract. Williams separately brought causes of action for
negligence (premises liability), negligent infliction of
emotional distress, and intentional infliction of emotional
distress -- all premised on the District’s wrongfully causing
Williams’s arsenic poisoning.
Williams LLC’s 2013 contract with the District
included an indemnity provision reading, in relevant part, as
follows:
“1. To the fullest extent permitted by law,
[Williams LLC] agrees to indemnify, and hold
DISTRICT entirely harmless from all liability
arising out of:
“[¶] . . . [¶]
“b. General Liability: Liability for
damages for (1) death or bodily injury to a person;
(2) injury to, loss or theft of property; (3) any
failure or alleged failure to comply with any
provision of law or (4) any other loss, damage or
expense arising under either (1), (2), or (3) above,
sustained by [Williams LLC] or the DISTRICT, or
any person, firm or corporation employed by
9
[Williams LLC] or the DISTRICT upon or in
connection with the PROJECT, except for liability
resulting from the sole or active negligence, or
willful misconduct of the DISTRICT, its officers,
employees, agents or independent consultants
3
who are directly employed by the DISTRICT;[ ]
“[¶] . . . [¶]
“d. [Williams LLC], at its own
expense, cost, and risk, shall defend any and all
claims, actions, suits, or other proceedings,
arising out of Article VIII, Paragraphs 1 (a) and
(b) above, that may be brought or instituted
against the DISTRICT, its officers, agents or
employees, on any such claim or liability, and
shall pay or satisfy any judgment that may be
rendered against the DISTRICT, its officers,
agents or employees in any action, suit or other
proceedings as a result thereof.”
The contract separately provided, “If either PARTY
[viz., the District or Williams LLC] becomes involved in
litigation arising out of this AGREEMENT or the
performance thereof, each PARTY shall bear its own
3
The contract defined the “PROJECT” as “project
management and planning consulting services for the Facilities
Development and Planning Branch . . . .”
10
litigation costs and expenses, including reasonable attorney’s
fees.”
The District sent Williams LLC a letter quoting the
indemnity provision and demanding that it “uphold its
obligations to defend and indemnify the District with regard
to all . . . liability of any kind arising out of Plaintiffs’ lawsuit
. . . .” In a similar letter sent after Williams and her LLC
amended their complaint, the District again demanded that
Williams LLC “uphold its obligations to defend (and
ultimately indemnify) the District with regard to all . . .
liability of any kind arising out of Plaintiffs’ lawsuit . . . .”
Williams LLC did not respond to these tenders of defense.
Its counsel informed the District’s counsel, during
proceedings in the Underlying Action, that Williams LLC
would not be defending the District.
C. The Cross-Complaint and Anti-SLAPP Motion
The District filed a cross-complaint against Williams
LLC. It asserted causes of action for: (1) breach of contract,
alleging Williams LLC breached the 2013 contract by failing
to accept the District’s tenders of defense and indemnity; (2)
declaratory relief, seeking declarations that Williams LLC
was required, under the contract or otherwise, to defend the
District against the claims in the Underlying Action and to
indemnify the District for any liability resulting “from any
and all claims, damages, and losses at issue in [the] Action”;
(3) equitable indemnity, seeking to hold Williams LLC liable
for the District’s costs of defense and any liability imposed
11
on the District “as a result of any recovery by any party” in
the action; and (4) “apportionment of fault,” seeking to limit
the District’s liability, if any, on the ground that Williams
LLC itself had been negligent.
Williams LLC filed an anti-SLAPP motion, asking the
trial court to strike the District’s cross-complaint in its
entirety. It argued that the District’s claims arose from
protected activity, viz., the Underlying Action. It further
argued that requiring Williams LLC to fund the District’s
defense would impair its ability to pursue its claims, and
that the District’s requested relief would have the effect of
“stifling [Williams LLC’s] right to petition by pricing it out of
the litigation market . . . .” Finally, it argued that the
District had not shown a reasonable probability of prevailing
on its cross-claims because: (1) the claims in the Underlying
Action fell within the indemnity provision’s exception for
liability resulting from sole or active negligence or willful
misconduct; (2) the indemnity provision would be
unconscionable if applied in the manner the District sought;
and (3) if applied in that manner, the provision would be an
invalid exculpatory clause affecting the public interest.
The District opposed the motion (after the court denied
the District’s application for leave to include an additional
nine pages in its opposition brief). It argued that its cross-
claims did not arise from the Underlying Action, but instead
from Williams LLC’s refusal to defend and indemnify the
District. It further argued that the anti-SLAPP statute did
not protect this refusal. Finally, it argued that it had shown
12
a probability of prevailing on its cross-claims because: (1)
the indemnity provision potentially covered any liability that
might be imposed on the claims in the Underlying Action;
and (2) the indemnity provision was enforceable.
At the hearing on the motion, the court announced its
understanding that the District’s cross-complaint sought
indemnity for all potential liability in the Underlying Action,
stating, “[I]f I read it correctly it essentially says regardless
of how plaintiff prevails or fails to prevail on the main
complaint, that no monies will be paid because she has
agreed to indemnify everyone in this case.” The District’s
counsel characterized the cross-complaint differently (in a
manner contrary to its language), asserting that the cross-
claims sought defense and indemnity only with respect to
Williams’s claims against the District, not her LLC’s: “This
case is no different than any construction contractor dispute
. . . where the owner . . . contracts with a contractor . . . to
indemnify it against claims that are brought by [the
contractor’s] employees, in this case Margaret Williams. . . .
What’s important is that the District . . . [is] seeking
indemnity and it’s seeking a defense only with regard to the
claims brought by the employee of the contractor that the
4
District contracted with.” He argued the District’s cross-
4
The District’s counsel repeated this mischaracterization of
the cross-complaint twice more, asserting, “[O]ur cross-complaint
seeks indemnity for Ms. Williams’ personal injury claims and her
(Fn. is continued on the next page.)
13
claims arose from Williams LLC’s “refusal to accept the
tender of defense and indemnity,” which was not protected
because “that is a contractual dispute that’s not in support of
their petition or [speech] rights.” He further argued the
District had demonstrated a probability of prevailing by
showing that the indemnity provision potentially covered
Williams’s claims. The court granted the motion,
announcing (without elaboration) its findings that the cross-
complaint arose from protected activity and that the District
had failed to demonstrate a probability of prevailing.
The District timely appealed from the order granting
the anti-SLAPP motion. It also appealed from the order
denying its application to include nine additional pages in its
opposition brief.
DISCUSSION
The District contends the trial court erred by striking
the District’s cross-complaint under the anti-SLAPP statute.
We review de novo a trial court’s decision on an anti-SLAPP
motion. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th
781, 788.) Our Supreme Court has summarized the two-step
analysis required by the anti-SLAPP statute as follows: “At
the first step, the moving defendant bears the burden of
identifying all allegations of protected activity, and the
claims for relief supported by them. . . . If the court
retaliation claim. It doesn’t have anything to do with [Williams
LLC’s] breach of contract claim.”
14
determines that relief is sought based on allegations arising
from activity protected by the statute, the second step is
reached. There, the burden shifts to the plaintiff to
demonstrate that each challenged claim based on protected
activity is legally sufficient and factually substantiated. . . .
If [the plaintiff fails to satisfy this burden], the claim is
stricken.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 396
(Baral).)
A. The District’s Cross-Claims Arose from Protected
Activity
“At the first step of the [anti-SLAPP] analysis, the
defendant must make two related showings. Comparing its
statements and conduct against the statute, it must
demonstrate activity qualifying for protection. [Citation.]
And comparing that protected activity against the complaint,
it must also demonstrate that the activity supplies one or
more elements of a plaintiff’s claims.” (Wilson, supra,
7 Cal.5th at p. 887.) Protected activity includes the filing
and prosecution of lawsuits. (Takhar v. People ex rel.
Feather River Air Quality Management Dist. (2018)
27 Cal.App.5th 15, 27-28 (Takhar).) It further includes
“conduct in furtherance of the exercise of the constitutional
right of petition or the constitutional right of free speech in
connection with a public issue or an issue of public interest.”
(Code Civ. Proc., § 425.16, subd. (e)(4).)
We agree with Williams LLC that the District’s cross-
claims arose from the Underlying Action, which is protected
15
activity. We find Lennar Homes of California, Inc. v.
Stephens (2014) 232 Cal. App. 4th 673 (Lennar Homes)
persuasive. There, three homebuyers (including a husband
and wife) bought homes from a developer, executing
purchase agreements that required the homebuyers to
indemnify and defend the developer from any costs and
liabilities arising out of the homebuyers’ own claims for
violation of disclosure requirements. (Id. at pp. 677-678.)
Two of the homebuyers (but not the wife) brought
nondisclosure claims against the developer in a federal class
action, which was dismissed without any finding of liability.
(Id. at p. 678.) The developer then brought a contractual
indemnity suit against all three homebuyers, seeking to
recover its defense costs incurred in the federal action.
(Ibid.) The homebuyers filed an anti-SLAPP motion, which
the trial court granted. (Id. at p. 679.) The Court of Appeal
affirmed, holding that the developer’s indemnity claim arose
from protected activity, viz., the federal action in which it
incurred the costs to be indemnified and without which the
5
indemnity claim would have no basis. (Id. at pp. 680-685.)
5
The District mischaracterizes Lennar Homes, asserting the
court did not address whether the developer’s indemnity claim
arose from protected activity. Although the developer did not
challenge the first-prong showing made by two of the
homebuyers, it did challenge the showing made by the third (the
wife, who was not a plaintiff in the federal action). (Lennar
Homes, supra, 232 Cal.App.4th at p. 680.) Thus, the court’s
conclusion that “all three defendants adequately showed that [the
(Fn. is continued on the next page.)
16
Here, the District’s cross-claims for defense and indemnity
likewise would have no basis without the Underlying Action
in which it seeks to be defended and indemnified. (See
Takhar, supra, 27 Cal.App.5th at pp. 30-32 [declaratory
relief claim, which alleged government was wasting
resources in civil enforcement action and “other conduct
incidental to the filing of that action,” arose from that action,
6
without which there would have been no controversy].)
developer’s] claim against them [arose] from protected activity”
was essential to its resolution of the dispute. (Id. at p. 685.)
6
We find Lennar Homes and Takhar more persuasive on this
point than the cases on which the District relies. In State Farm
General Ins. Co. v. Majorino (2002) 99 Cal. App. 4th 974, an
insurer brought a declaratory relief action against the parties in
an underlying lawsuit, seeking a declaration that the insurer had
no duty to defend and indemnify the underlying defendants (its
insureds). (Id. at p. 976.) The underlying plaintiffs filed an anti-
SLAPP motion in the insurer’s action, which the trial court
denied. (Ibid. at p. 976.) The Court of Appeal affirmed, holding
that the declaratory relief action did not arise from the
underlying action, but instead from “the tender of defense and
the terms of an insurance policy . . . .” (Id. at p. 977.) The court
observed that the anti-SLAPP statute did not apply “merely
because the declaratory relief action followed the filing of [the
underlying] personal injury case.” (Majorino, supra, at p. 977.)
But the underlying action did more than precede the declaratory
relief action -- as the court acknowledged, it also “frame[d] the
scope of coverage under the [insurance] policy.” (Ibid.) The scope
of that coverage was the subject of the controversy the
declaratory relief action sought to resolve. (Id. at p. 976.) The
court did not address what supplied the controversy.
(Fn. is continued on the next page.)
17
Even had we found that the District’s cross-claims did
not arise from the Underlying Action, we would find they
arose from protected activity. The District’s own position is
that its cross-claims arose from Williams LLC’s refusal to
defend and indemnify the District in the Underlying Action.
This refusal was protected conduct in furtherance of
petitioning in connection with an issue of public interest.
(See Code Civ. Proc., § 425.16, subd. (e)(4).) A refusal to
fund the defense of one’s own litigation -- and the defense of
a co-plaintiff’s claims arising from the same facts -- is
conduct in furtherance of the litigation. (See Takhar, supra,
27 Cal.App.5th at p. 28 [litigation funding decisions are
protected petitioning activity]; cf. Blue v. Office of Inspector
General (2018) 23 Cal.App.5th 138, 152-153 [state agency’s
refusals of interviewees’ requests for representation were
protected decisions about manner of conducting
investigation].) Further, the Underlying Action is connected
with an issue of public interest. Its allegations concern an
environmental hazard at a construction site for a public
We find City of Alhambra v. D’Ausilio (2011) 193
Cal. App. 4th 1301 inapposite. There, as another panel of the
same court noted in a later case, the controversy underlying the
declaratory relief action “did not involve the filing of a lawsuit
that resulted in the [asserted] breach . . . .” (Mundy v. Lenc
(2012) 203 Cal. App. 4th 1401, 1409, citing City of Alhambra v.
D’Ausilio, supra, at pp. 1307-1308.) Here, the controversy
involves just that; the filing of the Underlying Action resulted in
Williams LLC’s asserted duty, and breach thereof, to defend and
indemnify the District in that action.
18
school, violations of the state’s requirements for remedying
that hazard, and a public school district’s punishment of
resistance to those violations. (See Hecimovich v. Encinal
School Parent Teacher Organization (2012) 203 Cal. App. 4th
450, 465-468 (Hecimovich) [safety of children in after-school
sports and suitability of volunteer coach were issues of
public interest]; Ludwig v. Superior Court (1995)
37 Cal. App. 4th 8, 15 [development of a mall, “with potential
environmental effects such as increased traffic and
impaction on natural drainage, was clearly a matter of
public interest”]; cf. BRV, Inc. v. Superior Court (2006)
143 Cal. App. 4th 742, 757-760 [granting writ petition under
Public Records Act to require school district’s board of
education to release report analyzing allegations of
superintendent’s misconduct; superintendent’s privacy
interest, though significant, was “far outweighed” by public
interest in evaluating board’s response to alleged
misconduct].)
None of the cases on which the District relies persuade
us that Williams LLC’s refusal to defend and indemnify the
District was unprotected. The District cites Ericsson GE
Mobile Communications, Inc. v. C.S.I. Telecommunications
Engineers (1996) 49 Cal. App. 4th 1591, 1601-1602, for the
proposition that “acts relating to the formation or
performance of contractual obligations are not in furtherance
of the right of free speech.” But our Supreme Court,
clarifying that “conduct alleged to constitute breach of
contract may also come within constitutionally protected
19
speech or petitioning,” has disapproved Ericsson to the
extent it suggested otherwise. (Navellier v. Sletten (2002)
29 Cal. 4th 82, 92.) The other cases on which the District
relies are distinguishable, as neither concerned a refusal to
engage in conduct that would impair one’s pursuit of one’s
own litigation. (See Area 51 Productions, Inc. v. City of
Alameda (2018) 20 Cal.App.5th 581, 596 [anti-SLAPP
statute did not protect city’s reneging on commitment to
license property for private events]; Kajima Engineering and
Construction, Inc. v. City of Los Angeles (2002)
95 Cal. App. 4th 921, 930 [anti-SLAPP statute did not protect
acts seeking to secure and work on construction contract].)
In sum, the District’s cross-claims arose from protected
activity, viz., the filing of the Underlying Action. Even had
we found they arose from Williams LLC’s refusal to defend
and indemnify the District in the Underlying Action, as the
District contends, we would conclude the cross-claims arose
from protected activity because that refusal was protected.
B. The District Failed to Meet Its Burden to Show a
Probability of Prevailing on Its Cross-Claims
At the second anti-SLAPP step, the plaintiff bears the
burden of demonstrating a probability of prevailing on each
claim arising from protected activity. (Baral, supra,
1 Cal.5th at p. 384.) Under the “‘summary-judgment-like
procedure’” applicable at this step, the court “does not weigh
evidence or resolve conflicting factual claims.” (Ibid.) Where
the defendant raises an affirmative defense in its anti-
20
SLAPP motion, “the court, following the summary-judgment-
like rubric, generally should consider whether the
defendant’s evidence in support of an affirmative defense is
sufficient, and if so, whether the plaintiff has introduced
contrary evidence, which, if accepted, would negate the
defense.” (Bently Reserve LP v. Papaliolios (2013)
218 Cal. App. 4th 418, 434; see also Flatley v. Mauro (2006)
39 Cal. 4th 299, 323 [at second step, litigation privilege may
present defense that plaintiff “must overcome”].)
Here, Williams LLC raised an affirmative defense in
its anti-SLAPP motion, arguing that the District could not
prevail on its cross-claims because the indemnity provision is
unconscionable. “The overarching unconscionability
question is whether an agreement is imposed in such an
unfair fashion and so unfairly one-sided that it should not be
enforced.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 123
(OTO).) Both procedural unconscionability (the unfair
fashion in which the contract was imposed) and substantive
unconscionability (the unfairness of the contract’s terms)
must be shown -- but a high showing of one may compensate
for a relatively low showing of the other. (Id. at pp. 125-
126.) “‘The ultimate issue in every case is whether the terms
of the contract are sufficiently unfair, in view of all relevant
circumstances, that a court should withhold enforcement.’”
(Id. at p. 126, quoting Sanchez v. Valencia Holding Co., LLC
(2015) 61 Cal. 4th 899, 912 (Sanchez).)
21
1. Substantive Unconscionability
“Substantive unconscionability examines the fairness
of a contract’s terms.” (OTO, supra, 8 Cal.5th at p. 129.)
The analysis ensures that a contract does not impose terms
that are unreasonably favorable to the more powerful party.
(Ibid.) Such terms may include “terms that undermine the
nondrafting party’s reasonable expectations.” (Id. at
pp. 129-130.) The analysis “must be sensitive to context,”
including the contract’s commercial setting and purpose.
(Id. at p. 136.)
We agree with Williams LLC that the facts here are
similar to those in Lennar Homes. There, as noted, an
indemnity provision purported to require homebuyers to
defend and indemnify a developer from any costs and
liabilities arising out of the homebuyers’ own claims against
the developer for nondisclosure. (Lennar Homes, supra,
232 Cal.App.4th at pp. 677-678.) “In other words, on its face,
the indemnity provision preclude[d] any possibility that a
buyer who ha[d] a meritorious claim of fraud falling within
the scope of the indemnity clause could be made whole; any
judgment obtained would be payable by the buyer, not [the
developer], and in addition the buyer would be responsible
for [the developer’s] attorney fees and costs, win or lose.”
(Id. at p. 691.) Because the provision “purport[ed] to bar any
possibility of meaningful recovery for claims falling within
its scope, regardless of merit,” the court found a high degree
of substantive unconscionability. (Id. at p. 693.)
22
Here, the indemnity provision drafted by the District
similarly purports to preclude any possibility of Williams
LLC obtaining meaningful recovery on a broad category of
meritorious claims. The provision requires Williams LLC to
indemnify the District for all liability for specified types of
damage sustained by Williams LLC itself as a result of the
District’s conduct, subject only to an exception for liability
based on sole or active negligence or willful misconduct.
Where the District injures Williams LLC through garden-
variety negligence (or other non-willful misconduct) and is
not 100 percent liable, Williams LLC cannot meaningfully
recover: either it fails to establish liability, but must pay the
District’s defense costs (as damages for failing to actively
defend the District), or it establishes liability, but must pay
both the District’s defense costs and the very judgment it
won against the District. This “paradigmatic example of a
‘“heads I win, tails you lose”’ proposition” embodies a high
degree of substantive unconscionability. (Lennar Homes,
supra, 232 Cal.App.4th at p. 693.)
The indemnity provision is equally unfair in purporting
to require Williams LLC to defend and pay meritorious
claims brought by Williams. Unrebutted evidence indicates
that Williams LLC first contracted with the District for the
purpose of allowing Williams to work for the District --
indeed, that Williams LLC came into existence for that
purpose. Williams LLC could reasonably expect that in
entering contracts to allow Williams to work for the District,
it would not be depriving Williams of any possibility of being
23
made whole by the District (rather than by her own LLC) for
the District’s share of injuries jointly caused by its garden-
variety negligence (or other non-willful misconduct). In this
context, to which we must be sensitive, the indemnity
provision undermines Williams LLC’s reasonable
expectations as the nondrafting party, and is therefore
substantively unconscionable. (See OTO, supra, 8 Cal.5th at
pp. 129-130, 136.)
Contrary to the District’s contention, the existence of a
limitation on the indemnity provision’s coverage -- its
exclusion of liability for sole or active negligence or willful
misconduct -- does not materially distinguish Lennar Homes.
There, the indemnity provision’s coverage was limited to
liability “‘for nondisclosure or incomplete disclosure of the
general disclosure items and items separately disclosed to
[the homebuyers] in writing . . . .’” (Lennar Homes, supra,
232 Cal.App.4th at p. 678.) Despite this limitation on the
provision’s scope, the court found a high degree of
substantive unconscionability because the provision barred
meaningful recovery on meritorious claims within that
defined scope. (See id. at p. 691 [provision precluded
possibility of homebuyer being made whole on claim of
“fraud falling within the scope of the indemnity clause”], id.
at p. 693 [same regarding damages “from fraud . . . with
respect to disclosures”].) Here, the indemnity provision
similarly bars meaningful recovery on meritorious claims
within its scope. Its effect on those claims is not mitigated
by its exclusion of other claims.
24
Indeed, as a practical matter, the indemnity provision
here is a more potent bar to recovery than the provision in
Lennar Homes. There, the indemnity provision was
effectively moot with respect to liability; the underlying
litigation had already ended (pending appeal) without any
finding of liability, and the developer had conceded the
provision would have been unenforceable if the homebuyers
had established liability within the provision’s scope. (See
Lennar Homes, supra, 232 Cal.App.4th at pp. 678, 691.)
Here, the District’s demand for Williams LLC to pay any
judgment rendered against the District is far from moot.
Indeed, the District asserts that Williams herself was
negligent in failing to avoid being poisoned, and argues that
her alleged negligence -- along with her allegations against
third parties and other facts in the record -- show that her
injuries “will never be due to the ‘sole or active negligence, or
7
willful misconduct of the District.’”
7
The District asserts the trial court failed to apply the
holding of Crawford v. Weather Shield Mfg., Inc. (2008) 44
Cal. 4th 541 (Crawford), but identifies no relevant holding of that
case. In Crawford, neither the anti-SLAPP statute, nor first-
party indemnity, nor unconscionability were at issue. (See
Crawford, supra, at p. 568.) Far from discouraging
unconscionability defenses in future cases, our Supreme Court
observed that in noninsurance indemnity contracts, the
indemnitee “may often have the superior bargaining power, and
. . . may use this power unfairly to shift to another a
disproportionate share of the financial consequences of its own
legal fault.” (Id. at p. 552.)
25
2. Procedural Unconscionability
Courts analyzing procedural unconscionability begin by
determining whether the contract is adhesive, meaning the
contract is standardized (generally on a preprinted form)
and offered by the party with superior bargaining power on a
take-it-or-leave-it basis. (OTO, supra, 8 Cal.5th at p. 126,
citing Baltazar v. Forever 21, Inc. (2016) 62 Cal. 4th 1237,
1245 (Baltazar).) A finding that the contract is adhesive is
“sufficient to establish some degree of procedural
unconscionability.” (Sanchez, supra, 61 Cal.4th at p. 915;
see also Baltazar, supra, at p. 1244 [ordinary contracts of
adhesion contain degree of procedural unconscionability and
danger of oppression even without notable surprise].)
A higher degree of procedural unconscionability may be
established through an additional showing of oppression or
surprise. (See OTO, supra, 8 Cal.5th at p. 126; Baltazar,
supra, 62 Cal.4th at p. 1245.) Oppression involves lack of
negotiation and meaningful choice. (See OTO, at p. 126; see
also id at p. 127 [complaining party need not show
unsuccessful attempt to negotiate].) “‘The circumstances
relevant to establishing oppression include . . . the amount
and type of pressure exerted on the party to sign the
proposed contract . . . and the length and complexity of the
challenged provision . . . .’” (Id. at pp. 126-127, quoting
Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc.
(2015) 232 Cal. App. 4th 1332, 1348.) Relevant pressure may
include the economic pressure on an employee to accept a
contractual provision as a condition of keeping a job; as this
26
pressure may be substantial, courts must be particularly
attuned to the danger of oppression in the “posthiring”
setting. (OTO, at p. 127; see also Grand Prospect Partners,
L.P. v. Ross Dress for Less, Inc., supra, at p. 1348, fn. 10
[relevant pressure may be generated by market conditions or
other circumstances surrounding the contract’s formation].)
Surprise may be found where “the agreement appears to
have been drafted with an aim to thwart, rather than
promote, understanding,” undermining the nondrafting
party’s informed consent. (OTO, at p. 129.) An agreement
may thwart understanding by hiding the challenged
provision, or by using language -- for example, complex
sentences filled with legal jargon -- rendering the substance
of the challenged provision opaque. (See id. at p. 128.)
Once again, Lennar Homes is instructive. There, the
court declined to find a particularly high degree of
procedural unconscionability, citing several factors -- the
indemnity provision appeared on the same page as the
homebuyers’ signatures, and the homebuyers produced no
evidence that they were unaware of the provision, that they
were particularly unsophisticated, that similarly priced
housing was unavailable in the region, or that they
attempted to reject the indemnity provision. (Lennar
Homes, supra, 232 Cal.App.4th at pp. 689-690.)
Nevertheless, the court found a sufficient degree of
procedural unconscionability to invalidate the provision
when joined with the high degree of substantive
unconscionability also found by the court. (Id. at pp. 688,
27
690, 693.) The court found the provision procedurally
unconscionable because the contract was adhesive (as the
developer conceded), the developer’s bargaining power
exceeded that of the homebuyers, the indemnity provision
was a small part of a prolix form, and the homebuyers’
meaningful alternatives were limited by the fact that the
homes they bought from the developer were not “truly
interchangeable” with homes they might have bought from
others. (Id. at pp. 688-690.)
Here, Williams LLC has produced unrebutted evidence
of a moderate degree of procedural unconscionability. First,
Williams LLC’s evidence establishes that the 2013 contract
was adhesive. According to Williams’s declaration, her
LLC’s initial contract with the District was a standard form
contract presented by the District on a take-it-or-leave-it
basis. Further, Williams was unable to negotiate the
contract’s terms, or to enter the contract herself rather than
complying with the District’s requirement to form a business
entity. This evidence establishes the District’s superior
bargaining power. The District has submitted no contrary
evidence. Nor has it submitted any evidence that the
formation of this initial contract materially differed from the
formation of the 2013 contract. Thus, contrary to the
District’s contention, we need not weigh competing evidence
to conclude the 2013 contract was adhesive. (Cf.
Hecimovich, supra, 203 Cal.App.4th at pp. 471-472 [plaintiff
failed to meet second-step burden on defamation claim, even
assuming plaintiff made sufficient showing on claim’s
28
elements, where defendants produced evidence that
allegedly defamatory statements were privileged and
plaintiff failed to produce contrary evidence].)
Second, Williams LLC’s evidence establishes some
degree of oppression beyond that inherent in a contract of
adhesion. (See Sanchez, supra, 61 Cal.4th at p. 915.)
According to Williams’s declaration, she created her LLC for
the purpose of working for the District, and it worked for the
District exclusively (aside from one minor contract with
another school district) for nearly a decade. Thus, we infer
that in the “posthiring” setting in which Williams LLC
entered the 2013 contract, it experienced substantial
economic pressure to accept the contract as the District had
drafted it. (Cf. OTO, supra, 8 Cal.5th at p. 127 [“Employees
who have worked in a job for a substantial length of time
have likely come to rely on the benefits of employment. For
many, the sudden loss of a job may create major disruptions,
including abrupt income reduction and an unplanned
reentry into the job market”].) Although the District asserts
that Williams LLC could have found comparable work
elsewhere, it has produced no competent evidence to support
8
that assertion. Moreover, work opportunities are not truly
8
Even if we could infer the existence of comparable work
opportunities from Leahy’s allegation that Williams “and/or”
Williams LLC worked for two other school districts before
working for the District, that allegation was inadmissible because
it was based only on information and belief. (5 Witkin, Cal.
(Fn. is continued on the next page.)
29
interchangeable. (Cf. Lennar Homes, supra, 232 Cal.App.4th
at p. 689 [homebuyers lacked meaningful choice because
homes are considered unique, unlike truly interchangeable
goods and services].)
Finally, the language drafted by the District
establishes some degree of surprise (or an additional degree
of oppression). (See OTO, supra, 8 Cal.5th at pp. 126-128
[finding surprise where challenged provision’s language
rendered its substance opaque, and separately noting that
“complexity of the challenged provision” may be relevant to
establishing oppression].) In a provision separate from the
indemnity clause, the contract requires each party to bear its
own costs (including attorney’s fees) in any litigation “arising
out of this AGREEMENT or the performance thereof . . . .”
This category of litigation includes Williams LLC’s claims
against the District for terminating the contract -- indeed,
the District tendered its defense of those claims on the
ground that they “arise solely from performance of work
under the Contract . . . .” The District cannot be required to
bear its defense costs while also being entitled to a defense
from Williams LLC. (See Crawford, supra, 44 Cal.4th at
pp. 554-558 & fn. 6 [indemnitee entitled to defense is
Procedure (5th ed. 2008) Pleading, § 1035, p. 467 [“Affidavits on
information and belief are inadequate to establish a probability of
prevailing on the claim under [the anti-SLAPP statute] and are
permitted only when the facts to be established are incapable of
positive averment”], citing Evans v. Unkow (1995) 38 Cal. App. 4th
1490, 1498.)
30
entitled to defense costs as damages for breach of duty to
defend].) In light of the seemingly straightforward language
requiring each party to bear its own costs and fees in any
litigation between them arising out of the performance of the
contract, Williams LLC reasonably could have been
surprised by the District’s demands for a defense of Williams
9
LLC’s contract claims against the District.
Williams LLC’s unrebutted evidence of adhesion,
oppression, and surprise establishes a moderate degree of
procedural unconscionability. This degree is sufficient, when
combined with the high degree of substantive
9
In the District’s tenders of defense, it identified both
Williams and her LLC as the plaintiffs in the Underlying Action
and demanded defense and indemnity with regard to “all
damages, claims, loss and/or liability of any kind arising out of
Plaintiffs’ lawsuit . . . .” In its cross-complaint, it alleged that
Williams LLC owed the District indemnity from “any and all
claims, damages, and losses at issue in this Action, as more
[fully] set forth in the [Underlying] Complaint . . . .” Thus, at the
hearing on the anti-SLAPP motion, the trial court accurately
characterized the cross-complaint as seeking indemnity on all
claims in the Underlying Action; the District’s counsel
mischaracterized it by asserting that it did not seek indemnity on
Williams LLC’s claims. In its opening brief on appeal, the
District’s counsel again mischaracterized the cross-complaint by
suggesting it could not be read to seek indemnification from
Williams LLC on its own claims. At oral argument, the District’s
new counsel deferred to the language of the tenders and agreed
that they and the cross-complaint sought defense and indemnity
on all claims in the Underlying Action.
31
unconscionability we have found, to render the indemnity
provision unconscionable. In sum, the terms of the contract
are sufficiently unfair, in view of all relevant circumstances,
that we should withhold enforcement. (See OTO, supra, 8
Cal.5th at p. 126.)
3. Conclusion
The District failed to show a probability of overcoming
Williams LLC’s defense that the indemnity provision is
unconscionable. We exercise our discretion to limit the
application of the indemnity provision to avoid an
unconscionable result. (See Civ. Code, § 1670.5, subd. (a)
[court finding clause unconscionable has discretion to “refuse
to enforce the contract,” “enforce the remainder of the
contract without the unconscionable clause,” or “limit the
application of any unconscionable clause as to avoid any
unconscionable result”].) Specifically, we limit the
application of the indemnity provision by rendering it
inapplicable to claims brought by Williams LLC and claims
brought by Williams. This limitation avoids the
unconscionable result of Williams LLC being required to
defend or indemnify the District against its own claims or
Williams’s claims, including the claims in the Underlying
10
Action.
10
We express no opinion whether the indemnity provision
may be enforced to require Williams LLC to defend and
(Fn. is continued on the next page.)
32
As a result of this limitation on the indemnity
provision, the District failed to show a probability of
prevailing on its breach of contract and declaratory relief
claims, each of which sought to apply the provision to the
Underlying Action. (See South Sutter, LLC v. LJ Sutter
Partners, L.P. (2011) 193 Cal. App. 4th 634, 670-673 [trial
court properly granted anti-SLAPP motion to strike
declaratory relief claim, where no substantial evidence
supported declaration interpreting contract in plaintiff’s
favor; mere existence of controversy was insufficient].)
The District has presented no argument on its
probability of prevailing on its equitable indemnity claim.
The District has therefore forfeited any such argument. (See
Wall Street Network, Ltd. v. New York Times Co. (2008)
164 Cal. App. 4th 1171, 1177 [“Generally, appellants forfeit or
abandon contentions of error regarding the dismissal of a
cause of action by failing to raise or address the contentions
in their briefs on appeal”].)
Similarly, the District has neither argued the merits of
its purported cause of action for “apportionment of fault,” nor
replied to Williams LLC’s contention that “apportionment of
fault is not truly a separate cause of action, but rather an
affirmative defense to plaintiff’s complaint.” The District
has therefore forfeited any argument that “apportionment of
fault” is a cause of action on which it could prevail. (Cf.
indemnify the District against a claim brought by a party other
than Williams LLC or Williams.
33
Barry v. State Bar of California (2017) 2 Cal.5th 318, 326
[plaintiff may fail to demonstrate probability of prevailing
“because the court lacks the power to entertain the claims in
the first place”].)
Because the District failed to meet its burden to show a
probability of prevailing on its cross-claims, which arose
from protected activity, the trial court properly struck the
cross-complaint under the anti-SLAPP statute.
C. The District Is Not Entitled to Rehearing in the
Trial Court
The District contends this matter should be remanded
to the trial court with instructions to rehear the anti-SLAPP
motion after the District files a longer opposition brief,
arguing the court abused its discretion in denying the
District leave to include an additional nine pages. The
District concedes it could not find any published authority
reviewing the denial of such leave. The District falls far
short of showing error, and farther short of showing
prejudice. The District’s briefs on this appeal -- in which we
review the trial court’s decision de novo -- span 100 pages.
Nothing in them suggests that an extra nine pages below
would have made a difference.
34
DISPOSITION
The trial court’s orders are affirmed. Williams LLC is
awarded its costs on appeal.
CERTIFIED FOR PUBLICATION
MANELLA, P. J.
We concur:
COLLINS, J.
CURREY, J.
35