Applied Business Software, Inc. v. Pacific Mortgage Exchange, Inc

In Applied Business Software, Inc. v. Pacific Mortgage Exchange, Inc. (2008) 164 Cal.App.4th 1108, pending federal court litigation between a licensor and a licensee had been resolved in 2005 by a settlement agreement providing that the latter would cease using the former's software. Later that year and again in early 2006, the licensor's attorney wrote to the licensee demanding a certification that the licensee all copies of the software to the licensor and was otherwise in compliance with the federal court litigation settlement agreement. When such was not forthcoming, the licensor filed suit in Los Angeles Superior Court alleging causes of action for breach of the settlement agreement and specific performance. The defendant-licensee filed a section 425.16 motion, alleging that the state court case was brought to retaliate against it and as a warning to defendant to keep silent about the licensor's business practices. In support of that motion, the licensee-defendant argued that "a suit alleging a breach of a settlement agreement . . . is necessarily a suit that involves an act in furtherance of a person's right of petition." (Id. at p. 1115.) The licensee argued that the suit attacked protected activity, relying on language in Navellier v. Sletten (2002) 29 Cal.4th 82. The trial court denied the SLAPP motion and the appellate court affirmed, and did so in words relevant to defendants' arguments in this case regarding agreements in settlement of of actual or anticipated litigation: "Here, the gist of plaintiff's complaint is not that defendant did something wrong by acts committed during the course of the underlying federal action, but rather that defendant did something wrong by breaching the settlement agreement after the underlying action had been concluded. Under the explanatory provisions in subdivision (e) of section 425.16, defendant's entering into the settlement agreement during the pendency of the federal case was indeed a protected activity, but defendant's subsequent alleged breach of the settlement agreement after the federal case was concluded is not protected activity because it cannot be said that the alleged breaching activity was undertaken by defendant in furtherance of defendant's right of petition or free speech, as those rights are defined in section 425.16. Thus, the instant suit is based on alleged conduct of defendant that is not protected activity." (Applied Business, supra, 164 Cal.App.4th at p. 1118.) In sum, the parties had entered into a written agreement to settle a federal copyright lawsuit, and that suit was dismissed. (Id. at p. 1111.) The agreement provided that the defendant licensee (Pacific) would cease using the plaintiff licensor's (Applied's) software, and the defendant would certify the software had been deleted from its computers and that it had returned all physical copies of the software to the plaintiff. (Id. at p. 1112.) After the defendant had allegedly failed to provide the proper certifications and had used plaintiff's software without authorization, the plaintiff filed a state court action alleging claims for breach of the settlement agreement and for specific performance. (Id. at pp. 1112-1114.) The defendant filed a special motion to strike the complaint. (Id. at p. 1114.) The trial court denied the motion and the defendant appealed. The appellate court affirmed. It analyzed the "protected activity" prong of the defendant's anti-SLAPP motion as follows: The "defendant's acts on which the plaintiff's complaint is based are defendant's alleged failure to provide the certification called for in the settlement agreement, and defendant's alleged use of plaintiff's software after the time set out in the settlement agreement for ceasing use of it. Neither of those alleged actions by the defendant can reasonably be said to have been taken by defendant in furtherance of its right of petition or free speech in connection with a public issue." (Applied Business, supra, 164 Cal.App.4th at p. 1117.) Moreover, the court rejected the defendant's position that simply because the suit involved a settlement agreement, it thereby was one "arising from" the defendant's protected activity. (Ibid.) The court held that "under the explanatory provisions in subdivision (e) of section 425.16, defendant's entering into the settlement agreement during the pendency of the federal case was indeed a protected activity, but defendant's subsequent alleged breach of the settlement agreement after the federal case was concluded is not protected activity because it cannot be said that the alleged breaching activity was undertaken by defendant in furtherance of defendant's right of petition or free speech, as those rights are defined in section 425.16." (Id. at p. 1118.)