1 O 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 DEBORAH M. MANCHESTER, No. 2:17-cv-05309-ODW (JEMx) 11 PH.D., Hon. Otis D. Wright II 12 Plaintiff, ORDER GRANTING MOTION TO 13 vs. STRIKE COUNTERCOMPLAINT [118] 14 SIVANTOS GMBH, a German company; SIVANTOS, INC., a 15 Delaware corporation; AURALCARE HEARING CENTERS OF AMERICA, 16 LLC d/b/a MY HEARING CENTERS, a Utah Limited Liability Company; 17 DAVID D. LARSEN, an individual; RYAN K. BACHER, an individual; 18 and DOES 1-10, inclusive, 19 Defendants. 20 AURALCARE HEARING CENTERS 21 OF AMERICA, LLC d/b/a MY HEARING CENTERS, a Utah Limited 22 Liability Company,

23 Counterclaimant,

24 vs.

25 DEBORAH M. MANCHESTER, PH.D., And DOES 1-10, inclusive, 26 Counterdefendants. 27 28 1 I. INTRODUCTION 2 Presently before the Court is Counterdefendant Deborah M. Manchester, 3 Ph.D’s (“Manchester”) Motion to Strike Counterclaimant Auralcare Hearing Centers 4 of America’s (“Auralcare”) Countercomplaint pursuant to California Code of Civil 5 Procedure section 425.16. (Mot. to Strike (“MTS”) 7, ECF No. 118.) For the following reasons, Manchester’s Motion to Strike is GRANTED.1 6 II. FACTUAL BACKGROUND 7 The Court set forth the extensive background in this case in its recently issued 8 Order granting Summary Judgment, and incorporates that discussion by reference 9 herein. (Order, ECF No. 647.) The facts relevant to the instant motion are as follows. 10 Manchester met Mr. Larsen, the owner of Auralcare in 2013, while she was working 11 part time at a clinic called SoCal Hearing and Balance, located in Torrance, 12 California. (MTS 2.) Mr. Larsen sought to purchase the clinic, and reached a deal 13 with Dr. Jonathan Leiterman, to accomplish his goal. (Id.) It was in the purchase 14 context that Manchester signed an agreement with Auralcare to serve as “Director of 15 Hearing Services at [Auralcare’s] clinic in Torrance, CA.” (Id.) Manchester’s duties 16 included all facets of managing and operating a hearing clinic, and included testing 17 and fitting of potential patients, as well as sales, attending educational seminars, and 18 providing services and recordkeeping. (Agreement 1, ECF No. 107, Ex 1.) Larsen 19 never signed the agreement. (Manchester Declaration in Support of MTS 20 (“Manchester Decl.”) ¶4, ECF No. 121.) Ultimately, the sale fell through. 21 (Manchester Decl. ¶ 5.) Manchester, however, continued to work at Auralcare 22 facilities for four years after signing the independent contractor agreement. (Larsen 23 Declaration in Support of Auralcare Opposition (“Larsen Decl.”) ¶¶ 10, Ex. 1-2, ECF No. 209-2.) 24 After Manchester left the Torrance clinic, she and Larsen continued a 25 professional relationship under which Manchester saw Auralcare patients at her own 26 27 1 After considering the papers filed in connection with this Motion, the Court deemed this matter 28 appropriate for decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15.

1 1 clinic in Lancaster, California. (Manchester Decl. ¶¶ 10-11.) 2 In 2015, Manchester approached Larsen and Auralcare to solicit an investment 3 in her invention, HARP, but MHC declined to do so. (Id. ¶¶ 11-12.) Larsen 4 subsequently introduced Manchester to other potential investors, including Sivantos 5 GMBH/Sivantos, Inc. (Id. ¶ 12.) Manchester brought suit against Sivantos GMBH, and Sivantos, Inc. on May 6 24, 2017 (See Notice of Removal, Ex 1., ECF No. 1.) arguing trade secret 7 misappropriation and other contract-related claims. She subsequently added 8 Auralcare and Larsen eleven months later after, filing her Second Amended 9 Complaint. (See generally SAC, ECF No. 66). 10 Auralcare filed its countercomplaint on June 14, 2018, (Counterclaim, ECF 11 No. 107.), and Manchester filed the instant anti-SLAPP Motion on July 9, 2018. 12 (MTS.) 13 III. LEGAL STANDARD 14 California’s anti-SLAPP (Strategic Lawsuit against Public Participation) 15 statute allows defendants to make a special motion to strike a claim if that claim 16 arises from an act by the defendants to further their right of petition or free speech in 17 connection with a public issue.

(b)(1); see also 18 Newsham v. Lockheed Missiles & Space Co.,

(9th Cir. 1999) 19 (concluding that the twin aims of the Erie doctrine “favor application of California’s 20 anti-SLAPP statute in federal cases”). An act qualifies for protection under this 21 statute if it falls within one of four categories: (1) any written or oral statement or writing made before a 22 legislative, executive, or judicial proceeding, or any other 23 official proceeding authorized by law[;] (2) any written or oral statement or writing made in connection with an issue 24 under consideration or review by a legislative, executive, 25 or judicial body, or any other official proceeding authorized by law[;] (3) any written or oral statement or 26 writing made in a place open to the public or a public forum 27 in connection with an issue of public interest[;] or (4) any conduct in furtherance of the exercise of the constitutional 28

2 1 right of petition or the constitutional right of free speech in 2 connection with a public issue or an issue of public interest. Cal. Civ. Proc. § 425.16(e). 3 Analyzing an anti-SLAPP motion involves a two-step process. First, a court 4 determines whether the defendants have made a prima facie showing that the 5 plaintiff’s claims arise from an act protected under the statute. Ingles v. Westwood 6 One Broad. Servs., Inc.,

(2005). To make this 7 determination, a court should look to any pleadings or affidavits that state facts 8 supporting or refuting the parties’ theories of liability or defense regarding the claim. 9 Martinez v. Metabolife Int’l Inc.,

(2003). In the first 10 prong, courts do not consider the legitimacy of the plaintiff’s claims. Coretronic 11 Corp. v. Cozen O’Connor,

(2011). 12 If the defendant makes the required prima facie showing, the burden shifts to 13 the plaintiff to demonstrate “a probability that the plaintiff will prevail on the claim.” 14

(b)(1). The plaintiff must provide admissible evidence 15 to establish that “the complaint is legally sufficient and supported by a prima facie 16 showing of facts [that] sustain a favorable judgment.” Metabolife Int’l, Inc. v. 17 Wornick,

, 840 (9th Cir. 2001). If the plaintiff fails to make this showing 18 by a preponderance of the evidence, a court must grant the motion to strike and award 19 the prevailing defendant attorneys’ fees and costs.

(c)(1); Ingles, 129 Cal. App. 4th at 1061–62. 20 IV. DISCUSSION 21

22 A. MANCHESTER’S SPEECH IS PROPERLY WITHIN ANTI-SLAPP’S AMBIT The anti-SLAPP statute protects “any written or oral statement before a 23 legislative, executive, or judicial proceeding, or any other proceeding authorized by 24 law.”

(e)(2). 25 Auralcare maintains Manchester’s conduct runs afoul of the first prong, but it 26 is clear Manchester’s act is in furtherance of her constitutional right to petition. See 27

(a). Specifically, Manchester’s act of filing her Second 28

3 1 Amended Complaint fits firmly within the anti-SLAPP statute’s first category of 2 protected acts because the Second Amended Complaint is a writing made before a 3 judicial proceeding.

(e)(1). 4 Given that Manchester’s Second Amended Complaint is a valid attempt to 5 petition the Court, the burden now shifts to Auralcare to demonstrate the legal sufficiency of its counterclaims. 6

7 B. AURALCARE HAS NOT DEMONSTRATED A PROBABILITY OF PREVAILING To survive this anti-SLAPP motion, Auralcare must show that their breach-of- 8 contract, trade secret misappropriation, unjust enrichment, and their good faith and 9 fair dealing counterclaims have “minimal merit.” Navellier v. Sletten,

, 10 95 (2002). In so doing, Auralcare cannot simply rest on the Countercomplaint, but 11 must present evidence that would be admissible at trial. HMS Capital v. Lawyers 12 Title Co.,

, 212 (2004). 13 1. AURALCARE FAILS TO ESTABLISH A BREACH OF CONTRACT CLAIM 14 To properly allege a breach of contract, Auralcare must plead (1) the existence 15 of a contract; (2) its performance or excuse for nonperformance under the settlement 16 agreement; (3) Manchester’s breach of the contract; and (4) that Manchester’s breach 17 caused damages. Hamilton v. Greenwich Investors XXVI, LLC,

(2011). 19 Based on both the counterclaim itself and the papers filed for and against 20 Manchester’s anti-SLAPP motion, the Court finds that Auralcare fails to allege and 21 establish minimal merit for a viable breach of contract claim because it fails to 22 establish damages. Specifically, Auralcare centers its damages argument on 23 attorneys’ fees, and buttresses this argument with speculative assertions—that the 24 exact amount of damages are either “under investigation” (Auralcare Oppn. 13), and 25 “will be demonstrated during trial” (Id. at 2). Here, Attorney’s fees cannot serve as the foundation upon which Auralcare’s 26 damage claim rests. Auralcare provides no support for the proposition that attorney’s 27 fees can satisfy the damage element in a breach of contract claim. California courts 28

4 1 distinguish between “attorney’s fees that are sought as ‘an allowance . . . to the 2 prevailing party as an incident to the principal cause of action, and those that are 3 sought as part of the cause of action.” Monster, LLC v. Superior Court,

5th 1214, 1228 (2017)(citations and internal quotation marks omitted). However, the 5 latter refers to circumstances “where attorney fees are incurred in a prior action, or sought in a proceeding as damages as for example in false imprisonment or malicious 6 prosecution suits or where recoveries sought in an action by an attorney against his 7 client for an agreed or a reasonable fee.” Mabee v. Nurseryland Garden Centers, 8 Inc.,

(1979). But “[n]o similar procedural and evidentiary 9 base is required where ‘the attorney fee was not the cause of action but an incident to 10 it.’”

The attorney’s fees that Auralcare seeks are “incident to” its breach of 11 contract cause of action, and are not part of the action itself. 12 Accordingly, Auralcare has failed to establish probable success on its breach 13 of contract claim. 14 2. REMAINING CLAIMS 15 Auralcare’s remaining claims: breach of the implied covenant of good faith 16 and fair dealing, trade secret misappropriation, and for violations the California UCL 17 all share one common element—damages. See Britz Fertilizers v. Bayer Corp., 665

(“Causation resulting in damages is an essential element of a 19 claim for breach of contract as well as a claim for breach of the implied covenant of 20 good faith and fair dealing”); Sargent Fletcher v. Able Corp.,

, 21 1665 (2003)(“to state a prima facie claim for trade secret misappropriation, plaintiff 22 must demonstrate, inter alia, that defendants’ actions damage plaintiff”). Moreover, 23 “to have standing to bring a claim under California’s UCL, plaintiff must show he or she suffered injury in fact and has lost money or property as a result of the unfair 24 competition.” Cal. Bus. & Prof. § 17204. 25 Given that Auralcare failed to establish damages in its breach of contract claim, 26 it cannot prevail in establishing damages in any of the remaining claims given it 27 extends its failed damages argument to its other claims. 28

5 □ Accordingly, Manchester’s anti-SLAPP Motion is GRANTED. 2 | C. MANCHESTER IS ENTITLED TO ATTORNEY’S FEES AND COSTS 3 As Manchester’s anti-SLAPP motion successfully defeats Auralcare’s 4 | counterclaims, Manchester is entitled to attorney’s fees and costs related to the 5 | Motion.

(c)(1); Lafayette Morehouse, Inc. v. Chronicle 6 Pub. Co.,

(1995). In its papers, however, Manchester 7 does not specify what this amount is. (MTS 16.) As such, Manchester may submit g her total attorney’s fees and costs in a noticed motion to the Court no later than 9 August 16, 2019.

10 Vv. CONCLUSION For the foregoing reasons, Manchester’s Motion to Strike is GRANTED. (ECF No. 118.) 12 \ 8 IT IS SO ORDERED. GoW: 14 Gli ROY 4 15 August 7, 2019 / 16 Ss OTISD. WRIGHT, 7 UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28