RECENT CASE ILLUSTRATING APPLICATION OF THE PUBLIC INTEREST EXEMPTION FROM SLAPP (CCP 425.17(b))

UNFAIR BUSINESS PRACTICE CLAIM EXEMPT FROM SLAPP UNDER PUBLIC INTEREST EXEMPTION OF CCP § 425.17(b)

    In what is, perhaps, the most significant anti-SLAPP case of 2014 to date, Justice Aaron of the Fourth District, Division One Court of Appeal penned a highly instructive opinion in Tourgeman v. Nelson & Kennard (1/16/14) 2014 WL 171366, which examined in detail how to apply the public interest exemption to certain class action and representative actions that are brought solely in the public interest where three specified conditions are met.  The secondary holding in Tourgeman rejected the approach taken in Coltraine v. Shewalter (1998) 66 Cal.App.4th 94, which allows a trial judge "discretion" to determine the prevailing party in cases where the plaintiff dismisses the complaint in lieu of opposition for purposes of an attorney fee award.  Tourgeman, instead, adopted the approach taken in Liu v. Moore (1999) 69 Cal.App.4th 745, which held that the trial court must determine the merits of the anti-SLAPP motion as a predicate to an award of fees - i.e the defendant must prevail on the anti-SLAPP motion as a precondition to an award of fees thus depriving the court of discretion to determine the prevailing the party.   Rather, the court must hear the anti-SLAPP motion or decide which party would have won the anti-SLAPP motion.

    Tourgeman brought a putative class and representative action against Dell Financial Services and respondents, Nelson & Kennard.  In his complaint, Tourgeman contended that respondents violated the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692 et. seq.) while attempting to collect a debt that Tourgeman incurred in connection with his purchase of a Dell computer.   Tourgeman brought a single claim under the UCL (Bus. & Prof. Code § 17200) seeking an injunction to prevent respondents from engaging in unlawful, unfair, and/or fraudulent debt collection practices in the future.  Respondents filed a special motion strike.  Tourgeman voluntarily dismissed the action and respondents filed a motion for attorney's fees.  The trial court determined that Tourgeman failed to establish the public interest exemption under CCP § 425.17(b), that he could not show a probability of prevailing on prong two because he presented no opposition, granted the SLAPP motion, and awarded fees.  

    The gravamen of Tourgeman's single cause of action was that Nelson & Kennard "generated a collection letter to Tourgeman on a sample form template" that misidentified the original creditor or Tourgeman's loan.  Tourgeman further alleged that Scott Kennard "spent very little time reviewing this letter, and did not review Tourgeman's file or account notes, before signing it."  Tourgeman claims that as a result, Kennard had not been "`meaningfully involved'" as required by the FDCPA.  Tourgeman further alleged that Nelson & Kennard had "sent collections to hundreds of consumers that falsely identified the consumer's original creditor."  Tourgeman also alleged that Kennard had not conducted any "meaningful review" before signing the letters.  Tourgeman claimed that Nelson & Kennard had filed a lawsuit against that misidentified the original creditor or Tourgeman's loan, that he had incurred over $38,000.00 in legal fees defending the lawsuit, and that Nelson & Kennard had eventually dismissed the lawsuit without prejudice.

    Tourgeman filed a single cause of action against Dell Financial and Nelson & Kennard (N&K) for violation of the UCL on behalf of himself, "members of the class, and of the general public."  Tourgeman claimed that respondents, N&K, continued to send collection letters and file collection lawsuits without "enacting proper measures to ensure that they obtain complete and accurate information about consumers before sending out collection letters and/or filing suits."

    It is clear that the acts of sending collection letters and filing lawsuits fall right into the anti-SLAPP statute's official proceeding prongs (§ 425.16, subds. (e)(1),(2)).  Here, however, Tourgeman raised and supported the public interest exemption of CCP § 425.17(b) by analyzing the allegations of the complaint with reference to each of the elements of the public interest exemption, which mirror the elements of CCP 1021.5 for private attorney general attorney's fees.  No extrinsic evidence was needed for plaintiff to establish the exemption under CCP § 425.17(b).  Plaintiff bears the burden of establishing the exemption from SLAPP.

    First, Tourgeman's lawsuit was brought "solely in the public interest or on behalf of the general public." "The term `public interest' is used to define suits brought solely for the public's good or on behalf of the public."  The term "solely" in the statute expressly Legislative intent that section 425.17, subd. (b) not apply to an action that seeks a more narrow advantage for a particular plaintiff.   Here, Tourgeman did not seek damages or restitution for himself or the general public.  Rather, the sole remedy he sought was injunctive relief directed at preventing respondents from engaging in unlawful, unfair, and/or fraudulent debt collection practice in the future.  In addition, "it highly unlikely Tourgeman will again be the subject of respondent's debt collection efforts.  

    Second, respondents conceded that Tourgeman did not seek any greater or different relief from that sought for the general public in this action.   Respondents made a clever argument that because Tourgeman had a separate federal action in which he sought relief and damages for himself, that he failed to meet this requirement.   The court of appeal, however, squarely rejected the argument holding that there is nothing in the statute or legislative history that makes plaintiff's actions in separate lawsuits relevant to the public interest exemption.  In fact, the plain language is to the contrary - the exemption applies to "any action" as to which certain conditions exist.  The court held Tourgeman met the second criteria of the exemption.

    Third, the court found that Tourgeman's action, if successful, would enforce an important right affecting the public interest and would confer a significant benefit on the general public.   Here, Tourgeman sought to enforce the Fair Debt collection practices law in the future by seeking injunctive relief against respondents that would require them to follow the law before the sent collection letters and before they filed lawsuits to collect on a debt.   Respondents argued to no avail that Tourgeman failed to produce evidence that his action, if successful, would benefit the general public.  This suggestion is unsupported by any authority.  Whether Tourgeman's action would benefit the public is, instead, determined by examining his complaint to determine whether his lawsuit is of the kind that seeks to vindicate public policy goals.   

    Finally, private enforcement was necessary and placed a disproportionate financial on Tourgeman in relation to his stake in the matter.   Private enforcement was necessary simply because the action was brought on behalf of the general public and because neither the attorney general nor the Insurance Commissioner intervened to prosecute the action.  As to the disproportionate financial burden element, the court noted: "It has been said about this element that `the less direct or concrete a personal interest someone has, the more likely he or she will satisfy the element.  Courts first focus on what sort of financial stake the plaintiff had in the outcome, i.e. what the plaintiff hoped to gain financially from the litigation in comparison to what it cost.  The relevant inquiry is whether the "cost of the plaintiff's legal victory transcends their person interest."  Blanchard v. Direct TV (2005) 123 Cal.App.4th at 915-916.  In this case, the court found that Tourgeman did not seek any financial benefit from the lawsuit, and, as the trial court noted, it is unlikely that Tourgeman would have benefitted from any potential injunctive relief, since it is doubtful that he will again be the subject of respondent's collection efforts.   This fact, alone, supports the conclusion that the financial burden on Tourgeman is disproportionate to his stake in the action.  Compare Blanchard v. Direct TV, supra, 123 Cal.app.4th at 916 ["Plaintiffs seek an accounting to them and restitution to them of monies paid to Direct TV"].

    The facts of Tourgeman are at the very epicenter of the public interest exemption and its three conditions.   However, the statutory language and case law frame the disproportionate financial burden test in terms of a balancing test rather than requiring a purely altruistic cause of action where the plaintiff gets nothing for himself.  One can easily imagine cases where the plaintiff seeks no greater or different relief for himself than that sought for the general public, where a significant benefit would be conferred on the public, if the action were successful, where private enforcement is necessary, and where the "cost of the plaintiff's legal victory transcends their personal interest."  This does not necessarily mean that the plaintiff gets nothing for himself but the general public must benefit significantly more than the plaintiff.  In sum, the public interest exemption from SLAPP - CCP § 425.17(b) does not apply to every class or representative action - it applies to any action brought solely in the public interest or on behalf of the general public so long as the action meets all three conditions set forth in the statute.  









This article was printed in the Los Angeles Daily Journal in February 2014.

James J. Moneer, Esq. has been handling all aspects of anti-SLAPP motions and appeals for plaintiffs and defendants throughout California since 1994.  He frequently testifies for both sides as an attorney fee and legal malpractice expert in SLAPP cases.  He has been involved in six published anti-SLAPP decisions, including one before the CASC.  He has been an anti-SLAPP panelist for The Rutter Group and Pincus Professional Education since 2003 and 2009, respectively.  His website is www.slapplaw.com.