For over a decade now,the various districts and divisions of California Courts of Appeal have articulated conflicting approaches as to how to treat anti-SLAPP motions where the plaintiff is able to prove up a part of its claim or where part of its claim arises from unprotected activity - i.e. the proverbial "mixed cause of action" prong two case. One approach holds that that where the plaintiff can prove up any part of its claim the entire cause of action stands but if plaintiff cannot substantiate any part of the claim, the entire claim gets stricken, even if it is based in part on unprotected activity. On prong one, the law is well settled. Where the cause of action arises at least in part from protected activity, prong one is satisfied, and the burden shifts to plaintiff to show a probability of prevailing on the merits of the claim on prong two. Wallace v. McCubbin (2011) 196 Cal.App.4th 1169. The second approach holds that a mixed cause of action on prong two will be split into two causes of action - one cause of action based on unprotected activity, or one that plaintiff can substantiate with admissible evidence, will be allowed to remain unscathed by the anti-SLAPP motion. While only that part of the claim that is based on protected activity and which plaintiff cannot substantiate will be segregated into a separate cause of action and stricken under the anti-SLAPP statute, CCP section 425.16. A substantial number of cases have weighed in on this raging conflict among various California Courts of Appeal. Finally, on May 13, 2015, our High Court has granted review in one such case to resolve this conflict, Baral v. Schnitt (2015) 233 Cal.App.4th 1423, superseded by grant of review in Case No. S225090, 5/13/15.
Under Mann I, the court held that if the plaintiff can prove up "ANY PART OF ITS CLAIM, the plaintiff has established that its cause of action has some merit and THE ENTIRE CAUSE OF ACTION STANDS. The court need not engage in the time consuming task of determining whether a plaintiff can substantiate all theories presented within a single cause of action. ... " Mann v. Quality Old Time Service (2004) 120 Cal.App.4th 90, 106. The recently published decision int Baral v. Schnitt (2/5/2015; B253620) 233 Cal.App.4th 1423 jumped head first into the ever-mounting controversy among the various courts of appeal as to whether to apply the Mann rule or the City of Colton v. Singletary/Cho v. Chang rule to mixed causes of action on prong two and sided with Mann. On May 13, 2015 our High Court finally granted the petition for review filed in Baral v. Schnitt, supra and is now poised to resolve the conflict.
The author asserts that the latter rule set forth in the City of Colton and Cho v. Chang, infra, cases is the better approach to mixed causes of action on prong two because it honors the broad plain language of the statute by precisely targeting protected activity without being overbroad or underinclusive in the activity it targets. The Boral case sided with Mann by relying exclusively on the "cause of action" language in subdivision (b)(1) of section 425.16. But that language appears only at the beginning of the first independent clause of that subdivision, which exclusively deals with prong one. Prong two does not begin until the dependent clause "...unless... the plaintiff has established that there is a probability that the plaintiff will prevail on the `claim'". A claim can be divided into separate counts as articulated in Justice Needham's dicta in Wallace v. McCubbin (2011) 196 Cal.App.4th 1169, at 1195 et seq., which was adopted in the City of Colton v. Singletary (2012) 206 Cal.App.4th 751 majority opinion and later by Cho v. Chang (2013) 219 Cal.App.4th 521, which held that in mixed causes of action on prong two, the court will split the cause of action into two and strike the protected activity unless can plaintiff can prove it up and allow any allegations of unprotected activity to proceed unencumbered by the anti-SLAPP statute regardless of proof. The Legislature never intended to ensnare unprotected activity within the ambit of the anti-SLAPP statute. So why should unprotected acts be stricken just because they happen to be mixed with protected activity. The problem with the Mann rule is that it is both overbroad and underinclusive in that it allows the court to strike unprotected activity that the Legislature never intended to sweep into the clutches of the anti-SLAPP statute and it permits the court allow litigation privilege and other First Amendment activity to survive to chill another day if the plaintiff can stuff the "claim" with at least one other unprotected act it can prove up. Any suggestion by Wallace or Baral that this High Court already approved of the Mann rule, in Oasis, in a true mixed cause of action is misguided as this Court has repeatedly held that its cases do not stand for propositions not decided. Oasis West Realty v. Goldman (2011) 51 Cal.4th 811 approved of the Mann rule in a case that was not a mixed cause of action case because all of the activity upon which the claim was based met prong one. See Werdegar, J. concurring opinion. On the other hand, our High Court has time and time again expressed a preference for bright-line, easily administrable rules in the anti-SLAPP context, which is the virtue of the Mann rule - simplicity and ease of application. Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1119-1123. While these conflicts present an incredibly complex debate with courts and attorneys on different sides of this issue, the California Supreme Court has now finally agreed to resolve the hottest controversy that has been percolating for over a decade in California anti-SLAPP jurisprudence.
James J. Moneer, Esq.
Friday, May 15, 2015
Monday, March 9, 2015
Minnesota anti-SLAPP statute amended to include reports to police and other government agencies
According to a Twin Cities news outlet, a man named Keith Mueller is pushing to change a state law to protect someone from being sued for calling the cops. The Minnesota anti-SLAPP statute's current language protecting public participation is too vague and needs to include reporting apparent unlawful conduct to police, he contends. The judiciary has struggled to determine if calling police constitutes public participation under Minnesota law. Here, in California of course, police reports and any attempts to report suspected wrongdoing to any government agency are considered acts in furtherance of public participation under CCP 425.16(e)(1),(2), (4). A bill was heard in the Minnesota Legislature that would add language clarifying public participation to include calling police, speaking out about development, communicating with lawmakers, peaceful demonstrations and filing complaints with the government about safety, sexual harassment, civil rights or equal employment. The motion is to be heard March 10 in the Mueller case.
Minnesota statute 554, known as the state's anti-SLAPP statute, defines public participation as "speech or lawful conduct that is genuinely aimed in whole or in part at procuring favorable government action." This is the statute Mueller seeks to strengthen because of confusion over what constitutes public participation. This should make explicit what was implicit all along.
Minnesota statute 554, known as the state's anti-SLAPP statute, defines public participation as "speech or lawful conduct that is genuinely aimed in whole or in part at procuring favorable government action." This is the statute Mueller seeks to strengthen because of confusion over what constitutes public participation. This should make explicit what was implicit all along.
Thursday, January 8, 2015
Yelp defeats San Diego BK attorney's SLAPP motion under commercial speech exemption - Yelp v. McMillan (12/11/2014 SDSC)
In August 2013, Yelp sued McMillan for breach of contract, intentional interference with contract, unfair competition, and false advertising. Yelp believes that McMillan orchestrated fake reviews on the Yelp page for his bankruptcy law practice - an accusation McMillian denies. McMillan filed an anti-SLAPP motion in response to Yelp's suit. But McMillan's SLAPP motion appeared doomed to fail under the commercial speech exemption from SLAPP set forth in CCP 425.17(c). All of McMillan's statements that Yelp's suit alleged causes harm were statements of fact about McMillan's own services as a bankruptcy attorney designed to secure commercial transactions for his services and were published to actual or potential customers through Yelp's website. A recent ruling by Judge Joan M. Lewis confirmed this analysis denying the SLAPP motion under the commercial speech exemption of CCP 425.17(c). There will likely be an ensuing appeal but, in my opinion, it is not likely to succeed for the reasons set forth above. This appears to be a classic textbook example of a complaint alleging harm based on defendant's commercial speech activity as defined in CCP 425.17(c). Simpson-Strong-Tie v. Gore (2010) 49 Cal.4th 12.
Of more fundamental importance are the so-called extortion suits that have been filed against Yelp for burying or even deleting positive reviews unless the business buys advertising from Yelp. The Ninth Circuit has dismissed two such suits against Yelp over the past year holding that Yelp has the right to run its website as it sees fit - including the right to refuse to remove false entries, the right to bury positive reviews and bring negative ones to the top through its use of "filtered reviews" and in Levitt v. Yelp, the Ninth Circuit recently even went so far as to hold that Yelp could delete positive review/entries on its site.
What is a poor business owner to do in these cases of legalized "extortion" One Ninth Circuit Justice stated that Yelp's threat to bury or delete positive reviews is "hard bargaining" at best. But what about the unequal bargaining power between the small business and giant Yelp where the Yelp ratings are often the lifeblood of a small business. I think in some circumstances this kind of hard bargaining can rise to the level of unconscionability - both procedural and substantive. It would appear to be a contract of adhesion (procedural) and substantively so one-sided and oppressive as to shock the court's conscience in extreme cases. After all that business earned those positive reviews and that part of the Levitt holding that allows Yelp to altogether delete a positive review may sweep too far. Time will tell as this body of law develops along with the anti-SLAPP and other cyber laws.
Of more fundamental importance are the so-called extortion suits that have been filed against Yelp for burying or even deleting positive reviews unless the business buys advertising from Yelp. The Ninth Circuit has dismissed two such suits against Yelp over the past year holding that Yelp has the right to run its website as it sees fit - including the right to refuse to remove false entries, the right to bury positive reviews and bring negative ones to the top through its use of "filtered reviews" and in Levitt v. Yelp, the Ninth Circuit recently even went so far as to hold that Yelp could delete positive review/entries on its site.
What is a poor business owner to do in these cases of legalized "extortion" One Ninth Circuit Justice stated that Yelp's threat to bury or delete positive reviews is "hard bargaining" at best. But what about the unequal bargaining power between the small business and giant Yelp where the Yelp ratings are often the lifeblood of a small business. I think in some circumstances this kind of hard bargaining can rise to the level of unconscionability - both procedural and substantive. It would appear to be a contract of adhesion (procedural) and substantively so one-sided and oppressive as to shock the court's conscience in extreme cases. After all that business earned those positive reviews and that part of the Levitt holding that allows Yelp to altogether delete a positive review may sweep too far. Time will tell as this body of law develops along with the anti-SLAPP and other cyber laws.
Sunday, September 7, 2014
COMPLAINT DISMISSED IN FACE OF PENDING SLAPP MOTION - CONFLICT
WHAT HAPPENS WHEN PLAINTIFF DISMISSES COMPLAINT IN RESPONSE TO A PENDING ANTI-SLAPP MOTION? CONFLICTS ABOUND!
What happens when a plaintiff dismisses the complaint in lieu of opposition to a pending SLAPP motion pursuant to CCP section 425.16? Very recently, I have experienced wide variation in what different trial judges will do when confronted with this situation. I filed two SLAPP motions, in two different cases, before two different trial judges in the same courthouse. Both cases involved defamation, internet libel, and malicious prosecution claims. In both cases, each plaintiff dismissed the complaint in lieu of opposition within weeks of each other. Judge A heard the SLAPP motion on its merits and granted it in order determine prevailing party status for purposes of a subsequent motion for an award of mandatory attorney's fees pursuant to the anti-SLAPP statute's fee provision relying principally on Liu v. Moore (1999) 69 Cal.App.4th 745, 750-752 and Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 217-219. [CCP § 425.16, subd. (c)]. See also the most recent case on point, Tourgeman v. Nelson & Kennard (2014) 222 Cal.App.4th 1447, 1456-1457 [adopting the holdings and reasoning of Liu and Pfeiffer]. A few weeks later, a different judge down the hall, Judge B, ruled that the court had no jurisdiction to rule on the merits of the SLAPP motion, took the motion off calendar, and ordered defendants to argue the entitlement or prevailing party issue in defendant's subsequent motion for mandatory attorney's fees relying primarily on Kyle v. Carmon (1999) 71 Cal.App.4th at p. 908, fn. 4; and The Law Office of Andrew Ellis v. Yang (2009) 178 Cal.App.4th 869, 879. Judge B further ruled: "until defendant makes a motion for an award of attorneys fees and costs, the Court need not consider the merits." To Judge B's credit, however, His Honor ordered that the parties may not file any new briefing or evidence with respect to the merits of the SLAPP motion and that the preliminary question of who is the prevailing party shall be based solely upon the party's moving papers submitted in support of the initial anti-SLAPP motion as requested by defense counsel.
Even more perplexing is the palpable conflict of authority among a number of Second District cases. The approach taken in Liu v. Moore/Pfeiffer Venice Properties, supra, I believe, best comports with the plain language and policies undergirding the anti-SLAPP statute. Both cases hold, with the latter relying on the former, that the court is "required" to hear the SLAPP motion on its merits in order to determine the prevailing party on the anti-SLAPP motion before fees can be awarded. See also Tourgeman, supra. Moreover, it would seem to promote judicial economy for the court to resolve the merits issue while the SLAPP motion is teed up for the court rule on rather than have the parties wait and relitigate that issue as part of the fee motion - which is likely to be contentious in its own right. It definitely puts the specially moving SLAPP defendant at a significant disadvantage to have both motions ruled on in one fee motion. Furthermore, it is imperative to note that the Law Office of Andrew Ellis v. Yang (2009) 178 Cal.App.4th 869, 878 never even once mentioned the 1999 Liu v. Moore, supra, case, which is the landmark SLAPP case on this issue. This becomes more of an anomaly when one considers that all three of these cases (i.e. Liu, Pfeiffer, and Yang) are Second District cases. As shown below, Ellis and other similar cases do not comport with the plain language and policy of section 425.16.
As shown at length in Liu v. Moore (1999) 69 Cal.App.4th 745, inter alia, when plaintiff dismisses its action, with or without prejudice, in response to a pending section 425.16 anti-SLAPP motion, defendants have the right to a ruling on their special motion to strike as a necessary predicate to an award of attorney's fees. Id., at 751. The weight of authority in this situation holds that where a plaintiff dismisses its action in response to a SLAPP motion, the court must rule on the merits of the SLAPP motion as a predicate to an attorney fee award and retains jurisdiction to do so. Id.; Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 218-219 [accord approving of Liu, supra]; Tourgeman v. Nelson & Kennard (2014) 222 Cal.App.4th 1447, 1456-1457 [adopting the holdings and reasoning of Liu and Pfeiffer]. See also South Sutter, LLC v. L.J. Sutter Partners, L.P. (2011) 193 Cal.App.4th 634, 667 [anti-SLAPP procedure provides "a mechanism whereby a complaint's lack of merit can be determined on the merits after the complaint is dismissed]. But see Ellis, supra, 178 Cal.App.4th at 879 citing (Kyle v. Carmon (1999) 71 Cal.App.4th 901, 908, contra, [court had no jurisdiction to rule on the merits of the SLAPP motion after complaint dismissed].
"The purpose of section 425.16 is clearly to give relief, including financial relief in the form of attorney's fees and costs, to persons who have been victimized by meritless retaliatory SLAPP suits because of their participation in matters of public significance (§ 425.16, subd. (a))" Liu., at 750. "We hold that a defendant who is voluntarily dismissed, with or without prejudice, after filing a section 425.16 motion to strike, is nevertheless entitled to have the merits of such motion heard as a predicate to an award of attorney's fees and costs under subdivision (c) of that section." Liu, supra; Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211 [accord].
"Therefore, the trial court's adjudication of the merits of a defendant's special motion to strike is an `essential' predicate to a ruling on the defendant's request for an award of attorney's fees and costs. An award of these expenses under section 425.16 is only justified when a defendant demonstrates that plaintiff's action falls within the provisions of subdivision (b) and the plaintiff is unable to establish a reasonable probability of success. Until a court determines that these circumstances exist, a moving defendant is not entitled to fees and costs under section 425.16. If such judicial determinations were not first required, and a fair procedural opportunity to obtain it allowed, then a plaintiff's voluntary dismissal of the action could have the effect of (1) depriving the defendant statutorily authorized fees, or (2) entitling a defendant to such relief in a non-SLAPP action which was dismissed by plaintiff for entirely legitimate reasons. In both situations, the purpose of the statute's remedial provisions would be frustrated." Liu, supra,, at 752-753.
The Liu court's cogent reasoning plainly demonstrates that the approach taken in Ellis, Coltraine, and Kyle v. Carmon is fundamentally misguided because the moving party must first be adjudicated the prevailing party on the merits of the SLAPP motion before fees can be awarded according the terms of the statute. [Both Ellis and Kyle, supra, hold that the court lacks jurisdiction to rule on the merits of the SLAPP motion once plaintiff dismisses the complaint in response to a pending SLAPP motion and that the court must go back and decide which party would have prevailed on the SLAPP motion in connection with a subsequent fee motion]. While Coltraine, supra, holds that the court has jurisdiction to decide the prevailing party issue on the SLAPP motion, that case also holds that the court has "discretion" to either rule on the merits of the motion or simply decide who the prevailing party is without a ruling based solely on plaintiff's purported motives for dismissal. So if the court has "discretion" to decide the prevailing party issue without ruling on the SLAPP motion, then the court could easily end up depriving a worthy SLAPP defendant of fees and costs that Legislature intended them to have or it could award a windfall of SLAPP fees to an unworthy defendant without first requiring defendant to show that at least prong one of the anti-SLAPP statute has been satisfied. Thus, the Ellis/Kyle/Coltraine approach may result in both overbroad and underinclusive SLAPP fee awards. At minimum, the Ellis/Kyle/Coltraine approach unnecessarily frustrates the goal judicial economy and puts the fee applicant at an unfair disadvantage by forcing the applicant to brief and the court to, in effect, rule on two motions in one. In contrast, the Liu/Pfeiffer/Tourgeman approach best encourages participation in matters of public significance by encouraging attorneys to take on the defense of worthy SLAPP targets - without fear of plaintiff dismissing and evading SLAPP fees. On a final note, our High Court held that a plaintiff or cross-complainant can dismiss the complaint at any time before the SLAPP motion is filed without penalty. S.B. Beach Properties v. Berti (2006) 39 Cal.4th 374. So plaintiffs do have a ready escape hatch and a meaningful opportunity to screen and reevaluate their complaints for SLAPP issues before the defendants can get their motion on file - usually within the first 30-60 days after the complaint is served. [CCP § 425.16, subd. (f)].
For the foregoing reasons, I believe courts should follow the Liu/Pfeiffer/Tourgeman line of authority and resolve the merits of the anti-SLAPP motion where plaintiff dismisses the complaint in response to a pending SLAPP motion. But until the California Supreme Court weighs in on this issue, each party will have to argue cases that support their side, roll the dice, and hope the trial judge adopts the line of authority favorable to their client. This issue is in urgent need of High Court resolution - right up there with mixed causes of action on prong two. Based on recent denials of numerous petitions on these ripe SLAPP issues, it does not appear that our High Court will intervene anytime soon.
James J. Moneer, Esq. has been handling SLAPP motions, civil appeals, and SLAPP fee motions for plaintiffs and defendants throughout California since 1994. He has been a regular panelist on The Rutter Group anti-SLAPP seminars since 2003 and a panelist on Pincus Professional Education's anti-SLAPP seminars since 2009. He teaches anti-SLAPP law at the University of San Diego School of Law. He also testifies as an anti-SLAPP attorney fee and SLAPP legal malpractice expert and has published numerous articles on the subject. Web: www.slapplaw.com. Blog: www.slapplaw.blogspot.com
* NOTE:THIS ARTICLE WAS PREVIOUSLY PUBLISHED IN THE SEPTEMBER 5, 2014 EDITION OF THE LA DAILY JOURNAL
What happens when a plaintiff dismisses the complaint in lieu of opposition to a pending SLAPP motion pursuant to CCP section 425.16? Very recently, I have experienced wide variation in what different trial judges will do when confronted with this situation. I filed two SLAPP motions, in two different cases, before two different trial judges in the same courthouse. Both cases involved defamation, internet libel, and malicious prosecution claims. In both cases, each plaintiff dismissed the complaint in lieu of opposition within weeks of each other. Judge A heard the SLAPP motion on its merits and granted it in order determine prevailing party status for purposes of a subsequent motion for an award of mandatory attorney's fees pursuant to the anti-SLAPP statute's fee provision relying principally on Liu v. Moore (1999) 69 Cal.App.4th 745, 750-752 and Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 217-219. [CCP § 425.16, subd. (c)]. See also the most recent case on point, Tourgeman v. Nelson & Kennard (2014) 222 Cal.App.4th 1447, 1456-1457 [adopting the holdings and reasoning of Liu and Pfeiffer]. A few weeks later, a different judge down the hall, Judge B, ruled that the court had no jurisdiction to rule on the merits of the SLAPP motion, took the motion off calendar, and ordered defendants to argue the entitlement or prevailing party issue in defendant's subsequent motion for mandatory attorney's fees relying primarily on Kyle v. Carmon (1999) 71 Cal.App.4th at p. 908, fn. 4; and The Law Office of Andrew Ellis v. Yang (2009) 178 Cal.App.4th 869, 879. Judge B further ruled: "until defendant makes a motion for an award of attorneys fees and costs, the Court need not consider the merits." To Judge B's credit, however, His Honor ordered that the parties may not file any new briefing or evidence with respect to the merits of the SLAPP motion and that the preliminary question of who is the prevailing party shall be based solely upon the party's moving papers submitted in support of the initial anti-SLAPP motion as requested by defense counsel.
Even more perplexing is the palpable conflict of authority among a number of Second District cases. The approach taken in Liu v. Moore/Pfeiffer Venice Properties, supra, I believe, best comports with the plain language and policies undergirding the anti-SLAPP statute. Both cases hold, with the latter relying on the former, that the court is "required" to hear the SLAPP motion on its merits in order to determine the prevailing party on the anti-SLAPP motion before fees can be awarded. See also Tourgeman, supra. Moreover, it would seem to promote judicial economy for the court to resolve the merits issue while the SLAPP motion is teed up for the court rule on rather than have the parties wait and relitigate that issue as part of the fee motion - which is likely to be contentious in its own right. It definitely puts the specially moving SLAPP defendant at a significant disadvantage to have both motions ruled on in one fee motion. Furthermore, it is imperative to note that the Law Office of Andrew Ellis v. Yang (2009) 178 Cal.App.4th 869, 878 never even once mentioned the 1999 Liu v. Moore, supra, case, which is the landmark SLAPP case on this issue. This becomes more of an anomaly when one considers that all three of these cases (i.e. Liu, Pfeiffer, and Yang) are Second District cases. As shown below, Ellis and other similar cases do not comport with the plain language and policy of section 425.16.
As shown at length in Liu v. Moore (1999) 69 Cal.App.4th 745, inter alia, when plaintiff dismisses its action, with or without prejudice, in response to a pending section 425.16 anti-SLAPP motion, defendants have the right to a ruling on their special motion to strike as a necessary predicate to an award of attorney's fees. Id., at 751. The weight of authority in this situation holds that where a plaintiff dismisses its action in response to a SLAPP motion, the court must rule on the merits of the SLAPP motion as a predicate to an attorney fee award and retains jurisdiction to do so. Id.; Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 218-219 [accord approving of Liu, supra]; Tourgeman v. Nelson & Kennard (2014) 222 Cal.App.4th 1447, 1456-1457 [adopting the holdings and reasoning of Liu and Pfeiffer]. See also South Sutter, LLC v. L.J. Sutter Partners, L.P. (2011) 193 Cal.App.4th 634, 667 [anti-SLAPP procedure provides "a mechanism whereby a complaint's lack of merit can be determined on the merits after the complaint is dismissed]. But see Ellis, supra, 178 Cal.App.4th at 879 citing (Kyle v. Carmon (1999) 71 Cal.App.4th 901, 908, contra, [court had no jurisdiction to rule on the merits of the SLAPP motion after complaint dismissed].
"The purpose of section 425.16 is clearly to give relief, including financial relief in the form of attorney's fees and costs, to persons who have been victimized by meritless retaliatory SLAPP suits because of their participation in matters of public significance (§ 425.16, subd. (a))" Liu., at 750. "We hold that a defendant who is voluntarily dismissed, with or without prejudice, after filing a section 425.16 motion to strike, is nevertheless entitled to have the merits of such motion heard as a predicate to an award of attorney's fees and costs under subdivision (c) of that section." Liu, supra; Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211 [accord].
"Therefore, the trial court's adjudication of the merits of a defendant's special motion to strike is an `essential' predicate to a ruling on the defendant's request for an award of attorney's fees and costs. An award of these expenses under section 425.16 is only justified when a defendant demonstrates that plaintiff's action falls within the provisions of subdivision (b) and the plaintiff is unable to establish a reasonable probability of success. Until a court determines that these circumstances exist, a moving defendant is not entitled to fees and costs under section 425.16. If such judicial determinations were not first required, and a fair procedural opportunity to obtain it allowed, then a plaintiff's voluntary dismissal of the action could have the effect of (1) depriving the defendant statutorily authorized fees, or (2) entitling a defendant to such relief in a non-SLAPP action which was dismissed by plaintiff for entirely legitimate reasons. In both situations, the purpose of the statute's remedial provisions would be frustrated." Liu, supra,, at 752-753.
The Liu court's cogent reasoning plainly demonstrates that the approach taken in Ellis, Coltraine, and Kyle v. Carmon is fundamentally misguided because the moving party must first be adjudicated the prevailing party on the merits of the SLAPP motion before fees can be awarded according the terms of the statute. [Both Ellis and Kyle, supra, hold that the court lacks jurisdiction to rule on the merits of the SLAPP motion once plaintiff dismisses the complaint in response to a pending SLAPP motion and that the court must go back and decide which party would have prevailed on the SLAPP motion in connection with a subsequent fee motion]. While Coltraine, supra, holds that the court has jurisdiction to decide the prevailing party issue on the SLAPP motion, that case also holds that the court has "discretion" to either rule on the merits of the motion or simply decide who the prevailing party is without a ruling based solely on plaintiff's purported motives for dismissal. So if the court has "discretion" to decide the prevailing party issue without ruling on the SLAPP motion, then the court could easily end up depriving a worthy SLAPP defendant of fees and costs that Legislature intended them to have or it could award a windfall of SLAPP fees to an unworthy defendant without first requiring defendant to show that at least prong one of the anti-SLAPP statute has been satisfied. Thus, the Ellis/Kyle/Coltraine approach may result in both overbroad and underinclusive SLAPP fee awards. At minimum, the Ellis/Kyle/Coltraine approach unnecessarily frustrates the goal judicial economy and puts the fee applicant at an unfair disadvantage by forcing the applicant to brief and the court to, in effect, rule on two motions in one. In contrast, the Liu/Pfeiffer/Tourgeman approach best encourages participation in matters of public significance by encouraging attorneys to take on the defense of worthy SLAPP targets - without fear of plaintiff dismissing and evading SLAPP fees. On a final note, our High Court held that a plaintiff or cross-complainant can dismiss the complaint at any time before the SLAPP motion is filed without penalty. S.B. Beach Properties v. Berti (2006) 39 Cal.4th 374. So plaintiffs do have a ready escape hatch and a meaningful opportunity to screen and reevaluate their complaints for SLAPP issues before the defendants can get their motion on file - usually within the first 30-60 days after the complaint is served. [CCP § 425.16, subd. (f)].
For the foregoing reasons, I believe courts should follow the Liu/Pfeiffer/Tourgeman line of authority and resolve the merits of the anti-SLAPP motion where plaintiff dismisses the complaint in response to a pending SLAPP motion. But until the California Supreme Court weighs in on this issue, each party will have to argue cases that support their side, roll the dice, and hope the trial judge adopts the line of authority favorable to their client. This issue is in urgent need of High Court resolution - right up there with mixed causes of action on prong two. Based on recent denials of numerous petitions on these ripe SLAPP issues, it does not appear that our High Court will intervene anytime soon.
James J. Moneer, Esq. has been handling SLAPP motions, civil appeals, and SLAPP fee motions for plaintiffs and defendants throughout California since 1994. He has been a regular panelist on The Rutter Group anti-SLAPP seminars since 2003 and a panelist on Pincus Professional Education's anti-SLAPP seminars since 2009. He teaches anti-SLAPP law at the University of San Diego School of Law. He also testifies as an anti-SLAPP attorney fee and SLAPP legal malpractice expert and has published numerous articles on the subject. Web: www.slapplaw.com. Blog: www.slapplaw.blogspot.com
* NOTE:THIS ARTICLE WAS PREVIOUSLY PUBLISHED IN THE SEPTEMBER 5, 2014 EDITION OF THE LA DAILY JOURNAL
Saturday, August 9, 2014
Giving Legal Advice Prior To Filing Suit Is Protected By SLAPP And Barred By Litigation Privilege
In a recent unpublished case before the Second Dist. California Court of Appeal, Div. One., Kirkland v. Rappaport (B243607), the court expounded on the breadth of both the anti-SLAPP statute of CCP section 425.16 and the litigation privilege of CC 47(b) in a libel action where a lawyer or nonlawyer consultant writes a report for the client and his/her legal team to use in determining the feasibility of filing a proposed lawsuit. This case illustrates the broad protection provided to attorneys and other consultants who advise their clients as to the merits of proposed litigation.
Kirkland, a Pacific Palisades attorney, filed a libel action against attorney Rapport and the Akin Gump S.F. firm. San Francisco sole practitioner Douglas Rapport, formerly with the firm of Akin Gump, had written a report for a client, U.S. Aerospace, Inc., in which he concluded that Kirkland"likely violated his professional responsibilities as USAE's outside general counsel" and violated his fiduciary duties of loyalty, good faith, and care to the company. The report was also critical of a Charles Arnold, a former consultant to the company. Arnold was also a plaintiff in the libel action and Rapport was a defendant.
Disputing plaintiff's contention that no litigation was imminent, Justice Rothschild said, " the record shows that the USAE officers were seriously considering litigation against plaintiffs if Rapport's report confirmed their suspicion of plaintiff's wrongdoing.
Justice Rothchild observed that plaintiffs had no chance of prevailing on the merits in light of the litigation privilege; remarking:
"This is a classic case for the application of the litigation privilege because plaintiff are suing an attorney and his law firm based on confidential legal advice they supplied to a client in anticipation of litigation."
Taheri Law Group v. Evans (2006) 160 Cal.App.4th 482, 489-492 is a landmark case similarly on point. Attorney A sued Attorney B for intentional interference with contract where client sought out attorney B for a second opinion as to how to settle his pending lawsuit. Attorney B advised client to discharge Attorney A and not to pay his fees due to various breaches of the duty of care and fiduciary duties. First, the court held the act of giving legal advice to a client in the course of pending litigation goes to the heart of the client and the lawyer's petition rights. Hence, the cause of action arose from Attorney B's communications with the prospective client regarding Attorney A's actions during the pending litigation and that as a result, the claim was also barred by the litigation privilege. Moreover, the court held that as a matter of public policy, the commercial speech exemption from the anti-SLAPP statute under CCP 425.17(c) did not apply even though the plain language would indicate otherwise. - Legal advice to client during pending litigation.
The Kirkland case is one step removed from Taheri as it involved attorneys and consultants supplying advice to clients to assess the merits of filing a prospective lawsuit that was imminent and seriously contemplated. No commercial speech issue was raised in Kirkland - legal advice to client in contemplation of lawsuit.
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* EXPERT TESTIMONY IN SLAPP FEE MOTIONS
* EXPERT TESTIMONY IN SLAPP MALPRACTICE CASES
For more information contact James J. Moneer, Esq. at (619) 723-7030
Kirkland, a Pacific Palisades attorney, filed a libel action against attorney Rapport and the Akin Gump S.F. firm. San Francisco sole practitioner Douglas Rapport, formerly with the firm of Akin Gump, had written a report for a client, U.S. Aerospace, Inc., in which he concluded that Kirkland"likely violated his professional responsibilities as USAE's outside general counsel" and violated his fiduciary duties of loyalty, good faith, and care to the company. The report was also critical of a Charles Arnold, a former consultant to the company. Arnold was also a plaintiff in the libel action and Rapport was a defendant.
Disputing plaintiff's contention that no litigation was imminent, Justice Rothschild said, " the record shows that the USAE officers were seriously considering litigation against plaintiffs if Rapport's report confirmed their suspicion of plaintiff's wrongdoing.
Justice Rothchild observed that plaintiffs had no chance of prevailing on the merits in light of the litigation privilege; remarking:
"This is a classic case for the application of the litigation privilege because plaintiff are suing an attorney and his law firm based on confidential legal advice they supplied to a client in anticipation of litigation."
Taheri Law Group v. Evans (2006) 160 Cal.App.4th 482, 489-492 is a landmark case similarly on point. Attorney A sued Attorney B for intentional interference with contract where client sought out attorney B for a second opinion as to how to settle his pending lawsuit. Attorney B advised client to discharge Attorney A and not to pay his fees due to various breaches of the duty of care and fiduciary duties. First, the court held the act of giving legal advice to a client in the course of pending litigation goes to the heart of the client and the lawyer's petition rights. Hence, the cause of action arose from Attorney B's communications with the prospective client regarding Attorney A's actions during the pending litigation and that as a result, the claim was also barred by the litigation privilege. Moreover, the court held that as a matter of public policy, the commercial speech exemption from the anti-SLAPP statute under CCP 425.17(c) did not apply even though the plain language would indicate otherwise. - Legal advice to client during pending litigation.
The Kirkland case is one step removed from Taheri as it involved attorneys and consultants supplying advice to clients to assess the merits of filing a prospective lawsuit that was imminent and seriously contemplated. No commercial speech issue was raised in Kirkland - legal advice to client in contemplation of lawsuit.
GOT SLAPP PROBLEMS? PLAINTIFF OR DEFENDANT? WE CREATE SOLUTIONS!!
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For more information contact James J. Moneer, Esq. at (619) 723-7030
Wednesday, July 23, 2014
OLD REPUBLIC CLARIFIES "GRAVAMEN" TEST AND ADOPTS BROAD CONSTRUCTION
In a case that looks remarkably similar to Navellier v. Sletten (2002) 29 Cal.App.4th 82, the recent case of Old Republic Construction Program Group v. Boccardo Law Group (6/27/14 2014) 2014 WL 2900932, the court distinguished Navellier using the elusive "Gravamen" test. The question presented is whether the statute applies to claims alleging that defendants wrongfully withdrew settlement funds derived from a now-defunct lawsuit, which they had deposited into their trust account pursuant to a stipulation requiring Old Republic's consent prior to any withdrawal of funds. The thrust of all causes of action is that defendants Boccardo and Stein breached the contract and committed fraud and breach of fiduciary duty by dispersing the settlement proceeds without Old Republic's consent. The trial court granted the SLAPP motion based on Navellier, supra. But the Court of Appeal reversed. The court held that if the cause of action arose from the stipulation, then Navellier would apply and the motion should have been granted. The court, however, reasoned that the injury-producing conduct upon which the cause of action was based consisted of nothing more than than the withdrawal of funds - a noncommunicative act. By its plain language the first 3 subdivisions of section 425.16 only apply to oral or written statements - communicative acts. Because the withdrawal of funds was not communicative, that act could not be subject to anti-SLAPP treatment unless it were connected to a public issue under subd. (e)(4). Because there was no connection to a public issue, the court held that prong one was not met and denied the SLAPP motion accordingly.
The court reviewed prior cases and obeserved that a cause of action can only be said to arise from protected conduct if it alleges at least one wrongful act - conduct allegedly breaching a duty and injuring the plaintiff - that falls within the definition of protected conduct. This is a proper broad plain language construction of the gravamen/mixed cause of action test. Cases to the contrary, are repugnant to the statute's plain language and legislative purpose. But the CA High Court will have to weigh in to definitively resolve the conflict.
The lesson I have been teaching to students and lawyers for years is that simply because you see protected activity floating around in the cause of action, does not mean that the liability arises from it. It is the injury-producing conduct that must be the focus.
The court also canvassed a plethora of authorities and held that an order partially granting a SLAPP motion and partially denying a SLAPP motion is immediately appealable under CCP 904.1(a)(13).
Old Republic is an interesting case and provides much guidance and a clearer test for determining the gravamen of a cause of action.
GOT SLAPP PROBLEMS??
PLAINTIFF OR DEFENSE?
WE CREATE SOLUTIONS ANYWHERE IN CALIFORNIA OR OUT OF STATE!!
* SLAPP MOTIONS, SLAPP FEE MOTIONS, SLAPP APPEALS
* EXPERT CONSULTATION AND SPECIAL COUNSEL WORK
* EXPERT SLAPP FEE TESTIMONY
* EXPERT SLAPP MALPRACTICE TESTIMONY
James J. Moneer, Esq.
(619) 723-7030
The court reviewed prior cases and obeserved that a cause of action can only be said to arise from protected conduct if it alleges at least one wrongful act - conduct allegedly breaching a duty and injuring the plaintiff - that falls within the definition of protected conduct. This is a proper broad plain language construction of the gravamen/mixed cause of action test. Cases to the contrary, are repugnant to the statute's plain language and legislative purpose. But the CA High Court will have to weigh in to definitively resolve the conflict.
The lesson I have been teaching to students and lawyers for years is that simply because you see protected activity floating around in the cause of action, does not mean that the liability arises from it. It is the injury-producing conduct that must be the focus.
The court also canvassed a plethora of authorities and held that an order partially granting a SLAPP motion and partially denying a SLAPP motion is immediately appealable under CCP 904.1(a)(13).
Old Republic is an interesting case and provides much guidance and a clearer test for determining the gravamen of a cause of action.
GOT SLAPP PROBLEMS??
PLAINTIFF OR DEFENSE?
WE CREATE SOLUTIONS ANYWHERE IN CALIFORNIA OR OUT OF STATE!!
* SLAPP MOTIONS, SLAPP FEE MOTIONS, SLAPP APPEALS
* EXPERT CONSULTATION AND SPECIAL COUNSEL WORK
* EXPERT SLAPP FEE TESTIMONY
* EXPERT SLAPP MALPRACTICE TESTIMONY
James J. Moneer, Esq.
(619) 723-7030
Wednesday, April 2, 2014
CONCEALMENT OF CLIENT'S BANKRUPTCY IN SETTLEMENT IS PRIVILEGED ACTIVITY AND LAWSUIT WAS DISMISSED AS A SLAPP
In a recent SLAPP case, Livingiston v. Ballantine (B250110), attorney Ballantine failed to disclose his client's bankruptcy in the course of settlement negotiations in the underlying action. As a result, Livingston was never listed as a creditor in the Bankruptcy. Livingston then sued the attorney, Ballantine for fraud for concealing his client's bankruptcy in inducing the settlement. In a case, that reasons remarkably similar to Navellier v. Sletten (2002) 29 Cal.4th 82, the court of appeal held that the act of concealing the bankruptcy was protected activity under CCP 425.16, subdivision (e)(2), the anti-SLAPP statute, and that the fraud claim was barred by the litigation privilege of CC 47(b) - similar to Navellier v. Sletten. The most curious aspect of this case is that the court of appeal held that failure to disclose the bankruptcy (a negative fraud) was a "communicative act" for purposes of the litigation privilege. The litigation privilege has been held not to cover "noncomunicative" conduct in other contexts. But the significance of this case is that a lawyer has no legal duty to disclose his client's bankruptcy in the midst of settling pending litigation and may conceal the fact of the bankruptcy to induce the settlement without penalty because it is part and parcel of his right to petition on behalf of his client.
Wednesday, February 19, 2014
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.
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.
Wednesday, December 11, 2013
SLAPPS: FINE LINE DISTINCTION BETWEEN LEGITIMATE CIVIL DEMAND LETTER AND CRIMINAL EXTORTION
The illegality as a matter of law doctrine, expounded by our High Court in Flatley v Mauro (2006) 39 Cal.4th 299, is, perhaps, the most overused and abused exemption from anti-SLAPP motions. While illegality can be a lifesaver for plaintiffs in those rare cases where it is an appropriate bar to a SLAPP motion, very often, illegality ends up being the typical SLAPP plaintiff's argument of last resort but ultimately unavailing. The general rule is that the anti-SLAPP statute is to be construed broadly. [CCP § 425.16, subd. (a)]. But the corollary to this rule is that exemptions from the anti-SLAPP statute, like illegality and those under CCP § 425.17, must be construed narrowly. Members for an Honest Election Club v. Sierra Club (2008) 45 Cal.4th 309; Hutton v. Hafif (2007) 150 Cal.App.4th 527, 543-545.
Malin v. Singer (filed 7/16/13; No. B237804) illustrates the extreme narrowness of Flatley's illegality doctrine in distinguishing the pre-litigation demand letter in Malin from the criminally extortionate demand letters in Flatley and Mendoza v. Hamzeh (2013) 215 Cal.App.4th 799. Malin, Moore, and defendant Arazm are general partners of Geisha House, LLC (company). In 2011, Arazm consulted her attorney, Martin Singer, regarding Malin and Moore's alleged misappropriation of company assets. Singer sent Malin a demand letter and draft of Arazm's proposed complaint. The demand letter contained what Malin contends was an extortionate threat to disclose certain personal information if he did not pay to settle Arazm's claims.
The demand letter stated in pertinent part: "As a result of your embezzlement, conversion, and breach of fiduciary duty, you have misappropriated more than a million dollars from my client. As a result, my client intends to file the enclosed lawsuit against you, Moore and [others]. `As alleged in the complaint', you, Mr. Moore, and [others] have been embezzling and stealing money from Ms. Arazm and Geisha House for years." In substance, the letter went on to detail the allegations of the civil complaint regarding the schemes Malin and Moore devised to embezzle money, information regarding insurance scams defendants perpetrated as part of the complaint, and illegal transfers of money embezzled in an effort to avoid taxing authorities. Finally, the letter set forth the allegation of the complaint charging Malin had misused company resources to arrange sexual liaisons with older men, including an unidentified L.A. Superior Court Judge (retired) (name intentionally left blank but provided a photo of judge and stated that the name would not be blank if the complaint were filed).
After he received the demand letter, Malin sued Singer and Arazm for civil extortion, violation of civil rights, and intentional and negligent infliction of emotional distress. The latter two causes of action were based on illegal computer hacking and wiretapping tapping activities. The Malin court held that the latter two causes of action were based on activity that was illegal as a matter of law relying on Gerbosi v. Gaims, Weil, West & Epstein (2011) 193 Cal.App.4th 435, 445-446. In contrast, Malin found that the civil extortion claim based on the demand letter did not constitute criminal extortion as a matter of law, that the demand letter constituted protected petition activity under the anti-SLAPP statute, and that the claim was barred by the litigation privilege on CC § 47(b) on prong two. Malin reversed the trial court order denying the SLAPP motion as to the civil extortion claim but affirmed in all other respects.
Malin distinguished a similar demand letter in Flatley, which constituted criminal extortion as a matter of law. Criminal extortion is defined as "obtaining of property from another, with his consent... induced by a `wrongful' use of force or fear ... (Pen. Code § 518). Fear for purposes of extortion may be induced by a threat, either:... 2. to accuse the individual threatened, or any relative of his, or member of his family, of any crime; or, 3. To expose, or impute to `him or them' ... any deformity, disgrace or crime; or, 4. To expose any secret affecting `him or them'. (Pen. Code § 519). ~Every person who, with intent to extort money or other property from another, sends or delivers to any person any letter or writing, ... expressing or implying... any threat such as specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat. (Pen. Code § 523). Indeed, the Rules of Professional Conduct specifically prohibit attorneys from `threatening to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute. Flatley, at 327.
Michael Flatley, "the Lord of the Dance" was threatened with rape allegations by Ms. Robertson. Her attorney, Mauro, sent Flatley a demand letter, which expressly threatened to go public (to the media worldwide) with rape allegations and report him to various immigration, taxing, and other authorities if Flatley did not pay $1,000,000 for Mauro and Robertson's silence within 30 days. This threat was reiterated in a phone call to Flatley's attorney.
The Flatley exemption holds that the plaintiff must show that the defendant has either "effectively conceded, or that the evidence `conclusively' establishes, that the assertedly protected speech or petition activity was illegal `as a matter of law'" - such there can be no factual dispute on the point. If such a showing is made, the defendant is barred from using the anti-SLAPP procedure to dismiss the case regardless of merit. Moreover, the illegality established must constitute a violation of a specific criminal statute. G.R. v. Intelligator (2010) 185 Cal.App.4th 606.
The Flatley court found that Mauro's demand letter constitutes criminal extortion as a matter of law and thus Mauro could not challenge Flatley's complaint with a SLAPP motion even though the court assumed, without deciding, that the litigation privilege of CC § 47(b) applied. Flatley observed that the two statutes are not co-extensive. Flatley, at 322.
A key to understanding the Malin/Flatley distinction is the precise relationship between the anti-SLAPP statute's official proceeding prongs and the litigation privilege of CC § 47(b). An informed anti-SLAPP analysis must begin with the general rule, articulated by our High Court in Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1115 that where a communication is privileged under CC § 47(b), it will ordinarily be subject to a special motion to strike under the official proceeding prongs of subds. (e)(1),(2) of CCP § 425.16 as both statutes were intended to protect certain aspects of the First Amendment right of petition albeit in different ways. Malin, at 10. In contrast, the illegality exception in Flatley and Mendoza merely holds that simply because liability is based on a privileged communication under CC § 47(b), that does not, by itself, necessarily mean that the communication qualifies as a protected act under the anti-SLAPP statute and vice versa. Flatley v. Mauro (2006) 39 Cal.4th 299, 322-325. While the two statutes do not target precisely the same activity, there is significant overlapping coverage.
Malin observed that the "secret" that would allegedly expose Malin and others to disgrace was inextricably tied to Arazm's pending civil complaint. The demand letter accused him of embezzling money and simply informed him that Arazm knew how he had spent these funds. We cannot conclude that Malin's alleged activities [arranging sexual liaisons with old men] would subject him to any more disgrace than the claim that he was an embezzler. Second, to the extent Malin claims the threatened disclosure of secrets affecting a third party, his alleged sexual partner, necessarily constitutes extortion, he is mistaken. The third party - a retired judge - was neither a family member nor a relative under PC § 519. Most importantly, the Malin court concluded "We see a critical distinction between Singer's demand letter, which made no overt threat to report Malin to prosecuting authorities or the IRS, and the letters in Flatley and Mendoza, which contained those express threats and others that had no reasonable connection to the underlying dispute."
This article was previously published in the Los Angeles Daily Journal on July 23, 2013.
James J. Moneer, Esq. has been representing plaintiffs and defendants at all stages of anti-SLAPP litigation since 1994 and frequently testifies as an attorney fee expert. He has been a regular panelist on the The Rutter Group's Anti-SLAPP seminars and has been recognized as an expert in California anti-SLAPP law in Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 523-525. His website is www.slapplaw.com.
The illegality as a matter of law doctrine, expounded by our High Court in Flatley v Mauro (2006) 39 Cal.4th 299, is, perhaps, the most overused and abused exemption from anti-SLAPP motions. While illegality can be a lifesaver for plaintiffs in those rare cases where it is an appropriate bar to a SLAPP motion, very often, illegality ends up being the typical SLAPP plaintiff's argument of last resort but ultimately unavailing. The general rule is that the anti-SLAPP statute is to be construed broadly. [CCP § 425.16, subd. (a)]. But the corollary to this rule is that exemptions from the anti-SLAPP statute, like illegality and those under CCP § 425.17, must be construed narrowly. Members for an Honest Election Club v. Sierra Club (2008) 45 Cal.4th 309; Hutton v. Hafif (2007) 150 Cal.App.4th 527, 543-545.
Malin v. Singer (filed 7/16/13; No. B237804) illustrates the extreme narrowness of Flatley's illegality doctrine in distinguishing the pre-litigation demand letter in Malin from the criminally extortionate demand letters in Flatley and Mendoza v. Hamzeh (2013) 215 Cal.App.4th 799. Malin, Moore, and defendant Arazm are general partners of Geisha House, LLC (company). In 2011, Arazm consulted her attorney, Martin Singer, regarding Malin and Moore's alleged misappropriation of company assets. Singer sent Malin a demand letter and draft of Arazm's proposed complaint. The demand letter contained what Malin contends was an extortionate threat to disclose certain personal information if he did not pay to settle Arazm's claims.
The demand letter stated in pertinent part: "As a result of your embezzlement, conversion, and breach of fiduciary duty, you have misappropriated more than a million dollars from my client. As a result, my client intends to file the enclosed lawsuit against you, Moore and [others]. `As alleged in the complaint', you, Mr. Moore, and [others] have been embezzling and stealing money from Ms. Arazm and Geisha House for years." In substance, the letter went on to detail the allegations of the civil complaint regarding the schemes Malin and Moore devised to embezzle money, information regarding insurance scams defendants perpetrated as part of the complaint, and illegal transfers of money embezzled in an effort to avoid taxing authorities. Finally, the letter set forth the allegation of the complaint charging Malin had misused company resources to arrange sexual liaisons with older men, including an unidentified L.A. Superior Court Judge (retired) (name intentionally left blank but provided a photo of judge and stated that the name would not be blank if the complaint were filed).
After he received the demand letter, Malin sued Singer and Arazm for civil extortion, violation of civil rights, and intentional and negligent infliction of emotional distress. The latter two causes of action were based on illegal computer hacking and wiretapping tapping activities. The Malin court held that the latter two causes of action were based on activity that was illegal as a matter of law relying on Gerbosi v. Gaims, Weil, West & Epstein (2011) 193 Cal.App.4th 435, 445-446. In contrast, Malin found that the civil extortion claim based on the demand letter did not constitute criminal extortion as a matter of law, that the demand letter constituted protected petition activity under the anti-SLAPP statute, and that the claim was barred by the litigation privilege on CC § 47(b) on prong two. Malin reversed the trial court order denying the SLAPP motion as to the civil extortion claim but affirmed in all other respects.
Malin distinguished a similar demand letter in Flatley, which constituted criminal extortion as a matter of law. Criminal extortion is defined as "obtaining of property from another, with his consent... induced by a `wrongful' use of force or fear ... (Pen. Code § 518). Fear for purposes of extortion may be induced by a threat, either:... 2. to accuse the individual threatened, or any relative of his, or member of his family, of any crime; or, 3. To expose, or impute to `him or them' ... any deformity, disgrace or crime; or, 4. To expose any secret affecting `him or them'. (Pen. Code § 519). ~Every person who, with intent to extort money or other property from another, sends or delivers to any person any letter or writing, ... expressing or implying... any threat such as specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat. (Pen. Code § 523). Indeed, the Rules of Professional Conduct specifically prohibit attorneys from `threatening to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute. Flatley, at 327.
Michael Flatley, "the Lord of the Dance" was threatened with rape allegations by Ms. Robertson. Her attorney, Mauro, sent Flatley a demand letter, which expressly threatened to go public (to the media worldwide) with rape allegations and report him to various immigration, taxing, and other authorities if Flatley did not pay $1,000,000 for Mauro and Robertson's silence within 30 days. This threat was reiterated in a phone call to Flatley's attorney.
The Flatley exemption holds that the plaintiff must show that the defendant has either "effectively conceded, or that the evidence `conclusively' establishes, that the assertedly protected speech or petition activity was illegal `as a matter of law'" - such there can be no factual dispute on the point. If such a showing is made, the defendant is barred from using the anti-SLAPP procedure to dismiss the case regardless of merit. Moreover, the illegality established must constitute a violation of a specific criminal statute. G.R. v. Intelligator (2010) 185 Cal.App.4th 606.
The Flatley court found that Mauro's demand letter constitutes criminal extortion as a matter of law and thus Mauro could not challenge Flatley's complaint with a SLAPP motion even though the court assumed, without deciding, that the litigation privilege of CC § 47(b) applied. Flatley observed that the two statutes are not co-extensive. Flatley, at 322.
A key to understanding the Malin/Flatley distinction is the precise relationship between the anti-SLAPP statute's official proceeding prongs and the litigation privilege of CC § 47(b). An informed anti-SLAPP analysis must begin with the general rule, articulated by our High Court in Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1115 that where a communication is privileged under CC § 47(b), it will ordinarily be subject to a special motion to strike under the official proceeding prongs of subds. (e)(1),(2) of CCP § 425.16 as both statutes were intended to protect certain aspects of the First Amendment right of petition albeit in different ways. Malin, at 10. In contrast, the illegality exception in Flatley and Mendoza merely holds that simply because liability is based on a privileged communication under CC § 47(b), that does not, by itself, necessarily mean that the communication qualifies as a protected act under the anti-SLAPP statute and vice versa. Flatley v. Mauro (2006) 39 Cal.4th 299, 322-325. While the two statutes do not target precisely the same activity, there is significant overlapping coverage.
Malin observed that the "secret" that would allegedly expose Malin and others to disgrace was inextricably tied to Arazm's pending civil complaint. The demand letter accused him of embezzling money and simply informed him that Arazm knew how he had spent these funds. We cannot conclude that Malin's alleged activities [arranging sexual liaisons with old men] would subject him to any more disgrace than the claim that he was an embezzler. Second, to the extent Malin claims the threatened disclosure of secrets affecting a third party, his alleged sexual partner, necessarily constitutes extortion, he is mistaken. The third party - a retired judge - was neither a family member nor a relative under PC § 519. Most importantly, the Malin court concluded "We see a critical distinction between Singer's demand letter, which made no overt threat to report Malin to prosecuting authorities or the IRS, and the letters in Flatley and Mendoza, which contained those express threats and others that had no reasonable connection to the underlying dispute."
This article was previously published in the Los Angeles Daily Journal on July 23, 2013.
James J. Moneer, Esq. has been representing plaintiffs and defendants at all stages of anti-SLAPP litigation since 1994 and frequently testifies as an attorney fee expert. He has been a regular panelist on the The Rutter Group's Anti-SLAPP seminars and has been recognized as an expert in California anti-SLAPP law in Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 523-525. His website is www.slapplaw.com.
Wednesday, July 10, 2013
FAMILY LAW, MALICIOUS PROSECUTION. ABUSE OF PROCESS, AND DEFAMATION
The anti-SLAPP statute is constantly venturing into more and more civil practice areas. Family law is no exception. First, there are special rules that apply to speech and litigation based claims arising from family law and civil harassment proceedings. First and foremost is the Bidna v. Rosen (1993) 19 Cal.App.4th 27, 34, 37 rule: which created "an absolute bar of malicious prosecution claims based on any kind of family law motion or OSC.... no California case has yet to extend the malicious prosecution tort to family law actions." Under Siam v. Kizilbash (2005) 130 Cal.App.4th 1563 the court extended the ban on malicious prosecutions actions in family law to cases arising from prior unsuccessful petitions for civil harassment injunctions under CCP 527.6. A year later, Robinzine v. Vicory (2006) 143 Cal.App.4th 1416 extended the ban to petitions for workplace harassment injunctions under CCP 527.8. Finally, Nakumura v. Parker (2007) 156 Cal.App.4th 327, by analogy, extended the Siam/Robinzine ban on malicious prosecution actions to domestic violence restraining orders under the DPVA at FC 6200 et seq.
What would SLAPP and litigation privilege jurisprudence be without exceptions and exceptions to exceptions? Yet there is hope for you plaintiffs who want to sue your ex wife, girlfriend, or neighbor or any voluntary reporter who makes a knowingly false child abuse report to a mandated reporter or mandated reporting agency including the police, therapist, teacher or principal under PC 11172(a). If a mandated reporter makes such a claim it is absolutely privileged from liability from any action under the litigation privilege and from any malicious prosecution action. Siam, supra. But the Legislature struck a balance by allowing a party wrongly accused of child abuse to file any claim for damages, except malicious prosecution, against a voluntary reporter who makes a "knowingly false" child abuse report. Siam, supra. See also Begier v. Strom (1996) 46 Cal.App.4th 877, 883-885. The Legislative History states "that providing only qualified immunity to voluntary reporters `is necessary to prevent a vindictive former spouse or neighbor [or girlfriend] from making a knowingly false report [of child abuse]." (AB 2497; SB 781]. But yet there is one more exception to the qualified immunity rule for voluntary reporters of child abuse - that is where the child victim, him/herself, makes a voluntary report of child abuse. Chabak v. Monroy (2007) 154 Cal.App.4th 1502, The victim of the alleged abuse who also reports it is absolutely immune from any and all liability for making the report under CC 47(b) and from malicious prosecution liability under Siam and Chabak.
The next tag along tort we often see arising from family proceedings is the abuse of process tort, which is often conflated with malicious prosecution. This is a fundamental mistake that many attorneys make as malicious prosecution is a separate and distinct tort form abuse of process in terms of the activity which it targets and the distinct privilege defenses that may apply to each. Bidna, supra, The former may ordinarily be predicated on the alleged improper initiation and/or continuance of a prior judicial or other quasi-judicial proceeding. Jarrow Formulas v. La Marche (2003) 31 Cal.4th 728 and Zamos v. Stroud (2004) 32 Cal.4th 958. Abuse of process lies for an abuse or misuse of the court's process once in a lawsuit and only after the court issues its process. So any abuse of process claim based on the alleged improper filing of a motion, OSC, or TRO or other application with the court will ordinarily be barred by the litigation privilege of CC 47(b) to the extent the gravamen of the actions is based on communicative conduct even if also connected to other noncommunicative acts. Rusheen v. Cohen (2006) 37 Cal.4th 1048. Abuse of process, unlike malicious prosecution, does not lie for the wrongful initiation or continuance of prior judicial proceedings while malicious prosecution does not lie for subsidiary procedural actions within a lawsuit like the filing of an application for a TRO. Begier, supra. Moreover, abuse of process may only be based on the misuse of the "court's" or "judicial" process not than of an administrative or quasi-judicial tribunal whereas malicious prosecution actions are generally not so limited. Unlike abuse of process, malicious prosecution is the only tort exempt from the litigation privilege of CC 47(b). Jarrow, supra; Silberg v. Anderson (1990) 50 Cal.3d 205.
The classic example of an actionable abuse of process action is illustrated by the following example: W goes into family court to get a domestic violence restraining order and the court grants it. Note this is the first prerequisite - the court must have issued an order pursuant to its processes. Then, after the RO is issued by the court, W goes out and intentionally places herself within 300 feet of H in order to get him thrown in jail and gain an undue advantage in the ongoing child custody proceedings or just to be vindictive and retaliate against H. This is a true abuse or process that is based solely on W's noncommunicative intentional act of moving her body into a location which will result in H's violation of the restraining order. Because it is based on purely on noncommunicative activity, the litigation privilege will not apply. Silberg v. Anderson (1990) 50 Cal.3d 205.
Now that we have seen that pleading derivative tort causes of action arising from prior family law, civil harassment, and child abuse proceedings is like traversing a minefield - a labrynth of statutory and common law privileges and defenses and exceptions thereto, suing for acts arising from family law and CPS proceedings has now become even more fraught with danger for the family law and civil litigation attorney alike. Malicious prosecution, abuse of process, and defamation are the least understood and most abused torts on the books, perhaps because they are not taught in most law schools. Also IIED claims are common here as well and just as difficult to prove, and when based in communicative petition activity, they are barred by the litigation privilege subject to the narrow exceptions discussed above. The lesson for plaintiffs' attorneys is to think hard and have your complaint screened for potential SLAPP and privilege issues and prepare for the SLAPP motion before filing it. For the defense, always look for ways to SLAPP these claims out of court. But this can be more difficult in light of the Mann rule on prong 2 mixed cause of actions. Mann v. Quality Old Time Service (2004) 129 Cal.app.4th 90, 106.
Losing plaintiffs will pay the other side's attorney's fees to the tune of tens of thousands of dollars. The losing defendant has an immediate right of appeal and will get appeal fees is successful on appeal. Then the defense will have the right to file a SLAPPBack malicious prosecution action under CCP 425.18 against the losing plaintiff and his/her attorneys in the prior action.
A competent and experienced SLAPP/malicious prosecution/defamation attorney can dramatically improve chances of winning or losing a SLAPP motion or opposition and, more importantly, can cut down a hefty fee request from the defense and maximize the defense fees with a detailed expert declaration.
While just about any cause of action can trigger a SLAPP motion, the most common SLAPP type claims involve malicious prosecution, abuse of process, defamation, internet libel, slander, trade libel, intentional interference with business, IIED, invasion of privacy, public nuisance claims based on expressive activity. All of these claims, except for malicious prosecution, often involve litigation and other privilege defenses.
Remember SLAPP motions are nuclear. Everything else is just a toy.
What would SLAPP and litigation privilege jurisprudence be without exceptions and exceptions to exceptions? Yet there is hope for you plaintiffs who want to sue your ex wife, girlfriend, or neighbor or any voluntary reporter who makes a knowingly false child abuse report to a mandated reporter or mandated reporting agency including the police, therapist, teacher or principal under PC 11172(a). If a mandated reporter makes such a claim it is absolutely privileged from liability from any action under the litigation privilege and from any malicious prosecution action. Siam, supra. But the Legislature struck a balance by allowing a party wrongly accused of child abuse to file any claim for damages, except malicious prosecution, against a voluntary reporter who makes a "knowingly false" child abuse report. Siam, supra. See also Begier v. Strom (1996) 46 Cal.App.4th 877, 883-885. The Legislative History states "that providing only qualified immunity to voluntary reporters `is necessary to prevent a vindictive former spouse or neighbor [or girlfriend] from making a knowingly false report [of child abuse]." (AB 2497; SB 781]. But yet there is one more exception to the qualified immunity rule for voluntary reporters of child abuse - that is where the child victim, him/herself, makes a voluntary report of child abuse. Chabak v. Monroy (2007) 154 Cal.App.4th 1502, The victim of the alleged abuse who also reports it is absolutely immune from any and all liability for making the report under CC 47(b) and from malicious prosecution liability under Siam and Chabak.
The next tag along tort we often see arising from family proceedings is the abuse of process tort, which is often conflated with malicious prosecution. This is a fundamental mistake that many attorneys make as malicious prosecution is a separate and distinct tort form abuse of process in terms of the activity which it targets and the distinct privilege defenses that may apply to each. Bidna, supra, The former may ordinarily be predicated on the alleged improper initiation and/or continuance of a prior judicial or other quasi-judicial proceeding. Jarrow Formulas v. La Marche (2003) 31 Cal.4th 728 and Zamos v. Stroud (2004) 32 Cal.4th 958. Abuse of process lies for an abuse or misuse of the court's process once in a lawsuit and only after the court issues its process. So any abuse of process claim based on the alleged improper filing of a motion, OSC, or TRO or other application with the court will ordinarily be barred by the litigation privilege of CC 47(b) to the extent the gravamen of the actions is based on communicative conduct even if also connected to other noncommunicative acts. Rusheen v. Cohen (2006) 37 Cal.4th 1048. Abuse of process, unlike malicious prosecution, does not lie for the wrongful initiation or continuance of prior judicial proceedings while malicious prosecution does not lie for subsidiary procedural actions within a lawsuit like the filing of an application for a TRO. Begier, supra. Moreover, abuse of process may only be based on the misuse of the "court's" or "judicial" process not than of an administrative or quasi-judicial tribunal whereas malicious prosecution actions are generally not so limited. Unlike abuse of process, malicious prosecution is the only tort exempt from the litigation privilege of CC 47(b). Jarrow, supra; Silberg v. Anderson (1990) 50 Cal.3d 205.
The classic example of an actionable abuse of process action is illustrated by the following example: W goes into family court to get a domestic violence restraining order and the court grants it. Note this is the first prerequisite - the court must have issued an order pursuant to its processes. Then, after the RO is issued by the court, W goes out and intentionally places herself within 300 feet of H in order to get him thrown in jail and gain an undue advantage in the ongoing child custody proceedings or just to be vindictive and retaliate against H. This is a true abuse or process that is based solely on W's noncommunicative intentional act of moving her body into a location which will result in H's violation of the restraining order. Because it is based on purely on noncommunicative activity, the litigation privilege will not apply. Silberg v. Anderson (1990) 50 Cal.3d 205.
Now that we have seen that pleading derivative tort causes of action arising from prior family law, civil harassment, and child abuse proceedings is like traversing a minefield - a labrynth of statutory and common law privileges and defenses and exceptions thereto, suing for acts arising from family law and CPS proceedings has now become even more fraught with danger for the family law and civil litigation attorney alike. Malicious prosecution, abuse of process, and defamation are the least understood and most abused torts on the books, perhaps because they are not taught in most law schools. Also IIED claims are common here as well and just as difficult to prove, and when based in communicative petition activity, they are barred by the litigation privilege subject to the narrow exceptions discussed above. The lesson for plaintiffs' attorneys is to think hard and have your complaint screened for potential SLAPP and privilege issues and prepare for the SLAPP motion before filing it. For the defense, always look for ways to SLAPP these claims out of court. But this can be more difficult in light of the Mann rule on prong 2 mixed cause of actions. Mann v. Quality Old Time Service (2004) 129 Cal.app.4th 90, 106.
Losing plaintiffs will pay the other side's attorney's fees to the tune of tens of thousands of dollars. The losing defendant has an immediate right of appeal and will get appeal fees is successful on appeal. Then the defense will have the right to file a SLAPPBack malicious prosecution action under CCP 425.18 against the losing plaintiff and his/her attorneys in the prior action.
A competent and experienced SLAPP/malicious prosecution/defamation attorney can dramatically improve chances of winning or losing a SLAPP motion or opposition and, more importantly, can cut down a hefty fee request from the defense and maximize the defense fees with a detailed expert declaration.
While just about any cause of action can trigger a SLAPP motion, the most common SLAPP type claims involve malicious prosecution, abuse of process, defamation, internet libel, slander, trade libel, intentional interference with business, IIED, invasion of privacy, public nuisance claims based on expressive activity. All of these claims, except for malicious prosecution, often involve litigation and other privilege defenses.
Remember SLAPP motions are nuclear. Everything else is just a toy.
Wednesday, May 15, 2013
ORDER GRANTING SLAPP MOTION REVERSED IN UD CASE AS IT DID NOT ARISE FROM UD ACTION OR 3-DAY NOTICE IN COPENBARGER v. MORRIS CERULLO WORLDWIDE EVANGLISM 2013 WL 1809626
The Unlawful Detainer/SLAPP cases over the last six years or so continue to baffle courts and litigants alike due primarily to the sharp distinctions in the gravamen analysis that have become the hallmark of SLAPP motions in UD cases. Unlike the typical SLAPP case, which often involves malicious prosecution, abuse of process, defamation and related type claims, Copenbarger v. Morris Cerullo Worldwide Evangelism (4th Dist. Div. 3 2013) 2013 WL 1809626 involved claims for declaratory relief, breach of contract, and intentional interference with contract against sublessors of commercial office space in Newport Harbor.
The lesson of Copenbarger goes back to our High Court's landmark arising from prong analysis in City Cotati v. Cashman (2002) 29 Cal.4th 69. Simply because you see litigation or free speech activity floating around in the cause of action does not mean that the liability arises from it. Subd. (b)(1) of section 425.16 states in pertinent part that SLAPP motions apply to: "A cause of action against a person "arising from" any act in furtherance...." These two words - arising from - have been the most vexing for courts to apply. This deceptively simple phrase has led to the gravamen/principal thrust line of cases and the mixed cause of action doctrine in California's anti-SLAPP jurisprudence. In Cerullo, the court noted that although an unlawful detainer action itself is protected under section 425.16, terminating a lease is not. A complaint arising out of or based on the dispute or conduct underlying the UD action is not subject to a special motion to strike. "The mere fact that an action was filed after protected activity took place does not mean that the action arose from that activity for purposes of the anti-SLAPP statute. "When, as in this case, the challenged lawsuit follows service of a Three-Day Notice to Quit `the pivotal distinction' is whether an actual or contemplated unlawful detainer action by a landlord... merely `preceded' or `triggered' the tenant's lawsuit or whether it was instead the `basis' or `cause' of that suit." In Cerullo, the Court found that defendants fell prey to the "logical fallacy "post hoc ergo propter hoc - i.e. because the three-day notices preceded plaintiff's complaint the notices must have caused plaintiff's complaint."
Plaintiff, Paul Copenbarger, acting individually and derivatively on behalf of Newport Harbor Offices & Marina (NHOM) appealed from the order denying his special motion to strike in its entirety as to all three causes of action. NHOM (and Copenbarger) is the sublessee, defendant/respondent Morris Cerullo Worlwide Evangelism is the sublessor under a ground lease of commercial property in Newport Beach.
After Cerullo served NHOM with a three-day notice to cure or quit, Copenbarger filed a complaint asserting causes of action against Cerullo, Roger Artz, and D'Allessio and VMG et al. for declaratory relief, breach of lease, and intentional interference with contract. Defendants Cerullo et al. brought a special motion to strike, which the trial court granted in its entirety finding that each cause of action arose from the three-day notice and subsequent UD action against NHOM. The Court of Appeal resoundingly reversed. "The dispositive issue on appeal is whether the causes of action asserted in Copenbarger's complaint arose out of Cerullo's petitioning activity - i.e. service of the three-day notice to quit and the subsequent UD action. We conclude that while the three day notice might have triggered the complaint, the evidence in the record demonstrates the complaint was based on an underlying dispute over NHOM's repair and maintenance obligations under the sublease and other unprotected activities." Hence, the entire dispute arose from the repair obligations under the sublease which predated the three-day notice and UD action. Thus, the complaint could not have arisen from or based liability on the three-day notice or the subsequent UD action.
James J. Moneer, Esq. represented plaintiff, Paul D. Copenbarger, in the trial court in this matter. At oral argument, it was readily apparent that the trial judge was confused about the arising from prong - maintaining that because the lawsuit was "triggered by" or "came after" posting the three-day notice and filing the UD action, that each cause of action must therefore arise from these acts.
The lesson of Copenbarger goes back to our High Court's landmark arising from prong analysis in City Cotati v. Cashman (2002) 29 Cal.4th 69. Simply because you see litigation or free speech activity floating around in the cause of action does not mean that the liability arises from it. Subd. (b)(1) of section 425.16 states in pertinent part that SLAPP motions apply to: "A cause of action against a person "arising from" any act in furtherance...." These two words - arising from - have been the most vexing for courts to apply. This deceptively simple phrase has led to the gravamen/principal thrust line of cases and the mixed cause of action doctrine in California's anti-SLAPP jurisprudence. In Cerullo, the court noted that although an unlawful detainer action itself is protected under section 425.16, terminating a lease is not. A complaint arising out of or based on the dispute or conduct underlying the UD action is not subject to a special motion to strike. "The mere fact that an action was filed after protected activity took place does not mean that the action arose from that activity for purposes of the anti-SLAPP statute. "When, as in this case, the challenged lawsuit follows service of a Three-Day Notice to Quit `the pivotal distinction' is whether an actual or contemplated unlawful detainer action by a landlord... merely `preceded' or `triggered' the tenant's lawsuit or whether it was instead the `basis' or `cause' of that suit." In Cerullo, the Court found that defendants fell prey to the "logical fallacy "post hoc ergo propter hoc - i.e. because the three-day notices preceded plaintiff's complaint the notices must have caused plaintiff's complaint."
Plaintiff, Paul Copenbarger, acting individually and derivatively on behalf of Newport Harbor Offices & Marina (NHOM) appealed from the order denying his special motion to strike in its entirety as to all three causes of action. NHOM (and Copenbarger) is the sublessee, defendant/respondent Morris Cerullo Worlwide Evangelism is the sublessor under a ground lease of commercial property in Newport Beach.
After Cerullo served NHOM with a three-day notice to cure or quit, Copenbarger filed a complaint asserting causes of action against Cerullo, Roger Artz, and D'Allessio and VMG et al. for declaratory relief, breach of lease, and intentional interference with contract. Defendants Cerullo et al. brought a special motion to strike, which the trial court granted in its entirety finding that each cause of action arose from the three-day notice and subsequent UD action against NHOM. The Court of Appeal resoundingly reversed. "The dispositive issue on appeal is whether the causes of action asserted in Copenbarger's complaint arose out of Cerullo's petitioning activity - i.e. service of the three-day notice to quit and the subsequent UD action. We conclude that while the three day notice might have triggered the complaint, the evidence in the record demonstrates the complaint was based on an underlying dispute over NHOM's repair and maintenance obligations under the sublease and other unprotected activities." Hence, the entire dispute arose from the repair obligations under the sublease which predated the three-day notice and UD action. Thus, the complaint could not have arisen from or based liability on the three-day notice or the subsequent UD action.
James J. Moneer, Esq. represented plaintiff, Paul D. Copenbarger, in the trial court in this matter. At oral argument, it was readily apparent that the trial judge was confused about the arising from prong - maintaining that because the lawsuit was "triggered by" or "came after" posting the three-day notice and filing the UD action, that each cause of action must therefore arise from these acts.
Friday, April 26, 2013
IN DEFAMATION CASE, 9TH CIR. MAY REVISIT ISSUE OF WHETHER SLAPP MOTIONS CAN BE BROUGHT AT ALL IN FEDERAL COURT
In the latest case to send shock waves through the California civil defense bar, Makaeff v. Trump University (filed 4/17/13 9th Cir.) No. 11-55016, a disgruntled former student of Trump University's wealth building through real estate seminars sued Trump U. for unfair business practices, fraud and the like, claiming that Trump University is a "scam" and published her experiences with Trump U. internet chat rooms and review sites. She found many other former students had posted comments expressing their dissatisfaction with the seminar and the exorbitant price they paid ($34,000.00) with little or no ROI. In return, Trump sued Makaeff, the former student for defamation. Makaeff filed and won her anti-SLAPP motion before the 9th Circuit on that grounds that an (e)(4) issue of public interest was implicated by the post and met prong one. On prong two, the court found that Trump U was a limited purpose public figure for purposes of the public controversy of whether Trump U.'s private, for-profit, real estate education programs were a scam, which is exactly what Makeaff;s post was about. All Justices concede that this is clearly proper case in which to grant an anti-SLAPP under California's anti-SLAPP statutory scheme.
The rub comes from Chief Judge, Alex Kozinski's concurring opinion joined by Judge Paez. Judge Kozinski expressed his strong opinion that an en banc hearing revisiting the U.S. Newsham v. Lockheed Missile and Space Co., 190 F.3d 963, 973 (9th Cir. 1999) and its progeny on the issue whether exotic state procedural rules, like California's anti-SLAPP statute, should be applied in federal court. The Newsham case held that the anti-SLAPP statute will apply in federal court to state law claims in diversity cases but without the shortened time periods for filing the motion under subd. (f) and without the automatic stay on discovery under subd. (g) applicable in state court because those two provisions directly collide with the federal rule of civil procedure. Moreover, while the anti-SLAPP statute is a procedural burden shifting device and pre-trial dismissal motion, its goal is substantive - to swiftly extricate defendants from suit for engaging in prima facie First Amendent speech or petition activity. It is the lawsuit itself that has the chilling effect at which the anti-SLAPP statute is aimed. The Court conducted an analysis under the Erie doctrine in arriving at its conclusion that the anti-SLAPP statute serves a substantive goal, it will apply in federal court with some limitations. Erie Railroad v. Thompkins 304 U.S 64 (1938) [state substantive law will apply to state law claims in federal court but federal procedural law will apply in federal court]. Judge Kozinski believes the anti-SLAPP statute is purely procedural.
Under the pressure of sequestration and budget cuts, courts are feeling the pinch and this too might be partial motivating factor behind Judge Kozinski's eagerness to revisit Newsham. It would certainly eliminate a lot of messy SLAPP motions and appeals from the dockets in the 9th Circuit at the both the trial and appellate levels. Judge Kozinski has invited Trump's counsel to file a petition for en banc hearing on the issue of whether SLAPP motions are properly used at all in federal court. This case will be watched closely by the bench and bar in the coming months.
The argument for Makeaff if the court grants en banc hearing on the issue, is to show that the anti-SLAPP statute was intended as an immunity statute at least in protecting a specified class of defendants from the expense and delay of lawsuits generally simply because they have exercised their First Amendment speech or petition rights. This way the law may be considered substantive rather than procedural under Erie.
Moreover, eliminating the anti-SLAP procedure from federal courts would promote rampant forum shopping by plaintiffs lawyers, a result the California Legislature clearly did not intend - many plaintiffs would continue to get away with silencing defendants just for posting comments on the internet about their dissatisfaction with a business or retaliate for making a complaint to a government agency. Even with the anti-SLAPP law in place in federal court, it is still far more plaintiff friendly than its state law counterpart as Judge Kozinski points out.
Finally, the majority opinion contains a great defamation analysis in a consumer rights type of case against a business for unfair business practices etc.
The rub comes from Chief Judge, Alex Kozinski's concurring opinion joined by Judge Paez. Judge Kozinski expressed his strong opinion that an en banc hearing revisiting the U.S. Newsham v. Lockheed Missile and Space Co., 190 F.3d 963, 973 (9th Cir. 1999) and its progeny on the issue whether exotic state procedural rules, like California's anti-SLAPP statute, should be applied in federal court. The Newsham case held that the anti-SLAPP statute will apply in federal court to state law claims in diversity cases but without the shortened time periods for filing the motion under subd. (f) and without the automatic stay on discovery under subd. (g) applicable in state court because those two provisions directly collide with the federal rule of civil procedure. Moreover, while the anti-SLAPP statute is a procedural burden shifting device and pre-trial dismissal motion, its goal is substantive - to swiftly extricate defendants from suit for engaging in prima facie First Amendent speech or petition activity. It is the lawsuit itself that has the chilling effect at which the anti-SLAPP statute is aimed. The Court conducted an analysis under the Erie doctrine in arriving at its conclusion that the anti-SLAPP statute serves a substantive goal, it will apply in federal court with some limitations. Erie Railroad v. Thompkins 304 U.S 64 (1938) [state substantive law will apply to state law claims in federal court but federal procedural law will apply in federal court]. Judge Kozinski believes the anti-SLAPP statute is purely procedural.
Under the pressure of sequestration and budget cuts, courts are feeling the pinch and this too might be partial motivating factor behind Judge Kozinski's eagerness to revisit Newsham. It would certainly eliminate a lot of messy SLAPP motions and appeals from the dockets in the 9th Circuit at the both the trial and appellate levels. Judge Kozinski has invited Trump's counsel to file a petition for en banc hearing on the issue of whether SLAPP motions are properly used at all in federal court. This case will be watched closely by the bench and bar in the coming months.
The argument for Makeaff if the court grants en banc hearing on the issue, is to show that the anti-SLAPP statute was intended as an immunity statute at least in protecting a specified class of defendants from the expense and delay of lawsuits generally simply because they have exercised their First Amendment speech or petition rights. This way the law may be considered substantive rather than procedural under Erie.
Moreover, eliminating the anti-SLAP procedure from federal courts would promote rampant forum shopping by plaintiffs lawyers, a result the California Legislature clearly did not intend - many plaintiffs would continue to get away with silencing defendants just for posting comments on the internet about their dissatisfaction with a business or retaliate for making a complaint to a government agency. Even with the anti-SLAPP law in place in federal court, it is still far more plaintiff friendly than its state law counterpart as Judge Kozinski points out.
Finally, the majority opinion contains a great defamation analysis in a consumer rights type of case against a business for unfair business practices etc.
Sunday, April 14, 2013
CITY'S SLAPP MOTION GRANTED AS TO DEFAMATION, TRADE LIBEL, INTENTIONAL INTEFERENCE - "ARISING FROM" PUBLIC NUISANCE - ALLEGED PROSTITUTION AND MEDICAL MARIJUANA
The latest twist in anti-SLAPP/defamation/privilege jurisprudence resulted in the granting of the City of Costa Mesa's anti-SLAPP motion to a cross-complaint filed by a commercial landlord against the City and 4 out of 5 of the City employees sued. The recently published opinion is City of Costa Mesa v. D'Alessio Investments, LLC filed 3/11/13 (Case No. G046397 4th/3). In the the underlying complaint (main action), the City sued D'Alessio as the landlord of a commercial office building in Costa Mesa and various tenants to abate a public nuisance - namely alleged acts of prostitution at several massage establishments and the operation of medical marijuana dispensaries in violation of the City's zoning code. The trial court granted preliminary injunctions in favor of the City in August 2011, enjoining the prohibited practices on the premises during the pendency of the action. In September 2011, D'Alessio filed a cross-complaint for alleging the City and 5 of its employees (Nichols, Willa-Bouwens-Killeen, Lee, Melynda Shank, and Ashabi) committed slander, trade libel, and intentional interference with prospective economic advantage by making certain statements to D'Alessio's prospective tenants and construction contractors. The trial court granted the anti-SLAPP motion pursuant to Code of Civil Procedure section 425.16 as to three cross-defendants only. The Court of Appeal, affirmed and reversed in part, concluding that the anti-SLAPP motion should have been granted as to four out of five cross-defendants.
The complaint by the City essentially alleged the Costa Mesa Police Department initiated an investigation into the activities of massage establishments at the Property in July 2010, which resulted in the collection of evidence of prostitution as well as a variety of other noncriminal municipal code violations. The complaint further alleged that several of the defendant businesses were distributing marijuana in violation of the municipal code and these businesses had other non-marijuana related violations of the code. In August 2011, the court issued preliminary injunctions ordering D'Alessio and the tenants to cease operating any and all massage parlors and marijuana dispensaries on the premises during the pendency of the litigation.
D'Alessio's cross-complaint alleged that five City employees made 11 oral statements about D'Alessio that amounted to slander, trade libel, and interference with prospective economic advantage. The cross-complaint did not specify the date on which any of the statements were allegedly made or the context in which they were made, other than to allege they occurred within the past year. The defamation cross-complaint alleged the statements were made with malice. The slander cross-complaint went to allege the various statements made by each of the five City employees to potential tenants seeking business licenses from the City. As to the first three employees - Nichols, Shank, and Bouwens-Killeen, the gist of the statements was that each of these employees told a prospective tenant seeking a license to operate a business at the Property, in essence, that the Property had been raided by police, and that after police documented comings and goings at the Property, they found illegal businesses operating there. Other statements by these employees allegedly included: "the City of Costa Mesa will not issue business licenses to anyone attempting to rent space at the property because the City is in the middle of litigation with the owner of the Property due to illegal activity and that D'Alessio is the owner of the Property." Shank also allegedly told a construction contractor that "Dennis D'Alessio has been arrested for prostitution and drug dealing that occurred at the property." Bouwens-Killeen made each the foregoing statements to construction contractors and additionally stated" "[D'Alessio], the owner of the Property is known throughout the City for doing illegal things at the Property."
Ashabi allegedly told a prospective tenant that "the City will not issue business licenses to anyone attempting to rent space at the Property because the owner is in the middle of litigation with the City due to illegal activity."
In support of their anti-SLAPP motion pursuant to section 425.16, the City and its employees filed a declaration from the city attorney attesting in pertinent part to the following facts: When the City's Complaint was filed on April 22,2011, the City stopped issuing any new business licenses for the Property, if the requested business licenses concerned activities or operations related to the City's complaint. Pursuant to a TRO issued May 2011, the City ceased issuing for the property any building permits or new business licenses relating to medical marijuana or massage establishments. There is no City policy or court order regarding issuing other types of business licenses nor has the City placed a moratorium on issuing other types of business licenses for the Property. Moreover, each of the five employees signed declarations attesting that they never made any of the statements alleged in the complaint and that they denied bearing any malice or ill-will toward D'Alessio.
As to prong one, the court ruled that each of the alleged statements were made in connection with issues under review in ongoing litigation between the City and D'Alessio as well as the City's executive body. As to prong two, the court ruled as to three of the employees, Nichols, Shank, and Bouwens-Killeen, that D'Alessio provided no evidence that they made the statements alleged in the cross-complaint. Nor does D'Alessio even argue that the statements admitted to by Nichols and Bouwens-Killeen in their declarations were false or otherwise wrongful. Thus, the trial court should have granted the SLAPP motion as to all three of these cross-defendants. Trial court had erroneously denied the SLAPP motion as to Nichols and Bouwens-Killeen on prong one. Hence, the court of appeal reversed as to two out of three of the foregoing defendants and found that the SLAPP motion should have been granted as to each them.
The Court, however, went on to give more in-depth consideration to Ashabi and Lee's statements.
As to prong one, the Court broke down its analysis into three components: (a) was there an "issue under consideration or review by an executive, legislative or judicial body" under subdivision (e)(2)?; (b) were the employees' statements made "in connection with" this issue under subdivision (e)(2)?; and (c) did the causes of action pleaded by D'Alessio "arise from" the employees statements?
On a side note, one of the grounds curiously not raised by the cross-defendants here is that the issues of prostitution, dispensing marijuana, and other illegal acts in a prominent commercial building in the community constituted an issue of public interest under subdivision (e)(4). In footnote 4, in accord with the recent trend, the Court of Appeal recognized that subd. (e)(3) is superfluous in that its public forum requirement is now unnecessary in light of subdivision (e)(4), which has no such requirement. Subd. (e)(4) was added to section 425.16 in 1997 to broaden the statute.
An issue is "under consideration" if it is "kept before the mind, given attentive thought, reflection, or subject to inspection or examination.
Here, the Court held that at the time in question in the instant case, both an executive body (the City government) and a judicial body (the trial court) were considering and reviewing the issue of whether illegal activity was occurring at the Property and what should be done about it. The City, once injunctive relief was granted, formulated a policy of refusing to issue certain business licenses at the Property. Both forms of review qualify for anti-SLAPP protection under section 425.16, subdivision (e)(2). As to the second question - whether the employees' statements were made "in connection with" the issues under review - the trial court narrowly construed this prong in error in that it found prong one met only for those employee statements that mentioned the word "litigation" or that were made in connection with litigation. But the statute asks whether the statements were "made in connection with an issue under review" before a branch of government, not whether the statements specifically referenced litigation. The Court found that all of the allegedly slanderous communications referenced in the cross-complaint are based on employees in the City planning and code enforcement departments communicating with parties interested in obtaining licenses at the Property. Hence, each communication is connected to the issue of alleged illegal activity at the Property AND the executive body policy consequences of this issue for individuals seeking business licenses at the Property.
Prong two, the court went on to analyze the elements of each cause of action as to Ashabi and noted that while trade libel always places the burden of proving falsity on the plaintiff or cross-complainant, in a slander claim, the burden of proving truth is ordinarily on the defendant. But because this is a case involving an issue of public interest to the community- a public nuisance and alleged illegal activity in the neighborhood - the burden of falsity falls squarely on the plaintiff' shoulders under the First Amendment. Here, neither side presented any evidence that illegal activity occurred or did not occur at the property. Moreover, the court examined various statutory anc common law privilege and immunity defenses raised by the City and rejected each of them. The Court also rejected the litigation privilege defense of CC 47(b). Hence, because the burden of proving falsity as to each cause of action fell on D'Alessio, he could not show a probability of prevailing on each of his claims as to Ashabi.
Lee's statements, however, stand on substantially different footing. D'Alessio submitted declarations from two different prospective tenants on separate occasions attesting that Lee made the following statements to to them: He said "there was a lot of illegal businesses there, they have massage parlors and marijuana dispensaries and the cops raided it. A second prospective tenant had a conversation with Lee. "Lee said "Dennis D'Alessio has recently been `convicted' of prostitution and drug dealing and that `the entire building is set to be shut down shortly because of illegal activity carried on there."
Here, D'Alessio presented uncontroverted evidence that he had never been convicted of any crime - a fact conceded by cross-defendants on appeal. Nor was there any evidence that the entire building was set to be shut down or that the City had stopped issuing business licenses to other businesses other than the massage and dispensary businesses in that Property. Hence, D'Alessio had met his burden of raising a triable issue of falsity and malice as to Lee and the City. The Court rejected the litigation privilege because Lee's statements were not directed to a participant or witness in the City's lawsuit against D'Alessio - prospective tenant not a necessary party or witness with direct interest in outcome of that litigation. Lee's statements failed to serve a useful or functional step in furthering the truth ascertainment objectives of that proceeding.
Hence the SLAPP motion was granted as to four out of five cross-defendants
The complaint by the City essentially alleged the Costa Mesa Police Department initiated an investigation into the activities of massage establishments at the Property in July 2010, which resulted in the collection of evidence of prostitution as well as a variety of other noncriminal municipal code violations. The complaint further alleged that several of the defendant businesses were distributing marijuana in violation of the municipal code and these businesses had other non-marijuana related violations of the code. In August 2011, the court issued preliminary injunctions ordering D'Alessio and the tenants to cease operating any and all massage parlors and marijuana dispensaries on the premises during the pendency of the litigation.
D'Alessio's cross-complaint alleged that five City employees made 11 oral statements about D'Alessio that amounted to slander, trade libel, and interference with prospective economic advantage. The cross-complaint did not specify the date on which any of the statements were allegedly made or the context in which they were made, other than to allege they occurred within the past year. The defamation cross-complaint alleged the statements were made with malice. The slander cross-complaint went to allege the various statements made by each of the five City employees to potential tenants seeking business licenses from the City. As to the first three employees - Nichols, Shank, and Bouwens-Killeen, the gist of the statements was that each of these employees told a prospective tenant seeking a license to operate a business at the Property, in essence, that the Property had been raided by police, and that after police documented comings and goings at the Property, they found illegal businesses operating there. Other statements by these employees allegedly included: "the City of Costa Mesa will not issue business licenses to anyone attempting to rent space at the property because the City is in the middle of litigation with the owner of the Property due to illegal activity and that D'Alessio is the owner of the Property." Shank also allegedly told a construction contractor that "Dennis D'Alessio has been arrested for prostitution and drug dealing that occurred at the property." Bouwens-Killeen made each the foregoing statements to construction contractors and additionally stated" "[D'Alessio], the owner of the Property is known throughout the City for doing illegal things at the Property."
Ashabi allegedly told a prospective tenant that "the City will not issue business licenses to anyone attempting to rent space at the Property because the owner is in the middle of litigation with the City due to illegal activity."
In support of their anti-SLAPP motion pursuant to section 425.16, the City and its employees filed a declaration from the city attorney attesting in pertinent part to the following facts: When the City's Complaint was filed on April 22,2011, the City stopped issuing any new business licenses for the Property, if the requested business licenses concerned activities or operations related to the City's complaint. Pursuant to a TRO issued May 2011, the City ceased issuing for the property any building permits or new business licenses relating to medical marijuana or massage establishments. There is no City policy or court order regarding issuing other types of business licenses nor has the City placed a moratorium on issuing other types of business licenses for the Property. Moreover, each of the five employees signed declarations attesting that they never made any of the statements alleged in the complaint and that they denied bearing any malice or ill-will toward D'Alessio.
As to prong one, the court ruled that each of the alleged statements were made in connection with issues under review in ongoing litigation between the City and D'Alessio as well as the City's executive body. As to prong two, the court ruled as to three of the employees, Nichols, Shank, and Bouwens-Killeen, that D'Alessio provided no evidence that they made the statements alleged in the cross-complaint. Nor does D'Alessio even argue that the statements admitted to by Nichols and Bouwens-Killeen in their declarations were false or otherwise wrongful. Thus, the trial court should have granted the SLAPP motion as to all three of these cross-defendants. Trial court had erroneously denied the SLAPP motion as to Nichols and Bouwens-Killeen on prong one. Hence, the court of appeal reversed as to two out of three of the foregoing defendants and found that the SLAPP motion should have been granted as to each them.
The Court, however, went on to give more in-depth consideration to Ashabi and Lee's statements.
As to prong one, the Court broke down its analysis into three components: (a) was there an "issue under consideration or review by an executive, legislative or judicial body" under subdivision (e)(2)?; (b) were the employees' statements made "in connection with" this issue under subdivision (e)(2)?; and (c) did the causes of action pleaded by D'Alessio "arise from" the employees statements?
On a side note, one of the grounds curiously not raised by the cross-defendants here is that the issues of prostitution, dispensing marijuana, and other illegal acts in a prominent commercial building in the community constituted an issue of public interest under subdivision (e)(4). In footnote 4, in accord with the recent trend, the Court of Appeal recognized that subd. (e)(3) is superfluous in that its public forum requirement is now unnecessary in light of subdivision (e)(4), which has no such requirement. Subd. (e)(4) was added to section 425.16 in 1997 to broaden the statute.
An issue is "under consideration" if it is "kept before the mind, given attentive thought, reflection, or subject to inspection or examination.
Here, the Court held that at the time in question in the instant case, both an executive body (the City government) and a judicial body (the trial court) were considering and reviewing the issue of whether illegal activity was occurring at the Property and what should be done about it. The City, once injunctive relief was granted, formulated a policy of refusing to issue certain business licenses at the Property. Both forms of review qualify for anti-SLAPP protection under section 425.16, subdivision (e)(2). As to the second question - whether the employees' statements were made "in connection with" the issues under review - the trial court narrowly construed this prong in error in that it found prong one met only for those employee statements that mentioned the word "litigation" or that were made in connection with litigation. But the statute asks whether the statements were "made in connection with an issue under review" before a branch of government, not whether the statements specifically referenced litigation. The Court found that all of the allegedly slanderous communications referenced in the cross-complaint are based on employees in the City planning and code enforcement departments communicating with parties interested in obtaining licenses at the Property. Hence, each communication is connected to the issue of alleged illegal activity at the Property AND the executive body policy consequences of this issue for individuals seeking business licenses at the Property.
Prong two, the court went on to analyze the elements of each cause of action as to Ashabi and noted that while trade libel always places the burden of proving falsity on the plaintiff or cross-complainant, in a slander claim, the burden of proving truth is ordinarily on the defendant. But because this is a case involving an issue of public interest to the community- a public nuisance and alleged illegal activity in the neighborhood - the burden of falsity falls squarely on the plaintiff' shoulders under the First Amendment. Here, neither side presented any evidence that illegal activity occurred or did not occur at the property. Moreover, the court examined various statutory anc common law privilege and immunity defenses raised by the City and rejected each of them. The Court also rejected the litigation privilege defense of CC 47(b). Hence, because the burden of proving falsity as to each cause of action fell on D'Alessio, he could not show a probability of prevailing on each of his claims as to Ashabi.
Lee's statements, however, stand on substantially different footing. D'Alessio submitted declarations from two different prospective tenants on separate occasions attesting that Lee made the following statements to to them: He said "there was a lot of illegal businesses there, they have massage parlors and marijuana dispensaries and the cops raided it. A second prospective tenant had a conversation with Lee. "Lee said "Dennis D'Alessio has recently been `convicted' of prostitution and drug dealing and that `the entire building is set to be shut down shortly because of illegal activity carried on there."
Here, D'Alessio presented uncontroverted evidence that he had never been convicted of any crime - a fact conceded by cross-defendants on appeal. Nor was there any evidence that the entire building was set to be shut down or that the City had stopped issuing business licenses to other businesses other than the massage and dispensary businesses in that Property. Hence, D'Alessio had met his burden of raising a triable issue of falsity and malice as to Lee and the City. The Court rejected the litigation privilege because Lee's statements were not directed to a participant or witness in the City's lawsuit against D'Alessio - prospective tenant not a necessary party or witness with direct interest in outcome of that litigation. Lee's statements failed to serve a useful or functional step in furthering the truth ascertainment objectives of that proceeding.
Hence the SLAPP motion was granted as to four out of five cross-defendants
Friday, January 4, 2013
M.F. Farming apparently conflicts with Wang v. Walmart - Are statements made to obtain a permit from the City the "gravamen" of the claim under SLAPP??
Does M.F. Farming Co. v. Couch Distributing Co. (2012) 207 Cal.App.4th 180 apparently conflict with Wang v. Walmart (2007) 153 Cal.App.4th 790 sub silentio?
Couch is the "city permit/easement dispute" case.
Plaintiff, M.F. Farming, alleged the following in its First Amended Complaint (FAC): Plaintiff MF and defendant Couch Distributing entered into a written agreement in about November 1974 in which MF agreed to sell Parcels A and C to defendant Couch and to grant the company "a non exclusive right of way easement for ingress and egress and for all utility purposes over Parcel B. These parcels were on the ocean side of and abutted Highway 1. By grant deed recorded on June 5, 1975, M.F. granted the two Parcels A and C and the right of way/utility easement over Parcel B to defendant Couch. Defendant Couch purchased Parcel A for purposes of constructing and operating its Budweiser distribution center.
The FAC stated on information and belief that "on a parcel map dated December 1979, as well as subsequent parcel maps submitted to the City of Watsonville by Couch Distributing as part of its application for building permits, Couch Distributing knowingly showed Parcel B as a right of way easement rather than as a separate parcel in order to obtain permits which were otherwise not legal. The complaint further stated that plaintiff, MF now desires to develop and use its property that abuts the inland side of Highway 1 and intends to use parcel B for access. Couch contends that MF has in some manner lost the right to use Parcel B for ingress and egress.
Based on these facts, MF alleged four causes of action for quiet title, slander of title, cancellation of cloud on title, and injunctive relief. Only the latter three were the subject of Couch's anti-SLAPP motion. The slander of title cause of action alleged that defendant Couch Distributing published, without privilege or justification, false maps and plot plans that cast doubt on plaintiff's title. The cancellation of cloud on title cause of action alleged that the improperly published documents were false and fraudulently indicated Couch owned the property at issue and plaintiff MF owned only an easement. It further alleged that defendants were using the false claim of ownership as grounds for obtaining permits for the unlawful development of defendants' property and to prevent plaintiff from developing the subject property and/or causing various government agencies to coerce plaintiff into granting defendants rights and/or ownership of the subject property." The action for injunctive relief alleged that the defendants had blocked plaintiff from the free use of its property of Parcel B as a means of ingress and egress to its property abutting Highway 1.
Defendant submitted the declaration of George Couch which averred as follows: MF's proposed specific plan for the proposed development provided for "a major public access road across Parcel B. Couch testified that "this road would have routed substantial amounts of traffic through the heart of Couch Distributing's operations, which would have been devastating to its continued operations. Moreover, defendant Couch had opposed the use of Parcel B as a public access road in the City's administrative proceedings. George Couch or his attorney appeared at several noticed hearings to testify in opposition to the road and the attorney also wrote two letters to the City expressing the company's strong opposition to the road.
Using another "arising from" analysis, the court noted seminal SLAPP cases from our High Court that held: " The mere fact that an action was field after protected activity took place does not mean the action arose from that activity for purposes of the anti-SLAPP statute. That a cause of action may arguably have been "triggered" by protected activity does not entail is one arising from such activity.
Although the defendant's opposition to the City's approval of Parcel B as an access road to the development might have been a trigger for the lawsuit, those activities were not the basis for challenged causes of action. The complaint's second and third causes of action concerned defendant Couch Distributing's publication of allegedly false maps and documents. In fact, MF's declarations submitted in opposition to the SLAPP motion focused squarely on the two site plans. MF recognizes that the "site plans were submitted to the City of Watsonville as part of the development of Couch's property. Since the site maps were apparently submitted to the City in connection with its permitting process, an official proceeding, it appears that the arising from prong is satisfied as to the second and third causes of action. Since the cause of action arose directly out of statements made and plans submitted to the planning commission and the city council, the defendant satisfied the first prong of the anti-SLAPP statute. Plaintiff MF argued that defendant's statements to the City were fraudulent and thus did not constitute the exercise of free speech or petition. But the Court rejected plaintiff's argument holding that the issue of whether the statements were fraudulent is an issue to be addressed on prong two. The Court also rejected MF' argument that Couch's statements were fraudulent and illegal as a matter of law because there was a clear factual dispute on the point.
As to the fourth cause of action for injunctive relief, the court found that this cause of action arose from both protected and unprotected activity as it incorporated the allegations of petition activity from the prior causes of action by reference but also added allegations of overuse of the easement, encroachments, and other physical interferences with the easement. Having concluded that the injunctive relief claim was a mixed cause of action, the court held, relying on Haight-Ashbury Free Clinics v. Happening House, that the protected activity is not merely incidental, the first prong is satisfied, and the burden shifts to plaintiff to show a probability of prevailing on prong two. In this respect, MF Farming represents a continuation of the recent trend of following a broad plain language construction of the "arising from" prong in mixed cause of action cases while rejecting earlier narrow interpretation cases, like Wang v. Walmart. It is interesting that MF Farming failed to mention Wang because it is virtually indistinguishable from MF Farming and yet Wang found that the defendant's statements in the City Permit hearing were merely incidental to the claim and thus were not the "principal thrust or gravamen" of the claim.
On prong two, the court outlined the elements of a slander of title claim and found that plaintiff failed to adduce evidence to support the claim. First, the court found that it does not appeal that MF can show that Couch published documents that falsely represented that it owned Parcel B or falsely claimed some legal interest in it since there is no dispute that Couch owned an easement over Parcel B. Secondly, the court found that no evidence or expert testimony was introduced showing that defendant's recordation of the parcel map or submission of the site plans to the City had actually impaired the value of Parcel B. There was no evidence of proximately-caused pecuniary loss as to the slander of title claim. As to the third cause of action for cancellation of cloud on title, plaintiff, likewise, could not show that defendant's recordation and submissions to the City cast a cloud on title precisely, because there was no evidence of falsity or disparagement of title and no evidence of pecuniary loss was presented.
As to the fourth cause for injunctive relief, a mixed cause of action, the Court cited, indirectly, via our High Court opinion in Oasis West Realty v. Goldman, the Mann rule and held that because plaintiff produced evidence of unprotected activity alleged that defendant physically interfered with and overburdened plaintiff's right of way easement, plaintiff was able to show a probability of prevailing. Hence, the entire claim stands. Note that under City of Colton, the bribery case previously discussed in my prior blog, the result would have been different. Under Colton, the court would have split the injunctive relief claim into two separate causes of action. The Court would have stricken that part of the claim based on protected petition activity and allowed the remainder of the cause of action based on the unprotected activity to proceed. Under Mann, the entire cause of action stands. Under Colton, only that part of the claim based on protected activity gets stricken if plaintiff fails to show a probability of prevailing.
The MF Farming case presents a number of juicy SLAPP issues in mixed cause of action SLAPP cases on both prong one and prong two that, hopefully, will get resolved by our High Court soon.
Couch is the "city permit/easement dispute" case.
Plaintiff, M.F. Farming, alleged the following in its First Amended Complaint (FAC): Plaintiff MF and defendant Couch Distributing entered into a written agreement in about November 1974 in which MF agreed to sell Parcels A and C to defendant Couch and to grant the company "a non exclusive right of way easement for ingress and egress and for all utility purposes over Parcel B. These parcels were on the ocean side of and abutted Highway 1. By grant deed recorded on June 5, 1975, M.F. granted the two Parcels A and C and the right of way/utility easement over Parcel B to defendant Couch. Defendant Couch purchased Parcel A for purposes of constructing and operating its Budweiser distribution center.
The FAC stated on information and belief that "on a parcel map dated December 1979, as well as subsequent parcel maps submitted to the City of Watsonville by Couch Distributing as part of its application for building permits, Couch Distributing knowingly showed Parcel B as a right of way easement rather than as a separate parcel in order to obtain permits which were otherwise not legal. The complaint further stated that plaintiff, MF now desires to develop and use its property that abuts the inland side of Highway 1 and intends to use parcel B for access. Couch contends that MF has in some manner lost the right to use Parcel B for ingress and egress.
Based on these facts, MF alleged four causes of action for quiet title, slander of title, cancellation of cloud on title, and injunctive relief. Only the latter three were the subject of Couch's anti-SLAPP motion. The slander of title cause of action alleged that defendant Couch Distributing published, without privilege or justification, false maps and plot plans that cast doubt on plaintiff's title. The cancellation of cloud on title cause of action alleged that the improperly published documents were false and fraudulently indicated Couch owned the property at issue and plaintiff MF owned only an easement. It further alleged that defendants were using the false claim of ownership as grounds for obtaining permits for the unlawful development of defendants' property and to prevent plaintiff from developing the subject property and/or causing various government agencies to coerce plaintiff into granting defendants rights and/or ownership of the subject property." The action for injunctive relief alleged that the defendants had blocked plaintiff from the free use of its property of Parcel B as a means of ingress and egress to its property abutting Highway 1.
Defendant submitted the declaration of George Couch which averred as follows: MF's proposed specific plan for the proposed development provided for "a major public access road across Parcel B. Couch testified that "this road would have routed substantial amounts of traffic through the heart of Couch Distributing's operations, which would have been devastating to its continued operations. Moreover, defendant Couch had opposed the use of Parcel B as a public access road in the City's administrative proceedings. George Couch or his attorney appeared at several noticed hearings to testify in opposition to the road and the attorney also wrote two letters to the City expressing the company's strong opposition to the road.
Using another "arising from" analysis, the court noted seminal SLAPP cases from our High Court that held: " The mere fact that an action was field after protected activity took place does not mean the action arose from that activity for purposes of the anti-SLAPP statute. That a cause of action may arguably have been "triggered" by protected activity does not entail is one arising from such activity.
Although the defendant's opposition to the City's approval of Parcel B as an access road to the development might have been a trigger for the lawsuit, those activities were not the basis for challenged causes of action. The complaint's second and third causes of action concerned defendant Couch Distributing's publication of allegedly false maps and documents. In fact, MF's declarations submitted in opposition to the SLAPP motion focused squarely on the two site plans. MF recognizes that the "site plans were submitted to the City of Watsonville as part of the development of Couch's property. Since the site maps were apparently submitted to the City in connection with its permitting process, an official proceeding, it appears that the arising from prong is satisfied as to the second and third causes of action. Since the cause of action arose directly out of statements made and plans submitted to the planning commission and the city council, the defendant satisfied the first prong of the anti-SLAPP statute. Plaintiff MF argued that defendant's statements to the City were fraudulent and thus did not constitute the exercise of free speech or petition. But the Court rejected plaintiff's argument holding that the issue of whether the statements were fraudulent is an issue to be addressed on prong two. The Court also rejected MF' argument that Couch's statements were fraudulent and illegal as a matter of law because there was a clear factual dispute on the point.
As to the fourth cause of action for injunctive relief, the court found that this cause of action arose from both protected and unprotected activity as it incorporated the allegations of petition activity from the prior causes of action by reference but also added allegations of overuse of the easement, encroachments, and other physical interferences with the easement. Having concluded that the injunctive relief claim was a mixed cause of action, the court held, relying on Haight-Ashbury Free Clinics v. Happening House, that the protected activity is not merely incidental, the first prong is satisfied, and the burden shifts to plaintiff to show a probability of prevailing on prong two. In this respect, MF Farming represents a continuation of the recent trend of following a broad plain language construction of the "arising from" prong in mixed cause of action cases while rejecting earlier narrow interpretation cases, like Wang v. Walmart. It is interesting that MF Farming failed to mention Wang because it is virtually indistinguishable from MF Farming and yet Wang found that the defendant's statements in the City Permit hearing were merely incidental to the claim and thus were not the "principal thrust or gravamen" of the claim.
On prong two, the court outlined the elements of a slander of title claim and found that plaintiff failed to adduce evidence to support the claim. First, the court found that it does not appeal that MF can show that Couch published documents that falsely represented that it owned Parcel B or falsely claimed some legal interest in it since there is no dispute that Couch owned an easement over Parcel B. Secondly, the court found that no evidence or expert testimony was introduced showing that defendant's recordation of the parcel map or submission of the site plans to the City had actually impaired the value of Parcel B. There was no evidence of proximately-caused pecuniary loss as to the slander of title claim. As to the third cause of action for cancellation of cloud on title, plaintiff, likewise, could not show that defendant's recordation and submissions to the City cast a cloud on title precisely, because there was no evidence of falsity or disparagement of title and no evidence of pecuniary loss was presented.
As to the fourth cause for injunctive relief, a mixed cause of action, the Court cited, indirectly, via our High Court opinion in Oasis West Realty v. Goldman, the Mann rule and held that because plaintiff produced evidence of unprotected activity alleged that defendant physically interfered with and overburdened plaintiff's right of way easement, plaintiff was able to show a probability of prevailing. Hence, the entire claim stands. Note that under City of Colton, the bribery case previously discussed in my prior blog, the result would have been different. Under Colton, the court would have split the injunctive relief claim into two separate causes of action. The Court would have stricken that part of the claim based on protected petition activity and allowed the remainder of the cause of action based on the unprotected activity to proceed. Under Mann, the entire cause of action stands. Under Colton, only that part of the claim based on protected activity gets stricken if plaintiff fails to show a probability of prevailing.
The MF Farming case presents a number of juicy SLAPP issues in mixed cause of action SLAPP cases on both prong one and prong two that, hopefully, will get resolved by our High Court soon.
Thursday, December 20, 2012
Corporate Press Release not exempt from SLAPP under CCP 425.17, subd.(c)
Hawran v. Hixon (2012) 209 Cal.App.4th 256
This is the "Corporate press release/CFO Defamation" case.
Hawran ranks up there with City of Colton, previously discussed in my 8/27/12 blog, as one of the more significant SLAPP cases of 2012. This case is a treasure trove of commercial speech, defamation, and privilege law combined with a heavy twist of meticulous "gravamen" analysis. Moreover, the trial judge was the Hon. William S. Dato, perhaps, the brightest sitting trial judge in San Diego. The Appellate Opinion was penned by Justice O'Rourke, undoubtedly one of the brightest sitting Justices on our Courts of Appeal, along with the brain team of concurring Justices McIntyre and Irion. Judgment affirmed.
Sequenom is a publicly traded diagnostic testing and genetics analysis company, whose common stock trades on NASDAQ. Hawran was its CFO from April 2007 to his resignation on September 25, 2009. In the Spring of 2009, Sequenom publicly admitted that previously reported research and development results for a certain diagnostic test for fetal Down's Syndrome (Trisomy 21 or "T21") were mishandled by employees on the Sequenom science team. Thereafter, Sequenom's stock price declined, derivative and securities suits were filed, and Sequenom commenced its own internal investigation, led by a special litigation committee (SLC). In April 2009, sequenom issued its first press release concerning the delay in the launch of the T21 test due to the mishandling and, a day later, filed a Form 8-K reporting to the SEC Sequenom's formation of the SLC. In June 2009, Sequenom was alerted the SEC had commenced an investigation into matters related to the T21 issue.
In September 2009, defendants Sequenom and its Directors, Hixon, Lerner, and Lindsay made Hawran an offer that if he resigned as CFO, he would not be associated with the mishandling and would be separated from others involved in the test data mishandling. In reliance on those representations, Hawran resigned on September 25, 2009.
In September 2009, Sequenom filed another Form 8-K and issued a second press release announcing the completion of the SLC's independent investigation. In part, the September press release stated Sequenom had failed to put in place adequate protocols and control for the conduct of studies related to the program but that the Board of Directors had begun to implement various remedial measures. The Company has terminated the employment of its president and CEO and its vice President of R & D effective immediately. The portion of the press release subject to Hawran's claims read as follows:
"The company has obtained the resignation of its CFO, Paul Hawran, and one other officer. While each of those officers and employees has denied wrongdoing, the SLC's investigation has raised serious concerns, resulting in a loss of confidence by independent members of the company's board of directors in the personnel involved."
In August 2012, Hawran sued Directors Hixon, Lerner, and Lindsay and then filed a First Amended Complaint (FAC), a week later, adding Sequenom as a defendant. The First Amended Complaint sets forth causes of action for defamation, invasion of privacy/false light, negligent and intentional interference with prospective economic advantage, violation of the UCL, and negligent and intentional misrepresentation.
Hawran alleged Sequenom used the T21 test mishandling to constructively fire him for his prior complaints to the Board members about improper tax reporting. Hawran alleged his personal and professional reputation was irreparably damaged, and his ability to earn a living impacted, by the September press release, which falsely stated he had denied any wrongdoing, blamed him for the data mishandling, and directly and implicitly called into question his ethics, management capabilities, and performance as Sequenom's CFO. He alleged the press release defamed him and painted him in a false light, and substantially interfered with his prospective employment opportunities and that he had been unable to find alternative employment due to defendant's interference.
Defendants moved to strike the first amended complaint under section 425.16. They argued section 425.16 applied to each cause of action because the September press release was issued in connection with an SEC investigation and also addressed a matter of public concern rendering it a protected writing under subdivisions (e)(2), (e)(3), and (e)(4). On appeal, Hawran did not challenge the trial court finding that his causes of action were based on the press release, which was connected to issues under review in the SEC proceeding under subdivision (e)(2).
COMMERCIAL SPEECH EXEMPTION UNDER CCP 425.17, SUBD. (c)
Hawran's main contention was that section 425.16 did not apply to his claims because the commercial speech exception under CCP § 425.17, subd. (c) applied to bar defendants' SLAPP motion. The commercial speech exception of section 425.17, subd. (c) exempts a cause of action from a special motion to strike under section 425.16 when all of the following conditions are satisfied: (1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services; (2) the cause of action arises from a statement or conduct by that person consisting of `representations of fact' about `that person's or a business competitor's' business operations, goods, or services'; (3) the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions, in the person's goods or services or in the course of delivering the person's goods or services; and (4) the "intended audience" for the statement meets the definition set forth in CCP § 425.17, subd.(c)(2) [i.e. an actual, or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer]
Hawran contended, the September press release, the subject of each cause of action, concerned Sequenom's business operations in that it was devoted almost exclusively devoted to explaining what went wrong in its operations concerning the development and testing of a new genetic product and the operational steps defendants were taking to address the problem, and to announce a conference call to discuss these matters with investors, customers, and other interested parties. Moreover, Hawran introduced evidence as to the intent and purpose of Sequenom's press releases generally and explained Sequenom's custom and practice as to its distribution. Evidence was produced that the September press release was intended for the consumer and designed to maintain and increase sales and profits.
The court rejected Hawran's commercial speech argument and held that CCP 425.17(c) did not exempt his causes of action from defendant's anti-SLAPP motion because Hawran's interpretation of the September press release was overbroad. The is where the court engaged in meticulous "gravamen/arising from prong" analysis to focus solely on that portion of the press release that is alleged to form the basis of defamation liability. In so doing, the court analogized to the recent High Court decision in Simpson-Strong-Tie v. Gore, which rejected Simpson's contention that the exemption should apply so long as the statement giving rise to the cause of action was `accompanied' by factual representations about the defendant's business operations, goods, or services. In Hawran, the Court found that the "allegedly defamatory portions" of the press release are not representations of fact about "Sequenom's" business operations, goods or services. Instead, each cause of action specifically references and is based upon the assertedly false and defamatory statements in the September press release concerning Hawran's resignation and purported denial of wrongdoing. "They do not arise from the press release's other statements concerning the deficiencies of Sequenom's test protocols or controls, or the remedial measures taken."
The court reasoned, in accord with Simpson, that "section 425.17's commercial speech exemption is not triggered by the presence of other representations of fact concerning sequenom's business operations or services contained in the press release, if Hawran does not seek to impose liability based on those statements."
"Though the targeted statements that Sequenom "obtained the resignation of" Hawran and that he "has denied wrongdoing" arguably may broadly concern or relate to Sequenom's corporate events or business decisions, `NARROWLY CONSTRUING THE EXEMPTION AS WE MUST, WE CANNOT SAY THESE STATEMENTS ARE `ABOUT' SEQUENOM'S BUSINESS OPERATIONS, GOODS, OR SERVICES."
Given that the Legislature has expressly declared that section 425.16 "shall be construed broadly", the logical corollary illustrated by the Hawran case is that CCP § 425.17, and any other exemptions from SLAPP, must be narrowly construed. See our High Court opinion in Club Members for an Honest Election v. Sierra Club (2008) 45 Cal.4th 309.
PRONG TWO
FAIR AND TRUE REPORT PRIVILEGE CC § 47(d)
On prong two, the court found that Hawran presented sufficient evidence that the individual director defendants were, in part, responsible for the publication of the press release. But defendants argued that the fair and true report privilege of CC § 47, subd. (d) for fair and true reports in, or made to, a public journal of statements made in the course of an official proceeding. The Court squarely rejected this argument. Assuming the press release was disseminated to a Newswire (a public journal), this does not mean the press release constitutes a communication "of" or "about" the SEC investigation or of anything said in the course thereof. Indeed, the September press release does not even mention the SEC investigation, much less capture its substance, gist, or sting. While the Form 8-K filing with the SEC may constitute a writing "before" an official proceeding, the Form 8-K is not itself an official proceeding. The fact information in the press release was also disclosed to the SEC in the legally required Form 8-K does not transform the press release into a report "about" the SEC proceeding or statements made in the course thereof.
LITIGATION PRIVILEGE OF CC § 47(b)
For similar reasons, the court rejected defendant's litigation privilege argument based on the Form 8-K filing with the SEC. The argument failed because the press release, unlike the Form 8-K was published to the public at large beyond the participants necessary to promote the truth seeking function of the SEC proceeding. Secondly, Hawran's causes of action are not based on statements made in the Form 8-K but on those made in the September press release, which differ from those made in the Form 8-K.
COMMON INTEREST PRIVILEGE OF CC § 47(c)
The Court then rejected defendant's qualified common interest privilege of CC § 47, subd. (c) primarily because the press release was disseminated to a newswire that made the release available to the general public worldwide, which greatly exceeded the group of interested parties - investors and prospective investors in Sequenom.
Aside from the privilege defenses, Hawran was able to establish a probability on each of his claims. The challenged statements about Hawran in the press release were provable false factual assertions about Hawran's professional competence and ethics. Hawran produced evidence of falsity, malice, intent, causation and damages to support each of his claims. Ironically, while the court's painstakingly narrow construction of the press release defeated Hawran's commercial speech exemption, that same narrow interpretation of the press release also saved his claims from the clutches of defendant's various privilege defenses enabling him to show a probability of prevailing with the admissible evidence he produced in support of his case-in-chief.
The "corporate press release/CFO defamation" case in Hawran is truly a phenomenal opinion to read.
This is the "Corporate press release/CFO Defamation" case.
Hawran ranks up there with City of Colton, previously discussed in my 8/27/12 blog, as one of the more significant SLAPP cases of 2012. This case is a treasure trove of commercial speech, defamation, and privilege law combined with a heavy twist of meticulous "gravamen" analysis. Moreover, the trial judge was the Hon. William S. Dato, perhaps, the brightest sitting trial judge in San Diego. The Appellate Opinion was penned by Justice O'Rourke, undoubtedly one of the brightest sitting Justices on our Courts of Appeal, along with the brain team of concurring Justices McIntyre and Irion. Judgment affirmed.
Sequenom is a publicly traded diagnostic testing and genetics analysis company, whose common stock trades on NASDAQ. Hawran was its CFO from April 2007 to his resignation on September 25, 2009. In the Spring of 2009, Sequenom publicly admitted that previously reported research and development results for a certain diagnostic test for fetal Down's Syndrome (Trisomy 21 or "T21") were mishandled by employees on the Sequenom science team. Thereafter, Sequenom's stock price declined, derivative and securities suits were filed, and Sequenom commenced its own internal investigation, led by a special litigation committee (SLC). In April 2009, sequenom issued its first press release concerning the delay in the launch of the T21 test due to the mishandling and, a day later, filed a Form 8-K reporting to the SEC Sequenom's formation of the SLC. In June 2009, Sequenom was alerted the SEC had commenced an investigation into matters related to the T21 issue.
In September 2009, defendants Sequenom and its Directors, Hixon, Lerner, and Lindsay made Hawran an offer that if he resigned as CFO, he would not be associated with the mishandling and would be separated from others involved in the test data mishandling. In reliance on those representations, Hawran resigned on September 25, 2009.
In September 2009, Sequenom filed another Form 8-K and issued a second press release announcing the completion of the SLC's independent investigation. In part, the September press release stated Sequenom had failed to put in place adequate protocols and control for the conduct of studies related to the program but that the Board of Directors had begun to implement various remedial measures. The Company has terminated the employment of its president and CEO and its vice President of R & D effective immediately. The portion of the press release subject to Hawran's claims read as follows:
"The company has obtained the resignation of its CFO, Paul Hawran, and one other officer. While each of those officers and employees has denied wrongdoing, the SLC's investigation has raised serious concerns, resulting in a loss of confidence by independent members of the company's board of directors in the personnel involved."
In August 2012, Hawran sued Directors Hixon, Lerner, and Lindsay and then filed a First Amended Complaint (FAC), a week later, adding Sequenom as a defendant. The First Amended Complaint sets forth causes of action for defamation, invasion of privacy/false light, negligent and intentional interference with prospective economic advantage, violation of the UCL, and negligent and intentional misrepresentation.
Hawran alleged Sequenom used the T21 test mishandling to constructively fire him for his prior complaints to the Board members about improper tax reporting. Hawran alleged his personal and professional reputation was irreparably damaged, and his ability to earn a living impacted, by the September press release, which falsely stated he had denied any wrongdoing, blamed him for the data mishandling, and directly and implicitly called into question his ethics, management capabilities, and performance as Sequenom's CFO. He alleged the press release defamed him and painted him in a false light, and substantially interfered with his prospective employment opportunities and that he had been unable to find alternative employment due to defendant's interference.
Defendants moved to strike the first amended complaint under section 425.16. They argued section 425.16 applied to each cause of action because the September press release was issued in connection with an SEC investigation and also addressed a matter of public concern rendering it a protected writing under subdivisions (e)(2), (e)(3), and (e)(4). On appeal, Hawran did not challenge the trial court finding that his causes of action were based on the press release, which was connected to issues under review in the SEC proceeding under subdivision (e)(2).
COMMERCIAL SPEECH EXEMPTION UNDER CCP 425.17, SUBD. (c)
Hawran's main contention was that section 425.16 did not apply to his claims because the commercial speech exception under CCP § 425.17, subd. (c) applied to bar defendants' SLAPP motion. The commercial speech exception of section 425.17, subd. (c) exempts a cause of action from a special motion to strike under section 425.16 when all of the following conditions are satisfied: (1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services; (2) the cause of action arises from a statement or conduct by that person consisting of `representations of fact' about `that person's or a business competitor's' business operations, goods, or services'; (3) the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions, in the person's goods or services or in the course of delivering the person's goods or services; and (4) the "intended audience" for the statement meets the definition set forth in CCP § 425.17, subd.(c)(2) [i.e. an actual, or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer]
Hawran contended, the September press release, the subject of each cause of action, concerned Sequenom's business operations in that it was devoted almost exclusively devoted to explaining what went wrong in its operations concerning the development and testing of a new genetic product and the operational steps defendants were taking to address the problem, and to announce a conference call to discuss these matters with investors, customers, and other interested parties. Moreover, Hawran introduced evidence as to the intent and purpose of Sequenom's press releases generally and explained Sequenom's custom and practice as to its distribution. Evidence was produced that the September press release was intended for the consumer and designed to maintain and increase sales and profits.
The court rejected Hawran's commercial speech argument and held that CCP 425.17(c) did not exempt his causes of action from defendant's anti-SLAPP motion because Hawran's interpretation of the September press release was overbroad. The is where the court engaged in meticulous "gravamen/arising from prong" analysis to focus solely on that portion of the press release that is alleged to form the basis of defamation liability. In so doing, the court analogized to the recent High Court decision in Simpson-Strong-Tie v. Gore, which rejected Simpson's contention that the exemption should apply so long as the statement giving rise to the cause of action was `accompanied' by factual representations about the defendant's business operations, goods, or services. In Hawran, the Court found that the "allegedly defamatory portions" of the press release are not representations of fact about "Sequenom's" business operations, goods or services. Instead, each cause of action specifically references and is based upon the assertedly false and defamatory statements in the September press release concerning Hawran's resignation and purported denial of wrongdoing. "They do not arise from the press release's other statements concerning the deficiencies of Sequenom's test protocols or controls, or the remedial measures taken."
The court reasoned, in accord with Simpson, that "section 425.17's commercial speech exemption is not triggered by the presence of other representations of fact concerning sequenom's business operations or services contained in the press release, if Hawran does not seek to impose liability based on those statements."
"Though the targeted statements that Sequenom "obtained the resignation of" Hawran and that he "has denied wrongdoing" arguably may broadly concern or relate to Sequenom's corporate events or business decisions, `NARROWLY CONSTRUING THE EXEMPTION AS WE MUST, WE CANNOT SAY THESE STATEMENTS ARE `ABOUT' SEQUENOM'S BUSINESS OPERATIONS, GOODS, OR SERVICES."
Given that the Legislature has expressly declared that section 425.16 "shall be construed broadly", the logical corollary illustrated by the Hawran case is that CCP § 425.17, and any other exemptions from SLAPP, must be narrowly construed. See our High Court opinion in Club Members for an Honest Election v. Sierra Club (2008) 45 Cal.4th 309.
PRONG TWO
FAIR AND TRUE REPORT PRIVILEGE CC § 47(d)
On prong two, the court found that Hawran presented sufficient evidence that the individual director defendants were, in part, responsible for the publication of the press release. But defendants argued that the fair and true report privilege of CC § 47, subd. (d) for fair and true reports in, or made to, a public journal of statements made in the course of an official proceeding. The Court squarely rejected this argument. Assuming the press release was disseminated to a Newswire (a public journal), this does not mean the press release constitutes a communication "of" or "about" the SEC investigation or of anything said in the course thereof. Indeed, the September press release does not even mention the SEC investigation, much less capture its substance, gist, or sting. While the Form 8-K filing with the SEC may constitute a writing "before" an official proceeding, the Form 8-K is not itself an official proceeding. The fact information in the press release was also disclosed to the SEC in the legally required Form 8-K does not transform the press release into a report "about" the SEC proceeding or statements made in the course thereof.
LITIGATION PRIVILEGE OF CC § 47(b)
For similar reasons, the court rejected defendant's litigation privilege argument based on the Form 8-K filing with the SEC. The argument failed because the press release, unlike the Form 8-K was published to the public at large beyond the participants necessary to promote the truth seeking function of the SEC proceeding. Secondly, Hawran's causes of action are not based on statements made in the Form 8-K but on those made in the September press release, which differ from those made in the Form 8-K.
COMMON INTEREST PRIVILEGE OF CC § 47(c)
The Court then rejected defendant's qualified common interest privilege of CC § 47, subd. (c) primarily because the press release was disseminated to a newswire that made the release available to the general public worldwide, which greatly exceeded the group of interested parties - investors and prospective investors in Sequenom.
Aside from the privilege defenses, Hawran was able to establish a probability on each of his claims. The challenged statements about Hawran in the press release were provable false factual assertions about Hawran's professional competence and ethics. Hawran produced evidence of falsity, malice, intent, causation and damages to support each of his claims. Ironically, while the court's painstakingly narrow construction of the press release defeated Hawran's commercial speech exemption, that same narrow interpretation of the press release also saved his claims from the clutches of defendant's various privilege defenses enabling him to show a probability of prevailing with the admissible evidence he produced in support of his case-in-chief.
The "corporate press release/CFO defamation" case in Hawran is truly a phenomenal opinion to read.
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