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.
Wednesday, July 10, 2013
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.
Saturday, November 3, 2012
IALA UNDERSTANDING SLAPPS MCLE - L.A. WED 11/7/12 6:30PM
IRANIAN AMERICAN LAWYERS ASSOCIATION IS SPONSORING A SLAPP MCLE THIS WED 11/7/12 FROM 6:30PM TO 8:30 PM AT UNIVERSITY OF WEST LOS ANGELES SCHOOL OF LAW 9800 LA CIENAGA BLVD. 12TH FLOOR INGLEWOOD, CA 90301
PLEASE JOIN ME, JAMES J. MONEER, ESQ., AND BENJAMIN G. SHATZ, ESQ., A CERTIFIED APPELLATE SPECIALIST WITH MANATT PHELPS, FOR A 2 HOUR JAM PACKED SLAPP SEMINAR FROM BOTH THE PLAINTIFF'S AND DEFENSE PERSPECTIVES COVERING ALL MAJOR SLAPP TOPICS INCLUDING "OFFICIAL PROCEEDING" SLAPPS, "PUBLIC ISSUE SPEECH" SLAPPS, "CYBER SLAPPS", "GRAVAMAN" ANALYSIS, MIXED CAUSE OF ACTION ANALYSIS, SLAPP DISCOVERY MOTIONS, SLAPP FEE MOTIONS, SLAPP PROCEDURES, EXEMPTIONS FROM SLAPP INCLUDING ILLEGALITY, CCP 425.17 EXEMPTIONS FOR PUBLIC INTEREST SUITS AND COMMERCIAL SPEECH, AND SLAPPBACKS UNDER CCP 425.18. BOTH FOUNDATIONAL AND THE MOST CURRENT CASES WILL BE DISCUSSED AS WELL AS SLAPP STRATEGY AND SLAPP MALPRACTICE ISSUES.
To register please contact IALA for more info at 818-783-3444 or email: info@ialalawyers.org.
2 hours MCLE Credit. Cost $65.00
PLEASE JOIN ME, JAMES J. MONEER, ESQ., AND BENJAMIN G. SHATZ, ESQ., A CERTIFIED APPELLATE SPECIALIST WITH MANATT PHELPS, FOR A 2 HOUR JAM PACKED SLAPP SEMINAR FROM BOTH THE PLAINTIFF'S AND DEFENSE PERSPECTIVES COVERING ALL MAJOR SLAPP TOPICS INCLUDING "OFFICIAL PROCEEDING" SLAPPS, "PUBLIC ISSUE SPEECH" SLAPPS, "CYBER SLAPPS", "GRAVAMAN" ANALYSIS, MIXED CAUSE OF ACTION ANALYSIS, SLAPP DISCOVERY MOTIONS, SLAPP FEE MOTIONS, SLAPP PROCEDURES, EXEMPTIONS FROM SLAPP INCLUDING ILLEGALITY, CCP 425.17 EXEMPTIONS FOR PUBLIC INTEREST SUITS AND COMMERCIAL SPEECH, AND SLAPPBACKS UNDER CCP 425.18. BOTH FOUNDATIONAL AND THE MOST CURRENT CASES WILL BE DISCUSSED AS WELL AS SLAPP STRATEGY AND SLAPP MALPRACTICE ISSUES.
To register please contact IALA for more info at 818-783-3444 or email: info@ialalawyers.org.
2 hours MCLE Credit. Cost $65.00
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