Recent Anti-SLAPP Developments

By Sean M. SeLegue, Robert Spoo, and Rebecca M. Kahan
     
Under the anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, a defendant who is sued for speaking on a public issue or for petitioning the government can obtain an early termination of the action if the plaintiff lacks evidence to support it. (Cal. Code Civ. Proc § 425.16.) Designed to prevent public speeches and entreaties to the government from being crushed by the threat of expensive litigation, the statute gives a defendant the means to force a plaintiff to present proof early in the case rather than being dragged through lengthy and expensive pretrial and trial procedures to obtain vindication.
      The statute is broadly written and powerful?providing for a stay of discovery when an anti-SLAPP motion is filed, fee-shifting if the motion is successful, and an immediate right of appeal if the motion is denied.
     
      OVERVIEW OF THE STATUTE
      An anti-SLAPP motion consists of two distinct parts. First, the court must determine whether the cause of action in fact did arise from either the defendant's protected speech or petitioning activity.
      If the court concludes that it did, then it decides whether the plaintiff can establish a probability of success. (Cal. Code Civ. Proc. § 425.16(b)(1).) This second step involves a procedure similar to summary judgment; the plaintiff may not rely on mere allegations, but must present admissible evidence. (Varian Med. Sys., Inc. v. Delfino, 35 Cal. 4th 180, 192 (2005); see also Navellier v. Sletten, 29 Cal. 4th 82, 8889 (2002).)
     
      COVERED ACTIVITY
      In contrast to the requirement that speech must be on a "public issue" to be protected, the statute covers petitioning activity regardless of whether it relates to a private or public interest. (Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th 1106, 1123 (1999).) It applies to actions in court and proceedings before administrative agencies and other adjudicative bodies. (See ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1009 (2001) (complaint filed with SEC).)
      Section 425.16 covers claims for injunctive relief as well as claims for damages. (Equilon Enters., LLC v. Consumer Cause, Inc., 29 Cal. 4th 53, 67 & n.4 (2002).)
      Consistent with the statute's command that it shall be construed broadly, the courts have applied this provision to a wide range of litigation-related activities. (Cal. Code Civ. Proc. § 425.16(a).) Therefore, in assessing what it means to petition the government, think broadly: Even a phone call to the police might be considered protected petitioning activity. (See Wang v. Hartunian, 111 Cal. App. 4th 744, 749 (2003).)
      The statute is so broad that, in addition to actual petitioning, it covers activities undertaken in preparation for petitioning: Issuing demand letters, engaging in communications preparatory to litigation, and contacting law enforcement officials to initiate prelawsuit investigations all are protected activities. (Blanchard v. DIRECTV, Inc., 123 Cal. App. 4th 903, 919?21 (2004), demand letters; Briggs, 19 Cal. 4th at 1115, preparatory communications; Dickens v. Provident Life & Accident Ins. Co., 117 Cal. App. 4th 705, 714 (2004), contacts with federal investigators.) Even preparatory work?such as communications and debt- collection efforts?for an action never filed might fall within the statute's protection if litigation were under "serious consideration." (A.F. Brown Elec. Contractor, Inc. v. Rhino Elec. Supply, Inc., 137 Cal. App. 4th 1118, 112829 (2006).)
      Participating in regulatory proceedings?or representing a client in such matters?is generally considered petitioning activity within the scope of the anti-SLAPP statute. For example, a complaint filed with the Securities and Exchange Commission has been deemed "a statement before an official proceeding," protected under section 425.16(e). (ComputerXpress, 93 Cal. App. 4th at 1009.) Reports made to the National Response Center that an industrial water-maintenance company was dumping illegal chemicals into public drainage systems were also held to be protected under section 425.16(e)(2). (Mann v. Quality Old Time Serv., Inc., 120 Cal. App. 4th 90, 105 (2004).) Similarly, a hotel company's filing of an administrative challenge to a competitor hotel's expansion may fall within the scope of the anti-SLAPP statute. (Sunset Millennium Assocs., LLC v. LHO Grafton Hotel, L.P., 146 Cal. App. 4th 300 (2006) (reversing the grant of an anti-SLAPP motion on other grounds).)
      In addition, activities encouraging others to petition are subject to the anti-SLAPP statute. In Ludwig v. Superior Court (37 Cal. App. 4th 8 (1995)), a city sued a developer for having encouraged individuals to speak at a city council meeting against a competing development project that the city favored. The court of appeal held that the developer's conduct in encouraging political action by others furthered petitioning activity and thus fell within section 425.16. (37 Cal. App. 4th at 1718.)
     
      COMMON CLAIMS AGAINST LAWYERS
      Courts so far have differed in interpreting the scope of many anti-SLAPP claims commonly brought against lawyers.
      Malicious prosecution. When an attorney is sued for malicious prosecution-or indeed any petitioning activity -based on representing a client, both the attorney and the client are entitled to the protection of the anti-SLAPP statute. (Jarrow Formulas, Inc. v. LaMarche, 31 Cal. 4th 728, 734 (2003); see also, Jespersen v. Zubiate-Beauchamp, 114 Cal. App. 4th 624, 629?30 (2003).)
      Legal malpractice. Courts disagree about how to analyze whether a legal malpractice claim falls within the anti-SLAPP statute.
      In Jespersen, former clients alleged that their attorneys acted negligently by failing to provide discovery to an adversary in a prior litigation. The attorneys filed an anti-SLAPP motion, arguing that representing a party in an action constitutes protected petitioning activity. The court of appeal held that the attorneys were being sued for an omission?failure to comply with discovery obligations?rather than an affirmative act of petitioning. (Defendants were sued "for their failure to comply with a discovery statute and two court orders to do so." 114 Cal. App. 4th at 632.) Jespersen implies that a legal malpractice action based on petitioning?such as filing a motion or arguing in court?would come within the ambit of the anti-SLAPP statute.
      However, the court in Kolar v. Donahue, McIntosh & Hammerton (145 Cal. App. 4th 1532 (2006)) took a different and more sweeping approach to the question, holding that legal malpractice actions are categorically outside the reach of the anti-SLAPP statute. Kolar held that a legal malpractice action does not arise from petitioning activity but rather reflects an act of negligence?in the court's words, that the "attorney did not competently represent the client's interests." It reasoned that a malpractice action was not intended to be within the statute because it "does not have the chilling effect on advocacy found in malicious prosecution, libel, and other claims typically covered by the anti-SLAPP statute." (145 Cal. App. 4th at 1540.)
      Until the state Supreme Court provides further guidance, trial courts must choose which analysis?Jespersen's or Kolar's?to rely on in ruling on anti-SLAPP motions brought by legal malpractice defendants. (Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450, 456 (1962).) And in deciding which opinion to follow, a court will have to consider whether Kolar's analysis conflicts with the Supreme Court's view that: "Nothing in the statute itself categorically excludes any particular type of action from its operation, and no court has the 'power to rewrite the statute so as to make it conform to a presumed intention which is not expressed.' " (Navellier, 29 Cal. 4th at 92, quoting California Teachers Ass'n v. Governing Bd. of Rialto Unified Sch. Dist., 14 Cal. 4th 627 (1997).)
      Fiduciary duty claims. There is a similar disagreement among the courts of appeal deciding claims of breach of fiduciary duty against attorneys.
      The first case to consider the question was Benasra v. Mitchell Silberberg & Knupp, LLP (123 Cal. App. 4th 1179 (2004)). There, the plaintiff alleged that a law firm had represented the plaintiff in one matter, obtaining confidential information, only to use that same confidential information to cross-examine him in a later arbitration proceeding. The law firm filed an anti-SLAPP motion, contending that the cross-examination constituted petitioning and, thus, that the claim arose from petitioning activity.
      The court of appeal disagreed, viewing the law firm's alleged breach of duty as having arisen not during the arbitration but at the moment the law firm agreed to take on the new matter adverse to the plaintiff, the firm's former client. Specifically, it held: "The breach occurs not when the attorney steps into court to represent the new client, but when he or she abandons the old client." (123 Cal. App. 4th at 1189.)
      The issue was taken up again in Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton, LLP (133 Cal. App. 4th 658 (2005)). In that case, the plaintiffs contended that a law firm committed malpractice and aided and abetted a breach of fiduciary duty by, among other things, representing particular clients both before the SEC and in federal court. The court held that those allegations triggered the anti-SLAPP statute. It also criticized Benasra's focus "on the theoretical time that a breach of duty occurs, as opposed to the specific allegations of wrongdoing in the operative complaint." (133 Cal. App. 4th at 674.) The Peregrine court instead focused on the fact that the actions the law firm was alleged to have undertaken?appearing before the SEC and in court?and for which the plaintiff sought to impose liability were in fact petitioning activity.
      A third case, Freeman v. Schack (154 Cal. App. 4th 719 (2007)), recently held that a breach of fiduciary duty claim filed against an attorney by former clients was not subject to an anti-SLAPP motion. The principal thrust of the complaint, it reasoned, was not the filing or settlement of litigation but rather the attorney's undertaking of representation adverse to his former clients that amounted to a "sellout." Freeman seems to follow the reasoning in Benasra, but it expressly declined to address the split between Benasra and Peregrine.
      As with the Jespersen and Kolar decisions, trial courts must decide for themselves whether Benasra or Peregrine sets forth the more persuasive legal analysis.
     
      THE ILLEGALITY EXCEPTION
      The California Supreme Court recently held that the benefits of the anti-SLAPP statute are not available to a defendant who is sued for speech that is illegal as a matter of law. In Flatley v. Mauro (39 Cal. 4th 299 (2006)), an entertainer sued an attorney for extortion based on demand letters the attorney had sent to the entertainer. Those letters demanded enormous sums of money and threatened that, if the money were not paid promptly, the attorney intended to file an action and issue press releases alleging the entertainer had sexually assaulted the attorney's client.
      The court held that the attorney's conduct, which was reflected in correspondence and telephone calls the attorney did not dispute, constituted criminal extortion as a matter of law. It noted that when "the defendant concedes, or the evidence conclusively establishes, that the assertedly protected speech or petition activity was illegal as a matter of law, the defendant is precluded from using the anti-SLAPP statute to strike the plaintiff's action." (39 Cal. 4th at 320.)
      The court also reasoned that "the statute does not protect activity that, because it is illegal, is not in furtherance of constitutionally protected speech or petition rights." (39 Cal. 4th at 324.) Notably, it reached its conclusion based on the first prong of the anti-SLAPP analysis?whether the plaintiff's claim arises from the defendant's protected speech or petitioning?not the second prong, which requires analysis of the plaintiff's probability of success in the action. It remains to be seen whether Flatley's reasoning can be extended to petitioning activity.
     
      STATUTORY EXCEPTIONS
      In 2003 the Legislature enacted section 425.17 of the California Code of Civil Procedure. The provision was passed in response to a "disturbing abuse" of anti-SLAPP motions and, as a result, specified situations in which the anti-SLAPP procedure would no longer be available.
      The most significant provisions of the complicated statutory scheme are those that exempt actions brought for the public benefit and claims based on commercial speech, such as false advertising. After outlining those exemptions, the statute establishes exceptions to the exemptions, including one that protects a "dramatic, literary, musical, political, or artistic work, including, but not limited to, a motion picture or television program or an article published in a newspaper or magazine of general circulation." (Cal. Code Civ. Proc. § 425.17(d)(2).) If the trial court denies an anti-SLAPP motion based on section 425.17, the moving party has no right of immediate appeal. (Cal. Code Civ. Proc. § 425.17(e).)
     
      DISCOVERY HOLD
      As soon as an anti-SLAPP motion is filed, all discovery proceedings in a case are stayed. Mindful of the legislative goals of the statute, courts have interpreted "discovery proceedings" broadly. (See Mattel, Inc. v. Luce, Forward, Hamilton & Scripps, 99 Cal. App. 4th 1179, 1190 (2002), recognizing the legislative intent to "protect defendants from the burden of traditional discovery pending resolution of the motion.")
      And recently, in Britts v. Superior Court, the court of appeal held that "discovery proceedings" include discovery motions. (145 Cal. App. 4th 1112, 1125?26 (2006).) Britts is important because it prevents a plaintiff who anticipates an anti-SLAPP motion from serving discovery, demanding a response before the 60-day deadline to file an anti-SLAPP motion has passed, and then insisting that the anti-SLAPP stay on discovery does not apply to discovery served before the anti-SLAPP motion was filed.
      The case makes clear that the stay on discovery is absolute, unless the plaintiff successfully moves for an order permitting specified discovery for good cause shown. (Cal. Code Civ. Pro. § 425.16(g).) Even then, "good cause" requires the plaintiff to show that the requested discovery is both "necessary for the plaintiff to oppose the motion" and "tailored to that end." (Britts, 145 Cal. App. 4th at 1125, citing Tutor-Saliba Corp. v. Herrera, 136 Cal. App. 4th 604 at 617 (2006).)
     
      STAYS PENDING APPEAL
      In Varian Medical Systems, Inc. v. Delfino, the California Supreme Court held that an appeal from an order denying an anti-SLAPP motion automatically stays all further proceedings on the merits of the causes of action affected by the motion. (35 Cal. 4th 180 at 18891 (2005).)
      A more recent case carved out a narrow exception to the Varian rule. In Novartis Vaccines & Diagnostics, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (143 Cal. App. 4th 1284 (2006)), the court of appeal affirmed the trial court's jurisdiction to grant a preliminary injunction while an appeal on an anti-SLAPP motion was pending. The Novartis court held that the preliminary injunction "is not a decision on the merits and does not affect the merits of the claim." (143 Cal. App. 4th 1284 at 1302.)
     
      Sean M. SeLegue (sselegue@howardrice.com) is director and Robert Spoo (rspoo@howardrice.com) and Rebecca M. Kahan (rkahan@howardrice.com) are associates at Howard, Rice, Nemerovski, Canady, Falk & Rabkin in San Francisco.
     
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