California Court of Appeal, Second District, Division 7.
Aug. 16, 1994.
As Modified on Denial of Rehearing Sept. 15, 1994.
Review Denied Nov. 17, 1994.
JOHNSON, Associate Justice.
In her petition for writ of mandate Sondra Wilcox, a cross-defendant below, challenges the ruling of the trial court denying her motion to strike the cross-complaint against her for damages and injunctive relief based on restraint of trade and defamation. The motion to strike was based on California's anti-SLAPP (strategic lawsuits against public participation) suit statute (Code Civ.Proc., s 425.16). We issued an alternative writ of mandate and stayed proceedings in the trial court pending our decision on the merits. For the reasons set forth below we have determined the cross-complaint is subject to a motion to strike under the anti-SLAPP-suit statute and cross- complainants have failed to establish a probability they will prevail on their claims against petitioner.
This cause and its companion, Saunders v. Superior Court (1994), 27 Cal.App.4th 832, 33 Cal.Rptr.2d 438, arise out of the practice of "direct contracting" under which a certified shorthand reporter or association of reporters contracts with a major consumer of reporter services, such as an insurance company, for the exclusive right to report depositions taken by attorneys representing that consumer.
Plaintiffs in Saunders are certified shorthand reporters who brought suit against defendants, also certified shorthand reporters, alleging "direct contracting" as practiced by defendants constitutes an unfair business practice, intentional interference with plaintiffs' prospective economic advantages and interference with existing contracts. [FN1] The reporter defendants in Saunders are members of an association known as the California Reporting Alliance, referred to by the parties as CRA or the Alliance. Also named as defendants are two insurance companies which entered into "direct contracting" agreements with the reporter defendants through CRA. Petitioner Wilcox is not a plaintiff in the Saunders suit but she did make a financial contribution to support the litigation.
The first amended cross-complaint alleges Wilcox distributed a memorandum to various other shorthand reporters which stated, among other things: many shorthand reporting agencies were banding together "to 'permanently put the Alliance to rest once and for all'"; reporters were suing CRA and its members for extortion and racketeering; and reporters should tell attorneys representing insurance companies and their policyholders about this litigation so that the "threat" might be enough to make the insurers "back off" from entering into direct contracting agreements with CRA. The memorandum asked each reporter to contribute $100 to the lawsuit against CRA. The cross-complaint also alleges Wilcox told CRA members she would no longer refer them any work or network with them because they were affiliated with CRA.
Characterizing the cross-complaint as a SLAPP suit, [FN2] Wilcox filed a motion to strike as to her and her reporting agency pursuant to Code of Civil Procedure section 425.16. [FN3] The trial court denied the motion on the ground "the responding parties have proffered sufficient evidence in opposition to the motion to establish the probability they will prevail on their claims."
[FN3] As discussed more fully below, see page 451, Code of Civil Procedure section 425.16 authorizes a "special motion to strike" an alleged SLAPP suit based on the pleadings and declarations of the parties.
Litigation which has come to be known as SLAPP, is defined by the sociologists who coined the term as "civil lawsuits ... that are aimed at preventing citizens from exercising their political rights or punishing those who have done so." (Canan & Pring, Strategic Lawsuits Against Public Participation (1988) 35 Soc.Probs. 506.) The paradigm SLAPP is a suit filed by a large land developer against environmental activists or a neighborhood association intended to chill the defendants' continued political or legal opposition to the developers' plans. (See, e.g., Gordon v. Marrone (1992) 155 Misc.2d 726, 590 N.Y.S.2d 649, 651; Protect Our Mountain v. District Court (Col.1984) 677 P.2d 1361, 1364; Webb v. Fury (1981) 167 W.Va. 434, 282 S.E.2d 28; Note, Counterclaim and Countersuit Harassment of Private Environmental Plaintiffs: The Problem, Its Implications, and Proposed Solutions (1975) 74 Mich.L.Rev. 106, 112, 113.) SLAPPs, however, are by no means limited to environmental issues (see, e.g., Brownsville Golden Age Nursing Home, Inc. v. Wells (3d Cir.1988) 839 F.2d 155, 157 [suit by nursing home against private citizens who had complained to government officials about conditions in plaintiff's facility]), nor are the defendants necessarily local organizations with limited resources. (See, e.g., Sierra Club v. Butz (N.D.Cal.1972) 349 F.Supp. 934.)
The favored causes of action in SLAPP suits are defamation, various business torts such as interference with prospective economic advantage, nuisance and intentional infliction of emotional distress. (Barker, Common-Law and Statutory Solutions to the Problem of SLAPPs (1993) 26 Loyola L.A.L.Rev. 395, 402-403.) Plaintiffs in these actions typically ask for damages which would be ruinous to the defendants. (See, e.g., Protect Our Mountain v. District Court, supra, 677 P.2d at p. 1364 [developer sought $10 million compensatory and $30 million punitive damages]; Barker, supra, 26 Loyola L.A.L.Rev. at p. 403 [estimating damage claims in SLAPPs average $9.1 million].)
SLAPP suits are brought to obtain an economic advantage over the defendant, not to vindicate a legally cognizable right of the plaintiff. (Comment, Strategic Lawsuits Against Public Participation: An Analysis Of The Solutions (1991) 27 Cal.W.L.Rev. 399, 402; Barker, supra, 26 Loyola L.A.L.Rev. at p. 406.) Indeed, one of the common characteristics of a SLAPP suit is its lack of merit. (Barker, supra, 26 Loyola L.A.L.Rev. at pp. 396, 399.) But lack of merit is not of concern to the plaintiff because the plaintiff does not expect to succeed in the lawsuit, only to tie up the defendant's resources for a sufficient length of time to accomplish plaintiff's underlying objective. (Id. at p. 405.) As long as the defendant is forced to devote its time, energy and financial resources to combating the lawsuit its ability to combat the plaintiff in the political arena is substantially diminished. (Gordon v. Marrone, supra, 590 N.Y.S.2d at p. 656; Brecher, The Public Interest and Intimidation Suits: A New Approach (1988) 28 Santa Clara L.Rev. 105, 114; Comment, Strategic Lawsuits Against Public Participation: An Analysis Of The Solutions, supra, 27 Cal.Western L.Rev. at p. 404.) The SLAPP strategy also works even if the matter is already in litigation because the defendant/cross-complainant hopes to drive up the cost of litigation to the point where the plaintiff/cross-defendant will abandon its case or have less resources available to prosecute its action against the defendant/cross-complainant and to deter future litigation. (Note, Counterclaim and Countersuit Harassment of Private Environmental Plaintiffs: The Problem, Its Implications, and Proposed Solutions, supra, 74 Mich.L.Rev. at pp. 109-110.)
Thus, while SLAPP suits "masquerade as ordinary lawsuits" the conceptual features which reveal them as SLAPPs are that they are generally meritless suits brought by large private interests to deter common citizens from exercising their political or legal rights or to punish them for doing so. (Pring, SLAPPs: Strategic Lawsuits Against Public Participation (1989) 7 Pace Envtl.L.Rev. 3, 5-6, 9.) [FN4] Because winning is not a SLAPP plaintiff's primary motivation, defendants' traditional safeguards against meritless actions, (suits for malicious prosecution and abuse of process, requests for sanctions) are inadequate to counter SLAPPs. Instead, the SLAPPer considers any damage or sanction award which the SLAPPee might eventually recover as merely a cost of doing business. (Barker, supra, 26 Loyola L.A.L.Rev. at pp. 406-407.) By the time a SLAPP victim can win a "SLAPP-back" suit years later the SLAPP plaintiff will probably already have accomplished its underlying objective. Furthermore, retaliation against the SLAPPer may be counter-productive because it ties up the SLAPPee's resources even longer than defending the SLAPP suit itself. (Id. at p. 432; Comment, Strategic Lawsuits Against Public Participation: An Analysis Of The Solutions, supra, 27 Cal.W.L.Rev. at p. 403.)
California's response to SLAPP suits was to enact Code of Civil Procedure section 425.16, discussed below.
Senate Bill 1264, 1991-1994 Regular Session, added a new section 425.16 to the Code of Civil Procedure [FN5] effective January 1, 1993. (Stats.1992, ch. 726, s 2.)
"If the court determines that the plaintiff has established a probability that he or she will prevail on the claim, neither that determination nor the fact if that determination shall be admissible in evidence at any later stage of the case, and no burden of proof or degree of proof otherwise applicable shall be affected by that determination.
"(e) As used in this section, 'act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue' includes any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; or any written or statement or writing made in a place open to the public or a public forum in connection with an issue of public interest.
"(f) The special motion may be filed within 60 days of the service of the complaint or, in the court's discretion, at any later time upon terms it deems proper.
"(g) All discovery proceedings in the action shall be stayed upon the filing of a notice of motion made pursuant to this section. The motion shall be noticed for hearing not more than 30 days after service unless the docket conditions of the court require a later hearing. The stay of discovery shall remain in effect until notice of entry of the order ruling on the motion. The court, on noticed motion and for good cause shown, may order that specified discovery be conducted notwithstanding this subdivision."
As noted above, section 425.16 does not apply in every case where the defendant may be able to raise a First Amendment defense to a cause of action. Rather, it is limited to exposing and dismissing SLAPP suits-- lawsuits "brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances" "in connection with a public issue." (s 425.16, subds. (a), (b).)
Although the statute clearly places the burden on the plaintiff or cross- complainant to establish a probability of prevailing on the claim (s 425.16, subd. (b)), this burden does not arise unless the claim is one falling within the ambit of the statute. The statute is silent as to whether the defendant, as the moving party, has the burden of establishing the action arises out of acts in furtherance of defendant's First Amendment rights in connection with a public issue or whether the plaintiff bears the burden of showing its claim does not arise out of such acts by the defendant. A related question is what the statute means by the "furtherance" of the defendant's "right of petition or free speech." If the defendant's act is not constitutionally protected how can doing that act be "in furtherance" of the defendant's constitutional rights? On the other hand, if the defendant's act is constitutionally protected then, by definition, there is no probability the plaintiff will prevail on its claim. (Protect Our Mountain v. District Court, supra, 677 P.2d at pp 1368-1369)
Traditionally, a party seeking to benefit from a statute bears the burden of making a prima facie showing the statute applies to her. We see no reason why that rule should not apply to a party seeking a special motion to strike under section 425.16. It is not only logical to put this burden on the party seeking the benefit of section 425.16, it is fundamentally fair that before putting the plaintiff to the burden of establishing probability of success on the merits the defendant be required to show imposing that burden is justified by the nature of the plaintiff's complaint.
The legislative history of section 425.16 supports our conclusion. The first legislative proposal to deal with SLAPP suits would have erected a pleading bar to suits infringing on constitutional rights thus putting the burden of justifying the action entirely on the plaintiff. (Cf. Civ.Code s 1714.10, subd. (a).) The Governor vetoed this proposal. (Stokes, SLAPPing Down the Right to Trial by Jury: The SLAPP Legislation Confusion of 1992 (Dec.1992) 14 CEB Civ.Lit.Rep. 485, 487.) The Legislature rejected subsequent proposals to deal with SLAPPs through motions to strike or motions for summary judgment which would result in putting the burden entirely on the defendant. (Ibid.) Section 425.16 appears to compromise between these two positions by placing the initial burden on the defendant to show the action should be tested under the provisions of subdivision (b) and the burden on the plaintiff to show the action meets that test.
We do not believe the Legislature intended that to invoke the special motion to strike the defendant must first establish its actions are constitutionally protected under the First Amendment as a matter of law. If this were so the second clause of subdivision (b) would be superfluous because by definition the plaintiff could not prevail on its claim. (See discussion, supra, pp. 451-452)
We conclude, therefore, the statute requires the defendant to make a prima facie showing the plaintiff's suit arises "from any act of [defendant] in furtherance of [defendant's] right of petition or free speech under the United States or California Constitution in connection with a public issue." (s 425.16, subd. (b).) The defendant may meet this burden by showing the act which forms the basis for the plaintiff's cause of action was a written or oral statement made before a legislative, executive, or judicial proceeding; or such a statement in connection with an issue under consideration or review by a legislative, executive, or judicial body; or such a statement was made in a place open to the public or a public forum in connection with an issue of public interest. (s 425.16, subd. (e).) Thus, if the defendant's act was a lawsuit against a developer the defendant would have a prima facie First Amendment defense. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1136-1137, 270 Cal.Rptr. 1, 791 P.2d 587.) But, if the defendant's act was burning down the developer's office as a political protest the defendant's motion to strike could be summarily denied without putting the developer to the burden of establishing the probability of success on the merits in a tort suit against defendant.
It should be noted the definition of an "act in furtherance of" a person's First Amendment rights is not limited to oral and written statements. (s 425.16, subd. (e).) Thus if the plaintiff's suit arises out of the defendant's constitutionally protected conduct, such as a peaceful economic boycott the plaintiff should be required to satisfy the statute's requirements. (NAACP v. Claiborne Hardware (1982) 458 U.S. 886, 102 S.Ct. 3409, 73 L.Ed.2d 1215; State of Mo. v. Nat. Organization for Women (8th Cir.1980) 620 F.2d 1301.)
In ruling cross-complainants had established a probability of success on their claims, the trial court impliedly found petitioner had satisfied the threshold requirement of showing the claims arose from an act in furtherance of her right of petition or free speech. (s 425.16, subd. (b).) The record supports the trial court's determination on this threshold issue.
Cross-complainants concede the issue of "direct contracting" is a public issue within the meaning of section 425.16, subdivisions (b) and (e). They contend, however, petitioner failed to show the acts alleged in the cross-complaint were done "in connection with" the consideration of direct contracting by any legislative, executive or judicial body as required by those same subdivisions. They argue there is no rational connection between legislative, administrative and judicial challenges to direct contracting and petitioner's alleged defamatory statements and conspiracy with others to injure cross- complainants in their businesses.
This argument points up why traditional pleading-based motions such as demurrers and motions to strike are ineffective in combating SLAPP's and why the Legislature believed there was a need for a "special motion to strike" as authorized by section 425.16. In a SLAPP complaint the defendant's act of petitioning the government is made to appear as defamation, interference with business relations, restraint of trade and the like. For this reason the Legislature provided, in determining a motion under the anti-SLAPP statute, "the court shall consider the pleadings and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (s 425.16, subd. (b).)
Here petitioner's alleged defamatory statements were clearly made in connection with the underlying judicial challenge to direct contracting. As shown by the cross-complaint itself those statements were made in the context of exhorting shorthand reporters to contribute to the cost of pursing that litigation. Thus, there is a strong showing those statements are rationally connected to the litigation itself. (Pacific Gas & Electric Co. v. Bear Stearns & Co., supra, 50 Cal.3d at pp. 1132, 1135-1136, 270 Cal.Rptr. 1, 791 P.2d 587; City of Long Beach v. Bozek (1982) 31 Cal.3d 527, 535, 183 Cal.Rptr. 86, 645 P.2d 137; cf. McDonald v. Smith (1985) 472 U.S. 479, 484- 485, 105 S.Ct. 2787, 2790-2791, 86 L.Ed.2d 384.) (See discussion, post, pp. 456-457.)
As to the claims involving restraint of trade, "the constitutional right to petition for redress of grievances [establishes] that there is no antitrust liability for petitioning any branch of government, even if the motive is anticompetitive." (Pacific Gas & Electric Co. v. Bear Stearns & Co., supra, 50 Cal.3d at p. 1133, 270 Cal.Rptr. 1, 791 P.2d 587.) The only exception to this rule is for sham petitioning. (Hi-Top Steel Corp. v. Lehrer (1994) 24 Cal.App.4th 570, 574, 29 Cal.Rptr.2d 646.) There is case law supporting the proposition petitioning includes acts designed to influence public opinion concerning an issue before a legislative or administrative body. Eastern R.R. Presidents' Conference v. Noerr Motor Freight, Inc. (1961) 365 U.S. 127, 142-144, 81 S.Ct. 523, 532-533, 5 L.Ed.2d 464 (hereafter Noerr); Webb v. Fury, supra, 282 S.E.2d at p. 42.) Moreover, the fact a defendant's petitioning activity includes an economic boycott does not necessarily deprive that activity of constitutional protection. (NAACP v. Claiborne Hardware, supra, 458 U.S. at pp. 913-914, 102 S.Ct. at pp. 3425-3426; State of Mo. v. Nat. Organization for Women, supra, 620 F.2d at p. 1315.) Assuming petitioner engaged in a conspiracy to boycott the cross-complaining shorthand reporters, an allegation she denies, such activity is at least arguably protected by the petition clause of the First Amendment and the trial court properly shifted the burden to the cross-complainants on this issue. [FN6]