Anti-SLAPP motion

Daniels’ Defamation Action Against Trump was Doomed from the Start

I have frequently warned about the path defamation claims can take, and it was illustrated once more by the kerfuffle between Donald Trump and Stormy Daniels.

Here is the pattern.

Way outside every controlling statute of limitations, a woman states she was assaulted by a man, and the man responds by going on social media or stating to the press that the assault never occurred. The woman then sues for defamation, claiming that by denying the assault, the man is calling her a liar. As a variation, the accused man sometimes comes right out and says she is lying.

It’s a tough situation for the accused. If he fails to deny the charge, then it will be assumed that it must be true, but if he does deny it, then he buys himself a defamation action. He was safe from legal action, but his words started a whole new statute of limitations on the defamation claim. This is precisely what happen when Bill Cosby denied raping various women, which lead to very different conclusions.

Defamation claims against Bill Cosby.

In one case, Katherine Mckee sued Cosby for defamation after his attorney denied to the press that Cosby had ever raped her. There, the case was dismissed and the First Circuit upheld the dismissal. That one has a weird twist, because the dismissal was based in large part on finding that Mckee was a limited public figure, and then finding that she had failed to show malice by Cosby for his attorney’s statements. It’s disconcerting that a possible victim can become a limited public figure just because she reports the offense at a time when others are reporting similar events against the same celebrity.

The case of Janice Dickinson versus Cosby followed the exact same pattern, but that case did manage to survive dismissal, because the letters by Cosby’s attorney, Marty Singer, were so unrelated to any litigation and so beyond the pale, that the court concluded Dickinson could establish a case for defamation and denied the anti-SLAPP motion.

The Trump variation.

The Trump situation is a slight variation on the theme. There is no claim of assault, and I don’t recall if he is even denying having sex with Daniels, but as to her claim that some unidentified man tried to intimidate her into silence, Trump tweeted, “A sketch years later about a nonexistent man. A total con job, playing the Fake News Media for Fools (but they know it)!” Daniels’ attorney, Michael Avenatti, grabbed onto the “con job” language and used that as a basis to file a defamation action.

Stormy Daniels

Here is the actual allegation from Daniels’ defamation action, to show how the attempt is made to turn the denial into defamation (Stormy Daniels’ real name is Stephanie Clifford):

17. Mr. Trump’s statement falsely attacks the veracity of Ms. Clifford’s account of the threatening incident that took place in 2011. It also operates to accuse Ms. Clifford of committing a crime under New York law, as well as the law of numerous other states, in that it effectively states that Ms. Clifford falsely accused an individual of committing a crime against her when no such crime occurred. Mr. Trump’s statement is false and defamatory. In making the statement, Mr. Trump used his national and international audience of millions of people to make a false factual statement to denigrate and attack Ms. Clifford. Mr. Trump knew that his false, disparaging statement would be read by people around the world, as well as widely reported, and that Ms. Clifford would be subjected to threats of violence, economic harm, and reputational damage as a result.

But that defamation action by Daniels against Trump met its quick and predictable fate; it was dismissed by way of an anti-SLAPP motion. The scenario is different from the Cosby cases, because Trump’s response was so tepid (not a word that is often associated with Trump) and nonspecific.

You see, as Avenatti would have known if he’d had the simple sense to read this blog, language like “con job” is considered hyperbolic, and is too imprecise to create a verifiably false statement of fact. Without a verifiably false statement of fact, there can be no defamation. At best, the statement would be one of opinion, and therefore non-actionable. Judge S. James Otero concluded that Daniels had failed to establish a prima facie case for defamation.

The Court agrees with Mr. Trump’s argument because the tweet in question constitutes ‘rhetorical hyperbole’ normally associated with politics and public discourse in the United States. The First Amendment protects this type of rhetorical statement.

The judge then offered a definition of “rhetorical hyperbole,” defining it as “extravagant exaggeration employed for rhetorical effect” and stated that Trump’s tweet displayed “an incredulous tone, suggesting that the content of his tweet was not meant to be understood as a literal statement about Plaintiff. Instead, Mr. Trump sought to use language to challenge Plaintiff’s account of her affair and the threat that she purportedly received in 2011. As the United States Supreme Court has held, a published statement that is ‘pointed, exaggerated, and heavily laden with emotional rhetoric and moral outrage’ cannot constitute a defamatory statement.”

Rookie move.

Avenatti’s decision to bring the defamation action was a rookie move. He hates Trump, and no doubt thought that bringing the defamation action would be one more way to get in his face. In reality, it gives Trump a win against Daniels (although her declaratory relief action still remains), and now makes Daniels responsible for (no doubt) significant attorney fees.

It also exposes Avenatti to a malpractice claim by Daniels, should she decide she is not happy with this result. In my opinion, the fact that this defamation claim would not survive an anti-SLAPP motion was so apparent that it was below the standard of care to pursue it. As a result, Daniels is now on the hook for probably no less than $50,000 in attorney fees to Trump. Daniels works in the adult film industry, and according to an article by CNBC, likely makes around $1,000 per sex scene.

Stormy Daniels with Michael Avenatti

Avenatti did not take the loss well. Like a kid in the school yard who loses at tether-ball and cries, “yeah, well no one likes you,” Avenatti responded with an equally mature tweet, stating, “@realDonaldTrump – tens of millions of Americans are tired of your fraud, lies, and corruption. They are equally tired of your attacks on women, especially the ones who you have had sex with while cheating on your wives. We (and the UN) are laughing AT YOU, not with you.”

For their parts, Trump referred to Daniels as “Horseface” and Daniels implied that he has a “tiny” penis. It’s all very classy.

As to Avenatti’s tweet, in reality, at least for today, he is the one receiving the laughter. But remember, this is not the end of the legal claims by Daniels against Trump. This originated from the non-disclosure agreement she signed and is now seeking to invalidate, and ¶ 8.2 of that agreement contains an attorney fees provision. If she ultimately prevails on that action, Avenatti could have the last laugh, at least as regards attorney fees.

[UPDATE: Oct. 22, 2018] Not a great week for Michael Avenatti. A week after his very public and foolish loss in Daniels v. Trump, a judge ordered him to pay $4.85 million to a former lawyer from his office — a lawyer he had claimed actually owed him money. Avenatti’s firm had already been ordered to pay $10 million to the attorney, but with today’s ruling, Avenatti was made personally liable for $4.85 million. It represented a loss within a loss, because Avenatti had sought removal of the action to Federal Court, but the court denied the motion, concluding that the motion had no merit and was designed only to delay the ruling.

Within hours of that ruling, another judge found in favor of Avenatti’s landlord, ordering the eviction of Avenatti and his staff from Avenatti’s law offices in Fashion Island in Newport Beach, California. According to the complaint, Avenatti’s firm has not paid rent for four months.

A copy of the complaint by Jason Frank against Avenatti can be found here.

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SLAPP025 – Anti-SLAPP Motion Defeats Gone With the Wind Actress

de Havilland v. FX Networks, LLC

If you sell t-shirts bearing the images of the Three Stooges, can you be sued for violating their right of publicity?

And if you create and broadcast an 8-part docudrama centering on Bette Davis and Joan Crawford, can Olivia de Havilland sue you for including the details of HER life in that story?

Well, the just decided case of de Havilland v. FX Networks, LLC answers both those questions.

I enjoyed this anti-SLAPP case because it beautifully illustrates how some judges just don’t understand precedent.

Olivia de Havilland, who is now 102 years old, did not like the way she was protrayed in the FX docudrama, “Feud: Bette and Joan,” centering on deceased actresses Bette Davis and Joan Crawford.

In case you don’t recognize the name, de Havilland portrayed Melanie in Gone With the Wind. She was the one Scarlett was always jealous of, as I recall.

She sued FX, claiming the portrayal of her in the show amounted to the unauthorized use of her name and likeness for commercial gain.

FX responded with an anti-SLAPP motion.

The trial court, Judge Holly Kendig presiding, denied the anti-SLAPP motion, relying in large part on a California Supreme Court decision called Comedy III Productions v. Gary Saderup, Inc.

FX appealed. Listen to Episode 25 to see how it all turned out.

What is the current status of the requirement that an anti-SLAPP motion be heard within 30 days of filing?

Previously, Fair Political Practices Commission v. American Civil Right Coalition, Inc. and Decker v. U.D. Registry had held that the 30-day requirement was jurisdictional. Now Karnazes v. Ares holds that it is the clerk’s burden to set the hearing within 30 days. But does that mean counsel is safe if a hearing is outside the 30-day deadline. Listen to find out.

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The Morris Plan – How to Force Yelp (and other sites) to Remove Defamatory Reviews

Removing defamatory reviews.

What you are about to read is a completely untested but viable approach to forcing Yelp to remove a false and defamatory review, based on recent legal developments. It is on the bleeding edge of the law, and as that name implies, it may not be without pain as it works its ways through the courts. No nasty emails if it doesn’t work for you.

This approach arises from Yelp’s irrational need to create bad precedent, as evidenced by the Yelp v. McMillan case, and most recently the Supreme Court matter of Hassell v. Bird, wherein Yelp argued that the content posted by third parties is its content.

To those unfamiliar, in Hassell v. Bird the defendant Bird defamed a law firm – the Hassell Law Group – in a Yelp review. Hassell sued Bird, and the court found that the Yelp “review” by Bird was false and defamatory, and ordered Bird to take it down. But then comes a twist unique to this case. Knowing that Bird would be unlikely to comply with the order, the court also ordered Yelp to remove the review, even though Yelp had never been a party to the action.

It is not uncommon for court orders to include persons or entities who were not parties to the action, if some action by those third parties is necessary to effectuate the order. In a typical renter eviction action, for example, only the known tenant will be named in the action, but the eviction order will apply to anyone occupying the residence, in case the tenant allowed others to move in, subleased the property, etc.

Here, the trial court felt that it was reasonable to require Yelp to take down the false review, even though it was not a party to the action. The review had been deemed to be defamatory, and it was not Yelp’s speech that was being attacked, so certainly Yelp would have no horse in the race. Indeed, presumably Yelp wants the reviews posted on its site to be as truthful as possible, so it should welcome an order that would result in the removal of a false review.

But Yelp’s business model depends on negative reviews, so it cried foul. Even after the trial court and the Court of Appeal agreed that the review was false and defamatory, and even after the Court of Appeal found that the judge’s order was entirely proper, Yelp went to the Supreme Court to fight for the right to publish false and defamatory reviews.

A Federal law called the Communications Decency Act (“CDA”) does not allow a direct action against sites such as Yelp for the comments of third parties, so Hassell did exactly the right thing in failing to name Yelp in the action. Had it named Yelp, Yelp would have filed an anti-SLAPP motion, and Hassell ultimately would have been responsible for the attorney fees incurred in bringing that motion. By simply including Yelp in the injunctive relief, that was avoided.

But in its appeal briefs, both to the Court of Appeal and the Supreme Court, Yelp argued that it WANTS to be named in actions such as this. It candidly admitted at oral argument before the Supreme Court that it would then argue that it should not have been named and would bring an anti-SLAPP motion to be dismissed from the action, but gosh darn it it should at least be NAMED.

In fact, Yelp was given notice of the legal action, and had every opportunity to intervene if it felt that Bird’s review was not defamatory and should be protected. The complaint was sent to Yelp, explaining that the review was defamatory and asking Yelp to remove it. But Yelp argued that it wants to be a real party, not some afterthought. In this one instance, Yelp may actually have a valid stance.

During oral argument in front of the Supreme Court, the Chief Justice used the analogy of all the threats of legal action against her as the Chief Justice. Many people who have no concept of judicial immunity think they will scare the Justices into changing the law with threats of lawsuits. “Dear Chief Justice, you did not recognize my right to carry a concealed surface to air missile, so I’m going to name you in a legal action for violation of my constitutionals rights.” As she pointed out, she does not feel compelled to intervene in every such action, and quite reasonably Yelp could not be expected to intervene in this action. Just as with the colorful example of the Chief Justice, while Yelp was technically put on notice of the action and afforded a chance to intervene, it is a bit of a stretch to expect that Yelp would do so.

But the facts of the case and the argument of counsel for Yelp make clear that the level of notice is a meaningless distinction. Remember, Yelp argued that even if it had been given “official” notice in the form of being named in the action, it would have just brought an anti-SLAPP motion arguing that it should not be included in the action. In other words, fail to name it in the action, and Yelp will argue it should have been named. Name it in the action, and Yelp will claim it can’t be named.

The Morris Plan

So how do we untie this Gordian knot? Thankfully, Yelp has provided (albeit unintentionally) the map that allows us to navigate the narrow straights between the prohibition against naming it as a party, on the one hand, and the concerns of the Supreme Court that Yelp be given the opportunity to object, on the other. And therein arises The Morris Plan.

When suing the person who posted the false and defamatory review on Yelp, the prayer of the complaint should include a specific request for injunctive relief against the defendant and, in the alternative, Yelp, requiring that the defamatory review be removed. The complaint should then be personally served on Yelp, and that personal service should be reflected in the proof of service.

With this procedure, Yelp will legally be put on notice that it may be asked to take down a review if (1) the court first determines that the review was false and defamatory, and (2) the defendant then fails to comply with the court order to remove the defamatory review. Yelp is then free to intervene to its heart’s content, to protect the truly bizarre right to publish defamatory content that it tried to argue in front of the Supreme Court.*

How will Yelp respond?

Here is what I predict will happen as attorneys implement The Morris Plan. The first few times Yelp is served with a complaint in this manner, it will test the waters with an anti-SLAPP motion. It will argue that the CDA protects if from liability, and although it is not officially named as a party to the action, and the complaint alleges no liability as to Yelp, it is nonetheless being “brought into” the action by way of the prayer.

This argument will be unsuccessful, because the eventuality is just too attenuated. Yelp need not respond to the complaint unless it voluntarily elects to do so. And here is the fun part. In opposition to any anti-SLAPP motion by Yelp, counsel for Plaintiff can now attach the record from the Supreme Court, wherein Yelp argued that it WANTED to be provided notice of this sort of action to afford it the opportunity to intervene. It would be logically and legally inconsistent for Yelp to now argue that complying with its own request runs afoul of the CDA.

This approach should be more than sufficient to satisfy the concerns of the Supreme Court, because Yelp is afforded two opportunities to defend its self-proclaimed “right to post defamatory reviews.” It can intervene in the action upon service of the complaint, or it can wait for the determination by the court that the review was false and defamatory, wait to see if the reviewer complies with the court order and removes the content, and only then challenge the court’s order as to Yelp.

The best way to look at this conceptually is that Yelp is the one seeking affirmative relief, and therefore it does not violate the CDA to make it go to court to seek that relief. Allow me to make an analogy to illustrate the point.

There is a very disturbing trend occurring in Canada and England, where the governments are mandating certain speech from its citizens. Although free speech is often viewed as a western concept, in fact it is only America that has a guarantee of free speech in its Constitution. So let’s say that this trend spreads to America, and it is decided that the terms “Chinese food” and “Chinese restaurant” are offensive, and therefore illegal. The citizenry is instead mandated to use the terms “Asian food” and “Asian restaurant.” This concerns Yelp, because it knows many of its users will post reviews about Chinese restaurants and Chinese food, and it wants to protect them from the speech police. Any attempt by Yelp to challenge the law would be on its own and would have nothing to do with the CDA, even as it users were dragged off to the Gulags. It should be remembered that by its own terms, the CDA provides that it in no way impacts state laws unless they are contrary to the CDA. So, for example, California has statutes that define libel, and there is no prohibition against determining that a review posted on Yelp is defamatory, and ordering that it be removed. Doing so is not contrary to the CDA.

Thus, when Yelp contends that it wants an opportunity to be heard on whether a review that it did not write or post is defamatory, it is asking for affirmative relief, and it is not placing any improper burden on Yelp to require that it pursue such affirmative relief.

Lest it be argued that Yelp’s inclusion in the takedown order is not necessary since the court has full contempt power against the original reviewer, the Supreme Court saw right through that claim by Yelp. First, some just don’t care about contempt orders. We have all heard stories about husbands and wives who voluntarily go to jail rather than to comply with some aspect of a court’s divorce decree. But even more persuasively, one Justice pointed out that Yelp’s own Terms of Use provide that it can block reviewers from removing their own reviews. An order that the reviewer must remove the false and defamatory review would be meaningless if Yelp won’t permit the reviewer to do so. And that shows the wisdom of the decision by the trial court and Court of Appeal in concluding that Yelp could be included in the takedown order.

This technique will be especially effective against Yelp, since it asked for it.

This approach may well work with any review site, but it will be especially effective as against Yelp since it is officially on record as requesting that it be named in any action that might require it to take down a defamatory review. Further, the outcome of Hassell v. Bird will likely have no negative impact on The Morris Plan. If the court concludes simply that Yelp can be included in any takedown order, all the better. But if the court holds that in this particular case Yelp was not afforded sufficient due process, this approach deals with that issue.

Again, no promises, but thanks to Yelp, this approach seems unassailable.


* The CDA protects websites from any liability for content posted by third parties, specifically because it is not the websites’ own content. Yelp argued that the review posted by Bird was also Yelp’s content, and Yelp therefore had an independent right to protect. As an example, it cited to its star review system and algorithm. The reasoning is hard to follow, so bear with me a moment.

Say nine people posted five-star reviews about Hassell, and Bird then posted a one-star review (no doubt using the cliche, “I wish I could post a zero-star review”). This results in a ranking of 4.6 stars for Hassell. But if Yelp is required to remove that false, one-star review, Hassell would end up with a five star average based on the remaining nine reviews. By the reasoning of Yelp, that is why the content is also “Yelp’s content,” because removing it will impact its ranking system. As I’m sure I don’t need to explain (but the point apparently eluded Yelp), yes, it does impact the overall ranking, but only to make it more accurate since it removes the false review. Under the same false logic, Yelp contended that it also impacts its algorithm, because the algorithm failed to flag the review as a false review, and therefore concluded that Hassell should get a 4.6 star ranking. Unless and until Yelp’s algorithm deems the review to be false, it must remain, or at a minimum Yelp must be permitted to defend it, Yelp argued.

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SLAPP024 – Supreme Court Clarifies Whether Amended Complaint Resets 60-Day Clock for Anti-SLAPP Motion

In Episode 24 of the California SLAPP Law Podcast, we tackle two important anti-SLAPP issues.

Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism

The conventional wisdom until now, as expressed in cases such as Yu v. Signet Bank/Virginia, was that an amended complaint creates an new 60-day period to file an anti-SLAPP motion. Then along came the Court of Appeal decision of Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism. In that case, the plaintiff originally sued on two causes of action, to which the defendant demurrered. When the plaintiff filed a third amended complaint, which added two new causes of action, the defendant finally filed an anti-SLAPP motion, challenging all the claims, including the two that had been there all along. The trial court refused to consider the challenge to the previously existing claims, stating they were past the 60 days since they could have been previously challenged. The Supreme Court agreed.

This is a quantum shift in the prior case law, but will the consequences be as severe as the holding seems to indicate? Listen to Episode 24 to find out, and for the best strategies for dealing with the Newport Harbor reasoning.

Dowling v. Zimmerman

Certainly not a new case, but we use it to discuss whether an appeal stays collection of costs and attorney fees following a successful anti-SLAPP motion.

 

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You CAN Join an Anti-SLAPP Motion Brought by Another Party

I remember sitting in court – Judge Banks’ court in Orange County to be specific – and he called a motion for summary judgment that was on calendar, noting that another party had “joined” the motion. I see this all the time. One party files a demurrer, or a motion for summary judgment, or whatever, and an attorney representing a different party says, “hey, that’s a great idea,” and files a “notice of joinder” on the motion. You may have engaged in the behavior yourself.

But as Judge Banks explained to the unfortunate attorney, it doesn’t work that way. As he put it, “when you ‘join’ in a motion, it means only that you are cheering from the sideline, ‘go team go.’” The court has no power to bestow the requested relief on your client.

The reason should be self-evident. The evidence that is offered in support of a motion for summary judgment for one client may have no applicability to another. The missing elements that would justify sustaining a demurrer as to one party may not apply to another. If “joinder” were permitted, then the non-movant would be placed in a terrible quandary. He, she, or it would have to speculate on why the same arguments would apply to the joining party, and try to oppose them.

But with all that said, an anti-SLAPP motion presents a different analysis. Because of the two prong analysis, a defendant can ride on the coattails of another moving defendant. If the movant successfully argues that the conduct falls under the anti-SLAPP statute, the burden then shifts to the plaintiff to show a likelihood of success. The second prong can then be decided without any evidence from the defendant who joined the motion.

In the case of a motion for summary judgment, for example, the moving defendant must present evidence sufficient to establish a complete defense to the targeted claims, or to show that the plaintiff will be unable to prove an essential element. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 851. Simply joining the motion of another party does not satisfy this requirement.

But on a special motion to strike, the moving defendant need only demonstrate that the action arises out of protected First Amendment activity. Paul for Council v. Hanyecz (2001) 85 Cal.App.4th 1356, 1365. In Barak v. Quisenberry Law Firm (2006) 135 Cal.App.4th 654, 660-661, the Court concluded that so long as one defendant met that burden, others could join.

But don’t take this too far. Obviously, if the complaint alleges different types of wrongdoing by the defendants, the court may not be able to rule as to the joining defendant. Complicating matters further, there were problems with the plaintiff’s opposition in Barak.

Nonetheless, if you find yourself in a situation where one of the other defendants has filed an anti-SLAPP motion, take a hard look to determine if it would make sense to join in the motion.

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Mandated Arbitration Does Not Create a “Protected Activity”


A decision that involves both beer and anti-SLAPP law is right up my alley, so I had to bring you the details of Mission Beverage Company v. Pabst Brewing Company, LLC out of the Second District.

The importance of this case is the lesson it teaches in focusing on whether the conduct in question is indeed “protected activity” such that it satisfies the first prong of the anti-SLAPP analysis. As I have stated here before, the scope of the anti-SLAPP statute has grown and grown, but attorneys must not give short shrift to the first prong.

I. Facts

Defendant and appellant Pabst Brewing Company, LLC (Pabst) is a brewer of beers; among others, Pabst brews such American classics as Pabst Blue Ribbon (a beer I will occasionally enjoy on a hot day), Colt 45 Malt Liquor (good only for cleaning spark plugs), Old Milwaukee (not as bad as Budweiser, but something I would drink only if I had not had a cold beer for over a year and nothing else was available), Schlitz (I don’t recall if I liked it), and Stroh’s (I’ve never tried it).

In January 2009, Pabst entered into a written Distributor Agreement (Agreement) with Mission Beverage Company (Mission). Pabst granted Mission the exclusive right to distribute many of its beers within specifically delineated boundaries within Los Angeles County. In turn, Mission promised to “aggressively promote, encourage, and increase” the sales of, and “customer satisfaction” with, those beers. The parties’ powers to terminate the contract were not the same: Mission could terminate the contract with 60 days’ notice and irrespective of cause, while Pabst could terminate the contract only for one of ten enumerated reasons and then only if it gave Mission an opportunity to cure. One of those ten reasons, memorialized in section 8.2.10 of the Agreement, permits Pabst to terminate the Agreement if Pabst has a “right to terminate” under “applicable state or federal law, statute or regulation.” The Agreement also provides that any and all litigation should occur in court, and contemplates that Mission recover attorney’s fees if it prevails in litigation against Pabst.

In November 2014, Pabst came under new ownership. Three months later, in February 2015, Pabst sent Mission a letter “commencing termination” of the Agreement “pursuant to section 25000.2 and Section 8.2.10 of the Agreement.” Pabst stated that Classic Distributing & Beverage Group, Inc. (Classic) and Beauchamp Distributing Company (Beauchamp) would be replacing Mission as Pabst’s distributor. (I’m sure that would hurt from an economic standpoint, but I have to believe there would be some relief in no longer having to purvey Colt 45 Malt Liquor.) Pabst did not cite any other basis for terminating the Agreement.

The liquor industry is highly regulated, and section 25000.2 provides that when a brewer who acquires the right to manufacture beer “cancels an existing beer wholesaler’s rights to distribute a product,” that successor brewer’s designated replacement distributors must negotiate in good faith – and, failing that, arbitrate – with the existing distributor “to determine the fair market value of the affected distribution rights.” Pretty sweet protection. The brewer can fire you, but you get the fair market value for the distribution rights. Adhering to these procedures, Pabst’s designated distributors tried to negotiate with Mission, but Mission would not go quietly into that good night. It would not agree to a price so in March 2015, Pabst’s sent Mission a letter initiating arbitration.

II. Procedural Background

The following month, Mission responded by suing Pabst for (1) breach of contract, and (2) declaratory relief. Specifically, Mission alleged that Pabst breached the Agreement by “attempting to terminate” the Agreement on the basis of section 25000.2, which did not “provide an independent right to terminate ” Mission also sought a declaration that there was no valid “termination” of the Agreement.

So that left Mission with two litigation fronts – the arbitration and the litigation. Mission made several attempts to halt the ongoing arbitration between itself and Pabst’s newly designated distributors, all to no avail. Mission made an ex parte motion to stay the arbitration, but that motion was denied “without prejudice” to filing a noticed motion. Mission thereafter filed a noticed motion, but that motion was also denied. Not deterred, Mission also asked the arbitrator to dismiss the arbitration, but the arbitrator refused.

The arbitrator issued a final award in October 2015. In the award, the arbitrator made clear that his order “contained no findings, declarations or damages determinations regarding Mission’s pending civil cause of action that Pabst breached the Agreement.” This is an important point, because it made clear that the arbitrator viewed the arbitration and litigation as separate and distinct, with different issues presented. But as to the arbitration, the arbitrator fixed the fair market value of the distributorship rights conferred by the Agreement. Mission did not appeal the award, and Classic and Beauchamp thereafter paid Mission the amount fixed by the arbitrator.

For its part, Pabst refused to recognize the distinction being made by the arbitrator, and filed a motion to strike Mission’s lawsuit under the anti-SLAPP statute. Pabst argued that the “linchpin” of Mission’s lawsuit was Pabst’s “invocation of the statutorily-mandated arbitration process under section 25000.2,” which Pabst asserted was “protected activity” under the anti-SLAPP statute. Pabst further contended that Mission’s lawsuit lacked minimal merit because no “legally viable or non-duplicative remedy” remained once Mission had accepted the payment reflecting the fair market value of its distributorship rights from Classic and Beauchamp.

The theory was not as crazy as it may appear at first blush. Remember, “protected activity” under the anti-SLAPP statute includes activities related to “official proceedings” such as “statutorily required arbitration.” This wasn’t some contract requiring arbitration, but rather was a statutory scheme that forced arbitration, and here Mission was suing Pabst for following that mandated process, according to Pabst’s argument.

But the trial court disagreed and denied the anti-SLAPP motion. It concluded that Mission’s lawsuit was separate and distinct from the arbitration: The lawsuit was “for breach of the contract between Mission and Pabst,” while the arbitration was “between the distributors,” and the primary issue in the lawsuit – “whether the Agreement was validly terminated” – is “an issue separate from (and prerequisite to) the arbitration, not part of it.”

Despite the seemingly clear logic of the trial court’s conclusion, and the obvious problems that will be discussed below, Pabst appealed.

III. A Primer on Beer Law

To fully understand the reasoning of the Trial Court and Court of Appeal, a primer on beer law is required. The Alcoholic Beverage Control Act (Act) divides up the distribution chain for alcohol into three tiers – namely, (1) “manufacturers,” (2) “wholesalers” or distributors, and (3) “retailers”; and generally prohibits each from having an ownership interest in the others.

Section 25000.2 dictates the procedures to be followed when a “successor beer manufacturer acquires the rights to manufacture” held by a brewer, and then “cancels any of the [brewer’s] existing beer [distributor’s] rights to distribute the product.” The successor brewer “cancels” a distribution contract if it “terminates, reduces, does not renew, does not appoint or reappoint, or causes any of the same.” The pertinent procedure is as follows. First, the successor brewer must “notify” the existing distributor of its “intent to cancel any of the existing distributor’s rights to distribute the product.” Second, the entity the new brewer wants to be its new distributor – whom the Act calls the “successor beer manufacturer’s designee” – is required to “negotiate in good faith” with the existing distributor to “determine the fair market value of the affected distribution rights.” “Fair market value” is defined as “all elements of value, including, but not limited to, goodwill.” If the existing distributor and the successor brewer’s preferred distributor can “agree to the fair market value,” then the successor brewer’s preferred distributor “shall compensate the existing” distributor “in the agreed amount.” If they “are unable to mutually agree,” then the successor brewer’s preferred distributor “shall initiate arbitration to determine the issue of compensation for the fair market value of the affected distribution rights” following the time lines set forth in the statute, and if the existing distributor does not appeal the arbitration award, the successor brewer’s preferred distributor must pay the existing distributor that amount.

IV. Analysis

A. What conduct is the basis for the challenged claim(s), and does that conduct constitute protected activity?

Pabst argued that the trial court erred in concluding that Mission’s breach of contract and declaratory relief claims did not arise from protected activity because (1) those claims are based upon Pabst’s letter purporting to cancel the Agreement, and (2) that letter invokes section 25000.2’s procedures and is accordingly preparatory to statutorily mandated arbitration, which constitutes an official proceeding within the meaning of Code of Civil Procedure section 425.16, subdivision (e)(1) and (2).

1. What conduct by Pabst is Mission challenging?

A claim is subject to the anti-SLAPP statute only if conduct constituting protected activity “itself is the wrong complained of.” Park, 2 Cal.5th at p. 1060. Thus, where a plaintiff’s claim is based upon “an action or decision” of the defendant, it is not enough that some protected activity by the defendant precedes that action or decision, that some protected activity is the means of communicating that action or decision, or that some protected activity constitutes evidence of that action or decision. To fall under the anti-SLAPP statute, the challenged action or decision itself must be protected activity.

This is where so many attorneys go wrong. As occurred here, the attorney will see that a mandated action precipitated the complaint, and therefore jump to the conclusion that the complaint is arising from that protected activity. Close, but no cigar. The attorney needs to take one more baby step back to get a slightly larger view of the issue. The protected activity may be what lead to the complaint, but it does not necessarily follow that the complaint is challenging the protected activity. Where a plaintiff’s claim attacks only the defendant’s decision to undertake a particular act, and if that decision is not itself protected activity, that claim falls outside the ambit of the anti-SLAPP statute.

For example, in Park (above), the California Supreme Court held that the anti-SLAPP statute did not apply to a claim challenging a university’s decision to deny tenure to a professor, even though the decision was communicated in writing and even though the university dean’s comments supplied evidence of discriminatory animus. In Ulkarim v. Westfield LLC (2014) 227 Cal.App.4th 1266, 1275-1276, 1279, the court held that the anti-SLAPP statute did not apply to a claim challenging a landlord’s decision to terminate a tenancy, even though the landlord subsequently served a notice to quit and filed an unlawful detainer lawsuit. And in McConnell v. Innovative Artists Talent & Literary Agency, Inc. (2009) 175 Cal.App.4th 169, 176-177, the court held that the anti-SLAPP statute did not apply to a claim challenging an employer’s decision to wrongfully terminate employees, even though the employer later sent a letter terminating those employees. Only when the decision that the plaintiff attacks is itself protected activity will the anti-SLAPP statute apply.

In this case, Mission’s breach of contract and declaratory relief claims challenge Pabst’s decision to terminate the Agreement. That is because both claims challenge Pabst’s right to terminate the Agreement and, in particular, Pabst’s assertion that section 25000.2 provides such a right. Pabst’s subsequent letter merely communicated Pabst’s decision to terminate, but “that communication does not convert [Mission’s] suit into one arising from such speech.” (Park, supra, 2 Cal.5th at p. 1068.)

2. Is that conduct protected activity?

The Court of Appeal properly concluded that Mission’s claims did not involve protected activity for two reasons. First, Mission’s claims are based upon Pabst’s decision to terminate the Agreement – not Pabst’s subsequent letter communicating that decision. That decision precedes and is unconnected with any official proceeding. Second, that letter did not qualify as protected activity. Although section 25000.2’s mandatory arbitration undoubtedly qualifies as an official proceeding under the governing precedent, Pabst’s letter is not preparatory to such an arbitration. That is because section 25000.2 first contemplates that the existing distributor and successor brewer’s designated distributors negotiate in good faith and resort to arbitration only if negotiations fail. Like the insured who files a claim not knowing whether the insurer will pay the claim or fight the claim in litigation, Pabst had “no reason to believe” that arbitration “will follow” from its letter because Mission, Classic, and Beauchamp could well have negotiated a settlement and obviated any need for arbitration.

B. Do Mission’s Claims Have Minimal Merit?

Since the first prong of the anti-SLAPP analysis was not met, the second prong becomes moot, but for fun let’s analyze that as well.

Pabst argued that Mission’s two claims lacked the minimal merit necessary to withstand its anti-SLAPP motion. Specifically, Pabst asserted that Mission could not prove (1) any breach of contract because section 25000.2 independently confers upon brewers a right to terminate a distribution contract, or (2) any damages arising from any breach because Mission was made whole by Classic’s and Beauchamp’s payment reflecting the fair market value of Mission’s distribution rights. Because any breach of contract claim requires proof of a contractual duty, breach of that duty, causation, and damages, and because Mission’s declaratory relief claim that there was no valid termination in effect seeks a declaration that Pabst breached the contract, Mission was required to make out a prima facie case that Pabst breached the Agreement and that Mission was damaged by that breach.

The trial court did not bother to analyze the second prong, but the Court of Appeal took the opportunity, as permitted by Schwarzburd v. Kensington Police Protection & Community Services Dist. Bd. (2014) 225 Cal.App.4th 1345, 1355 and Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 615-616), on the grounds that an analysis of section 25000.2 was important.

1. Has Mission made a prima facie showing that Pabst breached the Agreement?

Because Pabst’s termination of the Agreement rested solely on its position that section 25000.2 confers upon brewers an independent right to terminate a distribution contract, whether Mission has made out a prima facie case for the element of breach turns on whether section 25000.2 confers such a right. This is a question of statutory interpretation, which the court reviewed de novo. (Weatherford v. City of San Rafael (2017) 2 Cal.5th 1241, 1247.)

It concluded that the text of section 25000.2 sets forth the procedures that must be followed when a “successor beer manufacturer acquires the rights to manufacture a product” and “cancels any of the existing distributor’s rights to distribute the product.” The statute prescribes what happens after the successor brewer cancels, but nothing in the statute’s text expressly grants the successor brewer the precursor right to cancel distribution rights. More to the point, nothing in the statute’s text expressly grants the successor beer manufacturer the further right to cancel distribution rights regardless of its contractual obligations with the existing distributor.

Nor could the Court infer an implied right to cancel distribution contracts – with or without impunity – from section 25000.2’s legislative history.

“To begin, section 25000.2 was sponsored by the California Beer and Beverage Distributors. It seems highly unlikely that an organization representing distributors would sponsor legislation that would deprive their members of their negotiated contractual rights. Moreover, section 25000.2 was enacted to address a specific problem: Brewers were buying up and consolidating more and more brands of beer and then seeking to use their own network of distributors, so there was a need for “an authorized and structured process to insure the timely payment of fair and market-based compensation for the transfer of brands between” distributors. Solving this problem does not require brewers to be granted an unvarnished right to terminate their distributorship contracts.”

Thus, Pabst’s argument was built entirely on a false premise. It claimed that having notified Mission that its rights were being terminated, arbitration naturally followed, and both were protected activities. But it still remained to be determined if Pabst had the right to terminate to begin with under the terms of the Agreement.

The Court goes on to list several more reasons that Pabst’s argument fails, but one in particular was the sort that before I was through the first pages of the decision, I was scratching my head wondering how Pabst could not see this point or chose to ignore it.

Pabst argued that section 25000.2 must be read to foreclose any lawsuit by an existing distributor against the brewer because such a lawsuit will always be either unripe or moot. Here was the reasoning of Pabst, which can be a little difficult to follow.

Under the scheme of section 25000.2, at least as Pabst interpreted it, (1) the termination notice is sent, (2) but the original distributor goes right on distributing until, (3) the new distributor pays the fair market value for the distributorship, whether that number is determined by agreement or arbitration. Thus, according to Pabst, there is no harm no foul to the prior distributor. It continued to make its profits up to the time it was paid in full for the distributorship.

I’m sure you begin to see the flaws in that argument. By that reasoning, no business is harmed by an unauthorized takeover, so long as it is paid the fair market value of the business.

According to the reasoning of Pabst, once the distributor is paid, any lawsuit instantly becomes moot because the payment makes the distributor whole and makes any declaratory relief redress for a “past wrong.”

The Court of Appeal saw the flaws as well, finding that Pabst was incorrect that a distributor’s claim for breach of contract is not ripe as long as it continues to distribute the brewer’s beer because, quite simply, the distributor may sue for anticipatory breach. It also concluded that Pabst was incorrect in arguing that a distributor’s claim is moot once the newly designated distributors remit the fair market value of the distribution rights because, additional damages may be available if there is a wrongful breach and there remains a live “actual controversy” warranting declaratory relief regarding those additional damages and the wrongful breach that caused them.

Perhaps Pabst can be forgiven for thinking there would be no future profits from the distribution of its beer, because of the Colt 45 component.

So, to summarize, when considering an anti-SLAPP motion, always examine the “protected activity”. Mission was suing for breach of contract and declaratory relief, arising from Pabst’s termination of the contract. Even if Pabst was 100% confident that it had the unfettered right to terminate the contract (a position that turned out to be incorrect), this remained a contract claim and did not involve any protected activities within the meaning of the anti-SLAPP statute.

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SLAPP021 – Anti-SLAPP Motions Against Mixed Causes of Action

California-SLAPP-Law-Cover-300x300 (1)

We discuss the very important case of Baral v. Schnitt, in which the California Supreme Court finally dealt with the split of authorities regarding how to deal with complaints with mixed causes of action; those that contain allegations of both protected and unprotected activities. This is probably the most important anti-SLAPP decision of the decade.

We also take a quick look at Hassell v. Bird, in which the Court of Appeal held that Yelp can be ordered to take down a false and defamatory post, even if it was not a party to the action.

Finally, I tell the tale of a very entertaining victory we had in Norwalk Superior Court, in front of a finger-wagging judge.

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Anti-SLAPP Motions in Federal Court – Some Judges Still Complaining

No Whiners Annoying Complainers Irritating Problem Customer
On August 3, 2016, the Ninth Circuit issued an opinion in the case Travelers Casualty Insurance Company of America v. Robert Hirsh.

The Court affirmed the district court’s denial of Robert Hirsh’s anti-SLAPP motion (Cal. Civ. Proc. Code § 425.16) to strike the second amended complaint filed by Travelers Casualty Insurance Company of America. Hirsh had alleged that Travelers’ claims arose out of his representation of Travelers’ insured, Visemer De Gelt, as Cumis counsel; and his activity was therefore protected under the anti-SLAPP statute.

The Ninth Circuit held that because Travelers’ causes of action were not based on an act in furtherance of Hirsh’s right of petition or free speech, they did not “arise from” protected activity, and thus did not satisfy the first prong of the anti-SLAPP analysis. The Court also held that Travelers established a probability of prevailing on the merits sufficient to survive a motion to strike. The Court further held that California’s litigation privilege, Cal. Civ. Code § 47(b), did not bar the suit because the causes of action arose from Hirsh’s post-settlement conduct, not his communications with De Gelt in settling a prior lawsuit.

Should we allow anti-SLAPP motions in Federal Court?

But like a number of appellate judges in the Ninth Circuit, Judge Kozinski and Judge Gould, although they concurred in the opinion, could not pass up the opportunity to complain about how anti-SLAPP motions in federal court were making them work too hard. Judge Kozinski decried that the existing case law is wrong, and he would urge the court to follow the D.C. Circuit’s holding in Abbas v. Foreign Policy Grp., LLC, which held that anti-SLAPP motions do not belong in federal court because they directly conflict with the Federal Rules of Civil Procedure. At the very least, Judge Kozinski urged the court to reconsider the holding in Batzel v. Smith, which allows defendants who lose anti-SLAPP motions to bring an immediate interlocutory appeal.

With all due respect, the reasoning of Judge Kozinski does not withstand scrutiny, as will be shown hereinbelow. What follows is Judge Kozinski’s concurring opinion, with my response to him in red on each of his points. Read the rest of this entry »

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‘American Hustle’ Producers Can’t Nuke Defamation Lawsuit – Hollywood Reporter

Paul Brodeur, a science writer who claims he was defamed by something Jennifer Lawrence said in David O. Russell’s 2013 film American Hustle, has survived an attempt to knock out his $1 million lawsuit on First Amendment grounds.

Source: www.hollywoodreporter.com

This is such an entertaining and ridiculous lawsuit.

In the movie American Hustle, Jennifer Lawrence plays a character named Rosalyn. The movie is set in the 70s, when microwave ovens were still relatively new, and Rosalyn makes the statement that microwaves cook the nutrition out of food. When another character questions that claim, she holds up a magazine and responds, “I read it in an article by Paul Brodeur.”

Paul Brodeur is a real person, and claims that the fictional statement from a fictional character hurts his reputation. During the 70s, Brodeur wrote about the dangers of microwave ovens, but he never stated that they take the nutrition out of food, and he therefore claims that the idea that he would have written this (fictional) article stating that food loses its nutrition when cooked in a microwave is akin to having Carl Sagan say that the sun revolves around the earth.

Brodeur should have been flattered that anyone remembered him, and laughed at the joke, but this is America, so he sued for a million dollars, claiming the statement was defamatory. The movie makers responded with an anti-SLAPP motion.

At the time, I gave the motion little chance of success, because I didn’t think the movie makers would be able to meet the first prong of the anti-SLAPP analysis, and show that this was a matter of public interest. Apparently the judge agreed, and denied the motion.

[UPDATE (June 6, 2016):] Cases such as this continue to show the importance of the automatic right of appeal, even from denial of an anti-SLAPP motion.

Paul Brodeur’s ridiculous lawsuit survived an anti-SLAPP motion, dooming the defendant (Atlas Entertainment, Inc.) to litigate issues through trial, were it not for the automatic right of appeal. That ability to demand a second look at the applicability of the anti-SLAPP statute resulted in the dismissal of this waste of court resources.

As it had to, the Court of Appeal held: Read the rest of this entry »

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When Considering an Anti-SLAPP Motion, Focus on the Gravamen of the Complaint

Fans on stadium game panorama view

I am the anti-SLAPP guy, and I’d be the last to criticize creative applications of the anti-SLAPP statute. But sometimes it is as though the attorney bringing an anti-SLAPP motion only read the Cliff Notes on the process. He knows some of the buzz words, such as “public interest” and “protected speech”, but lacks the big picture. When considering an anti-SLAPP motion, you must consider the true gravamen of the complaint.

Case in point is the recent Court of Appeal opinion in Rand Resources, LLC v. City of Carson (Los Angeles Superior Court Case No. B264493), arising from the efforts to build a football stadium in the City of Carson. The ruling of the Court of Appeal, published on May 31, 2016, can be found here.

Carson wanted to build a stadium and entertainment complex, and was hoping to woo the NFL to relocate a team there. Carson hired a lobbyist, of sorts, Richard Rand, giving him an exclusive arrangement to negotiate with the NFL.

Things between Rand and the city got off to a rocky start, leading Rand to successfully sue Carson for civil rights violations, alleging that the Mayor had demanded a bribe. The city and Rand both appealed, with the city claiming it had never happened, and Rand claiming he should get more in damages.

The parties eventually settled, but Carson did not honor Rand’s exclusivity arrangement. Rand sued again, this time for breach of contract and other claims.

“Well,” thought the city’s attorneys, “this whole football stadium thing is generating a ton of public interest, and anti-SLAPP motions can be brought where the situation is a matter of public interest, so let’s bring an anti-SLAPP motion.”

And that’s just what they did. The city challenged Rand’s action with an anti-SLAPP motion.

“Well,” thought the judge, “this whole football stadium thing is generating a ton of public interest, and anti-SLAPP motions can be brought where the situation is a matter of public interest, so I guess I should grant the anti-SLAPP motion.”

And that’s just what he did. Apparently having read the same Cliff Notes, the judge granted the anti-SLAPP motion. Rand appealed. Read the rest of this entry »

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Aaron Morris, Attorney
Aaron Morris
Morris & Stone, LLP

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