I routinely receive calls from parties and attorneys who have run afoul of California’s anti-SLAPP statute. Since most of the calls arise from defamation actions, I previously did not think the topic was appropriate for this business blog, but recent events have changed my mind. Some of my own anti-SLAPP motions have arisen in the business context, as well as the inquires from other attorneys. It is clear that business people need to have at least a cursory understanding of what constitutes a SLAPP action before pursuing litigation, since it is equally clear that many attorneys are not conversant with this area of the law.
What is a SLAPP suit, and what is an anti-SLAPP motion?
A "SLAPP suit" is a lawsuit that is intended to censor, intimidate and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. I use the expression Spurious Litigation Against Public Participation, since that better captures both the goal of the plaintiff and the nature of the lawsuit, but the standard verbiage is "strategic lawsuit against public participation".
The action is spurious and frivolous because the typical SLAPP plaintiff does not care whether he wins the lawsuit, and often knows he has no chance of prevailing. The plaintiff's goals are accomplished if the defendant succumbs to fear, intimidation, mounting legal costs or simple exhaustion and abandons the criticism. The heart of California’s anti-SLAPP legislation is set forth in subpart (e) of Code of Civil Procedure section 425.16, which provides:
(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:
(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law;
(2) 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;
(3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest;
(4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.
To win an anti-SLAPP motion, the defendant must first show that the speech in question falls under one of the four sections set forth above. But that is just the first prong of the analysis. If the defendant proves the speech was protected, the plaintiff can show that he is still likely to prevail on the action. In other words, defamatory speech is not protected simply because it falls under one of the four sections.
So how do you know a SLAPP action when you see it? That is not always obvious, and as many attorneys and their clients have painfully learned, failing to recognize they have created a SLAPP can be extremely costly. One of my recent anti-SLAPP successes provides a good example of how an attorney can be caught in this trap.
I’ll Sue You if You Sue Me.
In this case, our (future) client had entered into a settlement agreement with the defendant in a prior action. The settlement agreement required the defendant company to pay damages to our client, and contained a confidentiality agreement. Two years after the settlement agreement was signed, the defendant had still not paid the damages to the plaintiff, so he retained our firm to sue to collect the money due under the agreement.
We filed the action for breach of contract, attaching a copy of the settlement agreement. The defendant answered the complaint and also filed a cross-complaint, claiming that it was a breach of the confidentially agreement to attach the settlement agreement to the complaint. Incidentally, counsel for defendant had discussed with me his intention to cross-complain on this basis, and I had warned him that would be a really bad idea. He did so anyway.
The reason the cross-complaint was a bad idea was because it was a SLAPP. Do you see why? Remember again what SLAPP stands for – Spurious Litigation Against Public Participation. Under section 42516(e)(1), "any . . . writing made before a . . . judicial proceeding" is an "act in furtherance of person’s right of petition." Defendant had breached the settlement agreement, so clearly we were entitled to sue for breach of that contract. That is the public participation – taking a case before a court for redress of a grievance. By claiming that we had breached the agreement by attaching the confidential settlement agreement, Defendant was just suing our client for suing. Stated another way, the defendant company was in essence saying, "for daring to make our breach of the agreement public, I’m going to sue you." I filed an anti-SLAPP motion against the company for the cross-complaint.
So let’s run this case through the two-prong, anti-SLAPP analysis. Our burden was to show that the speech was protected under the anti-SLAPP statute. The speech here was the complaint itself, with the settlement agreement attached. Filing a complaint is a specifically protected activity under the anti-SLAPP statute, and comments made in conjunction with litigation are protected under Section 47. There was no issue that our complaint was a protected activity.
That takes us to the second prong, by which the plaintiff, here the cross-complainant, must show a reasonable likelihood of success on the merits of the case, even if the speech is a protected activity. The company had failed to pay our client the money due under the agreement, so it was clearly in breach, and therefore could not possibly prevail on its own breach of contract claim, since one of the elements of a breach claim is performance.
The court granted our anti-SLAPP motion, to the utter shock of opposing counsel. Counsel had argued that the motion could not be granted because the facts were in dispute. He erroneously thought that, like a motion for summary judgment, the evidence cannot be weighed. But an anti-SLAPP motion is supported by evidence. We provided evidence that the money owed had never been paid, and there was no evidence that could be presented to the contrary.
The company must now pay all of our client’s attorney fees. Fortunately for the company, I am very efficient at these motions, but I have received calls from attorneys facing fees exceeding $100,000 after they unwittingly created a SLAPP action.
Bottom line for businesses: You probably have no desire to become acquainted with the minutia of California’s anti-SLAPP laws, but if you are going to be involved with any litigation, whether bringing or defending an action, the possibility of a SLAPP action needs to be on your mental checklist. As the above example illustrates, it may never be a thought to your attorney, and you will be the one to pay the price.
Less than a month ago I wrote on the folly of terminating an employee at an inopportune time, even if your reasons are just and your motives are pure. Apparently the lawyers at Wal-Mart are not subscribers to the Business Law Alert because they did nothing to stop a very questionable termination.
Melissa Jackson is one of several plaintiffs suing Wal-Mart for sexual harassment. Jackson and the other women allege that Wal-Mart did nothing to stop reported sexual harassment by one of the employees. That suit was filed on January 22, and on February 16 Wal-Mart decided it was the perfect time to fire not only Jackson, but her husband as well. Both had been there for close to a decade, and during that time Wal-Mart had never seen a need to fire them, but less than a month after she files an action for sexual harassment, she and her husband had to go.
Do you see how bad that looks? Can you comprehend what the jury is going to think about that decision?
Let me switch perspectives for a moment and explain why Wal-Mart may have made that decision. As I wrote previously, unscrupulous employees will sometimes file employment lawsuits specifically because they know they are on their way out the door. If in defense of the sexual harassment claim by Jackson, Wal-Mart is going to claim that she was about to be terminated and only filed this suit in an effort to keep her job, then Wal-Mart should remain consistent and continue with the termination. Alternatively, it could be that Jackson and her husband have developed attitude problems about Wal-Mart, and are just too toxic to keep around. (I have no personal knowledge of the facts of this case, and offer this case only as a hypothetical fact pattern for discussion.)
But with all that said, was there no other way to handle this matter? I once spoke to the owner of a business that had come up with a very creative approach. He had an employee who was a perpetual problem, not doing his job and filing what the business owner perceived to be fraudulent worker's compensation and labor claims. He desperately wanted to fire the employee, but he knew any termination would be met with a wrongful termination action for retaliation. So, the business owner put the maintenance worker in charge of the flagpole. His duties were to raise and lower the flag, keep the pole and flag clean, and to make certain no one disturbed them. He was given an ergonomic chair to sit on near the flagpole so that he would not make any claims for back injuries, and there he sat, eight hours a day, five days a week, watching the flagpole. The employee could not stand the tedium, and within two weeks had quit.
Although the business owner's plan worked perfectly in that case, I don't suggest for a minute that this is a workable solution. Aside from the fact that many employees might be perfectly content to work as a flagpole watcher, from a legal standpoint the worker could still have made the claim that this newly created position was a form of retaliation. But I offer this tale as an example of an employer that thought outside the box. He looked at the bigger picture and successfully avoided a costly lawsuit.
Businesses tend to think in black and white terms. I often see cases where an employee loyally worked for a company for years, and after being rewarded with a promotion, the company terminates that employee because he is unable to perform the new job duties. Why is no thought given to returning the employee back to the position where he was a valued employee?
Lesson for all businesses: When you are considering terminating an employee and are asking yourself, "how is this going to look?", then take a moment to also ask yourself, "can I solve the problem with something other than a termination?"
Changing the facts slightly to preserve confidentiality, I received a call from someone who had paid a company to create a website. When the website was up and running, the caller discovered that the web design company had, in essence, left a backdoor open. Someone with a little computer knowledge could have made changes to the website. The caller was outraged, saying that if this error had been discovered and exploited, it could have cost his company millions.
I asked if he had notified the company of the problem so it could be corrected. He told me he had not, because he wanted to keep the problem in place until he filed a lawsuit. In other words, he was leaving his company’s website vulnerable to vandals in order to preserve a possible action, rather than to fix the problem and avoid any damages. That’s a crazy case of the tail wagging the dog.
That mentality is wrong on a couple of levels. It shows that the caller is not as interested in correcting the problem as he is in getting money. Consider how a jury would react. He was so upset by the negligence of the web design company that he is asking us to give him millions, but he did nothing to fix the problem?
Also, it fails to recognize the need for actual damages. This is a simple concept that sometimes alludes even my fellow attorneys. If there are no damages, then it’s no harm no foul. If no one found the open door, then how was the caller harmed? He may have a small case for breach of contract since the designer didn’t create a proper website, but with no damages there is no actionable negligence.
Don’t act in some artificial manner to “preserve” an action. When this caller discovered the open door, the natural thing to do would be to call the company and ask that the door be closed. To leave the door open while seeking out legal representation is a very unnatural reaction. By all means, he could take a few minutes to save some screen shots as evidence in case legal action becomes necessary, but acting intentionally to leave the problem in place or even to create damages where none exist, will hurt the case far more than it helps.
Don’t even get me started about class-action lawsuits.
In most (but not all) cases they are nothing but legalized extortion. They do not seek to address or correct a wrong, but rather are directed at hyper-technical violations that are used to create a putative class. In the end, the lawyers make millions in attorney fees and the "solution" to the problem is often comical. There is no shortage of examples, but one of my favorites involved the Jenny Craig diet centers. A class action was brought because Jenny Craig was committing the heinous act of failing to disclose that all the thin people displayed in the print ads did not represent the "typical" results. (Would anyone on the Jenny Craig diet have believed that all who entered would achieve the same results as those highlighted in the ads?) The class-action lawyers were paid huge legal fees, and for settlement the represented members received – are you ready? – a set of Jenny’s diet motivation tapes.
If a business is committing a genuine wrong that is causing real injury, and refuses to correct the situation, then have at them. But my frustration comes from the fact that many of these suits involve no real wrong, and in any event could be corrected with a stern letter from an attorney.
The California Court of Appeal agreed with my opinion of class-action lawsuits in the recent decision, Starbucks v. Superior Court (2008 DJDAR 18131). In the 1970s, California passed an obscure Labor Law that prohibits employers from asking prospective employees about minor marijuana-related convictions that are more than two years old. The two-page employment application form used by Starbucks, designed for nationwide use, asks the applicant to disclose marijuana convictions, which is theoretically a violation since the applicant could choose to disclose a conviction more than two years old if unaware of the law. However, the second page of the form specifically instructs California applicants not to disclose marijuana convictions more than two years old.
Plaintiffs’ counsel claimed that was not good enough, arguing that the question and the disclaimer should be together. (A letter from my office could have corrected that, but perhaps plaintiffs’ counsel is not as persuasive.) Unfortunately for Plaintiffs’ counsel, of the three representative plaintiffs, two testified at their depositions that they understood the disclaimer, and all three testified that they had no marijuana convictions to disclose. Nonetheless, attorneys for the class were seeking the statutorily mandated $200 per offense, which would have resulted in an eight-figure award if successful. Incredibly, Judge David C. Velasquez of the Orange County Superior Court denied Starbuck’s motion for summary judgment and certified the class, allowing the case to go forward.
In reversing Judge Velasquez and ordering the case dismissed, the Court of Appeal stated that "there are better ways to filter out impermissible questions on job applications than allowing ‘lawyer bounty hunter’ lawsuits brought on behalf of tens of thousands of unaffected job applicants." Justice Raymond Ikola added, "the civil justice system is not well served by turning Starbucks into a Daddy Warbucks."