Friday, November 29, 2013
Ninth Circuit Denies En Banc Rehearing in ‘Trump U.’ Suit
Divided Court Declines to Reconsider Precedent Applying State Anti-SLAPP Law to Diversity Cases
By JUSTIN LEVINE, Staff Writer
The Ninth U.S. Circuit Court of Appeals Wednesday denied en banc rehearing of a ruling that requires reconsideration of an anti-SLAPP motion brought by a woman who was sued for defamation by a company chaired by Donald Trump.
A three-judge panel ruled in April that Trump University, LLC was a limited purpose public figure, so its cross-complaint against Tarla Markaeff, who accused the company of fraud, was subject to being stricken unless the company could show that the accusations were knowing falsehoods or were made in reckless disregard of the truth.
Wednesday’s order leaves that ruling intact, sending the case back to the U.S. District Court for the Southern District of California. But four judges dissented, saying rehearing should have been granted so that the court can reconsider circuit precedent allowing an appeal as a matter of right when a special motion to strike under California’s anti-SLAPP statute is denied.
Precedent holds that the motion to strike and attorneys’ fees provisions of the anti-SLAPP statute apply in diversity cases brought before federal courts, and that a denial of an anti-SLAPP motion by such courts is immediately appealable under the collateral order doctrine.
Judge Paul Watford—joined by Chief Judge Kozinski and Judges Richard Paez and Carlos Bea—argued Wednesday that allowing the state’s anti-SLAPP statute to be applied in federal court is contrary to the Federal Rules of Civil Procedure as well as controlling Supreme Court precedent.
Judges Kim Wardlaw and Consuelo Callahan responded in an opinion concurring in the denial of en banc rehearing, saying it was unnecessary because the court’s previous decisions on the issue were correctly decided and that “the panel opinion faithfully follows our circuit’s precedent, creates no inter-circuit split, does not present an issue of exceptional importance, and [a] contrary result would create a circuit split.”
Judges William Fletcher and Ronald Gould joined the opinion by Wardlaw and Callahan.
The case began when Tarla Makaeff filed a class action against Donald Trump and Trump University for deceptive business practices after she spent several thousands of dollars for business workshops that she claimed offered little value. Trump University—which was later renamed the Trump Entrepreneurial Initiative after New York state officials objected to the use of the word “university”—counterclaimed against Makaeff for defamation after she publicly disparaged the workshops, prompting Makaeff to file an anti-SLAPP motion to strike the defamation claim.
A district judge denied Makaeff’s anti-SLAPP motion, holding that Trump University had demonstrated a reasonable probability of prevailing on the merits since it was not a public figure. The three-judge Ninth Circuit panel reversed and remanded, holding that Trump University was a limited-purpose public figure and that the lower court should determine if the company had a reasonable probability of proving that the statements were made with actual malice.
Kozinski and Paez were part of the original three-judge panel. They concurred with the decision, but wrote to express that they believed United States ex rel. Newsham v. Lockheed Missiles & Space Co., (9th Cir. 1999) 190 F.3d 963, which allowed the application of state anti-SLAPP statutes in federal court, was wrongly decided and should be reconsidered.
Kozinski wrote at the time that Newsham was “a big mistake.” He said California’s anti-SLAPP statute created no substantive rights, but rather “merely provides a procedural mechanism for vindicating existing rights.”
Because Congress has “plenary authority over the procedures employed in federal court,” Kozisnki wrote, such courts must ignore state rules of procedure such as the anti-SLAPP law.
In Wednesday’s dissent from the en banc denial, Watford said that the anti-SLAPP statute’s provision that forces a party to show at the pleading stage that he or she would likely prevail on the merits of a case conflicts with federal Rule 12. Watford said that Rule 12, “provides the sole means of challenging the legal sufficiency of a claim before discovery commences” in the federal system and that there were similar conflicts with Rule 56 which governs summary judgments.
Watford cited Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., (2010) 559 U.S. 393 to argue that federal courts should not apply the anti-SLAPP law. In Shady Grove, the Supreme Court held that a New York statute which precluded class certifications in actions seeking penalties or statutory minimum damages conflicted with federal Rule 23 in a diversity case.
“Viewed through Shady Grove’s lens,” Watford said, “California’s anti- SLAPP statute conflicts with Federal Rules 12 and 56. Taken together, those rules establish the exclusive criteria for testing the legal and factual sufficiency of a claim in federal court.”
Wardlaw and Callahan responded that Newsham was “correctly decided,” as was its precedent declaring anti-SLAPP motions to be immediately appealable under the collateral order doctrine.
“Not only is the dissent’s desire to use this appeal as a vehicle to change our circuit’s law based on a misreading of Supreme Court precedent; it also distorts our standard for rehearing an appeal en banc,” they wrote, further saying that en banc courts should only be convened in “extraordinary circumstances” which did not exist here.
Wardlaw and Callahan said that the Newsham decision had already established that there was no conflict between the statutory regimes since they could both exist “side by side.”
They said that a party who brings an unsuccessful anti-SLAPP motion is not precluded from later bringing a Rule 12 motion to dismiss, or a Rule 56 motion for summary judgment.
The pair said the Supreme Court’s reasoning in Shady Grove did not apply in this instance since the New York law in that in case “directly conflicted with Rule 23’s categorical rule,” whereas there was no such conflict between California’s anti-SLAPP law and the federal rules.
They also said that overturning Newsham would create an unnecessary circuit split since every circuit that considered the issue had also concluded that similar anti-SLAPP provisions from other states apply in federal court. The majority argued that banning anti-SLAPP motions from federal courts would encourage forum-shopping by plaintiffs looking for a strategic way to avoid anti-SLAPP motions.
“Through anti-SLAPP laws, the legislatures of Arizona, California, Guam, Hawaii, Nevada, Oregon, and Washington have decided to impose substantive limitations on certain state law actions,” Wardlaw and Callahan said. “Refusing to recognize these limitations in federal court is bad policy.”
The case is Makaeff v. Trump University, LLC, 11-155016.
Copyright 2013, Metropolitan News Company