S.C. Resolves Conflict Over Anti-SLAPP Rulings

Tuesday, August 2, 2016

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S.C. Resolves Conflict Over Anti-SLAPP Rulings

Justices Unanimously Agree That Trial Court May Strike Part of ‘Mixed’ Cause of Action

By KENNETH OFGANG, Staff Writer

An anti-SLAPP motion may be granted as to a part of a cause of action where the plaintiff’s claim arises from both protected and unprotected activity, the state Supreme Court ruled yesterday.

Justice Carol Corrigan, writing for a unanimous court, said the Court of Appeal’s ruling that the motion must be denied in such a case “unduly limits the relief contemplated by the Legislature.”

The rulings came in connection with a suit brought by Robert C. Baral against David Schnitt, his former co-owner of IQ Back Office, LLC. Baral initially accused Schnitt of secretly negotiating to sell the company, and of defaming him by telling the company’s auditors that Baral may have stolen company assets, as a result of which the accountants wrongly told the prospective purchaser and other members of the firm that Baral had committed misconduct.

After the defamation counts were stricken under the anti-SLAPP statute, Baral filed an amended complaint for breach of fiduciary duty, constructive fraud, and negligent misrepresentation. Although the defamation claims were no longer viable, Baral alleged in connection with the remaining claims that Schnitt excluded him from the audit in an effort to coerce him into approving the sale, and asked for an injunction to reopen the audit.

Schnitt then filed another anti-SLAPP motion, seeking to strike all references to the audit. Los Angeles Superior Court Judge Maureen Duffy-Lewis denied relief without reaching the merits, ruling that an anti-SLAPP motion can only be brought with respect to entire causes of action.

The Court of Appeal affirmed. While it agreed that the allegations the defendant sought to strike arose from protected activity, but held that because each cause of action also arose, at least in part, from activity not protected by the rights of free speech and petition, the motion had to be denied.

The panel acknowledged that other courts had reached conflicting decisions with respect to such “mixed causes of action,” but concluded that the better rule is one that applies Code of Civil Procedure 425.16 to entire causes of action only.

Corrigan, reviewing the cases extensively, concluded that the contrary cases more accurately reflected legislative intent.

The trial court and Court of Appeal, she noted, both relied on Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811,, which said that if a plaintiff “can show a probability of prevailing on any part of its claim,” the cause of action can survive. The Oasis court cited Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, which held that because the plaintiff was likely to prove that at least some of the defendant’s allegedly defamatory statements were not constitutionally protected, the anti-SLAPP motion had to be stricken in its entirety.

Corrigan, however, noted that Oasis did not involve a mixed cause of action, and that the case did not discuss mixed causes of action in its citation to Mann. The high court thus “had no occasion to consider the Mann rule and its implications,” she said, prior to now.

“The Mann court’s reading of section 425.16(b) does not withstand scrutiny,” she concluded. “Its refusal to permit anti-SLAPP motions to reach distinct claims within pleaded counts undermines the central purpose of the statute: screening out meritless claims that arise from protected activity, before the defendant is required to undergo the expense and intrusion of discovery.”

The alternatives suggested in Mann, motions for summary adjudication or conventional motions to strike, do not offer the early relief contemplated by the statute, she said. And the result cannot be squared with the statute’s provision subjecting to the special motion any claim “arising from any act of that person in furtherance of the person’s right to petition or free speech.”

Corrigan summarized the procedure required by the decision, if the defendant has established that the complaint implicates protected activity.

“[At the second step] the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken. Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing.”

Baral v. Schnitt, 16 S.O.S. 3856, was argued in the Supreme Court by James M. Wagstaffe of San Francisco’s Kerr & Wagstaffe for the defendant and Gerald L. Sauer of Century City’s Sauer & Wagner for the plaintiff. A number of news media organizations joined in an amicus brief supporting the defendant.