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Daily Journal - - Feb. 9, 2004

New Statute Exempts Certain Suits From SLAPP Law

Focus Column

Litigation

By James J. Moneer

Code of Civil Procedure Section 425.17 (SB515) became effective Jan. 1. The law makes public-interest suits and most suits arising from commercial speech or advertising activity immune from an anti-SLAPP motion under Code of Civil Procedure Section 425.16.
Section 425.17(b) offers three criteria for determining whether a suit is brought solely in the public interest and tracks the criteria in Code of Civil Procedure Section 1021.5. Section 425.17(c) offers specific criteria for meeting the anti-SLAPP statute's commercial or advertising-speech exemption.
Section 425.17's legislative history specifically states that it is intended to overrule the infamous case of DuPont Merck Pharmaceuticals v. Superior Court, 78 Cal.App.4th 562 (4th Dist. 2000). DuPont was the first SLAPP case to hold that consumer class actions based on alleged false-advertising and false-lobbying activity could be subject to Section 425.16.
Hence, even if a lawsuit otherwise arises from a defendant's petition or public-issue speech activity as defined in Section 425.16, the suit will be immune from an anti-SLAPP motion if it meets any of the two Section 425.17 exemptions.
Perhaps the most salient point about the new law is that the Legislature expressly provided in Section 425.17(e) that no right of appeal from an order denying a special motion to strike under Section 425.17 exists.
The Section 425.17(b) public-interest exception applies if all of these conditions are met: The plaintiff brought the lawsuit solely in the public interest and/or on behalf of the general public; the plaintiff seeks no greater or different relief than that sought for the class; the action, if successful, would result in the enforcement of important rights affecting the public interest; and the plaintiff's stake in the matter is disproportionate to his financial burden. Section 425.17(b).
The Section 425.17(c) commercial-speech exemption generally is met if the lawsuit arises from the defendant's "factual representations" about the defendant's or a competitor's goods, services or business operations for the purpose of promoting the business or if the 'statement' or 'conduct' was made in the course of delivering the person's goods and services and the defendant's intended audience is an actual or potential customer or someone likely to refer customers.
The basic rationale is that commercial speech is "hardy" enough to withstand the chilling effect of meritless lawsuits because it is profit-driven. Nagel v. Twin Laboratories, 109 Cal.App.4th 39 (4th Dist. 2003).
The recent trend has been to pull away from DuPont by distinguishing it or rejecting its holding and rationale altogether. See Consumer Justice Ctr. v. Trimedica Int'l Inc., 107 Cal.App.4th 595 (4th Dist. 2003); Nagel; Commonwealth Energy Corp. v. Investor Data Exch., 110 Cal.App.4th 26 (4th Dist. 2003); Martinez v. Metabolife, 113 Cal.App.4th 181 (4th Dist. 2003); Jewette v. Capitol One Bank, 2003 DJDAR 12777 (2nd Dist. Nov. 23, 2003). Scott v. Metabolife.
According to the reasoning in Robertson v. Rodriguez, 36 Cal.App.4th 347 (4th Dist. 1995), because Section 425.17 (like Section 425.16) is a purely procedural burden-shifting mechanism, applying it to cases filed before its effective date is not retroactive in effect because its application creates no new substantive rights or liabilities. In Robertson, the court applied Section 425.16 prospectively to an existing cause of action.
If the predecessor statute (Section 425.16) as a whole represents a purely procedural change in the law and is, therefore, applicable to cases that accrued before its enactment, then any amendment to it or newly enacted procedural statute modifying its application also must be applicable to cases that are pending on its effective date.
The sole purpose of Section 425.17, which is codified in the Code of Civil Procedure right after Section 425.16, is to restrict and limit the application of Section 425.16. Thus, Section 425.17 is undisputedly a procedural statute and applies to existing cases as of Jan. 1. Section 425.17(e) also abrogates the defendant's immediate right of appeal when a court denies an anti-SLAPP motion under the new law - a purely procedural function.
Some may argue that application of Section 425.17 to present cases would deprive defendants of their right to attorney fees and that, thus, Section 425.17 is retroactive in effect. But this argument is fundamentally misguided in several respects. First, Section 425.17 does not change the legal consequences of past conduct. It has not created or taken away any new substantive rights or liabilities.
Second, fees awarded under a procedural statute's fee-shifting provision are not damages and, thus, create no substantive rights or liabilities. The state Supreme Court in Equilon Enterprises LLP v. Consumer Cause Inc., 29 Cal.4th 53 (2002), made a sharp but clear distinction between statutes awarding "damages" and the anti-SLAPP "fee-shifting" provision. The former create substantive rights and liabilities; the latter does not.
More important, the Robertson plaintiff had an even-more-compelling interest in not getting hit with a heavy attorney-fee award without prior notice: The anti-SLAPP statute was not effective at the time that the plaintiff filed the complaint.
The crux of the matter is that Section 425.17, like Section 425.16, merely effects a change in the conduct of trials. It does not change the legal consequences of past conduct. Hence, its application to existing cases would not be retroactive.
Section 425.16 turns on a two-step analysis. The defendant has the initial burden of showing that the cause of action arises from the defendant's protected speech or petition activity, as defined in Section 425.16(e). Wilcox v. Superior Court, 27 Cal.App.4th 809 (2nd Dist. 1994). If the defendant makes the required prima facie showing, then the burden shifts to the plaintiff in the second step of the analysis to establish a probability of prevailing on the merits. Wilcox.
With Section 425.17, the Legislature added a third layer of analysis to the anti-SLAPP framework in public-interest and commercial-speech cases. Perhaps, the most efficient way for courts to analyze these cases is to address whether a Section 425.17 exemption applies in the first step of the analysis before addressing whether the complaint arises from protected activity.
If an exemption applies, then the question of whether the complaint arises from protected activity under Section 425.16 becomes entirely moot. The application of an exemption under the new law will, in most cases, be more readily ascertainable than will the application of Section 425.16 to a given cause of action.
If the court answers the first question in the affirmative (an exemption applies), then the remaining questions become moot, and the court must deny the SLAPP motion as a matter of law. If the court answers the first question in the negative (an exemption does not apply), then the court should engage in Section 425.16's two-step analysis.
The next question becomes, Which party has the burden of establishing whether the exemption applies to a given cause of action? This presents a legal question of first impression.
Arguably, Wilcox and its progeny stand for the proposition that the defendant has the burden of showing that Section 425.16 applies - period. Under this strict-construction approach, the defendant would have the dual burden of showing that Section 425.16 applies and the lesser included burden of showing that a Section 425.17 exemption does not apply - before the plaintiff would be required to meet its secondary burden of establishing a probability of prevailing.
In some cases, such an allocation of burdens may present practical problems. Accordingly, plaintiffs should assume that, once the defendant has met its initial burden under Section 425.16, the burden shifts to the plaintiff to show that the claim fits within one or more Section 425.17 exceptions or, alternatively, that the claim has merit.
In some rare cases, the defendant may invoke one of three special exceptions to the public-interest/commercial-speech immunities in Section 425.17(d). In these cases, the defendant should bear the burden of showing that Section 425.17(d) applies to permit a special motion to strike under Section 425.16.
This analysis is based on Section 425.17's plain language and cases interpreting Section 425.16. For a close call, however, the benefit of the doubt should weigh in favor of applying Section 425.16 because the anti-SLAPP statute has a "broad construction" requirement, whereas the new law does not. However, what the courts in fact will do with these and other issues when they actually are litigated remains to be seen.

James J. Moneer has handled SLAPP motions and appeals for plaintiffs and defendants in California since 1994. He is a panelist for the Rutter Group's anti-SLAPP seminars and drafted its anti-SLAPP handbook. He represented the defendant in Commonwealth Energy and has been amicus counsel in three SLAPP cases before the state Supreme Court. See www.slapplaw.com.