Brill Media Co. v. TCW Group, Inc.

MOSK, J., Dissenting.

I respectfully dissent.

Code of Civil Procedure1 section 425.16, which provides for a special motion to strike or “SLAPP” motion, governs a “cause of action . . . arising from any act of that person in furtherance of the person’s right of petition or free speech . . . .” “[T]he statutory phrase ‘cause of action . . . arising from’ means simply that the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 [124 Cal.Rptr.2d 519, 52 P.3d 695].) The acts complained of here are rights of petition or speech specified by the statute. The requirements of section 425.17 that would exempt the action from the provisions of section 425.16 have not been met.

1. The Allegations of the Complaint Arise From Acts in Furtherance of the Right of Petition.

Each of plaintiffs’ causes of action includes the general allegation that defendants breached the indenture by “mov[ing] to liquidate the Brill Media Companies’ properties prior to . . . satisfying the requirements of the Indenture Contract.” In addition, plaintiffs’ first cause of action for breach of the indenture specifically alleges that defendants “breached the Indenture Contract by taking steps to liquidate the Brill Media Companies’ properties prior to satisfying the requirements of the Indenture Contract” and by “forcing the Brill Media Companies to liquidate their assets” in violation of certain provisions of the indenture.

Plaintiffs’ allege in their fourth cause of action for intentional interference with the indenture that defendants “caused the Bondholders they were *344representing to breach the Indenture Contract” by “causing] the Bondholdholders ... to take steps to force liquidation of the Brill Media Properties in breach of the requirements of the Indenture Contract.” In their sixth cause of action for intentional interference with economic relations, plaintiffs allege that defendants intentionally interfered with plaintiffs’ economic relations by proceeding with a creditors remedy “for the liquidation of Brill Media Companies without first giving the Trustee written notice of a continuing Event of Default under the Indenture Contract” and by “taking unlawful actions to force the Brill Media Companies to liquidate all of their properties.” All of these alleged misdeeds concern defendants’ filing of a petition for involuntary bankruptcy liquidation proceedings and, as related to litigation or judicial proceedings, are protected under section 425.16.

Plaintiffs refer not only to acts intended to cause bond defaults but also to acts intended to force a liquidation of plaintiffs’ properties. In their original complaint, plaintiffs alleged that defendants’ wrongful conduct included “filing an Involuntary Petition under Chapter 7 of the Bankruptcy Code” and other acts in “preparation of [an] Involuntary Petition for Chapter 7 bankruptcy proceedings.” Although plaintiffs amended the complaint to allege “forced liquidation” instead of the filing of a chapter 7 bankruptcy petition, they do not contend that this change has any significance with respect to defendants’ special motion to strike. Moreover, generally, a forced liquidation refers to a bankruptcy proceeding. “Chapter 7 of the Bankruptcy Code is entitled ‘Liquidation’ and the title fully expresses the purpose of the chapter’s provisions. Chapter 7 provides the mechanism for taking control of the property of the debtor, selling it, and distributing the proceeds to creditors in accordance with the distribution scheme of the Code.” (1 Collier on Bankruptcy (15th ed. Rev. 2005) f 1.03 [2] [a] at p. 1-21.) Chapter 11 of the Bankruptcy Code is a “formal recognition of the propriety of a plan to liquidate assets of the debtor in a more orderly fashion than generally occurs in a Chapter 7 liquidation.” (5 Cowan, Bankruptcy Law and Practice (7th ed. 1998) § 20.1, p. 121; see In re Made in Detroit, Inc. (2005) 414 F.3d 576, 582 [“in bankruptcy proceedings in which the debtor is forced to liquidate . . .”].)

2. The Allegations of the Complaint Arise From Acts in Furtherance of the Right of Speech.

Section 425.16 provides protection for prelitigation statements and statements made in connection with an issue pending before a legislative, executive or judicial body. Subdivision (e)(1) of the statute covers “any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law.” Subdivision (e)(2) covers “any written or oral statement or writing made in *345connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.”

The California Supreme Court has held that “ ‘communications . . . within the protection of the litigation.privilege of Civil Code section 47, subdivision (b)[2] [citation], ... are equally entitled to the benefits of section 425.16.’ [Citations.]” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115 [81 Cal.Rptr.2d 471, 969 P.2d 564].) “Under the ‘usual formulation,’ the litigation ‘privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citations.]’ [Citation.] This includes prelitigation communications involving the subject matter of the ultimate litigation.” (Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1058 [18 Cal.Rptr.3d 882] (Sylmar); see Rubin v. Green (1993) 4 Cal.4th 1187, 1191 [17 Cal.Rptr.2d 828, 847 P.2d 1044].) The privilege includes statements concerning litigation threatened in the event a demand is not met. (Aronson v. Kinsella (1997) 58 Cal.App.4th 254, 260-261 [68 Cal.Rptr.2d 305].) The privilege also encompasses statements made to third parties who have a substantial interest in the outcome of the litigation. (Costa v. Superior Court (1984) 157 Cal.App.3d 673, 678 [204 Cal.Rptr. 1].) Thus, “statements made in connection with or in preparation of litigation are subject to section 425.16.” (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908 [120 Cal.Rptr.2d 576].)

Plaintiffs’ second, third, fifth, seventh, eighth, ninth and 10th causes of action are all based on statements defendants allegedly made concerning defendants’ intent to institute bankruptcy proceedings, to pursue fraudulent transfer remedies, or to oppose administrative action by the Federal Communications Commission in connection with the proposed transfer of licenses. In their second and 10th causes of action, plaintiffs allege that defendants breached confidentiality agreements by “threatening the Potential Buyers [of the assets of the Brill Media Companies] with actions at the FCC if they purchased any of the Brill Media Company radio stations,” and “telling the *346Potential Buyers, falsely, that the Brill Media Companies would be liquidated . . . .” Plaintiffs allege in their third cause of action that defendants breached implied covenants in the indenture by “making statements that the Brill media [sz'c] Companies would be liquidated when liquidation was not imminent or necessary.” Plaintiffs in their fifth, seventh, and ninth causes of action allege that defendants intentionally or negligently interfered with a contract to sell certain assets to NextMedia by “a) a telephone call from defendant Tell to Sean Stover, Chief Financial Officer of NextMedia, in which defendant Tell advised Mr. Stover, before the January 16, 2002 expiration of the grace period for payment of the December 17, 2001 interest payment, that there was going to be a default by the Brill Media Companies, that there would be a sale of the Brill Media assets, and that he was setting up a due diligence headquarters through TCW for such sale; b) a telephone call from defendant Ward to Steve Dinetz, the President and Chief Executive Officer of NextMedia at his home in Lake Tahoe in early January 2002, in which defendant Ward advised Mr. Dinetz against closing the purchase because the Bondholders would look seriously at unwinding the transaction; and c) a telephone call from defendant Ward to Mr. Stover several days later, in early January 2002, in which defendant Ward told Mr. Stover that the Bondholders would probably oppose any deal between NextMedia and the Brill Media Companies and that the Bondholders thought that Brill media should go through a liquidation of its assets.” Plaintiffs’ eighth cause of action includes the allegation that defendants “falsely told the Potential Buyers that the Brill Media Companies would be liquidated with the cooperation of Alan Brill.”

Each of these claims is based upon prelitigation statements protected under section 425.16, subdivision (e)(1) or (2). The statements were made concerning defendants’ intent to pursue a lawsuit or other administrative action concerning plaintiffs’ proposed sale of certain radio stations and plaintiffs’ inability to make a pending interest payment on bonds; they were made to achieve the object of those actions—to preclude the proposed sale and to enforce rights under the bonds; and they were made to third parties with a substantial interest in the outcome of those actions. (Sylmar, supra, 122 Cal.App.4th at p. 1058; Costa v. Superior Court (1989) 157 Cal.App.3d 673, 678 [204 Cal.Rptr. 1].) The statements are therefore covered by section 425.16. (Kashian v. Harriman, supra, 98 Cal.App.4th at p. 908.)

3. Additional Allegations Do Not Bar Application of the Statute.

The amended complaint also contains allegations of other acts by defendants that are not covered under the special motion to strike statute—for example, that defendants breached the indenture “by refusing to allow the Brill Companies to exercise their rights under the Indenture Contract” to sell *347certain of their radio stations to NextMedia and to use the proceeds from that sale to make interest payments under the loan. Nevertheless, “ ‘[published appellate court cases have concluded that where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 426.16 unless the protected conduct is “merely incidental” to the unprotected conduct.’ (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 103 [15 Cal.Rptr.3d 215].)” (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1245 [29 Cal.Rptr.3d 521]; see, e.g., Scott v. Metabolife Internat., Inc. (2004) 115 Cal.App.4th 404, 419 [9 Cal.Rptr.3d 242]; Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188 [6 Cal.Rptr.3d 494].) This issue is currently under review by the California Supreme Court. (Kids Against Pollution v. California Dental Association, review granted, Sept. 17, 2003, SI 17156.) Pending a determination of this issue by the Supreme Court, I would follow existing case law holding that “a plaintiff cannot frustrate the purposes of the SLAPP statute through a pleading tactic of combining allegations of protected and nonprotected activity under the label of ‘one cause of action.’ ” (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 308 [106 Cal.Rptr.2d 906].)

4. Section 425.17 Does Not Apply.

Section 425.17, which excludes the application of section 425.16 in certain cases, does not apply to this case. Section 425.17 provides in pertinent part: “Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services ... if both of the following conditions exist: [f] (1) The statement or conduct consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services, that is made for the purpose of obtaining . . . sales or . . . was made in the course of delivering the person’s goods or services. [][] (2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer . . . .” (§ 425.17, subd. (c).)

Section 425.17 requires that defendants’ statements be representations about defendants’ business or a competitor’s business. The legislative history confirms that section 425.17, subdivision (c) was intended to apply to statements of fact made by businesses about “their goods, services or business operations, or those of a competitor.” (3d reading analysis of Sen. Bill No. 515 (2003-2004 Reg. Sess.), May 6, 2003, p. 1.) The purpose of the *348statute appears to have been to immunize comparative advertising by retailers from the special motion to strike statute. One legislative analysis cites the following language in Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 960-961 [119 Cal.Rptr.2d 296, 45 P.3d 243], as the model for the type of speech covered by section 425.17: “In typical commercial speech cases, the speaker is likely to be someone engaged in commerce—that is, generally the production, distribution, or sale of goods or services—or someone acting on behalf of a person so engaged, and the intended audience is likely to be actual or potential buyers or customers of the speaker’s goods or services, or persons acting for actual or potential buyers or customers, or persons (such as reporters or reviewers) likely to repeat the message to or otherwise influence actual or potential buyers or customers. [1] Finally, the factual content of the message should be commercial in character. In the context of regulation of false or misleading advertising, this typically means that the speech consists of representations of fact about the business operations, products, or services of the speaker (or the individual or company that the speaker represents), made for the purpose of promoting sales of, or other commercial transactions in, the speaker’s products or services.” (Assem. Com. on Judiciary, Com. on Sen. Bill No. 515 (2003-2004 Reg. Sess.) June 27, 2003, p. 10, italics added; see Baker, Review of Selected 2003 California Legislation Civil: Chapter 338: “Another New Law, Another Slapp in the Face of California Business” (2004) 35 McGeorge L.Rev. 409, 422.)

Defendants allegedly made certain statements about plaintiffs’ business. Defendants and plaintiffs are not competitors. Defendants are in the business of providing investment and financial services. Plaintiffs owned and operated radio stations and newspapers. Defendants’ alleged statements were not made “in the course of delivering [their] goods or services.” The alleged statements were made to NextMedia, neither a current consumer of defendants’ services nor a potential future consumer of those services. And the alleged statements dealt with plaintiffs’ efforts to sell capital assets—not goods or services over which plaintiffs and defendants compete.

The “intended audience” of defendants’ alleged statements were not persons covered under section 425.17, subdivision (c)(2). NextMedia, the intended audience of defendants’ alleged statements, was not an actual or potential “buyer or customer” of defendants’ services, nor was NextMedia likely to repeat defendants’ statements in order to influence any actual potential buyer or customer of those services. The “intended audience” language in section 425.17 should not be construed to apply to any potential customer of either plaintiffs or defendants when plaintiffs and defendants are not business competitors.

*349To the extent section 425.17 can be based on evidence beyond the allegations in the first amended complaint, there is no admissible evidence3 to support the application of section 425.17 and specifically no admissible evidence to support the conclusion that defendants’ statements were made “in the course of delivering [their] goods or services.” Trying to take control of a company does not suggest that “goods or services” of competitors are involved for purposes of section 425.17. Neither the operative complaint nor the admissible evidence contains the conditions necessary for section 425.17 to apply.

I would affirm the judgment of the trial court.

On September 17, 2005, the opinion was modified to read as printed above. The petition of respondent AIG Retirement Services, Inc., for review by the Supreme Court was denied December 14, 2005.

All statutory citations are to the Code of Civil Procedure unless otherwise noted.

Subject to certain enumerated exceptions, Civil Code section 47, subdivision (b) states that a publication or broadcast is privileged if made “[i]n any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure ... .” Civil Code section 47 was amended, effective July 1, 2005. (Stats. 2004, ch. 182, § 4.) The amendments to subsection (b) of Civil Code section 47, which became effective on July 1, 2005, are not relevant here.

The trial court excluded all but a fraction of plaintiffs’ evidence.