Friday, November 7, 2014

Runaway anti-SLAPP Decision Eats Declaratory Relief

Lunada Biomedical v. Nunez, No. B243205 (D2d5 Oct. 9, 2014)

This opinion says that when a claim seeking a declaration of non-liability under the CLRA is met with an anti-SLAPP motion, the declaratory relief cause of action “arises from” the defendants’ CLRA notice letter. Under the test it states, a declaratory relief claim satisfies the first prong of the anti-SLAPP analysis so long as a communication between the parties is needed to show a live controversy. Taken at face value, that would mean that any declaratory relief claim seeking a declaration of non-liability satisfies the first step of the anti-SLAPP analysis.  That can’t be the law.

Some plaintiff lawyers sent a CLRA notice letter to Lunada, a manufacturer of a dietary supplement, accusing it of making false heath claims. After some back and forth between the lawyers, Lunada got sick of dealing with plaintiff and sued for declaratory relief, asking the court to declare that it didn’t violate the CLRA. Plaintiffs responded with an anti-SLAPP motion, which the trial court granted. 

The first prong of the anti-SLAPP analysis asks whether the cause of action addressed by the motion arises from protected activity, as defined by Code of Civil Procedure §§ 425.16(b)(1) and (e).  Here, the court looks to the correspondence and CLRA notice, which it deems to be pre-litigation correspondence. These statements are protected activity under § 425.16(e)(2), which protects “written or oral statement[s] or writing[s] made in connection with an issue under consideration or review by a judicial body.” 

But does a declaratory relief action seeking a declaration of non-liability really “arise from” the correspondence threatening suit? Or does it arise from the fact that the plaintiff claims not to be liable for what it has been accused of? The court here says the former, reasoning that “[b]ut for the CLRA Notice and demand letters, there would be no dispute[.]” If that’s the test the anti-SLAPP statute applies to a broad swathe of litigation that has nothing to do with anyone’s free speech rights. 

As the California Supreme Court explained in its landmark 2002 trilogy of cases interpreting § 425.16(b), the “arising from” test looks to whether the protected activity constitutes the gravamen of the cause of action. See City of Cotati v. Cashman, 29 Cal. 4th 69, 78 (2002) (“[T]he 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.”); Navellier v. Sletten, 29 Cal. 4th 82, 89 (2002) (“In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.”); Equilon Enters. v. Consumer Cause, Inc., 29 Cal. 4th 53, 67 (2002). 

When it does, there is inevitably some causal relationship between the activity and the claim because the activity forms the substance of the claim. (Viz. without a publication, there is no defamation; without a prior lawsuit, there is no malicious prosecution.) But that the converse isn’t necessarily true: Just because protected activity played some role in the lead up to litigation, it does not necessarily mean that the “cause of action itself was based on” the protected conduct. City of Cotati, 29 Cal. 4th at 78. As the court explained in City of Cotati: “That a cause of action arguably may have been triggered by protected activity does not entail that it is one arising from such.” Id. “To focus on [plaintiff’s] litigation tactics, rather than on the substance of [its] lawsuit, risks allowing [defendant] to circumvent the showing expressly required by section 425.16, subdivision (b)(1) that an alleged SLAPP arise from protected speech or petitioning.” Id.

The court here tries to distinguish City of Cotati, but its reading—that the case stands only for the proposition that “the mere fact an action was filed after protected activity took place does not mean it arose from that activity”—is too narrow. Indeed, a fair reading of City of Cotati reveals that, just as here, but for the defendant’s protected activity (here sending a CLRA notice letter, there filing a different lawsuit) a declaratory relief action would never have been filed. Id. at 71 (noting that the declaratory relief claim was filed “in response to” a prior litigation). The court’s distinction is thus without difference.

The analysis appears to go astray by relying on CKE Restaurants, Inc. v. Moore, 159 Cal. App. 4th 262, 271 (2008).  In CKE, a consumer group served the plaintiff a notice under Proposition 65, alleging that CKE’s French fries were contaminated with naphthalene. As required by the statute, the notice was also sent to the attorney general, the district attorneys for every county and six city attorneys. Under the proposition 65 scheme, a plaintiff can only bring suit after sixty days have elapsed since the notice, and no public agency has elected to bring an enforcement action. During the sixty-day window, CKE sued the consumer group for declaratory relief, seeking a ruling that CKE’s French fries complied with Prop 65. Under these facts, the court of appeal held that CKE’s declaratory relief claim arose from the consumers’ protected activity in filing the proposition 65 notice. The court reasoned that the declaratory relief action “arose entirely from the filing of the Proposition 65 notice” because absent the notice, there would be no dispute.

In getting to this result, CKE addressed a perceived a distinction between City of Cotati and Equilon. Both City of Cotati and Equilon were declaratory relief cases.  In City of Cotati the plaintiff sought a declaration that a trailer park rent control statute was constitutional. Equilon, like CKE, was a Prop 65 notice case. As the court does here, CKE reasoned that City of Cotati addressed only situations where “arising from” was based on a mere temporal relationship between the protected activity and the cause of action, whereas Equilon involved service of a Prop 65 notice that was a “but for” cause of the plaintiff’s declaratory relief claim. As I said, that’s an incorrect reading of the facts and holding of City of Cotati. Indeed, both CKE and this case miss the real reason that Equilon found that the arising from requirement was satisfied, but City of Cotati did not: in Equilon, the plaintiff’s declaratory relief action attacked the validity Prop 65 notice itself.  Equilon, 29 Cal. 4th at 57 (noting that the allegations were that (1) “the notice failed to comply with the California Code of Regulations”; (2) that “the notice had not been served on the proper parties” and (3) “that it failed to describe the alleged toxic discharges with sufficient particularity.”).  Because sending a Prop. 65 notice is protected activity, the arising-from test was met. Equilon—unlike City of Cotati, CKE and here—thus involved more than a mere request for a declaration over the lawfulness of plaintiff’s conduct. Indeed, Equilon expressly recognizes this distinction in a footnote.  Id. at 67 n.4.

At bottom, the problem with the reasoning of this opinion is that practically every declaratory relief claim that seeks a declaration of non-liability is responding to some potential plaintiff’s accusation. That, after all, is the purpose of seeking a declaratory judgment. See Meyer v. Sprint Spectrum L.P., 45 Cal. 4th 634, 647 (2009) (“The purpose of a declaratory judgment is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.” (quotation omitted)). Under those circumstances, “but for” the accusation, a live controversy wouldn’t exist. That does not mean, however, that the claim arises from the accusation. Indeed, the same thing is true with a cross-claim, and as Justice Werdegar explained in City of Cotati, “[t]o construe ‘arising from’ in § 425.16 as meaning ‘in response to’ would render all cross-actions potential SLAPP suits, and the Legislature could not have intended such an absurd result.” City of Cotati, 29 Cal. 4th at 77. 

In any event, the court also holds that the second prong of the analysis—whether plaintiff can show it is likely to succeed on the merits—was correctly decided by the trial court, albeit for a different reason. According to the court, structural features of the CLRA preclude a potential defendant accused of CLRA violations from bringing a declaratory relief action against a consumer to establish its own non-liability. Because plaintiff did not have a viable claim, the anti-SLAPP motion was correctly granted.

Finally, the trail court did not err in calculation of the attorney fee award to prevailing defendants.


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