Tuesday, September 15, 2015

Anti-Slapp Benchslap

Hewlett-Packard Co. v. Oracle Corp., No. H039507 (D6 Aug. 27, 2015)

Defendant in this case filed an anti-SLAPP motion in between phases of a two-phase trial. The trial court denied it because it was filed long past the sixty-day window in Code of Civil Procedure § 425.16(f), and because Defendant lacked a substantial justification for the late filing. Defendant then effectively deep-sixed the second phase of the trial by taking an immediate appeal. The court of appeal is not too very happy about the way this all played out. 

The case is a big fight between HP and Oracle about whether a license agreement requires Oracle to continue to make its software compatible with HP’s hardware, a process called “porting.” The trail court bifurcated the case into two phases. The first would address interpretation of the parties’ agreement. The second, if necessity, would address liability and damages. The court ruled for HP in the first phase, strongly suggesting that Oracle would be obliged to port its database software for HP’s servers.

To minimize its risk damages, Oracle reversed course and agreed to continue porting its software to HP’s systems. HP responded by substantially revising its damages theory
. It gave up on losses caused by failure to port, and instead sought damages measured by its economic injury caused by the risk that Oracle might cease porting at sometime in the future, particularly if Oracle won an appeal addressing the stage one issues. HP supported its theory with evidence of market reactions to an Oracle press release vowing to appeal the stage one ruling. (Even though an appeal would not be ripe until a final judgment is rendered, presumably after the stage two decision.)

And then, on the eve of the stage two trial, Oracle filed an anti-SLAPP motion, arguing that HP’s new damages theory rested on statements that Oracle made in connection with the litigation. The motion did not address any specific cause of action
just HP’s new theory of damages. It was, to say the least, a long time since the sixty-day window in § 426.16(f) had run. Although the trial court has the discretion to decline to even entertain a late motion, the trial court heard the motion and denied it its unjustifiably tardy. Oracle then appealed, which effectively put the whole case on ice.

The court of appeal starts out, as courts have previously, by decrying the use tactical appeals of denials of anti-SLAPP motions to inject months or years of delay into a case. It notes, as an aside, that a potential way for a trial court to avoid this result would have been simply to refuse to address the motion as tardy. Were that the case, there would be no “grant” or “denial” to create appellate jurisdiction under § 425.16(i). But since the trial court purported to deny the motion in this case, the court reaches the merits.

The case law recognizes two circumstances where a trial court could abuse its discretion in declining to hear a late-filed motion: (1) when it would contravene the substantive provisions of § 425.16; and (2) if under the circumstances, the court’s denial was outside the range of discretion when considered in light of the purposes and policy of the statute. This case implicates only the second ground.

First things first, a late anti-SLAPP motion generally fails to serve the paramount purpose of the statute: to quickly dispose of cases that impinge on the defendants’ First Amendment rights. That is particularly apt when, like here, the motion is not even addressed to the entire case. And the purpose is particularly ill-served if the motion isn’t made until both parties have already incurred the full expense of discovery. It follows that, absent some reason to reopen the sixty-day window (e.g., an amended complaint) a trial court would not abuse its discretion in declining to hear a late motion.

That was particularly the case here. Oracle filed its motion not only after the completion of discovery, but after a ruling on part of the trial. The motion was heard 618 days after the § 425.16(f) window had run, on the very last day before the start of stage two. Many cases have upheld denials for far shorter periods of tardiness.

Nor did Oracle’s excuse—HP’s late-to-the game change in its damages theory—mean that the trial court abused its discretion in denying due to delay. Notably, Oracle waited almost four months after HP expressed its intention to revise its damages theory. Even if the change in damages theory was a catalyst akin to the filing of an amended complaint that would re-start the clock on a motion, Oracle delayed filing till after
§ 425.16(f)'s sixty-day window had run from that point. So notwithstanding Oracle’s excuse, the trial court was in its rights to deny the motion as tardy. And although that disposes of the appeal, the court goes on to note that the motion was DOA on the merits anyways because it was not addressed to a cause of action, but only to part of HP’s damages case.

The court then implores the Legislature to fix the anti-SLAPP statute because the statute as currently written is vastly overbroad in that it “makes much longer and more expensive work of many suits bearing no resemblance whatever to the targeted paradigm.
It is, the court says, “as if a city had decided to cure an illness afflicting a few of its residents by lacing the water supply with a chemical that would indeed cure those sufferers, but would sicken a larger number of previously healthy citizens.” The court suggests amending the statute to provide an interlocutory appeal only (1) for denials; (1) when the motion was timely filed under § 425.16(f); and (3) had it been granted, the motion would have disposed of the whole case.

Everyone can wish. 


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