SEC Filings Are Protected Activity

Sugarman v. Bennett, No. B307753 (D2d8 Dec. 27, 2021)

Sugarman v. Brown, No. B308318 (D2d8 Dec. 27, 2021)

Two appeals from the same case decide the same issue: statements made in a corporation’s Form 10-K filing with the Securities and Exchange Commission are made “in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law,” and thus protected activity under the anti-SLAPP statute.

Makes sense.

Affirmed, in relevant part.

Style note: I have complained before about the goofy way California appellate courts explain partial publications, by explaining instead which parts of the opinion are not published. The decisions here do that too. But at least the slip opinion helpfully includes headings that say “[Begin nonpublished portion]” and “[End nonpublished portion].” Readers of slip opinions will take whatever we can get.

Do Not Settle. Do Not Collect a Contingency Fee. Go Straight to the State Bar.

Amjadi v. Brown, No. G059069 (D4d3 Aug. 30, 2021)

Sometimes clients won’t settle when their lawyers think they should. No matter how much you explain to them that it’s a good deal, that it’s better than anything they could expect even if they win at trial, or that they are letting emotional issues get in the way of what litigation is really about: money, they just won’t come around to your view of the situation. But if you didn’t want to deal with that, you should have told the interviewers at OCI that you want to be a capital markets lawyer. Because, as fools who decided to pursue a life in litigation, clients who don’t take our settlement advice are an occupational hazard we just need to suck up and deal with. 

Lots of strategic and tactical decisions in litigation belong to the attorney, not the client. But not settlement. Rule 1.2 of the Rules of Professional Conduct unequivocally states that a “lawyer shall abide by a client’s decision whether to settle a matter.” 

The plaintiff lawyers here (working on a contingency, no less) thought they could end around that rule by putting in their retainer agreement that the client delegated them the authority to decide if and when to settle, so long as the lawyers thought it was in the client’s interests. Bad idea.

Not only is that prohibited by the RPCs, cases have found that frustrating a client’s authority on when and under what terms to settle can constitute “moral turpitude.” So this all results in the Court of Appeal invalidating a settlement entered over the client’s objection, the Court declaring the retainer agreement void, and the lawyers being reported to the state bar, not just for the retainer agreement, but also for disclosing a bunch of client confidences in the course of the dispute over the settlement.

Reversed.

Insulating Fraud in Film Finance

Ojjeh v. Brown, No. A154889 (D1d3 Dec. 31, 2019)

Sigh.

Defendants raised money from plaintiff for the production of a documentary on Syrian refugees. But they never made any progress on making the film. Instead, they allegedly used the money for other reasons. Plaintiff sued them for breach of contract and fraud.

Defendants filed an anti-SLAPP motion, which the trial court denied because the claims did not arise from protected activity. The Court of Appeal, however, reverses, finding that the conduct from which the claims arise—securing alleged financing for a film—falls within the “conduct in furtherance” catchall under Code of Civil Procedure § 425.16(e)(4).

The court seems to recognize that there are three questions here. First, what conduct does the claim “arise from?” Second, is that conduct “in furtherance” of First Amendment activity. And third, does it relate to an issue of public concern? 

Things seem to go hinky on the second element. As the Supreme Court recently explained in Wilson, the (e)(4) “in furtherance” test can’t just ask if, superficially, the conduct at issue is something that “helps” a media defendant produce content. Otherwise, virtually any claim against a media defendant has to navigate an anti-SLAPP motion to proceed. Thus, courts examining (e)(4) arguments based on “in furtherance” conduct need to look at whether the conduct at issue actually plays a substantial role in carrying out or protecting core First Amendment protected activity.

For instance, the bare fact Wilson concerned CNN’s decision to terminate a news producer was not enough on its own to make that decision “in furtherance of protected activity” under (e)(4), even though employing producers “helps” CNN make the news. Laws of general applicability often incidentally affect the ability of media organizations to create content, but the First Amendment does not create some sort of blanket immunity from those laws.

Instead, (e)(4) was implicated in Wilson only because CNN came forward with evidence that the producer was terminated because he committed plagiarism, which was a sufficient threat to the core journalistic function of the CNN to implicate its exercise of its First Amendment rights, and thus for the termination to be “in furtherance” of those rights. 

The nuance demanded by Wilson is not evident from this opinion. Instead, the court just finds that soliciting investment funding was in furtherance of the production of the documentary—it “helped” the production— and therefore that (e)(4) applies. So apparently you have a protected right to commit fraud, so long as the subject of the fraud is the making of movies. Every huckster fronting as a “movie producer” will be thrilled!

What should have happened here, a la Wilson, is a closer examination of the nexus between the claims and the allegedly First Amendment-implicating activity. A moving defendant bears the burden on this point and in this context, that will usually require it to come forward with evidence extrinsic to the complaint. Which is what happened in Wilson. If the breach of contract and fraud claims are really about creative or political disagreements fundamental to the creation of a documentary, there might well be an (e)(4) issue. But if this was just a straight up promissory fraud ripoff there’s really no reason to be dragging the anti-SLAPP statute into the dispute. 

Reversed.

Nominal Statutory Damages Draw Right to Jury Trial

Brown v., Mortensen, No. B281704 (D2d1 Jan. 3, 2019)

The Court here holds that there’s a right to jury trial over a claim to recover nominal statutory damages under the Confidentiality of Medical Information Act. Civ. Code §§ 56, et seq. The statutory damages are, in effect, a penalty, and statutory penalties have historically been treated as actions at law, not equity. 

There is not, however, a right to jury trial on the Act’s attorney-fee shifting. The right to jury trial can sometimes attach to a fee award, but only when attorneys’ fees are recoverable as an element of damages. For instance, that happens in some kinds of insurance cases. But ordinary prevailing party fee awards, like the one in the Act, are an incidental form of relief that is properly adjudicated by a post-trial fee motion to be decided by the court. 

Reversed.

Anti-Vaxer Benchslap!

Brown v. Smith, No. B279936 (D2d Jul. 2, 2018)

Talk about calling bullshit. The Court here took judicial notice that the factual allegation at the core of Plaintiffs’ theory was false and thus that it didn’t need to be taken as true in their complaint. Because Plaintiffs are antivaxers. And because it is not really debatable, California courts have been taking judicial notice of the fact that vaccines are safe and effective since 1925. Which pretty much dooms plaintiffs’ case, in which they claim that their nonsensical anti-scientific feelings give them a constitutional right for their kids to spread measles to other kids in Disneyland. 

Affirmed.

Pick Three...

Eng v. Brown, No. D071773 (D4d1 Mar. 22, 2018)

Appellant in this case violated a rule of thumb that applies to appealing an adverse civil judgment in California: It does not matter how many times the trial court messed up, absent extraordinary circumstances, an appellant should pick, at most, the three best issues to raise on appeal and concentrate on them. If a reversal isn’t in the cards on your top three issues, the chances that it could be on issues six or seven are fleetingly slim. Plus, when too many issues are raised, the word limits on the briefs lead to underdeveloped arguments that aren’t very convincing.

Mass Joinder Requires Real Joinder

Brown v. Superior Court, No. F073964 (D5 Jan. 30, 2018)

This is a sketchy looking mass joinder case attacking home mortgage trust and servicing practices. It appears that some religious-sounding outfit convinced more than 1,000 homeowners to assign it the right to bring any claims related to their loans, along with a 5 percent interest in the underlying estates. The Ministry then re-assigned all those rights to Plaintiff, who filed an enormous litigation that seeks damages on behalf of everyone. 

Chin-ups on the Heck Bar

Brown v. County of L.A., No. B249825 (Aug. 29, 2014)

Chalk this one up as one of the more creative prisoner arguments I’ve seen in a while. Plaintiff is doing seventeen years to life for a murder he committed as a teenager. He claims that, because he was underage when he plead guilty, his plea agreement is voidable under Civil Code § 35, which allows minors to disaffirm contracts. Unfortunately for the plaintiff, you can’t use a civil suit to collaterally attack a criminal judgment. That’s what habeas is for. Further, although the plea bargain/contract analogy is oft drawn, criminal law does not wholesale import every aspect of civil contract law. While age is a recognized factor in measuring the voluntariness of a plea, there’s no bright line rule about minors like the one that applies to civil contracts.

Affirmed.

Hail Mary, Fail

Brown v. American Bicycle Group, No. D063268 (D4d1 Mar. 11, 2014)

In the published part of this opinion, the court holds that a trial judge is not required to disclose his ownership of stock in non-party insurance companies just because the defendant is insured. Plaintiff—who first raised the issue in a new trial motion after losing on the merits at trial—waived the objection by failing to seek writ relief after a timely recusal motion. And in any event, the information did not need to be disclosed because it did not suggest any basis for a recusal for cause. The fact that plaintiff claimed that the information might have been material to a decision on whether to file a peremptory strike under Code of Civil Procedure § 170.6 did not merit disclosure. The relevant ethical canons address disclosure of information that might give rise to a cause challenge, not a § 170.6 strike. The court then goes on—as has been happening all week—to resolve some interesting evidence issues in an unpublished part of the opinion.

Affirmed.