About that SLAPP thing

A number of law bloggers have posted recently (as noted by Colin Samuels at the link referred to in my previous post) in support of a federal statute to deal with the problem of lawsuits known as “strategic lawsuits against public participation”–SLAPP suits.   Ken at Popehat explains, and does so very well (except for his recurring bad habit of using dirty words — made family-safe here! — for no @%*!  good reason):

Last week Marc Randazza touted Congressman Steve Cohen (D-TN)’s Citizen Participation Act, a federal anti-SLAPP statute. It’s been boosted elsewhere as well. Randazza is absolutely [neato] on First Amendment issues — he has more fun than should be legal eviscerating opponents of free speech. I was happy to hear his call to make March “National SLAPP month,” and remain happy even after Patrick explained to me that it doesn’t mean I actually get to hit anyone. But I’m not entirely with Marc on Rep. Cohen’s bill.

First things first: for those not in the know, an anti-SLAPP statute protects litigants from meritless and/or frivolous lawsuits attacking protected speech. The statutes differ substantially among the few jurisdictions that have them, but they all share the same core idea: when plaintiffs sue defendants for certain types of speech, defendants should be able to force the plaintiff to convince a judge that they have a case before they force defendants to incur ruinous litigation costs. Some anti-SLAPP statutes are vigorous and effective, like California’s. I’m very fond of California’s anti-SLAPP statute, under which a judge recently ordered a plaintiff to pay my client nearly $35,000 in attorney fees. Other states, however, have narrow, weak, or ineffective anti-SLAPP statutes — take Maryland, for instance. Many jurisdictions have no anti-SLAPP statutes at all. There’s no existing federal anti-SLAPP statute, though federal courts have sometimes applied state anti-SLAPP statutes to pendant state claims or state claims in diversity cases.

Ken is right:  There are some serious problems with anti-SLAPP laws.  I have been so under water that I haven’t had the chance to respond to the original email that went out urging that we post on this topic, and the movement sort of moved on without me (amazingly!).  But while so many of my clients have been wrongly harmed, or even destroyed, by what could definitely be described as SLAPP suits — which in theory this new law would “solve “– at least one of them has been beat up pretty good by misapplication of the California version of this law, too.   All of which goes to show just how “solutions” consisting of more law so often end up doing exactly the opposite of what they were meant to do.

In the one particular case where this happened, my client — the “famous” S & L Vitamins, here sued under another business name, “Body Source” — was the defendant in a case brought by California Tan, a maker of indoor tanning salon goop.  This was the first “tanning lotion case” in that series of litigations in which the tanning lotion companies threatened to file, or in this case did file, complaints that were rafts of specious intellectual property claims meant to stop S & L from competing with the companies’ “authorized” distributors, despite their legal right to do so (and despite the fact that it was these distributors who were selling them the stuff in the first place).

In other words, for those of you who are not regular readers and hence already sick of the topic, these cases were nothing more or less than a business strategy to financially break companies that had the temerity to sell merchandise online without permission of the manufacturer.  Eventually these companies ended up being owned by one big fat one now called, quite ironically for the Dark Lords of indoor self-immolation, New Sunshine LLC.  And eventually they found that judge who was willing to shut S & L Vitamins down under a unique theory of liability (i.e., aggravated filing of legal arguments the Court does not understand).  But in 2004, this process was just beginning.

Creative as ever, among our counterclaims in the “Cal-Tan” case was a charge that the plaintiff was — as ultimately all the tanning lotion companies under this umbrella did — using meritless trademark infringement actions, and the threat of them, as a form of unfair competition itself.  This is not, as demonstrated below, a novel proposition under the cases; and as a matter of common sense, it is pretty self-evident.

Plaintiff’s California Ãœber Alles response, however, was to go out and hire a specialty law firm that handles mainly SLAPP cases, substitute them into the case for the general counsel, and make a motion to dismiss, and for sanctions, under California’s SLAPP statute based on this counterclaim.

We fought vigorously.  Unfortunately, I don’t have a final copy of the filed brief; PACER was in its infancy then and, well, there were things we didn’t track so well at the time.  But our argument in opposition was based on the handful of cases (yes, there were only a handful) that said that abuse of the litigation process can, in fact, be a form of unfair competition, and that therefore the case could not qualify under SLAPP as one lacking even a modicum of merit:

Under trademark law, the filing of baseless litigation constitutes unfair competition. Case law provides ample authority for Body Source’s contention that CalTan engaged in unfair competition. As one court noted, “[a] claim of trademark infringement must be carefully scrutinized to ensure that trademarks and the threat of trademark litigation is not, in essence, used in restraint of trade.” Puritan Sportswear Corp. v. Shure, 307 F.Supp. 377, 390, 165 U.S.P.Q. 71 (W.D. Pa. 1969). For example, it may be anticompetitive for a trademark owner to use an infringement suit as a selective coercive device to enforce a policy of vertical price-fixing. Id. It is axiomatic that “if suit is used ‘as a deliberate weapon of business aggression rather than an instrument for adjudicating honest disputes,’ then it is an unfair method of competition.” T.N. Dickinson Co. v. LL Corp., 985 WL 14175, *7, 227 U.S.P.Q. 145 (D. Conn. 1985), quoting R. Callman, Unfair Competition, Trademarks and Monopolies, §2.32 (4th Ed. 1981). Furthermore, one court cautioned that “malicious or excessive threats which go to companies whose activities could not possibly be considered as infringing . . . might be construed as an effort to extend a trademark monopoly beyond its legal limits.” LaMaur, Inc. v. Alberto-Culver Co., 1973 WL 917, *2, 179 U.S.P.Q. 607 (D. Minn. 1973), aff’d, 496 F.2d 618 (8th Cir.), cert. denied, 419 U.S. 902, 42 L.Ed.2d 148, 95 S.Ct. 186 (1974). The Ninth Circuit has held that a single baseless lawsuit will suffice to lose First Amendment immunity. See Clipper Express v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240 (9th Cir. 1982), cert. denied, 459 U.S. 1227 (1983). . . .

Body Source had and has every legal right to sell CalTan’s products. Body Source tried to tell CalTan so much, but CalTan was not interested in the law—it was interested in a fight. Body Source, imagining that perhaps it was ignorant of some new development in the law, even asked CalTan to provide its legal basis for contending that Body Source was in violation of trademark law, but CalTan refused to engage in dialogue and, instead, clung to its war mongering agenda. CalTan willfully, callously, and arrogantly thumbed its nose at fundamental trademark principles and filed a baseless lawsuit for one purpose only—to unfairly bash its perceived competition. It is uncontrovertible that CalTan engaged in unfair competition under federal trademark law.

Okay, it’s not the strongest cudgel I ever hit anyone with in litigation.  (It was 2004!)*   But if you consider the links above on the substantive legal points, it was hardly a stretch to say that these trademark claims stunk to high heaven.  They were garbage.  How could our counterclaim calling the other side out on that constitute the “strategic lawsuit against public participation” here?  As we said later in the brief:

A cause of action is subject to being stricken under the anti-SLAPP statute only if it “arises from protected speech or petitioning and lacks even minimal merit.”  Navellier v. Sletten, 29 Cal.4th 82, 89, 124 Cal.Rptr.2d 530, 52 P.3d 703 (2002) (emphasis supplied).  A plaintiff is not required “to prove the specified claim to the trial court;” rather, so as to not deprive plaintiff of a jury trial, the appropriate inquiry is whether “plaintiff has stated and substantiated a legally sufficient claim.”  Rosenthal v. Great Western Fin. Securities Corp., 14 Cal.4th 394, 411-12, 58 CalRptr.2d 875, 926 P.2d 1061 (1996) (original emphasis).  Once a plaintiff shows that “any part of its claim” has minimal merit, “plaintiff has established that its cause of action has some merit and the entire cause of action stands.”  Mann v. Quality Old Time Service, Inc., 2004 WL 1463039, *5 (Cal.App. 4 Dist. 2004) (original emphasis).As noted by the Wilcox court above as well as by a dearth of California case law, SLAPP suits typically are brought by “Goliath” in order to trample on the rights of “David.”  Section 425.16 is designed o keep “Goliath” at bay and is intended to protect against abuses by companies precisely like CalTan, not like Body Source.  In this case, CalTan filed a patently frivolous suit against Body Source solely to crush its punier competition.  Body Source tried to fight back against the bigger, wealthier CalTan by filing a counterclaim for unfair competition.  The facts of this case are not within the contemplation of the SLAPP statute nor was such a scenario ever envisioned by the Legislature when it enacted §425.16.  Indeed, Body Source has not found a single reported case where the SLAPP statute was applied to a counterclaim brought by a weaker party who was merely trying to stand its ground against a larger, richer party’s oppressive lawsuit.  To apply the SLAPP statute to Body Source’s counterclaim would contravene the very purpose of the statute and would only encourage more litigation initiated by the “large private interests” to which the Wilcox court alluded.

Moreover, if the SLAPP statute is applied to Body Source’s counterclaim, the result will encourage a policy of competition by litigation and suing first and asking questions later.  As stated more fully above, CalTan filed the instant lawsuit before ever even contacting Body Source.  There was no dialogue, no discussion, no exchange of information.  CalTan’s posture was to shoot without warning, to compete in the courtroom rather than in the boardroom.  While aggressive and zealous representation have their place in our legal system, so, too, do discussions outside the courtroom.  If CalTan’s SLAPP motion is granted, the message that is sent to big companies is that filing lawsuits is the legally sanctioned method of crushing smaller competitors. Such a result would go against the spirit of the SLAPP statute.

Judge Tevrizian’s spirit, however, was not willing to buy our argument. And he not only dismissed that counterclaim as unworthy of being litigated, he sanctioned our client $12,000 for filing it.  And when this motion was done, that budget-conscious GC (who is now a friendly acquaintance no longer with that company), who had brilliantly achieved this minor tactical victory at no cost but significant moral and, relatively speaking, financial expense to my client, substituted her own no-outside-counsel-fees bad self right back into the case.  The settlement followed not long after and our client stopped selling Cal Tan products on the Internet–which it otherwise actually had every right in the world to do.

That was in federal court, folks.  See, in California they didn’t even wait for a federal statute–they made a rule, did the federal judges, that notwithstanding the Supremacy Clause or stuff like that, California’s legislature is mighty enough to reach into federal court and tell what you can and can’t file there.

Yeah, that was just one case where SLAPP worked the wrong way. But it was not only one of my cases, and–as I am fond of thinking (never saying) when a judge suggests “I’ve got other cases to deal with, you know”–for my client as for most clients it was their only case. And they were severely wronged by a very clever, albeit cynical, litigation strategy abetted by a judge who (much like the one referred to above who finally administered the coup de grâce on my client’s impudent business) rose through the ranks of municipal lawyering to assume the elite, never-say-fired status of a United States District Court Judge under Article III of the United States Constitution and utterly lacked the moral vision to comprehend the wrongness of what he was doing.

So, me, I’m prejudiced, I guess, but even though you’d think I’d like SLAPP, what with its free-speechy kind of flavor, I will never get past this.  And I’m not rushing to put more tools in the hands of judges that authorize them to make meta-judgments which happen to get rid of lawsuits, parties or counsel they might not really understand, or want to have to deal with.

Yeah, it was just one case where it went like that, I know.

But it was my case.

They’re all–most of all, the ones I lose–my case.

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* Hey, David Nieporent–are you sure you want me to share the credit this time?