Re: 11/15/01 - [USAV/CPXP] Opinion: Computer Express Inc. v. Lee Jackson et al. (part 1 of 3)
Filed 11/15/01
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH DISTRICT
DIVISION TWO
STATE OF CALIFORNIA
COMPUTERXPRESS, INC.,
Plaintiff and Respondent,
v.
LEE JACKSON et al.,
Defendants and Appellants.
E027841
(Super.Ct.No. RIC341013)
OPINION
APPEAL from the Superior Court of Riverside County. Erik Michael Kaiser, Judge.
Affirmed in part and reversed in part.
Law offices of Yvonne M. Renfrew and Yvonne M. Renfrew for Defendants and
Appellants.
Best Best & Krieger, Douglas S. Phillips, G. Henry Welles and James C. Turney for Plaintiff and Respondent.
Defendants appeal the denial of their motion, pursuant to Code of Civil Procedure section 425.16 (section 425.16), to strike the complaint of ComputerXpress, Inc. (ComputerXpress) as a ``SLAPP'' suit (strategic lawsuit against public participation). The trial court determined that none of ComputerXpress's claims was subject to section 425.16. Therefore, it did not require ComputerXpress to establish a probability of prevailing on its claims.
We agree that some of ComputerXpress's claims were not subject to section 425.16 and affirm the denial of the motion to strike those claims. However, we conclude that some of the claims were subject to section 425.16. We further conclude ComputerXpress did not show a probability of prevailing on those claims and reverse the denial of the motion to strike those claims. Finally, we conclude defendants are entitled to recover attorney fees and costs incurred in moving to strike the claims subject to section 425.16.
I
PROCEDURAL BACKGROUND
The complaint, filed in March 2000, alleged: ComputerXpress is a public company selling computer related products to the public. In February 1999, when ComputerXpress was considering a merger with businesses owned by defendants, defendants falsely represented that their businesses were profitable, causing ComputerXpress to incur expenses and waste time pursuing the merger. Later, in May 1999, defendants entered into a conspiracy to damage ComputerXpress's reputation and cause it economic harm. To that end, beginning in about August 1999, defendants made numerous false and disparaging statements about ComputerXpress on the Internet and elsewhere to existing and potential customers and investors, causing monetary damage to ComputerXpress.
Based on these alleged facts, the complaint asserted nine causes of action: (1) fraud; (2) negligent misrepresentation; (3) negligence; (4) trade libel; (5) interference with contractual relations; (6) interference with prospective economic advantage; (7) abuse of process; (8) conspiracy; and (9) injunctive relief. On defendants' motion to strike the complaint, the court initially ruled the first three causes of action were not within the scope of section 425.16, but the remaining causes of action were. Later, however, the court changed its mind and ruled that defendants had not shown the remaining causes of action were within the scope of section 425.16. Therefore, it denied defendants' motion in its entirety, without ruling on whether ComputerXpress had shown a probability of prevailing.
II
DISCUSSION
A. Burden of Proof and Standard of Review
Section 425.16 applies to any cause of action arising from an ```act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue.''' (§ 425.16, subds. (b)(1), (e).) Such a claim ``shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.'' (Id., subd. (b)(1).) In order to encourage participation in matters of public significance, section 425.16 ``shall be construed broadly.'' (Id., subd. (a).)
The defendant has the initial burden of making a prima facie showing that the plaintiff's claims are subject to section 425.16. (Braun v. Chronicle Publishing Co. (1997) 52 Cal.App.4th 1036, 1042; Dixon v. Superior Court (1994) 30 Cal.App.4th 733, 742.) If the defendant makes that showing, the burden shifts to the plaintiff to establish a probability of prevailing, by making a prima facie showing of facts which would, if proved, support a judgment in the plaintiff's favor. (Kyle v. Carmon (1999) 71 Cal.App.4th 901, 907.) Whether section 425.16 applies and whether the plaintiff has shown a probability of prevailing are both reviewed independently on appeal. (Mission Oaks Ranch, Ltd. v. County of Santa Barbara (1998) 65 Cal.App.4th 713, 721, disapproved on another point in Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123, fn. 10; Monterey Plaza Hotel v. Hotel Employees & Restaurant Employees (1999) 69 Cal.App.4th 1057, 1064.)
B. Claims Subject to Section 425.16
As used in section 425.16, an act in furtherance of a person's right of petition or free speech includes: ``(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing 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; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.'' (§425.16, subd. (e).) We must first determine whether defendants met their burden of showing that ComputerXpress's claims were subject to section 425.16.
1. First three and fifth causes of action
ComputerXpress's first three causes of action, for fraud, negligent misrepresentation, and negligence, were based on defendants' alleged false representations in February 1999 that they owned solvent, profitable businesses which were appropriate for merger with ComputerXpress. ComputerXpress's fifth cause of action, for interference with contractual relations, alleged that in February 2000 ComputerXpress entered into a contract to sell computers to Cal Tech Solutions and that defendants then contacted Cal Tech and disparaged ComputerXpress and its officers and directors, causing Cal Tech to cancel the contract.
There was no indication, either in the complaint or in the evidence presented on the section 425.16 motion, that the conduct alleged in these causes of action occurred in connection with an official proceeding, concerned a public issue or issue of public interest, or took place in a public forum. However, defendants argue these causes of action were still subject to section 425.16, because (1) the complaint alleged a conspiracy covering all causes of action, some of which did involve public statements, and (2) in any event, section 425.16 applies to any suit filed after the defendant's exercise of speech or petition rights, not only to claims which are directly based on such conduct.
a. Conspiracy allegations
Defendants note the complaint included causes of action, other than the first three and fifth, which alleged conduct that did occur in an official or public context, such as defendants' filing of a complaint against ComputerXpress with the Securities and Exchange Commission (SEC) and posting messages on the Internet disparaging ComputerXpress.
They argue that, in deciding whether section 425.16 applies, all of the acts alleged in all of ComputerXpress's causes of action must be considered together. They contend this is so because the eighth and ninth causes of action alleged that all of the alleged acts were performed in furtherance of a single conspiracy to interfere with ComputerXpress's business.
The eighth cause of action did allege a conspiracy to ``interfere with Plaintiff's business and cause it substantial harm and damage.'' Nowhere, however, did it allege the conspiracy included the misrepresentations alleged in the first three causes of action. The eighth cause of action did not incorporate the allegations of the first three causes of action. Moreover, the eighth cause of action alleged the conspiracy occurred on or about May 2, 1999, months after the February 1999 misrepresentations alleged in the first three causes of action.
The ninth cause of action alleged a conspiracy to ``damage the business reputation of Plaintiff and to cause Plaintiff as much economic harm as possible . . . .'' However, it alleged the conspiracy was to be implemented ``through the dissemination of false and misleading information on the internet as set forth in the above counts incorporated herein.'' The allegations of the first three causes of action were not incorporated into the ninth cause of action, nor was there any allegation that the acts undertaken pursuant to the conspiracy included the misrepresentations during the merger negotiations. And again, the conspiracy was alleged to have begun on or about May 2, 1999, well after the merger negotiations.
The fifth cause of action differs from the first three in that the allegations contained in that cause of action were incorporated into the ninth cause of action, and the conduct alleged in the fifth cause of action occurred after the inception of the conspiracy alleged in the eighth and ninth causes of action. However, we are not persuaded that this degree of arguable connection between the fifth cause of action and the rest of the complaint means the fifth cause of action is a claim ``arising from'' the public speech and petition activity alleged elsewhere in the complaint.
The phrase ``arising from'' in section 425.16, subdivision (b)(1) has been interpreted to mean that ``the act underlying the plaintiff's cause'' or ``the act which forms the basis for the plaintiff's cause of action'' must have been an act in furtherance of the right of petition or free speech. (Braun v. Chronicle Publishing Co., supra, 52 Cal.App.4th 1036, 1043; Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1417.) Even assuming, though the complaint did not so allege, that defendants' disparaging statements to Cal Tech Solutions were made pursuant to the conspiracy alleged in the eighth and ninth causes of action, it does not follow that the speech and petition activity alleged elsewhere in the complaint was part of ``the act underlying'' or ``the act which forms the basis for'' the fifth cause of action.
That cause of action did not attempt to rely on the speech or petition activity as a basis for claiming interference. Rather, it simply alleged a direct contact between defendants and Cal Tech. There was no indication that any public activity, such as the SEC complaint or Internet statements, formed any part of the claim, nor that the alleged disparaging statements related in any way to any public issue or official proceeding.
Defendants note that the fifth cause of action did not specify the content of the alleged statements to Cal Tech, but merely described them as ``disparaging remarks regarding Plaintiff and its officers and directors . . . .'' Defendants suggest we therefore should infer that the content of the statements was the same as that of the SEC complaint and Internet statements which, as we determine later in this opinion, concerned issues of public interest. Making such an inference would permit defendants to invoke the principle, discussed post, that even purely private speech may be covered by section 425.16 if it concerns a public issue. (Averill v. Superior Court (1996) 42 Cal.App.4th 1170, 1174.)
We believe that making the inference defendants suggest would effectively relieve them of their burden to make the initial showing that the claims they seek to strike fall within section 425.16, contrary to the authority discussed in part II.A., ante. We also not that, when it ruled none of ComputerXpress's causes of action was subject to section 425.16, the court did not preclude the possibility that defendants might later be able to show the fourth through ninth causes of action were subject to the statute. In fact, the court stated that those causes of action ``could very well involve conduct described by the statute.'' It merely ruled that the papers submitted at that point were inadequate to permit that determination. If subsequent developments should reveal that the fifth cause of action was based on statements which concerned a public issue, the court may exercise its discretion, pursuant to section 425.16, subdivision (f) to permit defendants to renew their motion with respect to that cause of action.
b. Suit filed after speech or petition activity
Defendants also argue that a lawsuit is adequately shown to be one ``arising from'' an act in furtherance of the rights of petition or free speech as long as suit was brought after the defendant engaged in such an act, whether or not the purported basis for the suit is that act itself. They rely on Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628 (Wollersheim) and Averill v. Superior Court, supra, 42 Cal.App.4th 1170 (Averill). 1
Wollersheim was an action by the Church of Scientology to set aside a judgment Wollersheim had obtained against it in an earlier tort action. The court held section 425.16 applied to the action based, in part, on its finding that the suit was part of an extended course of oppressive litigation conduct designed to discourage Wollersheim's use of the courts. (Wollersheim, supra, 42 Cal.App.4th at pp. 648-649.)
Wollersheim cannot be read to mean that any claim asserted in an action which arguably was filed in retaliation for the exercise of speech or petition rights falls under section 425.16, whether or not the claim is based on conduct in exercise of those rights. To the contrary, Wollersheim specifically found that the church's suit was based on Wollersheim's exercise of such a right --- it sought to set aside the judgment obtained in his prior lawsuit against the church, an exercise of his right of petition. (Wollersheim, supra, 42 Cal.App.4th at pp. 647-648.)
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1 Defendants also cite Equilon Enterprises, LLC v. Consumer Cause, Inc. (2000) 85 Cal.App.4th 654. However, after defendants filed their opening brief, the Supreme Court granted review in that case. (S094877, review granted April 11, 2001.)
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In defendants' other citation, Averill, supra, 42 Cal.App.4th 1170, a charitable organization sued Averill after she made allegedly slanderous remarks about the organization to her employer. The employer was supporting the organization's home for battered women, which Averill had publicly opposed. As defendants note, even though Averill's remarks were made in a private setting rather than publicly, the court held the suit was subject to section 425.16. (Id., at pp. 1175-1176.)
In Averill, however, the court stressed the fact that, while the remarks were private, the subject of the remarks --- the home for battered women --- had been a topic of considerable public controversy, including city council and planning commission hearings. It characterized the issue as whether section 425.16 covered ``private conversations, regarding a public issue . . . .'' (Averill, supra, 42 Cal.App.4th at p. 1174, italics added.) Thus, Averill cannot be read to mean that a private statement is covered by section 425.16 regardless of whether it concerns a public issue, simply because the person who made the statement also made public statements against the plaintiff at other times.
For these reasons, Wollersheim and Averill do not support defendants' contention that any suit filed after the defendant's exercise of its petition or free speech rights automatically comes within section 425.16. In each case, the conduct on which the suit was based occurred in connection with an official proceeding (Wollersheim) or related to a public issue (Averill). Therefore, these decisions do not warrant a departure from the rule cited ante, which requires that ``the act underlying the plaintiff's cause'' or ``the act which forms the basis for the plaintiff's cause of action'' must itself have been an act in furtherance of the right of petition or free speech. (Braun v. Chronicle Publishing Co., supra, 52 Cal.App.4th 1036, 1043; Dowling v. Zimmerman, supra, 85 Cal.App.4th 1400, 1417.) Under that rule, the trial court properly found the first three and fifth causes of action were not subject to section 425.16.
ComputerXpress asserts this court must affirm the order denying defendants' SLAAP motion if it finds the motion was properly denied as to any cause of action in ComputerXpress's complaint. Since we have concluded, ante, that the motion was properly denied as to the first, second, third, and fifth causes of action, acceptance of ComputerXpress's position would mean we should affirm the order in its entirety. ComputerXpress bases its position on this court's decision in M.G. v. Time Warner, Inc. (2001) 89 Cal.App.4th 623 (M.G.). In M.G., this court held that, where the plaintiffs had shown a probability of prevailing on some of their causes of action, the action as a whole could not be said to be without merit. Therefore it was unnecessary to consider whether the plaintiffs had shown they probably would prevail on the remaining causes of action. Instead, all of the causes of action should survive the defendants' SLAPP motion. (Id., at p.637.)
Defendants point out that the Court of Appeal for the Second District, Division Five, took the opposite view in Shekhter v. Financial Indemnity Co. (2001) 89 Cal.App.4th 141 (Shekhter), a case decided shortly before M.G. In Shekhter, the court held that the express language of section 425.16, subdivision (b)(1) ``allows a single cause of action to be stricken. The fact that other claims remain does not bar a trial judge from granting a section 425.16 special motion to strike.'' (Shekhter, supra, at p. 150.)
It is not necessary in this case to attempt to resolve the conflicting holdings in M.G. and Shekhter. We conclude that, no matter which decision is correct, the fact the SLAPP motion was properly denied as to some of ComputerXpress's causes of action does not preclude granting the motion as to the remaining causes of action. In M.G., all of the causes of action were based on the same underlying conduct. Indeed, the court found four of the six causes of action to be, in reality, the same two causes of action, based on four different legal theories. The court also found the remaining two causes of action to be ``probably cumulative'' of the other four. (M.G., supra, 89 Cal.App.4th at p. 637.)
Under those circumstances, it can be said that, if one cause of action survives a SLAPP motion, the rest should too, because the causes of action are factually and legally intertwined. And because the causes of action are so closely related, even ``cumulative,'' a probability of prevailing on one claim shows the rest of the claims are not without merit. Here, however, the claims are not factually or legally intertwined. The causes of action we have concluded are not subject to being stricken --- the first through third and fifth --- are based on entirely different conduct than the remaining causes of action.
Moreover, the reason we have concluded the first through third and fifth causes of action should not be stricken is not that ComputerXpress showed a probability of prevailing on those claims, but that the claims are not subject to the SLAPP statute and hence ComputerXpress was not required to show a probability of prevailing. Therefore, the rationale underlying M.G.'s holding --- that a showing of a probability of prevailing as to one claim establishes that the lawsuit is not meritless --- does not apply here.
Accordingly, we consider whether ComputerXpress's remaining claims are subject to the SLAPP statute and, if so, whether ComputerXpress showed a probability of prevailing on those claims.
2. Remaining causes of action
ComputerXpress's fourth cause of action, for trade libel, alleged that beginning in August 1999 defendants published to other persons false and disparaging statements about ComputerXpress and its officers and directors. The statements were published on the Internet and included claims that ComputerXpress's products were inferior, the company was a stock scam and would be out of business within 30 days, the officers and directors were illegally conspiring to manipulate the value of its stock, and one of the officers or directors had filed bankruptcy.
ComputerXpress's sixth cause of action, for interference with prospective economic advantage, alleged that beginning in November 1999 defendants posted thousands of messages on the Internet defaming ComputerXpress and its officers and directors. As a result, potential investors failed to invest in the company.
ComputerXpress's seventh cause of action, for abuse of process, alleged that in March 2000 defendants filed a complaint with the SEC containing ``false allegations and accusations,'' presumably against ComputerXpress. Defendants then misused the legal process by posting the complaint on the Internet, to discourage potential investors. ComputerXpress's eighth cause of action, for conspiracy, alleged that in May 1999 defendants conspired to file the SEC complaint and take other action to damage ComputerXpress, including creating a website and thousands of message board postings.
ComputerXpress's ninth cause of action, for injunctive relief, alleged that beginning in May 1999 defendants conspired to damage the business reputation of ComputerXpress. ComputerXpress sought to enjoin defendants from publishing false and/or disparaging remarks about the company and to require them to withdraw remarks previously published. As our recitation indicates, the conduct on which these causes of action were based fell into two categories: Internet postings and the SEC complaint. We must determine whether defendants met their initial burden of making a prima facie showing that these causes of action were subject to section 425.16.
a. Internet postings
The complaint alleged defendants published their disparaging Internet statements on the message board of a Web site known as ``Raging Bull'' and also on a site they established known as ``Ogravity99.'' Defendants contend these statements were made in a public forum and concerned an issue of public interest, and therefore they came within section 425.16, subdivision (e)(3). ComputerXpress contends the postings simply involved statements of one company regarding the conduct and products of a competitor company, and therefore they did not involve a public forum or issue of public interest.
(1) Public forum
Cases construing the term ``public forum'' as used in section 425.16 have noted that the term ``is traditionally defined as a place that is open to the public where information is freely exchanged.'' (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 475.) ``Under its plain meaning, a public forum is not limited to a physical setting, but also includes other forms of public communication.'' (Id., at p. 476.) Thus, the court in Damon v. Ocean Hills Journalism Club held that a homeowners' association newsletter was a public forum for purposes of section 425.16, because it was ``a vehicle for open discussion of public issues and was widely distributed to all interested parties . . . .'' (Id., at p. 478.) 2
Electronic communication media may also constitute public forums. A federal court recently stated that a widely disseminated television broadcast was ``undoubtedly a public forum'' for purposes of section 425.16. (Metabolife Internat., Inc. v. Wornick (S.D.Cal. 1999) 72 F.Supp.2d 1160, 1165.) Apropos to this case, though not in the context of section 425.16, the court in Hatch v. Superior Court (2000) 80 Cal.App.4th 170 noted that Internet communications have been described as ``classical forum communications.'' (Id., at p. 201, fn. omitted.)
A federal court recently described the Raging Bull Web site as ``a financial website that organizes individual bulletin boards or `chat-rooms,' each one dedicated to a single publicly traded company. The chat-rooms are open and free to anyone who wants to read the messages; membership is also free and entitles the member to post messages. . . . [¶] Unlike many traditional media, there are no controls on the postings. Literally anyone who
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2 The court noted two previous decisions had concluded, or suggested in dictum, that a newspaper was not a public forum. (Zhao v. Wong (1996) 48 Cal.App.4th 1114, overruled on other grounds in Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at p. 1107; Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995) 37 Cal.App.4th 855, 863, fn. 5 [dictum].) It disagreed with these decisions, noting in part that they predated the amendment to section 425.16 stating the statute is to be construed broadly. (Damon v. Ocean Hills Journalism Club, supra, 85 Cal.App.4th at p. 478.)
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has access to the Internet has access to the chat-rooms.'' (Global Telemedia International, Inc. v. Doe (C.D. Cal. 2001) 132 F.Supp.2d 1261, 1264.)
Defendant Tom Mitchell stated in a declaration in support of defendants' section 425.16 motion that the Ogravity99 Web site is accessible free of charge to any member of the public. Mitchell further stated the site provides a forum where members of the public may read the views and information posted, and post on the site their own opinions. Thus, both the Raging Bull and Ogravity99 sites satisfy the criteria for a public forum set forth in Damon v. Ocean Hills Journalism Club, supra, 85 Cal.App.4th 468: ``a place that is open to the public where information is freely exchanged.'' (Id., at p. 475.) In fact, the Web sites in this case present even a stronger case for qualification as public forums than did the newsletter involved in Damon. While newspapers exercise editorial control over access to their pages, that feature is not shared by the Web sites involved here. We therefore conclude defendants made a prima facie showing that the Web sites involved in this case were public forums for purposes of section 425.16.
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