.Michael Marcow First Ammendment right to sell unregistered securities!!!!!
It is in the public interest to discuss the sale of unregistered securities!
Court says NO........
courtinfo.ca.gov
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
ROBERT VAN HOOSE, Plaintiff and Respondent, v.MICHAEL M. MARKOW et al., Defendants and Appellants. B162761 (Los Angeles County Super. Ct. No. LC061600)
APPEAL from an order of the Superior Court of Los Angeles County, Richard B. Wolfe, Judge. Affirmed.
Resch Polster Alpert & Berger, Michael C. Baum, and Andrew V. Jablon, and Ari Markow, for Defendants and Appellants.
David Steiner & Associates, David Paul Steiner and Paul E. Katz, for Plaintiff and Respondent.
I. INTRODUCTION
Defendants, Michael M. Markow, Global Guarantee Corporation (GGC), and Worldwide Corporate Finance (WCF), appeal from an order denying their special motion to strike (Code Civ. Proc., § 425.16) an action filed against them by plaintiff, Robert Van Hoose. We affirm.
II. BACKGROUND
Plaintiff’s complaint alleges as follows: Mr. Markow was the alter ego of the corporate defendants, GGC and WCF; Mr. Markow and WCF were the subjects of a Desist and Refrain Order issued by the California Department of Corporations in May 1998; a co-defendant, Robert Highstreet, who is not a party to this appeal, conspired with defendants “to sell securities through the dissemination of fraudulent and misleading information”; in the summer of 2000, Mr. Highstreet contacted plaintiff by telephone concerning the sale of stock shares in Shopss.Com, Inc.; Mr. Highstreet made negligent or fraudulent oral misrepresentations concerning the investment; Mr. Highstreet then had Mr. Markow telephone plaintiff; and Mr. Markow made further negligent or fraudulent misrepresentations about Shopss.Com, Inc., and, later, about Score One, Inc. Plaintiff was induced to purchase shares in both entities. In doing so, according to the complaint, plaintiff relied on oral misrepresentations made by Mr. Highstreet and Mr. Markow in telephone conversations. Plaintiff alleged: the Shopss.Com, Inc. shares “are now virtually worthless”; the Score One, Inc. shares underwent a reverse split; and the Score One, Inc. stocks “have been devalued by approximately 90%.” Plaintiff asserted causes of action against Mr. Markow, GGC, and WCF for: negligent misrepresentation; fraud; unfair competition in violation of Business and Professions Code section 17200; and unfair business practices in violation of Business and Professions Code sections 17045 and 17048.
Plaintiff’s complaint also alleged that in furtherance of the conspiracy, Mr. Highstreet posted “fraudulent and/or misleading material” on the Internet and made similar misrepresentations in news and press releases. There is no allegation, however, that plaintiff ever read the information on the Internet or in the news and press releases. There is no allegation plaintiff relied on anything he read on the Internet or in news or press releases. To the contrary, plaintiff specifically alleged he relied on oral misrepresentations made by Mr. Highstreet and Mr. Markow in telephone conversations.
In opposition to defendants’ special motion to strike, plaintiff presented the following evidence. Plaintiff met Mr. Highstreet on the Internet. Mr. Highstreet had later telephoned plaintiff. During a telephone conversation, Mr. Highstreet discussed an investment opportunity in Shopss.Com, Inc. Mr. Highstreet had learned of the investment opportunity from Mr. Markow. After speaking with plaintiff, Mr. Highstreet gave plaintiff’s telephone number to Mr. Markow. Mr. Markow telephoned plaintiff. Mr. Markow persuaded plaintiff to invest. Mr. Markow did not tell plaintiff about the Desist and Refrain Order. Mr. Markow had misrepresented the nature of the shares available to both plaintiff and Mr. Highstreet. Plaintiff did not see and did not rely on any press releases prior to his investment. Mr. Highstreet declared, “[T] his entire series of transactions led to the bilking of groups of individual investors.”
III. DISCUSSION
A. Section 425.16
A special motion to strike may be filed in response to “‘a meritless suit filed primarily to chill the defendant’s exercise of First Amendment rights.”’ (Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 783, quoting Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2, disapproved on another point in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68, fn. 5.) Section 425.16, which was enacted in 1992, authorizes a court to summarily dismiss such meritless suits. (Stats. 1992, ch. 726, § 2, pp. 3523-3524.) The purpose of the statute was set forth in section 425.16, subdivision (a) as follows: “The Legislature finds and declares that there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. The Legislature finds and declares that it is in the public interest to encourage continued participation in matters of public significance, and that this participation should not be chilled through abuse of the judicial process. . . .” Under section 425.16, any cause of action against a person “arising from any act . . . in furtherance of the . . . right of petition or free speech . . . ,” in connection with a public issue must be stricken unless the court finds a “probability” that the plaintiff will prevail on whatever claim is involved. (§ 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 58; Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1415.)
When a special motion to strike is made, the trial court must consider two components. First, the court must consider whether the moving defendant has carried its burden of showing that the lawsuit falls within the purview of section 425.16, i.e., arises from protected activity. The moving defendant has the initial burden of establishing a prima facie case that plaintiff’s cause of action arises out of a defendant’s actions in the furtherance of petition or free speech rights. (§ 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67; Mission Oaks Ranch, Ltd. v. County of Santa Barbara (1998) 65 Cal.App.4th 713, 721, overruled on another point in Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123, fn. 10.) The moving defendant has no obligation to demonstrate that the plaintiff’s subjective intent was to chill the exercise of constitutional speech or petition rights. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89; Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 66.) Nor must a moving defendant show that the action had the effect of chilling free speech or petition rights. (Navellier v. Sletten, supra, 29 Cal.4th at p. 88; City of Cotati v. Cashman (2002) 29 Cal.4th 69, 75.)
Second, once the defendant meets this burden, the obligation then shifts to the plaintiff to establish a probability that she or he will prevail on the merits. (§ 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67; Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at p. 1115.) As to the second step of the weighing process, the Supreme Court in Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821, described the trial judge’s duties as follows: “In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant (§ 425.16, subd. (b)(2)); though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant's evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. [Citation].)” (Orig. italics, see Paul for Council v. Hanyecz (2001) 85 Cal.App.4th 1356, 1365, disapproved on another point in Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 68, fn. 5.) We conduct independent review of the trial court’s decision. (Mission Oaks Ranch, Ltd. v. County of Santa Barbara, supra, 65 Cal.App.4th at p. 721; Paul for Council v. Hanyecz, supra, 85 Cal.App.4th at p. 1364.)
Section 425.16, subdivision (e), defines acts in furtherance of free speech or petition rights in connection with a public issue by setting forth four categories of conduct to which the statute applies. Section 425.16, subdivision (e) provides: “As used in this section, ‘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’ 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.” (Italics added.) The Supreme Court has held that a specific public issue showing is required for acts claimed to fall under section 425.16, subdivisions (e)(3) and (e)(4). (Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at pp. 1111-1123; Du Charme v. Intern. Bro. of Elec. Workers (2003) 110 Cal.App.4th 107 [1 Cal.Rptr.3d 501, 505-506].) As the Court of Appeal explained in Consumer Justice Center v. Trimedica International, Inc. (2003) 107 Cal.App.4th 595, 600-601, “When the defendant’s alleged acts fall under the first two prongs of section 425.16, subdivision (e) (speech or petitioning before a legislative, executive, judicial, or other official proceeding, or statements made in connection with an issue under review or consideration by an official body), the defendant is not required to independently demonstrate that the matter is a ‘public issue’ within the statute’s meaning. (Briggs v. Eden Council for Hope & Opportunity[, supra,] 19 Cal.4th [at p.] 1113 [].) If, however, the defendant’s alleged acts fall under the third or fourth prongs of subdivision (e), there is an express ‘issue of public interest’ limitation. (Id. at p. 1117 [].)” If a matter of public interest is not at issue, section 425.16, subdivisions (e)(3) or (e)(4) do not apply. (Commonwealth Energy Corp. v. Investor Data Exchange, Inc. (2003) 110 Cal.App.4th 26 [1Cal.Rptr.3d 390, 393]; Consumer Justice Center v. Trimedica International, Inc., supra, 107 Cal.App.4th at p. 600.)
B. Application to the Present Case
Defendants contend plaintiff’s lawsuit arises out of the exercise of free speech rights. However, the alleged acts underlying the complaint’s causes of action were statements made in direct, private telephone conversations between plaintiff and Mr. Markow. There is no indication Mr. Markow made the statements at issue in furtherance of his free speech rights in connection with any public issue. (§ 425.16, subd. (e)(4).) Mr. Markow sought simply to induce plaintiff to invest in certain entities. This was purely private speech unrelated to a public issue. Therefore, it does not fall within section 425.16. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1001-1002; Averill v. Superior Court (1996) 42 Cal.App.4th 1170, 1174.) Because we so find, we need not consider whether plaintiff established a probability of prevailing on the merits of his claims (Navellier v. Sletten, supra, 29 Cal.4th at p. 88; Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67), or reach any of the related issues raised by defendants on appeal. Plaintiff’s causes of action do not rest on any statements made in “a place open to the public or a public forum” (§ 425.16, subd. (e)(3)) and defendants do not contend otherwise.
Defendants contend the speech in question was in connection with a public issue because Mr. Markow talked to plaintiff about publicly traded corporations. They rely on ComputerXpress, Inc. v. Jackson, supra, 93 Cal.App.4th at page 1007, and Global Telemedia International, Inc. v. Doe 1 (C.D.Cal. 2001) 132 F.Supp.2d 1261, 1265, for the proposition that discussions about a publicly traded company are statements in connection with a public issue. Neither case so held. In both ComputerXpress, Inc. and Global Telemedia, the plaintiffs’ causes of action arose out of messages the defendants had posted on the Internet that were critical of the plaintiff, a publicly traded corporation, and were directed at existing or potential shareholders. In this case, plaintiff’s causes of action arise out of wholly different facts.
Consumer Justice Center v. Trimedica International, Inc., supra, 107 Cal.App.4th at pages 600-602, is similar to the present case. A consumer advocacy group brought an action for false advertising and consumer fraud against defendants who claimed their product, Grobust, was “‘The All-Natural Way To A Fuller, More Beautiful Bust!’” (Id. at p. 598.) The defendants argued, in support of their section 425.16 motion, “‘[H]erbal dietary supplements and other forms of complementary medicine are the subject of public interest.’” (Id. at p. 601.) The Court of Appeal held the defendants’ acts were not in furtherance of their free speech rights in connection with a public issue. The court’s discussion was as follows: “. . . Trimedica’s speech is not about herbal supplements in general. It is commercial speech about the specific properties and efficacy of a particular product, Grobust. If we were to accept Trimedica’s argument that we should examine the nature of the speech in terms of generalities instead of specifics, then nearly any claim could be sufficiently abstracted to fall within the anti-SLAPP statute. [] CJC suggests a hypothetical regarding false statements made in the course of a real property sale. Blackacre sells a house to Whiteacre, and Whiteacre sues, claiming defendant misrepresented the square footage. Whiteacre brings a special motion to strike, claiming his speech involves a matter of public interest, because millions of Americans live in houses and buy and sell houses. CJC correctly suggests that applying the anti-SLAPP statute in such a case would be absurd. [] This case is no more about the general topic of herbal supplements than the hypothetical above is about the general topic of buying and selling houses. The lawsuit in the hypothetical is about the specific topic of whether Blackacre misrepresented the house’s square footage to Whiteacre. The topic of this lawsuit is whether Trimedica misrepresented the specific properties and benefits of Grobust. Neither is a matter of general ‘public interest’ within the meaning of the statute. [] . . . [] The stated intent of the anti-SLAPP statute is ‘to encourage continued participation in matters of public significance.’ (§ 425.16, subd. (a).) No logical interpretation of this statement suggests that ‘matters of public significance’ includes specific advertising statements about a particular commercial product, absent facts which truly make that product a matter of genuine public interest, as was the case in [DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562, alleging a pharmaceutical company artificially inflated the price of a medication used by nearly 2 million Americans for treatment of life-threatening conditions]. . . . Construing the statute in this manner would allow every defendant in every false advertising case (or nearly any case that involves any type of speech) to bring a special motion to strike under the anti-SLAPP statute, even though it is obvious that the case was not filed for the purpose of chilling participation in matters of public interest. . . . We do not believe the Legislature intended the statute to be construed in such a manner . . . .” (Consumer Justice Center v. Trimedica International, Inc., supra, 107 Cal.App.4th at pp. 601-602.)
Weinberg v. Feisel (July 25, 2003, C041087) __ Cal.App.4th __ [2 Cal.Rptr.3d 385], is also similar to the present case. In Weinberg, the complaint alleged the defendant told others that the plaintiff had stolen a valuable item from him. (Id. at p. 387.) Our Third Appellate District colleagues explained, “[D]efendant claims that the cause of action ‘ar[o]se from [his] discussion of criminal activity, which is “an issue of public interest” under the [anti-SLAPP] statute.’” (Id. at p. 387.) The Court of Appeal disagreed, stating, “Defendant has failed to demonstrate that his dispute with plaintiff was anything other than a private dispute between private parties. The fact that defendant allegedly was able to vilify plaintiff in the eyes of at least some people establishes only that he was at least partially successful in his campaign of vilification; it does not establish that he was acting on a matter of public interest. [] Defendant contends that his statements accused plaintiff of criminal activity and that criminal activity is always a matter of public interest. . . . [] . . . [] [However,] [d]efendant did not report his suspicions to law enforcement, and there is no evidence that he intended to pursue civil charges against plaintiff. Rather, it is alleged that defendant began a private campaign . . . to discredit plaintiff in the eyes of a relatively small group of [people]. Since the record does not support a conclusion that plaintiff is a public figure or that he has thrust himself into any public issue, defendant’s accusations against plaintiff related to what in effect was a private matter. [] Simply stated, causes of action arising out of false allegations of criminal conduct, made under circumstances like those alleged in this case, are not subject to the anti-SLAPP statute. Otherwise, wrongful accusations of criminal conduct, which are among the most clear and egregious types of defamatory statements, automatically would be accorded the most stringent protections provided by law, without regard to the circumstances in which they were made—a result that would be inconsistent with the purpose of the anti-SLAPP statute . . . .” (Id. at pp. 393-395.)
In another case, the Court of Appeal held a cause of action based on contractual obligations between a communications company and a consultant was not premised on acts in furtherance of the right of free speech. (Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers (1996) 49 Cal.App.4th 1591, 1601-1602, disapproved on another point in Navelier v. Sletten, supra, 29 Cal.4th at p. 92, fn. 8; Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 68, fn. 5; and Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at p. 1123, fn. 10.) In Ericcson, the Court of Appeal held, “Since the acts of [the defendants], upon which the action here is based, were related to the performance of their contractual obligations, and were not motivated by their desire to promote or advance their right of free speech, the first prong of the test has not been met.” (Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers, supra, 49 Cal.App.4th at p. 1602.)
Nagel v. Twin Laboratories, Inc. (2003) 109 Cal.App.4th 39, 46-48, is also noteworthy. The plaintiff in Nagel sued a dietary supplement manufacturer for false and misleading advertising. At issue were statements on the defendant’s product’s label and on its website listing the product’s ingredients. The Court of Appeal opinion focused on the fact the speech at issue was commercial speech. However, the court also rejected the defendant’s argument its list of ingredients was in connection with a public issue—weight management. (Id. at p. 47.) The Court of Appeal explained, “[T]he list of . . . ingredients on the bottle labels and on [the defendant’s] Web site was not participation in the public dialogue on weight management issues; the labeling on its face was designed to further [the defendant’s] private interest of increasing sales for its products. [Citation.] [Defendant’s] commercial speech was not made ‘in connection with a public issue’ as that phrase is used in section 425.16.” (Id. at pp. 47-48.)
In the present case, defendants’ acts, allegedly misrepresenting the nature of investments in shares of corporate stock, were not in furtherance of their free speech rights in connection with a public issue. This lawsuit is about whether defendants misrepresented, in private communications with plaintiff, the nature of the investments. It concerns a private dispute. Mr. Markow was not engaged in a public interest dialogue involving a publicly held corporation. He simply sought to induce plaintiff to purchase shares in two corporations. This was not a matter of general public interest within the meaning of the section 425.16. Section 425.16 cannot be construed to extend to the present case. (Cf. Weinberg v. Feisel, supra, __ Cal.App.4th at pp. __-__ [2 Cal.Rptr.3d at pp. 393-395]; Nagel v. Twin Laboratories, Inc., supra, 109 Cal.App.4th at pp. 46-48; Consumer Justice Center v. Trimedica International, Inc., supra, 107 Cal.App.4th at pp. 600-602; Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers, supra, 49 Cal.App.4th at pp. 1601-1602.) Accordingly, we affirm the order denying the section 425.16 special motion to strike.
IV. DISPOSITION
The order denying the Code of Civil Procedure section 425.16 special motion to strike is affirmed. Plaintiff, Robert Van Hoose, is to recover his costs on appeal, jointly and severally, from defendants, Michael M. Markow, Global Guarantee Corporation, and Worldwide Corporate Finance.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
TURNER, P.J.
We concur:
ARMSTRONG, J.
MOSK, J. |
