Artful Pleading is Insufficient to Evade Application of California’s anti-SLAPP Statute In Cases Involving “Mixed Claims”

In Nancy Lee Sheley v. Linda Harrop (No. C977747, filed 3/20/17) the California Court of Appeal for the Third Appellate District held allegations arising out of a protected activity, as defined in California’s anti-SLAPP statute, should be struck from a pleading so long as such allegations are not “merely incidental” or “collateral” to a mixed cause of action.

California Code of Civil Procedure section 425.16, California’s “anti-SLAPP statute,” was enacted to protect Californians against meritless lawsuits arising out of the exercise of their right to petition the courts for relief and free speech. SLAPP stands for Strategic Lawsuit Against Public Participation. The anti-SLAPP statute provides for a special motion to strike a complaint where the complaint arises from a “protected activity,” as defined by the statute.

In Sheley the underlying lawsuit involved a dispute between various shareholders of a family run corporation following the death of the corporation’s founder. The decedent’s children (appellants) filed suit, naming the corporation as plaintiff, against the decedent’s second wife (respondent) alleging during the time she was married to the decedent, the two undertook several suspicious financial transactions to the detriment of the corporation. Respondent then filed a cross-complaint asserting causes of action for breach of fiduciary duty, conversion, negligence, and intentional infliction of emotional distress. In support of each cause of action, respondent alleged, among other things, that appellants wrongfully utilized corporate assets to fund the “frivolous lawsuit” that began the subject litigation. Appellants filed an anti-SLAPP motion asserting the act of filing a lawsuit was a protected activity within the meaning of C.C.P. section 425.16. The trial court agreed and granted the anti-SLAPP motion with respect to the Intentional Infliction of Emotional Distress cause of action but denied it as to the remaining three causes of action concluding the cross-complaint alleged “substantial wrongful activity apart for the allegations regarding the filing of this litigation.” That is, those causes of action were based, in part, on allegations of activity unprotected by the anti-SLAPP scheme, as well as protected activity.

On appeal, the Sheley court modified the trial court’s order. The Sheley court granted the appellants’ anti-SLAPP motion to strike specific allegations in each of the remaining causes of action because it concluded some of those allegations arose out of a protected activity and respondent had failed to factually substantiate those allegations. In doing so, the Court relied on the California Supreme Court’s recent decision in Baral v. Schnitt (2016) 1 Cal.5th 376, 396. Baral addressed a split amongst the Courts of Appeal regarding the manner in which “mixed claims” (claims that contain both allegations based on protected activity and allegations based on unprotected activity) should be addressed on an anti-SLAPP motion. Generally, analysis of an anti-SLAPP motion involves a two-step process. First, the defendant must establish the challenged claim arising from activity protected by C.C.P. 425.16. Second, if the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success. The Baral decision clarified the application of this two-step process to “mixed claims.”

The Baral court disapproved of the rule in Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90 which provided “[w]here a cause of action refers to both protected and unprotected activity and a plaintiff can show a probability of prevailing on any part of its claim, the cause of action is not meritless and will be not be subject to the anti-SLAPP procedure.” Instead, the Baral court held “if the allegations in support of a certain cause of action include conduct furthering the defendant’s exercise of the constitutional rights of free speech or petition, the pleaded cause of action arises from protected activity, at least in part,” and is subject to an anti-SLAPP motion. With respect to the burden of the party opposing an anti-SLAPP motion on the second step, the Baral court explained “[i]t is not the general rule that a plaintiff may defeat an anti-SLAPP motion by establishing a probability of prevailing on any part of a pleaded cause of action. Rather, the plaintiff must make the requisite showing as to each challenged claim that is based on allegations of protected activity . . . [W]hen the defendant seeks to strike particular claims supported by allegations of protected activity that appear alongside other claims within a single cause of action, the motion cannot be defeated by showing a likelihood of success on the claims arising from unprotected activity” (Baral, supra, 1 Cal.5th at p.392.)

Under, Baral, then, in mixed claims cases, “the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegation arising from activity protected by the statute, the second step is reached. There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated . . . if not, the claim is struck. Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing.” (Id. at p.396.)

In applying the Baral framework to the case before it, the Sheley court found each of the three remaining causes of action stated claims involving allegations related to the filing and funding of the lawsuit against respondent. First, the court noted the filing of lawsuits is an aspect of the First Amendment right of petition and “litigation finding decisions” further constitute protected petitioning activity within the meaning of the anti-SLAPP statute. Next, the Sheley court rejected the “primary thrust” or “gravamen” of the complaint approach sometimes used by California courts to analyze “mixed claims.” Instead, it looked at whether the allegations of protected activity were merely background and/or existed to provide context or whether they support a specific claim for recovery. The court concluded within each cause of action, respondent alleged conduct by appellants, specifically filing, maintaining and funding a lawsuit, that was based on a protected activity and as plead in the complaint, supported a claim for recovery. Proceeding to the second step of the anti-SLAPP analysis the Baral court found respondent failed to factually substantiate her claim that appellants’ lawsuit was frivolous. Accordingly, it struck allegations regarding the filing of a “frivolous lawsuit” from each remaining cause of action in the cross-complaint and left the remainder of each cause of action undisturbed.

Sheley is a reminder that California’s anti-SLAPP statute is broadly construed to effect its stated purpose of protecting the rights to petition and free speech. Artful pleading cannot insulate a plaintiff from having to demonstrate a probability of prevailing on the merits of claims based, even only in part, on protected activity within the meaning of the statute.

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March 27, 2017