Professional Liability Alert: Two Anti-SLAPP Appeals Address Statute of Limitations and Probable Cause Ramifications From Underlying Malicious Prosecution Actions

GetFugu, Inc. v. Patton Boggs LLP

The Second Appellate District partially reversed a successful special motion to strike under California Code of Civil Procedure section 425.16 (commonly referred to as an “Anti-SLAPP” motion – ‘strategic lawsuit against public participation’). In GetFugu, Inc. v. Patton Boggs LLP(filed 10/3/2013, DCA no. B231794), the underlying civil RICO action, including state law claims for fraud, breach of contract and conspiracy, was filed in federal court against GetFugu and two of its directors/officers by various attorneys and law firms acting on behalf of a class composed of the company’s shareholders.

In March 2010, a member of the Patton Boggs firm, lead counsel for the shareholder plaintiffs in the RICO action, issued a press release indicating that the FBI and the Securities and Exchange Commission were investigating one of GetFugu’s directors for several failed “pump and dump” investments and a related international money laundering scheme, which had also been investigated by Danish authorities. The release concluded by soliciting “investigative leads” to be sent to a email box. On August 26, 2010, the district court dismissed the RICO claim; GetFugu and one of its directors (“Plaintiffs”) filed their defamation and malicious prosecution action against the class representative plaintiffs and their attorneys the same day. On August 31, 2010, the same Patton Boggs attorney posted a Tweet which stated that GetFugu ran an organization that benefitted its directors and officers, not its shareholders, that the RICO suit was not frivolous and that the suit which had just been filed by GetFugu and its director for malicious prosecution and defamation arising from the dismissal of the RICO claims was meritless. On September 20, 2010, Plaintiffs amended their complaint in the new case.

In response to the first amended complaint, the various attorney and law firm defendants (“Attorney Defendants”) filed an Anti-SLAPP motion contending that the statements in question had been made in anticipation of or in connection with issues pending in an official proceeding, and were thus subject to the litigation privilege under California Civil Codesection 47(b), or were otherwise truthful or mere statements of opinion. Plaintiffs argued the statements were made to nonparticipants in the litigation and had no connection to the case, thus defeating the litigation privilege. Plaintiffs also offered declaration testimony to the effect that there had never been an FBI or SEC investigation and other aspects of the press release were false. The trial court granted the Anti-SLAPP motion, finding that the statements in question met the first prong of the Anti-SLAPP statute in that they were made in furtherance of the defendants’ right of petition or free speech under the Constitutions of the United States and the State of California, and occurred in connection with an issue pending in an official proceeding, or were otherwise matters of “public interest.” The court also found that Plaintiffs had failed to demonstrate a probability of prevailing on the merits and had failed to overcome defendants’ assertion of the litigation privilege.

The appellate court reversed the order granting the Anti-SLAPP motion as to Patton Boggs and its partner based on the conflicting evidence regarding the accuracy of the press release. Although finding that the alleged investment scam was, indeed, a matter of “public interest,” the court determined that Plaintiffs had met their burden to show that the defamation claim did have “minimal merit.” The court found that the litigation privilege did not apply given the widespread dissemination of the press release on the internet, citing several prior appellate decisions in which statements to the press were deemed not encompassed by the privilege and rejecting the concept of “litigating in the press.” The court also rejected the Attorney Defendants’ argument that the substance of the press release was true, based on the conflicting evidence submitted by Plaintiffs regarding the absence of an investigation by the FBI or SEC. The court did find that the Tweet was not actionable as it merely expressed the author’s opinions about the defamation claim.

Yee v. Cheung

In an opinion filed one day after the GetFugu decision, the Fourth Appellate District addressed both Anti-SLAPP and statute of limitations issues arising from a malicious prosecution action. In Yee v. Cheung (10/4/2013, DCA no. D060989), the underlying action was an unsuccessful suit for fraud and conversion. Almost two years after the plaintiff prevailed in that case, he filed a malicious prosecution action against the unsuccessful plaintiffs and their attorneys. The defendants filed Anti-SLAPP motions; one attorney defendant also filed a demurrer, asserting that the malicious prosecution action was time-barred by the one-year limitations period of the specific limitations period for actions against attorneys under Code of Civil Procedure section 340.6. The trial court sustained the attorney’s demurrer on the statute of limitations and granted the Anti-SLAPP motion filed by all attorney defendants. Plaintiff appealed, arguing he had sufficiently established a probability of succeeding on his malicious prosecution claim, despite the fact that the trial judge in that action had denied his motion for nonsuit during the trial. He also argued that the one-year limitations period under section 340.6 was only applicable to attorney malpractice actions brought by a client against his or her attorney.

The Court of Appeal rejected plaintiff’s contentions and affirmed the judgment. The malicious prosecution complaint was filed one day short of two years after the underlying jury verdict in plaintiff’s favor. Plaintiff argued that the more general two-year limitations period of Code of Civil Procedure section 335.1, which had been held to apply to malicious prosecution actions generally applied, under Stavropoulos v. Superior Court (2006) 141 Cal.App.4th 190 (“Stavropoulos”). The court discussed at length a more recent decision of the Second Appellate District, Vafi v. McCloskey (2011) 193 Cal.App.4th 174 (“Vafi”), which, although not binding on the Fourth District, offered persuasive reasoning for the applicability of the one-year period under section 340.6. The court found that the statutory language of section 340.6 clearly and unambiguously applied to all actions against attorneys (other than for actual fraud). It also found that section 340.6 as the more specific limitations provision than the more general, two-year provision stated in section 335.1, thus prevailed based on usual rules of construction that a specific statute trumps a more general provision. The appellate court rejected plaintiff’s argument that section 340.6 applies only to claims by clients against their attorneys for malpractice (a word never mentioned in the statute) and adopted the reasoning of the Vafi court. The court also found that the fact that attorney-defendants in malicious prosecution actions would be subject to a shorter limitations period than their clients was not inconsistent or absurd based on its reading of the Legislative history and the intent behind section 340.6. Finally, the court also rejected plaintiff’s contention that an earlier case, Silas v. Arden (2012) 213 Cal.App.4th 75 (“Silas”), which held that retroactive application of the one-year limitations period would be unfair because plaintiff had relied on existing law when he filed his case, should control. Silas had declined to apply section 340.6 to a malicious prosecution claim because the “prevailing view” prior to Vafi had been that the two-year limitations period of section 335.1 applied. (Click here for Haight’s January 31, 2013 Professional Liability Alert on the Silas case.)

Although the appellate court found that plaintiff had forfeited this issue by failing to include the argument in his briefing, the court questioned the holding in Silas because it had determined in the present case that the language of section 340.6 was clear and unambiguous. The court also found that, contrary to the Silas court’s conclusion that Vafi was a change in “settled law,” no court had previously held that the two-year limitations period of section 335.1 applied to malicious prosecution actions against attorneys. The court also dismissed the Silas court’s reliance on Stavropoulos because the defendant in that case was not an attorney, and the decision had not addressed which statute of limitations should apply to malicious prosecution actions against attorneys.

As to the Anti-SLAPP motion against the malicious prosecution claim, the court concluded that the denial of a nonsuit motion at the conclusion of the underlying plaintiff’s case established that the action had been prosecuted with probable cause notwithstanding the later, contrary jury verdict. The trial court had expressly denied the motion for nonsuit on the grounds that the underlying plaintiffs had presented sufficient evidence to permit their claims to go to the jury. The Court of Appeal thus concluded that the underlying record established that the present plaintiff could not show a probability of prevailing on his malicious prosecution claim, and affirmed the trial court’s order granting the Anti-SLAPP motion.

The significance of the Yee case is that it clearly rejects the Silas and Stavropoulos cases, and adopts the reasoning of Vafi to the effect that any malicious prosecution action against an attorney, whether or not filed prior to Vafi, should be subject to the one-year limitations provision of section 340.6, which the opinion confirmed is not limited to actions by clients. The GetFugu decision provides a detailed discussion of the applicability of the litigation privilege in an Anti-SLAPP situation where the challenged statements by counsel are not made in or to litigants or their counsel, or is otherwise only indirectly connected to a pending proceeding (such as a Tweet or internet press release). The decision also potentially confuses the standard of review under an Anti-SLAPP motion as to the possible ‘merit’ of the plaintiff’s case.

These cases indicate that the appellate courts may collectively be taking a harder look at the second prong of the Anti-SLAPP statute (“probability the claim has merit”). In particular, the GetFugu court permitted plaintiffs to defeat the Attorney Defendants’ Anti-SLAPP motion (which was predicated upon the litigation privilege and the ‘truth’ of the challenged statements) because it concluded plaintiffs’ opposing evidence contradicted or denied the factual assertions made by the Attorney Defendants in the subject press release because of its conclusion that the evidence, being in “conflict,” was enough to demonstrate the “minimal merit” of Plaintiffs’ claims. (See Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.) This result implies that, at least in the Second District Court of Appeal, “conflicting” evidence may itself be sufficient to establish “minimal merit” for purposes of an Anti-SLAPP motion. However, if “minimal merit” equates with the existence of a “triable issue of material fact” (the focus of the typical test for summary judgment motions), the Legislature’s inclusion of the phrase “a probability that plaintiff will prevail on the claim” in section 425.16 could be negated (emphasis added). “Probability” suggests something which is more probable than not; “conflicting evidence,” by contrast, suggests a toss-up or 50/50 chance of prevailing, clearly not a “probability.”

The GetFugu court’s focus on plaintiffs’ “conflicting evidence” also seemed inconsistent with the court’s stated reliance on the recent case of Grewal v. Jammu (2012) 191 Cal.App.4th 977, 989, for the proposition that in determining whether a plaintiff has met his or her burden in opposing an Anti-SLAPP motion, a court does not “. . . weigh credibility, nor [does it] evaluate the weight of the evidence. Instead, [the court will] accept as true all evidence favorable to the plaintiff and assess the defendant’s evidence only to determine if it defeats the plaintiff’s submission as a matter of law.” The GetFugu court’s conclusion that plaintiffs’ opposing declarations, which disputed the existence of an FBI criminal investigation of GetFugu’s director as stated in the press release, were sufficient by themselves to establish “minimal merit,” and that the Attorney Defendants could not rely on conflicting evidence to sustain their Anti-SLAPP motion, all of which appears to be in conflict with the prohibition against weighing credibility or the “weight” of the conflicting evidence. It remains to be seen whether or not the California Supreme Court will again find the need to address the appropriate standard for resolving the “second prong” of the Anti-SLAPP statute, assuming the Attorney Defendants in GetFugu do not seek review. The Supreme Court re-visited these issues in 2010 (see Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12).

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October 8, 2013