Kashian v. Harriman

(Appeal from Superior Court of Fresno County, No. 653781-5, Stephen J. Kane, Judge)
COUNSEL:

Kimble, MacMichael & Upton, Jon Wallace Upton, Mary Ann Bluhm and Robert W. Branch for Plaintiff and Appellant.

Law Office of Myron F. Smith and Myron F. Smith for Defendants and Respondents.

OPINION:

Edward M. Kashian brought this action against Richard L. Harriman and Valley Advocates (collectively Harriman) for what he alleged were Harriman’s unfair business practices and defamatory statements about him. Harriman filed a special motion to strike Kashian’s complaint pursuant to section 425.16 of the Code of Civil Procedure, [FN 1] or what is commonly known as the anti-SLAPP statute. (“SLAPP” is an acronym for a “strategic lawsuit against public participation.”) The trial court granted Harriman’s motion as to all causes of action, and Kashian has appealed. We will affirm.

[FN 1] Except as noted, all further statutory citations refer to the Code of Civil Procedure.

FACTUAL AND PROCEDURAL HISTORY

Kashian is a prominent businessman and civic leader in Fresno, who, when this dispute arose, was serving as chairman of the board of trustees of Community Hospitals of Central California (CHCC or Community), a nonprofit, tax-exempt corporation.

Harriman is an attorney in Fresno who has filed numerous public interest lawsuits on behalf of various environmental interests in the San Joaquin Valley, including Valley Advocates. The present controversy arose in an entirely different context, however.

In 1999, some local medical providers and advocacy groups became concerned about CHCC’s plan to build and operate a for-profit heart hospital in north Fresno in partnership with a group of local physicians. Harriman represented one such provider, Kratzer-Graves Pediatrics (KGP). According to news reports at the time, KGP once had been part of Valley PrimeCare Medical Providers, Inc. (Valley PrimeCare), a physicians’ group that filed for bankruptcy protection in 1997, and whose assets subsequently were sold to Community. Harriman had been retained by the bankruptcy trustee to serve as special counsel for the bankruptcy estate.

In May of 2000, again according to news reports, some of the concerned groups wrote to the Division of Charitable Trusts within the Attorney General’s office, seeking an investigation into Community’s activities on several grounds, including their concerns that Community’s involvement in a for-profit hospital (in direct competition with them) would conflict with its status as a tax-exempt corporation, and would interfere with its completion of a regional medical center in downtown Fresno (under a contract with the county to provide indigent medical care). [FN 2] Among the organizations that wrote such letters were Saint Agnes Medical Center (St. Agnes) and the Local Health Care Coalition (LHCC).

[FN 2] Section 12598, subdivision (a) of the Government Code provides in part: “The primary responsibility for supervising charitable trusts in California, for insuring compliance with trusts and articles of incorporation, and for protection of assets held by charitable trusts and public benefit corporations, resides with the Attorney General. The Attorney General has broad powers under common law and California statutory law to carry out these charitable trust enforcement responsibilities….”

Harriman’s Letter

On May 22, 2000, Harriman wrote a similar letter on behalf of KGP and Valley Advocates, joining in the request for a formal investigation of Community’s tax-exempt status. [FN 3] According to the letter, Harriman, in his role as special counsel for the bankruptcy estate of Valley PrimeCare, had for the past two years been conducting his own investigation of CHCC and two related business entities. The information he had uncovered in the course of this investigation, he wrote, had led him to believe “that all three entities have been engaged in unfair business practices since at least 1995, in violation of Business & Professions Code § 17200.”

[FN 3] Enclosed with Harriman’s letter were copies of news articles that had appeared in the Fresno Bee on May 10 and May 16, 2000. The copy of Harriman’s letter attached to Kashian’s complaint did not include the two articles (apparently because Kashian had not received them). Harriman now asks us to take judicial notice of them, as well as several other documents. We take notice of the articles only insofar as they help to put the letter into context, and not for the truth of anything stated in them. (See Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1064, 875 P.2d 73, 31 Cal. Rptr. 2d 358.) We decline to take notice of the other documents because they are not relevant to our discussion. (Id. 7 Cal. 4th at. p. 1063.)

“Specifically, the facts support an intentional course of conduct and practice by CHCC [and the other two entities], and its counsel of interfering with the professional medical practices of private practitioners, including … Valley PrimeCare Medical Providers, Inc. (VPC) and Kratzer-Graves Pediatrics (KGP), toward the end of driving them out of business so that CHCC and its related entities could acquire the business of the competing physicians and their medical groups….”

In his letter, Harriman requested the Attorney General’s office also conduct an investigation into a possible conflict of interest between Kashian’s private business interests and his role as chairman of the CHCC board. It is this part of the letter that would precipitate the present lawsuit. Harriman wrote, in part:

“My clients and others believe that, although Mr. Kashian has been careful to avoid appearing that he has an actual or potential pecuniary interest in the transactions of CHCC, a careful investigation will disclose that there are substantial economic advantages which have accrued to Mr. Kashian and/or business entities with which he has an ownership relationship or was involved in forming and/or engaging [sic] other property transactions which included land originally acquired, developed, owned, and/or sold by Mr. Kashian, either through partnerships, joint ventures, silent partnerships, and/or indirect ownership, such as medical offices or other commercial property ventures.”

At the end of the letter is a notation indicating Harriman sent a copy to “Clients.”
The Fresno Bee Article

On June 1, 2000, the Fresno Bee published a news article reporting on Harriman’s letter, under the headline “Hospital official assailed.” The article focussed primarily on the accusations about Kashian, and quoted parts of the letter, including the excerpt cited above. Kashian was quoted in the article as saying the accusations were “‘completely false.’” Harriman reportedly refused to comment on the letter when contacted by a Bee reporter.

The same article also appeared on the Bee‘s Internet website.
Kashian’s Lawsuit

On June 19, 2000, Kashian, on behalf of himself and members of the public, filed a lawsuit against Harriman and Valley Advocates asserting three causes of action. The first was for unfair and deceptive business practices in violation of section 17200 of the Business and Professions Code. [FN 4] Kashian alleged that Valley Advocates, and some other organizations on whose behalf Harriman had filed environmental lawsuits, were, in fact, one and the same entity, different in name only. Further, he alleged each organization was:

“… a mere shell and sham conceived by Harriman and used by Harriman as his alter ego and a device Harriman uses to create the false impression that a public interest group or an environmental group supports and sponsors the numerous lawsuits filed by Harriman in which entities like Valley Advocates appear as a plaintiff being represented by Harriman, when in fact said lawsuits are filed for Harriman’s own personal and individual business purposes and used by Harriman as a form of false advertising in order to enable him to recruit unsuspecting clients who are asked to join in the purported public interest cause being pursued by Harriman.” [FN 4] Section 17204 of the Business and Professions Code confers standing to bring an action for unfair competition on “any person acting for the interests of itself, its members or the general public.” A “person” may include a corporation or other organization. (Bus. & Prof. Code § 17201.)

Harriman’s purpose in filing these lawsuits, according to Kashian, was not to advance the public interest but “to extort settlements and reap the financial benefits to Harriman from the amounts paid by the various named defendants, many of them public entities funded by taxpayers, which named defendants choose to settle such suits in order to avoid the costs inherent in defending such suits.” On this basis, Kashian sought an order enjoining Harriman from filing or pursuing such lawsuits in the future, and directing him to account for and repay all funds recovered through the ones filed in the past.

Kashian’s second and third causes of action were for defamation, and overlapped one another to some degree. Both alleged Harriman’s letter was false and defamatory inasmuch as it “stated or lead [sic] the reader to believe that Mr. Kashian had used his position on the board of Community Medical Centers to advance his own financial interest improperly and in a dishonest, unethical or illegal manner.” Both also alleged Harriman had been negligent by failing to verify the truth and accuracy of statements in the letter. The second cause of action was directed primarily at Harriman’s delivery of the letter to the Attorney General’s office. The third cause of action was focussed on the letter’s appearance in the newspaper, and alleged Harriman, “deliberately and with actual malice, published these false [and defamatory] statements by sending or causing to be sent a copy of this letter to the Fresno Bee ….”
Harriman’s SLAPP Motion

Harriman filed a special motion to strike Kashian’s complaint on July 19, 2000. He argued that both his environmental litigation activities and his letter to the Attorney General were absolutely privileged (Civ. Code § 47, subd. (b)), and failed in any event to constitute a deceptive business practice or an actionable defamation, respectively. In his accompanying declaration, Harriman specifically denied Kashian’s allegations about the purposes behind his environmental litigation.

As for Kashian’s defamation claims, Harriman acknowledged sending his letter to the Attorney General. And he said he also sent copies to his clients (presumably Valley Advocates and KGP) and to the two other organizations with which he was joining to request an investigation of CHCC (presumably St. Agnes and LHCC). But he declared: “at no time did I provide a copy of the letter, or of its contents, nor did I arrange for the letter to be conveyed, to the Fresno Bee.”

Kashian’s opposition to Harriman’s SLAPP motion dealt principally with the first cause of action for unfair competition. Kashian attached declarations by three individuals who had been involved in one way or another with Harriman’s previous environmental lawsuits, as well as his own (Kashian’s) declaration; evidentiary objections to Harriman’s declaration in support of the motion; and a request the court take judicial notice of certain pleadings and other documents related to the earlier suits. He also challenged Harriman’s claims of privilege.

In reply, Harriman argued the evidence proffered by Kashian did not support his unfair competition claim, and noted in any case that most of it related to events that had occurred outside the four-year statutory limitations period for such claims. He also submitted the declarations of three more individuals involved with the environmental organizations on whose behalf he had filed suit, and another declaration of his own. Kashian again filed written objections to the declarations.

In anticipation of a hearing on Harriman’s SLAPP motion set for August 30, 2000, the court issued a tentative decision granting the motion as to all causes of action, on the ground Kashian had failed to establish he was likely to prevail if his claims went to trial. The hearing followed as scheduled, after which the court took the matter under submission. It issued a written order granting the motion on September 22, 2000.
The Court’s Order

The court concluded Harriman had met his initial burden of showing Kashian’s action was subject to the anti-SLAPP statute, such that the burden then shifted to Kashian to establish a probability he would prevail if the action were to go to trial. The court held Kashian had failed to meet this burden. [FN 5]

[FN 5] The court took judicial notice of the documents submitted by Kashian (consisting mostly of pleadings filed by Harriman in some of the environmental cases), but declined to take notice of the truth of any facts asserted in them. (See Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 8 Cal. Rptr. 2d 552.) The court also noted Kashian’s evidentiary objections, and stated it had considered only admissible evidence. (See Biljac Associates v. First Interstate Bank (1990) 218 Cal. App. 3d 1410, 1419, 267 Cal. Rptr. 819; but see Sambrano v. City of San Diego (2001) 94 Cal.App.4th 225, 234, 114 Cal. Rptr. 2d 151-238 [disagreeing with Biljac].)

As for the first cause of action for unfair competition, the court found the evidence failed to show that Valley Advocates and the other groups on whose behalf Harriman had filed environmental lawsuits were merely sham corporations he used to pursue meritless litigation for his own benefit. The court made no ruling about whether statements made in connection with the lawsuits were privileged.

As for the second cause of action for defamation (as a result of sending the letter to the Attorney General), the court concluded Harriman’s statements were privileged under section 47, subdivision (b) of the Civil Code. The court declined to decide whether the privilege was a qualified one (in which case it could be defeated by a showing the statements were made with actual malice), or it was absolute (in which case it applies regardless of malice). This was so, the court explained, because the evidence failed to show Harriman had acted with malice in any event. [FN 6]

[FN 6] Apart from the question of privilege, the court concluded Kashian was a private figure for First Amendment purposes. Thus, but for the privilege, Kashian could have established his claim for defamation without having to prove Harriman acted with actual malice. (See Mosesian v. McClatchy Newspapers (1991) 233 Cal. App. 3d 1685, 1697, 285 Cal. Rptr. 430.)

And, as for the third cause of action for defamation (as a result of the Fresno Bee article), the court found the evidence failed to show it was Harriman who sent the letter to the newspaper. It also ruled Harriman’s delivery of the letter to third persons (his clients, again presumably St. Agnes and LHCC) was privileged under Civil Code section 47, subdivision (c).

On November 9, 2000, Kashian filed a timely notice of appeal from the court’s order granting Harriman’s SLAPP motion. (See § 425.16, subd. (j), 904.1, subd. (a)(13); Kyle v. Carmon (1999) 71 Cal.App.4th 901, 906, 84 Cal. Rptr. 2d 303-907 [order granting or denying a special motion to strike under section 425.16 is appealable order].)

On November 30, the court granted Harriman’s motion for costs and attorney fees in the amount of $7,296.15. Kashian appealed from this order, and Harriman cross-appealed. (See § 904.1, subd. (a)(2); Norman I. Krug Real Estate Investments, Inc. v. Praszker (1990) 220 Cal. App. 3d 35, 46, 269 Cal. Rptr. 228 [postjudgment order awarding costs and attorney fees is separately appealable].) We subsequently dismissed Harriman’s cross-appeal.

DISCUSSION

I. The Anti- SLAPP Statute

The Legislature enacted section 425.16 in 1992 to provide a procedure by which a trial court can “dismiss at an early stage nonmeritorious litigation meant to chill the valid exercise of the constitutional rights of freedom of speech and petition in connection with a public issue.” (Sipple v. Foundation for Nat. Progress (1999) 71 Cal.App.4th 226, 235, 83 Cal. Rptr. 2d 677.) The statute, as subsequently amended, provides in part:

“(a) 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. To this end, this section shall be construed broadly.”(b)(1) A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue 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.

“(2) In making its determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.

“. . .

“(e) 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.)

Thus, section 425.16 requires the trial court to undertake a two-step process in determining whether to grant a SLAPP motion. “First, the court decides whether the defendant has made a threshold prima facie showing that the defendant’s acts, of which the plaintiff complains, were ones taken in furtherance of the defendant’s constitutional rights of petition or free speech in connection with a public issue.” (Paul for Council v. Hanyecz (2001) 85 Cal.App.4th 1356, 1364, 102 Cal. Rptr. 2d 864 (Paul for Council).) If the court finds the defendant has made the requisite showing, the burden then shifts to the plaintiff to establish a “probability” of prevailing on the claim by making a prima facie showing of facts that would, if proved, support a judgment in the plaintiff’s favor. (Kyle v. Carmon, supra, 71 Cal.App.4th at p. 907.) The court also considers the defendant’s opposing evidence, but only to determine if it defeats the plaintiff’s showing as a matter of law. (Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995) 37 Cal.App.4th 855, 867, 44 Cal. Rptr. 2d 46.) That is, the court does not weigh the evidence or make credibility determinations. (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 654, 49 Cal. Rptr. 2d 620; Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 827, 33 Cal. Rptr. 2d 446-828.) Finally, in assessing the probability the plaintiff will prevail, the court considers only the evidence that would be admissible at trial. (Church of Scientology v. Wollersheim 42 Cal.App.4th at pp. 654-655; Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1497, 45 Cal. Rptr. 2d 624.)

Whether section 425.16 applies, and whether the plaintiff has shown a probability of prevailing, are both questions we review independently on appeal. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999, 113 Cal. Rptr. 2d 625.)

Kashian, in his opening brief, concedes the first part of the two-step process by acknowledging the anti- SLAPP statute applies to all three causes of action stated in his complaint. However, on January 30, 2002, after briefing was complete, an opinion was filed in Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 116 Cal. Rptr. 2d 187 (Kajima), in which the appellate court affirmed the trial court’s order denying Kajima’s SLAPP motion. The court concluded section 425.16 did not apply to the causes of action asserted in the city’s cross-complaint, including several for unfair business practices. Kashian called Kajima to our attention and requested the opportunity to submit supplemental briefing on the question of whether the same must be said about his cause of action for unfair competition. We granted the request. After reviewing the case and the parties’ briefs, we conclude the statute applies.

Kajima sued the city for breach of contract and other related causes of action, claiming it had not been paid for work performed on a construction project. The city cross-complained against Kajima for breach of contract and of the implied covenant of good faith and fair dealing in connection with Kajima’s bidding and performance on the project. The city later filed an amended cross-complaint alleging 19 additional causes of action, including three for unfair business practices. Kajima moved to strike the amended cross-complaint under section 425.16, contending it was filed in retaliation for Kajima’s exercise of its First Amendment right to petition for redress of grievances (i.e., for having filed the complaint against the city). The trial court initially granted the motion, but later reinstated the amended cross-complaint (except for one cause of action), and Kajima appealed. (Kajima, supra, 95 Cal.App.4th at pp. 924-926.)

As the appellate court noted, the moving defendant in a SLAPP action has the initial burden of showing the plaintiff’s challenged cause of action arose from an act by the defendant in furtherance of its right of petition or free speech. (Kajima, supra, 95 Cal.App.4th at p. 928.) Notwithstanding Kajima’s claim of retaliation, the court found the city’s amended cross-complaint alleged causes of action “arising from Kajima’s bidding and contracting practices [that had occurred prior to its lawsuit], not from acts in furtherance of its rights of petition or free speech.” (Id. 95 Cal.App.4th at p. 929.) The city’s claims for unfair competition, for example, alleged Kajima had engaged in acts that included “‘intentional underbidding, bid-shopping, … [and] submission of false and inflated construction claims and change orders …,’” none of which implicated the company’s First Amendment rights. (Id. 95 Cal.App.4th at p. 930.) [FN 7]

[FN 7] Kashian makes the following argument in reliance on Kajima.”In Kajima, the court held that the allegations of the complaint were not in furtherance of the cross-defendant’s [Kajima's] right to petition the court or its free speech rights, but instead described the methods cross-defendant used to pursue its unfair business pattern and practice. Following the analysis of Kajima in the instant case, the allegations of the complaint arise from Harriman’s unlawful and unethical practices and conduct in his practice of law, not from acts in furtherance or Harriman’s right of petition or free speech. Filing sham lawsuits and cashing settlement checks without the authority of a client are not valid exercises of the right of petition or free speech — such allegations describe conduct that can subject an attorney to serious discipline or disbarment[.]”

This argument begins by misstating what happened in Kajima. In fact, as we have just explained, the court actually held the causes of action in the city’s cross-complaint did not arise from acts taken by Kajima in furtherance of its First Amendment rights. The court did not hold, contrary to what the rest of the argument would suggest, that (allegedly) unethical or illegal acts are not a “valid” exercise of these rights for purposes of applying the anti-SLAPP statute. We discuss this argument below in connection with Kashian’s citation to Paul for Council v. Hanyecz, supra, 85 Cal.App.4th 1356.

Kashian makes a similar sort of argument with respect to the litigation privilege, i.e., that it does not protect allegedly illegal or unethical conduct. We likewise consider this argument below in connection with Kashian’s citation to Carney v. Rotkin, Schmerin & McIntyre (1988) 206 Cal. App. 3d 1513, 254 Cal. Rptr. 478.

In the present case, by contrast, Kashian’s cause of action for unfair competition arose directly from Harriman’s acts or statements, or alleged acts or statements, made in connection with environmental litigation he was bringing on behalf of Valley Advocates and other organizations. Filing a lawsuit is an exercise of one’s constitutional right of petition, and statements made in connection with or in preparation of litigation are subject to section 425.16. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115, 969 P.2d 564, 81 Cal. Rptr. 2d 471.)

For example, Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 43 Cal. Rptr. 2d 350 involved a suit brought by the City of Barstow against Glen Ludwig, a developer, for unfair competition and other similar claims. The suit alleged that Ludwig, who hoped to build a shopping mall in competition with one planned within the city limits, had induced others to file meritless objections to the Barstow project, both judicial and administrative, in an effort to delay or defeat it. The trial court denied Ludwig’s SLAPP motion, and he petitioned the appellate court for a writ of mandate directing the lower court to grant it. The court issued the writ. It concluded Ludwig’s actions were communicative conduct protected under section 425.16 because they were taken “‘in connection with an issue under consideration or review by a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law….’” (Id. at p. 17, quoting 425.16, subd. (e)(2).)

Several other decisions likewise have adopted a fairly expansive view of what constitute litigation-related activities within the scope of section 425.16. The defendant in Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 54 Cal. Rptr. 2d 830, an action for defamation, was a law firm conducting an investigation in anticipation of filing a complaint with the Attorney General. Church of Scientology v. Wollersheim, supra, 42 Cal.App.4th 628 involved an action to set aside a court judgment the defendant had received in a prior lawsuit. And Wilcox v. Superior Court, supra, 27 Cal.App.4th 809, a suit for defamation and restraint of trade, concerned statements made by the defendant in exhorting others to contribute to the cost of proposed litigation. In each case, the court held the statute applied. Similarly, we conclude Harriman’s activities in connection with his previous environmental lawsuits are entitled to the protection of section 425.16.

The bulk of Kashian’s supplemental brief concerns an issue having little to do withKajima. [FN 8] He contends section 425.16 does not apply to his complaint because the statute “does not protect illegal activity.” He relies on Paul for Council, supra, 85 Cal.App.4th 1356. Paul for Council was a suit brought by Paul Christiansen following his defeat in a campaign for reelection to the city council. He alleged generally that the defendants had improperly influenced the election by making illegal campaign contributions to one of his opponents. The defendants, while acknowledging having laundered campaign money, moved under the anti-SLAPP statute to dismiss the suit on the basis their actions were constitutionally protected nonetheless. The court ruled the statute applied, such that the burden then shifted to Christiansen to establish a probability he would prevail at trial. He failed to make such a showing. [FN 9] Therefore, the court granted the defendants’ motion and dismissed the suit. Christiansen appealed.

[FN 8] The issue is therefore beyond the scope of our order granting permission to file supplemental briefing, as well as one that could have been raised earlier. We consider it only because it presents a question of law that does not require a lengthy discussion.[FN 9] Although it is not altogether clear from the opinion, it appears Christiansen may have stood on his claim the statute did not apply, and so made no attempt to show he was likely to prevail.