3. Admissible evidence presented by plaintiffs
Plaintiffs filed three declarations in opposition to the special motion to strike. The trial court conscientiously ruled on several hundred evidentiary objections to the declarations filed by plaintiffs. No abuse of discretion occurred in connection with any of the evidentiary rulings. The trial court excluded much of the declarations submitted by plaintiffs in the opposition to the special motion to strike. But the following under oath matters were before the trial court when the special motion to strike was granted. None of the declarations were contradicted by defendants.
The identities of the parties and bond ownership was supported by the declaration of one of plaintiffs' attorneys, James A. Hennefer. Mr. Hennefer further established the depressed state of the economy in late 2001. On November 19, 2001, Mr. Brill and Mr. Tell spoke. Mr. Brill described the November 19, 2001 conversation with Mr. Tell. Mr. Brill describes the conversation thusly: "[Mr.] Tell ... told me that he would like to do a restructuring of the Brill Media Companies to include other radio properties owned by me personally, in which restructuring TCW Group Entities would control the properties owned both by the Brill Media Companies and me personally, and in which other [b]ondholders would be squeezed out. [Mr.] Tell stated that he had missed the buying opportunities of the early 1990's, when a lack of financial markets funding drove the prices of radio properties to half their prior worth, and that [Mr.] Tell surely was not going to miss the opportunity to gain the huge profits from equity participation in such properties this time around." At the meeting, Mr. Brill was warned that his personal tax problems were "too deep" and he had to accept the proposals of the TCW Group, Inc.
According to Mr. Stover, the NextMedia Group chief financial officer, his company was attempting to purchase the Brill Media LLC Colorado and Wyoming radio stations. NextMedia Group was prepared to fund the purchase of the Brill Media LLC radio stations on Friday, January 11, 2002. According to Mr. Stover, "NextMedia was aware of the potential fraudulent conveyance issues that could arise[ ] out of the transaction, and it felt the purchase price represented a full and fair value and that the consideration was being allocated in a manner that fairly valued the assets to be acquired." On the afternoon of January 9, 2002, Ms. Ward, the AIG SunAmerica, Inc. vice president, told Mr. Dinetz, the NextMedia Group chief executive officer, that the bondholders "would look seriously at unwinding" the proposed transaction. Mr. Stover explained: "At the January 9, 2002 NextMedia [b]oard meeting, the [b]oard decided not to proceed with the Brill Media acquisition. The [b]oard came to the conclusion that it was uncomfortable with the potential threat of a fraudulent conveyance issue being raised and the potential that the bondholders would try to challenge the sale and the FCC approval process. The [b]oard decided that it wanted to do the transaction, but under the circumstances, it was not willing to proceed."
III. THE CAUSES OF ACTION ARISE IN THE COMMERCIAL CONTEXT SPECIFIED IN CODE
OF CIVIL PROCEDURE SECTION 425.17, SUBDIVISION (C)
Code of Civil Procedure section 425.17, subdivision (c) states in part: "Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services, including, but not limited to, insurance, securities, or financial instruments, arising from any statement or conduct by that person if both of the following conditions exist: [¶] (1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services, or the statement or conduct was made in the course of delivering the person's goods or services. [¶] (2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer ... notwithstanding that the conduct or statement concerns an important public issue."
Defendants assert their conduct, the filing of the involuntary bankruptcy petition, is protected by the right of petition. Normally, filing a lawsuit, such as an involuntary bankruptcy petition, is conduct arising from the exercise of the right of petition. (Zamos v. Stroud, supra, 32 Cal.4th at pp. 964-965, 12 Cal.Rptr.3d 54, 87 P.3d 802; Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at pp. 734-735, 3 Cal.Rptr.3d 636, 74 P.3d 737.) But as previously noted, Code of Civil Procedure section 425.17, subdivision (c) states that the special motion to strike procedure does not apply to a cause of action brought against a person, such as plaintiffs, "arising from any statement or conduct " if the enumerated elements are present. Filing an involuntary bankruptcy petition is "conduct" within the meaning of Code of Civil Procedure section 425.17, subdivision (c). If the other elements enumerated in Code of Civil Procedure section 425.17, subdivision (c) are present, then the filing of a lawsuit is not protected petitioning activity for purposes of Code of Civil Procedure section 425.16, subdivision (b)(1). We now turn to the other elements of Code of Civil Procedure section 425.17, subdivision (c).
First, defendants are "primarily engaged in the business of selling ... goods or services, including, but not limited to ... securities, or financial instruments" within the meaning of Code of Civil Procedure section 425.17, subdivision (c). Defendants are large financial management and services conglomerates involved in the purchase and sale of financial instruments and investing in companies. Plaintiffs' causes of action arise from claims bought by entities described in Code of Civil Procedure section 425.17, subdivision (c)(1).
Second, the challenged "statement or conduct was made in the course of delivering the person's goods or services" within the meaning of Code of Civil Procedure section 425.17, subdivision (c)(1). The first amended complaint alleges and the evidence to which evidentiary objections were overruled demonstrates: defendants breached the September 19 and October 4, 2001, confidentiality agreements; the purpose of the violations of the confidentiality agreements was to advance defendants' financial self interest by forcing the Brill Media entities into default and liquidation; defendants attempted to control any sale of the Brill Media entities; the chief financial officer of NextMedia Group as well as its president were threatened with litigation if the proposed purchase of the Colorado and Wyoming assets of the Brill Media entities was consummated; due to the threats of a fraudulent conveyance lawsuit and action before the Federal Communications Commission, the NextMedia Group board of directors decided not to purchase the Colorado and Wyoming properties thereby forcing a default which was in defendants' financial interest; defendants acted so as to deny the Brill Media entities the benefits of the indenture agreement; and this conduct prevented the Brill Media entities from avoiding default and liquidation.
Further, on September 19, 2001, Mr. Tell indicated he wanted to restructure the Brill Media entities. Mr. Tell spoke directly with Mr. Brill and made several proposals for a restructuring of the Brill Media entities. Under Mr. Tell's proposal, the TCW Group, Inc. related companies would control the assets of the Brill Media entities. Mr. Tell explained that Mr. Brill's tax problems were such that the TCW Group, Inc. entities' offer had to be accepted. These statements were made and conduct engaged in as part of an effort to secure control of the Brill Media entities. Securing control of the Brill Media entities was the type of business transaction engaged in by defendants.
Third, the statements at issue made to potential buyers of the Brill Media radio stations were presented to an "intended audience [who] is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer" within the meaning of Code of Civil Procedure section 425.17, subdivision (c)(2). The threatening statements made to the NextMedia Group president by Mr. Tell were related to a potential buyer of the Colorado and Wyoming assets of the Brill Media entities. The amended complaint alleged the intended audience consisted of potential buyers of the Brill Media entities. It is probable that misrepresentations made within the radio and newspaper industry and the broader financial community, such as the inability of the Brill Media entities to comply with their obligations under the trust indenture agreement or the competence and integrity of their management as alleged in the amended complaint, would be repeated to other potential customers.
Code of Civil Procedure section 425.17, subdivision (c)(2) does not require the potential purchaser be a "buyer or customer" of the defendant. There are no legislative committee reports which suggest that the potential purchaser be a "buyer or customer" of the defendant. Commercial speech directed at any "buyer or customer" including that of a plaintiff is within the scope of Code of Civil Procedure section 425.17, subdivision (c)(2). The language of Code of Civil Procedure section 425.17, subdivision (c)(2) does not require that the customer or buyer be one entering into a commercial relationship with the defendant.
One additional point warrants emphasis. Code of Civil Procedure section 425.17 was intended to apply to commercial disputes such as the one before us. The Senate Judiciary Committee report prepared for then Senate Bill No. 515 states, "[Senate Bill No.] 515 would make SLAPP motion[s] inapplicable to cases against a business where [the] cause of action arises from the business's commercial speech or activity." (Sen. Com. on Judiciary, Rep. on Sen. Bill No. 515 (2003-2004 Reg. Sess.) as amended May 1, 2003, p. 8; original underscore.) This case is exactly that -- plaintiffs' claims arise out of commercial speech and conduct. Our conclusion is entirely consistent with the legislative vision when it sought to restrict the availability of the special motion to strike remedy by the adoption of Code of Civil Procedure section 425.17, subdivision (c).
Therefore, defendants, by reference to the pleadings and the admissible evidence, failed to sustain their burden of proving that their challenged actions "aris[e] from any act ... in furtherance of [their] right of petition or free speech under the United States or California Constitution in connection with a public issue" as that term is used in Code of Civil Procedure section 425.16, subdivision (b)(1). This is because the special motion to strike procedure in Code of Civil Procedure section 425.16, subdivision (b)(1) does not apply to defendants' alleged conduct. Why? Because Code of Civil Procedure section 425.17, subdivision (c) explicitly excludes defendants' alleged conduct from the scope of the special motion to strike procedure. For these reasons, we, with respect, disagree with the trial court's ruling to the contrary.
IV. [FN**]
V. DISPOSITION
The order granting the special motion to strike is reversed. Plaintiffs are to recover their costs incurred jointly and severally from defendants.
I concur: ARMSTRONG, J.
MOSK, J., Dissenting.
I respectfully dissent.
Code of Civil Procedure [FN 1] section 425.16, which provides for a special motion to strike or "SLAPP" motion, governs a "cause of action ... arising from any act of that person in furtherance of the person's right of petition or free speech...." "[T]he statutory phrase 'cause of action ... arising from' means simply that the defendant's act underlying the plaintiff's cause of action must itself have been an act in furtherance of the right of petition or free speech." (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78, 124 Cal.Rptr.2d 519, 52 P.3d 695.) The acts complained of here are rights of petition or speech specified by the statute. The requirements of section 425 . 17 that would exempt the action from the provisions of section 425.16 have not been met.
1. The Allegations of the Complaint Arise From Acts in Furtherance of the Right of Petition.
Each of plaintiffs' causes of action includes the general allegation that defendants breached the indenture by "mov[ing] to liquidate the Brill Media Companies' properties prior to ... satisfying the requirements of the Indenture Contract." In addition, plaintiffs' first cause of action for breach of the indenture specifically alleges that defendants "breached the Indenture Contract by taking steps to liquidate the Brill Media Companies' properties prior to satisfying the requirements of the Indenture Contract" and by "forcing the Brill Media Companies to liquidate their assets" in violation of certain provisions of the indenture.
Plaintiffs' allege in their fourth cause of action for intentional interference with the indenture that defendants "caused the Bondholders they were representing to breach the Indenture Contract" by "caus[ing] the Bondholdholders ... to take steps to force liquidation of the Brill Media Properties in breach of the requirements of the Indenture Contract." In their sixth cause of action for intentional interference with economic relations, plaintiffs allege that defendants intentionally interfered with plaintiffs' economic relations by proceeding with a creditors remedy "for the liquidation of Brill Media Companies without first giving the Trustee written notice of a continuing Event of Default under the Indenture Contract" and by "taking unlawful actions to force the Brill Media Companies to liquidate all of their properties." All of these alleged misdeeds concern defendants' filing of a petition for involuntary bankruptcy liquidation proceedings and, as related to litigation or judicial proceedings, are protected under section 425.16.
Plaintiffs refer not only to acts intended to cause bond defaults but also to acts intended to force a liquidation of plaintiffs' properties. In their original complaint, plaintiffs alleged that defendants' wrongful conduct included "filing an Involuntary Petition under Chapter 7 of the Bankruptcy Code" and other acts in "preparation of [an] Involuntary Petition for Chapter 7 bankruptcy proceedings." Although plaintiffs amended the complaint to allege "forced liquidation" instead of the filing of a Chapter 7 bankruptcy petition, they do not contend that this change has any significance with respect to defendants' special motion to strike. Moreover, generally, a forced liquidation refers to a bankruptcy proceeding. "Chapter 7 of the Bankruptcy Code is entitled 'Liquidation' and the title fully expresses the purpose of the chapter's provisions. Chapter 7 provides the mechanism for taking control of the property of the debtor, selling it, and distributing the proceeds to creditors in accordance with the distribution scheme of the Code." (1 Collier on Bankruptcy (15th ed. Rev.2005) ¶ 1.03[2][a] at p. 1-21, 124 Cal.Rptr.2d 519, 52 P.3d 695.) Chapter 11 of the Bankruptcy Code is a "formal recognition of the propriety of a plan to liquidate assets of the debtor in a more orderly fashion than generally occurs in a Chapter 7 liquidation." (5 Cowan, Bankruptcy Law and Practice (7th ed.1998) § 20.1, p. 121; see In re Made in Detroit, Inc., Debtor (2005) 414 F.3d 576, 582 ["in bankruptcy proceedings in which the debtor is forced to liquidate ..."].)
2. The Allegations of the Complaint Arise From Acts in Furtherance of the Right of Speech.
Section 425.16 provides protection for prelitigation statements and statements made in connection with an issue pending before a legislative, executive or judicial body. Subdivision (e)(1) of the statute covers "any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law." Subdivision (e)(2) covers "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."
The California Supreme Court has held that " 'communications ... within the protection of the litigation privilege of Civil Code section 47, subdivision (b) [[FN 2]] [citation], ... are equally entitled to the benefits of section 425.16.' [Citations.]" (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115, 81 Cal.Rptr.2d 471, 969 P.2d 564.) "Under the 'usual formulation,' the litigation 'privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citations.]' This includes prelitigation communications involving the subject matter of the ultimate litigation." (Rubin v. Green (1993) 4 Cal.4th 1187, 1191, 17 Cal.Rptr.2d 828, 847 P.2d 1044; Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1058, 18 Cal.Rptr.3d 882 (Sylmar ).) The privilege includes statements concerning litigation threatened in the event a demand is not met. (Aronson v. Kinsella (1997) 58 Cal.App.4th 254, 260-261, 68 Cal.Rptr.2d 305.) The privilege also encompasses statements made to third parties who have a substantial interest in the outcome of the litigation. (Costa v. Superior Court (1984) 157 Cal.App.3d 673, 678, 204 Cal.Rptr. 1.) Thus, "statements made in connection with or in preparation of litigation are subject to section 425.16." (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908, 120 Cal.Rptr.2d 576.)
Plaintiffs' second, third, fifth, seventh, eighth, ninth and tenth causes of action are all based on statements defendants allegedly made concerning defendants' intent to institute bankruptcy proceedings, to pursue fraudulent transfer remedies, or to oppose administrative action by the Federal Communications Commission in connection with the proposed transfer of licenses. In their second and tenth causes of action, plaintiffs allege that defendants breached confidentiality agreements by "threatening the Potential Buyers [of the assets of the Brill Media Companies] with actions at the FCC if they purchased any of the Brill Media Company radio stations," and "telling the Potential Buyers, falsely, that the Brill Media Companies would be liquidated...." Plaintiffs allege in their third cause of action that defendants breached implied covenants in the indenture by "making statements that the Brill media [sic ] Companies would be liquidated when liquidation was not imminent or necessary." Plaintiffs in their fifth, seventh, and ninth causes of action allege that defendants intentionally or negligently interfered with a contract to sell certain assets to NextMedia by "a) a telephone call from defendant Tell to Sean Stover, Chief Financial Officer of NextMedia, in which defendant Tell advised Mr. Stover, before the January 16, 2002 expiration of the grace period for payment of the December 17, 2001 interest payment, that there was going to be a default by the Brill Media Companies, that there would be a sale of the Brill Media assets, and that he was setting up a due diligence headquarters through TCW for such sale; b) a telephone call from defendant Ward to Steve Dinetz, the President and Chief Executive Officer of NextMedia at his home in Lake Tahoe in early January 2002, in which defendant Ward advised Mr. Dinetz against closing the purchase because the Bondholders would look seriously at unwinding the transaction; and c) a telephone call from defendant Ward to Mr. Stover several days later, in early January 2002, in which defendant Ward told Mr. Stover that the Bondholders would probably oppose any deal between NextMedia and the Brill Media Companies and that the Bondholders thought that Brill media should go through a liquidation of its assets." Plaintiffs' eighth cause of action includes the allegation that defendants "falsely told the Potential Buyers that the Brill Media Companies would be liquidated with the cooperation of Alan Brill."
Each of these claims is based upon prelitigation statements protected under section 425.16, subdivisions (e)(1) or (e)(2). The statements were made concerning defendants' intent to pursue a lawsuit or other administrative action concerning plaintiffs' proposed sale of certain radio stations and plaintiffs' inability to make a pending interest payment on bonds; they were made to achieve the object of those actions -- to preclude the proposed sale and to enforce rights under the bonds; and they were made to third parties with a substantial interest in the outcome of those actions. (Sylmar, supra, 122 Cal.App.4th at p. 1058, 18 Cal.Rptr.3d 882; Costa v. Superior Court (1989) 157 Cal.App.3d 673, 678, 204 Cal.Rptr. 1.) The statements are therefore covered by section 425.16. (Kashian v. Harriman, supra, 98 Cal.App.4th at p. 908, 120 Cal.Rptr.2d 576.)
3. Additional Allegations Do Not Bar Application of the Statute.
The amended complaint also contains allegations of other acts by defendants that are not covered under the special motion to strike statute -- for example, that defendants breached the indenture "by refusing to allow the Brill Companies to exercise their rights under the Indenture Contract" to sell certain of their radio stations to NextMedia and to use the proceeds from that sale to make interest payments under the loan. Nevertheless, " '[p]ublished appellate court cases have concluded that where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 426.16 unless the protected conduct is 'merely incidental' to the unprotected conduct.' (Mann v. Quality Old Time Service, Inc.(2004) 120 Cal.App.4th 90, 103, 15 Cal.Rptr.3d 215.)" (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1245, 29 Cal.Rptr.3d 521; see, e.g., Scott v. Metabolife Internat., Inc. (2004) 115 Cal.App.4th 404, 419, 9 Cal.Rptr.3d 242; Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188, 6 Cal.Rptr.3d 494.) This issue is currently under review by the California Supreme Court. (Kids Against Pollution v. California Dental Association, review granted, Sept. 17, 2003, S117156.) Pending a determination of this issue by the Supreme Court, I would follow existing case law holding that "a plaintiff cannot frustrate the purposes of the SLAPP statute through a pleading tactic of combining allegations of protected and nonprotected activity under the label of 'one cause of action.' " (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 308, 106 Cal.Rptr.2d 906.)
4. Section 425.17 Does Not Apply.
Section 425.17, which excludes the application of section 425.16 in certain cases, does not apply to this case. Section 425.17 provides in pertinent part: "Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services ... if both of the following conditions exist: [¶] (1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services, that is made for the purpose of obtaining ... sales or ... was made in the course of delivering the person's goods or services. [¶] (2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer ...." (§ 425.17, subd. (c).)
Section 425.17 requires that defendants' statements be representations about defendants' business or a competitor's business. The legislative history confirms that section 425.17, subdivision (c) was intended to apply to statements of fact made by businesses about "their goods, services or business operations, or those of a competitor." (3d reading analysis of Sen. Bill No. 515 (2003 Reg. Sess.), May 6, 2003, p. 1.) The purpose of the statute appears to have been to immunize comparative advertising by retailers from the special motion to strike statute. One legislative analysis cites the following language in Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 960-961, 119 Cal.Rptr.2d 296, 45 P.3d 243, as the model for the type of speech covered by section 425.17: "In typical commercial speech cases, the speaker is likely to be someone engaged in commerce -- that is, generally the production, distribution, or sale of goods or services -- or someone acting on behalf of a person so engaged, and the intended audience is likely to be actual or potential buyers or customers of the speaker's goods or services, or persons acting for actual or potential buyers or customers, or persons (such as reporters or reviewers) likely to repeat the message to or otherwise influence actual or potential buyers or customers. [¶] Finally, the factual content of the message should be commercial in character. In the context of regulation of false or misleading advertising, this typically means that the speech consists of representations of fact about the business operations, products, or services of the speaker (or the individual or company that the speaker represents), made for the purpose of promoting sales of, or other commercial transactions in, the speaker's products or services." (Assem. Comm. on Judiciary, Com. on Sen. Bill No. 515 (2003 Reg. Sess.) June 27, 2003, p. 10 (italics added); see Baker, Review of Selected 2003 California Legislation Civil: Chapter 338: "Another New Law, Another Slapp in the Face of California Business" (2004) 35 McGeorge L.Rev. 409, 422.)
Defendants allegedly made certain statements about plaintiffs' business. Defendants and plaintiffs are not competitors. Defendants are in the business of providing investment and financial services. Plaintiffs owned and operated radio stations and newspapers. Defendants' alleged statements were not made "in the course of delivering [their] goods or services." The alleged statements were made to NextMedia, neither a current consumer of defendants' services nor a potential future consumer of those services. And the alleged statements dealt with plaintiffs' efforts to sell capital assets -- not goods or services over which plaintiffs and defendants compete.
The "intended audience" of defendants' alleged statements were not persons covered under section 425.17, subdivision (c)(2). NextMedia, the intended audience of defendants' alleged statements, was not an actual or potential "buyer or customer" of defendants' services, nor was NextMedia likely to repeat defendants' statements in order to influence any actual potential buyer or customer of those services. The "intended audience" language in section 425.17 should not be construed to apply to any potential customer of either plaintiffs or defendants when plaintiffs and defendants are not business competitors.
To the extent section 425.17 can be based on evidence beyond the allegations in the first amended complaint, there is no admissible evidence [FN 3] to support the application of section 425.17 and specifically no admissible evidence to support the conclusion that defendants' statements were made "in the course of delivering [their] goods or services." Trying to take control of a company does not suggest that "goods or services" of competitors are involved for purposes of section 425.17. Neither the operative complaint nor the admissible evidence contains the conditions necessary for section 425.17 to apply.
I would affirm the judgment of the trial court.