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SLAPP Suits Are Not Just for Protestors Any More

August 07, 2014

Posted in Business Litigation, Defamation and Slander, Partnership Law

photo - SLAPP suit (by David Shankbone)A SLAPP suit is a legal action to censor, intimidate and silence critics or opponents by forcing them to endure the cost of a legal defense until they abandon their criticism or opposition. SLAPP stands for “strategic lawsuit against public participation.” It was originally intended to protect consumer groups and citizens who spoke out against a company’s plans from being sued by that company on frivolous grounds in order to stop the criticism so the plans could proceed.

The goal of the typical SLAPP plaintiff is not necessarily to win the lawsuit, it’s to grind down critics under the financial, time and energy burdens that come with defending a lawsuit. These SLAPP suits, and anti-SLAPP motions, are not limited to businesses trying to squash public opposition to something. Businesses can be on both ends of these legal fights and something of public interest need not be involved. A court filing by one company against another could be the subject of a SLAPP suit.

California Law Tries to Balance Rights to Files Suits and Free Speech

The heart of California’s anti-SLAPP legislation is set forth in subpart (e) of Code of Civil Procedure section 425.16, which provides:

(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.

(Emphasis mine.)

If you believe a spurious lawsuit has been filed against your business, to have that suit dismissed, you would need to show that

  • The speech in question falls under one of the four sections set forth above.
  • The plaintiff would have to fail in showing it is still likely to prevail on the action.

SLAPP Suits and Business Litigation

These issues can arise in a business context with one businesses suing another or partners suing one another. One example is Panakosta Partners, LP v. Hammer Lane Management, LLC, 199 Cal.App.4th 612 (2011).

Panakosta sought to have the court dissolve its partnership with Hammer Lane, who later filed a motion asking the court to instead force Panakosta to sell its interests to it. Panakosta claimed Hammer Lane’s efforts were out of bounds because its intent was trying to prevent its right to petition and punish Panakosta by forcing it to endure more legal procedures while it didn’t have the resources to actually buy its interest in the partnership.

The appellate court disagreed for several reasons. It stated Hammer Lane’s efforts didn’t undermine Panakosta’s rights to petition. The court stated SLAPP suits do not include legal petitions simply because they respond to already filed complaints, seek an alternative remedy or are a litigation tactic. The court stated if it agreed with Panakosta, just about any efforts by one partner to force a sale instead of a court ordered dissolution of a partnership would be considered a SLAPP suit.

There are many grey areas when it comes to business litigation. A party may feel aggrieved by another business or group, but that doesn’t necessarily justify the filing of legal action, which may or may not be considered a SLAPP suit. If you are considering or are currently involved in business litigation, contact my office so we can discuss the situation and which measures may be right, or wrong, for you.