APPEALS from an order of the Superior Court of San Diego County, Timothy M. Casserly and William S. Dato, Judges. (Super. Ct. No. 37-2010-00058632- CU-DF-NC)
The opinion of the court was delivered by: O'rourke, J.
CERTIFIED FOR PUBLICATION
Plaintiff and appellant Paul Hawran filed a lawsuit against defendants and appellants Sequenom, Inc. (Sequenom), and Sequenom directors Harry Hixson, Jr., Richard Lerner, and Ronald Lindsay, stemming from representations made in a widely disseminated press release concerning Sequenom's internal investigation into its handling of certain research and development test data and results, which issued on the same day that defendants filed a legally required disclosure of information to the United States Securities and Exchange Commission (SEC). The trial court granted in part defendants' special motion to strike Hawran's first amended complaint as a strategic lawsuit against public participation under Code of Civil Procedure section 425.16 (commonly known as the anti-SLAPP statute),*fn1 in which defendants unsuccessfully asserted, among other things, the press release was absolutely privileged by the official proceeding and fair reporting privileges (Civ. Code, § 47, subds. (b), (d)). The court left standing Hawran's causes of action against all of the defendants for defamation, invasion of privacy, and unfair business practices under the Unfair Competition Law (UCL; Bus. & Prof. Code,
§ 17200), as well as Hawran's breach of contract cause of action against Sequenom.
Defendants appeal from the partial denial of their motion, arguing Hawran did not demonstrate a probability of prevailing on the merits of his claims. In part, they maintain the statements made within the press release are not defamatory, and in any event are absolutely or qualifiedly privileged. Hawran cross-appeals, contending the trial court should have denied defendants' motion in its entirety because all of his causes of action are exempt from the anti-SLAPP law by the commercial speech exemption of section 425.17, subdivision (c).
We hold Hawran did not meet his burden to show his causes of action fall within the commercial speech exemption, and thus they are subject to the anti-SLAPP law. However, we further hold the absolute and qualified privileges of Civil Code section 47 do not apply to defendants' press release, and that Hawran otherwise demonstrated a probability of prevailing on his causes of action for defamation, invasion of privacy, unfair business practices and breach of contract. Accordingly, we affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
Sequenom is a publicly traded diagnostic testing and genetics analysis company, whose common stock trades on the NASDAQ. Hawran was its chief financial officer from April 2007 to his resignation on September 25, 2009.
In the Spring of 2009, Sequenom publicly admitted that previously reported research and development results for a certain diagnostic test for fetal Down Syndrome (at times, Trisomy 21 or "T21") were mishandled by employees on the Sequenom science team. Thereafter, Sequenom's stock price declined, derivative and securities fraud lawsuits were filed, and Sequenom commenced its own internal investigation, led by a special litigation committee (SLC). In April 2009, Sequenom issued a press release concerning the delay in the launch of the T21 test due to the mishandling, and a day later filed a Form 8-K*fn2 reporting to the SEC Sequenom's formation of the SLC and other information. In June 2009, Sequenom was alerted that the SEC had commenced an investigation into matters related to the T21 issue.
In September 2009, defendants made Hawran an offer that if he resigned as chief financial officer, he would not be associated with the mishandling and would be separated from others involved in the test data mishandling. In reliance on those representations, Hawran resigned on September 25, 2009.
On September 28, 2009, Sequenom filed another Form 8-K and issued a press release (hereafter the September press release or press release) announcing the completion of the SLC's independent investigation. In part, the September press release stated Sequenom had failed to put in place adequate protocols and control for the conduct of studies related to the program, but that the board of directors had begun to implement various remedial measures. The press release continued: "The company has terminated the employment of its president and chief executive officer, Harry Stylli, Ph.D., and its senior vice president of research and development, Elizabeth Dragon, Ph.D., effective immediately. In connection with the termination of Dr. Stylli's employment, the company's board of directors has requested that he resign as a director, which he is obligated to do under the terms of his employment agreement. The company has obtained the resignation of its chief financial officer, Paul Hawran, and one other officer. While each of these officers and employees has denied wrongdoing, the special committee's investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company's board of directors in the personnel involved."*fn3 (Italics omitted.)
In August 2010, Hawran sued Hixson, Lerner and Lindsay and several days later filed a first amended complaint adding Sequenom as a defendant. The first amended complaint sets forth causes of action for defamation, invasion of privacy/false light, negligent and intentional interference with prospective economic advantage, violation of the UCL, breach of contract, and negligent and intentional misrepresentation. Hawran alleged that in 2008 and 2009, he raised objections about a board member compensation program proposed by Hixson that in his perception constituted inappropriate self-dealing, and also raised issues concerning the competence and tax reporting of certain members of Sequenom's audit committee. Hawran alleged Hixson criticized him for his efforts to ensure proper tax reporting and hold board members to their fiduciary obligations to shareholders. According to the complaint, Sequenom used the T21 test mishandling to constructively fire him for his prior complaints. Hawran alleged his personal and professional reputation was irreparably damaged, and his ability to earn a living impacted, by the September press release, which falsely stated he had denied any wrongdoing; blamed him for the data mishandling; and directly and implicitly called into question his ethics, management capabilities, and performance as Sequenom's CFO. He alleged the press release defamed him and painted him in a false light, and substantially interfered with his prospective employment opportunities; that despite his diligence, he had been unable to find alternative employment due to defendants' interference.
Defendants moved to strike Hawran's first amended complaint under section 425.16. They argued section 425.16 applied to each cause of action because the September press release was issued in connection with an SEC investigation and also addressed a matter of public concern, rendering it a protected writing made "in connection with an issue under consideration or review by . . . [an] official proceeding authorized by law" under section 425.16, subdivision (e)(2). They also argued the press release qualified for protection under section 425.16, subdivisions (e)(3) and (e)(4) as a "written . . . statement or writing made in a place open to the public or a public forum in connection with an issue of public interest" or "other conduct in furtherance of the exercise of the constitutional right of petition or . . . free speech in connection with a public issue or an issue of public interest." Defendants maintained Hawran could not demonstrate a probability of prevailing on any of his causes of action because he could not prove the statements were made or, if made, directed at him; the statement that Hawran "denied wrongdoing" was not defamatory; and the statement that Sequenom lost confidence or had serious concerns constituted opinion and Hawran could not prove the statement was false. Defendants further argued the press release was absolutely privileged under Civil Code section 47, subdivision (b)(3) as made in an official proceeding, and under Civil Code section 47, subdivision (d) as a fair and true communication to the press of an official public proceeding. Finally, defendants argued Hawran could not prove liability against any of the individual defendants because issuance of the press release was done by Sequenom after board approval, not by the individuals.
In support of the motion, defendants presented the declarations of two Sequenom executives and one of its attorneys of record. In part, the executives addressed the Form 8-K disclosures, the various lawsuits and government investigations commenced against Sequenom, and the press release distribution process.
In opposition, Hawran argued the September press release was excluded from protection under the commercial speech exemption of section 425.17, subdivision (c). He further argued the press release did not qualify as an act in furtherance of defendants' rights of free speech. In particular, he asserted it did not mention the SEC investigation and contained defamatory content not included in Sequenom's Form 8-K filing; its dissemination to the public was made via one-way communications that did not constitute statements made in a public forum; and the press release was an effort to further Sequenom's private commercial and economic aims of reassuring its customers and investors that it had corrected its problems. Hawran argued it was probable he would prevail on his claims for defamation, invasion of privacy, negligent and intentional interference with prospective economic advantage, unfair business practices, breach of contract, and misrepresentation. He maintained the press release was not privileged under Civil Code sections 47, subdivisions (b) or (d), and the SLC members were individually liable under the "group published information" doctrine.
Hawran presented his own declaration in opposition to the motion, as well as declarations from attorney Craig Nicholas, attorney Thomas Zaccaro, and Alan Mack, Sequenom's senior director of prenatal diagnostics and director of sales of clinical diagnostics from February 2008 through October 2010. In part, Mack described Sequenom's "custom and practice" during his tenure to use press releases to advertise its products to its customers; provide press releases to members of the sales department as part of their commercial and advertising materials; design such releases to inform customers as well as potential and existing investors; and disseminate them on Web sites with the "intended purpose" that they be picked up and influence customers and investors. He averred that Sequenom's "directive" was to use the press release's exact language as talking points to customers and investors. According to Mack, the September 28, 2009 press release was "designed to calm the fears of our customers and investors and assure them that the problem was fixed and our products were moving forward."
In reply, defendants submitted additional declarations and asserted various evidentiary objections to portions of Hawran's, Nicholas's and Mack's declarations. In addition to addressing section 425.16's application and Hawran's arguments as to the merits of his claims, they argued the exemption of section 425.17 was "facially inapplicable" to the individual defendants. Defendants further argued the exemption did not apply to Sequenom's press release because the release did not make factual statements about Sequenom's operations and its purpose was to meet mandatory SEC and NASDAQ reporting obligations.
Hawran filed a sur-reply, including "supplemental" declarations from Nicholas and Mack. He moved to strike in its entirety the evidence submitted by defendants as filed in violation of his due process rights. Hawran alternatively asserted objections to portions of defendants' declarations as lacking personal knowledge and foundation.
Defendants then moved to strike all but the first paragraph of Hawran's sur-reply papers, arguing the court had limited Hawran's sur-reply to the burden of proof on the section 425.17 commercial exemption.
Following arguments on the matter and resolving the parties' motions to strike and evidentiary objections, the trial court granted in part defendants' section 425.16 motion. Specifically, with regard to the interference with prospective economic advantage and misrepresentation claims as to all defendants, and as to the breach of contract claim as to the three individual defendants, the court found defendants had shown Hawran's causes of action arose from a writing, namely Sequenom's September press release, made in connection with an issue under consideration or review by an official proceeding authorized by law. It further found the claims were based on Sequenom's postings about its corporate activity, which were communications about issues of public interest made in a public forum. The court rejected application of the commercial speech exemption of section 425.17. It denied the motion as to Hawran's defamation, invasion of privacy and UCL causes of action, finding Hawran had demonstrated a probability of prevailing on those claims, and defendants had not established the applicability of any Civil Code section 47 privileges.
Defendants and Hawran appeal.
I. Defendants' Motion to Strike Portions of Hawran's Cross-Appeal Reply Brief
Defendants have moved to strike pages 13 through 52 of Hawran's cross-appellant's reply brief under California Rules of Court, rules 8.204(e)(2)(B) and 8.216(b)(3), the latter of which requires a party to confine its "reply brief, or the reply portion of a combined brief, to points raised in its appeal." They ask us to strike this portion of Hawran's reply brief as not limited to the issues raised in Hawran's cross-appeal, namely, application of the commercial exemption of section 425.17.
California Rules of Court, rule 8.204(e)(2) provides in part: "If a brief does not comply with this rule: [¶] If the brief is filed, the reviewing court may, on its own or a party's motion, with or without notice: [¶] (A) Order the brief returned for corrections and refiling within a specified time; [¶] (B) Strike the brief with leave to file a new brief within a specified time; or [¶] (C) Disregard the noncompliance."
We deny defendants' motion to strike in the interest of judicial economy, as the rule on which they rely does not authorize us to strike nonconforming briefs outright, but requires us to give Hawran "leave to file a new brief within a specified time." (Cal. Rules of Court, rule 8.204(e)(2)(B). However, we give effect to defendants' motion by disregarding issues or contentions raised for the first time in Hawran's cross-appellant's reply brief. (See Mansur v. Ford Motor Co. (2011) 197 Cal.App.4th 1365, 1387-1388 [appellate court will not consider arguments raised for the first time in a reply brief because it deprives the appellant of the opportunity to respond to the argument].) "The purpose of [California Rules of Court, rule 8.216(b)(3)] is to ensure that in its reply brief a party addresses only issues germane to its own appeal. For example, a cross-appellant may not use its cross-appellant's reply brief to answer points raised in the appellant's reply brief." (Advisory Com. com., 23 pt. 3 West's Ann. Codes, Rules (2012 supp.) foll. rule 8.216, p. 19.) Hawran's cross-appeal raises only the matter of the commercial speech exemption of section 425.17. We deem arguments beyond that issue new matters or new theories of error, and do not consider them.
II. Section 425.16 Burdens and Appellate Standard of Review
"A special motion to strike is a procedural remedy to dispose of lawsuits brought to chill the valid exercise of a party's constitutional right of petition or free speech. [Citation.] The purpose of the anti-SLAPP statute is to encourage participation in matters of public significance and prevent meritless litigation designed to chill the exercise of First Amendment rights. [Citation.] The Legislature has declared that the statute must be 'construed broadly' to that end." (Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 1153, 1165; see also Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 279 (Soukup).)
"The analysis of an anti-SLAPP motion . . . involves two steps. 'First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one "arising from" protected activity.' " (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 819.) " 'In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity.' " (In re Episcopal Church Cases (2009) 45 Cal.4th 467, 477.) The court looks to " 'the gravamen or principal thrust' of the action." (Id. at pp. 477-478, citing Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 193.)
" 'If the court finds [the threshold] showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim.' [Citation.] 'Only a cause of action that satisfies both prongs of the anti-SLAPP statute--i.e., that arises from protected speech or petitioning and lacks even minimal merit--is a SLAPP, subject to being stricken under the statute.' " (Oasis West Realty, LLC v. Goldman, supra, 51 Cal.4th at pp. 819-820.)
If defendant meets its threshold burden and the plaintiff asserts its claims are exempt under the commercial speech exemption of section 425.17, subdivision (c), the plaintiff then has the burden to show the applicability of that exemption. (See Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 22-26 (Simpson); Rivera v. First DataBank, Inc. (2010) 187 Cal.App.4th 709, 717.) If the plaintiff does not meet that burden, he or she must then establish a probability of prevailing on the claims. (See Rivera, at pp. 714-718.)
Review of an order granting or denying a motion to strike under section 425.16 is de novo. (Oasis West Realty, LLC v. Goldman, supra, 51 Cal.4th at p. 820.)
III. There is No Dispute Hawran's Claims Arise From Protected Activity
In part, the trial court found Sequenom's Form 8-K put the issues identified in the form under consideration or review by the SEC, and that Sequenom's September press release, from which Hawran's claims arose, was thus protected as a writing "made in connection with an issue under consideration or review by . . . any other official proceeding authorized by law . . . ." (§ 425.16, subd. (e)(2).)
This finding alone subjects Hawran's claims to section 425.16. Though defendants were not aggrieved by this aspect of the trial court's ruling in their favor (§ 902; In re S.C. (2006) 138 Cal.App.4th 396, 413-414; Benitez v. North Coast Women's Care Medical Group, Inc. (2003) 106 Cal.App.4th 978, 991), they nevertheless proceed to address all of the theories relied upon in their motion below to show they met section 425.16's threshold burden. As for Hawran, he states: "Should this Court conclude that the [September press release] is not commercial speech pursuant to Section 425.17,
Mr. Hawran will not contest on appeal Judge Dato's conclusions regarding the textual applicability of subsections (e)(2) and (3) for making his claims at least subject to anti-SLAPP review. . . ."*fn4 Because we reject application of section 425.17's commercial exception below (part IV, post), Hawran's statement is a concession of the point.
Given the trial court's unchallenged finding that Hawran's claims fall within section 425.16, subdivision (e)(2), we need not reach the correctness of that finding, or defendants' various other arguments and theories. Comment on those matters by this court would be advisory in any event. (In re S.C., supra, 138 Cal.App.4th at p. 414.)
IV. Commercial Speech Exemption of Section 425.17, ...