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ZL Technologies, Inc. v. Does 1-7

California Court of Appeals, First District, Fourth Division

July 19, 2017

ZL TECHNOLOGIES, INC., Plaintiff and Appellant,
v.
DOES 1-7, Defendants and Respondents GLASSDOOR, INC., Real Party in Interest and Respondent.

         Marin County Super. Ct. No. CIV1203944, Honorable Mark Talamantes Trial Judge:

          Counsel for Plaintiff and Appellant, ZL Technologies, Inc.: Kerr & Wagstaffe LLP, Jasmine Kaur Singh, James M. Wagstaffe, Michael von Loewenfeldt, and Anna P. Chang.

          Counsel for Defendants and Respondents, Does 1-7: No appearance.

          Counsel for Real Party in Interest and Respondent, Glassdoor, Inc.: Seubert French Frimel & Warner LLP, William Joseph Frimel.

          Counsel for Amici Curiae, Public Citizen, Inc. and Twitter, Inc. on behalf of Real Party in Interest and Respondent Public Citizen Litigation Group, Paul Alan Levy and Scott Michelman; Wilson Sonsini Goodrich & Rosati P.C., Corina I. Cacovean.

          Rivera, Acting P.J.

         Plaintiff and appellant ZL Technologies, Inc. (ZL) appeals from an order and judgment dismissing its complaint with prejudice for failure to serve defendants, and from an order denying its motion to compel compliance with the subpoena it served on real party in interest and respondent Glassdoor, Inc. (Glassdoor). ZL contends the trial court erred in denying its motion to compel, prohibiting it from identifying Doe defendants whom it contends anonymously defamed it on Glassdoor's website, and then improperly dismissed its action for failing to serve the same individuals, after denying it access to the information necessary to identify them. We agree and therefore shall reverse the judgment.

         I. BACKGROUND

         According to its complaint, ZL is a California corporation that provides email archiving, eDiscovery, and compliance software and support to businesses throughout the country. Glassdoor operates a website for job seekers on which people may anonymously post information and express opinions regarding current or past employers. Between September 2010 and June 2012, individuals representing themselves as current or former ZL employees posted seven anonymous reviews on Glassdoor's website criticizing ZL's management and work environment. On August 29, 2012, ZL filed a complaint against the individuals who posted the critical reviews, naming them as Doe defendants. The complaint alleged causes of action for libel per se in violation of Civil Code section 45, and online impersonation in violation of Penal Code section 528.5 to the extent any of the defendants was not actually a ZL employee. The following month, ZL served a subpoena on Glassdoor, requesting records identifying and providing contact information for defendants.

         Glassdoor objected to the subpoena, among other things contending that: compulsory disclosure of defendants' identities would violate their free speech rights under the First Amendment of the United States Constitution (First Amendment), and their privacy rights under the California Constitution; the posted statements were “protected opinion, patently hyperbolic, not harmful to reputation, ” or uncontested statements of fact; Glassdoor's reputation would be harmed if it disclosed defendants' identities; and, under Krinsky v. Doe 6 (2008) 159 Cal.App.4th 1154 (Krinsky), ZL was obligated to make a prima facie showing the statements were libelous before it could compel disclosure. The parties corresponded regarding Glassdoor's objections, but did not reach a resolution.

         ZL then filed a motion to compel Glassdoor to comply with the subpoena (motion to compel). The trial court issued a tentative ruling denying the motion to compel, reasoning that defendants had a First Amendment right to remain anonymous, their critical reviews of ZL were “similar to that written on bathroom walls-anonymous, angry, opinionated, and not very reliable, ” and it was “unclear” whether ZL, as defendants' former employer, might have alternatives for discovering their identities. After hearing argument from the parties the same day, the trial court took the matter under submission. The following day, it issued an order adopting the tentative ruling. The order recited the trial court's finding that ZL “failed to make a sufficient showing... the [defendants] engaged in wrongful conduct causing harm to [ZL].” “In the context of [Glassdoor's] website, ” the order stated, defendants' reviews were “primarily opinion and would not be considered reliable by the average person.”

         After the trial court issued its order, ZL explored independent methods for identifying defendants, without success. More than a year after ruling on the motion to compel, the trial court issued an order to show cause (OSC) why the case should not be dismissed given ZL's continued failure to serve defendants. At the subsequent OSC hearing, the trial court requested briefing about whether it should retain jurisdiction. ZL filed its motion to retain jurisdiction the following month. Contending it presented a prima facie case of libel (apparently by attaching copies of defendants' reviews to its complaint), [1] had taken reasonable steps to identify defendants, and had no remaining alternatives for securing that information, ZL requested renewal of the subpoena to compel Glassdoor to identify defendants, so that it might serve the complaint on them. The trial court denied ZL's request. The following month, after a hearing on the matter, the court dismissed the action with prejudice in light of ZL's failure to serve the defendants.

         This timely appeal followed. After the case was fully briefed, we received a request from Public Citizen and Twitter, Inc. to file a brief as amici curiae in support of Glassdoor, which we granted. ZL subsequently filed an answer to amici curiae's brief.

         II. DISCUSSION

         A. The Standard of Review on Appeal

         On appeal, ZL challenges the trial court's order and judgment dismissing its complaint for failure to prosecute, and the court's underlying order denying its motion to compel Glassdoor to comply with the subpoena.

         The trial court has discretion to dismiss an action for delay in prosecution if “[s]ervice is not made within two years after the action is commenced against the defendant.” (Code Civ. Proc., § 583.420, subd. (a)(1); see also Cal. Rules of Court, rule 3.1340 [requiring a noticed hearing on the issue].) When reviewing a discretionary dismissal, we must presume the decision of the trial court is correct, unless the party challenging the decision shows the trial court abused its discretion. (Howard v. Thrifty Drug & Discount Stores (1995) 10 Cal.4th 424, 443.) An appeal from a discovery order also “normally is reviewed under the deferential abuse of discretion standard. [Citations.]” (Krinsky, supra, 159 Cal.App.4th at p. 1161 [“ ‘the trial court has wide discretion in managing discovery issues' ”].)

         The trial court's discretion is limited, however, by the applicable legal principles. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1144.) “Thus, where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law. [Citation.]” (Ibid.) Here, the trial court grounded its ruling denying ZL's motion to compel on legal conclusions, i.e., that ZL did not make a sufficient showing defendants engaged in wrongful conduct causing ZL harm, and that defendants' Glassdoor reviews of ZL were “primarily opinion” that an average person would not consider reliable. In reaching these conclusions, the trial court referenced the constitutional principle that an “author's decision to remain anonymous... is an aspect of the freedom of speech protected by the First Amendment.” (McIntyre v. Ohio Elections Com'n (1995) 514 U.S. 334, 342.)

         “Thus, in this case, we need not defer to a trial court's resolution of disputed facts and inferences. Instead, we are concerned with the legal significance of the undisputed facts in the record.”[2] (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., supra, 20 Cal.4th at p. 1144.) We, therefore, review the trial court's exercise of its discretion in denying the motion to compel compliance with the subpoena “as a question of law in light of the pertinent legal principles.” (Ibid.; see, e.g., California Farm Bureau Federation v. State Water Resources Control Bd. (2011) 51 Cal.4th 421, 436 [appellate courts independently review questions of law]; Krinsky, supra, 159 Cal.App.4th at p. 1161 [appellate courts independently review “whether a particular communication falls outside the protection of the First Amendment”].)[3]

         B. The Test for Compulsory Disclosure of an Anonymous Speaker's Identity

         “[T]his case presents a conflict between a plaintiff's right to employ the judicial process to discover the identity of an allegedly libelous speaker and the speaker's First Amendment right to remain anonymous.” (Doe 2 v. Superior Court (2016) 1 Cal.App.5th 1300, 1310 (Doe 2).) Neither the United States nor the state Supreme Court has established a standard for resolving this conflict. In California, however, after surveying case law from this and other jurisdictions, our colleagues in the Sixth Appellate District, in Krinsky, supra, “agree[d] with those courts that have compelled the plaintiff to make a prima facie showing of the elements of libel” to obtain compulsory disclosure of a defendant's identity. (Krinsky, supra, 159 Cal.App.4th at p. 1172.)

         ZL and Glassdoor both cite Krinsky's requirement of a prima facie showing as providing the appropriate test in deciding ZL's motion to compel compliance with its subpoena. Amici curiae, however, urge us to go further than Krinsky, and to require application of the multifactor test the New Jersey appellate court articulated in Dendrite Intern. v. Doe No. 3 (2001) 342 N.J.Super. 134, 775 A.2d 756 (Dendrite). In particular, amici advocate requiring a final balancing test following any prima facie showing. For reasons discussed below, we concur with amici curiae about the need for courts to consider most of the Dendrite factors, but we decline to require the final balancing test, for the reason stated in Krinsky.

         Krinsky's Prima Facie Requirement

         In Krinsky, the Court of Appeal commenced its analysis by acknowledging that “the constitutional right to publish anonymously” has long been recognized as “ ‘an aspect of the freedom of speech protected by the First Amendment.' [Citations.]” (Krinsky, supra, 159 Cal.App.4th at pp. 1163-1164.) “ ‘Persecuted groups and sects from time to time throughout history have been able to criticize oppressive practices... either anonymously or not at all.' [Citation.] ‘The decision in favor of anonymity may be motivated by fear of economic or official retaliation, by concern about social ostracism, or merely by a desire to preserve as much of one's privacy as possible.' [Citations.]” (Id. at p. 1163.) The court went on to observe that “the relative anonymity afforded by the Internet” (id. at p. 1162), combined with the frequent use of pseudonyms in that forum, presented valuable opportunities for an unhindered exchange of views, but also created some risks. (Id. at pp. 1162-1164.)

         On the one hand, the court stated, “[t]he use of a pseudonymous screen name offers a safe outlet for the user to experiment with novel ideas, express unorthodox political views, or criticize corporate or individual behavior without fear of intimidation or reprisal. In addition, by concealing speakers' identities, the online forum allows individuals of any economic, political, or social status to be heard without suppression or other intervention by the media or more powerful figures in the field.” (Krinsky, supra, 159 Cal.App.4th at p. 1162.) On the other hand, the court noted, the environment of “informal debate and criticism” that is created leads “many to substitute gossip for accurate reporting and often to adopt a provocative, even combative tone, ” “ ‘heighten[ing] this sense that “anything goes.” ' [Citation.]” (Id. at p. 1163.) “[C]riticism on the Internet is often so recklessly communicated that the harm to its targets, particularly in the financial arena, may extend far beyond what is covered by rules applicable to oral rhetoric and pamphleteering.” (Id. at p. 1164.) “When vigorous criticism descends into defamation, ” Krinsky cautioned, “constitutional protection is no longer available.” (Ibid.; see, e.g., Ashcroft v. Free Speech Coalition (2002) 535 U.S. 234, 245-246 [the First Amendment's speech protections do not extend to defamation]; Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 340 [“there is no constitutional value in false statements of fact”; “[n]either the intentional lie nor the careless error materially advances society's interest in ‘uninhibited, robust, and wide-open' debate on public issues”].)

         The court concluded that “[c]orporate and individual targets of these online aspersions may seek redress by filing suit against their unknown detractors.” (Krinsky, supra, 159 Cal.App.4th at p. 1164.) To serve their complaint, plaintiffs may then seek disclosure of those detractors' identities. When this occurs, the anonymous Internet speakers' First Amendment rights must be balanced against a libel plaintiff's right to prosecute its case. (Id. at p. 1165.) Most of the state and federal courts that had addressed the subject, Krinsky observed (including Dendrite, supra, 775 A.2d at pp. 768-772), had agreed this balancing necessitated a prima facie showing of the elements of libel. (Krinsky, supra, at p. 1171; see also id. at pp. 1167-1171 [discussing case law in other jurisdictions, including Dendrite].) Krinsky concurred with this approach and adopted the same requirement. (Id. at pp. 1171-1172.)

         The court went on to define the prima facie standard as requiring evidence “ ‘that... will support a ruling in favor of [the plaintiff] if no controverting evidence is presented. [Citations.] It may be slight evidence which creates a reasonable inference of [the] fact sought to be established but need not eliminate all contrary inferences. [Citation.]' [Citations.]” (Krinsky, supra, 159 Cal.App.4that p. 1172, fn. 14.) To meet this standard in seeking compulsory disclosure of an anonymous Internet speaker's identity, the court added, “[a] plaintiff need produce evidence of only those material facts that are accessible to [it], ” for example, evidence of the allegedly libelous statement, its falsity, and its effect on the plaintiff. (Id. at p. 1172.) Requiring a prima facie showing, Krinsky reasoned, “ensures that the plaintiff is not merely seeking to harass or embarrass the speaker or stifle legitimate criticism.” (Id. at p. 1171.)

         Without directly discussing it, Krinsky also adopted the second factor of Dendrite' sprima facie showing requirement, namely, the existence of a legally valid claim. (Dendrite, supra, 775 A.2d at p. 760 [To make a prima facie showing, a plaintiff must “establish[] that its action can withstand a motion to dismiss for failure to state a claim upon which relief can be granted... [and] produce sufficient evidence supporting each element of its cause of action”].)[4] Explaining its decision to adopt the prima facie requirement, Krinsky stated, “When there is a factual and legal basis for believing libel may have occurred, the writer's message will not be protected by the First Amendment.” (Krinsky, supra, 159 Cal.App.4th at p. 1172, italics added.) In its analysis, the court specifically focused on whether the plaintiff had stated a legally valid defamation cause of action, as the defendant contended the speech was nonactionable opinion. (Id. at pp. 1173-1178.) Concluding the online speech, “while unquestionably offensive..., did not constitute assertions of actual fact and therefore [was] not actionable”-i.e., that the plaintiff had not pled a viable cause of action for defamation-the court ruled the subpoena to discover the defendant's identity should have been quashed. (Id. at p. 1179.)

         As noted, although ZL opposes adoption of the entire Dendrite test, it does not challenge Krinsky's requirement that it make a prima facie showing. (Krinsky, 159 Cal.App.4th at pp. 1172-1179.) We agree with Krinsky's approach and adopt the same prima facie showing requirements, i.e., a plaintiff seeking compulsory disclosure of an allegedly libelous speaker's identity must state a legally sufficient cause of action against the defendant, and must make a prima facie showing of the elements of that cause of action.

         Additional Factors to be Considered

         Amici curiae urge us to go beyond Krinsky, by requiring application of the complete Dendrite test in deciding requests for compulsory disclosure of an Internet speaker's identity in a libel case. As recounted in Krinsky, in Dendrite “a corporation alleged defamation by multiple Doe defendants on [an Internet] message board and then sought expedited discovery in order to learn their identities. The New Jersey appellate court set forth a four-part test to ensure that plaintiffs do not use discovery to ‘harass, intimidate or silence critics in the public forum opportunities presented by the Internet.' [Citation.] First, the plaintiff must make an effort to notify the anonymous poster that he or she is the subject of a subpoena or application for a disclosure order, giving a reasonable time for the poster to file opposition. The plaintiff must also set forth the specific statements that are alleged to be actionable. Third, the plaintiff must produce sufficient evidence to state a prima facie cause of action. If this showing is made, then the final step should be undertaken: to balance the strength of that prima facie case against the defendant's First Amendment right to speak anonymously. [Citation.] In Dendrite, the appellate court affirmed the trial court's denial of the discovery application, as the corporate plaintiff had failed to produce evidence” of one of the elements of libel and, thus, failed to make the requisite prima facie showing. (Krinsky, supra, 159 Cal.App.4th at p. 1167.)

         Amici curiae also cite Doe v. Cahill (Del. 2005) 884 A.2d 451 (Cahill), another seminal case in which the Delaware Supreme Court adopted portions of the Dendrite test. Krinsky considered Cahill as well, noting the court there adopted a standard applicable to a plaintiff opposing summary judgment. (Krinsky, supra, 159 Cal.App.4th at p. 1169, citing Cahill, supra, 884 A.2d at p. 460.) Under that standard, Krinsky recounted, “the plaintiff ‘must support his defamation claim with facts sufficient to defeat a summary judgment motion.'... [Citation.] The second Dendrite requirement, that the plaintiff set forth the exact statements alleged to be defamatory, was unnecessary [according to Cahill, ] because those statements must be quoted in the plaintiff's complaint to avoid summary judgment. The fourth Dendrite step, the balancing of the defendant's First Amendment rights against the strength of the plaintiff's case, was also unnecessary [Cahill concluded, ] because ‘[t]he summary judgment test [was] itself the balance. The fourth requirement add[ed] no protection above and beyond that of the summary judgment test and needlessly complicate[d] the analysis.' ” (Krinsky, supra, 159 Cal.App.4th at p. 1169, quoting Cahill, supra, 884 A.2d at p. 461.) Cahill “did, however, endorse the first element of the Dendrite test, ” Krinsky observed, requiring “that the plaintiff make reasonable efforts to notify the anonymous poster about the subpoena or request for a disclosure order and give the defendant a reasonable opportunity to respond. The Cahill court even required the plaintiff to publish that notice on the same message board where the allegedly defamatory statement appeared.” (Krinsky, supra, 159 Cal.App.4th at p. 1169.)

         Even if this court, like Cahill, determines the final balancing test is unnecessary, amici curiae contend, the other Dendrite factors present the minimal protections required by the First Amendment. ZL urges us to reject Dendrite'snotice and final balancing test factors, citing decisions from other states that, it maintains, required only a prima facie showing. (But see Independent News v. Brodie (Md. 2009) 966 A.2d 432, 456 [cited in ZL's brief, adopting the Dendrite test].)[5] ...


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