Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC339913. Jon M. Mayeda, Judge.
Greenberg Traurig, John M. Gatti, David A. Theaker; Randy B. Holman for Defendants and Appellants.
Snyder, Dorenfeld, David K. Dorenfeld, Rodger S. Greiner for Plaintiffs and Respondents.
BOREN, P.J.
The defendant asked the trial court to strike an unfair competition and defamation action as a Strategic Lawsuit Against Public Participation (SLAPP). (Code Civ. Proc., § 425.16.) The trial court denied the motion, and imposed sanctions on the defendant for bringing a frivolous motion. (§ 425.16, subd. (c).) We reverse, because the motion—while it did not succeed—was not totally devoid of merit and did not amount to sanctionable, egregious misconduct.
All further statutory references are to the Code of Civil Procedure. Section 425.16 is also called “the anti-SLAPP statute.”
FACTS
Allegations In The Complaint
Plaintiffs are film permitting companies. They are employed by production companies that film motion pictures, commercials, and music videos in Southern California. Plaintiffs obtain government permits to film; notify affected communities of the filming; obtain residents’ signatures; make changes to permits that have been issued; and so on. Plaintiffs arrange some 65 percent of all film permits issued in Los Angeles.
In 1995, the City of Los Angeles (the City) began delegating most of its film permit duties to defendant FilmL.A., Inc. (FilmLA), a nonprofit corporation. The City entered a contract with FilmLA allowing FilmLA to provide film permit coordination services to the entertainment industry. Anyone wishing to film in Los Angeles must now apply to FilmLA, though the City itself still issues the actual permit.
FilmLA was originally sued as Entertainment Industry Development Corporation of Southern California.
Plaintiffs allege that FilmLA treats them “in a discriminatory and unfair manner” by promulgating rules, regulations and procedures that make it difficult for plaintiffs to remain in business. Plaintiffs are not allowed to use convenient forms of payment; they cannot receive their permits from FilmLA by fax; and they do not receive their permits until the end of the working day, which creates uncertainty for plaintiffs’ clients.
By contrast, these onerous rules are not applied to production companies or to individuals who apply to FilmLA directly for film permits, without using plaintiffs’ services. Plaintiffs claim that production companies are allowed to use convenient forms of payment to obtain their permits; FilmLA faxes permits to production companies; and production companies receive their permits much earlier in the day. Plaintiffs have been unsuccessful in their attempts to obtain film permits directly from the City, without applying through FilmLA.
FilmLA allegedly made defamatory statements about plaintiffs to persuade plaintiffs’ clients to deal directly with FilmLA. This included statements by FilmLA’s senior vice president that film permitting companies are unnecessary, incompetent, and complicate the procedure of obtaining film permits. He falsely blamed a film permitting company for causing two permits to be issued for the same location on the same day, when, in fact, FilmLA was at fault for the duplicative permits. He also falsely blamed a film permitting company for failing to request a street closure when in fact, the company did request a street closure but FilmLA failed to put it in the permit.
The complaint asserts causes of action for unfair competition; slander per se; inducement of breach of contract; and intentional interference with prospective economic relations. The City is named as a defendant in this lawsuit, but is not a party to this appeal.
The Anti-SLAPP Motion
FilmLA filed a special motion to strike the complaint pursuant to the anti-SLAPP statute. FilmLA argued that plaintiffs’ slander claim arises from statements made in connection with an issue under consideration in a legislative, executive or judicial proceeding, or official proceeding authorized by law. FilmLA asserted that plaintiffs’ claims of unfair practices are part of the film permit application process and are acts in furtherance of free speech and petition rights. Finally, FilmLA contended that film permitting is a matter of public interest.
Plaintiffs countered that their complaint is exempt from the anti-SLAPP statute. They assert that a companion statute controls (section 425.17), which provides that the anti-SLAPP statute does not apply to any cause of action brought against persons primarily engaged in the business of selling goods and services. Plaintiffs maintain that FilmLA is “engaged in the business of selling film coordination and notification services”; all of FilmLA’s wrongful statements and conduct arose in the course of delivering these services and were aimed at plaintiffs’ clients and plaintiffs themselves. Plaintiffs also argued that the anti-SLAPP statute is inapplicable because their claims against FilmLA do not affect protected free speech activity or arise in the course of an official proceeding.
The Trial Court’s Rulings
The trial court denied FilmLA’s motion to strike pursuant to sections 425.16 and 425.17. After prevailing, plaintiffs asked the court to award attorney fees on the grounds that the anti-SLAPP motion was frivolous or brought to cause unnecessary delay.
The court found that the anti-SLAPP motion was frivolous, “totally devoid of merit and deserving of sanctions” because (1) FilmLA is “engaged in the business of selling film coordination and notification services” and the statements and conduct plaintiffs complained of were made in the course of delivering these services and the intended audience were plaintiffs or their customers; and (2) FilmLA failed to meet its threshold burden of establishing that the complaint arose from “protected activity” because none of plaintiffs’ claims arose from FilmLA’s exercise of the right to free speech or to petition; rather, the complaint concerns FilmLA’s “garden-variety unfair business practices.” The court awarded attorney fees to plaintiffs in the amount of $38,388.
DISCUSSION
1. Appeal And Review
FilmLA does not challenge the order denying its special motion to strike, though the order is appealable. (§ 425.16, subd. (i).) Instead, FilmLA challenges the sanctions award. An order directing the payment of over $5,000 in sanctions is appealable. (§ 904.1, subd. (a)(12).) The imposition of sanctions for a frivolous motion to strike is reviewed for an abuse of discretion. (Moore v. Shaw (2004) 116 Cal.App.4th 182, 199; Foundation for Taxpayer & Consumer Rights v. Garamendi (2005) 132 Cal.App.4th 1375, 1394.)
In their distinctly unhelpful brief, plaintiffs treat the merits of FilmLA’s motion as irrelevant. The merits are highly relevant: we cannot review the propriety of a sanctions award for a “frivolous” motion unless we actually assess the “frivolity” of the motion. The underlying motion “involves the merits or necessarily affects the judgment or order appealed from . . . .” (§ 906.) The anti-SLAPP motion is a necessary predicate to the sanctions order, and must be discussed on appeal. (See Moore v. Shaw, supra, 116 Cal.App.4th at pp. 199-200; Foundation for Taxpayer & Consumer Rights v. Garamendi, supra, 132 Cal.App.4th at pp. 1389-1393.)
The anti-SLAPP statute is aimed at curbing “lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” (§ 425.16, subd. (a).) Protection is extended to “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,” and to any “conduct in furtherance of the exercise of the constitutional right of petition . . . .” (§ 425.16, subd. (e)(2), (4).) The cause of action must “arise from” a protected activity in order for the anti-SLAPP statute to apply. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) It is not enough that the claim be “‘triggered’” by protected activity; rather, the “critical consideration” is whether the claim is “based on” free speech or petitioning activity. (Ibid.)
To succeed on an anti-SLAPP motion, the defendant must make a threshold showing that the lawsuit arises from an act in furtherance of his or her First Amendment rights. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) FilmLA argues that its acts were part of an official government proceeding and are therefore covered by the anti-SLAPP statute. FilmLA is not a government agency. Rather, it is a not-for-profit company that has a contract with the government to coordinate film permits. Plaintiffs (and others seeking film permits) compensate FilmLA to provide this service. Basically, the City has privatized one of its functions, so that money that would ordinarily be paid to the City to process a film permit application is, instead, paid to FilmLA.
An act that is a “purely business type event or transaction [ ] is not the type of protected activity contemplated under section 425.16, subdivision (e).)” (Blackburn v. Brady (2004) 116 Cal.App.4th 670, 677.) In the Blackburn case, fraudulent communications made in connection with bids submitted in a government auction were not protected because the bid was a business transaction, though the auction was conducted by the sheriff. In another case, conduct relating to a city construction contract fell outside the scope of the anti-SLAPP statute because the challenged conduct arose not from speech or government petitioning activities but rather from bidding and contracting practices. (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 929-930.) No protection is given to a subcontractor who files a “stop notice” with a government agency to require a school district to withhold money from a general contractor as part of a private dispute between the contractor and the subcontractor. (A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1129-1130.)
By contrast, statements made directly to a government agency or with respect to a pending matter are protected. For example, defamatory comments made in connection with ongoing proceedings before a government agency are afforded anti-SLAPP protection. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115.) Complaints made to the justice department requesting an investigation are protected. (Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 784.) And a disgruntled developer’s attack on a consultant that prepared an Environmental Impact Report falls within the anti-SLAPP statute because the EIR is prepared for the public and is a matter of public interest. (Mission Oaks Ranch, Ltd. v. County of Santa Barbara (1998) 65 Cal.App.4th 713, 728-729 (Mission Oaks), overruled on other grounds in Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at p. 1123, fn. 10.)
In short, anti-SLAPP protection is not accorded “to suits arising from any act having any connection, however remote, with an official proceeding. The statements or writings in question must occur in connection with ‘an issue under consideration or review’ in the proceeding” or during a determination of a disputed matter. (Paul v. Friedman (2002) 95 Cal.App.4th 853, 866; Blackburn v. Brady, supra, 116 Cal.App.4th at p. 677.)
Specifically, when the plaintiffs and defendants work together on a business project that entails obtaining a government permit, and the defendants engage in alleged improper conduct in the course of this predominantly private business-oriented activity, the government permit is only collateral and the anti-SLAPP statute does not apply. (Wang v. Wal-Mart Real Estate Business Trust (2007) 153 Cal.App.4th 790, 809-811.) In the Wang case, the trial court observed that each of plaintiffs’ claims for fraud and breach of contract arose from an application for a development permit; therefore, the court reasoned, section 425.16 applied because without the permit, no alleged duties and breaches would have occurred. (Id. at p. 799.) The Court of Appeal rejected the lower court’s reasoning, finding that no protected speech or petitioning conduct is involved when the plaintiffs’ claims “are factually based on allegations about the manner in which the private transactions between the parties were conducted, and the governmental development permit applications were only incidental or collateral to the principal purposes of those transactions.” (Id. at p. 794.)
The alleged misconduct in this case does not “arise from” and is not “based on” protected petitioning activity. A private entity that arbitrarily disallows the use of certain forms of payments, or won’t use a fax machine, or sends out permits later in the day is engaging in purely business-related activities. The City filming permit is collateral to the allegedly discriminatory business practices of FilmLA. Any alleged statements made by FilmLA’s vice president regarding plaintiffs’ purported incompetence or uselessness was not made in connection with a pending issue under government consideration or review or during the official determination of a disputed matter. The actual issuing of a City filming permit was a ministerial event and did not involve any petition for redress. Instead, plaintiffs seek relief for FilmLA’s alleged mistreatment of its clientele, not relief relating directly to a petition or issue before a government entity. Unlike the EIR in Mission Oaks, supra, 65 Cal.App.4th 713, FilmLA’s treatment of plaintiffs is not a matter of public interest.
3. Section 425.17 Does Not Apply To FilmLA’s Motion To Dismiss
In 2003, the Legislature carved out a statutory exception to the application of the anti-SLAPP law, due to a perceived “abuse” of the anti-SLAPP law. (§ 425.17.) The denial of a special motion to strike pursuant to the section 425.17 exception is not an appealable order. (§ 425.17, subd. (e).) However, if sanctions are imposed—as they were in this case—we may review the underlying motion with an eye toward whether it was frivolous and sanctionable. (§ 906.)
The statutory exception states, “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 . . . 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 . . . .” (§ 425.17, subd. (c).)
The objected-to conduct and statements in this case, in which FilmLA imposed onerous rules on plaintiffs and made negative statements about plaintiffs, were not aimed at promoting the “sale” of FilmLA’s services. Plaintiffs and FilmLA are not business competitors, i.e., rivals who sell or buy goods or services in the same market. (See New.Net, Inc. v. Lavasoft (C.D.Cal. 2004) 356 F.Supp.2d 1090, 1104.) FilmLA is a nonprofit organization that processes film permit applications for the City, thereby undertaking to provide a service that the government would otherwise perform. People who wish to film in Los Angeles must apply to FilmLA, regardless of whether they apply themselves or hire plaintiffs to submit an application. Because FilmLA provides a public service rather than operating a for-profit commercial enterprise in competition with plaintiffs, section 425.17 does not apply. (New.Net v. Lavasoft, supra, 356 F.Supp.2d at pp. 1103-1104.)
4. Imposition Of Sanctions
Section 425.16 authorizes the imposition of sanctions “[i]f the court finds that a special motion to strike is frivolous or is solely intended to cause unnecessary delay . . . .” When the court makes the necessary finding, the prevailing plaintiff is entitled to its costs and reasonable attorney fees. (§ 425.16, subd. (c).) The standard for a frivolous anti-SLAPP motion requires a finding that the motion is “totally and completely without merit” (§ 128.5, subd. (b)(2); Foundation for Taxpayer & Consumer Rights v. Garamendi, supra, 132 Cal.App.4th at p. 1388; Carpenter v. Jack in the Box Corp. (2007) 151 Cal.App.4th 454, 469.) An argument is not frivolous merely because it advocates a position that is “extremely unlikely” to succeed. (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.) Sanctions should not be used “‘in all but the clearest cases.’” (Ibid.)
This case is not an example of a clear-cut abuse of the anti-SLAPP statute, because a possible link between FilmLA and government action is not implausible. FilmLA works with government entities to facilitate the film permit process. As detailed in its papers, FilmLA assesses the public benefits of filming in a particular location against the private burden on affected businesses and residents; it works with the department of transportation if street or lane closures are required; it works with the police department on crowd control and safety issues, and with the fire department as well.
In an appropriate case, one could conclude that a matter involving FilmLA relates directly to a matter before a government body and is covered by the anti-SLAPP statute. There is precedent, cited by FilmLA, holding that the permit application process is an official proceeding within the meaning of section 425.16. (See Mission Oaks, supra, 65 Cal.App.4th 713.) Although this is not an appropriate case for applying the anti-SLAPP statute, it is not “totally and completely without merit” for FilmLA to attempt to convince the trial court that its actions relate to official proceedings under section 425.16 because of its status as a public benefit organization that works closely with government agencies to arrange film permits.
FilmLA correctly argued that the section 425.17 exception does not apply because it is not a commercial seller of goods or services and is not vying with plaintiffs for customers. The sanctions order was in part based on the trial court’s mistaken belief that section 425.17 applies here. Sanctions “should be used most sparingly to deter only the most egregious conduct” (In re Marriage of Flaherty, supra, 31 Cal.3d at pp. 650-651). Sanctions are not warranted in this case because FilmLA’s motion did not amount to egregious conduct.
DISPOSITION
The order awarding sanctions is reversed. Respondents to bear all costs on appeal.
We concur: ASHMANN-GERST, J., CHAVEZ, J.