Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County No. GIN056161, Michael M. Anello, Judge. Reversed with directions.
HUFFMAN, J.
Plaintiff and respondent Steve Lefkowitz (Lefkowitz or plaintiff) brought this action for damages against his former employer, defendant Community Bancorp, Inc. doing business as Community National Bank, and its president and chief executive officer Michael J. Perdue (sometimes jointly referred to as Community or the bank). Plaintiff alleged causes of action for (1) unlawful termination against public policy, (2) statutory remedies under Labor Code sections 1102.5 ("whistleblower retaliation"), (3) intentional infliction of emotional distress (IIED; in 2 counts), (4) defamation (libel per se), and (5) statutory claims under Labor Code sections 1050 et seq. (unlawful interference with employment opportunities). Lefkowitz generally alleges that in his former position as Community's appraisal manager, he was requested by his superiors to make inappropriate adjustments and alterations of appraisals in the course of his duties. He also alleges that certain statements made about him by Perdue on behalf of Community, in a letter dated August 11, 2006 to a governmental regulatory agency, the Office of the Comptroller of the Currency ("OCC"), that communicated information about Community's position on certain allegations made by Lefkowitz, amounted to libel per se, and were otherwise unprivileged and in violation of statute. (Civ. Code, §§ 45, 45a, 47, subd. (b); Labor Code, § 1050 et seq..)
As summarized in the trial court's ruling, "OCC is a federal governmental agency charged with administration and enforcement of federal banking regulations, including the investigation [&] remedying of possible banking lapses. The OCC was charged with oversight of Defendant bank, CNB."
In response to the filing of the first amended complaint (FAC), Community and Perdue brought a special motion to strike several of the causes of action in the complaint pursuant to Code of Civil Procedure section 425.16 (referred to as the anti-SLAPP statute (strategic lawsuit against public participation)). (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 (Equilon); Navellier v. Sletten (2002) 29 Cal.4th 82, 90-92(Navellier).) Specifically, the motion attacked the latter three causes of action with respect to the allegations about the August 11, 2006 letter to the OCC (the August 11 letter), referring to plaintiff's role in a pending investigation of Community's appraisal practices.
All statutory references are to the Code of Civil Procedure unless otherwise specified.
The trial court denied the motion to strike those portions of the FAC, ruling that the challenged statements were not entitled to the benefits of section 425.16, because they did not fall within its subdivisions (e)(1) or (2), the statutory language defining protected communications. The court found no applicable litigation privilege of Civil Code section 47, subdivision (b) for those statements. Because of those conclusions, the court did not reach the second portion of the statutory test under the anti-SLAPP statute, i.e., it ruled that the burden had not shifted to plaintiff to establish the probability that he will prevail on these specific claims (defamation, Lab. Code, § 1050 et seq., and IIED).
Community and Perdue appeal, contending the trial court erred as a matter of law in finding the anti-SLAPP statute was inapplicable by its terms. They argue the subject causes of action clearly arose out of protected petitioning activity, because they are based on factual allegations about Community's efforts to defend itself or to present relevant facts to its regulatory agency, during an official proceeding.
On de novo review, we agree with Community that the trial court was initially correct in the first part of its ruling, to find that the August 11 letter involved an ongoing administrative or investigative proceeding by the OCC about Community's appraisal practices, thereby qualifying the statements in general for statutory protections. However, the trial court erred in the next portion of its ruling, to find that certain statements in the letter about Lefkowitz's mental state and "irrational behavior," and his recent termination by Community, were not sufficiently connected to the actual subjects of the ongoing OCC proceeding, in order to qualify for anti-SLAPP protections. (§ 425.16, subd. (e)(1), (2).) Because Lefkowitz had recently caused the OCC investigative proceedings to take place, and they were still ongoing, we conclude that the statements in Community's letter had an adequate connection with the proceedings, as constituting a form of defense or other response to the OCC investigation, and his FAC reflects this. Community therefore made a preliminary showing the statements fell within the statutory protections.
However, even though the trial court could have found anti-SLAPP statutory protections applied as above, it erroneously denied the motion with respect to the first prong, and therefore it also erred in failing to address the second prong of the anti-SLAPP analysis. That is, the court should have resolved the issue of whether plaintiff has shown a probability of prevailing on the subject claims. In view of our analysis of the first prong of the test under these circumstances, we think the better approach on appeal is to reverse the order with directions to conduct such further appropriate proceedings in the trial court as will allow that court to make an informed decision on the second prong.
FACTUAL AND PROCEDURAL BACKGROUND
A
Background and Complaint
We will outline the background facts in a somewhat abbreviated manner, since the purpose of this opinion is not to resolve the merits of the overall dispute, but rather to determine whether the anti-SLAPP statutory scheme properly applies to this set of allegations concerning the August 11, 2006 letter. At that time, Community was a bank regulated by the OCC, and was subject to its recommendations in 2005 and 2006 that banks should separate their lending and appraisal functions. The OCC conducted a safety and soundness examination of Community in 2005, and Community responded by creating a separate appraisal department. In January 2006, Lefkowitz began working for Community in the newly created position of appraisal manager. The OCC continued its oversight of Community's appraisal department during 2006.
During the first half of 2006, Community was carrying out merger negotiations with another bank, and it made plans to eliminate its appraisal department and also to phase out Lefkowitz's position, upon completion of the merger. Meanwhile, Lefkowitz was having many disagreements with his managers at Community, regarding the manner of performance of his duties. The plan was that once the merger was completed, Lefkowitz would still be employed by Community in a different position, since his original job was being eliminated. However, due to different disputes, Community managers placed Lefkowitz on administrative leave beginning August 10, 2006.
According to Perdue's declaration, once Lefkowitz received notice that he was placed on leave, Lefkowitz sent e-mails to several Community managers, accusing them of continuing improper or criminal conduct in the appraisal functions. Community terminated his employment on August 11, 2006. Again according to Perdue, Lefkowitz responded with an e-mail stating that he had reported Community to the OCC for various alleged violations of law or policy in the appraisal functions carried out by Community.
In his opposition to the motion, Lefkowitz included an e-mail sequence dated July 27 through July 31, in which he stated to Community's credit chief that "the OCC has asked me to report any incidence of non compliance." However, the record does not appear to include copies of subsequent August 10 and 11 e-mails, as referred to by Perdue.
After notifying Lefkowitz his employment was terminated, Perdue sent the August 11 letter to the OCC, including the following information: Lefkowitz had been terminated from employment, based on "unjustified allegations" he was making against Community regarding its appraisal practices. The letter then states: "As you know, we have encountered ongoing personnel problems with Mr. Lefkowitz as discussed with our Credit Administrators and OCC Examiners at your last Asset Quality Review in Rancho Bernardo. We believe Mr. Lefkowitz's claims have no basis and we are concerned about his mental state and irrational behavior. We are handling this personnel matter [termination] as we would for any similarly situated employee."
After being terminated, Lefkowitz filed his original complaint for wrongful termination and retaliation, and discovery ensued. On May 11, 2007, he filed his FAC, which added allegations based on the August 11 letter, which he had recently received in discovery. The additional allegations include the third cause of action for IIED, in which two counts are pled: first, against the bank, based on the alleged requests to alter appraisals, and second, against Community and Perdue, based on the August 11 letter. The fourth cause of action, against Community and Perdue, sought damages for libel per se based on the August 11 letter, as damaging plaintiff in his professional reputation. The fifth cause of action under Labor Code section 1050 et seq. alleges that Community's conduct has interfered with his efforts to obtain new employment.
All of the challenged causes of action incorporate specific factual allegations made in the body of the FAC, claiming that while plaintiff was performing his job functions, several of his superiors threatened him with disciplinary action if he did not improperly alter his written appraisal review reports, so as to enable Community to increase its loan volume. He also claims the bank's chief credit officer tried to influence him to change the appraisal policy to remove sections requiring compliance with uniform professional standards. Plaintiff alleges he received such reprimands, and as a result of the pressure he was receiving, he contacted the OCC in February 2006, to explain that Community was improperly pressuring him to alter his written appraisal review reports, "so as to mislead the public to strengthen the appearance of [Community's] commercial real estate collateral assets." He advised his superior, Michael Cooney, of this contact, and he provided evidence to the OCC in July 2006 concerning his belief that Community was taking inappropriate and unlawful actions.
B
Special Motion to Strike
In response to the filing of the FAC, Community filed its special motion to strike, arguing that all allegations of defamation, IIED (count 2), and "blacklisting" arose from protected petitioning activity, since Community wrote the August 11 letter in pursuance of its right to petition the government for the redress of grievances, and to communicate with its regulator regarding a pending investigation. Perdue's declaration explained the circumstances in which the August 11 letter was written. Additionally, Community argued plaintiff would not be able to demonstrate a probability of prevailing on the subject claims, and it further contended that the statements were subject to litigation privilege, or were not libelous but were truthful expressions of opinion. Additionally, no misrepresentations had been made to any prospective employers, causing any damage. Community contended that the FAC lacked merit and sought an award of approximately $11,000 in attorney fees under section 425.16, subdivision (c).
Lefkowitz filed opposition, providing his attorney's declaration with attached exhibits showing, among other things, the sequence of e-mails from July 27, 2006 to July 31, 2006, stating that on July 27, 2006, Lefkowitz told his superior that "the OCC has asked me to report any incidence of non compliance." Lefkowitz argued he was wrongfully terminated, that Community's conduct was illegal and libelous, and that such illegal conduct could not constitute protected activity within the meaning of the anti-SLAPP definitions. Lefkowitz contended that he was entitled to an award of approximately $12,000 in attorney fees for the expenses of opposing the motion.
Reply papers were filed, contending Community had made its prima facie showing that it was engaging in a protected activity when it communicated with OCC, its regulator. Further, Lefkowitz had not shown he would probably prevail, nor that he was entitled to attorney fees.
C
Ruling on Appeal
Once the tentative ruling to deny the motion to strike was announced, the only oral argument that took place before the trial court had to do with attorney fees, which the tentative ruling had denied to either side. In its order, the trial court confirmed the tentative ruling as a whole, to deny Community's motion to strike or any fees awards. In its reasoning, the court compared the anti-SLAPP analysis to litigation privilege under Civil Code section 47, for purposes of determining whether the August 11 letter was entitled to such privilege and/or was protected speech. (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) The court noted that the FAC included allegations that Lefkowitz had contacted the OCC in February 2006 "to explain that Defendants were improperly and unlawfully pressuring Plaintiff to alter Plaintiff's written appraisal review reports and other reports, so as to mislead the public to strengthen the appearance of Defendant Bank's commercial real estate collateral assets." Further, Lefkowitz alleged that on July 27, 2006, he was contacted by the OCC and interviewed by the OCC at the bank, and, " 'At that time, Plaintiff provided to the OCC Plaintiff's evidence concerning Plaintiff's good faith belief that Defendant Bank's actions were inappropriate and unlawful.' "
With this background, the trial court drew a conclusion that there was some kind of official proceeding ongoing when the August 11 letter was written, because the July 26 e-mail suggested that "the issues were still under review by the OCC. For example, Exhibit C contains a series of e-mails dated from 7/27/06 to 7/31/06. The e-mail from Steve Lefkowitz to Mike Cooney on 7/27/06 states that 'the OCC has asked me to report any incidence of non compliance.' [Citation.] This seems to suggest that the OCC investigation was still ongoing as of 7/27/06, a mere 15 days prior to the drafting of the 8/11/06 letter to the OCC by Mr. Perdue."
Even though the trial court concluded that this "communication was made in connection with a judicial or quasi-judicial proceeding by a litigant," it went on to analyze the remaining elements of litigation privilege under Civil Code section 47, subdivision (b). Thus, with respect to certain statements in the letter sent by Community to the OCC ("[W]e believe Mr. Lefkowitz's claims have no basis and we are concerned about his mental state and irrational behavior"), the trial court concluded they did not appear to have a sufficient connection or logical relation to the specific matter under consideration by the OCC, which was "whether or not Defendants maintained an appraisal department independent from their lending department."
Likewise, the court concluded that "the statement regarding Plaintiff's mental state does not have any connection or logical relation to Plaintiff's complaint regarding alleged various violations of law or policy with respect to Defendants' appraisal practices. [Citation.]" Also, the statement, "We are handling this personnel matter as we would for any similarly situated employee," was deemed not to be sufficiently connected to the appraisal investigation, in order for any statutory protections to apply.
Accordingly, the trial court concluded that the challenged statements were not entitled to the litigation privilege of Civil Code section 47, subdivision (b), and thus the statements were not entitled to the benefits of Code of Civil Procedure section 425.16. The trial court declined to reach the second prong of the anti-SLAPP statute, on the ground that the burden had not been shifted to Lefkowitz to establish a probability that he will prevail on his claims of defamation, Labor Code sections 1052 and 1054, and IIED.
Community appeals the ruling denying its motion and fees request.
In his respondent's brief, Lefkowitz seeks an award of attorney fees as well, even though he did not file any cross-appeal of the order regarding the denial of such fees by the trial court. The issue is moot in any event in light of the reversal that we order for further proceedings on the motion.
DISCUSSION
I
INTRODUCTION
Community argues the trial court erred in denying its motion to strike the complaint. Although the trial court found for purposes of the anti-SLAPP statute that there was an official proceeding in process, in which the August 11 letter was a communication, the trial court went on to find that certain statements in the letter were not sufficiently related to the subject matter of the proceeding (separation of Community's appraisal and lending functions), and were not made "in connection with" the proceeding. It accordingly concluded that not all of the challenged speech was protected or privileged. (§ 425.16, subd. (e)(1), (2); Civ. Code, § 47.)
In response, Lefkowitz argues that only defamatory statements are concerned and they cannot be subject to protection under the anti-SLAPP statutory scheme, nor litigation privilege, because they lack a sufficient connection to the issues properly before the OCC. He also contends that he presented enough evidence in his opposition to the motion, in order to demonstrate to the trial court that he will probably prevail on his various claims. (§ 425.16, subd. (b)(1).) The trial court did not reach the latter issue, however.
Recent case law, such as Flatley v. Mauro (2006) 39 Cal.4th 299, 316 (Flatley), has clarified the relationship between the anti-SLAPP statutory scheme and litigation privilege. We agree with the trial court that a proper reading of the FAC shows that the challenged statements in the August 11 letter initially fall within the scope of the anti-SLAPP protections, for purposes of resolving the "official proceedings" portion of the first prong of its analysis. However, as will be explained, the trial court incorrectly applied the rules pertaining to litigation privilege when it decided the second portion ("in connection with an issue under consideration") of the first prong. As a result, the court did not reach the second prong, regarding the plaintiff's probability of prevailing. We find this was error and will return the matter to the trial court with directions to conduct appropriate further proceedings.
II
APPLICABLE STANDARDS
On appeal, we review de novo the trial court's ruling on the motion to strike. (Martinez v. Metabolife International, Inc. (2003) 113 Cal.App.4th 181, 186 (Martinez).) Whether section 425.16 applies to a particular complaint amounts to a legal question subject to de novo review. (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 906(Kashian).)
A cause of action may only be stricken under the anti-SLAPP statute if it arises from protected speech or petitioning activity and lacks even minimal merit. (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 105-106 (Mann); Navellier, supra, 29 Cal.4th at p. 89.) "Where a cause of action refers to both protected and unprotected activity and a plaintiff can show a probability of prevailing on any part of its claim, the cause of action is not meritless and will not be subject to the anti-SLAPP procedure." (Mann, supra, at p. 106.) The principal thrust or gravamen of the plaintiff's cause of action is considered in determining whether the anti-SLAPP statute applies. (Martinez, supra, 113 Cal.App.4th 181, 186-188). Where arguably unprotected statements are alleged, but they are only incidental or collateral to a cause of action based essentially on protected activity, the anti-SLAPP statutory scheme may still provide protection. (Ibid.)
In an anti-SLAPP motion to strike, the moving defendant is first required to make a prima facie showing the plaintiff's action is subject to section 425.16, by showing the defendant's challenged acts were taken in furtherance of constitutional rights of petition or free speech as defined by the statute. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733.) Normally, if a defendant satisfies the first portion of this test, the trial court next addresses whether it is reasonably probable the plaintiff will prevail on the merits at trial. (§ 425.16, subd. (b)(1).) However, a court need not reach this second prong of the analysis if the "arising from protected conduct" requirement is not met. (Equilon Enterprises, supra, 29 Cal.4th 53, 67; Navellier, supra, 29 Cal.4th 82, 88-89.)
Where "a factual dispute exists about the legitimacy of the defendant's conduct, it cannot be resolved within the first step but must be raised by the plaintiff in connection with the plaintiff's burden to show a probability of prevailing on the merits." (Flatley, supra, 39 Cal.4th 299, 316-320.) In Flatley, the Supreme Court only dealt with the first step, because the illegality of the defendant's conduct, extortion, was not subject to factual dispute. (Id. at p. 320.) It is now established that section 425.16 cannot be invoked by a defendant whose allegedly protected activity has been conclusively demonstrated to have been illegal as a matter of law, because such illegal conduct is not protected by constitutional guarantees of free speech and petition. (Ibid.) This holding arose in a case of extortion and amounts to a narrow exception, as pointed out in that majority opinion. (Id. at p. 32, fn. 16.) The concurring opinion in Flatley, as we will discuss further, would have found that the motion to strike the complaint for civil extortion and other claims was properly denied under either prong. (Id. at pp. 334-335 (conc. opn. of Werdegar, J.).)
Under subdivision (e) of section 425.16, an " 'act in furtherance of a person's right of petition or free speech' " includes, as contested here: "(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 . . . ." Although Lefkowitz in his brief makes some references to the "issue of public interest" standard in section 425.16, subdivision (e)(4), that issue was not litigated below and we need not consider it here.
III
STATUTORY SCHEME: FIRST PRONG
Two subissues are presented on the general question of whether, on a factual basis, Lefkowitz's causes of action for defamation, emotional distress, and interference with prospective employment opportunities arose from Community's act "in furtherance of the person's right of petition or free speech." (§ 425.16, subd. (b)(1).) The first question is whether the statements were made in connection with an official proceeding, and the second is whether the statements were made "in connection with an issue under consideration or review" in that proceeding. (§ 425.16, subd. (e)(1), (2); italics added.)
A. Official Proceeding: Section 425.16, subdivision (e)(1), (2)
As a threshold matter, we agree with the trial court's characterization of the OCC investigation as an official proceeding. In Flatley, supra, 39 Cal.4th 299, 322, footnote 11, the Supreme Court relied on Briggs v. Eden Council for Hope & Opportunity (1999)19 Cal.4th 1106, 1115, as previously establishing that communications that are preparatory or in anticipation of bringing an action or other official proceeding may fall within the protection of section 425.16. " '[C]ourts have adopted "a fairly expansive view of what constitutes litigation-related activities within the scope of section 425.16." [Citation.]' [Citation.] Accordingly, although litigation may not have commenced, if a statement 'concern[s] the subject of the dispute' and is made 'in anticipation of litigation "contemplated in good faith and under serious consideration," ' [citations] then the statement may be petitioning activity protected by section 425.16." (Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1268 (Neville).)
Case law has recognized that when a citizen writes a letter to the state Attorney General seeking to initiate an official investigation about certain allegations of impropriety or illegality, the letter may be subject to litigation privilege, absolute or conditional. (Kashian, supra, 98 Cal.App.4th 892, 915; Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 781-783 (Dove) [an investigation by the Attorney General constitutes an "official proceeding" within the meaning of Civ. Code, § 47, subd. (b)].) Such analyses, relating to requests for investigations of matters properly within the purview of a governmental agency, have also been used in the anti-SLAPP context, to determine that protected petitioning or speech were involved. (Dove, supra, at pp. 783-785; Mann, supra, 120 Cal.App.4th at pp. 103-105; also see ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1008-1010 (ComputerXpress) [reports of alleged misconduct to SEC].)
The wide ranging allegations of the FAC show that the OCC had been notified of Lefkowitz's concerns several times between February and July, 2006, and the OCC was continuing to take information from him and to investigate Community's appraisal practices. Community had been involved with several other OCC procedures in connection with the separation of the lending and appraisal functions, and it was working with the OCC on an ongoing basis. Community was not required to seek any particular or technical form of "redress," in order to communicate with its regulator on issues subject to regulation, in pursuit of its rights to present its positions on matters of current official concern.
We are satisfied that the official proceeding definition in the anti-SLAPP statute applies here. We next turn to the interplay of the privilege issues with anti-SLAPP definitions.
B. Litigation Privilege in the Anti-SLAPP Context
The trial court's ruling, issued in August 2007, reasoned that if the challenged statements were not entitled to the litigation privilege of Civil Code section 47, subdivision (b), then logically, the statements should not be entitled to the benefits of section 425.16. Accordingly, much of the parties' dispute in the briefs is framed around whether the August 11 letter is subject to litigation privilege, and therefore is also protected conduct under the anti-SLAPP statute. However, in 2006, the Supreme Court clarified that "litigation privilege and the anti-SLAPP statute are substantively different statutes that serve quite different purposes . . . ." (Flatley, supra, 39 Cal.4th 299, 322.) "There is, of course, a relationship between the litigation privilege and the anti-SLAPP statute. Past decisions of this court and the Court of Appeal have looked to the litigation privilege as an aid in construing the scope of subdivision (e)(1) and (2) with respect to the first step of the two-step anti-SLAPP inquiry-that is, by examining the scope of the litigation privilege to determine whether a given communication falls within the ambit of subdivisions (e)(1) and (2)." (Flatley, supra, at pp. 322-323.) However, problems will arise if the two different types of protection are treated alike.
In Ruiz v. Harbor View Community Ass'n. (2005) 134 Cal.App.4th 1456, 1467, footnote 3 (Ruiz), the appellate court stated a view previously held by many authorities, that "Subparts (1) and (2) of section 425.16, subdivision (e), but not subparts (3) and (4), are co-extensive with the litigation privilege of Civil Code section 47, subdivision (b). [Citation.]" (Also see A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1125-1126.) However, that view has been superseded by the statements in Flatley, supra, 39 Cal.4th 299, cited above, distinguishing between the purposes of those two doctrines. (Neville, supra, 160 Cal.App.4th at pp. 1262-1263.)
In Flatley, supra, 39 Cal.4th 299, the problem was that anti-SLAPP protections were being claimed for an extortion attempt that was made in the guise of prelitigation conduct. The court distinguished between litigation privilege, in which some illegal conduct may nevertheless be protected, and the anti-SLAPP statute, which was meant to be a procedural device for screening out meritless claims. The Supreme Court held that in the anti-SLAPP context, where the defendant has been sued for allegedly protected speech or conduct, in those rare cases in which "the defendant concedes, or the evidence conclusively establishes," (id. at p. 316) that the assertedly protected speech or petition activity was illegal as a matter of law, such a "defendant is precluded from using the anti-SLAPP statute to strike the plaintiff's action." (Id. at p. 320.) The high court said that "the question of whether the defendant's underlying conduct was illegal as a matter of law is preliminary, and unrelated to the second prong question of whether the plaintiff has demonstrated a probability of prevailing, and the showing required to establish conduct illegal as a matter of law-either through defendant's concession or by uncontroverted and conclusive evidence-is not the same showing as the plaintiff's second prong showing of probability of prevailing." (Id. at p. 320.)
Therefore, "Civil Code section 47 does not operate as a limitation on the scope of the anti-SLAPP statute. The fact that Civil Code section 47 may limit the liability of a party that sends to an opposing party a letter proposing settlement of proposed litigation does not mean that the settlement letter is also a protected communication for purposes of section 425.16." (Flatley, supra, 39 Cal.4th 299, 325.) "Nor do the two statutes serve the same purposes. The litigation privilege embodied in Civil Code section 47, subdivision (b) serves broad goals of guaranteeing access to the judicial process, promoting the zealous representation by counsel of their clients, and reinforcing the traditional function of the trial as the engine for the determination of truth. Applying the litigation privilege to some forms of unlawful litigation-related activity may advance those broad goals notwithstanding the 'occasional unfair result' in an individual case. [Citations.]" (Id. at p. 324.) In contrast, anti-SLAPP protections will apply to conduct in furtherance of valid speech and petition rights. (Id. at pp. 324-325.)
In the case before us, the allegedly invalid conduct attacked by the complaint is Community's "defamatory" or "unlawful" statements that interfered with plaintiff's well-being and opportunities. Those are lesser evils than extortion, but the analysis in Flatley, supra, 39 Cal.4th 299, about "validity" is still applicable for purposes of our examination of whether the challenged statements by Community are entitled to protection under the anti-SLAPP statute, as equivalent to free speech or constitutionally protected, valid communications. Litigation privilege alone is not dispositive.
For these reasons, we decline to adopt or address in detail Community's current proposal that we establish a new test for the coverage of the anti-SLAPP statutory scheme, that would have been based upon earlier litigation privilege authority. Specifically, Community cites to Lewis v. Linn (1962) 209 Cal.App.2d 394 and Sacramento Brewing Co. v. Desmond, Miller & Desmond (1999) 75 Cal.App.4th 1082, 1088, for the proposition that statements or publications in court, or in any official proceeding, should be considered to be privileged and protected, unless they are " 'palpably irrelevant to the subject matter.' " (Ibid.) Rather than relying on litigation privilege theories, we should look to the purposes of the anti-SLAPP statutory scheme in order to define the extent of protected speech or conduct.
C. Analysis of "In Connection With Subject Issues" Requirement
Under the applicable authority, we seek to determine whether the challenged statements about Lefkowitz's mental health, credibility and personnel status were made "in connection with an issue under consideration or review" in the official OCC investigation or proceeding. (§ 425.16, subd. (e)(2).) The trial court stated in its ruling: "The statement, 'we believe Mr. Lefkowitz's claims have no basis and we are concerned about his mental state and irrational behavior,' does not appear to have a connection or logical relation to the specific matter under consideration by the OCC, 'whether or not Defendants maintained an appraisal department independent from their lending department.' It also appears that the statement regarding Plaintiff's mental state does not have any connection or logical relation to Plaintiff's complaint regarding alleged various violations of law or policy with respect to Defendants' appraisal practices."
Next, the trial court ruled, "it appears that Plaintiff's termination and the reasons therefore were simply a personnel matter separate from the OCC investigation. This is best evidenced by the letter sent by Defendants to the OCC wherein the Defendants state, 'We are handling this personnel matter as we would for any similarly situated employee.' "
In Mann, supra, 120 Cal.App.4th 90, this court addressed the issue of whether certain acts by the defendants, reporting a suspected crime to interested governmental agencies, amounted to protected speech because they were "made in connection with an issue under consideration or review" in an official proceeding (§ 425.16, subd. (e)(2)). In that case, it was not disputed that such reports properly fell within those definitions, and that they were solicitations of official investigations regarding the plaintiff's business practices. However, claims of privilege were made, and therefore the anti-SLAPP question presented was "whether the activity or facts underlying the defamation and trade libel claims are 'based on' acts in furtherance of defendants' right to petition the government. [Citation.]" (Mann, supra, 120 Cal.App.4th 90, 103-104.)
In Mann, the defendants were former associates and competitors of the plaintiff, and they allegedly told plaintiff's customers that plaintiff was using illegal chemicals in its business and discharging them into the water supply, and defendants had also reported such alleged business practices to the National Response Center and the National Terrorist Hotline, resulting in an investigation. We concluded that the basis of the defamation cause of action, among others, was not only the comments made to plaintiff's customers, "but also defendants' reports to governmental agencies-petitioning activity protected under section 425.16, subdivision (e)(2)." (Mann, supra, 120 Cal.App.4th 90, 104-105; italics added.) Also, the plaintiff was able to make out a prima facie case that it would prevail on defamation claims. (Id. at p. 107.) Ultimately, this court affirmed the trial court's order denying the defendants' motion to strike, with some exceptions not relevant here. (Id. at pp. 112-113.)
In Mann, supra, 120 Cal.App.4th 90, when we examined the defamation cause of action and supporting materials, we noted that the defendants' "reports to governmental agencies formed a substantial part of the factual basis for the defamation and trade libel claims," so that accordingly, the defamation claim was properly subject to the anti-SLAPP statute. (Id. at p. 104.) We relied on Navellier, supra, 29 Cal.4th at page 94, as authority that a court need not inquire into the "validity" of the speech, at the stage of determining whether the anti-SLAPP statute potentially applies. Instead, the validity of the speech becomes a proper concern in the second prong of the anti-SLAPP test, in which the plaintiff must show a reasonable probability of prevailing. (Ibid.)
Our case likewise involves questions about the nature of the challenged statements to the governmental agency, and whether they were legitimately directed to the type of issues properly before that agency. Since plaintiff is claiming those statements are actionable as defamation, etc., their validity is called into question. In the second prong of the anti-SLAPP test, litigation privilege is an appropriate consideration to decide if plaintiff's action should be barred. (Flatley, supra, 39 Cal.4th at pp. 322-323; Mann, supra, 120 Cal.App.4th 90, 103-104.) Before we can address that secondary question, however, we must determine whether, at the motion stage, the burden should have been shifted to plaintiff to show a probability of prevailing.
In applying the definitions of protected speech in section 425.16, subdivisions (e)(1) and (2) in the first prong of the anti-SLAPP test, we ask whether Community adequately showed that the August 11 letter was "made in connection with an issue under consideration or review [in] any other official proceeding authorized by law." The FAC and supporting and opposing papers on the motion contain allegations and undisputed evidence that Lefkowitz contacted the OCC as early as February 2006, and remained in contact with its representatives as late as July and August 2006, in the course of making his allegations of improper dealings at Community with regard to its conduct of its appraisal and lending functions. When the letter was written August 11, Community had just fired Lefkowitz and was explaining to interested officials at the OCC that it believed it had a meritorious defense to the allegations before the OCC. The issues involved in the proceeding, which Lefkowitz had initiated, could not be evaluated without a consideration of the credibility of Lefkowitz, as the person communicating his concerns about his employment duties to the regulator of that employer. Public policy protects the right of a regulated entity to communicate with its regulator on subjects being investigated by the regulator.
When we examine the allegations of the FAC as a whole, we conclude the challenged statements about Lefkowitz's mental state and employment status fall within the protected definitions, under the second portion of the first prong of the test. The issues that Lefkowitz was seeking to bring before the OCC were whether his superiors at Community were pressuring him to inappropriately alter his appraisal review reports, and to change the appraisal policy to delete reference to applicable professional standards. Those allegations, and the respective declarations filed in connection with the motion, are inextricably linked to the validity of Community's practices, as disclosed to the OCC, including its representations to the OCC that it was acting lawfully. Community had a right to defend itself to its regulator, and these statements should as a matter of law be construed as furthering its right to consult and petition governmental agencies in carrying out its business, under oversight of its regulators.
Even though statements were made about Lefkowitz 's mental health and professional judgment, and they were derogatory, they must nevertheless be considered to be legitimately connected to the issues before the OCC regarding the conduct of Community's business, since Lefkowitz was a responsible official in dealing with that specific business during the relevant time periods, and had taken action to bring those issues before the OCC. His motivations and credibility in doing so were not collateral to the subject of the investigation. It makes no difference that Community had already phased out its appraisal department and was seeking to find another place in the organization for Lefkowitz immediately before the letter was written. As to the first prong of the analysis, the facts about his termination are not merely a personnel matter that is separate from the OCC investigation, and this is clearly reflected in the first two causes of action that were not subject to the anti-SLAPP motion (wrongful termination and whistleblower retaliation).
Because the trial court did not reach the issue of plaintiff's probability of prevailing, due to its incorrect evaluation of the challenged statements as significantly unrelated to the subject proceeding, we cannot avoid a discussion of whether that decision not to rule on the second prong was also erroneous. This requires another look at Flatley, supra, 39 Cal.4th 299, and its guidance on how and when courts should evaluate the validity of challenged statements.
D. Validity of Statements
In Flatley, supra, 39 Cal.4th 299, the Supreme Court majority opinion and concurring opinion debated the proper interpretation of Navellier, supra, 29 Cal.4th 82, with respect to when the validity or legality of the challenged speech should be addressed in the anti-SLAPP motion procedures. (Flatley, supra, at pp. 318-319, id. at pp. 334-335 (conc. opn. of Werdegar, J.).) The majority in Flatley says that in Navellier, it only addressed on a limited basis any claim that " 'the anti-SLAPP statute does not apply to this action because any petitioning activity on which it was based was not "valid." ' [Navellier, supra, 29 Cal.4th at p. 94.]" (Flatley, supra, at p. 319.) The majority in Flatley chose to resolve the very narrow issue before it, about the invalidity of that extortionate speech, solely through the first prong of the anti-SLAPP procedure, and held it was not protected. However, as noted in both the majority and the concurring opinion, the ordinary rule is that "any claimed illegitimacy of the defendant's conduct must be resolved as part of a plaintiff's secondary burden to show the action has 'minimal merit.' " (Flatley, supra, at p. 319, id. at pp. 334-335 (conc. opn. of Werdegar, J.), citing Navellier, supra, 29 Cal.4th at p. 87.)
Since this case, unlike Flatley, supra, 39 Cal.4th 299, does not involve extreme conduct and extraordinary facts such as extortion, the ordinary rules of procedure for anti-SLAPP motions will apply, such that the analysis should not stop at the first prong. (See Flatley, supra, at p. 332, fn. 16.) Many authorities have treated defamation claims that are challenged by anti-SLAPP motions to strike as normally subject to the requirements of the second prong of the analysis, in which the plaintiff must show a reasonable probability of prevailing. (Kashian, supra, 98 Cal.App.4th at pp. 910-911; Dove, supra, 47 Cal.App.4th 777, 781-785; Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 823-827 (Wilcox) (disapproved on another point in Equilon, supra, 29 Cal.4th at p. 68); Computer Xpress, supra, 93 Cal.App.4th at pp. 1010-1014; Ruiz, supra, 134 Cal.App.4th at pp. 1470-1474.) For example, the plaintiff must address the issues of malice, opinion, and truthfulness, and seek to overcome constitutional defenses. (See Ruiz, supra, at pp. 1471-1473; Kahn v. Bower (1991) 232 Cal.App.3d 1599, 1607-1609.) Merely alleging that statements are false or libelous does not make them so. (See Kashian, supra, at pp. 930-932.)
Here, as in Wilcox, supra, 27 Cal.App.4th 809, 823-827, if a defendant bringing a motion to strike has shown on a prima facie basis that the challenged speech may be protected, then the plaintiff must address the burden of demonstrating the merits of its causes of action, including a defamation claim. Plaintiff can show any constitutional defenses are not applicable to the case as a matter of law, or plaintiff can seek to negate them on a factual basis. (Id. at p. 824.)
In conclusion, the trial court should not have found that the first prong of the anti-SLAPP analysis was dispositive or justified a flat denial of the Community motion to strike Lefkowitz's causes of action (defamation, emotional distress, and interference with prospective employment opportunities), with respect to the statements that Community made about his mental health, professional judgment, and personnel status. The record shows sufficient facts and circumstances that bring the challenged statements within the scope of the statutory definitions of protected speech in the anti-SLAPP statutory scheme, both with respect to an ongoing official proceeding, and in connection with the specific issues under consideration by the OCC. (§ 425.16, subd. (e)(2).) However, that is not the end of the analysis.
IV
REMAINING ISSUES: SECOND PRONG; ATTORNEY FEES
Because of the conclusions reached above, regarding the first prong of the anti-SLAPP analysis, and because of the limited scope of the trial court's ruling, several issues remain for determination as to whether plaintiff has adequately showed a probability of prevailing in the action, under the second portion of the applicable test. (§ 425.16, subd. (b)(1).)
Regarding Lefkowitz's causes of action for defamation and emotional distress, Community is asserting several defenses that he must overcome to demonstrate a probability of prevailing. In Kashian, supra, 98 Cal.App.4th 892, issues were raised about whether the statements were truthful or merely opinion, and this case is no different. "Malice may be established by showing the publisher of a defamatory statement lacked reasonable grounds to believe the statement was true, and therefore acted with a reckless disregard for the rights of the person defamed. [Citation.] However, negligence is not malice. [Citation.] 'It is not sufficient to show that the statements . . . were inaccurate, or even unreasonable. Only willful falsity or recklessness will suffice. "It is only when the negligence amounts to a reckless or wanton disregard for the truth, so as to reasonably imply a wilful disregard for or avoidance of accuracy, that malice is shown." ' [Citations.]" (Id. at p. 931.) Thus, it is not enough for a plaintiff to merely assert that allegedly defamatory statements are false, or that they were malicious. (Ibid.) In that case, litigation privilege was deemed to be dispositive on the merits, but under the approach taken by the Supreme Court in Flatley, supra, 39 Cal.4th 299, we can no longer consider that to be a sufficient showing on these issues, without a fuller analysis of both prongs of the anti-SLAPP procedure.
As to all of Lefkowitz's claims, including unlawful interference with prospective employment opportunities (Lab. Code, § 1050 et seq.), he may now be required to demonstrate his probability of prevailing on his claim that the statements about his professional judgment, mental state and termination of employment did not fall within the scope of legitimate protected speech that was intended to further Community's constitutional right to communicate with its regulator regarding charges against it. The subject matter of Lefkowitz's personal qualities may or may not be a proper subject of opinion, in the context of complaints he made to an official governmental body. (Ruiz, supra, 134 Cal.App.4th at pp. 1470-1473.) The extent to which these statements were published is not clear. Likewise, Community's decision to terminate him from employment may or may not be a personnel matter that was entirely separate from the OCC investigation, but such factual issues cannot be resolved at the anti-SLAPP stage of the proceedings, except upon the preliminary basis outlined in the statute. (Ibid., Flatley, supra, 39 Cal.4th at p. 316.)
At this time, we express no opinion on the relative merits of the parties' claims and defenses, but instead determine only that the order must be reversed and the matter returned to the trial court, with directions to allow any appropriate further proceedings under section 425.16 to complete the statutory analysis. Although this court could address the second prong issues on a de novo basis in this appeal, the better approach is to allow the parties to make any necessary adjustments in their positions, by application to the trial court, in light of the views expressed in this opinion.
Currently, no award of attorney fees to either side has been made under section 425.16, subdivision (c), and this was an appropriate ruling by the trial court. No attorney fees will be awarded on appeal. In the further proceedings to be conducted, any renewal of such requests shall be reserved for the trial court's decision. (Ibid.)
DISPOSITION
The order denying the motion to strike or any award of attorney fees and costs is reversed with directions to allow further appropriate proceedings in accordance with the views expressed in this opinion. Each party to bear its own costs.
WE CONCUR: McCONNELL, P. J., McINTYRE, J.