California Supreme Court Strengthens Anti-SLAPP Statute in Baral v. Schnitt

California's top Court rules that anti-slapp motions may attack individual claims and need not attack entire causes of action that combine allegations of both protected and unprotected activity

By Austin Houvener
Toschi, Sidran, Collins & Doyle, APC

Aug 29, 2016

In Baral v. Schnitt (August 1, 2016), the California Supreme Court answered the question of how a special motion to strike under CCP Sec. 425.16 (California's anti-SLAPP statute) operates against a so-called "mixed cause of action" that combines allegations of activity protected by statue with allegations of unprotected activity.

Reversing the Court of Appeal, the Supreme Court ruled that an anti-SLAPP motion need not be brought against a mixed cause of action in its entirety. Rather, the Court ruled that the proper subject of an anti-SLAPP is defined as a "claim", and that therefore the motion may be used to attack individual claims within a cause of action. The Court of Appeal's application, which would have required defendant to attack the entire cause of action, "unduly limits the relief contemplated by the Legislature."

The Supreme Court's ruling is particularly significant because it reconciled a split of authority in the California Court of Appeal.

In Baral, plaintiff Robert C. Baral sued David Schnitt, owner and manager of IQ Backoffice, LLC, for fraud and multiple breaches of fiduciary duty. The original complaint alleged 16 counts supported by allegations that Schnitt secretly negotiated a sale of IQ to Schnitt's personal benefit. Baral also included causes of action for libel and slander relating to Schnitt's commissioning of an accounting firm, Moss Adams, to audit IQ and investigate possible appropriate of IQ assets. A report issued, and it concluded that Baral engaged in unauthorized transactions. It was published to a potential purchaser of IQ. The complaint included allegations that Schnitt refused to correct false allegations in the report.

Schnitt filed an anti-SLAPP motion. The defamation counts were stricken. Baral filed a first amended complaint. Schnitt filed another anti-SLAPP motion. Baral hired new counsel. By stipulation, the second motion was withdrawn and Baral filed a second amended complaint.

Baral's second amended complaint plead four causes of action: breach of fiduciary duty, constructive fraud, negligent misrepresentation, and a claim for declaratory relief. Among the facts plead in support, Baral claimed that Schnitt excluded Baral from the Moss Adams audit in order to coerce his cooperation in the sale of IQ. The second amended complaint requested an injunction to reopen the audit with Baral's participation and to bar Schnitt from interfering with any corrections Moss Adams might make to the report.

Schnitt filed another anti-SLAPP motion to strike all references to the Moss Adams audit. The trial denied the motion on the basis that the statute only applied to entire causes of action, not individual allegations. The Court of Appeal affirmed. It held that the allegations concerning the audit arose from protected activity. However, it affirmed the denial of the motion because since Baral could make a prima facie case on his claims regarding the sale of IQ, no cause of action in its entirety would be eliminated if the allegations of protected activity were stricken.

The Supreme Court reversed. In doing so, the Court addressed the conflicting authority in the Court of Appeal stemming from the Supreme Courts prior decisions in Taus v. Loftus (2007) 40 Cal.4th 683 (upholding denial of anti-SLAPP motion as to one facet of plaintiff's complaint for invasion of privacy, but striking allegations pertaining to three other incidents), and Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811. (quoting from the Court of Appeal's decision in Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, which held the opposite of Taus.)

The Court examined the Court of Appeal's decisions Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90 (anti-SLAPP motion must defeat an entire cause of action as it is pleaded in the complaint), Wallace v. McCubbin (2011) 196 Cal.App.4th 1169 (criticizing but affirming Mann), City of Colton v. Singletary (2012) 206 Cal.App.4th 751(reading Taus and holding that allegations of protected activity may be stricken from a mixed cause of action without affecting the allegations of unprotected activity), M.F. Farming Co. v. Couch Distributing Co., Inc. (2012) 207 Cal.App.4th 180(denial of anti-SLAPP motion proper since plaintiff would prevail on mixed cause of action), and Cho v. Chang (2013) 219 Cal.App.4th 521(acknowledging split of authority; held that plaintiff cannot frustrate the purposes of the SLAPP statute through a pleading tactic of combining allegations of protected and nonprotected activity under the label of one cause of action).

The Supreme Court rejected the suggestion that by merely citing Mann, that Oasis amounted to an implicit disapproval of Taus. Furthermore, neither Taus nor Oasis involved a mixed cause of action. Thus, this was the Court's first opportunity to examine the Mann rule and its implications.

Ultimately, the Court rejected the Mann court's reading of 425.16(b). Its refusal to permit anti-SLAPP motions to reach distinct claims within pleaded counts undermines the central purpose of the statute: screening out meritless claims that arise from protected activity, before the defendant is required to undergo the expense and intrusion of discovery.

The Court reasoned that while Mann suggested that summary adjudication and conventional motions to strike offer alternative means to eliminate theories within a cause of action, neither of those procedures allows a defendant, at the early stage to test the evidentiary sufficiency of claims arising from the kinds of activity given special protection by the anti-SLAPP statute.

The Court made note regarding the second step in the anti-SLAPP statute, which states "unless the court determines . . . there is a probability that the plaintiff will prevail on the claim." The Court held that these terms express the Legislature‘s desire to require plaintiffs to show a probability of prevailing on the claim arising from protected activity, not on another claim that is based on activity that is beyond the scope of the anti-SLAPP statute, but that happens to be included in the same count.Furthermore, restricting anti-SLAPP motions to indivisible causes of action, in the Court's view, would be inconsistent with the Legislature‘s use of the term "special motion to strike."