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anti-SLAPP not a deterrant to chutzpah

Healthsmart v. Kabateck, January 10, 2017, 
Dr. Drobot used to sell medical devices to Pacific Hospital that he owned through a wholly owned holding company called Healthsmart.  In January 2014, Dr. Drobot pled guilty to federal charges related to certain business schemes.  According to the plea, he sold the devices at fraudulently inflated prices for the purpose of getting reimbursements from insurance companies; he referred patients to Pacific Hospital to get a kickback on spinal surgeries; and he provided financial benefits to a senator to influence legislation.  One month later, a prior patient of Pacific Hospital filed a civil action based on those facts, and further alleged that counterfeit hardware was used in spinal surgeries.  The patient’s attorneys made statements about the lawsuit to reporters at Fox 11 news and CBS radio.  Dr. Drobot and Healthsmart sued the patient’s attorneys for defamation and related claims.
 The trial court granted attorneys’ anti-SLAPP motion and awarded about $64,000 in fees against Dr. Drobot.  Held: Affirmed.

The court used the usual two-step process to evaluate anti-SLAPP motions – Does the challenged claim arise from activity protected by the anti-SLAPP lawsuit (e.g., free speech about an issue of public interest), and, if so, can the plaintiff prove the probability of prevailing on the claim.  

Dr. Drobot argued that the attorneys were exercising their right to free speech, but not in connection with an public issue or issue of public interest.  The public interest test is problematic because it can mean anything, since almost anything can be more or less connected to some aspect of the “public interest.” To avoid over-application the “public interest” prong, one court has fashioned the test to focus on whether the conduct concerns (1) “a person or entity in the public eye”; (2) “conduct that could directly affect a large number of people beyond the direct participants”; or (3) “a topic of widespread, public interest.”

The court had no trouble finding that this prong of the test had been met: Dr. Drobot and the hospital put the devices in thousands of people, consumers have an interest in being informed of issues concerning certain doctors and health facilities, and there were assertions of a widespread illegal physician kickback scheme raise issues concerning the integrity of the health care system, which is a matter of widespread public concern.  On top of this, all of it was linked to allegations of bribing a senator.  So prong one, no problem.

The burden then shifted to Dr. Drobot to show that his claims had minimal merit.  Not a heavy burden; but he couldn’t meet it.  The attorneys’ statements to the media were protected under Civil Code section 47, under the “fair report” privilege. Civil Code section 47(d)(1) defines a “privileged publication or broadcast” to include one made “[b]y a fair and true report in, or a communication to, a public journal, of (A) a judicial, (B) legislative, or (C) other public official proceeding, or (D) of anything said in the course thereof, or (E) of a verified charge or complaint made by any person to a public official, upon which complaint a warrant has been issued.”  This privileged protects not only the media, but those who report to the media, including those attorneys who have a penchant for talking to the media.

A couple of footnotes: Attorneys should still exercise caution in how they speak to the media.  The court has modified its opinion (no change in judgment) to include the following sentence: “More particularly, the attorney defendants in this case are protected from liability under the fair report privilege in informing the news media that they have alleged that plaintiffs used counterfeit screws in spinal surgeries and were part of a scheme that supplied prostitutes, but they are not protected if they informed the media that such facts were true.” 

Second, the opinion contains this very interesting footnote about other litigation concerning against Dr. Drobot: “Other plaintiffs subsequently filed complaints against Drobot alleging similar facts and causes of action. Most of the lawsuits were filed by people who had surgery at hospitals other than Pacific Hospital. Drobot successfully demurred to the complaints of three such lawsuits and 27 other lawsuits were subsequently dismissed voluntarily. Drobot thereafter filed a verified complaint for malicious prosecution against the 30 plaintiffs and their attorneys, including the attorney defendants in this case. The attorney defendants in that malicious prosecution case filed an anti-SLAPP motion, which the court granted. Drobot appealed. That appeal, Healthsmart Pacific, Inc., et al. v. Golia, etc., et al., case No. B266311, is pending.” 

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No Rest for Employers

Augustus v. ABM Security, 12/22/16, Cal SC
The California Supreme Court has upheld the trial court’s $90 million summary judgment in favor of the security guards against their employer, ABM, over its rest break policy.  ABM had an explicit policy that required its security guards to be on-call during their 10-minute rest breaks, and required the security guards to carry pagers or radios in case there was an emergency.  The primary issue before the Court was whether an employer satisfies its obligation to relieve employees from duties and employer control during rest periods when the employer nonetheless requires its employees to remain on-call.  The Court answered, No —  An employee who is on-call during a rest break has not received a proper rest break and is entitled to an additional hour’s wage under Labor Code section 226.7.


Incredibly, this rule applies even if the on-call employee in fact took an uninterrupted rest break and regardless of whether the on-call policy actually interfered with any of the guards’ ability to take their rest breaks.  As the dissent points out, the evidence offered by ABM at the trial level tended to show that the policy did not interfere with the guards ability to take interrupted breaks, and there was no even evidence of guards being called off their breaks.  If that is the case, it is difficult to understand how the majority concluded that the employer’s policy prevented employees from taking short walks or pumping breast milk.  My favorite quote from the case is by the dissent: “In a marked departure from the approach we have taken in prior cases
concerning whether on-call time counts as work, and in sharp contrast to the
DLSE‘s views about what constitutes a duty-free break, the majority in this case
appears to conclude that a requirement to remain reachable by pager, phone, or
other portable communications device, without more, is inherently incompatible
with the requirement to provide a duty-free rest period — even if the pager never
sounds or the phone never rings.”  I added the emphasis.


And so this case has broad application and creates risks far beyond employers who explicitly require their employers to remain on-call during their rest breaks.  The key fact in the case was that guards were required to carry pagers or radios during their rest breaks, and were also required to respond to incidents during their rest breaks.  Many employers have practices that in fact amount to the same thing.  I am sure that future cases will attempt to apply this new rule to employers whose employees are simply required to keep their pagers or radios with them during their rest breaks.

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When “Victory” is Outspending Your Opponent on a Losing Case

Khan v. Shim, 12/29/2016, 6DCA

This case is one that should never have been filed. It arose from litigation following the sale of a dental practice.  Buyer sued for breach of contract and tort claims like fraud; Seller filed a cross-complaint.  Before trial, the Buyer dismissed her entire complaint; Seller proceeded to trial on the cross-complaint and lost.  The Seller sought and obtained an award of $140k in fees based on Buyer’s dismissed complaint.  The Buyer sought and obtained 90k in attorney’s fees on Seller’s failed x-complaint.  The trial court ordered the Buyer to pay the difference between the two awards. Not much of a win.

Buyer appealed the award of the entire $140k to Seller – She argued that fees should not have been awarded to seller on his contract claims because of the voluntary dismissal (a potentially very good argument), and also argued the fee clause in the contract was not broad enough to cover tort claims (a bad argument).  The fee provision provided: “If at any time after the Close of Sale, any litigation or arbitration is commenced between the parties to this Contract of Sale . . . concerning its terms, interpretation or enforcement or the rights and duties of any party in relation thereto, the party or parties prevailing in such litigation or arbitration shall be entitled, in addition to such other relief as may be granted to them, to a reasonable sum as and for their attorney fees incurred in such litigation or arbitration . . . .”   

The 6DCA reversed, agreeing with the first argument, but not the second.  Section 1717 includes the rule that when the plaintiff voluntarily dismisses before trial there is no prevailing party under the statute.  (International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, 223 (Olen).)  After Olen, section 1717(b)(2) was added to say the same thing.  But this limitation applies only to contract claims. Whether a party who has voluntarily dismissed its tort claims before trial will be liable for its opponent’s attorney fees spent in defending those tort claims is determined by the scope of the attorney’s fee clause.  

The court here had no trouble in finding that the recovery of fees for “any litigation,” “concerning” the purchase agreement’s terms, its interpretation or its enforcement, or any litigation concerning the rights and duties of the parties in relation to the contract was sufficiently broad.  The court pointed to the fact that the warranties that were allegedly violated as part of the breach of contract claim were the same warranties (promises) that were alleged to be fraudulent.  

The court remanded the Seller’s fee award for the trial court’s determination, noting that the trial court might apportion the fees between the contract and tort claims, or might find that the causes of action were too intertwined to apportion.  So the Seller made a costly mistake at the trial court – in its motion for fees, the Seller should have raised the issue of apportionment with the trial judge. If the Seller had done that, the Court would have made a decision on that issue and inoculated the fee award from appeal.  

So the Seller’s only real victory is that it spent more on attorney’s fees on his losing case than the Buyer spent on hers, and he can now recover some fraction of those fees back.  And the larger issue is that apparently neither side was able to evaluate their case in time to determine that neither should have been filed.  Early neutral evaluation techniques should be mandatory for all litigators.