Internet & Free Speech Cutting Edge Legal Issues [The SLAPP Suits & Motions]
Introduction – Case hypothetical
I am going to try to make this blog easy to understand by starting right off with a case example. Okay, let's say your company sells SOFTWARE and you a technology company headquartered in the East Bay or Silicon Valley or San Francisco. And let's say you have an ex-employee leave your company and then say the worst things about working for your company (for example, they over work you in violation of the wage and hour laws, they use software without having proper licenses, and the work environment is unsafe, hostile, and sexually harassing). Now as the owner of the software company you are FUMING and RAGING because this is causing your business serious online reputational damage. It's false you say (well mostly false), and you think this raises issues over publicizing private facts, defamation (libel or slander), breach of company policy or disclosure of private trade secrets. So here's how the “SLAPP SUITS” play out in general.
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General process of SLAPP and ANTI-SLAPP
So the lawsuit process is initiated (assuming your business has weighed the pros and cons of moving forward and there is no better way to resolve it – don't forget to check out my podcast on how to remove negative reviews from Google), and it might go something like this:
- Software company files a lawsuit in federal court challenging defamation and theft of corporate trade secrets, defamation, and CIVIL RICO. Let's assume the company really doesn't believe it has much of a case (because for the most part the review was an honest opinion, and may have had its share of truth), but the company knows they have more money than you and probably access to more litigation and trial lawyers who can file suit and try to take you down. So they file the lawsuit, not totally believing in the claims asserted, but seeking to “chill your free speech” instead. This is called THE SLAPP LAWSUIT (SLAPP = Strategic Lawsuit Against Public Participation). You file your motion with the Court, and then serve it on the other party.
2. Now the other party who posted the negative comments on line, let's say on Facebook, Twitter, a BBB review, Yelp review, Avvo review or other Complaint board, they are up in arms over being sued for what they perceive was nothing more than being honest about the companies labor practices (which may also be protected by the Fair Labor Standards Act), and they do not want to be pushed around by an aggressive internet defamation lawyer IP firm or high priced litigator who may try to drag the case on. So what can be done in this situation? One option is to file the “ANTI-SLAPP” LAWSUIT which is another of saying to a Court or Judge:
“There is no lawsuit here, there is no legitimate ability for the Plaintiff to win their case, and since what they are really trying to do is just intimidate me into a false settlement, and chill my speech, I am going to file the motion (usually should be filed with 60 days of being served a copy of the complaint). So the Defendant now files a “special motion to strike” called an Anti-SLAPP motion and hoping to get the case dismissed for the Plaintiff improperly filing a federal court lawsuit for the purpose of doing little more than “chilling” your free speech or “silencing” your legitimate rights of political expression, what you believe come under your First Amendment Rights!” Click below to watch a quick video on First Amendment – what most people just really don't have a clue about.
Here is one Anti-SLAPP case from the Northern District of California
Here is how the anti-SLAPP works in California
Attorney Steve tells you more about the First Amendment than most people will ever know.
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A SLAPP suit is “a meritless suit filed primarily to chill the defendant's exercise of First Amendment rights.” See Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2, 33 Cal.Rptr.2d 446.). See also Navarro v. IHOP Properties, Inc., 134 Cal. App. 4th 834, 839, 36 Cal. Rptr. 3d 385, 389 (2005).
What test will the Courts use in analyzing wether the ANTI-SLAPP motion will succeed (if the motion succeeds, it could strike the complaint and CASE OVER – so in some cases it could be worth a try to respond this way. Keep in mind, the losing party could very well end up paying the other party's costs and attorney fees if they lose the motion.
At any rate, A court considering a motion to strike under the anti-SLAPP statute must engage in a two-part inquiry.
A. First, a defendant must make an initial prima facie showing that the plaintiff's suit “aris[es] from” activity protected by the Anti–SLAPP statute. Brill Media Co. v. TCW Group, Inc., 132 Cal.App.4th 324, 329, 33 Cal.Rptr.3d 371 (2005); Cal.Code Civ. Pro. § 425.16(b)(1). In performing this analysis, the California Supreme Court has stressed, “the critical point is whether the plaintiff's cause of action itself was based on an act in furtherance of the defendant's right of petition or free speech.” City of Cotati v. Cashman, 29 Cal.4th 69, 78, 124 Cal.Rptr.2d 519, 52 P.3d 695 (2002) (emphasis in original). In other words, this is where the Defendant in the lawsuit we are talking about, has to put together their legal arguments as to how this is “free speech” or how its protected activity as a “whistleblowing in the software compliance case and seeking a reward from the BSA or SIIA)” This is where showing the true nature of the first amendment and the grounds for the action or conduct (ex, the posting of a review, or a shame video, or initiating a complaint on a gripe page. We ready to explain what your first amendment free speech rights are.
B. If the defendant is able to make this threshold showing, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the challenged claims. In practice, a plaintiff must show that the claim is “both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” Jarrow Formulas, Inc. v. LaMarche, 31 Cal.4th 728, 744, 3 Cal.Rptr.3d 636, 74 P.3d 737 (2003). Claims for which Plaintiff is able to satisfy this burden are “not subject to being stricken as a SLAPP.” Id. Flores v. Emerich & Fike, 416 F. Supp. 2d 885, 896 (E.D. Cal. 2006). If the defendant is able to make this threshold showing, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the challenged claims. In practice, a plaintiff must show that the claim is “both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” Jarrow Formulas, Inc. v. LaMarche, 31 Cal.4th 728, 744, 3 Cal.Rptr.3d 636, 74 P.3d 737 (2003). Claims for which Plaintiff is able to satisfy this burden are “not subject to being stricken as a SLAPP.” Id. Flores v. Emerich & Fike, 416 F. Supp. 2d 885, 896 (E.D. Cal. 2006).
C. It will be the defendants obligation under this scenario to prove that a legitimate free speech issue is being “chilled.” If not, the Defendants cannot bury their initial burden of proof and the motion could be over with you paying their attorney fees (ouch). Even if you with this section of the two part analysis, you still have the need to prove that the Plaintiff can show through admissible evidence that they can create a “prima facie case” for each of your listed causes of action in the complaint. If either the Defendant cannot meet their burden of proof, or the Plaintiff cannot, then there will be no winner on the motion to strike, On the other hand, if Defendant shows good faith first amendment speech in making the motion and can argue their first amendment legitimately covers your statement of conduct, then you could win, as long as the Defendants are not able to show a prima facie case that they would enough admissible proof to win their case. So it can be a tricky analysis in ruling on this type of situation.
D. One way for a Plaintiff to try to jump over all these legal hurdles and come up with the proper evidence or key arguments, is to try to seek an “EXEMPTION” from having to comply with the CCP requirements. But to do this, you need to be able to meet a narrow test. The gist of this “exemption” approach is to make it so that the Defendant has no defense and no argument to bring it in the first place and by proving the two exemptions don't apply, you can me the “Commercial argument defense.” Here's a look at this tool in the social media litigators toolbox.
The CCP 425.17(c) exemption – Cuts of the ability of court to hear the case!
Plaintiffs also argue that a second exemption, set forth in § 425.17(c) applies in this case. Section 425.17(c) provides: Section 425.16 [the Anti–SLAPP provisions] d0 not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services, including, but not limited to, insurance, securities, or financial instruments, 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, or the statement or conduct arose out of or within the context of a regulatory approval process, proceeding, or investigation, except where the statement or conduct was made by a telephone corporation in the course of a proceeding before the California Public Utilities Commission and is the subject of a lawsuit brought by a competitor, notwithstanding that the conduct or statement concerns an important public issue. Essentially, this provision a(if both prongs can be proven) exempts from the Anti–SLAPP statute any statements or conduct made by a seller or lessor of goods and services during the course of a commercial transaction either to a potential buyer or customer. However, the exemption only applies to causes of action brought against “person[s] primarily engaged in the business of selling or leasing goods or services….” See The Fike Defendants, who are attorneys, are not covered by the plain language of this provision, even though, technically, as attorneys, they market legal services to the public. Their alleged actions here do not pertain to efforts to market their services nor were representations made to potential consumers or to gain a competitive advantage. Flores v. Emerich & Fike, 416 F. Supp. 2d 885, 898-99 (E.D. Cal. 2006). See Cal. Civ. Proc. § 425.17(c). This exception was “intended to apply to commercial disputes.” Brill Media Co. v. TCW Group, Inc., 132 Cal.App.4th 324, 342, 33 Cal.Rptr.3d 371 (2005). See Sharper Image Corp. v. Target Corp., 425 F. Supp. 2d 1056, 1076 (N.D. Cal. 2006).
More on the “Commercial Speech Exception” to anti-SLAPP
So again, California Civil Procedure Code § 425.17 lays out several exemptions from anti-SLAPP liability. Among them is § 425.17(c), the “commercial speech exemption.” TYR Sport Inc. v. Warnaco Swimwear Inc., 679 F.Supp.2d 1120, 1142 (C.D.Cal.2009). Under this exemption, causes of action arising from commercial speech are exempt from the anti-SLAPP law when: (1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services; (2) the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person's or a business competitor's business operations, goods, or services; (3) the statement or conduct was made either 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 in the course of delivering the person's goods or services; and (4) 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. See Simpson Strong–Tie Co. v. Gore, 49 Cal.4th 12, 30, 109 Cal.Rptr.3d 329, 230 P.3d 1117 (2010). Weiland Sliding Doors & Windows, Inc. v. Panda Windows & Doors, LLC, 814 F. Supp. 2d 1033, 1036-37 (S.D. Cal. 2011). So this is the four factor test the courts will look at when determining whether or not to permit the exception to negate the Anti-SLAPP.
The Simpson factors
The factors the Courts will look at under CCP 425.17(c) were discussed in the case of Simpson Strong-Tie Co., Inc. v. Gore, 49 Cal. 4th 12, 30, 230 P.3d 1117, 1129 (2010), some call it the “ Simpson Factors.”
For these reasons, we interpret section 425.17(c) to exempt from the anti-SLAPP law a cause of action arising from commercial speech when
(1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services;
(2) the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person's or a business competitor's business operations, goods, or services;
(3) the statement or conduct was made either 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 in the course of delivering the person's goods or services;
(4) the intended audience for the statement or conduct meets the definition set forth in section 425.17(c)(2).
A case that exampled a “press release” that tried to seek to knock out an Anti-SLAPP challenge to a lawsuit was 1. Press Release The Press Release begins by detailing Weiland's lawsuit against Panda for infringement, inducement of infringement, and contributory infringement of patent nos. 7,007,343 and 6,792,651. (Amended Counterclaim, Exhibit C, ECF No. 59.) It then expounds on the innovations that Weiland bestowed on the door and window industry. ( Id.) The last paragraph discusses the possibility of tripling damages against Panda and a possible permanent injunction barring the manufacture and sale of Panda products. And the Press Release closes with a proposition: “[c]ontractors and dealers who wish to avoid liability for themselves and their customers for selling an infringing product should contact Weiland directly to discuss the possible licensing of non-Weiland patented drainage track.” Other than the main text, the Press Release also contains other tidbits. It compares Weiland Track and Panda Track side-by-side and identifies several features of the Weiland track: flush track, 16′ Tall Liftslides, Hurricane Ratings, and 13 1/2′ Tall Bifolds. It also provides contact information if anyone wanted “more information about [Weiland's] products.” Panda considers the Press Release a marketing ploy. The Press Release was allegedly sent “at the request of Weiland's dealers,” who “believed a Press Release would help their efforts to sell Weiland's products against Panda.” (Amended Counterclaim ¶ 18.) Indeed, the “dealers were not specifically concerned with Panda's sales of the accused infringing drainage track.” ( Id.) Panda alleges that Weiland “placed the Press Release on its website and distributed it to several thousand recipients, including its customers, vendors, and to trade publications that advertised Weiland products and that had not advertised any Panda product.” The first question before the Court is whether Panda's intentional interference with prospective business advantage claim based on Weiland's Press Release is exempt from anti–SLAPP liability under the commercial speech exemption. The Court looks toward the four Simpson factors. Simpson Strong–Tie Co., 49 Cal.4th at 30, 109 Cal.Rptr.3d 329, 230 P.3d 1117. First, the Court finds that Panda's cause of action is against a “person primarily engaged in the business of selling or leasing goods or services.” Simpson, 49 Cal.4th at 30, 109 Cal.Rptr.3d 329, 230 P.3d 1117. Weiland is “in the business of selling … liftslide doors, folding doors, swinging doors, and windows.” Second, Panda's claim arises out of the Press Release's statements of fact about Weiland's goods and Panda's goods. As an initial matter, Weiland admits that the Press Release consists “of representations of fact about Weiland's goods.” ( Id.) For instance, Weiland uses a “drawing of a Weiland commercial product that include[s] product elements … not covered by the patents [at issue].” (Amended Counterclaim ¶ 19.) Panda's claim arises from these representations of fact because the representations allegedly “create confusion and uncertainty on the part of the recipients of the Press Release with respect to the scope of the patents.” Third, the Court finds that the Press Release was made for the purposes of promoting or securing the sales of Weiland's goods. Even if patent licenses do not constitute goods, the Press Release nonetheless promotes Weiland's goods. All of the statements regarding Weiland's tracks and Panda's tracks are made in connection with directing the audience towards purchasing Weiland's product. The Press Release provides contact information and a website URL for viewers to “learn more” and get “more information” about Weiland products. And finally the Press Release's intended audience was “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.” Simpson, 49 Cal.4th at 30, 109 Cal.Rptr.3d 329, 230 P.3d 1117. Weiland allegedly “placed the press release on its website and distributed it to several thousand recipients, including its customers, vendors, and to trade publications.” (Amended Counterclaim ¶ 17.) Notwithstanding the other recipients, the trade publications are sufficient to satisfy the last factor. The publications were an intended audience because Weiland distributed the Press Release to the publications. And the publications repeat the statements to actual and potential buyers or customers. The Court therefore finds that Panda's intentional interference with prospective business advantage claim based on Weiland's Press Release is exempt from anti-SLAPP liability under the commercial speech exemption. The Press Release satisfies the four Simpson factors. Weiland's special motion to dismiss Panda's interference claim based on the Press Release is DENIED. 2. Oral Communications Weiland also moves to dismiss Panda's interference claim insofar as it is based on Weiland's oral communications with potential Panda customers. (MTD 7–8.) Weiland argues that Panda alleges in a conclusory fashion that Weiland's oral communications were for the purpose of securing sales or leases of Weiland's goods or services. ( Id. at 8.) And thus the counterclaim based on the oral communications is not subject to the commercial speech exemption. The Court disagrees. It is reasonable to infer from Panda's allegations that Weiland's communications were for the purpose of securing sales or leases of Weiland's goods or services. Panda alleges that Weiland communicated with Panda customers, telling the customers that they could be sued if they purchased Panda products. (Amended Counterclaim ¶ 22.) Importantly, Weiland allegedly made these statements without knowing whether the customers they spoke to were considering the purchase of Panda products that were potentially covered by Weiland products. Weiland also did not offer the customers the option of obtaining a license to Weiland's patents. On these allegations, the Court finds it reasonable to infer that Weiland's statements were made for the purpose of driving sales away from Panda and towards Weiland. The Court finds it reasonable to infer that Weiland's oral communications were made for the purpose of securing sales of Weiland's goods. And to the extent this is Weiland's argument why Panda's claim is not covered by the commercial speech exemption, the Court finds the argument unpersuasive. Weiland's motion to dismiss Panda's interference claim based on Weiland's oral communications is DENIED. 3. Attorney's Fees 34 Having denied Weiland's anti-SLAPP motion, the remaining question is whether Panda should be awarded fees and costs. Attorney's fees and costs can be assessed against a § 425.16 movant only if the “special motion to strike is frivolous or is solely intended to cause unnecessary delay.” Cal.Civ.Proc.Code § 425.16(c). This requires that “any reasonable attorney would agree such motion is totally devoid of merit.” Decker v. U.D. Registry, Inc., 105 Cal.App.4th 1382, 1392, 129 Cal.Rptr.2d 892 (Cal.Ct.App.2003). The Court finds that Weiland's § 425.16 motion is not frivolous and is not solely intended to cause unnecessary delay. The anti-SLAPP motion is combined with a motion to dismiss. This indicates a good faith effort to dismiss Panda's counterclaim. Consequently, Panda is not entitled to fees and costs. C. Conclusion Weiland moves to dismiss Panda's intentional interference with prospective business advantage claim pursuant to California Civil Procedure Code § 425.16. Weiland argues that Panda's claim should be dismissed insofar as it is based on Weiland's Press Release and Weiland's oral communications with potential Panda customers. The Court finds that Panda's claim, under both theories, is exempt from § 425.16 under the commercial speech exemption. Weiland's § 425.16 motion to dismiss is DENIED in its entirety. See Weiland Sliding Doors & Windows, Inc. v. Panda Windows & Doors, LLC, 814 F. Supp. 2d 1033, 1037-39 (S.D. Cal. 2011).
Don't forget to upload your filing papers to the Judicial Council
As the Judicial Council page points out:
How to Transmit and Access Documents Related to Special Motions to Strike Strategic Lawsuits Against Public Participation (SLAPPs) (Updated 09/25/09) Assembly Bill 1675 (Stat. 1999, ch. 960) amended Code of Civil Procedure section 425.16 to require any party who files a special motion to strike or who files an opposition to such a motion to, upon filing, promptly transmit the following documents to the Judicial Council:
(1) a copy of the endorsed-filed caption page of the motion or opposition (caption page only – not entire motion papers),
(2) a copy of any related notice of appeal or petition for a writ, and
(3) a conformed copy of any order pursuant to section 425.16, including any order granting or denying a special motion to strike, discovery, or fees.
The information that follows explains how to transmit and access these documents.
To Transmit Documents by Fax Send documents with a clearly addressed fax cover sheet to:
Judicial Council of California Administrative Office of the Courts RE: SLAPP Documents Per CCP §425.16
Attn: SLAPP Coordinator Fax: 415-865-4315 Email: [email protected].
Rights to appeal granting or denial of an Anti-SLAPP in California
Generally, a CCP 425.16 case can be appealed. However, if the Court ruled on the commercial speech exemption and found that there was no anti-SLAPP challenge due to the CCP 425(b) or (c) exemption (the “C” is the commercial speech exemption), then based on my initial research (you should verify this and not rely on this), there IS NO RIGHT TO APPEAL for the Defendant.
See Varian Med. Sys., Inc. v. Delfino, 35 Cal. 4th 180, 195, 106 P.3d 958, 968 (2005) which noted:
The Legislature reiterated this intent in 2003 when it enacted section 425.17—which exempted certain types of actions from the special motion to strike procedure established in section 425.16. (See Eu v. Chacon (1976) 16 Cal.3d 465, 470, 128 Cal.Rptr. 1, 546 P.2d 289 [“Although a legislative expression of the intent of an earlier act is not binding upon the courts in their construction of the prior act, that expression may properly be considered together with other factors in arriving at the true legislative intent existing when the prior act was passed”].) In creating this exemption, the Legislature expressly made the denial of an anti-SLAPP motion based on the section 425.17 exemption not appealable. (§ 425.17, subd. (e).) The Legislature did so because “[e]xisting law provides that an order denying a special motion to strike is appealable to the court of appeal” and “that the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby.” (Sen. Rules Com., Off. of Sen. Floor Analyses, analysis of Sen. Bill No. 515 (2003–2004 Reg. Sess.) as amended July 8, 2003, p. 4.) Thus, the Legislature found it necessary to render the “stay and appeals provisions inapplicable when a trial court denies a special motion to strike on the grounds that a cause of action is exempt” under section 425.17. (Sen. Rules Com., Off. of Sen. Floor Analyses, analysis of Sen. Bill No. 515 (2003–2004 Reg. Sess.) as amended July 8, 2003, p. 4, italics added.) In doing so, the Legislature confirmed its intent that an appeal from the denial of an anti-SLAPP motion on non–section–425.17 grounds automatically stays further trial court proceedings on the merits. Because we must follow the Legislature's intent, we agree with Mattel, supra, 99 Cal.App.4th 1179, 121 Cal.Rptr.2d 794, and hold that an appeal from the denial of an anti-SLAPP motion automatically stays further trial court proceedings on the merits.
Note however, even though an appeal may not be possible a “writ” still may be. This was discussed in another California case – See Goldstein v. Ralphs Grocery Co., 122 Cal. App. 4th 229, 233–34, 19 Cal. Rptr. 3d 292, 295 (2004) which held:
The language at issue is clear. When a special motion to strike is denied on the grounds the cause of action is exempt from such a procedure pursuant to section 425.17, subdivision (b) or (c), then the immediate appeal right in sections 425.16, subdivision (j) and 904.1, subdivision (a)(13) is inapplicable. Even if there is sufficient ambiguity in section 425.17, subdivision (e) to permit resort to external resources, the legislative committee reports and the Legislative Counsel's Digest make it clear that once the challenged cause of action is subject to one of the exemptions in section 425.17, subdivision (b) or (c), the immediate appeal right no longer exists.
Three additional points warrant brief comment. The parties do not dispute that section 425.17, subdivision (e) can apply even though this class action was commenced prior to January 1, 2004, the effective date of the 2003 amendments. (Physicians Committee For Responsible Medicine v. Tyson Foods, Inc. (2004) 119 Cal.App.4th 120, 125–131, 13 Cal.Rptr.3d 926; Brenton v. Metabolife Internat., Inc., supra, 116 Cal.App.4th at p. 690, 10 Cal.Rptr.3d 702.) Further, nothing we have said prevents a defendant dissatisfied with a ruling that a special motion to strike must be denied pursuant to section 425.17, subdivision (b) or (c) from seeking immediate writ review as occurred here. Finally, we do not address the issue of harmless error in the context of an appeal from a final judgment when the defendant seeks to challenge the pretrial denial of a special motion to strike. (§ 906; see Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830, 833, 16 Cal.Rptr.2d 38 [pretrial summary judgment denial subject to Cal. Const., art. VI, § 13 harmless error provisions].)
Attorney Steve Tip: Most writs are denied (some suggest 90%). Writs are discretionary and the judge can deny them summarily. So if the Defendant loses on a CCP 455.17(c) case, their recourse appears to be limited to a writ review, or they can wait to the end of the case (and assuming they lose at trial), appeal the case. The purpose of a writ is to allow a challenge to something that is clearly and obviously wrong, and which will result in immediate hardship and irreparable damages to the Defendant. They are disfavored as it results in “piecemeal” litigation and “cutting in line” in front of other cases that are properly up on appeal. Generally, most research I found indicates writs should be filed within 60 days of the court's ruling.
Listen to the Podcast on appealing following a CCP 425.17(b) or (c) denial
Speak with a California anti-SLAPP lawyer
If you need help with the California Code of Civil Procedure section 425.17 commercial speech exemption or any free speech (first amendment) legal issue call us. We have recently successfully defeated one of the top law firms in the State of California on an anti-SLAPP motion and we can help you understand the contours of the anti-SLAPP law and how they may apply to your case. Call us at (877) 276-5084.