Appel v. Wolf

Filing 29

ORDER Denying Defendant's Special Motion to Strike [Doc. 5 ]. Signed by Judge M. James Lorenz on 9/18/2019. (lrf)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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Case No.: 3:18-cv-814-L-BGS

HOWARD APPEL,
Plaintiff,

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v.

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ORDER DENYING DEFENDANT’S
SPECIAL MOTION TO STRIKE
[Doc. 5]

ROBERT S. WOLF,
Defendant.

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Pending before the Court is the Special Motion to Strike filed under California’s

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Anti-SLAPP (Strategic Lawsuit Against Public Participation) statute by Defendant Robert

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S. Wolf (“Defendant”). See Doc. 5. The motion is fully briefed. The Court finds this

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motion suitable for disposition on the papers without oral argument under Civil Local Rule

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7.1.d.1. For the reasons set forth below, Defendant’s Anti-SLAPP motion is DENIED.

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I.

Background

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In June 2017, Plaintiff Howard Appel (“Plaintiff”) registered the highest bid for

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certain real property in Fiji in a luxury residential real property auction. However, a dispute

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subsequently arose between Plaintiff, the seller of the property, and the auctioneer

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(Concierge).

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In July 2017, Concierge initiated an arbitration proceeding in New York against the

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seller. Concierge engaged Defendant for representation in the dispute. In October 2017,

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Plaintiff initiated a separate arbitration proceeding against Concierge in New York, for

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which Defendant was also engaged. Subsequently, Plaintiff withdrew his arbitration

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demand and, on November 8, 2017, filed suit against Concierge in the United States
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District Court for the Southern District of California (the “SDCA lawsuit”). Concierge

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engaged Capobianco Law Offices, P.C. (“CLO”) to defend the SDCA lawsuit and file

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motions in efforts to have the action sent to arbitration in New York or the United States

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District Court for the Southern District of New York.

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On November 27, 2017 Defendant sent an email to Joseph Preis, Plaintiff’s principal

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counsel; four additional attorneys were copied on Defendant’s email, two from Preis’ law

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firm and two attorneys for Concierge. In the email, Defendant first asked Preis to engage

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in settlement discussions with Concierge concerning the SDCA lawsuit. Defendant went

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on to imply that he is familiar with Plaintiff from Defendant’s prior work, stating

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“[Plaintiff] had legal issues (securities fraud) along with Montrose Capital and Jonathan

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Winston who were also clients [of Defendant] at the time.”

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Plaintiff regards, Defendant expressed his intention to speak with Preis soon.

After asking Preis to send

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As a result of Defendant’s email, on April 27, 2018, Plaintiff filed a Complaint

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against Defendant alleging libel per se. On two separate occasions, Plaintiff’s counsel

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asked Defendant to publish a retraction of the statement made in the email, but Defendant

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refused to do so and has not apologized for the false statement made in the email. On July

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2, 2018, Defendant filed the instant motion. Briefing on this motion was stayed while the

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magistrate judge determined whether early discovery was needed before the motion could

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be considered. On December 27, 2018, Defendant declared, through his counsel, that he

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was abandoning the following challenges: (1) Plaintiff cannot satisfy his burden to present

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competent evidence establishing success on the merits; and (2) Plaintiff’s Complaint must

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be stricken unless Plaintiff establishes a probability that he will prevail by producing

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competent evidence in support of his claims. On January 25, 2019, the magistrate judge

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concluded that discovery was not required because the instant motion was a purely legal

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challenge grounded in the application of Federal Rule of Civil Procedure 12(b)(6). On

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April 10, 2018, the Court overruled Plaintiff’s objection to the magistrate judge’s order and

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set a briefing schedule for the instant motion. The motion is now fully briefed and ready

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for disposition.
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///

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II.

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“California’s anti-SLAPP statute authorizes a ‘special motion to strike’ any ‘cause

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of action against a person arising from any act of that person in furtherance of the person’s

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right of petition or free speech . . . in connection with a public issue.’” Safari Club Int’l v.

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Rudolph, 862 F.3d 1113, 1119 (9th Cir. 2017) (quoting Cal. Civ. Proc. Code §

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425.16(b)(1)). When evaluating an anti-SLAPP motion, a court first determines whether

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the defendant has shown the challenged claim “aris[es] from activity taken ‘in furtherance’

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of the defendant’s right of petition or free speech.” Ibid. “If so, the burden shifts to the

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plaintiff to show ‘a [reasonable] probability of prevailing on the challenged claims.’”

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Safari Club Int’l, supra, (quoting Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590, 595 (9th

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Cir. 2010)).

Legal Standard

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In ruling on an anti-SLAPP motion that challenges legal deficiencies in a complaint,

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the Court must apply the pleading standards applicable on a Rule 12(b)(6) motion to

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dismiss. Planned Parenthood Fed’n of Am., Inc. v. Ctr. for Med. Progress, 890 F.3d 828,

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834 (9th Cir. 2018). Accordingly, the Court must assume the truth of all factual allegations

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and construe them most favorably to the nonmoving party. Huynh v. Chase Manhattan

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Bank, 465 F.3d 992, 997, 999 n.3 (9th Cir. 2006). Even if doubtful in fact, factual

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allegations are assumed to be true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

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“A well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof

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of those facts is improbable, and that a recovery is very remote and unlikely.” Id. at 556

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(internal quotation marks and citations omitted). On the other hand, legal conclusions need

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not be taken as true merely because they are couched as factual allegations. Id.; see also

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Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009).

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III.

Discussion

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A.

Cal. Civ. Proc. § 425.16

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“A defendant who files a special motion to strike bears the initial burden of

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demonstrating that the challenged cause of action arises from protected activity.”
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Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP, 35 Cal.Rptr.3d 31,

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38 (Cal. Ct. App. 2005) (citations omitted). “[T]he statutory phrase ‘cause of action . . .

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arising from’ means simply that the defendant’s act underlying the plaintiff’s cause of

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action must itself have been an act in furtherance of the right of petition or free speech.”

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City of Coati v. Cashman, 29 Cal.4th 69, 78 (Cal. 2002) (citations omitted) (emphasis in

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original). Under California Code of Civil Procedure subsection 425.16(e), an “act in

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furtherance of a person’s right of petition or free speech under the United States or

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California Constitution in connection with a public issue” includes: (1) any written or oral

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statement or writing made before a legislative, executive, or judicial proceeding, or any

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other official proceeding authorized by law, (2) any written or oral statement or writing

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made in connection with an issue under consideration or review by a legislative, executive,

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or judicial body, or any other official proceeding authorized by law, (3) any written or oral

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statement or writing made in a place open to the public or a public forum in connection

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with an issue of public interest, or (4) any other conduct in furtherance of the exercise of

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the constitutional right of petition or the constitutional right of free speech in connection

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with a public issue or an issue of public interest.

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Defendant contends his email was a protected communication protected under

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section 425.16(e) because it was, in part, an invitation to engage in settlement discussions

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of pending litigation.

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Cal.Rptr.3d 218, 222-23 (Cal. Ct. App. 2009), Defendant asserts that a settlement offer is

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protected activity. Defendant heavily relies on Dowling v. Zimmerman, 103 Cal.Rptr.2d

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174, 190 (Cal. Ct. App. 2001) in contending that his challenged email falls within the scope

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of an attorney’s protected free speech and petitioning activities. In Dowling, Dowling’s

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complaint alleged that Zimmerman defamed Dowling by disparaging his reputation among

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landlord and tenant business communities through unspecified words and actions. Id. at

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189. Dowling also alleged that Zimmerman knowingly misrepresented and concealed

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material facts while negotiating the stipulated settlement of Dowling’s third unlawful

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retainer action against Zimmerman’s clients.

In reliance on GeneThera, Inc. v. Gould Prof’l Corp., 171

Ibid. Dowling also claimed emotional

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distress based on Zimmerman “publish[ing] a false letter[]” about Dowling.

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Zimmerman filed an anti-SLAPP motion contending that the complaint was a meritless

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attempt to punish her for helping her clients exercise their right to petition the courts on

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public issues of safety and nuisance pursuant to Section 425.16(e)(2) & (4). Ibid.

Ibid.

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The Dowling court found that the complaint and evidence supporting Zimmerman’s

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anti-SLAPP motion demonstrated each cause of action arose from Zimmerman’s actions:

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negotiating a stipulated settlement, writing and publishing the letter, all while acting in her

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capacity as counsel for her clients. Ibid. In support of her anti-SLAPP motion, Zimmerman

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submitted her own declaration, the declarations of her clients, documentary evidence

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including the letter being challenged in the underlying SLAPP suit, and a harassment

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restraining order that one of her clients obtained against Dowling. The court highlighted

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that Zimmerman’s declaration confirmed she negotiated a stipulated settlement of the

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unlawful detainer action. Id. at 189. The court also pointed out that Zimmerman wrote the

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challenged letter, in her capacity as her clients’ lawyer, in which she: (1) identified herself

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as her clients’ counsel, (2) provided information about the unlawful detainer dispute

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between Dowling and her clients, and (3) referred to various forms of harassment

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Zimmerman’s clients endured from Dowling. Id. at 189-90. The court found that the letter

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was written in connection the unlawful detainer action and addressed public issues of

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nuisance and safety. Id. at 190. Additionally, the court recognized that Zimmerman’s

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purpose for writing the challenged letter was clear, to advise the governing authority of the

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potential nuisance and safety concerns. Ibid. Accordingly, the California Court of Appeal

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concluded that Zimmerman satisfied Section 425.16(e)(2) by showing that Dowling’s

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action stemmed from statements she “made in connection with an issue under consideration

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or review by a . . . judicial body” and were conducted “in furtherance of the exercise of the

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constitutional right of petition or the constitutional right of free speech in connection with

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a public issue” pursuant to Section 425.16(e)(4). Id. at 190.

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Our facts do not align with the settlement negotiation cases provided by Defendant.

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While it is undisputed that Plaintiff’s libel per se claim is based on Defendant’s November
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27, 2017 email, the Complaint and evidence supporting the instant motion fail to

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demonstrate the challenged email was sent in the settlement negotiation context. The cases

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upon which Defendant relies to prove his email was protected are not persuasive against

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our factual backdrop. See Seltzer v. Barnes, 106 Cal.Rptr.3d 290, 297-98 (Cal. Ct. App.

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2010); see also GeneThera, Inc., 90 Cal.Rptr.3d at 222-23. Notably, none of the cases

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cited by Defendant were grounded in libel per se and each are factually distinguishable.

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Unlike the communications in Seltzer and GeneThera, Inc., Defendant’s email was neither

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a settlement offer nor contained settlement terms. In fact, as highlighted in the Complaint,

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Defendant’s email represented that no settlement discussion would transpire via email.

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Unlike the alleged libelous statement here, the challenged communications in Navarro v.

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IHOP Properties, Inc., 36 Cal.Rptr.3d 385, 391 (Cal. Ct. App. 2005) were “promises

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[made] in exchange for stipulation of judgment.” As the court stated in Dowling, each cause

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of action arose from Zimmerman’s actions in her capacity as counsel for her clients in

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connection the unlawful detainer action.

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However, our facts do not unfold in the settlement negotiation context; rather, the

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allegedly libelous statement arises in the context of a pre-filing discussion before

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calendaring a motion to compel arbitration. Defendant failed to raise any issues or

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information pertinent to the the New York arbitration or Plaintiff’s Southern District of

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California lawsuit. Moreover, Defendant’s pleadings reveal that he was simply trying to

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establish a rapport with Appel’s counsel when he made the allegedly libelous statement.

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After review of the challenged email, the Court finds the email was not sent to further

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settlement negotiations as it is evident that no settlement discussion had commenced

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between the parties. Considering Defendant explicitly stated that settlement discussions

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will not commence via email, the Court finds that the allegedly libelous statement was not

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made in furtherance of settlement negotiation. Notably, none of the issues touched on in

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Defendant’s email were “under consideration or review by a . . . judicial body.”

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Defendant’s email neither was sent in furtherance of his constitutional right to petition or

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speak in connection with a public issue. As such, the Court finds that Defendant’s email

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does not fall within subsection 425.16(e).

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B.

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Statements made within the protection of California’s litigation privilege of Civil

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Code section 47(b) are also entitled to the benefits of section 425.16. Healy v. Tuscany

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Hills Landscape & Recreation Corp., 39 Cal.Rptr.3d 547, 549 (Cal. Ct. App. 2006). “The

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question of whether the litigation privilege should, or should not, apply to particular

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communications has always depended upon a balancing of the public interests served by

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the privilege against the important private interests which it sacrifices.” Rothman v.

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Jackson, 57 CalApp.4th 1134, 1146-47. “[T]he privilege applies to any communication

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(1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants

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authorized by law; (3) to achieve the objects of the litigation; and (4) that have some

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connection or logical relation to the action.” Silberg v. Anderson, 50 Cal.3d 205, 212 (Cal.

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1990).

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Litigation Privilege

“[T]he ‘connection or logical relation’ which a communication must
bear to litigation in order for the privilege to apply, is a functional connection.
That is to say, the communicative act-be it a document filed with the court, a
letter between counsel or an oral statement-must function as a necessary or
useful step in the litigation process and must serve its purposes. This is a very
different thing from saying that the communication’s content need only be
related in some way to the subject matter of the litigation . . .”

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Rothman, 57 Cal.App.4th at 1146.

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The issue here is whether Defendant’s alleged libelous statement, on which

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Plaintiff’s claim is based, is covered by California’s litigation privilege. Defendant asserts

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that the litigation privilege is an absolute defense to Plaintiff’s libel action by asserting (1)

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the email was transmitted after Plaintiff commenced the New York arbitration, (2) the

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email clearly intended to explore settlement opportunities, and (3) the email is absolutely

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protected because it was made during the course of litigation. Defendant relies on this

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Court’s recent decision in Welk Resort Group, Inc. v. Reed Hein & Associates, LLC, 2019
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WL 1242446, at *8 (S.D. Cal. Mar. 18, 2019) to further his assertion that the litigation

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privilege’s bounds are expansive. However, this Court did not touch on this issue in that

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decision. In Welk, this Court nonetheless noted that “the applicability of the [litigation]

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privilege and the scope of its reach are based on the gravamen of [the plaintiff’s] action.”

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Welk Resort, 2019 WL 1242446, at *6 (citations omitted).

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Plaintiff asserts that the litigation privilege does not apply because the allegedly

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libelous statement does not functionally relate to his underlying lawsuit against Concierge.

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Plaintiff relies on Nguyen v. Proton Technology Corp., 69 Cal.App.4th 140, 149 Cal. Ct.

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App. 1999) to contend that Defendant’s allegedly libelous statement is not protected

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because it was a “superficially litigation-related statement[].” In Proton, an employee left

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a technology company to work for its competitor and the company suspected that the new

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employer was improperly soliciting the company’s remaining employees and customers.

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Id. at 143. An attorney for the company sent a letter to the chief executive officer of the

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new employer cautioning that the new employer’s “recent acts of unfair competition will

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not be tolerated.” Ibid. The attorney also misrepresented that the departing employee had

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been imprisoned “for repeatedly and violently assaulting his wife …” Id. at 143-44. While

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the employee had previously been imprisoned, none of his convictions were related to

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violence against his wife. Id. at 151. The Proton court found that that the statement about

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the employee’s alleged imprisonment for crimes against his wife was not protected by

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section 47 as the statement was factually incorrect and “any ‘connection’ between such a

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conviction and the civil unfair competition focus of the demand letter [was], to be

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charitable about it, tenuous.” Ibid. The allegedly unfair competition acts were not crimes,

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and “one’s proclivity to engage in such practices [unfair competition] is in no way, shape

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or form predictable by whether he (a) beats his wife, (b) shoots at unoccupied cars, or (c)

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commits vandalism.”

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challenged statements were not reasonably related to the litigation and thus not protected

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by the litigation privilege. Id. at 152-53.

Ibid.

Therefore, the California appellate court held that the

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The Court is not persuaded by Defendant’s assertion and agrees with Plaintiff’s

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contention. Notably, the Proton court made clear that “section 47(b) does not prop the

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barn door wide open for any and every sort of [litigation] charge or innuendo, especially

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concerning individuals.” Proton, 69 Cal.App.4th at 150. With that in mind, this Court

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reasons that, while the litigation privilege is potentially an absolute defense, the privilege

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is not a blanket protection to shield all of a speaker’s potentially gratuitous, harmful, or

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defamatory statements in a communication, even if sent during the course of litigation,

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when the statement bears no relation to subject matter of the litigation. The gravamen of

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Plaintiff’s lawsuit against Concierge centered around Concierge’s allegedly fraudulent

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inducement and concealment of materials facts related to Plaintiff’s high bid for, winning

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of, and $285,000 deposit for a multi-million-dollar luxury residential property and its pre-

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auction knowledge of the property owner’s refusal to sell the property. As such, the bounds

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of the litigation privilege apply only to those communications having a functional

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relationship with that action. Like Proton, Defendant’s statement was factually inaccurate

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as he concedes that he was referring to a different Howard Appel. Similar to the court in

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Proton, this Court finds that Concierge’s “proclivity to engage in such practices [fraud] is

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in no way, shape, or form predictable by whether” Plaintiff had securities fraud issues ten

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years ago. Although Defendant attempts to persuade the Court that his entire email was an

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attempt to settle the Concierge case, the Court finds that Defendant’s alleged libelous

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statement was not reasonably related to the Concierge litigation. For the foregoing reasons,

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this Court concludes that Defendant’s alleged libelous statement is not protected by the

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litigation privilege.

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Accordingly, the Court finds that Defendant failed to carry the initial burden of

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presenting of presenting a prima facie case that Plaintiff’s suit arose from an “act in

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furtherance of [Defendant’s] right of petition or free speech.”

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C.

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Notwithstanding Defendant’s failure to carry the initial burden of proof, the Court

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finds that Plaintiff established a probability of prevailing as the Complaint and other

Probability of Prevailing

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evidence present a libel per se action with minimal merit. To survive dismissal and show

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a reasonable probability of prevailing, a plaintiff must establish that the complaint is legally

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sufficient and supported by sufficient facts to sustain a favorable judgment if the facts are

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credited. Metabolife Int’l, Inc. v. Wornick, 264 F.3d 832, 840 (9th Cir. 2001) (citations

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omitted).

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supporting and opposing affidavits stating the facts upon which the liability or defense is

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based.” Planned Parenthood of Fed’n of America, Inc. v. Ctr. for Medical Progress, 890

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F.3d 828, 833 (9th Cir. 2018) (citing Cal. Civ. Proc. Code § 425.16(b)(2)).

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defendant’s anti-SLAPP motion should be granted when a plaintiff presents an insufficient

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legal basis for the claims or when no evidence of sufficient substantially exists to support

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a judgment for the plaintiff.” Metabolife Int’l, 264 F.3d at 840 (internal quotation marks

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and citations omitted).

“The district court, in making its decision, considers the pleadings and

“[A]

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To prevail on a defamation claim under California law, a plaintiff must demonstrate

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(1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural

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tendency to injure or that causes special damage. Taus v. Lotus, 54 Cal.Rptr.3d 775, 804

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Cal. 2007). “A statement that is defamatory without the need for explanatory matter such

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as an inducement, innuendo or other extrinsic fact, constitutes ‘a libel on its face,’” or libel

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per se. Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688, 700 (Cal. Ct.

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App. 2007). “Perhaps the clearest example of libel per se is an accusation of crime.”

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Barnes-Hind, Inc. v. Superior Court, 181 Cal.App.3d 377, 358 (Cal. Ct. App. 1986).

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When a plaintiff adequately alleges a libel per se claim, damage to plaintiff’s reputation is

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presumed and there is no need to prove special damages. Id.

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Here, Plaintiff has established that a reasonable probability of prevailing on her libel

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per se cause of action exists by presenting sufficient facts. In his Complaint, Plaintiff

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specifically alleges that, on November 27, 2017, Defendant sent the challenged

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communication to four individuals, in which the libelous statement was made. Defendant

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concedes that his emailed statement was false as he confused Plaintiff with a different

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Howard Appel. The Court finds the communication clearly implies a connection between
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Plaintiff and potentially criminal conduct, securities fraud. Defendant’s contention that the

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statement is not actionable because it does not directly or indirectly accuse Plaintiff of

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wrongdoing is misplaced. See Medifast, Inc. v. Minkow, 2011 WL 1157625 (S.D. Cal.

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Mar. 25, 2011), affirmed in part, vacated in part, reversed in part by Medifast, Inc. v.

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Minkow, 577 Fed.Appx. 706 (9th Cir. 2014) (“[I]t is not necessary that the publication

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charge the commission of a crime; it is sufficient if it so reflects on the person’s integrity

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as to bring him or her into disrepute.”) The Court finds that a false intimation that Plaintiff

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had securities fraud in his background, to an unsuspecting audience, would have negative,

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injurious ramification on Plaintiff’s integrity. For the reasons stated in earlier sections, this

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Court has found that Defendant’s communication was not privileged. Taken together, the

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Court finds that Plaintiff has established a reasonable probability to prevail on his libel per

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se claim.

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D.

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For the foregoing reasons, Defendant’s Special Motion to Strike is DENIED.

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IT IS SO ORDERED.

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Conclusion

Dated: September 18, 2019

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