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March 27, 2003

1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568

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The California Court of Appeal for the Second District holds CCP § 425.16 will apply to cases arising out of constitutionally protected activity, even where it is alleged the activity was illegal.

Condor was an in-house attorney for 1- 800 Contacts.  When he left this position he agreed to keep confidential information he learned about the company in the course of his employment.  Condor then contacted Steinberg, a California attorney crusading against what he perceived to be illegal practices of 1-800 Contacts such as providing lenses without verification of a valid prescription.  Condor suggested that he and Steinberg join forces in a legislative consulting business serving state optometric associations to propose legislation to “fix” weaknesses in existing law regarding mail order contact lens sales.  Condor revealed that he was bound by a confidentiality agreement, and that he would not reveal any confidential information about 1-800 Contacts or its business practices.  At an industry convention in Las Vegas, Condor and Steinberg met with each other and various representatives of optometric associations to discuss legislative and legal efforts to curtail the ability of retailers to dispense contact lenses without a valid prescription.

1-800 Contacts then filed an action against Steinberg, alleging that Steinberg had induced Condor to breach his fiduciary duties.  Steinberg filed a motion to strike under California’s anti-­SLAPP (Strategic Lawsuit Against Public Participation) statute, C.C.P. § 425.16.  Steinberg asserted that his activities were in furtherance of his constitutional right of free speech and petition.  In support of the motion Condor and Steinberg submitted declarations to the effect that Condor did not reveal confidential information and that all information about 1-800 Contacts was either known to Steinberg through his prior litigation against 1-800 Contacts or was in the public domain.

1-800 Contacts countered that Condor was marketing information he learned while employed by it, including confidential internal analysis of the strengths and weaknesses of laws and litigation, and regulatory and legislative strategies.  1-800 Contacts also submitted declarations of an attorney and a private investigator who had eavesdropped on a conversation between Steinberg and Condor, both to the effect that Condor had offered to make available information learned during his representation of 1-800 Contacts.

The Court of Appeal agreed with the trial court that Steinberg’s activities fell within the constitutionally protected realm of free speech and petition.  The Court rejected 1-800 Contacts’ assertion that the acts were not protected because they were “illegal.”  The threshold question in an anti-SLAPP motion does not concern whether the challenged conduct is protected as a matter of law.  Otherwise the second prong, an analysis as to whether the plaintiff has established a probability of success, would be superfluous.  The validity of the defendant’s acts comes into play only in the second stage of the statutory analysis.

In order to establish the necessary probability of prevailing, 1-800 Contacts was required both to plead claims that were legally sufficient, and to make a prima facie showing, by admissible evidence, of facts that would merit a favorable judgment on those claims.  The court must also consider whether the evidence submitted by the defense establishes a defense or the absence of a necessary element.

The Court of Appeal agreed that 1-800 Contacts had not made a prima facie showing of success on the merits.  Not only had Condor approached Steinberg, but Condor had repeatedly stated to Steinberg that he would not reveal confidential information or otherwise breach is contractual obligations to 1- 800 Contacts.

A second, independent reason 1-800 Contacts could not prevail was that the litigation privilege applicable to legislative proceedings, C.C. § 47(b)(1), applies to claims for inducing breach of contract.  Steinberg’s activity to further the enactment of legislation fell within the privilege.  Condor’s agreement not to reveal confidential information did not preclude Steinberg from asserting the privilege.

The cause of action against Steinberg for inducing breach of fiduciary duties was also flawed.  Steinberg could not be held responsible for breaching duties he did not owe to 1-800 Contacts.

Comment: The 1-800 Contacts court demonstrated the power of the court to use the anti-SLAPP statute to protect the exercise of constitutional rights.  Plaintiffs seeking to curtail activity that can be characterized as constitutionally protected need to carefully consider the exposure to attorneys’ fees and other tort remedies prior to proceeding.

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