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September 17, 2016

Suarez v. Trigg Laboratories (2016) 3 Cal.App.5th 118

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The Second District holds claims of concealment under the guise of attorney-client privilege are protected petitioning activity under California’s Anti-SLAPP statute.

Rafael Suarez consulted with Trigg Laboratories and its owner Michael Trygstad to increase company profit and growth, prepare Trigg for an eventual sale, and raise capital under an oral agreement. After Suarez partially performed and deferred payment, Trygstad complained Suarez’s compensation was excessive and refused to reduce their agreement to writing.  Suarez sued Trysgstad for quantum meruit.

Trygstad engaged other consultants to help sell the company. He instructed these consultants not to send a letter of intent by an interested investor to him directly, but through an attorney to keep the contents privileged.  Suarez agreed to settle his claim unaware of the interested investor. 

After the settlement, Suarez learned of the interested investor and Trygstad’s instructions to claim attorney-client privilege, and filed another action seeking rescission of the prior agreement. He alleged the letter of intent had been fraudulently withheld from him under the guise of attorney-client privilege when he settled his claim.  The trial court granted a motion under California’s Anti-SLAPP statute, C.C.P. § 425.16, concluding Suarez’s causes of action arose from protected petitioning activities and he failed to prove a likelihood of success on the merits.

Anti-SLAPP motions involve a two-step process. The court decides whether the defendant has made a threshold showing the challenged cause of action is one arising from activity to further the constitutional right of petition or free speech. If so, the court then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. Petitioning activity includes any written or oral statement or writing made in connection with an issue under consideration or review by a judicial body.

The Court of Appeal affirmed, holding communications in settlement negotiations are protected activity within the scope of § 425.16. The protection applies even against allegations of fraudulent promises made during the settlement process.  Suarez’s claim Trygstad concealed and failed to disclose the letter from the interested investor did not render the activity unprotected.  It was litigation-related activity, aimed at Suarez’s case.

Even misrepresentation or failures to disclose can be protected petitioning activity under § 425.16. Freedom of speech under the United States and California Constitutions encompasses a right to speak freely and a right to not do so.

The alleged wrongdoing was directed squarely at the underlying litigation, distinguishing it from claims where the alleged wrongdoing was incidental to the litigation. For example, allegations an expert wrongfully entered into a business relationship with the opponent’s counsel, or that a party purchased confidential documents, although in the context of litigation, are unrelated to the petitioning activity.  Trygstad’s failure to disclose the potential investor occurred as an explicit part of its settlement strategy.

Suarez failed to address the second prong, the likelihood of prevailing.

Comment: It is difficult and sometimes counter-intuitive distinguishing between protected petitioning activity and activity merely incidental to or triggered by petitioning activity.

 

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