WARDLAW, Circuit Judge:
No one would deny that Donald Trump, the real estate magnate, television personality, author, and erstwhile presidential candidate, cuts a celebrated, if controversial, public figure. We must decide whether Trump University, LLC, a private, for-profit entity purporting to teach Trump's "insider success secrets," is itself a public or limited public figure so as to implicate the First Amendment. Disgruntled former customer Tarla Makaeff sued Trump University for, among other things, deceptive business practices. In return, Trump University counterclaimed against Makaeff for defamation. Makaeff moved to strike the defamation claim, contending that Trump University is a public figure and therefore must show that she made her allegedly defamatory statements with "actual malice," a requirement she contends Trump University cannot prove. See New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Denying the motion to strike, the district court held that Trump University is not a public figure. We disagree. Trump University is a limited public figure, and, to prevail here, must demonstrate that Makaeff acted with actual malice. Because the district court erred by failing to recognize Trump University's status as a limited public figure, we reverse and remand for further proceedings.
Donald Trump founded Trump University
Trump University has not been shy about touting its connection to its eponymous creator. Evoking Trump's wellknown reality television series, Trump University's advertisements promise that enrolling in Trump University is "the next best thing to being [Trump's] Apprentice." Its advertisements prominently showcase Trump's photo while urging consumers to "[l]earn from the Master," and promising to teach Trump's "insider success secrets." The home page of Trump University's website features Trump's photo next to the words: "Are YOU My Next Apprentice?
Trump University has collaborated with Donald Trump on several books.
Michael Sexton, Foreword to Wealth Building 101, at ix.
Almost from its inception, Trump University drew public comment. Donald Trump referenced the attention in 2005, noting in a blog post on the Trump University website that the nationally syndicated comic strip "Doonesbury" spent a week lampooning "the disparity between [Trump University] and a traditional university." The post was entitled: "We're laughing all the way to the bank."
In August 2008, Tarla Makaeff attended Trump University's three-day "Fast Track to Foreclosure Workshop" at a cost of approximately $1,495, which Makaeff says she split with a friend. Makaeff describes the seminars as slick productions featuring carefully choreographed presentations, speakers blaring "For the Love of Money," the theme song from Trump's hit reality television series "The Apprentice," and Trump University representatives exhorting customers to raise their credit card limits, ostensibly to enable "real estate transactions," but actually to facilitate the purchase of the $34,995 "Trump Gold Elite Program."
Apparently persuaded, Makaeff paid $34,995 to enroll in the Gold Elite Program, which entitled her to four three-day "advanced training workshops," a three-day "mentoring session in the field," and "training publications, software, and other materials." Makaeff's satisfaction with the program was short-lived. In April 2009, after completing five more programs and workshops, and after seven months of the Gold Elite Program, she wrote an email to Trump University complaining that she was in a "precarious financial position" and that she "did not receive the value that I thought I would for such a large expenditure." Makaeff had earlier spoken by phone with a Trump University representative who had told her that she was ineligible for a refund of the cost of the program. In response to Makaeff's email, Trump University offered more free "mentoring services," which Makaeff accepted.
By Fall 2009, however, the relationship between Makaeff and Trump University had gone irretrievably south. Makaeff wrote to her bank and the Better Business Bureau, contacted government agencies, and posted on Internet message boards about her dispute with Trump University. Makaeff requested a refund of $5,100 from her bank for services charged for Trump University programs. In the letter to the Better Business Bureau, Makaeff requested a refund of her payments for services that she did not receive. In both letters, Makaeff asserted that Trump University engaged in "fraudulent business practices," "deceptive business practices," "illegal predatory high pressure closing tactics," "personal financial information fraud," "illegal bait and switch," "brainwashing scheme[s]," "outright fraud," "grand larceny," "identity theft," "unsolicited taking of personal credit and trickery into [sic] opening credit cards," "fraudulent business practices utilized for illegal material gain," "felonious teachings," "neurolinguistic programming and high pressure sales tactics based on the psychology of scarcity," "unethical tactics," "a gargantuan amount of misleading, fraudulent, and predatory behavior," and business practices that are "criminal." Trump University claims that Makaeff published similar statements to unknown third parties and to the general public on the Internet.
In April 2010, Makaeff filed a class action complaint against Trump University, accusing it of, among other things, deceptive business practices. Trump University counterclaimed against Makaeff for defamation based on the statements in her letters and Internet postings. Thereafter, Makaeff moved under California's "anti-SLAPP" law, California Code of Civil Procedure § 425.16, to strike the defamation claim, a motion the district court denied. While it held that Trump University's suit arose from protected conduct under the anti-SLAPP statute, the court concluded
California law provides for the pre-trial dismissal of certain actions, known as Strategic Lawsuits Against Public Participation, or SLAPPs, that "`masquerade as ordinary lawsuits'" but are intended to deter ordinary people "from exercising their political or legal rights or to punish them for doing so." Batzel v. Smith, 333 F.3d 1018, 1024 (9th Cir.2003) (quoting Wilcox v. Superior Court, 27 Cal.App.4th 809, 33 Cal.Rptr.2d 446, 450 (1994)). We have jurisdiction to review the district court's denial of Makaeff's anti-SLAPP motion under the collateral order doctrine. See Hilton v. Hallmark Cards, 599 F.3d 894, 900 & n. 2 (9th Cir.2010); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1109 (9th Cir.2003) ("Motions to strike a state law claim under California's anti-SLAPP statute may be brought in federal court."). We review de novo the district court's determination of a motion to strike under California's anti-SLAPP statute. Vess, 317 F.3d at 1102; Gilbert v. Sykes, 147 Cal.App.4th 13, 53 Cal.Rptr.3d 752, 760 (2007).
California's anti-SLAPP statute allows a defendant to file a "special motion to strike" to dismiss an action before trial. Cal.Civ.Proc.Code § 425.16. To prevail on an anti-SLAPP motion, the moving defendant must make a prima facie showing that the plaintiff's suit arises from an act in furtherance of the defendant's constitutional right to free speech. Batzel, 333 F.3d at 1024. The burden then shifts to the plaintiff, here Trump University, to establish a reasonable probability that it will prevail on its claim in order for that claim to survive dismissal. Cal.Civ.Proc. Code § 425.16(b)(1); Gilbert, 53 Cal. Rptr.3d at 760. Under this standard, the claim should be dismissed if the plaintiff presents an insufficient legal basis for it, or if, on the basis of the facts shown by the plaintiff, "no reasonable jury could find for the plaintiff." Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832, 840 (9th Cir.2001) (citation and internal quotation marks omitted).
In evaluating Makaeff's anti-SLAPP motion, the district court held that Makaeff had met her initial burden of showing that Trump University's claim arose from an act by Makaeff in furtherance of her free speech rights. Proceeding to the second step, the court concluded that Trump University had established a reasonable probability of success on the merits of the defamation claim. In particular, it held that Trump University was not a public figure under Gertz v. Robert Welch, Inc., 418 U.S. 323, 345, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), and Trump University therefore did not need to meet the heightened standard of proof for defamation established in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Under this heightened standard, Trump University would have been required to show that Makaeff made her statements with actual malice. Gertz, 418 U.S. at 342, 94 S.Ct. 2997.
The district court was correct that Makaeff met her initial burden of showing that Trump University's defamation claim arose from an act in furtherance of her free speech rights. Vess, 317 F.3d at 1110. Under California's anti-SLAPP statute, such acts must be "in connection with a public issue," and include:
Cal.Civ.Proc.Code § 425.16(e). The district court determined that Makaeff's statements fell into the fourth category, conduct in connection "with a public issue or an issue of public interest," because the statements provided "consumer protection information."
Under California law, statements warning consumers of fraudulent or deceptive business practices constitute a topic of widespread public interest, so long as they are provided in the context of information helpful to consumers. For instance, in Wilbanks v. Wolk, 121 Cal.App.4th 883, 17 Cal.Rptr.3d 497 (2004), Gloria Wolk, a consumer advocate and expert on viatical settlements (arrangements in which dying persons sell their life insurance policies to investors to help pay for medical care and other expenses), posted negative comments on her website about a certain broker of such settlements. Id. at 499, 507. The California Court of Appeal held that the statements were protected activity under the anti-SLAPP statute because they were "consumer protection information." Id. at 507. It reasoned:
Id. at 507-08.
Similarly, in Paradise Hills Associates v. Procel, 235 Cal.App.3d 1528, 1 Cal.Rptr.2d 514 (1991), the California Court of Appeal held that a disgruntled buyer's statements made against a seller were protected by the First Amendment. Id. at 523. There, a homeowner embroiled in a dispute with a residential developer posted signs on her house, spoke with reporters, distributed leaflets, and spoke to prospective customers to urge them not to buy houses from the developer. Id. at 516. The developer sued, arguing that the homeowner's statements were not protected by the First Amendment because they "relate solely to her private concerns." Id. at 522. Rejecting that argument, the court reasoned that consumers have an "`interest in matters which affect their roles as consumers.'" Id. (quoting Concerned Consumers League v. O'Neill, 371 F.Supp. 644, 648 (E.D.Wis.1974)). The court therefore held that the First Amendment protected the homeowner's statements. Id. at 523.
Here, according to Trump University's defamation counterclaim, Makaeff published statements to "unknown third parties and the general public on the Internet."
Makaeff's posts on anonymous third-party websites could not have resolved her private dispute with Trump University. We therefore conclude that the postings constituted consumer protection information because they were intended as "a warning not to use plaintiffs' services" and came in the context of information that was "provided to aid consumers."
Moreover, we have doubts about Trump University's claim that Makaeff wrote her letters to her bank and the Better Business Bureau with purely private motives. The Better Business Bureau identifies its mission as advancing trust in the marketplace by offering objective and unbiased information about businesses to consumers.
Because at least some of Makaeff's statements were made with the intent to warn consumers about the educational experience at Trump University, we agree with the district court that Trump University's counterclaim arises from an act protected under the anti-SLAPP statute.
Because Trump University's counterclaim arose from an act protected under
If Makaeff's statements lie within California's statutory litigation privilege, then Trump University has no probability of success on the merits and Makaeff's special motion to strike should have been granted. California Civil Code section 47(b) renders privileged, inter alia, any publication of a statement made in a judicial proceeding, or "in the initiation or course of any other proceeding authorized by law," with some specific exceptions. Cal. Civ.Code § 47(b). "[T]he privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Silberg v. Anderson, 50 Cal.3d 205, 266 Cal.Rptr. 638, 786 P.2d 365, 369 (1990). The privilege also applies to a communication related to an anticipated lawsuit, if it is preliminary to an imminent proposed lawsuit contemplated in good faith and the purpose of the proposed litigation is to resolve the dispute. Edwards v. Centex Real Estate Corp., 53 Cal.App.4th 15, 61 Cal.Rptr.2d 518, 530-31 (1997).
The district court correctly concluded that Makaeff's statements are not protected by California's section 47(b) litigation privilege. Makaeff cannot assert the privilege on the basis that her statements were made in advance of an anticipated lawsuit. Makaeff's letters make no statement more concrete than that she would be willing to go to any lengths, including legal action, to get back her money. Therefore, any lawsuit at the time she made her statements was nothing more than a mere possibility, not imminent proposed litigation. Id. at 530.
Moreover, Makaeff made her statements not in a judicial proceeding, but to a private bank, the Better Business Bureau, and to the general public on the Internet. Although California courts have extended the litigation privilege to quasi-judicial proceedings such as private commercial arbitration, see, e.g., Moore v. Conliffe, 7 Cal.4th 634, 29 Cal.Rptr.2d 152, 871 P.2d 204, 219 (1994), Makaeff was not actually in arbitration with Trump University, as she asserts. California courts have extended the litigation privilege to only formal arbitration or mediation proceedings to which the parties consented as an alternative to trial. See, e.g., Howard v. Drapkin, 222 Cal.App.3d 843, 271 Cal.Rptr. 893, 905-06 (1990) (where plaintiff and ex-husband stipulated that an independent psychologist would serve as a neutral third party to perform dispute resolution services, the psychologist was entitled to protection for statements made during resulting proceeding). Trump University never consented to arbitration or mediation proceedings with Makaeff, her bank, or the Better Business Bureau.
The next question we must answer is whether Trump University is a public figure under New York Times Co. v. Sullivan. If so, Trump University must demonstrate by clear and convincing evidence that Makaeff made her allegedly defamatory statements with "actual malice"; that is, "with knowledge of [their] falsity or with reckless disregard for the truth." Gertz, 418 U.S. at 328, 342, 94 S.Ct. 2997. If, upon remand, Trump University cannot make such a showing, it has no possibility of success on the merits and the district court should grant Makaeff's special motion to strike.
In Gertz, the Supreme Court identified two types of public figures: (1) all purpose public figures, who occupy "positions of such persuasive power and influence that they are deemed public figures for all purposes," and (2) limited purpose public figures, who achieve their status by "thrust[ing] themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved." Id. at 345, 94 S.Ct. 2997. Because "[i]n either case such persons assume special prominence in the resolution of public questions," both categories of public figures are subject to the heightened burden of proof in defamation cases. Id. at 351, 94 S.Ct. 2997.
The Court articulated two policy reasons for requiring public figures to show actual malice. First, public figures enjoy "greater access to the channels of effective communication" than private individuals, and are therefore better able to "contradict the lie or correct the error." Id. at 344, 94 S.Ct. 2997. Second, the Court identified a normative consideration, rooted in the observation that public figures became such "by reason of the notoriety of their achievements or the vigor and success with which they seek the public's attention." Id. at 342, 94 S.Ct. 2997. In other words, true public figures voluntarily assume positions of importance in society. Public speakers, the Court noted, were thus entitled to act on the assumption that such public figures had also willingly exposed themselves to the risk of injury from defamatory falsehood. Id. at 345, 94 S.Ct. 2997.
The district court correctly held that Trump University is not an all purpose public figure. "Absent clear evidence of general fame or notoriety in the community, and pervasive involvement in the affairs of society," an individual is not a public figure for all purposes. Id. at 352, 94 S.Ct. 2997. The record does not support the conclusion that Trump University is generally famous or that it wields vast influence in public affairs. Makaeff argues that Trump University is a public figure because of its status as a "university." A handful of New York state cases have held that private colleges and universities are all purpose public figures, see, e.g., Ithaca Coll. v. Yale Daily News Publ'g Co., 105 Misc.2d 793, 433 N.Y.S.2d 530, 534 (App. Div.1980), but those cases are inapposite. Trump University has little in common with the Ithaca Colleges of the world. As a private, for-profit entity offering real estate seminars to small groups of students, it possesses neither a large, diverse student body, nor "general fame or notoriety" in the community, both factors which the New York Supreme Court, Appellate Division, found dispositive in Ithaca College. Id. Indeed, Trump University more closely resembles the private computer programming school in Commercial Programming Unlimited v. Columbia Broadcasting Systems, Inc., 81 Misc.2d 678, 367 N.Y.S.2d 986, 992 (Sup.Ct.1975), rev'd on other grounds, 50 A.D.2d 351, 378 N.Y.S.2d 69
Makaeff and amicus ACLU Foundation of San Diego and Imperial Counties, Inc. also argue that Trump University is an all purpose public figure because it is inextricably intertwined with Donald Trump, who all parties agree is an all purpose public figure for First Amendment purposes. Makaeff and the ACLU contend that père Trump's public figure status should be imputed to Trump University. We find this argument unavailing. Makaeff cites for support an out-of-circuit district court opinion, Schiavone Construction Co. v. Time, Inc., 619 F.Supp. 684 (D.N.J.1985), which we do not find apposite. There, contractor Ronald Schiavone and his construction company brought a libel action against Time, Inc., over a magazine article that linked the name Schiavone to organized crime. Id. at 686-87. The court held in a footnote that if Schiavone was a public figure, then so was his company:
Id. at 704 n. 13 (citation omitted).
In Schiavone, the court's holding was based on its earlier observation that Schiavone was the principal owner, chairman of the board of directors, CEO, and person "who might well have been responsible for the major decisions" of his construction company. Id. at 697. Although Donald Trump is the founder and chairman of Trump University, he is not so "inextricably intertwined" with Trump University's corporate structure and daily affairs as to in effect be the alter ego of the University, a showing Schiavone seems to require.
Because Trump University is not an all-purpose public figure, we examine the nature and extent of Trump University's "participation in the particular controversy giving rise to the defamation" to determine whether it is a public figure for the limited purposes of a defamation claim over its educational practices. Gertz, 418 U.S. at 352, 94 S.Ct. 2997. In undertaking this inquiry, we consider whether (i) a public controversy existed when the statements were made, (ii) whether the alleged defamation is related to the plaintiff's participation in the controversy, and (iii) whether the plaintiff voluntarily injected itself into the controversy for the purpose of influencing the controversy's ultimate resolution. Gilbert, 53 Cal.Rptr.3d at 762; see also Gertz, 418 U.S. at 351-52, 94 S.Ct. 2997. The district court assumed without deciding that a public controversy existed regarding Trump University's business practices, but held that Trump University did nothing to voluntarily thrust itself into the controversy. We disagree with this holding.
We have little difficulty in concluding that a public controversy existed over Trump University's educational and
Here, any general interest in Trump University stemming from its celebrity founder soon ripened into an actual dispute over Trump University's business and educational practices. By 2007 and 2008, disgruntled Trump University customers were posting complaints on public Internet message boards. Also by 2007, a columnist for a mass market newspaper had begun to report on Trump University's educational practices and business model. See Lazarus, Trump Spins in Foreclosure Game, supra. The column describes a Trump University seminar in unflattering terms, quotes both supporters and detractors of Trump University's programs, and discusses Trump University's educational practices against the backdrop of the mortgage foreclosure crisis. Id. We therefore conclude that by Fall 2009, the "specific question" of Trump University's legitimacy had become a public controversy. Waldbaum, 627 F.2d at 1297.
Moreover, this dispute had the potential to affect "the general public or some segment of it in an appreciable way." Id. at 1296. Trump University's business model involved offering seminars that encouraged members of the public to participate in the market for foreclosed properties, which had grown substantially in the wake of the 2007 financial and mortgage crisis. These activities, carried out by Trump University and other purveyors of real estate investment advice, had the potential to affect local housing markets by increasing or decreasing real estate speculation in the market for foreclosed homes. The debate over Trump University's business practices thus held ramifications not just for Trump University and its customers, but for all participants in the local housing markets. See id. at 1299 (a public debate over the marketing policies of a cooperative supermarket held the potential to affect consumers and industry retailers in the surrounding area).
Thus, a public controversy existed over Trump University's business practices at the time Makaeff made her statements in Fall 2009.
The district court erroneously concluded that Trump University did not voluntarily inject itself into this public controversy. Under Gertz, Trump University must have "thrust [itself] to the forefront" of this particular controversy "in order to influence the resolution of the issues involved." 418 U.S. at 345, 94 S.Ct. 2997. The district court concluded that even if Trump University was involved in the controversy over its allegedly deceptive business practices, its involvement was not voluntary. We disagree.
We hold, as have the Third and Fourth Circuits, that large scale, aggressive advertising can inject a person or entity into a public controversy that arises from the subject of that advertising. Advertising,
In Steaks Unlimited, Inc. v. Deaner, 623 F.2d 264 (3d Cir.1980), for instance, the Third Circuit considered a defamation suit against a television consumer affairs reporter for WTAE-TV in Pittsburgh, who was investigating a four-day steak-sale bonanza promoted by a company called Steaks Unlimited. She reported that the quality of the steaks was low and the prices high, and further stated that Steaks Unlimited's advertising was deceptive. Id. at 268. The Third Circuit held that Steaks Unlimited was a limited purpose public figure because of its "advertising blitz":
Id. at 273-74 (internal quotation marks and footnotes omitted).
Here, as in Steaks Unlimited and in NFCR, Trump University conducted an aggressive advertising campaign in which it made controversial claims about its products and services. This campaign included online, social media, local and national
We reject Trump University's argument, based on the reasoning of the California Supreme Court in Vegod Corp. v. American Broadcasting Cos., 25 Cal.3d 763, 160 Cal.Rptr. 97, 603 P.2d 14 (1979), that aggressive advertising of a message addressing a public controversy cannot render an entity a limited public figure. In Vegod, two firms sued for defamation over a television news report criticizing the firms' business practices in conducting a close-out sale for a respected but bankrupt department store, the City of Paris, the closing of which had generated a public controversy given the store's landmark status. Id., 160 Cal.Rptr. 97, 603 P.2d 14 at 15. The California Supreme Court held that the plaintiffs were not limited public figures. Id., 160 Cal.Rptr. 97, 603 P.2d 14 at 17. It reasoned that while the close-out firms had conducted aggressive advertising, their advertising standing alone did not render them public figures. Noting that "[i]t does not appear that plaintiffs urged City of Paris publicly or otherwise to terminate business or to destroy the `landmark,'" the court concluded that the advertising had not thrust the plaintiff firms into the vortex of the controversy. Id. "Merely doing business with parties to a public controversy does not elevate one to public figure status." Id.
Vegod is distinguishable. There, the plaintiffs' close-out advertising did not address the controversy over the planned destruction of the landmark store, and thus the firms were not limited public figures for purposes of that controversy. Id. There was no nexus between the critical news reports and the controversial destruction of the store. See Gilbert, 53 Cal.Rptr.3d at 762. Here, Trump University's advertisements, including Sexton's statements, both directly and indirectly address the subject of Trump University's
To be clear: Trump University is not a public figure because Donald Trump is famous and controversial. Nor is Trump University a public figure because it utilized Donald Trump as a celebrity pitchman. Trump University is a limited public figure because a public debate existed regarding its aggressively advertised educational practices. Did Trump's famous moniker draw public attention when Trump University's business practices proved worthy of debate? Perhaps. However, having traded heavily on the name and fame of its founder and chairman, Trump University was in no position to complain if the public's interest in Trump fueled the flames of the legitimate controversy that its business practices engendered.
The district court concluded that Trump University was not a limited public figure, and thus did not reach the question of actual malice.
On appeal Trump University nevertheless argues that Makaeff's early testimonials praising Trump University indirectly prove that she acted with a high degree of awareness of the probable falsity of her later statements.
That Makaeff's initial email to Trump University omitted the complaints of Trump University's alleged conduct that she later published to third parties also proves little. Makaeff's first email to Trump University was a request for a refund. It is possible that Makaeff chose to take a more conciliatory tone at this early stage of their increasingly acrimonious dialogue in the hopes of getting her money back. Thus, the district court may find that this initial email is consistent both with Makaeff's later, supposedly defamatory statements, and her contemporaneous goal of persuading Trump University to give her a refund.
Trump University further asserts that Makaeff recklessly republished the unverified complaints of anonymous third parties on the Internet. While the Supreme Court in St. Amant suggested that a statement "based wholly on an unverified anonymous telephone call" might justify a finding of actual malice, id. at 732, 88 S.Ct. 1323, the district court may reach the contrary conclusion: that Makaeff's statements were not based wholly on the anonymous Internet postings but were instead based on Makaeff's own educational experience. That Makaeff herself was disenchanted with Trump University may explain why she would not believe that the critical postings of others were "inherently improbable." Id. Nor would the circumstances of the Internet postings necessarily give Makaeff obvious reasons to doubt them — the postings were made on an Internet message board that offered no particular benefit to those who published statements criticizing Trump University.
Because Trump University is a public figure for the limited purpose of the public controversy over the quality of the education it purports to provide, the district court must address the inherently fact-intensive question of whether Trump University has a reasonable probability of proving, by clear and convincing evidence, that Makaeff made her critical statements with actual malice. We therefore
Chief Judge KOZINSKI, with whom Judge PAEZ joins, concurring:
I join Judge Wardlaw's fine opinion because it faithfully applies our law, as announced in United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 973 (9th Cir.1999), and its progeny. But I believe Newsham is wrong and should be reconsidered.
Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), divided the law applicable to diversity cases into two broad categories. Overruling Swift v. Tyson, 41 U.S. 1, 16 Pet. 1, 10 L.Ed. 865 (1842), it held that state law, rather than federal common law, applies to matters of substance. Erie, 304 U.S. at 78-79, 58 S.Ct. 817. But when it comes to procedure, federal law governs. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 & n. 7, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996); see also Hanna v. Plumer, 380 U.S. 460, 473, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) ("Erie and its offspring cast no doubt on the long-recognized power of Congress to prescribe housekeeping rules for federal courts....").
In most cases, it's easy enough to tell whether a rule is substantive or procedural. Whether a defendant is liable in tort for a slip-and-fall, or has a Statute of Frauds defense to a contract claim, is controlled by state law. Just as clearly, the time to answer a complaint, the manner in which process is served, the methods and time limits for discovery, and whether the jury must be unanimous are controlled by the Federal Rules of Civil Procedure. The latter is true, even though such procedural rules can affect outcomes and, hence, substantive rights. See Hanna, 380 U.S. at 471, 85 S.Ct. 1136.
But the distinction between substance and procedure is not always clear-cut. While many rules are easily recognized as falling on one side or the other of the substance/procedure line, there are some close cases that call for a more nuanced analysis. See, e.g., Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 130 S.Ct. 1431, 1437, 176 L.Ed.2d 311 (2010); Gasperini, 518 U.S. at 428, 116 S.Ct. 2211. In Walker v. Armco Steel Corp., 446 U.S. 740, 750-51, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980), for example, the Supreme Court considered the interplay between Federal Rule of Civil Procedure 3 and Oklahoma's statute of limitations. Rule 3 provided then, as it does now, that a civil action is commenced on the date the complaint is filed. Id. at 750, 100 S.Ct. 1978. In Walker, that date was within the state statute of limitations period. Id. at 742, 100 S.Ct. 1978. Oklahoma law, however, provided that a civil action began, for statute of limitations purposes, only when the summons was served on the defendant. Id. at 742-43, 100 S.Ct. 1978. If plaintiff filed the complaint at the end of the limitation period, service would still be timely, so long as it occurred no more than sixty days after the filing of the complaint. Id. at 743, 100 S.Ct. 1978.
Confronted with a state substantive rule (the statute of limitations) and a federal procedural rule fixing the date when a civil action commences, the Court held that there was no conflict because the two rules dealt with different questions. Id. at 750-51, 100 S.Ct. 1978. The federal rule, the Court noted, set the date for the commencement of the action for the purpose of measuring various time periods internal to the lawsuit. Id. at 751, 100 S.Ct. 1978. The rule wasn't meant to affect the time when the statute of limitations was tolled
Significantly, Walker considered whether there was a conflict between the state and federal rules only after it determined that the state rule was substantive, because it defined the period that a right created by state law could be enforced. See id. at 746, 749-50, 100 S.Ct. 1978. At the same time, a broad reading of the federal procedural rule could impinge on the substantive state law right by extending the statute of limitations. This would have led to the "`inequitable administration' of the law" by giving these plaintiffs greater rights than they would have enjoyed in state court, "solely because of the fortuity that there is diversity of citizenship between the litigants." Id. at 753, 100 S.Ct. 1978 (quoting Hanna, 380 U.S. at 468, 85 S.Ct. 1136).
Most of Newsham's analysis was devoted to showing that there's no "conflict" between California's anti-SLAPP statute and the Federal Rules of Civil Procedure and, therefore, the two regimes can operate side-by-side in the same lawsuit. But the question of a conflict only arises if the state rule is substantive; state procedural rules have no application in federal court, no matter how little they interfere with the Federal Rules. Newsham's mistake was that it engaged in conflict analysis without first determining whether the state rule is, in fact, substantive.
It's not. The anti-SLAPP statute creates no substantive rights; it merely provides a procedural mechanism for vindicating existing rights. The language of the statute is procedural: Its mainspring is a "special motion to strike"; it contains provisions limiting discovery; it provides for sanctions for parties who bring a non-meritorious suit or motion; the court's ruling on the potential success of plaintiff's claim is not "admissible in evidence at any later stage of the case"; and an order granting or denying the special motion is immediately appealable. See Cal.Civ.Proc. Code § 425.16. The statute deals only with the conduct of the lawsuit; it creates no rights independent of existing litigation; and its only purpose is the swift termination of certain lawsuits the legislators believed to be unduly burdensome. It is codified in the state code of civil procedure and the California Supreme Court has characterized it as a "procedural device to screen out meritless claims." See Kibler v. N. Inyo Cnty. Local Hosp. Dist., 39 Cal.4th 192, 46 Cal.Rptr.3d 41, 138 P.3d 193, 198 (2006).
Federal courts must ignore state rules of procedure because it is Congress that has plenary authority over the procedures employed in federal court, and this power cannot be trenched upon by the states. See Erie, 304 U.S. at 78, 58 S.Ct. 817 ("[T]he law to be applied in any [diversity] case is the law of the State" except for "matters governed by the Federal Constitution or acts of Congress...." (emphasis added)); see also 28 U.S.C. § 2072. To me, this is the beginning and the end of the analysis. Having determined that the state rule is quintessentially procedural, I would conclude it has no application in federal court.
The Federal Rules aren't just a series of disconnected procedural devices. Rather, the Rules provide an integrated program of pre-trial, trial and post-trial procedures designed to ensure "the just, speedy, and inexpensive determination of every action and proceeding." See Fed.R.Civ.P. 1. Pre-discovery motions, discovery, summary adjudication and trial follow a logical order and pace so that cases proceed smartly towards final judgment or settlement.
The California anti-SLAPP statute cuts an ugly gash through this orderly process. Designed to extricate certain defendants from the spiderweb of litigation, it enables them to test the factual sufficiency of a plaintiff's case prior to any discovery; it changes the standard for surviving summary judgment by requiring a plaintiff to show a "reasonable probability" that he will prevail, rather than merely a triable issue of fact; it authorizes attorneys' fees against a plaintiff who loses the special motion by a standard far different from that applicable under Federal Rule of Civil Procedure 11; and it gives a defendant who loses the motion to strike the right to an interlocutory appeal, in clear contravention of Supreme Court admonitions that such appeals are to be entertained only very sparingly because they are so disruptive of the litigation process. E.g., Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868, 114 S.Ct. 1992, 128 L.Ed.2d 842 (1994); Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100, 130 S.Ct. 599, 605, 175 L.Ed.2d 458 (2009).
We've already recognized that key aspects of this scheme can't possibly coexist with the Federal Rules of Civil Procedure. The Federal Rules contemplate that the sufficiency of a plaintiff's case will be tested prior to discovery only for legal sufficiency. See Fed.R.Civ.P. 12. If a plaintiff's case vaults that hurdle, the Federal Rules provide for a period for discovery before defendant can test plaintiff's case for factual sufficiency. See Fed.R.Civ.P. 26, 29-37, 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n. 5, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Federal Rules don't contemplate that a defendant may get a case dismissed for factual insufficiency while concealing evidence that supports plaintiff's case. See 10B Charles Alan Wright, Arthur R. Miller et al., Federal Practice & Procedure § 2740 (3d ed. 2012); see also Fed.R.Civ.P. 56(d). The California anti-SLAPP statute allows for precisely that.
That's why we held in Metabolife International, Inc. v. Wornick, 264 F.3d 832, 845 (9th Cir.2001), that the "discovery-limiting aspects" of the anti-SLAPP statute don't apply in federal court. See also Cal.Civ.Proc.Code § 425.16(f)-(g). The Federal Rules, after all, reflect a policy of forcing a defendant to disclose adverse facts before he may challenge plaintiff's case for factual sufficiency. See John H. Beisner, Discovering a Better Way: The Need for Effective Civil Litigation Reform, 60 Duke L.J. 547, 554-59 (2010).
In reaching this clearly correct conclusion, Metabolife decimated the state scheme. The anti-SLAPP statute is designed, first and foremost, to reduce the time and expense certain defendants spend in court upon being sued. See Wilcox v. Superior Court, 27 Cal.App.4th 809, 823,
After Metabolife, the federal court special motion is a far different (and tamer) animal than its state-court cousin. Metabolife diminished some of the tension between the state and federal schemes, but at the expense of depriving the state scheme of its key feature: giving defendants a quick and painless exit from the litigation. What we're left with after Metabolife is a hybrid procedure where neither the Federal Rules nor the state anti-SLAPP statute operate as designed.
From the federal perspective, Metabolife left in place quite a bit of disruption: the burden on the plaintiffs to show that they have not merely a triable issue of fact, but a reasonable probability of success; enhanced sanctions for bringing a weak claim; and the cost, disruption and delay inherent in a right to interlocutory appeal — created by state law, rather than by Congress. I find it passing strange that state legislatures have now displaced Congress as the delimiters of our jurisdiction. See Batzel v. Smith, 333 F.3d 1018, 1024-26 (9th Cir.2003) (we must allow immediate appeal because of text and legislative history of California's anti-SLAPP statute).
Newsham was a big mistake. Two other circuits have foolishly followed it. See Godin v. Schencks, 629 F.3d 79, 81, 85-91 (1st Cir.2010); Henry v. Lake Charles Am. Press, L.L.C., 566 F.3d 164, 168-69 (5th Cir.2009). I've read their opinions and find them no more persuasive than Newsham itself. It's time we led the way back out of the wilderness. Federal courts have no business applying exotic state procedural rules which, of necessity, disrupt the comprehensive scheme embodied in the Federal Rules, our jurisdictional statutes and Supreme Court interpretations thereof. As a three judge panel, Metabolife could only do so much, and we are generally bound to follow Newsham. But if this or another case were taken en banc, we could take a fresh look at the question. I believe we should.
Judge PAEZ, with whom Chief Judge KOZINSKI joins, concurring:
I concur fully in Judge Wardlaw's fine opinion. I also join Chief Judge Kozinski's concurrence because I, too, believe that United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963 (9th Cir.1999), is wrong and should be reconsidered. I agree that California's anti-SLAPP statute is "quintessentially procedural," and its application in federal court has created a hybrid mess that now resembles neither the Federal Rules nor the original state statute.
Yet another reason to reconsider the application of state anti-SLAPP statutes in federal court is that there are significant state-by-state variations within the circuit, despite facial similarities and identical procedural purposes of each state's anti-SLAPP
These differences play out in the availability of an appeal under the collateral order doctrine. See DC Comics v. Pac. Pictures Corp., 706 F.3d 1009, 1016 (9th Cir.2013). DC Comics recognized that Nevada's statute and Oregon's pre-2010 statute "were more akin to defenses against liability than immunities from suit, in that they did not provide for any consistent right of immediate appeal from the denial of an anti-SLAPP motion." Id. It is not the mere availability of immediate state appeal provided in the statute that creates the right to appeal under the federal collateral order doctrine, but rather that when "a legislature provide[s] an appeal unique to its anti-SLAPP statute ... it could be inferred that its purpose was to confer immunity from suit — an immunity which can only be vindicated by permitting an interlocutory appeal." Englert, 551 F.3d at 1107 (discussing the holding in Batzel v. Smith, 333 F.3d 1018, 1025 (9th Cir.2003) that California's immediate appeal provision and the statute's legislative history were instructive in "demonstrat[ing] that California lawmakers wanted to protect speakers from the trial itself rather than merely from liability"). That different state procedures are already interpreted by our case law to create ultimately different federal procedural outcomes — such as the availability of appeal under the collateral order doctrine — is further evidence that it makes no sense to treat state anti-SLAPP statutes as substantive state law under Erie.
