STUART M. BERNSTEIN, United States Bankruptcy Judge:
Prior to the petition date in these chapter 11 cases, Charles C. Johnson ("Johnson") and his company, Got News LLC ("GotNews," and together with Johnson, the "Claimants") brought a lawsuit against Debtor Gawker Media LLC ("Gawker") and two of its employees in California state court (the "California Action") alleging various torts arising out of the publication of certain content on Gawker's websites.
The Omnibus Objections raised a host of issues but only two are presently before the Court. First, are the Claims "personal injury tort" claims which the Court cannot
As of petition date, the Debtors operated seven distinct media brands with corresponding websites covering news and commentary on a variety of topics, including current events, pop culture, technology and sports. (Holden Declaration at ¶ 10-12.) The Debtors' websites allowed readers to engage with their content by "participating in online discussions," (id. at ¶ 13), and "commenting" on articles. (Cf., e.g., id. at ¶ 15 (stating that the Debtors believe they "have the best commenting environment of any digital media group").)
Johnson is a web-based journalist and the owner of GotNews, which operates through the GotNews.com website. (Opposition to Omnibus Objections to Proofs of Claim as to Charles C. Johnson and Got News LLC, dated Nov. 16, 2016 (the "Opposition") at ¶ 2 (ECF Doc. # 452); Johnson Omnibus Objection at ¶ 4; GotNews Omnibus Objection at ¶ 4.) According to the Complaint, in the late summer of 2014, Johnson began investigating, and through GotNews reporting on, the events leading to the death of Michael Brown in Ferguson, Missouri, and its aftermath. (Complaint at ¶¶ 98 p. 21-¶ 108 p. 23; Johnson Omnibus Objection at ¶ 4; GotNews Omnibus Objection at ¶ 4.) Following Johnson's and GotNews's publication of these and certain other articles, and allegedly in retaliation for Johnson's Ferguson-related reporting, (Opposition at ¶¶ 3-4), Gawker published several articles (the "Gawker Articles") about the Claimants. (Johnson Omnibus Objection at ¶ 8; GotNews Omnibus Objection at ¶ 8; Opposition at ¶ 4.) The Gawker Articles included statements criticizing Johnson's honesty as a reporter and his professional skills as a journalist. They characterized Johnson's reporting as "erroneous[]" and stories Johnson had covered as "complete[ly] fabricat[ed]," interpreted Johnson's statements regarding Michael Brown's death as suggesting that Brown "deserved to die" and contended that Johnson "gets things wrong a lot." (Johnson Omnibus Objection at ¶ 35 (emphasis in original) (quoting relevant Gawker Article); GotNews Omnibus Objection at ¶ 35 (emphasis in original) (same).) The Gawker Articles also cited "rumors" that Johnson had defecated in public and engaged in bestiality. (Johnson Omnibus Objection at ¶ 43 (quoting relevant Gawker Articles); GotNews Omnibus Objection at ¶ 43 (same).)
Gawker employees and affiliates and third parties posted comments on the articles relating to the articles and their content. (Johnson Omnibus Objection at ¶¶ 43, 47, 49 (quoting and discussing relevant Gawker Articles and comments); Got-News Omnibus Objection at ¶¶ 43, 47, 49 (same); see also, e.g., Opposition, Ex. 11.1 at 28-33 and Ex. 11.2 at 1-6 (attaching copies of comments) (ECF Doc. ## 452-11 and 452-12).) Additionally, Gawker, its employees and third parties posted content on the social media website twitter.com ("Twitter") that referenced and commented on the Gawker Articles and the rumors they discussed. (See, e.g., Opposition, Ex. 11.1 at 1-15 (attaching "screenshots"
As a consequence of the publication of the Gawker Articles, Johnson filed a pro se Complaint on behalf of himself and Got-News in California state court.
Gawker filed a chapter 11 petition on June 10, 2016, (Voluntary Chapter 11 Petition of Gawker Media LLC, filed June 10, 2016 (ECF Doc. # 1)), thereby staying the California action as against Gawker. 11 U.S.C. § 362(a)(1). Debtors Gawker Hungary Kft. ("Gawker Hungary") (f/k/a/Kinja, Kft.) and Gawker Media Group, Inc. ("GMGI") filed their chapter 11 petitions two days later. (Voluntary Chapter 11 Petition of Kinja, Kft., filed June 12, 2016 (Case No. 16-11718, ECF Doc. # 1); Voluntary Chapter 11 Petition of Gawker Media Group, Inc., filed June 12, 2016 (Case No. 16-11719, ECF Doc. # 1).)
On September 28, 2016, GotNews and Johnson filed the Claims, consisting of six total claims, one against each Debtor by each of GotNews and Johnson. (Johnson Omnibus Objection at ¶ 3; GotNews Omnibus Objection at ¶ 3.) Each proof of claim asserted an unsecured claim for $20 million based on "damages from tortious conduct," and attached the Complaint. In connection with confirmation of the Amended Joint Chapter 11 Plan of Liquidation for Gawker Media Group, Inc., Gawker Media LLC, and Gawker Hungary Kft. (the "Plan"), the Debtors and the Claimants agreed that the Debtors would establish and fund a single reserve of $1.5 million solely to satisfy the Claims "to the extent [the] Claims become Allowed Claims" (as defined in the Plan), and further agreed to cap the Claimants' recovery on account of the Claims at $1.5 million. (Findings of Fact, Conclusions of Law, and Order Confirming Amended Joint Chapter 11 Plan of Liquidation for Gawker Media Group, Inc., Gawker Media LLC
The Debtors filed the Omnibus Objections on October 31, 2016 seeking to disallow the Claims. They argued first that Federal Rules of Civil Procedure 12(b)(6) and/or 12(c) should be made applicable pursuant to Bankruptcy Rule 9014 because the Claims "sound in tort," are "based on outside litigation," and should be resolved in a manner "analog[ous] . . . to the ordinary civil litigation process." (Johnson Omnibus Objection at ¶¶ 13-15, GotNews Omnibus Objection at ¶¶ 13-15.) As to the Claims themselves, the Objections contended that they were barred as a matter of California law under the California anti-SLAPP statute, (Johnson Omnibus Objection at ¶¶ 16-31; GotNews Omnibus Objection at ¶¶ 16-31), and that the statements by Gawker, its employees and/or third parties that formed the basis of the Complaint constituted opinion and were not actionable defamation, were framed as questions rather than assertions of fact or were third party statements for which the Debtors could not be liable under section 230 of the Communications Decency Act, 47 U.S.C. § 230. (Johnson Omnibus Objection at ¶¶ 32-50; GotNews Omnibus Objection at ¶¶ 32-50). Further, the false light claims by both Claimants failed because their defamation claims were not actionable (Johnson Omnibus Objection at ¶¶ 51-52; GotNews Omnibus Objection at ¶¶ 51-52), and the false light cause of action was not available to GotNews because GotNews, as a corporate entity, does not have the interests, including privacy and feelings, that the tort seeks to protect. (GotNews Omnibus Objection at ¶ 53.)
Additionally, even if the Gawker Articles were actionable, Johnson failed to allege and could not prove that Gawker acted with actual malice because he is an all-purpose public figure, or at least a limited-purpose public figure. (Johnson Omnibus Objection at ¶¶ 53-65; GotNews Omnibus Objection at ¶¶ 54-66.). The alleged violation of Section 1983 was also baseless because the Claimants did not allege state action or deprivation of a cognizable right. (Johnson Omnibus Objection at ¶¶ 66-69; GotNews Omnibus Objection at ¶¶ 67-70.) Further, the Claims against GMGI and Gawker Hungary fail because those Debtors were not named in the Complaint and the one-year California law statute of limitations for libel and defamation had run by the time the Claims were filed. (Johnson Omnibus Objection at ¶¶ 70-72; GotNews Omnibus Objection at ¶¶ 71-73.) Finally, this Court can fully adjudicate the disallowance of the Claims because they were not personal injury tort claims within the meaning of 28 U.S.C. § 157(b)(2)(B). (Johnson Omnibus Objection at ¶¶ 73-80; GotNews Omnibus Objection at ¶¶ 74-81.)
The Claimants filed their Opposition on November 16, 2016. The Opposition disputed essentially all of the Debtors' contentions and argued that Federal Rules of Civil Procedure 12(b)(6) and 12(c) should not apply, (Opposition at ¶ 5-7), the California anti-SLAPP statute was inapplicable, (id. at ¶ 8-10), the Debtors were liable for defaming the Claimants and casting them in a false light, (id. at ¶¶ 11-28), the liability extended to GMGI and Gawker Hungary (id. at 29), and the Claims were personal injury torts that must be adjudicated in the United States District Court for the Southern District of New York. (Id. at ¶¶ 5, 30.)
Given the numerous legal issues involved and in the interest of efficiency, the Court directed the parties to meet and confer regarding scheduling and briefing on the Omnibus Objections. (Scheduling Order at 2.) Subsequently, the parties agreed that they would proceed by submitting the two, aforementioned issues to the Court in the first instance: "(a) which of
Bankruptcy courts have jurisdiction over all civil proceedings arising under, arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b); see also Amended Standing Order of Reference, dated Jan. 31, 2012, No. M-431, 12 Misc. 00032 (referring proceedings in this District arising under, arising in or related to the Bankruptcy Code to this Court). However, bankruptcy courts exercise limited power to enter final orders and judgments with respect to matters that are not core. E.g., Stern v. Marshall, 564 U.S. 462, 474-75, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). The "liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the estate for purposes of distribution" in a bankruptcy case is not core, 28 U.S.C. § 157(b)(2)(B), and must be tried in the District Court where the bankruptcy case is pending or where the claim arose. 28 U.S.C. § 157(b)(5).
The starting point for the interpretation of any statute is the plain language of the statute itself. United States v. Ron Pair Enters., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). "The plain meaning of legislation should be conclusive, except in the `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.'" Id. at 242, 109 S.Ct. 1026 (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982)); accord Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000). Plainness or ambiguity is determined by reference to the statutory language itself, "the specific context in which that language is used, and the broader context of the statute as a whole." Robinson v. Shell Oil Co., 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) (citing Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 477, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992)); accord United Sav. Assn. of Texas v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988) ("Statutory construction . . . is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme. . . ."). Where the statute's language and context fail to resolve the ambiguity, a court may resort, in order, to canons of statutory construction and legislative history to aid in its interpretation. United States v. Colasuonno, 697 F.3d 164, 173 (2d Cir. 2012); Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 423 (2d Cir. 2005).
The phrase "personal injury tort or wrongful death claims," or some variation, was introduced into title 28 under the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333 (1984) (the "1984 Amendments"), and appears in several provisions. See 28 U.S.C. §§ 157(b)(2)(B) & (O),
Lower courts in the Second Circuit and elsewhere have adopted different approaches to determine whether a particular claim constitutes a "personal injury tort" claim. Id. at 571-75 (collecting cases). The "narrow view" requires a trauma or bodily injury or psychiatric impairment beyond mere shame or humiliation to meet the definition of "personal injury tort." Id. at 571-72 (citations omitted); accord Perino v. Cohen (In re Cohen), 107 B.R. 453, 455 (S.D.N.Y. 1989) (stating that a claim based on a violation of New York's anti-discrimination law "is not a claim for a `personal injury tort' in the traditional, plain-meaning sense of those words, such as a slip and fall, or a psychiatric impairment beyond mere shame and humiliation," and that "[t]here is no legislative history that would bring this plaintiff's claim for a tort without trauma within the statutory exception for a personal injury tort."). The broad view interprets "personal injury tort" to "embrace[] a broad category of private or civil wrongs or injuries for which a court provides a remedy in the form of an action for damages, and include[] damage to an individual's person and any invasion of personal rights, such as libel, slander and mental suffering." Residential Capital, 536 B.R. at 572 (quoting Boyer v. Balanoff (In re Boyer), 93 B.R. 313, 317-18 (Bankr. N.D.N.Y. 1988) and collecting cases). Finally, under the intermediate, "hybrid" approach, a bankruptcy court may adjudicate claims bearing the "earmarks of a financial, business or property tort claim, or a contract claim" even where those claims might appear to be "personal injury torts" under the broad view. Id. (quoting Stranz v. Ice Cream Liquidation, Inc. (In re Ice Cream Liquidation, Inc.), 281 B.R. 154, 161 (Bankr. D. Conn. 2002) and citing, inter alia, Adelson v. Smith (In re Smith), 389 B.R. 902, 908-13 (Bankr. D. Nev. 2008)). Given the absence of a statutory definition and the facial reasonableness of each interpretation, the phrase "personal injury tort," as used in 28 U.S.C. § 157(b)(2)(B) and (b)(5), is ambiguous.
Turning first to the canons of statutory interpretation, and specifically the canon noscitur a sociis, the Court concludes that the narrow interpretation, which requires trauma or bodily injury, or a psychic injury beyond mere shame or humiliation, is the correct interpretation. Noscitur a sociis is, put simply, the principle that "a word is known by the company it keeps." Yates v. United States, ___ U.S. ___, 135 S.Ct. 1074, 1085, 191 L.Ed.2d 64 (2015); accord United States v. Williams, 553 U.S. 285, 294, 128 S.Ct. 1830, 170 L.Ed.2d 650 (2008) ("[A] word is given more precise content by the neighboring words with which it is associated."); see also 2A NORMAN SINGER, SUTHERLAND STATUTORY CONSTRUCTION § 47:16 at 353-64 (7th ed. 2014) ("SUTHERLAND") (discussing noscitur a sociis). The Supreme Court has relied on the noscitur a sociis canon "to avoid ascribing to one word a meaning so broad that it is inconsistent with its accompanying words, thus giving `unintended breadth to the Acts of Congress.'" Gustafson v. Alloyd Co., 513 U.S. 561, 575, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995) (quoting
The legislative history regarding the relevant provisions of the 1984 Amendments also supports the narrow interpretation. The personal injury tort/wrongful death exception originated with lobbying, including testimony, from personal injury lawyers who found themselves and their clients dragged into the Johns-Manville case and other asbestos bankruptcies. In re Dow Corning Corp., 215 B.R. 346, 353-54 (Bankr. E.D. Mich. 1997). In the wake of the Manville bankruptcy and the Supreme Court's decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), the Senate conducted hearings to consider amendments to the Bankruptcy Code and related jurisdictional provisions. See The Manville Bankruptcy and Amendments to the Bankruptcy Code Relating to the Northern Pipeline Decision: Hearing Before the Subcomm. on Courts of the S. Comm. on the Judiciary, 97th Cong., 2d Sess. (Nov. 10, 1982) (Serial No. J-97-150). Robert Steinberg, Esq., appearing on behalf of the Asbestos Litigation Group, an association of lawyers representing plaintiffs in asbestos litigation, testified that "the bankruptcy courts have other challenging and difficult issues to deal with and should not be a repository for thousands and thousands of personal injury claims and the necessity to litigate those." Id. at 58 (statement of Robert Steinberg, Esq., Counsel, Asbestos Litigation Group). John P. Sears, Esq., another representative of the Asbestos Litigation Group, submitted a letter to Senator Robert Dole that referred to "the well-established principle of American jurisprudence that the exercise of an individual's constitutional right to a trial by jury of a personal injury and wrongful death claim is the most effective and fair method of resolution," and stated that "[a]sbestos victims must not be stripped of their constitutional right to a trial by jury of their personal injury and wrongful death claims." Id. at 108 (letter from John P. Sears, Esq., Counsel, Asbestos Litigation Group to Sen. Robert Dole, Chairman, Subcomm. on Courts, S. Comm. on the Judiciary).
In June 1984, Congress took up the final debate on the amendments that ultimately became part of the 1984 Amendments. Senator DeConcini explained that "[t]he amendments that I propose seek to balance effective bankruptcy administration with the constitutional concerns reflected in the Marathon decision and the concerns of personal injury tort claimants." 130 CONG. REC. 17,154 (1984). While recognizing that "[b]ankruptcy courts must retain their traditional, long established, and undisputed power to resolve such claims inexpensively and expeditiously if our bankruptcy system is to work," including the estimation of claims, and "[a] broad limitation on estimation of contract claims . . . would create unnecessary delays and increased cost if there had to be de novo review by a district court judge of every such matter," the exemption of personal injury tort actions from the list of core proceedings addressed a concern of many of his colleagues. Id. Personal injury tort creditors "do not voluntarily become involved" with the debtor, and "should have the protection of having any final order entered by an article III district court judge." Id. Senator DeConcini referred to "claims arising from automobile accidents" as examples of the personal injury tort claims he had in mind, id. at 17,155, and
"Where Congress adopts language urged by a witness, it may be assumed that Congress also adopted the intent voiced by the witness." In re Teligent, Inc., 268 B.R. 723, 737 (Bankr. S.D.N.Y. 2001) (citations omitted); see also 2A SUTHERLAND § 48:10 at 596-97 ("Federal courts frequently look to committee member and interested-party statements made during committee hearings about conditions requiring legislative attention as an aid to determine legislative intent. Because committee hearing records are distributed to Congress members, courts assume they had knowledge of these statements and the evils they described, and that passage of a proposed bill is some evidence of their intent to remedy these evils." (footnote omitted)). The representatives of the Asbestos Litigation Group testified before the Senate about their concerns resulting from their experience in the Johns-Manville bankruptcy, about a bankruptcy court's power to estimate and liquidate personal injury and wrongful death claims, and the denial of the right to try those claims before a jury. Those specific concerns—and no others—were addressed by exempting personal injury tort and wrongful death claims from the otherwise broad definition of core claims in 28 U.S.C. § 157(b), singling them out from the provisions of mandatory abstention, 28 U.S.C. § 157(b)(4), requiring them to be heard in an Article III court, 28 U.S.C. § 157(d)(5) and preserving the right to trial by jury. 28 U.S.C. § 1411(a). Although Congress did not intend to limit personal injury tort claims to asbestos claims—Senator DeConcini referred to the example of an automobile accident—the exception was intended to be narrow and not derogate from the bankruptcy court's traditional role of resolving claims through the claims resolution process.
The broad interpretation ignores both the canons of construction and the legislative history, and cuts a broad exception that removes all tort claims from the jurisdiction of the bankruptcy court's claims resolution process. Generally, "[a] tort is conduct that amounts to a legal wrong and that causes harm for which courts will impose civil liability. Conduct that counts only as breach of contract may lead to legal liability under the rules of contract law, but breach of contract is not usually considered to be a tortious wrong." "DAN B. DOBBS, ET AL., LAW OF TORTS § 1 (2d ed. Updated June 2017) (footnotes omitted). The courts adopting the broad interpretation define "personal injury tort" to encompass "a broad category of private or civil wrongs or injuries for which a court provides a remedy in the form of an action for damages, and include[] damage to an individual's person and any invasion of personal rights, such as libel, slander and mental suffering." Residential Capital, 536 B.R. at 572 (quoting Boyer, 93 B.R. at 317). This is largely the same definition as the traditional definition of "tort." Thus, the broad interpretation essentially equates "personal injury tort" with any "tort," and renders the limiting phrase "personal injury" superfluous. While "personal injury" can be defined in both the narrow and broad senses, see BLACK'S 906 (defining "personal injury" as (i) synonymous with "bodily injury" and (ii) as "[a]ny invasion of a personal right"), and all tort creditors are involuntary creditors, the Congress that passed the 1984 Amendments viewed the personal injury/wrongful death limitation as a narrow exception to the bankruptcy court's jurisdiction to resolve
The hybrid approach finds no support in the words of the relevant statutes, any canon of construction or the legislative history, and is unworkable as this case shows. Under the hybrid approach, bankruptcy courts examine claims for the "earmarks of a financial, business or property tort claim, or a contract claim" and "reserve[] the right to resolve the personal injury tort claim issue by (among other things) a more searching analysis of the complaint." Residential Capital, 536 B.R. at 572 (quotation omitted). The thrust of the Complaint is that the Gawker Articles attacked Johnson's skills and integrity as a journalist, and he (and GotNews) suffered reputational and economic damage. However, the Gawker Articles also referred to rumors of public defecation and bestiality that occurred when Johnson was younger and had nothing to do with his later professional career. It is difficult to fit those repeated rumors under the rubric of a business tort, unless, the "searching analysis" allows me to inquire into the motives of the speaker and conclude that repeating these rumors was intended to undermine Johnson's reputation as a journalist.
Having adopted the narrow interpretation, the Court readily concludes that the Claims do not assert "personal injury torts." Torts such as defamation, false light and injurious falsehood do not require proof of trauma, bodily injury or severe psychiatric impairment, and the Complaint does not allege that the Claimants suffered these injuries.
Next, the Claimants' argument that "personal injury tort" should be accorded its common law meaning is unpersuasive. They rely, in the main, on a line of cases dating back to the 19th century in support of the proposition that Congress intended to give "personal injury" its broad, common law definition. (See Response to Debtors' Supplemental Brief in Further Support of its Omnibus Objections to Claims of Charles C. Johnson and Got News, LLC, dated Feb. 8, 2017 (the "GotNews/Johnson
As discussed earlier, however, neither the rules of interpretation nor the legislative history support the notion that the personal injury lawyers who first suggested the exception for "personal injury torts," or the Congress that adopted it, had a common law definition in mind. Moreover, the Claimants' authorities stand for the unremarkable proposition that a defamation judgment arising from willful and malicious conduct was nondischargeable as a "willful and malicious injur[y] to the person or property of another" under the Bankruptcy Act, which also remains the law under section 523(a)(6) the Bankruptcy Code. E.g., Zaretsky v. Berlin (In re Berlin), 513 B.R. 430, 432 (Bankr. E.D.N.Y. 2014). The relevant statutory text and the structure and history of the statutory scheme, however, provide no basis for equating "injury to the person" under the former Bankruptcy Act (or the current section 523 of the Bankruptcy Code) with "personal injury" within the meaning of 28 U.S.C. § 157.
I am mindful that at least one bankruptcy court has expressly adopted the common law definition of "personal injury" in construing 28 U.S.C. § 157(b)(5). That court wrote that the "hybrid" approach "is the most appealing because it is closely aligned with what are traditionally thought of as the `common law torts,'" including torts resulting in reputational harm. Smith, 389 B.R. at 908. But this does not explain why the statutory language added in the 1984 Amendments should be read in a manner aligned with the common law definition, particularly since that is not what Congress intended. As set forth above, importation of the common law meaning of "personal injury" would run contrary to the principles of statutory interpretation.
Finally, the Claimants contend that a process under which the bankruptcy court's would determine GotNews's Claims prior to Article III adjudication of Johnson's Claims would violate their equal protection rights by giving a natural person access to an Article III tribunal but denying it to a corporate person, and by making Johnson's access to Article III adjudication "ephemeral." (GotNews/Johnson Supplement at ¶¶ 25-27.) This concern is misplaced as this Court may properly resolve all of the Claims for the reasons set forth above. Additionally, this concern highlights another benefit of the narrow approach: courts should construe statutes to avoid constitutional problems unless the avoiding construction is plainly contrary to congressional intent. Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. & Const.
For these reasons, the Court concludes that the "personal injury tort" exception to core jurisdiction set forth at 28 U.S.C. § 157(b)(2)(B) is limited to claims involving bodily injury, physical trauma and/or a severe "psychiatric impairment beyond mere shame and humiliation," Cohen, 107 B.R. at 455, and the Claims do not meet this definition. Accordingly, this Court has core jurisdiction to liquidate the Claims.
SLAPP refers to "strategic lawsuits against public participation." California, like many other states, has enacted an anti-SLAPP statute "in the public interest to encourage continued participation in matters of public significance, [which] should not be chilled through abuse of the judicial process." CAL. CIV. PROC. CODE § 425.16(a); see Wilcox v. Superior Court, 27 Cal.App.4th 809, 33 Cal.Rptr.2d 446, 450 (1994) ("[W]hile SLAPP suits `masquerade as ordinary lawsuits' the conceptual features which reveal them as SLAPPs are that they are generally meritless suits brought by large private interests to deter common citizens from exercising their political or legal rights or to punish them for doing so." (quoting George W. Pring, SLAPPs: Strategic Lawsuits Against Public Participation, 7 PACE ENVT'L L. REV., 3, 5-6, 8 (1989))).
The California anti-SLAPP statute, among other things, provides an expedited procedural mechanism—a special motion— for short-circuiting SLAPP lawsuits:
CAL. CIV. PROC. CODE § 425.16(b)(1). Once the defendant shows that the plaintiff's claim arises from a protected activity (the right to petition or speak freely in connection with a public issue), the motion to strike shifts the burden to the plaintiff to demonstrate a probability of success, and stays discovery until the motion is resolved unless the court orders specified discovery for cause shown. Id. at § 425.16(g). In determining whether the plaintiff has established a probability of success, a court "shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based," id. at § 425.16(b)(2), but the determination that a plaintiff has established a probability of success on the underlying claim is inadmissible in evidence "at any later stage of the case, or in any subsequent action," and does not affect any "burden of proof or degree of proof otherwise applicable" in the case or any subsequent proceeding. Id. at § 425(b)(3). Finally, the anti-SLAPP statute contains a cost shifting provision. A defendant that prevails on the motion to strike is entitled to recover attorney's fees and costs subject to certain exceptions not relevant here; a prevailing plaintiff is entitled to recover his costs and reasonable attorney's fees if the court finds that motion was frivolous or intended to cause unnecessary delay. Id. at § 425.16(c)(1).
The issue presented is whether the special motion to strike under the California
As a general matter, the California anti-SLAPP statute will apply in diversity litigation "if state conflict-of-law principles call for a rule of decision (1) that would apply to the suit if it were brought in state court, (2) that is `substantive' within the meaning of [Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 S.Ct. 1188 (1938)] and (3) that is not displaced by a valid federal law or rule governing the same issue." Liberty Synergistics, 718 F.3d at 153; accord Adelson v. Harris, 774 F.3d 803, 809 (2d Cir. 2014). Although the issue has arisen in the context of a claim objection, the claim is based on state law (except for the Section 1983 claim), was pending in state court before the bankruptcy, and accordingly, I conclude that the rules applicable to diversity actions should apply here. See Statek Corp. v. Dev. Specialists, Inc. (In re Coudert Bros. LLP), 673 F.3d 180, 187 (2d Cir. 2012) (noting that while bankruptcy jurisdiction is a form of federal question jurisdiction, "Erie made clear that state law provides the rules of decision for the merits of state law claims in bankruptcy court" (emphasis in original) (citations omitted)).
"[A] federal court exercising diversity jurisdiction must apply the choice-of-law rules of the state in which that court sits to determine the rules of decision that would apply if the suit were brought in state court." Liberty Synergistics, 718 F.3d at 151. Where, however, a diversity action is transferred from one federal court to another federal court, the transferee court must apply the choice-of-law rules of the state in which transferor court sits. Ferens v. John Deere Co., 494 U.S. 516, 530-31, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990); Van Dusen v. Barrack, 376 U.S. 612, 638-39, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964). When a bankruptcy claim is wholly-derived from a pre-petition action pending in the courts of another state, and a party in interest objects to the claim, the bankruptcy court must look to the choice of law rules of the state where the pre-petition complaint was filed. Coudert Bros., 673 F.3d at 191.
The Claims in these cases parallel the Complaint—they attach the Complaint — and accordingly, California's choice of law rules apply. This means that I must pretend that I am sitting as a California court. Liberty Synergistics, 718 F.3d at 153. California's anti-SLAPP law is procedural as a matter of California state law, and therefore applies even if the substantive law of another jurisdiction governs the merits of the claim. Id. at 154. Thus, a California court would apply the state's anti-SLAPP law to the Claims even if the substantive law of another state governed the merits, and I must too unless it is not substantive or conflicts with a valid federal statute or rule.
Although the anti-SLAPP law is procedural under California state law, whether it is substantive under Erie is a question of federal law. Id., 718 F.3d at 152; see Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) ("Under the Erie doctrine, federal courts sitting in diversity
In Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), the Supreme Court identified the twin considerations that determine whether a state law is substantive under Erie:
Id. at 468 n.9, 85 S.Ct. 1136; accord Gasperini, 518 U.S. at 428, 116 S.Ct. 2211. The Second Circuit did not decide in Liberty Synergistics whether the California anti-SLAPP statute is substantive under Erie. 718 F.3d at 153; accord Liberty Synergistics Inc. v. Microflo Ltd., 637 Fed.Appx. 33, 34 n.1 (2d Cir. 2016). In Adelson, however, the Second Circuit observed that anti-SLAPP statutes are generally applied in federal proceedings under Erie, 774 F.3d at 809 (collecting cases), and specifically ruled that the immunity
As noted, the California anti-SLAPP statute includes a mandatory fee-shifting provision. While it does not include an express immunity provision like its Nevada counterpart, the Ninth Circuit has construed the California anti-SLAPP statute as providing "substantive immunity from suit." Batzel v. Smith, 333 F.3d 1018, 1025-26 (9th Cir. 2003). Moreover, the California and Nevada statutes are substantially similar in terms of the protections they afford the defendant. In relevant part, the defendant who makes the special motion to dismiss must first establish by a preponderance of the evidence that the plaintiff's claim is based on the defendant's good faith communication in furtherance of a protected activity. NEV. REV. STAT. § 41.660(3)(a). If the defendant satisfies its burden, the plaintiff must supply prima facie evidence of a probability of prevailing on the claim. Id. § 41.660(3)(b). In determining whether the plaintiff has met its burden, "the plaintiff must meet the same burden of proof that a plaintiff has been required to meet pursuant to California's anti-Strategic Lawsuits Against Public Participation law as of June 8, 2015." NEV. REV. STAT. § 41.665(2). If the court denies
Based on the foregoing, the Court concludes that the California anti-SLAPP statute is substantive under Erie. In addition to its similarities to the Nevada anti-SLAPP statute, which the Second Circuit has found to be substantive at least in part, its provisions meet the twin purposes of Erie. First, the failure to apply the anti-SLAPP law would encourage forum shopping. Given a choice, a plaintiff bringing a SLAPP suit would be well-advised to bring his claim in federal court if he could avoid the procedural and mandatory fee shifting provisions of a state anti-SLAPP statute. Second, not applying the anti-SLAPP law could lead to different results on the same claim depending on whether the litigation was brought in state or federal court. Accordingly, the California anti-SLAPP law will apply in resolving the Omnibus Objection unless it is displaced by a valid federal law or rule, in this case, the Federal Rules of Civil Procedure.
Whether a conflict exists between a state rule and a federal rule depends on "whether, when fairly construed, the scope of [the relevant federal rule] is sufficiently
The earlier discussion implied that a state rule will always be applied if it is substantive in that it affects a litigant's rights or the outcome of the case; otherwise, the failure to apply the state rule in federal court will encourage forum shopping and lead to the inequitable administration of justice. Nevertheless, even if a state rule is substantive under Erie, "[t]he short of the matter is that a Federal Rule governing procedure is valid whether or not it alters the outcome of the case in a way that induces forum shopping." Shady Grove, 559 U.S. at 416, 130 S.Ct. 1431 (plurality opinion).
Several federal civil rules, including Rules, 8, 12 and 56, govern pleading and the disposition of a litigation prior to trial, and touch upon the same areas as California's anti-SLAPP procedures. Claims objections are contested matters, In re Drexel Burnham Lambert Grp., Inc., 159 B.R. 420, 424-25 (S.D.N.Y. 1993), and hence, Rule 56 automatically applies. See FED. R. BANKR. P. 9014(c) (making FED. R. BANKR. P. 7056 applicable to contested matters); FED. R. BANKR. P. 7056 (incorporating Rule 56). Rules 8 and 12 do not automatically apply to a claim objection, but the Court may direct at any stage of the contested matter that other Part VII rules apply, including Federal Bankruptcy Rules 7008 and 7012. FED. R. BANKR. P. 9014(c). The Debtors have asked the Court to declare Federal Civil Rule 12 applicable, which may be appropriate given that the Claims attach the Complaint, but that issue is not currently before the Court.
The question that has divided the circuit and district courts is whether some or all of the relevant Federal Rules of Civil Procedure conflict with the provisions of anti-SLAPP statutes, and therefore displace them. In Newsham, the Ninth Circuit concluded that there was no "direct collision" between the special motion to strike and the mandatory fee-shifting provisions under the California anti-SLAPP statute on the one hand, and Rules 12 or 56 of the Federal Rules of Civil Procedure on the other. 190 F.3d at 972. If the special motion is denied, motions under Rule 12 and Rule 56 could still be made. Id. Furthermore, the anti-SLAPP statute served an interest not directly addressed by the Federal Rules: protection of the constitutional rights to freedom of speech and petition for redress of grievances. Id. at 973 (citation omitted). In Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832 (9th Cir. 2001), however, the Court ruled that the discovery-limiting aspects of section 425.16(f) and (g) of the California anti-SLAPP statute collided with the discovery-allowing aspects of Rule 56, and did not apply in federal court. Id. at 846; accord Rogers v. Home Shopping Network, Inc., 57 F.Supp.2d 973, 980 (C.D. Cal. 1999).
In Godin, the First Circuit upheld the special motion procedures contained in Maine's anti-SLAPP statute.
Curiously, other decisions have seized on the same procedural differences that Godin cited, and pointed to those differences in reaching the opposite conclusion that a direct conflict existed between the Federal Rules and the particular anti-SLAPP statute at issue. For example, within the Ninth Circuit, several judges have expressed the view that Newsham was wrongly decided even while acknowledging that it is Ninth Circuit law. In Makaeff v. Trump University, LLC, 715 F.3d 254 (9th Cir. 2013), Chief Judge Kozinski stated in a concurring opinion that the California anti-SLAPP statute directly collided with the Federal Rules of Civil Procedure:
Id. at 274 (Kozinski, C.J., concurring); accord Makaeff v. Trump University, LLC, 736 F.3d 1180, 1188-89 (9th Cir. 2013) ("Trump en Banc") (Watford, J., dissenting from denial of hearing en banc). In addition, after Metabolife "crippled" the
In his concurrence in Travelers Cas. Ins. Co. of Am. v. Hirsh, 831 F.3d 1179 (9th Cir. 2016), joined by Judge Gould, Judge Kozinski concluded that the California anti-SLAPP statute directly conflicted with Rule 12(b)(6). 831 F.3d at 1183-84 (Kozinski, J., concurring). The Rule 12(b)(6) standard requires the plaintiff to state a claim plausible on its face. Id. at 1183. The California rule requires the plaintiff to demonstrate "that the claim is 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.'" Id. (quoting Wilson v. Parker, Covert & Chidester, 28 Cal.4th 811, 123 Cal.Rptr.2d 19, 50 P.3d 733, 739 (2002)). "`Probability' is a much higher bar than `plausibility,'" id., and additionally, the California special motion requires supporting evidence while Rule 12 does not. Id. Rule 12's plausibility standard "alone strikes the right balance between avoiding wasteful litigation and giving plaintiffs a chance to prove their claims," and "[u]sing California's standard in federal court means that some plaintiffs with plausible claims will have their cases dismissed before they've had a chance to gather supporting evidence. It's obvious that the two standards conflict." Id. at 1183-84 (emphasis in original) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)).
Judge Gould's separate concurrence stated that he was persuaded to the same view by Judge Kozinski's concurrence and the D.C. Circuit's opinion in Abbas, which construed the D.C. anti-SLAPP statute, D.C. CODE § 16-5502. Id. at 1186 (Gould, J., concurring); see also Abbas, 783 F.3d at 1332-33 (discussing issue before the Court). The D.C. special motion requires the defendant to make a prima facie showing that the claim arises from a protected activity. D.C. CODE § 16-5502(b). If it does, the "motion shall be granted unless the responding party demonstrates that the claim is likely to succeed on the merits, in which case the motion shall be denied." Id. The filing of the special motion stays discovery, but the court may order specified discovery if it if it will enable the plaintiff to defeat the motion and is not unduly burdensome, but may shift the defendant's cost of compliance to the plaintiff.
Some of the California district courts have carved out a curious middle ground to avoid a conflict. In Rogers v. Home Shopping Network, the defendants made a special motion under the California anti-SLAPP statute, and the plaintiff requested the opportunity to take discovery notwithstanding
The Rogers court also addressed how the special motion would work in federal court, an issue that Newsham did not decide. The court ultimately concluded that to avoid a conflict, the special motion must apply the same standards as the Federal Rules:
57 F.Supp.2d at 983; accord In re Bah, 321 B.R. 41, 45 n.6 (9th Cir. BAP 2005); Bulletin Displays, LLC v. Regency Outdoor Advertising, Inc., 448 F.Supp.2d 1172, 1180 (C.D. Cal. 2006); Brit Uw Ltd. v. City of San Diego, No. 14cv2195 JM(WVG), 2016 WL 6269730, at *6 (S.D. Cal. Jan. 22, 2016); Bautista v. Hunt & Henriques, No. C-11-4010 JCS, 2012 WL 160252, at *3-4 (N.D. Cal. Jan. 17, 2012). The Ninth Circuit adopted this standard in an unreported opinion, Z.F. v. Ripon Unified Sch. Dist., 482 Fed.Appx. 239, 240 (9th Cir. 2012) ("If a defendant makes an anti-SLAPP motion to strike founded on purely legal arguments, then the analysis is made under Fed. R. Civ. P. 8 and 12 standards; if it is a factual challenge, then the motion must be treated as though it were a motion for summary judgment and discovery must be permitted.") Under this approach, the special motion is governed by the same rules that apply to motions to dismiss and motions for summary judgment under the Federal Rules, the discovery provisions in Rule 56 trump the discovery provisions under CAL. CIV. PROC. CODE section 425.16, and the only aspect of the state law that remains intact is the mandatory-fee shifting provisions.
Based on the foregoing, the Court concludes that the special motion procedures conflict with the procedures set forth in Rule 56 (and Rule 12 should it be made applicable) primarily for the reasons expressed by Judge Kozinski in his concurrences and the decisions in Abbas and Rogers.
Accordingly, the Court concludes that even though the California anti-SLAPP statute is substantive under Erie, the literal application of the special motion procedures conflict with Rule 56 (and Rule 12 to the extent it is made applicable), and does not apply to the disposition of the Omnibus Objection. I do not decide whether the fee shifting procedures are severable and survive, and leave that for another day. I have considered the parties' remaining arguments, and conclude that they lack merit.
For the reasons set forth above, the Claims are not "personal injury tort" claims within the meaning of 28 U.S.C. § 157, and consequently that the Court may adjudicate their allowance or disallowance and liquidate the Claims. Additionally, the California anti-SLAPP's special motion procedures are inapplicable to the disposition of the Omnibus Objection.
Settle order.
Metabolife, 264 F.3d at 846. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n.5, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).