Anti-SLAPP Motion fails to satisfy the first "arising from" prong under the customary two-part analysis

I regret that the press of work kept me away from this site for quite some time, other than the podcasts that I've continued to work on.  It looks like I'm going to be able to come up for air, so I am going to get back to posting on a more regular basis.

In Trilogy at Glen Ivy Maintenance Association, et al. v. Shea Homes, Inc., et al. (pub. ord. Mar. 19, 2015), the Court of Appeal (Fourth Appellate District, Division One) affirmed a trial court finding that an anti-SLAPP Motion lacked merit for failure to satisfy even the first prong of the two-part anti-SLAPP analysis.  As summarized by the Court, under the first step, "the defendant bringing an anti-SLAPP motion must make a prima facie showing that the plaintiff's suit is subject to section 425.16 by showing the plaintiff's claims arise from conduct by the defendant taken in furtherance of the defendant's constitutional rights of petition, or free speech in connection with a public issue, as defined by the statute."  Slip op., at 7-8.

The Court explained that, when evaluating whether a claim arises from protected speech, a trial court must look to the gravamen of the claim:

[W]e disregard the labeling of the claim (Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 522) and instead "examine the principal thrust or gravamen of a plaintiff's cause of action to determine whether the anti-SLAPP statute applies" and whether the trial court correctly ruled on the anti-SLAPP motion. (Id. at pp. 519-522.) We assess the principal thrust by identifying "the allegedly wrongful and injury-producing conduct . . . that provides the foundation for the claim." (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 189.) If the core injury-causing conduct on which the plaintiff's claim is premised does not rest on protected speech, collateral or incidental allusions to protected activity will not trigger application of the anti-SLAPP statute. (Ibid.)

Slip op., at 9. Following from this distinction, the Court concluded that the unusual choice of wording in the complaint was irrelevant to the analysis of the actual gravamen of the claim.  Specifically, the plaintiff used the word "repudiation" to describe a species of fiduciary breach, leading the defendant to claim that the complaint was about speech.  The Court was not persuaded, correctly identifying the fiduciary breach "gravamen" of the complaint.

AAA escapes class action alleging backdating of late renewals

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Still playing catch-up.  Today's edition of blog from the past concerns the Automobile Club of Southern California, an organization that inspires mixed feelings in me.  On the one hand, they do provide what I consider to be excellent insurance services.  But I can't help but feel that there is a dark underbelly at AAA of SoCal.  Some of that underbelly was challenged but escaped unscathed in Thompson v. Automobile Club of Southern California (pub. Ord. June 27, 2013), in which the Court of Appeal (Fourth Appellate District, Division Three) affirmed the trial court's denial of class certification in a case alleging claims based on the backdating of the membership renewals when the renewal is late.

The plaintiff specifically challenged the practice of “backdating” late renewals to the member’s original expiration date if the renewal occurs within 95 days.   The plaintiff contended that this practice resulted in late-renewing members receiving less than a full year of services. The Auto Club argued that the 95-day period is a “grace period” and that members are generally permitted to continue receiving services, particularly during the first 31 days, and saves members the $20 fee to start a new membership.  The plaintiff moved for class certification.  The trial court denied the motion, finding that the class members could not be ascertained and that individual questions predominated.

With respect to the factual issues surrounding class certification, we afford the trial court “ ‘great discretion in granting or denying certification.’ ” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311.) The trial court’s ruling will be reversed only if a “ ‘manifest abuse of discretion’ ” is present. (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1022.) “ ‘A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions. [Citations.]’ [Citations.]” (Ibid.)

Slip op., at 6.  The Court said, “ ‘We may not reverse, however, simply because some of the court’s reasoning was faulty, so long as any of the stated reasons are sufficient to justify the order. [Citation.]’ (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843-844.)”  Slip op., at 6-7.

The Court then examined the bases of the trial court’s decision.  Looking first at the trial court’s ascertainability finding, the Court concluded that the class definition was significantly overbroad, and thus not ascertainable from the available records:

If putative class members either received benefits during the delinquency period, were not damaged as a result of the renewal policy, or renewed after the Auto Club’s membership policy was disclosed, their ability to recover is called into serious question. If class members received benefits during the delinquency period or they were told about the Auto Club’s renewal practices, they cannot maintain a cause of action under the UCL.  If they were not economically damaged, they cannot recover on a breach of contract, under the CLRA, or through an unjust enrichment claim.  (See Civ. Code., § 1780, subd. (a); Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388; Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726.)

Slip op., at 11.  As it so happens, I disagree that the ability to identify the class from available records is the touchstone of ascertainability.  Certainly that is one very useful way, but the purpose of a class definition is to allow a potential class member to determine when reading the definition whether they are a member of the class.  Consider consumer class actions involving retail transactions.  Often, there is no way to know the identity of purchasers of a product; but the purchasers know.  The notion that the class can only be ascertained if they are identified in available records is simply an invitation to maintain shoddy records and a strangely narrow view of what it means to have an ascertainable class.  This portion of the opinion is horse hockey.

You can sense when the outcome won't go your way as the plaintiff when the Court of Appeal began by strongly emphasizing the discretion given to the trial court’s ruling on certification:

Anyhow, the Court of Appeal then agreed that the same issues impacting the ability to identify the class (under the Court's narrow view of ascertainability) presented individualized issues that predominated over common questions:

The trial court found that individual issues predominate: “(A) Individual issues predominate regarding whether a putative class member is entitled to recover on any of Plaintiff’s causes of action. This is because, as stated above, there were members who suffered no injury because they (i) received services during their delinquency, (ii) had the Auto Club’s renewal policy explicitly disclosed to them, and/or (iii) were economically better off under the Auto Club’s system of renewal than they would have been if they had begun new memberships on the date of payment and paid the $20 new enrollment fee. Determining whether a member falls into any of these categories and would therefore not be entitled to recover from the Auto Club on any of Plaintiff's theories of liability, can only be done on a case-by-case basis.” The court went on to explain that essentially the same reasons applied to each cause of action.

Slip op., at 13-14.  The Court concluded by finding that the arguments concerning typicality and superiority were not significant because of the substantial problems with ascertainability and commonality.  The decision presents an example of the potential for a serious entanglement of merits questions with certification issues when the Court considered the viability of the plaintiff’s theory.

Second Appellate District concludes that Gentry remains good law, despite Concepcion

While it may not last much longer than it takes the ink to dry on the opinion, the Court of Appeal (Second Appellate District, Division One), in Franco v. Arakenian Enterprises, Inc. (November 26, 2012) considered a significant question: "The question on appeal is whether Gentry was overruled by Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___ [130 S.Ct. 1758] (Stolt-Nielsen) and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740] (Concepcion)."  Slip op., at 3.  Summarizing a 65-page opinion, the Court said:

We conclude that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights. And, as required by Stolt-Nielsen, when a class action waiver is unenforceable under Gentry, the plaintiff's claims must be adjudicated in court, where the plaintiff may file a putative class action. Accordingly, we affirm.

Slip op., at 3.

The decision follows an earlier opinion in the matter, Franco v. Athens Disposal Co., Inc., 171 Cal. App. 4th 1277 (2009) (Franco I).  That procedural and factual history is extensive, and I won't summarize it.  The opinion also contains a footnote indicating that it invited comment on D.R. Horton, but because Franco did not respond to the request, the Court declined to address the impact of that matter.

 The decision also has an exhaustive review of arbitration decisions in the context of statutory claims.  After that history, the Court examined the reach of the Concepcion.  An extended portion of the Court's analysis cited approvingly to a law review analysis: Gilles & Friedman, After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion (2012) 79 U.Chi. L.Rev. 623.

Ultimately, after looking at the Question Presented in Concepcion, the Court concluded that, in this case, Franco lacked the means, not the incentive, to pursue his claims.  That distinction, the Court held, justified the trial court's decision to deny the petition to compel arbitration.

Then, tucked right into the end of the opinion, the Court offered a monumental observation that would have had great significance if the Court had considered D.R. Horton:

Which brings us to the subject of Concepcion's effect, if any, on PAGA claims. We have already concluded that Athens Services's arbitration agreement — the MAP — contains two unenforceable clauses: the class action waiver and the prohibition on acting as an attorney general. (See Franco I, supra, 171 Cal.App.4th at pp. 1297–1300, 1303; fn. 2, ante.) Those clauses operate independently of each other: One restricts Franco‘s pursuit of his rest and meal period claims while the other prohibits his recovery under the PAGA. Together, they render the MAP tainted with illegality, making it unenforceable and permitting Franco to adjudicate his claims in a judicial forum. (See Franco I, at p. 1303; fn. 2, ante.) Concepcion does not preclude a court from declaring an arbitration agreement unenforceable if the agreement is permeated by an unlawful purpose.

Slip op., at 64.  See that?!  Right there?!  This Court gets it!  If you impose a contract that violates the law (e.g., the NLRA), then the contract is unenforcable in Court on the general ground of illegality.  Any contract that violates the NLRA, not just arbitration agreements, is void and unenforceable.  How hard is this, really?  And here we finally see a Court clearly articulate the illegality defense analysis, but the Court declined to address the NLRA argument because one of the parties was too busy to answer.  Wonderful.

Of course, this case may vanish for years when it gets sucked up into the California Supreme Court's Gentry re-examination.

Arguelles-Romero v. Superior Court explains rules in Gentry and Discover Bank

If you were an arbitration agreement, this is your moment in the spotlight.  In Arguelles-Romero v. Superior Court (May 13, 2010), the Court of Appeal (Second Appellate District, Division Three) granted a petition for a writ of mandate after the trial court ordered the plaintiff to submit to individual arbitration.  The trial court also ruled that a class action waiver provision in the automobile financing contract was not unconscionable.  That finding by the trial court prompted the Court of Appeal to spend a good deal of time discussing the two different tests presented in the California Supreme Court cases of Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005) (Discover Bank) and Gentry v. Superior Court, 42 Cal. 4th 443 (2007) (Gentry).  The Court of Appeal held:

While we hold the trial court did not err in finding the class action waiver was not unconscionable, we also conclude that it should have also performed a discretionary analysis on whether a class action is a significantly more effective practical means of vindicating the unwaivable statutory rights at issue. We therefore grant the petition and remand with directions.

Slip op., at 2.  To provide some context, the Court stated the basic standard of review as follows:

“California law, like federal law, favors enforcement of valid arbitration agreements.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 (Armendariz).) Under both federal and California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the voiding of any contract. (Id. at p. 98 & fn. 4.) Unconscionability is a recognized contract defense which can defeat an arbitration agreement. (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1099.)

Slip op., at 12.

Cutting right to it, here is the first money quote:

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