Hawran sued Sequenom and its directors Hixson, Lerner, and Lindsay over a press release about Sequenom’s internal investigation into its handling of test data, which it issued on the same day it filed a legally required disclosure to the SEC. Hawran was Sequenom’s CFO from April 2007 until his resignation in September 2009. In spring 2009, Sequenom publicly admitted that previously reported results for a diagnostic test for fetal Down Syndrome were mishandled by employees on its science team. The stock price went down, lawsuits were filed, and Sequenom commenced an internal investigation led by a special litigation committee (SLC). In April 2009, Sequenom issued a press release concerning the delay in the launch of the test due to the mishandling, and a day later filed a required form reporting to the SEC Sequenom's formation of the SLC and related information. In June 2009, the SEC told Sequenom that it had had started an investigation.
In September, defendants “made Hawran an offer that if he resigned as chief financial officer, he would not be associated with the mishandling and would be separated from others involved in the test data mishandling,” and he resigned in reliance on those representations. Three days later, Sequenom filed another form and issued another press release announcing the completion of the SLC's independent investigation. This release said that Sequenom had failed to put into place adequate protocols and control for studies, but that the board had begun implementing remedial measures. It continued that Sequenom had terminated its president/CEO and its senior VP of R&D. And it said that Sequenom had obtained Hawran’s resignation along with one other officer. “While each of these officers and employees has denied wrongdoing, the special committee's investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company's board of directors in the personnel involved.” The relevant part of the SEC filing said the same thing. Hawran alleged that this was defamatory (etc.) and that he’d actually been constructively fired for raising red flags related to tax reporting and board members’ fiduciary obligations.
Defendants moved to strike because the statements related to a matter of public concern and were connected to an SEC investigation; in addition, they argued that the statement that he denied wrongdoing was not defamatory and that the statement of lost confidence was opinion, as well as raising additional defenses. As part of his argument that the press release was commercial speech not subject to the anti-SLAPP law, Hawran presented declarations indicating that Sequenom used press releases as promotional materials provided to the sales department, customers, investors, etc.
The trial court granted the anti-SLAPP motion in part, finding that Hawran’s causes of action arose communications covered by the anti-SLAPP law; the commercial speech exception didn’t apply. But, as to Hawran's defamation, invasion of privacy and UCL causes of action, Hawran had demonstrated a probability of prevailing on those claims, and defendants had not established the applicability of any privileges. The court of appeals affirmed.
The most notable part of the ruling is the interpretation of the commercial speech exception. When a defendant meets the threshold burden of showing its speech is covered, the plaintiff must then show that the commercial speech exemption applies (or establish a probability of prevailing on the underlying claims). Here, defendants’ speech was protected as a writing “made in connection with an issue under consideration or review by ... any other official proceeding authorized by law ....” However, the anti-SLAPP law does not apply to a cause of action arising from commercial speech when
(1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services; (2) the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person's or a business competitor's business operations, goods, or services; (3) the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services or in the course of delivering the person's goods or services; and (4) the intended audience for the statement or conduct [is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer].
This exemption is narrowly construed.
Here, the court of appeals agreed that Hawran didn’t show that the allegedly defamatory portions of the press release were representations of fact about Sequenom’s business operations, goods, or services. Hawran argued that the press release was “almost exclusively devoted to explaining what went wrong in [Sequenom’s] operations concerning the development and testing of a new genetic product and the operational steps [defendants] were taking to address the problem, and to announce a conference call to discuss these matters with investors, customers and other interested parties.” Thus, Hawran said the press release was commercial speech as in Kasky v. Nike.
Defendants argued that the press release was made in order to comply with mandatory NASDAQ reporting requirements and that the allegedly defamatory comments within it didn’t satisfy (2)-(4) of the exception’s requirements.
The broad purposes of the press release didn’t matter: the question was whether the allegedly defamatory portions of the press release were “representations of fact about [Sequenom's] ... business operations, goods, or services.” Merely being accompanied by factual representations about the defendant’s business operations isn’t sufficient to put a statement inside the exemption. Hawran’s claims were based on the statements concerning his resignation and purported denial of wrongdoing, not the statements about the deficiencies of Sequenom's test protocols and controls, or Sequenom’s remedial measures. What about the statements that Sequenom obtained Hawran’s resignation and that he denied wrongdoing? They “arguably may broadly concern or relate to Sequenom's corporate events or business decisions,” but the exemption should be construed narrowly, so they still weren’t about Sequenom’s business operations, goods, or services. The same was true of the statement that the investigation resulted in a “loss of confidence … in the personnel involved.” That was “about” the SLC’s investigation and the board’s reaction. Nike v. Kasky was not to the contrary, being a case about the meaning of commercial speech under the First Amendment and not under the anti-SLAPP statute.
Because failure on one element meant there was no exemption, Hawran had to show a probability of prevailing on the merits, which he did at this stage for his defamation, invasion of privacy, UCL, and breach of contract claims. (This is a “minimal merit” standard requiring only enough for the plaintiff to go forward, not a summary judgment-type standard.) Defendants’ claim to absolute privilege for either a fair and true report of an official proceeding to a public journal or a statement made pursuant to an official proceeding failed; the press release was neither even though it tracked statements required to be made to the SEC. It was also not covered by the conditional privilege for statements made without malice on subjects of mutual interest, since it was distributed widely, not just to the investing public or those with a proprietary interest.
Since the statements had a per se defamatory meaning that was plain on the face of the document, proof of harm to reputation was unnecessary. Defendants argued that the statement that Hawran denied wrongdoing was not defamatory, and that the other relevant statements (the investigation raised serious concerns, and those concerns resulted in a loss of confidence by the independent members of the board in “the personnel involved”) were opinion. But in context, there was a defamatory meaning, and the statements weren’t just opinions, mere impressions, or evaluative statements made, for example, in the context of an employee performance review. They were “statements of matters that can be proven or disproven concerning Sequenom's business decisions and the consequences of the SLC's investigation.” And they were made in a press release supplementing mandatory SEC disclosures. “Such formalized statements in press releases are usually intended to be factual, as opposed to rhetorical, persuasive, or evaluative.” Given the context of Sequenom’s trouble with substantiation and supervision in its research program, and the remedial measures and other terminations reported, an average person reading the whole press release would see the damaging implication that “Sequenom sought and obtained Hawran's resignation because Hawran was among the group of officers and employees somehow involved or responsible for the identified failures and deficiencies of the … program and failed company procedures. The statements suggest that Sequenom possessed undisclosed, and provably false, facts concerning what Hawran actually did or did not do at Sequenom to implicate him in the wrongdoing.”
Defendants also argued literal truth: “Hawran ultimately admitted in opposition to the motion that it was literally true that Hixson told him in a meeting that Sequonom's board had lost confidence in him.” But there was still a potentially false implication. Hawran denied any involvement with mishandling scientific data, and Sequenom’s filing with the SEC didn’t directly suggest that he was among the personnel in whom Sequenom lost confidence. This, combined with Hawran’s allegations about his prior whistleblower-type complaints, suggested that Sequenom’s motives may have been unrelated to the scientific misconduct; that’s the type of dispute that can’t be resolved at this stage. The evidence didn’t establish truth as a matter of law.