Ex-competitor status leads to ex-lawsuit

Integrated Healthcare Holdings, Inc. v. Fitzgibbons, --- Cal.Rptr.3d ----, 2006 WL 1629391 (Cal.App. 4 Dist.)

Fitzgibbons was a member of the medical staff at Western Medical Center (WMC), a trauma center in Orance County that plaintiff IHHI was seeking to purchase. IHHI was highly leveraged, and its ability to sustain operations was uncertain enough that its bid prompted several public hearings. The medical staff dropped its opposition to the purchase pursuant to a written agreement with IHHI, in which the WMC staff agreed to “express public support” for the acquisition.

After the acquisition, IHHI received a notice of default on $80 million in loans, which was reported in the Orange County Register. Fitzgerald then sent an email to a number of people questioning IHHI’s financial conditions, predicting its bankruptcy, and mocking its principals. According to IHHI, this email found its way to Blue Cross, with whom IHHI was negotiating for higher insurance payments, and stalled negotiations at a cost of over $500,000. IHHI sued for defamation, breach of contract, tortious interference, and violations of the Unfair Competition Law.

Fitzgibbons invoked California’s anti-SLAPP statute, and appealed when the trial court denied him protection. The court of appeals reversed, concluding that his email concerned “an issue of public interest.”

But there’s a twist: IHHI argued that the anti-SLAPP statute doesn’t apply to competitors engaged in commercial speech. Fitzgibbon belonged to an entity formed to purchase WMC (an entity whose offer was rejected before WMC’s then-owner accepted IHHI’s). Prior courts have been understandably concerned about subjecting run-of-the-mill trademark and false advertising cases between competitors to the substantial barriers thrown up by the anti-SLAPP statute.

The court of appeals stated that “in most cases,” a competitor’s statements would not be protected by the anti-SLAPP law, but there is no per se rule. In an earlier case, in which the defendants allegedly solicited their former employer’s customers with false statements that the employer used toxic chemicals, the court held that such speech didn’t concern a public issue because the defendant’s business wasn’t in the public eye. Here, by contrast, IHHI was already in the public eye. Furthermore, Fitzgibbons was an ex-competitor, not an active competitor – sour grapes are not the same as competition for SLAPP purposes.

Because Fitzgibbons was protected by the anti-SLAPP law, IHHI had to show a likelihood of success at an early stage in order to avoid dismissal, and this it could not do. Fitzgibbons disclosed the facts on which he based his opinions; IHHI didn’t disprove those facts. The contract between IHHI and the staff didn’t waive Fitzgibbons’ First Amendment rights: The court construed the contract narrowly because it involved free speech, and held that (1) an email to a limited number of people wasn’t “public” for purposes of expressing public support, and (2) the contract wasn’t specific enough require public support for the entire life of the contract; it was limited to pre-acquisition public support.