Monday, May 05, 2008

Attorney ads lead to SLAPP suit; anti-SLAPP motion succeeds

Simpson Strong-Tie Co., Inc. v. Gore, --- Cal.Rptr.3d ---, 2008 WL 1886602 (Cal. App. 6 Dist.)

An opinion with some very broad language rejected claims against an attorney who sought to draw clients by warning them about potentially defective products. Defendant ran the following ad in two local California papers:



If your deck was built after January 1, 2004 with galvanized screws manufactured by Phillips Fastener Products, Simpson Strong Tie or Grip Rite, you may have certain legal rights and be entitled to monetary compensation, and repair or replacement of your deck.

Please call if you would like an attorney to investigate whether you have a potential claim: [contact information]

Simpson sued defendant Gore and his firm for defamation, trade libel, false advertising, and unfair business practices. Defendants moved for dismissal under California’s anti-SLAPP statute. The trial court granted it, and the appellate court affirmed.

Background facts: galvanized screws are risky to use with modern pressure-treated wood, because the chemicals tend to corrode the screws, which can cause serious problems. The metal and coating for a screw should be carefully matched with the wood for a deck. Simpson can’t control what people who build decks do, though it warns about this issue extensively in its materials.

Gore saw three local news reports suggesting that owners of recently built outdoor decks were at risk of premature failure and collapse because new pressure treatments for wood were more corrosive than earlier versions. His research included conversations with a Contra Costa County District Attorney’s inspector who’d in the news reports. Once he learned about a Massachusetts lawsuit against another manufacturer of galvanized fasteners, he ran the ad. To date, he hasn’t filed suit against any manufacturer.

Simpson argued that its claims were exempt from the anti-SLAPP statute because of the recent amendment excluding claims (1) arising from representations of fact about the speaker’s or a competitor’s products or services, and (2) statements made in the course of delivering the speaker’s products or services.

Plaintiff had the burden of proving its claims fell within the exception. Though courts have referred to the exception as one covering “commercial speech,” it’s not that broad. The defendant has to be a person primarily engaged in the business of selling or leasing goods or services (which defendants were) and the statement has to be addressed to or intended for an appropriate audience (which it was).

The statements, however, were not representations of fact about defendants’ or a business competitor’s operations, goods, or services, though they were made for the purpose of promoting defendants’ business. Rather, the statements related to plaintiff, and plaintiff isn’t a competitor. Plaintiff argued that the ad represented that defendants had investigated the named companies, and thus made factual representations about defendants’ services. But the court disagreed—there was no express or implied statement about any investigation. “Some readers might surmise that Gore conducted an investigation. ... Some might fancy he was making things up out of whole cloth. Reasonable readers would refrain from any such speculation, since the advertisement affords no basis for it. The statutory exemption does not extend to every statement that might precipitate unbridled guesswork about the speaker’s business-related activities by unusually imaginative readers.”

Moreover, even if the ad had reported an investigation, the claim would not arise from the statement about the investigation, but from the statement about its results, which targeted the plaintiff. Without competition, there was no exception.

The other alternative for applying the exception would be if the statement were made in the course of delivering defendants’ services. The court ruled, however, that advertising for clients does not constitute delivering services for purposes of the anti-SLAPP statute. Advertising, like buying inputs, is a typical component of running a business, but that doesn’t make it delivering services. The court distinguished this case from a hypothetical in which a lawyer made a phone call “on behalf of a prospective client by whom he had not been formally retained.” But that would be delivering services to a prospective client, not seeking business from that client.

The court went on to hold that rejecting the exemptions in this case was entirely consistent with legislative purpose; indeed, “it would be absurd, if not perverse, to grant Simpson the shelter of the statutory exemptions.” This is so because the exemptions were enacted to combat “the growing use of anti-SLAPP motions by commercial enterprises seeking to impede or obstruct litigation brought against them by public-interest or consumer class plaintiffs.” The legislature concluded that meritless anti-SLAPP motions, which are immediately appealable and can take up to two years to resolve, were being used “‘as a litigation weapon,’” turning the law on its head. “[S]ince a SLAPP suit depends for its effectiveness on the economic burden and risk it imposes on the defendant, the concept has little if any application to actions against large commercial enterprises, which ‘have far greater resources to defend themselves when sued, and as a group are far less likely--or not likely at all--to be chilled in the exercise of their First Amendment Rights.’” This was a classic SLAPP suit.

Thus, to proceed, Simpson had to establish a probability of prevailing on the claim with a sufficient prima facie factual showing. This required Simpson to show a provably false statement of fact; statements that are substantially true are not false. Only if the “gist” of a truthful statement would have been different can there be defamation. The gist is to be assessed from the perspective of an ordinary observer.

Simpson argued that the ad was provably false because Simpson gave ample warnings of the risk of misuse of galvanized screws with pressure-treated wood. Thus, there could be no failure to warn claim, and therefore no product liability, there being no indication of any design or manufacturing defects. The court rejected the idea that the ad would only be true if Simpson could be held liable in a products liability suit. To the average newspaper reader, “defective” is not a term of art but a common word.

Moreover, the court held, the gist of the ad is not that the screws are “defective,” a word absent from the ad. Rather, the ad indicates that some of Simpson’s screws were unsuitable for use in certain decks and people who used them might have a remedy against someone. This isn’t provably false because (1) it’s not substantially different from the truth as Simpson puts it; (2) it’s explicitly a possibility; and (3) in speaking of legal rights, it’s “explicitly predictive and thus cannot be understood to assert a proposition of fact because it is almost universally understood that no one knows the future.”

The court used some rather strong language on this score:

[W]hen a prediction is not borne out by events, we do not ordinarily characterize it as false, but as inaccurate, meaning only that it missed its mark, as an arrow misses its target. This linguistic difference reflects the universal understanding that the future does not exist. Like anything that does not exist, it cannot be spoken of in factual terms, but only in suppositional or probabilistic ones. In general, therefore, a prediction of future events is intrinsically incapable of conveying a provable (or disprovable) assertion of fact.

Comment: predictions can be statements of fact when they come from a person who has reason to know. A lawyer who advertises “I will get you your money” is making a prediction, but could easily be subject to attorney ad regulations. But this ad wasn’t that explicit. Indeed, the court also noted the ad’s reference to “investigat[ion]” of “potential claims.”

As such, the ad didn’t imply any facts, but rather a possible state of fact subject to the contingencies of (1) investigation and (2) litigation. “A statement will not ordinarily be deemed factual when it is ‘cautiously phrased in terms of apparency’” (citation omitted). Once again, the court used strong language, followed by a retreat. The ad uses the word “may”:

An assertion that “X may be Y” posits only some possibility that X is Y. Such a statement is true so long there is any possibility that X is Y. To prove it false, one must establish that X could not be Y. That is why one who speaks carefully will concede almost any proposition couched in terms of “may” or “might,” perhaps with a grudging, “Anything is possible.” Here, insofar as Gore’s advertisement conveys the assertion that users of its galvanized screws “may” be entitled to legal relief, proof of literal falsity would require a demonstration that no reader could possibly be entitled to any relief, from anyone, on any theory or state of facts.

By its nature such a burden is practically impossible to carry. (emphasis added)

Stopping there would have made any sort of defamation practically impossible to prove: e.g., “my enemy may be a child molester.” But doctrine makes clear that statements of opinion may be the basis of liability where they imply knowledge of additional undisclosed defamatory facts.

Thus, the court analyzed the specific statements at issue here. Simpson’s own literature established that the choice of correct hardware was difficult. “It would be astonishing if no deck owner or contractor used galvanized hardware in a situation where it created a danger of property damage and even personal injury.” Even assuming without analysis that Simpson was completely shielded against liability, deck owners could have viable claims against others involved in the deck construction process. “It would therefore be astonishing if it were not substantially true, and indeed literally true, that some readers of the advertisement might be entitled to legal relief. Indeed, it would be highly surprising if none of them were in fact entitled to relief.”

Moreover, the ad conditioned any potential claim on further investigation. Rather than implying defamatory facts, it directly implied that defendants didn’t know, and needed further investigation to come to a conclusion on, whether Simpson or anyone else was liable.

Simpson also offered a consumer survey of Lowe’s Home Improvement shoppers on the issue of harm. The results indicated that the ad decreased respondents’ ratings of the quality of Simpson screws, increased their estimate of the likelihood that the screws would be “defective,” and decreased their willingness to purchase the screws.

Remember how defamatory meaning was supposed to be assessed from the perspective of a reasonable observer? As it turns out, survey respondents don’t count, only judges:

The requirement of a provably false assertion of defamatory fact is grounded in the constitutional entitlement to speak truthfully. That entitlement is not subject to defeasance by plebiscite, let alone by private opinion survey. It is for the courts, as guardians of our constitutional liberties, to say whether a statement is the type that will permit a judgment for libel. That function cannot be delegated to anonymous citizens questioned by anonymous interrogators in public parking lots.

The rhetoric here is stirring, except that it contradicts the idea that defamation depends on whether average observers believe that something defamatory has been said. This contradiction isn’t uncommon, but it’s rarely exposed so starkly by the presence of a survey.

Naturally, the court also had multiple criticisms of the survey itself, finding the questions nebulous; the possible answers unhelpful; and the context (interrupting one’s shopping/errands to answer an unrelated survey versus choosing to read an ad in a newspaper) unlikely to encourage comprehension. Note here the resurgence of the idea, rejected in advertising law for many years, that surveys are hearsay: “The law rightly mistrusts leading questions. It should not trust them more when they are posed out of court by anonymous interrogators to unsworn anonymous declarants.” I am not arguing that the criticisms of this survey were invalid. Rather, the court also made judgments that go to the relevance of all surveys, and that’s a bit more problematic if we think (which we might not) that defamation is about audience perception.

Anyway, without a provably false assertion of fact, the libel, trade libel, and unfair business practices claims failed.

Simpson also argued that defendants falsely advertised their own services by implying that they’d investigated the companies named in the ad and discovered that those companies were selling defective screws. The court concluded that the second part (discovery of defect) couldn’t reasonably be attributed to the ad, while the first part wasn’t false—the ad says Gore is a lawyer and that he’ll investigate potential claims by people who call him. Thus there was no false advertising claim.

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