21 Cal. App. 5th 167
Cal. Ct. App. 5th2018Background
- MMM Holdings and MSO (Puerto Rico health-plan entities) sued opposing counsel Marc Reich after his client Jose Valdez (a terminated MSO president) gave Reich ~26,000 electronic files Valdez retained from his employment.
- Valdez (through Reich) filed a qui tam False Claims Act suit alleging the plans overbilled Medicare and retaliated against providers; some of the documents from Valdez were used in that suit and later provided to third-party attorneys in other matters.
- Plaintiffs allege Reich wrongfully possessed, disseminated, and refused to return proprietary/privileged documents and assert claim and delivery, conversion, civil theft (Pen. Code § 496), unjust enrichment, and UCL claims.
- Reich moved to strike under California’s anti‑SLAPP statute (Code Civ. Proc. § 425.16); the trial court granted the motion, concluding Reich’s conduct was protected petitioning/speech and plaintiffs could not show a probability of prevailing because the litigation privilege barred liability.
- On appeal, the court held Reich’s dissemination of documents was activity in furtherance of petition/speech on a matter of public interest (qui tam/Medicare billing), and plaintiffs failed prong two because the litigation privilege and lack of prima facie evidence (e.g., no showing of theft intent) defeated their claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Reich’s receipt/use/dissemination of documents arises from protected petition/speech under §425.16 | Reich’s distribution went beyond litigation purposes and involved wrongful possession/disclosure of confidential privileged materials | Reich’s receipt/use/distribution furthered litigation (qui tam and related matters) and thus is petition/speech on a public interest issue | Reich’s conduct falls within §425.16(e)(4): distribution advanced petition/speech on matters of public interest (Medicare/qui tam) |
| Whether the documents’ dissemination was “in connection with a public issue” | Business disputes over provider contracts are private, not public interest matters | Qui tam and alleged Medicare fraud/underpayment impact taxpayers and public health system—matter of public interest | Court: qui tam/Medicare fraud allegations satisfy "public issue" analysis; dissemination therefore protected |
| Whether plaintiffs demonstrated a probability of prevailing (prong two) | Plaintiffs allege conversion, civil theft, unjust enrichment, UCL and assert privileged/confidential disclosure; claim Reich had no duty to keep/use documents | Reich invokes absolute litigation privilege (Civ. Code §47(b)) and denies privileged status of documents; argues plaintiffs lack prima facie evidence of theft or wrongful intent | Plaintiffs failed prong two: litigation privilege bars liability for communicative acts, and they produced no prima facie evidence (e.g., no showing Valdez intended theft or Reich knew of theft) |
| Whether any independent duty or unlawful conduct exception defeats privilege | Plaintiffs argue contract breach, criminal receiving stolen property (Pen. Code §496), or an independent duty might avoid privilege | Reich argues contract is between Valdez and employer (not Reich), alleged crimes unproven, and no independent duty to plaintiffs exists | Court: no binding duty from Valdez’s employment contract to Reich; no prima facie proof of theft or criminality; no independent duty shown—privilege applies |
Key Cases Cited
- Rusheen v. Cohen, 37 Cal.4th 1048 (litigation privilege and anti‑SLAPP context) (describing communicative vs. noncommunicative conduct)
- Baral v. Schnitt, 1 Cal.5th 376 (anti‑SLAPP two‑step framework and prong two as summary‑judgment‑like)
- Flatley v. Mauro, 39 Cal.4th 299 (litigation privilege can preclude claims arising from litigation publications)
- Strathmann v. Acacia Research Corp., 210 Cal.App.4th 487 (qui tam actions involve public interest; public‑interest exception analysis)
- Healthsmart Pacific, Inc. v. Kabateck, 7 Cal.App.5th 416 (statements about alleged medical fraud connect to public interest under §425.16(e)(4))
- Finton Constr., Inc. v. Bidna & Keys, 238 Cal.App.4th 200 (claims against lawyer for use of wrongfully obtained documents in litigation)
- Bergstein v. Stroock & Stroock & Lavan LLP, 236 Cal.App.4th 793 (attorney‑use‑of‑documents cases relevant to anti‑SLAPP/litigation privilege analysis)