Opinion
Plаintiff and appellant Paul W. Hawran filed a lawsuit against defendants and appellants Sequenom, Inc. (Sequenom), and Sequenom directors Harry Hixson, Jr., Richard Lemer, and Ronald Lindsay, stemming from representations made in a widely disseminated press release concerning Sequenom’s internal investigation into its handling of certain research and development test data and results, which issued on the same day that defendants filed a legally required disclosure of information to the United States Securities and Exchange Commission (SEC). The trial court granted in part defendants’ special motion to strike Hawran’s first amended complaint as a strategic lawsuit against public participation under Code of Civil Procedure section 425.16 (commonly known as the anti-SLAPP statute),
Defendants appeal from the partial denial of their motion, arguing Hawran did not demonstrate a probability of prevailing on the merits of his claims. In part, they maintain the statements made within the press release are not defamatory, and in any event are absolutely or qualifiedly privileged. Hawran cross-appeals, contending the trial court should have denied defendants’ motion in its entirety because all of his causes of action are exempted from the anti-SLAPP law by the commercial speech exemption of section 425.17, subdivision (c).
We hold Hawran did not meet his burden to show his causes of action fall within the commercial speech exemption, and thus they are subject to the anti-SLAPP law. However, we further hold the absolute and qualified privileges of Civil Code section 47 do not apply to defendants’ press release, and that Hawran otherwise demonstrated a probability of prevailing on his causes of action for defamation, invasion of privacy, unfair business practices and breach of contract. Accordingly, we affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
Sequenom is a publicly traded diagnostic testing and genetics analysis company, whose common stock trades on the NASDAQ. Hawran was its chief financial officer from April 2007 to his resignation on September 25, 2009.
In the spring of 2009, Sequenom publicly admitted that previously reported research and development results for a certain diagnostic test for fetal Down syndrome (at times, Trisomy 21 or T21) were mishandled by employees on the Sequenom science team. Thereafter, Sequenom’s stock price declined, derivative and securities fraud lawsuits were filed, and Sequenom commenced its own 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 T21 test due to the mishandling, and a day later filed a “Form 8-K”
In September 2009, 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. In reliance on those representations, Hawran resigned on September 25, 2009.
On September 28, 2009, Sequenom filed another Form 8-K and issued a press release (hereafter the September press release or press release) announcing the completion of the SLC’s independent investigation. In part, the September press release stated Sequenom had failed to put in place adequate protocols and control for the conduct of studies related to the program, but that the board of directors had begun to implement various remedial measures. The press release continued: “The company has terminated the employment of its president and chief executive officer, Harry Stylli, Ph.D., and its senior vice president of research and development, Elizabeth Dragon, Ph.D., effective immediately. In connection with the termination of Dr. Stylli’s employment, the company’s board of directors has requested that he resign as a director, which he is obligated to do under the terms of his employment agreement. The company has obtained the resignation of its chief financial officer, Paul Hawran, and 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.”
In August 2010, Hawran sued Hixson, Lemer and Lindsay and several days later filed a first amended complaint adding Sequenom as a defendant. The first amended complaint sets forth causes of action for defamation, invasion of privacy/false light, negligent and intentional interference with
Defendants moved to strike Hawran’s first amended complaint under section 425.16. They argued section 425.16 applied to each cause of action because the September press release was issued in connection with an SEC investigation and also addressed a matter of public concern, rendering it a protected writing made “in connection with an issue under consideration or review by . . . [an] official proceeding authorized by law” under section 425.16, subdivision (e)(2). They also argued the press release qualified for protection under section 425.16, subdivision (e)(3) and (4) as a “written . . . statement or writing made in a place open to the public or a public forum in connection with an issue of public interest” or “other conduct in furtherance of the exercise of the constitutional right of petition or . . . free speech in connection with a public issue or an issue of public interest.” Defendants maintained Hawran could not demonstrate a probability of prevailing on any of his causes of action because he could not prove the statements were made or, if made, directed at him; the statement that Hawran “denied wrongdoing” was not defamatory; and the statement that Sequenom lost confidence or had serious concerns constituted opinion and Hawran could not prove the statement was false. Defendants further argued the press release was absolutely privileged under Civil Code section 47, subdivision (b) as made in an official proceeding, and under Civil Code section 47, subdivision (d) as a fair and true communication to the press of an official public proceeding. Finally, defendants argued Hawran could not prove liability against any of the individual defendants because issuance of the press release was done by Sequenom after board approval, not by the individuals.
In opposition, Hawran argued the September press release was excluded from protection under the commercial speech exemption of section 425.17, subdivision (c). He further argued the press release did not qualify as an act in furtherance of defendants’ rights of free speech. In particular, he asserted it did not mention the SEC investigation and contained defamatory content not included in Sequenom’s Form 8-K filing; its dissemination to the public was made via one-way communications that did not constitute statements made in a public forum; and the press release was an effort to further Sequenom’s private commercial and economic aims of reassuring its customers and investors that it had corrected its problems. Hawran argued it was probable he wоuld prevail on his claims for defamation, invasion of privacy, negligent and intentional interference with prospective economic advantage, unfair business practices, breach of contract, and misrepresentation. He maintained the press release was not privileged under Civil Code section 47, subdivision (b) or (d), and the SLC members were individually liable under the “group published information” doctrine.
Hawran presented his own declaration in opposition to the motion, as well as declarations from Attorney Craig Nicholas, Attorney Thomas Zaccaro, and Alan Mack, Sequenom’s senior director of prenatal diagnostics and director of sales of clinical diagnostics from February 2008 through October 2010. In part, Mack described Sequenom’s “custom and practice” during his tenure to use press releases to advertise its products to its customers; provide press releases to members of the sales department as part of their commercial and advertising materials; design such releases to inform customers as well as potential and existing investors; and disseminate them on Web sites with the “intended purpose” that they be picked up and influence customers and investors. He averred that Sequenom’s “directive” was to use the press release’s exact language as talking points to customers and investors. According to Mack, the September 28, 2009 press release was “designed to calm the fears of our customers and investors and assure them that the problem was fixed and our products were moving forward.”
In reply, defendants submitted additional declarations and asserted various evidentiary objections to portions of Hawran’s, Nicholas’s and Mack’s declarations. In addition to addressing section 425.16’s application and Hawran’s arguments as to the merits of his claims, they argued the exemption of section 425.17 was “facially inapplicable” to the individuаl defendants.
Hawran filed a surreply, including “supplemental” declarations from Nicholas and Mack. He moved to strike in its entirety the evidence submitted by defendants as filed in violation of bis due process rights. Hawran alternatively asserted objections to portions of defendants’ declarations as lacking personal knowledge and foundation.
Defendants then moved to strike all but the first paragraph of Hawran’s surreply papers, arguing the court had limited Hawran’s surreply to the burden of proof on the section 425.17 commercial exemption.
Following arguments on the matter and resolving the parties’ motions to strike and evidentiary objections, the trial court granted in part defendants’ section 425.16 motion. Specifically, with regard to the interference with prospective economic advantage and misrepresentation claims as to all defendants, and as to the breach of contract claim as to the three individual defendants, the court found defendants had shown Hawran’s causes of action arose from a writing, namely Sequenom’s September press release, made in connection with an issue under consideration or review by an official proceeding authorized by law. It further found the claims were based on Sequenom’s postings about its corporate activity, which were communications about issues of public interest made in a public forum. The court rejected application of the commercial speech exemption of section 425.17. It denied the motion as to Hawran’s defamation, invasion of privacy and UCL causes of action, finding Hawran had demonstrated а probability of prevailing on those claims, and defendants had not established the applicability of any Civil Code section 47 privileges.
Defendants and Hawran appeal.
DISCUSSION
I. Defendants’ Motion to Strike Portions of Hawran’s Cross-appeal Reply Brief
Defendants have moved to strike pages 13 through 52 of Hawran’s cross-appellant’s reply brief under California Rules of Court, rules 8.204(e)(2)(B) and 8.216(b)(3), the latter of which requires a party to confine its “reply brief, or the reply portion of a combined brief, to points raised in its appeal.” They ask us to strike this portion of Hawran’s reply brief as not
California Rules of Court, rule 8.204(e) provides in part: “If a brief does not comply with this rule: [f] . . . [1] (2) If the brief is filed, the reviewing court may, on its own or a party’s motion, with or without notice: [][] (A) Order the brief returned for corrections and refiling within a specified time; [|] (B) Strike the brief with leave to file a new brief within a specified time; or [f] (C) Disregard the noncompliance.”
We deny defendants’ motion to strike in the interest of judicial economy, as the rule on which they rely does not authorize us to strike nonconforming briefs outright, but requires us to give Hawran “leave to file a new brief within a specified time.” (Cal. Rules of Court, rule 8.204(e)(2)(B).) However, we give effect to defendants’ motion by disregarding issues or contentions raised for the first time in Hawran’s cross-appellant’s reply brief. (See Mansur v. Ford Motor Co. (2011)
II. Section 425.16 Burdens and Appellate Standard of Review
“A special motion to strike is a procedural remedy to dispose of lawsuits brought to chill the valid exercise of a party’s constitutional right of petition or free speech. [Citation.] The purpose of the anti-SLAPP statute is to encourage participation in matters of public significance and prevent meritless litigation designed to chill the exercise of First Amendment rights. [Citation.] The Legislature has declared that the statute must be ‘construed broadly’ to that end.” (Fremont Reorganizing Corp. v. Faigin (2011)
“The analysis of an anti-SLAPP motion . . . involves two steps. ‘First, the court decides whether the defendant has made a threshold showing that
“ ‘If the court finds [the threshold] showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim.’ [Citation.] ‘Only a cause of action that satisfies both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under the statute.’ ” (Oasis West Realty, LLC v. Goldman, supra, 51 Cal.4th at pp. 819-820.)
If the defendant meets its threshold burden and the plaintiff asserts its claims are exempt under the commercial speech exemption of section 425.17, subdivision (c), the plaintiff then has the burden to show the applicability of that exemption. (See Simpson Strong-Tie Co., Inc. v. Gore (2010)
Review of an order granting or denying a motion to strike under section 425.16 is de novo. (Oasis West Realty, LLC v. Goldman, supra,
HI. There Is No Dispute Hawran’s Claims Arise from Protected Activity
In part, the trial court found Sequenom’s Form 8-K put the issues identified in the form under consideration or review by the SEC, and that Sequenom’s September press release, from which Hawran’s claims arose, was thus protected as a writing “made in connection with an issue under consideration or review by . . . any other official proceeding authorized by law . . . .” (§ 425.16, subd. (e)(2).)
This finding alone subjects Hawran’s claims to section 425.16. Though defendants were not aggrieved by this aspect of the trial court’s ruling in their favor (§ 902; In re S.C. (2006)
Given the trial court’s unchallenged finding that Hawran’s claims fall within section 425.16, subdivision (e)(2), we need not reach the correctness of that finding, or defendants’ various other arguments and theories. Comment on those matters by this court would be advisory in any event. (In re S.C., supra,
IV. Commercial Speech Exemption of Section 425.17, Subdivision (c)
A. Legal Principles
Section 425.17, subdivision (c) exempts a cause of action arising from commercial speech from the anti-SLAPP law 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 meets the definition set forth in section 425.17[, subdivision] (c)(2) [(i.e., 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)].” (Simpson, supra,
B. Hawran Has Not Shown the Allegedly Defamatory Portions of the September Press Release Are Representations of Fact About Sequenom’s Business Operations, Goods or Services
Hawran contends all of his causes of action fall within the commercial speech exemption of section 425.17, subdivision (c) because he has presented evidence establishing each of the above elements in connection with his claims based on Sequenom’s September press release. In part, he argues his claims arise from the September press release concerning Sequenom’s business operations; that the press release “[is] almost exclusively devoted to explaining what went wrong in its 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.” Hawran points to Mack’s declaration, in which Mack broadly characterized the intent and purpose of the September press release (and Sequenom’s press releases generally) аnd explained Sequenom’s custom and practice as to its distribution. Hawran maintains defendants’ issuance of the press release is analogous to the circumstances in Kasky v. Nike, Inc. (2002)
Defendants argue the exemption does not apply to the September press release because it was for the purpose of meeting mandatory NASDAQ reporting requirements and the allegedly defamatory comments within it did not concern Sequenom’s business or promote its products; did not make factual representations about Sequenom’s operations; were not made to secure sales or in the course of selling goods or services; and were not made to customers within the meaning of the statute.
Here, Hawran’s causes of action specifically reference and are based on the assertedly false and defamatory statements in the September press release concerning his resignation and purported denial of wrongdoing. They do not “arise from” the press release’s other statements concerning the deficiencies of Sequenom’s test protocols and controls, or the remedial measures Sequenom’s board intended to put into place as a result. As Simpson explains (Simpson, supra,
Hawran’s reliance on Kasky v. Nike, Inc., supra,
The plain language of section 425.17 requires that a plaintiff establish all of the elements of the section 425.17 exemption. (§ 425.17, subd. (c)(1), (2) [exemption applies if “both of the following conditions exist . . .”]; see Simpson, supra,
V. Hawran Has Demonstrated a Probability of Prevailing on the Merits on His Defamation, Invasion of Privacy, UCL and Breach of Contract Claims
“To establish a probability of prevailing, the plaintiff ‘must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.’ [Citations.] For purposes of this inquiry, ‘the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant (§ 425.16, subd. (b)(2)); though the court does not weigh the credibility or cоmparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the
Defendants contend the trial court erred in ruling Hawran demonstrated he was likely to prevail on his causes of action for defamation, invasion of privacy, unfair competition and breach of contract. We address seriatim defendants’ contentions, including their assertion of the Civil Code section 47 privileges.
A. Liability of the Individual Defendants for the September Press Release’s Statements ■
Defendants preliminarily contend Hawran cannot establish that any of the individual defendants is liable for statements made in Sequenom’s press release. In particular, they maintain the “group published information doctrine” (also known as the “group pleading doctrine” [see Bains v. Moores (2009)
“[T]he group published information doctrine is a pleading doctrine that, where applicable, allows a party to attribute statements made in a company’s public documents, such as annual reports and press releases, to individual members of the company’s board of directors.” (Bains v. Moores, supra, 172 Cal.App.4th at p. 450, fn. 4, citing Kamen v. Lindly (2001)
In Bains v. Moores, this court observed there were no reported California cases applying the group pleading doctrine in the context of a summary judgment motion. (Bains v. Moores, supra, 172 Cal.App.4th at pp. 475-476.) After reviewing federal authorities and some commentary on the issue, we held the doctrine did not apply after the pleading stage. (Id. at p. 476.) In part, we observed that its rationale is less compelling in the context of a summary judgment, in which discovery is complete. (Id. at p. 475.) We also questioned the continued viability of the presumption after enactment of the Private Securities Litigation Reform Act of 1995 (Pub.L. No. 104-67 (Dec. 22, 1995) 109 Stat. 737), which heightened pleading standards for securities class action lawsuits. (
For the same reasons set forth in Bains v. Moores, supra,
Hawran’s causes of action for defamation, invasion of privacy, and unfair competition against the individual defendants are based on the assertedly defamatory statements in the press release.
Here, Hawran in his supporting declaration averred that the individuals, Hixson, Lemer and Lindsay, were members of the SLC and that the SLC was responsible for the investigation of the purported scientific mishandling of the subject test data, met at least weekly to discuss the internal investigation, and engaged outside counsel to conduct the investigation. Though Hawran’s declaration includes the statement that “the SLC and [Sequenom] chose to issue the defamatory and false press release,” the trial court sustained defendants’ objection to that portion of the declaration on foundation grounds, and Hawran does not challenge that mling on appeal. Hawran’s evidence otherwise does not address whether Hixson, Lemer or Lindsay took some “responsible part” in the publication of the press release.
We conclude that evidence that each individual defendant was a member of both the SLC and Sequenom’s board, which created the press release and provided it to Clements, combined with the fact that the topic of the September 28, 2009 press release included the SLC’s findings, satisfies Hawran’s minimal burden on the issue of whether the individual defendants took a responsible part in its publication. (Overstock.com, Inc., supra, 151 Cal.App.4th at pp. 699-700 [plaintiff’s burden of establishing a probability of prevailing is “not high” because § 425.16 permits early intervention in lawsuits alleging unmeritorious causes of action that implicate free speech concerns, and limits opportunity to conduct discovery].
Of course, this conclusion does not by itself permit Hawran’s claims to proceed; he must still demonstrate a probability of prevailing on the merits of his defamation, invasion of privacy and UCL-related claims against the individuals and Sequenom.
B. Defamation/False Light Invasion of Privacy/UCL Claims
Defamation requires a publication that is false, defamatory, unprivileged, and has a tendency to injure or cause special damage. (Taus v. Loftus, supra,
Defendants contend Hawran cannot establish a probability of prevailing on his defamation-related claims because the September press release is absolutely privileged as either a fair and true report of an official proceeding to a public journal (Civ. Code, § 47, subd. (d)) or a statement made pursuant to an official proceeding (Civ. Code, § 47, subd. (b)). As we will explain, we disagree.
a. The September Press Release Is Not Subject to the Fair Reporting Privilege for a Publication Made to a Public Journal of a Public Official Proceeding or Statements Made in the Course Thereof
Civil Code section 47 makes privileged “a fair and true report in, or a communication to, a public journal, of . . . [a] public official proceeding, ... or ... of anything said in the course thereof . . . .” (Civ. Code, § 47, subd. (d);
Defendants bear the burden of proving the privilege’s applicability. (Carver v. Bonds (2005)
Broadly positing that communications and investigations with the SEC are considered “official proceedings,” and relying on Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996)
We are not persuaded. In addressing the first prong of section 425.16, the trial court did not conclude the September press release was an official proceeding. Rather, it ruled the press release was made “in connection with an issue under considerаtion or review by an official proceeding . . . .” This ruling does not, as defendants suggest, necessarily put the statements within the protection of the Civil Code section 47, subdivision (d) privilege pursuant to Dove Audio. Indeed, Dove Audio does not address the fair reporting privilege. It involved a letter made in preparation for sending a complaint to the Attorney General (Dove Audio, supra,
Assuming for purposes of argument that dissemination of the September press release to PR Newswire and other news outlets was to a “public journal,” the relevant inquiry is whether the September press release constitutes a report or communication “of’ or about the SEC investigation or “of anything said in the course of’ the SEC investigation. We conclude it is not such a report or communication.
The September press release is entitled “Sequenom Announces Completion of Independent Investigation.” It begins by stating that Sequenom has completed the SLC’s independent investigation related to the test data and results for the company’s testing. It summarizes the independent directors’ conclusions and lists the remedial measures implemented by the board. The press release then announces the termination or resignation of various officers and states that the members of the special committee and independent counsel “will make a presentation on the investigation to the staff of the [SEC].” The press release identifies the new interim officers appointed by Sequenom’s board of directors, states Sequenom will no longer rely on certain test data and results, and explains Sequenom cannot provide guidance on completion of research and development but maintains confidence in the underlying science. It gives information concerning a conference call and Webcast on the subject.
Sequenom’s evidence included the declaration of its vice-president and general counsel Clarke Neumann, who stated Sequenom was alerted in June 2009 that the SEC “had commenced an investigation of matters pertaining to the T21 issues” and that the Department of Justice “was commencing an inquiry.” Neumann referenced an attached exhibit, a Form 8-K filed in October 2009, after dissemination of the press release. Similarly, Clements averred that “investigations were conducted by the [SEC] and other law enforcement agencies.” Neither Neumann nor Clements described in any depth the issues underlying the SEC’s investigation of T21 matters or explained how the September 28, 2009 press release reported on either that investigation or statements made during the course of it. Instead, Clements stated that Sequenom’s board formulated the September press release so that investors and the public would be aware of Sequenom’s internal SEC investigation findings and conclusions.
Indeed, the September press release does not mention the subject SEC investigation, much less “capture[] [its] substance, . . . ‘gist’ or ‘sting’ . . . .” (Kilgore v. Younger, supra,
Concededly, the September press release communicates information similar to that contained in Sequenom’s Form 8-K, which was filed for the purpose of complying with the SEC’s mandatory disclosure requirements. While a Form 8-K may constitute a writing before an official proceeding (see, e.g., Fontani v. Wells Fargo Investments, LLC (2005) 129 Cal.App,4th 719, 731-732 [
We perceive no comparison between these circumstances and cases in which the reporter’s privilege was held to apply. In Colt v. Freedom Communications, Inc. (2003)
For the foregoing reasons, we conclude defendants have not met their burden of establishing application of the Civil Code section 47, subdivision (d) fair reporting privilege.
b. Official Proceeding Privilege of Civil Code Section 47, Subdivision (b)
Nor can we conclude the September press release qualifies for protection under the Civil Code section 47, subdivision (b) official proceeding privilege, which confers an аbsolute privilege to communications made as part of a “ ‘judicial or quasi-judicial proceeding[],’ ” defined to include any sort of “ ‘truth-seeking’ ” or other official proceeding. (People ex rel. Gallegos v. Pacific Lumber Co. (2008)
“ ‘The usual formulation is that the privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that [has] some connection or logical relation to the action.’ ” (Action Apartment Assn., Inc. v. City of Santa Monica (2007)
It is questionable whether a press release so widely disseminated to the public at large, as was Sequenom’s September press release, can meet the requirements of the official proceeding privilege. In addressing the litigation privilege of Civil Code section 47, subdivision (b), the court in Rothman v. Jackson (1996)
We need not further address that issue, because we conclude for other reasons that the official proceeding privilege does not apply. In Hagberg, the California Supreme Court undertook an extensive overview of the official proceeding privilege and cases applying it, explaining it applied to letters urging the Attorney General to institute an investigation into an entity’s tax-exempt status (Hagberg, supra,
(17) Hagberg emphasized that “the critical question [in applying the official proceeding privilege] is the aim of the communication, not the forum in which it takes place. If the communication is made ‘in anticipation of or [is] designed to prompt official proceedings, the communication is protected.’ ” (Hagberg, supra,
Here, defendants assert that the privilege applies, reasoning that the “Form 8-K filing constitutes an official proceeding,” and the purpose of the September press release was to ensure accurate information published in the official SEC proceeding was available to the public. They argue the public at large—which they also describe as the “investing public”—was an “interested party” for purposes of applying the privilege. According to defendants, the press release serves the purpose of NASDAQ and SEC requirements by notifying the general public of changes to the internal governance of the company, and “[b]ecause Sequenom is a publicly traded company, any information that could drastically affect its stock price is a matter of public concern. . . .”
Defendants’ evidence on this matter includes Clements’s declaration, in which he averred that “SEC filings are public filings, and are made to the SEC as part of its regulatory process and requirements, but are not automatically redistributed by the SEC to the broader investment community. To ensure that news filed with the SEC can fairly reach the broad spectrum of institutional and individual investors, in addition to notifying the investor community and public, [Sequenom] from time to time issues press releases as a further way to disseminate news or developments of importance.” He also stated, “Keeping investors and the public apprised of material Company developments is required by regulation and good practice. Because of the large number and wide distribution of shareholders, the Company issues press releases when disclosure or discussion of material information is appropriate.” Defendants lodged copies of a Form 8-K with its accompanying instructions, as well as NASDAQ listing rule 5250
We decline to extend Fontani to the circumstances of this case. Sequenom’s Form 8-K filing may have some relation to the SEC proceeding merely because it broadly pertains to the same subject matter, namely the problems with Sequenom’s T21 program. But unlike the form U-5, which is a report of wrongdoing to the NASD and may be a precursor to an investigation, the
Having assessed the “critical question [of] the aim of the communication” as we must (Hagberg, supra,
2. Qualified Common Interest Privilege of Civil Code Section 47, Subdivision (c)
Defendants also maintain the press release is qualifiedly privileged under the Civil Code section 47, subdivision (c) common interest privilege. Hawran asserts that defendants failed to raise the Civil Code section 47, subdivision (c) privilege in the trial court. However, because application of such a privilege is ordinarily a question of law (Mann v. Quality Old Time Service, Inc. (2004)
Section 47, subdivision (c) extends a conditional privilege against defamation to statements made without malice on subjects of mutual interests. (Noel v. River Hills Wilsons, Inc. (2003)
Here, as described by Clements (see fn. 8, ante), Sequenom’s press release was disseminated to the PR Newswire, a wire service distribution vehicle, and, from there, to the world at large via numerous Internet sources, well beyond the “investing public” or those having a proprietary interest in the subject matter. Defendants urge us to nevertheless conclude that the qualified common interest privilege applies to Sequenom, which, defendants argue, like other publicly traded companies, issues the press releases “to comply with mandatory public disclosure obligations.” They cite an unpublished opinion from a Delaware State Court of Chancery as “directly on point.” While citing unpublished federal opinions does not violate the California Rules of Court (Farm Raised Salmon Cases (2008)
Had Hawran sued Sequenom for defamatory statements made in its Form 8-K filing to the SEC, he would have a stronger case to apply the Civil Code section 47, subdivision (c) privilege. However, Sequenom’s Form 8-K met
Even if Sequenom’s press release is deemed to further a common interest to the general public, Hawran may still defeat the qualified privilege by demonstrating the September press release statements were made with malice. (See Lundquist v. Reusser, supra,
We view these differences in conjunction with Hawran’s opposing declaration, in which he averred that prior to Sequenom’s issuance of the September press release, he had complained about questionable corporate decisions and proposals made by Hixson, raising Hixson’s ire. Specifically, Hawran averred that in mid-2008, prior to issuance of the September press release, Hawran raised objections to a board member compensation program proposed by Hixson (to elect to receive Sequenom stock or options using a heavily discounted valuation in lieu of their annual compensation) that in Hawran’s perception constituted inappropriate self-dealing by the board members. According to Hawran, Hixson did not address his concerns, told him to “keep quiet” and it was “none of your affair,” and became “noticeably upset” with Hawran for opposing the compensation plan. At other times in 2008 and 2009, Hawran raised issues concerning the competence and tax reporting of certain members of Sequenom’s audit committee. According to Hawran, Hixson “expressed his outrage with me for questioning the Board’s judgment,” and attempted without any basis to blame him for the tax issue and false certifications filed by the board member, which had occurred before Hawran’s arrival at Sequenom.
In view of the standard required for Hawran to meet his burden, and drawing all inferences in his favor, we conclude there is enough circumstantial evidence to support a prima facie case that malice motivated the statements made concerning Hawran in the September press relеase.
A viable defamation claim requires the existence of a provable falsehood. (McGarry v. University of San Diego (2007)
Though mere opinions are generally not actionable (Taus v. Loftus, supra,
Thus, our inquiry is not merely whether the statements are fact or opinion, but “ ‘whether a reasonable fact finder could conclude the published statement declares or implies a provably false assertion of fact.’ ” (McGarry v. University of San Diego, supra,
Defendants advance several arguments that Hawran has not made out a prima facie case that the press release’s statements are defamatory. We reject one outright: that Hawran did not demonstrate injury to his reputation with admissible evidence. As we explain more fully below, reading the targeted statements in the entire context of the September press release, their defamatory meaning is plain on the face of the document, and thus such proof is unnecessary. (Finney v. Lockhart (1950)
Defendants also argue there is no proof the majority of the defamatory statements were made, but point out Hawran conceded that issue below. The parties appear to agree only three statements are at issue: that (1) Hawran denied wrongdoing; (2) the SLC’s investigation raised serious concerns; and (3) those concerns resulted in a loss of confidence by the independent members of the board in “the personnel involved.” Defendants contend the latter two statements are inactionable opinion or alternatively true. As to the first, they maintain the statement that Hawran “denied wrongdoing” is not defamatory because it does not impugn Hawran’s reputation.
Looking to the totality of the circumstances as we must, we examine the allegedly defamatory statements of the September press release, as well as the context in which the press release was issued, to determine whether Hawran satisfied his burden of providing a prima facie showing the press release contains actionable, provably false assertions of fact. (Balzaga v. Fox News Network, LLC, supra, 173 Cal.App.4th at pp. 1337-1338; Overkill Farms, supra,
The statements at issue here—that Sequenom “has obtained the resignation of . . . Paul Hawran . . .”; that each of “these officers and employees,”
Further, the statements are made in a press release that was intended to supplement mandatory SEC disclosures. Such formalized statements in press releases are usually intended to be factual, as opposed to rhetorical, persuasive, or evaluative. (See, e.g., Global Telemedia Internat., Inc. v. Doe 1 (C.D.Cal. 2001)
To examine the context more fully, the September press release was distributed after Sequenom’s prior discovery of problems with its T21 program, and describes company developments, which are inherently factual matters. Specifically, the press release reports the results of the SLC’s independent investigation into the problems, stating that the SLC had concluded Sequenom “failed to put in place adequate protocols and controls for the conduct of studies in the Trisomy 21 program”; that “[c]ertain of the company’s employees also failed to provide adequate supervision”; that without such controls and supervisions, the test data and results “included inadequately substantiated claims, inconsistencies and errors”; and that due to deficiencies in the company’s disclosure controls and procedures, in some cases the inadequate test data and results were reported to the public in press releases and other public statements. The press release states that at the SLC’s recommendation, the board had begun implementing “remedial measures, including: H[] ...[][].. . changes in the company’s organizational and reporting structure . . . .”
In the next paragraph, the document reports Sequenom terminated the employment of its president, CEO, and vice-president of research and development. The press release then makes the statements at issue: that it “obtained [Hawran’s] resignation” and that of one other employee, it terminated the employment of three other employees, and “[w]hile 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.” (Italics added.)
Defendants maintain that even assuming these statements are actionable statements of fact, Hawran cannot prove they are false. They correctly point out that truth is a complete defense to a defamation claim. (Smith v. Maldonado (1999)
As we have stated, Hawran need only demonstrate a prima facie showing of facts to sustain a favorable judgment if his evidence is credited. (Taus v. Loftus, supra, 40 Cal.4th at pp. 713-714.) We conclude Hawran met the requisite burden to show the falsity of the targeted statements. Defendants’ evidence does not establish as a matter of law the complete defense of truth so as to defeat Hawran’s evidentiary showing. (Id. at p. 714.)
Hawran’s breach of contract cause of action is based on the parties’ asserted oral agreement that in Sequenom’s forthcoming press announcement, it would separate Hawran from the wrongdoers and not implicate him in any wrongdoing in connection with his resignation. In opposition to defendants’ motion, Hawran averred that in September 2009 he was offered the opportunity to resign in exchange for fair and honest treatment in any subsequent press release. He states: “Specifically, I was informed that if I were to resign, I would be distinguished in the press release from the рurported wrongdoers such that there would be no implication of wrongdoing connected with my resignation.”
Defendants contend Hawran cannot establish a probability of prevailing on his breach of contract cause of action because the contract (1) is illegal and void as a “contract to misrepresent facts”; (2) was fully performed because the press release fairly and honestly stated that Sequenom had lost confidence in management, that Hawran denied culpability, and that Hawran resigned; (3) was not actually bargained for or created; (4) is inadmissible under Evidence Code section 1152; and (5) is unenforceable as an oral contract contrary to the parties’ agreement to be bound in writing.
To accept defendants’ first, second, third and fifth assertions—that the oral contract was illegal or fully performed, there was no bargained-for promise, or that Hawran’s resignation was intended to be the subject of a written contract—would require that we resolve conflicting evidence created by Hawran’s and Hixson’s respective declarations concerning the circumstances surrounding and terms of Hawran’s resignation. In part, Hixson averred he told Hawran he “believed it to be a certainty that the Board would, at [an upcoming September 21 meeting], formally determine that it has lost confidence in his judgment and leadership of the company, and elect to terminate him.” Hixson further stated that at no point did he and Hawran discuss
But in his opposing declaration, Hawran averred that at no point during the SLC’s investigation was he informed or presented with any evidence suggesting he was accused of or committed any wrongdoing. He stated, “This is because I never committed any wrongdoing with the purported mishandling of scientific data.” He further asserted the September press release’s statement that he had denied wrongdoing was factually false because at no point had he been accused of any wrongdoing to have denied it. In short, Hixson’s declaration creates a factual dispute by contradicting Hawran’s assertions as to the content and nature of the parties’ discussion and agreement.
It is not our role to resolve such evidentiary conflicts on defendants’ section 425.16 motion. Rather, as stated, this court accepts the truth of Hawran’s evidence in assessing whether he presented a probability of prevailing on the merits of his breach of contract claim. We evaluate defendants’ showing only to determine if it defeats Hawran’s showing as a matter of law (Soukup, supra,
As to defendants’ last point, even if we were to accept defendants’ evidence that Hixson contemplated a written resignation agreement, Hixson’s declaration does not establish Hawran also agreed not to be bound unless a writing was executed, as defendants’ cited authorities require. (See Spinney v. Downing (1895)
Finally, we are not persuaded by defendants’ argument that the alleged oral contract and underlying statements are inadmissible under Evidence Code section 1152 as “privileged” settlement communications. Citing the declaration of their attorney of record Richard Paul, defendants assert that the context of the conversation between Attorney Paul and Hawran’s attorney, Nicholas, was a discussion of Hawran’s threatened wrongful termination lawsuit, which is grounded on the same claims as the present case. They argue the trial court here impermissibly “allowed Hawran to use a statement made in an effort to settle a claim for reputational damage in connection with termination to form the basis of another reputational damage suit against the same parties based on the same facts and same alleged injury to reputation.” The trial court had rejected application of the evidentiary privilege, ruling Hawran “is not attempting to offer this testimony to prove defendants’ liability for [his] loss or damages related to [Hawran’s] cоntemplated wrongful termination claim; he is offering this testimony to show the terms of a separate agreement.”
Evidence Code section 1152, subdivision (a), provides: “Evidence that a person has, in compromise . . . furnished or offered or promised to furnish money or any other thing, act, or service to another who has sustained ... or claims that he or she has sustained or will sustain loss or damage, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove his or her liability for the loss or damage or any part of it.” Though defendants characterize this principle as a privilege, it is in fact a rule of evidence subject to review for abuse of discretion on defendants’ section 425.16 motion. (Covell v. Superior Court (1984)
Accepting defendants’ evidence that Nicholas and Paul were negotiating a compromise of a wrongful termination claim asserted by Hawran, the statements of Hawran and Nicholas at issue were admitted not to demonstrate
DISPOSITION
The order is affirmed. The parties shall bear their own costs on appeal.
McIntyre, Acting P. J., and Irion, J., concurred.
The petition of defendants and appellants for review by the Supreme Court was denied December 19, 2012, S206167.
Notes
All statutory references are to the Code of Civil Procedure unless otherwise indicated.
The SEC requires disclosure of specified material changes and other events “that the registrant deems of importance to security holders” whenever they occur via a Form 8-K. (Form 8-K, item 8.01 <http://www.sec.gov/about/forms/form8-k.pdf> [as of Sept. 13, 2012]; see 17 C.F.R §§ 240.13a-ll, 249.308 (2012); In re Boston Scientific Corp. Securities Litigation
The item 5.02 section of Sequenom’s September 28, 2009 Form 8-K states on this point: “On September 25, 2009, Paul Hawran informed us that he is resigning as our chief financial officer effective immediately.” In the item 8.01 section appearing later on the Form 8-K, Sequenom further reported: “In addition to the officer departures described in item 5.02 of this report, we have terminated the employment of three other employees and obtained the resignation of one other officer. While each of these officers and employees has denied wrongdoing, the committee’s investigation has raised serious concerns, resulting in a loss of confidence by the independent members of our board of directors in the personnel involved.”
Hawran, however, seeks to preserve his disagreement with the trial court’s reasoning: “However, Respondent respectfully disagrees with portions of Judge Dato’s reasoning for finding those subsections applicable to the extent he appeared to accept Appellants’ contentions about the similarity of the 8K and the [press release’s] content as it related to Appellants’ defamatory statements . . . .”
Defendants also unpersuasively respond, as they did below, that the commercial exemption does not apply to anti-SLAPP motions made by individual defendants; they maintain the legislative history and case law demonstrate the Legislature’s goal in enacting the exemption was to limit “corporate abuse” of the anti-SLAPP law. This proposition, which is a pure question of law (Major v. Silna (2005)
In his defamation cause of action, Hawran alleges: “On September 28, 2009, Defendants induced [Sequenom], in a writing of wide public circulation, published [sic] various false statements about Mr. Hawran and his employment at Sequenom. The written publication, a press release, specifically referenced Mr. Hawran.” He alleged the statements “falsely stated or implied” that “Hawran was of questionable moral or ethical character”; he was a “failure as a manager or supervisor and failed to place adequate protocols and controls at Sequenom”; that his “actions justifiably caused ‘serious concerns’ by Sequenom and justified a loss of
Civil Code section 47, subdivision (d) states that a privileged communication is one that is made: “(1) By a fair and true report in, or a communication to, a public journal, of (A) a judicial, (B) legislative, or (C) other public official proceeding, or (D) of anything said in the course thereof, or (E) of a verified charge or сomplaint made by any person to a public official, upon which complaint a warrant has been issued.”
Clements stated in his supporting declaration that Sequenom’s press releases were uploaded to a wire service distribution vehicle, PR Newswire. He averred: “The news is
NASDAQ listing rule 5250(b), entitled “Obligation to Make Public Disclosure,” provides in part: “Except in unusual circumstances, a Nasdaq-listed Company shall make prompt disclosure to the public through any Regulation FD compliant method (or combination of methods) of disclosure of any material information that would reasonably be expected to affect the value of its securities or influence investors’ decisions.” (NASDAQ listing rules, rule 5250(b)(1).) Regulation FD (Fair Disclosure) (17 C.F.R. § 243.100 et seq. (2012)) generally “prohibits a company and its senior officials from privately disclosing any material nonpublic
Defendants also cite ComputerXpress, Inc. v. Jackson (2001)
Defendants urge us to analyze defamatory meaning by first isolating each statement without considering its context. They maintain that if each isolated statement amounts to mere opinion, or is true, then we must end the analysis without considering the press release as a whole. This is not a proper application of the totality of the circumstances test. In Balzaga v. Fox News Network, LLC, supra,
Hawran offered the declaration of his personal counsel, Nicholas, to the same effect, who said: “In September of 2009, prior to both Paul Hawran’s resignation and the issuance of the September 28, 2009 press release, I spoke to Richard Paul, Esq., counsel for Sequenom regarding Sequenom’s request for Mr. Hawran to resign. During this telephone conference, Richard Paul specifically informed me that if . . . Hawran would resign from the company, Sequenom would treat him fairly and honestly in any future press releases by distinguishing Mr. Hawran from the purported wrongdoers such that there would be no implication of wrongdoing connected with Mr. Hawran’s resignation.” The trial court overruled defendants’ hearsay and Evidence Code section 1152 objections to both Hawran’s and Nicholas’s statements. Defendants do not renew their hearsay objections to this evidence on appeal, thus waiving any hearsay challenge. (Overhill Farms, supra,