Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_04-cv-02085/USCOURTS-casd-3_04-cv-02085-1/pdf.json

Nature of Suit Code: 320
Nature of Suit: Assault, Libel, and Slander
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

TIMOTHY W. MOSER, an individual,,

Plaintiff,

CASE NO. 04CV2085-LAB (WMc)

ORDER GRANTING MOTION TO

STAY PROCEEDINGS AGAINST

DEFENDANTS ENCORE CAPITAL

GROUP, INC., CARL C. GREGORY,

BARRY BARKLEY AND BRANDON

BLACK

[Dkt. Nos. 84, 117, 123.]

vs.

ENCORE CAPITAL GROUP, INC., a

Delaware corporation; CARL C. GREGORY,

III, an individual; BARRY BARKLEY, an

individual; BRANDON BLACK, an

individual, ROBERT M. WHYTE, an

individual; ALEXANDER LEMOND, an

individual; ERIC D. KOGAN, an individual;

BRIAN SCHORR, an individual,

Defendants.

On February 14, 2005, Plaintiff filed his First Amended Complaint (“FAC”), alleging

defamation, intentional interference with contractual relations, breach of contract, breach of the

covenant of good faith and fair dealing, and intentional or negligent infliction of emotional distress.

His claims arise under California law, and this Court’s jurisdiction is based on diversity. On March

4, 2005, Defendants Encore CapitalGroup,Inc. (“Encore”), Carl Gregory, Barry Barkley, and Brandon

Black (the “Anti-SLAPP Defendants”) brought a motion to strike Plaintiff’s first through fifth claims

(all claims against them) pursuant to Section 425.16 of California Code of Civil Procedure (“AntiSLAPP Motion”) and to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). They also

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sought attorneys’ fees. These Defendants contended the SEC filings containing allegedly defamatory

statements cannot serve as the basis for liability, and that additional communications are covered by

the litigation privilege.

As part of its order issued May 2, 2006, the Court denied the Anti-SLAPP Motion. In the same

order, the Court dismissed the sixth claim, granting Plaintiff leave to amend. On May 25, 2006,

Defendants Barkley and Black filed a notice of appeal of the denial of the Anti-SLAPP Motion. On

June 1, 2006, Plaintiff filed his Second Amended Complaint (“SAC”) against Defendants, making the

same claims but amending the sixth, for negligent infliction of emotional distress.

The U.S. Court of Appeals accepted the appeal. On June 16, 2006, Defendants Encore,

Gregory, Barkley, and Black moved to stay proceedings against them pending this appeal. Plaintiff

filed his opposition on July 31, 2006. On October 23, 2006, the Court of Appeals extended the

briefing schedule. The Court of Appeals has not yet rendered its decision on the pending appeal.

Defendants Lemond, Kogan, and Schorr have filed motions to dismiss for lack of personal

jurisdiction, which the Court will address in a separate order. Plaintiff has also requested that this

Court take judicial notice of pleadings filed in the appeal before the Ninth Circuit (Docket Nos. 117,

123.)

I. Factual Background

Plaintiff, an attorney, alleges he was wrongfully terminated after he had uncovered and

disclosed to Encore’s board of directors certain accounting irregularities in Encore’s proposed public

filings. Subsequently, Plaintiff and Encore settled his wrongful termination claim and his claim to

certain employment benefits. Plaintiff claims Defendants violated the terms of the settlement by

publicly representing he was terminated for cause. The allegedly defamatory statements were included

in a form S-1 filed with the SEC, and in addition, in certain other forms also filed with the SEC.

Plaintiff alleges the same information was also repeated in other materials released by various

Defendants, although he does not specifically allege which Defendants defamed him by other

communications. Plaintiff further allegesDefendants conspired to interfere with his relationships with

his wife, law firm, law partners, and clients by continuing to publish defamatory statements against

him. He alleges Encore through certain of its officers and counsel specifically threatened to do so after

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he filed his original complaint. His allegations concerning a meeting in January of 2005 at which he

says he was threatened pursuant to a conspiracy are included in his SAC. (SAC, ¶¶ 47–57.)

II. Requests for Judicial Notice

This Court “may take notice of proceedings in other courts . . . if those proceedings have a

direct relation to matters at issue.” U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc.,

971 F.2d 244 (9th Cir.1992) (citation omitted). Plaintiff has asked that this Court take notice of

pleadings filed in the appeal of this Court’s denial of the Anti-SLAPP Motion. The Court finds the

pleadings relevant to the issue of the effect the Ninth Circuit’s decision could have on Plaintiff’s

claims, as discussed below, and also on the issue of whether the appeal was frivolous, and therefore

GRANTS Plaintiff’s request filed October 17, 2006. 

On January 22, 2007, Plaintiff filed a second request, asking this Court to take notice of the

Anti-SLAPP Defendants’ Reply Brief on appeal. While the filed request indicates a copy of the brief

was attached, no such document was electronically filed in spite of a notice of non-compliance with

Civil Local Rule 5.4(a) regarding mandatory electronic filing. Because this document was identified

as a reply brief, it may not properly introduce new argument. United States v. Romm, 455 F.3d 990,

997 (9th Cir. 2006). Furthermore, as evidence it would be merely cumulative. See Fed. R. Evid. 403.

Therefore, this request is DENIED.

III. Discussion

The protection of California’s anti-SLAPP statute is a substantive immunity from suit. Batzel

v. Smith, 333 F.3d 1018, 1025 (9th Cir. 2003), cert. denied 541 U.S. 1085, 124 S.Ct. 2812, 159 L.Ed.2d

246 (2004). “The purpose of the anti-SLAPP statute is to allow early dismissal of meritless first

amendment cases aimed at chilling expression through costly, time-consuming litigation.” Verizon

Delaware, Inc. v. Covad Communications Co., 377 F.3d 1081, 1090 (9th Cir. 2004) (internal quotation

marks and citation omitted). A district court’s denial of an anti-SLAPP motion is appealable

interlocutorily pursuant to 28 U.S.C. § 1291. Batzel, 333 F.3d at 1026. 

Plaintiff cites Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982) for the

principle that the filing of a notice of appeal divests the trial court of jurisdiction over those aspects

of the case involved in the appeal. Plaintiff contends the aspects of the case involved in the appeal are

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narrow, and relate solely to the litigation privilege the Anti-SLAPP Defendants contend protects them.

(Opp’n at 5:6–13.) The stay the Anti-SLAPP Defendants would be entitled to under state law appears

to be broader than it would be under federal law, however. Under California law, an appeal of denial

of an anti-SLAPP motion “automatically stays all further trial court proceedings on the merits upon

the causes of action affected by the motion.” Varian Medical Systems, Inc. v. Delfino, 35 Cal.4th 180,

186 (2005).

As Batzel makes clear, the immunity secured by the California statute is a substantive

immunity, and is recognized as such by a federal court sitting in diversity, under the doctrine of Erie

R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). 333 F.3d at 1025–26. The

Court therefore looks to state law to determine the extent of the immunity, and thus the breadth of the

automatic stay.

Even though the Court is required to stay only proceedings “upon the causes of action affected

by the [anti-SLAPP] motion,” the Court has “inherent power to control the disposition of the causes

on its docket in a manner which will promote economy of time and effort for itself, for counsel, and

for litigants.” Filtrol Corp. v. Kelleher, 467 F.2d 242 (9th Cir. 1972) (citation omitted). While the

Court is not required to stay other portions of the proceedings, it nevertheless has discretion to do so.

Under Chuman v. Wright, 960 F.2d 104, 105 (9th Cir. 1992), the Court may decline to grant a

stay where it finds an appeal is frivolous. Plaintiff has argued the appeal is frivolous and likely to be

denied. (Opp’n at 12:19–19:10.) The standard for finding an appeal frivolous, however, is quite high:

it must be “wholly without merit.” United States v. Kitsap Physicians Service, 314 F.3d 995, 1003 n.3

(9th Cir. 2002). While the Court obviously believes the Anti-SLAPP Motion was correctly denied, the

Court does not find the appeal was “wholly without merit” or frivolous, just as it did not find the AntiSLAPP Motion to be frivolous. (See Order of May 2, 2006, at 12:13–14.)

Plaintiff points out that Defendants Lemond, Kogan, and Schorr did not appeal, and contends

as a result the proceedings against them cannot be stayed. (Opp’n at 5:4–6, 15–17.) Because

Defendants Lemond, Kogan, and Schorr did not appeal the Court’s denial of the anti-SLAPP motion,

the Court need not stay proceedings against them, although as noted it has discretion to do so.

/ / /

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“In determining whether a proceeding is embraced in or affected by the appeal, [the Court]

must consider the appeal and its possible outcomes in relation to the proceeding and its possible

results.” Varian, 35 Cal.4th at 189 (citation omitted). Should the Ninth Circuit grant the Anti-SLAPP

Defendants’ appeal and strike the claims against them, much of Plaintiff’s case against them would

effectively be gone. Plaintiff agrees the Anti-SLAPP Motion is based on whether material submitted

to the SEC can serve as a basis for his claims. (Opp’n at 7:11–14.) In his request for judicial notice

filed October 17, 2006, Plaintiff argued the Anti-SLAPP Defendants had not appealed the Court’s

denial of their Anti-SLAPP motion with regard to their second, third, and fourth claims. (Req. for

Judicial Notice filed Oct. 17, 2006, at 2:7–9.) However, the basis for the these claims is heavily

dependent on the SEC filings. (SAC, ¶¶ 78, 81, 88 (describing interference with contractual relations,

breach of contract, and breach of the covenant of good faith and fair dealing as related to

defamation.).) Should the Ninth Circuit grant the appeal, all Plaintiff’s claims at the very least would

be substantially affected, and, Plaintiff would likely need to amend his complaint. See Verizon, 377

F.3d at 1091 (holding that a plaintiff should be given leave to amend to pursue meritorious claims

following the grant of an anti-SLAPP motion). 

On the other hand, permitting the proceedings to continue against the Anti-SLAPP Defendants

runs the risk of rendering the appeal moot by eliminating the need for immunity from suit. See Varian,

35 Cal.4th at 190 (holding that “a proceeding affects the effectiveness of the appeal if the very purpose

of the appeal is to avoid the need for that proceeding”). Thus, virtually all Plaintiff’s claims against

the Anti-SLAPP Defendants are affected by the matters appealed. While the Court might attempt to

identify particular issues it believes would be unaffected by the appeal, such identification is

necessarily speculative in view of the Defendants’ allegedly unified conspiracy. The Court, moreover,

finds it uneconomical to proceed piecemeal with claims against the Anti-SLAPP Defendants. To the

extent the Court has discretion to move forward with proceedings against these Defendants while the

appeal is pending, the Court declines to do so.

IV. Conclusion and Order

Although, as discussed, the Court has discretion to stay all proceedings, the Court does not find

it necessary or advisable to do so. The remaining Defendants have brought motions to dismiss for lack

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of personal jurisdiction, and the Court will consider and rule separately on these motions. As to the

Anti-SLAPP Defendants, however, the Court GRANTS the instant motion and STAYS all

proceedings against them pending the Ninth Circuit’s resolution of their appeal.

IT IS SO ORDERED.

DATED: March 27, 2007

HONORABLE LARRY ALAN BURNS

United States District Judge

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