Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-02354/USCOURTS-cand-5_05-cv-02354-1/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1332 Diversity-Personal Injury

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 This disposition is not designated for publication and may not be cited.

Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

**E-Filed 11/1/05**

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

MARK SHERWOOD,

 Plaintiff,

 v.

WAVECREST CORPORATION, et al.,

 Defendants.

Case Number C 05-02354

ORDER1 DENYING SPECIAL

MOTION TO STRIKE AND

DENYING REQUEST FOR

ATTORNEYS’ FEES

[Docket No. 4]

On June 9, 2005, Plaintiff Mark Sherwood (“Sherwood”) filed a complaint against

Defendants Wavecrest Corporation (“Wavecrest”), Amherst Systems Associates, Inc.

(“Amherst”), Dennis Leisz (“Leisz”), and Michael K. Williams. Sherwood alleges three claims

for relif – interference with contract, defamation, and interference with prospective business

advantage – against all Defendants. On August 23, 2005, Defendants Wavecrest and Leisz filed

an amended special motion to strike all three claims and for attorneys’ fees and costs pursuant to

California Code of Civil Procedure § 425.16. On October 10, 2005, Sherwood filed opposition

Case 5:05-cv-02354-JF Document 21 Filed 11/01/05 Page 1 of 9
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2

 Sherwood objects to portions of the Leisz declaration on the grounds of irrelevance (¶

1), hearsay (¶¶ 8, 9, 10, 11, 13, 14, and 15), and confidential settlement communications (¶¶ 7, 8,

9, 10, 11, and Exhibit A). The Court does not rule on this objection at this time because the

disposition of the instant motion does not turn on the admissibility of the Leisz declaration. 

However, the Court does note that it is likely that all portions of the declaration would be

admitted in future stages of this litigation. Defendants correctly argue that Federal Rule of

Evidence 408 provides that while evidence related to settlement “is not admissible to prove

liability for or invalidity of the claim or its amount,” the Rule “does not require exclusion when

the evidence is offered for another purpose.” Defendants also identify reasons why the evidence

should not be excluded as hearsay. These include the non-application of the hearsay rule to

statements not offered for the truth of the matter asserted and the exceptions for party admissions

and state of mind evidence.

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

to the special motion to strike. The Court heard oral argument on October 28, 2005.

I. BACKGROUND

Wavecrest, a semiconductor capital equipment supplier, hired Sherwood in 1997. At the

time of his hiring, Sherwood signed an Employment Agreement that contained a covenant not to

compete with Wavecrest. Because of a reduction in workforce, Wavecrest laid off Sherwood,

effective October 15, 1998. At that time, Sherwood signed a Separation Agreement, in which

Wavecrest and Sherwood reaffirmed the earlier covenant not to compete. Sherwood then was

hired by GuideTech. Wavecrest considered GuideTech to be a competitor subject to the

covenant not to compete, and contacted both Sherwood and GuideTech. Sherwood subsequently

contacted Wavecrest, claiming that Wavecrest had caused his termination from GuideTech. 

Sherwood requested payment of attorneys’ fees incurred in his dispute with GuideTech. Leisz,

the founder, President, and Chief Executive Officer of Wavecrest, declared that he “believed that

[Sherwood] would sue Wavecrest if Wavecrest did not pay the attorneys’ fees that Sherwood

incurred relating to his dispute with GuideTech.” Leisz Decl. ¶8.2 Communication regarding a

possible settlement of this dispute began in 1998.

In July 2002, Leisz met with Robert Scott Bausback (“Bausback”), the Chief Operating

Officer of LeCroy Corporation (“LeCroy”), to discuss the possible acquisition of Wavecrest by

LeCroy. Leisz and Wavecrest assert that this meeting was in the context of due diligence, though

Sherwood alleges that the two companies had not entered formally into due diligence. At the

Case 5:05-cv-02354-JF Document 21 Filed 11/01/05 Page 2 of 9
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3

 Both parties submitted selected portions of the deposition of Bausback taken on June

10, 2004. Leisz and Wavecrest submitted portions of this deposition as Exhibit A of the

declaration of Shannon Sevey. However, Sherwood submitted different portions of this

deposition without authentication. There are no objections to this evidence and the Court will

consider it to be admissible.

4

 Wavecrest and Leisz argue that Bausback’s testimony is inadmissable as lacking in

foundation because Bausback could remember only the tone of the conversation and not the

precise words that Leisz used. However, Federal Rule of Evidence 602 requires only that

“evidence is introduced sufficient to support a finding that the witness has personal knowledge of

the matter.” Wavecrest and Leisz cite no authority for their proposition that a witness must

3

Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

time of this meeting, Sherwood was employed by LeCroy. What Leisz said to Bausback at this

meeting is central to the instant dispute and is debated by the parties.

Sherwood learned of the exchange between Leisz and Bausback in the context of a

lawsuit that Sherwood filed against another former employer, Cypress Semiconductor

Corporation (“Cypress”). On June 25, 2003, Sherwood filed a complaint in Santa Clara Superior

Court alleging that Cypress caused Sherwood’s termination from LeCroy, Sherwood v. Cypress

Semiconductor Corp., et al., 1-03-CV-818126. On June 10, 2004, Bausback was deposed. In his

deposition testimony, Bausback indicated that statements made by Leisz, of Wavecrest, and

Williams, of Amherst, influenced LeCroy’s decision to fire Sherwood. Based on this deposition

testimony, Sherwood filed the instant case against Leisz, Wavecrest, Williams, and Amherst,

while the state court case was still pending. Williams and Amherst have not yet filed any

motions in this Court.

Sherwood relies on the June 10, 2004 deposition of Bausback for his allegations against

Leisz and Wavecrest. In the deposition, Bausback described a meeting that he had “with the

principals of Wavecrest Corporation here in New York, getting to know each other. This was a

pre-acquisition discussion.” Bausback Depo. at 63.3 He testified that when he mentioned that

Sherwood had been hired by LeCroy, the Wavecrest group responded negatively, and Bausback

asked them what they knew about Sherwood. Id. at 64. Bausback testified as to their response:

“I can’t remember the exact words from Mr. Leisz, but paraphrasing the tone is that Mr.

Sherwood has sued every single company he has ever worked for.”4 Id. at 64-65. He testified

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remember accurately the precise words spoken in order for evidence to be admissible. As a

participant in the conversation at issue, Bausback has personal knowledge of the conversation

about which he testified. Accordingly, the evidence is admissible.

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

further:

In fairness, they said he was technically very competent at what he did, they could

understand why we would have been attracted to him given his skill set, but again,

hard to recall the specifics, but the comment about he sued everybody he has ever

worked for was coupled with general derogatory remarks about his character. 

And I believe leaving that meeting with – I left that meeting with a strong

warning, watch out for this guy, he’s going to be trouble.

Id. at 65.

Leisz and Wavecrest offer a different version of the conversation that took place during

this meeting. Leisz declared: 

In the context of this due diligence meeting at LeCroy, Bausback inquired whether

there were any current or threatened lawsuits of which Wavecrest was on notice. 

In response, I stated words to the effect of while Wavecrest had not been sued to

date, the only lawsuit that I believe could occur is from Mark Sherwood. I

referenced that Sherwood had been in a dispute over his Wavecrest non-compete

and threatened a lawsuit over the fees that Sherwood had allegedly incurred in

connection with the dispute.

Leisz Decl. ¶15. He declared further that all of his “statements to Bausback concerning Mark

Sherwood were factual and in response to a routine due diligence inquiry from an executive of a

company that was considering purchasing Wavecrest.” Id. ¶16.

II. DISCUSSION

Wavecrest and Leisz move to strike all three of Sherwood’s claims for relief on the

ground that they constitute a “strategic lawsuit against public participation” (“SLAPP”) within

the meaning of the California anti-SLAPP statute, California Code of Civil Procedure § 425.16. 

The anti-SLAPP statute allows a defendant to move to strike a claim if it “aris[es] from any act

of that person in furtherance of the person’s right of petition or free speech under the United

States or California Constitution in connection with a public issue.” Cal. Code Civ. Proc. §

425.16(b)(1). Such acts are defined to include:

(1) any written or oral statement or writing made before a legislative, executive, or

judicial proceeding, or any other official proceeding authorized by law; (2) any

written or oral statement or writing made in connection with an issue under

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

consideration or review by a legislative, executive, or judicial body, or any other

official proceeding authorized by law; (3) any written or oral statement or writing

made in a place open to the public or a public forum in connection with an issue

of public interest; (4) or any other conduct in furtherance of the exercise of the

constitutional right of petition or the constitutional right of free speech in

connection with a public issue or an issue of public interest.

Cal. Code Civ. Proc. § 425.16(e). The statute “shall be construed broadly,” Cal. Code Civ. Proc.

§ 425.16(a), and provides for the mandatory award of attorneys’ fees and costs to a defendant

who successfully brings a special motion to strike. Cal. Code Civ. Proc. § 425.16(c); Ketchum v.

Moses, 24 Cal.4th 1122, 1131 (2001). 

A court considering a motion to strike under the anti-SLAPP statute must engage in a

two-part inquiry. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1110 (9th Cir. 2003). “First, a

defendant ‘must make an initial prima facie showing that the plaintiff’s suit arises from an act in

furtherance of the defendant’s rights of petition or free speech.’” Id. (quoting Globetrotter

Software, Inc. v. Elan Computer Group, Inc., 63 F.Supp.2d 1127, 1129 (N.D. Cal. 1999)). 

“Second, once the defendant has made a prima facie showing, ‘the burden shifts to the plaintiff to

demonstrate a probability of prevailing on the challenged claims.’” Id. (quoting Globetrotter, 63

F.Supp.2d at 1129).

Leisz and Wavecrest argue that the Court should decide the instant motion based on

Leisz’s account of his statements. However, Sherwood’s allegations rely on Bausback’s

representation of the conversation between Leisz and Bausback. Although Leisz and Wavecrest

present an alternative account of the conversation, the Court cannot choose to give more weight

to this evidence than to the evidence that is the foundation of Sherwood’s allegations. In the

context of an anti-SLAPP motion, a court may not weigh the evidence. See Wilcox v. Superior

Court, 33 Cal. Rptr. 2d 446, 454 (Cal. Ct. App. 1994), overruled on other grounds by Equilon

Enter. v. Consumer Cause, Inc., 29 Cal.4th 53 (Cal. 2002). Thus, for the purpose of determining

whether the challenged conduct falls within a category of speech that is protected by the antiSLAPP statute, the Court must consider the nature of the conversation as accounted by Bausback.

Leisz and Wavecrest have not demonstrated that Leisz’s statements, as described by

Bausback, fall within any of the first three enumerated categories of speech that are protected by

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

the anti-SLAPP statute. Relying on Bausback’s account of Leisz’s statements, rather than on

Leisz’s account, there is no indication that the statements were made before or in connection with

an issue under consideration or review by a legislative, executive, or judicial body, or any other

official proceeding authorized by law. Cal. Code Civ. Proc. § 425.16(e)(1)-(2). It is undisputed

that the statements were not made in a place open to the public or a public forum. Cal. Code

Civ. Proc. § 425.16(e)(3). The fourth category enumerated in §425.16(e) covers much, if not

expressly all, of the remainder of the conduct that is covered by the statute. Cal. Code Civ. Proc.

§ 425.16(e)(4) ( “any other conduct in furtherance of the exercise of the constitutional right of

petition or the constitutional right of free speech in connection with a public issue or an issue of

public interest.”). Leisz and Wavecrest point out that the four categories enumerated in §

425.16(e) are not all-inclusive. Averill v. Superior Court, 42 Cal. App. 4th 1170, 1175 (Cal. Ct.

App. 1996). For example, in Averill, the court clarified that a statement about a public issue

made in a private conversation is covered by the statute, even if this is not necessarily expressly

clear from the language of the statute itself. Id. at 1175-76. Further determination of what may

be covered by the statute that is not expressly included in the fourth enumerated category is not

necessary for the determination of the instant motion. Both the general statement of the coverage

of the anti-SLAPP statute and the fourth enumerate category require that the defendant’s

statements must have been made “in connection with a public issue.” Cal. Code Civ. Proc. §§

425.16(b)(1) and (e)(4).

Leisz and Wavecrest have not demonstrated that Leisz’s statements were made in

connection with a public issue. Basing their argument on Leisz’s account of his statements,

Leisz and Wavecrest suggest that the disclosure of potential litigation prior to possible

acquisition by a public company is a public issue because it could affect thousands of

shareholders. However, this argument fails for two reasons. First, as stated above, the Court

cannot disregard Bausback’s account of Leisz’s statements in making its determination of the

instant motion. From Bausback’s account, it is not evident that the statements relate directly to

potential litigation. Second, the anti-SLAPP statute covers statements that were made in

connection with a public issue, not statements that could have an impact on the public. In the

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

cases cited by Leisz and Wavecrest as supporting their position that the Leisz statements were

made in connection with a public issue, the statements at issue themselves related to public

issues. 1-800 Contacts, Inc. v. Steinberg, 107 Cal. App. 4th 568, 576 (Cal. Ct. App. 2003)

(“[the] activities challenged by the complaint involved acts in furtherance of free speech and

petition in connection with a public issue, namely ‘[t]he issue of illegal sales of contact lenses . . .

.’”); Averill, 42 Cal. App. 4th at 1175 (“the allegedly slanderous statements arose in the context

of a public issue, i.e., the placement of a shelter in petitioner's neighborhood.”); Dove Audio, Inc.

v. Rosenfeld, Meyer & Susman, 47 Cal. App. 4th 777, 784 (Cal. Ct. App. 1996) (“RM&S's

communication raised a question of public interest: whether money designated for charities was

being received by those charities.”). 

Leisz and Wavecrest cite no authority for the proposition that communication that does

not relate directly to a public issue, but which may have an effect on the public, is covered by §

425.16. As this Court has held previously, “the statements of one company regarding a

competitor company do not satisfy the ‘issue of public interest’ requirement of the anti-SLAPP

statute.” MCSi, Inc. v. Woods, 63 F.Supp.2d 1127, 1130 (N.D.Cal. 1999) (citing Globetrotter

Software, Inc. v. Elan Computer Group, Inc., 63 F.Supp.2d 1127, 1129 (N.D. Cal. 1999)). 

Similarly, a comment in a business meeting about the personal characteristics of another

company’s employee do not satisfy the “issue of public interest” requirement. 

The second part of the Vess inquiry requires that the plaintiff demonstrate a probability of

prevailing on the challenged claims. As Leisz and Wavecrest point out, Bausback’s deposition

testimony is vague and may not be sufficient to prove Sherwood’s allegations. Indeed, further

discovery conceivably could establish that Defendants are entitled to summary judgment.

However, because the first part of the Vess inquiry has not been satisfied, the Court need not

reach the second part of the inquiry. Defendants have not made an initial prima facie showing

that the suit arises from an act in furtherance of the defendant’s rights of petition or free speech

in connection with a public issue. Accordingly, the Court will deny the special motion to strike

and the request for attorneys’ fees and costs.

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

IV. ORDER

Good cause therefore appearing, IT IS HEREBY ORDERED that Defendants Leisz and

Wavecrest’s special motion to strike is DENIED. 

IT IS FURTHER ORDERED that Defendants Leisz and Wavecrest’s request for

attorneys’ fees and costs is DENIED.

DATED: November 1, 2005

/s/ electronic signature authorized 

JEREMY FOGEL

United States District Judge

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Case No. C 05-02354

ORDER DENYING SPECIAL MOTION TO STRIKE AND DENYING REQUEST FOR ATTORNEYS' FEES

(JFLC1)

This Order has been served upon the following persons:

Robert David Baker attyatlaw@earthlink.net

Bradford K. Newman bradfordnewman@paulhastings.com,

yvettekillingham@paulhastings.com

John Sherman Purcell johnpurcell@quinnemanuel.com,

Nieve Anjomi

Baker & Anjomi

1611 The Alameda

San Jose, CA 95126

Case 5:05-cv-02354-JF Document 21 Filed 11/01/05 Page 9 of 9