Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-01742/USCOURTS-casd-3_05-cv-01742-4/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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 Plaintiff offered six documents to prove correspondence between Encore Capital Group, Inc.

and the Securities and Exchange Commission. Defendant’s reply argued that the documents constitute

inadmissible hearsay.

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

TIMOTHY W. MOSER, an individual,

Plaintiff,

CASE NO. 05CV1742 JLS (WMc)

ORDER (1) DENYING

DEFENDANT’S MOTION TO

STRIKE PURSUANT TO

CALIFORNIA CODE OF CIVIL

PROCEDURE § 425.16 AND (2)

DENYING AS MOOT

PLAINTIFF’S REQUEST FOR

JUDICIAL NOTICE

(Doc. Nos. 25, 57)

vs.

TRIARC COMPANIES, INC., a Delaware

corporation,

Defendant.

On August 1, 2007, Triarc Companies, Inc. (“defendant”) moved to strike both claims for

relief in Timothy W. Moser’s (“plaintiff”) first amended complaint (“FAC”), pursuant to

California Code of Civil Procedure § 425.16 (“anti-SLAPP”). (Doc. No. 25.) On November 2,

2007, plaintiff opposed defendant’s motion to strike and filed a notice of lodgment. (Doc. Nos. 42

& 43.) On November 16, 2007, defendant replied to plaintiff’s opposition and objected to the

evidence supporting plaintiff’s notice of lodgment.1

 (Doc. No. 49.) On May 16, 2008, plaintiff

requested that the Court take judicial notice, pursuant to Federal Rule of Evidence 201, of

documents which evidence correspondence between Encore Capital Group, Inc. (“Encore”) and

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the Securities and Exchange Commission (“SEC”). (Doc. No. 58.) Defendant objected to

plaintiff’s judicial notice request on May 29, 2008. (Doc. No. 59.) On June 12, 2008, plaintiff

replied to defendant’s opposition. (Doc. No. 61.) For the reasons stated below, the Court

DENIES defendant’s anti-SLAPP motion, and DENIES AS MOOT plaintiff’s request for judicial

notice.

BACKGROUND

A. Factual Background

During the relevant period, defendant was allegedly a “major shareholder . . . own[ing] a

significant percentage of the outstanding shares” of Encore. (FAC ¶ 9.) Defendant “beneficially

owned or had voting and dispositive power over what is considered voting control of” Encore. 

(Id.) 

In November 2000, the Plaintiff began working for Encore as an executive vice-president,

general counsel, and secretary. (FAC ¶ 10.) Encore’s business involves the purchase, sale, and

servicing of consumer debt. (Id. ¶ 9.) In the spring of 2001, plaintiff reported accounting

irregularities to Encore’s board of directors and audit committee. (Id. ¶¶ 11-13.) Outside counsel

conducted an investigation into the alleged irregularities and found no evidence of wrongdoing by

Encore. (Id. ¶ 23.) Subsequently, Encore terminated plaintiff’s employment on July 31, 2001. 

(Settlement Agreement & Mutual Release (“Agreement”), Recital No. II, June 21, 2002.)

On June 21, 2002, Encore and plaintiff entered the Agreement to resolve plaintiff’s

termination. The Agreement included two clauses at issue in this case. First, the Agreement

stated that Encore did not terminate plaintiff “for cause.” (FAC Ex. A, ¶ 1.1.2.) Second, the

Agreement’s confidentiality clause provided that the parties “shall not disclose any information

regarding the terms of this Agreement to any third party . . . other than stating that all issues

between the Parties ‘have been resolved.’” (Id. ¶ 1.1.1.)

In September 2003, Encore filed a Form S-1 with the SEC, as required by law. See 15

U.S.C. § 77e. The Form S-1 is a registration statement that must be filed prior to the sale of

securities. (FAC ¶ 21.). Encore filed the Form S-1 to “permit Encore and/or Triarc to sell shares

of Encore stock.” (Memo. ISO Motion, at 5.) The Form S-1 contained a section titled “Settlement

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28 2

 The Court assumes, without deciding, that defendant adopts the statements contained in the

Form S-1 by filing the instant motion to strike.

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with Former Officer” (“Officer Section”) to summarize plaintiff’s report of accounting

irregularities, the investigation by outside counsel, and the finding of no wrongdoing by Encore. 

(Doc. No. 3 in 04cv2085, Exhibit B.) In the Officer Section, Encore stated that Moser “questioned

the accuracy of its projections, liquidity position, adequacy of disclosure to the board of directors

and auditors, etc.” (Id.) The Officer Section explained that the outside counsel report had

concluded:

[T]he former officer had not pointed to any facts that reflected a lack of integrity or

competence in [Encore’s] management or that led the law firm to conclude that

[Encore’s] 2000 Form 10-K contained any material misstatements or omissions. The

law firm also concluded that none of the issues raised by [Moser] required any new or

amended public disclosure or other further action by [Encore’s] audit committee.

(Id.) Further, the report explained that plaintiff was placed on administrative leave and then

terminated. (Id.) Encore allegedly repeated these statements by incorporating them into

subsequent prospectuses and forms filed with the SEC. (FAC ¶ 25.) Plaintiff alleges Encore’s

statement that he was placed on administrative leave is untrue and intentionally interfered with the

Agreement’s terms by suggesting he was terminated for cause. Additionally, plaintiff claims that

defendant intentionally inflicted emotional distress on plaintiff, causing public embarrassment that

prevented plaintiff from “engaging in the practice of law in the normal fashion”. (FAC ¶¶ 49-51.)

Defendant controlled Encore “at the time it directed Encore to file the first Form S-1, and

thereby breach the terms of the [Agreement].”2

 (FAC ¶ 28.) Defendant allegedly benefited from

the filing of the S-1 by obtaining a higher price for Encore’s stock and being relieved of Encore’s

debt. (Id.)

B. Procedural Background

On October 18, 2004, plaintiff filed a separate action against Encore and individual

defendants, alleging various causes of action in tort and contract. (See Case No. 04cv2085.) In

that case, the Hon. Larry A. Burns denied all of defendants’ anti-SLAPP motions. (Doc. Nos. 73,

156 in 04cv2085.) Encore’s appeal of the denial of these motions is currently pending before the

Ninth Circuit Court of Appeals. (Doc. No. 159 in 04cv2085.)

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28 3

 On October 3, 2007, this action and the action against Encore were reassigned to the Hon.

Janis L. Sammartino.

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On September 7, 2005, plaintiff initiated the present action against the defendant. (Doc.

No. 1.) In the FAC filed on January 6, 2006, plaintiff alleged causes of action for intentional

interference with contractual relations and intentional infliction of emotional distress. (Doc. No.

3.) The plaintiff based these causes of action on the statements contained in the Form S-1 that

defendant caused Encore to file with the SEC.

On June 30, 2006, defendant moved to dismiss the FAC, arguing that plaintiff’s claims

were barred by the statute of limitations and limitation-of-liability principles favoring

shareholders. (Doc. Nos. 12 & 13.) Judge Burns denied that motion on March 29, 2007. (Doc.

No. 21.) Defendant then filed its anti-SLAPP motion on August 1, 2007. (Doc. No. 25.) Rather

than file an opposition to the motion to strike, plaintiff instead moved for leave to conduct

discovery, pursuant to Federal Rule of Civil Procedure 56(f). (Doc. No. 27.) On August 28, 2007,

Judge Burns granted the parties’ joint motion to continue the anti-SLAPP motion so the Court

could first decide the discovery motion. (Doc. No. 30.) On October 16, 2007, this Court3

 denied

plaintiff’s discovery request, finding that the anti-SLAPP motion challenged the legal adequacy of

plaintiff’s complaint, rather than the sufficiency of plaintiff’s evidence. (Doc. No. 39.)

DISCUSSION

Plaintiff argues that the law of the case doctrine bars the Court from considering

defendant’s anti-SLAPP motion. The law of the case doctrine precludes a court from

reconsidering an issue “that has already been decided by the same court, or a higher court, in the

identical case.” United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997). The doctrine is not

a limitation on a court’s power, but a guide to discretion. Id. The court retains “discretion to

consider its prior, non-final decisions.” Pyramid Lake Paiute Tribe of Indians v. Hodel, 882 F.2d

364, 369 (9th Cir. 1989). A court may depart from the law of the case if “1) the first decision was

clearly erroneous; 2) an intervening change in the law has occurred; 3) the evidence on remand is

substantially different; 4) other changed circumstances exist; or 5) a manifest injustice would

otherwise result.” Alexander, 106 F.3d at 876.

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 Defendant also argues that the litigation privilege protects statements made in the Form S-1.

Since defendant does not maintain that the reach of the anti-SLAPP law is broader than the reach of

the litigation privilege, the Court assumes that they are coterminous. Because the Court finds the antiSLAPP statute does not protect the defendant’s statements the litigation privilege also does not apply.

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The law of the case doctrine does not preclude review of defendant’s motion to strike for

two reasons. First, Triarc was not a party to the Court’s earlier motion to strike rulings. Instead of

jointly suing Encore and Triarc, Moser sued Triarc separately in this action after the Court denied

Encore’s motion to strike. The cases are similar, but do not involve identical parties. Second, the

Court retains discretion to review its prior decisions. Assuming, arguendo, the motion involves

identical parties and issues, the Court may exercise its discretion and review defendant’s antiSLAPP motion. 

“[D]efendants sued in federal courts can bring anti-SLAPP motions to strike state law

claims.” Verizon Del., Inc. v. Covad Comm’ns Co., 377 F.3d 1081, 1091 (9th Cir. 2004). The

motion to strike “may be filed within 60 days of the service of the complaint or, in the court’s

discretion, at any later time upon terms it deems proper.” Cal. Civ. Proc. Code § 425.16(f).

Given the two similar motions currently on appeal in the Ninth Circuit, the Court exercises

its discretion to hear defendant’s anti-SLAPP motion. Deciding the merits of the current motion

limits the possibility of a contradictory result and potentially allows for a consolidated appeal.

California’s anti-SLAPP statute creates a special motion to strike “[a] cause of action

against a person arising from any act . . . in furtherance of the person’s right of petition or free

speech . . . in connection with a public issue.” Cal. Civ. Proc. Code § 425.16(b)(1). The statute

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

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

proceeding authorized by law.”4

 Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th

1106, 1113 (Cal. 1999) (internal quotations omitted). The California legislature enacted the

statute to stem “a disturbing increase in lawsuits brought primarily to chill the valid exercise of the

constitutional rights of freedom of speech[.]” Cal. Civ. Proc. Code § 425.16(a). For policy

reasons, § 425.16 is construed broadly. Id.

Deciding an anti-SLAPP motion requires a two-step analysis. First, the court decides if the

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defendant “has made a threshold showing that the challenged cause of action is one arising from

protected activity.” Equilon Enters. v. Consumer Cause, Inc., 29 Cal. 4th 53, 67 (Cal. 2002). If

the defendant meets this burden, then, second, the Court “determines whether the plaintiff has

demonstrated a probability of prevailing on the claim.” Id.

The statute’s protection extends to communications intended to report wrongdoing or

trigger an investigation. Hagberg v. Cal. Fed. Bank FSB, 32 Cal. 4th 350, 368 (Cal. 2004). The

“official proceeding privilege applies to a communication intended to prompt an administrative

agency charged with enforcing the law to investigate or remedy a wrongdoing.” Id. at 362. It

protects communications to “government officials which may precede the initiation of formal

proceedings.” Id. at 361 (internal quotations and citations omitted). The “critical question is the

aim of the communication, not the forum in which it takes place. If the communication is made in

anticipation of or designed to prompt official proceedings, the communication is protected.” Id. at

368 (internal quotations, citations, and alterations omitted).

Based on public policy considerations, the privilege applies to complaints of wrongdoing

or requests for investigation. The privilege promotes freedom of communication between citizens

and the public officials charged with investigating and remedying wrongdoing. The benefit of

allowing this freedom of communication “outweighs the occasional harm that might befall a

defamed individual. Thus the absolute privilege is essential.” Id. at 364-65 (internal quotations,

citations, and alterations omitted).

Courts consistently apply the privilege where the communication reported or complained

about a wrongdoing or was intended to trigger an investigation. See, e.g., Kashian v. Harriman,

98 Cal. App. 4th 892, 926-27 (Cal. Ct. App. 2002) (letter to the Attorney General urging an

investigation into a health care provider’s tax-exempt status); Wise v. Thrifty Payless, Inc., 83 Cal.

App. 4th 1296, 1303 (Cal. Ct. App. 2000) (unfounded report to the DMV that a person was unfit to

drive because of drug use); Passman v. Torkman, 34 Cal. App. 4th 607, 616-19 (Cal. Ct. App.

1995) (letter to District Attorney intended to prompt a criminal prosecution); Tiedman v. Superior

Ct., 83 Cal. App. 3d 918, 924-26 (Cal. Ct. App. 1978) (letter to IRS accusing a person of tax

fraud); Martin v. Kearney, 51 Cal. App. 3d 309, 311 (Cal. Ct. App. 1975) (parents’ letter to a

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 Kibler’s criticism regarding whether a hospital peer review constitutes an “official

proceeding authorized by law” is not relevant to deciding the present motion. 

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school principal seeking action regarding a teacher’s poor performance); King v. Borges, 28 Cal.

App. 3d 27, 31-34 (Cal. Ct. App. 1972) (letter to the Department of Real Estate regarding an

agent’s failure to release escrow funds).

The anti-SLAPP statute specifically protects communications made to trigger an

investigation by a government agency. In ComputerXpress, Inc. v. Jackson, the defendants sent a

complaint letter to the SEC, alleging that certain press releases issued by plaintiff’s corporate

predecessor distorted or exaggerated facts in order to drive up stock prices and report unrestricted

stock issued without proper disclosure. 93 Cal. App. 4th 993, 1008 (Cal. Ct. App. 2001). The

court found that filing a complaint with the SEC “qualified at least as a statement before an official

proceeding” pursuant to § 425.16(e)(1). Id. at 1009. The court reasoned, “the purpose of the

complaint was to solicit an SEC investigation. . . . [T]he term ‘official proceeding’ has been

interpreted broadly to protect communications to or from government officials which may precede

the initiation of formal proceedings.” Id. (citation and emphasis omitted). “Communication to an

official administrative agency designed to prompt action by that agency is as much a part of the

‘official proceeding’ as communications made after the proceeding has commenced.” Id. (internal

citations and quotations omitted, emphasis added).

At least one purpose of the communication must be to prompt an investigation. In Fontani

v. Wells Fargo Investments, LLC, Wells Fargo terminated a broker-dealer employee and filed a

Uniform Termination Notice for Securities Industry Regulation (“Form U-5”) with the National

Association of Securities Dealers (“NASD”), as required by NASD by-laws. 129 Cal. App. 4th

719, 726 (Cal. Ct. App. 2005), criticized on other grounds by Kibler v. N. Inyo County Local

Hosp. Dist., 39 Cal.4th 192 (Cal. 2006).5 In the Form U-5, Wells Fargo stated that the termination

was for “violation of company policies by misinterpreting information in the sale of annuities, not

being properly registered and firm procedures regarding annuity applications.” The filing resulted

in an NASD investigation of the former employee. Id. Even if no review actually took place, “an

NASD investigation is at least one potential consequence of a Form U-5 filing that contains

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allegations of improper conduct by a broker-dealer.” Id. at 731. The court held that § 425.16(e)(1)

protected the statements made in the Form U-5 because it was a communication to an official body

“designed to prompt official action.” Id. at 731-32.

On the other hand, “[s]ection 425.16 does not accord anti-SLAPP protection to suits arising

from any act having any connection, however remote, with an official proceeding.” Blackburn v.

Brady, 116 Cal. App. 4th 670, 677 (Cal. Ct. App. 2004). In Blackburn, the plaintiff alleged that

the defendant made fraudulent statements at a sheriff’s foreclosure sale, with the intent to

discourage other bidders and drive up the amount the plaintiff would have to bid to acquire the

property. Id. at 698-99. The defendants filed an anti-SLAPP motion, claiming that the statements

were protected because they were made at the sheriff’s sale. Id. at 700-01. Without deciding

whether the sheriff’s sale was an official proceeding authorized by law, the court concluded that

the statements were not made in connection with an issue under consideration or review in the

proceeding, so as to implicate protected free speech or petition activity. Id. at 701. Specifically,

“[t]he ministerial event of a Sheriff’s sale or auction simply does not concern an issue under

review or determine some disputed matter as contemplated under the anti-SLAPP law” and does

not involve “any determination based on the exercise of one’s free speech or petition rights.” Id;

see Paul v. Friedman, 95 Cal. App. 4th 853, 867-69 (Cal. Ct. App. 2002) (injecting an “issue into

[the underlying official proceeding authorized by law] does not render the issue relevant, nor can

the attempted injection of an irrelevant matter transform it into an issue ‘under consideration or

review’ in the proceeding”).

The defendant argues that Plaintiff’s’s action is barred because it arises out of and is based

on communications in furtherance of their right of petition or free speech, since the offending

statements were made in a Form S-1 filed with the SEC. The Court disagrees.

The anti-SLAPP statute does not protect defendant’s statements made to authorize the sale

of its stock because the “critical question is the aim of the communication.” Hagberg, 32 Cal. 4th

at 368 (internal citations omitted). Unlike ComputerXpress or Fontani, defendant’s statements

were not made to prompt an SEC investigation or report wrongdoing. The Form S-1 was filed to

“permit Encore and/or Triarc to sell shares of Encore stock.” (Memo. ISO Motion, at 5.) 

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Although the SEC has authority to initiate a quasi-judicial proceeding, defendant filed the Form

S-1 to sell stock. Unlike a complaint letter to the SEC or Form U-5, each of which is intended to

report some wrongdoing or trigger an investigation, defendant did not intend, and indeed would

not welcome, an SEC investigation because it would delay the sale of its stock, which was its

stated purpose for filing the Form S-1.

In addition, the statements regarding Moser’s employment were not relevant to the SEC’s

determination. Similar to Blackburn, the specifics of the employment dispute between Moser and

Encore were irrelevant to the SEC’s determination whether defendant may sell securities more

than two years after the employment dispute. Defendant cannot transform the statements into an

issue under consideration or review in a proceeding by including them in the Form S-1. 

Accordingly, the anti-SLAPP statute does not protect defendant’s statements and the Court need

not consider whether the plaintiff has demonstrated a probability of prevailing on the claim.

To oppose the anti-SLAPP motion, plaintiff requested that the Court take judicial notice of

correspondence between the SEC and Encore. Plaintiff offers the documents to prove that

defendant knew the SEC would not actually review the Form S-1. Since the Court has concluded

that California’s anti-SLAPP statute does not protect defendant’s statements because defendant did

not intend to prompt an investigation or report wrongdoing, the Court need not decide whether the

documents may be judicially noticed.

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CONCLUSION

Defendant’s purpose in filing the Form S-1 with the SEC was not to trigger an

investigation, and the statements regarding Moser’s employment were not relevant to the SEC’s

determination whether to approve defendant’s sale of securities. Therefore, the Court finds the

defendant failed to demonstrate that the acts of which the plaintiff complains were taken in

furtherance of the defendant’s right of petition or free speech. Accordingly, the Court DENIES

defendant’s anti-SLAPP motion. Having denied the anti-SLAPP motion, the Court DENIES AS

MOOT plaintiff’s request for judicial notice.

IT IS SO ORDERED.

DATED: July 8, 2008 Honorable Janis L. Sammartino

United States District Judge

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