Court Opinion

ID: 4021500
Source: CourtListenerOpinion
Date Created: 2016-08-03 17:01:01.431025+00
Date Added: 2024-06-11T14:07:37.251771
License: Public Domain

FOR PUBLICATION

 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

TRAVELERS CASUALTY                   No. 14-55539
INSURANCE COMPANY OF
AMERICA,                                D.C. No.
         Plaintiff-Appellee,     2:13-cv-02504-GW-JC

             v.
                                         OPINION
ROBERT W. HIRSH,
      Defendant-Appellant,

            and

VISEMER DE GELT, LLC,
               Defendant.

     Appeal from the United States District Court
        for the Central District of California
      George H. Wu, District Judge, Presiding

         Argued and Submitted June 8, 2016
               Pasadena, California

                  Filed August 3, 2016

       Before: Alex Kozinski, Ronald M. Gould,
        and Andrew D. Hurwitz, Circuit Judges.
2             TRAVELERS CAS. INS. CO. V. HIRSH

                    Per Curiam Opinion;
                Concurrence by Judge Kozinski;
                 Concurrence by Judge Gould

                           SUMMARY*

                California Anti-SLAPP Statute

   The panel affirmed the district court’s denial of Robert
Hirsh’s special motion under the California anti-strategic
lawsuit against public participation (“anti-SLAPP”) statute,
Cal. Civ. Proc. Code § 425.16, to strike the second amended
complaint filed by Travelers Casualty Insurance Company of
America.

    Hirsh alleged that Travelers’ claims arose out of his
representation of Travelers’ insured, Visemer De Gelt, as
Cumis counsel; and his activity was therefore protected under
the anti-SLAPP statute.

    The panel held that because Travelers’ causes of action
for declaratory judgment, unjust enrichment, breach of Cal.
Civ. Code § 2860(d), and concealment were not based on an
act in furtherance of Hirsh’s right of petition or free speech,
they did not “arise from” protected activity. The panel also
held that Travelers established a probability of prevailing on
the merits sufficient to survive a motion to strike. The panel
further held that California’s litigation privilege, Cal. Civ.
Code § 47(b), did not bar the suit because the causes of action

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
            TRAVELERS CAS. INS. CO. V. HIRSH                 3

arose from Hirsh’s post-settlement conduct, not his
communications with De Gelt in settling a prior lawsuit.
Finally, the panel held that it did not have jurisdiction to
review Hirsh’s challenge to the district court’s striking count
two, alleging breach of a defense handling agreement,
because the denial was without prejudice, and there was no
final order as to the claim.

    Judge Kozinski, joined by Judge Gould, concurred to
emphasize that the existing caselaw is wrong, and he would
urge the court to follow the D.C. Circuit’s holding in Abbas
v. Foreign Policy Grp., LLC, 783 F.3d 1328, 1333–37 (D.C.
Cir. 2015), that anti-SLAPP motions do not belong in federal
court because they directly conflict with the Federal Rules of
Civil Procedure. At the very least, Judge Kozinski would
urge the court to reconsider the holding in Batzel v. Smith,
333 F.3d 1018, 1025–26 (9th Cir. 2003), which allows
defendants who lose anti-SLAPP motions to bring an
immediate interlocutory appeal.

    Concurring, Judge Gould joined the per curiam opinion,
concurred in Judge Kozinski’s separate concurrence, and
receded from his previous position joining in part the Batzel
precedent.
4            TRAVELERS CAS. INS. CO. V. HIRSH

                         COUNSEL

Brandon Scott Reif (argued) and Marc S. Ehrlich, Winget
Spadafora & Schwartzberg, LLP, Los Angeles, California, for
Defendant-Appellant.

Andrew R. McCloskey (argued), McCloskey, Waring &
Waisman LLP, San Diego, California; Heather L.
McCloskey, McCloskey, Waring & Waisman LLP, El
Segundo, California; for Plaintiff-Appellee.

                          OPINION

PER CURIAM:

   In this diversity suit, Robert W. Hirsh appeals the denial
of his special motion under the California anti-strategic
lawsuit against public participation (“anti-SLAPP”) statute,
Cal. Civ. Proc. Code § 425.16, to strike the second amended
complaint filed by Travelers Casualty Insurance Company of
America (“Travelers”). We affirm.

    1. Notwithstanding that the denial of the anti-SLAPP
motion did not give rise to what traditionally would be
deemed a final judgment (one resolving all claims in a suit),
our precedents establish our jurisdiction to consider this
appeal. “Because California law recognizes the protection of
the anti-SLAPP statute as a substantive immunity from suit,
this Court, sitting in diversity, will do so as well.” Batzel v.
Smith, 333 F.3d 1018, 1025–26 (9th Cir. 2003). We therefore
have held that the denial of an anti-SLAPP motion is “an
appealable final decision within the meaning of 28 U.S.C.
§ 1291 notwithstanding the absence of a final judgment.” Id.
             TRAVELERS CAS. INS. CO. V. HIRSH                 5

at 1026; see also DC Comics v. Pac. Pictures Corp., 706 F.3d
1009, 1015–16 (9th Cir. 2013) (affirming appealability of
denial of California anti-SLAPP motion after Mohawk Indus.,
Inc. v. Carpenter, 558 U.S. 100 (2009)). We therefore turn to
the merits of this appeal.

    2. Hirsh maintains that Travelers’ claims arise out of his
representation of Travelers’ insured, Visemer De Gelt
(“VDG”), as Cumis counsel. See San Diego Navy Fed. Credit
Union v. Cumis Ins. Soc’y, Inc., 208 Cal. Rptr. 494, 496 (Ct.
App. 1984); see also Cal. Civ. Code § 2860 (implementing
Cumis rule). He contends that his activity was therefore
protected under the anti-SLAPP statute. See Thayer v.
Kabateck Brown Kellner LLP, 143 Cal. Rptr. 3d 17, 27 (Ct.
App. 2012) (“Numerous cases have held that the SLAPP
statute protects lawyers sued for litigation-related speech and
activity.”). However, Travelers’ claims do not involve
Hirsh’s representation of VDG in the prior suit, but rather his
allegedly wrongful retention of settlement funds without off-
setting the fees he charged to Travelers. See Peregrine
Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP,
35 Cal. Rptr. 3d 31, 40 (Ct. App. 2005) (stating that anti-
SLAPP statute does not apply when “protected conduct is
‘merely incidental’ to the unprotected conduct” (citation
omitted)); see also Coretronic Corp. v. Cozen O’Connor,
121 Cal. Rptr. 3d 254, 261 (Ct. App. 2011) (holding that
gravamen of complaint was attorneys’ failure to disclose dual
representation and that “the concealment occurred in the
context of litigation” did not turn it into protected activity).
Because Travelers’ causes of action for declaratory judgment,
unjust enrichment, breach of Cal. Civ. Code § 2860(d), and
concealment are not “based on an act in furtherance of
[Hirsh’s] right of petition or free speech,” Peregrine Funding,
35 Cal. Rprt. 3d at 38 (quoting City of Cotati v. Cashman,
6           TRAVELERS CAS. INS. CO. V. HIRSH

52 P.3d 695, 701 (Cal. 2002)), they do not “arise from”
protected activity.

    3. “[A]ccepting as true the evidence favorable to the
plaintiff and evaluating the defendant’s evidence only to
determine whether the defendant has defeated the plaintiff’s
evidence as a matter of law,” Travelers “has made a prima
facie showing of facts supporting [its] cause[s] of action,” so
as to establish a probability of prevailing on the merits
sufficient to survive the motion to strike. Lefebvre v.
Lefebvre, 131 Cal. Rptr. 3d 171, 174 (Ct. App. 2011).

        a) Travelers filed this suit only after Hirsh sought to
compel arbitration in search of further fees from the insurer.
This filing created an actual controversy supporting
Travelers’ request for declaratory relief. See Calderon v.
Ashmus, 523 U.S. 740, 745–46 (1998) (discussing scope of
relief available under Declaratory Judgment Act, 28 U.S.C.
§ 2201).

         b) Travelers alleges that Hirsh received funds from
the settlement of the prior lawsuit and unjustly retained them
without providing Travelers a setoff in the fees it owed Hirsh.
This shows the “minimum level of legal sufficiency and
triability,” Linder v. Thrifty Oil Co., 2 P.3d 27, 33 n.5 (Cal.
2000), necessary to survive the motion to strike, see also
Lectrodryer v. SeoulBank, 91 Cal. Rptr. 2d 881, 883 (Ct. App.
2000) (stating the “elements for a claim of unjust enrichment:
receipt of a benefit and unjust retention of the benefit at the
expense of another”).

       c) Travelers also alleges that Hirsh failed to disclose
material, non-privileged information regarding the
amendment of the settlement in the prior lawsuit. These
             TRAVELERS CAS. INS. CO. V. HIRSH                 7

allegations state a claim under the Cumis statute, see Cal. Civ.
Code § 2860(d) (requiring independent counsel “to disclose
to the insurer all information concerning the action except
privileged materials relevant to coverage disputes, and timely
to inform and consult with the insurer on all matters relating
to the action”), and for concealment, see Boschma v. Home
Loan Ctr., Inc., 129 Cal. Rptr. 3d 874, 890 (Ct. App. 2011)
(setting forth elements for “an action for fraud and deceit
based on concealment” (citation omitted)).

    4. Because the causes of action at issue arise from
Hirsh’s post-settlement conduct, not his communications with
VDG in settling the prior lawsuit, California’s litigation
privilege, Cal. Civ. Code § 47(b), does not bar this suit. See
Rusheen v. Cohen, 128 P.3d 713, 719 (Cal. 2006) (holding
that “the litigation privilege protects only publications and
communications,” and that “[t]he distinction between
communicative and noncommunicative conduct hinges on the
gravamen of the action”).

    5. We do not have jurisdiction to review Hirsh’s
challenge to the district court’s striking count two, alleging
breach of a defense handling agreement, because the denial
was without prejudice, and there is no final order as to this
claim. See Hyan v. Hummer, No. 14-56155, 2016 WL
3254701, at *2 (9th Cir. June 14, 2016) (per curiam).

    AFFIRMED.1

  1
    Hirsh’s Motion for Leave to File Supplemental Reply Brief is
GRANTED.
8              TRAVELERS CAS. INS. CO. V. HIRSH

KOZINSKI, Circuit Judge, with whom Circuit Judge
GOULD joins, concurring:

    I must join because the opinion faithfully applies our
circuit’s precedents, which accord federal-court defendants
the procedural advantages of California’s anti-SLAPP law.
See Batzel v. Smith, 333 F.3d 1018, 1024–26 (9th Cir. 2003);
United States ex rel. Newsham v. Lockheed Missles & Space
Co., 190 F.3d 963, 970–73 (9th Cir. 1999). But I write once
again to emphasize that our caselaw is wrong: These
interloping state procedures have no place in federal court.
See Makaeff v. Trump Univ., LLC, 715 F.3d 254, 272 (9th
Cir. 2013) (Kozinski, C.J., concurring).

    Our precedents have not aged with grace. Ever since we
allowed them to take root, anti-SLAPP cases have spread like
kudzu through the federal vineyards. A casual Westlaw
search suggests that such cases have more than tripled over
the last ten years.1 And nowhere are anti-SLAPP cases more
common than in the Ninth Circuit: The Westlaw data suggest
that courts in our circuit have heard 80 percent of these cases
over the same decade.2 In other words, 80 percent of the
problem is right here.

    1
   A Westlaw search of federal cases by year for the term “anti-SLAPP,”
performed on July 11, 2016, generated 43 hits for 2006 and 138 hits for
2015. The number of hits rises more-or-less steadily in the intervening
years.
 2
   Of the 994 hits on Westlaw for the term “anti-SLAPP” in federal courts
between the start of 2006 and the end of 2015, 797 of them (80.2%) were
in dispositions from courts in the Ninth Circuit. Appeals are up too.
According to our clerk’s office, the Ninth Circuit inventoried an average
of 13.6 anti-SLAPP appeals per year from 2011 to 2015. We inventoried
an annual average of 7.4 from 2006 to 2010, and an average of 3 per year
from 2001 to 2005.
               TRAVELERS CAS. INS. CO. V. HIRSH                        9

     Fortunately, other circuits are starting to recognize this
problem for what it is. When our court last considered the
place of anti-SLAPP motions in federal court, some of our
colleagues saw unanimity among our sister circuits and were
reluctant to create a split. See Makaeff v. Trump Univ., LLC,
736 F.3d 1180, 1187 (9th Cir. 2013) (Wardlaw and Callahan,
JJ., concurring in the denial of rehearing en banc). We can
stop worrying: The D.C. Circuit has reached the overdue
conclusion that anti-SLAPP motions don’t belong in federal
court because they directly conflict with the Federal Rules of
Civil Procedure. Abbas v. Foreign Policy Grp., LLC,
783 F.3d 1328, 1333–37 (D.C. Cir. 2015). Now we’ve got a
circuit split, and we’re standing on the wrong side.

    It’s time to get it right. We should follow the D.C.
Circuit’s lead in giving these trespassing procedures the boot.
At the very least, we should reassess whether defendants who
lose on their anti-SLAPP motions have the right to an
immediate appeal. Either would be a welcome step toward
cleaning up our docket and securing the border between state
and federal law.

    Let’s review the basics: Every first-year law student
learns (or is supposed to learn) that federal courts in diversity
cases apply state law to substantive questions. Was the
contract breached? Was the accident negligent? See Erie
R.R. v. Tompkins, 304 U.S. 64, 78–79 (1938). But procedural
questions are different. When the state law directly conflicts
with one of the Federal Rules, the outcome is simple: The
Federal Rules trump.3

  3
    The Federal Rule will trump as long as it complies with the Rules
Enabling Act, and the Supreme Court has held that a Rule will do so if it
“really regulates procedure.” Sibbach v. Wilson & Co., 312 U.S. 1, 14
(1941). No Federal Rule has ever failed the Sibbach test.
10          TRAVELERS CAS. INS. CO. V. HIRSH

    California’s anti-SLAPP law directly conflicts with
Federal Rule 12, which provides a one-size-fits-all test for
evaluating claims at the pleading stage. To survive a 12(b)(6)
motion to dismiss, a plaintiff’s complaint has to state a claim
that is “plausible on its face.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). California, on the other hand,
gives defendants a “special motion to strike” any claims that
arise from protected speech activities. Cal. Civ. Proc. Code
§ 425.16(b)(1). To survive this motion, a plaintiff must show
that he has a “probability” of succeeding on the underlying
claim. Id. This requires demonstrating that the claim is
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.” Wilson v.
Parker, Covert & Chidester, 50 P.3d 733, 739 (Cal. 2002)
(citations omitted).

    In short, “probability” is a much higher bar than
“plausibility”:     California’s special motion requires
supporting evidence at the pleading stage; Rule 12 doesn’t.
That’s a problem because the Supreme Court has decided that
the plausibility standard alone strikes the right balance
between avoiding wasteful litigation and giving plaintiffs a
chance to prove their claims. See Twombly, 550 U.S. at 556;
see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The
Supreme Court’s balance might be the wrong one, of course,
but that’s not something that the state of California gets to
decide. The plausibility standard isn’t a floor or a ceiling
from which we can depart. Using California’s standard in
federal court means that some plaintiffs with plausible claims
will have their cases dismissed before they’ve had a chance
to gather supporting evidence. It’s obvious that the two
standards conflict.
            TRAVELERS CAS. INS. CO. V. HIRSH               11

    But it wasn’t so obvious to our court. In Newsham, we
erroneously reasoned that Rule 12 and the California statute
were at peace because a defendant could still bring a Rule 12
motion if his special motion to strike was unsuccessful.
190 F.3d at 972. But what’s the point? If a plaintiff survives
an anti-SLAPP motion by showing that his claim is legally
sufficient and has a probability of success, how could he lose
on a Rule 12 motion that requires him to show mere
plausibility? He can’t.

     Our acceptance of anti-SLAPP special motions was bad
enough, but we made the problem worse by allowing
defendants to bring interlocutory appeals. See Batzel,
333 F.3d at 1024–26. This case is a perfect example of the
consequences of that decision. Robert Hirsh appealed to our
court after the district court denied his meritless motion to
strike. That was in the spring of 2014. Two years and a few
hundred billable hours later, we’re sending the case back for
the district court to pick up right where it left off.

    To avoid these pointless and costly detours, parties
usually get to appeal only once, after the district court has
entered its final judgment. See Mohawk Indus. Inc. v.
Carpenter, 558 U.S. 100, 106 (2009). The collateral order
doctrine provides an exception, but only a select number of
decisions are supposed to get into this exclusive club. See
Dig. Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863,
867–68 (1994). Despite many efforts to expand the guest list,
the Supreme Court has kept the collateral order doctrine
“narrow and selective in its membership.” Will v. Hallock,
546 U.S. 345, 350 (2006). Undaunted by the Supreme
Court’s repeated warnings, our circuit has welcomed anti-
SLAPP appeals with open arms. Batzel, 333 F.3d at
12             TRAVELERS CAS. INS. CO. V. HIRSH

1024–26; see also DC Comics v. Pac. Pictures Corp.,
706 F.3d 1009, 1012–16 (9th Cir. 2013) (reaffirming Batzel).

    But this inclusive spirit was a mistake. A collateral order
is supposed to meet three requirements: It must be
“conclusive”; it must “resolve important questions
completely separate from the merits”; and it must be
“effectively unreviewable” after final judgment. Dig. Equip.
Corp., 511 U.S. at 867. A decision on the motion to strike
fails the latter two of the three.4

    Anti-SLAPP motions have the merits painted all over
them. California’s statute asks us to determine whether
“there is a probability that the plaintiff will prevail on the
claim.” Cal. Civ. Proc. Code § 425.16(b)(1). This can mean
only one thing: an evaluation of the merits. Batzel tried to
explain away this unfortunate textual obstacle by musing
mysteriously that a court denying an anti-SLAPP motion is
“merely find[ing] that such merits may exist, without

   4
     We can see that anti-SLAPP motions are a poor fit for the collateral
order doctrine by considering the three requirements or simply by
comparing these motions to others that the Supreme Court has said are
immediately appealable. For example, claims of absolute immunity
qualify because they present the legal question of whether the defendant
is in a class of people that can’t be sued in the first place. See Nixon v.
Fitzgerald, 457 U.S. 731, 741–43 (1982). The same is true for some
qualified immunity determinations. We accept interlocutory appeals to
determine whether a law that a government actor allegedly violated was
clearly established at the time. See Mitchell v. Forsyth, 472 U.S. 511,
526–27 (1985). But in answering this purely legal question, we don’t
address the merits of the underlying suit—that is, whether the official
actually broke the law. In contrast, interlocutory appeals are not allowed
from qualified immunity determinations that turn on factual disputes—for
example, whether a specific police officer had taken part in the plaintiff’s
beating—because the question posed is intertwined with the merits of the
case. See Johnson v. Jones, 515 U.S. 304, 313–14 (1995).
               TRAVELERS CAS. INS. CO. V. HIRSH                         13

evaluating whether the plaintiff’s claim will succeed.”
333 F.3d at 1025. Ponder that. Perhaps a poet5 can explain
how a determination that the merits exist can be “completely
separate” from those merits. But our circuit hasn’t done it
yet.

    And it can’t. Our experience with these cases has shown
us that they require an “exhaustive analysis of the merits.”
See Makaeff, 736 F.3d at 1190 (Watford, J., dissenting from
the denial of rehearing en banc). An exhaustive (and
exhausting) detour is exactly what the final judgment rule is
designed to avoid. Interlocutory appeals make it hard for a
district court to supervise a trial. Johnson, 515 U.S. at 309.
They undermine the efficient administration of justice when,
as here, a meritless appeal stalls a case for years. See
Mohawk Indus., 558 U.S. at 106. And they ask our court to
dive headlong into the merits of a case only to swim back,
years later, when it’s finally appealed from final judgment.

    Of course, if our precedents are correct, we must take
interlocutory appeals from the denial of anti-SLAPP motions
because they would be effectively unreviewable after final
judgment. Batzel, 333 F.3d at 1025. But we don’t need to
look very far to see that this holding is completely out of step
with how we treat similar orders. After all, the denial of a
12(b)(6) motion isn’t immediately appealable, and Rule 12
and California’s anti-SLAPP statute serve a common
purpose: eliminating frivolous or bullying claims before the
parties pay through the nose in discovery and suffer the other

 5
    As Juan Antonio puts it in Woody Allen’s Vicky Cristina Barcelona:
“It’s funny. Maria Elena and I, we are meant for each other and not meant
for each other. It’s a contradiction. I mean, in order to understand it, you
need a poet, like my father. Because I don’t.” Vicky Cristina Barcelona
(The Weinstein Company 2008).
14           TRAVELERS CAS. INS. CO. V. HIRSH

indignities of a trial. Nobody suggests that the district court’s
decision denying a 12(b)(6) motion is “effectively
unreviewable” at the end of the case because the defendant
has to incur an extra cost to get there. But that’s exactly the
reasoning our court has adopted to allow immediate appeals
from denials of anti-SLAPP motions.

    In Batzel, we made anti-SLAPP motions sound more
impressive by asserting that they gave defendants a form of
“immunity” from suit. 333 F.3d at 1025. Because immunity
would be useless if the defendant had to wait to appeal, we
found that denying a special motion would indeed be
“effectively unreviewable” after final judgment. Id. The
suggestion that California had granted certain defendants
immunity from suit should have immediately put us on high
alert, because claims of a “right not to be tried” are supposed
to be viewed “with skepticism, if not a jaundiced eye.” Dig.
Equip., 511 U.S. at 873. And we should have been especially
skeptical here because the statute itself makes no mention of
immunity. Cal. Civ. Proc. Code § 425.16. Either way,
tossing around the magic word immunity shouldn’t distract us
from the substantive point: What does an anti-SLAPP motion
confer that Rule 12 doesn’t? While they’re different in
degree, both procedures save a defendant from a costly
lawsuit when the plaintiff’s complaint hasn’t met a threshold
standard. Both are about reducing the incentive to bring
frivolous claims. Defendants who claimed that Rule 12
provided them with “immunity from suit” would get laughed
at. Anti-SLAPP defendants who make the same claim should
be treated no differently.

    Some of our recent decisions have started to turn the tide
against these encroaching state procedures. In Metabolife
International, Inc. v. Wornick, we held that a provision of the
             TRAVELERS CAS. INS. CO. V. HIRSH                15

law that stayed discovery while a special motion was being
decided conflicted with Federal Rule of Civil Procedure
56(f)’s discovery requirement and didn’t belong in federal
court. 264 F.3d 832, 846 (9th Cir. 2001). And we recently
pulled another tooth from the law, holding that federal
plaintiffs can’t immediately appeal some grants of special
motions because doing so would conflict with Rule 54(b)’s
definition of appealable final orders. Hyan v. Hummer, No.
14-56155, slip op. at 5–8 (9th Cir. June 14, 2016) (per
curiam).

    Now it’s time to deliver the coup de grâce. We were
wrong in Newsham and Batzel, and wrong not take Makaeff
en banc to reverse them. But it’s not too late to correct these
mistakes. Cases like this one have no place on our docket,
and we should follow the D.C. Circuit in extirpating them.
Our ink and sweat are better spent elsewhere.

GOULD, Circuit Judge, concurring:

    I join the per curiam opinion. I also concur in Judge
Kozinski’s separate concurrence taking issue with circuit
precedent permitting defendants in federal court to take
advantage of California’s anti-SLAPP law. Although I
previously joined in part the Batzel precedent that is
challenged by Judge Kozinski, and my partial dissent did not
disagree on the majority’s application there of collateral order
doctrine to permit appeal of denial of anti-SLAPP motion, I
am now persuaded by Judge Kozinski’s reasoning, as well as
that of the D.C. Circuit in Abbas v. Foreign Policy Grp., LLC,
783 F.3d 1328, 1333–37 (D.C. Cir. 2015), that an anti-SLAPP
motion has no proper place in federal court in light of the
16           TRAVELERS CAS. INS. CO. V. HIRSH

Federal Rules of Civil Procedure, and also that the collateral
order doctrine does not provide a good fit for immediate
appeal of denial of anti-SLAPP motions. Having recognized
that there was error in the position that I previously joined, I
recede from it.