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Metabolic Research v. Ferrell – Nevada Needs a Revised Anti-SLAPP Statute, but the 9th Circuit Gives us some Daylight

As a lawyer licensed in five states (MA, FL, CA, AZ, and NV) and who practices free speech law nationwide, I am in a position to comment on the relative merits of various states’ views on First Amendment principles. Among the many states where I have worked on cases, Flori-duh is the worst. Hands down.

It has no anti-SLAPP law to speak of. Its state legislation intended to deter frivolous litigation, Fla. Stat. 57.105, looks great on the books but is a “paper tiger.” While the statute was amended in 2002 to give it some real teeth, the state judiciary generally does not apply it. As a result, Flori-duh is a hotbed of frivolous SLAPP litigation. Why not? No downside to filing a garbage SLAPP suit. No prevailing party fees. No quick dismissal. No sanctions really available. What does a would-be SLAPPer or his attorney have to lose? Nothing.

If Nevada does not update its anemic anti-SLAPP law, it bears the risk of becoming the Florida of the West — at least with respect to frivolous SLAPP litigation. That risk is laid bare for all to see in the recent case of Metabolic Research v. Ferrell, despite the fact that the 9th Circuit seems to have tossed in a prescription to cure some of the symptoms of the Nevada Anti-SLAPP statute’s lack of a fully developed spine.

What Happened?

On October 20, 2009, Scott J. Ferrell, an attorney practicing law in Orange County California, sent “demand letters” to Metabolic Research, Inc. (“Metabolic”), at its address in Las Vegas, Nevada, and to General Nutrition Centers, Inc. (“GNC”), at its address in Pittsburgh, Pennsylvania. The demand letters purported to notify the recipients that they had violated California Civil Code §§ 1750-1756, the California Consumer Legal Remedies Act (“CLRA”), by falsely advertising the properties and potential benefits of a product named Stemulite, which they marketed as a natural fitness supplement. Ferrell represented that he was acting on behalf of Michael Campos, Thomas Hess, and Sarah Jordan, all of whom he alleged purchased Stemulite in California, in reliance on the supposed false advertising, and had not received the purported benefits. (Op. at 7027)

Ferrell demanded that Metabolic and GNC “cease their false advertising of Stemulite” (Op. at 7027), identify purchasers of the substance, provide refunds to them all, disgorge profits from Stemulite sales, and implement a corrective advertising campaign. A failure to do so would be met with a lawsuit.

Metabolic did not cave. Instead, they filed a lawsuit for extortion against Ferrell and the putative class he claimed to represent. The suit also included claims for “conspiracy to engage in racketeering, civil extortion, tortious interference with contract, and tortious interference with prospective economic relations, i.e., interfering with the agreement between Metabolic and GNC. Metabolic sought declaratory relief and punitive damages.” (Op. at 7028). Ferrell sought to have the case dismissed under the Nevada Anti-SLAPP statute, Nev. Rev. Stat. § 41.660. However, the motion was doubly-useless.

The Law

Judge Mahan of the District of Nevada found that Nevada’s Anti-SLAPP statute only covers communications made “directly to a governmental agency.” That seems to be a bit narrow of a reading of the statute, which is reproduced below:

NRS 41.660  Attorney General or chief legal officer of political subdivision may defend or provide support to person sued for engaging in right to petition; special counsel; filing special motion to dismiss; stay of discovery; adjudication upon merits.
     1.  If an action is brought against a person based upon a good faith communication in furtherance of the right to petition:
     (a) The person against whom the action is brought may file a special motion to dismiss; and
     (b) The Attorney General or the chief legal officer or attorney of a political subdivision of this State may defend or otherwise support the person against whom the action is brought. If the Attorney General or the chief legal officer or attorney of a political subdivision has a conflict of interest in, or is otherwise disqualified from, defending or otherwise supporting the person, the Attorney General or the chief legal officer or attorney of a political subdivision may employ special counsel to defend or otherwise support the person.
     2.  A special motion to dismiss must be filed within 60 days after service of the complaint, which period may be extended by the court for good cause shown.
     3.  If a special motion to dismiss is filed pursuant to subsection 2, the court shall:
     (a) Treat the motion as a motion for summary judgment;
     (b) Stay discovery pending:
           (1) A ruling by the court on the motion; and
           (2) The disposition of any appeal from the ruling on the motion; and
     (c) Rule on the motion within 30 days after the motion is filed.
     4.  If the court dismisses the action pursuant to a special motion to dismiss filed pursuant to subsection 2, the dismissal operates as an adjudication upon the merits.
     (Added to NRS by 1993, 2848; A 1997, 1365, 2593)

The Statute itself is (I think) already too textually narrow, in that it could be interpreted to protect the right to petition, and not the right to free speech (like California, Oregon, Texas, Washington, and the District of Columbia’s Anti-SLAPP statutes). However, it seems that Judge Mahan trimmed it even more by reading a restriction into the statute that is just not there.

The action was brought against Ferrell based upon a “good faith communication in furtherance of the right to petition.” I see nothing in the plain language of the statute that says your “right to petition” is only activated if you are speaking directly to a government official. Mr. Ferrell felt the same way, so he appealed to the 9th Circuit, which showed us yet another grave weakness in the Nevada Anti-SLAPP statute — it does not provide for an interlocutory appeal.

The 9th Circuit compared California’s Anti-SLAPP statute to Oregon’s by looking at a pair of 9th Circuit decisions. In Englert v. MacDonell, 551 F.3d 1099, 1106-07 (9th Cir. 2009), the 9th Circuit denied an appeal of an anti-SLAPP motion as a collateral order, because denials of a motion to strike under Oregon’s Anti-SLAPP statute were not immediately appealable. The Oregon statute only provided from immunity from liability in a SLAPP. It did not provide for immunity from suit. (Oregon has since fixed this defect in its statute). On the other hand, the 9th recognized in Batzel v. Smith, 333 F.3d 1018, 1025 (9th Cir. 2003) denials of Anti-SLAPP motions under California’s statute are immediately appealable.

In Batzel, we held that the denial of a motion to strike brought pursuant to California’s anti-SLAPP statute satisfied the collateral order doctrine because the purpose of the California law was to provide citizens with a substantive immunity from suit. 333 F.3d at 1025-26. In reaching this conclusion, the court relied upon the fact that California’s law provided for immediate appeal in state court and legislative history demonstrating that “lawmakers wanted to protect speakers from the trial itself rather than merely from liability.” Id. at 1025.

In contrast, Englert held that Oregon’s failure to provide for an immediate appeal at that time indicated its legislature’s belief that the normal appeal process was adequate to vindicate the anti-SLAPP right, which it in turn described as “a right to have the legal sufficiency of the evidence underlying the complaint reviewed by a nisi prius judge before a defendant is required to undergo the burden and expense of a trial.” 551 F.3d at 1105. The Englert court explained that “[i]t would simply be anomalous to permit an appeal from an order denying a motion to strike when Oregon was satisfied that the values underlying the remedy could be sufficiently protected by a trial judge’s initial review of the motion, followed by appellate review only after a final judgment in favor of the plaintiff.” Id. at 1105-06.

(Op. at 7033)

While discussing the differences between the two kinds of SLAPP statutes, the 9th Circuit hinted that Mahan’s decision might have been flawed, while shoring up the position that it was improper to review the appeal at this time.

We turn first to the major distinguishing feature between the Oregon and California laws—the right to an immediate appeal in state court—and find that Nevada’s antiSLAPP statute is more like Oregon’s at the time we decided Englert. In Nevada, “where no statutory authority to appeal is granted, no right exists.” Taylor Constr. Co. v. Hilton Hotels Corp., 678 P.2d 1152, 1153 (Nev. 1984). Nevada’s antiSLAPP statute does not expressly provide for an immediate right to appeal. It does state, however, that a court shall stay discovery pending “the disposition of any appeal from the ruling on the [special motion to dismiss].” Nev. Rev. Stat. § 41.660(3)(b)(2). We are unpersuaded that the statute’s generalized reference to an appeal implicitly, or otherwise, confers an immediate right to appeal. Nevada based its antiSLAPP statute on California’s law, and the legislature could have mirrored California’s unequivocal language concerning an immediate right to appeal had it intended to furnish one. See John, 219 P.3d at 1281 (“Nevada’s anti-SLAPP statute was enacted in 1993, shortly after California adopted its statute, and both statutes are similar in purpose and language.”). (Op. at 7034-35)

The Legal Satyricon previously noted another case that cited John and held that the Nevada and California statutes should be read similarly, at least in substance. This lends further credence to the argument that the District Court did read NRS 41.660 too narrowly. But, unfortunately for Mr. Ferrell, the Metabolic Research case is not about the substance of the statutes, but how they function procedurally.

Further persuading us that the Nevada legislature did not intend for its anti-SLAPP law to function as an immunity from suit is the statute’s definition of the anti-SLAPP right. Nevada’s law provides that “[a] person who engages in a good faith communication in furtherance of the right to petition is immune from civil liability for claims based upon the communication.” Nev. Rev. Stat. § 41.650 (emphasis added). We must presume the legislature selected its words with purpose, and immunity from “civil liability” is unquestionably different than immunity from “suit” or “trial.” Liberal, 632 F.3d at 1074 (“A denial of summary judgment is immediately appealable when the immunity is an immunity from suit, but not when it is a mere defense to liability.”). (Op. at 7036

The Court then went on to list the ways that Ferrell, and other similarly-situated defendants, might find justice. The 9th noted that despite the fact that Ferrell couldn’t appeal at this point, he still had a potential award of fees and costs later on. This might be true, but it is a small comfort if he can’t afford to litigate the matter for that long. The 9th then reminded us of the existence of Rule 11, the laughable sanctions mechanism in the Federal Rules. Rule 11 sanctions against even the most outrageous filings are slightly more common than rainbow sherbet flying out of a unicorn’s ass.

The 9th then threw in some very interesting dicta, in which it seemed to lay out an instruction manual for litigants (at least in Federal Court) who seek review of lower court decisions, when an Anti-SLAPP statute fails to provide a right to an interlocutory appeal.

First, a litigant in federal court may ask the district court to certify and the court of appeals to accept an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) as involving controlling questions of law the resolution of which will speed the termination of the litigation. Secondly, in truly extraordinary cases, a writ of mandamus is available. 28 U.S.C. § 1651(a) (the All Writs Act codifying the common law writ of mandamus); Cheney v. U.S. Dist. Court for the Dist. of Columbia, 542 U.S. 367, 377 (2004). We have had recourse to the writ of mandamus to protect first amendment rights where we feared that the Mohawk decision foreclosed collateral order appeals. See Perry v. Schwarzenegger, 591 F.3d 1147, 1154-56 (9th Cir. 2010). Ferrell did not seek to avail himself of 28 U.S.C. § 1292(b), nor did he seek mandamus in this Court. We, therefore, express no opinion on how we might have decided such an appeal or application had one been brought. We conclude that an immediate appeal is not necessary to protect the rights in Nevada Revised Statute § 41.660. (Op. at 7037-38).

We should thank the 9th Circuit for this, because it seems to be almost inviting federal litigants to use these alternative mechanisms to get true Anti-SLAPP protection, even if the Nevada legislature neglects to fortify the statute. Of course, this is of little comfort to a Nevada SLAPP victim if the plaintiff doesn’t provide an opportunity to remove the matter to federal court.

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