New Federal Court Decision in California Shows Need for Federal Anti-SLAPP Law

Apr 29, 13

Last week, a federal district judge in the Central District of California held that actions aimed at unionizing employees was protected activity under California’s anti-SLAPP statute. In Magic Laundry Services, Inc. v. Workers United Service Employees International Union, 2013 U.S. Dist. LEXIS 53296, Judge Michael Fitzgerald issued an order granting defendants’ special motion to strike all four state law claims brought by Magic Laundry. In the case, Magic Laundry asserted claims for relief against defendants based on allegations that defendants created flyers describing horrible work conditions at Magic Laundry, spoke to Magic Laundry employees about unionization on Magic Laundry’s property, organized demonstrations outside of Magic Laundry and its customers’ facilities, sent letters to Magic Laundry’s customers regarding working conditions at Magic Laundry, effectively organized a secondary boycott of Magic Laundry, and engaged in petitioning activity to local and national political entities regarding working conditions at Magic Laundry. Here is a brief look at how the court ruled on each of the four state law claims:

1. Misappropriation of Trade Secrets

Magic Laundry argued that its client list (that defendants used to send letters regarding working conditions) qualified as a trade secret under California law and that defendants acquired the list by improper means. However, defendants maintained that the list was not a trade secret because Magic Laundry’s market trucks deliver its goods publicly to the locations of its clients, rendering it public knowledge, and that the list was not subject to security or obtained by improper means. The court agreed with defendants and also noted that there was no admissible evidence that the disclosure harmed Magic Laundry in any way. The court held that Magic Laundry failed to show a prima facie case of misappropriation of trade secrets and struck that claim.

2. Interference with Contract

Magic Laundry claimed that the defendants intended to disrupt Magic Laundry’s contracts with third parties and that those disruptions made performance of contracts difficult. Defendants argued that the interference with contract claim was preempted by Sections 7 and 8 of the National Labor Relations Act (NLRA), which address employees’ rights to organize as well as permissible conduct by unions in their efforts to organize labor forces. The court held that the defendants’ conduct fell “squarely within the purview” of the NLRA and that Magic Laundry does not allege that defendants’ conduct “involved violence or threats of violence, or any other quality that would take their activity beyond the scope of federal labor regulations.” Because Magic Laundry could not show a probability of prevailing on this claim, it was struck.

3. Defamation

The court held that Magic Laundry failed to show a prima facie case of defamation, as they could not show actual malice. While the complaint alleged that defendants made a number of false statements, the court held that Magic Laundry did not provide any evidence to show that the statements at issue were knowingly false or made in reckless disregard for their falsity. In fact, the court noted that “Magic Laundry apparently concedes that it does not have evidence” to show that some of the statements were false. Therefore, the court struck the defamation claim.

4. Trespass

Defendants argued that Magic Laundry lacked sufficient facts to support its trespass claim and that, regardless, the conduct alleged is specifically exempted from trespass liability under California law. To protect and encourage labor activities, California law exempts those engaging in lawful union activity from its trespass statutes. See Banales v. Municipal Court, 132 Cal. App. 3d 67 (1982). The court agreed that defendants’ conduct was exempt and held that “speaking to employees, handing out coffee, and disseminating flyers appears to be lawful union activity, and Magic Laundry does not point to any evidence or authority to the contrary.” The court struck the trespass claim.

After dismissing all of Magic Laundry’s state law claims, the Court addressed Magic Laundry’s four federal Racketeer Influenced and Corrupt Organizations Act (RICO) claims. At the hearing, Magic Laundry requested leave to amend the RICO allegations. In his order, Judge Fitzgerald held that “The Court is dubious that Magic Laundry can allege a proper RICO claim on such a basis, including sufficiently detailed allegations of fraud. Nonetheless, the Court grants Magic Laundry leave to amend its RICO claims, if that can be done consistent with Rule 11(b).” In a warning to Magic Laundry, the court concluded by noting “Perhaps there will be a Second Amendment Complaint but there will be no Third.”

So while it is good news that the defendants were able to get the state claims dismissed under California’s anti-SLAPP law, the bad news is that the federal claims were not dismissed under California’s anti-SLAPP law.  Globetrotter Software, Inc. v. Elan Computer Group, Inc. (N.D. Cal. 1999) 63 F.Supp.2d 1127, and later, Restaino v. Bah (In re Bah) (B.A.P. 9th Cir. 2005) 321 B.R. 41, held that federal claims in federal courts are not subject to Claifornia’s anti-SLAPP law. This shows the need for federal anti-SLAPP legislation, as it exposes one of the biggest loopholes to the current state anti-SLAPP law framework. A plaintiff can avoid a strong state anti-SLAPP law like the one in California by simply filing a federal claim in federal court. Federal anti-SLAPP legislation would close this loophole and protect all Americans at the state and federal level.

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