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Davis v. Cox

Court of Appeals of Washington, Division 1

April 7, 2014

Kent L. Davis et al., Appellants ,
v.
Grace Cox et al., Respondents

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Superior Court County: Thurston. Superior Court Cause No: 11-2-01925-7. Date filed in Superior Court: July 12, 2012. Superior Court Judge Signing: Hon. William T. McPhee.

Robert M. Sulkin, Avi J. Lipman, and Barbara H. Schuknecht (of McNaul Ebel Nawrot & Helgren PLLC ), for appellants.

Bruce E.H. Johnson, Devin M. Smith, Angela C. Galloway, and Ambika K. Doran (of Davis Wright Tremaine LLP ), for respondents.

Robert B. Spitzer on behalf of The Lawfare Project, amicus curiae.

AUTHOR: Dwyer, J. We concur: Spearman, C.J., Schindler, J.

OPINION

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[180 Wn.App. 523] ¶ 1 Dwyer, J. --

To determine whether a pleaded cause of action falls within the ambit of Washington's anti-SLAPP [1] statutes, the trial court must decide whether the claim targets activity involving public participation and petition. To properly do so, the trial court must focus on the principal thrust or gravamen of the claim. A consideration of the relief sought by the party asserting the cause of action can be a determinative factor when resolving this question. Here, the plaintiffs' prayer for relief included a request that the court order the defendants to cease activity protected by the First Amendment. Accordingly, the trial court correctly ruled that the complaint was subject to an anti-SLAPP motion to strike.[2] Because the plaintiffs did not demonstrate a sufficient likelihood of success on the merits of their claim, as required by the relevant statute, the trial court also properly granted the defendants' motion to dismiss. Given that these two rulings were properly made, and because we find no error in the other rulings of the trial court, we affirm.

I

¶ 2 The Olympia Food Co-op (Co-op) is a nonprofit corporation with over 22,000 members. The Co-op was formed [180 Wn.App. 524] pursuant to the Washington Nonprofit Corporation Act [3] with the express purpose of " contribut[ing] to the health and well-being of people by providing wholesome foods and other goods and services, accessible to all, through a locally-oriented, collectively managed, not-for-profit cooperative organization that relies on consensus decision making." The Co-op has a long and active history of engagement in social, human rights, ecology, community welfare, and peace and justice issues. In 1993, the Co-op's board of directors " adopted" a Boycott Policy that prescribed a procedure by which the Co-op would recognize product boycotts. The Boycott Policy provides, in pertinent part, as follows:

BOYCOTT POLICY
Whenever possible, the Olympia Food Co-op will honor nationally recognized boycotts which are called for reasons that are compatible with our goals and mission statement.
... .

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A request to honor a boycott ... will be referred ... to determine which products and departments are affected. ... The [affected] department manager will make a written recommendation to the staff who will decide by consensus whether or not to honor a boycott.
... .
The department manager will post a sign informing customers of the staff's decision ... regarding the boycott. If the staff decides to honor a boycott, the [Merchandising Coordinator] will notify the boycotted company or body of our decision. ...

¶ 3 In March 2009, a cashier proposed to the staff work group a boycott of Israeli goods and financial investments. The staff members comprising the Merchandising Coordination Action team (MCAT) considered the request and attempted to reach an internal consensus for more than a year. After failing to reach a consensus, the MCAT reported its failure to the board. In May 2010, the board instructed the staff to again attempt to achieve full staff consensus. [180 Wn.App. 525] After this renewed effort failed, the board--at its next meeting in July 2010--by consensus agreed to support the boycott and adopted a resolution approving a boycott of Israeli-made products and divestment from Israeli companies. At the same time, the board invited any dissenting members to put the board's decision to a vote as provided for by the Co-op's bylaws. The board also posted a reminder on the Co-op's website informing members that they could compel a member vote by gathering the requisite number of signatures. No member pursued this option.

¶ 4 On September 2, 2011, Kent Davis, Linda Davis, Jeffrey Trinin, Susan Trinin, and Susan Mayer (collectively Members) filed a derivative suit on behalf of the Co-op against 16 current and former board members (collectively Directors) in Thurston County Superior Court. Their complaint was filed in the wake of a failed attempt by three Members to be elected to the board and following a demand letter sent from the Members to the Directors, wherein the Members stated that if the boycott was not rescinded, " we will bring legal action against you, and this process will become considerably more complicated, burdensome, and expensive than it has been already." In their complaint, the Members alleged that the Directors acted ultra vires and breached their fiduciary duties. The Members sought a declaratory judgment that the boycott was void, permanent injunctive relief preventing its enforcement, and monetary damages from all 16 defendants. The Members also served each defendant with a 13-page discovery demand and, several weeks later, noticed videotaped depositions of each defendant.

¶ 5 On November 1, the Directors filed a special motion to strike the Members' complaint pursuant to RCW 4.24.525--Washington's anti-SLAPP statute. The anti-SLAPP statute contains a two step process that a trial court must utilize in ruling on such a motion.

A moving party bringing a special motion to strike a claim under this subsection has the initial burden of showing by a [180 Wn.App. 526] preponderance of the evidence that the claim is based on an action involving public participation and petition. If the moving party meets this burden, the burden shifts to the responding party to establish by clear and convincing evidence a probability of prevailing on the claim. If the responding party meets this burden, the court shall deny the motion.

RCW 4.24.525(4)(b). The statute defines an " action involving public participation and petition," in pertinent part, as " [a]ny other lawful conduct in furtherance of the exercise of the constitutional right of free speech in connection with an issue of public concern, or in furtherance of the exercise of the constitutional right of petition." RCW 4.24.525(2)(e).

¶ 6 The Members opposed the motion and, in response, brought a motion for discovery, arguing that they were entitled to discovery pursuant to the " good cause" exception to the automatic discovery stay provision of RCW 4.24.525(5)(c). The Directors opposed the Members' discovery motion. The trial court heard argument on February 23, 2012 and denied the Members' motion. The court's basis for denying the request for discovery was twofold: (1) the request was belated, and (2) it was " broad-ranging" and " not focused."

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¶ 7 Subsequently, on February 27, the court granted the Directors' motion to strike the Members' claims. The court ruled that the Directors had shown by a preponderance of the evidence that their conduct fit within the statutory category of " any other lawful conduct in ... furtherance of the exercise of a constitutional right of free speech in connection with an issue of public concern or in furtherance of the exercise of the constitutional right of petition," and that the Members had failed to establish by clear and convincing evidence a probability of prevailing on their claims.

¶ 8 In dismissing the Members' claims, the court rejected their argument that the board lacked authority to resolve the boycott issue, instead concluding that the board's authorization in the bylaws to " resolve organizational conflicts [180 Wn.App. 527] after all other avenues of resolution have been exhausted" gave the board authority to adopt the boycott. In considering this issue, the court excluded as hearsay the declarations of two former board members, Tibor Bruer and Susan Trinin, who asserted that the board, by adopting the Boycott Policy, did not intend to retain the authority to enact a boycott if the staff failed to reach a consensus. However, the court did not exclude as hearsay the declaration of Harry Levine, another former board member, who stated that the board, by adopting the Boycott Policy, did not intend to relinquish its authority to resolve organizational conflict with respect to boycotts.

¶ 9 After rejecting the Members' various constitutional challenges to the anti-SLAPP statute, the trial court ordered the Members to pay a total of $221,846.75 to the various defendants, which included attorney fees and $10,000.00 in statutory damages payable to each named defendant, as mandated by the anti-SLAPP statute. RCW 4.24.525(6)(a)(ii).

¶ 10 The Members subsequently sought direct review in the Supreme Court. The Supreme Court denied direct review and transferred the case to Division Two, which then transferred the case to us.

II

¶ 11 The Members assign error to the trial court's grant of the Directors' anti-SLAPP motion. Specifically, the Members argue that the Directors failed to establish by a preponderance of the evidence that the lawsuit targeted activity involving public participation and petition and that, even if the Directors did meet their burden, the Members established by clear and convincing evidence a probability of prevailing on their claims. We are not persuaded by these arguments.

¶ 12 " We review the grant or denial of an anti-SLAPP motion de novo." Dillon v. Seattle Deposition Reporters, [180 Wn.App. 528] LLC, 179 Wn.App. 41, 70, 316 P.3d 1119 (2014). " Under the anti-SLAPP statute, a party may bring a special motion to strike 'any claim that is based on an action involving public participation and petition.'" Dillon, 179 Wn.App. at 67 (quoting RCW 4.24.525(4)(a)). The two step process by which we decide an anti-SLAPP motion is as follows:

In deciding an anti-SLAPP motion, a court must follow a two step process. A party moving to strike a claim has the initial burden of showing by a preponderance of the evidence that the claim targets activity " involving public participation and petition," as defined in RCW 4.24.525(2). U.S. Mission Corp. v. KIRO TV, Inc., 172 Wn.App. 767, 782-83, 292 P.3d 137, review denied, 177 Wn.2d 1014, 302 P.3d 181 (2013). If the moving party meets this burden, the burden shifts to the responding party " to establish by clear and convincing evidence a probability of prevailing on the claim." RCW 4.24.525(4)(b). If the responding party fails to meet its burden, the court must grant the motion, dismiss the offending claim, and award the moving party statutory damages of $10,000 in addition to attorney fees and costs. RCW 4.24.525(6)(a)(i), (ii).

Dillon, 179 Wn.App. at 67-68. " [T]he procedure for deciding anti-SLAPP motions is similar to that used in deciding a motion for summary judgment." Dillon, 179 Wn.App. at 68. Thus, a court ruling on an anti-SLAPP motion " shall consider pleadings and supporting and opposing affidavits stating the facts upon which the liability or defense is based." RCW 4.24.525(4)(c). However, " the trial

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court may not find facts, but rather must view the facts and all reasonable inferences therefrom in the light most favorable to the plaintiff." Dillon, 179 Wn.App. at 90.

A

¶ 13 We first inquire whether the trial court erred by concluding that the Directors did, in fact, establish by a preponderance of the evidence that the Members' claims targeted activity " involving public participation and petition." The Members contend that the Directors failed to [180 Wn.App. 529] meet their burden. This is so, they assert, because their lawsuit was meant to correct corporate malfeasance, not to target constitutionally protected speech. We disagree.

¶ 14 The anti-SLAPP statute defines " an action involving public participation and petition" as follows:

(a) Any oral statement made, or written statement or other document submitted, in a legislative, executive, or judicial proceeding or other governmental proceeding authorized by law;
(b) Any oral statement made, or written statement or other document submitted, in connection with an issue under consideration or review by a legislative, executive, or judicial proceeding or ...

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