People v. The McGraw-Hill Companies, Inc. et al

[Editor’s Note: My colleague, Gary Schons, contributed this post. We hope to have more posts from Gary in the future. –Matt Schettenhelm]

One thing common to all appellate lawyers— they love to appeal.Gavel But, as all appellate lawyers know, the right to appeal is fixed by statute. (Trede v. Superior Court (1943) 21 Cal.2d 630.) Thus, our ability to practice our craft is dependent on the leave granted by the legislature. In this case, the issue before a California appellate court was whether a specific provision of the anti-SLAPP statute granting the right to an immediate appeal of an order granting or denying a special motion is effectively nullified by a separate provision of the statute making it wholly inapplicable to enforcement actions brought by state, county or city prosecutors. As the appellate court noted in the preamble to its decision, this issue was “thoroughly briefed,” and perhaps ominously, oral argument was “vigorous indeed.” I’ll bet it was.

The Attorney General filed suit against McGraw-Hill and Standard & Poor’s for statutory violations arising out of defendants’ alleged business practice of inflating their credit ratings of various structured finance securities. The complaint alleged four causes of action, including two for violations of the California False Claims Act (CFCA). Defendants filed a special motion to strike the CFCA causes of action pursuant to section 425.16, subdivision (b) of the Code of Civil Procedure, the anti-SLAPP statute.

The superior court denied the motion on the ground that the People’s enforcement action was exempt from the special motion to strike procedure pursuant to section 425.16, subdivision (d), which provides that “This section shall not apply to any enforcement action brought in the name of the people of the State of California by the Attorney General, district attorney, or city attorney, acting as a public prosecutor.” Defendants filed a notice of appeal based on subdivision (i) of the statute which authorizes an immediate appeal from an order granting or denying an anti-SLAPP motion to dismiss. The AG filed a motion to dismiss the appeal relying on subdivision (d) which exempts enforcement actions from the anti-SLAPP statute altogether.

The subdivision (d) exemption was part of the original 1992 enactment of the anti-SLAPP statute. In fact, the Governor had vetoed previous versions of the bill just because it did not respond to the AG’s concern that it might impair state and local agencies’ ability to enforce consumer protection laws. The immediate appeal provision was enacted in 1999, some seven years later, in order to effectuate the overriding legislative intent behind the anti-SLAPP that defendants should not have to suffer the expense of a lawsuit to vindicate free speech rights.

The appellate court resolved the “mutually exclusive” claims of the parties by seeking to divine legislative intent. The court ultimately relied on the precept that portions of a statute are to be understood and construed in the context of the entire statute, giving significance to every word, phrase and sentence and part in pursuance of legislative purpose. (Curle v. Superior Court (2001) 24 Cal.4th 1057, 1063.)

The court held that because the exemption embodied in subdivision (d) eliminates any need for the trial court to access the nature of the defendant’s conduct as an exercise of free speech or to evaluate the likely merits of the plaintiff’s suit—the procedures set forth in subdivision (b) of the statute—the denial of a motion premised on subdivision (d)’s exemption essentially left nothing to appeal because it is a not a ruling on the “merits.”

The court additionally found that to permit an appeal of an order premised on subdivision (d) would undermine the very exemption from the law that the subdivision carved out, rendering it “meaningless.”

The court rejected the defendants’ additional argument that the timing of the enactment of the two subdivisions demonstrated that the later enactment was not intended to be affected by the previously enacted complete exemption.

Finally, the court noted that the very purpose of the anti-SLAPP statute—to prevent strategic (and meritless) lawsuits meant to stifle free expression could have no application in such an instance as “by their very definition public prosecutor enforcement actions are not SLAPP cases.” Thus, permitting an appeal from a motion granted on the basis of the prosecutorial exemption would simply undo the exemption without any justification. And, the court noted that the appeal of the denial of anti-SLAPP motions have, themselves, been widely regarded as abusive.

While it is rare to find such a juxtaposition of contrary “jurisdictional” provisions within the confines of a single statute, this decision points to the fact that the overall statutory scheme and purpose will be accessed in order resolve the statutory ambiguity or tension.

Image courtesy of Flickr by Brian Turner (creative-commons license, no changes made).