MARANATHA CORRECTIONS v. DEPARTMENT OF CORRECTIONS
Filed 1/11/08
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
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MARANATHA CORRECTIONS, LLC, et al., Plaintiffs and Appellants, v. DEPARTMENT OF CORRECTIONS AND REHABILITATION et al., Defendants and Respondents. | C053293, C053913 (Super. Ct. No. 05AS05768) |
APPEAL from a judgment of the Superior Court of Sacramento County, Loren E. McMaster, Judge. Affirmed.
Morrison & Foerster, LLP, James P. Bennett, George C. Harris and Derek Foran for Plaintiffs and Appellants.
Edmund G. Brown, Jr., Attorney General, James M. Schiavenza, Assistant Attorney General, Alberto L. Gonzalez and Jeffrey R. Vincent, Deputy Attorneys General, for Defendants and Respondents.
In order for government to function effectively, state officials must have the freedom to make tough policy decisions and tell the public about the reasons behind those decisions, without fear that their statements will expose them to tort liability. For this reason, Civil Code section 47, subdivision (a)[1]cloaks all acts in the proper discharge of an officials duty with an absolute privilege.
In this case, the director of the Department of Corrections[2]published a letter terminating the states contract with a private prison contractor on the ground, inter alia, that the contractor had misappropriated public funds. The contractor, Maranatha Corrections, LLC, along with coplantiffs the Moreland Family, LLC, and Terry Moreland filed suit against defendants the director, the CDCR, and the State of California, claiming libel and trade disparagement.
The trial court granted defendants special motion to strike the defamation-based causes of action on grounds that the publication of the letter was protected by the absolute privilege for official acts within the meaning of Civil Code section 47, subdivision (a). The court also awarded defendants attorney fees pursuant to the anti-SLAPP[3]statute. (Code Civ. Proc., 425.16.)
Plaintiffs appeal. They object to the award of attorney fees and assert that the trial court erred, both in finding that the defamation causes of action were protected by the anti-SLAPP statute and in ruling that the directors communications were absolutely privileged. We conclude the trial court got it right on all counts and shall affirm the orders.
FACTUAL BACKGROUND
I. The Parties
The plaintiffs
Plaintiff Maranatha Corrections, LLC (formerly Maranatha Production Company, LLC, hereafter Maranatha) is a California limited liability company. Terry Moreland is the founder and chief executive officer of Maranatha. The Moreland Family, LLC, is a single-asset entity whose only asset is the Victor Valley Modified (Medium) Community Correctional Facility in Adelanto (Victor Valley MCCF).
The defendants
The defendants are the State of California, the CDCR and its former director, Jeanne S. Woodford. The CDCR is a statutorily created department within the executive branch of state government. (Former Pen. Code, 5050, as added by Stats. (3d Ex. Sess. 1944) ch. 2, 1, p. 14; People v. Horton (1968) 264 Cal.App.2d 192, 196.) At all times relevant, defendant Jeanne Woodford was the Director of Corrections.[4] As such, she was the chief executive officer of the CDCR.
II. The CDCR-Maranatha Contract
Legislation enacted in 1965 and 1972 authorized the CDCR to contract with either public or private entities to house and supervise inmates at community correctional centers or facilities (commonly known as CCFs). (See Pen. Code, 6250-6256.)
On February 1, 1997, the CDCR entered into a long-term contract with Maranatha for the provision of housing, supervision and services for up to 500 correctional inmates at the Victor Valley MCCF.
Title 15, section 3282 of the California Code of Regulations requires all CCFs to provide certain telephone service to correctional inmates, including allowing them to place collect calls to persons outside the facility at designated times. (Cal. Code Regs., tit. 15, 3282.)
In accordance with this mandate, Maranatha entered into a series of contracts with Global Tel*Link, to provide telephone services to the Victor Valley MCCF. Under the agreements, Maranatha received commissions from the telephone revenue generated by the service.
III. The Notice of Termination
In 2002, a dispute arose between the CDCR and Maranatha regarding ownership and control over the commissions earned under the Global Tel*Link contracts, income which the parties commonly referred to as Inmate Telephone Revenue Funds (ITRF). A June 2002 amendment to the CDCR-Maranatha contract acknowledged these pending disagreements and reserved the parties rights to enforce their respective interpretations of the contract through legal means including litigation and/or arbitration. Between 1997 and 2004, Maranatha and the Moreland Family, LLC (as Moreland-owned enterprises) received approximately $1.6 million in commissions from the Global Tel*Link contracts.
By letter dated June 29, 2004 (Woodford letter), Director Woodford notified plaintiffs that the CDCR was terminating the Maranatha contract for cause. The Woodford letter consisted of 14 pages plus attachments, setting forth a detailed explanation of the reasons for the CDCRs termination of the contract. Among the stated grounds was that Maranatha has misappropriated . . . Inmate Telephone Revenue Funds (ITRF) in an amount estimated to be well in excess of $1 million. According to Woodford, it was the CDCRs position that ITRF constituted program income, which Maranatha was contractually obligated to remit to the state. Woodford asserted that Maranatha had been either unable or unwilling to account for the ITRF generated at the Victor Valley MCCF and was therefore in material breach of the contract.
The Woodford letter also recited evidence that Terry Moreland had full control over all Moreland family entities, leading to the inference that there was no meaningful distinction between Maranatha, Moreland Corporation, and the Moreland Family, LLC, for purposes of the contract dispute. If, on the other hand, it turned out these entities were technically distinct, Woodford asserted, then it appears that these separate companies have engaged in an illegal scheme or conspiracy with Maranatha to misappropriate the ITRF.
In July, August and September 2004, the CDCR provided copies of the Woodford letter to the Victor Valley Daily Press, the Sacramento Bee and other newspapers; these publications then printed stories about the contents of the letter. CDCR information officer Margot Bach later made statements to the press essentially repeating the assertions contained in the Woodford letter.
In November 2004, the Office of the Inspector General (OIG) issued a report on the results of an inquiry into the dispute between the CDCR and Maranatha over entitlement to ITRF at the Victor Valley MCCF. (OIG Rep. on Review of Inmate Telephone Revenues at the Victor Valley MCCF (Nov. 15, 2004)
PROCEDURAL HISTORY
Plaintiffs filed the present lawsuit against the State, the CDCR, and former Director Woodford, asserting tort as well as contract-based causes of action. Only the first three causes of action for defamation, disparagement of services and conspiracy to libel are the subject of this appeal.
According to the first amended complaint (FAC), defendants wrongfully demanded that Maranatha account for the ITRF generated by the Victor Valley MCCF. When Maranatha continued to assert its lawful right to the ITRF, defendants terminated the contract by issuing the Woodford letter.
Plaintiffs allege that the publication of the Woodford letter was defamatory, in that it contained false accusations of misappropriation, of accomplice liability, of perpetuating a subterfuge against the state and of engaging in an illegal conspiracy. The FAC asserts that these statements were false and libelous per se in that they charge plaintiffs with hav[ing] committed crimes of misappropriation and conspiracy. Defendants are alleged to have made these statements for the purpose of coercing [p]laintiffs to capitulate to [d]efendants wrongful demands. Further, the statements were uttered with malice, in that they were made with knowledge of their falsity and/or reckless disregard for their truth.
Defendants demurrer to the first three causes of action of the FAC was sustained without leave to amend, on the ground that the contents of the Woodford letter were absolutely privileged under Civil Code section 47, subdivision (a).
Defendants then moved to strike the first three causes of action under the SLAPP statute. The court granted the special motion to strike, finding that defendants communications were protected activity under section 425.16, subdivision (e)(2) (hereafter 425.16(e)(2)), because they were made in connection with an issue under consideration or review in an official proceeding by an executive body. Since the court previously sustained a demurrer to these causes of action, the court found that plaintiffs were unable to carry their burden of showing a probability that they would prevail on the merits.
Subsequently, the court issued an order granting defendants motion for attorney fees under section 425.16, subdivision (c).
Plaintiffs appeal from both the order granting the special motion to strike the first three causes of action (C053293)[5]and the order awarding defendants anti-SLAPP attorney fees (C053913). The two appeals have been consolidated.
DISCUSSION
I. The Anti-SLAPP Statute and the Standard of Review
The anti-SLAPP statute is designed to nip SLAPP litigation in the bud by striking offending causes of action[] which chill the valid exercise of the constitutional rights of freedom of speech and petition . . . . ( 425.16, subd. (a).) Finding a disturbing increase in such lawsuits, the Legislature has declared it in the public interest to encourage continued participation in matters of public significance, and that this participation should not be chilled through abuse of the judicial process. (Ibid.) [] Thus, where a cause of action arises from any act of a person in furtherance of the persons right of petition or free speech . . . in connection with a public issue, that cause is subject to a motion to strike, unless the plaintiff establishes a probability of prevailing on the claim. ( 425.16, subd. (b).) (Braunv. Chronicle Publishing Co. (1997) 52 Cal.App.4th 1036, 1042 (Braun).) In order to encourage continued participation in matters of public significance, the Legislature has mandated that section 425.16 shall be construed broadly. ( 425.16, subd. (a).)
In determining whether to grant a special motion to strike an alleged SLAPP, the trial court engages in a two-step process. First, the court determines whether the challenged cause of action arises from a protected activity as described in the statute. ( 425.16, subd. (e).) Second, if the court so finds, it then decides whether the plaintiff has established a probability of prevailing on the merits of the claim. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.)
An order granting a special motion to strike is an appealable order. ( 425.16, subd. (i); Vergos v. McNeal (2007) 146 Cal.App.4th 1387, 1394.) We review de novo a ruling on a special motion to strike under section 425.16. (Kyle v. Carmon (1999) 71 Cal.App.4th 901, 907.) Thus, we apply our independent judgment, both to the issue of whether the cause of action arises from a protected activity and whether the plaintiff has shown a probability of prevailing on the claim. (Tutor-Saliba Corp. v. Herrera (2006) 136 Cal.App.4th 604, 609-610 (Tutor-Saliba).)
This case arises in an unusual procedural context, in that the trial court sustained a demurrer without leave to amend to the defamation-related causes of action before granting defendants special motion to strike them. Although the order sustaining the demurrer is reviewable as an intermediate order affecting the rights of the parties ( 906), we do not pause to reach the merits of the demurrer. The reason is simple: The special motion to strike contains a developed factual record not available to us on demurrer. Furthermore, if the motion to strike was properly granted, any error in sustaining the demurrer would surely be harmless.
II. Protected Activity Under Section 425.16
The initial question is whether the first three causes of action embraced activity protected by the anti-SLAPP statute. Section 425.16, subdivision (e) provides that a cause of action is subject to a special motion to strike if it arises from acts in furtherance of a persons right of petition or free speech . . . in connection with a public issue. Subdivision (e) defines such issues as including (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest . . . . (Italics added.)
The trial court found that the defamation-related causes of action, all of which were predicated on the dissemination of the Woodford letter to the press, fell within section 425.16(e)(2).
We shall conclude these claims qualify for SLAPP treatment under both section 425.16(e)(2) and (3).
A. Section 425.16(e)(2)
During the period identified in the FAC, Woodford was the department head of the CDCR, part of the executive branch of state government. As used in section 425.16(e)(2), a matter is under consideration if it is one kept before the mind, given attentive thought, reflection, meditation. [Citation.] A matter under review is one subject to an inspection, examination. (Braun, supra, 52 Cal.App.4th at p. 1049.)
Maranathas right to retain revenue from inmate telephone calls at the Victor Valley MCCF was undoubtedly an issue under consideration by Woodford and the CDCR. Indeed, the CDCR and Maranatha argued over the issue for years and their disagreement was referenced in an amendment to the contract. The conflict finally came to a head when Woodford terminated the contract on the ground that Maranatha had failed to account for and wrongfully withheld the ITRF.
Plaintiffs claim that courts have found that a matter was under consideration or review only in cases involving formal proceedings specifically authorized by statute is inaccurate. Neither of the cases cited (Annette F. v. Sharon S. (2004) 119 Cal.App.4th 1146 (Annette F.); ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993) states or implies that statements relating to issues under consideration by a governmental body fail to qualify for anti-SLAPP protection unless they are also the subject of official proceedings.
The assertion that official proceedings are a necessary prerequisite to public interest protection also disregards the plain language of section 425.16(e)(2), which protects any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law. ( 425.16(e)(2), italics added.) The statement thus enjoys protected status if it is connected either to an issue under review by one of the three branches of government or to an official proceeding authorized by law. Plaintiffs would change the or to an and in derogation of settled principles of statutory construction and in disregard of the legislative mandate that section 425.16 be construed broadly.
Story Continues as Part II ..
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[1] Civil Code section 47, subdivision (a) provides: A privileged publication or broadcast is one made: (a) In the proper discharge of an official duty.
[2] On July 1, 2005, during the events on which this appeal is based, the Department of Corrections was reorganized and renamed the Department of Corrections and Rehabilitation (hereafter CDCR). (Pen. Code, 5000 et seq.)
[3] SLAPP stands for strategic lawsuit against public participation and Code of Civil Procedure section 425.16 is commonly referred to as the anti-SLAPP statute (undesignated statutory references are to the Code of Civil Procedure). (See Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57.) We shall refer to an anti-SLAPP motion as a special motion to strike‑‑the language used in the statute ( 425.16, subd. (b)(1)).
[4] The Director of Corrections is now known as the Secretary of the Department of Corrections and Rehabilitation. (Pen. Code, 5050, as amended by Stats. 2005, ch. 10, 36.)
[5] The notice of appeal from the order granting defendants special motion to strike (C053293) also purports to appeal from a prior order sustaining the demurrer without leave to amend. That order is nonappealable (Olson v. Volkswagen of America (1988) 201 Cal.App.3d 1437, 1439) and the purported appeal from it is dismissed.
