Judge: Curtis A. Kin, Case: 22STCV34431, Date: 2023-04-20 Tentative Ruling

Case Number: 22STCV34431    Hearing Date: April 20, 2023    Dept: 72

SPECIAL MOTION TO STRIKE (ANTI-SLAPP)

Date:               4/20/23 (9:30 AM)

Case:               Joshua Held v. OpenNode Inc. et al. (22STCV34431)

TENTATIVE RULING:

Defendants OpenNode, Inc. and Matthew Fox’s Motion to Strike Pursuant to CCP § 425.16 is GRANTED.

All evidentiary objections are OVERRULED.

Defendants OpenNode, Inc. (“OpenNode”) and Matthew Fox move to strike allegations based on plaintiff Joshua Held’s slander claim. Plaintiff alleges that, during a meeting on September 27, 2022, defendant Matthew Fox, on behalf of defendant OpenNode, Inc. and its Board of Directors, stated that plaintiff was fired because plaintiff improperly defrauded the company and was dishonest. (Compl. ¶ 52.) Fox is alleged to have said: “You know we have ordered and completed an independent investigation into this on the situation at the company. What has come out of that, among other things, is a clear understanding of profligate, excessively profligate spending by members of management. Much of which had very little to do with the product or any of the people here. As well as a persistent unwillingness to be honest with the board and investors. As a result, . . . Josh [Held] . . .[is] no longer with the company. . . . You know the actions were extremely disappointing and have significantly strained the company’s financial position here.” (Compl. ¶ 52.)

The Court employs a two-prong process in ruling on a CCP section 425.16 motion to strike. 

“First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one ‘arising from’ protected activity. [Citation.] If the court finds such a showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Curtin Maritime Corp. v. Pacific Dredge & Construction, LLC (2022) 76 Cal.App.5th 651, 663, quoting Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 819–820, internal quotations omitted.) With respect to the first prong,

“[a] defendant need only make a prima facie showing that plaintiff's claims arise from the defendant's constitutionally-protected free speech or petition rights.” (Curtin Maritime, 76 Cal.App.5th at 664.) With respect to the second prong, the plaintiff “must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” (Ibid., quoting Navellier v. Sletten (2002) 29 Cal.4th 82, 88–89, internal quotations omitted.)

As for the first prong, CCP § 425.16(e)(3) and (e)(4) provide that “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” or “any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest,” respectively, are amenable to a special motion to strike.

The parties dispute whether the September 27 meeting was “open to the public” or a “public forum” within the meaning of CCP § 425.16(e)(3). Although plaintiff generally alleges that his termination was announced at a “public meeting” (Compl. ¶ 3), plaintiff more specifically alleges that the meeting was attended by “employees, officers, Board members, and investors of OpenNode….” (Compl. ¶ 31). Defendants similarly contend that the meeting was attended by “members of the New Board, the Company’s executives, officers, employees, and the Company’s investors.” (Fox Decl. ¶ 12.) Defendants present no evidence that members of the public were present at the meeting or that the public was somehow informed of the statements made at the meeting. Accordingly, the Court finds that CCP § 425.16(e)(3) does not apply.

However, defendants sufficiently demonstrate that the statements made at the September 27 meeting were made “in connection with a public issue or an issue of public interest” within the meaning of CCP § 425.16(e)(4). “In articulating what constitutes a matter of public interest [under CCP § 425.16(e)(4)], courts look to certain specific considerations, such as whether the subject of the speech or activity ‘was a person or entity in the public eye’ or ‘could affect large numbers of people beyond the direct participants’….” (FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133, 145.)

With respect to whether plaintiff, the subject of the statements made at the September 27 meeting, is in the public eye, plaintiff alleges that he was the “face” of OpenNode and that he “field[ed] press, podcasts, and media in general.” (Compl. ¶ 26.) Plaintiff alleges that his primary responsibility at OpenNode was “raising capital to grow the company,” which plaintiff did by “lean[ing] into…his network of previous investors and other industry contacts” and “field[ing] dozens of management calls with prospective institutional investors.” (Compl. ¶¶ 24, 27.) These admissions of fact in the Complaint are judicial admissions considered “a conclusive concession of the truth of the matter.” (Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 187.) Defendants additionally present evidence that plaintiff was the subject of a profile published in C-Suite Quarterly. (Kim Decl. ¶ 7 & Ex. E.) Regardless of whether C-Suite Quarterly’s readership is sufficient to demonstrate that plaintiff is in the public eye, based on the allegations in the Complaint, plaintiff admits that he is the face of a company known to the press. This is sufficient to establish that plaintiff is in the public eye.

Further, even if plaintiff were not in the public eye, defendant demonstrates that the allegations of fraud made against plaintiff in the September 27 meeting affected large numbers of people beyond the participants of the meeting. “Consumer information . . . at least when it affects a large number of persons, also generally is viewed as information concerning a matter of public interest.” (Wilbanks v. Wolk (2004) 121 Cal.App.4th 883, 898.) The context of a statement, including the identity of the speaker, the audience, and the purpose of the speech, is relevant, but not necessarily dispositive, in determining whether the statement was made to further free speech in connection with a public issue. (FilmOn, 7 Cal.5th at 140.) According to defendant and CEO Fox, OpenNode is a “Bitcoin payment processor that provides a platform for merchants to accept payments and send payouts using Bitcoin.” (Fox Decl. ¶ 2.) OpenNode “services thousands of merchants, has processed nearly one million transactions, and works with some of the largest firms in the traditional payment processing industry.” (Fox Decl. ¶ 6.) Although plaintiff characterizes OpenNode as a small private company (Held Decl. ¶¶ 4, 5), plaintiff does not dispute that OpenNode services thousands of merchants and has processed nearly a million transactions. Any of the thousands of investors and client merchants, as well as any of the numerous persons or entities considering investing in OpenNode or using its services, has an interest in knowing about plaintiff’s alleged acts of malfeasance, particularly as such acts of malfeasance reportedly strained OpenNode’s financial position.

Thus, when the alleged defamatory statements are examined in the context of the speaker (the CEO of a company servicing thousands of merchants) and the purpose of the speech (to assure investors and partners that plaintiff’s alleged fraud is being addressed through plaintiff’s termination), defendant demonstrates that the statements consist of consumer information that is protected under CCP § 425.16(e)(4). (See Fox Decl. ¶ 14; Wilbanks, 121 Cal.App.4th at 899-900 [statements made against a viatical settlements brokers by consumer watchdog on a web site about those who broker life insurance policies are consumer protection information].) Defendants sought to provide information regarding the steps they were taking to address prior malfeasance at OpenNode.

For the foregoing reasons, the statements at issue are in furtherance of free speech in connection with a public issue (including a person or entity in the public eye) and statements that could directly affect a large number of persons beyond the direct participants.

Because defendant satisfies the first prong of the anti-SLAPP analysis, the burden shifts to plaintiff Held to demonstrate a probability of prevailing on the merits.

“The elements of a defamation claim are (1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural tendency to injure or causes special damage.” (J-M Manufacturing Co., Inc. v. Phillips & Cohen LLP (2016) 247 Cal.App.4th 87, 97.) Defendants assert that the statements made during the September 27 meeting are protected by the common interest privilege set forth in Civil Code § 47(c). “Communications made in a commercial setting relating to the conduct of an employee have been held to fall squarely within the qualified privilege for communications to interested persons.” (Cuenca v. Safeway San Francisco Employees Fed. Credit Union (1986) 180 Cal.App.3d 985, 995.) Here, the statements made during the September 27 meeting concerned plaintiff, who was Head of Strategy and eventually Co-President of OpenNode. (Compl. ¶ 2.) The statements were made to employees, officers, Board members, and investors of OpenNode (Compl. ¶ 31)—individual who clearly shared a contractual, business, or similar relationship with defendants. (Cornell v. Berkeley Tennis Club (2017) 18 Cal.App.5th 908, 949 [common interest privilege applies where the parties to the communication share a contractual, business, or similar relationship].)

Thus, because the communications at issue are subject to the common-interest privilege, plaintiff must show defendant acted with malice in order to prevail on his claim.  (Civ. Code § 47(c)(1); Lundquist v. Reusser (1993) 7 Cal.4th 1193, 1202.) “The malice necessary to defeat a qualified privilege is ‘actual malice’ which is established by a showing that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable ground for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights [citations].” (Taus v. Loftus (2007) 40 Cal.4th 683, 721, internal quotations omitted.) Likewise, plaintiff must also prove the challenged statements are false and that defendant acted with actual malice, because, as discussed above, plaintiff is a figure in the public eye.  (Christian Research Institute v. Alnor (2007) 148 Cal.App.4th 71, 81.) Actual malice means that defendant knew the statements were false or had serious doubt about the truth of such statements. (CACI 1700 [Defamation].)

Actual malice presents “a heavy burden, far in excess of the preponderance sufficient for most civil litigation. The burden of proof by clear and convincing evidence ‘requires a finding of high probability. The evidence must be so clear as to leave no substantial doubt. It must be sufficiently strong to command the unhesitating assent of every reasonable mind.” (Christian Research Institute, 148 Cal.App.4th at 84, internal quotations and citations omitted.) The inquiry into actual malice is a “subjective test, under which the defendant's actual belief concerning the truthfulness of the publication is the crucial issue.” (Reader's Digest Assn. v. Superior Court (1984) 37 Cal.3d 244, 257.)

Here, defendants undertook an investigation into company management with the assistance of an outside forensic advisory form to uncover malfeasance by management at OpenNode.  (Fox Decl. ¶¶ 7-10.)  Plaintiff contends that the report upon which defendants relied in deciding to terminate him did not mention plaintiff himself engaged in “excessively profligate spending” or “persistent unwillingness” to be honest with the Board and investors. (Held Decl. ¶ 13; cf. Compl. ¶ 52 [alleged defamatory statements].) Plaintiff, however, presents no evidence regarding the defendants’ state of mind and whether Fox actually believed that his statements concerning plaintiff’s profligate spending and dishonesty were false. Even if the report upon which Fox relied did not attribute any fraud to plaintiff directly, mere negligence is not sufficient to demonstrate lack of reasonable cause. (Noel v. River Hills Wilsons, Inc. (2003) 113 Cal.App.4th 1363, 1370.) Further, even if Fox threatened to initiate criminal proceedings or accused plaintiff of commingling and embezzlement of OpenNode funds (Held Decl. ¶¶ 14, 15), that is insufficient to demonstrate that Fox’s statements during the September 27 meeting were motivated by hatred or ill will, as opposed to a genuine belief that his attribution of fraud and dishonesty to Held was well-founded.

Accordingly, based on plaintiff’s failure to establish that the challenged statements from defendants may be false and that defendants may have made the statements with actual malice, plaintiff fails to meet his burden on the second prong.

The motion is GRANTED.

“When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 394.) Defendants’ motion is aimed at the statements made during the September 27 meeting. Notably, defendants’ motion did not directly address whether statements made by Fox during a call to one of plaintiff’s “highly influential industry contacts” concerning plaintiff’s purported commingling and embezzlement were protected. (Compl. ¶ 56; Motion at 12, fn. 2 [“Because of the vagueness of the allegations, Defendants are unable to understand what call or statements Plaintiff is purporting to describe, and therefore focus this Motion on the September 27 meeting”].) Accordingly, the following allegations regarding the September 27 meeting are STRICKEN: paragraphs 51, 52, 53, 54, and 55 in their entirety and the phrase “slandering Mr. Held in public” in paragraph 73. The description of the September 27 meeting in paragraph 31 and 32 shall not be stricken, because they may pertain to plaintiff’s claim that he was terminated without cause.  (See Compl. ¶ 48.)