Eagle Broadband v. Mould

Filed 12/14/07 Eagle Broadband v. Mould CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

The plaintiff brought this lawsuit for defamation and unfair competition after statements were posted about it on an internet message board. These appeals are taken from the trial courts rulings on two related motions: a special motion to strike the plaintiffs complaint as a strategic lawsuit against public participation, brought by two defendants, and a motion to lift the discovery stay, brought by the plaintiff. At issue here is the trial courts grant of the special motion to strike as to one defendant, its denial of the motion as to another defendant, and its refusal to continue the hearing and allow discovery as requested by the plaintiff.

Independently reviewing the rulings on the special motions to strike, we conclude that the trial court should have granted the special motion to strike as to both defendants. As for the courts denial of the plaintiffs discovery motion, we find no abuse of discretion. Based on those conclusions, we affirm in part and reverse in part.

INTRODUCTION

In this introductory section, we briefly describe the parties and the events that brought them to this court. In the next section of the opinion, we set forth the general legal principles that inform our analysis. Against that backdrop, we describe the procedural history of this case in greater detail. Finally, we analyze the specific issues presented in these combined appeals.

The parties before us are plaintiff Eagle Broadband, Inc. (plaintiff); defendant and respondent Roy Thomas Mould, called DOE 5 by plaintiff, who posted messages under the screen name benderanddundat (Mould); and defendant and appellant Richard Williams, called DOE 4 by plaintiff, who posted messages under the screen name richwill21 (Williams).

This action was filed in 2005, after Mould, Williams, and others posted unflattering messages on the Yahoo! Finance message board concerning plaintiff. Plaintiff sued those responsible for the internet postings as Doe defendants, alleging defamation and unfair competition. Defendants Mould and Williams responded with a special motion to strike the complaint on the ground that it was a SLAPP a strategic lawsuit against public participation within the meaning of section 425.16 of the Code of Civil Procedure.[1] Plaintiff opposed that motion, and it filed its own motion seeking a continuance in order to conduct discovery. ( 425.16, subd. (g).)

This appeal follows the trial courts rulings in favor of Mould but against Williams on their special motion to strike, and against plaintiff on its discovery motion.

LEGAL BACKGROUND

To establish the proper framework for our analysis, we summarize the law governing the special motion to strike, and we also review the general legal principles relevant to plaintiffs claims for defamation and unfair competition.

I. Section 425.16

Strategic lawsuits against public participation are commonly referred to by the acronym SLAPP. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 (Equilon); see Integrated Healthcare Holdings, Inc. v. Fitzgibbons (2006) 140 Cal.App.4th 515, 519, fn. 1 (Integrated Healthcare).) The paradigm action of this type is a meritless suit filed primarily to chill the defendants exercise of First Amendment rights. (Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2 (Wilcox), disapproved on another ground in Equilon, at p. 68, fn. 5; see also Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (Navellier I); see generally 5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, 962, pp. 422-424; id. (2007 supp.) 962, pp. 69-80; Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2007) 7:207 to 7:271.30, pp. 7-72 to 7-123.)

In 1992, the Legislature responded to the disturbing increase in such suits by enacting section 425.16. ( 425.16, subd. (a); Monterey Plaza Hotel v. Hotel Employees & Restaurant Employees (1999) 69 Cal.App.4th 1057, 1063.) The statute incorporates the Legislatures express declaration that it is 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. ( 425.16, subd. (a).) In 1997, the statute was amended to clarify the Legislatures intent that this section shall be construed broadly. (Ibid.; see Equilon, supra, 29 Cal.4th at p. 60.)

A. Motion to Strike

Section 425.16 was enacted to bring about an early test of the merits in actions tending to chill citizen participation in public affairs. (Vogel v. Felice (2005) 127 Cal.App.4th 1006, 1014.) To that end, the statute furnishes a mechanism for quickly identifying and eliminating suits that chill public participation: a special motion to strike, commonly called an anti-SLAPP motion. The California Supreme Court recently described that mechanism as a summary-judgment-like procedure at an early stage of the litigation. (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192 (Varian).) The statute provides: A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim. ( 425.16, subd. (b)(1).) As this court recently observed, the statute was designed to protect defendants from having to expend resources defending against frivolous SLAPP suits unless and until a plaintiff establishes the viability of its claim by a prima facie showing. (Britts v. Superior Court (2006) 145 Cal.App.4th 1112, 1124.)

A special motion to strike triggers a two-step process in the trial court. (Varian, supra, 35 Cal.4th at p. 192.) First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76 (Cotati), quoting  425.16, subd. (b)(1).) As relevant here, the statutory definition of protected activity expressly includes 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. ( 425.16, subd. (e)(3).) 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. (Cotati, at p. 76.)

In each part of the two-step process, the party with the burden need only make a threshold, prima facie showing. (Cotati, supra, 29 Cal.4th at p. 76.) A prima facie showing is one that is sufficient to support the position of the party in question. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 851 [summary judgment].) In deciding whether the party with the burden has carried it, the court considers the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. ( 425.16, subd. (b)(2).)

B. Discovery Stay

In addition to the motion to strike, the statute provides another mechanism designed to minimize the financial impact of a SLAPP, a discovery stay. ( 425.16, subd. (g); see The Garment Workers Center v. Superior Court (2004) 117 Cal.App.4th 1156, 1161.) The statute thus provides in part: All discovery proceedings in the action shall be stayed upon the filing of a notice of motion made pursuant to this section. The stay of discovery shall remain in effect until notice of entry of the order ruling on the motion. ( 425.16, subd. (g).) This language has been uniformly interpreted to provide a general stay on discovery in accordance with the statutes overall purposes. (Britts v. Superior Court, supra, 145 Cal.App.4th at p. 1125.)

The statute expressly permits the trial court to lift the discovery stay: The court, on noticed motion and for good cause shown, may order that specified discovery be conducted notwithstanding this subdivision. (425.16, subd. (g).) The discovery stay thus may be lifted to permit specified discovery limited to the issues raised in the special motion to strike. (Ruiz v. Harbor View Community Association (2005) 134 Cal.App.4th 1456, 1475 (Ruiz).) To warrant that relief, there must be a proper showing that includes good cause for the requested discovery. (Tutor-Saliba Corp. v. Herrera (2006) 136 Cal.App.4th 604, 617.) The decision whether to lift the discovery stay is within the trial courts discretion. (Ibid.)

C. Types of Claims

The range of legal actions that might qualify as strategic lawsuits against public participation is broad. (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 652 (Church of Scientology), disapproved on another ground in Equilon, supra, 29 Cal.4th at p. 68, fn. 5.)

As relevant here, defamation is among the favored causes of action in SLAPP suits. (Wilcox, supra, 27 Cal.App.4th at p. 816; see, e.g, AmpexCorp. v. Cargle (2005) 128 Cal.App.4th 1569, 1573 (Ampex) [action against internet poster for defamation]; Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO (2003) 105 Cal.App.4th 913, 915 (Rivero) [action against union for libel and slander]; ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1005 (ComputerXpress) [action against former merger target for trade libel]; Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 471 [action against homeowners association for defamation].)

The statute also may apply to a cause of action for unlawful business practices pursuant to Business & Professions Code section 17200 so long as the plaintiff is seeking damages personal to himself. (Ingels v. Westwood One Broadcasting Services, Inc. (2005) 129 Cal.App.4th 1050, 1067, fn. omitted; see 425.17, subd. (b) [exempting specified public benefit actions from the operation of 425.16].)

D. Appellate Review

An order granting or denying a special motion to strike is appealable. ( 425.16, subd. (j); 904.1, subd. (a)(13).) As to each step of the two-prong analysis, we review the record de novo. (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 103 (Mann).) We assess the pleadings and admissible evidence in the record to undertake our independent review. (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1240.) We review a trial courts decision on the discovery stay for an abuse of discretion. (Tutor-Saliba Corp. v. Herrera, supra, 136 Cal.App.4th at p. 617.)

II. Defamation Law

One of plaintiffs two causes of action is for defamation. In papers filed below, plaintiff asserts that its defamation claim is essentially a trade libel/libel per se cause of action. Plaintiff continues to press that assertion in its briefs in this court.

Defamation and trade libel both require the intentional publication of a false and unprivileged statement of fact. (Mann, supra, 120 Cal.App.4th at p. 104.) Even so, courts have recognized defamation and trade libel as two distinct torts. (See Barnes-Hind, Inc. v. Superior Court (1986) 181 Cal.App.3d 377, 381 (Barnes-Hind); Polygram Records, Inc. v. Superior Court (1985) 170 Cal.App.3d 543, 548-550 (Polygram Records); Leonardini v. Shell Oil Co. (1989) 216 Cal.App.3d 547, 573 (Leonardini); Guess, Inc. v. Superior Court (1986) 176 Cal.App.3d 473, 479 (Guess).)

A. Defamation

Defamation is an invasion of the interest in reputation. The tort involves the intentional publication of a statement of fact that is false, unprivileged, and has a natural tendency to injure or which causes special damage. (Smith v. Maldonado (1999) 72 Cal.App.4th 637, 645.) In California, a corporations right and redress against defamation is well established. (Vegod Corp. v. American Broadcasting Companies, Inc. (1979) 25 Cal.3d 763, 770 (Vegod).)

Defamation in written form is called libel, which is defined by statute as a false and unprivileged publication by writing, printing, picture, effigy, or other fixed representation to the eye, which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation. (Civ. Code, 45.) As the California Supreme Court has long recognized, libel includes almost any language which, upon its face, has a natural tendency to injure a persons reputation. (Forsher v. Bugliosi (1980) 26 Cal.3d 792, 803.) Libel is recognized as either being per se (on its face), or per quod (literally meaning, whereby), and each requires a different standard of pleading. (Palm Springs Tennis Club v. Rangel (1999) 73 Cal.App.4th 1, 5; see also MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536, 549; Civ. Code, 45a.)

1. Requirement of falsity

There can be no recovery for defamation without a falsehood. (Seelig v. Infinity Broadcasting Corp. (2002) 97 Cal.App.4th 798, 809, citing Baker v. Los Angeles Herald Examiner (1986) 42 Cal.3d 254, 259.) Thus, to state a defamation claim that survives a First Amendment challenge, plaintiff must present evidence of a statement of fact that is provably false. (Seelig, at p. 809, citing Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1, 20 (Milkovich).) Truth is a complete defense to defamation. (Smith v. Maldonado, supra, 72 Cal.App.4th at p. 646.) However, the defendant need not justify the literal truth of every word of the allegedly defamatory matter. It is sufficient if the defendant proves true the substance of the charge. (Id. at pp. 646-647.)

2. Fact versus opinion

It is an essential element of defamation that the publication be of a false statement of fact rather than opinion. (Ringler Associates Inc. v. Maryland Casualty Co. (2000) 80 Cal.App.4th 1165, 1181.) In this context courts apply the Constitution by carefully distinguishing between statements of opinion and fact, treating the one as constitutionally protected and imposing on the other civil liability for its abuse. (Gregory v. McDonnell Douglas Corp. (1976) 17 Cal.3d 596, 601.) Like other forms of opinion, hyperbole and insults are expressions that typically receive constitutional protection. (Seelig v. Infinity Broadcasting Corp.,supra, 97 Cal.App.4th at p. 809.) Parody and satire fall within the same constitutionally protected category. (Franklin v. Dynamic Details, Inc. (2004) 116 Cal.App.4th 375, 385 (Franklin).)

There is no artificial dichotomy between opinion and fact, however. (Milkovich, supra, 497 U.S. at p. 19.) Expressions of opinion thus do not enjoy blanket constitutional protection. (Franklin, supra, 116 Cal.App.4th at p. 384, discussing Milkovich, at p. 18.) If a statement of opinion implies a knowledge of facts which may lead to a defamatory conclusion, the implied facts must themselves be true. (Ringler Associates Inc. v. Maryland Casualty Co., supra, 80 Cal.App.4th at p. 1181.) An opinion thus loses its constitutional protection and becomes actionable when it is based on implied, undisclosed facts and the speaker has no factual basis for the opinion. (Ruiz, supra, 134 Cal.App.4th at p. 1471.) The same is true of hyperbole and satire, which may be actionable if they convey false and defamatory information. (Wilbanks v. Wolk (2004) 121 Cal.App.4th 883, 902.)

The determination of whether a statement expresses fact or opinion is a question of law for the court, unless the statement is susceptible of both an innocent and a libelous meaning, in which case the jury must decide how the statement was understood [citations]. (Franklin, supra, 116 Cal.App.4th at p. 385.) Ultimately, the dispositive question is whether a reasonable fact finder could conclude the published statement declares or implies a provably false assertion of fact. (Ibid.)

3. Malice requirement for public figures

In addition to the other elements of the tort, a public figure suing for defamation must show actual or constitutional malice, defined for these purposes as knowledge of falsity or reckless disregard for the truth. (See New York Times Co. v. Sullivan (1964) 376 U.S. 254, 279-280; Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 342; Khawar v. Globe Internat., Inc. (1998) 19 Cal.4th 254, 275.)

The characterization of public figure falls into two categories: the all-purpose public figure, and the limited purpose or vortex public figure. The all-purpose public figure is one who has achieved such pervasive fame or notoriety that he or she becomes a public figure for all purposes and contexts. The limited purpose public figure is an individual who voluntarily injects him or herself or is drawn into a specific public controversy, thereby becoming a public figure on a limited range of issues. (Ampex, supra, 128 Cal.App.4th at p. 1577.)

There is a higher standard of proof for public-figure defamation plaintiffs, who must prove by clear and convincing evidence that the defamatory statement was made with knowledge that it was false, or with reckless disregard of whether it was false or not. (Walker v. Kiousis (2001) 93 Cal.App.4th 1432, 1445-1446, criticized on another point in People v. Stanistreet (2002) 29 Cal.4th 497, 512.) This heightened standard of proof must be taken into account in deciding a defendants motion to strike a claim for defamation under section 425.16. (Id. at p. 1446; see also, McGarry v. University of San Diego (2007) 154 Cal.App.4th 97, 113 (McGarry); Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 700 (Overstock).)

B. Trade Libel

Trade libel is the publication of matter disparaging the quality of anothers property, which the publisher should recognize is likely to cause pecuniary loss to the owner. (ComputerXpress, supra, 93 Cal.App.4th at p. 1010.) To prevail in a claim for trade libel, a plaintiff must demonstrate that the defendant: (1) made a statement that disparages the quality of the plaintiffs product; (2) that the offending statement was couched as fact, not opinion; (3) that the statement was false; (4) that the statement was made with malice; and (5) that the statement resulted in monetary loss. (Optinrealbig.com, LLC v. Ironport Systems, Inc. (N.D.Cal. 2004) 323 F.Supp.2d 1037, 1048, citing Guess, supra, 176 Cal.App.3d at p. 479; see also, e.g., Global Telemedia Intern., Inc. v. Doe 1 (C.D.Cal. 2001) 132 F.Supp.2d 1261, 1266 (Global); Nichols v. Great American Ins. Companies (1985) 169 Cal.App.3d 766, 773 (Nichols); Erlich v. Etner (1964) 224 Cal.App.2d 69, 73-74 (Erlich).)

1. Nature of the tort as trade disparagement, not injury to reputation

With trade libel, the focus is on statements concerning the plaintiffs property or business. This is in contrast to common law defamation, which relates to the standing and reputation of the businessman as distinct from the quality of his or her goods. (Barnes-Hind, supra, 181 Cal.App.3d at p. 381; see generally, 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, 640, p. 945; id. (2007 supp.), p. 73.)

In Polygram Records, a case decided in 1985, the court described trade libel as a confusing concept that has not been subjected to rigorous judicial analysis in California. (Polygram Records, supra, 170 Cal.App.3d at p. 548, fn. omitted.) In the courts view, this confusion arises primarily from uncertainty whether trade libel should be treated as a species of defamation, or instead constitutes the distinct tort of injurious falsehood. (Ibid.) After analyzing the question, the court held that the two torts are distinct; that is, trade libel is not true libel and is not actionable as defamation. (Id. at p. 549.) Other California courts have reached the same conclusion. (See, e.g., Leonardini, supra, 216 Cal.App.3d at p. 573; Guess, supra, 176 Cal.App.3d at p. 479.) However, as recognized in Polygram Records, the distinction between personal aspersion and commercial disparagement will sometimes be difficult to draw, because statements may effectuate both harms. (Polygram Records, at p. 550.)

2. Requirement of false statement of fact

To constitute trade libel, a statement must be false. (ComputerXpress, supra, 93 Cal.App.4th at p. 1010.) Since mere opinions cannot by definition be false statements of fact, opinions will not support a cause of action for trade libel. (Id. at pp. 1010-1011.)

3. Malice element

As just explained, the key element distinguishing defamation and trade libel is whether the challenged expressions defamed the reputation of [the plaintiff] or merely disparaged products it owns or markets. (Melaleuca, Inc. v. Clark (1998) 66 Cal.App.4th 1344, 1360 (Melaleuca).) The distinction is critical, it has been said, since only statements which directly damage a plaintiffs reputation will give rise to liability without a showing of actual malice. (Ibid.)

As thoroughly analyzed in the Melaleuca case, various reasons support the imposition of a malice requirement for trade libel claims, but not for defamation claims. (Melaleuca, supra, 66 Cal.App.4th at pp. 1360-1362.) They include policy justifications based on differing societal values placed on reputation versus commerce, historical common law distinctions, and constitutional precepts. (Ibid.; see 5 Witkin, Summary of Cal. Law, supra, Torts, 642, p. 948, discussing Melaleuca on this point.)

Other courts have identified malice or at least intent as a requirement of trade libel. For example, in several cases, the court has defined trade libel as the intentional disparagement of goods or property. (Polygram Records, supra, 170 Cal.App.3d at p. 548; Leonardini, supra, 216 Cal.App.3d at p. 572; Erlich, supra, 224 Cal.App.2d at p. 73.) In Polygram Records, the court adopted the Restatement view that a trade libel plaintiff must prove the fault of the defendant who was subject to liability only if he knew of the falsity or acted with reckless disregard concerning it, or if he acted with ill will or intended to interfere in the economic interests of the plaintiff in an unprivileged fashion. (Polygram Records, at p. 549, quoting Rest.2d Torts (1977) 623A, com. g, pp. 340-341; cf., Gudger v. Manton (1943) 21 Cal.2d 537, 544 [malice is an essential element in slander of title but it may be express or implied], disapproved on another ground in Albertson v. Raboff (1956) 46 Cal.2d 375, 381; 5 Witkin, Summary of Cal. Law, supra, Torts, 642, p. 948 [for slander of title, all that is required is the fictional malice or malice implied in law from the unprivileged character of the act].)

By contrast, in Nichols, the court concluded that it is not absolutely necessary that the disparaging publication be intentionally designed to injure. (Nichols, supra, 169 Cal.App.3d at p. 773.) But as its analysis makes clear, the Nichols court drew no distinction between trade libel and libel. First, the court spoke in terms of defamatory meaning and recovery on a defamation theory. (Id. at p. 774.) Moreover, in support of its conclusion that liability could be premised on negligent conduct alone, the court cited a case of libel, not trade libel. (See id. at p 773, fn. 3, citing Hellar v. Bianco (1952) 111 Cal.App.2d 424, 425, 426-427.)

In view of the differences between defamation and trade libel, the better reasoned authority recognizes malice as a required element of trade libel.

4. Special damages

The distinctions between trade libel and defamation also give rise to differing requirements concerning damages. Unlike personal defamation, the plaintiff seeking damages for trade libel must prove special damages in the form of pecuniary loss. (Guess, supra, 176 Cal.App.3d at p. 479; see also Leonardini, supra, 216 Cal.App.3d at p. 573.) Moreover, like New York, California requires a plaintiff to allege special damages specifically, by identifying customers or transactions lost as a result of disparagement, in order to state a prima facie case. (Isuzu Motors Ltd. v. Consumers Union of U.S., Inc. (C.D.Cal. 1998) 12 F.Supp.2d 1035, 1043; see Erlich, supra, 224 Cal.App.2d at pp. 73-74; New.Net, Inc. v. Lavasoft (C.D.Cal. 2004) 356 F.Supp.2d 1090, 1113.) The plaintiff in a trade libel case thus may not rely on a general decline in business arising from the falsehood, and must instead identify particular customers and transactions of which it was deprived as a result of the libel. (Mann, supra, 120 Cal.App.4th at p. 109.) A cause of action for trade libel thus carries rigorous requirements of proof of damage. (Erlich, at p. 73.)

III. Unfair Competition Law

In addition to its defamation claim, plaintiff also sued under Californias unfair competition law (UCL). (See Bus. & Prof. Code, 17200 et seq.; id., 17500 et seq.) Business and Professions Code section 17200 et seq. prohibits unfair competition, including unlawful, unfair, and fraudulent business acts. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1143, fn. omitted (Korea Supply).) The UCL protects both consumers and competitors. (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676.)

A. The Statutes Reach

The UCL covers a wide range of conduct. (Korea Supply, supra, 29 Cal.4th at p. 1143.) Section 17200 borrows violations from other laws by making them independently actionable as unfair competitive practices. (Ibid., citing Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) In addition, under section 17200, a practice may be deemed unfair even if not specifically proscribed by some other law. (Korea Supply, at p. 1143.)

Despite the statutes breadth, some conduct is beyond the reach of the UCL. (Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1009.) For example, at least one court has concluded that section 17200 does not apply to securities transactions. (Bowen v. Ziasun Technologies, Inc. (2004) 116 Cal.App.4th 777, 788.) Other authorities cast some doubt on that conclusion, however. (See Overstock, supra, 151 Cal.App.4th at pp. 715-716, discussing Spinner Corp. v. Princeville Development Corp. (9th Cir.1988) 849 F.2d 388, 390-391; and Roskind v. Morgan Stanley Dean Witter & Co. (2000) 80 Cal.App.4th 345, 355.)

As this court recently stated, a UCL action is barred only if another law specifically bars the subject UCL action or specifically permits the conduct complained of. (Paulus v. Bob Lynch Ford, Inc., supra, 139 Cal.App.4th at p. 679; cf., In re Tobacco Cases II (2007) 41 Cal.4th 1257 [UCL claim preempted by Federal Cigarette Labeling and Advertising Act].) Even so, a UCL claim is not an all-purpose substitute for a tort or contract action. (Korea Supply, supra, 29 Cal.4th at p. 1150.)

B. Remedies

While the scope of conduct covered by the UCL is broad, its remedies are limited. (Korea Supply, supra, 29 Cal.4th at p. 1144.) Suits asserting statutory UCL claims are equitable actions. (Feitelberg v. Credit Suisse First Boston, LLC, supra, 134 Cal.App.4th at p. 1009.) For that reason, compensatory damages are not available in such suits. (Ibid.) Instead, successful private UCL plaintiffs are generally limited to injunctive relief and restitution. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 179.)

With the foregoing general legal principles in mind, we turn to the case at hand.

FACTS AND PROCEDURAL HISTORY

According to its complaint, plaintiff is a Texas corporation authorized to do business in California, which provides broadband and communications technology and services. Defendants Mould and Williams are two individuals who posted negative messages about plaintiff on the internet in 2005.

Plaintiffs Complaint

In October 2005, plaintiff complained against 25 Doe defendants for unfavorable internet postings about it. The complaint identifies seven of those defendants by their respective screen names. Defendant Mould (Doe 5) and defendant Williams (Doe 4) are among them.

The complaint makes a number of general allegations, including these:

13. Internet-based stock manipulation schemes are both common and increasing. These types of schemes often target smaller technology companies and such schemes rely on the dissemination of public misinformation coupled with illegal stock trading and other market manipulation schemes in an attempt to impact price movements in the marketplace.

15. Activity on various public Internet message boards for Eagle Broadband such as Yahoo! Finance, Raging Bull and others indicate[s] that Plaintiff is a victim of market manipulation schemes designed to significantly damage Plaintiffs business.

16. The Yahoo! Finance message board contains many specific incidences of postings of false information that have had a negative impact on Plaintiffs business.

As an example of a false posting, the complaint cites a fabricated press release purportedly issued by Eagle Broadband announcing that the company had been deleted from the Russell 3000 Index due to poor performance and business failures, which was posted by defendant Williams on June 10, 2005.

Concerning defendant Mould, the complaint asserts that he posted a fabricated announcement on January 24, 2005, stating that Eagle Broadband was suffering from continued financial losses causing the share price to drop and encouraging others to go short to make some of your money back.

Both the June 2005 fabricated press release by Williams and the January 2005 fabricated announcement by Mould were attached as exhibits to the complaint.

Based on these two messages, and on internet postings by other defendants, the complaint asserts two causes of action: one for violation of the unfair competition law and the other for defamation.

Defendants Special Motion to Strike

Defendants Mould and Williams responded to the complaint with a special motion to strike, under section 425.16. (See 425.16, subd. (b)(1); id., subd. (f).) They asserted that the complaint is a SLAPP a strategic lawsuit against public participation which arose from their exercise of free speech. Defendants observed that section 425.16 contemplates a two-step analysis: the defendant must first make a prima facie showing that the statute applies, which then shifts the burden to the plaintiff to show a probability of prevailing. (See 425.16, subd. (b)(1).)

Defendants offered argument concerning both parts of the analysis. Addressing the first prong, defendants asserted that their activity in posting internet messages was within the scope of the statute, under section 425.16, subdivision (e)(3). In defendants view, the messages giving rise to the complaint were statements made in a public forum (an internet website) about a matter of public interest (plaintiffs performance as a publicly traded company). As for the second prong, defendants argued in abbreviated fashion that plaintiff would be unable to carry its burden of showing a probability of prevailing on its claims against them.

In support of their motion, defendants offered evidence concerning plaintiff, including press releases, historical data concerning its share price, and its website homepage, as well as a copy of the Profile page of the Yahoo! Finance message board for Eagle Broadband, Inc.

Plaintiff opposed the motion. It presented argument refuting both prongs of the analysis. Plaintiff also offered opposition evidence, including one declaration from its vice president of marketing, Frederick Reynolds, and another from an independent certified public accountant, Deirdre Flaherty. In addition, plaintiff filed a request for judicial notice of certain documents evidencing procedural aspects of the litigation.

Defendants replied to plaintiffs opposition, presenting both argument and further evidence. The additional defense evidence included declarations by defendants Williams and Mould, as well as a supplemental declaration by one of defendants attorneys.

Plaintiff interposed written evidentiary objections to the defense evidence. Among other things, plaintiff objected to defendants introduction of new evidence in their reply papers.

Plaintiffs Discovery Motion

As a further response to the defense motion to strike, plaintiff brought its own motion to lift the discovery stay. (See 425.16, subd. (g).) Plaintiff sought: permission to take discovery in order to oppose the defense motion; a continuance of the hearing on the defense motion; and the opportunity for further briefing after discovery. Plaintiff offered five separate grounds for its motion, including the need to ascertain the applicability of a statutory exception, section 425.17, subdivision (c); the need to provide context for the defendants postings; and the need to gather additional evidence concerning its probability of success on the merits.

Defendants opposed plaintiffs motion, and plaintiff replied to their opposition.

Trial Courts Determination

In February 2006, the trial court heard the motions together.[2] After entertaining oral argument by the parties, the court took the matters under submission.

In March 2006, the court issued a formal order after hearing. As relevant here, the order (1) granted the special motion to strike plaintiffs complaint as to defendant Mould; (2) denied the special motion to strike as to defendant Williams; and (3) denied plaintiffs motion for a continuance to conduct discovery.

Appeals

These appeals ensued. Plaintiff filed its notice of appeal on May 4, 2006. Defendant Williams filed his notice of appeal four days later.

In both appeals, the parties filed their appellate briefs pursuant to an agreed briefing schedule, as authorized by this court. In addition to receiving the parties briefs, we granted an application by the Attorney General to file a brief as amicus curiae. The Attorney Generals amicus brief was filed in the Williams appeal. It drew two responses, one from plaintiff and the other from Williams.

contentions

In its appeal, plaintiff makes two main assignments of error. First, it contends that the trial court erred in granting Moulds special motion to strike. Plaintiff argues that it carried its burden of demonstrating a probability of prevailing on its defamation and unfair competition claims against defendant Mould. Second, plaintiff also asserts that the court abused its discretion in refusing to continue the hearing to allow discovery to meet evidence raised in the defense reply papers.

In his appeal, defendant Williams asserts that the court should have granted his special motion to strike the complaint as a strategic lawsuit against public participation. He argues that his posting is protected speech, not actionable defamation, and that it does not fall within the ambit of the unfair competition law. The Attorney Generals amicus brief addresses the reach of the unfair competition law.

Analysis

We begin our analysis with the trial courts order on defendants special motion to strike.

I. Special Motion to Strike: Overview

A. First Prong Defendants Burden of Proof

The courts have struggled to refine the boundaries of a cause of action that arises from protected activity. (Brenton v. Metabolife Internat., Inc. (2004) 116 Cal.App.4th 679, 685.) That struggle need not detain us in this case, however.

Although it disputed the point below, plaintiff now concedes that defendants carried their burden of proof under the first prong of the anti-SLAPP analysis. Given that concession, we bypass the initial inquiry because everyone agrees that the first hurdle in obtaining anti-SLAPP relief has been met. (Overstock, supra, 151 Cal.App.4th at p. 99.)

B. Second Prong Probability of Prevailing

Addressing the disputed second prong, plaintiff contends that it has established a probability of prevailing against both defendants as to both of its claims. Defendants disagree.

In addressing those contentions, we bear in mind that the burden is on plaintiff, who must make a prima facie showing of the likelihood of success on each cause of action arising from protected activity. (ComputerXpress,supra, 93 Cal.App.4th at p. 1010; Church of Scientology, supra, 42 Cal.App.4th at pp. 653-654.) The plaintiffs showing is measured against a standard similar to that used in deciding a motion for nonsuit, directed verdict, or summary judgment. (ComputerXpress, at p. 1010; Church of Scientology, at p. 653.) A plaintiffs burden at this stage is minimal. (Navellier I, supra, 29 Cal.4th at p. 89.) Precisely because the statute (1) permits early intervention in lawsuits alleging unmeritorious causes of action that implicate free speech concerns, and (2) limits opportunity to conduct discovery, the plaintiff's burden of establishing a probability of prevailing is not high. (Overstock, supra, 151 Cal.App.4th at p. 699.)

The court assesses two factors: the legal sufficiency of the complaint and the existence of a prima facie factual showing that would support a judgment for the plaintiff. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821 (Wilson).) The legal sufficiency of the claim is evaluated in the first instance against the allegations of the complaint. (Vogel v. Felice, supra, 127 Cal.App.4th at pp. 1017-1018.) Beyond that, in order to demonstrate a legally sufficient claim, plaintiffs evidentiary showing must negate defendants constitutional defenses. (Wilcox, supra, 27 Cal.App.4th at p. 824.)

In evaluating the evidentiary showing, the court must credit all admissible evidence favorable to [the plaintiff] and indulge in every legitimate favorable inference that may be drawn from it. (Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist., supra, 106 Cal.App.4th at p. 1238; see also, e.g., Overstock, supra, 151 Cal.App.4th at pp. 699-700.) The court must accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendants evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law. (Flatley v. Mauro (2006) 39 Cal.4th 299, 326, internal quotation marks deleted.) The defense evidence defeats the plaintiff's showing as a matter of law, when it establishes a defense or the absence of a necessary element. (1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585.) The court determines only whether the plaintiff has made the requisite showing of minimal merit; it does not weigh the plaintiffs evidence. (Wilson,supra, 27 Cal.App.4that p. 821; Flatley v. Mauro, at p. 326; see ComputerXpress, supra, 93 Cal.App.4th at p. 1010.)

With that overview in mind, we turn to plaintiffs defamation claims.

II. Defamation and Trade Libel

To substantiate its defamation claims, plaintiff must present evidence that each defendants posting constituted a provably false assertion of fact. As we explain, because plaintiff is a limited purpose public figure, it also must make a prima facie showing of malice.

A. Plaintiffs Defamation Claim Against Mould

Plaintiffs defamation action against Mould is based on a single message that he posted in January 2005 on the Yahoo! Finance message board devoted to plaintiff.

As alleged in the body of the complaint, Mould stated that changes were coming for plaintiff, he asserted that plaintiff was suffering from continued financial losses causing the share price to drop, and he encouraged others to go short to make some of your money back. The complaint also alleges that Moulds posting contained false and misleading information concerning Plaintiffs purported inability to sell a key product line essential to its business.

The full text of Moulds posting was attached as a one-page exhibit to the complaint. It contains nothing about plaintiffs product lines. But it does contain these additional statements by Mould: Significant change is coming at Eagle. They are out of cash, sales, and time. They must pay Aggregate back the $10mm which they do not have. Plaintiff refers to this part of the posting as the Out of Cash, Must Pay statement. Mould also predicted that plaintiffs share price would continue to drop significantly, that plaintiff would be forced to make hard financial choices, which might include bankruptcy, and that the situation ahead would be ugly. Mould closed by stating: This is truly a case study in professional incompetence and dereliction of fiduciary duty to shareholders[.]

1. Threshold Procedural Issues

At the outset, we consider several procedural points.

Pleading of Defamatory Matter: The parties disagree as to which of Moulds statements are addressed by the complaint. According to Mould, the trial court should not have considered the so-called out of cash, must pay statements, since they do not appear in the body of the complaint. (See 425.16, subd. (b)(2); Navellier I, supra, 29 Cal.4th at p. 89 [court considers the pleadings, and supporting and opposing affidavits ]; Church of Scientology, supra, 42 Cal.App.4th at p. 656 [the pleadings frame the issues to be decided]; Paulus v. Bob Lynch Ford, Inc., supra, 139 Cal.App.4th at pp. 672-673 [same].) For its part, plaintiff points to the principle of liberal construction of pleadings and argues that it need not set forth the challenged statement verbatim in the complaint. (See 452 [pleadings must be liberally construed]; Okun v. Superior Court (1981) 29 Cal.3d 442, 458 [slander can be charged by alleging the substance of the defamatory statement]; cf., Neilson v. City of California City (2005) 133 Cal.App.4th 1296, 1305 [on appeal from judgment of dismissal after demurrer was sustained without leave to amend, an appellate court assumes the truth of all facts contained in exhibits to the complaint].)

We agree with plaintiffs position on this procedural question. In this case, plaintiff attached a true and correct copy of Moulds entire January 2005 posting as an exhibit to the complaint. It is well settled that a written instrument which is the foundation of a cause of action may be pleaded in haec verba, rather than according to its legal effect, either by setting forth a copy in the body of the complaint or by attaching a copy as an exhibit and incorporating it by proper reference. (Holly Sugar Corp. v. Johnson. (1941) 18 Cal.2d 218, 225.) Where an incorporated written instrument is the foundation of a cause of action or defense, its recitals may serve as a substitute for direct allegations ordinarily essential to the pleading. (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, 391, p. 488; see generally, id., 388-391, pp. 486-488.) Concerning allegations of defamation, it has been said, the complaint should set the matter out verbatim, either in the body or as an attached exhibit. (5 Witkin, Cal. Procedure, supra, Pleading, 695, p. 155, italics added; see Kahn v. Bower (1991) 232 Cal.App.3d 1599, 1612, fn. 5.) In this case, although plaintiff did not specifically incorporate the allegedly defamatory communication by reference, it did attach a copy as an exhibit to the complaint.

Under these circumstances, we conclude that plaintiff sufficiently pleaded the challenged out of cash, must pay statements and that the trial court properly considered those statements for purposes of the special motion to strike.

Statements Challenged on Appeal: We limit our review of plaintiffs claims against Mould to his out of cash, must pay statements about plaintiff.

In its briefs in this court, plaintiff addresses only the specific out of cash, must pay statements. It offers no argument that it was defamed by any other part of the January 2005 posting, which includes: (1) Moulds statement that plaintiff was suffering from continued financial losses, (2) his advice to other shareholders to go short to make some of your money back, (3) his prediction that plaintiffs share price would continue to drop significantly, (4) his suggestion that plaintiff might be facing bankruptcy, (5) his characterization of the situation ahead as ugly, and (6) his statement about professional incompetence and dereliction of fiduciary duty to shareholders. In a passing reference in its reply brief, offered as part of its argument that the out of cash, must pay statements are subsumed within the complaint, plaintiff characterizes its pleading as alleging that Moulds posting as a whole falsely exaggerated Eagles financial condition. As just explained, however, plaintiff offers no argument in this court concerning the defamatory nature of any other part of Moulds January 2005 posting.

Because plaintiff has failed to offer appellate argument that Moulds posting was defamatory, except as to his out of cash, must pay statement, we shall treat as abandoned any claims that any of Moulds other statements are defamatory. (See, e.g., Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994, 1001, fn. 2 [contention forfeited, where it is merely asserted without argument or authority]; Mann, supra, 120 Cal.App.4th at p. 107 [contention deemed forfeited, where it is raised only by passing reference in appellants reply brief].) Therefore, like plaintiff, we focus only on the out of cash, must pay statements here. (Cf., Readers Digest Assn. v. Superior Court (1984) 37 Cal.3d 244, 266 [plaintiffs ignored most of the charges in defendants article, focusing instead on just three sentences].)

Forfeiture of Malice Issue: The final threshold procedural issue is whether the issue of malice is preserved. According to plaintiffs reply brief on appeal, Mould failed to offer any legitimate argument to the trial court about plaintiffs failure to plead and prove malice. Plaintiff acknowledges that Mould mentioned malice in passing in his reply papers below. But plaintiff asserts that a conclusory statement in a reply brief is not sufficient to raise the issue for consideration or preserve it for appeal. In plaintiffs view, it was incumbent on Mould, as the moving party, to demonstrate the inadequacy of plaintiffs claims.

We reject plaintiffs assertion that the question of malice has been forfeited. The cases cited by plaintiff address the issue of forfeiture in the context of appellate briefing. (See Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [on fairness grounds, refusing to consider the new issues raised by defendant in his reply brief on appeal]; Jones v. Superior Court (1994) 26 Cal.App.4th 92, 99 [same]; Neighbours v. Buzz Oates Enterprises (1990) 217 Cal.App.3d 325, 335, fn. 8 [same].) The principles reflected in those cases do not apply in the context of the special motion to strike, which employs a procedure that shifts the burden of making a prima facie evidentiary showing from the moving defendant to the plaintiff. Here, Mould adequately and timely raised the question of malice in his reply papers below. In placing the issue before the trial court at that juncture, Mould was not engaging in a belated attempt to carry his own burden of proving that his activity was within the ambit of the statute; rather, he was simply addressing plaintiffs failure to carry its burden of showing a probability of prevailing. The anti-SLAPP statute contemplates this very procedure. Thus, when replying to the plaintiffs opposition to a special motion to strike, the defendant may properly point to the [plaintiffs] failure to meet [its] burden, regardless of any other theories he may have advanced in his original moving papers. (Navellier v. Sletten (2003) 106 Cal.App.4th 763, 775 (Navellier II).)

2. Substantive Contentions

On the merits, plaintiff argues that its evidence sufficiently establishes a prima facie case against Mould on theories both of libel per se and of trade libel. Mould disagrees. The parties dispute several key elements of plaintiffs libel claims.

Falsity: The first disputed element relates to the asserted falsity of Moulds out of cash, must pay statements.[3] Plaintiff accuses Mould of misrepresenting that the company was out of cash and owes Aggregate 10 million dollars. It asserts that the evidence demonstrates the falsity of those statements. In the main, plaintiff relies for evidentiary support on the declaration of its vice president of marketing, Frederick Reynolds, a declaration that was executed nearly a year after Moulds January 2005 internet posting. As Mould points out, however, that declaration states in the present tense that plaintiff is not out of cash and [that it] does not owe Aggregate any amount. The trial court was persuaded by that logic, concluding that plaintiff failed to offer any evidence that the challenged factual statements were untrue when they were made. As the court explained, Reynoldss declaration does not say anything about Eagles financial condition and/or its debt to Aggregate on January 24, 2005. Apart from its reliance on the Reynolds declaration, plaintiff argues in its reply brief that evidence of falsity may be found in Moulds own declaration.

Malice: In addition to falsity, the parties also dispute the related question of malice. Plaintiff argues that it need not plead and prove malice in connection with its claim of libel per se, because is not a public figure. Mould disagrees. Plaintiff also contends that it need not plead and prove malice in connection with its trade libel claim, because malice is not an element of that cause of action. In any event, plaintiff asserts, it made an adequate prima facie showing that defendant Mould acted with malice.

Damages: The final disputed element is the adequacy of plaintiffs showing on the question of damages. Plaintiff argues that it made the requisite minimal showing to support its prima facie case, principally through the declaration of its independent accounting expert, Deirdre Flaherty. Mould disagrees, arguing that plaintiff failed to show any damages as a result of his January 2005 posting. He asserts that the Flaherty declaration is speculative and fails to identify any specific injury caused by his posting. Moreover, Mould argues, to the extent that plaintiff asserts damages based on declines in share price, (1) the price actually increased immediately after his posting, and (2) the overall share price decline was caused by other factors, including dilution in value resulting from the issuance of tens of millions of additional shares. In reply, plaintiff attacks Moulds arguments as self-serving and impermissible lay opinion on the question of damages, which either make no sense, are inadmissible, or at best, contradict Ms. Flahertys analysis, and therefore cannot be considered by the Court.

3. Analysis: Plaintiffs status as a limited purpose public figure

A threshold determination in a defamation action is whether the plaintiff is a public figure. (McGarry, supra, 154 Cal.App.4th at p. 113.) Addressing this issue first enables us to ascertain and apply the correct standard for assessing falsity.

This determination is a question of law for the trial court. (Khawar v. Globe Internat., Inc., supra, 19 Cal.4th at p. 264.) On appeal, the trial courts resolution of disputed factual questions bearing on the public figure determination is reviewed for substantial evidence, while the trial courts resolution of the ultimate question of public figure status is subject to independent review for legal error. (Ibid.) Notwithstanding plaintiffs arguments to the contrary, the trial court in this case implicitly determined that plaintiff is a public figure. That determination is evident from its discussion of malice in connection with the motion brought by Does 2 and 3. In any event, neither party asserts any factual dispute on the question. We therefore decide the issue as a matter of law. (Ibid.)

As developed in the case law, there are three elements that must be present in order to characterize a plaintiff as a limited purpose public figure. First, there must be a public controversy, which means the issue was debated publicly and had foreseeable and substantial ramifications for nonparticipants. Second, the plaintiff must have undertaken some voluntary act through which he or she sought to influence resolution of the public issue. In this regard it is sufficient that the plaintiff attempts to thrust him or herself into the public eye. And finally, the alleged defamation must be germane to the plaintiffs participation in the controversy. (Ampex, supra, 128 Cal.App.4th at p. 1577, citing Copp v. Paxton (1996) 45 Cal.App.4th 829, 845-846.) We consider each element in turn.

Public controversy: To characterize a plaintiff as a limited purpose public figure, the courts must first find that there was a public controversy. (Copp v. Paxton, supra, 45 Cal.App.4th at p. 845.) A public controversy is not simply a matter of interest to the public; it must be a real dispute, the outcome of which affects the general public or some segment of it in an appreciable way. (Waldbaum v.