California Supreme Court Holds That A Withdrawing Plaintiff Does Not Have To Pay Fees If An Anti-SLAPP Motion Has Not Yet Been Filed
October, 2006
In S.B. Beach Properties v. Richard A. Berti, 2006 DJDAR 9913, the California Supreme Court recently held that defendants who do not file an anti-SLAPP motion before plaintiff’s voluntary dismissal may not recover attorney fees and costs pursuant to California Code of Civil Procedure § 425.16(c).
Procedural Background
The plaintiff, a real estate development company, sued three limited partners of the company for breach of fiduciary duty, accusing them of trying to thwart the company’s efforts to develop property in Santa Barbara’s main downtown shopping area on State Street. The defendants claimed that the lawsuit was filed in retaliation for their continued demands for audits of the company’s records.
Within three weeks after the lawsuit was filed, the defendants notified the court that they were preparing to file an anti-SLAPP motion. A week later, the plaintiffs voluntarily dismissed their entire complaint with prejudice. The next day, defendants tried to file an anti-SLAPP motion, including a notice of a request for attorneys fees and costs. The court clerk refused to calendar a hearing because the plaintiffs already dismissed the action. The defendants then filed a motion to recover attorney fees and costs under the anti-SLAPP statute and Code of Civil Procedure §1033.5(a)(10). The court denied the motion on the grounds that it could not award fees given that the case was dismissed before the motion was filed. The court stated that awarding fees “would inevitably open the door to judicial intervention, after
dismissal,” in virtually any case that “might possibly be related to the interests sought to be protected.”
The Court of Appeal reversed, relying on cases holding that a dismissal of the complaint after the anti-SLAPP motion is filed, but prior to a hearing on the motion, does not deprive the court of jurisdiction to award fees and costs under the anti-SLAPP statute. The Court of Appeal concluded that the “purpose of the anti-SLAPP statute will not be achieved if an offending plaintiff can avoid sanctions simply by dismissing his complaint before the defendant files his motion.”
Discussion & Analysis
Code of Civil Procedure §425.16(b)(1) provides that
A cause of action against a person arising from any act of that person in furtherance of the person’s 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 possibility that the plaintiff will prevail on the claim.
Section 425.16(c) further provides that “a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs.”
The Supreme Court reasoned that once the plaintiffs dismissed the action, no lawsuit existed for the defendants to move against pursuant to Section 425.16(c) and thus, they did not “prevail” on the motion as required by the express language of the statute. Additionally, the Court rejected the defendants’ reliance on the general rule that a voluntary dismissal does not deprive the trial court of jurisdiction over collateral statutory rights, including the right to statutory costs and fees, because the defendants’ request was based on a claimed entitlement arising from their success on a motion they did not file.
Further, the Court concluded that the holding would provide the plaintiff with the freedom to reconsider the wisdom of their actions without penalty before defendants have incurred clearly identifiable and recoverable legal fees. At the same time, defendants are expeditiously relieved of the burden a SLAPP suit imposes, because they must generally file the anti-SLAPP motion within 60 days of service of the complaint. Lastly, according to the Court, the holding has the added benefit of discouraging prolonged litigation solely over issues of fees and costs.
Learning Point:
Whether the Court’s bright-line rule will encourage people who might have been deterred from filing meritless suits to file those suits, only to withdraw them before an anti-SLAPP motion is filed remains an open question and one that may not be capable of objective measurement. Nevertheless, the ruling represents a significant financial burden on SLAPP defendants. The defendant will incur legal fees and expenses in preparing the anti-SLAPP motion, before the voluntary dismissal of the action. Within the insurance context, given that the motion must be filed at an early procedural juncture, the insured bears the burden of these costs as they will likely fall within deductible amounts.
We will continue to update our readers as new developments occur in anti-SLAPP litigation.
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