EMPLOYER CALLING EX-EMPLOYEES “CRIMINALS” AND “LIARS” MUST DEFEND DEFAMATION LAWSUIT
California has a proud history of supporting free speech rights, even unpopular and arguably defamatory speech, on the grounds that people should not be punished for speaking on topics that are in the public interest or relate to ongoing litigation. In 1992, California became the first state to enact an anti-SLAPP statute (the acronym SLAPP stands for “Strategic Lawsuit Against Public Participation”). California’s anti-SLAPP laws provide a mechanism for a defendant to file a special motion to strike a complaint where the allegations arise from the defendant’s protected speech. The issue of whether certain speech is protected under the anti-SLAPP statute or rises to the level of defamation, often comes up in the context of employment disputes, where one or both parties make serious accusations against the other. Drawing the line between what speech is and is not protected by the anti-SLAPP statute can become especially complicated. In Lawler v. Guillon Enterprises, __ Cal.App.5th __ (2022), the California Court of Appeal issued an unpublished decision further clarifying when an employer has crossed that line.
1. Jury Verdict And Judgment Against The Employer
The three plaintiffs in Lawler were former employees of Crush Steakhouse in Ukiah, California (“Crush”). After leaving Crush, they filed lawsuits against the restaurant and its parent company for gender and pregnancy discrimination, sexual harassment, and various wage and hour claims. In March of 2020, the court entered a judgment in favor of the plaintiffs for $305,000 against Crush, $125,000 against a Crush manager who was found to have sexually harassed two of the plaintiffs, and $135,000 in attorney’s fees and costs.
2. Letter Defaming The Plaintiffs Sent To Crush Employees
After the court finalized the judgment one of Crush’s co-owners wrote a letter, which was later distributed to 80 Crush employees, stating that due to the judgment, the restaurant would be permanently closing. The co-owner wrote that the three plaintiffs “conspired” to sue Crush and were awarded by the jury “for lying on the stand” and doing a “great acting job.” The co-owner then referred to the plaintiffs’ attorney as being “crooked” whose “only accomplishment” was to “teach witness[es] how to lie in court.” The letter ended by referring to the plaintiffs as “criminals.”
3. The Plaintiffs Defamation Lawsuit And The Trial Court’s Denial Of The Anti-SLAPP Motion
A few months after the restaurant’s co-owner distributed the letter, and after the restaurant filed for bankruptcy, the three plaintiffs filed a defamation lawsuit against various entities owned and controlled by the author of the letter. In response to the defamation lawsuit, the defendants filed an anti-SLAPP motion. Defendants argued that the letter contained protected speech under two separate provisions: first that it constitutes “litigation activity” (Cal. Code of Civil Procedure Section 425.16(e)(2)); and second that it was written in connection with a “public issue” (Cal. Code of Civil Procedure Section 425.16(e)(3) and (e)(4)). Defendants argued that the “public issue” involved the question of whether unlawful activities occurred at Crush and whether the restaurant would close as a result of the lawsuit.
The trial court denied the defendants’ anti-SLAPP motion. The court found that the challenged statements did not fall under either section. First, the court concluded that the letter was published to Crush employees only, not to the general public, and that it concerned “details of Plaintiffs’ experiences” that were not of public significance. The court noted that while the circumstances of the restaurant’s closing may have been a legitimate public concern, that did not insulate the allegedly defamatory statements. And second, the court concluded that the letter was not written in connection with a judicial proceeding because there was no case involving Crush pending at the time the letter was published. Moreover, if the letter was intended to inform employees about the closure and pending bankruptcy, referring to the plaintiffs as liars and criminals, was unnecessary in the court’s view.
The defendants appealed the order allowing the defamation claims to proceed past the pleading stage. The Court of Appeal affirmed the order denying the defendants’ anti-SLAPP motion.
4. The California Supreme Court’s FilmOn.com Test
The Court of Appeal took issue with the defendants’ characterization of the letter as being made to address concerns in the “public interest.” The court reasoned that it is not sufficient that the challenged speech in some manner relates to the public interest. Rather, to prevail on an anti-SLAPP motion, defendants must show that the statements “contribute to” the public debate about those issues. In reaching this conclusion, the court relied heavily on the California Supreme Court’s decision in FilmOn.com Inc. v. DoubleVerify Inc., 7 Cal.5th 133 (2019).
In FilmOn.com, the defendant, DoubleVerify, provided clients with paid confidential reports including information from websites that its clients may want to advertise on. These confidential client reports note if, according to DoubleVerify, a website contains “Adult Content” or “Copyright Infringement.” FilmOn.com filed suit claiming that these labels discouraged potential advertisers. The defendant responded to the lawsuit with an anti-SLAPP motion, which the trial court granted, and the appellate court affirmed.
The California Supreme Court reversed the appellate court’s ruling, finding that the confidential client reports were not in the public interest as contemplated by the statute. According to the Supreme Court, when analyzing whether a communication is in the “public interest” courts must “not only [analyze] its content, but also  its location, its audience, and its timing.” The Court recognized that while the “Adult Content” label on a website is important, in order to be protected speech, the statement must actually contribute to public debate. And because DoubleVerify’s confidential reports were solely for business purposes, they were “too remotely connected to the public conversation [regarding adult content and copyright infringement] to merit protection under the [anti-SLAPP law’s] catchall provision.” FilmOn.com, supra, at 140.
The Court in FilmOn.com went on to establish a two-party test to determine whether alleged wrongful conduct by the defendant falls under the anti-SLAPP’s statutes “catchall provision.” First, as to the challenged speech, trial courts must determine whether the statement implicates a public issue or is of an issue of public interest. This may include any of the following categories that constitute a “public interest”: (1) a person or entity in the public eye; (2) conduct that could directly affect a large number of people beyond the direct participants; or (3) a topic of widespread public interest. And second, assuming the alleged conduct is sufficiently in the public interest, in determining whether to apply anti-SLAPP protections, a court must then consider the “functional relationship” between the challenged speech and the public conversation about the matter. Id. at 149-150. The “functional relationship” is determined by considering context (including the identity of the speaker), the audience, and the apparent purpose of the speech. Id. at 142-144, 152.
5. The Co-Owner’s Letter Does Not Constitute Protected Speech
Turning back to the letter authored by Crush’s co-owner, the court in Lawler applied the FilmOn.com standard and agreed with the trial court that the author of the letter, and his companies, could be sued for defamation by the three plaintiffs. First, the court questioned whether the challenged statements in the letter actually implicated a public issue. In addition to the fact that the three plaintiffs were not public figures, whether or not they were liars or criminals (the allegations made in the letter) was not a topic of widespread public interest. Second, the co-owner published the letter to the restaurant’s employees, not to the general public. Third, the audience who received the letter (i.e., other employees) had no role or authority to weigh in on the restaurant’s closing—the purported public interest according to the defendants—as they had no ownership interest in the restaurant. And finally, despite calling the plaintiffs “criminals” and accusing them of perjury, the court noted that nothing in the challenged letter suggested that the author intended to involve the criminal justice system.
Turning to the defendants’ argument that the letter was protected because it was made in the context of ongoing legal enforcement proceeding and review by a “judicial body,” the court stated that in order to fall under the litigation exception, the “challenged speech must be aimed at achieving the objects of the litigation.” Lawler at 16. Here, the statements in the letter were not directed to anyone with an interest in the “enforcement proceedings” but instead to the restaurant’s employees.
The Lawler case offers an important reminder to employers who want to publicly call out an ex-employee/plaintiff for bringing what the employer considers to be baseless claims against the employer. While the anti-SLAPP statute certainly allows an employer to make a variety of statements, including statements which in other contexts may be considered defamatory, the line on what is and is not acceptable is not always clear. For that reason, before hitting “send” on an email which could end before a court, it is important to consult with an attorney to help navigate the line between protected speech and defamation.To read more articles like this one, subscribe to the ALERT Newsletter today!
About The Author
Adam R. Rosenthal is a Partner in Sheppard Mullin’s Labor and Employment Practice Group in the firm’s San Diego (Del Mar) and Los Angeles offices. Mr. Rosenthal represents a broad spectrum of employers in all areas of employment law before federal and state courts, the American Arbitration Association and JAMS. He has significant trial and arbitration experience in single plaintiff and class action cases involving wage and hour disputes such as allegations of missed meal and rest breaks, unpaid overtime, off-the-clock work and time shaving, wrongful termination, sexual harassment and disability discrimination, defamation, misclassification of manager “exempt” employees, and non-compete agreements and trade secrets.
Adam frequently lectures on employment law issues to in-house legal departments, trade associations and business and HR groups. He has written a number of articles and is also the co-author of the Employer's Guide to COVID-19 and Emerging Workplace Issues.
Mr. Rosenthal represents national and international clients in retail, transportation, high-tech, manufacturing, healthcare, biotech, financial services, food services and non-profit organizations. He received his law degree from the University of California, Davis in 2006 and his undergraduate degree from the University of California, Los Angeles, cum laude.