Phx. Trading, Inc. v. Loops LLC
| Decision Date | 04 October 2013 |
| Docket Number | No. 11–36053.,11–36053. |
| Citation | 732 F.3d 936 |
| Parties | PHOENIX TRADING, INC., a Washington corporation, dba Amercare Products Inc.; Wendy Hemming, an individual, Plaintiffs–Appellants, v. LOOPS LLC, a Delaware limited liability corporation; Loops Flexbrush LLC, a Delaware limited liability corporation; Steven L. Kayser, an individual, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HERE
Brooks F. Cooper, Portland, OR, for Plaintiffs–Appellants.
Nicholas L. Jenkins and Amber L. Pearce, Floyd, Pflueger & Ringer, P.S., Seattle, WA, for Defendants–Appellees.
Appeal from the United States District Court for the Western District of Washington, James L. Robart, District Judge, Presiding. D.C. No. 2:10–cv–00920–JLR.
Before: A. WALLACE TASHIMA and CONSUELO M. CALLAHAN, Circuit Judges, and RANER C. COLLINS, District Judge.**
This defamation action arises out of a business dispute between companies that design and distribute hygiene products for prisoners. One of those companies, Loops, designed a flexible toothbrush made for safe use in prisons and then bid on a contract with the New York City Department of Corrections (“NYC–DOC”). The other company, Amercare, ultimately won the contract using a similar toothbrush. In a series of letters to government officials and to the press, Loops then alleged that Amercare had engaged in procurement fraud because, among other things, Amercare had counterfeited Loops products. Based on those statements, Amercare filed this defamation action in Washington state court. The action was removed to the Western District of Washington, and the district court granted Loops' motion to strike the complaint under Washington's anti-SLAPP statute. This appeal followed. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
Plaintiffs–Appellants are Phoenix Trading, Inc., dba Amercare Products, Inc., and Wendy Hemming (together “Amercare”). Amercare imports and distributes toiletries and health products, and it often contracts with correctional institutions. Hemming is the majority shareholder and president of Amercare. Defendants–Appellees are Loops LLC, Loops Flexbrush LLC, and Steven Kayser (collectively, “Loops”). Loops designs and markets oral hygiene products for safe use in prisons. Kayser is the founder of Loops and the inventor of the Loops Flexbrush, a toothbrush with a flexible handle that cannot be altered into a shank.1 Loops applied for a patent on the Loops Flexbrush in August 2004, and the patent issued on February 26, 2008.
On July 30, 2010, Loops filed a patent infringement action in the Western District of Washington. In that action, Loops alleged that: Amercare fraudulently obtained a sample of the Loops Flexbrush; sent it to China for copying; and then—relying on pricing information obtained from Loops—underbid Loops for a contract with the NYC–DOC. Loops, LLC v. Phoenix Trading, Inc., No. 08–1064, 2010 WL 3041866, at *1–*3 (W.D.Wash.2010).
The district court granted partial summary judgment to Amercare. It held that Loops could not recover monetary damages because Amercare's last sale of the allegedly infringing toothbrush occurred no later than May 22, 2008, yet Loops had not adequately marked its product until September 12, 2008, and had not notified Amercare of its patent until June 13, 2008. Thus, the district court held that under 35 U.S.C. § 287, Loops could not recover monetary damages for its patent infringement claim. Id. at *4–*5, *11–*12. The district court also granted summary judgment on several related claims. Id. at *11–*12.2
On February 18, 2010, during the pendency of the patent litigation, Amercare filed a defamation action against Loops in Washington state court, and the action was later removed to the Western District of Washington.3Phoenix Trading, Inc. v. Kayser, No. 10–0920, 2011 WL 3158416, at *1–*2 (W.D.Wash.2011). The defamation claims target four sets of statements.
Loops—through either Kayser or Kayser's counsel—sent three letters to various New York City officials, all alleging that Amercare had altered Loops toothbrushes and passed them off as its own. All three letters were part of Loops' claim that Amercare won the contract by way of procurement fraud. The letters alleged that Amercare had filed off the Loops trademark from sample Loops toothbrushes, affixed the Amercare trademark, and presented the altered toothbrushes to the NYC–DOC in its bid. The first letter, sent on August 20, 2007, was addressed to Mayor Michael Bloomberg and several other New York City officials. The second letter, sent on August 22, 2007, was addressed to Mario Crescenzo, New York's Chief Contracting Officer. The third letter, sent on September 12, 2007, was addressed to New York's Office of the General Counsel.
On February 18, 2008, Kayser sent a letter to New York officials and several New York Times reporters, alleging that Amercare toothbrushes were “laden with lead and heavy metals” and had “excessive amounts of lead and heavy metals.” These allegations were based on an examination—conducted by Intertek (a testing laboratory) and commissioned by Loops—of the Amercare toothbrushes. The Intertek report had detected some levels of lead and other heavy metals, but the report concluded that the products easily complied with relevant regulations.
In certain communications, Loops accused Amercare of infringing one of its patents. These statements were made, with varying degrees of clarity, in: (1) the February 18, 2008, letter discussed above; (2) an April 21, 2008, letter to various New York City officials, which referenced toothbrushes that the NYC–DOC purchased in 2007; (3) a May 19, 2008, letter sent to the International Anticounterfeiting Coalition (“IAC”), the press, and various New York City officials; and (4) a July 29, 2008, letter to the press.
Loops also accused Amercare of “counterfeiting.” In most of the letters discussed above, Loops stated that Amercare had provided “counterfeit toothbrushes” to the NYC–DOC. Similar allegations were contained in a letter sent to the IAC, Harper's Bazaar Magazine, and the New York Sun.
The parties filed cross-motions for summary judgment, and Loops filed a special motion to strike under Washington's anti-SLAPP statute, Wash. Rev.Code § 4.24.525.4 The court first found that the anti-SLAPP motion was timely. Phoenix Trading, 2011 WL 3158416, at *6. The court then ruled that, under § 4.24.510, Loops was immune from civil liability for all statements made to government agencies or officials. Id. at *7.
Turning to the statements made to the media, the court concluded that the statements were made to a “public forum in connection with an issue of public concern” under § 4.24.525(2)(d). Id. As for the statements to the IAC, the court held that they were in furtherance of Loops' free speech rights and in connection with an issue of public concern. Id. at *8. Thus, with respect to the media and IAC statements, the burden shifted to Amercare to show a probability of success on the merits.
The court then concluded that Amercare failed to show a likelihood of overcoming the two-year statute of limitations for defamation claims. Id. at *9–*10. This deficiency applied to the statements regarding product alteration and counterfeiting. As for the remaining statements, the court held that Amercare's contract with a public agency placed it in the role of a public official; accordingly, Amercare had to show that Loops acted with malice. Id. at *11. In the district court's view, Amercare had failed to carry its burden of showing malice with respect to any of the four categories of statements. Id. at *11–*16. Accordingly, the court granted the anti-SLAPP motion and denied the summary judgment motions as moot. Id. at *16.
Washington's anti-SLAPP statute, like many others throughout the country, was designed quickly to dispose of and deter lawsuits that chill the exercise of speech and petition rights. See S.S.B. No. 6395, 61st Leg., Reg. Sess., 2010 Wash. Legis. Serv. Ch. 118, § 1. Under § 4.24.525(4)(a), “[a] party may bring a special motion to strike any claim that is based on an action involving public participation and petition.” 5 The anti-SLAPP analysis then proceeds in two steps. First, the movant must show by a preponderance of the evidence that the claim is “based on an action involving public participation and petition.” § 4.24.525(4)(b). If the moving party meets that burden, the responding party mush establish, by clear and convincing evidence, a likelihood of success on the merits. Id. If the responding party meets its burden, the motion must be denied. Id.
Amercare did not contest the first step in the district court, and on appeal it concedes that its claims involve public participation. See Phoenix Trading, 2011 WL 3158416, at *7–*8. Accordingly, after addressing the timeliness of the motion, we address only the second step of the anti-SLAPP analysis.
We review an anti-SLAPP ruling de novo.Vess v. Ciba–Geigy Corp., 317 F.3d 1097, 1102 (9th Cir.2003). There is little Washington caselaw on the relative burdens of proof under Washington's anti-SLAPP statute and, in such circumstances, we may look to the standards governing California's similarly structured anti-SLAPP statute. See Castello v. City of Seattle, No. C10–1457, 2010 WL 4857022, at *4 (W.D.Wash.2010) (). In...
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