Duracraft Corp. v. Holmes Products Corp.

• Decision Date: 25 March 1998
• Citation: 427 Mass. 156,691 N.E.2d 935
• Parties: , 13 IER Cases 1479 DURACRAFT CORPORATION v. HOLMES PRODUCTS CORPORATION & another. 1 Supreme Judicial Court of Massachusetts, Suffolk
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 935

691 N.E.2d 935

427 Mass. 156, 13 IER Cases 1479

DURACRAFT CORPORATION v. HOLMES PRODUCTS CORPORATION & another. ¹

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Dec. 8, 1997.

Decided March 25, 1998.

Dustin F. Hecker, Boston, for Holmes Products Corporation.

Richard J. Yurko, Boston (Evan M. Fray-Witzer, with him), for Francis E. Marino.

Edward J. Dailey, Boston (Lee Carl Bromberg, with him), for Duracraft Corporation.

Scott Harshbarger, Attorney General, Dorothy Anderson, Edward J. DeAngelo and William J. Duensing, Assistant Attorneys General, for amicus curiae Commonwealth.

Alan Garber, Clair A. Carlson and Paul D. Boynton, Boston, for amicus curiae, Office One, Inc.

Before WILKINS, C.J., and ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL and IRELAND, JJ.

MARSHALL, Justice.

We are asked to determine whether the defendants' special motions to dismiss pursuant to G.L. c. 231, § 59H, commonly referred to as the anti-SLAPP statute, are applicable to the plaintiff's claim that the defendant, Francis E. Marino, breached a confidentiality agreement with it, and other related claims, and if so, whether the statutory procedure for early dismissal of such claims is constitutional. We conclude that the Legislature did not intend the anti-SLAPP statute to apply to claims such as those in this case, a result also reached by the Appeals Court in a thoughtful opinion. Duracraft Corp. v. Holmes Prods. Corp., 42 Mass.App.Ct. 572, 678 N.E.2d 1196 (1997). We affirm the judge's interlocutory order denying the defendants' special motions to dismiss the complaint.

1. We summarize the undisputed background facts to the controversy. The plaintiff, Duracraft Corporation (Duracraft), and the defendant, Holmes Products Corporation (Holmes), are direct competitors supplying the market for consumer home appliances. The two companies also are adversaries in adjudicatory proceedings before the Trademark Trial and Appeal Board (TTAB). ² From 1987to mid-1990, Marino was employed as a senior executive for Holmes. He subsequently was employed by Duracraft from August, 1990, to August, 1994, and was then again employed by Holmes in December, 1995.

On August 6, 1990, shortly after he was hired by Duracraft, Marino executed a "Nondisclosure and Non-Competition Agreement" with Duracraft. The agreement bound Marino to hold confidential information concerning Duracraft's products and processes, except "upon the lawful demand of any governmental agency (including court process)." The agreement further provided that, prior to Marino's making any disclosure in the event of such a demand, "Duracraft shall have the opportunity to review and comment upon the Confidential Information requested and may participate with [Marino] in discussing with such agency concerning the scope and content of the requested Confidential Information." While at Duracraft, Marino was responsible for intellectual property matters, including litigation and applications for patents and trademarks. He served as Duracraft's liaison to counsel and as Duracraft's designated witness in the TTAB proceedings against Holmes.

In December, 1995, more than one year after he had left Duracraft, Marino was rehired by Holmes. ³ On November 30, 1995, shortly before Marino rejoined Holmes, Holmes noticed Marino's deposition in the TTAB proceeding. Duracraft and Holmes offer divergent interpretations of discussions held between Marino and Holmes concerning Marino's deposition, Marino's reemployment with Holmes, any connection between these two events, and whether Duracraft had contemporaneous knowledge of Holmes's rehiring of Marino. After several postponements, Marino's deposition took place on February 7, 1996, by which time Marino was an employee of Holmes. Counsel for Duracraft was present at Marino's deposition and, in light of Marino's nondisclosure agreement with Duracraft, voiced a number of objections. ⁴

On March 21, 1996, Duracraft filed the complaint that led to this appeal, alleging that Marino had breached his nondisclosure contract with Duracraft and his fiduciary duties to it by his testimony at the deposition and in his discussions with Holmes prior to the deposition. ⁵ Duracraft alleged that Marino's disclosures also violated its attorney-client and work-product privileges. Duracraft secured an ex parte temporary restraining order preventing Holmes from using Marino's deposition testimony in the underlying trademark proceeding. The restraining order was extended pending the defendants' filing, on April 17, 1996, of special motions to dismiss Duracraft's complaint, pursuant to G.L. c. 231, § 59H. After a hearing on May 9, 1996, the judge denied both Duracraft's request for a preliminary injunction and the defendants' special motions to dismiss, from which interlocutory order the defendants filed leave to appeal. On May 7, 1997, the Appeals Court affirmed the denial of the special motions to dismiss. 42 Mass.App.Ct. 572, 583, 678 N.E.2d 1196 (1997). We granted the defendants' application for further appellate review.

2. General Laws c. 231, § 59H, inserted by St.1994, c. 283, § 1, set out in relevant part in the margin, ⁶ is popularly known as the "anti-SLAPP" law. ⁷ It was enacted on December 29, 1994, and this case presents the first occasion in which we have considered the statute. Marino and Holmes contend that the deposition testimony given by Marino in the TTAB proceeding is "petitioning activity" protected under the statute, and that any claim by Duracraft based on the giving of that testimony is barred by the statute and must be dismissed. Duracraft counters that the anti-SLAPP statute was not intended to authorize dismissal of an otherwise valid claim, and that, if the statute was to be so construed, then it would violate Duracraft's own constitutionally protected right to petition a court for redress of its grievance. ⁸

3. In the preamble to 1994 House Doc. No. 1520, the Legislature recognized that "full participation by persons and organizations and robust discussion of issues before legislative, judicial, and administrative bodies and in other public fora are essential to the democratic process, [and] that there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." In order that such "disfavored" litigation could "be resolved quickly with minimum cost to citizens who have participated in matters of public concern," the act amended G.L. c. 231, inserting § 59H, to provide a procedural remedy for early dismissal of the disfavored SLAPP suits.

One lawsuit appears to have been an impetus for introduction of the anti-SLAPP legislation. ⁹ In 1991, fifteen residents of Rehoboth, concerned with the protection of wetlands draining into the Palmer River, signed a petition opposing a permit for construction of six single-family residences. The developer sued, and the Rehoboth petitioners said they had incurred more than $30,000 in legal fees before the suit was dismissed nine months later. ¹⁰

The typical mischief that the legislation intended to remedy was lawsuits directed at individual citizens of modest means for speaking publicly against development projects. SLAPP suits have been characterized as "generally meritless suits brought by large private interests to deter common citizens from exercising their political or legal rights or to punish them for doing so." Wilcox v. Superior Court, 27 Cal.App.4th 809, 816-817, 33 Cal.Rptr.2d 446 (1994), citing Pring, SLAPPs: Strategic Lawsuits Against Public Participation, 7 Pace Envtl. L.Rev. 3, 5-6, 9 (1989). The objective of SLAPP suits is not to win them, but to use litigation to intimidate opponents' exercise of rights of petitioning and speech. Id. SLAPP suits target people for "reporting violations of law, writing to government officials, attending public hearings, testifying before government bodies, circulating petitions for signature, lobbying for legislation, campaigning in initiative or referendum elections, filing agency protests or appeals, being parties in law-reform lawsuits, and engaging in peaceful boycotts and demonstrations." Pring, supra at 5.

The Justices of the Supreme Court of New Hampshire issued an advisory opinion on proposed anti-SLAPP legislation and observed that "[i]dentifying SLAPPs, which typically appear as ordinary lawsuits, presents difficulties." Opinion of the Justices, 138 N.H. 445, 449, 641 A.2d 1012 (1994). The New Hampshire Justices then recited objective identifying features: the implication of a defendant's constitutional speech and petitioning rights; the filing of limited types of legal claims; and certain types of persons or organizations who file SLAPP suits. Id. Professors Pring and Canan set out four SLAPP suit criteria: (1) a civil complaint or counterclaim (for monetary damages or injunction); (2) filed against nongovernmental individuals or groups; (3) because of their communications to a government body, official, or the electorate; and (4) on an issue of some public interest or concern. Pring, supra at 8.

The legislative history in Massachusetts demonstrates that in response to the problem of SLAPP suits the Legislature intended to enact very broad protection for petitioning activities. The Governor, in letters explaining his vetoes of anti-SLAPP bills passed in two successive legislative terms, suggested that the bills, as written, applied "to a broad group of potential claims, sweeping in cases that are far beyond the types of lawsuits which the bill's proponents wish to control." See 1994 House Doc. No. 5604. The Governor's letter regarding 1994 House Doc. No. 3033, an earlier version of the bill, recognized that the statute shifted the normal burden of proof on a motion to dismiss, but went further by erecting "a nearly insurmountable barrier to a suit, thereby transforming the law and creating an absolute...