Hawran v. Hixson

• Decision Date: 13 September 2012
• Docket Number: No. D059019.,D059019.
• Citation: 209 Cal.App.4th 256,147 Cal.Rptr.3d 88
• Court: California Court of Appeals Court of Appeals
• Parties: Paul W. HAWRAN, Plaintiff and Appellant, v. Harry HIXSON, Jr. et al., Defendants and Appellants.

209 Cal.App.4th 256

147 Cal.Rptr.3d 88

2012 Daily Journal D.A.R. 12,921

Paul W. HAWRAN, Plaintiff and Appellant,

v.Harry HIXSON, Jr. et al., Defendants and Appellants.

No. D059019.

Court of Appeal, Fourth District, Division 1, California.

Sept. 13, 2012.

Review Denied Dec. 19, 2012.

See 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 1025 et seq.

Law Offices of George Rikos and George D. Rikos for Plaintiff and Appellant.

Paul, Plevin, Sullivan & Connaughton, San Diego, and Richard A. Paul for Defendants and Appellants.

O'ROURKE, J.

Plaintiff and appellant Paul Hawran filed a lawsuit against defendants and appellants Sequenom, Inc. (Sequenom), and Sequenom directors Harry Hixson, Jr., Richard Lerner, and Ronald Lindsay, stemming from representations made in a widely disseminated press release concerning Sequenom's internal investigation into its handling of certain research and development test data and results, which issued on the same day that defendants filed a legally required disclosure of information to the United States Securities and Exchange Commission (SEC). The trial court granted in part defendants' special motion to strike Hawran's first amended complaint as a strategic lawsuit against public participation under Code of Civil Procedure section 425.16 (commonly known as the anti-SLAPP statute),¹ in which defendants unsuccessfully asserted, among other things, the press release was absolutely privileged by the official proceeding and fair reporting privileges ( Civ.Code, § 47, subds. (b), (d)). The court left standing Hawran's causes of action against all of the defendants for defamation, invasion of privacy, and unfair business practices under the Unfair Competition Law (UCL; Bus. & Prof.Code, § 17200), as well as Hawran's breach of contract cause of action against Sequenom.

Defendants appeal from the partial denial of their motion, arguing Hawran did not demonstrate a probability of prevailing on the merits of his claims. In part, they maintain the statements made within the press release are not defamatory, and in any event are absolutely or qualifiedly privileged. Hawran cross-appeals, contending the trial court should have denied defendants' motion in its entirety because all of his causes of action are exempt from the anti-SLAPP law by the commercial speech exemption of section 425.17, subdivision (c).

We hold Hawran did not meet his burden to show his causes of action fall within the commercial speech exemption, and thus they are subject to the anti-SLAPP law. However, we further hold the absolute and qualified privileges of Civil Code section 47 do not apply to defendants' press release, and that Hawran otherwise demonstrated a probability of prevailing on his causes of action for defamation, invasion of privacy, unfair business practices and breach of contract. Accordingly, we affirm the order.

FACTUAL AND PROCEDURAL BACKGROUND

Sequenom is a publicly traded diagnostic testing and genetics analysis company, whose common stock trades on the NASDAQ. Hawran was its chief financial officer from April 2007 to his resignation on September 25, 2009.

In the Spring of 2009, Sequenom publicly admitted that previously reported research and development results for a certain diagnostic test for fetal Down Syndrome (at times, Trisomy 21 or “T21”) were mishandled by employees on the Sequenom science team. Thereafter, Sequenom's stock price declined, derivative and securities fraud lawsuits were filed, and Sequenom commenced its own internal investigation, led by a special litigation committee (SLC). In April 2009, Sequenom issued a press release concerning the delay in the launch of the T21 test due to the mishandling, and a day later filed a Form 8–K ² reporting to the SEC Sequenom's formation of the SLC and other information. In June 2009, Sequenom was alerted that the SEC had commenced an investigation into matters related to the T21 issue.

In September 2009, defendants made Hawran an offer that if he resigned as chief financial officer, he would not be associated with the mishandling and would be separated from others involved in the test data mishandling. In reliance on those representations, Hawran resigned on September 25, 2009.

On September 28, 2009, Sequenom filed another Form 8–K and issued a press release (hereafter the September press release or press release) announcing the completion of the SLC's independent investigation. In part, the September press release stated Sequenom had failed to put in place adequate protocols and control for the conduct of studies related to the program, but that the board of directors had begun to implement various remedial measures. The press release continued: “The company has terminated the employmentof its president and chief executive officer, Harry Stylli, Ph.D., and its senior vice president of research and development, Elizabeth Dragon, Ph.D., effective immediately. In connection with the termination of Dr. Stylli's employment, the company's board of directors has requested that he resign as a director, which he is obligated to do under the terms of his employment agreement. The company has obtained the resignation of its chief financial officer, Paul Hawran, and one other officer. While each of these officers and employees has denied wrongdoing, the special committee's investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company's board of directors in the personnel involved.” ³ (Italics omitted.)

In August 2010, Hawran sued Hixson, Lerner and Lindsay and several days later filed a first amended complaint adding Sequenom as a defendant. The first amended complaint sets forth causes of action for defamation, invasion of privacy/false light, negligent and intentional interference with prospective economic advantage, violation of the UCL, breach of contract, and negligent and intentional misrepresentation. Hawran alleged that in 2008 and 2009, he raised objections about a board member compensation program proposed by Hixson that in his perception constituted inappropriate self-dealing, and also raised issues concerning the competence and tax reporting of certain members of Sequenom's audit committee. Hawran alleged Hixson criticized him for his efforts to ensure proper tax reporting and hold board members to their fiduciary obligations to shareholders. According to the complaint, Sequenom used the T21 test mishandling to constructively fire him for his prior complaints. Hawran alleged his personal and professional reputation was irreparably damaged, and his ability to earn a living impacted, by the September press release, which falsely stated he had denied any wrongdoing; blamed him for the data mishandling; and directly and implicitly called into question his ethics, management capabilities, and performance as Sequenom's CFO. He alleged the press release defamed him and painted him in a false light, and substantially interfered with his prospective employment opportunities; that despite his diligence, he had been unable to find alternative employment due to defendants' interference.

Defendants moved to strike Hawran's first amended complaint under section 425.16. They argued section 425.16 applied to each cause of action because the September press release was issued in connection with an SEC investigation and also addressed a matter of public concern, rendering it a protected writing made “in connection with an issue under consideration or review by ... [an] official proceeding authorized by law” under section 425.16, subdivision (e)(2). They also argued the press release qualified for protection under section 425.16, subdivisions (e)(3) and (e)(4) as a “written ... statement or writing made in a place open to the public or a public forum in connection with an issue of public interest” or “other conduct in furtherance of the exercise of the constitutional right of petition or ... free speech in connection with a public issue or an issue of public interest.” Defendants maintained Hawran could not demonstrate a probability of prevailing on any of his causes of action because he could not prove the statements were made or, if made, directed at him; the statement that Hawran “denied wrongdoing” was not defamatory; and the statement that Sequenom lost confidence or had serious concerns constituted opinion and Hawran could not prove the statement was false. Defendants further argued the press release was absolutely privileged under Civil Code section 47, subdivision (b)(3) as made in an official proceeding, and under Civil Code section 47, subdivision (d) as a fair and true communication to the press of an official public proceeding. Finally, defendants argued Hawran could not prove liability against any of the individual defendants because issuance of the press release was done by Sequenom after board approval, not by the individuals.

In support of the motion, defendants presented the declarations of two Sequenom executives and one of its attorneys of record. In part, the executives addressed the Form 8–K disclosures, the various lawsuits and government investigations commenced against Sequenom, and the press release distribution process.

In opposition, Hawran argued the September press release was excluded from protection under the commercial speech exemption of section 425.17, subdivision (c). He further argued the press release did not qualify as an act in furtherance of defendants' rights of free speech. In particular, he asserted it did not mention the SEC investigation and contained defamatory content not included in Sequenom's Form 8–K filing; its dissemination to the public was made via one-way communications that did not constitute statements made in a public forum; and the press release was an effort to further Sequenom's private commercial and economic aims of reassuring its customers and investors that it had corrected its problems. Hawran argued it was probable he...