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Torchstar Corporation sells LED products through Amazon
So, to back up for a second, Torchstar sued Hyatech, and Hyatech countersued Torchstar. Nothing unusual to see here, welcome to commercial litigation. But now it gets interesting.
Instead of fighting Hyatech’s claims on the merits, Torchstar instead filed a special motion to strike under Washington’s Uniform Public Expression Protection Act (UPEPA), which is Washington’s Anti-SLAPP law. Torchstar argued that its report to Amazon and the launching of litigation against Hyatech was privileged litigation communications, that Hyatech’s claim was barred for technical reasons (discussed below), and that Hyatech ultimately cannot establish its claim for tortious interference against Torchstar. This will all be examined more closely when we dive into the court’s opinion, as found in Touchstar Corp., Hyatech, Inc., 2023 WL 137762 (E.D.Wa., Jan. 9, 2023), which you can read for yourself here.
A UPEPA special motion basically provides a way for a litigant in some circumstances to test adverse claims at a very early stage in the proceeding, where the claims against the litigant are based on communications arising from the litigant’s exercise of their free speech and similar rights on a matter of public concern. Exempted from the scope of UPEPA, however, is so-called “commercial speech”, which is speech arising from the sale or leasing of goods or services.
Torchstar’s special motion was largely based on a technical ground, being that the so-called Noerr-Pennington doctrine creates an immunity for activity which petitions the government for a redress of grievances. In other words, if a litigant petitions the government for something or other, then under the Noerr-Pennington doctrine the litigant cannot be sued as a result of that petitioning activity.
That is the general rule of the doctrine. However, as I have very frequently pointed out in my articles, the thing about general rules is that they are generally inapplicable. For our purposes here, one of the exceptions to the Noerr-Pennington doctrine is that it doesn’t apply to so-called “sham petitions”, which are defined as those which are objectively baseless and which attempt to misuse the litigation process to interfere with a competitor’s business relationships. A similar exception is that the doctrine does not apply to communications to a third party that does not threaten litigation against that third party.
The Court found that Torchstar could not assert immunity under the Noerr-Pennington doctrine for a number of reasons. First, Torchstar did not threaten Amazon with any litigation. Second, since Amazon is a private party, Torchstar did not have any constitutional right to petition Amazon for any redress of grievances. However, the Court left open to be resolved later the issue of whether Torchstar’s claims against Hyatech were in the nature of sham litigation. The bottom line was that Torchstar could not prove that Hyatech’s claims could be resolved as a matter of law, and thus Torchstar’s UPEPA special motion failed.
While this case ultimately turned ― at least in the opinion of the court ― on the vagaries of the Noerr-Pennington doctrine, it is worth noting that there were substantial alternative grounds for the court to have denied Torchstar’s motion to dismiss, not the least of which being UPEPA’s commercial speech exception. Which is to say that the purpose of UPEPA is to protect a much larger sphere of constitutional rights, most predominantly those of free speech and the right to petition, but is not meant to encompass what amounts to a purely commercial dispute between two competing sellers of goods.
Another item to consider is that a UPEPA special motion is very much in the nature of a motion for summary judgment, which is something that usually occurs at the end of the case, after all discovery has been completed, and tests whether a party has enough evidence that a jury may reasonably reach a verdict in its favor. What the UPEPA, and other Anti-SLAPP laws, effective do is to move the summary judgment from the near conclusion of the litigation to the litigation’s outset, so that cases that which would have been thrown out anyway are thrown out more quickly. The reason for this moving of the fourth quarter to the first quarter is to prevent litigants in the area of protected activity to be free of the costs and expenses of the litigation in the meantime. This prevents abusive litigants from misusing the legal system to harass parties with the litigation itself to the detriment of their protected conduct.
The bottom line here is that if a case will or will not ultimately survive a summary judgment motion, then similarly it will or will not survive a UPEPA special motion. But because the party against whom the UPEPA special motion is brought will not have the opportunity for extended litigation, it effectively means that parties who litigate within the area of protected activity must get all their ducks in a row at the very outset of the case, and not wait for their case to slowly assemble itself in the ordinary course of the litigation. Thus, here the court found that Hyatech had presented sufficient evidence to make it to trial on the sham litigation issue as if it were being tested on a motion for summary judgment, and thus the Torchstar’s UPEPA special motion failed just as if Torchstar’s motion for summary judgment would fail.
Note here as well that Torchstar’s UPEPA special motion arose in relation to Hyatech’s counterclaim. The UPEPA does not limit the availability of its special motions only to those who commence litigation, but such special motions can be asserted against every claim, counterclaim, cross-claim, third-party claim, etc., however designated or in whatever posture it arises, so long as the motion is timely.
Finally, and to change the direction of this discussion entirely, it is worth nothing that although Torchstar’s UPEPA special motion ultimately failed, the bringing of the motion itself probably brought a litigation advantage to Torchstar in that it made Hyatech essentially show its entire case in advance of the discovery that will likely next occur between these parties. That is no minor advantage, and will likely cut down Torchstar’s discovery needs quite substantially. The lesson here for litigators is that if a UPEPA special motion is at least colorable and not asserted for purposes of delay, that motion should usually be brought. Similarly, Torchstar now has the opportunity to bring an immediate appeal of the denial of its UPEPA special motion, which would not ordinarily be available to ordinary motions to dismiss brought at the outset of a case. Litigators should take note of that potential advantage as well.