Travelers Casualty Insurance Co. of America v. Hirsh

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TRAVELERS CASUALTY No. 14-55539

INSURANCE COMPANY OF

AMERICA, D.C. No.

Plaintiff-Appellee, 2:13-cv-02504-GW-JC

v.

OPINION

ROBERT W. HIRSH,

Defendant-Appellant,

and

VISEMER DE GELT, LLC,

Defendant.

Appeal from the United States District Court

for the Central District of California

George H. Wu, District Judge, Presiding

Argued and Submitted June 8, 2016

Pasadena, California

Filed August 3, 2016

Before: Alex Kozinski, Ronald M. Gould,

and Andrew D. Hurwitz, Circuit Judges.

2 TRAVELERS CAS. INS. CO. V. HIRSH

Per Curiam Opinion;

Concurrence by Judge Kozinski;

Concurrence by Judge Gould

SUMMARY*

California Anti-SLAPP Statute

The panel affirmed the district court’s denial of Robert

Hirsh’s special motion under the California anti-strategic

lawsuit against public participation (“anti-SLAPP”) statute,

Cal. Civ. Proc. Code § 425.16, to strike the second amended

complaint filed by Travelers Casualty Insurance Company of

America.

Hirsh alleged that Travelers’ claims arose out of his

representation of Travelers’ insured, Visemer De Gelt, as

Cumis counsel; and his activity was therefore protected under

the anti-SLAPP statute.

The panel held that because Travelers’ causes of action

for declaratory judgment, unjust enrichment, breach of Cal.

Civ. Code § 2860(d), and concealment were not based on an

act in furtherance of Hirsh’s right of petition or free speech,

they did not “arise from” protected activity. The panel also

held that Travelers established a probability of prevailing on

the merits sufficient to survive a motion to strike. The panel

further held that California’s litigation privilege, Cal. Civ.

Code § 47(b), did not bar the suit because the causes of action

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

TRAVELERS CAS. INS. CO. V. HIRSH 3

arose from Hirsh’s post-settlement conduct, not his

communications with De Gelt in settling a prior lawsuit.

Finally, the panel held that it did not have jurisdiction to

review Hirsh’s challenge to the district court’s striking count

two, alleging breach of a defense handling agreement,

because the denial was without prejudice, and there was no

final order as to the claim.

Judge Kozinski, joined by Judge Gould, concurred to

emphasize that the existing caselaw is wrong, and he would

urge the court to follow the D.C. Circuit’s holding in Abbas

v. Foreign Policy Grp., LLC, 783 F.3d 1328, 1333–37 (D.C.

Cir. 2015), that anti-SLAPP motions do not belong in federal

court because they directly conflict with the Federal Rules of

Civil Procedure. At the very least, Judge Kozinski would

urge the court to reconsider the holding in Batzel v. Smith,

333 F.3d 1018, 1025–26 (9th Cir. 2003), which allows

defendants who lose anti-SLAPP motions to bring an

immediate interlocutory appeal.

Concurring, Judge Gould joined the per curiam opinion,

concurred in Judge Kozinski’s separate concurrence, and

receded from his previous position joining in part the Batzel

precedent.

4 TRAVELERS CAS. INS. CO. V. HIRSH

COUNSEL

Brandon Scott Reif (argued) and Marc S. Ehrlich, Winget

Spadafora & Schwartzberg, LLP, Los Angeles, California, for

Defendant-Appellant.

Andrew R. McCloskey (argued), McCloskey, Waring &

Waisman LLP, San Diego, California; Heather L.

McCloskey, McCloskey, Waring & Waisman LLP, El

Segundo, California; for Plaintiff-Appellee.

OPINION

PER CURIAM:

In this diversity suit, Robert W. Hirsh appeals the denial

of his special motion under the California anti-strategic

lawsuit against public participation (“anti-SLAPP”) statute,

Cal. Civ. Proc. Code § 425.16, to strike the second amended

complaint filed by Travelers Casualty Insurance Company of

America (“Travelers”). We affirm.

1. Notwithstanding that the denial of the anti-SLAPP

motion did not give rise to what traditionally would be

deemed a final judgment (one resolving all claims in a suit),

our precedents establish our jurisdiction to consider this

appeal. “Because California law recognizes the protection of

the anti-SLAPP statute as a substantive immunity from suit,

this Court, sitting in diversity, will do so as well.” Batzel v.

Smith, 333 F.3d 1018, 1025–26 (9th Cir. 2003). We therefore

have held that the denial of an anti-SLAPP motion is “an

appealable final decision within the meaning of 28 U.S.C.

§ 1291 notwithstanding the absence of a final judgment.” Id.

TRAVELERS CAS. INS. CO. V. HIRSH 5

at 1026; see also DC Comics v. Pac. Pictures Corp., 706 F.3d

1009, 1015–16 (9th Cir. 2013) (affirming appealability of

denial of California anti-SLAPP motion after Mohawk Indus.,

Inc. v. Carpenter, 558 U.S. 100 (2009)). We therefore turn to

the merits of this appeal.

2. Hirsh maintains that Travelers’ claims arise out of his

representation of Travelers’ insured, Visemer De Gelt

(“VDG”), as Cumis counsel. See San Diego Navy Fed. Credit

Union v. Cumis Ins. Soc’y, Inc., 208 Cal. Rptr. 494, 496 (Ct.

App. 1984); see also Cal. Civ. Code § 2860 (implementing

Cumis rule). He contends that his activity was therefore

protected under the anti-SLAPP statute. See Thayer v.

Kabateck Brown Kellner LLP, 143 Cal. Rptr. 3d 17, 27 (Ct.

App. 2012) (“Numerous cases have held that the SLAPP

statute protects lawyers sued for litigation-related speech and

activity.”). However, Travelers’ claims do not involve

Hirsh’s representation of VDG in the prior suit, but rather his

allegedly wrongful retention of settlement funds without off-

setting the fees he charged to Travelers. See Peregrine

Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP,

35 Cal. Rptr. 3d 31, 40 (Ct. App. 2005) (stating that anti-

SLAPP statute does not apply when “protected conduct is

‘merely incidental’ to the unprotected conduct” (citation

omitted)); see also Coretronic Corp. v. Cozen O’Connor,

121 Cal. Rptr. 3d 254, 261 (Ct. App. 2011) (holding that

gravamen of complaint was attorneys’ failure to disclose dual

representation and that “the concealment occurred in the

context of litigation” did not turn it into protected activity).

Because Travelers’ causes of action for declaratory judgment,

unjust enrichment, breach of Cal. Civ. Code § 2860(d), and

concealment are not “based on an act in furtherance of

[Hirsh’s] right of petition or free speech,” Peregrine Funding,

35 Cal. Rprt. 3d at 38 (quoting City of Cotati v. Cashman,

6 TRAVELERS CAS. INS. CO. V. HIRSH

52 P.3d 695, 701 (Cal. 2002)), they do not “arise from”

protected activity.

3. “[A]ccepting as true the evidence favorable to the

plaintiff and evaluating the defendant’s evidence only to

determine whether the defendant has defeated the plaintiff’s

evidence as a matter of law,” Travelers “has made a prima

facie showing of facts supporting [its] cause[s] of action,” so

as to establish a probability of prevailing on the merits

sufficient to survive the motion to strike. Lefebvre v.

Lefebvre, 131 Cal. Rptr. 3d 171, 174 (Ct. App. 2011).

a) Travelers filed this suit only after Hirsh sought to

compel arbitration in search of further fees from the insurer.

This filing created an actual controversy supporting

Travelers’ request for declaratory relief. See Calderon v.

Ashmus, 523 U.S. 740, 745–46 (1998) (discussing scope of

relief available under Declaratory Judgment Act, 28 U.S.C.

§ 2201).

b) Travelers alleges that Hirsh received funds from

the settlement of the prior lawsuit and unjustly retained them

without providing Travelers a setoff in the fees it owed Hirsh.

This shows the “minimum level of legal sufficiency and

triability,” Linder v. Thrifty Oil Co., 2 P.3d 27, 33 n.5 (Cal.

2000), necessary to survive the motion to strike, see also

Lectrodryer v. SeoulBank, 91 Cal. Rptr. 2d 881, 883 (Ct. App.

2000) (stating the “elements for a claim of unjust enrichment:

receipt of a benefit and unjust retention of the benefit at the

expense of another”).

c) Travelers also alleges that Hirsh failed to disclose

material, non-privileged information regarding the

amendment of the settlement in the prior lawsuit. These

TRAVELERS CAS. INS. CO. V. HIRSH 7

allegations state a claim under the Cumis statute, see Cal. Civ.

Code § 2860(d) (requiring independent counsel “to disclose

to the insurer all information concerning the action except

privileged materials relevant to coverage disputes, and timely

to inform and consult with the insurer on all matters relating

to the action”), and for concealment, see Boschma v. Home

Loan Ctr., Inc., 129 Cal. Rptr. 3d 874, 890 (Ct. App. 2011)

(setting forth elements for “an action for fraud and deceit

based on concealment” (citation omitted)).

4. Because the causes of action at issue arise from

Hirsh’s post-settlement conduct, not his communications with

VDG in settling the prior lawsuit, California’s litigation

privilege, Cal. Civ. Code § 47(b), does not bar this suit. See

Rusheen v. Cohen, 128 P.3d 713, 719 (Cal. 2006) (holding

that “the litigation privilege protects only publications and

communications,” and that “[t]he distinction between

communicative and noncommunicative conduct hinges on the

gravamen of the action”).

5. We do not have jurisdiction to review Hirsh’s

challenge to the district court’s striking count two, alleging

breach of a defense handling agreement, because the denial

was without prejudice, and there is no final order as to this

claim. See Hyan v. Hummer, No. 14-56155, 2016 WL

3254701, at *2 (9th Cir. June 14, 2016) (per curiam).

AFFIRMED.1

1

Hirsh’s Motion for Leave to File Supplemental Reply Brief is

GRANTED.

8 TRAVELERS CAS. INS. CO. V. HIRSH

KOZINSKI, Circuit Judge, with whom Circuit Judge

GOULD joins, concurring:

I must join because the opinion faithfully applies our

circuit’s precedents, which accord federal-court defendants

the procedural advantages of California’s anti-SLAPP law.

See Batzel v. Smith, 333 F.3d 1018, 1024–26 (9th Cir. 2003);

United States ex rel. Newsham v. Lockheed Missles & Space

Co., 190 F.3d 963, 970–73 (9th Cir. 1999). But I write once

again to emphasize that our caselaw is wrong: These

interloping state procedures have no place in federal court.

See Makaeff v. Trump Univ., LLC, 715 F.3d 254, 272 (9th

Cir. 2013) (Kozinski, C.J., concurring).

Our precedents have not aged with grace. Ever since we

allowed them to take root, anti-SLAPP cases have spread like

kudzu through the federal vineyards. A casual Westlaw

search suggests that such cases have more than tripled over

the last ten years.1 And nowhere are anti-SLAPP cases more

common than in the Ninth Circuit: The Westlaw data suggest

that courts in our circuit have heard 80 percent of these cases

over the same decade.2 In other words, 80 percent of the

problem is right here.

1

A Westlaw search of federal cases by year for the term “anti-SLAPP,”

performed on July 11, 2016, generated 43 hits for 2006 and 138 hits for

2015. The number of hits rises more-or-less steadily in the intervening

years.

2

Of the 994 hits on Westlaw for the term “anti-SLAPP” in federal courts

between the start of 2006 and the end of 2015, 797 of them (80.2%) were

in dispositions from courts in the Ninth Circuit. Appeals are up too.

According to our clerk’s office, the Ninth Circuit inventoried an average

of 13.6 anti-SLAPP appeals per year from 2011 to 2015. We inventoried

an annual average of 7.4 from 2006 to 2010, and an average of 3 per year

from 2001 to 2005.

TRAVELERS CAS. INS. CO. V. HIRSH 9

Fortunately, other circuits are starting to recognize this

problem for what it is. When our court last considered the

place of anti-SLAPP motions in federal court, some of our

colleagues saw unanimity among our sister circuits and were

reluctant to create a split. See Makaeff v. Trump Univ., LLC,

736 F.3d 1180, 1187 (9th Cir. 2013) (Wardlaw and Callahan,

JJ., concurring in the denial of rehearing en banc). We can

stop worrying: The D.C. Circuit has reached the overdue

conclusion that anti-SLAPP motions don’t belong in federal

court because they directly conflict with the Federal Rules of

Civil Procedure. Abbas v. Foreign Policy Grp., LLC,

783 F.3d 1328, 1333–37 (D.C. Cir. 2015). Now we’ve got a

circuit split, and we’re standing on the wrong side.

It’s time to get it right. We should follow the D.C.

Circuit’s lead in giving these trespassing procedures the boot.

At the very least, we should reassess whether defendants who

lose on their anti-SLAPP motions have the right to an

immediate appeal. Either would be a welcome step toward

cleaning up our docket and securing the border between state

and federal law.

Let’s review the basics: Every first-year law student

learns (or is supposed to learn) that federal courts in diversity

cases apply state law to substantive questions. Was the

contract breached? Was the accident negligent? See Erie

R.R. v. Tompkins, 304 U.S. 64, 78–79 (1938). But procedural

questions are different. When the state law directly conflicts

with one of the Federal Rules, the outcome is simple: The

Federal Rules trump.3

3

The Federal Rule will trump as long as it complies with the Rules

Enabling Act, and the Supreme Court has held that a Rule will do so if it

“really regulates procedure.” Sibbach v. Wilson & Co., 312 U.S. 1, 14

(1941). No Federal Rule has ever failed the Sibbach test.

10 TRAVELERS CAS. INS. CO. V. HIRSH

California’s anti-SLAPP law directly conflicts with

Federal Rule 12, which provides a one-size-fits-all test for

evaluating claims at the pleading stage. To survive a 12(b)(6)

motion to dismiss, a plaintiff’s complaint has to state a claim

that is “plausible on its face.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007). California, on the other hand,

gives defendants a “special motion to strike” any claims that

arise from protected speech activities. Cal. Civ. Proc. Code

§ 425.16(b)(1). To survive this motion, a plaintiff must show

that he has a “probability” of succeeding on the underlying

claim. Id. This requires demonstrating that the claim is

legally sufficient and “supported by a sufficient prima facie

showing of facts to sustain a favorable judgment if the

evidence submitted by the plaintiff is credited.” Wilson v.

Parker, Covert & Chidester, 50 P.3d 733, 739 (Cal. 2002)

(citations omitted).

In short, “probability” is a much higher bar than

“plausibility”: California’s special motion requires

supporting evidence at the pleading stage; Rule 12 doesn’t.

That’s a problem because the Supreme Court has decided that

the plausibility standard alone strikes the right balance

between avoiding wasteful litigation and giving plaintiffs a

chance to prove their claims. See Twombly, 550 U.S. at 556;

see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The

Supreme Court’s balance might be the wrong one, of course,

but that’s not something that the state of California gets to

decide. The plausibility standard isn’t a floor or a ceiling

from which we can depart. Using California’s standard in

federal court means that some plaintiffs with plausible claims

will have their cases dismissed before they’ve had a chance

to gather supporting evidence. It’s obvious that the two

standards conflict.

TRAVELERS CAS. INS. CO. V. HIRSH 11

But it wasn’t so obvious to our court. In Newsham, we

erroneously reasoned that Rule 12 and the California statute

were at peace because a defendant could still bring a Rule 12

motion if his special motion to strike was unsuccessful.

190 F.3d at 972. But what’s the point? If a plaintiff survives

an anti-SLAPP motion by showing that his claim is legally

sufficient and has a probability of success, how could he lose

on a Rule 12 motion that requires him to show mere

plausibility? He can’t.

Our acceptance of anti-SLAPP special motions was bad

enough, but we made the problem worse by allowing

defendants to bring interlocutory appeals. See Batzel,

333 F.3d at 1024–26. This case is a perfect example of the

consequences of that decision. Robert Hirsh appealed to our

court after the district court denied his meritless motion to

strike. That was in the spring of 2014. Two years and a few

hundred billable hours later, we’re sending the case back for

the district court to pick up right where it left off.

To avoid these pointless and costly detours, parties

usually get to appeal only once, after the district court has

entered its final judgment. See Mohawk Indus. Inc. v.

Carpenter, 558 U.S. 100, 106 (2009). The collateral order

doctrine provides an exception, but only a select number of

decisions are supposed to get into this exclusive club. See

Dig. Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863,

867–68 (1994). Despite many efforts to expand the guest list,

the Supreme Court has kept the collateral order doctrine

“narrow and selective in its membership.” Will v. Hallock,

546 U.S. 345, 350 (2006). Undaunted by the Supreme

Court’s repeated warnings, our circuit has welcomed anti-

SLAPP appeals with open arms. Batzel, 333 F.3d at

12 TRAVELERS CAS. INS. CO. V. HIRSH

1024–26; see also DC Comics v. Pac. Pictures Corp.,

706 F.3d 1009, 1012–16 (9th Cir. 2013) (reaffirming Batzel).

But this inclusive spirit was a mistake. A collateral order

is supposed to meet three requirements: It must be

“conclusive”; it must “resolve important questions

completely separate from the merits”; and it must be

“effectively unreviewable” after final judgment. Dig. Equip.

Corp., 511 U.S. at 867. A decision on the motion to strike

fails the latter two of the three.4

Anti-SLAPP motions have the merits painted all over

them. California’s statute asks us to determine whether

“there is a probability that the plaintiff will prevail on the

claim.” Cal. Civ. Proc. Code § 425.16(b)(1). This can mean

only one thing: an evaluation of the merits. Batzel tried to

explain away this unfortunate textual obstacle by musing

mysteriously that a court denying an anti-SLAPP motion is

“merely find[ing] that such merits may exist, without

4

We can see that anti-SLAPP motions are a poor fit for the collateral

order doctrine by considering the three requirements or simply by

comparing these motions to others that the Supreme Court has said are

immediately appealable. For example, claims of absolute immunity

qualify because they present the legal question of whether the defendant

is in a class of people that can’t be sued in the first place. See Nixon v.

Fitzgerald, 457 U.S. 731, 741–43 (1982). The same is true for some

qualified immunity determinations. We accept interlocutory appeals to

determine whether a law that a government actor allegedly violated was

clearly established at the time. See Mitchell v. Forsyth, 472 U.S. 511,

526–27 (1985). But in answering this purely legal question, we don’t

address the merits of the underlying suit—that is, whether the official

actually broke the law. In contrast, interlocutory appeals are not allowed

from qualified immunity determinations that turn on factual disputes—for

example, whether a specific police officer had taken part in the plaintiff’s

beating—because the question posed is intertwined with the merits of the

case. See Johnson v. Jones, 515 U.S. 304, 313–14 (1995).

TRAVELERS CAS. INS. CO. V. HIRSH 13

evaluating whether the plaintiff’s claim will succeed.”

333 F.3d at 1025. Ponder that. Perhaps a poet5 can explain

how a determination that the merits exist can be “completely

separate” from those merits. But our circuit hasn’t done it

yet.

And it can’t. Our experience with these cases has shown

us that they require an “exhaustive analysis of the merits.”

See Makaeff, 736 F.3d at 1190 (Watford, J., dissenting from

the denial of rehearing en banc). An exhaustive (and

exhausting) detour is exactly what the final judgment rule is

designed to avoid. Interlocutory appeals make it hard for a

district court to supervise a trial. Johnson, 515 U.S. at 309.

They undermine the efficient administration of justice when,

as here, a meritless appeal stalls a case for years. See

Mohawk Indus., 558 U.S. at 106. And they ask our court to

dive headlong into the merits of a case only to swim back,

years later, when it’s finally appealed from final judgment.

Of course, if our precedents are correct, we must take

interlocutory appeals from the denial of anti-SLAPP motions

because they would be effectively unreviewable after final

judgment. Batzel, 333 F.3d at 1025. But we don’t need to

look very far to see that this holding is completely out of step

with how we treat similar orders. After all, the denial of a

12(b)(6) motion isn’t immediately appealable, and Rule 12

and California’s anti-SLAPP statute serve a common

purpose: eliminating frivolous or bullying claims before the

parties pay through the nose in discovery and suffer the other

5

As Juan Antonio puts it in Woody Allen’s Vicky Cristina Barcelona:

“It’s funny. Maria Elena and I, we are meant for each other and not meant

for each other. It’s a contradiction. I mean, in order to understand it, you

need a poet, like my father. Because I don’t.” Vicky Cristina Barcelona

(The Weinstein Company 2008).

14 TRAVELERS CAS. INS. CO. V. HIRSH

indignities of a trial. Nobody suggests that the district court’s

decision denying a 12(b)(6) motion is “effectively

unreviewable” at the end of the case because the defendant

has to incur an extra cost to get there. But that’s exactly the

reasoning our court has adopted to allow immediate appeals

from denials of anti-SLAPP motions.

In Batzel, we made anti-SLAPP motions sound more

impressive by asserting that they gave defendants a form of

“immunity” from suit. 333 F.3d at 1025. Because immunity

would be useless if the defendant had to wait to appeal, we

found that denying a special motion would indeed be

“effectively unreviewable” after final judgment. Id. The

suggestion that California had granted certain defendants

immunity from suit should have immediately put us on high

alert, because claims of a “right not to be tried” are supposed

to be viewed “with skepticism, if not a jaundiced eye.” Dig.

Equip., 511 U.S. at 873. And we should have been especially

skeptical here because the statute itself makes no mention of

immunity. Cal. Civ. Proc. Code § 425.16. Either way,

tossing around the magic word immunity shouldn’t distract us

from the substantive point: What does an anti-SLAPP motion

confer that Rule 12 doesn’t? While they’re different in

degree, both procedures save a defendant from a costly

lawsuit when the plaintiff’s complaint hasn’t met a threshold

standard. Both are about reducing the incentive to bring

frivolous claims. Defendants who claimed that Rule 12

provided them with “immunity from suit” would get laughed

at. Anti-SLAPP defendants who make the same claim should

be treated no differently.

Some of our recent decisions have started to turn the tide

against these encroaching state procedures. In Metabolife

International, Inc. v. Wornick, we held that a provision of the

TRAVELERS CAS. INS. CO. V. HIRSH 15

law that stayed discovery while a special motion was being

decided conflicted with Federal Rule of Civil Procedure

56(f)’s discovery requirement and didn’t belong in federal

court. 264 F.3d 832, 846 (9th Cir. 2001). And we recently

pulled another tooth from the law, holding that federal

plaintiffs can’t immediately appeal some grants of special

motions because doing so would conflict with Rule 54(b)’s

definition of appealable final orders. Hyan v. Hummer, No.

14-56155, slip op. at 5–8 (9th Cir. June 14, 2016) (per

curiam).

Now it’s time to deliver the coup de grâce. We were

wrong in Newsham and Batzel, and wrong not take Makaeff

en banc to reverse them. But it’s not too late to correct these

mistakes. Cases like this one have no place on our docket,

and we should follow the D.C. Circuit in extirpating them.

Our ink and sweat are better spent elsewhere.

GOULD, Circuit Judge, concurring:

I join the per curiam opinion. I also concur in Judge

Kozinski’s separate concurrence taking issue with circuit

precedent permitting defendants in federal court to take

advantage of California’s anti-SLAPP law. Although I

previously joined in part the Batzel precedent that is

challenged by Judge Kozinski, and my partial dissent did not

disagree on the majority’s application there of collateral order

doctrine to permit appeal of denial of anti-SLAPP motion, I

am now persuaded by Judge Kozinski’s reasoning, as well as

that of the D.C. Circuit in Abbas v. Foreign Policy Grp., LLC,

783 F.3d 1328, 1333–37 (D.C. Cir. 2015), that an anti-SLAPP

motion has no proper place in federal court in light of the

16 TRAVELERS CAS. INS. CO. V. HIRSH

Federal Rules of Civil Procedure, and also that the collateral

order doctrine does not provide a good fit for immediate

appeal of denial of anti-SLAPP motions. Having recognized

that there was error in the position that I previously joined, I

recede from it.