Do California Code of Civil Procedure § 425.17’s Exclusions of Anti-SLAPP Protection for Certain Types of Commercial Speech Violate the First Amendment?

11.02.2018

Part 1 in a series examining constitutional rights and defenses in commercial litigation

California’s anti-SLAPP statute is a powerful defense in lawsuits targeting speech, but do the Legislature’s viewpoint-based exceptions for commercial speech violate the First Amendment?

The California Legislature enacted Code of Civil Procedure section 425.16—the “anti-SLAPP” statute—to combat “a disturbing increase” in Strategic Lawsuits Against Public Participation. Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th 1106, 1109 n.1 (1999). “A SLAPP is a meritless suit filed primarily to chill the defendant’s exercise of First Amendment rights.” Robles v. Chalilpoyil, 181 Cal. App. 4th 566, 572 (2010).

The anti-SLAPP statute subjects such suits to a “special motion to strike” and dictates that “a defendant who is the ‘prevailing [party] on’ such a motion is ‘entitled to recovery his attorney’s fees and costs.’”[1] S.B. Beach Properties v. Berti, 39 Cal. 4th 374, 377 (2006) (quoting Cal. Code of Civ. Proc. § 425.16(c)). The Legislature dictated that “this section shall be construed broadly.” Cal. Code of Civ. Proc. § 425.16(a).

But Code of Civil Procedure section 425.17 dictates that the anti-SLAPP statute affords no protection to most types of commercial speech—a category of speech for which the public’s interest “in the free flow of information . . . may be as keen, if not keener by far, than [its] interest in the day’s most urgent political debate.” Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 764 (1976).

This article addresses whether section 425.17’s partial exclusion of commercial speech from anti-SLAPP protection constitutes viewpoint-based discrimination, which itself violates the First Amendment.

R.A.V. v. City of St. Paul Limits California’s Power to Selectively Regulate Speech that Is Otherwise Subject to Content-Based Proscription on the Basis of the Views It Expresses

At first blush, section 425.17’s content-based exclusion of commercial speech from anti-SLAPP protection seems consistent with First Amendment jurisprudence. While “[c]ontent-based regulations [of speech] are presumptively invalid,” the Supreme Court has long recognized that certain discrete categories of speech—most notably defamation, obscenity, and fighting words—“can, consistently with the First Amendment, be regulated because of their constitutionally proscribable content.” R.A.V. v. City of St. Paul, 505 U.S. 377, 382–83 (1992). Commercial speech is one of these discrete categories of speech for which “content-based restrictions . . . may be permissible.” Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66 (1983). Such regulation is permissible because of commercial speech’s “greater potential for deception or confusion.[2] Id.

But in R.A.V. v. City of St. Paul, the Court recognized that while “these areas of speech can, consistently with the First Amendment, be regulated because of their constitutionally proscribable content” they may not “be made the vehicles for content discrimination unrelated to their distinctively proscribable content.” R.A.V., 505 U.S. at 383–84. For example, “the government may proscribe libel; but it may not make the further content discrimination of proscribing only libel critical of the government.” Id. at 384 (emphasis in original). The greater power to proscribe all libel does not include the lesser power to selectively regulate in a manner that subjects otherwise proscribable libel to harsher or more lenient treatment based on the viewpoint expressed (or the government’s agreement or disagreement with particular viewpoints). See id.

This same principle extends to the content-based regulation of commercial speech. “A State may choose to regulate price advertising . . . because of the risk of fraud . . . [b]ut a State may not prohibit only that commercial advertising that depicts men in a demeaning fashion.” Id. at 388–89. The former regulation targets “one of the characteristics of commercial speech that justifies depriving it of full First Amendment protection.” Id. at 388. The latter “impose[s] special prohibitions on those speakers who express views on disfavored subjects.” Id. at 391.

The Court analogized the State’s power to regulate commercial speech and other speech that is otherwise proscribable on the basis of its content to the State’s power to regulate “a noisy sound truck.” R.A.V., 505 U.S. at 386. The State may subject sound trucks to volume restrictions but it “may not regulate use based on hostility—or favoritism—towards the underlying message expressed.” Id. That is, it may not prescribe different volume restrictions based on the State’s approval or disapproval of the content of the message expressed. Id.

The most virulent violation of this principle occurs where a statute subjects opposing sides of an argument to different debating rules. As the R.A.V. Court observed, a State “has no authority to license one side of a debate to fight freestyle, while requiring the other to follow Marquis of Queensberry rules.” Id. at 392.

The Ninth Circuit recently invoked R.A.V. to strike down an Arizona law that “ma[de] it unlawful for a motor vehicle occupant to hire or attempt to hire a person for work at another location from a stopped car that impedes traffic.”[3] Valle Del So Inc. v. Whiting, 709 F.3d 808, 814 (9th Cir. 2013). The law “singled out day labor solicitation for a harsh penalty while leaving other types of solicitation speech that blocks traffic unburdened.” Id. The court found that while the act targeted commercial speech, it violated R.A.V.’s prohibition because the statute—which the court suggested was motivated by animus to undocumented laborers—did not categorically target commercial solicitation “from a stopped car that impedes traffic,” but only such solicitation by day-laborers. Id. While “Arizona may prohibit pedestrians and motorists from blocking traffic . . . it may not, consistent with the First Amendment, use a content-based law to target individuals for lighter or harsher punishment because of the message they convey while they violate an unrelated traffic law.” Id. at 823. “R.A.V.’s ultimate lesson . . . is that government may not leverage its power to regulate one sphere of activity into the ability to favor certain speech within that sphere. So, though a state may ban all fighting words, it may not ban only those that” express a disfavored viewpoint. Id.

Section 425.17 May Violate R.A.V.’s Prohibition Against Viewpoint Discrimination

Because commercial speech is among the categories of speech for which content-based regulation is permitted, categorical exclusion of all commercial speech from the anti-SLAPP statute’s protections would likely raise no constitutional issues. But section 425.17 does not categorically exclude all commercial speech from such protections. It includes several content-based exceptions and in so doing may run afoul of R.A.V.’s proscriptions in three ways.[4]

Section 425.17 Affords Special Protection to Commercial Speech Subsidized by the Government

Section 425.17 does not apply to commercial speech made by any non-profit organization that “receives more than 50 percent of its annual revenues from federal, state, or local government grants, awards, programs, or reimbursements for services rendered.” Cal. Code Civ. Proc. § 425.17(d)(3). In other words, the statute affords special protection to commercial messages endorsed or subsidized by the government. This may violate R.A.V.’s admonition that a State “may not regulate [otherwise proscribable speech] based on [the State’s] hostility—or favoritism—towards the underlying message.”[5] R.A.V., 505 U.S. at 386 (emphasis added). As the Ninth Circuit explained, the State “may not leverage its power to regulate one sphere of activity into the ability to favor certain speech within that sphere.” Valle Del So Inc., 709 F.3d at 823.

Section 425.17 Affords Divergent Protections to Speech on Opposing Sides of Commercial Disputes

Section 425.17 does not restrict itself to the First Amendment’s definition of commercial speech. For First Amendment purposes, “commercial speech” is that “which does no more than propose a commercial transaction.”[6] Va. State Bd. of Pharmacy, 425 U.S. at 762. In contrast, section 425.17 limits the definition of commercial speech to “representations of fact about [the speaker’s] or a business competitor’s business operations, goods, or services.” Cal. Code Civ. Proc. § 425.17(c)(1) (emphasis added). This distinction can lead to divergent application to speech on opposing sides of a debate and thus may offend the First Amendment.

For example, in Simpson Strong-Tie Co., Inc. v. Gore, 49 Cal. 4th 12 (2010), the California Supreme Court found that section 425.17 did not apply to advertisements by an attorney soliciting plaintiffs for a products-liability class action lawsuit against the manufacturer of galvanized screws used in the construction of wooden decks. Id. at 30. The manufacturer sued the attorney for defamation, trade libel, and false advertising asserting that his advertisement “communicate[d] that Simpson’s galvanized screws are defective.” Id. The attorney’s advertisement invited purchasers of “galvanized screws manufactured by [the plaintiff]” to “call if [they] would like an attorney to investigate whether [they] have a potential claim.” Id. at 19. Because it did “no more than propose a commercial transaction” the attorney’s advertisement constituted commercial speech for First Amendment purposes.[7] See Va. State Bd. of Pharmacy, 425 U.S. at 762.

Nonetheless, the court found that the advertisement did not fall within the ambit of section 425.17 because the allegedly disparaging representation “that Simpson’s screws are defective [wa]s not ‘about’ [the attorney’s] or a competitor’s ‘business operations, goods, or services’”—it was about Simpson’s goods. Simpson Strong-Tie Co., Inc., 49 Cal. 4th at 30 (emphasis added) (quoting Cal. Code Civ. Proc. § 425.17(c)(1)). The problem with section 425.17’s narrow definition of commercial speech is that it affords significantly greater protections to the attorney’s advertisements disparaging the manufacturer’s products than to public statements by the manufacturer rebutting such advertisements.

Any public statements by the manufacturer defending its products or rebutting the attorney’s advertisement would be “about” its “goods” and would not qualify for the anti-SLAPP statute’s protections.[8] Meanwhile, the attorney can publish advertisements disparaging the product secure in the knowledge that the anti-SLAPP statute would protect him in the event of litigation. See Simpson Strong-Tie Co., Inc., 49 Cal. 4th at 30. Subjecting speakers on opposing sides of a dispute to different rules constitutes a quintessential violation of the viewpoint-neutrality principle recognized by R.A.V. A State “has no authority to license one side of a debate to fight freestyle, while requiring the other to follow Marquis of Queensberry rules.” R.A.V., 505 U.S. at 392.

Section 425.17 Affords Special Protections to the Motion Picture and Television Industries

In apparent deference to the entertainment industry, section 425.17 exempts advertisements promoting “a motion picture or television program” from the statute’s definition of commercial speech. Cal. Code Civ. Proc. § 425.17(d)(2). At least one court has found that a commercial-speech regulation conferring preferential treatment to particular state-favored business ventures runs afoul of R.A.V.’s proscriptions.

In Citizens United for Free Speech II v. Long Beach Township Bd. of Comm’rs, 802 F. Supp. 1223, 1233–34 (D.N.J. 1992), the court confronted the constitutionality of a municipal ordinance that permitted home owners to place “for sale” signs on their properties, but strictly curtailed the display of “for rent” signs. Id. at 1232. The court enjoined enforcement of the ordinance, finding that its divergent treatment of favored transactions (home sales) and disfavored transactions (home rentals) violated R.A.V.’s neutrality provisions. Id. at 1233–34. “The Township’s restriction of ‘for rent’ signs therefore [was] unconstitutional under R.A.V. . . . because it [wa]s not content neutral.” Id. at 1234.

The court noted that “[o]ne might think that” the ordinance’s disparate treatment of “for sale” and “for rent” signs “is a trivial type of content distinction, not related to any serious or profound form of expression,” but “the jurisprudence of content-based regulation itself draws no distinctions on the basis of the seriousness of the content—such would be inconsistent with the general ban against content-based restrictions.” Id. at 1232-34.

Likewise, by singling out entertainment-industry advertisements for special protection, section 425.17 may afford special protection to favored transactions and thus fail R.A.V.’s content-neutrality test.

Conclusion

The constitutional limits of section 425.17’s viewpoint-based exceptions to the anti-SLAPP statute have not been tested in the courts. But they will be. And when they are, will the statute’s exceptions for commercial speech prescribed on the basis of content, viewpoint, and government endorsement pass muster, or if they will they prove to be section 425.17’s Achilles heel? The answer may depend on who is asking.

[1] The anti-SLAPP statute invokes a two-step analysis. Initially, defendants need only show that the conduct alleged in the complaint comes within the purview of the statute. This requirement is satisfied if the suit “potentially impairs the right of free speech.” Beilenson v. Superior Court, 44 Cal. App. 4th 944, 950 (1996). The burden then shifts to the plaintiff to bring forward admissible evidence establishing a probability of success on the merits. “First, the court decides whether the defendant has made a threshold prima facie showing that the defendant’s acts, of which the plaintiff complains, were ones taken in furtherance of the defendant’s constitutional rights of petition or free speech in connection with a public issue.” Kashian v. Harriman, 98 Cal. App. 4th 892, 906 (2002) (citations omitted). If the defendant makes this showing, “the burden then shifts to the plaintiff to establish a ‘probability’ of prevailing on the claim by making a prima facie showing of facts that would, if proved, support a judgment in the plaintiff’s favor.” Id. Defendants satisfy their burden if a complaint arises from “any . . . conduct in furtherance of the exercise of . . . the constitutional right of free speech in connection with a public issue or an issue of public interest.” Code of Civ. Proc. § 425.16(e). A hybrid claim alleging both protected and unprotected activity is subject to the statute unless the plaintiff can demonstrate that the protected conduct is “‘merely incidental’ to the unprotected activity.” Scott v. Metabolife Int’l, Inc., 115 Cal. App. 4th 404, 419 (2004).

[2] The test governing the permissible regulation of commercial speech was established in Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557 (1980. Under Central Hudson, a regulation of commercial speech will be upheld if (1) the regulated speech concerns lawful activity and is not misleading; (2) the regulation is supported by a substantial government interest; (3) the regulation directly advances that interest; and (4) the regulation is not more extensive than necessary to serve the government's interest. Id. at 566.

[3] The day-labor provision was part of Arizona’s controversial comprehensive immigration reform bill, S.B. 1070. Valle Del So Inc. v. Whiting, 709 F.3d 808, 815 (9th Cir. 2013).

[4] A categorical exclusion of anti-SLAPP protection from commercial speech likely would not violate the First Amendment. R.A.V. recognized that a content-based regulation targeting otherwise proscribable speech does not violate the First Amendment if “the content discrimination consists entirely of the very reason the entire class of speech at issue is proscribable” because in such cases “no significant danger of idea or viewpoint discrimination exists.” R.A.V., 505 U.S. at 388. Economic incentives make “commercial speech . . . more hardy [and] less likely to be ‘chilled’” than other forms of speech. Bd. of Trustees of State Univ. of N.Y. v. Fox, 492 U.S. 469, 481 (1989). Thus, a viewpoint-neutral statute excluding all commercial speech from anti-SLAPP protection is likely permissible given that the anti-SLAPP statute’s purpose is to terminate lawsuits that “chill the defendant’s exercise of First Amendment rights.” Robles, 181 Cal. App. 4th at 572. Accordingly, SLAPP suits are less likely to chill commercial speech. But a statute that provides anti-SLAPP protection to some commercial speech and withholds it from other commercial speech “based on [the State’s] hostility—or favoritism—towards the underlying message” or the speaker violates the First Amendment. R.A.V., 505 U.S. at 386. While commercial speech, defamation, fighting words, and obscenity “can, consistently with the First Amendment, be regulated because of their constitutionally proscribable content . . . they may not be made the vehicles for content discrimination unrelated to their distinctively proscribable content.” Id. at 383–84.

[5] This provision may also run afoul of R.A.V.’s recognition that a State “has no authority to license one side of a debate to fight freestyle, while requiring the other to follow Marquis of Queensberry rules.” R.A.V., 505 U.S. at 392. Section 425.17 affords commercial messages by a non-profit organization sponsored by the government materially greater protection than competing commercial speech by a non-profit not subsidized by the government.

[6] In Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60 (1983) the Supreme Court devised a test to determine whether speech that proposed a commercial transaction but also contains non-commercial elements constitutes commercial speech. Id. at 66–67. Bolger held that speech is properly characterized as commercial when (1) the speech is admittedly advertising, (2) the speech references a specific product, and (3) the speaker has an economic motive for engaging in the speech. Id. The Court stated that these three factors are not dispositive, but the “combination of all these characteristics . . . provides strong support for the . . . conclusion that the [publication is] properly characterized as commercial speech.” Id. at 67.

[7] The fact that the message potentially conveyed important information to the public does not take the advertisement outside the realm of commercial speech. “[C]ommunications can ‘constitute commercial speech notwithstanding the fact that they contain discussions of important public issues.’” Bd. of Trustees of State Univ. of N.Y., 492 U.S. at 476 (quoting Bolger, 463 U.S. at 67).

[8] The California Supreme Court has ruled that virtually any public statements made by a manufacturer refuting disparaging comments about its products constitute commercial speech. Kasky v. Nike, Inc., 27 Cal. 4th 939, 964 (2002). Kasky addressed a false advertising suit against shoe-maker Nike. Id. In response to criticism concerning working conditions at its foreign factories, Nike had made a series of public statements “in press releases, in letters to newspapers, [and] in a letter to university presidents and athletic directors” asserting that

workers who make Nike products are protected from physical and sexual abuse, that they are paid in accordance with applicable local laws and regulations governing wages and hours, that they are paid on average double the applicable local minimum wage, that they receive a “living wage,” that they receive free meals and health care, and that their working conditions are in accordance with applicable local laws and regulations governing occupational health and safety.

Id. at 947–48. The plaintiff sued Nike, alleging these statements constituted false advertising. Id. at 947. Concluding that Nike’s statements were made “for the purpose of maintaining and increasing [Nike’s] sales and profits,” the California Supreme Court held that the statements constituted “commercial speech” Id. at 947, 964. Nagel v. Twin Labs, Inc., 109 Cal. App. 4th 39 (2003) observed that section 425.17 would prevent Nike from invoking the anti-SLAPP statute in its defense because the publications at issue constituted “factual statements about how Nike makes its products.” Id. at 48–49 (emphasis added). In Simpson Strong-Tie, any public statements by Simpson refuting the attorney’s advertisements’ assertion “that Simpson’s screws are defective” would likewise be factual statements about Simpson’s products and would be denied anti-SLAPP protection by section 425.17. See Simpson Strong-Tie Co., Inc., 49 Cal. 4th at 30.

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