Long Beach Unified Sch. Dist. v Williams, No. B290069 (D2d4, as modified Dec. 31, 2019)
Wong v. Wong, No. A154286 (D1d1 Dec. 13, 2019)
C.W. Howe Partners v. Moordian, No. B290665 (D2d7 Dec. 19, 2019)
Within the course of a few weeks, the Court of Appeal (a panel of the First District, and two Different panels of the Second) decided three cases addressed to whether the anti-SLAPP statute applies to a claim demanding a litigation based indemnity. That is, an equitable or contractual right to obtain compensation for defense costs or judgements from another party, sometimes even a counterparty in the underlying litigation.
Despite coming up different factual contexts, Wong and C.W. Howe basically come out the same door. Of course an indemnity requires something to indemnify against and a litigation indemnity requires a litigation. So, in a very superficial way, a litigation indemnity claim would not exist “but for” a litigation. That, however, does not mean the claim arises from the litigation. (The are some cases, including a case called Lennar Homes, that suggest otherwise, but the Court in C.W. Howe refers to the logic applied in those cases as “facile.”) Applying the framework in the Supreme Court’s decision in Park, the arising from test is met only when protected conduct forms an essential element of the claim. If that’s not the case, other protected-type conduct can show up in the case as evidence, without the arising from test being satisfied.
Looking at the elements, Wong and C.W. Howe say this is an evidence, not an elements, situation. A contractual indemnity is just based on a contract and a refusal to pay. And an equitable indemnity claim arises from being a co-tortfeasor in partial proportionate fault. Neither of those elements requires a litigation, so the fact that the costs or results of litigation are the subject of the compensation for is just evidence and not a fundamental element.
Williams comes out the other door. Mind you, the facts of Williams are pretty bad. She’s a contract environmental consultant for the Long Beach School District, helping with the development and environmental compliance with a school construction site, in which she discovered a contractor was dumping materials contaminated with arsenic. After Williams came down with arsenic poisoning, the District cut off her contract. Williams and her company sued for retaliation and for causing the poisoning. The District counterclaimed, arguing that Williams had an obligation to cover both defense costs and any judgment under an indemnification provision in her contract. Williams moved to strike the claim under the anti-SLAPP statute.
Unlike C.W. Howe and Wong, however, the Williams court found the analysis in Lennar to be persuasive, because without her underlying claim, the indemnification claim would have “no basis.” But the court hedges a little and also finds that even if the case did not arise from Williams’ lawsuit, it arose from Williams’ unwillingness to fund the District’s lawsuit. According to the Court, a “refusal to fund the defense of ones own litigation—and the defense of a co-plaintiff’s claims arising from the same facts—is conduct in furtherance of the litigation” under Code of Civil Procedure § 425.16(e)(4). And since the litigation is about arsenic contamination at a school site, the Court finds that it was a matter of public interest.
Moreover, since the indemnification agreement—requiring Williams to pay for the defense and any judgment arising from her own lawsuit—was unconscionable, the district had no probability of prevailing.
* * *
This feels like another one where bad facts make bad law. C.W. Howe and Wong pretty clearly have the better side of the Lannar argument. If an indemnity
“arises from” the litigation to be indemnified, every insurance coverage dispute is a SLAPP.
So far as the (e)(4) issue goes, the cases are clear that funding litigation can be “in furtherance.” But refusing to advance or indemnify under a commercial indemnification contract doesn’t seem very expressive. Do corporations really have a first amendment right not to advance litigation expenses in D&O claims? The public interest analysis here also seems a little short shrift and inconsistent with the structure set up in the Supreme Court's FilmOn analysis. Is the expression at issue about arsenic contamination in public schools? Or about whether Williams needed to fund the District’s defense in such a litigation?
Mind you, the Court is certainly right that the indemnification provision in Williams’ contract is unenforceable, for any number of reasons—unconscionability, public policy, illegality, etc. But that doesn’t necessarily make the District’s cross-claim a SLAPP.
Wong v. Wong, No. A154286 (D1d1 Dec. 13, 2019)
C.W. Howe Partners v. Moordian, No. B290665 (D2d7 Dec. 19, 2019)
Within the course of a few weeks, the Court of Appeal (a panel of the First District, and two Different panels of the Second) decided three cases addressed to whether the anti-SLAPP statute applies to a claim demanding a litigation based indemnity. That is, an equitable or contractual right to obtain compensation for defense costs or judgements from another party, sometimes even a counterparty in the underlying litigation.
Despite coming up different factual contexts, Wong and C.W. Howe basically come out the same door. Of course an indemnity requires something to indemnify against and a litigation indemnity requires a litigation. So, in a very superficial way, a litigation indemnity claim would not exist “but for” a litigation. That, however, does not mean the claim arises from the litigation. (The are some cases, including a case called Lennar Homes, that suggest otherwise, but the Court in C.W. Howe refers to the logic applied in those cases as “facile.”) Applying the framework in the Supreme Court’s decision in Park, the arising from test is met only when protected conduct forms an essential element of the claim. If that’s not the case, other protected-type conduct can show up in the case as evidence, without the arising from test being satisfied.
Looking at the elements, Wong and C.W. Howe say this is an evidence, not an elements, situation. A contractual indemnity is just based on a contract and a refusal to pay. And an equitable indemnity claim arises from being a co-tortfeasor in partial proportionate fault. Neither of those elements requires a litigation, so the fact that the costs or results of litigation are the subject of the compensation for is just evidence and not a fundamental element.
Williams comes out the other door. Mind you, the facts of Williams are pretty bad. She’s a contract environmental consultant for the Long Beach School District, helping with the development and environmental compliance with a school construction site, in which she discovered a contractor was dumping materials contaminated with arsenic. After Williams came down with arsenic poisoning, the District cut off her contract. Williams and her company sued for retaliation and for causing the poisoning. The District counterclaimed, arguing that Williams had an obligation to cover both defense costs and any judgment under an indemnification provision in her contract. Williams moved to strike the claim under the anti-SLAPP statute.
Unlike C.W. Howe and Wong, however, the Williams court found the analysis in Lennar to be persuasive, because without her underlying claim, the indemnification claim would have “no basis.” But the court hedges a little and also finds that even if the case did not arise from Williams’ lawsuit, it arose from Williams’ unwillingness to fund the District’s lawsuit. According to the Court, a “refusal to fund the defense of ones own litigation—and the defense of a co-plaintiff’s claims arising from the same facts—is conduct in furtherance of the litigation” under Code of Civil Procedure § 425.16(e)(4). And since the litigation is about arsenic contamination at a school site, the Court finds that it was a matter of public interest.
Moreover, since the indemnification agreement—requiring Williams to pay for the defense and any judgment arising from her own lawsuit—was unconscionable, the district had no probability of prevailing.
* * *
This feels like another one where bad facts make bad law. C.W. Howe and Wong pretty clearly have the better side of the Lannar argument. If an indemnity
“arises from” the litigation to be indemnified, every insurance coverage dispute is a SLAPP.
So far as the (e)(4) issue goes, the cases are clear that funding litigation can be “in furtherance.” But refusing to advance or indemnify under a commercial indemnification contract doesn’t seem very expressive. Do corporations really have a first amendment right not to advance litigation expenses in D&O claims? The public interest analysis here also seems a little short shrift and inconsistent with the structure set up in the Supreme Court's FilmOn analysis. Is the expression at issue about arsenic contamination in public schools? Or about whether Williams needed to fund the District’s defense in such a litigation?
Mind you, the Court is certainly right that the indemnification provision in Williams’ contract is unenforceable, for any number of reasons—unconscionability, public policy, illegality, etc. But that doesn’t necessarily make the District’s cross-claim a SLAPP.