On April 17, 2013, the Ninth Circuit issued an important anti-SLAPP decision in Makaeff v. Trump University, LLC, No. 11-55016 that raises the bar for parties seeking to defeat a California anti-SLAPP motion in District Court.  Businesses, in particular, frequently confront an anti-SLAPP motion when they file a counter-claim against a dissatisfied customer who has made perceived defamatory statements.  These statements are increasingly being communicated through blogs and Internet posts to accuse the business of fraudulent, unlawful, or unfair business practices.  Makaeff provides guidance on how customers’ and businesses’ use of these ubiquitous forms of communication may impact the outcome of the anti-SLAPP motion.  The Ninth Circuit concluded that vigorous use of these media to post complaints or advertise can raise a businesses’ burden in opposing an anti-SLAPP motion by transforming the business into a limited purpose public figure.

The facts in Makaeff are in many respects unremarkable.  Donald Trump is the founder and CEO of Trump University, LLC, a for-profit enterprise offering courses focused on the real estate industry.  Trump University utilized an aggressive advertising campaign, including on-line advertising, to promote its curriculum.  In the process, it generated significant controversy, particularly given the sub-prime mortgage crisis over the past several years.  Plaintiff Makaeff invested over $34,000 in Trump University’s “Gold Elite Program” to gain the full measure of Trump University’s real estate investment training.  Makaeff became dissatisfied and asked for a tuition refund, which Trump University declined.  As a result, Makaeff embarked on a letter-writing campaign to the Better Business Bureau and made frequent postings on Internet message boards detailing her dispute and accusing the institution of fraudulent, deceptive, and unfair business practices.

In April 2010, Makaeff filed a class action against Trump University in the United States District Court for the Southern District of California.  In response, Trump University counter-claimed for defamation.  Makaeff replied to the defamation claim with a motion to strike pursuant to California’s anti-SLAPP statute, California Code of Civil Procedure section 425.16.  The District Court held that Makaeff’s suit arose from protected conduct under the anti-SLAPP statute, and that Trump University was not a public figure.  Trump University was therefore able to demonstrate a reasonable probability of prevailing on the merits of its defamation claim without having to prove “actual malice.”  The District Court denied Makaeff’s anti-SLAPP motion, and Makaeff appealed.  The Ninth Circuit reversed.

At the outset, the Ninth Circuit agreed with the District Court’s assessment that Trump University’s defamation claim arose from an act in furtherance of Makaeff’s free speech rights.  Relying on Cal. Civ. Proc. Code section 425.16(e)(4), the Ninth Circuit agreed that Makaeff made her Internet postings and wrote her letters in connection with an issue of public interest because the statements provided “consumer protection information.”  Trump University unsuccessfully argued that her accusations merely addressed her private concerns rather than any interest in advancing the public good.  In the eyes of the Court, the fact that Makaeff broadly published statements on the Internet and infused them with language that on its face apparently sought to alert other consumers about her experience with Trump University sufficiently qualified her complaints as matters of general interest rather than merely the iteration of a private dispute with Trump University.

More problematic for Trump University, however, was the Ninth Circuit’s conclusion that Trump University was a limited purpose public figure and therefore required to demonstrate it could establish by clear and convincing evidence that Makaeff made her allegedly defamatory statements with actual malice.  The Court rejected the proposition Donald Trump’s fame and close association transformed Trump University into an all-purpose public figure.  However, Trump University’s vigorous advertising about its program rendered it a limited purpose public figure.  Of particular importance to the Court was the direct relationship between Trump University’s aggressive advertising campaign and Makaeff’s allegedly defamatory statements, “which reflects Trump University’s pre-existing involvement in this particular matter of public concern and controversy.”  In reaching this conclusion, the Ninth Circuit aligned itself with the Third and Fourth Circuits, concluding that “large-scale, aggressive advertising can inject a person or entity into a public controversy that arises from the subject of that advertising.  And in so doing, they become limited purpose public figures.”

By focusing on Trump University’s advertising campaign as the basis for determining its limited public figure status, the Ninth Circuit expressly rejected the California Supreme Court’s reasoning in Vegod Corp. v. American Broadcasting Cos., 25 Cal.3d 763 (1979), and other California cases holding that aggressive advertising of a message involving a public controversy cannot render an entity a limited public figure.  Even though the Ninth Circuit addressed a state law claim in assessing the District Court’s denial of Makaeff’s anti-SLAPP motion, it expressly declined to follow what was arguably controlling California authority on the question of whether a company’s advertising could turn a business into a limited purpose public figure.

Makaeff provides several significant guidelines for parties confronting California’s anti-SLAPP statute.  First, a plaintiff with claims of fraud and deceptive practices who might anticipate a counter-suit for defamation would be well served to broadly publicize its claims of misleading conduct on Internet message boards and the like, and include ample language couching the accusations with concerns for the public good and efforts to protect the interests of the consumer.  Second, for defendants, an aggressive advertising campaign that generates controversy can, at least in the Ninth Circuit, transform the company into a limited purpose public figure and thus saddle itself with an actual malice standard to prove a defamation claim and to defeat an anti-SLAPP motion.  Finally, in potential District Court actions involving California state law defamation claims, the conventional wisdom that federal court is more hospitable for a corporate defendant needs to be closely assessed, especially where it is the company’s advertising that fueled the controversy because in the Ninth Circuit, advertising can transform a company into a limited purpose public figure.

If you have any questions, please contact Robert Bleicher at: (650) 342-9600 or rbleicher@carr-mcclellan.com.