DURACRAFT CORPORATION v. HOLMES PRODUCTS CORPORATION

MARSHALL, J.

We are asked to determine whether the defendants' special motions to dismiss pursuant to G. L. c. 231, § 59H, commonly referred to as the anti-SLAPP statute, are applicable to the plaintiff's claim that the defendant, Francis E. Marino, breached a confidentiality agreement with it, and other related claims, and if so, whether the statutory procedure for early dismissal of such claims is constitutional. We conclude that the Legislature did not intend the anti-SLAPP statute to apply to claims such as those in this case, a result also reached by the Appeals Court in a thoughtful opinion. See Duracraft Corp. v. Holmes Prods. Corp., 42 Mass.App.Ct. 572 (1997). We affirm the judge's interlocutory order denying the defendants' special motions to dismiss the complaint.

1. We summarize the undisputed background facts to the controversy. The plaintiff, Duracraft Corporation (Duracraft), and the defendant, Holmes Products Corporation (Holmes), are direct competitors supplying the market for consumer home appliances. The two companies also are adversaries in adjudicatory proceedings before the Trademark Trial and Appeal Board (TTAB).2 From 1987 to mid-1990, Marino was employed as a senior executive for Holmes. He subsequently was employed by Duracraft from August, 1990, to August, 1994, and was then again employed by Holmes in December, 1995.

On August 6, 1990, shortly after he was hired by Duracraft, Marino executed a "Nondisclosure and Non-Competition Agreement" with Duracraft. The agreement bound Marino to hold confidential information concerning Duracraft's products and processes, except "upon the lawful demand of any governmental agency (including court process)." The agreement further provided that, prior to Marino's making any disclosure in the event of such a demand, "Duracraft shall have the opportunity to review and comment upon the Confidential Information requested and may participate with [Marino] in discussing with such agency concerning the scope and content of the requested Confidential Information." While at Duracraft, Marino was responsible for intellectual property matters, including litigation and applications for patents and trademarks. He served as Duracraft's liaison to counsel and as Duracraft's designated witness in the TTAB proceedings against Holmes.

In December, 1995, more than one year after he had left Duracraft, Marino was rehired by Holmes.3 On November 30, 1995, shortly before Marino rejoined Holmes, Holmes noticed Marino's deposition in the TTAB proceeding. Duracraft and Holmes offer divergent interpretations of discussions held between Marino and Holmes concerning Marino's deposition, Marino's reemployment with Holmes, any connection between these two events, and whether Duracraft had contemporaneous knowledge of Holmes's rehiring of Marino. After several postponements, Marino's deposition took place on February 7, 1996, by which time Marino was an employee of Holmes. Counsel for Duracraft was present at Marino's deposition and, in light of Marino's nondisclosure agreement with Duracraft, voiced a number of objections.4

On March 21, 1996, Duracraft filed the complaint that led to this appeal, alleging that Marino had breached his nondisclosure contract with Duracraft and his fiduciary duties to it by his testimony at the deposition and in his discussions with Holmes prior to the deposition.5 Duracraft alleged that Marino's disclosures also violated its attorney-client and work product privileges. Duracraft secured an ex parte temporary restraining order preventing Holmes from using Marino's deposition testimony in the underlying trademark proceeding. The restraining order was extended pending the defendants' filing, on April 17, 1996, of special motions to dismiss Duracraft's complaint, pursuant to G. L. c. 231, § 59H. After a hearing on May 9, 1996, the judge denied both Duracraft's request for a preliminary injunction and the defendants' special motions to dismiss, from which interlocutory order the defendants filed leave to appeal. On May 7, 1997, the Appeals Court affirmed the denial of the special motions to dismiss. 42 Mass.App.Ct. 572, 583 (1997). We granted the defendants' application for further appellate review.

2. General Laws c. 231, § 59H, inserted by St. 1994, c. 283, § 1, set out in relevant part in the margin,6 is popularly known as the "anti-SLAPP" law.7 It was enacted on December 29, 1994, and this case presents the first occasion in which we have considered the statute. Marino and Holmes contend that the deposition testimony given by Marino in the TTAB proceeding is "petitioning activity" protected under the statute, and that any claim by Duracraft based on the giving of that testimony is barred by the statute and must be dismissed. Duracraft counters that the anti-SLAPP statute was not intended to authorize dismissal of an otherwise valid claim, and that, if the statute was to be so construed, then it would violate Duracraft's own constitutionally protected right to petition a court for redress of its grievance.8

3. In the preamble to 1994 House Doc. No. 1520, the Legislature recognized that "full participation by persons and organizations and robust discussion of issues before legislative, judicial, and administrative bodies and in other public fora are essential to the democratic process, [and] that there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." In order that such "disfavored" litigation could "be resolved quickly with minimum cost to citizens who have participated in matters of public concern," the act amended G. L. c. 231, inserting § 59H, to provide a procedural remedy for early dismissal of the disfavored SLAPP suits.

One lawsuit appears to have been an impetus for introduction of the anti-SLAPP legislation.9 In 1991, fifteen residents of Rehoboth, concerned with the protection of wetlands draining into the Palmer River, signed a petition opposing a permit for construction of six single-family residences. The developer sued, and the Rehoboth petitioners said they had incurred more than $30,000 in legal fees before the suit was dismissed nine months later.10

The typical mischief that the legislation intended to remedy was lawsuits directed at individual citizens of modest means for speaking publicly against development projects. SLAPP suits have been characterized as "generally meritless suits brought by large private interests to deter common citizens from exercising their political or legal rights or to punish them for doing so." Wilcox v. Superior Court, 27 Cal.App.4th 809, 816-817 (1994), citing Pring, SLAPPs: Strategic Lawsuits Against Public Participation, 7 Pace Envtl. L. Rev. 3, 5-6, 9 (1989). The objective of SLAPP suits is not to win them, but to use litigation to intimidate opponents' exercise of rights of petitioning and speech. Id. SLAPP suits target people for "reporting violations of law, writing to government officials, attending public hearings, testifying before government bodies, circulating petitions for signature, lobbying for legislation, campaigning in initiative or referendum elections, filing agency protests or appeals, being parties in law-reform lawsuits, and engaging in peaceful boycotts and demonstrations." Pring, supra at 5.

The Justices of the Supreme Court of New Hampshire issued an advisory opinion on proposed anti-SLAPP legislation and observed that "[i]dentifying SLAPPs, which typically appear as ordinary lawsuits, presents difficulties." Opinion of the Justices, 138 N.H. 445, 449 (1994). The New Hampshire Justices then recited objective identifying features: the implication of a defendant's constitutional speech and petitioning rights; the filing of limited types of legal claims; and certain types of persons or organizations who file SLAPP suits. Id. Professors Pring and Canan set out four SLAPP suit criteria: (1) a civil complaint or counterclaim (for monetary damages or injunction); (2) filed against nongovernmental individuals or groups; (3) because of their communications to a government body, official, or the electorate; and (4) on an issue of some public interest or concern. Pring, supra at 8.

The legislative history in Massachusetts demonstrates that in response to the problem of SLAPP suits the Legislature intended to enact very broad protection for petitioning activities. The Governor, in letters explaining his vetoes of anti-SLAPP bills passed in two successive legislative terms, suggested that the bills, as written, applied "to a broad group of potential claims, sweeping in cases that are far beyond the types of lawsuits which the bill's proponents wish to control." See 1994 House Doc. No. 5604. The Governor's letter regarding 1994 House Doc. No. 3033, an earlier version of the bill, recognized that the statute shifted the normal burden of proof on a motion to dismiss, but went further by erecting "a nearly insurmountable barrier to a suit, thereby transforming the law and creating an absolute privilege for the right to petition, for the first time," citing McDonald v. Smith, 472 U.S. 479 (1985) (right of petition not absolutely privileged). The Legislature rejected a proposed alternative bill offered by the Governor and legislative opponents, and overrode the Governor's second veto. 1994 Senate J. 1491; 1994 House J. 1306.

We are dubious that the Legislature intended to create an absolute privilege.11 We also see no evidence that the statute was intended to reach suits such as this one between two corporate competitors involved in other ongoing litigation, where the special motion may have been deployed not to limit "strategic litigation," but as an additional litigation tactic. In the statute as enacted, the Legislature, however, did not address concerns over its breadth and reach, and ignored its potential uses in litigation far different from the typical SLAPP suit.

In trying to fashion a properly supported way to narrow the statute, the Superior Court judge in this case relied on the House floor debates and on anti-SLAPP statutes enacted in other jurisdictions,12 and concluded that the Massachusetts anti-SLAPP statute was designed to protect "citizens sued for speaking out on issues of public concern."13 The judge ruled that Marino's deposition testimony was not protected by the statute because the trademark dispute between Duracraft and Holmes was not a matter of public concern. Duracraft Corp. v. Holmes Prods. Corp., 42 Mass.App.Ct. 572, 574-575 (1997). The Appeals Court, however, traced amendments to predecessor bills and documented that the phrase "public concern" was struck from the bill before it was passed in final form. Id. at 578. The Legislature may have had many reasons for dropping the phrase, including a fear that courts might find disputes among abutting property owners of insufficient public concern to trigger the statute's protections.14 But despite expressions in the legislative debate about the need to protect the right of petition on matters of public concern, the phrase was removed from the text of the statute. Accordingly, we agree with the Appeals Court that it is inappropriate for a judge to "reinsert the rejected condition that the moving party's activity must involve a matter of public concern."15 Id. at 579, citing King v. Viscoloid Co., 219 Mass. 420, 425 (1914). Accord Bronstein v. Prudential Ins. Co., 390 Mass. 701, 706 (1984).

"SLAPPs are by definition meritless suits." Barker, Common Law and Statutory Solutions to the Problems of SLAPPs, 26 Loy. L.A. L. Rev. 395, 399 (1993). See Wilcox v. Superior Court, 27 Cal.App.4th 809, 816-817 (1994), citing Pring, SLAPPs: Strategic Lawsuits Against Public Participation, 7 Pace Envtl. L. Rev. 3 (1989). The merit of claims in other contexts is tested by whether there is support for the facts and contentions of law put forward. See Van Christo Advertising, Inc. v. M/A-COM/LCS, 426 Mass. 410, 416 (1998); Bird v. Bird, 24 Mass.App.Ct. 362, 368 (1987) (stating standard for compliance with Mass. R. Civ. P. 11, 365 Mass. 753 [1974]). Such a test echoes the first prong of the anti-SLAPP statute's test to defeat a special motion to dismiss. The focus of the statutory test, however, is not on the plaintiff's claim, but rather on the petitioning activity that the special movant asserts bars the plaintiff's claim: unless the plaintiff can show that the special movant's petitioning activity is "devoid of any reasonable factual support or any arguable basis in law," the statute directs that the plaintiff's claim be dismissed.16 The Massachusetts statute makes no provision for a plaintiff to show that its own claims are not frivolous.

The statutory test's focus on the petitioning activity of the special movant alone may adequately test a claim solely "based on" the petitioning activity: a defamation claim, for example, can be tested by showing that the defendant's petitioning activity was devoid of factual or legal support and thus can overcome a presumption of qualified immunity. In this case, however, focusing on the defendants' petitioning activity and ignoring Duracraft's claims — that a contractual obligation precludes Marino's exercise of otherwise protected petitioning activity — fails to test fully whether Duracraft's claim lacks merit. Many preexisting legal relationships may properly limit a party's right to petition, including enforceable contracts in which parties waive rights to otherwise legitimate petitioning. A quintessential example of such a waiver is a settlement agreement, in which a party releases legal claims against an adversary that otherwise properly could be prosecuted by petitioning the court.17 But neither this example nor contractual or fiduciary relationships in general exhaust the conceivable occasions on which a party assumes obligations that in turn limit the party's subsequent free exercise of speech and petitioning rights. Furthermore, we are aware of no case that has immunized alleged breaches of such preexisting legal obligations based on constitutional protection for the right to petition, whether applying the POME standard (Protect Our Mountain Env't, Inc. v. District Court, 677 P.2d 1361 [Colo. 1984]) or otherwise; nor have we found cases dismissing such claims under anti-SLAPP statutes of other jurisdictions.

Despite the apparent purpose of the anti-SLAPP statute to dispose expeditiously of meritless lawsuits that may chill petitioning activity, the statutory language fails to track and implement such an objective. By protecting one party's exercise of its right of petition, unless it can be shown to be sham petitioning, the statute impinges on the adverse party's exercise of its right to petition, even when it is not engaged in sham petitioning.18 This conundrum is what has troubled judges and bedeviled the statute's application.19 In addition to its constitutional problems, the statute on its face alters procedural and substantive law in a sweeping way, as the motion judge noted in her memorandum of decision. "A matter may be within the letter of a statute and not come within its spirit, if the matter is beyond the mischief intended to be reached or if to include it would require a radical change in established public policy or in the existing law and the act does not manifest any intent that such a change should be effected." Commissioner of Corps. & Taxation v. Dalton, 304 Mass. 147, 150 (1939).

We must construe statutory provisions, when possible, to avoid unconstitutionality, id., and to preserve as much of the legislative intent as is possible in a fair application of constitutional principles. See Keniston v. Assessors of Boston, 380 Mass. 888, 905 (1980); Lowell v. Kowalski, 380 Mass. 663, 670 (1980). The Appeals Court attempted to rescue the statute by interpreting the statutory language "shall grant ... [the] special motion" as "may" grant it. Duracraft Corp. v. Holmes Prods. Corp., supra at 582 n.20. Rather than committing decisions on such special motions to dismiss wholly to judicial discretion, we prefer another construction.

Because the Legislature intended to immunize parties from claims "based on" their petitioning activities, we adopt a construction of "based on" that would exclude motions brought against meritorious claims with a substantial basis other than or in addition to the petitioning activities implicated. The special movant who "asserts" protection for its petitioning activities would have to make a threshold showing through the pleadings and affidavits that the claims against it are "based on" the petitioning activities alone and have no substantial basis other than or in addition to the petitioning activities.20 Once the special movant so demonstrates, the burden shifts to the nonmoving party as provided in the anti-SLAPP statute. See Wilcox v. Superior Court, 27 Cal.App.4th 809, 819 (1994). Such a showing by the special movant should serve to distinguish meritless from meritorious claims, as was intended by the Legislature.

Applying this construction to this case, Duracraft submitted to the court a copy of the nondisclosure agreement, which constitutes a substantial basis other than Marino's petitioning activity to support Duracraft's claims. The defendants' special motions therefore must fail. We need not resolve the remainder of the defendants' arguments in this appeal. Even though we hold that Marino may not avail himself of immunity derived from the anti-SLAPP statute, he has not lost recourse to other defenses. We leave to the Superior Court to determine whether the circumstances of Marino's deposition were legitimate and whether he may invoke any other basis for immunizing his deposition statements. The Superior Court, of course, must also determine the meaning of the terms of the contract between Marino and Duracraft, and whether Marino violated any of the contract's provisions.21

We affirm the judge's interlocutory order denying the defendants' special motions to dismiss the complaint against them and remand the case to the Superior Court for further proceedings on these and other pending issues between the parties.

So ordered.