California employers face tricky rules regarding their pre-litigation ability to notify customers of a departed employee’s bad acts. Employers wish to avoid sparking counterclaims for defamation or interference with the employee’s new business prospects. While such counterclaims are often struck down under California’s Anti-SLAPP law—which allows defendants to dismiss claims seeking to chill the exercise of constitutional free speech rights, including writings in connection with a civil litigation—there has been no magic line demarcating which pre-litigation customer communications are “safe” from counter-suit. However, a recent California Court of Appeal decision has provided some guidance on where such a line should be drawn.
In Neville v. Chudacoff, 160 Cal. App. 4th 1255 (2008), a California employer terminated an employee in December of 2004 for allegedly misappropriating customer lists and soliciting customers to start a competing enterprise. Several months later, in May of 2005, the employer’s in-house counsel sent a letter to its customers notifying them of these accusations. The letter further expressly indicated that the employer intended to commence litigation against the former employee and suggested that customers should refrain from doing business with the former employee to avoid potential involvement in the ensuing litigation. When the employer then filed its suit in September 2005, the employee filed a cross-complaint for defamation.
The Court of Appeal held that, even though litigation had not yet commenced at the time the letter was sent and, in fact, was not filed until four months after that letter, the letter constituted a communication “in connection with an issue under consideration or review by a judicial body,” within the meaning of California’s Anti-SLAPP statute. The letter fell within the statute because (1) it directly related to the employer’s claims against the employee, and (2) the employer was “seriously and in good faith contemplating litigation” against the employee. Because the former employee failed to show a likelihood of success on the merits the court granted the employer’s motion to strike the defamation claim.
California district courts have already followed Neville, including most recently in American National Red Cross v. United Way California Capitol Region, No. Civ. S-07- 1236, 2008 U.S. Dist. LEXIS 43055 (E.D. Cal. May 30, 2008). There, the parties were in ongoing negotiations regarding lease disputes, and the Red Cross filed suit in June of 2007. The United Way counterclaimed for tortious interference based on statements that the Red Cross had made several months earlier regarding the validity of United Way’s property ownership options. The district court determined that the Red Cross’s statements since February of 2007 were “in connection with an issue under consideration or review by a judicial body” for a suit later filed in June of 2007. The limited factual record before the Court in making this determination is interesting: the Red Cross had submitted a declaration regarding the starting period of its good faith contemplation of litigation and, with little else apparently on the record, the Court found there was no reason to doubt such anticipation. As in Neville, because the counterclaimant in turn could not show that they would have succeeded on the claim, it was properly stricken.
While the safe zone of pre-litigation customer contact will never be certain, Neville has set forth important guidelines for when such communications might be permitted and what they should convey, which should always be subject to counsel’s advice.