Quidel Corporation v. Siemens Medical Solutions USA, Inc.

Opinion

5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 QUIDEL CORPORATION, Case No. 16-cv-3059-BAS-AGS 11 Plaintiff, ORDER GRANTING 12 PLAINTIFF’S SPECIAL MOTION TO STRIKE DEFENDANT’S 13 v. COUNTERCLAIMS 14 SIEMENS MEDICAL SOLUTIONS [ECF No. 141] USA, INC., et al., 15 Defendants. 16 17 18 Plaintiff Quidel Corporation filed a two-part Motion seeking to strike in part 19 and/or dismiss in part Defendant Siemens Healthcare Diagnostics, Inc.’s 20 counterclaims. The Court held oral argument on the Motion on September 17, 2019. 21 For the reasons discussed below, the Court GRANTS Quidel’s Motion to Strike. 22 I. Background 23 Plaintiff Quidel and Defendants Siemens Healthcare and Siemens Medical 24 Solutions USA, Inc. each manufacture and sell assays (blood tests) used for 25 measuring thyroid stimulating antibodies that, among other things, can aid in the 26 detection of Graves’ disease. Quidel sells the Thyretain Bioreporter TSI Assay 27 (“Thyretain”), and Defendants sell the IMMULITE 2000/2000 XPi TSI Assay 1 Quidel brings suit against Defendants for Lanham Act false advertising, 2 statutory unfair competition and false advertising, and intentional interference with 3 prospective economic advantage. Quidel alleges Thyretain is intended “for the 4 qualitative detection in serum of” thyroid-stimulating immunoglobins, or “TSI.” 5 Quidel alleges Thyretain “is the only commercially available assay that detects TSI 6 only, as opposed to those that fail to differentiate between thyroid-stimulating and 7 thyroid-blocking immunoglobins [also known as “TBI”].” (First Amended 8 Complaint, “FAC,” ECF No. 12, ¶ 13.) Assays that are unable to differentiate 9 between TSI and TBI are called “TRAb” assays. 10 Defendants’ product IMMULITE is intended to compete with Thyretain. (Id. 11 ¶ 14.) Defendants advertised IMMULITE on their website as detecting TSI only. 12 Quidel alleges Defendants failed to disclose that IMMULTE “also detects thyroid- 13 blocking antibodies, which may lead to misdiagnosis.” (Id. ¶ 15.) Therefore, Quidel 14 alleges Defendants engaged in false advertising because IMMULITE does not detect 15 TSI “only” but may also detect TBI. “[W]here blocking antibodies are present, the 16 inability of the IMMULITE Assay to distinguish between blocking antibodies and 17 stimulating antibodies can result in false positives, i.e., an erroneous Graves’ 18 diagnosis.” (Id. ¶ 17.) Quidel raised these concerns with Defendants, and 19 Defendants removed the term “only” from various marketing statements. (Id. ¶ 20.) 20 However, Quidel alleges Defendants did nothing to correct the prior false statements 21 and continues to describe IMMULITE in a false and misleading manner. (Id.) 22 Quidel alleges it has suffered damages from the statement that IMMULITE 23 detects “TSI only.” IMMULITE is less expensive and faster than Thyretain. (Id. 24 ¶ 21.) By selling IMMULITE for less than Thyretain, Defendants are “promoting 25 the ability of customers to capture more of the difference between Medicare 26 reimbursement for a true TSI only assay (Thyretain) and the cost of the IMMULITE 27 Assay (not a true TSI only assay).” (Id. ¶19.) Further, a laboratory that had 1 Plaintiff in the amount of approximately $250,000.00 per year.” (Id. ¶ 22.) Quidel 2 has attempted to “educate customers” on the differences between the two assays, but 3 Quidel continues to suffer damages. (Id.) These damages and Defendants’ market 4 advantage resulting from the allegedly false advertising of IMMULITE are the basis 5 for Quidel’s suit. 6 Quidel’s original complaint was brought against Defendant Siemens Medical 7 Solutions USA, Inc. Siemens Medical moved to dismiss the complaint, and Quidel 8 filed a timely first amended complaint. The amended complaint added Siemens 9 Healthcare as a defendant. Both Defendants moved to dismiss the amended 10 complaint, and the Court denied the motion. Defendants answered the complaint but 11 later requested leave to file an amended answer and counterclaims. The Court 12 granted the motion. Defendants filed an amended answer, and within the answer, 13 asserted counterclaims on behalf of Siemens Healthcare. (ECF No. 124.)1 The 14 counterclaims are unfair competition, intentional interference with prospective 15 economic relations, trade libel, and abuse of process. The counterclaims are the basis 16 of the present Motion. 17 Quidel seeks to strike a portion of the counterclaims pursuant to California 18 Code of Civil Procedure § 425.16, commonly known as the Anti-Strategic Lawsuits 19 Against Public Participation (“Anti-SLAPP”) law. 20 II. Legal Standard 21 California’s anti-SLAPP statute is intended to “provide a procedural remedy 22 to dispose of lawsuits that are brought to chill the valid exercise of constitutional 23 rights.” Rusheen v. Cohen, 37 Cal. 4th 1048, 1055–56 (2006). The Anti-SLAPP 24 law, provides in relevant part: 25 A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the 26 27 United States Constitution or the California Constitution in connection 1 with a public issue shall be subject to a special motion to strike, unless 2 the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim. 3 4 Cal. Civ. Proc. Code § 425.16.2 5 Courts apply a two-part test to determine whether an action is subject to an 6 anti-SLAPP special motion to strike. Navellier v. Sletten, 29 Cal. 4th 82, 85, 88 7 (2002). First, the moving party must establish that “the challenged cause of action is 8 one arising from protected activity.” Id. Once the party makes a threshold showing 9 that the act in question is protected, the burden shifts to the non-moving party. To 10 resist the special motion to strike, the non-moving party must establish “a probability 11 of prevailing on the claim.” Id. The level of proof the Court requires under this step 12 is discussed infra. 13 III. Analysis 14 A. Timeliness of the Motion 15 The parties address the timeliness of the present Motion only in passing 16 footnotes, but the timeliness of an anti-SLAPP motion in federal court is an issue that 17 deserves more than a footnote. Siemens notes the Motion was filed 17 days after 18 Siemens filed its amended answer and counterclaims. (“Opp’n,” ECF No. 157, at 14 19 n.10.) Siemens cites Meredith v. Weilburg, where the court held a response to an 20 amended pleading must be filed within 14 days. No. 3:13-cv-277-RCJ-WGC, 2014 21 WL 3697111, at *3 (D. Nev. July 23, 2014) (citing Fed. R. Civ. P. 15(a)(3)). Siemens 22 therefore argues Quidel’s Motion is untimely. In response, Quidel merely 23 distinguishes the facts of Meredith from those of this case. (Reply 6 n.1.) 24 The anti-SLAPP statute provides that the motion “may be filed within 60 days 25 26 2 Although anti-SLAPP motions are usually filed by defendants seeking to strike complaints, they 27 can also arise when plaintiffs seek to strike cross-complaints. See Cal. Civ. Proc. Code § 425.16(h). 1 of the service of the complaint or, in the court’s discretion, at any time upon terms it 2 deems proper.” Cal. Civ. Proc. Code § 425.16(f). But this 60-day deadline is a 3 procedural rule under the Erie doctrine that can conflict with the Federal Rules of 4 Civil Procedure. See Sarver v. Chartier, 813 F.3d 891, 900 (9th Cir. 2016) (following 5 “our own rules of procedure” (i.e. Rule 56) rather than the anti-SLAPP timing rules). 6 “For purposes of the Federal Rules of Civil Procedure, a motion brought on 7 anti-SLAPP grounds can either be analogous to a motion to dismiss or a motion for 8 summary judgment.” Clifford v. Trump, 339 F. Supp. 3d 915, 922 (C.D. Cal. 2018). 9 Quidel’s Motion is analogous to a motion to dismiss because Quidel moves to 10 strike/dismiss the counterclaims based on legal arguments. In contrast, Quidel is not 11 “providing alternate facts to challenge the allegations” in the counterclaims, so the 12 motion is not analogous to a motion for summary judgment. Id. (citing Planned 13 Parenthood Fed’n of Am., Inc. v. Ctr. for Med. Progress, 890 F.3d 828, 834 (9th 14 Cir.), amended, 897 F.3d 1224 (9th Cir. 2018)). 15 A motion to dismiss must be filed within 21 days of service. Fed. R. Civ. P. 16 12(a). The present Motion to Strike was filed 17 days after service of the 17 counterclaims, thus, the Motion is timely. The Court now turns to the merits of the 18 Motion. 19 B. Protected Activity 20 Quidel has the initial burden to establish its actions alleged in the 21 counterclaims arise from protected activity. Braun v. Chronicle Publ’g Co., 52 Cal. 22 App. 4th 1036 (1997). A “‘cause of action . . . arising from’ means simply that the 23 [plaintiff’s] act underlying the [defendant’s] cause of action must itself have been an 24 act in furtherance of the right of petition or free speech.” City of Cotati v. Cashman, 25 29 Cal. 4th 69, 78 (2002). The anti-SLAPP statute’s “definitional focus” for this 26 issue is not on the cause of action but rather on the “[plaintiff’s] activity that gives 27 rise to [its] asserted liability—and whether that activity constitutes protected speech.” 1 Siemens’ criticism of Quidel’s conduct begins well before this litigation 2 began, and extends well beyond the filing of the complaint. Siemens alleges Quidel 3 has “long engaged” in reimbursement fraud before Siemens entered the market. 4 (Amended Answer and Counterclaims, “CC,” ECF No. 124, at ¶ 3.) Then, once 5 Siemens’ IMMULITE assay became available, Quidel “peppered laboratories and 6 physicians” with false information about the assays. (Id. ¶¶ 6, 7.) Quidel then 7 “redoubled its efforts to disparage Siemens” and its assay “by bringing this action” 8 and later by filing an amended complaint (“FAC”). (Id. ¶¶ 9, 10.) Quidel sent its 9 complaint to one of the parties’ customers and also made false allegations about 10 Siemens in letters sent to “up to ten thousand physicians.” (Id. ¶ 11.) Quidel also 11 allegedly asserted untrue claims of false advertising in its initial disclosures and 12 sworn interrogatory responses. (Id. ¶ 62.) 13 But Quidel does not assert that all of the above actions arise from protected 14 activity. (Mot. at 11.) Quidel alleges the following conduct arises from protected 15 activity: 16 (a) Quidel’s commencement and prosecution of this case; (b) allegations contained within Quidel’s original Complaint and the FAC; 17 (c) statements made in Quidel’s initial disclosures and interrogatory 18 responses; (d) republication of Quidel’s original Complaint and the FAC to non-participating third parties; and (e) statements made to non- 19 participating third parties about this case. 20 21 (Id. at 3.) 22 The Court addresses each category of conduct to determine whether it is 23 protected activity.3 24 25 3 Siemens dedicates one paragraph to arguing that Quidel’s conduct does not arise from protected activity. (Opp’n at 17–18.) Siemens argues Quidel’s wrongful activity began before it filed its 26 pleading, and not the other way around. (Id. at 18.) But the language “arises from” does not mean that the Court focuses on the chronological history of events. “A claim arises from protected 27 activity when that activity underlies or forms the basis for the claim.” Park v. Bd. of Trustees of 1 1. Quidel’s commencement and prosecution of this case and the 2 allegations contained within Quidel’s complaint and FAC 3 Protected activity includes “any written or oral statement or writing made 4 before a . . . judicial proceeding.” Cal. Civ. Proc. Code § 415.16(e)(1). Quidel’s 5 actions in filing its complaint, amended complaint, and other filings with this Court 6 are protected activities. See Rusheen, 37 Cal. 4th at 1056 (holding protected activity 7 includes “communicative conduct such as the filing, funding, and prosecution of a 8 civil action”); Navellier, 29 Cal. 4th at 90 (holding a claim for relief filed in federal 9 district court is protected activity). The allegations within the complaints also 10 constitute protected speech. 11 2. Statements made in Quidel’s initial disclosures and interrogatory 12 responses 13 The counterclaims also assert that Quidel falsely asserted in its initial 14 disclosures and sworn interrogatory responses that a laboratory decided to purchase 15 IMMULITE over Thyretain because of Siemens’ advertising. (CC ¶ 62.) 16 As noted above, any written statement made before a judicial proceeding 17 constitutes protected activity. Cal. Civ. Proc. Code § 415.16(e)(1). Protected activity 18 also includes any writing “made in connection with an issue under consideration or 19 review by a . . . judicial body.” Id. at subsection (e)(2). Section 425.16 is “construed 20 broadly” to protect litigants’ “freedom of access to courts without the fear of being 21 harassed subsequently by derivative tort actions.” Healy v. Tuscany Hills Landscape 22 & Rec. Corp., 137 Cal. App. 4th 1, 5 (2006). Discovery responses have been 23 determined to be protected activity because they are made in litigation and directed 24 to persons having an interest in that proceeding. Crossroads Inve’rs, L.P. v. Fed. 25 Nat’l Mortg. Ass’n, 13 Cal. App. 5th 757, 778–79 (2017). 26 27 moves to strike only some of the allegations, and argues its conduct arose only in part from 1 The Court finds this discovery-related conduct is protected activity pursuant 2 to California Code of Civil Procedure § 415.16(e)(2) as writing made in connection 3 with this litigation. The initial disclosures and responses were made during discovery 4 in this action and were directed to the defendant in the case, who is a party having an 5 interest in this proceeding. Therefore, the conduct is protected. 6 3. Republication of Quidel’s complaint and FAC to non- 7 participating third parties and statements made to non- 8 participating third parties about the case 9 Various counterclaims assert that Quidel sent presentations and letters to 10 customers regarding the two assays and also sent a copy of the complaint to one of 11 the parties’ largest customers. (CC ¶¶ 6, 11.) Quidel argues this constitutes protected 12 activity. (Mot. at 12.) 13 Protected activity includes conduct in furtherance of the defendant’s 14 constitutional right of petition or free speech in connection with a public issue.” 15 Fremont, 198 Cal. App. 4th at 1167 (citing Cal. Civ. Pro. § 425.16(b)(1)). This 16 includes a writing made “in connection with an issue under consideration” by a court. 17 Cal. Civ. Pro. § 425.16(e)(2). “A statement is ‘in connection with’ an issue under 18 consideration by a court in a judicial proceeding . . . if it relates to a substantive issue 19 in the proceeding and is directed to a person having some interest in the proceeding.” 20 Id.; see also Graham-Sult v. Clainos, 756 F.3d 724, 740 (9th Cir. 2014) 21 (“Communicating about the subject matter of litigation to a person with an interest 22 in the litigation is a protected activity.” (citing Fremont, 198 Cal. App. 4th at 1167)). 23 Quidel broadly argues, with no explanation, that the physicians and customers 24 to whom Quidel sent the complaint have “some interest in this proceeding” and 25 therefore communication directed at them is protected. (Mot. at 12.) In Youngevity 26 International Corp. v. Smith, Youngevity issued a press release to a trade publication 27 announcing the initiation of the litigation. No. 16-cv-704-BTM-JLB, 2017 WL 1 part sub nom. Youngevity Int’l Corp. v. Andreoli, 749 F. App’x 634 (9th Cir. 2019). 2 Youngevity was “a publicly traded corporation and the press release was sent to a 3 trade publication and read by individuals in the multi-level marketing community.” 4 Id. Judge Moskowitz found the press release constituted protected speech because it 5 was made “in connection with” the litigation and targeted at those with “some interest 6 in the proceeding.” On appeal, the Ninth Circuit did not specifically address what 7 constitutes having “some interest in the proceeding.” Youngevity Int’l Corp. v. Smith, 8 749 F. App’x 634, 635 (9th Cir. 2019). But the panel found that the actions of 9 republishing the complaint and disseminating a press release to distributors and the 10 marketing community constituted protected speech. 11 Here, Quidel sent the complaint and its allegations regarding the parties’ 12 products to customers and clients. The Court finds that the customers and those 13 buying products from a pharmaceutical company have at least “some” interest in the 14 litigation regarding those products. For example, if the Court were to determine that 15 a product was falsely advertised, the purchasers of that product would be interested 16 in such a finding. Therefore, Quidel’s actions of republishing the complaint and 17 sending letters to third parties regarding the subject of this litigation are protected 18 activities. 19 In sum, all of the conduct presented in the Motion to Strike is protected 20 activity. Normally, the Court would now turn to the second step in the anti-SLAPP 21 analysis. Once a court determines conduct is protected activity, this means it is the 22 proper subject of a motion to strike, and the moving party must next prove they are 23 likely to prevail on their claims. However, Siemens argues that even if the conduct 24 is protected activity, Siemens is exempt from anti-SLAPP coverage under an 25 exception. 26 C. Commercial Speech Exception 27 Even if the claims are partially based on allegations of Quidel’s protected 1 commercial speech exemption to the anti-SLAPP statute. 2 The commercial speech exception, codified at California Code of Civil 3 Procedure § 425.17, removes from anti-SLAPP coverage “disputes that are purely 4 commercial.” Taheri Law Grp. v. Evans, 160 Cal. App. 4th 482, 491 (2008). The 5 purpose of the statute is to “immunize comparative advertising by retailers from the 6 special motion to strike statute.” Brill Media Co., LLC v. TCW Grp., LLC, 132 Cal. 7 App. 4th 324, 348 (2005) (Mosk, J. dissenting). For the exemption to apply, Siemens 8 Healthcare must demonstrate: (1) that Quidel is “primarily engaged in the business 9 of selling or leasing goods or services”; (2) that the challenged claims arise “from a 10 statement or conduct by [Quidel] consisting of representations of fact about 11 [Quidel’s] or a business competitor’s business operations, goods, or services”; (3) 12 that Quidel’s statement was made “for the purpose of obtaining approval for, 13 promoting, or securing sales or leases of” its goods or services or “in the course of 14 delivering” the goods or services; and (4) that Quidel’s intended audience was “an 15 actual or potential buyer or customer[.]” See Weiland Sliding Doors & Windows, 16 Inc. v. Panda Windows & Doors, LLC, 814 F. Supp. 2d 1033, 1036–37 (S.D. Cal. 17 2011); Simpson Strong-Tie Co. v. Gore, 49 Cal. 4th 12, 30 (2010). The exception is 18 to be narrowly construed. Simpson, 49 Cal. 4th at 22. Siemens has the burden to 19 prove the exception applies. Id. at 26. 20 Siemens argues it has satisfied the four conditions, namely: (1) Quidel is 21 primarily engaged in the business of selling a medical device; (2) the counterclaims 22 arise from Quidel’s representations regarding Thyretain’s and IMMULITE’s 23 performance and quality; (3) Quidel’s communication was directed at laboratory 24 customers and laboratories to promote the purchase and use of Thyretain; and (4) 25 Quidel’s audience was actual or potential laboratory customers and the physician 26 community. (Opp’n at 14–15.) 27 Quidel disagrees and disputes the third and fourth element. Quidel argues the 1 complaint, amended complaint, initial disclosures, and interrogatory responses) 2 because the statements were not made “for the purpose of obtaining approval for, 3 promoting, or securing sales or leases of, or commercial transactions in, Quidel’s 4 goods or services or in the course of delivering Quidel’s goods or services, and the 5 intended audience was the Court and Siemens.” (“Reply,” ECF No. 181, at 5.) 6 Clearly, there is a distinction between the various forms of conduct alleged in 7 the counterclaims. It appears to be unsettled as to whether the commercial speech 8 exception can be applied to portions of a mixed cause of action. See Cal. Civ. Proc. 9 Code § 425.17(c) (the anti-SLAPP statute does not apply to certain commercial 10 “cause[s] of action”). But the California Supreme Court in Baral determined that the 11 Legislature, in using the term “cause of action” in section 425.16, “had in mind 12 allegations of protected activity that are asserted as grounds for relief.” 1 Cal. 5th 13 at 395. The Legislature intended to indicate “that particular alleged acts giving rise 14 to a claim of relief may be the object of an anti-SLAPP motion.” Id. The Supreme 15 Court therefore found it appropriate to look at allegations within a cause of action. 16 This Court finds it most logical that the same interpretation should be applied to the 17 use of the phrase “cause of action” in section 425.17(c) and will review each 18 allegation of protected activity to determine whether it falls into the exception. 19 The Court first addresses the conduct of Quidel sending copies of the 20 complaint and letters to laboratories and physicians. A similar situation arose in 21 Sharper Image Corp. v. Target Corp., 425 F. Supp. 2d 1056 (N.D. Cal. 2006). There, 22 the plaintiff sent emails to retailers advising them of the lawsuit and asking them not 23 to carry the defendant’s product. The purpose of the letters was to make sure the 24 retailers were aware of the litigation and to improve the plaintiff’s commercial 25 relationship with the retailers. Id. at 1075–76. The plaintiff moved to strike the 26 defendant’s counterclaims based on the conduct of sending the letters. The court 27 found the commercial speech exception applied to the conduct and denied the motion 1 Pro Inc., 152 Cal. App. 4th 1043, 1054 (2007), the court found that plaintiff’s act of 2 sending an email summarizing the litigation did not fall under the exception because 3 the email did not discuss the parties’ goods or services and was not sent to promote 4 goods, but was sent to provide the recipient with the plaintiff’s allegations. Id. The 5 court reasoned the plaintiff is not “in the ‘business’ of litigating clams” and the email 6 only discussed the litigation, not the goods of the plaintiff’s business. Id.; see Cal. 7 Civ. Proc. Code § 415.17(c) (for the exception to apply, the statement must consist 8 of “representations of fact about that person’s or a business competitor’s business 9 operations”). 10 This case is more similar to Sharper Image than to Contemporary Services. 11 Quidel sending its complaint and letters to physicians and laboratories (who are 12 customers) was done to promote the sale of Thyretain and provide Quidel’s opinion 13 regarding the competitive product IMMULITE. The letter to LabCorp provides that 14 Quidel filed a complaint against Siemens and that the complaint alleges that Siemens 15 has falsely advertised IMMULITE for various reasons. (ECF No. 157-1, at 5.)4 The 16 purpose of the letter was to encourage the clients not to carry or promote IMMULITE 17 and therefore to improve Quidel’s relationship and business with the clients. The 18 conduct alleged in the counterclaims that Quidel republished its complaint and FAC 19 to non-participating third parties and made statements to non-participating third 20 parties falls under the exception of section 425.17, and therefore does not fall under 21 anti-SLAPP coverage. 22 As to the remaining conduct (the filing of the complaint and making certain 23 allegations in the complaint, the initial disclosures, and the interrogatory responses), 24 the Court agrees with Quidel that the exception does not apply. Siemens has not met 25 26 4 The letter is attached to a declaration by defense counsel who declares that the attachment is a true and correct copy of a letter produced by Quidel during discovery. (ECF No. 157-1, ¶ 3.) In 27 analyzing anti-SLAPP motions, “the court shall consider the pleadings, and supporting and 1 its burden in establishing this conduct was done for the commercial purpose of 2 promoting Quidel’s goods. Instead it was done to commence a lawsuit against 3 Siemens and to proceed through litigation. Further, Siemens has not established that 4 the intended audience of the litigation activity was potential customers. The intended 5 audience of the complaint and discovery conduct was the Court or Siemens. See 6 Turk Beckstoffer Wines LLC v. Ultimate Distribs., Inc., 682 F. Supp. 2d 1003, 1012 7 (N.D. Cal. 2010) (finding the act of filing a lawsuit does not fall into the § 425.17(c) 8 exception). Therefore, the exception does not fully bar the anti-SLAPP suit, and the 9 relief sought in the counterclaims is based partially on allegations arising from 10 protected activity. 11 D. Mixed Causes of Action 12 As noted, Quidel does not move to strike the counterclaims in their entirety. 13 In fact, Quidel specifically moves to strike particular allegations within the 14 counterclaims. Thus, Quidel seems to admit that portions of the counterclaims are 15 not subject to strike. And the Court finds above that some allegations within the 16 counterclaims arise from protected activity. Although Siemens does not bring up the 17 issue in its briefing, the Court finds it important to analyze how to proceed in such a 18 case. 19 The anti-SLAPP statute allows for a special motion to strike against any “cause 20 of action” without further defining the term. Cal. Civ. Proc. Code § 425.16(b)(1). 21 The issue of what to do when a claim is “mixed”—meaning when it combines 22 allegations of protected activity with those of unprotected activity—was taken up by 23 the California Supreme Court. Baral v. Schnitt, 1 Cal. 5th 376, 381 (2016). The 24 court concluded that courts reviewing anti-SLAPP motions were to rule on “specific 25 claims of protected activity” rather than let litigants survive a motion to strike simply 26 because they pled a mixture of protected and unprotected activity. Id. at 393. At the 27 first step of the anti-SLAPP analysis, the moving party must identify all allegations 1 Allegations of unprotected activity are disregarded. 2 If the court determines relief is sought based on allegations arising from 3 protected activity, then the court turns to the second step. Id. The nonmoving party 4 has the burden to “demonstrate that each challenged claim based on protected activity 5 is legally sufficient and factually substantiated.” Id. If the party’s showing is not 6 sufficient to sustain a favorable judgment, “[a]llegations of protected activity 7 supporting the stricken claim are eliminated from the complaint, unless they also 8 support a distinct claim on which the plaintiff has shown a probability of prevailing.” 9 Id. at 396; see Youngevity Int’l Corp v. Andreoli, 749 F. App’x 634, 635 (9th Cir. 10 2019) (“[W]e separately consider each statement that [plaintiff] argues is 11 protected.”). 12 At oral argument, the Court asked the Parties how it should proceed at this 13 stage. Specifically, the Court finds that each cause of action contains allegations of 14 protected activity, but also allegations of unprotected activity. Although the 15 argument is not mentioned in its briefing, Defendant suggested the Court find that 16 the protected activity is “merely incidental” or “collateral” to the claims as a whole. 17 See Baral, 1 Cal. 5th at 394 (holding assertions that are “merely incidental” or 18 “collateral” are not subject to an anti-SLAPP motion). Defendant argued that the 19 allegations of protected activity “merely provide context” to the claims and therefore 20 nothing should be stricken. The Court disagrees. A large basis of the counterclaims 21 is the allegations that Plaintiff filed complaints, made certain allegations in the 22 complaints, and made disparaging and false remarks in discovery and in disclosures. 23 The Court cannot say that such allegations are collateral to the claims as a whole. 24 While it is true that the counterclaims allege Plaintiff engaged in unlawful activity 25 that occurred before the litigation began, that does not mean the litigation activity is 26 collateral to the claims as a whole. Instead, the allegations of protected activity are 27 an important part of the counterclaims, and the claims “rest on” this protected speech. 1 Therefore, the Court cannot ignore the allegations of protected activity on this basis, 2 and now turns to the second prong of the anti-SLAPP test. The Court will analyze 3 whether Defendant can “demonstrate that each challenged claim based on protected 4 activity is legally sufficient and factually substantiated.” Baral, 1 Cal. 5th at 392 5 (holding a claim “supported by allegations of protected and unprotected activity in a 6 single cause of action,” cannot “escape[] review if the [non-moving party] shows a 7 probability of prevailing on the allegations that are not covered by the anti-SLAPP 8 statute”). 9 E. Probability of Prevailing on the Claims 10 Because the Court has found that all four claims are based in part on 11 allegations arising from protected activity, the Court must now determine if the 12 “challenged claim[s] based on protected activity [are] legally sufficient and factually 13 substantiated.” Id. at 396. 14 In this second step, Siemens must show “a reasonable probability” of 15 prevailing on the challenged claims. Metabolife Intern., 264 F.3d at 840. The level 16 of proof that California anti-SLAPP law and the Federal Rules of Civil Procedure 17 require for this step has been disputed. But “if there is a contest between a state 18 procedural rule and the federal rules, the federal rules of procedure will prevail.” 19 Planned Parenthood Fed’n of Am., 890 F.3d at 834 (citing Hanna v. Plumer, 380 20 U.S. 460 (1965)). Therefore, the Court follows the holding from the Ninth Circuit: 21 When an anti-SLAPP motion to strike challenges only the legal sufficiency of a claim, a district court should apply the Federal Rule of 22 Civil Procedure 12(b)(6) standard and consider whether a claim is 23 properly stated. And, on the other hand, when an anti-SLAPP motion to strike challenges the factual sufficiency of a claim, then the Federal 24 Rule of Civil Procedure 56 standard will apply. 25 26 Id. Quidel challenges the legal sufficiency of the counterclaims in arguing that the 27 claims are barred by the litigation privilege and that Siemens fails to state a claim. 1 1. First Claim: Unlawful, Unfair, and Fraudulent Trade Practices 2 Quidel argues Siemens cannot prevail on this claim because the litigation 3 privilege bars the claim. The litigation privilege “may present a substantive defense 4 [the non-moving party] must overcome to demonstrate a probability of prevailing” 5 in the second step of the anti-SLAPP analysis. Flatley v. Mauro, 39 Cal. 4th 299, 6 323 (2006). 7 The purpose of California’s litigation privilege “is to afford litigants . . . the 8 utmost freedom of access to the courts without fear of being harassed subsequently 9 by derivative tort actions.” Silberg v. Anderson, 50 Cal.3d 205 (1990). The litigation 10 privilege applies to any communication “(1) made in judicial or quasi-judicial 11 proceedings; (2) by litigants or other participants authorized by law; (3) to achieve 12 the objects of the litigation; and (4) that ha[s] some connection or logical relation to 13 the action.” Mansell v. Otto, 108 Cal. App. 4th 265, 133 (2003). Moreover, “[a]ny 14 doubt about whether the privilege applies is resolved in favor of applying it.” 15 Kashian v. Harriman, 98 Cal. App. 4th 892, 913 (2002). 16 The privilege protects “any publication required or permitted by law in the 17 course of judicial proceedings to achieve the objects of the litigation.” Silberg, 50 18 Cal. 3d at 212. Even if it is alleged that a party “made misrepresentations in the 19 complaint, false statements in sworn discovery responses . . . and false allegations[,]” 20 the conduct is all covered by the litigation privilege. Butler v. Resurgence Fin., LLC, 21 521 F. Supp. 2d 1093, 1095 (C.D. Cal. 2007). Plaintiff’s actions of filing of a 22 complaint and other documents within a litigation are protected by the litigation 23 privilege. The conduct is protected activity, and because it falls under the litigation 24 privilege, Siemens has not shown it has a reasonable probability of prevailing on this 25 claim. 26 2. Second Claim: Intentional Interference with Prospective 27 Economic Relations 1 under California law are: (1) an economic relationship between the plaintiff and 2 another containing a probability of future economic benefit, (2) knowledge by the 3 defendant of the existence of the relationship, (3) intentional acts by defendant 4 designed to disrupt the relationship, (4) actual disruption of the relationship, and (5) 5 damages to the plaintiff proximately caused by the acts of the defendant. Della 6 Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 389 (1995). 7 Siemens alleges Quidel committed this tort by inducing Siemens’ prospective 8 and existing customers to sever their business relationships with Siemens. (CC ¶ 81.) 9 Quidel did so by engaging in acts protected by the litigation privilege. For the same 10 reasons as above, this claim is barred by the litigation privilege. Siemens has not 11 shown it has a reasonable probability of prevailing on this claim. 12 3. Third Claim: Trade Libel 13 California law defines trade libel as “an intentional disparagement of the 14 quality of property [or a product], which results in pecuniary damage. Erlich v. 15 Etner, 224 Cal. App. 2d 69, 73 (1964). The elements of trade libel are (1) a false 16 publication, (2) which induces others not to deal with the party, and (3) special 17 damages. Aetna Cas. & Surety Co. v. Centennial Ins. Co., 838 F.2d 346, 351 (9th 18 Cir. 1988). 19 In its trade label claim, Siemens alleges “Quidel has published in writing false 20 statements identifying Siemens that are disparaging to Siemens and the IMMULITE 21 TSI assay” and “Quidel knew that their [sic] published statements were false, or acted 22 in reckless disregard or negligence of the truth or falsity of the statements.” (CC 23 ¶¶ 84–85).) For the elements of trade libel, Siemens has alleged Quidel’s statements 24 are false, were intended to encourage purchase of Quidel’s product over Siemens’ 25 product, and Siemens suffered damages of legal fees, lost sales and customers, and 26 loss of reputation and goodwill. (CC ¶¶ 12, 70–74, 87.) Quidel argues Siemens has 27 not adequately alleged special damages. Rule 9(g) establishes that special damages 1 Siemens cites Swiss America Trading Corp. v. Regal Assets, LLC, No. CV 14- 2 4960 DDP (ASx), 2015 WL 631569, at *3 (C.D. Cal. Feb. 13, 2015), in arguing it 3 has adequately alleged special damages. There, the court found the defendant alleged 4 special damages when it alleged lost market share as the result of false online 5 reviews. The court reasoned that the party had pled its sales depend upon word of 6 mouth, so a false online review was “particularly important” and caused damages. 7 The Swiss America court appeared to accept the defendant’s sparse allegations in 8 finding defendant had sufficiently shown special damages. But the breadth of cases 9 require much more. 10 In Homeland Housewares, LLC v. Euro-Pro Operating LLC, No. CV 14-3954 11 DDP (MANx), 2014 WL 6892141, at *4 (C.D. Cal. Nov. 5, 2014), the plaintiffs 12 alleged special damages by alleging they suffered “general statements of economic 13 loss” and it requested $3 million total for all causes of action. The court held “to 14 recover damages based on general business loss, Plaintiffs ‘should have alleged facts 15 showing an established business, the amount of sales for a substantial period 16 preceding the publication, the amount of sales subsequent to the publication, [and] 17 facts showing that such loss in sales were the natural and probable result of such 18 publication[.]’” Id. (quoting Isuzu Motors Ltd. v. Consumers Union of U.S., Inc., 12 19 F. Supp. 2d 1035, 1047 (C.D. Cal. 1998)). Because the plaintiffs had only generally 20 alleged “lost sales, market share, and customer goodwill,” they had not adequately 21 alleged special damages for trade libel. Id.; see also Franklin Fueling Sys., Inc. v. 22 Veeder-Root Co., No. S-09-580 FCD/JFM, 2009 WL 2462505, at *5 (E.D. Cal. Aug. 23 11, 2009). Further, courts have held if the plaintiff alleges lost sales, it must “identify 24 particular customers and transactions of which it was deprived as a result of the 25 libel.” Mann v. Quality Old Time Serv., Inc., 120 Cal. App. 4th 90, 109 (2004). 26 Here, Siemens only broadly alleges that the “value of [its] assay, clinical 27 reputation, brand[,]” and goodwill will suffer immeasurable damage from the false 1 without providing any further detail. (Id. ¶¶ 79, 87.) As evidenced by the above case 2 law, this is insufficient to allege special damages. Siemens has not shown it has a 3 reasonable probability of prevailing on this claim. 4 4. Fourth Claim: Abuse of Process 5 The California abuse of process tort has two elements: “(1) an ulterior motive; 6 and (2) a willful act in the use of process not proper in the regular conduct of the 7 proceedings.” Drum v. Bleau, Fox & Assocs., 107 Cal. App. 4th 1009, 132 (Ct. App. 8 2003). Simply filing or maintaining a lawsuit—even with an improper motive—is 9 not actionable. Silver v. Gold, 211 Cal. App. 3d 17 (Ct. App. 1989). The tort must 10 involve a misuse of the power of the court, or “an act done under the authority of the 11 court for the purpose of perpetrating an injustice.” Younger v. Solomon, 38 Cal. App. 12 3d 289, 297 (1974). There must be “an improper act outside the scope of judicial 13 proceedings[,]” Carlock v. RMP Fin., No. 03-cv-688 W (AJB), 2003 WL 24207625, 14 at *2 (S.D. Cal. Aug. 5, 2003), because “maintenance of a lawsuit . . . is not a proper 15 basis for an abuse of process action.” Oren Royal Oaks Venture v. Greenberg, 16 Bernhard, Weiss & Karma, Inc., 42 Cal. 3d 1157, 1168 (1986). 17 Siemens clearly believes Quidel filed this lawsuit solely to deceive customers 18 and injure Siemens. (CC ¶ 90.) But filing a lawsuit and engaging in litigation is not 19 an “abuse” of the process, even though Siemens claims Quidel’s sole purpose in 20 doing so was to continue its ongoing disparagement scheme against Siemens. 21 Siemens has only alleged that Quidel has used litigation for an improper purpose, 22 and this does not show abuse of process. Therefore, Siemens has not shown it has a 23 reasonable probability of prevailing on this claim. 24 IV. Conclusion 25 The Court finds that all four counterclaims are based in part on allegations of 26 protected activity. And the Court finds that Siemens has not met its burden in 27 establishing it will prevail on the merits of any of the counterclaims. Therefore, the 1 ||Court GRANTS Quidel’s Motion to Strike.° 2 Siemens is granted leave to amend and may file new counterclaims omitting 3 the stricken material. See Verizon Delaware, Inc. v. Covad Commc’ns Co., 377 F.3d 4 || 1081, 1091 (9th Cir. 2004) (“[G]ranting a defendant’s anti-SLAPP motion to strike 5 plaintiffs initial complaint without granting the plaintiff leave to amend would 6 || directly collide with Fed. R. Civ. P. 15(a)’s policy favoring liberal amendment’). 7 ||Siemens may not add any new counterclaims or allegations, and the only change it 8 ||may make is to excise the allegations of protected activity the Court discusses in this 9 ||Order. Siemens may file the new counterclaims within fourteen (14) days of the date 10 |/of this Order. 11 Next, Quidel’s motion for summary judgment as to Siemens’ counterclaims is 12 ||now moot. (See ECF No. 148.) The Court TERMINATES the motion and grants 13 || Quidel leave to re-file the motion within thirty (30) days of the date when Defendant 14 || files new counterclaims. 15 Finally, because the Court grants the motion to strike, Quidel may file a motion 16 ||for attorney’s fees and costs. See Cal. Civ. Proc. Code § 425.16(c)(1) (If the movant 17 prevails on a special motion to strike, it is “entitled to recover [its] attorney’s fees 18 ||and costs”). The motion is to be referred to Magistrate Judge Schopler. 19 IT IS SO ORDERED. 20 21 ||DATED: September 27, 2019 ( i thia (. 4s han □ 22 How. Cynthia Bashant 34 United States District Judge 24 25 26 27 |j——_ 28 > Because the Court grants the Motion to Strike, it does not address Quidel’s alternative request to dismiss the counterclaims under Federal Rule of Civil Procedure 12(b)(6).