Avid Telecom LLC et al v. Frankel et al, No. 4:2022cv00558 - Document 100 (D. Ariz. 2023)
Court Description: ORDER denying 66 Motion to Dismiss. (See attached Order for complete details) Signed by Judge John C Hinderaker on 11/28/2023. (MCO)
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Avid Telecom LLC et al v. Frankel et al 1 Doc. 100 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Avid Telecom LLC, et al., 9 Plaintiffs, 10 11 v. 12 David Frankel, et al., 13 No. CV-22-00558-TUC-JCH ORDER Defendants. 14 15 In this case, Plaintiff Avid Telecom 1 alleges Defendant David Frankel 2 defamed 16 Avid to telecom business groups, the public, and to multiple states attorneys general. Doc. 17 49 ("SAC") at 7, 9–11. On June 9, 2023, Avid filed its second amended complaint, asserting 18 six claims for relief. Id. at 13–24. On June 29, Frankel answered. Doc. 53. 19 Before the Court is Frankel's "Second Motion to Dismiss Case Under Arizona's 20 Anti-SLAPP Statute A.R.S. § 12-751," filed August 8. Doc. 66 ("MTD"). Following Ninth 21 Circuit guidance, the Court ordered a response under Rule 56. Doc. 69. Avid responded 22 primarily under Rule 12. See Doc. 77. Frankel replied, disavowing a Rule 12 challenge. 23 See Doc. 80 at 7. The Court ordered a sur-reply focusing Avid on Rule 56. Docs. 81. Avid 24 complied, Doc. 84, and the Court heard oral argument on November 8, 2023. Doc. 98 25 ("Hr'g Tr."). 26 1 27 28 Michael D. Lansky, L.L.C. dba Avid Telecom and Michael Lansky, individually. For convenience, the Court will use “Avid Telecom” or “Avid” to mean both Plaintiffs. 2 Together with ZipDX LLC, whose sole member is Frankel. The Court will use “Frankel” in the singular to mean both Defendants. Dockets.Justia.com 1 I. Background 2 Avid Telecom is a common-carrier provider of long-distance telecommunications 3 services. SAC ¶ 1. These services include transiting robocalls, which are pre-recorded 4 messages delivered by computerized auto-dialer. Id. ¶ 11. Most robocalls are legal. Id. For 5 example, calls delivered by computerized auto-dialer are legal if they are not pre-recorded, 6 and vice versa. Id. ¶ 12. And pre-recorded messages delivered by computerized auto-dialer 7 are legal if the caller is exempted by statute, such as political campaigns, or by the receiver's 8 consent to these calls, such as pharmacy order updates. Id. ¶ 13. 9 Frankel is the highest-profile national advocate against illegal robocalling. SAC 10 ¶ 46. Frankel developed a software system that purports to identify illegal robocalls and 11 their source. MTD at 4. Frankel's software monitors thousands of telephone numbers 12 Frankel purchased and placed on the National Do Not Call Registry. Id. The software 13 interacts with any caller to these phone numbers while recording caller-ID information and 14 the nature of the call. Id. Frankel markets this software as a way to identify suspect or 15 illegal robocalls, and who is responsible for creating them. See id. 16 Avid alleges Frankel made false and misleading representations about Avid during 17 a presentation to telecom industry leaders, and to the Ohio and Indiana attorneys general. 18 SAC ¶¶ 48, 51. Specifically, Avid alleges Frankel showed a slide at a telecom industry 19 summit essentially stating falsely that Avid was transiting illegal robocalls. Id. ¶¶ 51(a), 20 54. Avid also alleges Frankel falsely told telecom industry leaders that Avid was "the top 21 offender" for illegal robocalls. Id. ¶¶ 51(b), 60. Avid also alleges Frankel made similar 22 statements to at least the Ohio and Indiana attorneys general. Id. ¶¶ 40, 48, 63. 23 Avid alleges that, as a direct result of these statements, the Ohio and Indiana 24 attorneys general issued onerous "Civil Investigative Demands" to Avid, two of Avid's 25 customers withdrew their business, and one cancelled an anticipated contract. Id. ¶¶ 48, 26 118–19, 133–34, 152. Avid states six claims arising from these allegations: (1) defamation, 27 (2) false light invasion of Avid principal Michael Lansky's privacy, (3–4) tortious 28 interference with two business relationships, and (5–6) tortious interference with -2- 1 prospective economic advantage from those relationships. Id. at 13–23. 2 Frankel moves to dismiss under A.R.S. § 12-751. MTD at 1. Section 12-751 3 concerns "strategic lawsuits against public participation" ("SLAPP"). See A.R.S. § 12-751 4 (2022). SLAPP suits seek to use the threat or cost of litigation to deter constitutional 5 activity. Arizona's anti-SLAPP statute was substantially revised on September 24, 2022. 6 Compare A.R.S. § 12-751 (2022), with A.R.S. §§ 12-751, 752 (2006). The extent of the 7 revision is best illustrated visually. The Court provides the first four sections only: 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Westlaw, https://westlaw.com/ (search "A.R.S. § 12-751"; then choose "History," "Versions," "Add to compare," "§ 12-751 (Effective September 24, 2022)," "§ 12-752 (Effective April 28, 2006 to September 23, 2022)"; then "Compare"). These revisions have not yet been applied in state or federal court. Several changes stand out. Section 12-751 (2006) no longer exists, replaced by the revised § 12-752 (2006), which was then renumbered § 12-751 (2022). Formerly, § 12-751 provided a statement of the legislature's purpose in enacting an anti-SLAPP framework and a statutory definition of the protected activity. See §§ 12-751(1), Sec. 2(A) (2006). The amendment also broadens the statute's protections beyond the "right to petition" (narrowly defined by § 12-751(1) (2006)). The amendment now extends to the "right to petition" in any context as well as the "right of speech, … the press, [and] … to freely associate or … peaceably assemble" (defined as "pursuant to the United States Constitution or Arizona constitution"). A.R.S. § 12-751(A) (2022). The amendment also adds a dramatically different ex parte burden-shifting framework. The moving party's initial burden is an ex parte showing of "prima facie proof" that the action is "substantially motivated by a desire to deter, retaliate against or prevent the lawful exercise of a constitutional right." A.R.S. § 12-751(B) (2022). The statute does not define "prima facie proof" or explain how it differs from the more commonly used terms "prima facie evidence" or "prima facie showing." The nonmovant is not required to respond to a motion until the court finds "prima facie proof." The Court has no occasion to interpret the changes to Arizona's statute because state anti-SLAPP statutes are treated differently in federal court. -4- 1 II. Legal Standard 2 A federal court sitting in diversity jurisdiction applies federal procedural law and 3 state substantive law. Hanna v. Plumer, 380 U.S. 460, 465 (1965) (citing Erie R.R. Co. v. 4 Tompkins, 304 U.S. 64, 78 (1938)). Given a direct conflict between federal procedural rules 5 and state law, the federal rules govern in federal court. Shady Grove Orthopedic Assocs., 6 P.A. v. Allstate Ins. Co., 559 U.S. 393, 398 (2010) (citations omitted). The Ninth Circuit 7 interprets these precedents and others to permit some state anti-SLAPP defenses in federal 8 court. See, e.g., CoreCivic, Inc. v. Candide Grp., LLC, 46 F.4th 1136 (9th Cir. 2022); 9 Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832 (9th Cir. 2001); U.S. ex rel. Newsham v. 10 Lockheed Missiles & Space Co., 190 F.3d 963 (9th Cir. 1999). 11 The Ninth Circuit employs a two-step process to evaluate anti-SLAPP motions. 12 First, the court determines whether the actions at issue involve an exercise of protected 13 rights. See, e.g., Tennenbaum v. Arizona City Sanitary Dist., 799 F. Supp. 2d 1083, 1086 14 (D. Ariz. 2011) (interpreting A.R.S. § 12-752 (2006)). Second, the court analyzes whether 15 the anti-SLAPP motion raises a legal or a factual challenge. See Planned Parenthood Fed'n 16 of Am., Inc. v. Ctr. for Med. Progress, 890 F.3d 828, 834–35 (9th Cir. 2018). When the 17 anti-SLAPP motion "challenges the legal sufficiency of a claim, a district court should 18 apply the Federal Rule of Civil Procedure 12(b)(6) standard and consider whether a claim 19 is properly stated." Id. at 834. By contrast, when the anti-SLAPP motion "challenges the 20 factual sufficiency of a claim, ... the Federal Rule of Civil Procedure 56 standard will 21 apply." Id. 22 III. 23 24 25 26 27 28 Analysis A. The Court declines to decide which parts of § 12-751 are compatible with Rule 56 because discovery is required in any event. Frankel first argues the Court must still use aspects of Arizona's anti-SLAPP statute while applying a Rule 56 standard. MTD at 5–6. In Frankel's view, at least the burdenshifting and attorneys' fees aspects of Section 12-751 are compatible with the federal rules. Id. at 6 (citing Gunn v. Drage, 65 F.4th 1109, 1118 (9th Cir. 2023) (burden-shifting); Planned Parenthood, 890 F.3d at 833–34 (attorneys' fees)); Hr'g Tr. at 4:21–5:7. Frankel -5- 1 asserts the Arizona statute is compatible with Rule 56 because both require nonmovants to 2 "present sufficient evidence … to establish each element of their asserted claims." MTD at 3 6. That Rule 56 burden, says Frankel, is the same as § 12-751(B)(2), which requires 4 nonmovants to "show that their lawsuit is justified by existing law." Id. 5 Frankel was previously skeptical about the Court's approach to Arizona's anti- 6 SLAPP statute. See 5/17/23 Hearing Transcript at 35:8–37:22. The Court disagreed then 7 that Arizona's legislature used "prima facie proof" to mean "prima facie evidence" because 8 it would tend to ignore a potentially meaningful difference. Doc. 44 at 6 (citing Nicaise v. 9 Sundaram, 432 P.3d 925, 927 (Ariz. 2019) ("A cardinal principle of statutory interpretation 10 is to give meaning, if possible, to every word and provision so that no word or provision is 11 rendered superfluous.") (citation omitted)). The Court also noted that Arizona's new anti- 12 SLAPP statute is substantially different from others. See id. For example, California, 13 Oregon, and Arizona's own former statute all define their terms and require briefing from 14 both parties. See Cal. Civ. Proc. Code §§ 425.16(b)(2), (f); Or. Rev. Stat. Ann. § 31.150(3); 15 A.R.S. § 12-752(A), (B) (2006). And some of Arizona's revisions appear to conflict with 16 the federal rules. Compare, e.g., A.R.S. § 12-751(E) (2022), with Metabolife, 264 F.3d at 17 846. The Court also found its ruling, based on Rules 12 and 56, likely would be the same 18 under Arizona's statute. Doc. 44 at 7. 19 Here, it's déjà vu all over again. The Court continues to see the difference between 20 "prima facie proof" and "prima facie evidence" as potentially meaningful. Frankel was 21 unable to identify any Arizona cases for the proposition that they are synonymous. Hr'g Tr. 22 at 6:20–21. The Court also found none. Arizona's new statute remains different in 23 potentially meaningful ways from other states' anti-SLAPP statutes. Some of Arizona's 24 revisions appear to conflict with the federal rules—not only the discovery stay but also the 25 initial ex parte posture. And, again, the Court's ruling today under Rule 56(d) likely has the 26 same result as a ruling under Arizona's statute. Even assuming Frankel could shift the 27 burden to Avid to show its claims were "justified by existing law," the sufficiency of Avid's 28 complaint is not at issue, Hr'g Tr. at 4:10–11, and Avid seeks discovery that appears -6- 1 essential to defend its case. See infra § II.D. To decide differently would deprive Avid of 2 the safeguards required by the Federal Rules of Civil Procedure. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. As a threshold matter only, Frankel's actions involved protected rights. The Court first determines that Frankel's actions were exercises of a protected right under Arizona's § 12-751. Section 12-751 provides: In any legal action that involves a person's lawful exercise of the right of petition, the right of speech, the freedom of the press, the right to freely associate or the right to peaceably assemble pursuant to the United States Constitution or Arizona constitution, the person other than a state actor or an intervenor may file a motion to dismiss or quash the action under this section. A.R.S. § 12-751(A). Frankel specifically invokes only the U.S. Constitution, alleging Avid's lawsuit is directed at Frankel's "relevant rights pursuant to the United States Constitution," including "at least his rights of speech and petition, and to freely assemble." MTD at 1, 7. The First Amendment in part prohibits Congress from "abridging the freedom of speech … or the right of the people to petition the Government for a redress of grievances." U.S. Const. amend. I. The right to free speech "on matters of public concern is at the heart of the First Amendment's protection." Snyder v. Phelps, 562 U.S. 443, 451 (2011) (citations and internal quotations omitted). Matters of public concern are those "fairly considered as relating to any matter of political, social, or other concern to the community[.]" Id. (citations omitted). Similarly, the right to freely petition the Government for a redress of grievances includes the right to solicit enforcement of the law. See E. R. R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127, 137–38 (1961). The Court finds—as a threshold matter only—this case involves "rights … pursuant to the United States Constitution." The parties agree Frankel is a leading advocate concerning illegal robocalling, and that illegal robocalling is a topic of nationwide importance. See SAC ¶¶ 18, 46; MTD at 3–5. The parties also agree Frankel's statements about Avid were made to gathered industry leaders and to law enforcement in a context related to illegal robocalling. See SAC ¶ 45; MTD at 7–9. That is sufficient to bring them within the Constitution's ambit for a threshold determination. Illegal robocalling is a matter -7- 1 of social concern. And soliciting attorneys general to enforce the robocalling laws exercises 2 the right to petition. Frankel's actions were thus "pursuant to the United States 3 Constitution," and Arizona's anti-SLAPP statute is available to him. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C. Frankel's anti-SLAPP Motion contains primarily a factual challenge, so the Court will analyze it under Rule 56. The Court construed Frankel's Motion under Rule 56 because it found that Frankel explicitly attacked only the factual sufficiency of Avid's complaint. Doc. 69 at 3 (citing MTD at 7 ("each claim fails under the Rule 56 standard …. [and] applying the Rule 56 standard … the Court should grant this Motion to Dismiss"), 14 ("the defamation claim is not justified by existing law as it fails under the Rule 56 standard"), 17 ("these claims do not survive a Rule 56 analysis")). When Avid replied primarily under Rule 12, Frankel responded that Avid's Rule 12 arguments were "irrelevant" because "Defendants do not raise legal challenges for Rule 12 analysis." Doc. 80 at 7. Frankel reiterated that "there are only factual challenges in the Motion." Id. (cleaned up) (citation omitted). And at oral argument, Frankel stated that the SAC survives scrutiny under Rule 12. Hr'g Tr. at 4:10– 11. Thus, the Court will analyze Frankel's Motion under Rule 56 because it raises primarily factual challenges and because Frankel intended it only to raise factual challenges. Cf. Gunn, 65 F.4th at 1120 (citation omitted) ("The defendant determines which motions she files, not the plaintiff."). If an anti-SLAPP motion challenges the factual sufficiency of a claim, "discovery must be allowed ... before any decision is made by the court." Planned Parenthood, 890 F.3d at 833. Courts must allow discovery because "[r]equiring a presentation of evidence without accompanying discovery would improperly transform … the anti-SLAPP [motion] into a motion for summary judgment without providing any of the procedural safeguards that have been firmly established by the Federal Rules of Civil Procedure." Id. at 833–34. One of these safeguards is to require discovery when "a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition." Fed. R. Civ. P. 56(d). Rule 56(d) provides "a device for litigants to avoid summary judgment when they -8- 1 have not had sufficient time to develop affirmative evidence." Stevens v. Corelogic, Inc., 2 899 F.3d 666, 678 (9th Cir. 2018) (citation omitted). A party seeking additional discovery 3 under Rule 56(d) must "explain what further discovery would reveal that is essential to 4 justify its opposition to the motion for summary judgment." Id. (cleaned up) (citations 5 omitted). "[T]he evidence sought must be more than the object of pure speculation." Id. 6 (citation omitted). The party seeking more discovery under Rule 56(d) "must state what 7 other specific evidence it hopes to discover and the relevance of that evidence to its claims. 8 Id. (cleaned up) (citation omitted). "In particular, the requesting party must show that: (1) it 9 has set forth in affidavit form the specific facts it hopes to elicit from further discovery; (2) 10 the facts sought exist; and (3) the sought-after facts are essential to oppose summary 11 judgment." Id. (cleaned up) (citation omitted). 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. Despite some shortcomings, the Court construes Avid's statements as a Rule 56(d) motion. Avid's Response and Sur-Reply are somewhat ambivalent regarding Rule 56(d). Avid's Response appears to seek more discovery. Avid states that the Court "must allow additional discovery on each issue" before considering summary judgment. See Doc. 77 at 17. The Response does not provide the facts it hoped further discovery would elicit. See generally id. Noting that and other shortcomings under Rule 56, the Court ordered a surreply. Doc. 81. Avid's Sur-Reply is less adamant about discovery than its Response. Avid states "[i]f the Court requires information regarding the technological basis for [Avid's] allegations, [Avid] respectfully request[s] the opportunity to depose Frankel … and his sole employee[.]" Doc. 84 at 6 n. 8 (emphasis added). Similarly, Avid seeks more discovery "to the extent that the Court believes that additional facts need to be developed to address open issues under Rule 56(d)[.]" Id. at 7 (emphasis added). But Avid also "believes it would be most appropriate that [Frankel's anti-SLAPP] Motion simply be dismissed in its entirety at this point[.]" Id. The Court appreciates that some of Avid's ambiguity is due to argument in the alternative. Avid seeks first to argue that its evidence demonstrates a genuine dispute, but alternatively to argue that Avid needs more discovery to demonstrate a genuine dispute. At oral argument, Avid clarified that it was in fact moving for more discovery under -9- 1 Rule 56(d). See Hr'g Tr. at 32:11–21. Avid acknowledged that it did not file a Rule 56(d) 2 declaration in response to the second anti-SLAPP motion, emphasizing that it had done so 3 previously. See id.; Doc. 35-1 at 89–91. Avid asked the Court to accept its previous 4 declaration as if it were filed in response to the second anti-SLAPP motion. See Hr'g Tr. at 5 34:2–6, 34:22–35:4. As in its previous declaration, Avid specifically avows the need to 6 depose Defendant Frankel and his associate Graves. Compare id., with Doc. 35-1 at 90. 7 Avid also avows the need to depose Rebecca Barkhuizen, who allegedly told Avid about 8 the contents of the SOMOS call or the STIR/SHAKEN presentation, or both, as well as 9 "one or two other depositions." See Hr'g Tr. at 34:22–35:4. Finally, Avid previously stated 10 that "[f]urther evidence of [the connection between Frankel's statements to the attorneys 11 general] will, as necessary, be adduced at the depositions of Mr. Frankel and 12 representati[ves] of Ohio and Indiana." Doc. 77 at 16 n. 16. Avid could not say what 13 discovery it would seek with respect to the attorneys general but said it had not abandoned 14 that aspect of its complaint. Hr'g Tr. at 45:5–23. The Court agrees Avid's depositions are 15 essential to oppose summary judgment. Many of Avid's claims revolve around what 16 Frankel knew and said. Frankel's, Graves's, and Barkuizen's depositions will elicit facts 17 bearing on Frankel's knowledge and statements. That knowledge could extend to Frankel's 18 interactions with the state attorney generals. Further discovery is therefore warranted. 3 19 Accordingly, the Court will construe Avid's statements as a Rule 56(d) motion and 20 accept Avid's previously filed declaration, Doc. 35-1 at 89–91, for that purpose. So 21 construed, the Court will grant Avid's Rule 56(d) motion and deny Frankel's motion to 22 dismiss under Arizona's anti-SLAPP statute. Because the Court denies Frankel's motion, 23 Frankel's request for attorneys' fees is denied. Avid's request for attorneys' fees is also 24 denied—Avid has not shown that Frankel's motion was frivolous or intended solely to 25 delay the proceedings. The Court notes in closing that Rule 11 attorneys' fees may become 26 3 27 28 Fact discovery is nearly closed. Previously the deadline was December 15, 2023, and the Court extended the deadline by stipulation to January 31, 2024. That should give the parties ample time to finish up. The Court expects not to extend fact discovery again and will not absent extremely good cause. - 10 - 1 relevant again at summary judgment. If, as Frankel has consistently urged, Avid's lawsuit 2 turns out to have been improperly motivated or frivolous, an award of attorneys' fees could 3 be appropriate. The Court will consider those issues when the evidence is in. 4 IV. Order 5 Accordingly, 6 IT IS ORDERED DENYING Frankel's Motion to Dismiss (Doc. 66). 7 Dated this 28th day of November, 2023. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 11 -
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