Archive for the ‘Laws and Legislation’ Category

The Kardashian Consequence — Texas Anti-SLAPP Law & Endorsements

When this blog read over the news this week and saw that the Kardashians won a case after trashing a company they had an endorsement deal with, the first reaction was, “how?”  Then, come to find out that the same law that allowed the Kardashians to escape liability was just passed in Texas.  Oh happy day! To tie in the Texas Leg and the Kardashians?!  Only thing better than this would be some rain.

First, the news and a bit of setup.  Anytime the end of a legislative session occurs and a wave of laws suddenly rolls through, the media naturally fails to cover some things, but the blog was a little surprised it didn’t hear more about this.  Last week, Texas unanimously became the 27th state to adopt an Anti-SLAPP lawsuit law which will go into effect on September 1, 2011.  An odd name to be sure, SLAPP stands for Strategic Lawsuit Against Public Participation.  The purpose of the law is to “safeguard the constitutional rights of persons to … speak freely … and otherwise participate in government….”   The law is designed to encourage free speech by discouraging frivolous lawsuits that, via the threat of a costly and drawn out lawsuit, inhibit people from speaking out about matters of public concern.

But what is public concern?  Well, it’s rather broad and includes anything connected with health, safety, the government, public officials, and environmental, economic and community well-being — basically, it’s almost everything.  Under the anti-SLAPP law, a defendant who finds herself in a lawsuit regarding public concern speech makes a special motion to the judge to have full discovery suspended while the two sides briefly present why there should or shouldn’t be a full lawsuit.  The suspension of discovery is the real kicker here because the pretrial discovery process is easily the most drawn out process of a suit and typically the most expensive part; it’s also the time when the plaintiff gains access to the facts necessary to prove her case.  The anti-SLAPP law now requires the plaintiff prove her case with “clear and specific evidence” in order to prevent the entire action from being tossed out.  This increased burden is the purpose of the law.  By making sure the plaintiff’s got a dang good case before she files, the law hopes to weed out all those other lawsuits that lack merit.

However, there is an additional consequence to this new law — a Kardashian consequence (the author suggests that a “Kardashian Consequence” be adopted into the general lexicon as a word meaning “an unexpected situation which breeds an unearned consequence”.).

The setup is brief.  The Kardashian suit is in California, a state which adopted the anti-SLAPP law in 1992 and leads the country in dealing with suits related to the law.

The Kardashians were sued for breach of contract by Revenue Resource Group (RRG) seeking $75 million in damages.  RRG entered into a deal with the Kardashians to offer a branded prepaid debit card.  When the card began to receive a lot of public flak for having high fees, the Kardashians terminated their deal with RRG and began making disparaging public comments.  Not surprisingly, these comments were in opposition to the contract which required the Kardashians make positive and glowing comments only — in short, they were to constantly endorse the card.  RRG claimed the Kardashians’ comments essentially ruined their entire business, hence the $75 million in damages as opposed to the far less damage that would normally accompany a breach of contract claim.

The Kardashians quickly motioned that the suit be thrown out on anti-SLAPP grounds because they were exercising their free speech regarding a matter of public concern.  Judge Jeffrey Hamilton agreed.  “We do not have a mere breach of contract action here, seeking recovery from the Kardashians of the contract damages for their breach of same,” Hamilton wrote. “Instead, we have an attempt to also charge the defendants with loss of all other business unrelated to them, specifically tied to defendants’ exercise of free speech.”  The judge found that because RRG was losing money before the Kardashians made their comments, the overall damages to the company were not their fault.

To wrap it up — and kudos to you if you’re still reading — now that Texas has effectively the same anti-SLAPP law, this Kardashian opinion really speaks loudly, albeit narrowly.

Recognizably, it’s commonplace to engage in an endorsement deal with a celebrity/spokesperson, one which requires the spokesperson say nice things about the product and so forth.  This case speaks to that narrow area where a spokesperson breaks contract and speaks out against a product, and the damages that flow therefrom may or may not be related to the spokesperson’s speech.  If the company wants to bring suit for breach of contract, they can, no problem.  But if they want to recover any damages directly related to the spokesperson’s statements, this new anti-SLAPP law has placed an addtional hurdle in their way, and likely made recovery of those damages far more difficult.  Why? Well, now that same company would have to prove with “clear and specific evidence” that the spokesperson’s statements were what caused the damage, and do this before discovery or with only the limited discover the anti-SLAPP law permits.  Without the discovery, a successful case is significantly more difficult to establish.

While the law doesn’t take effect until September 1, 2011, it’s important to see how this new law influences the litigation process in areas other than traditional speech torts such as defamation or slander.  The Kardashian case cautions us that the anti-SLAPP law can also affect breach of contract claims.  Notably, the case is a California Superior Court case and in no way will influence the outcome of a Texas court on the same or similar issue.

However, any time we pass new laws, it’s wise to know what we’re getting ourselves into.  This recent case cautions us to only one (of many?) of the law’s Kardashian Consequences.