Hsu v. Zeisler

Background

Frederick W. Hsu brought a breach-of-contract claim against Winslow Strong, Brian Burns, and Aaron M. Zeisler. The claim alleges that the defendants violated a stipulated confidentiality order entered by an arbitration panel. Burns and Zeisler were Strong’s attorneys in the arbitration and continued to represent him in a petition seeking confirmation of the arbitration award.

The defendants filed an anti-SLAPP motion under California Code of Civil Procedure section 425.16 and a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). The court considered the parties’ briefing and oral argument held October 5, 2023.

Anti-SLAPP motion

California’s anti-SLAPP statute permits an early challenge to claims based on conduct furthering a person’s rights of petition or free speech. The court explained that, after the defendant makes the required initial showing, the plaintiff must show a reasonable probability of prevailing—that is, that the claim is legally sufficient and supported by facts. The court called this the “minimal merit” inquiry.

The court concluded that Hsu met that standard. The confidentiality order defined “Protected Material” to include all evidentiary material, pleadings, submissions, filings, transcripts, and orders in the arbitration. The defendants argued that an arbitration “award” was not an arbitration “order.” The court disagreed, reasoning that the ordinary meaning of “order” includes an arbitration award. The court also found no plausible reason why the parties would protect arbitration orders generally but exclude the arbitration panel’s final order, the arbitration award. At most, the order’s separate uses of “award” and “order” created an ambiguity; they did not defeat Hsu’s claim as a matter of law.

The defendants also argued that the arbitration panel’s adoption of the confidentiality order extinguished the underlying confidentiality agreement. The court rejected that argument because the cases cited by the defendants involved a court incorporating an agreement into a court order, while this case involved an arbitration. The court noted that arbitration is contractual and that the confidentiality order contemplated a later action in a court of competent jurisdiction to enforce its terms. The court reasoned that a breach-of-contract claim was a viable way to bring such an action.

Finally, the defendants argued that the litigation privilege barred the claim. The court rejected that argument because the defendants’ position depended on their assertion that the confidentiality order did not cover the arbitration award. Having concluded that Hsu plausibly alleged that the order covered the award, the court held that the defendants had not shown that the litigation privilege defeated the claim. The court specifically noted that Hsu alleged the defendants shared the arbitration award with third parties.

Motion to dismiss and disposition

The Rule 12(b)(6) motion relied on the same arguments as the anti-SLAPP motion. For the same reasons, the court held that the breach-of-contract claim survived the motion to dismiss.

The court denied the defendants’ anti-SLAPP motion and motion to dismiss. It ordered the defendants to answer the complaint by November 1, 2023. The court denied as moot the administrative motions to seal at Docket Nos. 24 and 29 because Hsu had notified the court that he did not oppose unsealing the exhibits at issue. The court also set an initial case-management conference for November 16, 2023, and stated that the order disposed of Docket Nos. 16, 24, and 29.