Langan counterclaimed, seeking damages for breach of the covenant of good faith and fair dealing.

RLI moved to strike that cause of action, asserting that it violated California's Anti-SLAPP statute.

The District Court's Decision

The district court denied RLI's motion.

In its decision, the district court explained that the California legislature passed California Civil Procedure Code Section 425.16 to address "a disturbing increase" in so-called "Strategic Lawsuits Against Public Participation" ("SLAPPs"), or lawsuits brought "primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." As the district court noted, Section 425.16 permits defendants (and counterclaim defendants) to bring a "special motion to strike" if a cause of action against them arises "from any act . . . in furtherance of the person's right of petition or free speech . . . in connection with a public issue." A special motion to strike under Section 425.16 is commonly referred to as an anti-SLAPP motion.

The district court added that, to prevail on an anti-SLAPP motion, a movant first must make a prima facie showing, through the pleadings themselves and supporting affidavits, that the statement or conduct underlying the legal claims against it qualified for protection under the anti-SLAPP statute. Specifically, the movant must show that the challenged cause of action was one "arising from" protected activity, which included "any written or oral statement or writing made before a . . . judicial proceeding."

The district court then ruled that Langan's counterclaim did not "arise from" protected activity by RLI. The district court explained that Langan's counterclaim arose from the underlying insurance contracts and the dispute over whether RLI had acted in bad faith – an issue that had "been percolating, as alleged in the counterclaim, for several years and certainly long before the filing of RLI's complaint."

The district court noted that Langan's counterclaim alleged in part that:

• Langan provided timely notice of the Millennium Tower litigation in August 2016;
• RLI did nothing in response for nearly three years;
• RLI sat on its hands to see if Langan could successfully defend against the successor liability claim;
• RLI did so to continue collecting premiums from Langan without committing to coverage; and
• After it appeared likely that Langan would lose a summary adjudication motion on the successor liability issue, RLI filed its action to rescind the policies.

According to the district court, RLI's complaint informed Langan of an actual controversy crystallizing a dispute that had been ongoing for years, and the substance of Langan's counterclaim was "based on the underlying controversy regarding the insurance contracts" and was "not based on RLI's complaint."

Therefore, the district court concluded, RLI had not carried its burden to show that Langan's counterclaim arose from RLI's protected activity and Langan's counterclaim was not subject to a special motion to strike under the anti-SLAPP statute.

The case is RLI Ins. Co. v. Langan Engineering, No. 19-cv-02022-SI (N.D. Cal. Dec. 5, 2019). Attorneys involved include: For RLI Insuance Company, Plaintiff: Dean C. Burnick, Henry Ming-Cheng Su, LEAD ATTORNEYS, Michael Dale Prough, Morison & Prough, LLP, Walnut Creek, CA. For Langan Engineering, Environmental, Surveying and Landscape Architecture, D.P.C., Langan Engineering & Environmental Services, Inc., Treadwell & Rollo, Inc., Defendants: Cristina M. Shea, Reed Smith LLP, San Francisco, CA.