As a trust litigation attorney in Sacramento, I seldom see overlap between bare knuckle political campaigns and family inheritance disputes. So, on the eve of a big election, it seems fitting to report on a new case that bridges political and family conflicts.

Case Background

In the 2014 election season, James Gallagher and Jim Reed were locked in a tight campaign for an open seat in the California State Assembly, District 3. The District covers the City of Chico and other rural parts of the northern and eastern Sacramento valley, including cities like Oroville, Yuba City, and Marysville. Both candidates were attorneys.

In the closing weeks of the campaign, Gallagher ran a 30-second television advertisement that called Reed “an unscrupulous lawyer”, “a crook,” accused Reed of financial elder abuse, and claimed that Reed had been ordered to pay back attorneys’ fees improperly collected from an elderly client.

Gallagher won the election convincingly, by a 63.1% to 36.9% margin. Reed sued Gallagher after the election for defamation based on the statements in the TV ad.

Gallagher demurred (filed a motion to dismiss) to Reed’s defamation suit and filed an Anti-SLAPP motion. (For a focused discussion on Anti-SLAPP motions, see Jeff Galvin’s “Watch Out for SLAPPs in California Trust and Estate Litigation.”)

The Basis for the Television Ad

Gallagher alleged that the statement made in the 30-second ad arose from Reed’s representation of a self-described naïve widow, Bonnie Hinckley. Hinckley had been a client of Reed’s some years earlier in a contingency fee probate matter after the death of Hinckley’s husband. Purportedly, Reed recovered more than $1 million for Hinckley in a will contest against Hinckley’s deceased husband’s children from a prior marriage. Per the contingency fee agreement between Reed and Hinckley, Reed collected $230,000 in attorneys’ fees. In response, Hinckley sued Reed for malpractice and for financial elder abuse.

In the probate litigation, the trial court granted Hinckley’s motion for summary adjudication because the contingency fee agreement between Reed and Hinckley apparently did not contain language required by the Business and Professions Code for contingency arrangements. As such, the trial court rescinded the contingency fee agreement and ordered Hinckley to pay Reed only his reasonable attorneys’ fees, not $230,000. Ultimately, Reed and Hinckley reached a settlement on his fees, in an undisclosed and confidential amount.

Defense of the Defamation Claim

Gallagher claimed that, based on Reed’s interactions with Hinckley, the statements in the 30-second advertisement were true. The Butte county court agreed, sustained Gallagher’s demurrer, and threw out Reed’s defamation lawsuit. Reed appealed and the Third District Court of Appeal affirmed. (See Reed v. Gallagher (2016) 248 Cal.App.4th 841, 864.)

The Court of Appeal’s Rationale

First and foremost, the Court of Appeal focused on the issue of falsity. To win his defamation lawsuit Reed needed to show the existence of falsehood.

• To prove falsity, a defamatory statement must contain false factual assertions that can be “reasonably interpreted as stating actual facts” and not just “rhetorical hyperbole” or “vigorous epithets.”
• The Court of Appeal concluded that the statement that Reed was “an unscrupulous attorney” was non-actionable as a statement of opinion and non-defamatory.
• Parties to trust and estate disputes are sometimes annoyed when their relatives “bad mouth them” to others in the family and raise the possibility of a defamation claim. But, if the family gossip is merely stating an opinion then there is no cause of action for defamation. For example, “the trustee is taking advantage of you,” does not form the basis for a winning defamation suit for the trustee.

While the statement that Reed was a “crook” is a more specific factual assertion, the Court of Appeal took into account the totality of the circumstances. Per the Court, in a political campaign the audience anticipates the use of rhetorical hyperbole and no reasonable person would believe that, in fact, Reed was a criminal based on Gallagher calling him a crook. As such, the statement was not defamatory.

Reed also argued that the television ad was defamatory because it said that the court ordered him to pay back attorney’s fees when in reality the court ordered rescission of the contingency fee agreement and Reed and Hinckley reached an agreement on fees. The Court declined to slice the statement so thin, and found that the claim was “substantially true.” Substantial truth is all that is required for a defamation defense.

The Court also found that Reed failed to establish “actual malice,” which is required when the alleged defamation concerns a public figure.

Conclusion and Take Away Points

• Regardless of what one candidate may say about another in this final run up to Election Day, virtually no matter how inflammatory, “the overwhelming weight of authority is that campaign rhetoric is protected speech and, as such, recovery by a candidate [for defamation] is highly unusual.” (Reed v. Gallagher, supra, 248 Cal.App.4th at p. 864 quoting Beilenson v. Superior Court (1996) 44 Cal.App.4th 944, 956.)
• It is hard to win a defamation case. Trust and estate litigation often creates painful wedges between family members. While it may be the visceral reaction to learning that your brother has been speaking ill of you, it is rarely a cost-effective strategy to pursue litigation based on defamation.
• Jim Reed lives to fight another day! Reed’s defeat in 2014 has paved the way for a run for Congress in 2016. Reed is back on the ballot again this November 8 in a race for California’s first congressional district.