Commercial Litigation and Arbitration

Erie—State Statute Requiring Verification of Complaint Doesn’t Apply in Federal Court Despite Rule 11’s Exception for “a Rule or Statute” Requiring Verification—Means Only Fed. Rules & Stats—Other Anti-SLAPP Cases Distinguished

Royalty Network, Inc. v. Harris, 2014 U.S. App. LEXIS 13222 (11th Cir. July 10, 2014):

Appellants Carl Harris and his company, Phat Groov Music, appeal the district court's order denying their motion to dismiss a complaint filed by Appellees The Royalty Network, Frank Liwall, and Steven Weber. Harris sought to dismiss the complaint because the Appellees failed to comply with Georgia's anti-SLAPP (Strategic Lawsuits Against Public Participation) statute by not filing verifications with their complaint, as required by O.C.G.A. § 9-11-11.1(b). The district court denied the motion, and Harris pursued this interlocutory  [*2] appeal. We conclude we have appellate jurisdiction under the collateral order doctrine and we affirm the district court's order because § 9-11-11.1 does not apply in federal court in a diversity action.


B. Conflict with the Federal Rules of Civil Procedure

Harris contends the district court erred by finding § 9-11-11.1(b)'s verification requirement is a procedural rule that does not apply in federal court. It is well established that when a federal court considers a case that arises under its diversity jurisdiction, the court is to apply state substantive law and federal procedural law. Hanna v. Plumer, 380 U.S. 460, 465, 85 S. Ct. 1136, 1141 (1965). We have explained that to aid courts  [*15] in determining whether a law is substantive or procedural, "the Supreme Court developed a two-part test in Hanna." Burke v. Smith, 252 F.3d 1260, 1265 (11th Cir. 2001) (citation omitted). "Under the Hanna test, when the federal law sought to be applied is a congressional statute or Federal Rule of Civil Procedure, the district court must first decide whether the statute is sufficiently broad to control the issue before the court." Id. (internal quotation marks omitted). "If the federal procedural rule is sufficiently broad to control the issue and conflicts with the state law, the federal procedural rule applies instead of the state law." Id. (internal quotation marks omitted). A federal rule applies in the face of a conflicting state rule, however, only if the federal rule comports with the Rules Enabling Act, 28 U.S.C. § 2072, and the Constitution. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 n.7, 116 S. Ct. 2211, 2219 n.7 (1996) ("Concerning matters covered by the Federal Rules of Civil Procedure . . . [i]t is settled that if the Rule in point is consonant with the Rules Enabling Act, and the Constitution, the Federal Rule applies regardless of contrary state law."  [*16] (citation omitted)).

If the federal rule is not sufficiently broad to cover the issue or does not directly conflict with the state law, the district court should then proceed to the second prong of the Hanna test, which requires the district court to apply Erie and its progeny to determine "whether failure to apply the state law would lead to different outcomes in state and federal court and result in inequitable administration of the laws or forum shopping." Burke, 252 F.3d at 1265 (internal quotation marks omitted); see also Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 398, 130 S. Ct. 1431, 1437 (2010) ("We do not wade into Erie's murky waters unless the federal rule is inapplicable or invalid.").

Accordingly, we first consider whether the Federal Rules of Civil Procedure are sufficiently broad to control the issue of whether a complaint must be verified. In the federal system, Rule 11 provides the general rule regarding verifications and representations to the court. In pertinent part, Rule 11(a) states that "[u]nless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit." Fed. R. Civ. P. 11(a).  [*17] Rule 11(b) provides:

   By presenting to the court a pleading, written motion, or other paper--whether by signing, filing, submitting, or later advocating it--an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

Fed. R. Civ. P. 11(b). Rule 11(c) authorizes the district court to impose appropriate sanctions on an attorney, law firm, or party for violations of the rule. Fed. R. Civ. P. 11(c).

Section 9-11-11.1(b) addresses the same subjects, i.e., whether a complaint must be accompanied by a verification or affidavit, what certifications must be made, and sanctions. Specifically, the Georgia statute provides:

   For any claim asserted against a person or entity arising from an act by that person or entity which could reasonably be construed as an act in furtherance of the right of free speech or the right to petition government for a redress of grievances under the Constitution of the United States or the Constitution of the State of Georgia in connection with an issue of public interest or concern, both the party asserting the claim and the party's attorney of record, if any, shall be required to file, contemporaneously with the pleading containing the claim, a written verification under oath . . . . Such written verification  [*19] shall certify that the party and his or her attorney of record, if any, have read the claim; that to the best of their knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; that the act forming the basis for the claim is not a privileged communication . . . and that the claim is not interposed for any improper purpose such as to suppress a person's or entity's right of free speech or right to petition government, or to harass, or to cause unnecessary delay or needless increase in the cost of litigation. If the claim is not verified as required by this subsection, it shall be stricken unless it is verified within ten days after the omission is called to the attention of the party asserting the claim. If a claim is verified in violation of this Code section, the court, upon motion or upon its own initiative, shall impose upon the persons who signed the verification, a represented party, or both an appropriate sanction which may include dismissal of the claim and an order to pay to the other party or parties the amount of the  [*20] reasonable expenses incurred because of the filing of the pleading, including a reasonable attorney's fee.

O.C.G.A. § 9-11-11.1(b).

Based on the plain text of the state law and the federal rule, it is apparent that the federal rule is broad enough to cover the issue and that the two directly conflict. The federal rule explicitly provides that a pleading need not be verified or accompanied by an affidavit and allows parties discretion in deciding whether to verify pleadings. The Georgia statute, by comparison, mandates that a complaint or pleading asserting a claim must be accompanied by a verification making specific representations. See Burlington N. R.R. Co. v. Woods, 480 U.S. 1, 7, 107 S. Ct. 967, 970 (1987) (concluding a state statute providing for a mandatory affirmance penalty conflicted with Federal Rule of Appellate Procedure 38 which affords courts of appeals discretion to assess damages for frivolous appeals and stating that "the Rule's discretionary mode of operation unmistakably conflicts with the mandatory provision of Alabama's affirmance penalty statute"). Rule 11, moreover, provides the rule regarding representations to the district court, stating that any presentation  [*21] of a document to the district court in any form carries with it a certification from the attorney or unrepresented party submitting the document. See Fed. R. Civ. P. 11(b). Section 9-11-11.1(b) addresses this same subject but requires specific averments in writing from both the represented party and his counsel. The Georgia law's requirements for filing a complaint or pleading directly conflict with the procedure for filing a pleading specified in the federal rule, and the two may not peacefully co-exist or operate in the same case. Cf. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 26 n.4, 108 S. Ct. 2239, 2242 n.4 (1988) (explaining that to directly conflict, federal and state law need not be "perfectly coextensive and equally applicable to the issue at hand").

We acknowledge that Rule 11 states a pleading need not contain a verification "[u]nless a rule or statute specifically states otherwise." Fed. R. Civ. P. 11(a). The rule's reference to other rules or statutes, however, means other federal rules or statutes. We long ago held in Follenfant v. Rogers, 359 F.2d 30, 32 n.2 (5th Cir. 1966), that "state rules requiring verified pleadings . . . are wholly inapposite [in federal court]" in light of Rule 11, and that holding remains binding and is applicable in the instant case. See also Farzana K. v. Ind. Dep't of Educ., 473 F.3d 703, 705 (7th Cir. 2007) (explaining that Rule 11's reference to other rules or statutes "means federal rule or federal statute, because state requirements for pleading do not apply in federal litigation").

Because § 9-11-11.1(b)'s verification requirement conflicts with Rule 11, we must apply the federal rule unless it is invalid under the Rules Enabling Act or the Constitution. Alexander Proudfoot Co. World Headquarters L.P. v. Thayer, 877 F.2d 912, 917 n.11 (11th Cir. 1989). Regarding the constitutionality of the federal rules, the Supreme Court has held that "[r]ules regulating matters indisputably procedural are a priori constitutional," and further, "[r]ules regulating matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either, also satisfy this constitutional standard." Woods, 480 U.S. at 5, 107 S. Ct. at 970 (internal quotation marks omitted). Rule 11's regulation of verifications is "indisputably procedural" and thus "a priori constitutional," but even  [*23] if it were not, the rule is at least "rationally capable of classification" as procedural and is therefore constitutional. See id.

Rule 11 is also valid under the Rules Enabling Act. That act authorized the Supreme Court to promulgate rules of procedure for cases in the federal district courts and courts of appeals. 28 U.S.C. § 2072(a); Woods, 480 U.S. at 5 n.3, 107 S. Ct. at 969 n.3. But to be valid under the Rules Enabling Act, the federal rule at issue must not "abridge, enlarge or modify any substantive right." 28 U.S.C. § 2072(b); Woods, 480 U.S. at 5, 107 S. Ct. at 970. The Supreme Court has stated that "any Rules Enabling Act challenge to Rule 11 has a large hurdle to get over" because it can "succeed only if the Advisory Committee, [the Supreme Court], and Congress erred in their prima facie judgment that the Rule transgresses neither the terms of the Enabling Act nor constitutional restrictions." Bus. Guides, Inc. v. Chromatic Commc'ns Enters., Inc., 498 U.S. 533, 552, 111 S. Ct. 922, 933 (1991) (internal quotation marks and alteration omitted) (addressing a challenge to the imposition of Rule 11 sanctions against a represented party).

Rule 11 does not abridge, enlarge, or modify  [*24] any substantive rights simply because application of that rule instead of § 9-11-11.1(b) will mean that the Appellees' lawsuit will go forward against Harris. In Hanna, the Supreme Court confronted a similar situation when it held that the federal rule governing service of process applied to a lawsuit rather than the contrary Massachusetts rule under which the lawsuit would not have been properly commenced. See Hanna, 380 U.S. at 463-64, 85 S. Ct. at 1140. The Court explained that it had previously held "[t]he fact that the application of Rule 4(f) will operate to subject [the] petitioner's rights to adjudication by the [federal] district court . . . will undoubtedly affect [the petitioner's] rights. But it does not operate to abridge, enlarge or modify the rules of decision by which that court will adjudicate [the petitioner's] rights." Id. at 465, 85 S. Ct. at 1140 (internal quotation marks omitted). Although following Rule 11's  [*25] dictate that a pleading need not be verified will subject Harris's rights to adjudication by the district court, the rule does not operate to abridge, enlarge, or modify the rules of decision by which the district court will adjudicate the Appellees' claims.

In addition, it is irrelevant to our Rules Enabling Act analysis that § 9-11-11.1 may have been enacted for substantive or important purposes, such as safeguarding First Amendment rights or deterring abusive filings, because the state legislature's objectives "cannot override the statute's clear text." Shady Grove, 559 U.S. at 403, 130 S. Ct. at 1440; see also Sibbach v. Wilson & Co., 312 U.S. 1, 14, 61 S. Ct. 422, 426 (1941) ("If we were to adopt the suggested criterion of the importance of the alleged right we should invite endless litigation and confusion worse confounded. The test must be whether a rule really regulates procedure."). Even if § 9-11-11.1(b) is directed toward a substantive aim, it achieves its goal through the mechanism of requiring a party and his counsel to file a verification or affidavit. That requirement conflicts with a valid federal rule of civil procedure, and we cannot rewrite either the rule or the  [*26] state law to avoid a collision. Shady Grove, 559 U.S. at 403, 405-06, 130 S. Ct. at 1440-42.

Furthermore, because the Georgia anti-SLAPP statute seeks to achieve its objectives through a verification requirement, the instant case is distinguishable from the cases considered by other circuits that have found state anti-SLAPP laws applicable in federal court. For instance, in United States ex rel. Newsham v. Lockheed Missiles & Space Co., Inc., 190 F.3d 963, 972-73 (9th Cir. 1999), the Ninth Circuit held California's anti-SLAPP statute did not conflict with Federal Rules of Civil Procedure 8, 12, or 56, because the state law and federal rules operated in different spheres, and, further, that the state law was "substantive" for Erie purposes and therefore applied in federal court. As explained by the Ninth Circuit, California's anti-SLAPP law authorizes a defendant to file a special motion to strike and requires the defendant to make a prima facie showing that the lawsuit arises from his right to petition or to free speech. Id. at 971. The burden then shifts to the plaintiff to establish a reasonable probability he will prevail on the merits. Id.; see also Cal. Civ. Proc. Code § 425.16(b)(1).

In  [*27] Henry v. Lake Charles American Press, LLC, 566 F.3d 164, 168-69, 182 (5th Cir. 2009), the Fifth Circuit dismissed a claim under Louisiana's anti-SLAPP statute, stating without elaboration that Louisiana law, including the state's anti-SLAPP provision, governed that diversity case. Louisiana's anti-SLAPP statute, like the California statute, authorizes a defendant to file a special motion to strike claims arising from an act in furtherance of the right to free speech or to petition. Id. at 170. After a defendant files a motion to strike and demonstrates the anti-SLAPP law applies to the activity giving rise to the suit, the plaintiff must establish a probability of success on the merits. Id.; see also La. Code Civ. Proc. Ann. art. 971(A)(1).

In Godin v. Schencks, 629 F.3d 79, 86-87 (1st Cir. 2010), the First Circuit concluded that Maine's anti-SLAPP statute applied in federal diversity cases notwithstanding Federal Rules of Civil Procedure 12(b)(6) and 56 because the federal rules were not broad enough to cover the same issues as the state law. According to the First Circuit, Maine's anti-SLAPP statute "creates a special process by which a defendant may move to dismiss any claim that  [*28] arises from the defendant's exercise of the right of petition under either the United States Constitution or the Constitution of Maine." Id. at 82. The law specifically provides that once a defendant brings a special motion to dismiss and demonstrates the plaintiff's claims are based on his petitioning activity, the trial court must grant the motion unless the plaintiff shows the defendant's "exercise of its right of petition was devoid of any reasonable factual support or any arguable basis in law and that the moving party's acts caused actual injury to the responding party." Id. (internal quotation marks omitted); see also Me. Rev. Stat. tit. 14, § 556. The First Circuit held that the Maine statute was not preempted by Rules 12(b)(6) and 56 because the state law and the federal rules addressed different issues, and the statute did not create a substitute for the rules. Godin, 629 F.3d at 88-89. The First Circuit also concluded that Maine's anti-SLAPP law applied in federal court because application of the state law furthered Erie's twin aims of discouraging forum shopping and avoiding inequitable administration of the law. Id. at 91-92.

Georgia's anti-SLAPP statute is distinct from  [*29] the anti-SLAPP statutes of California, Louisiana, and Maine in that it attempts to effectuate its deterrent purpose through a verification requirement. The California, Louisiana, and Maine provisions do not require a complaint to be verified, and the courts of appeals considering those statutes were therefore not presented with a potential conflict between the state laws and Rule 11. Compare Cal. Civ. Code § 425.16, and La. Code Civ. Proc. Ann. art. 97, and Me. Rev. Stat. tit. 14, § 556, with O.C.G.A. § 9-11-11.1. Accordingly, the First, Fifth, and Ninth Circuits had no occasion to address the question we consider in this case. In addition, unlike the First and Ninth Circuits, because we conclude a valid federal rule controls the question before us, we do not reach the second Hanna prong and thus do not wade into Erie's murky waters. See Shady Grove, 559 U.S. at 398, 130 S. Ct. at 1437.

In sum, Rule 11's discretionary rule regarding the verification of pleadings answers the question in this case, does not transgress either the terms of the Rules Enabling Act or the Constitution, and is valid and controlling in federal cases arising under the district court's diversity jurisdiction.

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