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MARK GOLDOWITZ, # 96418 CALIFORNIA ANTI SLAPP-PROJECT 2903 Sacramento Street Berkeley, CA 94702 Phone: (510) 486-9123 x 301 Fax: (510) 486-9708 Special Counsel for Defendants DOE 4 a/k/a richwill21 and DOE 5 a/k/a benderanddundat

SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA EAGLE BROADBAND, INC., Plaintiff, v. DOES 1 through 25, inclusive, Defendants. ) ) ) ) ) ) ) ) ) ) CASE NO.: 1-05-CV050179 DEFENDANTS DOES 4 AND 5’S OPPOSITION TO PLAINTIFF’S MOTION FOR DISCOVERY; DECLARATION OF PAUL CLIFFORD Date: February 23, 2006 Time: 9:00 a.m. Dept.: 2 Judge: Hon. William J. Elfving Complaint Filed: October 5, 2005 Trial Date: None Set

DEFENDANTS DOES 4 AND 5’S OPPOSITION TO PLAINTIFF’S MOTION FOR DISCOVERY; DECLARATION OF PAUL CLIFFORD

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TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. THE ANTI-SLAPP LAW IS INTENDED TO PROVIDE FOR A FAST AND INEXPENSIVE UNMASKING AND DISMISSAL OF SLAPPS. THE DISCOVERY STAY SERVES THIS FUNCTION AND SHOULD NOT BE SET ASIDE LIGHTLY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PLAINTIFF HAS NOT SHOWN GOOD CAUSE TO PROCEED WITH ANY DISCOVERY AGAINST DOES 4 OR 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A. Applicability of Section 425.16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1. 2. Section 425.17(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Public Forum or Place Open to the Public. . . . . . . . . . . . . . . . . . . . . . . . . 3

Probability of Prevailing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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INTRODUCTION. Apparently recognizing that it cannot defeat the anti-SLAPP motion filed by defendants Does 4 and 5, plaintiff seeks to do the next best thing – extend the life of this meritless SLAPP for another six months so it can continue to dangle it over defendants’ heads as a Sword of Damocles and continue to impose its chilling effect on the defendants and other message board critics. Plaintiff has not shown good cause to proceed with discovery regarding either the applicability of the anti-SLAPP law (because defendants are not competitors of plaintiff and because the Yahoo! Finance message board has already been held by binding appellate precedent to be a public forum) or its probability of prevailing on its claims (because defendants have never shorted plaintiff’s stock or participated in any “short and distort” scheme). Plaintiff’s motion for discovery is a meritless fishing expedition and it should be denied.

I.

THE ANTI-SLAPP LAW IS INTENDED TO PROVIDE FOR A FAST AND INEXPENSIVE UNMASKING AND DISMISSAL OF SLAPPS. THE DISCOVERY STAY SERVES THIS FUNCTION AND SHOULD NOT BE SET ASIDE LIGHTLY. The anti-SLAPP law is intended to provide a mechanism for “a fast and inexpensive

16 unmasking and dismissal of SLAPP’s.” (Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 17 823, disapproved on another point in Equilon v. Superior Court (2002) 29 Cal.4th 53, 68, fn. 5.) 18 One of the ways the law achieves that purpose is by imposing a stay on discovery pending the 19 20 this way, the anti-SLAPP law promotes “early resolution to minimize the potential costs of 21 protracted litigation” and seeks “to protect defendants from the burden of traditional discovery 22 pending resolution of the [anti-SLAPP] motion.” (Mattel v. Luce, Forward, Hamilton & Scripps 23 (2002) 99 Cal.App.4th 1179, 1190.) As noted in Ludwig v. Superior Court (1995) 37 24 Cal.App.4th 8, 16, courts should be very careful in approving exceptions to the discovery stay: 25 26 27 28
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resolution of the defendant’s anti-SLAPP motion. (Code Civ. Proc., § 425.16, subd. (g).) 1 In

[A]n overly lenient standard would be wholly inappropriate, given that the statute is intended to “provid[e] a fast and inexpensive unmasking and dismissal of SLAPP’s.” Obviously, the purpose of the statute would be frustrated if the plaintiff could drag on All statutory section references herein are to the Code of Civil Procedure. 1
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proceedings for many months by claiming a need to conduct additional investigation. The legislative intent is best served by an interpretation which would require a plaintiff to marshal facts sufficient to show the viability of the action before filing a SLAPP suit. (Citation omitted.) Further, the anti-SLAPP statute is to be construed broadly, to protect the First Amendment rights of defendants. (§ 425.16, subd. (a).) This, of course, includes the discovery stay provision of the statute.

PLAINTIFF HAS NOT SHOWN GOOD CAUSE TO PROCEED WITH ANY DISCOVERY AGAINST DOES 4 OR 5. To be granted relief from the discovery stay imposed by the filing of an anti-SLAPP

10 motion, plaintiff must show good cause to proceed with specified discovery, upon noticed 11 motion. (§ 425.16, subd. (g).) As discussed below, plaintiff has not met that burden as to 12 defendants Does 4 or 5. 13 A. 14 Plaintiff claims it needs to pursue discovery (1) concerning defendants’ “identities and 15 employment information to determine whether the Section 425.17(c) exception to the Anti16 SLAPP statute applies here” and (2) “discovery from Yahoo! about the controls it sets in place 17 on the use of its Finance message board for Eagle Broadband and any complaints and restrictions 18 it has placed on Does 2-5 to establish that the Yahoo! message board is not a public forum.” 19 (Plaintiff’s memorandum in support of its motion for discovery [“MfD”], 2:1-27, especially 2:720 8 and 2:21-24.) As discussed below, plaintiff has not shown good cause to pursue the specified 21 discovery. 22 1. 23 As to the first category of information, the basis for plaintiff’s claimed need to pursue this 24 discovery is to prove the applicability of the exemption in section 425.17, subdivision (c). 25 However, this exemption only applies if the defendant’s: 26 27 28 statement or conduct consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services, or the statement or conduct was made in 2
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Applicability of Section 425.16.

Section 425.17(c).

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the course of delivering the person’s goods or services. (§ 425.17, subd. (c)(1).) First, plaintiff makes no allegations in its Complaint that its claims relate to, or arise out of, defendants’ businesses or that defendants are competitors of plaintiff. Plaintiff only began asserting that defendants may be competitors or posting messages to promote their own businesses after it was faced with anti-SLAPP motions. Second, Does 4 and 5, with their reply papers, will eliminate any need for this discovery by revealing their identities and occupations – that Doe 4, aka richwill21, is Richard Williams, a self-employed contractor, and Doe 5, aka benderanddundat, is Thomas Mould, a self-employed CPA – and that neither of them is a competitor of Eagle Broadband or has ever sold short its stock or participated in a “short and distort” scheme; indeed, they both are actually shareholders of Eagle Broadband (and thus their interest is in the price of its stock going up, not down); and that their posts were not regarding their businesses, were not made for the purpose of obtaining approval for or promoting their goods or services, and were not made in the course of delivering their goods or services. Thus, it will be clear that plaintiff’s claims against both these defendants are not exempt from the anti-SLAPP law pursuant to section 425.17, subdivision (c), because defendants are not competitors of plaintiff and their posts did not contain representations of fact about the defendants’ businesses, and therefore subdivision (c)(1) does not apply to plaintiff’s claims against them. Since subdivision (c) expressly requires that both (c)(1) and (c)(2) be met for the subdivision (c) exemption to apply ((c)(1) and (c)(2) are preceded with this condition: “...if both of the following conditions exist:”), the subdivision (c) exemption does not apply to these defendants. Therefore, plaintiff can not justify delaying resolution of defendants’ anti-SLAPP motion by its proposed discovery related to the section 425.17, subdivision (c) exemption. 2. Public Forum or Place Open to the Public.

As to the second category of information, first, it should be noted that the applicable standard is whether the Yahoo! Finance message board is a public forum or a place open to the public. Second, the governing precedent already expressly establishes that the Yahoo! Finance 3
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message board is a public forum, for purposes of the anti-SLAPP law (which must be construed broadly (§ 425.16, subd. (a))). As the court held in Ampex Corporation v. Cargle (2005) 128 Cal.App.4th 1569, 1576: Web sites that are accessible free of charge to any member of the public where members of the public may read the views and information posted, and post their own opinions, meet the definition of a public forum for purposes of section 425.16. . . . Thus the Yahoo! message board maintained for Ampex was a public forum. Similarly, the court in ComputerXpress v. Jackson (2001) 93 Cal.App.4th 993, 1007, held

7 that the “Raging Bull” financial message board and a website established by the defendants 8 called “Ogravity99” were public fora for purposes of the anti-SLAPP law because each was “a 9 place that is open to the public where information is freely exchanged.” 10 Plaintiff argues that it wants to pursue discovery which might show that the public does 11 not have “unfettered access to the Yahoo! message boards at any time without restriction.” 12 (MfD, 2:26-27.) However, as noted above, Ampex already determined that the Yahoo! Finance 13 message board is a public forum, because it is accessible to the public, free of charge, and 14 members of the public may post their own opinions on it. There is no contrary authority. This 15 standard does not require unfettered access at any time without restriction, and it does not 16 prohibit a public forum from requiring registration or having reasonable operating restrictions, 17 so what plaintiff seeks to prove will not show that the Yahoo! EAG board is not a public forum, 18 much less that it is not open to the public. 19 In addition, plaintiff has already submitted Yahoo!’s written Terms of Service (Reynolds 20 Decl., Exhibit H), which cover these issues, and plaintiff does not provide any reason to believe 21 that any different policies would apply to the Yahoo! EAG message board. Significantly, 22 Yahoo!’s Terms of Service expressly states that Yahoo!’s message boards are “Publicly 23 accessible” areas “that are intended by Yahoo! to be available to the general public.” (Id., p. 5.) 24 Also, plaintiff has not provided any reason that any complaints or restrictions Yahoo! has placed 25 on Does 2-5 would add anything material to the Terms of Service or the issue of whether this 26 board is a public forum or a place open to the public. 27 Furthermore, it is important to note that Yahoo!’s Terms of Service only places 28 4
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limitations on the ability of persons to register, receive an account and password, and post items on a message board. (Id., pp. 1-2, ¶¶ 3, 5) Any person with a computer and an Internet browser can, without registering, access Yahoo! message boards and read the posts on it merely by entering the appropriate website address (URL) into that person’s Internet browser. (Clifford Decl., ¶ 2.) Clearly the Yahoo! Finance message boards are, at the very least, places “open to the public.” (§ 425.16, subd. (e)(3).) No discovery by plaintiff can refute that fact. Plaintiff cites Wilbanks v. Wolk (2004) 121 Cal.App.4th 883 to support its motion for discovery. (MfD, 2:24.) However, this case actually supports defendants’ position. Significantly, in Wilbanks, the defendant’s statements were posted on her own website, which she controlled, and on which she did not post information or opinions from other sources. (Id. at p. 895.) The Wilbanks court contrasted this with the websites in ComputerXpress, “which accepted postings from anyone” (which is also true for the Yahoo! Finance message boards), and noted that therefore the defendant’s website was “not a true public forum.” (Wilbanks, supra.) Nonetheless, the court still concluded that the defendant’s statements were made in a public forum for purposes of the anti-SLAPP law, because they were on her website, which “posts statements that can be read by anyone who is interested, and because others, who choose to do so, can post a message through the same medium [i.e., the Internet] that interested persons can read.” (Id. at p. 897 [bracketed words added].) Thus, the Yahoo! message boards are much more participatory than the private website in Wilbanks, which was held to be a public forum for purposes of the anti-SLAPP law. Similarly, in Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 476-77, the court held that a private newsletter was a public forum for purposes of the anti-SLAPP law, even if it presented only a single viewpoint. In the same vein, a letter to the editor has also been held to be a statement made in a public forum for purposes of the anti-SLAPP statute, even though a publication’s editor by definition exercises discretion over which letters are published. (Annette F. v. Sharon S. (2004) 119 Cal.App.4th 1146, 1158, 1161, 1168 [defendant’s letter to the editor of the Gay and Lesbian Times was a statement made in a public forum].) Ampex’s holding that Yahoo! Finance message boards are a public forum is consistent 5
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with ComputerXpress, Wilbanks, Damon, Annette F., and the required broad construction of the anti-SLAPP law. If the statements in the latter three cases were made in a public forum for purposes of the anti-SLAPP law, as these cases held, then certainly so are statements made on a Yahoo! Finance message board, which is much more participatory than the fora in those cases. The discovery which plaintiff seeks on this issue is not necessary, because plaintiff can not suggest any reasonably possible results of this discovery which would allow it to overcome the overwhelming case law supporting defendants’ position. B. Probability of Prevailing.

Plaintiff further asserts that it needs to discover the following information which it claims is related to showing that it has a probability of prevailing against each defendant: the identity of the Does, the financial records for the Does, information about short positions opened and closed, and complete Yahoo! message board postings for Eagle during the “relevant period”. (MfD, 3:17-4:8.) However, plaintiff is simply seeking to launch another fishing expedition to justify its primary fishing expedition which was launched by its Complaint. Plaintiff’s purported need for this discovery is predicated upon a theory that the defendants’ posts were part of a “short and distort” scheme to manipulate the price of plaintiff’s stock. (MfD, 3:2-16.) However, as noted above, Does 4 and 5 will file declarations with their reply papers which disclose their identities, that they are not competitors of Eagle, that they are Eagle shareholders with an interest in the stock price increasing, and that they have never shorted Eagle’s stock or participated in a scheme to “short and distort.” Thus, plaintiff’s “short and distort” theory is entirely inapplicable to these defendants. In addition, as will be shown in detail in defendants’ reply papers for their special motion to strike, plaintiff has not shown a probability of prevailing on its claims against Does 4 or 5 because defendants’ posts are protected by the First Amendment and plaintiff has not established the elements of either cause of action as to either defendant. Plaintiff also vaguely asserts that review of the complete board postings for Eagle during the (unspecified) “relevant period” “is required for a detailed analysis of postings and trades” and that “certain” (again unspecified) “postings required to analyze the relevant time period are 6
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no longer available.” (MfD, 3:25-28.) First, the problems noted in the previous paragraph are equally applicable to this claim. Second, plaintiff’s theory is that the specific posts to which it objects in the Complaint are actionable. Plaintiff provides no explanation why it needs to discover other (unspecified) posts which are “no longer available” to be able to show that the posts to which they object are actionable and have caused them damage. Thus, plaintiff has not shown good cause to pursue these four items of discovery as to these defendants.

CONCLUSION. As discussed above, plaintiff has not shown good cause to pursue any of the specified discovery as to defendants Does 4 or 5. To allow plaintiff a continuance as to these defendants to pursue this unnecessary discovery would undermine the goal of the anti-SLAPP law to provide for “a fast and inexpensive unmasking and dismissal of SLAPP’s.” (Wilcox, supra.) Plaintiff’s motion for discovery as to Does 4 and 5 should be denied.

Dated: February 7, 2006

Respectfully submitted, ___________________ Mark Goldowitz California Anti-SLAPP Project Special Counsel for Defendants Does 4 and 5, aka richwill21 and benderandundant.

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DECLARATION OF PAUL CLIFFORD I, Paul Clifford, hereby declare: 1. I am an attorney for defendants Does 4 and 5 in this case and the facts set forth

herein are of my own personal knowledge. 2. I am personally familiar with, and have accessed (without registering with

Yahoo!), the Yahoo! Finance message boards in general and the EAG message board for Eagle Broadband in particular. From personal experience, I know that any person with a computer and an Internet browser can, without registering with Yahoo!, access the Yahoo! EAG board, and Yahoo! Finance message boards in general, and read the posts on it merely by entering the appropriate website address (URL) into that person’s Internet browser. Registration with Yahoo! is only necessary to receive an account and password, which is necessary to post items on a message board. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Dated: February 7, 2006

_________________________________ Paul Clifford

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PROOF OF SERVICE The undersigned hereby states under the penalty of perjury under the laws of the State of California: I am employed in Alameda County; I am over the age of eighteen and not a party to the within cause; and my business address is 2903 Sacramento Street, Berkeley, California 94702. On this day, I caused an envelope to be addressed to: KARINEH KHACHATOURIAN JEFFREY M. RATINOFF AMY P. MACLEAR GORDON & REES LLP Embarcadero Center West 275 Battery Street, Suite 2000 San Francisco, CA 94111 GREG BROILES, ESQ. 1625 The Alameda, Suite 800 San Jose, CA 95126-2225 and I enclosed in said envelope a copy of the following document: DEFENDANTS DOES 4 AND 5’S OPPOSITION TO PLAINTIFF’S MOTION FOR DISCOVERY; DECLARATION OF PAUL CLIFFORD and I deposited said envelope, postage prepaid fully thereon, in a U.S. mail depository, in

15 Berkeley, California; 16 all on this day. 17 18 19 20 21 22 23 24 25 26 27 28 Dated: February 7, 2005 Geoffrey King

PROOF OF SERVICE