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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 REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT SPECIAL MOTION TO STRIKE BY DEFENDANTS DOE 4 A/K/A RICHWILL21 AND DOE 5 A/K/A BENDERANDDUNDAT, PURSUANT TO C.C.P. § 425.16 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 [Filed in conjunction with defendants’ declarations, compendium of federal authorities, and proof of service of reply papers]

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1 2 3 4 5 A. 6 B. 7 8 9 II. 10 11 12 13 1. 14 2. 15 16 a. 17 18 19 20 3. 21 22 23 1. 24 25 a. 26 27 28 b. B. b. c. C.

TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. DEFENDANTS MET THEIR BURDEN OF SHOWING THAT THE COMPLAINT ARISES FROM DEFENDANTS’ EXERCISE OF THEIR SPEECH RIGHTS AND IS THEREFORE COVERED UNDER SUBDIVISION (e)(3) OF THE ANTI-SLAPP LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Yahoo! Finance Message Board Is a Public Forum. . . . . . . . . . . . . . . . . . . . 1 Defendants’ Posts about Plaintiff, a Publicly-Traded Corporation, Were Made in Connection with an Issue of Public Interest. . . . . . . . . . . . . . . . . . . . . . . 2 The Complaint Is Not Exempt from the Anti-SLAPP Statute Pursuant to Section 425.17(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

PLAINTIFF DID NOT ESTABLISH A PROBABILITY OF PREVAILING ON ITS CLAIMS AGAINST DEFENDANTS RICHW ILL21 AND BENDERANDDUNDAT, AND THEREFORE ITS COMPLAINT MUST BE DISMISSED AS TO THESE DEFENDANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A. Plaintiff Has Not Shown a Probability of Prevailing on Its Claims Against Defendant Richwill21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Post by Richwill21 Is Parody Protected by the First Amendment. . . . 3 Plaintiff Has Not Shown That Richwill21’s Post Was an Unlawful, Unfair, or Fraudulent Business Act or Practice Prohibited by Business and Professions Code Sections 17200 et seq. . . . . . . . . . . . . . . . . . . . . . . . 5 Richwill21’s Post Is Not a Business Act or Practice or Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Securities Transactions Are Not Covered Section 17200.. . . . . . . . 6 Plaintiff Has Not Shown That It Suffered Any Damage as a Result of Richwill21’s Post. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Plaintiff Has Not Shown That Richwill21’s Post Was Actionable Defamation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Plaintiff Has Not Shown a Probability of Prevailing on Its Claims Against Defendant Benderanddundat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Plaintiff Has Not Shown That Benderanddundat’s Post Was an Unlawful, Unfair, or Fraudulent Business Act or Practice Prohibited by Business and Professions Code Sections 17200 et seq. . . . . . . . . . . . . . . . . . . . . . . . 8 Plaintiff Has Not Shown That Benderanddundat’s Post Contains Any False Statement of Fact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Plaintiff Has Not Shown That It Suffered Any Damages From Benderanddundat’s Post. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 i

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2.

Plaintiff Has Not Shown That Benderanddundat's Post Was Actionable Defamation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 a. Plaintiff Has Not Pled and Proved that Benderanddundat Has Made a Provably False Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 9 Plaintiff Has Not Shown Any Damage as a Result of Benderanddundat’s Post. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 b.

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TABLE OF AUTHORITIES FEDERAL CASES Dworkin v. Hustler Magazine (9th Cir. 1989) 867 F.2d 1188 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Strigliabotti v. Franklin Resources (N.D.Cal 2005) 2005 WL 645529 . . . . . . . . . . . . . . . . . . . . 6 STATE CASES Ampex Corporation v. Cargle (2005) 128 Cal.App.4th 1569 . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2 Averill v. Superior Court (1996) 42 Cal.App.4th 1170 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Baker v. Los Angeles Herald Examiner (1986) 42 Cal.3d 254 . . . . . . . . . . . . . . . . . . . . . . 3, 5, 9 Barrett v. Rosenthal, S122953 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Blatty v. New York Times (1986) 42 Cal.3d 1033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Bowen v. Ziasun Technologies (2004) 116 Cal.App.4th 777 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628 . . . . . . . . . . . . . . . . . . . . . . . 9 ComputerXpress v. Jackson (2001) 93 Cal.App.4th 993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2 Couch v. San Juan Unified School District (1995) 33 Cal.App.4th 1491 . . . . . . . . . . . . . . . . . . 4 Equilon Enterprises v. Consumer Cause (2002) 29 Cal.4th 53 . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Kahn v. Bower (1991) 232 Cal.App.3d 1599 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 10 Kasky v. Nike (2002) 27 Cal.4th 939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Leonardini v. Shell Oil (1989) 216 Cal.App.3d 547 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Navellier v. Sletten (2002) 29 Cal.4th 82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 9 Navellier v. Sletten (2004) 106 Cal.App.4th 763 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Rosenauer v. Scherer (2001) 88 Cal.App.4th 260 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Roskind v. Morgan Stanley Dean Witter (2000) 80 Cal.App.4th 345 . . . . . . . . . . . . . . . . . . . . . 6 San Francisco Bay Guardian v. Superior Court (Sparks) (1993) 17 Cal.App.4th 655 . . . . . . 4, 5 Vargas v. City of Salinas (2005) 135 Cal.App.4th 361 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3 Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 FEDERAL STATUTES 47 U.S.C. § 230 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Civil Code

STATE STATUTES

§ 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 § 45 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 10 Code of Civil Procedure § 425.16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 3 § 425.16 (e)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2 § 425.17 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3 § 425.17 (c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business & Professions Code §§ 17200 et seq (Unfair Competition Law) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6, 8 § 17204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 § 17500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6

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INTRODUCTION. This lawsuit is an effort by a financially troubled company to silence its critics and a public relations ploy (filed two weeks before the annual shareholders’ meeting) to create an illusion that its management is looking out for shareholders’ interests. (See Mould Decl., ¶¶ 16, 19; Reynolds Decl., ¶¶ 5-6.) After all, it is much simpler to blame and sue Internet posters than to build and grow a successful business. As set forth below and in defendants’ moving papers, plaintiff’s claims against defendants are subject to the anti-SLAPP law and plaintiff has not shown a probability of prevailing on them. Therefore, defendants’ special motion to strike the Complaint should be granted, and this SLAPP should be dismissed as to Does 4 and 5. I. DEFENDANTS MET THEIR BURDEN OF SHOWING THAT THE COMPLAINT ARISES FROM DEFENDANTS’ EXERCISE OF THEIR SPEECH RIGHTS AND IS THEREFORE CO VERED UNDER SUBDIVISION (e)(3) OF THE ANTISLAPP LAW. On a special motion to strike, the initial burden is on the defendant to make a “threshold,

13 prima facie showing” that the claims arise from petition or speech covered by the anti-SLAPP 14 law. (Vargas v. City of Salinas (2005) 135 Cal.App.4th 361, 374.) Defendants richwill21 and 15 benderanddundat did that in their moving papers. (Memo 4:15-7:24.) As discussed below, 16 plaintiff has not rebutted defendants’ prima facie showing. 17 A. 18 In their moving papers, defendants cited two cases holding that Internet finance message 19 boards are public fora for purposes of the anti-SLAPP law. (Memo 6:17-19, citing Ampex 20 Corporation v. Cargle (2005) 128 Cal.App.4th 1569, 1576, and ComputerXpress v. Jackson 21 (2001) 93 Cal.App.4th 993, 1006-08.) Plaintiff argues that the Yahoo! Finance board is not a 22 public forum because it places restrictions on who may post and what content may be posted. 23 (Opp. 6:6-8; 5:23-7:7.) Plaintiff not only cites no authority to support this argument, but also 24 ignores Ampex, which expressly held the Yahoo! message board to be a public forum: 25 26 27 28 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. (Ampex, supra, citing ComputerXpress, supra; see also Wilbanks v. Wolk (2004) 121 1
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The Yahoo! Finance Message Board Is a Public Forum.

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Cal.App.4th 883, 895, 897 [private website on which public could not post is a public forum]; Annette F. v. Sharon S. (2004) 119 Cal.App.4th 1146, 1161, 1168 [letter to editor is statement made in a public forum]; Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 476-77 [private newsletter is a public forum].) 1 B. Defendants’ Posts about Plaintiff, a Publicly-Traded Corporation, Were Made in Connection with an Issue of Public Interest.

In their moving papers, defendants demonstrated that their posts concerned an issue of 7 public interest – the management, operation, and financial prospects of a publicly-traded 8 corporation. (Memo 6:20-7:24.) Plaintiff ignores this and simply asserts that, “Assuming 9 Defendants are competitors of Eagle Broadband,” their posts do not involve a matter of public 10 interest. (Opp. 7:7-19.) However, the Complaint makes no such allegation and plaintiff 11 provides no evidence to support it. In fact, defendants are not competitors of plaintiff (and have 12 not shorted its stock); rather, they are shareholders with an interest in the share price going up. 13 (Williams Decl., ¶¶ 3-5; Mould Decl., ¶¶ 3-5.) Further, “Internet postings about corporate 14 activity constitute an issue of public importance. . . . ” (Ampex, supra, at p. 1576.) 15 Plaintiff also argues that defendants were not exercising their First Amendment rights 16 because their speech was false and was made on a “private” Internet site. (Opp. 7:19-8:2.) 17 However, the only case cited by plaintiffs does not involve section 425.16 or the Internet. In 18 fact, as previously discussed, the cases make clear that statements on financial message boards 19 about a publicly traded corporation are covered by subdivision (e)(3) of the anti-SLAPP law. 20 (Ampex, supra [Yahoo!]; ComputerXpress, supra.) In addition, the validity of a defendant’s 21 speech bears only on the second prong of section 425.16 (probability of prevailing) – not the first 22 (applicability of the statute). (Navellier v. Sletten (2002) 29 Cal.4th 82, 94-95.) 23 C. 24 25 26 27 28 Further, this issue is not before the Supreme Court in Barrett v. Rosenthal, S122953, as plaintiff incorrectly asserts. (Opp. 5:27-6:1.) Rather, that case involves the scope of immunity for Internet reposting under 47 U.S.C. § 230. (Goldowitz Decl., ¶ 3.) 2
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The Complaint Is Not Exempt from the Anti-SLAPP Statute Pursuant to Section 425.17(c).

Plaintiff also argues that the Complaint is exempt from the anti-SLAPP law pursuant to

1 2 3 4 5 6 7 8

C.C.P. § 425.17(c), based on its assumption that defendants are competitors of plaintiff. (Opp. 4:26-5:22.) However, plaintiff has presented no evidence to support this previously unalleged claim, which is not true, as noted above. Defendants’ posts were not made to promote transactions in, or in the course of delivering, defendants’ goods or services. Thus, § 425.17(c) does not apply. (Williams Decl., ¶¶ 3-4, 7; Mould Decl., ¶¶ 3, 5, 7; see § 425.17(c)(1).) II. PLAINTIFF DID NOT ESTABLISH A PROBABILITY OF PREVAILING ON ITS CLAIMS AGAINST DEFENDANTS RICHWILL21 AND BENDERANDDUNDAT, AND THEREFORE ITS COMPLAINT M UST BE DISMISSED AS TO THESE DEFENDANTS. Once a defendant has made a prima facie showing that the lawsuit arises from petition or

9 speech activity covered by section 425.16, as defendants have done here, the burden shifts to the 10 plaintiff to establish a probability of prevailing on its claims. To do this, “a plaintiff responding 11 to an anti-SLAPP motion . . . must demonstrate that the complaint is both legally sufficient and 12 supported by a sufficient prima facie showing of facts to sustain a favorable judgment . . . ” 13 (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821 [internal citations and 14 punctuation omitted].) Plaintiff must meet its burden with “competent, admissible evidence.” 15 (Vargas v. City of Salinas, supra.) Plaintiff’s Complaint alleges causes of action for unfair 16 business practices and defamation. As to defendants richwill21 and benderanddundat, the 17 Complaint alleges only one allegedly actionable post by each. (See Complaint ¶¶ 16, 27-28, and 18 Exhibits A and H thereto.) As discussed below, plaintiff has failed to show that either of its 19 causes of action have any merit as to these two defendants. 20 A. 21 22 23 24 25 26 27 28 Plaintiff Has Not Show n a Probability of Prevailing on Its Claims Against Defendant Richwill21. 1. The Post by Richw ill21 Is Parody Protected by the First Amendment.

Parody is protected by the First Amendment because it does not convey a provably false assertion of fact. For instance, in Baker v. Los Angeles Herald Examiner (1986) 42 Cal.3d 254, 258, plaintiff, the producer of a television documentary on sex education, sued for the publication of a review of the documentary based on the reviewer’s statement that “My impression is that [the producer] . . . told his writer/producer . . . ‘We’ve got a hot potato here – let’s pour on titillating innuendo and as much bare flesh as we can get away with. Viewers will 3
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eat it up.’” The Supreme Court noted that the principle that defamation requires a falsehood “is grounded in the First Amendment itself” and held that this passage was not actionable because the average reader could not have reasonably understood that the review stated that the purported quotation was something that the producer had actually said. (Id. at pp. 259, 265-68.) In San Francisco Bay Guardian v. Superior Court (1993) 17 Cal.App.4th 655, 657, a landlord sued a newspaper for publishing a fake letter, purportedly written by the landlord, which said “I don’t understand why Vince Bielski is so upset about electroshock therapy. I find that my tenants who have undergone this treatment are much more cooperative.” Even though plaintiff submitted five declarations stating that the declarants did not recognize the letter as a parody, the court nonetheless concluded that “the average reader, as a matter of law, would recognize that the letter was a . . . parody and not actually written by [plaintiff].” (Id. at p. 659.) Therefore, the court held, “the letter does not defame [plaintiff] by false attribution or presentation of false facts.” (Id. at p. 661.) 2 Here, richwill21’s post is unquestionably a parody. It was a take-off on the press release that plaintiff issued on June 28, 2004, when it was added to the Russell 3000 Index. (See Clifford Decl., Exhibit D.)3 About a year later, plaintiff was removed from that Index (Clifford Supp.Decl., Exhibit B), which led to the parody press release. (Williams Decl., ¶ 9.) Indeed, richwill21 re-posted plaintiff’s June 2004 press release 10 minutes before posting the parody in reply. (See Williams Decl., ¶¶ 10-12, and Clifford Supp.Decl., Exhibits C and D.) The parody press release purports to be issued by plaintiff, quoting plaintiff’s Chairman and CEO as saying that Eagle’s deletion from the Russell 3000 Index was a “clear recognition” of plaintiff’s

Although plaintiff here is a public figure (see memorandum filed by Does 2 and 3, 6:726), First Amendment protection of parody is not limited to suits by public figures. (See, e.g., Couch v. San Juan Unified School District (1995) 33 Cal.App.4th 1491, 1494-96, 1503-04 [high school campus security officer could not recover for publication of a parody].) Plaintiff asserts that it “has never been listed on the Russell 3000 Index Fund.” (Opp. 8:26-27, citing Reynolds Decl., ¶ 9.) However, this is not true, according to Russell’s website (Clifford Supp.Decl., ¶ 3 and Exhibit B); indeed, plaintiff sent out a press release in June 2004 entitled “Eagle Broadband added to Russell 3000 Index.” (Clifford Decl., Exhibit D.) 4
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2

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“continued failures in executing our business plan over the last year,” a “reflection of our continued stagnation, worsening financials and decreased market capitalization,” and “an indication of further customer rejection of Eagle’s technology and services, the indifference of our employees and our continued focus on eroding shareholder value.” (Complaint, ¶ 16, Exhibit A.) Plaintiff asserts that this parody press release has the “look and feel” of a corporate press release. (Opp. 10:5-16; see also 8:24-9:1) It does, superficially – that’s the whole idea of a parody. However, the average reader could not reasonably believe that plaintiff had actually issued such a press release with its Chairman/CEO making such negative statements about his company and its “continued focus on eroding shareholder value.” This “press release” was a recognizable and non-actionable parody, just as much as the fake letter in San Francisco Bay Guardian or the fake quotation in Baker. Indeed, there is no evidence that anybody sreiously believed that the parody release was a real Eagle Broadband press release, and richwill21 posted two subsequent posts on the same day which indicated that it was not. (Clifford Supp.Decl., Exhibits E and F; Williams Decl., ¶ 12.) This First Amendment defense applies to both causes of action in plaintiff’s Complaint. (Blatty v. New York Times (1986) 42 Cal.3d 1033, 1044-45 [“First Amendment limitations are applicable to all claims, of whatever label, whose gravamen is the alleged injurious falsehood of a statement. . . ”].) 2. Plaintiff Has Not Shown That Richw ill21’s Post W as an Unlawful, Unfair, or Fraudulent Business Act or Practice Prohibited by Business and Professions Code Sections 17200 et seq.

Plaintiff’s first cause of action is for unfair business practices, in violation of the Unfair Competition Law (UCL), Business and Professions Code sections 17200 et seq. (Complaint, ¶¶ 37-40.) This claim against richwill21 is without merit for at least three reasons, in addition to the First Amendment infirmity discussed above. a. Richwill21’s Post is Not a Business Act or Practice or Advertising.

The Unfair Competition Law defines acts of unfair competition as follows: 28 5
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As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code. (B&PC § 17200.) Section 17500 applies only to advertising. (see B&PC § 17500; see also

4 Kasky v. Nike (2002) 27 Cal.4th 939, 951 [§ 17500 proscribes false or misleading advertising].) 5 Plaintiff has provided no evidence or authority that richwill21’s post was a “business act or 6 practice” or advertising. Indeed, this post was not connected to richwill21’s business. (Williams 7 Decl., ¶¶ 3-5, 7.) Therefore, plaintiff has failed to show that richwill21 violated this statute. 8 b. 9 Plaintiff states that federal law does not pre-empt section 17200 claims, citing Roskind v. 10 Morgan Stanley Dean Witter (2000) 80 Cal.App.4th 345. (Opp. 13:18-20, 14:12-16.) However, 11 as noted in Bowen v. Ziasun Technologies (2004) 116 Cal.App.4th 777, 789-90, Roskind merely 12 held that federal securities laws do not pre-empt section 17200 claims. After a detailed analysis 13 of state and federal cases, Bowen concluded that “section 17200 does not apply to securities 14 transactions.” (Id. at p. 790, quoted with approval in Feitelberg v. Credit Suisse First Boston 15 (2005) 134 Cal.App.4th 997, 1009.) Plaintiff argues that Bowen is not applicable because it 16 dealt with fraud in the purchase of securities and “the purchase or sale of securities is tangential” 17 to Eagle’s claim. (Opp. 13:20-14:23.) However, this is not correct – the Complaint alleges that 18 defendants’ posts are part of “stock market manipulation schemes” designed “to deflate the price 19 of Eagle Broadband stock and reap illegal gains from short sales.” (Complaint, 1:25-28, ¶¶ 1320 15; see also Opp. 14:3-6.) Thus, the Complaint is expressly based on allegedly illegal short 21 sales of stock, which undeniably involves securities transactions. Strigliabotti v. Franklin 22 Resources (N.D.Cal 2005) 2005 WL 645529, cited by plaintiff (Opp. 14:7-12), is not applicable 23 because it does not involve the purchase or sale of securities (as does this case and Bowen); 24 indeed, it may not even be a published opinion. Therefore, the Complaint does not allege a valid 25 UCL claim. 26 c. 27 28 Plaintiff Has Not Show n That It Suffered Any Damage as a Result of Richw ill21’s Post. Securities Transactions Are Not Covered by Section 17200.

A UCL claim can only be brought, as relevant here, by a “person who has suffered injury 6
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in fact and has lost money or property as a result of such unfair competition.” (B&PC § 17204, as amended by Proposition 64, effective 11/3/04.) However, plaintiff has not shown that it suffered injury in fact and lost money or property as a result of richwill21’s post. Although plaintiff generally alleges that the price of its stock fell because of the posts of the seven defendants (Complaint, ¶¶ 33, 36), it has produced no evidence to indicate that richwill21’s post produced such a result. In fact, the record indicates to the contrary. Richwill21’s post was posted on June 10, 2005, a Friday, at 8:41 p.m., after the stock market had closed. (See Complaint, Exhibit A.) That day, plaintiff’s stock closed at 22 cents per share. On M onday, June 13, 2005, plaintiff’s stock opened at 22 cents, reached a high of 23 cents, and closed at 21 cents. The next day, June 14, it closed at 25 cents, up 4 cents. Before richwill21’s post, from January 3, 2005, through June 10, 2005, plaintiff’s stock price had already dropped from 67 cents to 22 cents, with no help from richwill21. (Clifford Supp.Decl., Exhibit BB.) Further, plaintiff’s purported expert merely speculates that a decline in plaintiff’s share price “could” lead to losses for plaintiff. (Flaherty Decl., ¶ 26.) Thus, there is no evidence that richwill21’s parody post caused plaintiff’s stock price to decrease, much less any damages to plaintiff. Plaintiff’s failure to show any damages is an indication that this is a meritless SLAPP. (Averill v. Superior Court (1996) 42 Cal.App.4th 1170, 1176.) 3. Plaintiff Has Not Shown That Richw ill21’s Post W as Actionable Defamation.

Plaintiff’s second cause of action is for defamation. (Complaint, ¶¶ 41-45.) As discussed 20 above, this claim is without merit as to richwill21 because said defendant’s post was parody 21 protected by the First Amendment. (See II-A-1.) In addition, Civil Code section 45a states in 22 relevant part that “Defamatory language not libelous on its face is not actionable unless the 23 plaintiff alleges and proves that he has suffered special damage as a proximate result thereof.” 24 However, the Complaint does not allege, and plaintiff has not shown, that said post constituted 25 libel on its face (it does not accuse plaintiff of criminal conduct or the like), and plaintiff has not 26 shown that it has suffered special damages as a result of said post. (See II-A-2-c.) Further, 27 plaintiff asserts that its defamation claims are for trade libel (Opp. 8:8), which requires a 28 7
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showing of special damages. (Leonardini v. Shell Oil (1989) 216 Cal.App.3d 547, 572.) B. Plaintiff Has Not Show n a Probability of Prevailing on Its Claims Against Defendant Benderanddundat.

Similarly, plaintiff’s claims against benderanddundat have no merit. It appears that 4 plaintiff has sued him because he has been a vocal critic of plaintiff’s management and had 5 publicly encouraged a shareholders’ suit. (M ould Decl., ¶¶ 17-19.) 6 1. 7 8 9 10 11 12 13 14 15 The requirement that “speech contain a false statement of fact applies not just to 16 defamation claims, but to all claims seeking to impose civil liability for speech not otherwise 17 outside the protection of the first amendment.” (Dworkin v. Hustler Magazine (9th Cir. 1989) 18 867 F.2d 1188, 1196, fn. 5.) However, plaintiff has not shown that benderanddundat’s post 19 contains any false statement of fact, as discussed below at II-B-2-a. Therefore, plaintiff’s UCL 20 claim against this defendant is without merit. 21 b. 22 23 24 25 26 27 28 Plaintiff Has Not Shown That It Suffered Any Damages From Benderanddundat’s Post. Plaintiff Has Not Show n That Benderanddundat’s Post Was an Unlawful, Unfair, or Fraudulent Business Act or Practice Prohibited by Business and Professions Code Sections 17200 et seq.

Plaintiff’s first cause of action for violation of the UCL is without merit as to benderanddundat for at least four reasons: (1) securities transactions, which are alleged by plaintiff, are not covered by the UCL (see II-A-2-b); and plaintiff has not shown: (2) that defendant’s post was a “business act or practice” or advertising (see II-A-2-a), (3) that benderanddundat made a false statement (see below), or (4) damages (see below). a. Plaintiff Has Not Shown That Benderanddundat’s Post Contains Any False Statement of Fact.

As discussed above, plaintiff must show actual injury to establish a violation of the UCL. (See II-A-2-c.) Plaintiff has not met this burden. Plaintiff alleges that on the day of benderanddundat’s post, Monday, January 24, 2005, plaintiff’s stock closed five cents lower than it opened. (Complaint, ¶¶ 27-28.) However, there is no evidence that benderanddundat’s post caused any of this drop. First, it appears that the probable cause for this drop was plaintiff’s filing notice with the SEC, after the close of the market the previous Friday, that it was going to 8
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increase the number of outstanding shares by about 13%, thereby naturally decreasing the value of each share. (Clifford Supp.Decl., Exhibit K; Mould Decl., ¶¶ 10-13.) Second, the decline of plaintiff’s stock price on the day of the post occurred before the post was made; the share price actually increased that day after the post! (Mould Decl., ¶ 14, and Exhibit D.) Third, this was one of hundreds of posts on the EAG message board on that date. (According to plaintiff, the average number of monthly posts on this board is 23,000 (Complaint ¶ 15(b)), which means more than 760 per day.) Fourth, plaintiff’s share price was already in a strong downward trend. (Clifford Decl., ¶ 6, Exhibit E; Clifford Supp.Decl., Exhibit AA.) The brutal truth is that plaintiff has consistently lost millions of dollars a year since its fiscal year 2000, and had just announced that it was going to dilute its shares by 13%. Its stock price quite logically declined as a result. (Mould Decl., ¶¶ 10-13, 16, Exhibits A-C; Clifford Decl., Exhibit A; Clifford Supp.Decl., Exhibits H-K, O, X, and Z.) Plaintiff has not shown that this post caused any part of this decline, much less any damages to plaintiff. (See II-A-2-c.) 2. Plaintiff Has Not Shown That Benderanddundat's Post Was Actionable Defamation.

Plaintiff’s second cause of action for defamation is without merit as to benderanddundat, 16 because plaintiff has not pled and proved a false statement or shown damages. 17 a. 18 19 20 21 22 23 24 25 26 27 28 Plaintiff Has Not Pled and Proved that Benderanddundat Has Made a Provably False Statement.

In a special motion to strike, “the pleadings frame the issue to be decided.” (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 655, disapproved on another point in Equilon Enterprises v. Consumer Cause (2002) 29 Cal.4th 53, 68 fn. 5.) The plaintiff must state and substantiate “a legally sufficient claim.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) A complaint for libel must specifically identify, if not plead verbatim, the words constituting the allegedly libelous statement. (Kahn v. Bower (1991) 232 Cal.App.3d 1599, 1612, fn. 5.) To be libelous, a statement must be provably false. (Civil Code § 45; Baker, supra, at p. 259.) Plaintiff’s Complaint alleges that benderanddundat’s January 24, 2005, post contains two false factual assertions: (1) “that Eagle Broadband was suffering from continued financial losses causing the share price to drop” (Complaint, ¶ 27); and (2) it contained “information 9
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concerning Plaintiff’s purported inability to sell a key product line essential to its business.” (Id., ¶ 28.) Plaintiff makes no effort to show that these statements are false (indeed, the second one was not even in the post) and plaintiff has therefore effectively abandoned these claims. Instead, plaintiff argues that two other statements are false: that plaintiff is “out of cash” and owes “Aggregate” $10 million. (See Opp. 9:11-14.) However, these statements are not specifically identified in the Complaint and therefore cannot be the basis of a claim for defamation. (Kahn v. Bower, supra.) In addition, plaintiff has not proved that these statements were false when they were made, on January 24, 2005. Plaintiff’s only evidence in this regard is a declaration dated January 19, 2006, which states that “Eagle Broadband is not ‘out of cash’ and Eagle Broadband does not owe ‘Aggregate’ any amount.” (Reynolds Decl., ¶ 15 [emphasis added], cited in Opp. 9:13-14.) This statement regarding Eagle’s finances in January 2006 does not prove that defendant’s statements made a year earlier were false. Defendant had ample basis to make these statements and they were not made with “actual malice.” (M ould Decl., ¶¶ 15-16; Clifford Supp.Decl., Exhibits H–M, X and Z.) Indeed, the “gist” of the “out of cash” statement is true. (Mould Decl., ¶ 16.) In any case, the “out of cash” statement was at worst nonactionable hyperbole. (Mould Decl., ¶ 16(h); Rosenauer v. Scherer (2001) 88 Cal.App.4th 260, 280 [“hyperbolic language . . . is constitutionally protected”].) Thus, plaintiff has not pled and proved that benderanddundat made a false statement. b. Plaintiff Has Not Show n Any Damage as a Result of Benderanddundat’s Post.

The defamation claim is also without merit as to said defendant because plaintiff has not 21 shown any damages, as discussed above in II-B-1-b. This failure is fatal to plaintiff’s 22 defamation claim against benderanddundat because the Complaint does not allege, and the 23 allegations against said defendant do not constitute, libel on its face. (See Civil Code § 45a.) 24 Dated: February 15, 2006 25 26 27 28 10
DEFENDANTS’ REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SPECIAL MOTION TO STRIKE

Respectfully submitted, ______________________________ Mark Goldowitz, Special Counsel for Defendants Does 4 and 5