(CN) - Declining to reconsider Trump University's defamation counterclaim against an unhappy former student, the 9th Circuit added fuel Wednesday to a controversy over the application of state anti-SLAPP laws in federal court.
Tarla Makaeff lodged a class action alleging deceptive business practices against the for-profit school in 2010. She claimed that Trump University, now called The Trump Entrepreneur Initiative, took her for nearly $60,000 and failed to follow up on promises it made during expensive seminars that Makaeff said were little more than "infomercials."
Trump University answered the allegations with a counterclaim for defamation based on Makaeff's online postings and other comments, which Makaeff said were intended to "alert other consumers of my opinions and experience with Trump University," and to "inform other consumers of my opinion that Trump University did not deliver what it promised."
Makaeff moved to strike the counterclaim under California's anti-SLAPP (Strategic Lawsuits Against Public Participation) law, but U.S. District Judge Irma Gonzalez in San Diego denied the motion.
A three-judge federal appeals panel reversed Gonzalez in April, finding that she had failed to set the appropriately high standard that Trump University must meet to prove defamation as a "limited public figure."
In a concurrence to the ruling, Chief Judge Alex Kozinski argued that California's anti-SLAPP law, which has been used in federal court since 1999, had "cut an ugly gash" across an otherwise orderly federal process.
He said an 11-judge, en banc rehearing of the Trump case would provide a "fresh look at the question."
The appeals court refused to take Kozinski's bait and denied en banc rehearing in an order published Wednesday. This inspired a long dissent on the anti-SLAPP statute's many alleged shortcomings from Judge Paul Watford, which was joined by Kozinski and Judges Richard Paez and Carlos Bea.
The judges argued that the Anti-SLAPP law clashes with at least two federal rules of procedure by requiring a higher standard for pre-trial dismissal and "for testing the legal sufficiency of a claim."
They further contended that the U.S. Supreme Court's 2010 ruling in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., in which the high court ruled that a New York state statute conflicted with federal procedures governing class actions, warranted a rehearing of the Trump case.
"That intervening decision should have led us to revisit - and reverse - our precedent permitting application of state anti-SLAPP statutes in federal court," Judge Watford wrote.
He added that, "even if anti-SLAPP motions may be brought in federal court, we should stop entertaining interlocutory appeals from rulings on such motions."
In a concurrence that addressed many of the issues raised in the dissent, Judges Kim McLane Wardlaw and Consuelo Maria Callahan said that en banc rehearing was only proper under extraordinary circumstances.
Meanwhile, a "contrary result" in the Trump case would create a split among the federal circuits, they said, joined by Judges William Fletcher and Ronald Gould.
The judges also defended the application of anti-SLAPP laws in the federal courts.
"Without anti-SLAPP protections in federal courts, SLAPP plaintiffs would have an incentive to file or remove to federal courts strategic, retaliatory lawsuits that are more likely to have the desired effect of suppressing a SLAPP defendant's speech-related activities," Wardlaw and Callahan wrote. "Encouraging such forum-shopping chips away at "'one of the modern cornerstones of our federalism.'"