Opinion
C033477.
7-8-2003
CHERRY VALLEY DEVELOPMENT, LLC, Cross-Complainant and Appellant, v. KENNETH L. COX et al., Cross-Defendants and Respondents.
Although the paradigm SLAPP (strategic lawsuit against public participation) began with well-financed developers attempting to squelch the humble protests of environmental activists, it has expanded to, in this case, the trial courts proper dismissal of a SLAPP filed by one developer against another. (Code Civ. Proc., § 425.16; Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815-819.) In this appeal, Cherry Valley Development (Cherry Valley) insists that its cross-complaint against Kenneth L. Cox and L.L. Loveless for allegedly interfering with its ability to secure approval for a development in Tuolumne County is not a SLAPP. Simply put, Cherry Valley argues that the alleged misrepresentations made to county planners by Loveless and Cox were not in furtherance of a constitutional right to free speech or petition but instead constituted a breach of their agreement to help Cherry Valley obtain approval of the project. Cherry Valley also asserts that the trial court abused its discretion by refusing to allow discovery and by awarding $ 13,523 in attorney fees and costs.
We conclude the cross-complaint is a SLAPP because the alleged communications were statements "made in connection with an issue under consideration or review by a legislative, executive, or judicial body . . ." (§ 425.16, subd. (e)) and therefore fall within the anti-SLAPP statute as a matter of law. All SLAPPs are not dismissed, however; only those without merit. The trial court properly dismissed Cherry Valleys SLAPP because it failed to make a prima facie showing that it could prevail on the merits of its claim that Loveless and Cox had interfered with its prospective economic advantage. Because we also find the trial court did not abuse its discretion by denying Cherry Valleys request for discovery or by awarding attorney fees, we affirm the dismissal of the cross-complaint.
FACTS
In the early 1990s Loveless and Cox purchased property in Tuolumne County and thereafter obtained governmental approval of a tentative map and development plan for 158 homes. In 1997 they sold the property to Cherry Valley. As part of the sales agreement, Cherry Valley executed a promissory note and promised to pay Loveless and Cox an additional $ 10,400 for every lot that was approved beyond the original 158. Loveless and Cox agreed to assist Cherry Valley in obtaining a modified tentative map and development plan for the increase in the number of lots to be developed.
Cherry Valley also entered into an agreement with the Tuolumne Park and Recreation District (the District) to finance the development of a golf course as well as commercial and residential sites from the sale of municipal bonds. Despite the issuance of the bonds, the project stalled. The ensuing dispute between the District and Cherry Valley garnered vast media attention. In September 1998 the District filed a complaint against Cherry Valley for fraud.
In October 1998 Cherry Valley cross-complained against Loveless and Cox, alleging a single cause of action for interference with prospective economic advantage. The unverified cross-complaint states that Loveless and Cox conspired to deprive Cherry Valley of the benefits of its agreement with the District by "encouraging the District to breach its agreement with [Cherry Valley] so that . . . Cox and Loveless could benefit in taking the project over." Cherry Valley further alleged on information and belief that Loveless and Cox had published untrue statements about the use of the bond proceeds and their performance of the contract to county planning agencies and to the Districts board of directors. Cherry Valley did not serve the cross-complaint on Loveless until December 10, 1998, and did not serve Cox.
After a November 1998 hearing, however, Cherry Valley obtained a change of venue of the underlying action to San Joaquin County. Neither Loveless nor Cox had notice of the motion for a change of venue. In January, counsel for Cherry Valley gave both Loveless and Cox, the latter making his appearance without formal service, an open extension of time to answer the cross-complaint. Hoping to be dismissed from the lawsuit, Loveless and Cox met with Cherry Valleys lawyer to openly discuss what they knew, what they said, and to whom they had spoken. At the conclusion of the meeting, they expected the lawsuit would be dismissed.
Quite to the contrary, on March 15, 1999, Cherry Valley terminated the open extension of time in which to file a responsive pleading to the cross-complaint. In mid-April, Loveless and Cox filed a motion for a change of venue since neither of them lived in San Joaquin County, nor was the property located in that county. They later withdrew their motion at the request of their codefendants.
In May 1999 Loveless and Cox filed a motion to strike portions of the cross-complaint pursuant to the anti-SLAPP statute. (& sect; 425.16.) In a declaration Cox submitted in support of the motion to strike, Cox claimed he had both a "personal interest as a concerned citizen" and a "substantial financial interest" and admitted he had spoken to county officials on a number of occasions about the status of the project. He denied making any untrue statements or attempting to thwart county approval of the revised tentative map and development plan. Loveless relied on Cox to speak on his behalf.
Cherry Valley submitted no evidence in opposition to the motion to strike. Instead, it requested an order to allow discovery "in order to factually substantiate the allegations of its cross-complaint" and thereby demonstrate the "probability that cross-complainant will prevail." Specifically, Cherry Valley sought to depose Loveless, Cox, engineer Tom Sceza, and an unnamed representative of the Tuolumne County Planning Department.
The trial court denied the request for discovery and granted the motion to strike. The court found that the cross-complaint is a SLAPP action within the meaning of section 425.16. The court also found there was no evidence to suggest that Cherry Valley could prevail on its claim against Loveless and Cox: "I just dont have any factual evidence here that anythings been done to prove up this case, even the small amount that would have to be done in order to get by this SLAPP action. And based on that, Im not willing to grant a continuance for discovery. I think that almost a year is sufficient time to have found something that you could put before the Court to show that you will prevail on the facts of the case." The cross-complaint as to Loveless and Cox was dismissed with prejudice.
DISCUSSION
I
As litigation itself became an increasingly effective weapon in the arsenal used to deter the exercise of rights protected by the First Amendment, the Legislature created a procedural device to dispose of SLAPPs shortly after they are filed. The so-called "anti-SLAPP statute" thus provides in pertinent part that "[a] cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." (§ 425.16, subd. (b)(1).)
The anti-SLAPP statute represents a legislative determination that the rights to free expression and petition trump the unrestricted right to litigate. The Legislature did not obliterate the right to litigate causes of action impacting free speech and the right to petition, but it did accelerate the time within which a plaintiff who files a SLAPP must demonstrate the lawsuit has merit. The motion to strike a SLAPP is predicated on the fundamental notion that a lawsuit that might chill free speech or petition should not be filed before a plaintiff has marshaled facts sufficient to show the viability of the action. (Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 16 (Ludwig).)
Defendants bear the threshold burden to make a prima facie case that they acted in furtherance of their rights of petition or free speech in connection with a public issue. (Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO (2003) 105 Cal.App.4th 913, 918.) If the defendants meet their burden, then we must determine whether the plaintiff offers sufficient admissible evidence to demonstrate a probability of success on the merits of the claim. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999.) We must exercise our independent judgment as to whether the parties met their respective burdens (Governor Gray Davis Com. v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 456), cognizant that the 1997 amendment to section 425.16 mandates broad construction of the statute. (§ 425.16, subd. (a), as amended by Stats. 1997, ch. 271, § 1; Decker v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, 1390.)
A. Is the Cross-Complaint Against Loveless and Cox a SLAPP?
Loveless and Cox bear the burden of proving that their alleged interference with Cherry Valleys prospective economic advantage arose from the exercise of either their right to petition or to free speech in connection with a public issue. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 (Cotati); Gallimore v. State Farm Fire & Casualty Ins. Co. (2002) 102 Cal.App.4th 1388, 1398.) Section 425.16 expressly defines acts of protected speech or petitioning in subdivision (e) of the statute. Subdivision (e) includes "any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law . . . ."
Subdivision (e) of section 425.16 safeguards "free speech and petition conduct aimed at advancing self government, as well as conduct aimed at more mundane pursuits. Under the plain terms of the statute it is the context or setting itself that makes the issue a public issue: all that matters is that the First Amendment activity take place in an official proceeding or be made in connection with an issue being reviewed by an official proceeding." (Braun v. Chronicle Publishing Co. (1997) 52 Cal.App.4th 1036, 1047 (Braun).) Therefore, a defendant utilizing subdivision (e) to prove that the cause of action is a SLAPP need not prove that the issue was of any public significance. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1122, 969 P.2d 564 (Briggs).) Rather, subdivision (e) provides a "bright-line test" that "clearly and unambiguously" prescribes that statements or writings made in connection with an issue under consideration by any official proceeding constitute a public issue and thereby satisfy a defendants burden of proof. (Briggs, supra, 19 Cal.4th at p. 1122; Braun, supra, 52 Cal.App.4th at p. 1047.)
Cox filed a declaration in support of the motion to strike wherein he described the communications he had with representatives of the county and the District about the status of the project and the approval of the modified tentative map. As we described ante, Cherry Valley had submitted a modified tentative map to the county for approval of the expanded development. Cox stated he had various conversations with staff in the planning department regarding the status of the tentative map as well as with staff at the Tuolumne Utility District about the water commitment for the additional lots and staff at the Tuolumne City Sewer District about the availability of sewer service. Under the plain terms of the statute, Coxs statements were made in connection with the status of the project, an "issue under consideration or review" by the county, "a legislative . . . body." (§ 425.16, subd. (e).)
Cherry Valley insists the self-serving commercial nature of Loveless and Coxs conduct defeats any claim they were genuinely exercising the rights safeguarded by the First Amendment. To the extent Cherry Valley is suggesting that Loveless and Coxs motives or subjective intent ought to be considered, they are mistaken. There is no language in the statutes operative sections "implying or even suggesting an intent-to-chill proof requirement," and "judicial imposition of an intent-to-chill proof requirement would undermine the Legislatures expressed aim that public participation not be chilled (§ 425.16, subd. (a)) by SLAPPs." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 58-60 (Equilon).) Nor must a defendant prove that the filing of the lawsuit had a chilling effect. (Cotati, supra, 29 Cal.4th at p. 74.)
Relying exclusively on an outmoded rationale espoused in Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers (1996) 49 Cal.App.4th 1591 (Ericsson), Cherry Valley argues that Loveless and Coxs tortious interference occurred during the course of performing a contractual obligation and not in furtherance of their right to free speech or petition. Ericsson was decided before the legislative expansion of section 425.16 and the onslaught of judicial opinions the 1997 amendment spawned. It thus provides feeble support for any legal proposition and even less in a case such as this with very different facts.
In Ericsson, Orange County hired a consultant to evaluate Ericssons technical compliance with its request for a proposal. (Ericsson, supra, 49 Cal.App.4th at pp. 1594-1595.) The consultant criticized Ericssons proposal; eventually, another company was awarded the contract. (Id. at pp. 1595-1596.) Ericsson thereafter filed a complaint against the consultant for interference with its prospective economic advantage. (Id. at p. 1596.) The trial court granted the consultants special motion to strike, but the Court of Appeal reversed. (Id. at pp. 1597, 1604.) The appellate court concluded that the consultants report could not be construed as an expression of free speech in connection with a public issue because it was merely performing its contractual obligation to the county. (Id. at p. 1602.)
The court concluded: "Thus in determining whether a cause of action falls within the scope of the statute, we hold that the Legislature intended to include only those suits that are based upon acts that are primarily in furtherance of a persons constitutional right of free speech, i.e., acts which advance or promote that right. For it is only in those cases where the party acted for the purpose of promoting or advancing his or her right of free speech, in contrast to one where the parties are performing or breaching their contractual obligations, that the right could be chilled by the specter of an unfounded lawsuit." (Ericsson, supra, 49 Cal.App.4th at p. 1601.) The plaintiffs purpose, whether it be primary, secondary, collateral, or otherwise, however, is simply irrelevant. (Equilon, supra, 29 Cal.4th at p. 67; Cotati, supra, 29 Cal.4th at p. 74.) To the extent Ericsson suggests otherwise, it has been soundly rejected.
Nor are the facts analogous. The consultant in Ericsson had been hired by the county to assess competing proposals for the sale of a telecommunications system. But there is absolutely no mention of any of the subdivisions of section 425.16 wherein protected activity is defined, nor was there any evidence of a public interest. As the court in Mission Oaks Ranch, Ltd. v. County of Santa Barbara (1998) 65 Cal.App.4th 713 (Mission Oaks) aptly observed: "[Ericsson] simply involved two companies competing for a contract to provide a product in the absence of public participation or concern." (Id. at p. 728.) And although Cherry Valley strains to fit the dubious Ericsson template that the performance of a contractual obligation cannot constitute protected activity, it failed to allege a cause of action against Loveless and Cox for breach of contract. Ericsson, therefore, is neither factually nor legally helpful.
By contrast, Ludwig, supra, 37 Cal.App.4th 8, also decided before the 1997 statutory amendment, was legally prophetic and factually apposite. Mr. Ludwig, a developer, hoped to build a mall but learned that a competitor was attempting to obtain approval of plans to build a second mall in a neighboring city. (Id. at p. 12.) Ludwig purportedly solicited surrogates to sabotage the approval of the competing mall and was then sued for interference with prospective economic advantage. (Ibid.) The Court of Appeal held that the lawsuit constituted a SLAPP. (Id. at p. 16.)
The Ludwig holding is straightforward. "On the face of the matter, Ludwigs activities qualified under the statute. . . . [P] . . . [P] . . . It expressly includes any writing or speech made in connection with an issue under consideration or review by a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law. . . . There is no requirement that the writing or speech be promulgated directly to the official body." (Ludwig, supra, 37 Cal.App.4th at pp. 15-17.) The court in Mission Oaks, supra, 65 Cal.App.4th 713, a case in which a disgruntled developer sought to stifle an environmental impact report, echoed the same holding. The anti-SLAPP statute is designed to put a quick end to lawsuits involving speech made in connection with an issue of public concern under consideration by a legislative body, even when, as here, that speech is commercial. (Id. at pp. 728-729.)
The declarations of Loveless and Cox satisfy their burden of proving that the cross-complaint against them is a SLAPP because, as we have discussed at length, their communications, albeit a blend of political and commercial speech, were made in connection with an issue under consideration by the county, that is, the approval of the modified tentative map. Since neither motive nor effect is relevant to our assessment whether a lawsuit is a SLAPP, we conclude that the cross-complaint alleges conduct arising from protected activity. We therefore must proceed to determine whether Cherry Valley sustained its burden of showing that the cause of action for interference with prospective economic advantage against Loveless and Cox has merit.
B. Is the SLAPP Viable?
Since Loveless and Cox have met their initial burden of proving that the cross-complaint arises from acts in furtherance of their First Amendment rights, the cross-complaint must be stricken unless Cherry Valley can prove a probability of success on the merits. (Rosenaur v. Scherer (2001) 88 Cal.App.4th 260, 274.) Its resistance to dismissal must be based on evidence, not argument. (DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562, 567-568.) It offered none. Since Cherry Valley utterly failed to meet its burden, the trial court properly granted the motion to strike and dismissed the cross-complaint.
II
Cherry Valley argues it was unable to meet its burden of proof because the trial court erroneously denied its motion to conduct discovery. Section 425.16, subdivision (g) provides that "all discovery proceedings in the action shall be stayed upon the filing of a notice of motion made pursuant to this section" although "the court, on noticed motion and for good cause shown, may order that specified discovery be conducted notwithstanding this subdivision." We review the trial courts denial of the discovery request for an abuse of discretion. (Sipple v. Foundation for Nat. Progress (1999) 71 Cal.App.4th 226, 247 (Sipple).)
The automatic stay of discovery might, if used indiscriminately, infringe on a plaintiffs right to due process "by placing the burden on the plaintiff to show a prima facie case without permitting the collection of evidence needed to satisfy that burden[.]" (Schroeder v. Irvine City Council (2002) 97 Cal.App.4th 174, 190-191.) In Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995) 37 Cal.App.4th 855, the Court of Appeal cautioned trial courts to grant discovery liberally. The court explained: "If the plaintiff makes a timely and proper showing in response to the motion to strike, that a defendant or witness possess evidence needed by plaintiff to establish a prima facie case, the plaintiff must be given the reasonable opportunity to obtain that evidence through discovery before the motion to strike is adjudicated. The trial court, therefore, must liberally exercise its discretion by authorizing reasonable and specified discovery timely petitioned for by a plaintiff in a case such as this, when evidence to establish a prima facie case is reasonably shown to be held, or known, by defendant or its agents and employees." (Id. at p. 868.)
Cherry Valley suggests it was sandbagged with the motion to dismiss, filed without warning over seven months after the cross-complaint had been filed and during a deluge of motions and discovery. The trial court rejected Cherry Valleys skewed version of the facts during the hearing on the motions to strike and to grant discovery. We find no abuse of discretion.
We begin with a reminder to Cherry Valley that a plaintiff who chooses to assert a cause of action predicated on protected conduct under the First Amendment has an obligation to marshal sufficient facts to make a prima facie showing the claim is meritorious before filing the lawsuit. (Ludwig, supra, 37 Cal.App.4th at p. 16.) "It is not unfair to insist that a party who chooses to bring what appears on its face to be a SLAPP suit be prepared to back up his claim with facts." (Id. at pp. 23-24, fn. 23.)
Even if we ignore Cherry Valleys obligation to garner a factual basis for its claim before filing the cross-complaint, we reject the notion it had been oppressed by the complexity of the case and surprised by the motion to strike. It was Cherry Valley that delayed service of the cross-complaint, obtained a change of venue disadvantageous to Loveless and Cox before they had been served or had notice of the action against them, granted an open extension of time to answer and then abruptly terminated the extension, and failed to conduct any discovery during the seven months the cross-complaint was pending and over a year after the initial complaint was filed. Hence, the trial court concluded Cherry Valley had ample time to obtain the "small amount" of evidence sufficient to withstand a motion to strike. The record does not disclose any underhanded or surreptitious behavior by Loveless and Cox, and Cherry Valley certainly does not provide any authority for the novel proposition that Loveless and Cox had some kind of duty to notify it of an intention to file the motion to strike. As the trial court observed, Loveless and Cox voluntarily participated in discovery with the hope and expectation they would be dismissed from the lawsuit. Hence, they had no reason to consider a motion to strike until their expectation was frustrated.
Finally, we note that Cherry Valleys request for discovery falls miserably short of explaining what additional facts it expects to uncover and why the depositions it proposes are necessary to carry its burden of proving a prima facie case. (Sipple, supra, 71 Cal.App.4th at p. 247.) Cherry Valley stated only that it needed to take several depositions because it had not had a "reasonable opportunity" before the motion was filed. Having failed, however, to explain what information it hoped to obtain from the four deponents and how that information would provide an evidentiary basis for the cross-complaint, Cherry Valley did not demonstrate good cause for invoking the exception to section 425.16s automatic stay provision. (§ 425.16, subd. (g).) Thus, the trial court did not abuse its discretion by refusing to prolong the litigation of what appears to be a meritless SLAPP.
III
Having prevailed on their motion to strike, Loveless and Cox are entitled to an award of attorney fees. (§ 425.16, subd. (c).) Cherry Valley contends the award is excessive, unfair, and includes inappropriate charges. We review the reasonableness of the award for an abuse of discretion. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132.)
Cherry Valley filed a motion to tax costs, arguing that the $ 12,597.10 in fees and costs requested by Loveless and Cox was excessive and unreasonable. The court disallowed 10 hours of attorney time and $ 368.95 for various photocopying and postage expenses, but it granted Loveless and Coxs request for additional fees incurred in opposing the motion to tax costs. It awarded Loveless and Cox attorney fees in the total amount of $ 13,523.55.
Cherry Valley complains that whereas its lawyers incurred only 19.5 hours in opposing the motion to strike, its adversaries lawyers billed an excessive 105.3 hours. The trial court may have concluded that the disparity in the number of hours was proportionate to the disparity in the quality of the work. The opposition to the motion to strike was meager at best. Cherry Valley offered absolutely no evidence to sustain its burden of proving that the cross-complaint had some potential merit. Its request for discovery was equally anemic. By contrast, Loveless and Cox, cognizant that they bore the initial burden of proving the cross-complaint was a SLAPP, filed a motion to strike complete with declarations, exhibits, and points and authorities. We cannot say the trial court abused its discretion by awarding fees commensurate with the time spent and the quality of the work presented.
Cherry Valley next challenges attorney travel time and charges for photocopying newspaper articles about the controversies surrounding the development. We will not second-guess the trial courts determination that these fees were reasonable. Cherry Valley offers no authority to support its argument that the motion should have been mailed rather than filed by an attorney. And the newspaper articles were attached to the motion to demonstrate that the lawsuit was a SLAPP because it involved an issue of public significance. Consequently, Cherry Valley fails to demonstrate an abuse of discretion.
Finally, Cherry Valley insists the award "makes a mockery of the concepts of fairness and equity" because it includes an award for fees incurred by Loveless and Cox in defending the motion to tax costs. Cherry Valley points out that the trial court had tentatively denied the motion to tax costs but, following oral argument, ultimately agreed that some of the costs were improper. Cherry Valley forgets the context in which the trial court exercised its discretion.
The motion to strike was designed to put a quick end to the meritless SLAPP. A prompt dismissal eliminates the chilling effect on the exercise of rights protected by the First Amendment by curtailing the cost of litigation, including attorney fees. Indeed, the Legislature has made mandatory the award of fees to a successful defendant. (§ 425.16, subd. (c).) In this context, we must defer to the trial courts assessment of the relative value of the motion to tax costs and whether the fees incurred to defend the mandatory attorney fees were reasonable. Given the strong public policy involved in dissuading the prosecution of SLAPPs, we cannot say the trial court abused its discretion by including the fees incurred by Loveless and Cox in defending the motion to tax costs.
DISPOSITION
The judgment is affirmed. Loveless and Cox are entitled to attorney fees and costs on appeal.
We concur: SCOTLAND, P.J., and MORRISON, J. --------------- Notes: All further statutory references are to the Code of Civil Procedure.