LOS CARNEROS COMMUNITY ASSOCIATES INC v. PENFIELD SMITH ENGINEERS INC

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Court of Appeal, Second District, Division 6, California.

LOS CARNEROS COMMUNITY ASSOCIATES, INC., et al., Plaintiffs and Appellants, v. PENFIELD & SMITH ENGINEERS, INC., et al., Defendants and Respondents.

No. B105545.

Decided: June 29, 1998

Coleman & Richards, Richard M. Coleman, Laurie J. Richards, Los Angeles, Reicker, Clough, Pfau & Pyle and Kurt H. Pyle, Santa Barbara, for Plaintiffs and Appellants. Collins, Collins, Muir & Traver, Samuel J. Muir, Pasadena, Stephen W. Olson, Diane M. Matsinger, Santa Barbara, Hatch and Parent, Peter N. Brown, Stanley M. Roden and Colin L. Pearce, Santa Barbara, for Defendants and Respondents.

A company wishes to build a commercial development project.   It hires an expert to render engineering services for the project and to speak on behalf of the project before government agencies.   The company sues its expert and a rival company alleging that the expert wrongfully agreed with the rival company not to criticize the rival company's project in exchange for a promise of future business from the rival company.

Here we hold that the company's action is not a Strategic Lawsuit Against Public Participation (SLAPP).  (Code Civ. Proc., § 425.16.) 1

Plaintiffs, Los Carneros Community Associates, Inc. and Los Carneros Community Associates (Los Carneros), and defendant, Camino Real LLC (Camino), are developers.   At different times, each developer hired defendant, Penfield & Smith Engineers, Inc. (Penfield), a civil engineering firm, to design and promote its competing project before government agencies.   The projects were the subject of significant public interest and media coverage.

Los Carneros terminated its contract with Penfield because it believed that Camino secretly rehired Penfield on condition that Penfield not publicly disparage Camino's competing project.

Los Carneros filed suit against Penfield, Camino and others for intentional interference with contractual relations and prospective business advantage, breach of contract, declaratory and injunctive relief, among other things.

The Penfield defendants and the Camino defendants each filed SLAPP motions to strike the Los Carneros complaint, pursuant to section 425.16.   The Legislature enacted section 425.16 to prevent suits brought to inhibit a citizen's constitutional right to speak on matters of public significance.

The trial court, noting that appellate courts have expansively interpreted section 425.16, granted the respective motions and dismissed the suit against the defendants.   We reverse.

FACTS

Around 1984, Los Carneros hired Penfield to perform engineering services and to represent it before government agencies in order to obtain approval to develop nearly 50 acres of land for residential, commercial and industrial uses in Goleta.   Defendant Michael Caccese managed the Los Carneros project for Penfield from 1986 to January 1996.   Penfield's services included advocating on behalf of the project and pointing out deficiencies in competing projects.

In June 1994, Camino hired Penfield to provide similar services to develop 83 acres zoned for commercial and recreational uses in Goleta.   In June 1995, Los Carneros sought a zoning amendment to build a large commercial shopping center.   Each developer sought approval for “big box retail store” complexes on its respective parcel in Goleta.

About March 1995, Mark Linehan, in charge of the Camino project, believed that Caccese publicly attacked the merits of the Camino project.   Linehan told Penfield he believed it could not work for both the Camino project and the Los Carneros project.   Penfield believed it could properly work for both projects, but, when confronted with an ultimatum, it chose to continue its relationship with Los Carneros.   Linehan terminated the Camino contract with Penfield.

At a business lunch in early November 1995, Penfield partners broached Linehan about possible work.   Linehan believed that Caccese had continued to criticize his Camino project.   In a letter of November 17, 1995, Penfield sought to assuage Linehan's concern about Caccese's comments.   In the letter Penfield assured Linehan that Caccese would limit his activities on Los Carneros to technical work and “not participate in any activities that would involve active opposition to your [Camino] project.”

The letter states, in pertinent part, “It was nice to ․ discuss the possibility of working with you [Linehan] on various projects you have in the works․  [Penfield] would very much appreciate the opportunity of working with you as engineers and surveyors․  [¶] [W]e discussed with [Caccese] ․ your need to limit our activities on the [Los Carneros] project to those which are appropriate for an engineering company and those that do not involve active opposition to your [Camino] project․  [¶] ․ [Penfield] would very much like to work with you on your future development projects.   We understand your concern regarding the possible conflict․  [Caccese] has agreed to not participate in any activities that would involve active opposition to your [Camino] project․  [¶] Based on the above understanding, we would be pleased to work on your current and future projects.  [¶] Please call ․ if you would like to ․ discuss this matter further.”

Later, Linehan hired Penfield to work on various unrelated easement projects.   Los Carneros considered Penfield's November 1995 letter to be a secret contract with Camino violating Penfield's contract with Los Carneros and Penfield's ethical duty to promote the Los Carneros project.   Los Carneros terminated Penfield.   In early 1996, Caccese resigned from Penfield.   He continued to work for Los Carneros on its project through another engineering firm.

Los Carneros filed the instant complaint against Penfield, Camino, Linehan and others alleging, among other things, interference with prospective business advantage, declaratory and injunctive relief and breach of contract.   Los Carneros complains that Camino wrongfully induced Penfield not to make negative comments about the Camino project in order to obtain contracts with Camino, as shown by the November 17, 1995 letter.

In an overly optimistic prayer, Los Carneros seeks to prevent Penfield from keeping its files, drawings and plans, from using any information concerning the Los Carneros property that it acquired during the business relationship and from performing services for other entities competing with Los Carneros for permits from government agencies.   Similarly, Los Carneros seeks to prevent Camino from seeking, receiving or using information about the Los Carneros project that it may have acquired from Penfield and to prevent Camino from retaining Penfield to assist in obtaining permits from government agencies on projects that compete with Los Carneros.

This appeal ensued after the trial court ordered the complaint dismissed and entered judgments in favor of defendants.

DISCUSSION

 A SLAPP suit is a meritless action filed primarily to chill the defendant's First Amendment rights.  (Bradbury v. Superior Court (1996) 49 Cal.App.4th 1108, 1113, 57 Cal.Rptr.2d 207;  Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2, 33 Cal.Rptr.2d 446.)  Section 425.16 states, in pertinent part, “(a) The Legislature finds and declares that there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of ․ freedom of speech and petition for the redress of grievances․ [I]t is in the public interest to encourage continued participation in matters of public significance, ․ this participation should not be chilled through abuse of the judicial process ․ [¶] (b)(1) A cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech ․ 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.  [¶] (2) In making its determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts․”

 Defendants bear the initial burden to show that plaintiffs' complaint constitutes a SLAPP suit.  (Beilenson v. Superior Court (1996) 44 Cal.App.4th 944, 949-950, 52 Cal.Rptr.2d 357;  Wilcox v. Superior Court, supra, 27 Cal.App.4th at pp. 819-820, 33 Cal.Rptr.2d 446.)   They must establish that the litigation relates to an act made “․ ‘in connection with a public issue’ [that] includes any written or oral statement or writing made before a legislative, executive ․ or any other official proceeding authorized by law;  ․ any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive ․ body, or ․ any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest.”  (§ 425.16, subd. (e).)

 If defendants show that plaintiffs' action is a SLAPP suit, plaintiffs bear the burden of establishing the probability of success on the merits of their action.  (Wilcox v. Superior Court, supra, 27 Cal.App.4th at pp. 821, 823, 33 Cal.Rptr.2d 446;  § 425.16, subd. (b).)

Los Carneros' complaint alleges that “Penfield agreed to act as Plaintiffs' agent in communications with representatives of governmental agencies relating to development issues ․”  (Italics added.)   Plaintiffs state that “various governmental, quasi-governmental and private groups and citizens voiced and continue to voice opposition to ․ development of the Los Carneros property.   Penfield's services were necessary to counter said opposition.”  (Italics added.)

Los Carneros alleges that “[t]he Camino Real Defendants intend to develop their property for commercial ․ uses and are a competitor of Plaintiffs to obtain the necessary government approvals.  [¶] Certain governmental representatives and private citizens contend that the Goleta Community Plan cannot support the commercial development of both [projects] ․ and are working to have any necessary permits denied․   The expertise ․ of Penfield is, and will be, invaluable to Plaintiffs to counter any opposition ․ that arises because of the competing goals between it and the Camino Real Project.”

Los Carneros alleges that the Penfield defendants agreed with the Camino defendants that in representing Los Carneros, before government agencies, or other groups, Penfield would not provide any unfavorable or negative information about the Camino project.

Defendants argue that the anti-SLAPP statute applies here because it protects any written or oral statement concerning a public issue or a statement “made in connection with an issue under consideration or review” by a legislative or executive body, even if the statement is made privately and concerns commercial speech.  (§ 425.16, subd. (e);  Averill v. Superior Court (1996) 42 Cal.App.4th 1170, 1174-1175, 50 Cal.Rptr.2d 62.)

The Courts of Appeal have construed section 425.16 broadly to apply to suits involving statements made during political campaigns and recall elections (Beilenson v. Superior Court, supra, 44 Cal.App.4th 944, 52 Cal.Rptr.2d 357;  Robertson v. Rodriguez (1995) 36 Cal.App.4th 347, 42 Cal.Rptr.2d 464;  Matson v. Dvorak (1995) 40 Cal.App.4th 539, 46 Cal.Rptr.2d 880;  Evans v. Unkow (1995) 38 Cal.App.4th 1490, 45 Cal.Rptr.2d 624);  acts supporting litigation charging unfair competition (Wilcox v. Superior Court, supra, 27 Cal.App.4th 809, 33 Cal.Rptr.2d 446);  acts and private comments by a homeowner opposed to the establishment of a battered women's shelter in her neighborhood (Averill v. Superior Court, supra, 42 Cal.App.4th 1170, 50 Cal.Rptr.2d 62);  public comments contemplated by the California Environmental Quality Act (Dixon v. Superior Court (1994) 30 Cal.App.4th 733, 36 Cal.Rptr.2d 687);  statements by media defendants and newspapers on matters of public interest (Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995) 37 Cal.App.4th 855, 44 Cal.Rptr.2d 46);  statements designed to cull support for an investigation by the Attorney General into activities of a charitable organization (Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 54 Cal.Rptr.2d 830);  and a developer's acts to encourage individuals to oppose a development project before the city council (Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 43 Cal.Rptr.2d 350).  (Accord Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers (1996) 49 Cal.App.4th 1591, 57 Cal.Rptr.2d 491.)

Some cases have concluded that section 425.16 must be interpreted narrowly (e.g., Zhao v. Wong (1996) 48 Cal.App.4th 1114, 1125, 55 Cal.Rptr.2d 909;  Linsco/Private Ledger, Inc. v. Investors Arbitration Services, Inc. (1996) 50 Cal.App.4th 1633, 1638, 58 Cal.Rptr.2d 613), but the Legislature recently amended the statute to provide that it should be construed broadly.  (Stats.1997, ch. 271, No. 5 West's Cal. Legis.   Service, pp. 986-988.)   That is the interpretation we give it.

The common thread among the cases is that the statements or acts which formed the gravamen of the plaintiffs' complaints were directly related to a matter of some public interest, and the litigation was designed to stifle a citizen's right to free speech or to extinguish the public's participation in the public process.

 The alleged acts Los Carneros complains of were not made in furtherance of such rights, but instead may constitute a breach of a contract.   The legal action here does not take on public significance simply because it bears some relation to proceedings before a government or administrative agency.   We do not construe the statute so broadly as to abrogate the law of contracts.

Linsco/Private Ledger, Inc. v. Investors Arbitration Services, Inc., supra, 50 Cal.App.4th 1633, 58 Cal.Rptr.2d 613 is instructive here.   The appellate court held that section 425.16 was not applicable to a suit to enjoin an arbitration firm from the alleged unauthorized practice of law.   There, the plaintiffs were members of the National Association of Securities Dealers.   They sought to enjoin Investors Arbitration Services, Inc. (IAS) from providing assistance and representation to individual investors who sought to pursue a claim in arbitration against a securities broker.   The Court of Appeal held that although arbitration proceedings in general may involve an exercise of the right of petition, “․ the mere fact that IAS's conduct occurs within and pertains to arbitration proceedings does not create a public issue.   IAS represents individual investors in disputes between those investors and their stockbrokers.   Such disputes over individual investment losses are matters of private, not public, concern.   Plaintiffs' lawsuits do not arise from statements ‘in connection with a public issue.’ ”  (Id., at p. 1639, 58 Cal.Rptr.2d 613.)

It is true that Linsco expressly interpreted the statute narrowly, contrary to the Legislature's recent clarification of its intention that it be construed broadly.   But even a broad reading of the statute supports the court's conclusion that the “․ right to petition for redress of grievances remains unaffected by plaintiffs' lawsuits, as do the petition rights of the individual investors.   Plaintiffs do not seek to restrict access to the arbitration forum;  at most, plaintiffs challenge who may represent the investors within that forum.   Nor do plaintiffs' lawsuits arise from IAS's exercise of free speech.  [Citation.]   Plaintiffs challenge IAS's conduct, its activities in a representative capacity on behalf of its investor-clients.”  (Linsco/Private Ledger, Inc. v. Investors Arbitration Services, Inc., supra, 50 Cal.App.4th at p. 1638, 58 Cal.Rptr.2d 613.)

Similarly, in Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers, supra, 49 Cal.App.4th 1591, 57 Cal.Rptr.2d 491, the Court of Appeal held that despite an expansive interpretation of the statute, “there are limits in its application.”  (Id., at p. 1600, 57 Cal.Rptr.2d 491.)   There, Ericsson and Motorola submitted proposals to provide a communications system to Orange County.   Orange County hired C.S.I. as an independent contractor to evaluate the proposals for compliance with specifications provided by the county.   C.S.I.'s report recommended that the county accept Motorola's proposal.   It delineated various technical concerns about Ericsson's proposal.

The county agreed that Motorola's proposal was technically superior, but, because Ericsson's proposal was less costly, it desired to select Ericsson if it could resolve the technical concerns raised by C.S.I.   The county determined that Ericsson could not satisfy these concerns and awarded the contract to Motorola.   Ericsson sued C.S.I. for intentional interference with economic advantage, alleging, inter alia, that the conditions set forth by C.S.I. concerned items proprietary to Motorola.   C.S.I. filed a SLAPP motion.

Ericsson explained that “․ in determining whether a cause of action falls within the scope of the statute, ․ the Legislature intended to include only those suits that are based upon acts that are primarily in furtherance of a person's constitutional right of free speech, i.e., acts that 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 GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers, supra, 49 Cal.App.4th at p. 1601, 57 Cal.Rptr.2d 491.)

Ericsson concluded that C.S.I.'s acts were not motivated by any speech concerns but related only to performance of its contract with the county.   Nor did C.S.I.'s contract involve issues of particular concern to the public.   (Ericsson GE Mobile Communications, Inc. v. C.S.I. Telecommunications Engineers, supra, 49 Cal.App.4th at pp. 1602-1603, 57 Cal.Rptr.2d 491.)

 The same rationale applies here.   Both Los Carneros and Camino hired Penfield to appear before government agencies to seek approval of development permits of interest to the public.   Los Carneros does not seek to stop participation in a matter of public concern, nor does it seek to prevent Camino from criticizing the Los Carneros project or praising its own project.   Instead, it seeks redress for conduct unrelated to the public issues-the alleged agreement between Camino and Penfield that Penfield will not actively oppose the Camino project in exchange for the promise of future work from Camino.

The alleged agreement between Camino and Penfield does not reflect a desire of defendants to advance their free speech rights or their rights to petition for redress.   Instead, the alleged agreement was designed to silence Penfield's criticism of Camino's project and to discourage public support of the Los Carneros project.   This stifles the open public debate the anti-SLAPP statute was designed to encourage.

 As we have stated, the anti-SLAPP statute is a powerful and necessary tool to promote “․ the open expression of ideas, opinions and the disclosure of information.”  (Beilenson v. Superior Court, supra, 44 Cal.App.4th at p. 956, 52 Cal.Rptr.2d 357.)   But it is limited to those lawsuits that are “ ‘brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances' ‘in connection with a public issue.’  (§ 425.16, subds. (a), (b).)”  (Wilcox v. Superior Court, supra, 27 Cal.App.4th at p. 819, 33 Cal.Rptr.2d 446.)

 It is true that SLAPP suits are often pleaded in terms of breach of contract or other valid actions.  (See, e.g., Wilcox v. Superior Court, supra, 27 Cal.App.4th 809, 33 Cal.Rptr.2d 446;  Dixon v. Superior Court, supra, 30 Cal.App.4th at p. 741, 36 Cal.Rptr.2d 687.)   When presented with a motion to strike a complaint pursuant to section 425.16, a court must consider the actual objective of the suit and grant the motion if the true goal is to interfere with and burden the defendant's exercise of his free speech and petition rights.  (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 652, 49 Cal.Rptr.2d 620.)

By the same token, not every lawsuit between parties who appear before legislative or executive bodies on some common issue is a SLAPP suit.   To apply the statute here would give immunity to parties contracting to perform services concerning matters before government agencies.   A party could breach its contract with impunity and raise the anti-SLAPP shield to prevent recovery for damages.   That is not what the Legislature had in mind when it enacted section 425.16.   Under such a view, the anti-SLAPP statute would do an about-face.   It does not protect speech that induces a breach of contract.

Defendants have not met their burden of showing that the lawsuit qualifies as a SLAPP suit.   Therefore, we need not consider whether Los Carneros is likely to succeed on the merits.   Defendants are free to challenge the lawsuit on other grounds, including summary judgment.

The judgment of dismissal and order awarding costs and attorney's fees are reversed.   Costs are awarded to appellants.

FOOTNOTES

1.   All statutory references are to this code.

GILBERT, Associate Justice.

STONE, P.J., and YEGAN, J., concur.

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