Filed 3/17/20 Beaman v. City of Rocklin CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Placer)

—-

MICHAEL BEAMAN et al.,

Plaintiffs and Appellants,

v.

CITY OF ROCKLIN,

Defendant and Respondent.

C088580

(Super. Ct. No. SCV0041538 )

Plaintiffs Michael Beaman and Robert Lindsey sued defendant, the City of Rocklin (City), after the City posted “do not occupy” signs on their business. The City brought a successful anti-SLAPP motion to strike the complaint, and the plaintiffs appealed. On appeal, plaintiffs contend (1) their causes of action did not arise from a protected activity, and (2) they have demonstrated a probability of success.

We conclude the trial court erred as to three of plaintiffs’ four causes of action: intentional interference with contractual relations, intentional interference with prospective economic relations, and negligent interference with prospective economic relations. We will reverse as to those claims and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

The Facts Alleged in the Complaint

Plaintiffs filed a complaint alleging that in September 2014, they toured property in Rocklin, intent on opening a business combining a coffee shop, “Hoot Coffee,” with an assembly-use area, “Party Place,” which would host children’s birthday parties and provide a place for children and family members to congregate, play and eat. Plaintiffs then met with City employees to ensure their business would be operated in compliance with local regulations.

Plaintiffs explained their business plan to the City, specifying that it was an assembly-use business, not a mercantile-use business. They were told the city did not know the property’s current occupancy classification. But plaintiffs were provided with documents to complete. They were told to complete the occupancy permit and the City would “look into how the Property was currently being used.” They were told a permit would be needed if their intended use was different than the property’s current use classification.

Plaintiffs completed all of the documents the City had requested and a week later received a business license in the mail. Plaintiffs alleged: “They reasonably assumed that they had complied with all City regulations, including obtaining the right to use permit.” They then signed a two-year lease and began operating their business.

In 2015, the City approved installation of an outdoor sign for Party Place. And between 2015-2017, the City made two fire inspections, issuing no citations.

In June 2017, a City code enforcement officer came to investigate a complaint of a child getting stuck in a bounce house in the Party Place. No notice of violation issued, but the next day plaintiffs met with City employees and were told the property had several “life safety” issues, and they were operating under the wrong use permit. They were also told the City would be forcing Party Place’s closure.

The meeting ended with an understanding that the City was interested in working with plaintiffs to avoid an immediate closure of Party Place. The City allowed plaintiffs “to temporarily continue operating Party Place,” conditioned on them installing barriers separating the Hoot Coffee portion from Party Place and preventing customers from entering the assembly use area. Plaintiffs were also to submit plans with proposed upgrades and improvements to the assembly use area.

Plaintiffs promptly installed barriers and prepared plans for the assembly use area. The next day, they met a City employee at the property to show the barriers and plans. Plaintiffs were given a temporary permit to conduct mercantile-use coffee sales in the lobby area. Plaintiffs retained an architect to prepare plans.

A week later, plaintiffs emailed the City that the architect’s plans would be ready for review that afternoon. The City responded “with a less-than-positive message”: the architect’s plans would need to address electrical issues, and improvements could not begin until the City approved the plans and issued a building permit. The email added that, “the understanding [the City] had was that [plaintiffs] would contact planning first to determine what uses may or may not be allowed.”

The next day, plaintiffs sent the architect’s plans for the City’s review. They met with the City the following day and were told inspections had been called off and the City would no longer consider forcing Party Place’s closure so long as plaintiffs continued to make progress. They were also told they could continue operating the business as an assembly-use business. In reliance, plaintiffs removed the partitions and resumed operating Party Place.

Shortly after the meeting, plaintiffs received an email from the City, with 48 concerns to be addressed. Plaintiffs alleged that addressing the 48 concerns “would have been, by any reasonable standard, impossible to do within the time period offered by the City. Doing so would have cost upwards of $60,000, requiring the hiring of mechanical and electrical engineering firms, and taken about three months.”

Two weeks later, plaintiffs’ architect met with the City. After the meeting, the City emailed plaintiffs, expressing concern that plaintiffs were continuing to operate Party Place. The City, the email continued, would issue a notice of violation and post a “do not occupy” sign on the Party Place portion. And if the architect’s preliminary plans were not received in seven days, a “do not occupy” sign would be put on the front door.

The next day plaintiffs received a notice of violation and “do not occupy” signs were put on Party Place. Plaintiffs spoke with the City, stressing that they were doing everything they could to comply, and needed to operate Party Place to avoid financial failure. The City told them to have their architect submit plans addressing the City’s life-safety concerns.

Six days later, revised architectural plans were submitted. Plaintiffs alleged: “These revised plans addressed all the City’s life-safety concerns, including fire-exit signage and egress paths. Unfortunately, it was impossible for the architect’s plans to address all 48 of the issues raised . . . .”

The City responded that the revised plans were insufficient and “do not occupy” signs would be posted on the front door. Later that day, plaintiffs met with the City and were given a notice to vacate and a proposed compliance agreement to avoid placement of the “do not occupy” signs. They were given two hours to sign the agreement. Plaintiffs alleged the compliance agreement was deficient in multiple ways, and not having time to have an attorney review it, they refused to sign.

“Do not occupy” signs were then posted on the front door.

The Four Causes of Action

The complaint alleged four causes of action: (1) equitable estoppel, (2) intentional interference with contractual relations, (3) intentional interference with prospective economic relations, and (4) negligent interference with prospective economic relations.

As to equitable estoppel, the complaint alleged, in pertinent part, that “[w]hen the City approved Plaintiffs to open Party Place, the City represented to Plaintiffs that their use permit for Party Place was proper, and that the Property was code compliant. [¶] After Party Place had already begun operating, the City repeated those representations when inspections were later performed with no concerns raised to Plaintiffs as to use permits or life-safety violations.” (Italics added.)

As to intentional interference with contractual relations, the complaint alleged “The City’s conduct in compelling the closure of Party Place prevented Plaintiffs from performing its [contractual] obligations.” (Italics added.)

And as to both the intentional, and negligent, interference with prospective economic relations claims, the complaint alleged in pertinent part: “From late-2014 until July 2017, the City expressly or impliedly approved of Plaintiffs’ use permit and the Property at which Plaintiffs operated Party Place, and it was not until July 26, 2017 that the City arbitrarily and wrongfully decided that Plaintiffs needed a different use permit and needed substantial code-compliant improvements to be made to the Property.” These causes of action realleged and incorporated by reference the earlier allegations in the complaint, which would include the allegation that the City compelled closure of plaintiffs’ business.

The Anti-SLAPP Motion

The City filed an anti-SLAPP motion, arguing the complaint arose from protected speech, in the form of inspections, meetings, phone calls, emails, and letters. The City also argued plaintiffs cannot demonstrate a probability of prevailing on the merits because several sections of the Government Code render the City and employees immune.

Opposing the motion, Plaintiffs’ counsel conceded: “the complaint alleges that the City engaged in speech. . . . [¶] Nevertheless, the crux of this complaint is not what the City said or wrote or promised. The crux is what the City’s actions were. Plaintiffs[] allege that the City neglected to issue citations for years, then for no discernable reason decided to issue an overwhelming number of citations. Such conduct is not speech.” At the motion hearing, plaintiffs’ counsel emphasized that the claims arose from the City’s failure to investigate the use permit at the outset along with the City’s denial of the permit two and a half years later.

The Trial Court’s Ruling

The trial court granted the anti-SLAPP motion, concluding: “Defendant has presented sufficient evidence to meet the initial burden by showing that each cause of action aris[es] from protected activity, shifting the burden to plaintiff to establish a probability of prevailing on each of [the] pleaded causes of action.” And to that: “Plaintiff has not made a sufficient showing that he will prevail on any of his causes of action.”

DISCUSSION

On appeal, plaintiffs challenge the trial court’s ruling, arguing their causes of action did not arise from protected activity, and they have demonstrated a probability of prevailing on the merits.

I. Standard of Review and the Anti-SLAPP Statute

We review an order granting or denying an anti-SLAPP motion de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325–326.)

“A SLAPP suit has been described as ‘a meritless suit filed primarily to chill the defendant’s exercise of First Amendment rights.’ ” (Bradbury v. Superior Court (1996) 49 Cal.App.4th 1108, 1113 (Bradbury).) “The anti-SLAPP statute . . . provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384.) It requires that two prongs be satisfied: (1) the defendant “must establish that the challenged claim arises from activity protected by [Code of Civil Procedure] section 425.16”; and if the first prong is shown (2) “the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success.” (Ibid., italics added.)

The anti-SLAPP statute applies to the speech of government employees and entities. (City of Costa Mesa v. D’Alessio Investments, LLC (2013) 214 Cal.App.4th 358, 371 (Costa Mesa); Bradbury, supra, 49 Cal.App.4th at p. 1114 [“the word ‘person’ as used in section 425.16, subdivision (b) must be read to include a governmental entity.”].)

II. Analysis

A. The First Prong

Plaintiffs argue their claims do not arise from the City’s protected speech. They acknowledge negotiating with the City, which was an exercise of the City’s free speech. But they maintain their claims arose from the City issuing an allegedly wrongful code violation. We agree that plaintiffs’ claims do not arise from protected activity as to all but the cause of action for equitable estoppel.

1. The First Prong Requirements

A defendant satisfies the first prong by demonstrating the allegedly injurious conduct falls within one of four categories of protected activity described in subdivision (e) of Code of Civil Procedure section 425.16, and that the claim arose from that conduct. (Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 620.) Those categories include statements made before an “official proceeding authorized by law,” as well as “any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.” (Code Civ. Proc., § 425.16, subd. (e).)

“A claim arises from protected activity when that activity underlies or forms the basis for the claim.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062 (Park).) And that underlying activity must itself be “ ‘an act in furtherance of the right of petition or free speech.’ ” (Id. at p. 1063) It not enough that an action is filed after protected activity takes place. (Ibid.) Thus, “the focus is on determining what ‘the defendant’s activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.” (Ibid.) To that end, courts ruling on an anti-SLAPP motion, “should consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability.” (Ibid.)

Courts must also distinguish “between activities that form the basis for a claim and those that merely lead to the liability-creating activity or provide evidentiary support for the claim.” (Park, supra, 2 Cal.5th at pp. 1064-1065.) For example, in Park, a California State University professor sued for national origin discrimination after he was denied tenure. (Id. at p. 1061.) The University filed an anti-SLAPP motion, arguing the suit arose from its decision to deny tenure as well as the numerous communications leading up to and following that decision. (Ibid.) Those communications, the University maintained, were protected activities. (Ibid.) The Park court disagreed, explaining: “a claim is not subject to a motion to strike simply because it contests an action or decision that was arrived at following speech or petitioning activity, or that was thereafter communicated by means of speech or petitioning activity. Rather, a claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted.” (Id. at pp. 1060-1061.)

The Park court also warned: “Failing to distinguish between the challenged decisions and the speech that leads to them or thereafter expresses them ‘would chill the resort to legitimate judicial oversight over potential abuses of legislative and administrative power.’ ” (Park, supra, 2 Cal.5th at p. 1067.) Further, “to read the ‘arising from’ requirement differently, as applying to speech leading to an action or evidencing an illicit motive, would, for a range of publicly beneficial claims, have significant impacts the Legislature likely never intended.” (Ibid.)

2. The Equitable Estoppel Cause of Action

Here, only one of plaintiffs’ four claims arose from protected activity. The equitable estoppel claim, as alleged, arose from the city’s repeated representation that the use permit was proper, and the property was code compliant. It is this activity that “underlies or forms the basis for the claim.” (Park, supra, 2 Cal.5th at p. 1062; See also Graffiti Protective Coatings, Inc. v. City of Pico Rivera (2010) 181 Cal.App.4th 1207, 1215 (Graffiti) [“An anti-SLAPP motion should be granted if liability is based on speech or petitioning activity itself”].) Thus, the court did not err in granting the anti-SLAPP motion as to this cause of action.

3. The Remaining Causes of Action

The remaining causes of action were not based on speech, but rather arose from conduct that followed speech.

The intentional interference with contractual relations claim alleged, “[t]he City’s conduct in compelling the closure of Party Place,” prevented plaintiffs from performing their contractual obligations. (Italics added.) Indeed, plaintiffs do not contend any oral statement or writing is actionable as to this claim. Thus, while the closing of Party Place followed many instances of city speech — which may evidence alleged wrongful conduct — liability is not based on the communications themselves. Put differently, it was not the city’s speech that allegedly interfered with plaintiffs’ contracts, it was the forced shuttering of the business. (See Graffiti, supra, 181 Cal.App.4th at pp. 1214-1215, 1220, 1224 [that the city’s speech may be evidence leading up to the alleged wrongful conduct does not make plaintiffs’ claims subject to an anti-SLAPP motion; “the trial court should distinguish between (1) speech or petitioning activity that is mere evidence related to liability and (2) liability that is based on speech or petitioning activity”].) Accordingly, the first prong of the anti-SLAPP test is not satisfied for this cause of action.

Similarly, the claims for intentional and negligent interference with prospective economic relations arose from conduct following speech and were not based on speech. As alleged, the city “arbitrarily and wrongfully decided that Plaintiffs needed a different use permit” along with substantial improvements. While reaching the decision to demand improvements and a different use permit, and ultimately to close the business undoubtably involved speech, that speech is not what plaintiffs now challenge. (See Park, supra, 2 Cal.5th at p. 1067 [“Government decisions are frequently ‘arrived at after discussion and a vote at a public meeting’ ”].) Nor is it of any moment that those decisions were communicated to plaintiffs orally or in writing. (Id. at p. 1068 [“tenure decision may have been communicated orally or in writing, but that communication does not convert Park’s suit to one arising from such speech”].)

And while the interference with prospective economic relations claims also alleged that the City “expressly or impliedly approved of” the use permit from 2014 to 2017 — which implies speech — the crux of the claim is still the interference with the prospective economic relations, not speech. Indeed, claims for interference with prospective economic relations require wrongful conduct that disrupts that economic relationship — and the city’s alleged prior permit approval is not what disrupted the economic relationship. (See CACI No. 2202; Park, supra, 2 Cal.5th at p. 1063 [“in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by the defendant supply those elements”]; see also Shahbazian v. City of Rancho Palos Verdes (2017) 17 Cal.App.5th 823, 835 [noting the elements of the claims did not require the plaintiffs to prove the city made statements or acted in furtherance of its right to speech and petition].) Accordingly, the first prong of the anti-SLAPP test is not satisfied for these causes of action.

The City, however, maintains that any statements made in connection with code enforcement activities are protected under section 425.16, subd. (e)(2). But again, plaintiffs’ claims relate to the decision that plaintiffs needed a different use permit, requiring substantial improvements, and ultimately closing the business — not the speech leading up to that conduct. Indeed, one of the cases the City cites in support of this contention, Costa Mesa, supra, 214 Cal.App.4th 358, expressly draws that distinction.

In Costa Mesa the court noted that, “[i]n some instances, speech and petitioning activity is peripheral to the actual legal claim in the complaint.” (Costa Mesa, supra, 214 Cal.App.4th at 374.) But that was not the case there because the plaintiff had sued for slander, trade libel, and intentional interference with prospective economic advantage, all based on statements city employees allegedly made to the plaintiff’s prospective tenants and contractors regarding the plaintiff’s property. (Id. at pp. 366-367, 375.) Critically, the plaintiff did not challenge the city’s refusal to issue permits and business licenses to the persons to whom the statements were made. (Id. at pp. 373, 375 [“[Plaintiff] is suing for relief based on the oral statements, not challenging the underlying acts (the refusal of the City and its employees to issue licenses)”].)

In connection with its contention that statements made in connection with code enforcement activities are protected, the City also cites, without elaboration, Levy v. City of Santa Monica, (2004) 114 Cal.App.4th 1252. In Levy, homeowners sued for declaratory judgment and injunctive relief against a city and a city council member after the city issued a notice of violation for a backyard playhouse. A neighbor had complained about the playhouse to the city council member, who in turn communicated with a city official about structure’s legality. (Id. at pp. 1255-1257.) The homeowners sought a declaratory judgment that council members are precluded from engaging in communications with city staff designed to influence staff decisions and injunctive relief precluding council members from such communications. (Id. at p. 1257.) On appeal from the denial of the city’s anti-SLAPP motion, the Court of Appeal reversed, concluding an injunction prohibiting conversations between council members and city staff concerning constituent inquiries would violate the First Amendment, reasoning that “[t]he First Amendment protects everyone, even politicians.” (Id. at p. 1255.) Because the homeowners’ action was based on these communications, the city met its burden of showing the action arose from constitutionally protected speech. (Id. at pp. 1258-1259.)

Costa Mesa and Levy are both distinguishable. In both, speech formed the basis of the claims. While, here, all causes of action except the equitable estoppel claim are based on conduct following speech and not the speech itself.

We will therefore reverse the trial court’s order as to each cause of action except the equitable estoppel claim. We turn to the second anti-SLAPP prong only as to the equitable estoppel claim.

B. The Second Prong – Equitable Estoppel Claim

Plaintiffs argue they alleged sufficient facts to support every element of every cause of action. And while the anti-SLAPP motion asserted the City was immune, plaintiffs note that only discretionary government actions enjoy immunity — mandatory actions do not. They maintain the City’s action in not identifying the current use or occupancy classification for the property in 2014 was a mandatory act. We disagree.

The Government Code immunizes public entities for most injuries arising out of acts or omission of public entities or their employees, including “the issuance, denial, suspension or revocation” of permits. (See Gov. Code, §§ 815, 818.4, 818.8, 820.2, 821.6.) Further, as the City notes, “estoppel will not be invoked against a government agency where it would defeat the effective operation of a policy adopted to protect the public.” (Pettitt, supra, 34 Cal.App.3d at pp. 816, 822-823 [city could not be estopped to deny the validity of building permit issued in violation of zoning ordinance].)

Plaintiffs offer no argument that estoppel should, nevertheless, apply in this case. Plaintiffs do, however, maintain that the city was not immune because it failed to perform a mandatory action, to which immunity does not extend and cite two cases in support, Morris v. County of Marin (1977) 18 Cal.3d 901, 904 (Morris), and Johnson v. State (1968) 69 Cal.2d 782, 784 (Johnson). Neither advance their argument.

In Morris, the county issued a building permit to an employer, authorizing construction. (Morris, supra, 18 Cal.3d at p. 905.) In doing so, the county failed to require the employer to show he had workers’ compensation insurance. (Ibid.) This was contrary to Labor Code section 3800, which required the county to obtain proof of such insurance when issuing building permits. (Id. at pp. 905-906.) An injured worker, unable to obtain compensation benefits from the employer, sued the county for failing to fulfill its statutory obligation to ensure the employer was insured. (Id. at p. 905.) The trial court sustained the county’s demurrer. (Ibid.) The California Supreme Court reversed, concluding Government Code section 818.4 and 818.2 offered no immunity because the county lacked discretion. (Id. at pp. 917-918.) The immunity applies only to discretionary duties, and Labor Code section 3800 imposed a mandatory duty to ensure applicants carried workers’ compensation insurance. (Id. at pp. 906-907, 911.)

Here, plaintiffs maintain that, like in Morris, the city had a mandatory duty to determine the correct use permit for the property when it knew plaintiffs intended to operate Party Place there. Based on the record before us, we disagree. Unlike in Morris, plaintiffs point to no comparable authority, such as a local ordinance or code, imposing a mandatory duty in determining the correct use permit. Morris is therefore unhelpful.

Similarly, in Johnson, the plaintiff sued the state for negligently allowing a 16-year-old boy with homicidal tendencies to be placed in her home without providing her notice of the youth’s propensities. (Johnson, supra, 69 Cal.2d at pp. 784-785.) The trial court granted summary judgement for the state, concluding Government Code sections 820.2 and 845.8 provided immunity. (Id. at p. 785.) The California Supreme Court reversed, explaining that a parole officer’s decision as to what warning to give a foster parent “does not constitute the type of basic policy decision that the Government Code seeks to insulate from liability in section 820.2.” (Id. at pp. 786, 793, 801.) It added that the state had “failed to prove that the officer consciously considered the risks to plaintiff and determined that other policies justified them.” (Id. at p. 797.)

Here, again, plaintiffs argue that like in Johnson, the city was required to notify plaintiffs that the property did not have the correct occupancy permits. But once more, plaintiffs fail to offer authority to support such a duty. And again, plaintiffs offer no grounds for putting aside the “thesis that estoppel will not be invoked against a government agency where it would defeat the effective operation of a policy adopted to protect the public.” (Pettitt, supra, 34 Cal.App.3d at p. 822 (See fn. 6, ante).)

Accordingly, as to the equitable estoppel claim, we conclude plaintiffs have failed in their burden to show a probability of success on the claim.

 

DISPOSITION

The trial court’s order granting the City’s special motion to strike plaintiffs’ complaint is reversed as to the second, third, and fourth causes of action: intentional interference with contractual relations, intentional interference with prospective economic relations, and negligent interference with prospective economic relations. The matter is remanded for further proceedings consistent with this opinion. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278, subd. (a)(5).)

/s/

MURRAY, J.

We concur:

/s/

BLEASE, Acting P. J.

/s/

ROBIE, J.