2016-80002482-CU-WM

Reynen & Bardis (Laguna Ridge) LP vs. City of Elk Grove

Nature of Proceeding: Motion to Strike (SLAPP)

Filed By: Ebrahimi, Mona G.

Defendants City of Elk Grove and Community Facilities District 2005-1 Laguna Ridge’s special anti-SLAPP motion to strike the 4th cause of action from plaintiff Reynen & Bardis (Laguna Ridge), LP’s Second Amended Complaint (“2AC”) is DENIED because the court is not persuaded that the gravamen or principal thrust of the 4th cause of action is any written or oral statement or other conduct in furtherance of the exercise of defendants’ the constitutional right of petition or the constitutional right of free speech which is protected under Code of Civil Procedure §425.16.

Defendants’ request for leave to file (after the 60-day deadline in §425.16(f)) an additional special anti-SLAPP motion to strike the first three causes of action alleged in the 2AC is DENIED for the same reason.

Although the notice of motion provided notice of the court’s tentative ruling system as required by Local Rule 1.06(D), the notice does not comply with that rule. Moving counsel is directed to review the Local Rules, effective 1/1/2018.

Factual Background

This action arises out plaintiff’s role in the development of a portion of the City of Elk Grove (“City”) commonly referred to as Laguna Ridge following City’s adoption of a “Specific Plan” in 2004. According to the 2AC, this plan recognized that developers like plaintiff might be required to advance funds to construct facilities and to oversize the construction beyond their fair share, something which prompted City to contemplate that “[r]eimbursement agreements or fee credits may be utilized so that developers fronting the cost of improvements benefitting other land areas will be able recover these costs.” (2AC, ¶8.) Plaintiff alleges that City’s Municipal Code requires reimbursement of anyone who provides more than its fair share of public facilities and infrastructure but City also approved a financing plan which “expect[ed] developers [would] privately finance the construction costs of many public facilities needed at the outset of development…prior to the first phase of development to provide the necessary infrastructure and public facilities to meet the demands of [the]

development.” (2AC, ¶¶9-10.) The 2AC asserts that the financing plan further specified one or more “land secured financing districts” would be formed; developers would be reimbursed for the facilities and/or would receive credits against the appropriate fees for facilities which would have been funded by the fees, in recognition of City’s obligation to administer the public facilities; and reimbursement agreements or fee credits could be utilized to so that developers could recover the costs advanced for the initial improvements. (2AC, ¶¶11-14.) Additionally, plaintiff contends that in 2007 it entered into an agreement with City for acquisition of privately-constructed facilities within the Community Facilities District for Laguna Ridge (“Acquisition Agreement”) which contemplated “Developers” including plaintiff constructing certain infrastructure that would later be acquired by the Community Facilities District upon payment to the Developers for certain construction costs, including those incurred by plaintiff in connection with the Big Horn Water Treatment Plant and the Well Field. (2AC, ¶¶15-18.)

In June 2007 City authorized a sale of Series A Bonds primarily against land owned by plaintiff, from which the latter received approximately $42 million in financing but the proceeds were insufficient to reimburse plaintiff for all of the eligible facilities it had constructed or was still constructing. Thus, reimbursement for remaining costs had to wait for a subsequent bond sale but as a result of the downturn in the real estate market, City’s next bond sale did not occur until 2016. Under the Acquisition Agreement, plaintiff proceeded to complete nearly $70 Million in eligible infrastructure facilities (e.g., roads, water, sewer, drainage, etc.) for roughly 5,000 homes even though plaintiff owned around 1,000 lots and had received about $42 million in financing from the 2007 bond sale. (2AC, ¶¶19-21.)

In 2014 plaintiff advocated for refinancing the existing Series A Bonds, which City initially rejected until plaintiff demonstrated not only that City’s determination was incorrect but also that City could significantly benefit from refinancing the bonds. After learning of an upcoming bond sale, plaintiff submitted a claim for reimbursement of nearly $17 Million in costs incurred in constructing several eligible facilities including the Big Horn Water Treatment Plant and Wells. (2AC, ¶¶22-23.) In 2016 City authorized a bond sale but just 10 days before authorizing the sale of which plaintiff was “the clear promoter,” City advised plaintiff the latter “could not be part of the bond issue.” Plaintiff contends this information was “purposefully withheld” from the parties “numerous conversations and meetings” relating to the sale, effectively forcing plaintiff to quickly liquidate and transfer various assets. (2AC, ¶¶25-27.)

Then in March 2016 when it adopted Resolution No. 2016-048 entitled “Laguna Ridge Community Facilities District Guiding Principles” (“Guiding Principles”), City formally stated its position that plaintiff had already been fully reimbursed for infrastructure improvements in the Laguna Ridge area. (2AC, ¶28.) Plaintiff disputes City’s assertion and insists this Resolution revealed not only that another developer in the same situation as plaintiff received over $4 Million from the 2016 bond sale but also that other proceeds from the 2016 bond sale were not needed by developers of the next 2,000 lots in Laguna Ridge because the major infrastructure serving those lots was already in place at plaintiff’s expense. Instead, City was intending to use the 2016 bond sale to begin development in areas outside of Laguna Ridge without having fully reimbursed plaintiff, despite numerous representations that reimbursement would occur when funds were available. (2AC, ¶¶28-30, 34-36.)

The present action was commenced on 11/8/2016 and the operative 2AC purports to

assert four causes of action for breach of the contract (i.e., the Acquisition Agreement), breach of the implied covenant of good faith, declaratory relief, and breach of mandatory duty under Government Code §815.6. Only this last cause of action is at issue here and it alleges in its entirety:

64. Defendants violated statute(s), regulation(s), and/or ordinance(s), including, but not limited to, Elk Grove Municipal Code section 22.70.005, by taking or failing to take certain actions, including, but not limiting to, failing and refusing to take all necessary and proper actions to ensure that [plaintiff] would be fully reimbursed, and failing and refusing to fully reimburse [plaintiff] for the considerable sums it expended in constructing improvements that serve CFO 2005-1.

65. Additionally, to the extent defendants contend that they cannot reimburse [plaintiff] for its construction of the Big Horn Water Treatment Plant and the Big Horn Wells, because there allegedly is not a fully executed Joint Community Facilities Agreement allowing defendants to reimburse [plaintiff] for these facilities, defendants have failed to comply with Government Code section 53316.2 in that they have failed and refused to take all necessary and proper actions to ensure that [plaintiff] would be fully reimbursed, as represented within the Acquisition Agreement that it entered into [sic].

66. As a result of defendants’ violation of the statute(s), regulation(s), and/or ordinance(s), including, but not limited to, Elk Grove Municipal Code section

22.70.005 and Government Code section 53316.2, [plaintiff] has been damaged in that it was forced to pay more than its fair share of expenditures for infrastructure improvements for which it has not been reimbursed.

67. Defendants’ violation of the statute(s), regulation(s), and/or ordinance(s), including, but not limited to, Elk Grove Municipal Code section 22.70.005 and Government Code section 53316.2, was a substantial factor in causing [plaintiff’s] harm.

(2AC, pp.14-15.)

Moving Papers. Defendants now move to strike only the final cause of action (which was added with the 2AC filed on 5/11/2018) pursuant to Code of Civil Procedure §425.16 on the grounds it arises from City and its officials’ “protected speech and activity in connection with a public bond issuance” and plaintiff cannot establish a “probability of prevailing” this cause of action.

More specifically, defendants contend that the 4th cause of action (as well as the others) is based on the claims that (1) the City “formally stated its position that [plaintiff] had been fully reimbursed when it adopted Resolution No. 2016-048” [which Resolution stated “[p]roperties covered in the Series A Bonds were fully reimbursed for delivered infrastructure…”]; (2) “Defendants, in conjunction with the Official Statement for the Series 2016 bonds, formally took the position that [plaintiff] had been fully reimbursed and would not be compensated from the series 2016 bonds and/or any future bonds;” and (3) both the statement in the Resolution which was adopted by the City Council at a public meeting and the Official Statement for the Series 2016 bonds which was authorized by City at a joint meeting of the City Council and the Elk Grove Finance Authority are “protected” pursuant to Code of Civil Procedure §425.16(e) as “act[s] in furtherance of a person’s right of petition or free speech in connection with a

public issue,” including any statement “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” or “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(e)(2), (4).

Defendants have also requested leave of court to file an additional special anti-SLAPP motion to strike the first three causes of action alleged in the 2AC notwithstanding the 60-day deadline in §425.16(f) since the first three causes of action were included in the previous iterations of plaintiff’s complaint.

Opposition. Plaintiff opposes, arguing first that the 4th cause of action does not arise from any statement or conduct in furtherance of City’s right of petition or free speech protected under § 425.16 but rather arises from nothing more than City’s failure to fully reimburse plaintiff for constructing certain facilities in Laguna Ridge, thereby rendering inapplicable the provisions of the anti-SLAPP statute. The opposition adds that even if the court finds the statute applicable, plaintiff has presented evidence sufficient to demonstrate a “probability of prevailing” on the 4th cause of action since the evidence shows plaintiff has not been fully reimbursed. For the same reasons, plaintiff insists defendants should not be given leave to file a belated anti-SLAPP motion targeting the first three causes of action.

Reply. In their reply, defendants contend plaintiff’s claims arise from the City Council’s legislative acts associated with issuing bonds and approval of the Guiding Principles regarding the use of those bonds, thereby demonstrating that the gravamen of the 4th cause of action is the City Council’s approval of Resolution No. 2016-048 and related statements made in connection with an issue in the course of an official proceeding. Consequently, defendants maintain that they are entitled to the protection of the anti-SLAPP statute.

Analysis

Under the anti-SLAPP statute, the court engages in a two-step analysis. First, the court considers whether the moving defendant has made a threshold showing that the challenged cause of action is one “arising from” activity protected by the statute. (Code Civ. Proc. §425.1(b)(1).) The moving defendant bears the burden of showing the plaintiff’s cause of action ‘arises from’ the defendant’s exercise of free speech or petition rights as defined in the statute. (Code Civ. Proc. §425.16(e).) If the moving defendant makes this threshold showing, then the burden shifts to the plaintiff to make a prima facie showing of facts which, if credited by the trier of fact, would sustain a favorable judgment. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 61; Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) The court considers the pleadings and evidence submitted by both sides, but does not weigh credibility or compare the weight of the evidence. Rather, the court’s responsibility is to accept as true the evidence favorable to the plaintiff (Nagel v. Twin Laboratories, Inc. (2003) 109 Cal.App.4th 39, 45-46), and to evaluate the moving defendant’s evidence only to determine if it has defeated as a matter of law the evidence submitted by the plaintiff. ( Kashian v. Harriman (2002) 98 Cal.App.4th 892, 906.) With these concepts in mind, the court now turns to their application to the facts of the case at bar.

It is true plaintiff’s complaint specifically mentions a variety of statements and/or conduct by defendants relating to the issuance of bonds in 2016 which otherwise meet

the broad definition of conduct protected by the anti-SLAPP statute including but not limited to the adoption of and statements contained in “Guiding Principles” Resolution; the authorization of and contents of the “Official Statement” for the 2016 bonds; and other statements made in connection with the 2016 bonds (all of which indicate that plaintiff either had already been fully reimbursed for improvements in Laguna Ridge or would not receive any proceeds from the 2016 or later bonds) but there is no merit to defendants’ suggestion that any of this conduct including the referenced statements is the gravamen or principal thrust of the 4th cause of action (or any of the others) alleged in plaintiff’s complaint. Instead, this court is persuaded that it is not defendants’ conduct or statements related to the 2016 bond issue but rather nothing more than defendants’ ongoing refusal to reimburse plaintiff for its construction work pursuant to the provisions of the Elk Grove Municipal Code and California’s Government Code (as well as the Acquisition Agreement on which the 1st, 2nd and presumably 3rd causes of action are based) that is the sole and exclusive ground for their alleged liability to plaintiff.

According to PrediWave Corp. v. Simpson Thacher & Bartlett LLP (2009) 179 Cal.App.4th 1204, “‘[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. [Citation.] Moreover, that a cause of action arguably may have been “triggered” by protected activity does not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.’ [ Navellier, at 89.] (Episcopal Church Cases (2009) 45 Cal.4th 467, 477.)” (PrediWave Corp., at 1219 (italics in original).) “When a pleading contains allegations regarding both protected and unprotected activity, ‘it is the principal thrust or gravamen of the plaintiff’s cause of action that determines whether the anti-SLAPP statute applies ( Cotati, supra, 29 Cal.4th at p. 79). …” (Martinez v. Metabolife Internat. (2003 (rev. denied, 2004)) 113 Cal.App.4th 181, 188.)” (PrediWave Corp., at 1219 (italics in original).) “Incidental allegations regarding protected activity do not ‘subject the cause of action to the anti-SLAPP statute. (Ibid.)’ ‘The ‘principal thrust or gravamen’ test serves the Legislative intent that section 425.16 be broadly interpreted’ because a plaintiff cannot ‘deprive a defendant of anti-SLAPP protection by bringing a complaint based upon both protected and unprotected conduct.’ (Club Members for an Honest Election v. Sierra Club (2008) 45 Cal.4th 309, 319 [“‘principal thrust or gravamen’” test does not apply under § 425.17, subd. (b), an exception to § 425.16].)” (PrediWave Corp., at 1219-1220.)

“For example, in Episcopal Church Cases, supra, 45 Cal.4th 467, the action did not arise from protected activity within the meaning of the anti-SLAPP statute where the claim concerned whether the Episcopal Church or St. James Parish, which had disaffiliated itself from the Episcopal Church as the result of a doctrinal dispute, owned certain property. (Id.) Even though ‘protected activity arguably lurk[ed] in the background of [the] case …’ (Id., at p. 473 ), ‘the actual dispute concern[ed] property ownership rather than any such protected activity’ (ibid.) and ‘the gravamen or principal thrust’ of the action was the property dispute in which ‘both sides claim[ed] ownership of the same property’ (Id., at pp. 477-478 ).” (PrediWave Corp., at 1220; see also, Kolar v. Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532, 1537 [“A claim ‘arises from’ an act when the act ‘ “ ‘forms the basis for the plaintiff’s cause of action’ …” ’ ”]; Robles v. Chalilpoyil (2010) 181 Cal.App.4th 566, 574 [“ ‘that a cause of action arguably may have been “triggered” by protected activity does not entail that it is one arising from such’ ”].) Thus, simply because plaintiff’s 4th cause of

action may be tangentially associated with protected activity related to the 2016 issuance of bonds does not mean that the 4th cause of action (or any others alleged in the complaint) against defendants “arises from” such protected activity.

Since plaintiff’s 4th cause of action neither asserts nor suggests that defendants acted wrongfully by engaging in the protected activities referenced but rather merely cites this conduct as evidence of defendant’s breach of their alleged mandatory duty to reimburse plaintiff pursuant to the Elk Grove Municipal Code and/or the California Government Code, this court concludes the otherwise broad protections of Code of Civil Procedure §425.16 have no application to the 4th cause of action or to any of the other three causes of action currently pled in the complaint.

Conclusion

For the reasons explained above, defendants’ anti-SLAPP motion must be and hereby is denied.

In light of the foregoing, the court need not rule on defendants’ objections to evidence.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)