California Court Rejects Santa Barbara Beach Club’s Attempts to Suppress Criticism

An interesting unpublished decision, handed down Monday. The court’s opinion strikes me as clearly correct, both in rejecting the plaintiff’s unsound constitutional tension method argument and in more broadly rejecting the defamation claim and related tort claims. As the court concludes, “Residents of a community seeking to express their disagreement with what they perceive to be objectionable conduct by a fellow resident ought not be dissuaded by threat of litigation.” It’s too bad that the neighbors had to go through all the hassle, though fortunately the anti-SLAPP statute will require the Beach Club to pay the owners’ attorney fees. Here’s a longish excerpt:

In 2007, appellant Beach Club remodeled and enlarged a single-family residence at 5277 Austin Road in Santa Barbara. The residence, now 6,600 square feet, is an ocean-front property on a bluff with unobstructed views of the Santa Barbara coast and Pacific Ocean. The property is in a subdivision that is governed by a declaration of conditions and restrictions (C&R’s). One such restriction is that “[e]ach residential dwelling in the tract shall be designed, built, maintained and used for the primary purpose of a single family residence ….” …

In July 2007, respondents Bonnie and Fred Freeman, whose home is also located on Austin Road, learned that the Beach Club was advertising “fractional ownerships” in its property. Several neighborhood meetings were held to discuss the issue. The Association, which comprises approximately 100 homeowners, sent a letter to its County supervisor in September 2007 protesting the sales. The Association also sent letters to the Beach Club stating that selling fractional ownerships in the property would violate the C&R’s. The Beach Club disagreed and continued its marketing efforts to sell six fractional shares in the residence for approximately $2 million each.

Several weeks later, the Freemans and several other residents of the neighborhood, including respondents Michael and Terry Fealy and Joan Myers (collectively “the homeowners”), posted two-foot by two-foot signs on the front lawns of their residences. Each sign states:

“Say No To:
Fractional Ownership
Timeshare Ownership
Beach Club Ownership
In Our More Mesa Shores Neighborhood.”

The Beach Club threatened the homeowners with litigation if the signs were not removed. Several of the residents removed their signs. Freeman, Fealy and Myers did not.

On July 25, 2008, the Beach Club filed a first amended complaint for nuisance, slander of title, and interference with prospective economic advantage. The complaint seeks an injunction and damages and alleges that the signs are defamatory and have interfered with the Beach Club’s “constitutional right to sell its property.”

The Freemans filed a motion to strike pursuant to section 425.16 [the California anti-SLAPP statute] in which the Fealys and Myers joined…. [T]he trial court issued an order granting the motion.

On appeal, the Beach Club contends the homeowners have not met their burden of showing that the signs are speech protected by the First Amendment because they are defamatory, are not posted in a public forum, and do not concern an issue of public interest. It also asserts it has met its burden of showing a probability of prevailing on the merits because it has a “constitutional right to sell its property.”

The Beach Club further contends that, if section 425.16 requires the court to accord a presumption of validity to the signs, it is unconstitutional. It asserts that the court must engage in a weighing process balancing the competing constitutional rights of the parties, without according the signs a presumption of validity, in determining whether to grant or deny the motion to strike….

A SLAPP suit (strategic lawsuit against public participation) is a lawsuit brought primarily to chill a party’s constitutional right of petition or free speech. The anti-SLAPP statute was enacted to prevent and deter lawsuits that chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances and provides “an efficient procedural mechanism to obtain an early and inexpensive dismissal of nonmeritorious claims” arising from the exercise of those constitutional rights.

Section 425.16, subdivision (b)(1), states: “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 under the United States Constitution or the 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.”

Section 425.16, subdivision (e), defines acts in furtherance of free speech or petition rights in connection with a public issue as follows: “As used in this section, ‘act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue’ includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) 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; (3) 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; [or] (4) …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.” …

The consideration of an anti-SLAPP motion is a two-step process. “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity.” “If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” …

Beach Club asserts that, to the extent the anti-SLAPP statute “exalts one [constitutional] right over another,” it is unconstitutional on its face. The premise is faulty and the claim fails. The statute does not exalt First Amendment rights over property rights. The statute merely establishes a procedure requiring a plaintiff who challenges the exercise of First Amendment rights to make an evidentiary showing at the outset of litigation that his complaint has substantive merit. Prior decisions have found no merit to similar constitutional challenges….

At oral argument, the Beach Club asserted that the “first step” of the analysis requires that we measure the Beach Club’s protected property rights against the homeowners’ free speech rights. The claim is without merit. The first step is to determine whether “the challenged cause of action is one arising from protected activity.” The Beach Club’s property rights become relevant during the second step of the analysis when the court determines whether plaintiff has demonstrated a probability of prevailing on the merits….

A cause of action “arises from” protected activity if the act underlying the plaintiff’s cause of action, or the act which forms the basis for it, was itself an act in furtherance of the right of petition or free speech. The homeowners’ signs are a classic exercise of their right of free speech. Nonetheless, Beach Club asserts the signs are not entitled to First Amendment protection and do not fall within the ambit of section 425.16 because they are defamatory, the homeowners have not presented sufficient evidence interpreting the language of the signs, and the homeowners intend the signs to interfere with the Beach Club’s right to sell its property. The Beach Club also asserts that section 425.16 does not apply because the signs were not posted in a public forum and do not concern a matter of public interest….

Considering all of the circumstances, the signs are not defamatory. The signs were posted during a neighborhood controversy in an effort to persuade others. The phrase “Say No To,” as well as the signs as a whole, express an opinion or point of view concerning an issue that is important to the homeowners. The phrases “Fractional Ownership,” “Timeshare Ownership,” “Beach Club Ownership,” to the extent they are taken out of context, may be considered statements of fact. However, these words are not defamatory as a matter of law because they are true. The Beach Club advertised itself as offering “fractional ownerships.” “Timeshare Ownership,” in context, means the same as fractional ownership—several people owning divided shares in a residence. “Beach Club Ownership” does no more than identify the Beach Club property. “In Our More Mesa Shores Neighborhood” is simply a means of identifying the location of the controversy.

The Beach Club argues that the homeowners did not submit evidence of the meaning of the words in the signs and therefore have failed to meet their burden of proof…. [But t]he signs contain clear, simple language that requires no extrinsic evidence to aid in their interpretation. Nothing in the signs impugns the reputation of the Beach Club or insinuates that it is guilty of criminal conduct. The average reader does not have the legal sophistication to differentiate “fractional ownership” from “timeshare ownership” or the knowledge of the regulatory framework applicable to time shares, and there is no possibility that the signs contain defamatory innuendo.

The Beach Club also argues that the signs are not entitled to First Amendment protection because they merely express a dislike of the Beach Club’s sales efforts. This argument too is without merit. Defamation does not occur and First Amendment protection is not lost based on the motive of the speaker….

The Beach Club asserts that the signs are not speech subject to section 425.16 because the front lawn of the homeowners’ properties is not a public forum and the signs do not concern a matter of public interest, but rather concern a private dispute among property owners and is targeted not at the public but only to potential purchasers. We disagree…. [T]he anti-SLAPP statute protects private conversations as well as those occurring in a public forum….

The signs concern a matter of public interest. There are approximately 100 households in the Association. It actively participated in the ongoing dispute concerning use of the Beach Club property by sending letters to its members, to the Beach Club and to its governmental representative concerning the Beach Club’s use of its property. The dispute is of vital importance to each individual and the neighborhood as a whole. The manner in which the Beach Club uses its property is a matter of public interest and debate, the very type of debate that led the Legislature to enact the anti-SLAPP statute.

The homeowners’ community is smaller than the groups involved in [earlier cases] However, in light of the Legislature’s express directive to broadly construe the anti-SLAPP statute to encourage continued public participation in matters of public significance (425.16, subd. (a)), we conclude that the signs fall within the ambit of section 425.16, subdivisions (e)(3) and (4), and that the homeowners met their threshold burden….

[The court also rejected the other tort claims, saying, among other things: -EV] Claims for interference with prospective economic advantage may not be based on speech that is entitled to constitutional protection….

The facts of this case underscore the continuing wisdom of Wilcox v. Superior Court, supra, 27 Cal.App.4th at page 815. Residents of a community seeking to express their disagreement with what they perceive to be objectionable conduct by a fellow resident ought not be dissuaded by threat of litigation….