Opinion
A145515
09-22-2017
UKIAH VALLEY SANITATION DISTRICT, Plaintiff and Respondent, v. CITY OF UKIAH, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SCV 256737)
Defendant City of Ukiah appeals from a trial court order denying its motion to strike two of the complaints claims under the anti-SLAPP statute. (Code Civ. Proc., § 425.16.) In these claims, plaintiff Ukiah Valley Sanitation District alleged that the City had violated certain agreements by seeking approval from the Mendocino County Local Agency Formation Commission (LAFCO) to detach from the District a service area that lies within the Citys boundaries. In denying the anti-SLAPP motion, the court found that: (1) the City failed to demonstrate that the two claims arose from the Citys protected activity and (2) even if the claims did arise from protected activity, the District demonstrated a probability of prevailing on them. We agree with the court on the first point, and we therefore affirm.
"SLAPP is an acronym for strategic lawsuit against public participation. " (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 732, fn. 1.) All further statutory references are to the Code of Civil Procedure unless otherwise noted.
I.
FACTUAL AND PROCEDURAL
BACKGROUND
The following facts are drawn from the Districts first amended complaint. (See Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)
Both parties also filed declarations in conjunction with the anti-SLAPP motion. The parties do not rely on the declarations in addressing whether the Districts claims arise from protected activity, however, and we find it unnecessary to discuss their contents further. In particular, we need not consider the Citys claim that the trial court abused its discretion by admitting portions of the declaration of Frank McMichael, the District Manager for the District.
The City is a general law city in Mendocino County. The District is a sanitation district organized under the County Sanitation District Act (Health and Safety Code section 4700 et sequitur). It was formed by the Mendocino County Board of Supervisors in 1954, and part of its service area is within the Citys boundaries (the overlap area). Originally, the District had a dependent governing board comprised of members of the Mendocino County Board of Supervisors and the Ukiah City Council, but in November 2008, a new, independent board was created with five members elected by District voters.
When it was first established, the District provided sewer services only to customers in unincorporated areas. Over the years, however, the overlap area was created because on 13 occasions the City annexed various areas that fell within the District. None of the annexations detached territory from the District, and the District therefore continued to provide sewer services in the overlap area.
Beginning in 1955, the City and the District entered a series of agreements involving the operation of joint sanitation facilities. The original agreement provided that annual costs were to be divided between the parties "based upon the proportionate number of sewage connections." In 1958, the parties agreed that the City would "undertake the maintenance, operation[,] and repair of the sewerage collection system of the District" and provide billing and collection services. In exchange, the District would cover the costs of the services the City provided. In 1985, the parties agreed to change the method of apportioning costs from being based on the number of sewage connections to being based on the number of equivalent sewer service units (ESSUs), which were meant to approximate the needs and discharges of "a typical single family residential unit."
In 1995, the City and the District entered a "Participation Agreement," which has a term of 30 years. In line with the previous agreements, the Participation Agreement provides that the City and the District "have determined that present and future needs [for sewage disposal] will best be served through the operation of joint facilities and that these facilities will best serve the interests of the City . . . and the . . . District and the inhabitants thereof." The City is to "operate, maintain, and repair [the] Districts sewage collection system . . . as part of its sewer collection system." (Some capitalization omitted.) Costs for sewage treatment are to "be apportioned between the City and District each year based upon the ratio of City to District [ESSUs]," subject to annual adjustments, and the City is denominated "the paying and receiving agent for all District operation and maintenance funds." (Some capitalization omitted.) The District promises to "establish such fees and charges as will be sufficient to reimburse [the] City for its actual costs of issuance of permits and costs of inspection," and the City is to maintain complete financial records involving the Participation Agreement.
The Participation Agreement has been amended twice, including in 2004 in response to the fact that "[t]he wastewater treatment plant [was] at or near its capacity to treat and discharge treated wastewater." The 2004 amendment discusses a project to expand the plants treatment capacity and make other upgrades. The amendment addresses the division of the plants increased capacity and the costs for that portion of the project between the District and the City, a division that is to be revisited annually based on the proportion of "the actual proportion of new connections in the City and the District." The amendment also provides that the costs for the upgrade portion of the project are to be allocated "based upon the ratio of City and District ESSUs for each year of operation, commencing in the year when Project Costs are first incurred," consistent with the calculation of costs under the Participation Agreement. In the decade following the Participation Agreement, the parties also entered into other contracts related to sewer services, including a 2006 agreement involving the financing of the project (Financing Agreement).
In 2011, three years after the creation of an independent District board, the District conducted a financial assessment that raised questions about the accuracy of the allocation of costs. The assessment showed "that 172 ESSUs in [the] Districts territory were missing from a District customer list provided by the City, which may have resulted in misallocations of District revenue to the City." (Some capitalization omitted.) The District sought the Citys related financial records, but the City never provided them. Meanwhile, the City promised to address any erroneous assignment of ESSUs and revenue, but according to the District, the problems were never corrected.
The District eventually discovered a number of other issues, including that the City had overestimated the Districts number of ESSUs; used an incorrect formula to annually apportion the costs for sewage treatment; failed to credit the District for certain funds; and overcharged the District well over two million dollars for various services and equipment fees. In October 2013, the District filed a complaint against the City alleging causes of action for declaratory relief, breach of contract, breach of fiduciary duty, and rescission and restitution.
A year later, in October 2014, the City filed applications with the Mendocino LAFCO to initiate the process of detaching District territory. A month later, the City filed another application with the LAFCO "for the specific purpose of . . . seeking detachment of the [overlap area]." As part of the proposed detachment, the City sought to transfer to itself "a proportionate share of [the] Districts monetary assets . . . which are properly attributable to the overlap area." The City justified the proposed detachment by maintaining that it would reduce or eliminate administrative costs, conflicting regulations, and payment disputes about the treatment-plant project.
The District then amended its complaint to allege the two claims at issue in this appeal (collectively, the LAFCO claims). First, it added a fourth "count" seeking 21 separate declarations to the existing cause of action for declaratory relief. Two declarations pertain to whether the City can unilaterally terminate the Participation Agreement, two pertain to whether seeking detachment constitutes a breach of the Participation Agreement and Financing Agreement, two pertain to whether detachment impairs those agreements, seven pertain to whether the detachment is proper, and the remaining eight pertain to whether the District is entitled to be reimbursed for and collect various funds and whether it remains liable for other costs.
After the District filed its amended complaint, its motion to transfer venue to a neutral county was granted, and the case was transferred from Mendocino County Superior Court to Sonoma County Superior Court.
Second, the District added a cause of action for injunctive relief seeking to enjoin the City "[f]rom pursuing [its] application for detachment before LAFCO prior to a complete resolution of the issues as presented in this case" and to require the City "[t]o rescind all resolutions or other application materials pending before [the] Mendocino LAFCO." (Some capitalization omitted.) In support of this claim, the District alleged that detachment would "cause great and irreparable injury" by preventing the District from complying with the Participation and Financing Agreements and impairing the Districts "duties to its residents and ratepayers" as a result of lost revenue.
The City responded to these new claims by filing an anti-SLAPP motion seeking to strike them. In relevant part, the City argued that the LAFCO claims arose from "acts and communications in connection with or in proceedings before [the Mendocino] LAFCO," which constituted protected activity. The District opposed the motion, arguing that the LAFCO claims arose from the Citys breach of the Participation and Financing Agreements, not the "Citys LAFCO application, for which no liability is sought."
In denying the Citys anti-SLAPP motion, the trial court determined that the LAFCO claims did not arise from the Citys protected activity, explaining, "Count IV [of the declaratory-relief cause of action] does not directly raise the LAFCO applications . . . but merely seeks a determination of whether detaching the [ESSUs] will breach the agreements between the parties. The LAFCO applications are merely incidental to this claim and are no more than a trigger, the mechanism by which [the City] would effect the detachment which [the District] claims is wrongful. Thus, [the District] is not attacking the LAFCO applications, [the Citys] right or ability to bring such applications, or LAFCOs right or jurisdiction to consider and approve or deny such applications but only whether detaching the [ESSUs] will breach the parties agreements. [¶] For the same reasons, the . . . cause of action for injunctive relief, although superficially appearing to be directed at the applications, as well does not arise from such protected activity." The court also ruled that the District had demonstrated a probability of prevailing on the LAFCO claims.
II.
DISCUSSION
A. General Legal Standards.
The anti-SLAPP statute allows a defendant to move to dismiss "certain unmeritorious claims that are brought to thwart constitutionally protected speech or petitioning activity." (Robinzine v. Vicory (2006) 143 Cal.App.4th 1416, 1420-1421.) The heart of the statute states: "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 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." (§ 425.16, subd. (b)(1).)
In deciding whether to grant a defendants anti-SLAPP motion, courts engage in a two-step, burden-shifting analysis. (Park v. Board of Trustees of the California State Univ. (2017) 2 Cal.5th 1057, 1061 (Park).) Under the first step, the court considers whether the defendant has made "a prima facie showing that the plaintiffs cause of action . . . aris[es] from an act by the defendant in furtherance of the [defendants] right of petition or free speech . . . in connection with a public issue. " (Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 21, quoting § 425.16, subd. (b)(1).) To make such a showing, the defendant need not demonstrate that its actions were protected as a matter of law, but need only establish a prima facie case that the actions fell into one of the categories listed in section 425.16, subdivision (e). (Flatley v. Mauro (2006) 39 Cal.4th 299, 314.) If the defendant cannot make such a showing, the anti-SLAPP motion must be denied, and the plaintiff is entitled to continue to litigate the cause of action.
But if the defendant can make such a showing, the analysis proceeds to the second step, where the burden shifts to the plaintiff to demonstrate "that there is a probability that the plaintiff will prevail on the [cause of action]." (§ 425.16, subd. (b)(1).) To meet this burden, " the plaintiff "must demonstrate that the [cause of action] is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." " (Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.) If the plaintiff can meet this burden, the anti-SLAPP motion must be denied, and the plaintiff is entitled to continue to litigate the cause of action. (See Flatley v. Mauro, supra, 39 Cal.4th at p. 332 & fn. 16.) Thus, an anti-SLAPP motion is granted only if the defendant first shows that its conduct was constitutionally protected and the plaintiff then fails to "demonstrate its claims have at least minimal merit. " (Park, supra, 2 Cal.5th at p. 1061.)
We review de novo the denial of an anti-SLAPP motion. (Park, supra, 2 Cal.5th at p. 1067.) "If the trial courts decision is correct on any theory applicable to the case, we affirm the order regardless of the correctness of the grounds on which the lower court reached its conclusion." (Robles v. Chalilpoyil (2010) 181 Cal.App.4th 566, 573.) As we shall explain, here we are concerned with only with the first step of the analysis, which requires us to "exercise independent judgment in determining whether, based on our own review of the record, the challenged claims arise from protected activity." (Park, at p. 1067.) We consider both the pleadings and "affidavits concerning the facts upon which liability is based," and we "accept the plaintiffs submissions as true and consider only whether any contrary evidence from the defendant establishes its entitlement to prevail as a matter of law." (Ibid.)
B. The LAFCO Claims Do Not Arise from the Citys Protected Activity.
The City claims that the trial court erred by determining that the LAFCO claims do not arise from protected activity. We are not persuaded.
The parties agree that the Citys filing of the LAFCO applications is a protected activity. They disagree, however, on whether the LAFCO claims "arise from" the Citys protected activity of filing the LAFCO applications. In evaluating this dispute, we focus on the fourth count of the Districts declaratory-relief cause of action because " [i]njunctive relief is a remedy, not a cause of action, " and "section 425.16 applies only to a cause of action." (Guessous v. Chrome Hearts, LLC (2009) 179 Cal.App.4th 1177, 1187; § 425.16, subd. (b)(1); see also Wong v. Jing (2010) 189 Cal.App.4th 1354, 1360, fn. 2.)
"[T]he statutory phrase cause of action . . . arising from means simply that the defendants act underlying the plaintiffs cause of action must itself have been an act in furtherance of the right of petition or free speech. [Citation.] In the anti-SLAPP context, the critical point is whether the plaintiffs cause of action itself was based on [protected activity]," and "the mere fact an action was filed after protected activity took place does not mean it arose from that activity." (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76-78 (City of Cotati).) Thus, it is not enough for the City to demonstrate that its filing of the LAFCO applications prompted the District to amend the complaint to add the fourth count of the claim for declaratory relief. Instead, the City must show that the claim is based on its filing of the LAFCO applications.
Recently, in Park, supra, 2 Cal.5th 1057, our state Supreme Court addressed the "requisite nexus between the claims an anti-SLAPP motion challenges and protected activity." (Id. at p. 1062, italics and some capitalization omitted.) The Court explained that "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 p. 1060.) Thus, in evaluating anti-SLAPP motions, "courts should consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability." (Id. at p. 1063.)
" The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject. " (City of Cotati, supra, 29 Cal.4th at p. 79.) In City of Cotati, the plaintiff sought a declaration that its rent control ordinance was constitutional after the defendants filed a federal lawsuit seeking a declaration that the ordinance was invalid. (Id. at pp. 71-72.) The defendants then filed an anti-SLAPP motion contending that the plaintiffs cause of action for declaratory relief arose from the protected activity of their filing the federal lawsuit. (Id. at pp. 72-73.) Our state Supreme Court concluded that the plaintiffs cause of action arose from the underlying controversy over whether the ordinance was constitutional, not from the federal lawsuit that also sought to resolve that controversy. (Id. at pp. 79-80.)
City of Alhambra v. DAusilio (2011) 193 Cal.App.4th 1301 (City of Alhambra) applied City of Cotati to a cause of action for declaratory relief that was based, as is the fourth count here, on a contractual dispute. In City of Alhambra, a city and its former firefighter employee were parties to a settlement agreement under which the former employee agreed to limit his involvement in the firefighters association for a certain period of time. (Id. at p. 1304.) After the former employee participated in association activities involving a protest against the city, the city brought a claim for declaratory relief seeking a judicial determination of whether the employees conduct had violated the settlement agreement and whether the agreement was valid. (Id. at pp. 1304-1305.)
The Court of Appeal affirmed the trial courts denial of the former employees anti-SLAPP motion to strike the declaratory-relief claim, holding that the claim arose "from an actual, present controversy between the parties regarding the scope and enforceability of . . . the settlement agreement" and not from the employees protected activity. (City of Alhambra, supra, 193 Cal.App.4th at p. 1307.) The appellate court observed, "While [the employees] protected speech activities may have alerted the City that an actual controversy existed regarding the legality of [the settlement agreement], the speech itself [did] not constitute the controversy. The City did not sue [the employee] because he engaged in protected speech; the City sued him because it believed he breached a contract which prevented him from engaging in certain speech-related conduct and a dispute exist[ed] as to the scope and validity of that contract." (Id. at p. 1308.)
We apply this rationale here and conclude that the fourth count of the Districts claim for declaratory relief arises from the parties dispute about their obligations under the Participation and Financing Agreements, not from the Citys filing of the LAFCO applications. The allegations pertaining to the Citys filing of the LAFCO applications are "only incidental to the thrust of" the fourth count. (Moriarty v. Laramar Management Corp. (2014) 224 Cal.App.4th 125, 139-140.)
In arguing otherwise, the City mischaracterizes the fourth count. The City contends that "the Fourth Count seeks six judicial declarations that the Applications breach, impair[,] or terminate the Participation Agreement and Financing Agreement; seven declarations that the Applications are not justified or otherwise flawed; and eight declarations as to what the District is entitled [to] if the Applications are granted." In fact, only two of the declarations sought refer to the filing of the LAFCO applications as opposed to detachment itself: one that "[the Citys] action in filing a detachment application with LAFCO is an anticipatory breach of the Participation Agreement . . . and the Financing Agreement," and one that "[the Citys] filing [of] a detachment application is a material breach of the Participation Agreement . . . and the Financing Agreement." (Some capitalization omitted.) We see no meaningful distinction between these declarations and the declaration sought in City of Alhambra involving whether the former employees protected activity constituted a breach of contract.
The City also argues that City of Alhambra does not govern here because "section 425.16 does apply to actions for declaratory relief." We agree that the anti-SLAPP statute can apply to actions for declaratory relief. City of Alhambra does not hold otherwise, although it does illustrate that the fact a claim is for declaratory relief can be determinative in assessing whether the claim arises from protected activity. This is apparent when comparing City of Alhambra to Navellier v. Sletten, supra, 29 Cal.4th 82, in which the plaintiffs filed a claim for breach of contract alleging that the defendant had violated a release of claims by filing counterclaims against the plaintiffs in another action. (Id. at pp. 86-87.) Our state Supreme Court concluded that the claim for breach of contract arose from the protected activity of filing counterclaims. (Id. at p. 90.) Although Navellier and City of Alhambra both involved allegations that a defendants protected activity constituted a breach of contract, their holdings can be reconciled because the protected activity furnished an element of the cause of action in Navellier—breach—but did not furnish an element of the cause of action in City of Alhambra—an actual controversy. (See also Vivian v. Labrucherie (2013) 214 Cal.App.4th 267, 274 [distinguishing City of Alhambra as involving declaratory-relief claim based on contractual dispute, not breach-of-contract claim seeking damages].) It is conceivable that protected activity could form the basis of an actual controversy giving rise to a declaratory-relief claim. Here, however, the controversy between the District and the City is based on the agreements between them, not the filing of the LAFCO applications, and therefore City of Alhambra governs.
The City also attempts to distinguish City of Alhambra on the basis that the District seeks not just declaratory relief but monetary and injunctive relief. As to monetary relief, we agree with the District that the damages it seeks relate to claims other than the LAFCO claims. The City points to the fact that the fourth count of the Districts declaratory-relief cause of action seeks declarations that the District is entitled to reimbursement of various funds if detachment occurs. The fourth count does not actually seek damages in any set amount, however, and specifically states that the declarations sought "will avoid future disputes between the parties on the same subject matter, separate and apart from an application for damage and other relief for completed breaches of the Participation Agreement . . . and the Financing Agreement . . . ." (Some capitalization omitted.) Nor do we find it significant that in its prayer for relief the District requests, as to all causes of action, "an order requiring [the City] to pay [the District] in an amount to be shown according to proof" and attorneys fees. The fourth count does not purport to seek an award of damages, and this general statement that applies to other causes of action seeking damages does not transform the fourth count into one that does as well.
The City also fails to persuade us that the fact the District is seeking injunctive relief related to the LAFCO applications transforms the fourth count of the declaratory-relief cause of action into one arising from protected activity. The City relies on footnote four in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53 (Equilon). In Equilon, the defendant served a notice of intent to sue under Proposition 65, and the plaintiff responded by filing a suit seeking a declaration that the notice did not comply with the California Code of Regulations and an injunction barring the defendant from filing a Proposition 65 enforcement action. (Id. at p. 57.) The bulk of the opinion addressed the issue whether a defendant bringing an anti-SLAPP motion is required to show "that the action was brought with the intent to chill the defendants exercise of constitutional speech or petition rights." (Ibid.)
After explaining that there is no such requirement, our state Supreme Court concluded, with little discussion, that the Court of Appeal had correctly determined that the plaintiffs "action for declaratory and injunctive relief [was] one arising from [the defendants] activity in furtherance of its constitutional rights of speech or petition—viz., the filing of Proposition 65 intent-to-sue notices." (Equilon, supra, 29 Cal.4th at p. 67.) Observing that it was "beside the point" whether the plaintiff "had pure intentions when suing [the defendant]," the Supreme Court then stated that although the plaintiff claimed it "sought declaratory relief solely in order to get clarification of what it had to do to avoid Proposition 65 liability after receiving [the defendants] notices," it "neglect[ed] to mention, when arguing in this vein, that it also sought injunctive relief that expressly would restrict [the defendants] exercise of petition rights." (Id. at p. 67 & fn. 4.) Therefore, the Court did not need to determine "whether or when a pure declaratory relief action seeking mere clarification of past speech or petitioning . . . might evade anti-SLAPP scrutiny." (Id. at p. 67, fn. 4.)
It is true that the District seeks an injunction to prevent the City from pursuing its LAFCO applications. We do not, however, read footnote four of Equilon to imply that a declaratory-relief cause of action that does not arise from protected activity is transformed into one that does just because the plaintiff also seeks an injunction to halt the protected activity. In Equilon, the plaintiffs claim for declaratory relief arose from a controversy involving protected activity, whereas here, the fourth count of the Districts declaratory-relief claim arises from a controversy over the parties agreements, not the filing of the LAFCO applications. And as we have said, the anti-SLAPP statute does not apply to a claim for injunctive relief. Even though the District seeks a remedy that would prevent the City from engaging in protected activity, that is insufficient, without more, to establish that count four arises from protected activity.
III.
DISPOSITION
The trial courts order denying the anti-SLAPP motion is affirmed. Respondent is awarded its costs on appeal.
/s/_________
Humes, P.J. We concur: /s/_________
Margulies, J. /s/_________
Banke, J.