Opinion
B245959
12-21-2016
CITY OF MONTEBELLO, Plaintiff and Respondent, v. ROSEMARIE VASQUEZ et al., Defendants and Appellants; ARAKELIAN ENTERPRISES INC., Intervener.
Revere & Wallace, Frank Revere for Defendants and Appellants. AlvaradoSmith, Raul F. Salinas, and Mary M. Monroe; Leibold McClendon & Mann, John G. McClendon for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC488767) APPEAL from a judgment of the Superior Court of Los Angeles County. Rolf Treu, Judge. Reversed. Revere & Wallace, Frank Revere for Defendants and Appellants. AlvaradoSmith, Raul F. Salinas, and Mary M. Monroe; Leibold McClendon & Mann, John G. McClendon for Plaintiff and Respondent.
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In 2008, Arakelian Enterprises, doing business as Athens Disposal Company (Athens), held the franchise for residential waste collection in the City of Montebello, while a number of other companies provided commercial waste services. Athens's executive vice-president, Dennis Chiapetta, was approached by Robert Urteaga, who suggested that Athens consider seeking an exclusive commercial waste hauling contract in addition to its residential franchise.
We sometimes refer to Montebello as "the City." It is unclear whether Urteaga was running for a seat on the Montebello City Council or had recently been elected when the meeting with Chiapetta occurred, but the timing is immaterial for our purposes.
Athens entered into negotiations with the city administrator, Richard Torres, about expanding its residential franchise to include all of the City's waste. Torres had long opposed such a move, but had recently changed his mind in light of the City's need to comply with the Integrated Waste Management Act, Public Resources Code section 4000 et seq. In July 2008, the Montebello City Council voted on Athens's proposal, approving it three-to-two, Urteaga and fellow council members Kathy Salazar and Rosemarie Vasquez voting for the proposal and Montebello Mayor William Molinari and another councilmember voting against it. As part of the proposal, Athens agreed to make a one-time $500,000 payment to the City, improve its residential waste hauling service, and indemnify the City for any failure to comply with the Integrated Waste Management Act.
When Mayor Molinari declined to sign the resulting contract, Vasquez signed it in her capacity as mayor pro tem.
In 2009, Montebello resident Mike Torres (no relation to Richard Torres) sued the City, seeking to invalidate the Athens contract on various grounds. The trial court ultimately invalidated the contract on the ground that it was void because it had not been executed by the Mayor, a decision that was affirmed on appeal by Division Three of this District. (Torres v. City of Montebello (2015) 234 Cal.App.4th 382, 392.)
Molinari and Vasquez ran for re-election in November 2009, and Montebello voters qualified an election to recall Urteaga and Salazar in February 2010. Athens contributed $37,300 to defeat Molinari and $45,000 to reelect Vasquez in the first election, and contributed $352,912.73 to defeat the recall of Urteaga and Salazar in the second. Despite these efforts, Molinari was reelected, Vasquez was defeated, and Urteaga and Salazar were recalled. In 2009, Torres retired as city administrator.
In July 2012, the City sued Urteaga, Vasquez, Salazar and Torres, asserting a single cause of action for conflict of interest in violation of Government Code section 1090, which prohibits city officers or employees from being financially interested in any contract made by them in their official capacity. Montebello alleged defendants negotiated and voted on the Athens contract in exchange for Athens's financial support in the council members' election campaigns. The City sought a declaration that the Athens contract is void, and an order requiring that Urteaga, Vasquez and Salazar disgorge Athens's campaign contributions. Athens intervened in the litigation.
Defendants moved to strike the complaint under the anti-SLAPP statute, Code of Civil Procedure section 425.16. They argued their negotiating and voting on the Athens contract was an exercise of their constitutional right of free speech in connection with an issue of public interest related to their official duties, and thus constituted protected activity within the meaning of the anti-SLAPP statute. In support of their motion, defendants declared they had no financial interest in the Athens contract. They voted for it because they thought it best for the City, not because they anticipated Athens would financially support their election campaigns. Defendants also cited Chiapetta's deposition testimony, in which he stated Urteaga encouraged Athens to seek an exclusive waste hauling franchise because "he thought it was a good idea."
SLAPP is an acronym for "strategic lawsuit against public participation." Further statutory references will be to the Code of Civil Procedure unless otherwise indicated.
In opposition to the motion, Montebello argued that voting by a public official is not protected activity within the meaning of section 425.16, but in any event the evidence established a probability that the City would prevail in the lawsuit (§ 425.16, subd. (b)(1)). The City adduced evidence that Urteaga and Torres encouraged Athens to seek an exclusive waste hauling contract; Urteaga, Vasquez and Salazar voted to approve the contract; and Athens financially supported their later political campaigns.
The trial court found defendants' voting on the Athens contract constituted protected activity for purposes of section 425.16, but the City's evidence established a reasonable probability it would prevail. It therefore denied defendants' anti-SLAPP motion. On appeal, we affirmed the trial court's ruling on the ground that a city council member's vote is not protected activity under section 425.16. We did not reach the question of whether the City could establish a probability it would prevail.
Our Supreme Court reversed. It held that "the council members' votes, as well as statements made in the course of their deliberations at the city council meeting where the votes were taken, qualify as" protected activity under section 425.16, as does "[a]nything they or City Administrator Torres said or wrote in negotiating the contract." (City of Montebello v. Vasquez (2016) 1 Cal.5th 409, 423.) The Court remanded the matter to us to evaluate whether the trial court correctly found the City made a sufficient showing to establish a likelihood of prevailing on the merits.
DISCUSSION
The anti-SLAPP statute provides, in relevant part: "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." (§ 425.16, subd. (b)(1).)
"Review of an order granting or denying a motion to strike under section 425.16 is de novo." (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.) A "special motion to strike under section 425.16 involves a two-step process. First, the moving defendant must make a prima facie showing 'that the act or acts of which the plaintiff complains were taken "in furtherance of the [defendant]'s right of petition or free speech under the United States or California Constitution in connection with a public issue," as defined in the statute.' [Citation.] If the defendant makes this initial showing of protected activity, the burden shifts to the plaintiff at the second step to establish a probability it will prevail on the claim. [Citation.] The plaintiff need only state and substantiate a legally sufficient claim. [Citation.] The plaintiff's evidence is accepted as true; the defendant's evidence is evaluated to determine if it defeats the plaintiff's showing as a matter of law. [Citation.] The procedure is meant to prevent abusive SLAPP suits, while allowing 'claims with the requisite minimal merit [to] proceed.'" (City of Montebello v. Vasquez, supra, 1 Cal.5th at p. 420.)
It is undisputed that defendants, acting in their official capacities, participated in the making of the Athens contract, which is protected activity under section 425.16. The issue is whether the City has made a prima facie showing that it will likely prevail.
Government Code section 1090 provides in pertinent part that "city officers or employees shall not be financially interested in any contract made by them in their official capacity . . . ." (Gov. Code, § 1090, subd. (a).) The statute "codifies the long-standing common law rule that barred public officials from being personally financially interested in the contracts they formed in their official capacities." (Lexin v. Superior Court (2010) 47 Cal.4th 1050, 1072 (Lexin).) "To determine whether section 1090 has been violated, a court must identify (1) whether the defendant government officials or employees participated in the making of a contract in their official capacities, (2) whether the defendants had a cognizable financial interest in that contract, and (3) (if raised as an affirmative defense) whether the cognizable interest falls within any one of section 1091's or section 1091.5's exceptions for remote or minimal interests." (Id. at p. 1074.) Here, we focus on the second element, whether defendants had a cognizable financial interest in the Athens contract.
"'Financial interests prohibited by section 1090 "are not limited to express agreements for benefit and need not be proven by direct evidence. Rather, forbidden interests extend to expectations of benefit by express or implied agreement and may be inferred from the circumstances." [Citation.]' [Citation.] Nevertheless, while acknowledging direct or indirect interests are equally prohibited, our Supreme Court has instructed that the inquiry is 'whether the [official] had a cognizable financial interest in that contract.' (Lexin, supra, 47 Cal.4th at p. 1074, italics added.) 'Courts thus generally focus on whether the contract in question could confer some type of pecuniary advantage to the target of a section 1090 inquiry: "Section 1090 is triggered when a public official receives any profit from a public contract and includes the acceptance of a bribe in return for influencing the public entity to enter into a particular contract." [Citation.] "The phrase 'financially interested' broadly encompasses anything that would tie a public official's fortunes to the existence of a public contract."' [Citation.] 'Put in ordinary, but nonetheless precise, terms, an official has a financial interest in a contract if he might profit from it.'" (Torres v. City of Montebello, supra, 234 Cal.App.4th at pp. 401-402.)
"We must disregard the technical relationship of the parties and look behind the veil which enshrouds their activities in order to discern the vital facts. [Citation.] However devious and winding the trail may be which connects the officer with the forbidden contract, if it can be followed and the connection made, a conflict of interest is established." (People v. Watson (1971) 15 Cal.App.3d 28, 37.)
The City offered the following evidence to demonstrate defendants were financially interested in the Athens contract: (1) Chiapetta testified that Urteaga and Torres encouraged Athens to consider expanding its residential waste hauling franchise to include all of the City's waste; and (2) Molinari declared that following approval of the Athens contract, Athens contributed to Vasquez's reelection campaign and to Urteaga's and Salazar's efforts to avoid recall. This evidence fails to establish a probability the City will prevail.
First, that Urteaga and Torres urged Athens to seek exclusivity in its waste hauling contract has no tendency in reason to suggest they were financially interested in the matter. Public officials routinely encourage private undertakings. Chiapetta mentioned no financial interest arising from these discussions, and the City adduces none.
Second, Athens's campaign contributions to Vasquez, Urteaga and Salazar after the Athens contract was signed are not cognizable financial interests in the Athens contract.
In Torres v. City of Montebello, which concerned this same Athens contract and Salazar's part in effectuating it, the plaintiff argued Salazar violated Government Code section 1090 because when she participated in the vote to approve the contract she failed to disclose she was an officer of the nonprofit drug counseling organization MELA Counseling Services Center (MELA), to which Athens had made financial contributions. (Torres v. City of Montebello, supra, 234 Cal.App.4th at p. 402.) Our colleagues in Division Three disagreed. The court held that section 1090 applies only to interests in the contract itself, not to payments made outside the contract. "Had the vote concerned a contract with MELA, or had Athens conditioned future contributions to MELA on approval of the Contract, then Salazar, as a MELA officer, would have been subject to section 1091's disclosure and abstention requirements. But MELA was not a party to the Contract and the trial court specifically found, based on the evidence, that 'Salazar did not receive any promises from Athens for her vote.' MELA simply had no financial interest in the Contract. And, because MELA had no financial interest in the Contract, it follows that Salazar had no remote interest by virtue of her employment as a MELA officer. The trial court properly rejected Torres's claim for violation of section 1090 et seq." (Id. at p. 402; see, e.g., Eden Township Healthcare Dist. v. Sutter Health (2011) 202 Cal.App.4th 208, 214-216, 227 [district official who negotiated public contracts with company of which he was an officer had "no disqualifying financial conflict of interest" because there was no evidence his salary, benefits, or status changed relating to the contracts].)
Similarly here, the City offered no evidence suggesting that when they made the contract, defendants contemplated even that they would run for reelection (or be subject to recall), much less that Athens would contribute to their future campaigns. Speculation that the officials anticipated a future quid pro quo is not evidence of a financial conflict of interest. (See BreakZone Billiards v. City of Torrance (2000) 81 Cal.App.4th 1205, 1230 ["Where the interest is remote and speculative, no conflict of interest is held to be presented under [Government Code section 1090]"].) Defendants "simply had no financial interest in the [Athens c]ontract." (Torres v. City of Montebello, supra, 234 Cal.App.4th at p. 402.)
Further, public policy mandates that a third party's contribution to an official's campaign cannot, without more, disqualify the official from participating in the making of contracts involving the contributor. "Public policy strongly encourages the giving and receiving of campaign contributions. Such contributions do not automatically create an appearance of unfairness." (Woodland Hills Residents Asso v. City Council of L.A. (1980) 26 Cal.3d 938, 947; accord All Towing Services LLC v. City of Orange (2013) 220 Cal.App.4th 946, 959 [as a matter of law, campaign contributions "do not constitute a conflict of interest"]; Hub City Solid Waste Services, Inc. v. City of Compton (2010) 186 Cal.App.4th 1114, 1128 ["The fact that persons or entities make campaign contributions to officials who favor a particular position or who support the donor does not prove illegality"].) "If a political contribution automatically disqualifies the recipient after his election from considering and acting on matters in which the contributor has an interest, the enterprising developer could disqualify all known environmentalists who are running for municipal office by making nominal contributions to the campaign committees of such persons. Future applications of the developer could then be judged by a panel from which all known environmentalists have been disqualified." (Woodland Hills Residents Asso v. City Council of L.A., supra, 26 Cal.3d at p. 947, fn. 9; accord All Towing Services LLC v. City of Orange, supra, 220 Cal.App.4th at p. 960 ["the practical reality [is] that a campaign contribution disqualification rule could be easily manipulated"].)
We therefore conclude that the City failed to demonstrate a likelihood of success on the merits.
DISPOSITION
The superior court's order denying defendants' anti-SLAPP motion is reversed. The court is directed to enter a new order granting the motion. Defendants are to recover costs on appeal.
NOT TO BE PUBLISHED.
CHANEY, J. We concur:
ROTHSCHILD, P. J.
JOHNSON, J.