Thursday, August 14, 2014
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California Supreme Court Agrees to Decide Whether Anti-SLAPP Law Bars City’s Conflict-of-Interest Suit
By KENNETH OFGANG, Staff Writer
The state Supreme Court agreed yesterday to decide whether a city’s conflict-of-interest suit against its former officials implicates protected activity and is barred by the anti-SLAPP statute.
The justices, at their weekly conference in San Francisco, voted unanimously to grant review in City of Montebello v. Vasquez (2014) 226 Cal. App. 4th 1084.
Div. One of this district’s Court of Appeal ruled April 30 that Los Angeles Superior Court Judge Rolf Treu was correct in denying an anti-SLAPP motion by former Montebello City Council members Rosemarie Vasquez, Robert Urteaga and Kathy Salazar and former City Administrator Richard Torres.
The city is seeking a judicial declaration that the defendants had illegal personal financial interests stemming from a quid pro quo in which they agreed to vote for a trash hauling contract in exchange for campaign contributions.
It claims that Urteaga approached Arakelian Enterprises, Inc., which does business as Athens Services, in 2007 with a proposal that the company—which has provided residential hauling services in the city since 1962—become its exclusive provider of commercial and industrial sanitation services, and that Torres negotiated the terms of the contract.
Contract Awarded
In 2008, the council voted 3-2 to award the 15-year, $150 million contract to Athens by a 3-2 vote. The contract caused a political firestorm in the city, and Vasquez was defeated for reelection in November 2009, following which opponents of the contract organized a recall campaign and ousted Urteaga and Salazar.
Athens donated $45,000 to Vasquez’s failed reelection effort, more than $350,000 to fight the recall, and $37,000 to an unsuccessful campaign to block the reelection of the city’s mayor, who voted against the contract. Evidence showed that the company never donated more than $9,000 to any other local candidate in that election cycle.
Under its new majority, the council sued the three ex-lawmakers and also sued Torres, who allegedly helped conceal the contract terms from the public. The city won a separate Superior Court action to invalidate the contract, and that ruling is the subject of a separate appeal.
The defendants sought to strike the conflict-of-interest suit on the grounds that their council votes constituted protected activity in connection with a public issue.
Treu agreed that the council members’ votes were protected activity, but said the city had demonstrated a likelihood of prevailing on its conflict-of-interest claims under Government Code §1090.
Court of Appeal Opinion
Justice Victoria Chaney, writing for the Court of Appeal, said Treu was correct in granting the anti-SLAPP motion, but wrong about the protected-activity issue.
A council member’s vote is an act on behalf of the public, not the individual, and thus does not implicate free speech and petition rights, the justice said.
She cited Nev. Commission on Ethics v. Carrigan (2010) 131 S.Ct. 2343, in which the Supreme Court rejected a First Amendment challenge to a Nevada law making it illegal for a legislator to vote or take a position on any measure in which the legislator holds a personal financial interest.
She wrote:
“Here, the City’s claim against Vasquez, Urteaga, and Salazar is based on the council members’ votes to approve a contract in which they had a financial interest. Their acts of voting represented the commitment of their legislative power to the approval of a city contract, which did not implicate their own right to free speech nor convey any symbolic message…and therefore those acts fail to qualify as protected activity within the meaning of [Code of Civil Procedure] section 425.16.”
As to the claim against the former city administrator, Chaney distinguished Santa Barbara County Coalition Against Automobile Subsidies v. Santa Barbara County Association of Governments (2008) 167 Cal.App.4th 1229, which held that a suit charging a transportation agency with illegally spending public funds to support a ballot measure implicated free speech rights for purposes of the anti-SLAPP statute.
The justice explained;
“Unlike the lawsuit in Santa Barbara County, which was based on a government entity’s political campaign in favor of a ballot measure, the City’s claim against Torres is predicated on his negotiation of the Athens contract, not on any actions publicly advocating for its passage. Nothing about Torres’s duties as City Administrator to negotiate contracts on the City’s behalf implicated Torres’s right to take positions on issues of public interest.”
In other conference action, the justices left standing an April 22 ruling by the Sixth District Court of Appeal, which upheld a jury’s liability verdict in favor of a Silicon Valley startup company that sued Mitsubishi Electric Co.
Jurors awarded Grail Semiconductor, Inc. nearly $124 million after finding that Mitsubishi breached a confidentiality agreement attached to unsuccessful negotiations regarding possible involvement by Mitsubishi in the development of Grail’s memory technology. Grail co-founder Donald Stern proposed to combine the strengths of three different memory types—”the density of DRAM, [the] speed of SRAM and the non-volatility of FLASH”— in a single chip.
Witnesses said that if the design worked, it would be the “Holy Grail” of memory technology. Grail claimed the technology was passed along to Renesas, a joint venture between Mitsubishi and Hitachi, Ltd., and incorporated in a Renesas memory chip.
The trial judge said the damages awarded by the jurors were excessive, and granted a new trial as to the amount, but denied Mitsubishi judgment notwithstanding the verdict or a new trial as to liability.
The Court of Appeal said there was sufficient evidence for the jury to find that the nondisclosure agreement was breached. It also rejected Mitsubishi’s claim that it was prejudiced by mistranslation of two documents from Japanese to English.
Grail did not appeal the order for a new trial on damages.
The case is Grail Semiconductor, Inc. v. Mitsubishi Electric & Electronics USA, Inc. (2014) 225 Cal. App. 4th 786.
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