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Court of Appeal:
Lawsuit Over Campaign Mailers Was Not a SLAPP
Declares That a Jury Could Find That There Was a False Implication That a Developer Had Committed Fraud
By a MetNews Staff Writer
Div. Three of the Fourth District Court of Appeal has upheld the denial of an anti-SLAPP motion filed by a political consultant who is being sued for libel, holding that a jury could reasonably construe campaign mailers that the defendant designed as alleging, falsely, that the plaintiff, a developer, had committed fraud.
In fact, the City of Dana Point in Orange County, which had leveled the accusation against the developer, Sanford Edward, in a 2016 lawsuit, admitted as part of a settlement of cross actions in 2017 that the claim was a “mistake.”
“[W]e conclude the mailers in question could reasonably be understood by an average Dana Point voter to imply that Edward was found liable for fraud and paid money damages to the City as a result,” Justice Thomas M. Goethals said in the majority opinion, in which Orange Superior Court Judge Linda S. Marks, sitting on assignment, joined. Acting Presiding Justice Richard D. Fybel wrote an opinion in which he concurred in the result.
The opinions, filed Tuesday, were not certified for publication.
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SANFORD EDWARD developer |
‘Good Will’ Gesture
Money had, in fact, been paid to the city under the 2017 settlement agreement— $248,200—but that sum was proffered not by Edward but by his co-defendant, Headlands Reserve, LLC, of which he is a managing member, and it was specified that the payment was a “ ‘good will’ gesture,” only. The donation was to go toward renovation of a community center.
Edward and Headlands had developed The Strand at Headlands, described by Goethals as “an oceanfront community of multimillion dollar homes sited at one of the last undeveloped coastal promontories in Southern California.”
A defendant in the action, and the appellant, is political consultant David Ellis who produced the mailers for his client, Dana Point Taxpayers Association, a political action committee, which is also a defendant. It is not, however, a party to the appeal; its anti-SLAPP motion had earlier been denied and it did not seek relief in the appellate court.
The association backed a slate of three candidates for election in 2018 to the Dana Point City Council. Two mailers produced by Ellis linked the plaintiff to Joe Jaeger, Mark McGinn, and Charles Payne, opponents of the slate candidates—when, in fact, Edward had made no endorsements.
Hit Pieces
Ellis’s mailers spotlighted allegations by the city in the 2016 lawsuit that Edward had committed fraud, not disclosing that the allegation had later been repudiated by the city. Apparently alluding to the $248,200 payment by Headlands, the mailers said:
“Edward wants his money back. Electing city council candidate Charles Payne is his payday.”
Below is one side of a mailer.
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The city had claimed in its lawsuit that Headlands failed to reimburse it for $553,000 in attorney fees it had paid in defending against a lawsuit it settled in 2016 challenging an ordinance under which The Strand was allowed to restrict beachfront access. Headlands, which had signed an indemnity agreement with respect to attorney fees incurred by the city, cross complained, alleging it had been had overbilled by more than $667,000.
Under the settlement, neither side paid money, other than the sum from Headlines characterized as a voluntary gift.
Motion Denied
Orange Superior Court Judge Richard Y. Lee denied Ellis’s special motion to strike under the anti-SLAPP statute, Code of Civil Procedure §425.16. Although he found that the first prong of the statute was met—that the action arises from protected speech—he declared that Ellis did not meet his burden under the second prong of showing a probability that he would prevail on the merits.
In his opinion affirming Lee’s order, Goethals said that “the apparent implication” of statements in the mailers “is that Edward was found liable and had to pay damages on the City’s claims, including its fraud claim, and he now wants to recover that money.” He continued:
“That brings us to whether that insinuation was provably false. We conclude it was, as it is undisputed that Edward paid nothing to the City on its fraud cause of action….
“Of course, that is not the only possible reading of the mailers. We recognize an average reader might reach some other conclusion.3 But if the statements contained in the mailers are susceptible of both an innocent and libelous meaning, it is for the jury, not us, to decide how they were in fact understood.”
‘Not Political Hyperbole’
He went on to say:
“Here, the phrase ‘Edward wants his money back’ appears immediately below actual screenshots and a factual description of the City’s 2016 complaint against Edward. Indeed, Ellis testified he used the screenshots of the complaint’s caption ‘to generate [a sense of] authenticity and validity.’ The juxtaposition and proximity of the phrase ‘Edward wants his money back’ to those screenshots and factual description suggests the ‘money back’ statement was intended to be factual in nature, not political hyperbole.”
Edward is a public figure and, accordingly, he mist show that falsehoods were spread by Ellis with “actual malice”—knowing that the implications were false or acting in reckless disregard of the truth. Goethals said Ellis “arguably” did act with thee requisite state of mind because he admitted knowing that the city had recanted its allegation of fraud.
Fybel’s Opinion
Fybel wrote: “I concur in the result in this case because Edward’s burden on the second step of the anti-SLAPP analysis is only to show that his claim has the requisite minimal merit….[T]his burden has been met, but only because it is so low.”
Criticizing Edwards’s resort to litigation, he commented:
“[I]t would have been much more consistent with our cherished and robust First Amendment values for Edward to have responded to the assertions in the flyer by engaging in public speech rather than filing a lawsuit. Edward… had the ability and means to issue his own flyer or press release or otherwise tell his side of the story in a public forum.
“If the flyers told lies, Edward could counter them with the truth.”
The case is Edward v. Ellis, 2021 S.O.S. 6568.
Copyright 2021, Metropolitan News Company