City of Rocklin v. Legacy Family Adventures-Rocklin, LLC

• Decision Date: 21 December 2022
• Docket Number: C091172
• Citation: 86 Cal.App.5th 713,303 Cal.Rptr.3d 52
• Parties: CITY OF ROCKLIN, Plaintiff and Respondent, v. LEGACY FAMILY ADVENTURES-ROCKLIN, LLC, et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

86 Cal.App.5th 713

303 Cal.Rptr.3d 52

CITY OF ROCKLIN, Plaintiff and Respondent,

v.LEGACY FAMILY ADVENTURES-ROCKLIN, LLC, et al., Defendants and Appellants.

C091172

Court of Appeal, Third District, California.

Filed December 21, 2022

Weintraub Tobin Chediak Coleman Grodin and Brendan J. Begley, Sacramento, for Defendants and Appellants.

Downey Brand, Sean J. Filippini and Christopher M. Kolkey, Sacramento, for Plaintiff and Respondent.

HOCH, J.

Plaintiff City of Rocklin (City) filed an action against defendants Legacy Family Adventures-Rocklin, LLC, (LFA) and David Busch asserting 12 causes of action related to their joint undertaking involving the construction and operation of a theme park, Quarry Park Adventures. Defendants filed an anti-SLAPP¹ special motion to strike the first four causes of action pursuant to Code of Civil Procedure section 425.16.² The parties did not actively dispute that the speech at issue in those causes of action was commercial speech, to which section 425.16 does not apply. Instead, the primary issue the parties litigated was whether the speech concerning the theme park qualified under what we will refer to as the "artistic work" exception to the commercial speech exemption.³ In opposing defendants’ special motion to strike, the City requested attorney fees, asserting the motion was frivolous. The trial court denied defendants’ special motion to strike, and, concluding the motion was indeed frivolous, granted the City's request for attorney fees. Defendants appeal from the subsequent order in which the trial court awarded the City specified attorney fees and costs.

On appeal, defendants assert (1) their special motion to strike was not frivolous because, even if we conclude a theme park is not an artistic work, reasonable attorneys could differ on the matter, (2) the trial court erred in failing to follow the mandatory procedures set forth section 128.5 in sanctioning them, and (3) certain rulings and the "arbitrary rotation of trial judges" deprived them of their due process rights. We affirm and remand for a determination and award of the City's attorney fees on this appeal.

FACTUAL AND PROCEDURAL BACKGROUND

Background and the City's Complaint

According to the complaint, in 2016, Busch approached the City with a proposal for an adventure park. He "trumpeted his unrivaled experience and expertise in developing amusement and adventure parks" in Texas and furnished the City with a financial statement to demonstrate that, "if the City invested millions of dollars to build the park, [Busch] would make it a financial success."

On January 24, 2017, the Rocklin City Council met to consider whether to enter into a master agreement with LFA, of which Busch was chief executive officer and sole member. Busch "spoke extensively about his past successes with adventure and amusement parks and the unqualified success that the City's (yet to be constructed) Adventure Park would become under his direction." He characterized two of the Texas parks as " ‘wildly successful.’ "

However, according to the City, Busch "misrepresented and concealed that his only adventure park projects ... were abject failures that were actively being investigated for child labor law violations." According to the City, those Texas adventure parks were "operational and financial disasters." They defaulted on financial obligations to lenders and, in 2016, "the entities failed and the Texas cities ended their long term agreements with the Busch entities after just two years." According to the City, Busch represented that two of his Texas theme parks were active, successful, and projected to realize substantial profits in 2016, even as "his companies’ operation of both parks was completely shut down by that time amidst huge operational losses and unpaid obligations."

The City alleged that, in reliance on Busch's misrepresentations and concealments, it entered into the master agreement with LFA. The adventure park, Quarry Park Adventures, was completed in September 2018 at a cost of $7 million, more than 200% higher than projected by LFA.

After the parties entered into a new operating agreement, and after the park opened, LFA furnished the City with revised projections. Among other things, year one operating profits were revised to an amount $300,000 less than projected six months earlier and the profits for the first three years were revised to be less than $600,000 as opposed to the $2 million originally projected. The revised projected attendance for the first 10 years was about half of prior projections. The revised projections established that LFA would not be able to honor its financial obligations to the City.

The City then performed a thorough investigation into Busch's background, which, according to the City, "revealed the ... misrepresentations and concealments relating to Busch's Texas business dealings." The City entered into an exit agreement with LFA requiring LFA to vacate the park and cede control to the City.

The City filed a complaint asserting 12 causes of action. Four causes of action would become the subject of defendants’ special motion to strike. The first cause of action, for fraud, pertained to Busch "tout[ing] his business acumen and alleged prior success in operating amusement parks, concealing and not disclosing his prior business failings," and misrepresenting the successfulness and viability of the theme parks in Texas. The second cause of action, also for fraud, was based on defendants’ alleged misrepresentations and concealments "concerning the projected profitability and attendance levels for the adventure park, and the amount of capital necessary to design, construct, and operate the adventure park." The third cause of action, for negligent misrepresentation, was based on Busch's "numerous material misrepresentations ..., including but not limited to representations concerning his business acumen, his alleged prior success in operating amusement parks, the projected profitability and attendance levels for the adventure park, and the anticipated amount of capital necessary to design, construct, and operate [the] adventure park." The fourth cause of action, for violation of the unfair competition law ( Bus. & Prof. Code, § 17200 et seq. ), addressed defendants’ "misrepresentations about Busch's prior business ‘expertise,’ the adventure park's anticipated attendance and profitability, amount of capital necessary to build the adventure park, and Busch's failure to install an experienced management team, provide sufficient staffing and course supervision, make the adventure park open for reasonable hours of operation, sufficiently market and advertise the adventure park, provide park security and patron safety, and other bad faith misconduct ...."

Defendants’ Special Motion to Strike

Defendants filed an anti-SLAPP special motion to strike the first four causes of action pursuant to section 425.16. Defendants asserted that these causes of action arose from protected activity. More specifically, defendants asserted Busch's remarks to the Rocklin City Council on January 24, 2017, were " ‘oral statement[s] ... made before a legislative, executive, or ... other official proceeding’ " within the meaning of section 425.16, subdivision (e)(1). Defendants further asserted Busch's initial proposal and e-mails prior to the city council meeting, and his subsequent communications, constituted " ‘oral statement[s] or writing[s] made in connection with an issue under consideration or review by a legislative, [or] executive ... body, or any other official proceeding’ " within the meaning of section 425.16, subdivision (e)(2). Defendants asserted all of these communications constituted " ‘written or oral statement[s] ... in connection with an issue of public interest, or ... 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’ " within the meaning of section 425.16, subdivision (e)(3) and (4).

Defendants asserted that, because all challenged claims were based, at least in part, on protected activity, the burden shifted to the City to establish a probability of success on the merits. They asserted the City could not meet this burden. Defendants asserted Busch's communications before the Rocklin City Council were privileged under Civil Code section 47, subdivision (b). They also asserted the City could not establish actual and reasonable reliance.

Exline's Expert Declaration

In their memorandum of points and authorities, defendants did not address whether the speech at issue was commercial speech within the meaning of section 425.17, subdivision (c). Nor did they explicitly argue that, if the speech did constitute commercial speech, it qualified under the artistic work exception to the commercial speech exemption ( § 425.17, subd. (d)(2) ), and therefore was still the proper subject of a special motion to strike. Nevertheless, with their motion papers, defendants submitted a declaration by David Exline of Exline Design & Architecture "which offers services in the concepting, master-planning, design and development of multiple project types including themed entertainment, mixed-use, commercial retail, museum, exhibit design, and custom residential projects." Exline offered an expert opinion as to the meaning of the term "art": "art can be anything that is perceptible to the senses that is conceived of and created by one or more persons through some combination of the creator's (or creators’) passion and creativity that informs, changes or broadens the viewer's, reader's, listener's or patron's perception of life or the human experience (be it the world in which they live or a world that is alien to them)."

Exline opined that theme parks should be included in the definition of art because of the "billions of attendees who have now experienced and had their perceptions transformed and...