City of West Covina v. Hassen Imports Partnership, B195660 (Cal. App. 3/27/2008), B195660

• Decision Date: 27 March 2008
• Docket Number: B195660
• Court: California Court of Appeals Court of Appeals
• Parties: CITY OF WEST COVINA et al., Cross-defendants and Respondents, v. HASSEN IMPORTS PARTNERSHIP et al., Cross-complainants and Appellants,

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CITY OF WEST COVINA et al., Cross-defendants and Respondents, v. HASSEN IMPORTS PARTNERSHIP et al., Cross-complainants and Appellants,

B195660

Court of Appeals of California, Second Appellate District, Division Four

March 27, 2008

NOT TO BE PUBLISHED

Appeal from a judgment of the Superior Court of Los Angeles County, No. KC048157, Dan Thomas Oki, Judge. Affirmed.

Oldman, Cooley, Sallus, Gold, Birnberg & Coleman, Ron Gold; Law Offices of Norman Hoffman, Norman Hoffman; Capital Advocates, and Ravinder Mehta for Cross-complainants and Appellants.

Alvarez-Glasman & Colvin, Arnold M. Alvarez-Glasman, City Attorney, Matthew M. Gorman, Deputy City Attorney; Squire, Sanders & Dempsey, Stephen T. Owens, Michael T. Purleski, Stacie D. Yee, and Erinn M. Partridge for Cross-defendants and Respondents.

MANELLA, J.

INTRODUCTION

Appellants Hassen Imports Partnership, Hassen Imports, Inc., Ziad Alhassen, an individual, West Covina Motors, Inc. and Hassen Holdings Company, were the defendants and cross-complainants below. Respondents City of West Covina (City) and the City of West Covina Community Development Commission (Commission) were plaintiffs and cross-defendants. Appellants' cross-action alleged violations of the Political Reform Act of 1974 (PRA or Act), Government Code section 81000 et seq.¹

Appellants appeal from the dismissal of their cross-action, entered after respondents prevailed in a special motion to strike the first amended cross-complaint (FACC) under the anti-SLAPP (Strategic Lawsuit Against Public Participation) statute. 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 or 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." (Code Civ. Proc., § 425.16, subd. (b)(1).)²

Appellants concede that their cross-action arose from the cross-defendants' exercise of their constitutional right of petition or free speech in connection with a public issue, and do not claim to have established a probability of prevailing on the cross-action. Appellants' sole contention on appeal is that the enactment of section 425.16 subsequent to the PRA had the effect of amending the Act, in violation of article II, section 10, subdivision (c), of the California Constitution.³ We disagree, and affirm the judgment.

BACKGROUND

In 2006, respondents filed a complaint alleging breach of contract and liability under a written guaranty, naming appellants as defendants. The complaint alleged that beginning in 1983, the Commission entered into a series of development agreements with appellants and their predecessors, under which appellants received loans from the Commission to develop or rehabilitate several automobile dealerships, in consideration for guaranteed minimum sales tax revenue. The last of these agreements was amended in 2005, in order to address appellants' delinquencies under the previous agreements. The 2005 amendment gave appellants additional time and financial assistance to complete the construction of two dealerships by March 15, 2006. The complaint alleged that when appellants failed to meet the deadline and sales tax revenue goals, respondents demanded payment of the shortfall; when appellant failed to pay, respondents filed this action.

Appellants filed a cross-complaint, as taxpayers and citizens of the City, against respondents and three members of the city council — Michael Touhey, Steven Herfert and Shelley Sanderson (council members) — alleging violations of the conflict of interest provisions of the PRA.⁴ Respondents demurred to the cross-complaint and filed an anti-SLAPP motion seeking dismissal of the cross-action. After arguing the demurrer, the parties agreed that appellants would file an amended cross-complaint, and respondents would file a new anti-SLAPP motion.

The FACC alleged that within 12 months of the City's filing of the complaint, the named council members received gifts with a value in excess of $1,000 from appellants' "direct business competitors" in which the council members had management or ownership interests. The FACC alleged that in order to further their own economic interests, the council members directed the Commission to create the appearance of a tax revenue shortfall by refusing to give appellants proper credit for tax revenue generated by appellants' business, and by voting to approve the filing of the underlying lawsuit, knowing it was baseless. The FACC prayed for injunctive relief setting aside the council members' financial transactions found to be conflicts of interest, enjoining future violations and enjoining the prosecution of the underlying lawsuit or taking any action on appellants' contracts with the Commission.⁵

Respondents demurred to the FACC and brought another anti-SLAPP motion. Appellants opposed the anti-SLAPP motion on the ground that section 425.16, subdivision (g), which automatically stays discovery pending the motion, effected a "de facto" amendment of the PRA, prohibited by the California Constitution.

The trial court granted respondents' anti-SLAPP motion, dismissed the cross-complaint and took the demurrer off calendar. In a written order filed October 16, 2006, the court found that the FACC alleged actions taken by respondents in furtherance of their constitutional rights of petition or free speech, and that appellants had failed to meet their burden to make a prima facie showing that the council members' actions had been taken with a financial interest in the outcome, as defined in section 87100 and the regulations interpreting that provision. The court further found that section 425.16 did not effect an unconstitutional amendment of the PRA. After the court denied appellants' motion for reconsideration, appellants timely filed their notice of appeal November 30, 2006.

DISCUSSION

1. Appellants' Contentions on Appeal

Appellants contend that the trial court erred in applying the anti-SLAPP statute to a cause of action arising from alleged violations of the PRA. They assert, as they did below, that section 425.16 was a de facto amendment to the PRA, prohibited by article II, section 10, subdivision (c), of the California Constitution. Appellants acknowledge that they have found nothing in the language or legislative history of section 425.16 indicating a legislative intent to amend the PRA. However, they argue that the practical effect of the anti-SLAPP statute was to amend the PRA, because it "may be used to restrict or chill any of the remedies expressly created under the PRA . . . ."

In particular, appellants contend that the automatic discovery stay of section 425.16, subdivision (g), forecloses a plaintiff's ability to establish a probability of prevailing, as required by section 425.16, subdivision (b)(1), and thus, actions under the PRA face unavoidable dismissal. In this way, appellants argue, the anti-SLAPP statute takes away the injunctive remedies provided by the PRA in section 91003.⁶

2. The Political Reform Act

The PRA was enacted in 1974 as an initiative measure intended to correct election abuses in California. (§§ 81001, 81002; California Common Cause v. Fair Political Practices Com. (1990) 221 Cal.App.3d 647, 649.) The measure was intended to ensure that "[s]tate and local government should serve the needs and respond to the wishes of all citizens equally, without regard to their wealth"; and that "[p]ublic officials, whether elected or appointed, should perform their duties in an impartial manner, free from bias caused by their own financial interests or the financial interests of persons who have supported them." (§ 81001, subds. (a), (b).) The PRA declared that its purposes would be accomplished by requiring the disclosure of "[a]ssets and income of public officials which may be materially affected by their official actions," the disqualification of such officials in appropriate circumstances, "in order that conflicts of interest may be avoided," and the provision of "[a]dequate enforcement mechanisms . . . to public officials and private citizens in order that [the Act] will be vigorously enforced." (§ 81002, subds. (c), (f).)

The PRA permits amendment by the Legislature "to further its purposes by statute, passed in each house by rollcall vote entered in the journal, two-thirds of the membership concurring and signed by the Governor, if at least 12 days prior to passage in each house the bill in its final form has been delivered to the commission for distribution to the news media and to every person who has requested the commission to send copies of such bills to him or her." (§ 81012, subd. (a).) Any statute amending or repealing the PRA "becomes effective only when approved by the electors." (§ 81012, subd. (b).)

Section 425.16 does not purport to amend the PRA. Indeed, its provisions make no mention of the PRA.⁷

3. Standards for Determining Whether a Legislative Act is an Amendment Prohibited by the California Constitution

Article II, section 10, subdivision (c), of the California Constitution provides: "The Legislature may . . . amend or repeal an initiative statute by another statute that becomes effective only when approved by the electors unless the initiative statute permits amendment or repeal without their approval." Under article II, section 10, "`the voters have the power to decide whether or not the Legislature can amend or repeal initiative statutes. This power is absolute and includes the power to enable legislative amendment subject to conditions attached by the voters. [Citation.]' [Citations.]" (Amwest Surety Ins. Co. v. Wilson (1995) 11 Cal.4th 1243, 1251, italics omitted.)

The voters' initiative power is coextensive with the power of the...