Cordoba Corp. v. City of Indus.
| Decision Date | 03 January 2023 |
| Docket Number | B316304 |
| Citation | 87 Cal.App.5th 145,303 Cal.Rptr.3d 353 |
| Parties | CORDOBA CORPORATION, Cross-complainant and Appellant, v. CITY OF INDUSTRY, Cross-defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
Gordon Rees Scully Mansukhani, Louis Dorny, Los Angeles, and Don Willenburg, Oakland; Alvarado Smith, Raul F. Salinas, Frances Q. Jett and Monisha A. Coelho, Los Angeles, for Cross-complainant and Appellant.
Casso & Sparks, James M. Casso, City of Industry, Bianca Sparks, John J. Harris and Carolin Sahimi for Cross-defendant and Respondent.
The City of Industry sued Cordoba Corporation, among others, after uncovering allegedly fraudulent billings for a solar energy development. Cordoba filed a cross-complaint, but the trial court granted the City's special motion to strike it as a strategic lawsuit against public participation ( Code Civ. Proc., § 425.16 ), or anti-SLAPP motion. We affirm the order.
Undesignated statutory citations are to the Code of Civil Procedure.
Cordoba is a firm specializing in civil engineering and contract management. In August 2015, the City hired Cordoba as a consultant to review reports and technical studies and to develop plans related to City-owned property. The City and Cordoba entered into several contracts for this work, and the City paid Cordoba a monthly retainer of $45,000. One contract was the Real Estate Advisory Services Agreement, which we call the Agreement. Section 15 of the Agreement required Cordoba to submit any proposed subconsultant agreement to the City for approval.
In May 2016, the City entered a land lease with San Gabriel Valley Water and Power, LLC to develop a solar energy farm at a property called Tres Hermanos Ranch. We call this entity the Developer. The lease and its amendments provided the City would reimburse up to $20 million of the Developer's costs related to the project. The lease allowed the City to request evidence of the work performed.
In 2017, the City began to receive requests under the Public Records Act ( Gov. Code, § 6252 et seq. ) from nearby cities and others for documents related to the lease. In February and again in March 2018, the City asked the Developer for documentary evidence of the work so far completed and reimbursed. It set a deadline of March 12, 2018. The Developer did not provide documentation until May 9, 2018. Because the City in turn had not supplied documents requested under the Public Records Act, in April 2018 two neighboring cities took legal action against the City.
On March 14, 2018, Cordoba gave the City written notice of resignation. By mid-2018, the City had paid all Cordoba's outstanding invoices, except for some Cordoba voluntarily withdrew. Cordoba did not demand any other fees.
On May 23, 2018, the City terminated the lease with the Developer. The Developer continued to submit invoices for work performed, although it had exhausted the $20 million cap.
In March 2019, the City filed a complaint against the Developer for violating the False Claims Act ( Gov. Code, § 12650 et seq. ) (the Act) and defrauding the City by submitting false or inflated invoices for work not actually performed. In March 2020, the City received a discovery response showing a company called Mojave Green Power, LLC was a 50 percent owner of the Developer. Mojave Green's sole member and manager was one Frank Hill.
The City also served a records subpoena on Cordoba for documents related to the Tres Hermanos project, requesting its communications and agreements with the Developer or other defendants, including Hill. Cordoba's response revealed that in November 2015, Cordoba hired Frank Hill to consult on "real estate and related advisory services" for the City for a monthly fee of $20,000. Cordoba provided Hill's invoices of $20,000 to $25,000, which Cordoba had paid each month from November 2015 to January 2018. Cordoba never informed the City of its contract with Hill or shared these invoices during its work under the Contracts.
In September 2020, the City filed its First Amended Complaint against the Developer and named Cordoba as a codefendant. It accused Cordoba, among others, of violation of the Act, fraud, unfair business practices ( Bus. & Prof. Code, § 17200 et seq. ), breach of contract, and breach of the implied covenant of good faith and fair dealing. The City alleged Cordoba subcontracted its work under the Agreement without the required authorization, that Cordoba was passing along about half of its fees from the City to Hill, and that it held out Hill, who had a controlling interest in the Developer, as a representative of the City when the City in fact had no connection to him. The City said Hill, Cordoba, and other defendants conspired to put Cordoba in charge of review of the Developer's invoices to ensure those invoices were approved with minimal oversight, "in order to conceal the fact that the project was a sham and that no substantive work was actually being done." The City specifically claimed Cordoba both submitted false invoices itself and knew about the Developer's false submissions but, instead of alerting the City, conspired with other defendants to conceal these facts.
In response, Cordoba filed a cross-complaint against the City for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief.
In its first cause of action, Cordoba alleged the City's lawsuit breached paragraph 4(c) of the Agreement, which addresses payment of invoices and requires 30-day notice of any dispute over fees. Cordoba claimed damages for "significantly increased costs of staffing, investigation, accounting, attorney's fees and related costs" due to the City's years-long delay in discovering the fraud and raising the issue.
Regarding the breach of the implied covenant of good faith and fair dealing, Cordoba alleged the City's dispute with the Developer and confusion about the future of the Tres Hermanos project caused Cordoba to "los[e] confidence" in its work with the City and to "form[ ] the opinion that the City was not headed in a positive direction." Because of this, Cordoba gave notice of resignation in 2018. Cordoba alleged the City's actions "frustrated the agreed-upon common purpose" of the contracts and "rendered Cordoba's performance impossible." It did not specify its damages.
Finally, Cordoba asked for declaratory relief regarding its obligations under its various contracts with the City operable between 2015 and 2018.
The City filed a special motion to strike Cordoba's cross-complaint under section 425.16, arguing Cordoba's claims arose from the City's protected activity—namely, its lawsuit against Cordoba.
The trial court held a hearing on the motion. Cordoba characterized the lawsuit as a dispute over fees initiated well beyond the 30-day deadline and argued the court should deny the special motion to strike. For the first time at the hearing, Cordoba analogized the City's duty under the contract to indemnity obligations. It said "the gravamen of this dispute is Cordoba's invoices."
The trial court disagreed with Cordoba's indemnity analogy and said, The court reasoned Cordoba's points might be a defense to the City's lawsuit, but found "the only alleged harm was the bringing of the lawsuit, and that would be privileged." The court granted the special motion to strike the cross-complaint under section 425.16. Cordoba appealed.
We independently review rulings on special motions to strike. ( Woodhill Ventures, LLC v. Yang (2021) 68 Cal.App.5th 624, 630, 283 Cal.Rptr.3d 507 ( Woodhill ).) First we determine whether the claims arose from protected activity, and, if so, we test whether the plaintiff has shown a probability of success on its claims. ( Id. at p. 631, 283 Cal.Rptr.3d 507.)
The trial court was right to grant the City's motion. On the first step, Cordoba's cross-complaint sought to curb the City's protected right to petition. ( § 425.16, subd. (b)(1).) On the second, it did not demonstrate a probability of success on its claims because each of its three causes of action failed to state a case. We address each step in turn.
Activity protected by section 425.16 includes "any written or oral statement or writing made before a legislative, executive, or judicial proceeding." ( § 425.16, subd. (e)(1).) This right of petition encompasses the act of filing a lawsuit. ( Navellier v. Sletten (2002) 29 Cal.4th 82, 90, 124 Cal.Rptr.2d 530, 52 P.3d 703 ( Navellier ).)
When a party pleads a cause of action that rests on allegations of multiple acts, a court must analyze each action to determine whether it is protected. ( Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009–1012, 281 Cal.Rptr.3d 678, 491 P.3d 1058.) Courts may consider the "gravamen" of claims to determine whether particular acts are elements, as opposed to incidental background, but not to determine the essence of a mixed cause of action. ( Id. at p. 1012, 281 Cal.Rptr.3d 678, 491 P.3d 1058.)
Cordoba does not deny filing a lawsuit is protected activity. Instead, it argues its three causes of action arise not from the City's petitioning activity, but from the City's noncompliance with its contractual obligations. As will become clear, this is a distinction without a difference.
The court properly struck Cordoba's breach of contract claim because the conduct Cordoba attacked was protected petitioning activity. Cordoba argues the City is precluded from raising any issue related to the invoices 30 days after receipt, so the City's years-delayed allegations of fraud violates the contract. This complaint plainly arises from the City's lawsuit. Put another way, but for the City's...
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