Brian McKOWN v. WAL-MART STORES, INC.

115 Cal.Rptr.2d 868 (2002)
27 Cal.4th 219
38 P.3d 1094

Brian McKOWN, Plaintiff and Respondent,
v.
WAL-MART STORES, INC., Defendant and Appellant.

No. S091097.
Supreme Court of California.

January 31, 2002.

Snyder & Strozier, Snyder, Strozier, Maho & Tomlinson, Barry Clifford Snyder and Will Tomlinson, Santa Barbara, for Defendant and Appellant.

Fred J. Hiestand, Sacramento, for the Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Appellant.

Garza, Garza & Pacheco, John M. Pacheco; Law Offices of Robert H. Pourvali and Robert H. Pourvali, Calabasas, for Plaintiff and Respondent.

Ian Herzog, Santa Monica; William L. Veen; James C. Sturdevant, San Francisco; Brian C. Unitt, Riverside; Dennis M. Elber, Long Beach; David A. Rosen, Los Angeles; The Arns Law Firm, Morgan C. Smith and Robert S. Arns, San Francisco, for the Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Respondent.

BROWN, J.

This is the third in a series of recent cases in which we have been called upon to consider the reach of our decisions in Privette v. Superior Court (1993) 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721 (Privette ) and Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253, 74 Cal. Rptr.2d 878, 955 P.2d 504 (Toland). In Privette and Toland, we held that an employee of a contractor may not sue the hirer of the contractor under either of the alternative versions of the peculiar risk doctrine set forth in sections 413 and 416 of the Restatement Second of Torts (hereafter Restatement),[1] but is restricted instead 870*870 to a claim against the contractor under the workers’ compensation insurance system. The two prior cases, respectively, raise the question whether, under the rationale of Privette and Toland, an employee of an independent contractor is barred from suing the hirer of the contractor under the tort theories of (1) negligent hiring, and (2) negligent exercise of retained control. In Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235, 108 Cal. Rptr.2d 617, 25 P.3d 1096 (Camargo), we held that an employee of an independent contractor is barred from suing the hirer of the contractor for the tort of negligent hiring. In Hooker v. Department of Transportation (2002) 27 Cal.4th 198, 115 Cal.Rptr.2d 853, 38 P.3d 1081 (Hooker), a companion to this case, we held that a hirer of an independent contractor is not liable to an employee of the contractor merely because the hirer retained control over safety conditions at a work site, but that a hirer is liable to an employee of a contractor insofar as a hirer’s exercise of retained control affirmatively contributed to the employee’s injuries. In this case, we hold that a hirer is liable to an employee of an independent contractor insofar as the hirer’s provision of unsafe equipment affirmatively contributes to the employee’s injury.[2]

FACTUAL AND PROCEDURAL BACKGROUND

Brian McKown was the employee of an independent contractor hired by defendant Wal-Mart Stores, Inc. (Wal-Mart) to install sound systems in its stores, including the store in Chino where this accident occurred. Installation of the sound systems involved running wires and installing speakers in the store ceilings. Wal-Mart requested that the contractor use Wal-Mart’s forklifts whenever possible in performing the work. The request was understood not to be a directive. The forklift that Wal-Mart employees furnished McKown had equipment for overhead work, consisting of a work platform along with a four-foot extension to raise the platform. For safety, the extension was supposed to be chained to the forklift, and the platform chained to the forklift or to the extension. However, only one chain, securing the extension to the forklift, was provided by Wal-Mart. After discussing the advisability of using the forklift without a chain securing the platform to the extension or the forklift, McKown and his colleague decided to do so. While his colleague was driving the forklift and McKown was working on the platform, the platform hit a ceiling pipe, disengaged from the extension, and fell about 12 to 15 feet to the floor with McKown on it.

A jury found that Wal-Mart was negligent in providing unsafe equipment and allocated 55 percent of the responsibility for the accident to McKown’s employer, 23 percent to Wal-Mart, 15 percent to the manufacturer of the equipment, and 7 percent to McKown. The Court of Appeal affirmed the judgment, concluding that “plaintiffs claim that Wal-Mart negligently 871*871 supplied unsafe equipment was viable notwithstanding Privette and Toland.” We granted review, and limited the issue to be briefed and argued to the question whether, under our decisions in Privette and Toland, an employee of an independent contractor is barred from pursuing a lawsuit against the hirer of the independent contractor on the theory the hirer negligently provided unsafe equipment. After review was granted, we issued our decision in Camargo, extending Privette and Toland to the tort of negligent hiring, and we then requested counsel to file supplemental letter briefs exploring the significance of Camargo for the question whether an employee of an independent contractor may bring an action for the tort of negligent provision of unsafe equipment against the hirer of the contractor. The judgment of the Court of Appeal, which affirmed the judgment of the trial court in favor of plaintiff McKown, is affirmed.

DISCUSSION

The line of cases bearing on the question presented here is discussed in the companion to this case, Hooker, supra, 27 Cal.4th 198, 115 Cal.Rptr.2d 853, 38 P.3d 1081, so that discussion need not be repeated at length here. To summarize: In Privette and Toland, we held that an employee of a contractor may not sue the hirer of the contractor under either of the alternative versions of the peculiar risk doctrine set forth in sections 413 and 416 of the Restatement. Under section 413, a person who hires an independent contractor to do inherently dangerous work, but who fails to provide in the contract or in some other manner that special precautions be taken to avert the peculiar risks of that work, can be liable if the contractor’s negligent performance of the work causes injury to others. Under section 416, even if the hirer has provided for special precautions in the contract or otherwise, the hirer can nevertheless be liable if the contractor fails to exercise reasonable care to take such precautions and the contractor’s performance of the work causes injury to others. In Toland, we rejected the argument that Privette did not bar recovery for direct liability under section 413, but only for vicarious liability under section 416. “[P]eculiar risk liability is not a traditional theory of direct liability for the risks created by one’s own conduct: Liability under both sections is in essence `vicarious’ or ‘derivative’ in the sense that it derives from the `act or omission’ of the hired contractor, because it is the hired contractor who has caused the injury by failing to use reasonable care in performing the work.” (Toland, supra, 18 Cal.4th at p. 265, 74 Cal.Rptr.2d 878, 955 P.2d 504.)

In Camargo, supra, 25 Cal.4th 1235, 108 Cal.Rptr.2d 617, 25 P.3d 1096, we held that an employee of a contractor may not sue the hirer of the contractor under the negligent hiring theory set forth in section 411. Under section 411, a hirer is liable for physical harm to third persons caused by the hirer’s failure to exercise reasonable care to employ a competent contractor to perform work that will involve a risk of physical harm unless it is skillfully and carefully done, or to perform any duty the hirer owes to third persons. In Camargo, we rejected the argument that Privette and Toland were distinguishable on the ground that in a negligent hiring case the hirer is, in a sense, being taxed with his own negligence, making his liability direct. “[T]he same could be said with regard to an action brought under the peculiar risk theory set forth in section 413. More importantly, under both sections 411 and 413, the liability of the hirer is `in essence “vicarious” or “derivative” in the sense that it derives from the “act or omission” of the hired contractor, because it is the hired contractor who caused the injury by 872*872 failing to use reasonable care in performing the work.’ (Toland, supra, 18 Cal.4th at p. 265, 74 Cal.Rptr.2d 878, 955 P.2d 504.) Therefore, in a negligent hiring case under the theory set forth in section 411, just as in peculiar risk cases under the theories set forth in sections 413 and 416, ‘it would be unfair to impose liability on the hiring person when the liability of the contractor, the one primarily responsible for the worker’s on-the-job injuries, is limited to providing workers’ compensation coverage.’ (Toland, supra, 18 Cal.4th at p. 267, 74 Cal.Rptr.2d 878, 955 P.2d 504.)” (Camargo, supra, 25 Cal.4th at p. 1244, 108 Cal.Rptr.2d 617, 25 P.3d 1096.)

In Hooker, we held that a hirer of an independent contractor is not liable to an employee of the contractor merely because the hirer retained control over safety conditions at a worksite, but that a hirer is liable to an employee of a contractor insofar as a hirer’s exercise of retained control affirmatively contributed to the employee’s injuries. Imposing tort liability on a hirer of an independent contractor when the hirer’s conduct has affirmatively contributed to the injuries of the contractor’s employee is consistent with the rationale of our decisions in Privette, Toland and Camargo, because the liability of the hirer in such a case is not in essence vicarious or derivativ e in the sense that it derives from the act or omission of the hired contractor. “To the contrary, the liability of the hirer in such a case is direct in a much stronger sense of that term.” (Hooker, supra, 27 Cal.4th at p. 212, 115 Cal.Rptr.2d 853, 38 P.3d 1081.)

For the same reason, when a hirer of an independent contractor, by negligently furnishing unsafe equipment to the contractor, affirmatively contributes to the injury of an employee of the contractor, the hirer should be liable to the employee for the consequences of the hirer’s own negligence. “The general supervisory right to control the work so as to insure its satisfactory completion in accordance with the terms of the contract does not make the hirer of the independent contractor liable for the latter’s negligent acts in performing the details of the work. [Citation.] An owner is not liable for injuries resulting from defective appliances unless he has supplied them or has the privilege of selecting them or the materials out of which they are made [citation] or unless he exercises active control over the men employed or the operations of the equipment used by the independent contractor. [Citation.]” (McDonald v. Shell Oil Co. (1955) 44 Cal.2d 785, 788-789, 285 P.2d 902, italics added.) McDonald predates Privette, but as the Court of Appeal here observed, it serves to underline the fact that, “where the hiring party actively contributes to the injury by supplying defective equipment, it is the hiring party’s own negligence that renders it liable, not that of the contractor.” Indeed, the jury in this case clearly distinguished between the liability of the contractor and that of the hirer, allocating 55 percent of the responsibility to the contractor and 23 percent to the hirer, Wal-Mart.

Wal-Mart contends it should not be held liable for provision of the unsafe equipment because it merely requested, and did not insist, the contractor use its forklift. To the contrary: The contractor had several contracts with Wal-Mart for the installation of sound systems in Wal-Mart stores, and Wal-Mart, the world’s largest retailer, was a customer the contractor was presumably loathe to displease. (The chief executive officer of the contractor testified that Wal-Mart had requested that the contractor use Wal-Mart’s forklifts whenever possible, and “[a]s a businessman I found that if a customer has a legitimate request, it’s 873*873 usually best to do what the customer asks.”) Wal-Mart presumably believed the forklift it provided was safe, and plaintiff may well have believed that refusal to use it would have generated ill will. The extra expense of renting a forklift would have been chargeable to Wal-Mart. Moreover, renting a forklift would have entailed delaying the installation project for at least 24 hours for the following reasons: The installation work was to occur at night when the store was closed. Wal-Mart provided the forklift to the contractor’s employees around midnight. At that time of night rental yards, where substitute equipment might have been obtained, were closed. Admittedly, Wal-Mart was not the only one at fault, but then the jury’s verdict reflected that.

With regard to the jury’s verdict, Wal-Mart contends it should not be held liable for its negligence because the jury found the contractor was primarily (55 percent) at fault. We have stated that “`it would be unfair to impose liability on the hiring person when the liability of the contractor, the one primarily responsible for the worker’s on-the-job injuries, is limited to providing workers’ compensation coverage.'” (Camargo, supra, 25 Cal.4th at p. 1244, 108 Cal.Rptr.2d 617, 25 P.3d 1096, quoting Toland, supra, 18 Cal.4th at p. 267, 74 Cal.Rptr.2d 878, 955 P.2d 504.) However, in this case, as well as in Hooker, the hirer’s affirmative contribution to the employee’s injuries eliminates the unfairness in imposing liability where the contractor is primarily at fault.

Finally, Wal-Mart contends that, in a suit for negligent provision of unsafe equipment, imposition of liability on a hirer for injuries to an employee of an independent contractor would violate the spirit of the workers’ compensation exclusivity rule and give the employee an unwarranted windfall. For the reasons stated in Hooker, these contentions should be rejected. (See Hooker, supra, 27 Cal.4th at pp. 213-214, 115 Cal.Rptr.2d 853, 38 P.3d 1081.)

The judgment of the Court of Appeal is affirmed.

WE CONCUR: GEORGE, C.J., KENNARD, BAXTER, CHIN and MORENO, JJ.

Concurring Opinion by WERDEGAR, J.

I concur in the result. But as in the companion case, Hooker v. Department of Transportation (2002) 27 Cal.4th 198, 115 Cal.Rptr.2d 853, 38 P.3d 1081 (Hooker), I disagree with the majority’s rule limiting a hirer’s liability for its own negligence to acts that “affirmatively’ contribute” to the injury of a contractor’s employee (maj. opn., ante, 115 Cal.Rptr.2d at p. 870, 38 P.3d at p. 1095). That limitation is an unwarranted intrusion into the jury’s role in finding facts and allocating fault.

In the present case, Wal-Mart Stores, Inc. (Wal-Mart) argues it should not be liable because the jury found it only 23 percent at fault, while finding the 1227Contractor 55 percent at fault, arguably making the contractor the party “primarily” at fault. Wal-Mart’s position is in obvious conflict with the principles of comparative fault. That one party is deemed less responsible than another, or that the more responsible party is assigned more than 50 percent of the fault, does not exonerate or immunize the less responsible party, though it may reduce that party’s ultimate liability. The majority is therefore correct to reject Wal-Mart’s position, but in substituting its own “affirmatively contribute” test (maj. opn., ante, 115 Cal. Rptr.2d at pp. 872-873, 38 P.3d at p. 1097), the majority makes essentially the same error as Wal-Mart. As I explain in my 874*874 dissent in Hooker, supra, 27 Cal.4th 198, 215, 115 Cal.Rptr.2d 853, 38 P.3d 1081, that one party is deemed to have negligently contributed to an accident only by omission, or that another party contributed to the accident by affirmative act, does not exonerate or immunize the party contributing by omission, though it may well reduce that party’s ultimate liability.

The distinction between act and omission, or activity and passivity, is likely to be important to a jury in allocating fault, but it does not properly play a role in a court’s decision whether a hirer may be liable at all for injuries to a contractor’s employee. (See Hooker, supra, 27 Cal.4th at pp. 216, 217, 115 Cal.Rptr.2d 853, 38 P.3d 1081 (dis. opn. of Werdegar, J.).) Just as the majority in this case accepts the jury’s allocation of fault even though Wal-Mart “requested,” rather than “insisted,” that its own forklift be used (maj. opn, ante, 115 Cal.Rptr.2d at p. 872, 38 P.3d at p. 1097), so should it accept a jury’s allocation of fault (if supported by all the evidence) without imposing a rule of complete immunity for hirers who contribute to an accident by negligent omission rather than affirmative act.

[1] Unless otherwise indicated, all section references are to the Restatement Second of Torts.

[2] In Camargo, we noted we were not reaching this question. “Today we have concluded that the rationale of our decisions in Privette and Toland, which involved tort liability under the peculiar risk doctrine, also applies to the tort of negligent hiring. Review has been granted in cases that present related questions—whether the Privette /Toland rationale should apply as well to the tort of negligent exercise of retained control (Hooker v. Depart of Transportation, review granted Nov. 1, 2000, S091601) or the tort of negligent provision of unsafe equipment (McKown v. Wal-Mart Stores, Inc. (2000) 82 Cal.App.4th 562, 98 Cal.Rptr.2d 214, review granted Oct. 18, 2000, S091097)—and our opinion today should not be read as having prejudged those questions.” (Camargo, supra, 25 Cal.4th at p. 1245, fn. 2, 108 Cal.Rptr.2d 617, 25 P.3d 1096.)

Roseanne HOOKER v. DEPARTMENT OF TRANSPORTATION

115 Cal.Rptr.2d 853 (2002)
27 Cal.4th 198
38 P.3d 1081

Roseanne HOOKER, Plaintiff and Appellant,
v.
DEPARTMENT OF TRANSPORTATION, Defendant and Respondent.

No. S091601.
Supreme Court of California.

January 31, 2002.Rehearing Denied March 27, 2002.

 

Paul & Janofsky, Gary M. Paul, John S. Janofsky, Santa Monica; Lewis, Goldberg & Ball, Michael L. Goldberg, McLean, Va, and Michael D. Hutchinson, for Plaintiff and Appellant.

Ian Herzog, Santa Monica; William L. Veen; James C. Sturdevant, San Francisco; Brian C. Unitt, Riverside; Dennis M. Elber, Long Beach; David A. Rosen, Los Angeles; The Arns Law Firm, Morgan C. Smith and Robert S. Arns, San Francisco, for the Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Neumeyer & Boyd, Carol Boyd, Katherine A. Tatikian, Los Angeles; Seifert, Henderson & Farricker and Edward Wm. Farricker, Pasadena, for Defendant and Respondent.

Sedgwick, Detert, Moran & Arnold and Frederick D. Baker, San Francisco, for the American Chemistry Council as Amicus Curiae on behalf of Defendant and Respondent.

John P. Carpenter, Salt Lake City, UT, for Associated General Contractors of California as Amicus Curiae on behalf of Defendant and Respondent.

Fred J. Hiestand, Sacramento, for the Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Respondent.

Radoslovich Law Office, Frank M. Radoslovich and Brad J. Stephens, for Production Framing Systems, Inc., as Amicus Curiae on behalf of Defendant and Respondent.

BROWN, J.

This is the latest in a series of cases in which we have considered whether an employee of an independent contractor may sue the hirer of the contractor under tort theories covered in chapter 15 of the Restatement Second of Torts (hereafter Restatement).[1] In Privette v. Superior Court (1993) 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721 (Privette) and Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253, 74 Cal.Rptr.2d 878, 955 P.2d 504 (Toland), we held that an employee of a contractor may not sue the hirer of the contractor under either of the alternative versions of the peculiar risk doctrine set forth in sections 413 and 416. Under section 413, a person who hires an independent contractor to do inherently dangerous work, but who fails to provide in the contract or in some other manner that special precautions be taken to avert the peculiar risks of that work, can be liable if the 855*855 contractor’s negligent performance of the work causes injury to others. Under section 416, even if the hirer has provided for special precautions in the contract or otherwise, the hirer can nevertheless be liable if the contractor fails to exercise reasonable care to take such precautions and the contractor’s performance of the work causes injury to others. Most recently, in Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235, 108 Cal.Rptr.2d 617, 25 P.3d 1096 (Camargo), we held that an employee of a contractor may not sue the hirer of the contractor under the negligent hiring theory set forth in section 411. Under section 411, a hirer is liable for physical harm to third persons caused by the hirer’s failure to exercise reasonable care to employ a competent contractor to perform work which will involve a risk of physical harm unless it is skillfully and carefully done, or to perform any duty which the hirer owes to third persons.

The question presented in this case is whether an employee of a contractor may sue the hirer of a contractor for the tort of negligent exercise of retained control set forth in section 414.[2] Section 414 provides: “One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.”

We conclude that a hirer of an independent contractor is not liable to an employee of the contractor merely because the hirer retained control over safety conditions at a worksite, but that a hirer is liable to an employee of a contractor insofar as a hirer’s exercise of retained control affirmatively contributed to the employee’s injuries. In this case, although plaintiff raised triable issues of material fact as to whether defendant retained control over safety conditions at the worksite, plaintiff failed to raise triable issues of material fact as to whether defendant actually exercised the retained control so as to affirmatively contribute to the death of plaintiffs husband. Therefore, the trial court properly granted summary judgment in favor of defendant, and the Court of Appeal erred in reversing that judgment.

 

Factual and Procedural Background

Paul Hooker was a crane operator. He was employed by a general contractor hired by the California Department of Transportation (Caltrans) to construct an 856*856 overpass. The overpass was 25 feet wide and the crane with the outriggers extended was 18 feet wide, so Hooker would retract the outriggers to allow other construction vehicles or Caltrans vehicles to pass. Shortly before the fatal accident, Hooker retracted the outriggers and left the crane. When Hooker returned, he attempted, without first reextending the outriggers, to swing the boom. Because the outriggers were retracted, the weight of the boom caused the crane to tip over. Hooker was thrown to the pavement and killed.

With regard to the question whether Caltrans had negligently exercised the control it had retained over safety at the jobsite, plaintiff relied on the safety chapter of the Caltrans construction manual and the testimony of Caltrans officials responsible for supervising the jobsite. The safety chapter of the Caltrans construction manual provided in pertinent part: “[C]altrans is responsible for obtaining the Contractor’s compliance with all safety laws and regulations…. [¶] The construction safety coordinator must be familiar with highway construction procedures and equipment, construction zone traffic management and be able to recognize and anticipate unsafe conditions created by a Contractor’s operation…. [¶] The Construction Safety Coordinator shall visit contracts [sic] periodically to observe the Contractor’s operation and traffic conditions affected by the construction.” (Italics added.) The manual further gave the Caltrans resident engineer authority to set compliance schedules for the correction of dangerous conditions and to shut down affected operations until the dangerous conditions were corrected.

The senior Caltrans representative on the jobsite, whose responsibilities included safety, had previously observed the crane operators on this project retract their outriggers to let other vehicles pass; he knew they did so “from time to time[ ] or frequently”; and he realized that a crane would be unstable if its boom were extended over its side when its outriggers were retracted. The resident Caltrans engineer on the project had the power to shut the project down because of safety conditions and to remove employees of the contractor for failing to comply with safety regulations. He answered “probably” to the following two questions: (1) “Do you agree that if [the crane operator] had been given priority in the area he was working in and the [overpass] was flagged off, that he wouldn’t have had to retract his outriggers to permit vehicles to pass?” and (2) “And if he hadn’t retracted his outriggers, the crane wouldn’t have become unstable and tipped over, correct?” A Caltrans transportation engineer on the project, whose responsibilities included bringing unsafe conditions to the attention of the resident engineer or the general contractor, conceded that if he had seen a crane operator retract the outriggers to permit vehicles to pass, he would have felt “odd” because the more the outriggers are extended, “the better the stability. That’s simple physics.”

Plaintiff, Hooker’s widow, received workers’ compensation benefits for his death from the contractor’s insurer. Plaintiff also sued Caltrans on the theory Caltrans had negligently exercised control it had retained over safety conditions at the jobsite. Caltrans moved for summary judgment. The motion was based on the ground, among others, that a suit against a hirer of an independent contractor by an employee of the contractor for negligent exercise of retained control was barred by our decisions in Privette and Toland. The trial court granted Caltrans’s summary judgment motion, but the Court of Appeal reversed. We granted review and limited the issue to be briefed and argued to the 857*857 question whether, under our decisions in Privette and Toland, an employee of an independent contractor is barred from pursuing a lawsuit against the hirer of the independent contractor on the theory the hirer negligently exercised control it had retained. After review was granted, we issued our decision in Camargo, extending Privette and Toland to the tort of negligent hiring, and we then requested counsel to file supplemental letter briefs exploring the significance of Camargo for the question whether an employee of an independent contractor may bring an action for the tort of negligent exercise of retained control against the hirer of the contractor.

Discussion

I. The Rationale of Privette, Toland, and Camargo

In Toland, we summarized the peculiar risk doctrine and explained why we had concluded in Privette that under the doctrine a hirer’s liability does not extend to the hired contractor’s employees. “Under the doctrine of peculiar risk, a person who hires an independent contractor to do inherently dangerous work can be held liable for tort damages when the contractor causes injury to others by negligently performing the work. The doctrine serves to ensure that innocent bystanders or neighboring landowners injured by the hired contractor’s negligence will have a source of compensation even if the contractor turns out to be insolvent. As we explained in Privette [, supra, 5 Cal.4th at page] 694 [21 Cal.Rptr.2d 72, 854 P.2d 721], courts created the peculiar risk doctrine in the belief that `as between two parties innocent of any personal wrongdoing—the person who contracted for the work and the hapless victim of the contractor’s negligence—the risk of loss occasioned by the contracted work was more fairly allocated to the person for whose benefit the job was undertaken.’ [¶] In Privette …, we unanimously held that under the peculiar risk doctrine the hiring person’s liability does not extend to the hired contractor’s employees. Because the Workers’ Compensation Act (Lab.Code, § 3200 et seq.) shields an independent contractor from tort liability to its employees, applying the peculiar risk doctrine to the independent contractor’s employees would illogically and unfairly subject the hiring person, who did nothing to create the risk that caused the injury, to greater liability than that faced by the independent contractor whose negligence caused the employee’s injury. (5 Cal.4th at pp. 698-700 [21 Cal.Rptr.2d 72, 854 P.2d 721].) As we concluded: `[T]he property owner should not have to pay for injuries caused by the contractor’s negligent performance of the work when workers’ compensation statutes already cover those injuries.’ (Id. at p. 699 [21 Cal.Rptr.2d 72, 854 P.2d 721].)” (Toland, supra, 18 Cal.4th at p. 256, 74 Cal.Rptr.2d 878, 955 P.2d 504.)

As we have indicated, the doctrine of peculiar risk, insofar as it was relevant in Privette and Toland, is described in sections 413 and 416. Under section 413, a person who hires an independent contractor to do inherently dangerous work, but who fails to provide in the contract or in some other manner that special precautions be taken to avert the peculiar risks of that work, can be liable if the contractor’s negligent performance of the work causes injury to others. “Because section 413 rests the liability of the hiring person on his or her omission to provide for special precautions in the contract or in some other manner, it is sometimes described as a rule of `direct liability.'” (Toland, supra, 18 Cal.4th at p. 259, 74 Cal.Rptr.2d 878, 955 P.2d 504.) Under section 416, even if the hiring person has provided for special precautions in the contract or otherwise, 858*858 the hiring person can nevertheless be liable if the contractor fails to exercise reasonable care to take such precautions and the contractor’s performance of the work causes injury to others. “Because the hiring person’s liability under section 416 .. . flows from the independent contractor’s negligent failure to take special precautions in performing the inherently dangerous work, as required by `the contract or otherwise,’ the hiring person’s liability is often referred to as `vicarious liability.’ [Citations.]” (Toland, supra, 18 Cal.4th at p. 260, 74 Cal.Rptr .2d 878, 955 P.2d 504, fn. omitted.)

In Toland, a subcontractor’s employee sued the general contractor for on-the-job injuries, asserting that Privette did not bar recovery for direct liability under section 413, but only for vicarious liability under section 416. We rejected the argument, noting that the distinction between the two sorts of liability was not that neat under peculiar risk theory. “[P]eculiar risk liability is not a traditional theory of direct liability for the risks created by one’s own conduct: Liability under both sections is in essence `vicarious’ or `derivative’ in the sense that it derives from the `act or omission’ of the hired contractor, because it is the hired contractor who has caused the injury by failing to use reasonable care in performing the work.” (Toland, supra, 18 Cal.4th at p. 265, 74 Cal.Rptr.2d 878, 955 P.2d 504.) Accordingly, we held that, “contrary to plaintiff Toland’s assertion, our decision in Privette, supra, 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721, bars employees of a hired contractor who are injured by the contractor’s negligence from seeking recovery against the hiring person, irrespective of whether recovery is sought under the theory of peculiar risk set forth in section 416 or section 413 of the Restatement Second of Torts. In either situation, it would be unfair to impose liability on the hiring person when the liability of the contractor, the one primarily responsible for the worker’s on-the-job injuries, is limited to providing workers’ compensation coverage.” (Toland, supra, 18 Cal.4th at p. 267, 74 Cal.Rptr.2d 878, 955 P.2d 504.)

In Camargo, we held that an employee of a contractor is barred from suing the hirer of the contractor under the negligent hiring theory set forth in section 411. Under section 411, a hirer is liable for physical harm to third persons caused by the hirer’s failure to exercise reasonable care to employ a competent contractor to perform work that will involve a risk of physical harm unless it is skillfully and carefully done, or to perform any duty the hirer owes to third persons. We rejected the argument that Privette and Toland were distinguishable on the ground that in a negligent hiring case the hirer is, in a sense, being taxed with his own negligence, making his liability direct. “[T]he same could be said with regard to an action brought under the peculiar risk theory set forth in section 413. More importantly, under both sections 411 and 413, the liability of the hirer is `in essence “vicarious” or “derivative” in the sense that it derives from the “act or omission” of the hired contractor, because it is the hired contractor who caused the injury by failing to use reasonable care in performing the work.’ (Toland, supra, 18 Cal.4th at p. 265, 74 Cal.Rptr.2d 878, 955 P.2d 504.) Therefore, in a negligent hiring case under the theory set forth in section 411, just as in peculiar risk cases under the theories set forth in sections 413 and 416, `it would be unfair to impose liability on the hiring person when the liability of the contractor, the one primarily responsible for the worker’s on-the-job injuries, is limited to providing workers’ compensation coverage.’ (Toland, supra, 18 Cal.4th at p. 267, 74 Cal.Rptr.2d 878, 955 P.2d 504.)” (Camargo, 859*859 supra, 25 Cal.4th at p. 1244, 108 Cal.Rptr.2d 617, 25 P.3d 1096.)

 

II. Applying the Rationale of Privette, Toland and Camargo to the Doctrine of Negligent Exercise of Retained Control

Again, section 414 provides: “One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.” (Italics added.)

Defendant Caltrans contends that employees of a contractor are not others for the purposes of section 414. There are no illustrations to section 414, and the comments to section 414 cast no light on this question. (See § 414, corns, a-c, pp. 387-388.) However, section 414—like sections 413 and 416, which set out the peculiar risk doctrine at issue in Privette and Toland, and section 411, which sets out the negligent hiring doctrine at issue in Camargo— appears in chapter 15 of the Restatement. And as we noted in Toland, and reiterated in Camargo, “a tentative draft to the Restatement ‘stated that “when the Sections in this Chapter speak of liability to `another,’ or `others,’ or to `third persons,’ it is to be understood that the employees of the contractor, as well as those of the defendant himself, are not included.” (Rest.2d Torts (Tent. Draft No. 7, Apr. 16, 1962) ch. 15, special note, p. 18, italics added.)’ (Toland, supra, 18 Cal.4th at pp. 266-267, 74 Cal.Rptr.2d 878, 955 P.2d 504.)” (Camargo, supra, 25 Cal.4th at p. 1241, 108 Cal. Rptr.2d 617, 25 P.3d 1096.)

In Camargo, we noted that “[t]he overwhelming majority of the courts of other jurisdictions that have addressed the question have concluded that an employee of a contractor is not a third person for the purposes of section 411. [Citations.]” (Camargo, supra, 25 Cal.4th at p. 1241, 108 Cal.Rptr.2d 617, 25 P.3d 1096.) Unfortunately, the courts of our sister states have not developed a similar consensus, nor have they spoken with anything like the same clarity, with regard to the question whether employees of contractors are others for the purposes of section 414.

The courts of a number of states have assumed, without directly addressing the question, that an employee of a contractor may sue the hirer of the contractor for negligent exercise of retained control, and these courts have focused, instead, on whether a triable issue was presented as to retention of control or on whether a judgment in favor of the plaintiff was supported by sufficient evidence as to retention of control. (See Alabama Power Co. v. Beam (Ala.1985) 472 So.2d 619, 622-625; Elkins v. Arkla, Inc. (1993) 312 Ark. 280, 849 S.W.2d 489, 490-492; Corsetti v. Stone Co. (1985) 396 Mass. 1, 483 N.E.2d 793, 799; Clausen v. Aberdeen Grain Inspection (S.D.1999) 594 N.W.2d 718, 721-723; Hittel v. WOTCO, Inc. (Wyo.2000) 996 P.2d 673, 676-678.)

The courts of states that have directly addressed it are evenly split on the question whether an employee of a contractor may sue the hirer of the contractor for negligent exercise of retained control.

Answering the question in the affirmative, the Supreme Court of North Dakota has stated the rule broadly. “Employees of an independent contractor fall within the protection of Section 414, and an employer of an independent contractor owes a duty to the independent contractor’s employees to exercise the retained control with reasonable care.” (Fleck v. ANG Coal Gasification Co. (N.D.1994) 522 N.W.2d 445, 447.)

860*860 Taking a more nuanced position, the Supreme Court of Utah has held that a hirer is not liable to an employee of an independent contractor for negligent exercise of retained control, unless the hirer’s conduct meets the active participation standard. (Thompson v. Jess (Utah 1999) 979 P.2d 322, 326-328 (Thompson).) “Under the ‘active participation’ standard, a principal employer is subject to liability for injuries arising out of its independent contractor’s work if the employer is actively involved in, or asserts control over, the manner of performance of the contracted work. [Citation.] Such an assertion of control occurs, for example, when the principal employer directs that the contracted work be done by use of a certain mode or otherwise interferes with the means and methods by which the work is to be accomplished. [Citations.]” (Id. at p. 327.) Therefore, retained control is somewhat of a misnomer for the doctrine as the Utah Supreme Court applies it. “Under the standards announced herein, a duty of care is imposed if the principal employer asserts affirmative control over or actually participates actively in the manner of performing the contracted work. `Retained,’ to the extent the word implies passivity or nonaction, is inapt.” (Id at p. 328, fn. 3.)

Like the North Dakota Supreme Court in Fleck, supra, 522 N.W.2d 445, the Supreme Court of New Mexico has voiced a broad theory of liability. “If [an employer of an independent contractor] has the right to, and does, retain control of the work performed by the independent contractor, he owes the duty of care to the independent contractor’s employee which, if breached, can result in liability to the employee. [Citation.]” (Valdez v. Cillessen & Son, Inc. (1987) 105 N.M. 575, 734 P.2d 1258, 1262.) However, the New Mexico Supreme Court announced this broad rule in a case in which the hirer’s conduct would have more than satisfied the active participation standard announced by the Utah Supreme Court in Thompson, supra, 979 P.2d 322. An employee of a lathing and plastering subcontractor was injured in the collapse of scaffolding. A grant of summary judgment in favor of the hirer was reversed by the New Mexico Supreme Court because there was evidence in the record that the hirer had issued detailed directions to the subcontractor concerning virtually every aspect of the job, including the manner in which the scaffolding was to be erected, and that the hirer, through its superintendent at the jobsite, had “fired the employees of subcontractors, instructed employees on how, when, and where to do their jobs, and assigned employees to tasks other than those which they had been hired to do.” (Valdez, at pp. 1262-1263.)

On the other hand, the courts of other states have concluded that an employee of an independent contractor is barred from suing the hirer of the contractor for negligent exercise of retained control. The Court of Appeals of Kentucky concluded that “[n]othing in the discussions of Sections 413, 414, 416, and 427 of the Restatement, Torts 2d, indicates that an employee of an independent contractor is within the class of `others’ protected by those sections.” (King v. Shelby Rural Electric Cooperative Corp. (Ky.1974) 502 S.W.2d 659, 662, italics added.) In Parker v. Neighborhood Theatres (Ct.Spec.App.1988) 76 Md.App. 590, 547 A.2d 1080, the Court of Special Appeals of Maryland, after concluding the plaintiff had failed to establish retention of control, added that the plaintiff had also failed to provide the court “with any authority that an employee of an independent contractor injured by the negligence of his own master is a person intended to be included among the class of persons to whom the owner owes a nondelegable duty of reasonable care…. No 861*861 matter how appellant phrases it, what he is unsuccessfully attempting is an end run on the Worker’s Compensation Law.” (Id. at p. 1085.) In Sutherland v. Barton (Minn. 1997) 570 N.W.2d 1, the Supreme Court of Minnesota found that no triable issue had been presented as to retained control, and so it reinstated the summary judgment in favor of the hirer, which had been reversed by the intermediate appellate court. In the course of reaching that conclusion, the court noted that “when applying the Restatement [Second of Torts] sections that impose liability on companies hiring independent contractors, we have held that ‘others’ does not include the employees of an independent contractor. [Citation.] This limitation also applies to § 414.” (Id. at p. 5, fn. omitted.)

Recently, the Courts of Appeal of California that have addressed the question have agreed that a hirer may, under certain circumstances, be liable to an employee of a contractor under a retained control theory. However, they have disagreed as to whether mere retention of control is sufficient, or whether something more, something like the Utah Supreme Court’s concept of active participation, must be shown. (Compare Grahn v. Tosco Corp. (1997) 58 Cal.App.4th 1373, 68 Cal.Rptr.2d 806 (Grahn) with Kinney v. CSB Construction, Inc. (2001) 87 Cal.App.4th 28, 103 Cal.Rptr.2d 594 (Kinney).) Under Grahn, “the hirer may be held liable to the independent contractor’s employee where the hirer retains sufficient control over the work of an independent contractor to be able to prevent or eliminate through the exercise of reasonable care the dangerous condition causing injury to the independent contractor’s employee. [Citations.]” (Grahn, at p. 1393, 68 Cal.Rptr.2d 806, italics added.) Under Kinney, on the other hand, mere retention of the ability to control safety conditions is not enough. “[A] general contractor owes no duty of care to an employee of a subcontractor to prevent or correct unsafe procedures or practices to which the contractor did not contribute by direction, induced reliance, or other affirmative conduct. The mere failure to exercise a power to compel the subcontractor to adopt safer procedures does not, without more, violate any duty owed to the plaintiff. Insofar as section 414 might permit the imposition of liability on a general contractor for mere failure to intervene in a subcontractor’s working methods or procedures, without evidence that the general contractor affirmatively contributed to the employment of those methods or procedures, that section is inapplicable to claims by subcontractors’ employees against the general contractor.” (Kinney, at p. 39, 103 Cal.Rptr.2d 594.)

The Kinney court, we conclude, correctly applied the principles of our decisions in Privette and Toland, whereas the Grahn court made much the same mistake in applying Privette to section 414 as it did in applying that case to section 411 (see Camargo, supra, 25 Cal.4th at pp. 1242-1245, 108 Cal.Rptr.2d 617, 25 P.3d 1096, disapproving Grahn, supra, 58 Cal.App.4th 1373, 68 Cal.Rptr.2d 806, insofar as it was inconsistent with that opinion).

In Grahn, an employee of an independent contractor sued the hirer of the contractor under three theories of negligence, including negligent hiring (§ 411) and negligent exercise of retained control (§ 414). (Grahn, supra, 58 Cal.App.4th at pp. 1389-1396, 68 Cal.Rptr.2d 806.) Grahn was decided after Privette but before Toland, and without the benefit of the gloss provided by Toland the Court of Appeal in Grahn misunderstood Privette to have been bottomed on the ground that the hirer in a peculiar risk case is not directly negligent. “In Privette, the court had before it only the issue of whether a peculiar risk theory could be used to hold a nonnegligent hirer 862*862 liable under vicarious liability for the negligence of the independent contractor.” (Grata, at p. 1384, 68 Cal.Rptr.2d 806.) To the contrary, as we explained in Toland and reiterated in Camargo, “the rationale of our decision in Privette extends to cases where the hirer is directly negligent in the sense of having failed to take precautions against the peculiar risks involved in the work entrusted to the contractor. To repeat: In Toland, we rejected the plaintiffs argument that Privette did not bar recovery for direct liability under section 413, but only for vicarious liability under section 416.” (Camargo, supra, 25 Cal.4th at pp. 1243-1244, 108 Cal.Rptr.2d 617, 25 P.3d 1096.)

The Grahn court repeated its mistake in applying Privette to the doctrine of retained control. “Having retained control of the independent contractor’s work, the hirer has a direct and nonimputed obligation to see that reasonable precautions are taken to eliminate or reduce the risk of harm to the employees of its independent contractors.” (Grahn, supra, 58 Cal. App.4th at p. 1394, 68 Cal.Rptr.2d 806, italics added.) Again, the conclusion that a hirer’s liability can be characterized as direct does not end the inquiry into whether the hirer should be held liable for injuries to a contractor’s employees, as we explained in Camargo. “Admittedly, as the Grahn court observed, under section 411, the hirer is, in a sense, being taxed with his own negligence under a theory of direct liability. (Grahn, at p. 1385, 68 Cal.Rptr.2d 806.) However, the same could be said with regard to an action brought under the peculiar risk theory set forth in section 413. More importantly, under both sections 411 and 413, the liability of the hirer is `in essence “vicarious” or “derivative” in the sense that it derives from the “act or omission” of the hired contractor, because it is the hired contractor who caused the injury by failing to use reasonable care in performing the work.’ (Toland, supra, 18 Cal.4th at p. 265, 74 Cal.Rptr.2d 878, 955 P.2d 504.) Therefore, in a negligent hiring case under the theory set forth in section 411, just as in peculiar risk cases under the theories set forth in sections 413 and 416, `it would be unfair to impose liability on the hiring person when the liability of the contractor, the one primarily responsible for the worker’s on-the-job injuries, is limited to providing workers’ compensation coverage.’ (Toland, supra, 18 Cal.4th at p. 267, 74 Cal.Rptr.2d 878, 955 P.2d 504.)” (Camargo, supra, 25 Cal.4th at p. 1244, 108 Cal.Rptr.2d 617, 25 P.3d 1096.)

Similarly, because the liability of the contractor, the person primarily responsible for the worker’s on-the-job injuries, is limited to providing workers’ compensation coverage, it would be unfair to impose tort liability on the hirer of the contractor merely because the hirer retained the ability to exercise control over safety at the worksite. In fairness, as the Kinney court recognized, the imposition of tort liability on a hirer should depend on whether the hirer exercised the control that was retained in a manner that affirmatively contributed to the injury of the contractor’s employee. “We are persuaded that the holdings of Privette and Toland should also apply to employees’ claims under section 414 at least where, as here, (1) the sole factual basis for the claim is that the hirer failed to exercise a general supervisory power to require the contractor to correct an unsafe procedure or condition of the contractor’s own making, and (2) there is no evidence that the hirer’s conduct contributed in any way to the contractor’s negligent performance by, e.g., inducing injurious action or inaction through actual direction, reliance on the hirer, or otherwise. The fairness rationale at the core of Privette and Toland applies 863*863 equally to preclude imposition of liability on a hirer for mere failure to exercise a general supervisory power to prevent the creation or continuation of a hazardous practice, where such liability would exceed that imposed on the injured plaintiffs immediate employer, who created the hazard.” (Kinney, supra, 87 Cal.App.4th at p. 36, 103 Cal.Rptr .2d 594.)

In Kinney, an employee of a subcontractor (PBE) was injured in a fall from scaffolding, and he sued the general contractor, CSB Construction, Inc. (CSB), for negligent exercise of retained control. Kinney is strikingly similar to the present case in that, although the hirer in theory retained a high degree of control over safety conditions at the jobsite, there was no indication the hirer contributed to the accident by an affirmative exercise of that control. “The parties agreed for purposes of the summary judgment motion that during the performance of the subcontract, CSB `had the right to order any safety means or measures that it felt were appropriate’ on the jobsite…. [According to the testimony of CSB’s site superintendent], [i]f he saw an unsafe condition, he ‘had a right to do whatever [he thought was] appropriate.’ … Specifically, `[i]f a subcontractor was working without adequate fall protection and [he] felt that fall protection was required, [he] would … tell them that they needed fall protection’ and `would … stop the work until they had good fall protection.’ … However, he did not recall an instance in which he actually directed PBE or any of the other subcontractors on the job to alleviate an unsafe condition.” (Kinney, supra, 87 Cal. App.4th at p. 31, 103 Cal.Rptr.2d 594.)

The question, as the Kinney court framed it, was “whether a general contractor who claims the power to control all safety procedures on the worksite may be liable to the injured employee of a subcontractor for failing to direct the subcontractor to take safety precautions where there is no evidence that any conduct by the general contractor contributed affirmatively to the injuries.” (Kinney, supra, 87 Cal.App.4th at p. 30, 103 Cal.Rptr.2d 594.) Kinney answered that question in the negative. “We hold that in light of recent California Supreme Court holdings limiting the liability of general contractors for injuries to employees of subcontractors, liability cannot be imposed on the general contractor based upon a mere failure to require the subcontractor to take safety precautions, where the general contractor’s failure is not shown to have affirmatively contributed to the creation or persistence of the hazard causing the plaintiffs injuries. Accordingly, we affirm the judgment for defendant.” (Ibid.)

The Kinney court correctly applied our prior decisions. Imposing tort liability on a hirer of an independent contractor when the hirer’s conduct has affirmatively contributed[3] to the injuries of the contractor’s employee is consistent with the rationale of our decisions in Privette, Toland and Camargo because the liability of the hirer in such a case is not “`in essence “vicarious” or “derivative” in the sense that it derives from the “act or omission” of the hired contractor.'” (Camargo, supra, 25 Cal.4th at p. 1244, 108 Cal.Rptr.2d 617, 25 P.3d 1096, quoting Toland, supra, 18 Cal.4th at p. 265, 74 Cal.Rptr.2d 878, 955 P.2d 504.) To the contrary, the liability 864*864 of the hirer in such a case is direct in a much stronger sense of that term.

Unlike the rule announced in Grahn, the rule announced in Kinney is not susceptible to the objection raised by Caltrans that a defendant will never be able to prevail on a motion for summary judgment in an action for negligent exercise of retained control. To the contrary, where, as here, the plaintiff fails to present a triable issue as to whether the defendant’s exercise of retained control affirmatively contributed to the employee’s injuries, summary judgment is appropriate.

Caltrans also objects that two policy considerations that we have relied upon in barring employees of independent contractors from bringing tort actions against the hirers of the contractors under the peculiar risk doctrine or the negligent hiring doctrine also apply to actions brought under the retained control doctrine.

Caltrans finds support in the following passage from Camargo: “Two of the related policy considerations we relied upon in Privette also support our conclusion here that an employee of an independent contractor should not be permitted to bring a negligent hiring action against the hirer of the contractor: (1) The rule of workers’ compensation exclusivity, which shields an independent contractor who pays workers’ compensation insurance premiums from further liability to its employees, should equally apply to the person hiring the contractor because the hirer has indirectly paid the cost of such coverage inasmuch as it was presumably calculated into the contract price (Privette, supra, 5 Cal.4th at p. 699, 21 Cal.Rptr.2d 72, 854 P.2d 721); and (2) permitting such a recovery would give employees of independent contractors an unwarranted windfall, something that is denied other workers—the right to recover tort damages for industrial injuries caused by their employer’s failure to provide a safe working environment (id. at pp. 699-700, 21 Cal.Rptr.2d 72, 854 P.2d 721).” (Camargo, supra, 25 Cal.4th at pp. 1244 1245, 108 Cal.Rptr.2d 617, 25 P.3d 1096, fn. omitted.)

Caltrans’s reliance is misplaced. While it is true that the cost of workers’ compensation insurance coverage is as likely to have been calculated into the contract price paid by the hirer in a retained control case as it is in peculiar risk or negligent hiring cases, the contract price could not have reflected the cost of injuries that are attributable to the hirer’s affirmative conduct. The contractor has no way of calculating an increase in the costs of coverage that are attributable to the conduct of third parties, which is why the employee, despite the existence of the workers’ compensation system, is not barred from suing a third party who proximately causes the employee’s injury. (See Lab.Code, § 3852.)

Moreover, a close reading of our opinion in Privette reveals another ground for distinguishing between peculiar risk and negligent hiring cases, on the one hand, and negligent exercise of retained control cases, on the other, in this regard. “At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor’s negligence in performing the work. [Citations.] Central to this rule of nonliability was the recognition that a person who hired an independent contractor had `”no right of control as to the mode of doing the work contracted for”` (Green v. Soule (1904) 145 Cal. 96, 99, 78 P. 337; accord, McDonald v. Shell Oil Co. (1955) 44 Cal.2d 785, 788, 285 P.2d 902.)[4] The reasoning was that the work 865*865 performed was the enterprise of the contractor, who, as a matter of business convenience, would be better able than the person employing the contractor to absorb accident losses incurred in the course of the contracted work. This could be done, for instance, by indirectly including the cost of safety precautions and insurance coverage in the contract price. [Citations.]” (Privette, supra, 5 Cal.4th at p. 693, 21 Cal.Rptr.2d 72, 854 P.2d 721, italics added.) On the other hand, if a hirer does retain control over safety conditions at a worksite and negligently exercises that control in a manner that affirmatively contributes to an employee’s injuries, it is only fair to impose liability on the hirer.

Similarly, if an employee of an independent contractor can show that the hirer of the contractor affirmatively contributed to the employee’s injuries, then permitting the employee to sue the hirer for negligent exercise of retained control cannot be said to give the employee an unwarranted windfall. The tort liability of the hirer is warranted by the hirer’s own affirmative conduct. The rule of workers’ compensation exclusivity “does not preclude the employee from suing anyone else whose conduct was a proximate cause of the injury” (Privette, supra, 5 Cal.4th at p. 697, 21 Cal.Rptr.2d 72, 854 P.2d 721), and when affirmative conduct by the hirer of a con tractor is a proximate cause contributing to the injuries of an employee of a contractor, the employee should not be precluded from suing the hirer.

Grahn v. Tosco Corp., supra, 58 Cal. App.4th 1373, 68 Cal.Rptr.2d 806, is disapproved insofar as it is inconsistent with this opinion.

III. By Merely Permitting Traffic to Use the Overpass, Caltrans Did Not Affirmatively Contribute to Mr. Hooker’s Death

In oral argument before this court, a question was raised as to whether Caltrans required, in the sense of ordered, the crane operator to retract his outriggers to permit vehicles to pass. The record does not reflect that any such order was issued by Caltrans. Indeed, in response to a question from the bench, counsel for the plaintiff admitted: “The honest answer to your question … is [Caltrans] permitted it to happen. They permitted this traffic to happen on the overpass. They didn’t direct it to happen.”

Confusion in this regard was generated by an earlier statement made by plaintiffs counsel. In arguing that Caltrans’s exercise of retained control affirmatively contributed to Mr. Hooker’s death, plaintiffs counsel stated, “I think it’s an affirmative act when Caltrans’s own engineer specifically 866*866 comes up and requires the operator to retract the outriggers.” He later explained what he meant by this: “There was evidence in the record that the Caltrans Senior Engineer himself used the overpass as a shortcut to traverse the construction and had to wait until the operator retracted the outriggers.” This narrower statement is supported by the record.

Perhaps the clearest way to put it is this: Caltrans permitted construction vehicles, as well as vehicles owned and operated by Caltrans, to use the overpass while the crane was being operated, and because the overpass was narrow, the crane operator was required to retract the outriggers in order to let the traffic pass. That is what plaintiff asserted below: “Given the narrow width of the portion of the [high occupancy vehicle] lane where he was working, Mr. Hooker was regularly required to retract his extended outriggers to permit construction vehicles, including vehicles owned and operated by Defendant State of California, to pass.”

We are not persuaded that Caltrans, by permitting traffic to use the overpass while the crane was being operated, affirmatively contributed to Mr. Hooker’s death. Interestingly, when pressed for a standard, plaintiffs counsel referred to a passage in the Thompson opinion of the Utah Supreme Court quoted above: “Under the `active participation’ standard, a principal employer is subject to liability for injuries arising out of its independent contractor’s work if the employer is actively involved in, or asserts control over, the manner of performance of the contracted work. [Citation.] Such an assertion of control occurs, for example, when the principal employer directs that the contracted work be done by use of a certain mode or otherwise interferes with the means and methods by which the work is to be accomplished. [Citations.]” (Thompson, supra, 979 P.2d at p. 327, italics added.) To repeat, Caltrans did not direct the crane operator to retract his outriggers to permit traffic to pass.

Accordingly, under the standard we announce today, summary judgment was appropriate here. Plaintiff raised triable issues of material fact as to whether defendant retained control over safety conditions at the worksite. However, plaintiff failed to raise triable issues of material fact as to whether defendant actually exercised the retained control so as to affirmatively contribute to the death of plaintiffs husband. While the evidence suggests that the crane tipped over because the crane operator swung the boom while the outriggers were retracted, and that the crane operator had a practice of retracting the outriggers to permit construction traffic to pass the crane on the overpass, there was no evidence Caltrans’s exercise of retained control over safety conditions at the worksite affirmatively contributed to the adoption of that practice by the crane operator. There was, at most, evidence that Caltrans’s safety personnel were aware of an unsafe practice and failed to exercise the authority they retained to correct it.

Disposition

The judgment of the Court of Appeal is reversed and the matter remanded for further proceedings consistent with this opinion.

WE CONCUR: GEORGE, C.J., KENNARD, J., BAXTER, J., CHIN, J. and MORENO, J.

Dissenting Opinion by WERDEGAR, J.

I respectfully dissent. While I agree with the majority that a party hiring an 867*867 independent contractor may be liable in tort to employees of the contractor for negligent exercise of control the hirer has retained over any part of the work, I disagree that such liability may exist only when the hirer’s exercise of control “affirmatively contributed to the injury of the contractor’s employee” (maj. opn., ante, 115 Cal.Rptr.2d at p. 862, 38 P.3d at p. 1089, italics in original). The majority’s analysis, and the result it reaches in this case, usurp the factfinding and fault allocation functions assigned to the jury under our comparative fault system.

The evidence produced on summary judgment showed that California Department of Transportation (Caltrans) employees had permitted construction traffic on the overpass where plaintiffs decedent was working, and had driven Caltrans’s own vehicles on the overpass. The Caltrans construction manual required the construction safety coordinator to know proper “construction zone traffic management,” implying that Caltrans bore responsibility for exercising such management. A reasonable trier of fact could infer that Caltrans retained control over construction zone traffic management and that, in exercising this retained control, Caltrans used, and permitted other vehicles to use, the overpass. The resulting traffic frequently required the decedent to retract the outriggers of his crane, a practice that led proximately to his fatal accident. Evidence showed as well that Caltrans representatives had observed the outriggers being repeatedly retracted, knew the crane was unstable in that state, and knew that if they were to “flag off the overpass the crane operator would not have to retract the outriggers. This complex of evidence raises at least a triable issue of fact (Code Civ. Proc, § 437c) as to whether Caltrans negligently exercised its retained control over construction zone traffic, contributing to the decedent’s death.

To be sure, the evidence suggests that Caltrans did not bear sole fault in the accident. Caltrans apparently did not order the decedent to retract the outriggers for passing traffic; nor, apparently, did Caltrans direct the decedent to attempt operating the crane before reextending the outriggers. It may be that a jury, hearing all the evidence, would find the decedent largely at fault for his own death and assign to Caltrans only a small share of the fault, based on its having permitted and contributed to the overpass traffic. In that case, Caltrans’s liability would be reduced; the comparative fault system operates to reduce the liability of a negligent hirer in the same manner it reduces the liability of other third parties for employee injuries. (See Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253, 280, 74 Cal.Rptr.2d 878, 955 P.2d 504 (cone. & dis. opn. of Werdegar, J.).) No special judicial test of negligence is required in order to achieve a fair allocation of fault.

The majority’s “affirmatively contribute” test of negligence liability reflects the notion that a person who actually performs a dangerous act, or directs its performance, is likely to be more at fault for the resulting accident than a person who merely fails to correct the conditions creating the danger. One might expect that generalization to be reflected, as well, in a jury verdict on liability: to the extent the hirer’s fault is seen as resting solely on inaction, the jury is likely to assign the hirer a low share of fault in comparison to those who contributed to the injury by their actual participation in the operation. But the determination of comparative fault in this manner, like any negligence determination, rests on the specific facts of the case: to whom was the danger apparent; who had the ability to alleviate the danger, 868*868 and by what means and at what costs? From the distinctions between activity and passivity, act and omission, which a jury might properly use to measure and compare fault, the majority fashions a purported bright-line rule for courts to apply.[1] Its effort is both unnecessary and inimical to the jury system.

I do not suggest every retained-control claim must go to a jury. The mere fact that a contract gives the hiring party general control over the project and the authority to stop work should not create liability if, in practice, the hirer’s supervision and control did not actually extend to any part of the operation contributing to the hazard. As the Restatement Second of Torts cautions: “It is not enough that [the hirer] has merely a general right to order the work stopped or resumed, to inspect its progress or to receive reports, to make suggestions or recommendations which need not necessarily be followed, or to prescribe alterations and deviations…. There must be such a retention of a right of supervision that the contractor is not entirely free to do the work in his own way.” (Rest.2d Torts, § 414, com. c, p. 388; see also Hobbs v. Mobil Oil Corporation (Alaska 1968) 445 P.2d 933, 936 [hirer not liable to a contractor’s employee if “under the contract and in actual practice” the hirer’s control does not affect the contractor’s “methods of work” or the “operative detail” of the work].)

The present case, however, is not merely one of contractual or formal control. Plaintiff has produced evidence from which one can infer that Caltrans’s actual exercise of control over traffic on the site affected the manner in which the crane operations were conducted; the contractor, consequently, was not “entirely free to do the work in his own way.” (Rest.2d Torts, § 414, com. c, p. 388.) Whether after full discovery and trial a jury would agree with plaintiff that Caltrans’s management of traffic at the site was partly responsible for the crane’s unsafe operation and the resulting accident is not at issue at this point in the proceedings. To properly obtain summary judgment, defendant must show that plaintiff “has not established, and cannot reasonably expect to establish, a prima facie case” of negligent exercise of retained control. (Saelzler v. Advanced Group WO (2001) 25 Cal.4th 763, 768, 107 Cal.Rptr.2d 617, 23 P.3d 1143, italics added.) Defendant has not made that showing.

I would affirm the judgment of the Court of Appeal.

[1] Unless otherwise indicated, all section references are to the Restatement Second of Torts.

[2] In both Toland and Camargo, we noted we were not reaching this question. “Our grant of review did not extend to, and therefore we do not decide, a second issue raised by Toland: whether Privette, supra, 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721, would preclude an employee of an independent contractor from seeking tort recovery for workplace injuries under the theory of section 414 of the Restatement Second of Torts that the general contractor or landowner `retained control’ over the operative details of the hired work. As the Court of Appeal unanimously concluded, the facts Toland offered in opposing summary judgment were insufficient to raise a triable issue on that question.” (Toland, supra, 18 Cal.4th at p. 264, fn. 2, 74 Cal.Rptr.2d 878, 955 P.2d 504.) “Today we have concluded that the rationale of our decisions in Privette and Toland, which involved tort liability under the peculiar risk doctrine, also applies to the tort of negligent hiring. Review has been granted in cases that present related questions—whether the Privette/Toland rationale should apply as well to the tort of negligent exercise of retained control (Hooker v. Department of Transportation, review granted Nov. 1, 2000, S091601) or the tort of negligent provision of unsafe equipment (McKown v. Wal-Mart Stores, Inc. (2000) 82 Cal.App.4th 562, 98 Cal.Rptr.2d 214, review granted Oct. 18, 2000, S091097)—and our opinion today should not be read as having prejudged those questions.” (Camargo, supra, 25 Cal.4th at p. 1245, fn. 2, 108 Cal.Rptr.2d 617, 25 P.3d 1096.)

[3] Such affirmative contribution need not always be in the form of actively directing a contractor or contractor’s employee. There will be times when a hirer will be liable for its omissions. For example, if the hirer promises to undertake a particular safety measure, then the hirer’s negligent failure to do so should result in liability if such negligence leads to an employee injury.

[4] In McDonald v. Shell Oil Co., supra, 44 Cal.2d 785, 285 P.2d 902, we did not have occasion to grapple with the question presented by this case—whether an employee of a contractor may sue the hirer of a contractor for the tort of negligent exercise of retained control. McDonald did involve a negligence suit by an employee of a contractor against the hirer of the contractor. And our discussion did begin with a recitation of the following general principles: “The general supervisory right to control the work so as to insure its satisfactory completion in accordance with the terms of the contract does not make the hirer of the independent contractor liable for the latter’s negligent acts in performing the details of the work. [Citation.] An owner is not liable for injuries resulting from defective appliances unless he has supplied them or has the privilege of selecting them or the materials out of which they are made [citation] or unless he exercises active control over the men employed or the operations of the equipment used by the independent contractor. [Citation.]” (Id. at pp. 788-789, 285 P.2d 902, italics added.) However, in McDonald we found the hirer of the contractor had retained no more than the general supervisory right to control the work so as to insure its satisfactory completion in accordance with the terms of the contract. (See id. at p. 790, 285 P.2d 902.) Moreover, of course, McDonald long predated Privette.

[1] The line drawn is actually rather fuzzy in light of the majority’s suggestion that some “omissions” may be deemed “affirmative” contributions to an injury. (Maj. opn., ante, 115 Cal.Rptr.2d at p. 863, fn. 3, 38 P.3d at p. 1089, fn. 3.) The majority further fails to explain why a hirer’s “promise[ ]” (ibid.) to exercise control allows for possible liability while the contractual retention of control is held insufficient as a matter of law, even, as in this case, where the hirer’s retention of control could reasonably have led the contractor and its employees to expect that the hirer would in fact exercise its control when necessary.

FRANKLIN PRIVETTE v. THE SUPERIOR COURT OF SANTA CLARA COUNTY

5 Cal.4th 689 (1993)
854 P.2d 721
21 Cal. Rptr.2d 72

FRANKLIN PRIVETTE, Petitioner,
v.
THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent; JESUS CONTRERAS, Real Party in Interest.

Docket No. S024758.
Supreme Court of California.
July 19, 1993.

691*691 COUNSEL

Ropers, Majeski, Kohn, Bentley, Wagner & Kane, Mark G. Bonino and Justice C. McPherson for Petitioner.

Horvitz & Levy, David M. Axelrad, Christine T. Hoeffner, Sedgwick, Detert, Moran & Arnold and Frederick D. Baker as Amici Curiae on behalf of Petitioner.

No appearance for Respondent.

Seltzer & Cody, Christopher T. Cody and Richard Seltzer for Real Party in Interest.

OPINION

KENNARD, J.

(1a) Under the peculiar risk doctrine, a person who hires an independent contractor to perform work that is inherently dangerous can be held liable for tort damages when the contractor’s negligent performance of the work causes injuries to others. By imposing such liability without fault on the person who hires the independent contractor, the doctrine seeks to ensure that injuries caused by inherently dangerous work will be compensated, that the person for whose benefit the contracted work is done bears responsibility for any risks of injury to others, and that adequate safeguards are taken to prevent such injuries. Courts differ, however, on the propriety of extending the doctrine to the contractor’s own employees. A minority of jurisdictions, including California, have permitted such employees to seek recovery from the person who hired the contractor. But the decisions of this court by which the minority rule has become established in California have never addressed the potential conflict between the peculiar risk doctrine, as applied in favor of the contractor’s employees, and the system of workers’ compensation. Today, this court for the first time directly confronts this issue.

692*692 When an employee of the independent contractor hired to do dangerous work suffers a work-related injury, the employee is entitled to recovery under the state’s workers’ compensation system. That statutory scheme, which affords compensation regardless of fault, advances the same policies that underlie the doctrine of peculiar risk. Thus, when the contractor’s failure to provide safe working conditions results in injury to the contractor’s employee, additional recovery from the person who hired the contractor — a nonnegligent party — advances no societal interest that is not already served by the workers’ compensation system. Accordingly, we join the majority of jurisdictions in precluding such recovery under the doctrine of peculiar risk.

 

I

 

Franklin Privette hired Jim Krause Roofing, Inc. (hereafter Krause) to install a new tar and gravel roof on his duplex. Using a kettle and pumping device parked in a driveway next to the duplex, the roofing crew transported hot tar to the roof. When the gravel truck arrived, the crew moved the kettle and pumping device to make room for the truck.

After the gravel was deposited on the roof, crew members realized they needed 50 more gallons of tar to complete the job. The foreman then directed employee Jesus Contreras to carry 10 five-gallon buckets of hot tar up a ladder to the roof. While performing this task, Contreras fell off the ladder and was burned by hot tar.

Contreras sought workers’ compensation benefits for his injuries. He also sued Privette, the owner of the duplex, alleging two theories of recovery: that Privette had been negligent in selecting Krause as a roofer; and that, because of the inherent danger of working with hot tar, Privette should, under the doctrine of peculiar risk, be liable for injuries to Contreras that resulted from Krause’s negligence.

In a pretrial motion for summary judgment (Code Civ. Proc., § 437c), Privette sought termination of Contreras’s action. Among the arguments Privette made was that the availability of workers’ compensation to Contreras for injuries resulting from his employer’s conduct should bar him from any recovery from Privette under the doctrine of peculiar risk.[1] In support of his motion, Privette presented these undisputed facts: Privette, a school teacher, owned some rental properties, including the duplex where roofing employee Contreras was injured. Privette had hired the Krause roofing firm 693*693 to reroof his duplex only after checking references and determining that Krause was licensed and carried workers’ compensation insurance for its employees. Privette was not present when Contreras was injured during the roofing process, nor did he participate in the foreman’s decision to have Contreras carry buckets of hot tar up a ladder to the roof.

The trial court denied Privette’s motion for summary judgment. Following Privette’s unsuccessful attempt to obtain relief from the Court of Appeal, we granted his petition for review and issued an alternative writ to determine the applicability of the peculiar risk doctrine in this case.

 

II

 

At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor’s negligence in performing the work. (Prosser & Keeton on Torts (5th ed. 1984) § 71, p. 509 [hereafter Prosser]; see S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350 [256 Cal. Rptr. 543, 769 P.2d 399].) Central to this rule of nonliability was the recognition that a person who hired an independent contractor had “`no right of control as to the mode of doing the work contracted for.'” (Greene v. Soule (1904) 145 Cal. 96, 99 [78 P. 337]; accord, McDonald v. Shell Oil Co. (1955) 44 Cal.2d 785, 788 [285 P.2d 902].) The reasoning was that the work performed was the enterprise of the contractor, who, as a matter of business convenience, would be better able than the person employing the contractor to absorb accident losses incurred in the course of the contracted work. This could be done, for instance, by indirectly including the cost of safety precautions and insurance coverage in the contract price. (Fleming, An Introduction to the Law of Torts (1967) pp. 172-173 [hereafter Fleming]; Prosser, supra, § 71, at p. 509; Van Arsdale v. Hollinger (1968) 68 Cal.2d 245, 250 [66 Cal. Rptr. 20, 437 P.2d 508].)

Over time, the courts have, for policy reasons, created so many exceptions to this general rule of nonliability that “`”the rule is now primarily important as a preamble to the catalog of its exceptions.”‘” (Van Arsdale v. Hollinger, supra, 68 Cal.2d at p. 252, quoting Pacific Fire Ins. Co. v. Kenny Boiler & Mfg. Co. (1937) 201 Minn. 500 [277 N.W. 226]; Rest.2d Torts, §§ 410-429 and § 409, com. b, at p. 370 [describing the nonliability rule as “`general’ only in the sense that it is applied where no good reason is found for departing from it”].) One of these exceptions pertains to contracted work that poses some inherent risk of injury to others. This exception is commonly referred to as the doctrine of peculiar risk.

The origins of this doctrine can be traced to roughly the latter half of the nineteenth century, when a growing recognition developed in the courts that 694*694 a landowner who chose to undertake inherently dangerous activity on his land should not escape liability for injuries to others simply by hiring an independent contractor to do the work. As a leading English decision from 1876 put it: “[A] man who orders a work to be executed, from which, in the natural course of things, injurious consequences to his neighbor must be expected to arise… cannot relieve himself of his responsibility by employing some one else….” (Bower v. Peate (1876) 1 Q.B.D. 321, 326.) In that case, the English court held a landowner liable for damages to his neighbor’s property when an independent contractor hired by the landowner to tear down an old house on his land and to build a new one on the same site, but with a deeper foundation, undermined the ground supporting the neighbor’s house. (Id. at pp. 323, 324-327.)

Interestingly, 14 years earlier, in 1862, the United States Supreme Court had articulated similar reasoning in imposing liability on a landowner. (Chicago v. Robbins (1862) 67 U.S. (2 Black) 418, 426-427 [17 L.Ed. 298, 303-304].) In that case, a landowner had a contractor construct a building on his land. In the course of the work, the contractor excavated the adjoining city sidewalk and left the hole uncovered. A passerby fell into the hole, and sought recovery from the landowner for the resulting injuries. In holding the owner liable for the contractor’s negligence, the high court reasoned that the injury had been caused “by the very nuisance which [the landowner] ha[d] created for his own benefit.” (Id. at p. 427.)

The courts adopted the peculiar risk exception to the general rule of nonliability to ensure that innocent third parties injured by the negligence of an independent contractor hired by a landowner to do inherently dangerous work on the land would not have to depend on the contractor’s solvency in order to receive compensation for the injuries. (See Note, Liability to Employees of Independent Contractors Engaged in Inherently Dangerous Work: A Workable Workers’ Compensation Proposal (1980) 48 Fordham L.Rev. 1165, 1176-1178 [hereafter A Workable Proposal]; see also Comment, The Peculiar Risk Doctrine: A Criticism of Its Application in California (1988) 22 U.C. Davis L.Rev. 215, 222 [hereafter Comment].) It was believed that as between two parties innocent of any personal wrongdoing — the person who contracted for the work and the hapless victim of the contractor’s negligence — the risk of loss occasioned by the contracted work was more fairly allocated to the person for whose benefit the job was undertaken. (Fleming, supra, p. 173.) Also, by spreading the risk of loss to the person who primarily benefited from the hired work, the courts sought to promote workplace safety, a concern of great significance to the public. (Aceves v. Regal Pale Brewing Co. (1979) 24 Cal.3d 502, 508 [156 Cal. Rptr. 41, 595 P.2d 619].)

695*695 (2) A person held liable under the doctrine of peculiar risk is entitled to equitable indemnity from the independent contractor at fault for the injury. (Fleming, supra, p. 173; Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 508; see Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628 [119 Cal. Rptr. 449, 532 P.2d 97] [distinguishing the right to indemnity based on principles of equity from contractually based indemnity]; Pearson Ford Co. v. Ford Motor Co. (1969) 273 Cal. App.2d 269, 272 [78 Cal. Rptr. 279] [describing the principle underlying equitable indemnity as the idea “`that everyone is responsible for the consequences of his [or her] own wrong, and if others have been compelled to pay damages which ought to have been paid by the wrongdoer, they may recover from him [or her]'”].) Thus, although peculiar risk is sometimes described as a “nondelegable duty” rule (see Comment, The Peculiar Risk Doctrine: High Rise Benefits for California Construction Workers (1986) 19 Loy. L.A.L.Rev. 1495, 1498 [hereafter High Rise Benefits]; Comment, supra, 22 U.C. Davis L.Rev. 215, 219), it is in effect a form of vicarious liability. (Prosser, supra, § 71, at p. 511; Fleming, supra, at pp. 172-173; see also A Workable Proposal, supra, 48 Fordham L.Rev. 1165, 1171.)[2]

(3) A critical inquiry in determining the applicability of the doctrine of peculiar risk is whether the work for which the contractor was hired involves a risk that is “peculiar to the work to be done,” arising either from the nature or the location of the work and “`against which a reasonable person would recognize the necessity of taking special precautions.'” (Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d 502, 509, quoting Griesel v. Dart Industries, supra, 23 Cal.3d 578, 586; Rest.2d Torts, § 413, com. b.; id., § 416, com. b.) The term “peculiar risk” means neither a risk that is abnormal to the type of work done, nor a risk that is abnormally great; it simply means “`a special, recognizable danger arising out of the work itself.'” (Aceves v. Regal Pale Brewing Co., supra, at p. 509, quoting Rest.2d Torts, § 413, com. b.) For that reason, as this court has pointed out, the term “special risk” is probably a more accurate description than “peculiar risk,” which is the terminology used in the Restatement. (Aceves v. Regal Pale Brewing Co., supra, at p. 509, fn. 2.)

696*696 (4) Even when work performed by an independent contractor poses a special or peculiar risk of harm, however, the person who hired the contractor will not be liable for injury to others if the injury results from the contractor’s “collateral” or “casual” negligence. (Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 510; Prosser, supra, § 71, at pp. 515-516; Rest. 2d Torts, § 426.) An independent contractor’s negligence is collateral, we have said, when the negligence involves an “operative detail of the work, as distinguished from the general plan or method to be followed.” (Aceves v. Regal Pale Brewing Co., supra, at p. 510.) But, as we have also acknowledged, it is often difficult to distinguish those risks that are inherent in the work from those that are collateral, and the line to be drawn between the two types of risks is “shadowy.” (Van Arsdale v. Hollinger, supra, 68 Cal.2d 245, 252, quoting Harper, Law of Torts (1933) § 292.)

 

III

 

(1b) As we have seen, in its original form the doctrine of peculiar risk made a landowner liable to innocent bystanders or neighboring property owners who were injured by the negligent acts of an independent contractor hired by the landowner to perform dangerous work on his or her land. In turn, the landowner could sue the contractor for equitable indemnity.

Gradually, the peculiar risk doctrine was expanded to allow the hired contractor’s employees to seek recovery from the nonnegligent property owner for injuries caused by the negligent contractor. California is among the minority of jurisdictions that has adopted this view. We applied this expansion of the doctrine for the first time in Woolen v. Aerojet General Corp. (1962) 57 Cal.2d 407, 410-411 [20 Cal. Rptr. 12, 369 P.2d 708], seeing “no reason to hold otherwise.” Since Woolen, we have approved peculiar risk liability in favor of an independent contractor’s employee in several decisions. (See, e.g., Ferrel v. Safway Steel Scaffolds (1962) 57 Cal.2d 651 [21 Cal. Rptr. 575, 371 P.2d 311]; Van Arsdale v. Hollinger, supra, 68 Cal.2d 245; Griesel v. Dart Industries, Inc., supra, 23 Cal.3d 578; Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d 502.) Privette, the property owner sued here, recognizes this. He urges us, however, to reconsider Woolen and its progeny. He argues that when the person injured by negligently performed contracted work is one of the contractor’s own employees, the injury is already compensable under the workers’ compensation scheme and therefore the doctrine of peculiar risk should provide no tort remedy, for those same injuries, against the person who hired the independent contractor. We agree, for reasons that follow.

 

IV

 

Under the Workers’ Compensation Act (hereafter the Act), all employees are automatically entitled to recover benefits for injuries “arising out of and 697*697 in the course of the employment.” (Lab. Code, § 3600, subd. (a);[3] see also § 3716 [setting up an uninsured employers fund to provide benefits for employees not covered by workers’ compensation insurance].) The workers’ compensation system was created to provide, in the words of our state Constitution, “for the comfort, health and safety and general welfare of any and all workers and those dependent upon them for support to the extent of relieving from the consequences of any injury or death incurred or sustained by workers in the course of their employment….” (Cal. Const., art. XIV, § 4.)

In S.G. Borello & Sons, Inc. v. Department of Industrial Relations, supra, 48 Cal.3d 341, 354, we articulated four distinct objectives of the Act: “(1) to ensure that the cost of industrial injuries will be part of the cost of goods rather than a burden on society, (2) to guarantee prompt, limited compensation for an employee’s work injuries, regardless of fault, as an inevitable cost of production, (3) to spur increased industrial safety, and (4) in return, to insulate the employer from tort liability for his employees’ injuries. [Citations.]”

When the conditions of compensation exist, recovery under the workers’ compensation scheme “is the exclusive remedy against an employer for injury or death of an employee.” (Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, 468 [165 Cal. Rptr. 858, 612 P.2d 948, 9 A.L.R.4th 758], citing § 3602.) The purpose of this exclusivity provision is to give efficacy to the theoretical “compensation bargain” between the employer and employee. (Shoemaker v. Myers (1990) 52 Cal.3d 1, 16 [276 Cal. Rptr. 303, 801 P.2d 1054].) In Shoemaker, we described that bargain as follows: “[T]he employer assumes liability for industrial personal injury or death without regard to fault in exchange for limitations in the amount of that liability. The employee is afforded relatively swift and certain payment of benefits to cure or relieve the effects of industrial injury without having to prove fault but, in exchange, gives up the wider range of damages potentially available in tort. [Citations.]” (Ibid.) The Act’s exclusivity clause applies to work-related injuries regardless of fault, including those attributable to the employer’s negligence or misconduct (Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 160 [233 Cal. Rptr. 308, 729 P.2d 743]), as well as the employer’s failure to provide a safe workplace (Royster v. Montanez (1982) 134 Cal. App.3d 362, 371 [184 Cal. Rptr. 560]). But the exclusivity clause does not preclude the employee from suing anyone else whose conduct was a proximate cause of the injury. (§ 3852; Dafonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 598 [7 Cal. Rptr.2d 238, 828 P.2d 140]; County of San Diego v. Sanfax Corp. (1977) 19 Cal.3d 862, 873 [140 Cal. Rptr. 638, 568 P.2d 363].)

698*698 To encourage employers to obtain workers’ compensation insurance for their employees, the Act’s “exclusive remedy” clause does not apply in favor of employers that fail to obtain such insurance, and consequently they are not immune from tort liability for such injuries. (§ 3706.) Conversely, an employer that provides compensation coverage has no further liability for workplace injuries to an employee. Therefore, if a nonnegligent third party pays damages for an employee’s injuries that are attributable in whole or in part to the negligence of the employer, the Act’s limitations on employer liability preclude the third party from obtaining equitable indemnity from the employer. (§ 3864; see generally, Alameda Tank Co., Inc. v. Starkist Foods, Inc. (1980) 103 Cal. App.3d 428, 433 [162 Cal. Rptr. 924].)

 

V

 

When an independent contractor causes injury to the contractor’s own employee, the Act’s “exclusive remedy” provision shields the contractor from further liability for the injury. Yet, under the expansive view of the peculiar risk doctrine that has been adopted in California and a minority of other jurisdictions, the person who hired the independent contractor can, for the same injury-causing conduct of the contractor, be held liable in a tort action for the injuries to the contractor’s employee. Because this expansive view produces the anomalous result that a nonnegligent person’s liability for an injury is greater than that of the person whose negligence actually caused the injury, it has been widely criticized. (See generally, Comment, supra, 22 U.C. Davis L.Rev. at pp. 231-235; id. at p. 218, fn. 18 [and cases cited therein]; High Rise Benefits, supra, 19 Loyola L.A.L.Rev. 1495; A Workable Proposal, supra, 48 Fordham L.Rev. 1165.) Indeed, most courts that have considered the issue have refused to extend the peculiar risk doctrine to allow such an employee to recover tort damages from the person who hired the contractor. (Wagner v. Continental Cas. Co. (1988) 143 Wis.2d 379 [421 N.W.2d 835]; Peone v. Regulas Stud Mills (1987) 113 Idaho 374 [744 P.2d 102, 106]; Jones v. Chevron U.S.A., Inc. (Wyo. 1986) 718 P.2d 890; Vertentes v. Barletta Co., Inc. (1984) 392 Mass. 165 [466 N.E.2d 500]; Johns v. New York Blower Co. (Ind. Ct. App. 1982) 442 N.E.2d 382 [34 A.L.R.4th 904]; Tauscher v. Puget Sound Power and Light Co. (1981) 96 Wn.2d 274 [635 P.2d 426]; Cooper v. Metropolitan Government of Nashville and Davidson County (Tenn. Ct. App. 1981) 628 S.W.2d 30; Conover v. Northern States Power Co. (Minn. 1981) 313 N.W.2d 397; Jackson v. Petit Jean Electric Co-op (1980) 279 Ark. 506 [606 S.W.2d 66]; Donch v. Delta Inspection Services, Inc. (1979) 165 N.J. Super. 567 [398 A.2d 925]; Vagle v. Pickands Mather & Co. (8th Cir.1979) 611 F.2d 1212, 1218 [interpreting Minn. law]; Sloan v. Atlantic Richfield Co. (Alaska 1976) 552 P.2d 157; King v. Shelby Rural Electric Cooperative Corp. (Ky. Ct. App. 1973) 502 S.W.2d 659; Olson 699*699 v. Kilstofte and Vosejpka, Inc. (D.Minn. 1971) 327 F. Supp. 583, 587; Welker v. Kennecott Copper Co. (1965) 1 Ariz. App. 395 [403 P.2d 330]; but see Elliott v. Public Service Co. of N.H. (1986) 128 N.H. 676 [517 A.2d 1185].)

As one court observed, the “principal” who hires an independent contractor should be subject to no greater liability “than its [independent contractor] agent,” whose exposure for injury to an employee is limited to providing workers’ compensation insurance. (Olson v. Kilstofte and Vosejpka, Inc., supra, 327 F. Supp. 583, 587.) Other courts have reasoned that the rule of workers’ compensation exclusivity, which shields an independent contractor who pays workers’ compensation insurance premiums from further liability to its employees for on-the-job injuries, should equally protect the property owner who, in hiring the contractor, is indirectly paying for the cost of such coverage, which the contractor presumably has calculated into the contract price. Therefore, these courts have concluded, the property owner should not have to pay for injuries caused by the contractor’s negligent performance of the work when workers’ compensation statutes already cover those injuries. (Jones v. Chevron U.S.A., Inc., supra, 718 P.2d at p. 899; Johns v. New York Blower Co., supra, 442 N.E.2d at p. 388; Vertentes v. Barletta Co., Inc., supra, 466 N.E.2d at p. 503; Welker v. Kennecott Copper Co., supra, 403 P.2d 330, 338-339; Tauscher v. Puget Sound Power and Light Co., supra, 635 P.2d at p. 430; Jackson v. Petit Jean Elec. Co-op., supra, 606 S.W.2d at p. 69; Wagner v. Continental Cas. Co., supra, 421 N.W.2d at pp. 842-843; Donch v. Delta Inspection Services, Inc., supra, 398 A.2d at p. 929; Peone v. Regulas Stud Mills, supra, 744 P.2d at p. 106; see also A Workable Proposal, supra, 48 Fordham L.Rev. at p. 1180.)

Similar reasoning appears in a tentative draft of the Restatement Second of Torts; it too concludes that a hiring party’s liability should not extend to an independent contractor’s employees who are injured as a result of the negligently performed contracted work. (Rest.2d Torts (Tent. Draft. No. 7, Apr. 16, 1962) ch. 15, special note, pp. 17-18 [recognizing that workplace injuries incurred by an independent contractor’s employees are covered by workers’ compensation insurance, the cost of which is “included by the contractor in his contract price” and “ultimately … borne by the defendant who hires him”].) The tentative draft’s proposed limitation on liability was not included in the Restatement itself, however, because of the lack of uniformity in the workers’ compensation statutes that have been adopted throughout the United States. (See Proceedings of ALI (39th Ann. Meeting, 1962) pp. 244-246; see also High Rise Benefits, supra, 19 Loyola L.A. L.Rev. 1496, 1505.)

Courts and legal commentators have expressed concern that to allow an independent contractor’s employees who incur work-related injuries compensable under the workers’ compensation system to also seek damages 700*700 under the doctrine of peculiar risk from the person who hired the contractor would give those employees an unwarranted windfall. As these authorities point out, to permit such recovery would give these employees something that is denied to other workers: the right to recover tort damages for industrial injuries caused by their employer’s failure to provide a safe working environment. This, in effect, would exempt a single class of employees, those who work for independent contractors, from the statutorily mandated limits of workers’ compensation. (Vagle v. Pickands Mather & Co., supra, 611 F.2d 1212, 1218; High Rise Benefits, supra, 19 Loyola L.A. L.Rev. 1495, 1499; A Workable Proposal, supra, 48 Fordham L.Rev. at p. 1180; see also West v. Guy F. Atkinson Construction Co. (1967) 251 Cal. App.2d 296, 301 [59 Cal. Rptr. 286].) Moreover, to impose vicarious liability for tort damages on a person who hires an independent contractor for specialized work would penalize those individuals who hire experts to perform dangerous work rather than assigning such activity to their own inexperienced employees. (Wagner v. Continental Cas. Co., supra, 421 N.W.2d at p. 842; King v. Shelby Rural Electric Cooperative Corp., supra, 502 S.W.2d at p. 663.)

 

VI

 

As mentioned earlier, we have, since our decision in Woolen v. Aerojet General Corp., supra, 57 Cal.2d 407, adhered to the view that under the doctrine of peculiar risk an employee of an independent contractor injured on the job may seek tort damages from the person who hired the contractor. Until today, we have had no occasion to attempt to reconcile our decision in Woolen with the provision of the workers’ compensation scheme limiting employer liability for an employee’s work-related injury to providing workers’ compensation coverage.

Our most recent application of the peculiar risk doctrine occurred in Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d 502, a case in which an employee of a wrecking firm hired by a brewery to demolish some of its buildings was awarded tort damages against the brewery owner for on-the-job injuries. In discussing the issue of the workers’ compensation insurance carrier’s entitlement to reimbursement from the brewery for benefits paid to the employee, we made only a passing reference to the employee’s receipt of workers’ compensation. We did not address the propriety of imposing vicarious liability on the brewery owner for a workplace injury that was subject to workers’ compensation coverage. To justify imposition of liability on the brewery owner for injuries to the independent contractor’s employee, we merely reiterated policy reasons supporting peculiar risk liability generally, including the ability of persons held liable under the peculiar risk 701*701 doctrine to seek indemnification from the negligent contractor. (Aceves v. Regal Pale Brewing Co., supra, at p. 508.) Not considered in Aceves, however, was the unavailability of equitable indemnity from a negligent employer whose employee is covered by workers’ compensation, an issue we address here.

When a property owner or general contractor who hires an independent contractor for work presenting a peculiar risk of harm to others is held liable under the doctrine of peculiar risk for injuries to an innocent bystander or an owner of neighboring land, the property owner or general contractor can, for the damages paid the injured party, obtain equitable indemnity from the independent contractor responsible for the injuries. This ensures that the ultimate responsibility for the harm caused by the peculiar risk of the work done is borne by the individual or entity at fault for the injury. But when the person injured is an employee of the independent contractor, the exclusivity provisions of the workers’ compensation scheme shield the negligent contractor from an action seeking equitable indemnity. (§ 3864.) Not present in such a case is a significant policy justification for imposing peculiar risk liability on a nonnegligent party: the ability of the person held liable on a peculiar risk theory to be made whole by the party responsible for the injury. As one California Court of Appeal has recognized, affixing liability without indemnification places an onerous burden on someone who is “fault-free.” (Anderson v. Chancellor Western Oil Dev. Corp. (1975) 53 Cal. App.3d 235, 242-243, fn. 2 [125 Cal. Rptr. 640].)

The availability of equitable indemnity, as mentioned earlier, is but one of several policy reasons that generally support the imposition of peculiar risk liability. In addition, the peculiar risk doctrine seeks to ensure that injuries caused by contracted work will not go uncompensated, that the risk of loss for such injuries is spread to the person who contracted for and thus primarily benefited from the contracted work, and that adequate safety measures are taken to prevent injuries resulting from such work. (Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 508.) But in the case of on-the-job injury to an employee of an independent contractor, the workers’ compensation system of recovery regardless of fault achieves the identical purposes that underlie recovery under the doctrine of peculiar risk: It ensures compensation for injury by providing swift and sure compensation to employees for any workplace injury; it spreads the risk created by the performance of dangerous work to those who contract for and thus benefit from such work, by including the cost of workers’ compensation insurance in the price for the contracted work; and it encourages industrial safety.

Therefore, when considered in light of the various goals that the workers’ compensation statutes seek to achieve, our conclusion in Woolen v. Aerojet 702*702 General Corp., supra, 57 Cal.2d 407, that peculiar risk liability should extend to the employees of the independent contractor, does not withstand scrutiny.[4] Moreover, such a broad extension of the doctrine of peculiar risk is inconsistent with the approach taken by a majority of jurisdictions, and with the view expressed by the drafters of the Restatement Second of Torts.

 

VII

 

In his complaint against Privette (the owner of the duplex where roofing employee Contreras was injured while installing a roof), Contreras asserted Privette’s liability under the doctrine of peculiar risk for the injuries suffered. Without question, Contreras’s injuries arose “out of and in the course of … employment,” and thus are subject to workers’ compensation coverage. (§ 3600.) Thus, the doctrine of peculiar risk affords Contreras no basis for seeking damages from Privette for the same injuries compensable under the workers’ compensation scheme.

The complaint also alleged as a separate cause of action that Privette was negligent in his hiring of the Krause roofing firm, which employed Contreras. But, as mentioned at the outset, Contreras abandoned that theory of recovery.

Throughout this litigation, Privette has asserted that the injury-causing conduct, transporting hot tar up a ladder in a bucket, was a “collateral” as opposed to a “peculiar” risk of tar and gravel roofing. We need not address this contention in view of our conclusion that because workplace injuries are covered by workers’ compensation, liability under the doctrine of peculiar risk does not extend to the employees of an independent contractor hired to do dangerous work.

 

CONCLUSION

 

When, as here, the injuries resulting from an independent contractor’s performance of inherently dangerous work are to an employee of the contractor, and thus subject to workers’ compensation coverage, the doctrine of peculiar risk affords no basis for the employee to seek recovery of tort damages from the person who hired the contractor but did not cause the injuries. Thus, in this case, roofing employee Contreras is precluded from suing duplex owner Privette for injuries compensable under the workers’ compensation system.

Accordingly, the judgment of the Court of Appeal is reversed with directions to grant the petition for writ of mandate ordering respondent court to enter judgment for defendant. The alternative writ is discharged.

703*703 Lucas, C.J., Mosk, J., Panelli, J., Arabian, J., Baxter, J., and George, J., concurred.

The petition of real party in interest for a rehearing was denied September 16, 1993, and the opinion was modified to read as printed above.

[1] At the time of the summary judgment motion, it was uncontested that Contreras, in response to interrogatories, had abandoned his theory that Privette was negligent in hiring Krause.

[2] The conclusion that peculiar risk is a form of vicarious liability is unaffected by the characterization of the doctrine as “direct” liability in situations when the person hiring an independent contractor “fails to provide in the contract that the contractor shall take [special] precautions.” (Rest.2d Torts, § 413; see Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 509; Griesel v. Dart Industries, Inc. (1979) 23 Cal.3d 578, 585-586 [153 Cal. Rptr. 213, 591 P.2d 503].) Irrespective of whether a contract of hire provides that special precautions be taken, a person who employs an independent contractor to perform dangerous work is subject to liability under the doctrine of peculiar risk. (Rest.2d Torts, § 416.) Thus, peculiar risk liability is normally premised on the broader rule of vicarious liability for the contractor’s negligence. (See A Workable Proposal, supra, 48 Fordham L.Rev. 1165, 1171; Bower v. Peate, supra, 1 Q.B.D. at p. 326 [the contractor’s default is attributable to the person who authorized the work].)

[3] Further statutory references are to the Labor Code.

[4] To the extent that they hold to the contrary, Woolen v. Aerojet General Corp., supra, 57 Cal.2d 407, and its progeny are overruled.

Mojtahedi v. Carpenter

Summary by Pejman D. Kharrazian, Esq.:

 

Homeowners Mojtahedi and Carpenter both served on the association’s board together. Mojtahedi sued Carpenter, the association, and other board members for, among other things, breach of fiduciary duty, breach of written contract, and injunctive relief. Mojtahedi contends that (1) Carpenter funneled Association funds to projects and repairs to common area that directly benefitted Carpenter’s unit, (2) the repairs were capital improvements that required membership approval, but Carpenter wrongfully characterized them as “emergency repairs”, and (3) Carpenter failed to disclose his own interest in the projects and recuse himself from voting on the repairs, and bypassed the association’s bidding process by hiring his friends to the work. Carpenter filed an anti-SLAPP motion to strike certain portions of Mojtahedi’s complaint. The trial court denied Carpenter’s anti-SLAPP motion. Carpenter appealed. The appellate court held that Mojtahedi’s claims did not arise from Carpenter’s protected activities because (1) the Carpenter’s votes during board meetings were incidental to the alleged wrongful conduct and (2) the Carpenter’s false statements alleging the emergency-nature of the repairs did not occur in the context of an ongoing controversy, dispute, or discussion. Specifically, the board voted on these repairs during two meetings and two instances is not enough to show that there was an ongoing debate about Carpenter’s characterization of the repairs as emergency repairs. In other words, Carpenter’s alleged false statements did not concern a public issue or an issue of public interest. The appellate court affirmed the trial court’s ruling to deny Carpenter’s anti-SLAPP motion.

TAKEAWAY: Whether or not a court will grant or deny a defendant’s anti-SLAPP motion is extremely fact dependent and complicated. If you, as a board member, or your association is sued and you believe that the suit is based on the exercise of protected activity, please contact your legal counsel for further guidance.

***End Summary***

2022 Cal. App. Unpub. LEXIS 5618; 2022 WL 4231818.

No. G059691.

Court of Appeals of California, Fourth District, Division Three.

Filed September 14, 2022.
Appeal from an order of the Superior Court of Orange County, Super. Ct. No. 30-2018-00998174, Robert J. Moss, Judge. Affirmed.

London Fischer, Nicholas W. Davila and Jeffrey W. Griffith; Azar Law Group, David E. Azar; Benedon & Serlin, Gerald M. Serlin and Wendy S. Albers for Defendant and Appellant.

Hejazi Law Group, Ashkan Hejazi; Ezner, Chang & Boyer, Andrew N. Chang and Kevin K. Nguyen for Plaintiffs and Respondents.

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

 

OPINION

 

SANCHEZ, J.

Plaintiffs Michael Mojtahedi and Mojdeh Mojtahedi along with defendant Greg Carpenter are homeowners in a condominium complex in Laguna Beach, California. Plaintiff Mojdeh Mojtahedi and defendant concurrently served on the homeowners association’s board of directors. Plaintiffs sued defendant, the homeowners association, and other individual board members for breach of written contract, enforcement of equitable servitudes, breach of fiduciary duty, declaratory relief, and injunctive relief. Among other things, the complaint alleges defendant wrongfully used funds from the homeowners association for projects and repairs benefiting his units and failed to disclose his personal interests. The complaint also alleges defendant misrepresented some of the improvements as emergency repairs. The relevant repairs occurred when defendant was president of the board of directors.

Defendant filed a special motion to strike (anti-SLAPP motion) under Code of Civil Procedure section 425.16.[1] He asserted plaintiffs’ claims arose, in part, from protected activity because some of the allegations concerned his statements or voting at board meetings. He also argued plaintiffs could not establish a likelihood of success on their claims.

The court denied the anti-SLAPP motion, finding plaintiffs’ claims did not arise from the protected conduct of voting. Instead, the court found plaintiffs’ claims arose from defendant’s “failure to disclose a number of material facts to benefit himself, and the spending of large sums of the Association’s money and reserves in violation of the project documents, state law, or based upon [his] fiduciary duty to members of the association.” The court concluded any voting allegations were incidental to the alleged wrongdoing. Defendant appealed.

After reviewing the record de novo, we conclude the court properly denied the anti-SLAPP motion. As we explain below, plaintiffs’ claims did not arise from protected activity. We therefore affirm.

 

FACTS

 

 

Relevant Background

 

The Laguna Sands condominium complex (Laguna Sands) consists of 32 units on the waterfront in Laguna Beach. The complex is governed by Laguna Sands, Inc. (HOA), a homeowners association. Each homeowner is a member of the HOA. The HOA’s board of director’s (the Board) consists of five directors and one alternate director.

In 2009, plaintiffs purchased one of the units at Laguna Sands. Defendant also owns a unit at Laguna Sands and previously owned a second unit. Both plaintiff Mojdeh Mojtahedi and defendant concurrently served on the Board during the time period relevant to the instant case. Defendant served as the president of the Board from January 2016 to December 2018.

 

The Complaint

 

Plaintiffs initiated the instant action in June 2018. In September 2019, plaintiffs filed a second amended complaint against defendant as well as the HOA and two other Board members who are not parties to this appeal.[2] The complaint generally alleges defendant was involved in funneling HOA funds to projects and repairs benefiting his units or common areas adjacent to his units.

In May 2017, defendant allegedly called a telephonic Board meeting for emergency repairs to the walkway adjacent to his unit. In July 2017, he called another telephonic Board meeting for emergency repairs to the wall on the second floor. He also “arm-twisted and manipulated the Board” to approve a new elevator. In December 2017, the Board approved the repair and replacement of the hallway wall immediately adjacent to defendant’s unit. Defendant also unilaterally approved a change to the color and texture of the hallway walls but failed to secure the proper permits for these improvements. In February 2018, the Board approved deck coating and waterproofing for the hallway next to defendant’s unit. In April 2018, defendant unilaterally approved work on a vertical drain and vent lines for his unit. He also allegedly approved multiple plumbing repairs that benefited his units. Finally, in July 2018, he demanded an emergency repair of the pool deck. The complaint alleges the remodel was intended to increase the sale value of defendant’s unit, which overlooked the pool deck. In total, the complaint claims defendant induced the Board to approve approximately $150,000 in improvements directly benefiting defendant or his units.

The complaint also alleges the repairs were capital improvements requiring majority homeowner approval under the HOA’s declaration of covenants, conditions, and restrictions (CC&Rs). But defendant wrongfully characterized the improvements as “emergency” repairs to bypass the CC&Rs and bylaws. He further failed to disclose his own interest in the projects or recuse himself from voting on the improvements. Finally, the complaint alleges defendant bypassed the bidding process for construction work by hiring his friends to do the work.

Based on the above allegations, the complaint alleges causes of action for breach of written contract, enforcement of equitable servitudes, breach of fiduciary duty, declaratory relief, and injunctive relief.

 

The Anti-SLAPP Motion

 

In 2019, defendant filed an anti-SLAPP motion seeking to strike certain portions of the complaint. The motion specifically sought to strike allegations arising from statements defendant made or how he voted at the Board meetings. Defendant argued these allegations arose from protected activity because the statements and decisions occurred in a public forum and pertained to issues of public interest within the condominium association community. He also argued plaintiffs could not establish a likelihood of success on their claims because his decisions were protected by the business judgment rule.

The court denied the anti-SLAPP motion. Citing Talega Maintenance Corp. v. Standard Pacific Corp. (2014) 225 Cal.App.4th 722 (Talega), the court noted a cause of action generally does not arise from protected activity just because protected activity may have triggered the cause of action. The court then reasoned defendant’s “alleged voting as a Board member was incidental to the alleged wrongdoing, i.e., the improper spending of large sums of HOA funds for projects that either directly, or indirectly benefited [him] personally.” While plaintiffs’ claims involved the act of voting, the court held the claims did not arise from defendant’s act of voting with the Board. Instead, the court emphasized plaintiffs’ claims arose from defendant’s “failure to disclose a number of material facts to benefit himself, and the spending of large sums of the Association’s money and reserves in violation of the project documents, state law, or based upon [his] fiduciary duty to members of the association.” Because the claims did not arise from the protected conduct of voting, the court held any specific allegations likewise were incidental to the claims. The court did not address whether plaintiffs had established a probability of success on the merits.

 

DISCUSSION

 

Defendant contends the court erred by denying his anti-SLAPP motion. He argues plaintiffs’ claims arise, in part, from protected activity because plaintiffs’ challenge is based on how he voted and expressed himself on matters of public interest. In other words, defendant claims plaintiffs’ pleaded mixed causes of action resting on allegations of multiple acts, including some of which were protected activity. He also argues plaintiffs cannot prevail on the merits because his decisions were protected by the business judgment rule under Corporations Code section 7231 and the challenged repair decisions did not require majority homeowner approval.

Contrary to defendant’s assertion, plaintiffs’ claims do not arise from defendant’s protected activities. While defendant identifies some allegations that involved the act of voting, those allegations were incidental to the alleged wrongdoing — defendant’s withholding of information and self-dealing. Other allegations regarding defendant’s misrepresentations about emergency repairs were not made in connection with a public issue or an issue of public interest because the record does not show there was an ongoing controversy, dispute, or discussion about the issue. We therefore affirm.

 

Applicable Law and Standard of Review

 

“[T]he anti-SLAPP statute is designed to protect defendants from meritless lawsuits that might chill the exercise of their rights to speak and petition on matters of public concern. [Citations.] To that end, the statute authorizes a special motion to strike claims `arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.'” (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 883-884.)

The trial court conducts a potentially two-step inquiry to evaluate an anti-SLAPP motion. (Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009 (Bonni).) First, the court must decide whether the defendant has met its burden of establishing the plaintiff’s claim arises from protected activity in which the defendant has engaged. (Ibid.) Second, assuming defendant has met its burden, the court determines whether the plaintiff has established “there is a probability . . . the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).) In meeting this burden, “the plaintiff must show the claim has `at least “minimal merit.”‘” (Bonni, at p. 1009.)

We review the court’s ruling de novo, applying the legal principles discussed above. (Falcon Brands, Inc. v. Mousavi & Lee, LLP (2022) 74 Cal.App.5th 506, 518.)

 

Protected Activity

 

In determining whether plaintiffs’ claims arise from protected activity, “the critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) “At this first step, courts are to `consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability.’ [Citation.] The defendant’s burden is to identify what acts each challenged claim rests on and to show how those acts are protected under a statutorily defined category of protected activity.” (Bonni, supra, 11 Cal.5th at p. 1009.) “We review the parties’ pleadings, declarations, and other supporting documents at this stage of the analysis only `to determine what conduct is actually being challenged, not to determine whether the conduct is actionable.'” (Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490-491.)

If a plaintiff pleads mixed causes of action based on allegations of both protected and unprotected activity, “analysis of an anti-SLAPP motion is not confined to evaluating whether [the] entire cause of action, as pleaded by the plaintiff, arises from protected activity or has merit.” (Bonni, supra, 11 Cal.5th at p. 1010.) Instead, courts analyze each act supplying a basis for relief to determine whether the acts are protected. (Baral v. Schnitt (2016) 1 Cal.5th 376, 393, 395 (Baral).) “So long as a `court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached’ with respect to these claims.” (Bonni, at p. 1010.) But “[a]llegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.” (Baral, at p. 394.)

The anti-SLAPP statute identifies four categories of protected activity: “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any 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 on an issue of public interest.” (§ 425.16, subd. (e)(1)-(4).)

Relying on the latter two categories, defendant insists plaintiffs’ claims are based on how he voted and what he said on matters of public interest (common area maintenance and repair work) at seven Board meetings. (§ 425.16, subd. (e)(3)-(4).) He points to the following allegations in the complaint: (1) defendant “made numerous decisions and votes . . . that were influenced by his interests rather than the interests of the HOA and Members”; (2) defendant “did not disclose his . . . interests . . . in numerous votes and decisions made by the Board and then failed to recuse himself from discussions and votes on those issues”; (3) defendant “used his status as President to actively influence those same votes”; (4) defendant “obtained the necessary votes through a storm of misrepresentations, threats of lawsuits against the Board, arm-twisting, and deceit”; (5) defendant breached the CC&Rs and bylaws by engaging in wrongful conduct, which included “wrongfully characterizing non-emergency capital improvements as `emergency’ repairs”; and (6) defendant breached his duties by “intentionally misrepresenting the existence of an `Emergency Situation’ as defined by the CC&Rs.” The first four categories involve the act of voting while the latter two categories concern defendant’s alleged misrepresentations regarding emergency repairs. We address each in turn.

 

A. Voting Allegations

 

While some of the complaint’s allegations involved the act of voting at Board meetings, “voting is not per se protected activity.” (Talega, supra, 225 Cal.App.4th at p. 729, italics added.) Indeed, these allegations appear in two short paragraphs under the “introduction” section of the complaint’s background allegations. They merely provide context for defendant’s wrongful expenditure of HOA funds for projects that benefited him personally and for his failure to disclose material facts. In other words, plaintiffs’ claims could be asserted without reference to defendant’s voting.

For example, in the fifth cause of action for breach of fiduciary duty, the complaint emphasizes defendant breached his duties “by using his position as a Board member to direct a substantial amount of HOA funds to improve his units or common areas immediately adjacent to his units.” The complaint also alleges defendant breached his duties by “repeatedly hir[ing] his friends to perform repairs and improvements” and by failing “to disclose his . . . interest[s]. . . .” In the third and fourth causes of action for breach of contract and equitable servitudes, the complaint alleges defendant breached the HOA’s governing documents by failing to follow proper procedures when signing contracts and before performing repairs. Neither defendant’s voting nor any statements were the wrongful conduct at issue. The complaint references defendant’s voting as context and evidence of his efforts to seek personal gain. Thus, defendant’s voting as a Board member was incidental to the alleged wrongdoing.

Talega, supra, 225 Cal.App.4th 722 is instructive. In Talega, a homeowners association sued two developers and former board members who were appointed by the developers to serve on the board. (Id. at p. 726.) After riding and hiking trails were damaged by severe rain, the board members represented that the association was responsible and expended HOA funds to pay for the repairs. (Ibid.) Several years later, independent board members discovered the developers were financially responsible and the trails’ failure was likely due to construction defects. (Id. at pp. 726-727.) The homeowners association filed suit, alleging causes of action for breach of fiduciary duty, fraud, constructive fraud, construction defect, negligence, and declaratory relief. (Id. at pp. 727-728.) According to the complaint, the former board members knew, but failed to disclose, the developers were responsible for the repairs and that the damages were caused by the developers’ improper construction. (Id. at p. 726.) The board members filed an anti-SLAPP motion arguing the claims arose from protected statements they made at board meetings. (Id. at p. 729.)

Another panel of this court denied the anti-SLAPP motion. (Talega, supra, 225 Cal.App.4th at p. 735.) With respect to the breach of fiduciary duty, constructive fraud, and negligence claims, the court found the claims were “principally based on the Developer Board Members withholding information and improperly directing the expenditure of funds.” (Id. at p. 728.) The court acknowledged “the expenditure of money may have been precipitated by a vote.” (Id. at p. 729.) But the court emphasized “`the fact that protected activity may have triggered a cause of action does not necessarily mean the cause of action arose from the protected activity.'” (Ibid.) The court accordingly concluded the vote was merely incidental to the wrongful conduct. (Id. at pp. 729-730.) As to the fraud cause of action, the court held the issue was a “closer question.” (Id. at p. 730.) But the court determined the claim was not based on protected activity because the alleged fraudulent statements were not made in connection with an issue of public interest. (Id. at p. 734.) The court noted the issue of who would pay for repairing the trails was not subject to any controversy, dispute, or discussion. (Ibid.)

Like the complaint in Talega, the complaint here is not based on defendant’s speech or petitioning activity. Instead, the complaint challenges defendant’s withholding of information and self-dealing, which included the wrongful expenditure of HOA funds for projects that benefited him personally. Defendant’s vote is not the wrong complained of, but instead “a step leading to some different act for which liability is asserted.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1060.)

Defendant suggests Talega is no longer controlling in light of Baral, supra, 1 Cal.5th 376. Not true. In Baral, our Supreme Court held an anti-SLAPP motion can be directed to specific allegations of protected activity within a cause of action that also includes allegations of unprotected activity. (Baral, at pp. 382, 392-393.) But the court reaffirmed “assertions that are `merely incidental’ or `collateral’ are not subject to” an anti-SLAPP motion. (Id. at p. 394.) Indeed, in Bonni, supra, 11 Cal.5th 995, our Supreme Court later clarified that not every court labeling its approach as a gravamen test has erred because courts can “determine whether particular acts alleged within the cause of action supply the elements of a claim [citation] or instead are incidental background. . . .” (Id. at p. 1012.)

Defendant’s reliance on Lee v. Silveira (2016) 6 Cal.App.5th 527 (Lee) also is misplaced. In Lee, minority board members sued six other board members regarding the board’s renewal of the association’s management contract and the decisionmaking process at board meetings. (Id. at pp. 530-531, 542.) The defendants filed an anti-SLAPP motion arguing the declaratory relief claim was based on their decisions and statements at board meetings. (Id. at p. 531.) In reversing the trial court’s denial of the anti-SLAPP motion, the court held the plaintiffs’ claim arose from the defendants’ voting at board meetings. (Id. at p. 545.) The court emphasized “it [was] significant” the defendants were individual board members and not the homeowners association. (Id. at p. 542.)

Unlike the plaintiffs in Lee, plaintiffs are not suing defendant based on his individual vote. As discussed ante, defendant’s vote was incidental to the claims, which concerned the violation of his fiduciary duties. The other cases defendant cites are distinguishable for the same reason. (Schwarzburd v. Kensington Police Protection & Community Services Dist. Bd. (2014) 225 Cal.App.4th 1345; City of Montebello v. Vasquez (2016) 1 Cal.5th 409.) We also note the plaintiffs in Lee did not sue the association. In the instant case, plaintiffs filed a derivative suit and named the HOA as a defendant.

For the foregoing reasons, any voting allegations were incidental and did not relate to any protected activity.

 

B. Allegations Regarding Misrepresented Emergency Repairs

 

In the first and second causes of action for breach of contract and enforcement of equitable servitudes, the complaint alleges defendant breached the HOA’s governing documents and his duties by misrepresenting the improvements as emergency repairs. These allegations present a closer question.

As noted ante, section 425.16, subdivision (e)(3) applies to statements “made in a place open to the public or a public forum in connection with an issue of public interest.” (Ibid.) Likewise, section 425.16, subdivision (e)(4) applies to any other conduct “in connection with a public issue or on an issue of public interest.” (Ibid.)

Plaintiffs argue section 425.16, subdivision (e)(3) does not apply because defendant’s written or oral statements are not at issue. We disagree. The complaint clearly alleges defendant made false representations and wrongful characterizations about the repairs. Regardless, we find section 425.16, subdivisions (e)(3) and (e)(4) do not apply because the allegedly false statements were not made in connection with a public issue or an issue of public interest.

“In articulating what constitutes a matter of public interest, courts look to certain specific considerations, such as whether the subject of the speech or activity `was a person or entity in the public eye’ or `could affect large numbers of people beyond the direct participants’ [citation]; and whether the activity `occur[red] in the context of an ongoing controversy, dispute or discussion’ [citation], or `affect[ed] a community in a manner similar to that of a governmental entity.'” (FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133, 145-146.) Next, courts consider “what functional relationship exists between the speech and the public conversation about some matter of public interest.” (Id. at pp. 149-150.)[3]

Turning to the context here, defendant was not a person or entity “in the public eye.” (FilmOn.com Inc. v. DoubleVerify Inc., supra, 7 Cal.5th at p. 146.) The issue also was not of interest to the public at large but to a limited portion of the public — namely, the HOA’s 32 members. At a minimum, the speech or conduct therefore had to occur in the context of an ongoing controversy, dispute or discussion. (Talega, supra, 225 Cal.App.4th at p. 734, quoting Du Charme v. International Brotherhood of Electrical Workers (2003) 110 Cal.App.4th 107, 119.) Defendant contends he satisfied this requirement because plaintiff Mojdeh Mojtahedi objected to the repairs. He also points to his declaration, which generally stated agenda topics were discussed at every Board meeting. But the record before us does not establish there was an ongoing controversy, dispute, or discussion surrounding defendant’s characterization of the improvements as emergency repairs. Indeed, plaintiff Mojdeh Mojtahedi was not even present and did not vote on the emergency repairs at issue during the May 2017 and July 27, 2017 Board meetings. While it appears she voted against the emergency repairs at issue during the July 10, 2017 and July 2018 Board meetings, these two instances are insufficient to show there was an ongoing topic of debate about defendant’s characterization of the improvements as emergency repairs. (Talega, supra, 225 Cal.App.4th at p. 734 [statement that homeowners association was liable for certain repairs did not involve a matter of public interest because “there was no controversy about the issue”].)

Defendant relies on distinguishable cases where the requirement of an ongoing controversy, dispute, or discussion was satisfied. In Lee, supra, 6 Cal.App.5th 527, the court emphasized the defendants’ voting on a roofing project and management contract had divided the board. (Id. at pp. 542-543.) In Cabrera v. Alam (2011) 197 Cal.App.4th 1077, the defamatory statements were made in the context of an election campaign and accused the plaintiff of stealing money from the homeowners association. (Id. at pp. 1081-1082.) Finally, in Colyear v. Rolling Hills Community Assn. of Rancho Palos Verdes (2017) 9 Cal.App.5th 119, the court found “there was an ongoing controversy, dispute, or discussion regarding the applicability of tree-trimming covenants to lots not expressly burdened by them, and the [homeowners association’s] authority to enforce such covenants.” (Id. at pp. 132-133.) Although the evidence was sparse, the court concluded that “the issue was an ongoing topic of debate between the board and homeowners, resulting in multiple hearings, letters, and several changes to the board’s policy on the matter starting as early as 2002 and continuing up to the current dispute.” (Id. at p. 133.)

Because the emergency repairs in the instant case were noncontroversial issues pending before the Board, defendant’s allegedly false statements did not concern a public issue or an issue of public interest. For the foregoing reasons, the complaint does not seek relief based on allegations arising from protective activity. We accordingly need not address the second prong of the anti-SLAPP analysis. (Sheley v. Harrop (2017) 9 Cal.App.5th 1147, 1162.)

 

DISPOSITION

 

The order is affirmed. Plaintiffs shall recover costs incurred on appeal.

BEDSWORTH, ACTING P. J. and MARKS, J.,[*] concurs.

[1] All further statutory references are to the Code of Civil Procedure.

[2] Plaintiffs subsequently filed a third amended complaint after defendant filed his anti-SLAPP motion. Because the anti-SLAPP motion is directed at the second amended complaint and the parties solely focus on the second amended complaint, we need not address the third amended complaint.

[3] FilmOn.com Inc. v. DoubleVerify Inc., supra, 7 Cal.5th 133 concerned protected conduct under section 425.16, subdivision (e)(4). (FilmOn.com Inc., at pp. 139-140.) Because section 425.16, subdivision (e)(3) similarly includes the requirement that a statement be “in connection with an issue of public interest,” the court’s consideration of context appears equally applicable to section 425.16, subdivision (e)(3).

[*] Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

 

Ambassador Real Estate v. Kashay

Summary by Pejman D. Kharrazian, Esq.:

 

Management company and the owner of the management company, who also served as the community manager for a 28-unit senior mobile home community (hereinafter “Plaintiffs”), sued Kashay who is a resident and owner of the mobile home community for defamation. The Plaintiffs’ defamation claim was based on the following: (1) Kashay raised her concerns to other members about Plaintiffs’ handing of the association’s finances, their handling of a recent board election, and the Plaintiff manager’s general mistreatment of other members; (2) Kashay filed a criminal complaint with the Sheriff’s Department alleging the Plaintiff manager committed elder abuse; and (3) Kashay also filed a complaint against Plaintiff management company with the Better Business Bureau (“BBB”) claiming the management company violated its contract with the association. In response to Plaintiffs’ defamation lawsuit, Kashay filed an anti-SLAPP motion. While the trial court denied Kashay’s anti-SLAPP motion, on appeal the appellate court found that Kashay’s criminal complaint, complaint to the BBB, and statements made to the community related to Plaintiffs’ handling of the association’s finances and recent board election were protected activity under the anti-SLAPP statute. The appellate court remanded the matter to the trial court for the trial court to consider whether Plaintiffs could demonstrate that their claims are meritorious such that they would likely prevail at trial.

TAKEAWAY: Homeowner criticisms of board members, the association’s management company, or the association’s manager related to association business or other association matters may be protected activity under the anti-SLAPP statute. Consequently, if a complaint is based on a defendant’s protected activity, the plaintiff may need to overcome a defendant’s anti-SLAPP motion before the lawsuit can move forward.
Additionally, it is extremely important to have all of the evidence needed to prove each element of defamation before filing a defamation lawsuit. It is also important to confirm that any witnesses are able and willing to testify in support of your defamation claim.

***End Summary***

2022 Cal. App. Unpub. LEXIS 1970; 2022 WL 951238.

No. D078302.

Court of Appeals of California, Fourth District, Division One.

 

Filed March 30, 2022.
APPEAL from an order of the Superior Court of San Diego County, Super. Ct. No. 37-2020-00000017-CU-DF-NC, Jacqueline Stern, Judge. Reversed.

Lynna Kashay, in pro. per., for Defendant and Appellant.

Lowell Robert Fuselier, in pro. per., for Plaintiffs and Respondents.

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

DO, J.

 

INTRODUCTION

 

Lowell Robert Fuselier, a California licensed attorney and real estate broker, owns and runs Ambassador Real Estate, Inc. (Ambassador), a property and homeowner association management service company. In July 2019, Osborne Mobile Home Park (Osborne Park), through its homeowner’s association (HOA), hired Ambassador to manage the HOA. Osborne Park is a senior community of 28 units with residents 55 years or older. Soon after Ambassador was hired, Lynna Kashay, a resident, raised concerns about the company’s management of the HOA, including its handling of the election of the HOA Board of Directors and Fuselier’s mistreatment of the members. Those concerns prompted Kashay to report Fuselier for elder abuse to the San Diego County Sheriff’s Department and to file a business complaint with the Better Business Bureau (BBB).

As a result, Ambassador and Fuselier (together, Plaintiffs) sued Kashay for defamation. As alleged in their complaint, the alleged defamatory statements arose from Kashay: (1) making a “criminal complaint against F[uselier] for [e]lder [a]buse to the San Diego Sheriff”; (2) filing “a business complaint against A[mbassador]” to the BBB; and (3) making various, vague statements “publicly” about Plaintiffs’ performance of their professional duties in managing the HOA.[1]

Kashay filed a special motion to strike the complaint as a strategic lawsuit against public participation (SLAPP) (Code Civ. Proc., § 425.16),[2] asserting that Plaintiffs filed the defamation action to chill her and other members of Osborne Park in “their attempt to speak out” against Plaintiffs’ mismanagement of the HOA. The trial court denied the anti-SLAPP motion, finding that Kashay failed to establish the alleged defamatory statements arose from any protected activity. We conclude that was error and we reverse.

 

FACTUAL AND PROCEDURAL BACKGROUND

 

 

I.

 

 

Relevant Facts

 

Osborne Park is a senior mobile home community of 28 separate units, located in Vista, California. Osborne Park was incorporated as a California non-profit mutual benefit corporation in 1987. Osborne Park, Inc. (OPI) is the corporate entity for Osborne Park. In 2018, OPI filed a “Statement by Common Interest Development Association” with the Secretary of State of California, in which it declared that it was a common interest development (CID) under the Davis-Stirling Common Interest Development Act (Davis-Stirling Act) (Civ. Code, § 4000 et seq.).[3]

The OPI articles of incorporation stated that its purpose “is to provide its members with space for mobile homes and community facilities on a non-profit basis.” The articles also stated that “any adult person” approved by the Board of Directors shall be eligible for membership, but that “at least eighty percent (80%)” of the heads of household must be 55 years of age or older, and that “no one under 45 may reside in [Osborne] Park.” (All capitalizations omitted.) According to Kashay, Osborne Park provides housing for low-income seniors, many of whom are primarily homebound due to illness or disability.

In July 2019, OPI hired Ambassador to manage the HOA. They entered into an “HOA Management Retainer Agreement” (the Agreement) for Ambassador to serve as the HOA’s “exclusive managing agent as that term is defined in California Civil Code section 4158.”[4] Civil Code section 4158 is part of the Davis-Stirling Act and defines “`managing agent'” as “a person who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development.” (Civ. Code, § 4158, subd. (a).) The Agreement provided that Ambassador “shall utilize its experience, professional skills and knowledge to assist the [HOA]’s Board and its committees in accordance with generally accepted industry standards in the area of Common Interest Development Management.” Among other responsibilities, Ambassador was to help the HOA’s Board of Directors in “accurately maintain[ing]” HOA records to comply with the Davis-Stirling Act.

In the summer of 2019, Kashay became a resident at Osborne Park.[5] Approximately six months later, in December 2019, Kashay was nominated to the HOA Board of Directors along with four other residents—Bill Bouma, John Fageol, Steve Guidry, and Sharon Payne. As reflected in the minutes of the December 10, 2019 board meeting, the nominees assumed their board positions without “the expense of an election” because “there were only nominations equal to the number of vacant positions.” Kashay “offered to be President” and Payne “offered to be Treasurer, but there was no motion or vote taken by the board to appoint the officers.”

Conflict quickly followed. According to Fuselier, Kashay “concluded that she was the President of [the] Osborne HOA over the objection of other board members.” She “immediately began issuing instructions to A[mbassador] regarding the finances of the [Osborne Park] HOA” but “A[mbassador] refused to follow [her] instructions.” When Fuselier “refused to support Kashay’s contention that she was appointed president,” Kashay “began a slanderous campaign” attacking Fuselier’s and Ambassador’s competency, “made a criminal complaint against F[uselier] for [e]lder [a]buse,” and filed a business complaint against Ambassador with the BBB.

On December 30, 2019, Fuselier sent an email to Kashay. He told Kashay: “You have 24 hours to withdraw your complaint to the BBB. If you do not, you will be named as a defendant in a suit for slander per se that I will file with the Superior Court this week. [¶] Also, if I hear that you spoke my name or the name Ambassador for any reason to anyone, I will file the action in the Superior Court.” (Italics added.) Three days later, on January 2, 2020, Fuselier and Ambassador filed this lawsuit against Kashay for defamation.

 

II.

 

 

The Defamation Lawsuit

 

In their complaint, Ambassador and Fuselier alleged their “business reputation for providing professional and ethical services to the public is critical to its success in the market place.” Further, “[k]eeping a client requires A[mbassador] to maintain a positive and trusting relationship with the HOA Board and the individual homeowners in an HOA.”

Plaintiffs alleged the Osborne Park HOA hired Ambassador to be its manager in July 2019. They attached to the complaint a copy of the Agreement for Ambassador to provide “HOA management” for Osborne Park. In December 2019, “[i]n accordance with California [l]aw and Osborne’s CC&R’s, A[mbassador] prepared election materials for the election of the Board of Directors,” but the election became unnecessary because “there were only nominations equal to the number of vacancies.” Plaintiffs also attached to the complaint a copy of the minutes of the December 10, 2019 board meeting, which showed Bouma, Fageol, Guidry, Payne and Kashay were nominated to the Board of Directors.

Plaintiffs alleged Kashay “nominated herself” for a position on the Board. “At the December 20, 2019 meeting, a disagreement arose about who should be president.” Kashay had “offered to be president . . . [but] no motion was made, and no vote was taken by the Board on the matter as required for the appointment of an officer pursuant to Osborne’s CC&R’s.” Plaintiffs also alleged that “Osborne’s CC&R’s require[ed] a minimum of six (6) months residency in the HOA in order to be eligible to hold a Board position” and Kashay’s “residency [was] less than 6 months at the drafting of [the] complaint.”

Plaintiffs alleged Kashay “nevertheless concluded that she was the President of [the] Osborne HOA over the objection of other board members.” She “immediately began issuing instructions to A[mbassador] regarding the finances of the HOA” but Ambassador refused to follow her instructions. Kashay then “attempted to intimidate board members into accepting her as the President” and, when they refused, Kashay “began a slanderous campaign to convince homeowners [to] force the Board to cancel A[mbassador]’s contract.”

“As part of that effort, K[ashay] made a criminal complaint against F[uselier] for [e]lder [a]buse to the San Diego Sheriff,” and “openly and publicly accused F[uselier] of the crime of [e]lder [a]buse.” Kashay then “made a second report to the San Diego Sheriff of a suspicious person harassing elderly people” while Fuselier was conducting business at the park. Law enforcement responded and Kashay identified Fuselier “as that `dangerous person.'”

Plaintiffs alleged Kashay “filed a business complaint against A[mbassador] and falsely stated in that complaint: Bob F[uselier], A[mbassador] Property Management, violating Osborne Park’s Contract. When these issues were brought to his attention, he slandered, smeared, called names, threatened, harassed, bullied and intimidated. He’s also taking advantage of the elderly and disabled.” (Italics omitted.)

Plaintiffs further alleged, “[i]ncluded but not limited to the following summary, K[ashay] has falsely and publicly stated that A[mbassador] and F[uselier] have committed crimes; breached fiduciary duties while performing their professional duties; committed gross negligence in the performance of their professional duties; breached their Contract while performing their duties; conduct[ed] management duties contrary to the Davis Sterling [sic] Act et seq.; conducted a fraudulent election; [committed] incompetence in performing management duties; improperly handled HOA funds; and [committed] the crime of [e]lder [a]buse in performing their management duties.”

Plaintiffs alleged Kashay’s statements were false, she knew them to be false and they were malicious because she made them with the intent to cause Plaintiffs injury and damage. Asserting a single cause of action for defamation, both libel and slander, Plaintiffs sought compensatory damages in an amount “exceeding $50,000” and an additional $100,000 in punitive damages.

 

III.

 

 

The Anti-SLAPP Motion

 

 

A. Kashay’s Anti-SLAPP Motion

 

As a self-represented litigant, Kashay filed a special motion to strike the complaint pursuant to section 425.16. Kashay asserted Plaintiffs filed the complaint “as an attempt to chill [hers and] an entire senior community’s First Amendment Right of free speech and their attempt to speak out regarding the way they are being treated by Plaintiff[s], improper elections, violations of [the HOA’s] Bylaws/CCRs, violations of [the] Davis-Stirling Law, and other laws.” She asserted the defamation cause of action arose from activities protected under section 425.16,[6] and identified the following three specific categories of protected speech.

First, Kashay asserted her statements criticizing Plaintiffs’ performance as the HOA manager were protected speech. She explained that “[t]here [wa]s an ongoing controversy of holding official, proper, defensible, and lawful elections of [the Osborne Park HOA] Board” that began “on or before September 10, 2019.” At some point, Kashay “was informed” by homeowners “of election irregularities,” including that “some members were not given nomination forms,” “election rules were not disseminated,” and “write-in candidates were not allowed.” So she “began communicating about the elections being improper, asking for new elections, and documenting” Plaintiffs’ alleged mishandling of the elections.

Relying on this court’s decision in Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468 (Damon), she argued the Osborne Park HOA was a “quasi-governmental entity” with “legislative, judicial, and executive duties,” and that Plaintiffs’ performance and failure to hold proper elections were “topics of public interest” that directly impacted “a narrow and definable portion of the public, namely all [28 Osborne Park members].” Thus, she contended, her statements criticizing Plaintiffs in their performance as HOA manager, specifically regarding unlawful elections, were protected speech under section 425.16, subdivisions (e)(1) through (e)(4), and were further protected as pre-litigation communication.

Second, Kashay asserted any reports to law enforcement were protected speech. She explained that she “learned from multiple” homeowners that Payne, who was appointed to the board and was a signatory on the HOA bank accounts, had a stroke in the past and is 80 years old. She asserted that “many” homeowners became “alarmed” when Payne allegedly “moved” HOA money into a new bank account with Ambassador, and the HOA “may have lost control and/or ownership of its Reserve Account funds.” On December 17, 2019, Payne told Kashay “that she was `confused’ as to why she moved . . . [HOA] money to new bank accounts, . . . that she was directed to do so by [Fuselier], and . . . that she didn’t want to be on the . . . Board but was `forced'” by Fuselier.

As a result, Kashay asserted that “[s]ome” homeowners reported “suspicions” of elder abuse to “the [p]olice.” When the police arrived on December 19, 2019, “multiple” homeowners “informed” the police “about the circumstances that they were aware of and the police looked into the matter.” Kashay pointed out that the San Diego County District Attorney’s public website encourages “`[a]nyone who has even the slightest suspicion that an elder or dependent adult is a potential victim of abuse’ “to report their concerns, and argued such reports are protected under section 425.16, subdivision (e)(1) and (e)(2). She further asserted that “[a]ll communications leading up to calling the [p]olice, with the [p]olice, and about what happened with the [p]olice” are protected activities under section 425.16, subdivision (e)(3) and (e)(4) as they, too, pertained to matters of public interest concerning a definable portion of the public.

Third, Kashay asserted her filing of the BBB complaint was protected activity. She explained that she “started a BBB reconciliation/arbitration process” regarding Plaintiffs and their “potentially unlawful activities” on December 28, 2019. She asserted that the topics addressed in the complaint were, similarly, of public interest and that “[o]nline reviews of service providers are a matter of public concern, because of the community interest in staying informed about the quality of services rendered by businesses.” She stated that she “attempted to write [an] opinion that was true and accurate regarding the services of Ambassador.” But on December 30, 2019, Fuselier sent an email to Kashay threatening to sue her for slander if she did not withdraw the BBB complaint. She attached the email as an exhibit to the motion to strike. Kashay stated that she withdrew the BBB complaint on January 2, 2020 “in response to threats [by Fuselier] of being sued if it was published.”

Kashay asserted the BBB “provides a platform and reconciliation/arbitration process to address disputes before involving the courts” and the process is substantially similar to pre-litigation communications. Thus, she argued her communications with the BBB were protected activity under section 425.16, subdivisions (e)(1) through (e)(4), as well as the pre-litigation privilege.

Although Kashay did not file a separate declaration in support of her motion to strike, Kashay personally signed the motion since she was acting in pro. per. She also attached a number of exhibits to the motion, which she asserted substantiated her claims. Among those already described, the exhibits include multiple petitions for a special meeting regarding a new election submitted by other HOA members, surveys of several HOA members regarding the allegedly improper elections, and a January 26, 2020 email from Fuselier suggesting the HOA Board of Directors not respond to the petitions. The email’s subject line was “Official Park Business[/]4th Petition for Special Meeting About Elections” and in it Fuselier told the directors, “I suggest that you do not respond to her improper demands.” Kashay also submitted a redacted bank statement for an account named “Osborne Park . . . Reserve Account,” which showed Ambassador was also named on the account.

To substantiate her claim that Fuselier was engaging in “threatening or inflaming” conduct, Kashay submitted a copy of a letter written by Fuselier on Ambassador’s letterhead, dated January 16, 2020, to another member of the HOA Board of Directors. In the letter, Fuselier told the director: “I have not done anything inappropriate, illegal, or unethical. Please stop shouting in my face and accusing me of things that I have not done. . . . [¶] Kashay is not a member of the board of directors . . . [s]he does not have a winning hand, and you should not bet on her. [¶] . . . [¶] If it is not going to be possible for us to work together, then it is a rainy day, and it will be hard for us to play ball. Just like you, I stand my ground when people try to push me around. My preference is that we both win by working together, but if we have to be at odds, so be it. Know this for sure, I am not going anywhere.”

Kashay also submitted a letter dated October 31, 2019 that was sent to Elaine Johnson, another Osborne Park member. The letter was written by an attorney named Joseph A. Lara of the Business Law Group PC, which appears to be Fuselier’s law firm. In it, Lara stated he represented Ambassador and Fuselier and accused Johnson of “[d]efamatory [s]tatements” against Ambassador and Fuselier, including public statements that she was “going to get Ambassador fired as the HOA manager,” and demanded she “cease and desist [her] slander of both.”[7] (Boldface omitted.)

 

B. Plaintiffs’ Opposition to the Anti-SLAPP Motion

 

Fuselier, representing himself and Ambassador, filed an opposition to the anti-SLAPP motion. Plaintiffs argued the motion to strike failed for seven reasons: (1) the alleged defamatory statements were not a matter of public interest, as they advanced Kashay’s personal agenda to be president of the HOA Board of Directors; (2) the alleged defamatory statements were not made in a public forum because Osborne Park was not a CID under the Davis-Stirling Act; (3) Kashay was not a member of the HOA and therefore did not have standing to complain; (4) the alleged defamation was “[k]nowingly [f]alse and [m]aliciously [m]ade”; (5) the motion to strike was not supported by a sworn declaration; (6) the litigation privilege does not apply; and (7) Plaintiffs had a high probability of success on the merits.

In support of their opposition, Plaintiffs filed declarations from Fuselier, Payne, Fageol, and attorney Lara. The record indicates that Fuselier “prepare[d]” both the Payne and Fageol declarations himself.[8] Payne’s declaration stated: “I am not incompetent,” “I am not confused,” “I am not afraid,” “I am not powerless,” and “I am not controlled by Ambassador or Fuselier.” Both the Payne and Fageol declarations stated that the HOA Board of Directors removed Kashay from the board after concluding she “had not been a resident of Osborne for 6 months at the time that the new board was constituted.”

Lara averred that after researching Osborne Park’s history between February 17 to February 24, 2020, he determined Osborne Park was incorporated as a non-profit mutual benefit corporation on February 3, 1987 and, in his opinion, Osborne Park “does not meet the [Davis-Stirling Act’s] requirements for it to be considered a CID” because “there has never been CC&Rs recorded” nor has a “`final map or parcel map'” been recorded regarding the property.

In his own declaration, Fuselier provided additional details regarding the dispute that arose from the election of the HOA Board of Directors and the alleged defamation. Specifically as to the BBB complaint, Fuselier averred that Kashay “filed a defamatory complaint with the [BBB]” and “submitted an untrue review to the BBB accusing Ambassador of despicable behavior.” He disputed “K[ashay]’s claim that she withdrew the complaint” as “false.” Elsewhere, he averred that Kashay made the defamatory statements “publicly” to the BBB. He further asserted that Kashay also committed defamation by “republishing” defamatory statements made by “The San Diego Minute Men and its president, Jeff Schwilk,” whom Fuselier had represented in a federal lawsuit, regarding a legal dispute with Fuselier’s prior law firm over funds held in a trust account. Fuselier also asserted that Osborne Park “has no CC&Rs” and is not a CID.

Plaintiffs also filed evidentiary objections to Kashay’s special motion to strike, including multiple objections to nearly every statement made in the motion and to every exhibit submitted in support of the motion.

 

C. Kashay’s Responsive Declaration and Motion in Limine

 

Approximately nine days after Plaintiffs filed their opposition, Kashay filed her own declaration in support of the special motion to strike. Kashay averred that she did own a home in Osborne Park, and that she was in good standing. She further declared that Osborne Park “has had and does have ongoing controversies, that predate [her], regarding . . . having proper and lawful elections” and whether Ambassador should continue managing the HOA. She re-asserted the defamation lawsuit was a clear attempt to prevent her, and other Osborne Park members, from speaking up about these abuses. As with the original motion, Plaintiffs filed extensive evidentiary objections to Kashay’s declaration.

Kashay also filed a “Motion in Limine” before the original hearing date on her special motion to strike, in which she raised evidentiary objections to the declarations of Lara, Payne and Fageol. She attached several exhibits to the motion in limine, which she argued demonstrated the falsity of several assertions in Plaintiffs’ declarations.

Addressing Lara’s and Fuselier’s declarations averring that Osborne Park was not a CID under the Davis-Stirling Act, Kashay submitted a copy of the “Statement by Common Interest Development Association” that OPI filed with the Secretary of State in December 2018, declaring it to be a CID under the Davis-Stirling Act. She also submitted a copy of the “Statement of Information” filed with the Secretary of State certifying that Osborne Park was a CID under the Davis-Stirling Act. Fuselier himself signed the document on December 31, 2019, and it was subsequently filed with the Secretary of State on March 16, 2020, after Fuselier submitted his sworn declaration stating Osborne Park was not a CID. In response to Lara’s declaration that no final map or parcel map had been recorded for Osborne Park, Kashay submitted a copy of what appears to be a parcel map for Osborne Park with a stamp from the San Diego County Assessor’s Office stating it was prepared for purposes of assessment. The “recorder’s certificate” is dated June 1981.

In addition, Kashay attached a number of emails between Fuselier and various Osborne Park owners. In one, Fuselier stated, “[t]he Association is governed first by the Civil Code — Davis Sterling [sic] Act.” In another, dated December 13, 2019, Fuselier confirmed his understanding that Kashay was president of the HOA Board of Directors and provided her with a hyperlink to the Davis-Stirling Act so she could “familiarize [her]self with [her] responsibilities and obligations as president.” In a subsequent email dated January 27, 2020, Fuselier told Kashay the petitions she had submitted for a special meeting had been reviewed by legal counsel and were not actionable as they were not for a proper purpose.

In the motion in limine, Kashay alerted the trial court that Plaintiffs had sued three other Osborne Park members, and had threatened to sue a fourth. She concluded by stating, “[t]here are only 19 people living at Osborne Park and most of these individuals are sickly, disabled, and/or housebound. There are only a handful of active people at [Osborne Park] and Plaintiff is suing all of us.”

Plaintiffs objected to the motion in limine as an unauthorized sur-reply. In addition, they asserted the motion and the exhibits contained hearsay, and that the exhibits were not authenticated as required by Evidence Code section 1400.

 

D. The Trial Court’s First Tentative Ruling

 

On July 8, 2020, Judge Earl Maas issued a tentative ruling denying Kashay’s special motion to strike. The trial court focused exclusively on the communications regarding the allegedly improper elections and Ambassador’s performance as manager of the HOA. The court found Kashay had not proven that “a proceeding before a homeowner’s association is an `official proceeding authorized by law’ within the meaning of [section 425.16] subdivisions (e)(1) or (e)(2).” As to subdivision (e)(3), the court found Kashay “failed to establish that the alleged defamatory statements were made in a public forum.” The court stated, unlike Damon, “[t]he alleged defamatory statements [at issue here] were not made in a board meeting or an official newsletter. [Kashay] has failed to cite any authority that the e-mails and statements were made in a public forum.”[9] As to subdivision (e)(4), the court found the statements were not made in connection with an issue of public interest because they did not impact “`a broad segment of society.'” The court distinguished the present case from Damon once again, based on the fact that there were approximately 3,000 members in the HOA at issue in Damon. As a final matter, the court awarded Plaintiffs—who were represented by Fuselier in pro. per.—$12,000 in attorney fees for time spent preparing their opposition.

Kashay asked for a continuance at the July 10, 2020 hearing, due to a family emergency. The court granted the motion and continued the matter to September 11. The court also granted Kashay leave to file additional papers related to her motion, on or before August 28, and likewise permitted plaintiffs to file a reply, no later than September 4.

Kashay filed a brief opposition to the trial court’s tentative ruling on July 20, 2020. On August 28, she filed a supplemental brief. The brief was supported by her own declaration and she stated twice, at the outset and conclusion of the brief, “I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. [¶] All the content of the Motion to Strike is included herein, including any and all attachments and exhibits, under penalty of perjury.” Kashay pointed out that the complaint alleged defamation based on the reports of elder abuse to law enforcement and the BBB complaint. She asked the court to, at a minimum, strike those allegations.

On September 8, 2020, Kashay filed a second supplemental brief. Kashay alleged Plaintiffs were continuing the pattern of intimidation and threats of lawsuits against her and other members of Osborne Park. She included a declaration, under penalty of perjury, and a number of exhibits. The first exhibit is an email from Fuselier to Bouma, a member of the HOA Board of Directors, and although it is undated, the content indicates the email was at least sent after Judge Maas issued the court’s tentative ruling. Fuselier began the email with, “Bill I am so tire[d] of your stupidity,” and continued with the following statements, in part: “Ambassador is the property manager because Judge Stern of the Superior Court put me in charge of Osborne to protect the other owners. You never had the authority to fire Ambassador. Only the Board of Directors for Osborne can fire me, and that is not you and your band of crazies.” Fuselier attached Judge Maas’s tentative ruling on the motion to strike to the email, and told Bouma:

“The things you and your group have said about me are actionable in court. That is where Kashay is now. She lost her motion to stop my case, and the judge sanctioned her $12,000 for her meritless motion. His ruling is attached. . . . She will pay a lot more for slandering me and Ambassador after the trial. So will anyone else that damages my reputation as a professional, ethical and honest businessman in the community.” (Italics added.)

The other exhibits include a number of other emails and letters from Fuselier to various Osborne Park members, similarly calling them “ignorant” and a “band of crazies” and threatening, “I am currently dealing with Kashay in Superior Court, and I will deal with the others in due time.”

 

E. The Trial Court’s Order Denying the Motion

 

On September 9, 2020, Judge Maas recused himself based on “familiarity . . . with one of the parties.”

After hearing argument on September 18, 2020, Judge Jacqueline M. Stern, now presiding, denied the anti-SLAPP motion. In the written order, the court noted that it “could disregard all pleadings [Kashay] filed after July 20, 2020, as unauthorized sur-replies.” However, despite what the trial court characterized as Kashay’s “blatant disregard for the court’s orders,” the court stated that it had exercised its discretion to consider all of the various supplemental materials submitted by both sides. The court did not, however, rule on any of the myriad evidentiary objections raised by Plaintiffs.

With respect to the merits, the trial court’s written order provides largely the same analysis, using verbatim much of the same language, as the previous tentative order issued by Judge Maas on July 8, 2020. However, unlike the previous tentative ruling, Judge Stern denied Plaintiffs’ request for attorney’s fees. First, the court found “[t]he motion was not frivolous in that it mostly involved statements criticizing the handling of a homeowner’s association election.” And second, Fuselier represented himself and was not entitled to an attorney fee award, as a matter of law. Kashay timely appealed.

 

DISCUSSION

 

 

I.

 

 

Relevant Legal Principles

 

Section 425.16, the anti-SLAPP statute, provides a mechanism to protect defendants from meritless lawsuits that chill their exercise of constitutional rights to speech and petition. (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 883-884; Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral); § 425.16, subd. (a).) The statute provides in pertinent 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 Constitution or the 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.” (§ 425.16, subd. (b)(1).) The statute creates a summary-judgment-like procedure that allows for early dismissal of actions deemed to be strategic lawsuits against public participation, or SLAPP suits. (Baral, at p. 384, fn. 5; see Navellier v. Sletten (2002) 29 Cal.4th 82, 85.)

As the California Supreme Court recently explained, in Baral, a single cause of action may include multiple claims. In the context of a motion to strike pursuant to section 425.16, “courts may rule on plaintiffs’ specific claims of protected activity,” even if those claims are mixed, in a single cause of action, with other claims arising out of activity that is not protected by the statute. (Baral, supra, 1 Cal.5th at p. 393; accord Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009-1011 (Bonni) [confirming “courts should analyze each claim for relief—each act or set of acts supplying a basis for relief, of which there may be several in a single pleaded cause of action—to determine whether the acts are protected”].)

Our high court then summarized the showings and findings required by section 425.16: “At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached. There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken. Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing.” (Baral, supra, 1 Cal.5th at p. 396.)

On appeal, we independently review a trial court’s order denying a special motion to strike pursuant to section 425.16. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 (Soukup).) Like the trial court, “[w]e consider `the pleadings, and supporting and opposing affidavits . . . upon which the liability or defense is based.’ [Citation.] However, we neither `weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant’s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.'” (Ibid.)

As this court recently explained in Medical Marijuana, Inc. v. ProjectCBD.com (2020) 46 Cal.App.5th 869 (Medical Marijuana), “`the issues in an anti-SLAPP motion are framed by the pleadings.’ [Citations.] Thus, the act or acts underlying a claim for purposes of an anti-SLAPP statute is determined from the plaintiffs’ allegations. [Citation.] Because the issues to be determined in an anti-SLAPP motion are framed by the pleadings, we will not `insert into a pleading claims for relief based on allegations of activities that plaintiffs simply have not identified. . . . It is not our role to engage in what would amount to a redrafting of [a] complaint in order to read that document as alleging conduct that supports a claim that has not in fact been specifically alleged, and then assess whether the pleading that we have essentially drafted could survive the anti-SLAPP motion directed at it.'” (Id. at p. 883.)

The complaint at issue pleads a single cause of action for defamation. Defamation occurs either through libel or slander. (Civ. Code, § 44.) “`The elements of a defamation claim are (1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural tendency to injure or causes special damage.'” (John Doe 2 v. Superior Court (2016) 1 Cal.App.5th 1300, 1312.) Libel is defamation based on a publication in writing or other fixed, visible representation (Civ. Code, § 45; see Medical Marijuana, supra, 46 Cal.App.5th at p. 884), while slander is based on an oral utterance (Civ. Code, § 46).

Both libel and slander have special pleading requirements. Because defamation “is not committed unless the defamatory matter is `published’ or communicated to a third person[,] . . . publication must be pleaded.” (5 Witkin Cal. Procedure (5th ed. 2008) Pleading, § 740, p. 160.) Further, “`[t]he general rule is that the words constituting an alleged libel must be specifically identified, if not pleaded verbatim, in the complaint.'” (Medical Marijuana, supra, 46 Cal.App.5th at p. 884, quoting Kahn v. Bower (1991) 232 Cal.App.3d 1599, 1612, fn. 5.) The pleading requirements for slander are less strict, but even when pleading slander, “the substance of the defamatory statement” must be alleged. (Okun v. Superior Court (1981) 29 Cal.3d 442, 458 (Okun).) No matter the theory of defamation, the complaint must be alleged with sufficient certainty to “`acquaint [the] defendant with what he must defend against.'” (Medical Marijuana, at p. 894, quoting Albertini v. Schaefer (1979) 97 Cal.App.3d 822, 832-833; see also Okun, at p. 458 [discussing pleading requirements for slander; stating the complaint must “give[ ] notice of the issues sufficient to enable preparation of a defense”].)

 

II.

 

 

Kashay Met Her Initial Burden of Establishing the Defamation Claims

 

 

Arise Out of Protected Activity

 

Kashay asserts, as she did in the trial court, that the complaint alleged three categories of defamatory statements: (1) communications to law enforcement reporting elder abuse; (2) communications with the BBB in connection with a consumer complaint; and (3) communications criticizing Plaintiffs’ performance as the HOA manager, including the refusal to hold lawful elections.

Relying on Baral, Kashay contends the trial court erred by failing to address the allegations related to the first two categories. We agree. (See Bonni, supra, 11 Cal.5th at pp. 1009-1011 [“courts should analyze each claim for relief—each act or set of acts supplying a basis for relief, of which there may be several in a single pleaded cause of action—to determine whether the acts are protected”]; Baral, supra, 1 Cal.5th at p. 393 [“courts may rule on plaintiffs’ specific claims [within a cause of action] of protected activity”].) For reasons that are not apparent, the court focused solely on Kashay’s communications regarding Plaintiffs’ management of the HOA, and did not address the reports of elder abuse to law enforcement or the BBB complaint.

Kashay also asserts the trial court erred by concluding her communications criticizing Plaintiffs’ performance as the HOA manager were not protected speech because the communications did not occur in a public forum and did not pertain to issues of public interest. We agree with this contention as well. On our independent review, we conclude that Kashay has met her initial burden of establishing that all three categories of communications underlying Plaintiffs’ defamation claim fall within protected speech under section 425.16, subdivisions (e)(1), (e)(2), (e)(3), and (e)(4).

 

A. Communications to Law Enforcement

 

First, Plaintiffs alleged Kashay “made a criminal complaint against F[uselier] for [e]lder [a]buse to the San Diego Sheriff,” and “made a second report to the San Diego Sheriff of a suspicious person harassing elderly people in Osborne [Park],” whom she later identified as Fuselier. Reports of criminal activity to law enforcement are generally protected activity under section 425.16, subdivisions (e)(1) and (e)(2), as communications made in connection with an official proceeding authorized by law, so long as the reports are not admittedly false. (See Chabak v. Monroy (2007) 154 Cal.App.4th 1502, 1512 [complaints about abuse to investigative authorities arise from the right to petition the government and are protected]; but see Lefebvre v. Lefebvre (2011) 199 Cal.App.4th 696, 705 (Lefebvre) [uncontested allegation of false criminal report made for purpose of gaining litigation advantage not protected].) Plaintiffs do not contend otherwise.

Rather, in summary fashion, Plaintiffs assert that “Kashay knows her claim that Fuselier is committing elder abuse by forcing Member Payne to remain a board member is false.” As an initial matter, the allegations in the complaint are not specific to Payne. Plaintiffs alleged Kashay reported to law enforcement that Fuselier was “harassing elderly people.” Further, Plaintiffs provide no evidence that Kashay knows her claim to be false or, more importantly, that she knew it to be false when she made the report. They assert in their response brief, based on their declarations, that “[b]oth F[a]ge[o]l and Payne deny being helpless fools.” However, it is apparent from the record that it was Fuselier himself that prepared the declarations signed by Payne and Fageol. Beyond those declarations, Plaintiffs rely solely on Fuselier’s own conclusory self-serving declaration. While we accept the evidence presented by plaintiff as true under the relevant standard of review (Soukup, supra, 39 Cal.4th at p. 269, fn. 3), we may disregard “declarations that lack foundation or personal knowledge, or that are argumentative, speculative . . . or conclusory” (Gilbert v. Sikes (2007) 147 Cal.App.4th 13, 26 (Gilbert)).

Moreover, Kashay disputes that the reports were false. She contends that several Osborne Park residents had concerns over Plaintiffs’ conduct, including but not limited to Plaintiffs’ control over Payne, and that several residents made good faith complaints regarding elder abuse, which the authorities investigated. An admission that a report to law enforcement was false may render the report unlawful, thereby removing it from the protection of the anti-SLAPP statute, but the mere allegation that the report was false is not sufficient. (See Lefebvre, supra, 199 Cal.App.4th at p. 705 [admittedly false police report not protected]; Kenne v. Stennis (2014) 230 Cal.App.4th 953, 966-967 [finding an allegation that report was false insufficient to remove anti-SLAPP protection].) Where, as here, the defendant denies that the report was false, and there is no conclusive evidence to the contrary, it remains protected activity under section 425.16, subdivisions (e)(1) and (e)(2). (Kenne, at pp. 966-967.)

We therefore conclude that Kashay has met her burden of establishing the defamation claims related to Kashay’s reports of elder abuse arise from protected activity under section 425.16, subdivisions (e)(1) and (e)(2).

 

B. The BBB Complaint

 

Second, Plaintiffs alleged Kashay “publicly” filed a “business complaint” to the BBB against Ambassador in which she falsely stated: “Bob F[uselier], A[mbassador] Property Management, violating Osborne Park’s Contract. When these issues were brought to his attention, he slandered, smeared, called names, threatened, harassed, bullied and intimidated. He’s also taking advantage of the elderly and disabled.” (Italics omitted.) We note that this is the only allegedly defamatory language identified with any specificity in the complaint. (See Medical Marijuana, supra, 46 Cal.App.5th at p. 884 [“`The general rule is that the words constituting an alleged libel must be specifically identified, if not pleaded verbatim, in the complaint.'”]; Okun, supra, 29 Cal.3d at p. 458 [“the substance of the defamatory statement” must be alleged].) However, as with the reports of elder abuse to law enforcement, the trial court failed to consider whether these specific statements arose from protected activity. We conclude that they do.

Postings to consumer-oriented websites, such as Yelp or, as here, the BBB, that implicate matters of public concern that can affect other consumers—such as the business practices of a service provider—are generally considered to be protected activity under section 425.16, subdivision (e)(3). (See Chaker v. Mateo (2012) 209 Cal.App.4th 1138, 1142, 1147 (Chaker) [finding statements made on website “where members of the public may comment on the reliability and honesty of various providers of goods and services” to be protected]; Wong v. Jing (2010) 189 Cal.App.4th 1354, 1359, 1366-1367 [finding statements on Yelp criticizing dental services to be protected]); Willbanks v. Wolk (2004) 121 Cal.App.4th 883, 889-890, 894-901 [finding statements published on a consumer watchdog website concerning ethical practices of investment broker to be protected].)

“The Better Business Bureau identifies its mission as advancing trust in the marketplace by offering objective and unbiased information about business to consumers.” (Makaeff v. Trump Univ., LLC (9th Cir. 2013) 715 F.3d 254, 263 (Makaeff) [applying California law], fn. omitted.) In Makaeff, the Court of Appeals for the Ninth Circuit concluded that an individual’s statements about a business dispute to the BBB addressed issues of public interest, because “even if made in the context of a request that [the BBB] intercede in [a defendant’s private] dispute with [the subject business], [such statements] are not so easily separated from `information . . . provided to aid consumers.'” (Id. at p. 263.)

Here, Plaintiffs—in their complaint and their filings in opposition to the special motion to strike—consistently alleged that Kashay “filed a defamatory complaint with the [BBB]” and “submitted an untrue review to the BBB accusing Ambassador of despicable behavior.” In his own declaration, Fuselier specifically averred that Kashay made the defamatory statements “publicly” to the BBB.[10] The content of the BBB complaint, as Plaintiffs have alleged, included statements that “F[uselier], A[mbassador] Property Management, violat[ed] Osborne Park’s Contract” and “[w]hen these issues were brought to [Fuselier’s] attention, he slandered, smeared, called names, threatened, harassed, bullied and intimidated. He’s also taking advantage of the elderly and disabled.” (Italics omitted.) Thus, by Plaintiffs’ own account, the BBB complaint alerted other potential consumers that might otherwise contract with Ambassador of a concern regarding Ambassador’s and Fuselier’s business practices. Accordingly, we conclude the BBB complaint qualifies as protected speech under section 425.16, subdivision (e)(3). (See Chaker, supra, 209 Cal.App.4th at pp. 1142, 1147; Makaeff, supra, 715 F.3d at p. 263.) Again, Plaintiffs do not contend otherwise.

Rather, Plaintiffs summarily state that Kashay’s desired resolution was termination of Ambassador’s contract with the HOA, and that Kashay “knows” she is not a party to that contract. But they provide no legal authority to explain why that matters to the determination of whether an otherwise legitimate consumer complaint to the BBB on a matter of public interest is protected speech under section 425.16. Moreover, to make the assertion, Plaintiffs rely primarily on conclusory statements in Fuselier’s declaration, which we may disregard, as factual support.[11] (See Gilbert, supra, 147 Cal.App.4th at p. 26 [court may disregard “declarations that lack foundation or personal knowledge, or that are argumentative, speculative . . . or conclusory”].)

Further still, as an Osborne Park resident, Kashay had an interest in the management of the HOA, even if she was not a party to the HOA management contract itself. As was stated in Makaeff, an individual’s statements about a business dispute to the BBB addressed issues of public interest “even if made in the context of a request that it intercede in [a private] dispute with [the subject business],” because such statements “are not so easily separated from `information . . . provided to aid consumers.'” (Makaeff, supra, 715 F.3d at p. 263.) So too are Kashay’s statements to the BBB, even if (as Plaintiffs assert) her complaints involved her private dispute with Plaintiffs’ contract with the HOA. Kashay’s individual statements about a business dispute with Ambassador to the BBB are protected speech under section 425.16, subdivision (e)(3) because they are not so easily separated from the aim of providing information to aid other consumers at large.

Thus, we conclude that Kashay has met her burden of establishing the defamation claims related to the BBB complaint arise from protected activity under section 425.16, subdivision (e)(3).

 

C. Communications Criticizing Plaintiffs’ Management of the HOA

 

Third, Plaintiffs alleged, that: “Included but not limited to the following summary, K[ashay] has falsely and publicly stated that A[mbassador] and F[uselier] have committed crimes; breached fiduciary duties while performing their professional duties; committed gross negligence in the performance of their professional duties; breached their Contract while performing their duties; conduct[ed] management duties contrary to the Davis Sterling [sic] Act et seq.; conducted a fraudulent election; [are] incompeten[t] in performing management duties; improperly handled HOA funds; and [committed] the crime of [e]lder [a]buse in performing their management duties.” These “summary” allegations are too vague. As noted, we must determine “the act or acts underlying a claim for purposes of an anti-SLAPP statute . . . from the plaintiffs’ allegations,” (Medical Marijuana, supra, 46 Cal.App.5th at p. 883), but deciphering those claims are challenging when, as here, they are impermissibly vague. Taking what we can from these vague allegations, we conclude Kashay has met her burden of establishing that the alleged communications arise from protected activity as well.

As she did in the trial court, Kashay relies primarily on this court’s decision in Damon and asserts the communications criticizing Plaintiffs’ performance as the HOA manager were protected speech under section 425.16, subdivision (e)(3). In Damon, we concluded alleged defamatory statements made at an HOA board meeting and in a newsletter published by a group of residents concerning the manner in which a large residential community would be governed fell within the protection of section 425.16, subdivision (e)(3). (Damon, supra, 85 Cal.App.4th at pp. 474-475.) In reaching that conclusion, we considered both whether the statements were made in a public forum and whether they related to an issue of public interest. (Ibid.)

We observed, “[a]s our Supreme Court has recognized, [that] owners of planned development units `”comprise a little democratic subsociety[.]”‘” (Damon, supra, 85 Cal.App.4th at p. 475, quoting Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 374.) Further, “[i]n exchange for the benefits of common ownership, the residents elect a[ ] legislative/executive board and delegate powers to this board. This delegation concerns not only activities conducted in the common areas, but also extends to life within `”the confines of the home itself.”‘” (Damon, at p. 475, quoting Nahrstedt, at p. 373.) An HOA board “is in effect `a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government.’ [Citation.] [¶] Because of [an HOA] board’s broad powers and the number of individuals potentially affected by a board’s actions, the Legislature has mandated that boards hold open meetings and allow the members to speak publicly at the meetings. (Civ. Code, §§ 1363.05, 1363, 1350-1376.)” (Damon, at p. 475.) We thus concluded an HOA board meeting is a “`public forum[ ]'” within the meaning of section 425.16, subdivision (e)(3). (Ibid.)

Turning to the public issue requirement, we explained, “[t]he definition of `public interest’ within the meaning of the anti-SLAPP statute has been broadly construed to include not only governmental matters, but also private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity.” (Damon, supra, 85 Cal.App.4th at p. 479, cited with approval in FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133, 145-146 (FilmOn.com).) The alleged defamatory statements in Damon “concerned (1) the decision whether to continue to be self-governed or to switch to a professional management company; and/or (2) [plaintiff’s] competency to manage the [HOA].” (Damon, at p. 479.) We observed “the statements were made in connection with the Board elections and recall campaigns,” and noted that “`[t]he right to speak on political matters is the quintessential subject of our constitutional protections of the right of free speech. “Public discussion about the qualifications of those who hold or who wish to hold positions of public trust presents the strongest possible case for applications of the safeguards afforded by the First Amendment.”‘” (Ibid.) Thus, “[a]lthough the allegedly defamatory statements were made in connection with the management of a private homeowners association, they concerned issues of critical importance to a large segment of our local population. `For many Californians, the homeowners association functions as a second municipal government[.]'” (Ibid.)

Although the HOA at issue in Damon included a much larger number of residents, other courts have applied these same principles to smaller communities. For example, the court in Cabrera v. Alam (2011) 197 Cal.App.4th 1077 applied the reasoning in Damon to conclude the annual “untelevised” meeting and election of board of directors of a significantly smaller and less technologically sophisticated HOA likewise fell within the protection of section 425.16, subdivision (e)(3). (Id. at pp. 1087-1092.) “[T]he impact the association and its leadership had on all the residents . . . was not any less significant.” (Id. at p. 1088.) Of relevance here, relying on Damon, the Cabrera court viewed that “statements made in connection with elections to the board of directors constitute a public issue in that such elections affect all members of the [HOA] and `concern[ ] a fundamental political matter—the qualifications of a candidate to run for office.'” (Id. at p. 1089.)

Thus, as other courts have explained, communications may concern a matter of public interest, and fall under the protection of section 425.16, subdivision (e)(3), “`in cases where the issue is not of interest to the public at large, but rather to a limited, but definable portion of the public (a private group, organization, or community), [but,] the constitutionally protected activity must, at a minimum, occur in the context of an ongoing controversy, dispute or discussion, such that it warrants protection by a statute that embodies the public policy of encouraging participation in matters of public significance.'” (Ruiz v. Harbor View Community Assn. (2005) 134 Cal.App.4th 1456, 1468 (Ruiz), first italics added, quoting Du Charme v. International Brotherhood of Electrical Workers (2003) 110 Cal.App.4th 107, 119.) Such communications are also protected under section 425.16, subdivision (e)(4). (Ruiz, at pp. 1467-1470 [private letters from community association’s attorney concerned a dispute about governance of the association, a topic of interest to the members of the association, a definable portion of the public]; see FilmOn, supra, 7 Cal.5th at pp. 148, 152 [holding that “context matters” under the catchall provision of subdivision (e)(4), requiring consideration of the “audience, speaker, and purpose” of assertedly protected speech].)

Here, the dispute related to a definable portion of the public—the elderly residents of Osborne Park. (See Ruiz, supra, 134 Cal.App.4th at p. 1468.) Further, it is apparent from the complaint and the record before us that the alleged defamatory statements here arose from and were made in connection with disputes concerning Plaintiffs’ competency to manage the HOA, the HOA board elections, and the petitions to hold a special meeting regarding those elections. These are the precise types of concerns that we found to be matters of public interest in Damon. (See Damon, supra, 85 Cal.App.4th at p. 479.) Further, like the community in Damon, the members of Osborne Park delegated matters that affected their daily lives to the HOA Board, which, in turn, served both a legislative and executive function. (Id. at p. 475.) Thus, as we concluded in Damon, Kashay’s right to speak on such matters, on behalf of herself and others living under the governance of Plaintiffs’ management and the HOA Board of Directors at Osborne Park, is a “quintessential subject of our constitutional protections of the right of free speech.” (Id. at p. 479.)

Moreover, as in Ruiz, the record also establishes that there was an ongoing dispute regarding Plaintiffs’ conduct and interaction with the HOA Board of Directors, which affected the governance of the entire low-income senior community and “therefore would also be of interest to community members,” as well as the public at large. (Ruiz, supra, 134 Cal.App.4th at p. 1468.) Kashay’s comments, at a minimum, “`contribute[d] to the public debate'” on issues related to those ongoing disputes and the inherent political issues regarding the HOA board elections and the overall governance of the HOA. (Id. at pp. 1468-1469.) Stated differently, Kashay’s statements were not just tangentially related to these topics, but rather they “furthered[ ] the discourse” on matters of critical importance to the Osborne Park community. (See FilmOn, supra, 7 Cal.5th at p. 151.) For those reasons, we independently conclude that Kashay met her initial burden of proving her communications criticizing Plaintiffs’ performance as HOA manager fell within the protection of section 425.16, subdivisions (e)(3) and (e)(4).

Plaintiffs assert, as they did in the trial court, that the communications were not made in a public forum and did not concern a matter of public interest, primarily because, as they contend, Osborne Park is a not a CID under the Davis-Stirling Act. We are not persuaded, for several reasons. First, Plaintiffs alleged in the complaint that Kashay made the allegedly defamatory statements regarding the HOA board elections and Ambassador’s management “publicly.” (Italics added.) But they now contend that Kashay actually made private statements to other Osborne Park members, orally and in personal letters and emails. They rely, at least in part, on additional allegations presented in the declarations submitted in opposition to Kashay’s special motion to strike and which attempt to expand on the vague allegations in the complaint.

Our review is delimited by the complaint itself, and not the additional allegations presented in declarations submitted only after Kashay filed her special motion to strike. (Medical Marijuana, supra, 46 Cal.App.5th at p. 883.) Kashay is not required to prove that these additional, allegedly private statements were made in a public forum when the complaint itself alleged defamation based only on vague categories of things Kashay has allegedly “falsely and publicly” stated. (See id., at pp. 898-899 [explaining the “procedural quagmire” that would result from allowing a SLAPP plaintiff to amend the complaint after the court finds the defendant has met their burden on the first prong].) Instead, we consider only the allegedly public statements that form the basis of Plaintiffs’ claims in the complaint.

Second, there is no real dispute that at the time Kashay made the allegedly defamatory statements, all parties believed that Osborne Park was a CID under the Davis-Stirling Act. Indeed, Plaintiffs attached to the complaint a copy of the “HOA Management Retainer Agreement” between the HOA Board of Directors and Ambassador, which clearly stated the board hired Ambassador “as its exclusive managing agent as that term is defined in California Civil Code section 4158 [of the Davis-Stirling Act].” Consistent with that understanding, Osborne Park filed a “Statement by Common Interest Development Association” in 2018, declaring that it was a CID with 28 separate interests.

It was only in February 2020—after both the complaint and Kashay’s special motion to strike were filed—that Lara researched whether Osborne Park was actually a CID under the Davis-Stirling Act. And contrary to Lara’s and Fuselier’s declarations in opposition to the special motion to strike, Fuselier himself signed a “Statement of Information” certifying to the Secretary of State that Osborne Park was a CID under the Davis-Stirling Act. Although he signed the document on December 31, 2019, it was filed with the Secretary of State on March 16, 2020, after Fuselier and Lara submitted sworn declarations stating Osborne Park was not a CID.

Plaintiffs further contend that Osborne Park is not a CID because it does not have recorded CC&Rs, but, again, the complaint itself alleged Osborne Park was governed by CC&Rs, in at least three different places. Thus, to accept Plaintiffs’ argument, we would have to ignore that the complaint explicitly alleged the statements were made “publicly,” that the complaint alleged Osborne Park did have CC&Rs, and that the HOA management contract attached to the complaint expressly called Osborne Park a CID under the Davis-Stirling Act. We see no reason to do so.

Regardless, it is not apparent that the analysis in Damon, or the cases that followed Damon, is limited to CIDs under the Davis-Stirling Act. Plaintiffs provide no authority suggesting it does. We noted in Damon that the Davis-Stirling Act requires HOA boards to hold open meetings, in the context of determining that the meetings were, therefore, a public forum. (Damon, supra, 85 Cal.App.4th at p. 475.) The remainder of our analysis, however, focused on the role of HOAs more generally, without any further reference to CIDs or the Davis-Stirling Act. As we explained, “[a] homeowner’s association board is in effect `a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government,'” and the private conduct of an HOA may be an issue of “`public interest'” insofar as it impacts the HOA community in a manner similar to that of a governmental entity. (Id. at pp. 475, 479, italics added.) Here, again, there was no real dispute that Osborne Park was governed by an HOA at the time Kashay made the allegedly defamatory statements. Indeed, although our review is de novo, we note that even the trial court described the alleged defamatory statements as primarily “criticizing the handling of a homeowner’s association election.”

In sum, we conclude Kashay has met her burden to establish Plaintiffs’ claims arise from protected activity under section 425.16, subdivision (e), with respect to all three categories of defamatory statements alleged in the complaint.

 

III.

 

 

We Decline to Make an Independent Determination of Plaintiffs’ Demonstration on the Second Prong

 

Because the trial court concluded Kashay had not met her initial burden to establish that the challenged cause of action arose from protected activity, it did not reach the second step of the anti-SLAPP analysis of whether Plaintiffs demonstrated a probability of prevailing on the merits or, as the Court in Baral put it, whether the claim is “legally sufficient and factually substantiated.” (Baral, supra, 1 Cal.5th at p. 396.) Plaintiffs assert, as they did in the trial court, that they have “a [h]igh [p]robability” of success on the merits.

Under the applicable standard of review, we have discretion to reach the second step and make an independent determination as to whether Plaintiffs have established a probability of prevailing. (See Collier v. Harris (2015) 240 Cal.App.4th 41, 58.) However, we decline to exercise that discretion here, because doing so would require us to consider the evidence, and the numerous evidentiary objections that have not been addressed by the trial court in the first instance.[12] (See ibid. [noting the majority of appellate courts have declined to reach the second prong where “contested evidentiary issues existed or simply because it was appropriate for the trial court to decide the issue first”]; Baral, supra, 1 Cal.5th at p. 393 [court may strike one claim of many within a single cause of action and allegations supporting the stricken claim are eliminated from the complaint].)

Accordingly, we remand the matter to the trial court with instructions to consider whether Plaintiffs have demonstrated that each challenged claim based on protected activity is legally sufficient and factually substantiated.

 

IV.

 

 

Kashay Has Not Established That She Did Not Receive a Fair Hearing

 

Kashay asserts that she did not receive a fair hearing by an impartial judge in the trial court. She contends Judge Stern issued the order denying her special motion to strike just days after Judge Maas recused himself for familiarity with a party,[13] and that Judge Stern’s order was substantially similar to the previous tentative decision issued by Judge Maas. Kashay does not adequately develop the argument or provide any legal authority to support her position. (See Los Angeles Unified School Dist. v. Torres Construction Corp. (2020) 57 Cal.App.5th 480, 498 [“`We may and do “disregard conclusory arguments that are not supported by pertinent legal authority or fail to disclose the reasoning by which the appellant reached the conclusions he wants us to adopt.”‘”].) But the mere fact that Judge Stern’s order is substantially similar to the previous tentative order issued by Judge Maas is not sufficient to demonstrate that Kashay did not receive a fair hearing. The transcripts from the hearing are not included in the record on appeal, and Kashay presents no other evidence of bias or impartiality. Regardless, having reviewed the issues independently under the applicable de novo standard of review, we reverse the trial court’s ruling on prong one for the reasons already stated.

 

V.

 

 

Attorney Fees

 

As a final matter, Plaintiffs assert Kashay’s special motion to strike was frivolous and requests that this court award attorney fees in an amount to be determined by the trial court. We reject that request, for three reasons. First, Plaintiffs did not file a cross-appeal from the order denying their request for attorney fees in the superior court, and do not provide any authority indicating it is appropriate for this court to award attorney fees in the first instance. Second, as the trial court noted, to the extent he is representing himself, Fuselier is not entitled to an attorney fee award as a matter of law. (See Witte v. Kaufman (2006) 141 Cal.App.4th 1201, 1211.) Third, we have independently concluded Kashay met her burden as to the first prong, and agree with the trial court’s finding that Kashay’s special motion to strike was not frivolous. (See Cabral v. Martins (2009) 177 Cal.App.4th 471, 491 [abuse of discretion standard of review applies in the context of fee awards under the anti-SLAPP statutes].)

 

DISPOSITION

 

The order denying Kashay’s special motion to strike the complaint is reversed and the matter is remanded for further proceedings consistent with this opinion. Kashay shall recover her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

HALLER, Acting P. J. and AARON, J., concurs.

[1] The original verified complaint was not designated for inclusion in the Clerk’s Transcript on appeal. In the interests of justice and in order to resolve the appeal, we obtained a copy from the superior court and, on our own motion, augment the record to include it. (Cal. Rules of Court, rule 8.155(a)(1)(A); see also State Comp. Ins. Fund v. WallDesign Inc. (2011) 199 Cal.App.4th 1525, 1528, fn. 1 [“We have frequently used our discretionary authority under California Rules of Court, rule 8.155 to augment the appellate record with documents contained in the trial court record that were omitted by the parties, through mistake or neglect, in order to assist us in reviewing appeals on their merits.”].)

[2] All further unspecified statutory references are to the Code of Civil Procedure.

[3] As we will discuss in more detail, the Davis-Stirling Act governs the creation and operation of CIDs, which are defined to include condominium projects, planned developments and stock cooperatives. (Civ. Code, § 4000 et seq.)

[4] The Agreement expressly referred to “the Osborne Mobile Home Park Homeowner’s Association” as the party to the Agreement, but also provided that the HOA is “a California Mutual Benefit, Non-Profit Corporation.” The Agreement was also signed by the president of the “OPI board.” It appears the terms OPI (the official name of the corporate entity) and Osborne Mobile Home Park Homeowner’s Association (the HOA) were used interchangeably. Further, Plaintiffs alleged that it was the “Board of Directors for Osborne Park HOA” that hired Ambassador. We shall refer to the relevant entity as the Osborne Park HOA or the HOA.

[5] Kashay claimed she bought a home in Osborne Park but Plaintiffs contend there is no record of the sale or of Kashay applying for HOA membership. Kashay was a resident and was appointed to the Board of Directors, nonetheless.

[6] Section 425.16, subdivision (e) sets forth the following four categories of protected activity: “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any 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.”

[7] It seems that Fuselier also sued Johnson for defamation. Johnson’s attorney, Conrad Joyner, filed a declaration on October 28, 2020 to “set the record” straight regarding his interaction with Fuselier concerning Johnson’s deposition. According to Joyner, when he tried to persuade Fuselier to drop the defamation case against his client, “Fuselier’s demeanor changed from polite and pleasant to angry” and “shouted out . . . `I will break their f—ing knees !'” (Boldface omitted.)

[8] Fuselier submitted a “Time sheet” in support of his request for attorney fees, in which he indicated his time billed for preparing the Payne and Fageol declarations.

[9] We note that the complaint does not include any allegations regarding e-mails and the order provides no further detail as to the “e-mails and statements” it found were not made in a public forum.

[10] While there is some indication that Kashay may have eventually withdrawn the BBB complaint in response to Fuselier’s threatening email, it remains that the complaint was at least initially made to the BBB as part of the ongoing dispute regarding Plaintiffs’ management of the Osborne Park HOA. Moreover, Plaintiffs disputed Kashay’s claim that she withdrew the complaint as “false.” Plaintiffs instead continued to assert that Kashay did not withdraw her complaint and “published” her claims to the BBB.

[11] Plaintiffs also cite to “Exhibits 15, 16” but do not provide record citations or identify what pleading, if any, to which those Exhibits are attached. It would appear these exhibits were the subject of Plaintiffs’ motion to augment, filed on February 8, 2021. In particular, Exhibit 15, described by Plaintiffs as Kashay’s BBB complaint, is a printout of page “2/2” of an internet webpage titled “BBB Complaint Case ID #14044872.” Its contents are consistent with the parties’ descriptions of the BBB complaint. On February 25, 2021, this court denied the motion to augment without prejudice because Plaintiffs failed to establish the exhibits were filed or lodged with the trial court when it ruled on the appealed-from order. In their respondents’ brief, Plaintiffs confirm they tried to lodge the exhibits in the trial court, but the lodgment was rejected.

[12] We note, however, that we have some serious concerns as to whether the vague, unlimited allegations set forth in paragraph 32 of Plaintiff’s original verified complaint are sufficient to meet the heightened pleading standards for defamation. (See Medical Marijuana, 46 Cal.App.5th at p. 894; Okun, supra, 29 Cal.3d at p. 458.)

[13] Kashay contends Fuselier is that party but the record before us does not establish which party Judge Maas was referencing in his recusal order.

Olson v. Doe

Summary by Pejman D. Kharrazian, Esq.:

 

Homeowner Doe filed a civil harassment restraining order lawsuit against her association’s board president Olson, among others, for sexual battery, assault and discrimination. At the court hearing, the parties were ordered to mediate. At the mediation, Doe and Olson signed a mediation agreement wherein they agreed not to contact or communicate with one another. One of the terms of the mediation agreement was that the “parties agree not to disparage each other.” After the mediation agreement was reached, Doe alleged that Olson’s harassment did not stop. Doe filed an administrative complaint with United States Department of Housing and Urban Development which was referred to the Department of Fair Employment and Housing alleging discrimination based on sex and gender. Doe subsequently filed a civil complaint against Olson and the association. Olson filed a cross-complaint alleging Doe breached the mediation agreement’s nondisparagement clause by filing the administrative complaint and civil complaint. Doe filed an anti-SLAPP motion to strike Olson’s cross-complaint. The trial court granted Doe’s anti-SLAPP motion. Olson appealed. The appellate court affirmed the trial court’s decision in part and reversed in part. The decision was appealed to the California Supreme Court who found that Doe’s filing of the administrative complaint and civil complaint is protected activity under the anti-SLAPP statute. Consequently, the court analyzed prong two of the anti-SLAPP statute analysis, i.e., whether Olson had enough evidence to prevail on his breach of contract claim. For myriad reasons, the court determined that Doe’s filing of an administrative complaint and civil complaint against Olson was not a breach of the nondisparagement clause of their mediation agreement.

TAKEAWAY: Like all contracts, mediation agreements need to be carefully drafted so that all parties to the mediation agreement understand and agree to their terms. If there is a dispute as to how a mediation agreement should be interpreted, courts will utilize the general principals regarding contract interpretation, such as construing contracts as a whole and considering the circumstances under which the contract is made and the matter to which the contract relates.

***End Summary***

12 Cal.5th 669 (2022)
288 Cal. Rptr. 3d 753

No. S258498.

Supreme Court of California.

January 13, 2022.
Appeal from the Superior Court of Los Angeles County, No. SC126806. Craig D. Karlan, Judge.

Second Appellate District, Division Eight, B286105.

Buchalter, Robert M. Dato, Eric Michael Kennedy, Robert Collings Little and Paul Augusto Alarcón for Cross-complainant and Appellant.

Martinez Business & Immigration Law Group, Gloria P. Martinez-Senftner; Keiter Appellate Law, Mitchell Keiter; Sidley Austin, David R. Carpenter, Collin P. Wedel, Andrew B. Talai, Joel L. Richert, Paula C. Salazar; Bryan Cave Leighton Paisner, Jean-Claude André, Anne Redcross Beehler and Kristy Anne Murphy for Cross-defendant and Respondent.

Goodwin Procter, Neel Chatterjee, Alexis S. Coll-Very, Stella Padilla, Megan D. Bettles; Arati Vasan, Janani Ramachandran, Jennafer Dorfman Wagner, Erin C. Smith; and Amy C. Poyer for Family Violence Appellate Project and California Women’s Law Center as Amici Curiae on behalf of Cross-defendant and Respondent.

Law Offices of Aimee J. Zeltzer and Aimee Zeltzer for John K. Mitchell and Dr. Jack R. Goetz as Amici Curiae on behalf of Cross-defendant and Respondent.

 

673*673 OPINION

 

LIU, J.—

Code of Civil Procedure section 527.6 provides a specialized procedure for a petitioner who has suffered harassment within the meaning of the statute to expeditiously seek a limited judicial remedy— injunctive relief to prevent threatened future harm. (All undesignated statutory references are to the Code of Civil Procedure.) A petitioner who also desires retrospective relief in connection with the same underlying conduct, such as tort damages, must do so separately.

Cross-defendant Jane Doe and cross-complainant Curtis Olson each own units in the same condominium building. Doe sought a civil harassment restraining order against Olson pursuant to section 527.6. As a result of court-ordered mediation, the parties agreed “not to contact or communicate with one another or guests accompanying them, except in writing and/or as required by law,” to “go[] their respective directions away from one another” 674*674 if “the parties encounter each other in a public place or in common areas near their residences,” and “not to disparage one another.”

The question here is whether the nondisparagement clause in the parties’ mediation agreement potentially applies to and thereby limits Doe’s ability to bring a subsequent unlimited civil lawsuit against Olson seeking damages. Doe later filed such a lawsuit; Olson cross-complained for breach of contract and specific performance, arguing that Doe’s suit violated the nondisparagement clause; and Doe moved to strike Olson’s cross-complaint under the anti-SLAPP statute. We hold that the mediation agreement as a whole and the specific context in which it was reached—a section 527.6 proceeding— preclude Olson’s broad reading of the nondisparagement clause. Accordingly, Olson has failed to show the requisite “minimal merit” on a critical element of his breach of contract claim—Doe’s obligation under the agreement to refrain from making disparaging statements in litigation—and thus cannot defeat Doe’s anti-SLAPP motion. (Navellier v. Sletten (2002) 29 Cal.4th 82, 94 [124 Cal.Rptr.2d 530, 52 P.3d 703] (Navellier).)

 

I.

 

Doe and Olson met in 2002 and worked together to acquire and preserve a historic apartment building. Olson acquired the building, converted the apartments into eight condominium units, and ultimately became the owner and part-time resident of one of the units. Olson served as the president of the building’s homeowners association (HOA) board from 2013 to January 2016, and Doe resided in one of the condominium units.

In December 2016, Doe filed an unlimited civil lawsuit against Olson and various other defendants, including other residents of the building, the HOA, and the property management company. Through the complaint, Doe seeks damages for a variety of claims, including sexual battery, assault, and discrimination based on perceived ethnicity, religion, and marital status. The complaint alleges multiple romantic advances over a long period of time by Olson toward Doe, which Doe rejected, followed by “a pattern of retaliatory events” by Olson, friends and associates of Olson (some of whom resided in the building after purchasing units from Olson), and the HOA. Doe ultimately moved out of the building for a period from 2009 to 2013.

The complaint further alleges that in May 2015, after Doe had resumed living in her unit, Olson invited her to meet with him in order to “`bury the hatchet,'” and after socializing in the courtyard of the building, Doe accompanied Olson to his condominium unit to watch a short video on the Internet that he was having difficulty loading. According to the complaint, Doe was sitting on a sofa in Olson’s unit when Olson “forced himself on top of” her 675*675 and “started touching her face, hair, and breasts and tried to kiss” her before she was able to struggle free and leave. After this incident, Doe alleges, Olson confronted her in the courtyard visibly upset, and over the ensuing months Olson and his associates continued to harass and stalk her by, for example, “peeping, filming, videotaping, and/or photographing [Doe] and her guests,” including through the bedroom and bathroom windows of her condominium unit, which prompted Doe to file police reports.

The events described in the complaint initially prompted Doe to seek a civil harassment restraining order against Olson pursuant to section 527.6 in October 2015. Her request included allegations of sexual battery, peeping, harassment, and threats to Doe’s life and property, and it sought both personal conduct and stay-away orders against Olson. The court granted Doe’s request for a personal conduct order against Olson and issued a temporary restraining order, but the court denied Doe’s request for a stay-away order in advance of a hearing.

Olson opposed Doe’s request for a civil harassment restraining order, “vehemently deny[ing] th[e] allegations” in her request and asserting that the HOA “and its vendors have had a well-documented history of problems with [Doe] in connection with her use and residency” at the building, including her continued use of a basement storage unit. At a hearing on December 10, 2015, the court ordered the parties to mediation supervised by a volunteer mediator from the California Academy of Mediation Professionals (CAMP). The parties then entered into single-page “Mediation” and “Mediation/Confidentiality” agreements that same day.

Pursuant to the mediation agreement, Doe’s request for a civil harassment restraining order was dismissed without prejudice, and the parties agreed to resolve their dispute in pertinent part as follows: “(1) [Olson] denies each and every allegation made by [Doe] in the dispute. (2) This agreement is made voluntarily by mutual agreement of the parties, and nothing contained herein is to be construed as an admission of any wrongdoing of the parties. (3) The parties agree not to contact or communicate with one another or guests accompanying them, except in writing and/or as required by law. (4) Should the parties encounter each other in a public place or in common areas near their residences, they shall seek to honor this agreement by going their respective directions away from one another. (5) The parties agree not to disparage one another. (6) The term of this agreement shall be three (3) years.”

According to Doe’s civil complaint, harassment by the HOA board and other associates of Olson continued even after the mediation agreement was reached, including a demand by the HOA board in May 2016 that Doe pay a 676*676 percentage of the legal fees incurred by Olson in connection with opposing the civil harassment restraining order. In August 2016, Doe filed an administrative complaint with the United States Department of Housing and Urban Development (HUD), naming Olson and the HOA as respondents and alleging discrimination based on sex and gender. The administrative complaint was referred to the Department of Fair Employment and Housing (DFEH) for investigation. In the administrative complaint, Doe claimed “discrimination based on sex and gender,” alleging that Olson “stalked her,” “subjected her to unwanted sexual comments and touching,” took “pictures of [her] while she [wa]s in the bathroom and in her bedroom,” and “used his position as board president to direct the maintenance man to install cameras in [her] unit,” and that “as a result of the restraining order [Olson and the HOA] tied in a portion of the attorney fees to her home” such that “[i]f the balance[] is not paid in full a 10% monthly fee is added to the unpaid balance and they are able to foreclose on [her] property.”

Doe subsequently filed a civil complaint against Olson and the other defendants seeking damages. In May 2017, Olson filed a cross-complaint against Doe for breach of contract damages and specific performance. The cross-complaint alleges that Doe breached the mediation agreement’s nondisparagement clause by filing her administrative complaint and her civil complaint for damages, and it requests contract damages and an order for specific performance requiring Doe “to withdraw and dismiss all claims in this case, the HUD Complaint, and the DFEH Complaint against Olson or that otherwise disparage Olson.”

Doe moved to strike Olson’s cross-complaint under the anti-SLAPP statute, asserting that it was “retaliatory litigation” and “an attempt to chill Doe’s exercise of her rights of free speech under the United States or California Constitution … and right to petition the courts and the executive branch for redress of grievances.” (See § 425.16, subds. (b)(1), (e)(1) & (e)(4).) Doe argued that Olson could not establish a probability of prevailing because “[t]here was an exception clause that expressly preserves Doe’s right to sue and no release of all claims executed by Doe and Doe’s Complaint and reports to HUD and DFEH are absolute [sic] privileged under California Civil Code § 47.” Olson opposed the motion, arguing that the parties “agreed not to disparage one another for three years,” that Doe breached that agreement by filing the administrative and civil complaints, and that “having contractually obligated herself not to disparage Olson, Doe is not entitled to th[e] protections” of the anti-SLAPP statute.

The trial court granted Doe’s special motion to strike, and Olson appealed. The Court of Appeal affirmed in part and reversed in part. With respect to Doe’s administrative complaint, the Court of Appeal agreed with the trial 677*677 court and viewed Vivian v. Labrucherie (2013) 214 Cal.App.4th 267 [153 Cal.Rptr.3d 707] as dispositive, concluding that applying the litigation privilege was necessary to promote full and candid disclosure to a public agency whose purpose is to protect the public from illegal activity and thus absolved Doe of any liability. With respect to Doe’s civil complaint, however, the Court of Appeal disagreed with the trial court, concluding that the public policy underlying the litigation privilege did not support its application to Doe’s complaint. The Court of Appeal further concluded that Olson had demonstrated the minimal merit needed to pass the second prong of the anti-SLAPP inquiry with respect to his breach of contract claim for damages but had failed to do so with respect to his claim for specific performance. We granted review to decide under what circumstances the litigation privilege of Civil Code section 47, subdivision (b) applies to contract claims, and whether an agreement following mediation between the parties in an action for a civil harassment restraining order, in which they agree not to disparage one another, can lead to liability for statements made in a later unlimited civil lawsuit arising from the same alleged misconduct.

 

II.

 

The parties’ dispute centers on the construction of their mediation agreement, which was reached within the context of a civil harassment restraining order proceeding. (§ 527.6.) We begin with some background on this specialized civil procedure.

The Legislature enacted section 527.6 in 1978 in order “to protect the individual’s right to pursue safety, happiness and privacy as guaranteed by the California Constitution.” (Stats. 1978, ch. 1307, § 1, p. 4294; see Cal. Const., art. I, § 1.) The provision was intended to “`establish an expedited procedure for enjoining acts of “harassment”‘” in order “`to provide quick relief to harassed persons.'” (Smith v. Silvey (1983) 149 Cal.App.3d 400, 405 [197 Cal.Rptr. 15] (Smith).) In the Legislature’s view, “procedures under [then-]existing law”—namely “a tort action based either on invasion of privacy or on intentional infliction of emotional distress”—were “inadequate to remedy the mental and emotional distress suffered by a person,” and “[t]he length of time it takes to obtain an injunction in many cases is too long.” (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 3093 (1977-1978 Reg. Sess.) as amended June 19, 1978, pp. 1-2.) Section 527.6, subdivision (a)(1) enables a victim of “harassment” to “seek a temporary restraining order and an order after hearing prohibiting harassment.” In its current form, section 527.6 provides “for the issuance of a temporary restraining order without notice … on the same day that the petition is submitted to the court” (§ 527.6, subd. (e)) and generally requires the court to hold a hearing on the petition within 21 days (id., subd. (g)). “If the judge finds by clear and convincing 678*678 evidence that unlawful harassment exists, an order shall issue prohibiting the harassment.” (Id., subd. (i).)

Thus, “section 527.6 provides a quick, simple and truncated procedure… and was drafted with the expectation that victims often would seek relief without the benefit of a lawyer.” (Yost v. Forestiere (2020) 51 Cal.App.5th 509, 521 [265 Cal.Rptr.3d 175], citation omitted (Yost).) To that end, section 527.6 from its inception has required the Judicial Council to develop forms for use in these proceedings (Stats. 1978, ch. 1307, § 2, subd. (k), pp. 4294, 4296; see § 527.6, subd. (x)(1)), and current law requires that “[t]he petition and response forms … be simple and concise, and their use by parties in actions brought pursuant to [section 527.6] is mandatory” (§ 527.6, subd. (x)(1)).

Section 527.6 has also made clear since its inception that utilizing this specialized civil procedure does not “preclude a plaintiff’s right to utilize other existing civil remedies.” (Stats. 1978, ch. 1307, § 2, subd. (j), pp. 4294, 4296; see § 527.6, subd. (w).) “The quick, injunctive relief provided by section 527.6 `lies only to prevent threatened injury’—that is, future wrongs”—and “is not intended to punish the restrained party for past acts of harassment.” (Yost, supra, 51 Cal.App.5th at p. 520, quoting Scripps Health v. Marin (1999) 72 Cal.App.4th 324, 332 [85 Cal.Rptr.2d 86].)

 

III.

 

With this statutory context in mind, we consider the subject of Doe’s special motion to strike Olson’s cross-complaint: whether Doe’s civil lawsuit violated the nondisparagement clause in the parties’ mediation agreement arising from Doe’s section 527.6 action seeking a temporary restraining order. (See § 425.16.) The question is whether such a nondisparagement clause applies to statements made in a later unlimited civil lawsuit arising from the same alleged misconduct.

 

A.

 

Pursuant to section 425.16, a party may file a special motion to strike a cause of action or particular claims underlying a cause of action that arise from activity protected by the anti-SLAPP statute. The moving party “must establish that the challenged claim arises from activity protected by section 425.16”; if the moving party does so, “the burden shifts” to the nonmoving party “to demonstrate the merit of the claim by establishing a probability of success.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 [205 Cal.Rptr.3d 475, 376 P.3d 604] (Baral); see § 425.16, subd. (b)(1).) Before the trial court and on appeal, Olson conceded that Doe’s administrative and civil complaints— 679*679 the conduct that gave rise to Olson’s actions for breach of contract and specific performance—constitute petitioning activity protected by section 425.16. Thus, the only issue before us is whether Olson has shown a probability of success. In that regard, we address only the breach of contract claim that Olson raised in the Court of Appeal: that Doe breached their agreement, not by suing him under his own name, but by filing the administrative and civil complaints against him. The Court of Appeal held that Olson “failed to prove the requisite minimal merit” for his claim for specific performance and affirmed that portion of the trial court’s order, and Olson did not seek review. (Doe v. Olson (Aug. 30, 2019, B286105) [nonpub. opn.].)

To succeed in opposing a special motion to strike, the nonmoving party must “demonstrate both that the claim is legally sufficient and that there is sufficient evidence to establish a prima facie case with respect to the claim.” (Taus v. Loftus (2007) 40 Cal.4th 683, 714 [54 Cal.Rptr.3d 775, 151 P.3d 1185].) “[C]laims with the requisite minimal merit may proceed.” (Navellier, supra, 29 Cal.4th at p. 94.) The moving party prevails by “defeat[ing]” the “claim as a matter of law” (Baral, supra, 1 Cal.5th at p. 385) in “a summary-judgment-like procedure” (Taus, at p. 714).

As relevant here, we recognized in Navellier that the anti-SLAPP statute can apply to a breach of contract claim, but the statute “preserves appropriate remedies for breaches of contracts involving speech” since “a defendant who in fact has validly contracted not to speak or petition has in effect `waived’ the right to the anti-SLAPP statute’s protection in the event he or she later breaches that contract.” (Navellier, supra, 29 Cal.4th at p. 94.) An essential element of Olson’s breach of contract action is showing that Doe breached the mediation agreement. (E.g., Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821 [124 Cal.Rptr.3d 256, 250 P.3d 1115] [setting forth elements of breach of contract claim].) In light of the language of the nondisparagement clause, the mediation agreement as a whole, and the broader context in which the agreement was negotiated, we hold that the nondisparagement clause does not apply to statements made by Doe in the litigation context. Thus, Olson has failed to make a prima facie showing on this element sufficient to overcome Doe’s special motion to strike.

The language of the nondisparagement clause is simple: “The parties agree not to disparage one another.” Read in isolation, this language is vague as to its scope and conceivably could be understood to sweep broadly as Olson suggests. Yet a few reasons suggest that such a reading—i.e., one that prevents Doe from making any allegations potentially disparaging against Olson in future litigation—is foreclosed as a matter of law. (See People v. Doolin (2009) 45 Cal.4th 390, 413, fn. 17 [87 Cal.Rptr.3d 209, 198 P.3d 11] (Doolin) [“[w]here … the meaning of [the] agreement does not turn on the credibility of extrinsic evidence, interpretation is a question of law”].)

680*680 First, the nondisparagement clause must be understood in connection with the mediation agreement as a whole. (See Doolin, supra, 45 Cal.4th at p. 413, fn. 17 [“Our interpretation of the agreement is guided by the basic principle that `[a]ny contract must be construed as a whole, with the various individual provisions interpreted together so as to give effect to all, if reasonably possible or practicable.'”].) It is one of only six numbered terms of the one-page agreement, and only three of those constitute the substantive terms intended to directly govern the prospective conduct of the parties. Apart from the nondisparagement clause, Doe and Olson agreed “not to contact or communicate with one another or guests accompanying them, except in writing and/or as required by law,” and “to honor this agreement by going their respective directions away from one another” if “the parties encounter each other in a public place or in common areas near their residences.” The purpose and primary focus of the mediation agreement is self-evident from the agreement as a whole: to set forth mutually agreeable parameters to govern the parties’ potential future physical interactions with one other, including encounters rendered unavoidable by the fact that both owned condominium units in the same building.

The terms of Doe and Olson’s agreement were handwritten. The mediator had apparently run out of the standard-issue, typed mediation agreements used at the courthouse. But the substantive terms contained in Doe and Olson’s agreement nonetheless share substantial similarity with those contained in the version provided by the clerk in response to a request for the “standard mediation agreement.” The standard agreement provides: “The parties agree not to communicate with each other directly or through persons acting on their behalf….” Further, although the standard agreement does not anticipate parties sharing a residential building, it says: “The parties agree to stay away from each other and their respective property, including but not limited to, their residences, places of employment, and personal property,” and “[s]hould the parties encounter each other in a public place, they agree to continue going in their respective directions away from one another.”

The standard-issue mediation agreement also has a nondisparagement clause of sorts. It provides that the “parties agree to not gossip about each other to anyone. The parties further agree to not comment … about each other to nongovernmental 3rd parties unless specifically requested to do so. If they are asked to comment, they shall refer to each other using neutral terms and shall not use negative words or disparage one another.” By specifically exempting “governmental 3rd parties” from its ambit, the form makes clear that such agreements are intended to prevent interpersonal third party “gossip” and rumor-spreading, not official filings with legal authorities. The similarities between Doe and Olson’s agreement and the standard-issue form suggest that the parties did not intend something out of the ordinary with 681*681 their agreement. The standard-issue form, moreover, makes clear that the typical nondisparagement clause is not intended to apply to litigation conduct.

Absent from either Doe and Olson’s agreement or the standard mediation agreement are terms providing any release from liability or waiver of claims. Olson seeks a broad reading of the nondisparagement clause, one that would effectively serve the purpose of those missing terms. Yet we must tread carefully in such circumstances. “`Release, indemnity and similar exculpatory provisions are binding on the signatories and enforceable so long as they are … “clear, explicit and comprehensible in each [of their] essential details. Such an agreement, read as a whole, must clearly notify the prospective releasor or indemnitor of the effect of signing the agreement.”‘” (Skrbina v. Fleming Companies (1996) 45 Cal.App.4th 1353, 1368 [53 Cal.Rptr.2d 481], quoting Powers v. Superior Court (1987) 196 Cal.App.3d 318, 320 [242 Cal.Rptr. 55].) Moreover, according to the terms of the agreement, Doe’s section 527.6 petition was dismissed “without prejudice,” in clear contemplation of the potential for further section 527.6 proceedings. A broad reading of the nondisparagement clause would render a dismissal without prejudice meaningless if Doe could be liable for breach of the mediation agreement were she to exercise her right to seek further section 527.6 relief against Olson or against any other party where the underlying factual allegations touch on Olson. Olson concedes that the mediation agreement does not limit Doe’s ability to file a renewed petition for a restraining order against him; he agrees that Doe would not face contract damages for doing so. But he provides no reason to believe the parties intended to permit Doe to make disparaging remarks in one kind of litigation (a subsequent petition for a restraining order) but not in other litigation seeking a different type of relief.

The parties’ agreements further suggest that they contemplated the possibility of future litigation outside of section 527.6 proceedings. The “Mediation/Confidentiality Agreement” between Doe and Olson says that “each party … understands and acknowledges that evidence presented during this mediation may be verified outside of the mediation process and used as evidence in subsequent legal proceedings.” (Italics added.) The mediation agreement itself also specifically provides, immediately above the signature line, that “this written settlement may be disclosed in a court of law. Upon disclosure, this agreement may be admitted as evidence and/or enforced as determined to be appropriate by the court.” Thus, the parties’ agreements as a whole counsel against an expansive reading of the nondisparagement clause.

Second, the mediation agreement is inextricably linked to the broader context in which it was negotiated—i.e., in a proceeding for a civil harassment restraining order. This context is critical. (See Civ. Code, § 1647 682*682 [“A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates.”]; id., § 1648 [“However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.”].) Such a proceeding is statutorily designed to narrowly focus on interpersonal conflict. Its purpose, when warranted by the circumstances, is to prevent threatened future injury through a resulting “order enjoining a party from harassing, intimidating, molesting, attacking, striking, stalking, threatening, sexually assaulting, battering, abusing, telephoning, including, but not limited to, making annoying telephone calls, as described in Section 653m of the Penal Code, destroying personal property, contacting, either directly or indirectly, by mail or otherwise, or coming within a specified distance of, or disturbing the peace of, the petitioner.” (§ 527.6, subd. (b)(6)(A).)

The narrow focus of these proceedings is communicated to petitioners through instructions issued by the Judicial Council. Judicial Council form CH-100-INFO explains that the purpose of a civil harassment restraining order is to “protect people from harassment.” The instructions explain that in a civil harassment case, the court can “order a person to … [¶] [n]ot harass or threaten you[,] [¶] [n]ot contact or go near you, and [¶] [n]ot have a gun.” But the court cannot, among other things, “[O]rder a person to pay money that he or she owes you.”

That the petitioner in a section 527.6 proceeding has no ability to seek, and the court has no authority to order, redress of past wrongs through damages or otherwise does not mean that a petitioner waives the right to separately seek such other remedies merely by utilizing this specialized statutory procedure for imminent injunctive relief. To the contrary, the statute expressly provides that “a petitioner” is “not preclude[d] from using other existing civil remedies.” (§ 527.6, subd. (w).) “Section 527.6 was passed to supplement the existing common law torts of invasion of privacy and intentional infliction of emotional distress by providing quick relief to harassment victims threatened with great or irreparable injury,” not to supplant those complementary remedies. (Grant v. Clampitt (1997) 56 Cal.App.4th 586, 591 [65 Cal.Rptr.2d 727], italics added.)

“Compromise agreements are, of course, `governed by the legal principles applicable to contracts generally …’… [and] `regulate and settle only such matters and differences as appear clearly to be comprehended in them by the intention of the parties and the necessary consequences thereof, and do not extend to matters which the parties never intended to include therein, although existing at the time.'” (Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 677 [186 Cal.Rptr. 589, 652 P.2d 437], citation omitted.) We have applied this principle in a somewhat analogous 683*683 context where we considered the meaning of the standard language used to release claims and causes of action in workers’ compensation settlements. (See Claxton v. Waters (2004) 34 Cal.4th 367 [18 Cal.Rptr.3d 246, 96 P.3d 496].) Despite the broad language of the release at issue in Claxton— “`releas[ing] and forever discharg[ing] said employer and insurance carrier from all claims and causes of action, whether now known or ascertained, or which may hereafter arise or develop as a result of said injury'”—we held that it “releases only those claims that are within the scope of the workers’ compensation system, and does not apply to claims asserted in separate civil actions.” (Claxton, at pp. 371, 376.) We construed this language in light of the statutory context governing workers’ compensation—in particular, the statute focuses narrowly on eligible employee injuries where it provides the exclusive remedy; some claims based on conduct contrary to fundamental public policy are not subject to the scheme’s exclusivity provisions; and other claims are not compensable or cognizable under the scheme at all and must be pursued separately. (Id. at pp. 372-374.) We also noted the goal of “quickly provid[ing] benefits” to “injured workers,” the “informal rules of pleading [that] apply to such proceedings,” and the fact that “workers may be represented by individuals other than attorneys.” (Id. at p. 373.)

Similar reasoning applies here. As noted, a petitioner seeking a civil harassment restraining order and a court reviewing such a request are confined by the limited nature of section 527.6 proceedings. Tort and other actions seeking retrospective relief by way of damages for the conduct underlying a petition are not cognizable. It is clear from the statute and legislative history that section 527.6 proceedings are not intended to provide a forum for a global resolution of a petitioner’s potential claims related to the underlying conduct at issue. Rather, section 527.6 provides “`an expedited procedure … to provide quick relief to harassed persons'” (Smith, supra, 149 Cal.App.3d at p. 405), not to the exclusion of a petitioner’s right to seek other relief through traditional civil litigation and at a much slower pace (see § 527.6, subd. (w)). Like the workers’ compensation scheme in Claxton, section 527.6 procedures are relatively informal, proceeding by “simple and concise” forms that parties are required to use (§ 527.6, subd. (x)(1)) and “with the expectation that victims often … seek relief without the benefit of a lawyer,” as was the case here with Doe proceeding in propria persona (Yost, supra, 51 Cal.App.5th at p. 521).

Moreover, the specific procedures governing the mediation process for section 527.6 proceedings seem uniquely unsuited to expanding a section 527.6 mediation beyond the statute’s narrow focus. The parties were referred to mediation on the day of the trial court hearing on Doe’s petition. As amici curiae note, such mediations “are conducted only by court appointed specially trained mediators,” “only on the court’s premises,” and agreements “must be agreed to and signed the same day, by the close of the courthouse day, which 684*684 is usually about 4:30 p.m.” If the parties fail to reach an agreement, an evidentiary hearing on the section 527.6 petition typically begins the following day. These procedures appear tailored to the narrow focus and expedited nature of section 527.6 proceedings; expanding the mediation to consider additional issues would run counter to the statutory purpose of “`provid[ing] quick relief to harassed persons.'” (Smith, supra, 149 Cal.App.3d at p. 405.) This counsels skepticism toward reading an agreement reached through such a process to have far-reaching implications beyond the section 527.6 context.

Finally, it is undisputed that Doe’s administrative and civil complaints constitute petitioning activity protected by section 425.16 and article I, section 3 of the California Constitution. (See Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115 [81 Cal.Rptr.2d 471, 969 P.2d 564] [“`petitioning activity involves lobbying the government, suing, [and] testifying'” and “`”[t]he constitutional right to petition … includes the basic act of filing litigation or otherwise seeking administrative action”‘”].) Although the right to petition is somewhat differently situated from the right to a jury trial under article I, section 16 of the California Constitution (see Code Civ. Proc., § 631; Grafton Partners v. Superior Court (2005) 36 Cal.4th 944 [32 Cal.Rptr.3d 5, 116 P.3d 5]), the fact that Olson’s broad construction of the nondisparagement clause in the mediation agreement would impair Doe’s exercise of constitutional rights remains an important consideration. (Janus v. State, County, and Municipal Employees (2018) 585 U.S. ___ [201 L.Ed.2d 924, 138 S.Ct. 2448, 2486] [waiver of 1st Amend. rights “cannot be presumed” and, “to be effective, … must be freely given and shown by `clear and compelling’ evidence”].)

In sum, the mediation agreement as a whole, the statutory context in which it was negotiated, and the fact that it implicates constitutionally protected petitioning activity lead us to conclude that the nondisparagement clause does not apply to the circumstances here. Under the reading Olson urges, the clause would seem to constrain Doe’s ability to further avail herself of the very protections provided by section 527.6, including filing another petition or utilizing the “other existing civil remedies” that the statute expressly preserves. (§ 527.6, subd. (w).) Under Olson’s interpretation of the agreement, the nondisparagement clause would even apply to statements the parties make in litigation involving third parties or about conduct occurring after Doe and Olson entered into the agreement. We see no indication that the parties understood the nondisparagement clause to sweep so broadly. Olson’s reliance on the bare text of the clause, devoid of context and without more, is insufficient to proceed on a breach of contract claim in the face of an anti-SLAPP motion.

We are not confronted with factual circumstances that might make the anti-SLAPP question more difficult, such as conduct that falls somewhere 685*685 between direct communication between the parties as contemplated by the mediation agreement and subsequent litigation. For example, this case does not concern whether the nondisparagement clause might apply to a concerted, hostile media campaign by one party against the other. We have no occasion here to address such a scenario. Olson has failed to show “the requisite minimal merit” to “proceed” on his breach of contract claim. (Navellier, supra, 29 Cal.4th at p. 94.)

 

B.

 

Olson argues that Doe may “try to prove her tort causes of action” but “cannot shoot and miss without facing the penalty of contract damages.” First, Olson analogizes the Court of Appeal’s holding to the statutory provisions governing family law proceedings and custody determinations in the face of one parent’s potentially false accusations of sexual abuse by the other. According to Olson, such family law provisions demonstrate “another context where the Legislature has recognized the incentive to make false accusations can be so great as to overwhelm the motivation for veracity.” But the analogy does not hold. We are not confronted with how to apply a highly reticulated statutory scheme reflecting the Legislature’s sensitive policy judgments. This case turns on an ordinary question of contract interpretation that the Legislature likely did not contemplate when enacting section 527.6 or the anti-SLAPP statute.

Next, Olson contends that the answer to the question before us is “simple because the Court of Appeal’s holding does not bar Doe’s claims but allows Olson to plead and prove his.” Olson’s argument is that “the non-disparagement clause in the mediated agreement does not operate to `bar’ Doe’s `unlimited civil lawsuit'” because Doe can still proceed with her claims, just with the specter of breach of contract liability hanging over her head. This fails to respond to the substance of the question at hand. Whether the claim is that Doe cannot file suit or that she may be subject to damages liability for doing so is materially the same for purposes of assessing whether the nondisparagement clause applies to statements made in connection with subsequent litigation.

In Olson’s view, even if Doe prevailed on her sexual battery claim, he could also prevail on his breach of contract claim and seek damages for economic injury based on reputational harm to offset any damages he owed her. Such an interpretation could require Doe to pay Olson after having successfully proven her case if his damages exceed those awarded to her. There are strong public policy reasons to refrain from such an interpretation. Not long after the mediation agreement in this case was signed, the Legislature clarified that a provision within a settlement agreement that prevents the 686*686 disclosure of factual information related to sexual assault or harassment is prohibited. (Code Civ. Proc., § 1001, subd. (a)(1), (2); see Assem. Com. on Judiciary, Analysis of Sen. Bill No. 820 (2017-2018 Reg. Sess.) as amended June 20, 2018, pp. 3-4 [expressing concerns with confidentiality provisions in settlement agreements in cases involving sexual harassment and assault].) While Olson’s interpretation of the clause would not prohibit Doe from revealing factual information, the specter of liability would clearly disincentivize it.

Olson is correct, of course, that generally speaking a party can “validly contract[] not to speak or petition” and thereby “`waive[]’ the right to the anti-SLAPP statute’s protection in the event he or she later breaches that contract.” (Navellier, supra, 29 Cal.4th at p. 94.) But the circumstances here are meaningfully different from what we have confronted in other cases.

In Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781 [249 Cal.Rptr.3d 295, 444 P.3d 97], a tort settlement “included several provisions purporting to impose confidentiality obligations on the parties and their counsel,” and counsel signed the agreement “under a notation that they approved [it] as to form and content.” (Id. at p. 785.) Monster Energy subsequently sued counsel, alleging that public statements about the settlement constituted breach of the agreement. We held that Monster Energy had met its burden of showing the “minimal merit” needed to proceed on the breach of contract claim “[i]n light of the nature and extent of provisions in the agreement here purporting to bind counsel, and the other properly submitted evidence.” (Id. at p. 796.) We specifically looked to the agreement’s “numerous references to counsel as one whose keeping of confidentiality is assured,” which “reflect[ed] an expectation that the confidentiality provisions would apply to counsel as well.” (Ibid.) Thus, we found it “reasonable to argue that counsel’s signature on the document evinced an understanding of the agreement’s terms and a willingness to be bound by the terms that explicitly referred to him.” (Ibid.)

Whereas the agreement as a whole, together with extrinsic evidence, supported the breach of contract claim in Monster Energy, Olson relies solely on the text of the nondisparagement clause. Going beyond that isolated language, as we must, to consider the mediation agreement as a whole and the context in which it was negotiated undermines Olson’s showing on a critical element of his claim: Doe had no obligation under the contract to refrain from making disparaging statements in litigation. Olson thus cannot defeat Doe’s anti-SLAPP motion.

 

687*687 C.

 

We also granted review to decide under what circumstances the litigation privilege of Civil Code section 47, subdivision (b) applies to contract claims. Because we conclude that Olson has not demonstrated a probability of success necessary to overcome Doe’s anti-SLAPP motion, we need not and do not reach the question whether the litigation privilege also poses a barrier to Olson’s claims. (See Flatley v. Mauro (2006) 39 Cal.4th 299, 323 [46 Cal.Rptr.3d 606, 139 P.3d 2] [“The litigation privilege is also relevant to the second step in the anti-SLAPP analysis in that it may present a substantive defense a plaintiff must overcome to demonstrate a probability of prevailing.”].) We note only that the approach we have taken here—carefully construing a clause that would effectively waive claims—is similar to the approach of courts that have assessed the application of the privilege in the context of a contract said to have waived it. (See O’Brien & Gere Engineers v. City of Salisbury (2016) 447 Md. 394 [135 A.3d 473, 489-491].)

 

CONCLUSION

 

We reverse the judgment of the Court of Appeal insofar as it reversed the trial court’s order granting Doe’s special motion to strike the breach of contract cause of action with respect to statements in Doe’s civil complaint. We remand the matter for further proceedings consistent with this opinion.

Cantil-Sakauye, C. J., Corrigan, J., Kruger, J., Groban, J., Jenkins, J., and Moor, J.,[*] concurred.

[*] Associate Justice of the Court of Appeal, Second Appellate District, Division Five, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

 

Orangecrest Country Cmty. Ass’n v. Burns

Summary by Pejman D. Kharrazian, Esq.:

 

Homeowner Burns submitted an architectural request for various improvements to her property, one of which was the construction of six-foot high stucco walls in her front yard. The association’s architectural guidelines restrict owners from constructing walls or fences in their front yards. The association sent Burns a letter approving her proposed improvements with the following condition: “The stucco walls in the front yard have been denied.” Burns began constructing the walls anyway resulting in the association demanding that she immediately stop. Burns instead constructed non-stucco walls. When Burns failed to respond to the association’s mediation request, the association sued. At trial, Burns argued the “partial approval” letter denied her stucco walls, but did not deny her from building non-stucco walls. She also argued that the association allowed other owners to build walls in their front yards. The association argued that its intent to deny Burns’ proposed walls (stucco or not) is clear from its letter, but admitted that on occasion the association had allowed short walls no taller than three feet to be constructed in front yards. The trial court found in the association’s favor and issued a mandatory injunction ordering Burns to remove the walls. Burns appealed relying on the doctrine of equitable estoppel and arguing selective enforcement. The appellate court found Burn’s arguments unpersuasive. For equitable estoppel to exist, one party must be intentionally misled by another into doing something injurious to themselves that they would not have otherwise done. The appellate court found that the association made it abundantly clear in its letter that it had flatly denied Burns’ request to build the walls contemplated in her architectural request. As to Burns’ selective enforcement argument, the appellate court held that she failed to provide evidence that the association allowed other walls similar to hers to be built.

TAKEAWAY: Make sure your association’s architectural improvement approval or denial letters are abundantly clear and leave no room for other reasonable interpretations as to the association’s decision regarding those improvements. Additionally, if your association has allowed other violations of a particular restriction to stand, then it has effectively given up its right to enforce that same restriction against another owner for the same or similar violation.

***End Summary***

June 9, 2022, No. E074445) 2022 Cal. App. Unpub. LEXIS 3563; 2022 WL 2072063.*

No. E074445.

Court of Appeals of California, Fourth District, Division Two.

 

Filed June 9, 2022.
APPEAL from the Superior Court of Riverside County, Super. Ct. No. RIC1813722, Steven G. Cornelis, Judge. Affirmed.

Sandra Burns, in pro per.; Keiter Appellate Law and Mitchell Keiter for Defendant and Appellant.

Tinnelly Law Group and Sarah A. Kyriakedes, for Plaintiff and Respondent.

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

 

OPINION

 

SLOUGH, J.

Defendant Sandra Burns sought approval to build a wall across her front yard, and when her homeowners association said no, she built it anyway. After multiple attempts to get her to stop construction (and later to mediate the issue) failed, the association sued Burns, seeking a permanent injunction requiring her to remove the wall. Following a two-day bench trial, the judge found Burns had willfully violated her community’s declaration of covenants, conditions, restrictions and reservations (CC&R’s) and issued the injunction.

On appeal, Burns asserts two grounds for reversal. She argues the trial judge erred by failing to find that: (1) the affirmative defense of equitable estoppel applied to justify her construction of the wall, and (2) the association acted unfairly and discriminatorily because they have allowed other homeowners to build walls in their front yards. We conclude these contentions lack merit and affirm.

 

I

 

 

FACTS

 

Burns owns a home in Orangecrest Country, a residential community managed by Orangecrest Country Community Association (the association). She purchased the home subject to the association’s governing documents, which include the community’s CC&R’s and Architectural Guidelines.

Under Article VII, section 7.18 of the CC&R’s, a homeowner may not alter the exterior appearance of their lot without prior approval from the association’s Architectural Committee (the committee). Among other criteria, before approving an alteration, the committee must find that it “will not be detrimental to the appearance of the surrounding area” and “will be in harmony with the surrounding structures.” (CC&R, Art. VIII, § 8.4.1.) Certain structures, however, are flatly prohibited. As relevant here, section 4.11 of the Architectural Guidelines restricts homeowners from installing any walls or fences in the front “setback,” which is the area from the property line located in the center of the street to the front of the home. In practical terms, the setback is the front yard.

On April 27, 2017, Burns submitted an application requesting approval for six modifications to her property—front yard landscaping, painting, a patio cover for the backyard, new rain gutters, and stucco walls in the side yard and front yard. On May 9, the association sent Burns a “partial approval” letter informing her that her plans submitted on April 27 “for installation of front yard landscape, rear yard patio cover, painting and rain gutters . . . have been approved by the Architectural Committee with the following conditions: The stucco walls in the front yard have been denied.” (Emphasis in original.)

On June 30, the association learned that contractors had begun construction on a wall in Burns’s front yard. That same day, the association reached out to Burns by mail, email, and telephone. Elmorabit sent Burns an email and left her a voice message informing her that she lacked approval for the wall she was building on her property and asking her to stop construction immediately. The association sent Burns a cease and desist letter saying the wall being built on her property had not been approved, pointing her to the approval requirement in Article VII, section 7.18 of the CC&R’s, and asking her to “cease work immediately.” The following day, Burns called Elmorabit and “made some remark about not having time for this.”

On July 2, Etienne Caroline, the president of the association’s board of directors, spoke with the construction workers at Burns’s property, told them to check to see if Burns had approval to build the wall, and left his telephone number for her to call him. Burns called Caroline later that day and hung up on him after a brief, contentious conversation.

About a week later, on July 10, the association gave Burns notice they would hold a disciplinary hearing on her noncompliance on August 10. Construction was completed on Burns’s wall sometime later that month.

On August 8, Burns submitted a new application for a wall in her front yard on which she wrote, “no stucco!! Per approval with conditions letter dated 5/9/2017.” On August 9, the association sent Burns a denial letter stating the committee had never approved her wall and demanding she remove it.

At the disciplinary hearing the following day, Burns told the association’s board of directors she had “nothing to say” to them. On August 15, the association sent her a Hearing Decision letter informing her that she had until September 1 to remove the unapproved wall from her front yard.

When Burns failed to remove the wall or respond to their attempts to mediate the dispute, the association filed this lawsuit. In the parties’ joint pretrial statement, Burns informed the court she would not be offering any affirmative defenses at trial. She stipulated that she had received the partial approval letter denying the stucco walls in the front yard and that she had instructed her contractors to build “a wall without stucco” across the front of her property sometime in June or July 2017. She also stipulated that the association had sent her a cease and desist letter and that the wall was still present on her property.

Riverside County Superior Court Judge Steven Counelis presided over the two-day bench trial. The association called four witnesses—Elmorabit, Caroline, Jeff Smith (the association’s architecture expert), and committee member Dennis Friedman. The first two witness described their interactions with Burns about her wall and the association’s attempts to resolve the issue. Smith explained the purpose of the setback rule was twofold—to maintain a consistent open and expansive design and to prevent interference with utility easements. He said Burns’s wall, which was seven feet tall at its highest point, clearly violated the setback rule. Not only was it located in the setback area (or front yard), but Burns had it installed only seven feet beyond her property line, which was immediately adjacent to the sidewalk and interfered with the public’s right-of-way. Smith explained that under the applicable city zoning ordinance, any wall located in the setback area cannot exceed three feet in height, except semitransparent parts of the wall can be as high as four feet tall. Friedman said that during his four years serving on the committee they had never approved a “full size” front yard wall. He said the committee would approve short retaining, landscaping, or decorative walls in the front yard, but nothing taller than three feet. The association also presented evidence that they had recently enforced the setback rule against another resident with a tall front wall similar to the one Burns erected, resulting in the wall’s removal.

Burns, who represented herself at trial as she does on appeal, cross-examined the association’s witnesses but called no witnesses of her own and did not testify on her own behalf. During her cross-examination of Friedman, Burns attempted to impeach his testimony that the committee had never approved a full-size front yard wall by showing him photographs of three other properties in the community that had walls in the front yard. The first photograph depicted a short retaining wall covered by landscaping. The second depicted a short wall on the side of the front yard that ran perpendicular to the side walk and separate that homeowner’s yard from their neighbor’s. And the third depicted an even shorter wall running across a portion of the front yard located several feet behind the sidewalk. Friedman said he wasn’t familiar with the second and third walls because he wasn’t on the committee when they were approved but said the first wall was a permissible retaining wall that didn’t violate the setback rule.

During closing statements, Burns argued she did in fact have approval to build the wall. She argued the phrase “[t]he stucco walls in the front yard are denied” in the May 9 partial approval letter constituted a “conditional approval” to build a wall, so long as it wasn’t made of stucco. She said, “You just don’t put the term conditional approval not relating to anything. So I don’t have a reading comprehension problem. I have a Ph.D. I think I can read, and I think I can articulate what I’m reading. . . . I spent $10,000 on that wall. I wouldn’t be sitting here [having] dedicated 28 months to this case if I truly believed I don’t have in my possession a conditional approval for the wall. That’s it, Your Honor.”

The judge rejected Burns’s claim of conditional approval, finding that even if she had initially (and unreasonably) read the May 9 letter as a conditional approval, the association disabused her of that interpretation when construction began. The judge found Burns “was put on notice, that there was no approval . . . [and] willfully violated the CC&R’s [and] chose to proceed with construction of the wall in opposition to communications from the homeowners association.” He found Burns “led herself to believe that she may establish her own loophole and proceed with construction.”

The judge entered judgment in the association’s favor and issued a mandatory injunction ordering Burns to remove the wall and to submit an application to restore the landscaping that had been removed to construct the wall. Burns filed this appeal.

 

II

 

 

ANALYSIS

 

 

A. Equitable Estoppel

 

For the first time on appeal, Burns argues that the doctrine of equitable estoppel justifies her construction of the wall. Based on principles of fairness, we do not consider factual theories not raised during trial. (Ghazarian v. Magellan Health, Inc. (2020) 53 Cal.App.5th 171, 191; see also Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52 Cal.App.4th 820, 847 [permitting a party to “`adopt a new and different theory on appeal . . . would not only be unfair to the trial court, but manifestly unjust to the opposing litigant'”].) But even if we were to consider this newly raised defense, we would conclude it doesn’t apply.

“`The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment. The elements of the doctrine are that (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.'” (City of Goleta v. Superior Court (2006) 40 Cal.4th 270, 279.)

The crux of estoppel is that one party has intentionally misled another to do something injurious to themselves that they otherwise would not have done. (Brown v. Chiang (2011) 198 Cal.App.4th 1203, 1227.) But “simple reliance on a false statement or conduct is not enough.” (Ibid.) To invoke the doctrine of equitable estoppel, “the reliance must be reasonable.” (Ibid.)

According to Burns, the association intentionally misled her to believe she had been given conditional approval for the wall by stating in the May 9 letter that “[t]he stucco walls in the front yard have been denied.” She claims she believed she could install the wall on the condition she not use stucco. The problem with this argument is that Burns’s claimed reliance was not reasonable. To begin with, there is no basis for her interpretation of the May 9 letter. The association couldn’t have been more clear. The letter was entitled a “partial approval” is because everything in Burns’s application except the wall had been approved; nothing about the direct assertion “[t]he stucco walls in the front yard have been denied” suggests a condition or the opportunity for negotiation. But even more importantly, even if there were two ways to interpret the May 9 letter, the association made it abundantly clear that it had flatly denied the walls on June 30, when they contacted Burns through multiple media to ask her to stop construction and reiterate that she did not have approval for the wall. Thus, if Burns had raised an equitable estoppel defense at trial, the defense would have failed.

 

B. Evidence of Other Walls

 

Next, Burns claims she presented evidence the association acted unfairly and unreasonably by allowing other homeowners within the community to construct walls in their front yards, and she argues the judge should have afforded that evidence more weight. We conclude the judge properly afforded little significance to the existence of the other walls because they bore no similarity to Burns’s wall.

When a homeowners association seeks to enforce its CC&R’s, the association bears the burden of demonstrating “that it has followed its own standards and procedures prior to pursuing such a remedy, that those procedures were fair and reasonable and that its substantive decision was made in good faith, and is reasonable, not arbitrary or capricious.” (Pacific Hills Homeowners Assn. v. Prun (2008) 160 Cal.App.4th 1557, 1565-1566.) The homeowner, however, bears the burden of proving the affirmative defense of waiver—that is, that the association has allowed so many violations of a particular restriction to stand that it has effectively given up its right to enforce the rule. (E.g., Id. at p. 1567 [homeowner bears the burden of producing “evidence of another homeowner’s violation” of the CC&R’s to “support their waiver argument”].)

Here, the association demonstrated they followed their own standards and procedures, but Burns failed to provide evidence that the association had allowed another wall like hers to stand. According to the testimony of Elmorabit and Friedman, the committee reviewed Burns’s application under the rules and criteria contained in the CC&R’s and Architectural Guidelines and denied her wall proposal based on the setback rule in section 4.11 of the Architectural Guidelines. They communicated this decision in their May 9 letter to Burns; sent letters, emails, and made phone calls demanding that Burns comply with the decision once they found out she was moving forward with construction; held a disciplinary hearing and informed her of the outcome; invited her to participate in alternative dispute resolution; and—when none of those responses worked—finally filed suit. They also presented evidence of a similar wall they successfully had removed for violating the same setback rule. This evidence supports a finding that the association followed their ordinary procedures in reviewing and partially denying Burns’s application and in attempting to enforce their decision.

Burns, on the other hand, did not present any evidence the association had allowed other homeowners to build similar nonconforming walls. As we’ve noted, none of the three walls Burns relies on are higher than three feet, and none abut (and run parallel to) the sidewalk. Because of these differences, the judge’s determination that he was “not persuaded by that argument at all” is entirely reasonable. We are unpersuaded by Burns’s claim the judge committed legal error by ignoring the evidence of the other walls she presented during trial. Rather, our review of the judge’s ruling satisfies us that he considered the evidence Burns presented but simply found it insufficient to prove the other walls were in any way similar to hers or even in violation of the setback rule. It was Burns’s burden (not the association’s) to demonstrate the association had let residents erect walls like hers in the community, and she failed to carry that burden.

We conclude Burns’s claims of error fail and uphold the order granting the injunction.

 

III

 

 

DISPOSITION

 

We affirm the judgment. Respondent shall recover their costs on appeal.

RAMIREZ, P. J. and FIELDS, J., concurs.

Schwindt v. Omar

Summary by Pejman D. Kharrazian, Esq.:

 

Homeowner Omar built a room addition that was approved by the association, over the objection of Schwindt, a complaining neighbor. Schwindt sued alleging the room addition was built in a prohibited patio area and interfered with her view. The court agreed that Omar built the room addition in a prohibited patio area, but found the board did not act arbitrarily or capriciously when it determined the addition did not unreasonably interfere with Schwindt’s view. The court denied Schwindt’s request for a mandatory injunction because the hardship to Omar in having to remove his improvements would outweigh the hardship to Schwindt in having to live with a slightly reduced view.

TAKEAWAY: Courts will look at reasonableness in light of the project as a whole and consider the language of the governing documents. In this case, the governing documents gave the board discretion to allow some items in the prohibited patio area. The court distinguished this association’s governing document from the more restrictive CC&Rs language in Ekstrom v. Marquesa at Monarch Beach Homeowner’s Assn. In Ekstrom, the CC&Rs did not give the association discretion to allow trees to obstruct any portion of any lot view, whereas the CC&Rs provision in this case gave the board discretion to approve an improvement, unless the “Proposed Improvement . . . would unreasonably obstruct the view from any other Residence in the Project.”

***End Summary***

(May 17, 2022, Nos. G05943, G059687) 2022 Cal. App. Unpub. LEXIS 3011; 2022 WL 1550691.*

Nos. G059343, G059687.

Court of Appeals of California, Fourth District, Division Three.

 

Filed May 17, 2022.
Appeal from a judgment of the Superior Court of Orange County, Super. Ct. No. 30-2015-00774201, Randall J. Sherman, Judge. Affirmed.

Bohm Wildish & Matsen, Daniel R. Wildish and Charles H. Smith for Plaintiff and Appellant.

Stuart Kane, Eve A. Brackmann, Donald J. Hamman; Apex Lawyers, Shazad Z. Omar; Howard & Howard Attorneys and Ryan A. Ellis for Defendants and Appellants.

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

 

OPINION

 

MOORE, J.

Dr. Christina Schwindt lives in a Newport Beach community (the Bluffs) governed by a Homeowners Association (HOA). Schwindt’s next door neighbors, Ruhksana and Akbar Omar, built a room addition onto their home. The HOA’s Board of Directors (the Board) approved the room addition over Schwindt’s objection.

Schwindt sued the Omars alleging the room addition violated the Bluffs’ Covenants, Conditions, and Restrictions (CC&Rs). Schwindt alleged the addition was built in a prohibited patio area and it unreasonably interfered with her view. In an earlier bench trial, the court issued a mandatory injunction ordering the Omars to demolish their room addition and return their home to its original state. The Omars appealed.

This court reversed and remanded because the trial court’s statement of decision failed to address whether the room addition was built in a prohibited patio area and whether the court found the Board’s approval to be clearly arbitrary and capricious. (Schwindt v. Omar et al., (Sept. 28, 2018, G054373) [nonpub. opn.].)

On remand, a different trial court judge conducted a second bench trial, which included a site visit. The court found the Omars built the room addition in a prohibited patio area, but the court found the Board was not arbitrary and capricious when it determined the addition did not unreasonably interfere with Schwindt’s view. The court denied Schwindt’s request for a mandatory injunction because “the hardship to [the Omars] in having to remove their improvements would outweigh the hardship to [Schwindt] in having to live with her slightly reduced view.”

The Omars requested $377,134.32 in attorney fees. The trial court ordered Schwindt to pay the Omars $100,000.00 in attorney fees.

Schwindt filed an appeal from the trial court’s denial of her requested injunction and an appeal from the award of attorney fees. Omar filed a cross-appeal, challenging the amount of attorney fees. This court consolidated the appeals.

We find no abuse of the trial court’s discretion in any of its rulings. Thus, we affirm the judgment in all regards.

 

I

 

 

FACTS AND PROCEDURAL HISTORY

 

In 2004, Schwindt purchased a home in the Bluffs Community in Newport Beach. From the rear of the property, Schwindt’s home features views of the back bay, to include views of the Pacific Ocean and Catalina Island.

In 2014, the Omars purchased a home next door to Schwindt’s home. The Omars hired an architect, David Bailey, who drafted plans for an enclosed room addition. The room addition extended into the rear portion of the Omars’ home; an area that had formerly been used by the prior owner as a patio.

Bailey submitted the building plans to the Bluffs’ Architectural Control Committee (ACC), which initially rejected the proposed improvements. Bailey revised the plans at least twice and erected “story poles,” indicating how the views of surrounding neighbors would be impacted. Bailey conducted a “view analysis” and determined the impact of the proposed room addition on Schwindt’s view would be minimal. The ACC visited the property and eventually approved the plans for the (now smaller) room addition. Schwindt appealed the ACC’s decision to the Board.

Schwindt and other homeowners attended a Board meeting. A long-time resident, Claude Whitney, who had participated in the drafting of the Bluffs’ revised CC&Rs, attended the meeting. Whitney “specifically read the applicable CC&R’s to the Board about . . . the prohibition of building on a patio.” According to Whitney: “To our surprise, the Board went ahead, despite actual knowledge of the CC&R’s . . ., they approved it.”

Shortly thereafter, construction began on the Omars’ room addition. Schwindt sent a letter to the Omars requesting alternative dispute resolution. The Omars did “not consent to any form of arbitration, mediation, or alternative dispute resolution.”

In February 2015, Schwindt filed a complaint, alleging violations of the CC&Rs: 1) the Omars’ room addition was being built in a prohibited patio area; and 2) the structure unreasonably interfered with Schwindt’s view. The complaint sought declaratory and injunctive relief, and “damages according to proof at the time of trial in excess of $25,000.”

In March 2015, Schwindt, filed a motion for a temporary restraining order, seeking to prohibit the Omars “from continuing to build, construct, erect or otherwise install any room addition or other enclosed improvement on any portion of their patio area and/or future patio area.” The trial court denied the temporary injunction but told the Omars they were proceeding at their own risk.

In July 2016, after a three-day bench trial, the trial court issued a mandatory injunction requiring the Omars “to promptly demolish the enclosed room addition and to restore the premises, insofar as is possible, to its condition prior to the construction of the enclosed room addition.” The Omars appealed from the judgment.

In September 2018, this court reversed: “We direct the trial court on remand to directly address . . . within its statement of decision (whether the court found the decision of the Board to be clearly arbitrary and capricious, and whether the Omar’s room addition was built on a prohibited patio easement).” (Schwindt v. Omar et al., supra, G054373.)

In December 2019, the trial court (a different judge) presided over a three-day bench trial. After visiting the site, the court denied Schwindt’s request for a permanent mandatory injunction (there was no longer a request for damages).

In August 2020, the Omars filed a motion requesting $377,134.32 in attorney fees. The trial court found the Omars to be the prevailing party and awarded $100,000.00 in attorney fees.[1]

 

II

 

 

DISCUSSION

 

Schwindt filed an appeal from the trial court’s denial of her request for a permanent injunction, and later filed an appeal from the court’s order granting the Omars attorney fees. Omar filed a cross-appeal challenging only the amount of the attorney fee award. This court consolidated the appeals.

In this opinion, we will address the: A) the trial court’s denial of Schwindt’s request for an injunction; and B) the attorney fee award to the Omars.

 

A. The Trial Court’s Denial of Schwindt’s Request for an Injunction

 

Schwindt argues the trial court erred when it denied her request for an injunction (the demolition of the Omars’ room addition). We disagree.

A trial court’s decision to deny a party’s request for an injunction is reviewed for an abuse of its discretion. (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 771; Husain v. California Pacific Bank (2021) 61 Cal.App.5th 717, 727-728 [“`the trial court is better equipped than we are to fashion equitable relief and we afford it considerable discretion'”].)

“The abuse of discretion standard is not a unified standard; the deference it calls for varies according to the aspect of a trial court’s ruling under review. The trial court’s findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious.”[2] (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-712, fns. omitted.)

In this part of the discussion, we will: 1) review relevant legal principles; 2) summarize the trial court proceedings; and 3) analyze the law as applied to the facts.

 

1. Relevant Legal Principles

 

Generally, “while the right to injunctive relief under proper circumstances is well established, its issuance is largely discretionary with the court and depends upon a consideration of all the equities between the parties. No hard and fast rule can be adopted which will fit all cases and hence each must be determined upon its own peculiar facts.” (Pahl v. Ribero (1961) 193 Cal.App.2d 154, 161.)

This “balancing of the equities” legal doctrine has been known by several names over the years, including “a balancing of the conveniences,” “a balancing of the equities and hardships,” and “the relative hardship doctrine.” (See Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 526; Associated Cal. Loggers, Inc. v. Kinder (1978) 79 Cal.App.3d 34, 38-39; Hirshfield v. Schwartz, supra, 91 Cal.App.4th at p. 758.)

“Under the relative hardship test, the trial court must identify the competing equities underlying each party’s position. It then must balance the relative hardships of granting or denying an injunction to remove encroachments from the plaintiff’s property.” (Hirshfield v. Schwartz, supra, 91 Cal.App.4th at pp. 761-762.)

“An injunction that requires no action and merely preserves the status quo” is known as a “prohibitory injunction”; “while an injunction requiring the defendant to take affirmative action” is known as a “mandatory injunction.” (Daly v. San Bernardino County Bd. of Supervisors (2021) 11 Cal.5th 1030, 1035.) Generally, “courts give greater scrutiny to mandatory injunctions.” (People ex rel. Brown v. iMergent, Inc. (2009) 170 Cal.App.4th 333, 343.)

CC&Rs are interpreted according to the principles applicable to all written contracts. (Westrec Marina Management, Inc. v. Arrowood Indemnity Co. (2008) 163 Cal.App.4th 1387, 1391-1392.) “The mutual intention of the contracting parties at the time the contract was formed governs. [Citations.] We ascertain that intention solely from the written contract, if possible, but also consider the circumstances under which the contract was made and the matter to which it relates. [Citations.] We consider the contract as a whole and construe the language in context, rather than interpret a provision in isolation. [Citation.] We interpret words in a contract in accordance with their ordinary and popular sense, unless the words are used in a technical sense or a special meaning is given to them by usage. [Citation.] If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs.” (Ibid.)

 

2. Trial Court Proceedings

 

In her complaint, Schwindt alleged the Omars violated the CC&Rs by building their room addition in a prohibited patio area and the home improvement unreasonably interfered with her view.

As to patio areas, the CC&Rs provide:

“No Owner shall build, construct, erect or otherwise install any Proposed Improvement which requires a Building Permit on any portion of his Patio Area and/or Future Patio Area without complying with the provisions of this Article and without first obtaining a Lot Line Adjustment. . . . Notwithstanding the foregoing, the [ACC] shall not have any right, power or authority to approve, and no Owner shall build, construct, erect or otherwise install any room addition or other `enclosed’ Improvement on any portion of his Patio Area and/or Future Patio Area.”

As to views, the CC&Rs provide:

“No owner shall build, construct or erect any Improvement or otherwise allow any Improvement located on such Owner’s Residential Estate to unreasonably interfere with the passage of light and air to, or the view from, any other Residence in the Project.” “The [ACC] shall not approve any Proposed Improvement which would unreasonably obstruct the view from any other Residence in the Project.” “All decisions of the Board shall be conclusive on the issue and binding on the parties unless such decision is clearly arbitrary and capricious.”

During the bench trial, Schwindt testified the room addition “has blocked the . . . entire left side of my home which was — actually the side that’s oriented towards the Catalina Island and ocean view, so it was the most important part of the view. . . .”

Whitney, the longtime resident, testified that although a person may have an ownership interest in “the patio . . . they still couldn’t build on it.” Whitney said the Omars’ room addition constituted a “clear encroachment on the patio.” The person who previously owned the Omars’ home testified the enclosed room addition extended into an area that he previously used as a patio. A construction expert similarly testified the Omars’ room addition was built in a patio area in violation of the CC&Rs, under the common sense understanding of the word patio.

Bailey, the Omars’ architect, testified the room addition did not extend into a prohibited “`Future Patio Easement Area.” Bailey said the story poles were erected based on feedback from the ACC, and the plans were revised to reduce the depth of the project based “in response to some of the neighbors comments about the addition.” In preparation for the Board meeting, Bailey prepared a “view analysis” based on the views from the neighbors’ homes. Bailey said Schwindt’s view was reduced about seven to 10 percent.

A Bluffs’ Board member testified the terms “Future Patio Area” and “Future Patio Area Easement” are used interchangeably in the CC&Rs. The Board member voted to approve the Omars’ proposed room addition. The Board member lived near the Omars’ home and had visited the site several times while the story poles were erected. The Board member concluded Schwindt’s view “would not be unreasonably obstructed.”

An ACC member testified the term “patio area” is not defined in the CC&Rs.[3] The ACC member said he had visited the Omars’ property to “evaluate the concerns to the adjacent neighbors, and then ultimately when the story poles are erected, to evaluate the concerns of the neighbors with physical evidence in place to understand whether it’s reasonable or unreasonable or what other impact it may have.” The ACC member testified: “By the time the second go-around went and story poles were reviewed by the committee, the committee was satisfied that it was not unreasonable. Not unreasonable view obstruction.”

After the close of evidence, “the Court concludes that the CC&Rs unambiguously prevents building in a patio area.” The court further concluded it was “clearly arbitrary and capricious for the Board to conclude otherwise.”

After the site visit, the court found “the view of the back bay water was not affected by the development. The view of Catalina, which was obstructed that day by clouds, that wasn’t obstructed by the development. The view of the Pacific Ocean was not obstructed by the development. The view that got obstructed was of — I guess it’s called the bluffs which is kind of like the side of the mountain.” The court concluded: “It would not be clearly arbitrary and capricious for the Board of Directors to have concluded that there was no unreasonable affect on [Schwindt’s] view.”

As far as the requested relief, the court said: “So this case is not about money damages. It’s about an injunction. Whenever the court issues an injunction, the court has to balance the hardships. And mandatory injunctions typically have a more stringent test than prohibitory injunctions. And in this case, it’s not necessarily true that just because an owner violates the CC&Rs by building in a prohibited patio area, that that has an adverse effect or significant adverse effect on one of the homeowners.”

The court concluded, “I do think it really comes down to whether [Schwindt’s] view was significantly impaired and that the patio area, as a legal issue for the decision in this case, kind of becomes somewhat moot.

“I mean, the fact that the CC&Rs specifically prohibit unreasonably obstructing a view kind of gives you the standard for the court to use on this hardship. It’s kind of the same thing even though it’s somewhat coincidental because it states the hardship was a loss of view. And so if the court were to conclude that the loss of view was unreasonably affected, then the court would find that that’s a significant hardship to the [Schwindt]. But in this case, the court is concluding that the hardship to the [Omars] outweighs the hardship to [Schwindt] in that the cost of tearing down what they built, even it [was], at the time of the denial of preliminary injunction, is a greater hardship than what is a somewhat minimal view loss for [Schwindt].

“You know, I appreciate the fact that the plaintiff didn’t want her view impeded whatsoever, but the standard in the CC&Rs is unreasonably, and the court of appeals mandate to the superior court that the court must go with the HOA’s conclusion unless it is clearly arbitrary and capricious. I mean, not even arbitrary and capricious, but clearly arbitrary and capricious, that based on these facts mandates a ruling in favor of the [Omars] on the injunction issue.

“You know, if this was a case about money and there was some quantitative showing of view loss or property value loss, I could get into that, but that’s not part of this case. [¶] So judgment will be for the [Omars].”[4]

 

3. Analysis and Application

 

It is apparent from the trial court’s cogent ruling that it was not arbitrary or capricious when it applied the law to the facts. The court was aware of the relevant case law. (See, e.g., Kahn v. Price, supra, 69 Cal.App.5th at pp. 241-242.) The court was also aware of the underlying facts; indeed, the court conducted a three-day bench trial, which included a site visit to see the impact of the room addition on Schwindt’s view.

The trial court properly identified the competing equities to the parties: the burden of tearing down the room addition to the Omars, versus the loss of view to Schwindt. (See, e.g., Hirshfield v. Schwartz, supra, 91 Cal.App.4th at pp. 761-762.) The court then concluded the “greater hardship” to the Omars outweighed the “minimal” hardship to Schwindt and denied her request for an injunction that would have required the destruction of the Omars’ room addition.

While we may have come to a different decision, we find no abuse of the trial court’s discretion. Thus, we affirm the court’s ruling.

Schwindt argues this court’s opinion in Ekstrom v. Marquesa at Monarch Beach Homeowner’s Assn. (2008) 168 Cal.App.4th 1111, 1121 (Ekstrom), compels a different result. We disagree.

In Ekstrom, a residential beach community Association’s CC&Rs provided: “All trees . . . shall be trimmed by the Owner of the Lot upon which they are located so that they shall not exceed the height of the house on the Lot; provided, however, that where trees do not obstruct the view from any of the other Lots in the Properties . . . they shall not be required to be so trimmed.” (Ekstrom, supra, 168 Cal.App.4th at pp. 1114-1115.) The Association routinely enforced the CC&R by ordering homeowners to trim their trees; however, the Association did not enforce the CC&R as to palm trees because the Board determined “the aesthetic benefit to the entire community from the maturing and now very lush looking palm trees outweighed the value of preserving views of just a few homeowners.” (Id. at p. 1116.) Some plaintiffs whose views were obstructed by the palm trees sued for injunctive relief. The trial court granted the mandatory injunction requiring the Association to enforce the tree trimming CC&R, even though the trimming (or topping) of the palm trees would result in their destruction. (Id. at pp. 1120-1121.) This court affirmed the ruling of the trial court. (Id. at p. 1127.)

In this case, the trial court found the Board’s approval of the Omars’ room addition in a prohibited patio area was clearly arbitrary and capricious.[5] Schwindt appears to be arguing that under the holding of Ekstrom—as a pure issue of law—the trial court was required to issue an injunction requiring the Omars to demolish their room addition and return their home to its original state. We disagree. In Ekstrom, the tree trimming CC&R did not give the Association the discretion to allow any trees to obstruct any portion of the view from any of the community’s lots. Conversely, the improvement provision in the Bluffs’ CC&Rs gave the Board the discretion to approve a proposed home improvement, unless the “Proposed Improvement which would unreasonably obstruct the view from any other Residence in the Project.” (Italics added.)

Here, after visiting Schwindt’s home, the trial court found the Board was not arbitrary and capricious when it determined that Schwindt’s view was not unreasonably obstructed by the Omars’ room addition. Thus, the trial court was not required to issue a mandatory injunction as the trial court did in Ekstrom.

Schwindt quotes Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 975, for the proposition: “Restrictions are evaluated for reasonableness in light of `the restriction’s effect on the project as a whole,’ not from the perspective of the individual homeowner. [Citations.] Accordingly, courts do not conduct a case-by-case analysis of the restrictions to determine the effect on an individual homeowner [but rather] must consider the reasonableness of the restrictions by looking at the goals and concerns of the entire development.” But the quoted portion of the published opinion concerns the presumptive reasonableness of an Association’s land use restrictions. The quotation certainly does not stand for the notion that a trial court must always issue a mandatory injunction every time a homeowner violates a CC&R, regardless of the seriousness or trivialness of the violation, or the court’s balancing of the equities.

Schwindt also argues “the Superior Court’s judgment left Schwindt wronged without a remedy.” We disagree.

At the time of the trial, Schwindt was no longer seeking damages and was only requesting declaratory and injunctive relief. As the trial court stated: “You know, if this was a case about money and there was some quantitative showing of view loss or property value loss, I could get into that, but that’s not part of this case.”

In other words, there may have been a remedy available to Schwindt—as the trial court seemed to suggest—but we will never know because Schwindt took the possibility of money damages off the table prior to trial. (See Vlahovich v. Cruz (1989) 213 Cal.App.3d 317, 323 [“A litigant will be held to his choice of remedies”].)

In sum, this case is not about a trial court judge ignoring a requirement of the CC&Rs (the patio building restriction). Indeed, the court recognized the Omars’ violation. But then the court deftly used another CC&R (the reasonable view restriction) to accurately weigh the equities because Schwindt’s action was only brought in equity.

 

B. The Attorney Fee Award

 

In this case: 1) Schwindt contends the trial court erred by awarding the Omars any attorney fees; and 2) the Omars contend the court erred by reducing their attorney fee award. We shall analyze the parties’ contentions.

 

1. The trial court did not err by awarding attorney fees to the Omars.

 

“In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract . . . shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717, subd. (a).)[6]

“In an action to enforce the governing documents [CC&Rs], the prevailing party shall be awarded reasonable attorney’s fees and costs.” (§ 5975, subd. (c).)

Generally, “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract. . . .” (§ 1717, subd. (b)(1).)

“A trial court has broad discretion in determining which party has obtained greater relief on the contract, and we will not disturb such a determination on appeal absent a clear abuse of discretion.” (In re Tobacco Cases I (2013) 216 Cal.App.4th 570, 578.) “We are required to uphold a reasonable ruling even if we may not have ruled the same way and a contrary ruling would also be sustainable.” (Ibid.)

The Bluffs’ CC&Rs provide: “In the event the Declarant, the Association or any Owner shall commence legal proceedings to enforce any of the covenants and/or terms of this Declaration, or to declare rights and/or obligations arising hereunder, . . . the prevailing party in such action shall be entitled to recover its costs of suit and reasonable attorneys’ fees as may be fixed by the Court.” (Italics added.)

Here, after the trial court’s judgment on the merits, the Omars filed a motion for determination of the prevailing party and $377,134.32 in attorney fees, which was supported by numerous declarations and billing records. Schwindt filed an opposition, arguing “the `mixed results’ herein support a determination of `no party prevailing’ under Civil Code Section 1717.” Schwindt also argued the requested award should be denied or lowered because the Omars refused to participate in alternative dispute resolution. The Omars filed a reply.

After hearing oral argument, the trial court awarded the Omars $100,000.00 in attorney fees. The court found: the Omars “undoubtedly were the prevailing parties, because they ultimately received a Judgment in their favor.”

Since Schwindt was unsuccessful in obtaining a mandatory restraining order to remove the room addition, and the trial court found that impact on Schwindt’s view was minor, we agree with the court’s ruling that the Omars were the prevailing party. Thus, we find no abuse of the court’s discretion.

Schwindt argues the trial court found the Omars built their room addition in a prohibited patio area, and therefore they did not achieve a complete victory. Schwindt cites various opinions for the proposition that the trial court should have found there was no prevailing party. (See, e.g., Marina Pacifica Homeowners Assn. v. Southern California Financial Corp. (2018) 20 Cal.App.5th 191, 205-206 [court of appeal affirmed ruling of the trial court that there was no prevailing party for purposes of attorney fees because neither party achieved a complete victory].)

While we may have affirmed the trial court’s designation of no prevailing party (had that been the court’s ruling), such a finding is not required under section 1717, or any cases cited by Schwindt. The court was well within its discretion to designate the Omars as the prevailing party, and we will not disturb that finding on appeal.

 

2. The trial court did not err by reducing the attorney fee award.

 

“`The trial court has broad discretion to determine the amount of a reasonable fee, and the award of such fees is governed by equitable principles.'” (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 881-882.)

“In an enforcement action in which attorney’s fees and costs may be awarded, the court, in determining the amount of the award, may consider whether a party’s refusal to participate in alternative dispute resolution before commencement of the action was reasonable.” (§ 5960.)

Trial courts ordinarily use the lodestar method to calculate an attorney fee award “`by multiplying the number of hours reasonably expended by counsel by a reasonable hourly rate. Once the court has fixed the lodestar, it may increase or decrease that amount by applying a positive or negative “multiplier” to take into account a variety of other factors, including the quality of the representation, the novelty and complexity of the issues, the results obtained, and the contingent risk presented.'” (Laffitte v. Robert Half Internat. Inc. (2016) 1 Cal.5th 480, 489.)

In this case, the trial court ruled: “This case went through a bench trial, a reversal on appeal, and a new trial with a new judge. [The Omars] seek attorneys’ fees of $377,134.32, which includes $59,465.32 for the appeal. But if the parties had arbitrated, they would have had a binding decision the first time, rather than incur more fees on an appeal and a retrial. Thus, pursuant to Civil Code §5960, this court will `consider whether a party’s refusal to participate in alternative dispute resolution before commencement of the action was reasonable’, [and] conclude that [the Omars’] refusal to arbitrate was not reasonable, and award [the Omars] only the court’s best estimate of the fees [they] would have incurred if they had arbitrated this dispute.”

Here, we do not find the amount of the attorney fee award to be clearly wrong, so we find no abuse of discretion. (See Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132 [“The `”experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong”‘”].)

On appeal, the Omars argue because Schwindt’s complaint requested $25,000.00 in damages and emergency injunctive relief, the Davis-Sterling Common Interest Development Act, which allowed for the lowering of the attorney fee award based on the refusal to arbitrate, does not apply. (See § 4000 et seq.) But this specific argument and other related issues were not raised in the trial court, so they have been forfeited for purposes of appeal. (See Sea & Sage Audubon Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 417 [“As a general rule, `issues not raised in the trial court cannot be raised for the first time on appeal'”].)

Finally, the Omars argue “the trial court was required to follow the `lodestar’ approach.” However, the trial court was not required to provide a statement of decision. (See, e.g., Ketchum v. Moses, supra, 24 Cal.4th at pp. 1140-1141.) Nor was the court required to “otherwise detail its fealty to the law, which we presume.” (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1323; citing Evid. Code, § 664 [“It is presumed that official duty has been regularly performed”].)

To reiterate and conclude, we find no abuse of the trial court’s discretion in any of its rulings.

 

III

 

 

DISPOSITION

 

The judgment is affirmed. Neither party shall be awarded costs on appeal.

BEDSWORTH, Acting P.J. and GOETHALS, J., concurs.

[1] The trial court’s proceedings and rulings will be covered in greater detail in the discussion section of this opinion.

[2] Schwindt argues the standard of review is de novo “since the court below erred in its interpretation of the CC&R’s when it denied the injunction.” As we shall discuss, we find the trial court did not err in interpreting the CC&Rs. In any event, that aspect of the court’s ruling still falls within the scope of the broad abuse of discretion standard of review. (See Haraguchi v. Superior Court, supra, 43 Cal.4th at pp. 711-712.)

[3] At oral argument in this court Omars’ counsel argued the phrase “patio area” is defined in various provisions of the CC&Rs. However, we note that in the “Definitions” section of the CC&Rs (Article I), the phrase “patio area” is not among the several words or phrases that is specifically listed.

[4] The court later incorporated its oral ruling into its written statement of decision.

[5] The Omars argue the trial court was mistaken as to “patio area” portion of its ruling. But they did not file a cross-appeal as to this issue. (See California Rules of Court, rule 8.406(b).) In any event, we agree with the trial court that the issue is essentially moot given the court’s denial of Schwindt’s requested injunction.

[6] Further undesignated statutory references are to the Civil Code.

 

Miller v. Roseville Lodge No. 1293

Summary by Pejman D. Kharrazian, Esq.:

 

Roseville Lodge No. 1293, Loyal Order of Moose, Inc. (the Lodge) hired contractor Gelatini to move an automated teller machine (ATM) on its premises. Miller worked for Gelatini and performed the work. Miller was injured on the job when he fell from a scaffold that did not have its wheels locked at the time, and he sought to hold the Lodge and its bartender liable for his injuries. Citing the Privette doctrine the Lodge and bartender argued they were not liable, and they moved for summary judgment. The Privette doctrine says: “[g]enerally, when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work.” Miller argued triable issues of fact existed over whether an exception to the Privette doctrine applied. The trial court granted the Lodge’s summary judgment motion, and Miller appealed. The appellate court found none of the exceptions to the Privette doctrine applied. First, because the alleged hazard in this case was not concealed, but rather was reasonably ascertainable to Gelatini (and Miller), the concealed hazardous condition exception to the Privette doctrine did not apply. Instead, the Lodge delegated to Gelatini any duty it had to protect Miller from hazards associated with using a wheeled scaffold. Second, the court found that the Lodge merely offered the scaffold for use, but did not insist on its use. Therefore, the Lodge did not retain control of Miller’s use of the scaffold. Accordingly, the court of appeal affirmed the trial court’s judgment.

TAKEAWAY: When an independent contractor is hired, the hirer not only delegates to that contractor the responsibility to do the work safely, but also control of the worksite. Whatever reasonable care required of the hirer, then becomes the responsibility of the contractor. If a worker of the contractor becomes injured after that delegation takes place, the contractor alone is presumed to be responsible for any failure to take reasonable precautions. Therefore, do not direct your independent contractors! Retaining control over a jobsite in a manner that contributes to an injury is one of the exceptions to the Privette doctrine that otherwise shields the hirer from liability when an independent contractor or its employees are injured on the job.

A hirer must, however, warn a contractor of any concealed hazardous conditions on its property, and failing to do so is will expose the hirer to liability if a worker becomes injured due to that concealed hazardous condition. Therefore, if your association knows that a component or a portion of the property is hazardous and that hazardous condition is not reasonably ascertainable, then your association must notify any independent contractor it hires (and anyone else for that matter) about that concealed hazardous condition.

***End Summary***

83 Cal.App.5th 825 (2022)
299 Cal. Rptr. 3d 151

No. C090751.

Court of Appeals of California, Third District.

September 2, 2022.
Appeal from the Superior Court No. 34-2017-00207092-CU-PO-GDS.

Demas Law Group, John N. Demas, Brad A. Schultz; and C. Athena Roussos for Plaintiff and Appellant.

Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Ernest Slome and Joann M. O. Rangel for Defendants and Respondents.

 

828*828 OPINION

 

EARL, J.—

This case involves application of the so-called Privette doctrine (Privette v. Superior Court (1993) 5 Cal.4th 689 [21 Cal.Rptr.2d 72, 854 P.2d 721]), which deals with whether an entity that hires an independent contractor can be liable for on-the-job injuries sustained by the independent contractor’s workers. Under the Privette doctrine, the answer is no, unless an exception applies.

829*829 Defendant and respondent Roseville Lodge No. 1293, Loyal Order of Moose, Inc. (the Lodge), hired Charlie Gelatini to move an automated teller machine (ATM) on its premises. Plaintiff and appellant Ricky Lee Miller, Jr., worked for Gelatini and was the person who performed the work. Miller was injured on the job when he fell from a scaffold, and he seeks to hold the Lodge and its bartender John Dickinson liable for his injuries. Citing the Privette doctrine, the Lodge and Dickinson argued they are not liable, and they moved for summary judgment. Miller argued triable issues of fact exist over whether an exception applies. The trial court granted the motion, and Miller appealed. We now affirm.

 

I

 

 

FACTUAL AND PROCEDURAL BACKGROUND

 

Gelatini owns Tri-Valley Amusement, Inc. (collectively Gelatini). Miller worked part time for Gelatini installing, upgrading, repairing, maintaining, and cleaning ATM’s. Gelatini was the point of contact with the customer, and about 40 percent of the time he would be at the jobsite with Miller. Gelatini would tell Miller what needed to be done, and Miller would complete the work. Miller was working for Gelatini at the time of the incident and considered himself to be Gelatini’s employee.[1]

Gelatini was hired by the Lodge to relocate an ATM. On the day of the incident, Gelatini and Miller arrived at the Lodge without a ladder. They walked inside the Lodge and saw a scaffold up against one of the walls near the bar area. Dickinson was the only other person present at the Lodge when the incident occurred. He was working as a bartender and was in charge of the area where the scaffold was located.

Miller, Gelatini, and Dickinson offered slightly different accounts of what happened next. Miller states he asked Dickinson for a ladder so he could check where in the ceiling he was going to have to run cables for the ATM. 830*830 Dickinson replied that he did not have a ladder, but that Miller could use the scaffold. Miller states he asked Dickinson if the scaffold was safe, and Dickinson responded that it was and that he used it to change lightbulbs.

According to Gelatini, the scaffold was already in the room where the work would be done. Miller put his hands on the scaffold and yelled to Dickinson, “Hey, is this thing safe?” Dickinson responded, “I don’t know.” Miller then proceeded to climb the scaffold.

According to Dickinson, Gelatini asked him if Miller could use the scaffold. Dickinson replied, “Does he know how to use it?” and Gelatini responded, “Of course he does because he does this for a living.”

The scaffold had four wheels that had to be locked to prevent it from moving while in use. Miller had never used a scaffold before, and did not know that it had wheels or that the wheels had to be locked in order to prevent it from moving. Dickinson did not say anything about the scaffold having wheels or the wheels needing to be locked, and he did not know whether the wheels were locked.

Miller proceeded to climb onto the scaffold. He testified he was not actually moving the ATM while he was on the scaffold, and that he was “just looking at where we can run the line.” While getting down off the scaffold he put his hand on the wall, the scaffold shifted away from the wall, and he fell and hit his head. Immediately after the incident, Dickinson took a picture of the scaffold that showed one of the wheels was unlocked.

Miller sued the Lodge and Dickinson for negligence and respondeat superior.[2] In support of his negligence claim, Miller alleged the Lodge owned, controlled, and maintained the scaffolding. He also alleged: (1) defendants negligently permitted, encouraged, or instructed him to use the scaffold; (2) they knew or should have known the scaffold was dangerous, or unsecured, or unsafe; and (3) he was not aware the scaffold was dangerous, or unsecured, or unsafe. Finally, he alleged that, as a result of defendants’ negligence, the scaffold moved while he was on it, which caused him to fall to the ground and suffer personal injuries. In support of his respondeat superior claim, Miller alleged Dickinson was an employee of the Lodge, and was acting within the scope of his employment at the time of the incident.

The Lodge and Dickinson moved for summary judgment on the ground that the Privette doctrine provides a complete defense to Miller’s claim for 831*831 negligence and his derivative claim for respondeat superior.[3] The trial court agreed and granted the motion. Judgment was entered in favor of the Lodge and Dickinson.

Miller timely appealed.

 

II

 

 

DISCUSSION

 

 

1. Standard of Review

 

On appeal from the grant of a motion for summary judgment, “`”`[w]e review the trial court’s decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained.'” [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.'” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 717 [68 Cal.Rptr.3d 746, 171 P.3d 1082].) “We accept as true both the facts shown by the losing party’s evidence and reasonable inferences from that evidence.” (Castro-Ramirez v. Dependable Highway Express, Inc. (2016) 2 Cal.App.5th 1028, 1036 [207 Cal.Rptr.3d 120].) “`A trial court properly grants a motion for summary judgment only if no issues of triable fact appear and the moving party is entitled to judgment as a matter of law. [Citations.] The moving party bears the burden of showing the court that the plaintiff “has not established, and cannot reasonably expect to establish,”‘ the elements of his or her cause of action.” (Wilson, at p. 720.)

Because the trial court’s judgment is presumed to be correct, Miller (as appellant) has the burden of affirmatively establishing reversible error. (Jameson v. Desta (2018) 5 Cal.5th 594, 608-609 [234 Cal.Rptr.3d 831, 420 P.3d 746]; Swigart v. Bruno (2017) 13 Cal.App.5th 529, 535 [220 Cal.Rptr.3d 556].) Because “we review `the ruling, not the rationale,'” on this appeal from summary judgment, we may affirm on any basis supported by the record and the law. (Skillin v. Rady Children’s Hospital & Health Center (2017) 18 Cal.App.5th 35, 43 [226 Cal.Rptr.3d 505].)

 

2. The Privette Doctrine and Its Exceptions

 

The Privette doctrine takes its name from Privette v. Superior Court, supra, 5 Cal.4th 689 (Privette), which held that a person or entity that hires an 832*832 independent contractor to do work generally is not liable for on-the-job injuries to the independent contractor’s workers. The doctrine has produced a large body of case law, including 10 cases from our Supreme Court alone: Privette, supra, 5 Cal.4th 689; Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253 [74 Cal.Rptr.2d 878, 955 P.2d 504] (Toland); Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235 [108 Cal.Rptr.2d 617, 25 P.3d 1096] (Camargo); Hooker v. Department of Transportation (2002) 27 Cal.4th 198 [115 Cal.Rptr.2d 853, 38 P.3d 1081] (Hooker); McKown v. Wal-Mart Stores, Inc. (2002) 27 Cal.4th 219 [115 Cal.Rptr.2d 868, 38 P.3d 1094] (McKown); Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659 [36 Cal.Rptr.3d 495, 123 P.3d 931] (Kinsman); Tverberg v. Fillner Construction, Inc., supra, 49 Cal.4th 518 (Tverberg); SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal.4th 590 [129 Cal.Rptr.3d 601, 258 P.3d 737] (SeaBright); Gonzalez v. Mathis (2021) 12 Cal.5th 29 [282 Cal.Rptr.3d 658, 493 P.3d 212] (Gonzalez); and Sandoval v. Qualcomm Incorporated, supra, 12 Cal.5th 256 (Sandoval). According to our Supreme Court, the rationale for the doctrine is delegation.[4]

“[A]t common law it was regarded as the norm that when a hirer delegated a task to an independent contractor, it in effect delegated responsibility for performing that task safely, and assignment of liability to the contractor followed that delegation.” (Kinsman, supra, 37 Cal.4th at p. 671; see also Gonzalez, supra, 12 Cal.5th at p. 54 [noting “strong presumption under Privette that a [hirer] delegates all responsibility for workplace safety to the independent contractor”]; SeaBright, supra, 52 Cal.4th at p. 594 [“By hiring an independent contractor, the hirer implicitly delegates to the contractor any tort law duty it owes to the contractor’s employees to ensure the safety of the specific workplace that is the subject of the contract”]; Tverberg, supra, 49 Cal.4th at p. 528 [“When an independent contractor is hired to perform inherently dangerous construction work, that contractor, unlike a mere employee, receives authority to determine how the work is to be performed and assumes a corresponding responsibility to see that the work is performed safely. The independent contractor receives this authority over the manner in which the work is to be performed from the hirer by a process of 833*833 delegation”].) In its most recent Privette case, our high court explained, “When a person or organization hires an independent contractor, the hirer presumptively delegates to the contractor the responsibility to do the work safely. [Citations.] This presumption is grounded in two major principles: first, that independent contractors by definition ordinarily control the manner of their own work; and second, that hirers typically hire independent contractors precisely for their greater ability to perform the contracted work safely and successfully.” (Sandoval, supra, 12 Cal.5th at p. 269.) “A presumptive delegation of tort duties occurs when the hirer turns over control of the worksite to the contractor so that the contractor can perform the contracted work. Our premise is ordinarily that when the hirer delegates control, the hirer simultaneously delegates all tort duties the hirer might otherwise owe the contract workers. [Citations.] Whatever reasonable care would otherwise have demanded of the hirer, that demand lies now only with the contractor. If a contract worker becomes injured after that delegation takes place, we presume that the contractor alone—and not the hirer—was responsible for any failure to take reasonable precautions.” (Id. at p. 271.) In other words, because the hirer delegates to the contractor all tort duties it might otherwise owe to the contractor’s workers, the hirer cannot be held liable if those workers are injured on the job.

Thus, “The Privette doctrine holds that a hirer generally delegates to an independent contractor all responsibility for workplace safety and is not liable for injuries sustained by the contractor or its workers while on the job.” (Gonzalez, supra, 12 Cal.5th at p. 40; see also SeaBright, supra, 52 Cal.4th at p. 594 [“Generally, when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work”].) In this case, the Lodge is the hirer, Gelatini is the independent contractor, and Miller is the worker who was injured on the job. Under the Privette doctrine, the Lodge is not liable for Miller’s on-the-job injuries because we presume the Lodge delegated to Gelatini “all tort duties [it] might otherwise owe [to] contract workers” like Miller, and that “[w]hatever reasonable care would otherwise have demanded of the [Lodge], that demand lies now only with [Gelatini].” (Sandoval, supra, 12 Cal.5th at p. 271.)

There are, however, two exceptions to the Privette doctrine “that apply where [the hirer’s] delegation is either ineffective or incomplete.” (Sandoval, supra, 12 Cal.5th at p. 271.) The first exception was recognized in Hooker, supra, 27 Cal.4th 198 and is usually referred to as the retained control exception. It applies if: (1) the hirer retains control over the manner in which the contractor performs the work; (2) the hirer actually exercises its retained control by involving itself in the work such that the contractor is not entirely free to do the work in its own manner; and (3) the hirer’s exercise of retained control affirmatively contributes to the worker’s injury. (Sandoval, at pp. 276-277.) Under this exception, the hirer’s delegation of tort duties to the 834*834 independent contractor can be seen as “incomplete” or “only partial[]” because it retains control over some aspect of the work and actually exercises that retained control. (Id. at p. 271.)

The second exception was recognized in Kinsman, supra, 37 Cal.4th 659 and is usually referred to as the concealed hazard exception. It applies if the hirer is also an owner or possessor of land, and if “the landowner knew, or should have known, of a latent or concealed preexisting hazardous condition on its property, the contractor did not know and could not have reasonably discovered this hazardous condition, and the landowner failed to warn the contractor about this condition.” (Id. at p. 664, fn. omitted.) Under this exception, the hirer’s delegation of tort duties can be seen as “ineffective” because the independent contractor cannot protect its workers against a hazard it does not know about and could not reasonably discover. (Sandoval, supra, 12 Cal.5th at p. 271.)

 

3. The Privette Presumption Applies

 

The recent case of Alvarez v. Seaside Transportation Services LLC (2017) 13 Cal.App.5th 635 [221 Cal.Rptr.3d 119] explained how the Privette doctrine affects the parties’ respective burdens on a motion for summary judgment. Again, our Supreme Court has held that “[w]hen a person or organization hires an independent contractor, the hirer presumptively delegates to the contractor the responsibility to do the work safely.” (Sandoval, supra, 12 Cal.5th at p. 269, italics added.) The Alvarez court referred to this as the “Privette presumption.” (Alvarez, supra, 13 Cal.App.5th at p. 642.) It held the Privette presumption arises once the defendant establishes the requisite factual foundation—namely, that it hired an independent contractor to perform certain work, and the independent contractor’s worker was injured in the course of that work. (Id. at p. 644.) Once the presumption arises, the burden shifts to the plaintiff to raise a triable issue of fact as to whether one of the exceptions to the Privette doctrine applies, and if it cannot, the defendant is entitled to summary judgment. (Ibid.)

Here, the trial court applied the Alvarez burden shifting analysis, and found (1) the Lodge met its burden of establishing the Privette presumption, and (2) the burden thus shifted to Miller to raise a triable issue of fact as to whether an exception applies. Miller does not challenge this portion of the trial court’s decision. We will thus presume that the Lodge delegated to Gelatini any tort duties it might otherwise have owed to Miller, and that the sole issue on appeal is thus whether Miller has raised a triable issue of fact as to whether an exception to the Privette doctrine applies.

 

835*835 4. There Is No Triable Issue of Fact as to Whether an Exception Applies

 

 

A. The Retained Control Exception

 

Miller cites McKown, supra, 27 Cal.4th at page 222, for the proposition that “a hirer is liable to an employee of an independent contractor insofar as the hirer’s provision of unsafe equipment affirmatively contributes to the employee’s injury.” He contends McKown “is on all fours with the present case” and “directly on point” because Dickinson supplied him with a scaffold that was unsafe unless the wheels were locked, but negligently failed to either check that the wheels were locked or tell Miller to do so.

McKown is a short decision, and the facts are quite simple. Wal-Mart Stores, Inc. (Wal-Mart), hired an independent contractor to install a sound system in one of its stores, and the plaintiff was an employee of the independent contractor. Installing the sound system involved running wires and installing speakers in the store’s ceiling. Wal-Mart requested—but did not direct—that the contractor use Wal-Mart’s forklift when performing the work, and the contractor complied with the request. The forklift was missing a chain that secured a work platform to the forklift, and the plaintiff was injured when the platform disengaged and fell to the floor. A jury found Wal-Mart was negligent in providing unsafe equipment and allocated it 23 percent of the responsibility for the plaintiff’s injuries. (McKown, supra, 27 Cal.4th at p. 223.) Wal-Mart appealed, arguing it was immune from liability under the Privette doctrine, and our Supreme Court affirmed.

The McKown court began by summarizing its decision in Hooker, which recognized the retained control exception to the Privette doctrine and which held a hirer could be liable for injuries to an independent contractor’s employee if the “hirer’s exercise of retained control affirmatively contributed to the employee’s injuries.” (McKown, supra, 27 Cal.4th at p. 225, italics added.) The McKown court then noted, “Imposing tort liability on a hirer of an independent contractor when the hirer’s conduct has affirmatively contributed to the injuries of the contractor’s employee is consistent with the rationale of our decisions in Privette, Toland and Camargo, because the liability of the hirer in such a case is not in essence vicarious or derivative in the sense that it derives from the act or omission of the hired contractor. `To the contrary, the liability of the hirer in such a case is direct in a much stronger sense of that term.’ (Hooker, supra, 27 Cal.4th at p. 212.)” (McKown, supra, 27 Cal.4th at p. 225, italics omitted.) Finally, it held, “For the same reason, when a hirer of an independent contractor, by negligently furnishing unsafe equipment to the contractor, affirmatively contributes to the injury of an employee of the contractor, the hirer should be liable to the employee for 836*836 the consequences of the hirer’s own negligence.” (Ibid., italics added.) The McKown court thus appears to have viewed the negligent furnishing of unsafe equipment as one way a hirer can exercise retained control over a contractor’s work, and later cases have made that clear.

In Gonzalez, supra, 12 Cal.5th 29, for example, our Supreme Court recently explained its holding in McKown as follows: “[W]e did find that the hirer in Hooker‘s companion case, McKown[, supra,] (2002) 27 Cal.4th 219 …, exercised its retained control in a manner that affirmatively contributed to the injury where it required the independent contractor to use the hirer’s own defective equipment in performing the work.” (Id. at p. 42, italics added.) It also explained: “In the nearly two decades following our opinion in Hooker, courts have consistently reaffirmed that `[a] hirer’s failure to correct an unsafe condition’ is insufficient, by itself, to establish liability under Hooker‘s exception to the Privette doctrine. [Citations.] To be liable, a hirer must instead exercise its retained control over any part of the contracted-for work—such as by directing the manner or methods in which the contractor performs the work; interfering with the contractor’s decisions regarding the appropriate safety measures to adopt; requesting the contractor to use the hirer’s own defective equipment in performing the work; contractually prohibiting the contractor from implementing a necessary safety precaution; or reneging on a promise to remedy a known hazard—in a manner that affirmatively contributes to the injury. (See Hooker, at pp. 212, fn. 3, 215; McKown, supra, 27 Cal.4th at p. 225; [citations].)” (Gonzalez, supra, 12 Cal.5th at pp. 46-47, italics added.) Even more recently, in Sandoval, supra, 12 Cal.5th 256 the Supreme Court cited McKown as an example of a retained control case where “affirmative contribution” was found because the “hirer `requested’ that contractor use faulty equipment, thus at least in part inducing the contractor’s decision to use it.” (Id. at p. 277.) Thus, furnishing unsafe equipment is simply one example of exercising retained control, rather than its own separate exception to the Privette doctrine.[5]

Miller argues McKown is directly on point. Miller contends that there are triable issues of fact as to whether Dickinson, the Lodge’s agent, negligently provided him with unsafe equipment. The unsafe equipment in this case is the scaffold, and Miller concedes that what made the scaffold unsafe was the fact that the wheels were not locked.[6] (He acknowledges in his briefs, for example: “While Miller was on the scaffold, it moved because at least one of 837*837 the wheels was not locked, causing him to fall and sustain a significant head injury”; “The scaffold here was dangerous to use unless the wheels were locked”; “Dickinson knew the scaffold was not safe to use unless the wheels were locked, yet he said nothing about the wheels and failed to check them”; “The scaffold is clearly unsafe to use if the wheels are unlocked”; and “The failure to ensure that the wheels were locked, or to even tell Miller to check the wheels, … created an unreasonable risk of danger and was precisely why Miller was injured.”) We find Miller fails to raise a triable issue of fact as to whether the retained control exception applies.

The trial court found McKown was distinguishable because the hirer in that case “specifically requested the contractor to use [the] hirer’s own forklift.” We agree. Here, and in contrast to McKown, Dickinson did not ask Miller or Gelatini to use the scaffold. At best, he offered the scaffold for use, thereby permitting its use because Miller and Gelatini apparently had no equipment that would allow the necessary access, and “passively permitting an unsafe condition to occur … does not constitute affirmative contribution” within the meaning of the retained control exception. (Tverberg v. Fillner Construction, Inc. (2012) 202 Cal.App.4th 1439, 1446 [136 Cal.Rptr.3d 521].)

Miller argues this attempt to distinguish McKown is unpersuasive. He contends the evidence shows Dickinson offered him the scaffold in lieu of a ladder, and he analogizes this to Wal-Mart’s request in McKown that the contractor use its forklift. We find the analogy to be inapt. There is a difference between asking a contractor to use your equipment and allowing a contractor to use your equipment. Again, “a hirer is not liable under Privette where it merely permits a dangerous work condition or practice to exist. [Citation.] This is true even where the hirer knows of the danger and has the authority and ability to remedy it.” (Gonzalez, supra, 12 Cal.5th at p. 46.) At best, the evidence in this case would support a finding that Dickinson knew the scaffold was unsafe unless the wheels were locked and had the ability to either advise Miller of that fact or make sure the wheels were locked, but that he failed to do so. This is insufficient to hold the Lodge liable for Miller’s injuries. Instead, “Something more is required, such as `”inducing injurious action or inaction through actual direction”‘ [citation]; directing `”the contracted work be done by use of a certain mode”‘ [citation]; or interfering with `”the means and methods by which the work is to be accomplished”‘ [citation].” (Id. at p. 42.) Here, that “[s]omething more” is lacking because 838*838 Dickinson did not direct Miller to use the scaffold, he did not direct that the work be done by use of a certain mode, and he did not interfere with the means and methods by which the work was done.

“A hirer `retains control’ where it retains a sufficient degree of authority over the manner of performance of the work entrusted to the contractor,” and it “`actually exercise[s]'” its retained control “when it involves itself in the contracted work `such that the contractor is not entirely free to do the work in the contractor’s own manner.’ [Citations.]'” (Sandoval, supra, 12 Cal.5th at pp. 274, 276.) In McKown, Wal-Mart involved itself in the work when it asked the contractor to use its forklift such that the contractor was not entirely free to do the work in its own manner. Here, in contrast, Dickinson did not ask Gelatini and Miller to use the scaffold or otherwise involve himself (or the Lodge) in the work of moving the ATM, and Gelatini and Miller were free to do the work as they saw fit.

SeaBright, supra, 52 Cal.4th 590, is instructive. There, the defendant was an airline that hired an independent contractor to maintain and repair a conveyor that it used to move luggage at an airport. An employee of the independent contractor was inspecting the conveyor and was injured when his arm got caught in its moving parts. The employee sued the airline, alleging causes of action for negligence and premises liability.[7] The airline moved for summary judgment based on Privette and Hooker, arguing it was not liable for the employee’s injuries because it did not retain control over the independent contractor’s work or exercise the control it retained in a way that affirmatively contributed to the employee’s injury. The employee opposed the motion with a declaration from an expert who stated the conveyor’s lack of safety guards violated Cal-OSHA regulations and the safety guards would have prevented the employee’s injury. The trial court granted the motion, and the appellate court reversed, holding that, under the Cal-OSHA regulations, the airline had a nondelegable duty to ensure that the conveyor had safety guards and that there was a triable issue of fact as to whether the airline’s failure to perform this duty affirmatively contributed to the employee’s injury. (SeaBright, supra, 52 Cal.4th at pp. 594-595.)

Our Supreme Court reversed, holding the airline “presumptively delegated to [the independent contractor] any tort law duty of care the airline had under Cal-OSHA and its regulations to ensure workplace safety for the benefit of [the independent contractor’s] employees. The delegation … included a duty to identify the absence of the safety guards required by Cal-OSHA regulations 839*839 and to take reasonable steps to address that hazard.” (SeaBright, supra, 52 Cal.4th at p. 601, italics added.) Thus, even though the employee was injured because the conveyor lacked guardrails that were required by Cal-OSHA regulations, the airline was not liable.

This case is similar. In SeaBright, the employee was injured because the equipment he was working on lacked safety guards required by Cal-OSHA regulations. Here, Miller was injured because the equipment he was using to perform the work (i.e., the scaffold) was unsafe unless its wheels were locked. Just as in SeaBright the airline delegated to the independent contractor the duty to identify the absence of the safety guards and to take reasonable steps to address the hazard, here, the Lodge delegated to Gelatini the duty to identify the fact that the scaffold had wheels and was unsafe to use unless the wheels were locked or the scaffold was steadied in some manner, and to take reasonable steps to address that hazard.

We thus agree with the trial court that the retained control exception does not apply.

 

B. The Concealed Hazardous Condition Exception

 

Miller also argues the Lodge is liable for his injuries because it failed to warn him of a concealed hazardous condition on its property (i.e., the unsafe scaffold). We disagree.

The concealed hazardous condition exception applies when the hirer is also an owner or occupier of land. In that case, “the hirer as landowner may be independently liable to the contractor’s employee, even if it does not retain control over the work, if: (1) it knows or reasonably should know of a concealed, preexisting hazardous condition on its premises; (2) the contractor does not know and could not reasonably ascertain the condition; and (3) the landowner fails to warn the contractor.” (Kinsman, supra, 37 Cal.4th at p. 675.) Here, the undisputed facts demonstrate the hazardous condition was not concealed, and the exception thus does not apply even if we assume Dickinson knew of the hazardous condition, and Dickinson failed to warn Gelatini and Miller.

“[A] `concealed’ hazard means something specific: a hazard that the hirer either knows or reasonably should know exists, and that the contractor does not know exists and could not reasonably discover without the hirer’s disclosure.” (Sandoval, supra, 12 Cal.5th at p. 272, italics added; see also Kinsman, supra, 37 Cal.4th at p. 664 [describing concealed hazard as one that is hidden].) If the hazard is “reasonably ascertainable” to the independent contractor, the hazard is not concealed and the hirer is not liable. (Kinsman, at p. 682.)

840*840 Here, the fact that the scaffold had wheels was not concealed. Gelatini and Miller could have discovered their existence had they simply inspected the scaffold before Miller climbed onto it. Miller argues that whether a condition is concealed is an issue of fact that cannot be decided on summary judgment. Given the evidence in this case, we disagree.

To create an issue of fact, Miller contends, “It was dark inside the room” where the accident occurred. Presumably his point is that it was so dark the wheels on the scaffold were not visible. Again, a concealed hazard is a hazard “that the contractor does not know exists and could not reasonably discover without the hirer’s disclosure.” (Sandoval, supra, 12 Cal.5th at p. 272, italics added.) That the room may have been dark does not establish that Gelatini and Miller could not reasonably discover that the scaffold had wheels unless Dickinson pointed that out—all they had to do to discover the wheels was simply to look at the scaffold deploying adequate lighting.

Moreover, and more importantly, the evidence cited by Miller does not actually support his contention that the room was so dark the wheels were not visible. He cites deposition testimony from Gelatini and Dickinson. Gelatini was shown a photograph (marked as exhibit No. 2) of a scaffold that was taken at an inspection that occurred sometime after the accident, and he was asked, “Does that appear to be the scaffold that was involved?” He responded, “I can’t tell because it’s light out—dark in that room.” It is unclear whether Gelatini was referring to the room depicted in the photograph or the room where the accident occurred. Even if we assume he was referring to the room where the accident occurred, however, at best his testimony might prove the room was too dark to tell whether the scaffold depicted in a photograph was the same scaffold that Miller used. Gelatini’s testimony does not create a triable issue as to whether the wheels on the scaffold were visible when Miller used it.

Dickinson’s testimony is even less helpful to Miller. Dickinson was asked whether it was “bright or dark” inside the Lodge on the day of the incident, and he responded there “probably would have been lights on. But I don’t remember.” Dickinson’s testimony that he doesn’t remember whether the lights were on is insufficient to create a triable issue of fact as to whether Gelatini and Miller could not reasonably discover the scaffold had wheels without Dickinson’s disclosure. (See, e.g., Johnson v. Tosco Corp. (1991) 1 Cal.App.4th 123, 140 [1 Cal.Rptr.2d 747] [“It cannot seriously be argued that a partially assembled and unstable scaffold placed over a hard and uneven surface constitutes a concealed danger”].)

Miller also contends the fact that the wheels needed to be locked to safely use the scaffold was not something he and Gelatini could discover without 841*841 Dickinson’s disclosure.[8] Again, we disagree. Upon simple inspection, including checking whether the scaffold would move before Miller climbed on it, Gelatini (and Miller) reasonably should have known that the scaffold could move while Miller was on it if the wheels were not locked or the scaffold was not otherwise steadied in some manner. Again, they failed to inspect the scaffold.

Because the alleged hazard in this case was not concealed and was reasonably ascertainable to Gelatini (and Miller), the concealed hazardous condition exception does not apply. Instead, the Privette presumption remains unrebutted, and the Lodge delegated to Gelatini any duty it had to protect Miller from hazards associated with using a wheeled scaffold.

 

DISPOSITION

 

The judgment is affirmed and the Lodge shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

Mauro, Acting P. J., and Duarte, J., concurred.

[1] There is a hint in Miller’s brief that there may be a dispute over whether he was Gelatini’s employee or was an independent contractor. However, neither party directly addresses this issue in their briefs, and assuming there is such a dispute, we find it to be immaterial because the Privette doctrine applies whether the injured worker is an employee or is himself an independent contractor, and Miller does not suggest otherwise. (See, e.g., Sandoval v. Qualcomm Incorporated (2021) 12 Cal.5th 256, 270 & fn. 2 [283 Cal.Rptr.3d 519, 494 P.3d 487] [doctrine applies when “`contract worker'” is injured on the job, and “`contract worker'” includes “the independent contractor personally, the independent contractor’s employees, the independent contractor’s subcontractors personally, the subcontractors’ employees, and so on”]; Tverberg v. Fillner Construction, Inc. (2010) 49 Cal.4th 518, 528 [110 Cal.Rptr.3d 665, 232 P.3d 656] [“It would be anomalous to allow an independent contractor … to recover against the hirer … while denying such recovery to an independent contractor’s employee“].)

[2] He also sued Gelatini and Tri-Valley Amusement, Inc. Although they are also defendants in the underlying action, they are not parties to the underlying summary judgment motion or to this appeal.

[3] The Lodge also argued the respondeat superior claim failed for an additional reason because Dickinson was not acting as its agent or employee when he interacted with Miller. The trial court did not address this argument, and neither do we.

[4] In Privette itself, and in earlier cases discussing the doctrine, our Supreme Court explained the rationale in terms of the injured employee’s entitlement to workers’ compensation benefits, and the fact that workers’ compensation is the exclusive remedy against an employer for injuries arising in the course and scope of employment. (See Privette, supra, 5 Cal.4th at pp. 696-702; Toland, supra, 18 Cal.4th at pp. 261, 266-67; Camargo, supra, 25 Cal.4th at pp. 1238-1240, 1244-1245; Hooker, supra, 27 Cal.4th at pp. 204-206.) Starting with Kinsman, supra, 37 Cal.4th 659, our Supreme Court began explaining the doctrine “in terms of delegation rather than workers’ compensation.” (Sandoval, supra, 12 Cal.5th at p. 270.) It has also made clear that the doctrine applies “to a solo independent contractor who has no employees and who has declined to obtain workers’ compensation insurance, such that the contractor will receive no coverage for his or her injuries.” (Gonzalez, supra, 12 Cal.5th at p. 42.)

[5] In a footnote, Miller suggests that the negligent exercise of retained control is one exception to the Privette doctrine, and the negligent provision of unsafe equipment is an entirely separate exception. For the reasons just stated, we disagree, and find the provision of unsafe equipment is simply one way a hirer can exercise retained control over the worksite.

[6] Miller also argues the trial court erred in overruling his objection to a defense expert’s declaration that the expert inspected the scaffold about seven months after the accident, and “[a]ll component parts were in serviceable condition. To my knowledge, no portion of the scaffold had been repaired or replaced.” Miller objected on the grounds that the statement lacked foundation and personal knowledge. Assuming for the sake of argument that the objection should have been sustained, we find the error to be harmless. The Lodge proffered the expert’s declaration to refute any argument that the scaffold was defective, but Miller did not make such an argument in opposition to the motion. Instead, he contended that the scaffold was unsafe to use unless the wheels were locked, not that it was unsafe because it was not in serviceable condition or was otherwise defective in some way.

[7] The lawsuit was initially filed by the independent contractor’s workers’ compensation insurer, which claimed the airline had caused the employee’s injury and which sought to recover the workers’ compensation benefits it had paid; the employee intervened in that lawsuit. (SeaBright, supra, 52 Cal.4th at pp. 594-595.)

[8] In other words, even if the wheels themselves were visible, the concealed hazard was the fact that the wheels needed to be locked.

Fowler v. Golden Pacific Bancorp

Summary by Pejman D. Kharrazian, Esq.:

Fowler, a corporate director (not of a common interest development), petitioned the court to compel an inspection of corporate books and records pursuant to the Corporations Code. The corporation opposed the petition arguing that because the director was involved in ongoing litigation with the corporation, the court should curtail the director’s inspection rights because the director could use the information obtained during inspection against the corporation in the ongoing litigation. The trial court granted the director’s petition and the corporation appealed.
The court of appeal, in upholding the trial court’s ruling, found that the mere possibility that information could be used adversely against the corporation is not by itself sufficient to defeat a director’s inspection rights. Rather, any exception to the general rule favoring access to corporate records by directors must only be limited to extreme cases, e.g., where enforcing an absolute right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation

TAKEAWAY: Consult with legal counsel before restricting a director’s access to corporate records. California has a strong public policy favoring a broad right of access to corporate records to assist directors in performing their duties in an intelligent and fully informed manner. The statutory scheme gives every director the right to inspect and copy all books, records and documents, but there are several California cases (see e.g., Chantiles v. Lake Forest II Master Homeowners Assn.; Tritek Telecom, Inc. v. Superior Court; and Havlicek v. Coast-to-Coast Analytical Services, Inc.) that limit that right in certain specific limited circumstances. Because the denial of access to corporate records may operate to deny a director the ability meaningfully to participate in corporate governance, any exception to the policy of “absolute” access must be construed narrowly.

***End Summary***

80 Cal.App.5th 205 (2022)

No. C092179.

Court of Appeals of California, Third District.

 

June 23, 2022.
APPEAL from a judgment of the Superior Court of Sacramento County, Super. Ct. No. 34-2019-80003150-CU-WM-GDS, James P. Arguelles, Judge. Reversed with directions.

Law Office of Stephanie J. Finelli and Stephanie J. Finelli for Defendant and Appellant.

Tisdale & Nicholson and Michael D. Stein for Plaintiff and Respondent.

 

OPINION

 

KRAUSE, J.—

This is an action to compel an inspection of books and records pursuant to Corporations Code section 1600 et seq.[1] Plaintiff Rick Fowler (Fowler) sought a writ of mandate against defendant Golden Pacific Bancorp, Inc. (Bancorp), to enforce his statutory rights as a director and majority shareholder to inspect corporate books and records. Bancorp opposed the petition, arguing that the trial court should curtail Fowler’s inspection rights because he is involved in ongoing litigation with Bancorp and could use the information to undermine Bancorp’s position in the lawsuit. Unpersuaded that Bancorp met the heavy burden necessary to curtail Fowler’s inspection rights, the trial court granted Fowler’s writ petition.

Bancorp appealed, contending that the trial court erred by (1) allowing Fowler to submit additional evidence on reply without permitting Bancorp an adequate opportunity to respond; and (2) granting the writ petition and permitting Fowler to have unfettered access to Bancorp’s corporate books and records.

After we issued an oral argument waiver notice, Bancorp moved to dismiss the appeal as moot. Bancorp asserted that due to the recent acquisition of 211*211 Bancorp by Social Finance, Inc., Fowler is no longer a Bancorp board member, and therefore it is impossible for this court to grant effective relief. Fowler requested oral argument. We deferred ruling on the motion until after oral argument.

We shall conclude that the primary issue raised in this appeal is moot because Fowler is no longer a member of Bancorp’s board of directors and therefore has no director’s inspection rights. Nevertheless, we exercise our discretion to reach the merits because it presents an issue of substantial and continuing public interest: whether a director’s “absolute” right of inspection under section 1602 may be curtailed because the director and corporation are involved in litigation and there is a possibility the documents could be used to harm the corporation.

We shall conclude the mere possibility that information could be used adversely to the corporation is not by itself sufficient to defeat a director’s inspection rights. Rather, any exception to the general rule favoring unfettered access must be limited to extreme cases, where enforcing an “absolute” right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation.

We decline to reach the other question referenced in the parties’ briefs concerning Fowler’s inspection rights as a shareholder, because that issue was not resolved by the trial court and the record is insufficiently developed for us to determine whether it is moot. Thus, we shall remand this matter for the trial court to consider whether that issue is moot and, if not, to resolve any remaining disputes in the first instance.

 

FACTUAL AND PROCEDURAL BACKGROUND

 

Bancorp was a bank holding company conducting business through its wholly owned subsidiary, Golden Pacific Bank, N.A. Fowler was a member of Bancorp’s board of directors and its largest individual shareholder, holding over 19 percent of the outstanding stock. Fowler also is the chief operating officer of a law firm, Kronick, Moskovitz, Tiedemann & Girard (KMTG).

In July 2018, Bancorp filed a lawsuit in the Sacramento County Superior Court (Golden Pacific Bancorp, Inc. v. Kronick, Moskovich, Tiedemann & Girard (Super. Ct. Sacramento County, No. 34-2018-00236905)) against KMTG, an individual attorney at KMTG, and Fowler (the malpractice lawsuit). The lawsuit arose out of KMTG’s representation of Bancorp in prior litigation against a company called BillFloat, Inc. (the BillFloat litigation). Bancorp’s amended complaint alleges claims against KMTG and its attorney 212*212 for breach of contract, breach of professional duties, professional negligence, and breach of fiduciary duties in connection with the prosecution and eventual settlement of the BillFloat litigation. Among other things, the complaint alleges that KMTG and the attorney overbilled for services, negligently failed to evaluate and prepare the case for trial, and caused Bancorp to accept a grossly inadequate settlement amount.

The complaint also alleges claims against Fowler for negligence, breach of fiduciary duty, concealment, and fraud based on his actions as a Bancorp director. Specifically, it asserts that Fowler breached his fiduciary duties by persuading Bancorp to hire KMTG for the BillFloat litigation despite knowing that KMTG was not competent to handle the litigation. It further alleges that Fowler used his position as director to persuade Bancorp to settle the BillFloat litigation for a grossly inadequate amount because Fowler knew KMTG had failed to conduct sufficient discovery and investigation to prepare the case for trial.

In September 2018, two months after Bancorp filed the malpractice lawsuit, Fowler delivered to Bancorp a written demand to inspect and copy the following books and records pursuant to section 1600 et seq.:

1. A list of the names, addresses, e-mail addresses, and holdings of all Bancorp shareholders;

2. A breakdown of the expense and income balance sheet items labeled “Other” for Bancorp and its wholly owned subsidiary bank;

3. A breakdown of where on the 2017 and 2018 consolidated financial statements the BillFloat settlement payment was booked, and where KMTG’s legal fees for 2016, 2017, and 2018 were booked;

4. Any change in control/severance/golden parachute agreements for Bancorp-affiliated parties;

5. Any resolutions approving change in control agreements or an increase in director fees and/or bonuses for 2016, 2017, and 2018;

6. Any documents evidencing payment of the personal legal fees of Bancorp president and chief executive officer, Virginia Varela, in 2016, 2017, and 2018;

7. The loan file pertaining to the Axis Energy SBA loan; and

8. The bank’s accounting books and records, and meeting minutes for its board and committees from September 2017 through the date of the request.

213*213 Fowler asserted that, as a director, he had an “absolute right” to inspect the records under section 1602. Bancorp, however, refused to permit inspection, citing conflicts of interest and concerns that Fowler was seeking the records for an improper purpose, namely, to undermine Bancorp’s position in the malpractice lawsuit.

Fowler did not immediately seek a peremptory writ to enforce his statutory inspection right. Instead, in November 2018, Fowler served Bancorp with a request for production of documents in the malpractice lawsuit seeking records substantially similar to those sought in his inspection demand letter.

When Bancorp refused to produce the requested documents, Fowler filed a motion to compel. In support of his motion, Fowler argued that the requested documents were relevant to Bancorp’s claims and his defenses in the malpractice lawsuit. Bancorp opposed the motion, asserting, inter alia, that most of the records Fowler requested were irrelevant to the lawsuit and would only be of interest in his capacity as a “disgruntled shareholder/director.” The court agreed with Bancorp. It denied the motion to compel, concluding that the document requests were overbroad, invaded third party privacy rights, and sought information that was not relevant.

Shortly thereafter, Fowler filed this action for a peremptory writ of mandate to enforce his statutory right to inspect Bancorp’s books and records. His amended petition alleges that he has an “absolute right” as a director and shareholder to inspect and copy the records pursuant to sections 1600 and 1602. In a supporting declaration, Fowler stated that he requested the inspection to protect his interests as Bancorp’s single largest shareholder and to fulfill his fiduciary duty as a director to stay informed about Bancorp’s financial condition and operations.

Bancorp opposed the writ petition, asserting that inspection should be denied because Fowler is not a disinterested director and his only motive in requesting the records is to “dismantle and undermine” Bancorp’s lawsuit against him and the law firm for which he works. Bancorp characterized the petition as an attempted “end-run” around the adverse discovery ruling in the malpractice lawsuit.

To support its claim that Fowler was requesting the documents for an improper purpose, Bancorp submitted a declaration from Bancorp board member David Roche.[2] Roche declared, inter alia, that (1) Fowler is a party to ongoing litigation with Bancorp in which it is alleged Fowler breached his 214*214 fiduciary duties; (2) Fowler repeatedly stated his desire to have the litigation dismissed; (3) Bancorp’s board believes that allowing Fowler to inspect and copy the requested records would “severely undermine” its position in the litigation; (4) Fowler previously sought to compel discovery of the same records in the lawsuit, but his request was denied; (5) it was only after the adverse discovery ruling that Fowler filed the writ petition; and (6) Fowler never previously made a demand to inspect Bancorp’s corporate records.

In reply, Fowler filed a supplemental declaration responding to the factual assertions made in Bancorp’s opposition papers. Fowler declared, “Contrary to [Bancorp’s] supposition about my purpose in filing the Petition, I want to inspect the subject corporate records, especially the financial statements and working papers for these records, among other things, to learn how certain expenses and income items were calculated and what certain large numbers consist of, as well as how the compensation for [Bancorp’s] Chief Executive Officer and its directors is being determined and the basis for and calculations of certain stock transactions with [Bancorp’s] preferred shareholder.”

In his supplemental declaration, Fowler also addressed why he never previously invoked his statutory right to inspect Bancorp’s corporate records. He explained that before July 2017, he regularly received reports, had frequent exchanges with the chief executive officer and committee chairs, and had unrestricted access to most corporate documents through an online platform. It was only when Bancorp “cut off” his ability to contact employees and access corporate records online that it became necessary for him to invoke his statutory inspection rights.

The writ petition was heard on March 6, 2019. On the morning of the hearing, Bancorp filed a declaration of Virginia Varela, Bancorp’s president and chief executive officer, which sought to refute various statements in Fowler’s supplemental declaration, including his assertions that (1) he previously had online access to the records discussed in his September 2018 demand; and (2) he was wrongfully denied access to the basic financial information necessary for him to carry out his duties as a board member. The court agreed to consider the Varela declaration to the extent it responded to the factual assertions in Fowler’s supplemental declaration, but refused to consider any new grounds for denying inspection.

After a hearing, the trial court granted the writ petition. In its ruling, the court agreed with Bancorp that Fowler’s statutory inspection rights are not “absolute.” However, the court ruled that a director’s inspection rights can be curtailed only in “`extreme circumstances'” in which the corporation establishes by a preponderance of the evidence the director’s intent to commit an 215*215 irremediable tort against the corporation. The court ruled that, notwithstanding the inherent conflict raised by the malpractice lawsuit, “[t]he preponderance of the evidence in this action does not establish Fowler’s intent to commit a tort against [Bancorp], much less one that is irremediable in damages.” The court thus enforced Fowler’s right to inspect the corporate books and records under section 1602.

Judgment was entered on March 17, 2020. Bancorp filed a timely notice of appeal.

While the appeal was pending, Bancorp was acquired by Social Finance, Inc. (SoFi), by and through a merger with Gemini Merger Sub, Inc. (Gemini), a temporary subsidiary of SoFi formed solely for that purpose. Pursuant to the terms of the agreement, Gemini was merged into Bancorp, with Bancorp as the surviving corporation. Further, under the agreement, the directors of Gemini became the directors of the surviving corporation. SoFi completed the acquisition of Bancorp on or about February 2, 2022.

 

DISCUSSION

 

 

I

 

 

Mootness

 

As a threshold issue, we consider whether the appeal is moot due to SoFi’s acquisition of Bancorp.

An appeal becomes moot when the occurrence of an event makes it impossible for the appellate court to grant any effective relief. (Newsom v. Superior Court (2021) 63 Cal.App.5th 1099, 1109 [278 Cal.Rptr.3d 397].) “`[A]n action which originally was based upon a justiciable controversy cannot be maintained on appeal if the questions raised therein have become moot by subsequent acts or events.'” (Id. at p. 1110.)

Bancorp argues that this appeal is moot and must be dismissed because, as a result of the acquisition, Fowler is no longer a shareholder or member of Bancorp’s board of directors, and therefore no longer has standing to assert any inspection rights.

Fowler opposes Bancorp’s motion to dismiss. He argues the case is not moot for several reasons, including that he filed a “dissenter’s right” lawsuit challenging SoFi’s acquisition of Bancorp and seeking a determination of the fair market value of his shares. Further, even if the case has been rendered 216*216 technically moot, Fowler argues the appeal still should be decided because it concerns an issue of public importance that is likely to recur.

We agree with Bancorp that the issue of Fowler’s inspection rights as a director is now moot. It is well established that a director’s right to inspect corporate books and records ends upon his or her removal from office. (Chantiles v. Lake Forrest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914, 920 [45 Cal.Rptr.2d 1] (Chantiles).) A former director has no right to an ongoing and enforceable right to inspect corporate records. (Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 919 [110 Cal.Rptr.3d 850] (Wolf).) Here, it is undisputed that, as a result of SoFi’s acquisition, Fowler is no longer a Bancorp director. Thus, Fowler can no longer assert rights as a director to inspect Bancorp’s books and records, rendering the issue moot. (Chantiles, supra, at p. 920; Wolf, supra, at p. 919.)

Nevertheless, we may exercise our discretion to retain and decide an issue which is technically moot where the issue is of substantial and continuing public interest. (Chantiles, supra, 37 Cal.App.4th at p. 921; accord, La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court (2004) 121 Cal.App.4th 773, 781-782 [17 Cal.Rptr.3d 467].) We do so here. The scope of a director’s inspection rights is one of public importance which we should decide, even if it is technically moot.

We reach a different conclusion, however, regarding Fowler’s claim to shareholder inspection rights under section 1600, subdivision (a). This issue was not resolved by the trial court and the additional facts before us are inadequate for us to determine whether subsequent events have rendered the issue moot. Accordingly, we shall remand this matter for the trial court to consider whether subsequent events have rendered this issue moot and, if not, to resolve any remaining disputes in the first instance.

 

II

 

 

Bancorp’s Request for Additional Briefing

 

Turning to the merits, we first address Bancorp’s argument that the trial court erred by allowing Fowler to provide additional evidence in his reply papers while denying Bancorp a fair opportunity to respond.

As described above, in reply to Bancorp’s opposition, Fowler submitted a supplemental declaration giving his reasons for demanding an inspection and explaining why he had not made similar demands in the past. Bancorp objected to the additional evidence and, in the alternative, requested additional time to file a sur-reply brief addressing Fowler’s new evidence. The court overruled Bancorp’s objections and denied its request to file a sur-reply brief.

217*217 We review the trial court’s ruling for an abuse of discretion (Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1299 [72 Cal.Rptr.3d 259]), and find no abuse here. As the trial court held, “Although Fowler is the petitioner in this proceeding, it was not his initial burden to provide reasons for the inspection.” Unlike director inspection rights in other states, “[t]he California statutory scheme does not impose a `proper purpose’ requirement….” (Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1851 [46 Cal.Rptr.2d 696] (Havlicek); cf. Del. Code Ann., tit. 8, § 220.) Thus, Fowler was not required in his moving papers to articulate a proper purpose for the inspection reasonably related to his interests as a director. He merely needed to show that he was a director and that he made a demand for inspection, which was refused. (§§ 1602, 1603.)

When Fowler made that showing, the burden shifted to Bancorp to show why the inspection should be curtailed by “just and proper conditions.” (§ 1603; Havlicek, supra, 39 Cal.App.4th at p. 1856; see Saline v. Superior Court (2002) 100 Cal.App.4th 909, 915 [122 Cal.Rptr.2d 813] (Saline).) In attempting to meet that burden, Bancorp presented evidence to show that Fowler was seeking the documents for an improper purpose. The trial court correctly ruled that Fowler was entitled to respond with countervailing evidence in his reply.

Bancorp argues that because the court allowed Fowler to refute the evidence presented in the opposition, the court was obliged to give Bancorp the same opportunity. But Bancorp was given an opportunity to refute the additional evidence presented in the reply. On the morning of the hearing, Bancorp filed the Varela declaration to “refute many of the misstatements and omissions” in Fowler’s supplemental declaration. The court considered that declaration to the extent it responded to the factual assertions in the supplemental declaration. The record shows that Bancorp had a fair opportunity to respond. Bancorp has failed to demonstrate that the trial court abused its discretion in refusing to allow it additional time to file a sur-reply, much less that it was prejudiced by the refusal.

 

III

 

 

Fowler’s Right To Inspect Corporate Records

 

Bancorp next argues that the trial court erred in granting the petition to enforce Fowler’s right to inspect corporate books and records under section 1602. We disagree.

 

218*218 A. The scope of a director’s inspection rights

 

In reviewing the trial court’s judgment granting a petition for writ of mandate, we apply the substantial evidence test to the trial court’s factual findings. (Vasquez v. Happy Valley Union School Dist. (2008) 159 Cal.App.4th 969, 980 [72 Cal.Rptr.3d 15].) Legal issues, such as statutory interpretation, are reviewed de novo. (Ibid.) The scope of a director’s right to inspect corporate documents is a question of law subject to de novo review. (Saline, supra, 100 Cal.App.4th at p. 913.)

In construing section 1602, as with any statute, our task is to ascertain the intent of the lawmakers so as to effectuate the purpose of the law. (Sierra Club v. Superior Court (2013) 57 Cal.4th 157, 165 [158 Cal.Rptr.3d 639, 302 P.3d 1026].) We begin “with the words of the statute, because they generally provide the most reliable indicator of legislative intent.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 871 [39 Cal.Rptr.2d 824, 891 P.2d 804].) If the language contains no ambiguity, we generally presume the Legislature meant what it said, and the plain meaning controls. (Garcetti v. Superior Court (2000) 85 Cal.App.4th 1113, 1119 [102 Cal.Rptr.2d 703].)

Section 1602, which governs the right of inspection, provides in relevant part: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director and also of its subsidiary corporations, domestic or foreign.” (§ 1602.) By its plain terms, section 1602 establishes a broad right of inspection. (Havlicek, supra, 39 Cal.App.4th at p. 1852.) The Legislature’s choice of the word “absolute” suggests a right “having no restriction, exception, or qualification.” (Merriam-Webster Unabridged Dict. Online (2022) [as of June 23, 2022], archived at .) This “absolute” right reflects a legislative judgment that directors are better able to discharge their fiduciary duties to the corporation and its shareholders “if they have free access to information concerning the corporation.” (Havlicek, at p. 1852; see Hartman v. Hollingsworth (1967) 255 Cal.App.2d 579, 581-582 [63 Cal.Rptr. 563].)

Nevertheless, decisional authority establishes that a director’s right to inspect documents is subject to exceptions. (Havlicek, supra, 39 Cal.App.4th at p. 1855.) While the “absolute right” to inspect documents is the general rule in California, courts have held that the literal meaning of the words of the statute may be disregarded where necessary to avoid absurd results. (Havlicek, at p. 1856; see also Anderson Union High School Dist. v. Shasta Secondary Home School (2016) 4 Cal.App.5th 262, 279 [208 Cal.Rptr.3d 564] 219*219 [the language of a statute should not be given a literal meaning if doing so would result in absurd consequences].) Thus, a trial court may impose “just and proper conditions” upon a director’s inspection rights in appropriate cases. (§ 1603, subd. (a);[3] Havlicek, at p. 1856; see Saline, supra, 100 Cal.App.4th at p. 914.)

The full scope of exceptions to a director’s “absolute” inspection rights remains unsettled. But our colleagues in other appellate districts have identified certain circumstances in which inspection rights may be curtailed.

In Chantiles, supra, 37 Cal.App.4th 914, the Fourth Appellate District, Division Three, held that the “absolute” right of a homeowners association director to access records may be limited to preserve the constitutional rights of members to keep their voting decisions private. (Id. at pp. 918, 926.) In Chantiles, a director who believed that he had been shortchanged in the tabulation of proxy votes, filed a petition to inspect and copy all the ballots cast in the association’s annual election. (Id. at p. 919.) But the trial court refused to permit the director unfettered access to the ballots. Instead, the court established a procedure whereby the director’s attorney could inspect the ballots while preserving the secrecy of how each individual member voted. (Id. at pp. 920, 926.) The appellate court affirmed. It held that the trial court had properly balanced the competing interests and determined that the director’s statutory right to an unqualified inspection must yield to the members’ constitutional right of privacy. (Id. at pp. 925-926; but see conc. opn. of Crosby, J., at pp. 927-929 [concluding damages, rather than a rejection of inspection rights, is the appropriate remedy for misapplication of corporate records].)

In Havlicek, the Second Appellate District, Division Six, considered whether the trial court properly denied inspection of corporate books and records by two dissident directors who were opposed to a corporation’s pending merger. (Havlicek, supra, 39 Cal.App.4th at pp. 1848-1850.) The directors asserted an absolute right to inspect the records, but the corporation refused to permit access because it suspected the directors might use the documents to establish a competing business. (Id. at pp. 1849-1850.) The directors filed a lawsuit to enforce their inspection rights, which the trial court denied. (Id. at p. 1850.) The appellate court reversed and remanded. (Id. at 220*220 pp. 1856-1857.) It concluded that the trial court erred in refusing to grant the directors, “at the very least, an `inspection with just and proper conditions.'” (Id. at p. 1848.)

For guidance on remand, the court explained that because the right of inspection arises out of a director’s fiduciary duty—a duty to act with honesty, loyalty, and good faith in the best interests of the corporation (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1037 [100 Cal.Rptr.3d 875])—courts may limit inspection rights when a director intends to misuse those rights to harm the corporation. (Havlicek, supra, at pp. 1852, 1855-1856.) The court offered the following hypothetical to illustrate the point: “A disgruntled director unambiguously announces his or her intention to violate his or her fiduciary duties to the corporation and the shareholders by using inspection rights to learn trade secrets, gain access to confidential customer lists, and compete with the corporation. In this situation, does the Legislature want the judiciary to come to the aid of the disgruntled director, enforce the `absolute right’ to inspect and help the director commit a tort against the corporation? No.” (Id. at pp. 1855-1856.) Thus, the court concluded, when the evidence shows an unfettered inspection will result in a tort against the corporation, the trial court may “exercise its broad discretion under section 1603, subdivision (a) to fashion a protective order imposing just and proper conditions on the inspection.” (Id. at p. 1856.)

In Saline, supra, 100 Cal.App.4th 909, the Fourth Appellate District, Division Three, followed Havlicek in concluding that a court may place restrictions on a director’s access to corporate records when there is evidence the director intends to use the documents to commit a tort against the corporation. (Saline, at p. 914.) However, the court clarified that this principle should “only be applied in extreme circumstances where a preponderance of the evidence establishes the director’s clear intent to use the documents to commit an egregious tort—one that cannot be easily remedied by subsequent monetary damages—against the corporation.” (Id. at p. 915.)

The Saline court refused to limit the inspection rights of a director despite evidence that the director had a conflict of interest, breached fiduciary duties, breached a confidentiality agreement, and publicly defamed management, because there was no evidence to show the director intended to use the documents obtained to “disclose trade secrets, compete with or otherwise harm” the corporation.[4] (Saline, supra, 100 Cal.App.4th at pp. 912, 914.) The court reasoned: “Only the issues related to the prevention of a tort resulting from [the director’s] inspection of the documents—not the entirety of his 221*221 conduct as a director—are relevant to the question of whether limiting [his] access to corporate documents was appropriate.” (Id. at p. 914.) Without evidence that the director intended to use the documents to commit a tort against the corporation, the court held it was improper to limit the director’s access. (Id. at pp. 914-915.)

In Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal.App.4th 1385 [87 Cal.Rptr.3d 455] (Tritek), a different division of the Fourth District (Division One) considered a related question: whether a director’s right to inspect corporate records should include attorney-client communications generated in defense of the director’s own suit for damages against the corporation. (Id. at p. 1387.) The court decided it should not. (Id. at pp. 1391-1392.) In that case, a disgruntled director sought to enforce his inspection rights after suing the corporation to vindicate his individual rights as a shareholder. (Id. at pp. 1387-1388.) The corporation did not dispute the director’s right to inspect corporate documents generally, but objected that the right of inspection should not include documents protected by the attorney-client privilege. (Id. at p. 1391.) The Court of Appeal agreed, concluding that a director’s inspection rights may be restricted when the director intends to misuse those rights to access privileged documents that were generated in defense of a suit for damages that the director filed against the corporation. (Id. at pp. 1391-1392.)

Here, in ruling on Fowler’s petition, the trial court followed Saline, supra, 100 Cal.App.4th 909, and concluded that a director’s right to inspect corporate records generally may be curtailed only in “extreme circumstances” in which the corporation establishes by a preponderance of the evidence the director’s intent to use the information to commit a tort against the corporation that cannot easily be remedied in a damages action. The trial court rejected Bancorp’s claim that the mere fact Fowler was involved in litigation with the corporation should defeat his inspection rights.

Bancorp argues that the trial court interpreted the scope of a director’s inspection rights too broadly. Bancorp argues that a court may deny access to corporate records whenever the director has a conflict of interest and there is a mere possibility the documents could be used to harm the corporation. We disagree.

Like the trial court, we conclude that exceptions to the general rule favoring unfettered access should only be applied in “extreme” cases where enforcing the “absolute” right of inspection would otherwise produce an absurd result. (Saline, supra, 100 Cal.App.4th at p. 915; Havlicek, supra, 39 Cal.App.4th at p. 1856.) We reach this conclusion for several reasons.

222*222 California has adopted a strong public policy favoring a broad right of access to assist directors in performing their duties in an intelligent and fully informed manner. (Saline, supra, 100 Cal.App.4th at p. 914; see also Chantiles, supra, 37 Cal.App.4th at p. 929 (conc. opn. of Crosby, J.).) The statutory scheme gives “`[e]very director … the absolute right … to inspect and copy all books, records and documents of every kind,'” and imposes no “`proper purpose'” requirement. (Havlicek, supra, 39 Cal.App.4th at p. 1851; see § 1602.) Because the denial of access to corporate records may operate to deny a director the ability meaningfully to participate in management, any exception to the policy of “absolute” access must be construed narrowly, limited to the most extreme cases where applying the literal meaning of the words would frustrate the manifest purpose of the law. (Havlicek, at pp. 1855-1856; see also Anderson Union High School Dist. v. Shasta Secondary Home School, supra, 4 Cal.App.5th at p. 279 [absurdity exception should be used only in extreme cases].)

Second, to construe the exception broadly would risk allowing the exception to swallow the rule. Differences of opinion invariably will arise among corporate directors. If a minority director can lose access to corporate records merely because the director is deemed hostile or adverse to management, the exception could remove the very protections that the “absolute right” of inspection was intended to supply. This invariably would impede inspections pursued for indisputably proper purposes, such as ascertaining the condition of corporate affairs or investigating possible mismanagement. (See, e.g., Henshaw v. American Cement Corp. (Del.Ch. 1969) 252 A.2d 125, 129.)

Third, applying the exception narrowly does not generally leave the corporation unprotected. If a director abuses a right of inspection to the detriment of the corporation, the corporation normally will have an adequate remedy in the form of an action against the director for breach of fiduciary duty. (Saline, supra, 100 Cal.App.4th at p. 916; Chantiles, supra, 37 Cal.App.4th at p. 929 (conc. opn. of Crosby, J.).)

We therefore agree with the Court of Appeal in Saline that the mere possibility that the information could be used to harm the corporation is not sufficient to defeat a director’s otherwise “absolute” inspection rights. (Saline, supra, 100 Cal.App.4th at p. 914.) While inspection rights may be curtailed when the corporation adduces evidence that a director intends to use those rights to violate his or her fiduciary duties or otherwise commit a tort against the corporation, we are not persuaded that a director’s right of inspection must be denied solely because the director has a conflict of interest or is embroiled in litigation with the corporation. Allowing a director to inspect records under such circumstances does not necessarily lead to an absurd result. To conclude otherwise would defeat the purpose of section 1602.

223*223 The cases on which Bancorp relies, Wolf, supra, 185 Cal.App.4th 903, and Tritek, supra, 169 Cal.App.4th 1385, are easily distinguishable. Wolf involved an inspection demand by a plaintiff who formerly served as a director of the defendant corporation. (Wolf, at pp. 906-907, 919.) Because the plaintiff was no longer a director, the appellate court held that the plaintiff did not have standing to enforce any inspection rights.[5] (Wolf, at p. 919.) The language in Wolf stating that the plaintiff’s threat to sue the corporation “severely undermined” his inspection rights was unsupported dictum, which we find neither compelling nor persuasive. (Ibid.)

Bancorp similarly points to a statement in Tritek suggesting that a court may limit a director’s inspection rights whenever “the director’s loyalties are divided and documents obtained by a director in his or her capacity as a director could be used to advance the director’s personal interest in obtaining damages against the corporation.” (Tritek, supra, 169 Cal.App.4th at p. 1391.) But Bancorp’s argument takes this language out of context and ignores the holding of the case, which is that a director does not have the right to access privileged documents generated in defense of a suit for damages that the director filed against the corporation. (Id. at pp. 1391-1392.) In such a scenario, the director’s intent to misuse the information to harm the corporation is self-evident. Therefore, consistent with the holdings in Havlicek, supra, 39 Cal.App.4th at pages 1855-1856, and Saline, supra, 100 Cal.App.4th at pages 914-915, it was proper to limit the director’s inspection rights to exclude the privileged documents. There has been no similar showing here—that Fowler is seeking access to documents protected by the attorney-client privilege. Thus, Tritek‘s holding simply does not apply under the facts of this case.

Bancorp also argues the trial court interpreted Fowler’s inspection rights too broadly by requiring Bancorp to show Fowler intended to use the information to commit “irremediable” harm. It contends that a threatened “irremediable” tort against the corporation is merely an “example of when a director’s inspection may be curtailed,” and not a requirement to curtail a director’s inspection rights. Bancorp argues the court should have asked only whether Fowler intended to use the information to harm the corporation.

We find it unnecessary to reach this issue because the trial court expressly found that the “preponderance of the evidence in this action does not establish Fowler’s intent to commit a tort against [Bancorp,] much less one 224*224 that is irremediable in damages.” Thus, even under a more lenient standard, Bancorp failed to carry its burden.

In sum, this is not a case in which the director’s right to inspect corporate records was alleged to conflict with constitutional or other statutory protections, as in Chantiles, supra, 37 Cal.App.4th 914. Nor is it a case involving access to privileged documents generated in defense of a suit for damages that the director filed against the corporation, as in Tritek, supra, 169 Cal.App.4th 1385. The only accusation in this case was that Fowler intended to breach his fiduciary duties in some fashion by using the records sought adversely to the corporation in the malpractice lawsuit. Under these circumstances, the trial court properly considered whether Bancorp showed by a preponderance of the evidence that a protective order was necessary to prevent Fowler from breaching his fiduciary duties or otherwise committing a tort against the corporation. (Saline, supra, 100 Cal.App.4th at p. 915; Havlicek, supra, 39 Cal.App.4th at p. 1856.)

 

B. Sufficiency of the evidence for the trial court’s ruling

 

We next consider the trial court’s finding that Bancorp failed to make a sufficient evidentiary showing to justify restrictions in this case. This presents a question of fact. (Saline, supra, 100 Cal.App.4th at p. 913; Hall v. Regents of University of California (1996) 43 Cal.App.4th 1580, 1586 [51 Cal.Rptr.2d 387]; Hartman v. Bandini Petroleum Co. (1930) 107 Cal.App. 659, 661 [290 P. 900].)

Bancorp argues that it submitted significant evidence demonstrating Fowler intended to harm the corporation by using the documents to undermine the claims against him in the malpractice litigation. The trial court disagreed, finding that Bancorp failed to carry its burden. Although the court acknowledged the divergence of interests between Fowler and Bancorp with respect to the malpractice lawsuit,[6] the court was not persuaded that Fowler’s inspection was motivated by an improper purpose or that he intended to breach fiduciary duties or otherwise commit a tort against the corporation.

It is not our function on appeal to reexamine whether a preponderance of the evidence supports Bancorp’s position. We are bound by the fundamental appellate rule that the judgment of the lower court is presumed 225*225 correct and that all intendments and presumptions will be indulged in favor of its correctness. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [275 Cal.Rptr. 797, 800 P.2d 1227].) The appellant has the burden to overcome that presumption and show reversible error. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610 [109 Cal.Rptr.2d 256].) Where, as here, the issue on appeal turns on a failure of proof, the question for a reviewing court is whether the evidence compels a finding in favor of the appellant as a matter of law, i.e., whether the evidence was “`”of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.”‘” (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466 [126 Cal.Rptr.3d 301]; accord, Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 769 [201 Cal.Rptr.3d 268].) Bancorp falls well short of that standard.

In opposing the petition, Bancorp relied primarily on evidence that Fowler (1) previously breached his fiduciary duties in connection with the BillFloat litigation; and (2) unsuccessfully sought to obtain the same corporate records as part of his discovery in the malpractice lawsuit. The first category of “evidence,” consisting largely of unsupported allegations, had little persuasive value on the question whether Fowler was likely to use the requested corporate records to breach his fiduciary duties or otherwise commit a tort against the corporation. (Saline, supra, 100 Cal.App.4th at p. 914 [only the director’s likely use of the information is relevant, not the entirety of his or her conduct as a director].)

As to the second category of evidence, Bancorp argues that it proved Fowler’s intent to harm the corporation by using the information to undermine Bancorp’s lawsuit. The trial court, however, found otherwise. It credited Fowler’s declarations that the purpose of the inspection was related to his continuing duties as a member of Bancorp’s board of directors. “[W]e must defer to the trial court’s determinations of credibility.” (Harris v. Stampolis (2016) 248 Cal.App.4th 484, 498 [204 Cal.Rptr.3d 1].)

Moreover, even if we were to find that Fowler had an ulterior motive, Bancorp argued, and the trial court in the malpractice lawsuit agreed in its discovery ruling, that the documents Fowler sought were irrelevant to the litigation. Thus, regardless of Fowler’s motives, there is no support for Bancorp’s vague assertion that allowing Fowler access to the records would “severely undermine” its position in the lawsuit. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 357 [260 Cal.Rptr.3d 1] [doctrine of judicial estoppel prohibits a party from asserting a position that is contrary to a position successfully asserted in the same or some earlier proceeding].)

226*226 On this record, we conclude the trial court did not err in finding Bancorp’s evidence insufficient to curtail Fowler’s “absolute” right to inspect corporate records.

 

DISPOSITION

 

Bancorp’s request for judicial notice is granted. Bancorp’s motion to dismiss is denied. The judgment is reversed as moot. This reversal does not imply that the judgment was erroneous on the merits, but is solely for the purpose of returning jurisdiction over the case to the trial court by vacating the otherwise final judgment solely on the ground of mootness. On remand, the trial court is directed to dismiss Fowler’s claim to a director’s right of inspection under section 1602 as moot. The trial court is directed to consider whether Fowler’s claim to a shareholder’s right of inspection under section 1600, subdivision (a) is also moot and, if not, to resolve any remaining disputes between the parties relating to that issue. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

Robie, Acting P. J., and Hull, J., concurred.

[1] Undesignated statutory references are to the Corporations Code.

[2] The trial court sustained evidentiary objections to the Roche declaration. The rulings on those objections are not challenged in this appeal.

[3] Section 1603, subdivision (a) provides, in part: “Upon refusal of a lawful demand for inspection, the superior court of the proper county, may enforce the right of inspection with just and proper conditions or may, for good cause shown, appoint one or more competent inspectors or accountants to audit the books and records kept in this state and investigate the property, funds and affairs of any domestic corporation or any foreign corporation keeping records in this state … and to report thereon in such manner as the court may direct.”

[4] The trial court’s order refused the director access to documents protected by the attorney-client privilege and work product doctrine, and the director did not challenge that condition. (Saline, supra, 100 Cal.App.4th at pp. 912-913.)

[5] In the course of explaining the plaintiff’s lack of standing, the court in Wolf suggested that a director’s inspection rights may be denied if the director is not “disinterested.” (Wolf, supra, 185 Cal.App.4th at p. 919.) We find this language to be erroneous dictum to the extent it suggests a director’s inspection rights may be denied based merely on the existence of a conflict of interest or adversarial relationship between the director and the corporation.

[6] We grant Bancorp’s request to take judicial notice that on September 21, 2021, Fowler filed a lawsuit against Bancorp challenging the proposed SoFi merger/acquisition, but we take notice of it only for purposes of the mootness claim, and not for purposes of judging the sufficiency of the evidence. (California School Bds. Assn. v. State of California (2011) 192 Cal.App.4th 770, 803 [121 Cal.Rptr.3d 696]; Duronslet v. Kamps (2012) 203 Cal.App.4th 717, 737 [137 Cal.Rptr.3d 756].)