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Graffiti Protective Coatings, Inc. v. City of Pico Rivera

February 5, 2010


APPEAL from orders and judgments of the Superior Court of Los Angeles County, Jerry K. Fields, Judge. (Retired judge of the L.A. Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Order and judgment of October 31, 2008, reversed; order and judgment of January 27, 2009, vacated. (Los Angeles County Super. Ct. No. BC389269).

The opinion of the court was delivered by: Mallano, P. J.


Through competitive bidding, plaintiff was awarded a municipal contract to maintain a city's bus stops. Four years later, the city terminated the contract as permitted. Without inviting competitive bids, the city entered into a new contract with one of plaintiff's competitors. Plaintiff filed this action, seeking a writ of mandate and declaratory relief to invalidate the new contract and to compel the city to award the contract through competitive bidding.

In response, the city filed a special motion to strike, contending that the action was a "strategic lawsuit against public participation" (SLAPP) (Code Civ. Proc., § 425.16, subd. (b)(1); all further statutory references are to that code unless otherwise indicated). The trial court granted the motion, reasoning that the maintenance of the city's bus stops was an issue of public interest and plaintiff was not likely to prevail on the merits of its claims. Under the anti-SLAPP statute, the city was entitled to an award of attorney fees, which the trial court fixed at over $24,000. (See § 425.16, subd. (c).)

We conclude that, even if plaintiff's claims involve a public issue, they are not based on any statement, writing, or conduct by the city in furtherance of its right of free speech or its right to petition the government for the redress of grievances. Rather, plaintiff's claims are based on state and municipal laws requiring the city to award certain contracts through competitive bidding. Thus, the claims are not subject to the anti-SLAPP statute. It follows that plaintiff does not have to demonstrate a probability of prevailing on the merits at the pleading stage, risking the dismissal of its claims and the payment of the city's attorney fees. Were we to conclude otherwise, the anti-SLAPP statute would discourage attempts to compel public entities to comply with the law. Accordingly, we reverse.


The allegations and evidence in this case are taken from the pleadings and the papers submitted in the trial court with respect to the anti-SLAPP motion.

A. Complaint

The complaint alleged as follows. Steven Lenhoff founded Graffiti Protective Coatings, Inc. (GPC), and developed a confidential and proprietary method for providing high quality cleaning of bus stops at low cost. The City of Pico Rivera (City) learned about GPC's reputation through the company's work in other cities.

In July 2003, GPC submitted a bid to perform the maintenance work on the City's bus stops. The contract concerned the performance of a public works project that exceeded $5,000 per year. Under Public Contract Code sections 20161 and 20162, the contract had to be awarded to the lowest responsible bidder. The City used its own informal bidding process, which, whenever possible, had to be based on at least three bids. (See Pico Rivera Mun. Code, § 3.48.040.) GPC was awarded the contract on July 21, 2003.

The term of the contract was one year, to be automatically extended for four additional years, one year at a time, unless either party notified the other of its intent not to extend the contract at least 30 days before the renewal term.

In April 2007, one month before the contract came due for its last extension, Carlos Velasquez, a GPC employee, was approached by one of GPC's competitors, National Environmental Services (NES), a division of Joe's Sweeping, Inc. NES told Velasquez it would be receiving the City's bus stop maintenance contract and wanted to hire him when it began work on the bus stops. Telephone numbers were exchanged. NES kept Velasquez informed of its efforts to get the GPC contract "terminated."

In May 2007, GPC received a notice of non-renewal from the City. GPC contacted the City's director of public works and was told that GPC was the best contractor for bus stop maintenance, GPC should disregard the non-renewal notice, and the City would not be inviting any new bids.

Over the following weeks, GPC called the director of public works several times to check on the status of the contract extension. The director said he was waiting to hear from the city manager.

On July 18, 2007, GPC called the director and was informed that the City planned to perform the bus stop maintenance "in house." On July 20, 2007, the director notified GPC that its contract would not be renewed for the remaining year. Shortly thereafter, GPC learned that the bus stop contract had been given to NES and that no bidding process had been used.

On July 22, 2007, Velasquez told GPC that NES had offered him a job performing the same services he was performing for GPC. Velasquez had access to GPC's "trade secret" method for maintaining bus stops and, like other GPC employees, had signed a confidentiality agreement in that regard. NES wanted the specifics of GPC's maintenance program and sought to obtain them by hiring Velasquez at an inflated salary. Velasquez commenced employment with NES on July 23, 2007. The next day, NES began work on the City's bus stops.

On April 24, 2008, GPC and its founder, Lenhoff (collectively GPC), brought this action against NES, Velasquez, and the City. GPC alleged five claims against NES and Velasquez: trade libel, slander, misappropriation of trade secrets, unfair competition, and unjust enrichment. NES was named as the only defendant on a claim for intentional interference with prospective economic advantage. Against the City, GPC alleged a claim entitled "petition for writ of mandate." That claim, based on the Public Contract Code and the City's municipal code, sought to compel the City to award the bus stop maintenance contract through competitive bidding. GPC alleged a separate claim against NES and the City for declaratory relief, requesting that the contract between NES and the City be declared void. Finally, GPC alleged that the City had breached the bus stop maintenance contract by terminating it.

B. Anti-SLAPP Motion

On June 5, 2008, the City filed a special motion to strike (§ 425.16, subd. (b)(1)), contending that (1) the claims against it were based on its communications with GPC, Velasquez, NES, and the public regarding the maintenance of the City's bus stops and (2) GPC was not likely to prevail on the merits of its claims. As evidence, the City offered a copy of the bus stop maintenance contract with GPC.

GPC filed an opposition, arguing that the claims were not based on the City's right of petition or free speech and that GPC was likely to prevail on its claims. Lenhoff submitted a declaration tracking the allegations of the complaint. Attached to the declaration was a document dated May 29, 2003, entitled, "Contract Documents and Specifications for Project No. 9128, Bus Stop Maintenance Program in the City of Pico Rivera." The document, which consisted of 57 pages, began with a notice that the City was accepting sealed bids for the bus stop maintenance project and stated that the "Council will award the contract to the lowest responsible bidder." GPC also offered the City's May 22, 2007 notice of non-renewal of its contract with GPC. The notice informed GPC that the City would no longer be bound by the parties' contract as of July 21, 2007, and stated that the City intended "to issue a new ...

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