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City of Costa Mesa v. D'alessio Investments

March 11, 2013

CITY OF COSTA MESA, PLAINTIFF, CROSS-DEFENDANT AND APPELLANT,
v.
D'ALESSIO INVESTMENTS, LLC, ET AL., DEFENDANTS, CROSS-COMPLAINANTS AND APPELLANTS; MELYNDA SHANK ET AL., CROSS-DEFENDANTS AND APPELLANTS.



Appeal from an order of the Superior Court of Orange County, Judge David Chaffee. (Super. Ct. No. 30-2011-00468876)

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

CERTIFIED FOR PUBLICATION

OPINION

Affirmed in part, reversed in part, and remanded with directions.

Dennis D'Alessio and D'Alessio Investments, LLC (collectively, D'Alessio), own commercial real property at 440 Fair Drive in Costa Mesa, California (the Property). In April 2011, the City of Costa Mesa (the City) sued D'Alessio and various tenants at the Property to abate a public nuisance -- namely, alleged acts of prostitution at several massage establishments and the operation of medical marijuana dispensaries in violation of the City's zoning code. The trial court granted preliminary injunctions in favor of the City in August 2011, enjoining the prohibited practices during the pendency of the action. In September 2011, D'Alessio filed a cross-complaint alleging the City and certain individual employees (George Nichols, Willa Bouwens-Killeen, Mel E. Lee, Melynda Shank, and Minoo Ashabi) committed slander, trade libel, and intentional interference with prospective economic advantage by making certain statements to D'Alessio's potential tenants and construction contractors.*fn1 The City and the employees filed an anti-SLAPP (strategic lawsuit against public participation) motion, which the court granted in part and denied in part. (Code Civ. Proc. § 425.16, hereafter section 425.16.) Because we conclude the court should have granted additional (but not all) aspects of the anti-SLAPP motion, we affirm in part and reverse in part.

FACTS

Complaint

In April 2011, the City and the State of California filed an action for injunctive relief to abate a public nuisance pursuant to Civil Code sections 3494, 3496, 3479, and 3480, as well as Code of Civil Procedure section 731, Penal Code section 11225 et seq., and Business and Professions Code section 17200 et seq. The complaint named as defendants D'Alessio, 10 businesses operating at the Property (A1 Oriental Massage, Inc., Angel Spa, Fantastic Spa, Rainbow Spa, Relax Zone, Super Day Spa, Inc., Visage Spa, Herban Elements, Inc., Illuminade, Inc., and Medmar Patient Care Collective), and 16 individuals affiliated with the businesses.

The complaint alleged that the Costa Mesa Police Department had initiated an investigation into the activities of massage establishments at the Property in July 2010, which resulted in the collection of evidence of prostitution at these establishments as well as a variety of other non-criminal municipal code violations. The complaint further alleged that several of the defendant businesses were distributing marijuana in violation of the Costa Mesa Municipal Code and these businesses had other non-marijuana related violations of the municipal code.

Preliminary Injunctions Granted

The court issued a preliminary injunction against the massage establishments and individuals affiliated therewith on August 1, 2011.*fn2 These defendants were ordered to abate all conditions causing the nuisance at the Property and were enjoined from operating at or in any way using the Property during the pendency of the action. Moreover, the injunction prohibited the operation of any massage establishments at the Property. D'Alessio, however, was not named as a defendant subject to this preliminary injunction.

The court subsequently granted an application for preliminary injunction against the medical marijuana defendants on August 31, 2011 (the preliminary injunction was entered on Sept. 19, 2011). This injunction prohibited the sale, cultivation, possession, and distribution of marijuana at the Property. The defendants were ordered to abate all conditions causing the nuisance at the Property and were prohibited from occupying or using the Property during the pendency of the action. D'Alessio was named as a defendant subject to this preliminary injunction. The court noted in its minute order, "As for the motion for preliminary injunction based on [D'Alessio's] leasing property to the medical marijuana dispensaries in violation of the City's ordinances, the application is granted. [D'Alessio] does not dispute that they knew that the medical marijuana dispensaries were operating as dispensaries, and are thereby subject to the provisions of the Costa Mesa ordinance."

Cross-complaint

On September 12, 2011, D'Alessio filed a cross-complaint against the City and five of its employees. The cross-complaint alleged the five employees made 11 oral statements about D'Alessio that amounted to slander, trade libel, and interference with prospective economic advantage. The cross-complaint did not specify the date on which any of the statements were allegedly made or the context in which they were made, other than to allege they had occurred within the past year. The cross-complaint alleged the statements were made with "malice, hatred and ill will."

George Nichols allegedly "told a prospective tenant of the Property that the Property has been raided by police from the City, and after the police documented the comings and goings at the Property and conducted surveillance there for over a year, they found illegal businesses operating there."*fn3

Melynda Shank allegedly "told a prospective tenant at the Property that the City of Costa Mesa will not issue business licenses to anyone attempting to rent space at the Property because the City is in the middle of litigation with the owner of the Property due to illegal activity." Shank also allegedly "told a construction contractor that the City of Costa Mesa will not issue business licenses to anyone attempting to rent space at the Property because the City is in the middle of litigation with the owner of the Property due to illegal activity and that [D'Alessio] is the owner who is involved with such illegal activity at the Property." Shank also allegedly "told a construction contractor that Dennis D'Alessio has been arrested for prostitution and drug dealing that occurred at the Property."

Willa Bouwens-Killeen allegedly "told a construction contractor that the City of Costa Mesa will not issue business licenses to anyone attempting to rent space at the Property because the City is in the middle of litigation with the owner of the Property due to illegal activity and that [D'Alessio] is the owner who is involved with such illegal activity at the Property." Bouwens-Killeen also allegedly "told a construction contractor that the City of Costa Mesa will not issue building permits to anyone attempting to perform works of improvement on or at the Property because [D'Alessio], the owner of the Property, is known throughout the City for doing illegal things at the Property."

Minoo Ashabi allegedly "told a prospective tenant at the Property that the City of Costa Mesa will not issue business licenses to anyone attempting to rent space at the Property because the City is in the middle of litigation with the owner of the Property due to illegal activity."

Mel E. Lee allegedly (1) "told a prospective tenant at the Property that Dennis D'Alessio has been convicted of prostitution and drug dealing that occurred at the Property"; (2) "told a prospective tenant at the Property that the Property is known for illegal activity including prostitution and drug dealing"; (3) "told a prospective tenant [at the Property] that the entire building at the Property is scheduled to be shut down because of illegal activity that is conducted there"; and (4) "told a prospective tenant at the Property that she should 'look at other buildings' because of the illegal activities being conducted at the Property."

Anti-SLAPP Motion

The City and the employees responded to the cross-complaint with an anti-SLAPP motion on November 3, 2011. Elena Q. Gerli, a deputy city attorney for the City, attested to several pertinent facts. "Pursuant to City Policy and the Costa Mesa Municipal Code, the City has never issued business licenses for the operation of medical marijuana dispensaries." "When the City's Complaint was filed on April 22, 2011, the City stopped issuing any new business licenses for the Property, if the requested business licenses concerned activities or operations related to the City's Complaint. This cessation of the issuance of business licenses for the Property was pursuant to the litigation concerning the Property." "Pursuant to [a temporary restraining order issued on May 6, 2011], the City ceased issuing for the Property any building permits or new business licenses relating to medical marijuana or massage establishments . . . as ordered by the TRO. There is no City policy regarding not issuing other types of business licenses, nor has the City temporarily suspended or placed a moratorium on issuing other types of business licenses for the Property." "Prior to the April 22, 2011 filing by the City of the underlying lawsuit in this matter, I am personally aware that the City enacted a City-wide moratorium on the issuance of new business licenses for new massage establishments within the City."

The five employee cross-defendants signed declarations in support of the anti-SLAPP motion. All of the employees denied making the statements attributed to them in the cross-complaint. All of the employees denied bearing any malice, hatred, or ill-will toward D'Alessio, or having any reason to do so.

Four of the employees recall some conversations concerning the Property. Mel E. Lee, a senior planner with the City, remembered a conversation he had with a tenant or prospective tenant of the Property in August 2011. This conversation occurred in the context of processing a city permit for the display of a banner at the Property. Lee "may have conversed with this individual about the issuance of City permits and/or City licenses for the Property."

George Nichols, a code enforcement officer, recalls having conversations with a representative of a medical marijuana dispensary at the Property. In this conversation, Nichols recalls mentioning that there was a temporary restraining order or preliminary injunction at the Property and that the dispensary should refrain from conducting unlawful operations within the City. Nichols also told a dispensary agent that the police had conducted searches at medical marijuana dispensaries within the City.

Willa Bouwens-Killeen, chief of code enforcement, may "have told someone that there are 'illegal improvements' at the Property." She also "informed a construction contractor that the City would not issue a building permit to perform plumbing repairs at one of the massage establishments located at the Property, because of the ongoing litigation. This individual became frustrated that he could not get a City permit to perform work which was enjoined by the [temporary restraining order]."

Minoo Ashabi, a senior planner, recalls a conversation with an individual about business licenses at the Property. Ashabi "accurately told the applicant the type of license which was being inquired about was presently not being issued, and I believe I told the individual it was because of the litigation concerning the Property." "I do not recall whether I also told ...


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