CAI 2002 LAW SEMINAR California Case Law Summary and Additional Cases
by Scott Jackson
Jon H. Epsten, Esq.
(800) 300-1704
F. Scott Jackson, Esq.
(949) 752-8585
Constitutional Law / Free Speech / SLAPP Litigation
Damon v. Ocean Hills Journalism Club et al., 85 Cal. App. 4th 468 (2000).
A former manager of a homeowners association brought a defamation action against association members, two members of the association’s board of directors, and a private homeowners association club. All defendants were critical of the manager’s job performance and all made disparaging comments about the manager’s performance either in the association’s newsletter or during board meetings. The association manager’s action for defamation was dismissed pursuant to a SLAPP motion because the two locations where the alleged defamatory statements were made were open to the public and constituted “public forums.” Additionally, each of the alleged defamatory statements concerned the manner in which a large residential community would be governed. As such, the statements also concerned “issues of public interest.”
DeGrassi v. Cook, previously published at 85 Cal. App. 4th 163 (2000). Review granted February 28, 2001.
A city council member brought damage claims against other council members and the city attorney for violation of her state constitutional right to free speech. The complaint alleged that the defendants generally discouraged, obstructed, and interfered with the city council member’s participation as a city council member. In determining whether this constitutional right was self-executing entitling the council member to damages, the court of appeals examined (1) the language of the provisions; (2) the voters’ intentions; (3) alternative remedies available; and (4) the importance of the particular constitutional right. The court held that right of free speech as expressed in the California Constitution, Article I, Section 2, is not self-executing and, if violated, does not support a claim for damages.
Dowling v. Zimmerman, 85 Cal. App. 4th 1400 (2001).
A condominium owner filed an action against an attorney who represented his lessees in an unlawful detainer action. In connection with the unlawful detainer action, the attorney wrote to the property manager and the association claiming the owner was harassing the lessees. The condominium owner brought causes of action for defamation, misrepresentation and intentional and negligent infliction of mental distress. The trial court granted the attorney’s motion to strike based on the anti-SLAPP statute and awarded attorney fees. The statements made by the attorney came under the anti-SLAPP statute because they addressed the public concerns of nuisance and safety and they were directed to persons who held themselves out to be members of the board of directors. The court of appeals affirmed. The defendant was entitled to recover an award of reasonable attorney fees under the mandatory provisions of Code Civ. Proc. Section 425.16. The court further held that an appeal from a judgment awarding attorney fees and costs to the attorney did not automatically stay enforcement of the judgment.
Golden Gateway Center v. Golden Gateway Tenants Association, 26 Cal. 4th 1013 (2001).
An owner of a private apartment complex in San Francisco brought an action to enjoin the tenants association from distributing unsolicited newsletters and leaflets to apartments in the complex. The apartment building emphasized privacy and security and its access was limited to residential tenants and their invitees. The complex also had building standards which banned all solicitation in the building. The Supreme Court of California found that the apartment complex was not the functional equivalent of a traditional public forum. The Court held that the free speech clause in the state constitution contains a state action limitation and that the landlord’s ban on the distribution of leaflets was not state action.
Civil Rights / Fair Housing
PGA Tour, Inc. v. Martin, 121 S. Ct. 1879 (2001).
A professional golfer suffering from a circulatory disorder in his leg sued the PGA alleging that its rule banning the use of golf carts in certain tournaments violated the Americans with Disabilities Act (ADA). The United States Supreme Court found that golf tours fit within the coverage of Title III of the ADA because a golf course is specifically identified by the Act as a public accommodation. The Court held that even if the protected class provision under Title III of the ADA was narrowly read to only include “clients or customers” it would be appropriate to classify golfers who pay the PGA money to compete in qualifying tournaments as “clients or customers.” The Court also found that allowing the disabled golfer to use a golf cart was not a modification that would “fundamentally alter the nature” of golfing events and that the use of a cart was required by Title III of the ADA.
Longberg v. Sanborn Theaters, Inc., 259 F.3d 1029 (2001).
Wheelchair bound patrons of movie theater filed suit against the theater and the architect of the theater. Their complaint alleged violations of the Americans with Disabilities Act (ADA) because various aspects of the theater were not sufficiently accessible to persons who use wheelchairs. Title III of the ADA limits persons who may be liable for discrimination to a person “who owns, leases (or leases to), or operates a place of public accommodation.” The court held that the architect who designed the movie theater, but who was not the owner, lessee, lessor, or operator of the theater, was not liable under the ADA.
Holley v. Crank, 258 F.3d 1127 (2001).
Prospective homeowners sued a real estate agent and the agency for whom the agent worked alleging violations of the Fair Housing Act. They also brought a separate action against the agency’s president seeking to hold him liable for the agent’s actions. The court held that a corporation and its officers may be held liable for their failure to ensure the corporation’s compliance with the FHA whether or not the officers directed or authorized a particular discriminatory act that occurred.
Homeowners Rights to Inspect Documents
Moran v. Oso Valley Greenbelt Association, 92 Cal. App. 4th 156 (2001).
A homeowner sued the association for failure to produce the association’s minutes for inspection. The trial court found that the meeting minutes had been wrongfully withheld and ordered the minutes produced, but the trial court declined to award the homeowner her attorney fees and costs pursuant to Corporations Code Section 8337. The appellate court reversed. The appellate court stated that every litigant prevailing under Corporations Code Section 8337 is not entitled to an award of attorney fees since the statute says “may” rather than “shall.” However, the appellate court believed that once the trial court concluded the association acted “wrongfully,” the denial of attorney fees and costs without further explanation was an abuse of discretion.
Insurance Issues
Adelman v. Associated International Insurance Co., 90 Cal. App. 4th 352.
Individual owners of condominium units brought an action against the insurer of the homeowners association. The owners alleged that their injury was caused by the insurance company’s negligence in failing to timely perform its indemnity obligations under an insurance policy which only covered the common areas of the development. The repair of the damage to the common areas was intertwined with the repair of the individual units such that the repair of the individual units could not be accomplished without first completing the repairs needed in the common areas. The owners claimed that the insurance company had a “special” relationship with them and thus owed them a duty of care. The court held that the insurance company owed no duty of care to the owners.
Alternative Dispute Resolution / Mandatory Arbitration
Foxgate Homeowners’ Association v. Bramalea California, Inc., 26 Cal. 4th 1 (2001).
In a construction defect action, a homeowners association moved for sanctions against the defendant developer and its attorney for failing to participate in good faith in a court ordered mediation. A report by the mediator and a declaration by plaintiff’s counsel concerning statements made during the mediation were attached to the motion for sanctions. The Supreme Court of California held that there are no exceptions to the confidentiality of mediation communications and that neither a mediator nor a party may reveal communications made during mediation. The Court also concluded that while a party may report to a court about the conduct of participants in a mediation session, a mediator may not.
Villa Milano Homeowners Association v. Il Davorge, 84 Cal. App. 4th 819 (2000).
After the association filed suit against the developer seeking damages, the developer filed a petition to compel arbitration based on an arbitration clause contained in the CC&Rs of the condominium development. The trial court denied the petition, stating that the arbitration clause was in essence an unenforceable adhesion contract. The court of appeals affirmed. The appellate court held that the arbitration provision in the CC&Rs was procedurally and substantively unconscionable. It was procedurally unconscionable because there was no opportunity for the individual buyers to negotiate an amendment to the CC&Rs that would be applied to their own property and it was an all-or-nothing proposition. It was substantively unconscionable because the arbitration provision contained no notice provision, the buyer did not sign it and the developer avoided informing the buyer that he or she was waiving the right to a jury trial.
Home Buyers Warranty Corporation v. Paula Reddish Zinnemann, Real Estate Commissioner for California Department of Real Estate, U.S. District Court, Central District of California, Case No. CV00-09976 RMT (CWx).
Home Buyers Warranty Corporation provided their HBW warranty to a subdivider. The HBW warranty provided coverage against certain types of construction defects in residential dwellings offered for sale by the subdivider. The California Department of Real Estate (DRE) denied the subdivider the issuance of a public report because the HBW warranty contained an arbitration provision, which among other things, allowed for the equal sharing of arbitration fees between parties. This particular provision, as well as others in the HBW warranty, did not comply with 10 Cal. Code Reg. Section 2791.8. Home Buyers Warranty Corporation sued the DRE arguing that the regulation violated the Federal Arbitration Act. The Federal Arbitration Act governs all arbitration agreements involving interstate commerce and supercedes all statutory, regulatory and judicial law which counter the Act’s objective of enforcing private arbitration agreements. The U.S. District Court held the HBW warranty was subject to the Federal Arbitration Act so that the Federal Arbitration Act preempted the DRE regulation. As a result, the DRE had to issue a public report to the subdivider.
Interpretation of Civil Code § 1350
The Committee to Save the Beverly Highlands Homes Association v. The Beverly Highlands Homes Association, 92 Cal. App. 4th 1247 (2001).
The association did not own the four open space lots within the development and it did not own any mutual or reciprocal easements over the residential lots or the open space lots within the development. The association was unwilling to own common area. The dissolution of the association was approved by a majority of the association quorum. The plaintiff argued that under Corporations Code § 8724, which is applicable to common interest developments, the association was improperly dissolved because 100% of the association members did not approve of the dissolution. The court held that the community was not a common-interest development because it had no common area. And as a result, Corporations Code § 8610 controlled and only a majority of the quorum needed to approve the dissolution.
Construction Defects
Nash v. MacDonald, previously published at 92 Cal. App. 4th 847 (2001), review denied January 3, 2002, ordered not published.
Homeowners brought suit against a developer for negligence, strict liability, breach of contract, breach of warranty and declaratory judgment. The homeowners’ complaint alleged that the access road to their lots was improperly compacted and constructed with inadequate drainage. The trial court granted summary judgment for the developer as to the strict liability claim holding that the homeowners could not recover for a purely economic loss. The trial court also ruled that the homeowners’ other claims were barred under Code of Civil Procedure Section 337.1 because the defects were patent, rather than latent. The appellate court reversed. After concluding that residential real property lots are subject to strict liability claims, the appellate court held that the homeowners produced enough evidence to establish the existence of a triable issue of physical damage to the homeowners’ property. Furthermore, the court found that the defects were latent because a reasonable inspection by ordinary users would not have resulted in disclosure of the defect. As a result, the homeowners’ causes of action were governed by Code of Civil Procedure Section 337.15, applicable to latent defects. Under this statute, the causes of action by the homeowners were timely.
Additional Out-of-State Cases
FHAA/Attorney Fees
Buckhannon Board and Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 121 S. Ct. 1835 (2001).
The issue facing the Supreme Court involved whether a plaintiff was a “prevailing party” under the Americans with Disabilities Act (ADA) and Fair Housing Amendments Act (FHAA) enabling an award of attorney fees. Plaintiff brought a suit against the state and state agencies seeking declaratory and injunctive relief under the FHAA and ADA after the plaintiff’s assisted living residences failed a fire inspection because some residents were incapable of “self-preservation.” The state then eliminated the “self-preservation” requirement and the case was dismissed as moot. Using the “catalyst theory,” the plaintiff argued for an award of attorney fees because the lawsuit achieved its desired result through a voluntary change in the defendant’s conduct. The Court denied attorney fees and held that the fee-shifting provisions of FHAA and ADA require a party to secure either a judgment on merits or a court ordered consent decree in order to qualify as a “prevailing party.”
Amendments to Documents
Mulligan v. Panther Valley POA, 337 N.J. Super. 293 (App. Div. 2001).
An association adopted five amendments to the community’s declaration and bylaws. The amendments at issue set forth qualifications for board members, provided for certain limitations on access to records, shifted the burden for legal fees in an enforcement action to the unit owner and allowed the association to file a notice of violation where a continuing rules violation existed. The last amendment declared that an individual registered as a Tier 3 (highrisk) sex offender under Megan’s Law could not reside in the development. Using a “reasonableness” standard, the court found that the amendments regarding the inspection of the association’s books and records, the nomination and election of the board and the collection of legal fees were reasonable. However, the amendment dealing with the notice of violation was not reasonable because under the existing amendment, a notice of violation could be filed without the individual owner receiving notice of the filing. As to the Megan’s Law amendment, the plaintiff failed to create a sufficient record for review and did not have standing to sue. The prohibition of sale to a Tier 3 offender was not per se an unlawful restriction upon the right to sell or lease a home.
Assessments
The Glen, Section I Condominium Association v. June, 244 N.J. Super. 271 (App. Div. 2001).
An owner ceased paying assessments as a result of financial difficulty. The association blocked the owner’s garage. The association believed it had the right to do this because the master deed to the condominium complex granted the association the power to suspend an owner’s enjoyment of the common elements. The trial court ruled that as a result of the association’s actions, the owner was kicked out of the association and that the owner did not have to pay the assessments accrued during the time his garage was blocked. The appellate court reversed. The court held that the suspending of an owner’s garage did not revoke the owner’s membership in the association. However, the driveway was not a common element because the owner exclusively used it. As a result, the association breached its duty of good faith and fair dealing when it blocked the owner’s driveway.
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