By Jill E. Fox
May 7, 2014
Free speech rights aren’t typically associated with the business of real estate. But in recent years, California businesses have invoked a unique California law designed to protect First Amendment rights to attack a variety of common real estate claims. Quiet title, foreclosure, and eviction claims have all been scrutinized as potential “strategic lawsuits against public participation,” i.e. “SLAPP” suits, which improperly seek to punish a person for constitutionally protected speech.
Last week, a California appellate court considered another common real estate scenario as potentially protected speech: Homeowners’ Association meetings. In Talega Maintenance Corporation v. Standard Pacific Corporation (2014 WL 1440925), the Fourth District Court of Appeal decided that HOA directors were not automatically shielded from liability simply because they voted for an otherwise improper expenditure of HOA funds.
As guidance, the court looked to a seminal decision finding that a nonjudicial foreclosure sale is not constitutionally protected activity shielded by California’s “anti-SLAPP” statute (CCP § 425.16). The anti-SLAPP statute bars lawsuits based on speech “before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law.” Garreston noted that while a nonjudicial foreclosure sale is governed by statute and includes public notice requirements, it is still fundamentally “a private contractual proceeding, rather than an official governmental proceeding or action.” (Garretson v. Post (2008) 156 Cal.App.4th 1508, 1520.)
The Talega court reasoned that an HOA meeting and vote was likewise private commercial activity. In Talega, directors who had been appointed by the developer during the early phases of development voted to use HOA funds to repair public trails. The directors stated that the HOA was financially responsible for the trails, a statement that later proved false. The HOA sued the directors for breach of their duties to the HOA and fraud. In response, the directors claimed their statements and vote constituted protected speech in an “official proceeding,” for which they could not be sued pursuant to the anti-SLAPP law.
The court disagreed: “Although courts have recognized the similarities between a homeowners association and a local government … a homeowners association is not performing or assisting in the performance of the actual government’s duties.” (Talega at 5.)
Talega adds to a growing number of decisions excluding some common real estate dealings from the scope of the anti-SLAPP law because they are principally private business transactions. Their reasoning parallels a seldom-used exception to the anti-SLAPP law: commercial speech. The so-called Commercial Speech Exception (CCP § 425.17(c)) clarified that statements made in the course of a business transaction are actionable, even if those statements are also made in an “official proceeding” or otherwise protected.