3500 Sepulveda, LLC v. Rreef America Reit II Corp Bbb ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
3500 SEPULVEDA, LLC, a Delaware No. 18-56620
limited liability company; 13TH &
CREST ASSOCIATES, LLC, a D.C. No.
California limited liability company, 2:17-cv-08537-
Plaintiffs-Counter-Defendants- R-JPR
Appellants,
v.
MACY’S WEST STORES, INC.,
Defendant-Appellee,
RREEF AMERICA REIT II
CORPORATION BBB, a Maryland
corporation,
Defendant-Counter-Claimant-
Appellee,
v.
6220 SPRING ASSOCIATES, LLC, a
California limited liability company,
Counter-Defendant.
2 3500 SEPULVEDA V. RREEF AMERICA REIT II
3500 SEPULVEDA, LLC, a Delaware No. 18-56637
limited liability company; 13TH &
CREST ASSOCIATES, LLC, a D.C. No.
California limited liability company, 2:17-cv-08537-
Plaintiffs-Counter-Defendants- R-JPR
Appellees,
v.
MACY’S WEST STORES, INC.,
Defendant,
and
RREEF AMERICA REIT II
CORPORATION BBB, a Maryland
corporation,
Defendant-Counter-Claimant-
Appellant,
v.
6220 SPRING ASSOCIATES, LLC, a
California limited liability company,
Counter-Defendant-Appellee.
3500 SEPULVEDA V. RREEF AMERICA REIT II 3
3500 SEPULVEDA, LLC, a Delaware No. 19-55227
limited liability company; 13TH &
CREST ASSOCIATES, LLC, a D.C. No.
California limited liability company, 2:17-cv-08537-
Plaintiffs-Counter-Defendants- R-JPR
Appellees,
v.
MACY’S WEST STORES, INC.,
Defendant,
and
RREEF AMERICA REIT II
CORPORATION BBB, a Maryland
corporation,
Defendant-Counter-Claimant-
Appellant,
6220 SPRING ASSOCIATES, LLC, a
California limited liability company,
Counter-Defendant-Appellee.
4 3500 SEPULVEDA V. RREEF AMERICA REIT II
3500 SEPULVEDA, LLC, a Delaware No. 19-55273
limited liability company; 13TH &
CREST ASSOCIATES, LLC, a D.C. No.
California limited liability company, 2:17-cv-08537-
Plaintiffs-Counter-Defendants- R-JPR
Appellants,
v. OPINION
MACY’S WEST STORES, INC.,
Defendant,
and
RREEF AMERICA REIT II
CORPORATION BBB, a Maryland
corporation,
Defendant-Counter-Claimant-
Appellee,
6220 SPRING ASSOCIATES, LLC, a
California limited liability company,
Counter-Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Argued and Submitted September 2, 2020
Pasadena, California
Filed November 20, 2020
3500 SEPULVEDA V. RREEF AMERICA REIT II 5
Before: Sandra S. Ikuta and Mark J. Bennett, Circuit
Judges, and Douglas P. Woodlock, * District Judge.
Opinion by Judge Bennett
SUMMARY **
California Law
The panel affirmed the district court’s summary
judgment on the nuisance claim, and reversed the district
court as to the remaining claims, in a diversity action
alleging claims and counterclaims arising from a
construction project to expand Manhattan Village Shopping
Center in Manhattan Beach, California.
Plaintiffs are 3500 Sepulveda, LLC and 13th & Crest;
and defendants are RREEF America REIT II Corporation
BBB and Macy’s West Stores, Inc. RREEF brought
counterclaims against plaintiffs and additional
counterdefendant 6220 Spring Associates, LLC (together,
counterdefendants are known as “Hacienda”). The parties’
predecessors executed a Construction, Operation and
Reciprocal Easement Agreement (“COREA”) in 1980. In
2008, the parties resolved various disputes in a Settlement
Agreement, which included a “Site Plan.”
*
The Honorable Douglas P. Woodlock, United States District Judge
for the District of Massachusetts, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
6 3500 SEPULVEDA V. RREEF AMERICA REIT II
Plaintiffs alleged that defendants violated the COREA.
Applying California law, the panel held that the district court
erred in granting summary judgment to defendants on this
claim. The fact that RREEF had discretion to revise the Site
Plan did not mean that Hacienda gave up its rights under the
COREA, especially considering that the Settlement
Agreement, by its own terms did not amend the COREA.
Plaintiffs alleged that defendants’ Project interfered with
their easement rights under the COREA. The panel held that
the Settlement Agreement did not extinguish plaintiffs’
easement rights under the COREA, and the district court
erred in holding otherwise.
Plaintiffs alleged that defendants violated the Settlement
Agreement’s covenant of good faith and fair dealing. The
panel held that there was a genuine dispute of material fact
as to whether RREEF’s construction of a north parking deck
involved bad faith.
Plaintiffs alleged that defendants’ construction
encroached on their easement and eliminated essential
parking, creating a nuisance under California law. The panel
held that plaintiffs did not point to any specific offensive
conduct or manner that was not authorized by the City of
Manhattan Beach. Accordingly, plaintiffs did not raise
triable issues of fact regarding the nuisance claim, and the
panel affirmed the district court’s grant of summary
judgment.
Plaintiffs alleged that defendants intentionally or
negligently interfered with Hacienda’s business and
contractual relations with its tenants. The panel held that
plaintiffs raised triable issues whether defendants’
construction interfered with Hacienda’s tenant contracts, and
3500 SEPULVEDA V. RREEF AMERICA REIT II 7
whether defendants acted with the knowledge that
interference would occur as a result of their action. The
panel reversed the district court’s grant of summary
judgment.
The panel also reversed the district court’s grant of
summary judgment as to plaintiffs’ request for declaratory
relief on the parties’ rights and duties arising out of the
Settlement Agreement and the COREA.
Concerning RREEF’s counterclaims, the district court
granted Hacienda’s motion for summary judgment on the
basis that RREEF’s counterclaims were barred by
California’s litigation privilege. The panel disagreed. The
panel held that policy considerations weighed against
applying the litigation privilege here. Applying the litigation
privilege to this case would undermine the Settlement
Agreement and invite more litigation.
Finally, the panel held the attorneys’ fees question moot,
and vacated the district court’s order denying the parties’
motions for attorneys’ fees.
COUNSEL
Geoffrey B. Kehlmann (argued) and Robin Meadow,
Greines Martin Stein & Richland LLP, Los Angeles,
California, for Plaintiffs-Counter-Defendants-Appellants/
Cross-Appellees.
Michael G. Romey (argued), R. Peter Durning Jr., Jamie L.
Sprague, and Sarah F. Mitchell, Latham & Watkins LLP,
Los Angeles, California, for Defendant-Counter-Claimant-
Appellee/Cross-Appellant.
8 3500 SEPULVEDA V. RREEF AMERICA REIT II
OPINION
BENNETT, Circuit Judge:
Before the court are cross-appeals from the district
court’s orders granting summary judgment (i) to Defendants
on Plaintiffs’ claims, and (ii) to Counterdefendants on the
counterclaims. We have jurisdiction under 28 U.S.C.
§ 1291, and we review the district court’s grant of summary
judgment de novo, viewing the facts in the light most
favorable to the non-movant. See Flores v. City of San
Gabriel, 824 F.3d 890, 897 (9th Cir. 2016). The parties
agree that California law applies. We affirm in part, reverse
in part, and remand.
I. Background
Plaintiffs are 3500 Sepulveda, LLC, and 13th & Crest
Associates, LLC. They brought claims against Defendants
RREEF America REIT II Corporation BBB (“RREEF”), and
Macy’s West Stores, Inc. (“Macy’s”). Defendant RREEF
then brought counterclaims against Plaintiffs and an
additional Counterdefendant, 6220 Spring Associates, LLC
(together, Counterdefendants are known as the “Hacienda
Parties” or “Hacienda”).
The parties’ dispute concerns a construction project to
expand Manhattan Village Shopping Center (the “Shopping
Center”) in Manhattan Beach, California. The forty-four-
acre Shopping Center includes multiple parcels of land. The
Hacienda Parties own a 0.7-acre parcel located at
3500 Sepulveda Boulevard. The Hacienda Building is a
commercial building located on the 3500 Sepulveda
property. Hacienda rents its space to commercial tenants,
including restaurants, retail stores, and offices. Macy’s
3500 SEPULVEDA V. RREEF AMERICA REIT II 9
owns another single parcel of land, and RREEF owns the
remaining parcels in the Shopping Center.
The parties’ predecessors executed the Construction,
Operation and Reciprocal Easement Agreement (the
“COREA”) in 1980. The COREA defines a “Common
Area” within the Shopping Center as including the
“Automobile Parking Area, access roads, driveways,
Perimeter Sidewalks . . . , and similar areas.” Under the
COREA, the parties and their permittees have “nonexclusive
easements over the Common Area of [the parties’]
respective Tract[s], for the passage and accommodation of
pedestrians and vehicles.” The easements run with the land.
Hacienda’s tenants and customers drive through and park in
the Common Area. The parking lot known as “Lot F” is
particularly important to Hacienda, as Lot F is located
“across the drive aisle from the Hacienda Building.”
In 2006, RREEF applied to the City of Manhattan Beach
(the “City”) for approval to renovate and expand the
Shopping Center. Around the same time, Hacienda was
attempting to convert parts of its building from office space
to restaurants. RREEF and Hacienda vigorously opposed
each other’s plans for renovation, and various legal disputes
arose.
The parties resolved those disputes in a Settlement
Agreement (the “Agreement”) in 2008. 1 Under the terms of
the Settlement Agreement, RREEF agreed not to oppose
Hacienda’s plan to convert office space into restaurants, and
1
The parties to the Settlement Agreement are the Hacienda
Parties—3500 Sepulveda, 13th & Crest, and 6220 Spring (which is a
Counterdefendant but not a Plaintiff)—and RREEF. Macy’s, which is a
Defendant to some of the claims but not a Counterclaimant, is not named
as a party to the Settlement Agreement.
10 3500 SEPULVEDA V. RREEF AMERICA REIT II
Hacienda agreed not to oppose RREEF’s expansion project
(the “Project”)—subject to certain limitations in the
Agreement. The current dispute is over RREEF’s Project,
and Hacienda’s restaurant-conversion plan is irrelevant for
our purposes.
The Settlement Agreement includes a “Site Plan”—a
series of drawings that set forth RREEF’s proposed Project
to expand Macy’s and other retail space, and to construct
new parking structures. The Site Plan and an additional
“Parking Plan” lay out, among other things, the available
retail and parking spaces during and upon completion of
stages of construction. The Settlement Agreement provides
that RREEF will submit the Site Plan to the City for
approval: “RREEF is preparing to amend the RREEF
Application [to the City] to reflect a revised expansion plan
for the Shopping Center as generally depicted in the
[attached] Site Plan.” The Settlement Agreement also gives
RREEF “discretion” to revise the Site Plan, and it allows
Hacienda to object to certain material revisions during the
City’s approval process. Section 6 of the Settlement
Agreement states that “nothing in this Agreement shall
constitute an amendment to the . . . COREA.”
The City’s approval process includes circulating the
proposed plan and environmental impact report for public
comment and holding public hearings. During this process,
RREEF submitted multiple revised versions of the Site Plan.
Hacienda took issue with the new versions, which Hacienda
believed were materially different from the agreed-upon Site
Plan in the 2008 Settlement Agreement and would harm
Hacienda’s interests. In particular, Hacienda was concerned
that the new plans reduced the amount of available parking
for Hacienda and its tenants—both during and after the
completion of construction. Hacienda and its agents
3500 SEPULVEDA V. RREEF AMERICA REIT II 11
opposed the revised Site Plans in multiple public hearings,
wrote letters to the City raising similar concerns, and were
allegedly involved in certain lawsuits challenging the
Project.
The City approved RREEF’s Project—based on a
revised Site Plan—in 2017, and construction began soon
after. Hacienda’s tenants started complaining about the
construction almost immediately, raising concerns about the
loss of parking spaces, road closures, and other
inconveniences. Tenants demanded compensation for lost
business. They also demanded rent reductions, threatened to
not renew their leases, and threatened legal action.
In October 2017, Plaintiffs sued Defendants in
California Superior Court, alleging breach of contract,
anticipatory breach of contract, breach of the covenant of
good faith and fair dealing, interference with easement
rights, nuisance, and intentional and negligent interference
with business and contractual relations. Plaintiffs’
underlying theory is that the current Site Plan is substantially
different from the agreed-upon Site Plan in the Settlement
Agreement, and that RREEF’s expansion and construction
Project violates Plaintiffs’ rights. Defendants removed the
case to federal court, and RREEF filed counterclaims against
the Hacienda Parties, alleging breach of contract and breach
of the covenant of good faith and fair dealing. RREEF’s
theory is that Hacienda violated the Settlement Agreement
by opposing the Project.
The parties filed cross-motions for summary judgment,
and the district court granted both motions and dismissed all
the claims and counterclaims. The parties then each filed a
motion for attorneys’ fees, which the district court denied on
the ground that no party prevailed. This appeal and cross-
appeal followed. Plaintiffs argue that the district court erred
12 3500 SEPULVEDA V. RREEF AMERICA REIT II
in granting summary judgment on their claims, and RREEF
argues that the district court erred in granting summary
judgment on its counterclaims.
II. Plaintiffs’ Claims
We affirm the district court’s grant of summary
judgment on the nuisance claim and reverse the district court
as to the remaining claims.
1. Breach of Contract
Plaintiffs allege that Defendants violated the COREA,
under which the parties agreed to perform construction work
“so as not to unreasonably interfere with the use, occupancy
or enjoyment of the remainder of the Shopping Center or any
part thereof by any other Party, and any other Occupant of
the Shopping Center, and the Permittees of any other Party
and such other Occupants.” The district court granted
summary judgment to Defendants on this claim. According
to the district court, Plaintiffs agreed to the Project under the
Settlement Agreement, and further agreed that RREEF
would have discretion to revise the Site Plan and execute the
Project; therefore, Plaintiffs cannot now complain of
conduct to which they consented.
Plaintiffs point out that section 6 of the Settlement
Agreement provides that “nothing in this Agreement shall
constitute an amendment to the . . . COREA,” and argue that
they have claims under the COREA. The district court,
however, essentially read section 6 out of the Agreement:
While Section 6 of the Settlement Agreement
states that the agreement does not constitute
an amendment to the COREA, the agreement
would essentially lose all meaning if the court
3500 SEPULVEDA V. RREEF AMERICA REIT II 13
were to adopt [Hacienda’s] interpretation of
this section as preserving all of their
easement rights even during the duration of
the construction project.
We disagree. We conclude that section 6 can be harmonized
with the rest of the Settlement Agreement and with the
COREA. See Cal. Civ. Code § 1641 (“The whole of a
contract is to be taken together, so as to give effect to every
part, if reasonably practicable, each clause helping to
interpret the other.”). Read in conjunction with section 6,
sections 4 and 5 of the Settlement Agreement provide that
RREEF has discretion to pursue the Project and alter the Site
Plan, and Hacienda’s objections to the City are limited to
RREEF’s material changes. That RREEF has discretion to
revise the Site Plan does not mean that Hacienda gave up its
rights under the COREA, especially considering that the
Settlement Agreement, by its own terms, does not amend the
COREA. 2
2. Interference with Easement Rights
Plaintiffs allege that Defendants’ Project has interfered
with their easement rights under the COREA. Under
California law, interference with an easement is actionable
when the grantor of the easement “unreasonably impede[s]
the [grantee] in his rights,” Dolnikov v. Ekizian, 165 Cal.
Rptr. 3d 658, 666 (Ct. App. 2013) (quoting City of Los
2
The district court stated that Defendants argued below that the
Settlement Agreement’s release provision “includes Plaintiffs’ claims”
related to the Project. On appeal, Defendants do not argue that the
Settlement Agreement’s release provision bars Plaintiffs’ claims in this
lawsuit, and we do not address this issue. As discussed below, we note
that the release provision is ambiguous on its face and extrinsic evidence
is needed to interpret the provision.
14 3500 SEPULVEDA V. RREEF AMERICA REIT II
Angeles v. Howard, 53 Cal. Rptr. 274, 277 (Ct. App. 1966)),
through actions “that make it more difficult to use an
easement, that interfere with the ability to maintain and
repair improvements built for its enjoyment, or that increase
the risks attendant on exercise of rights created by the
easement,” id. (emphasis omitted) (quoting Restatement
(Third) of Property: Servitudes § 4.9 cmt. c (Am. Law Inst.
2000)).
The district court granted summary judgment to
Defendants, again concluding that Plaintiffs cannot sue
Defendants for conduct to which Plaintiffs consented. As
discussed above, the Settlement Agreement does not
extinguish Plaintiffs’ easement rights under the COREA,
and the district court erred in holding otherwise.
3. Breach of the Covenant of Good Faith and Fair
Dealing
Plaintiffs argue that Defendants violated the Settlement
Agreement’s covenant of good faith and fair dealing when
they used their discretion “to unfairly change the site plan
and engage in unreasonable construction activities.” “There
is an implied covenant of good faith and fair dealing in every
contract that neither party will do anything which will injure
the right of the other to receive the benefits of the
agreement.” Foley v. Interactive Data Corp., 765 P.2d 373,
390 (Cal. 1988) (quoting Comunale v. Traders & Gen. Ins.
Co., 328 P.2d 198, 200 (Cal. 1958)). A party can breach the
covenant without “breach of a specific provision of the
contract.” Carma Devs. (Cal.), Inc. v. Marathon Dev. Cal.,
Inc., 826 P.2d 710, 727 (Cal. 1992). Rather, the question is
whether the party’s conduct, “while not technically
transgressing the express covenants . . . frustrates the other
party’s rights to the benefits of the contract.” Racine &
Laramie, Ltd. v. Dep’t of Parks & Rec., 14 Cal. Rptr. 2d 335,
3500 SEPULVEDA V. RREEF AMERICA REIT II 15
338 (Ct. App. 1992) (quoting Love v. Fire Ins. Exch.,
271 Cal. Rptr. 246, 256 (Ct. App. 1990)). “The covenant of
good faith finds particular application in situations where
one party is invested with a discretionary power affecting the
rights of another.” Carma Devs., 826 P.2d at 726. The party
with discretionary power must exercise such power in good
faith and through “objectively reasonable conduct.” Badie
v. Bank of Am., 79 Cal. Rptr. 2d 273, 284 (Ct. App. 1998)
(quoting Lazar v. Hertz Corp., 191 Cal. Rptr. 849, 857 (Ct.
App. 1983)).
Section 5 of the Settlement Agreement provides that the
“North Deck may be constructed in two stages—Stage One
and Stage Two—as depicted on the Site Plan and in
substantial conformity with [the Parking Plan],” and that
“the construction of the Parking Decks shall be subject to the
additional terms set forth in attached Exhibit G.” Exhibit G
further provides that “[d]uring Stage One construction of the
North Deck, there shall be not less than 240 parking spaces
available in the area referenced as ‘Lot F.’” RREEF
thereafter decided to construct the North Deck as a “unitary
deck” rather than in stages, and did not maintain the
240 parking spaces in Lot F. 3
Because the Settlement Agreement does not require
construction of the North Deck in stages, and Exhibit G
provides for 240 parking spaces during Stage One, RREEF
has not expressly breached the Agreement by constructing
the North Deck without maintaining any parking spaces in
3
Hacienda’s opening brief appears to suggest that its breach of
covenant claim is based on a theory of anticipatory breach because
RREEF represented that it did not intend to maintain the 240 parking
spaces. However, construction of the North Deck has since begun,
thereby mooting the anticipatory breach theory.
16 3500 SEPULVEDA V. RREEF AMERICA REIT II
Lot F. However, viewing the facts in the light most
favorable to Plaintiffs, there is a genuine dispute of material
fact as to whether RREEF’s construction of the North Deck
involved bad faith. The parties clearly contemplated
whether construction of the North Deck would cause parking
shortages for Hacienda and agreed to measures to mitigate
those expected problems. Notably, Exhibit G does not say
that its terms are applicable only if the North Deck is
constructed in stages. Rather, it simply assumes that there
will be stages of construction. RREEF has not presented any
evidence that constructing the North Deck as a “unitary
deck” will eliminate or mitigate the contemplated problems
regarding parking shortages. Accordingly, Plaintiffs have
presented sufficient evidence to raise a triable issue as to
whether RREEF’s construction of the North Deck was
contrary to “the contract’s purposes and the parties’
legitimate expectations.” Carma Devs., 826 P.2d at 728.
4. Nuisance
Plaintiffs allege that Defendants’ construction
encroached on their easement and eliminated essential
parking, creating a nuisance under California law. See
Monks v. City of Rancho Palos Verdes, 84 Cal. Rptr. 3d 75,
104 (Ct. App. 2008). Defendants argue that the Project was
constructed in accordance with City regulations; therefore, it
could not have been a nuisance. See Cal. Civ. Code § 3482
(“Nothing which is done or maintained under the express
authority of a statute can be deemed a nuisance.”); Williams
v. Moulton Niguel Water Dist., 232 Cal. Rptr. 3d 356, 361
(Ct. App. 2018) (“Although [§ 3482] speaks in terms of ‘a
statute,’ that term has been broadly interpreted to include
regulations and other express government approvals.”).
Plaintiffs respond that “even if there were a City
ordinance approving the expansion project, it would not
3500 SEPULVEDA V. RREEF AMERICA REIT II 17
expressly allow RREEF to engage in such harmful
interference as to eliminate all convenient parking for the
Hacienda Building during a yearlong construction project.”
While it is true that “although an activity authorized by
statute cannot be a nuisance, the [m]anner in which the
activity is performed may constitute a nuisance,” Venuto v.
Owens-Corning Fiberglas Corp., 99 Cal. Rptr. 350, 359 (Ct.
App. 1971), Plaintiffs do not point to any specific offensive
conduct or manner that was not authorized by the City.
Accordingly, Plaintiffs have not raised triable issues of fact
regarding the nuisance claim, and we affirm the district
court’s grant of summary judgment.
5. Interference with Business and Contractual
Relations
Plaintiffs allege that Defendants intentionally or
negligently interfered with Hacienda’s business and
contractual relations with its tenants, pointing to tenant
complaints about RREEF’s construction. The elements of a
claim of intentional interference are “(1) a valid contract
between plaintiff and a third party; (2) defendant’s
knowledge of this contract; (3) defendant’s intentional acts
designed to induce a breach or disruption of the contractual
relationship; (4) actual breach or disruption of the
contractual relationship; and (5) resulting damage.”
Quelimane Co. v. Stewart Title Guar. Co., 960 P.2d 513, 530
(Cal. 1998) (quoting Pac. Gas & Elec. Co. v. Bear Stearns
& Co., 791 P.2d 587, 589–90 (Cal. 1990)). The only
difference between intentional and negligent interference is
the defendant’s intent. See Nelson v. Tucker Ellis, LLP,
262 Cal. Rptr. 3d 250, 264 n.5 (Ct. App. 2020).
We conclude that Plaintiffs have raised triable issues
whether Defendants’ construction interfered with
Hacienda’s tenant contracts, and whether Defendants acted
18 3500 SEPULVEDA V. RREEF AMERICA REIT II
with the knowledge that “interference is certain or
substantially certain to occur as a result of [their] action.”
Quelimane, 960 P.2d at 531.
Defendants’ sole argument on appeal is that Plaintiffs’
claims fail because a claim of tortious interference “requires
a ‘wrongfulness’ element, such that the defendant’s
interfering conduct ‘was wrongful by some legal measure
other than the fact of interference itself.’” Defendants are
incorrect. Under California law, there is no additional
“wrongfulness” element for a claim of interference with
existing contracts. See id. at 530 (“Because interference
with an existing contract receives greater solicitude than
does interference with prospective economic advantage, it is
not necessary that the defendant’s conduct be wrongful apart
from the interference with the contract itself.” (citation
omitted)). Accordingly, we reverse the district court’s grant
of summary judgment.
6. Declaratory Relief
For the reasons noted above, we also reverse the district
court’s grant of summary judgment as to Plaintiffs’ request
for declaratory relief on the parties’ rights and duties arising
out of the Settlement Agreement and the COREA.
III. RREEF’s Counterclaims
RREEF brought counterclaims against Hacienda for
breach of contract, breach of the implied covenant of good
faith and fair dealing, and declaratory relief. RREEF
contends that Hacienda and its agents engaged in an
“exhaustive campaign of opposition” to the Project,
violating the Settlement Agreement’s release provision and
other provisions governing the parties’ conduct in the City’s
application-approval process.
3500 SEPULVEDA V. RREEF AMERICA REIT II 19
The district court granted Hacienda’s motion for
summary judgment on the basis that “RREEF’s
counterclaims are barred by California’s litigation
privilege.” We disagree.
In California, the litigation privilege immunizes
defendants from certain lawsuits based on their privileged
communications in judicial proceedings and other official
proceedings, including local city council proceedings. See
Cal. Civ. Code § 47; Cayley v. Nunn, 235 Cal. Rptr. 385, 387
(Ct. App. 1987). The litigation privilege traditionally
applied only to tort claims, and the California Supreme Court
has not decided whether the privilege applies to contract
claims. We understand that the California Supreme Court is
currently considering whether the litigation privilege applies
to contract claims, and if so, under what circumstances. See
Doe v. Olson, Cal. Sup. Ct. No. S258498.
“In the absence of [a decision of the highest state court],
a federal court must predict how the highest state court
would decide the issue using intermediate appellate court
decisions, decisions from other jurisdictions, statutes,
treatises, and restatements as guidance.” In re Kirkland,
915 F.2d 1236, 1239 (9th Cir. 1990). California’s
intermediate appellate courts have applied the litigation
privilege to contract claims in limited situations where “its
application furthers the policies underlying the privilege.”
Wentland v. Wass, 25 Cal. Rptr. 3d 109, 114 (Ct. App. 2005).
These policies include “ensur[ing] free access to the courts,
promot[ing] complete and truthful testimony, encourag[ing]
zealous advocacy, giv[ing] finality to judgments, and
avoid[ing] unending litigation.” Id. at 115.
20 3500 SEPULVEDA V. RREEF AMERICA REIT II
We conclude that the policy considerations weigh
against applying the litigation privilege here. 4 While the
Settlement agreement did not clearly prohibit Hacienda’s
prior participation in the municipal and judicial proceedings
regarding the construction of the Shopping Center, and while
Hacienda’s right to communicate in such proceedings is a
matter of public concern, Hacienda willingly limited its
communications under the Settlement Agreement. See id. at
116 (“Just as one who validly contracts not to speak waives
the protection of the anti-SLAPP statute, so too has he
waived the protection of the litigation privilege.” (citation
omitted)). California courts that have applied the litigation
privilege to contract claims did so in the face of weightier
policy concerns than we face here. See, e.g., Vivian v.
Labrucherie, 153 Cal. Rptr. 3d 707, 716 (Ct. App. 2013)
(communication made during investigation of potential
police misconduct); McNair v. San Francisco, 210 Cal. Rptr.
3d 267, 281 (Ct. App. 2016) (doctor’s disclosure of public
safety concerns involving patient who was a bus driver).
And on the other side of the policy balance are significant
concerns about the finality of settlements and the stability of
contract. See Wentland, 25 Cal. Rptr. 3d at 116 (refraining
from applying the litigation privilege where doing so would
“not encourage finality [or] avoid litigation”). Applying the
litigation privilege to this case would undermine the
Settlement Agreement and invite more litigation.
4
If the California Supreme Court holds otherwise while this case is
pending, the district court is not bound by our conclusion. See Owen ex
rel. Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983) (“Our
interpretation . . . was only binding in the absence of any subsequent
indication from the California courts that our interpretation was
incorrect.”).
3500 SEPULVEDA V. RREEF AMERICA REIT II 21
We note that some California courts have also held that
“the privilege will apply to contract claims only if the
agreement does not ‘clearly prohibit’ the challenged
conduct.” Crossroads Invs., L.P. v. Fed. Nat’l Mortg. Ass’n,
222 Cal. Rptr. 3d 1, 28 (Ct. App. 2017) (quoting
Labrucherie, 153 Cal. Rptr. 3d at 715). The counterclaims
here are partly based on the Settlement Agreement’s release
provision, section 12, and RREEF alleges that Hacienda
violated section 12 through its involvement in lawsuits
opposing the Project. We conclude that section 12 is
ambiguous as to whether it prohibits the lawsuits in question.
Specifically, the language of section 12 is ambiguous as to
(i) whether the release covers claims based on future events
that occur after the date of the Settlement Agreement, and
(ii) if it does, whether those later-arising claims include
claims based on future versions of the Site Plan. On the one
hand, section 12 contains arguably forward-looking
language: “[Hacienda] releases [RREEF] from . . . [all
claims] that [the Hacienda Parties] have or may have against
[RREEF]” (emphasis added). On the other, section 12
references two specific applications for two specific Site
Plans, both of which were already in existence at the time of
the Settlement Agreement’s execution. 5
Thus, we conclude that the district court erred in
applying the litigation privilege to grant summary judgment.
5
Because section 12 is ambiguous, the district court will need to
consider extrinsic evidence on remand should it need to interpret section
12. See Winet v. Price, 6 Cal. Rptr. 2d 554, 557 (Ct. App. 1992).
22 3500 SEPULVEDA V. RREEF AMERICA REIT II
Finally, we hold the attorneys’ fees question moot and
vacate the district court’s January 29, 2019 Order denying
the parties’ motions for attorneys’ fees. 6
The parties are to bear their own costs on appeal.
AFFIRMED in part, REVERSED in part, and
REMANDED.
6
Hacienda’s Motion to Take Judicial Notice (Dkt. 36) is
GRANTED. Defendants’ Motion to File Oversized Brief (Dkt. 63) is
GRANTED.