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In Jan Dunning et al. v. Kevin K. Johnson, APLC et al., the Fourth District Court of Appeal held that a developer and property owner could pursue its claims against a neighbor and project opponent for malicious prosecution after the developer successfully defended a meritless CEQA lawsuit against its construction of a private secondary school project.  The Fourth District found that the developer established a probability of prevailing on its malicious prosecution claim by presenting evidence that the project opponents in the CEQA action pursued their claim with malice and without probable cause.  This case is a warning shot to project opponents filing knowingly meritless CEQA lawsuits based on ulterior motives.

In the underlying CEQA action (Clews Land and Livestock LLC et al. v. City of San Diego (2017) 19 Cal.App.5th 161), Clews Horse Ranch, a commercial horse ranch, filed an unsuccessful petition for a writ of mandate against the City of San Diego, as respondent, and Cal Coast, a developer and property owner, as real party in interest, over construction of a private secondary school adjacent to the Ranch pursuant to a Mitigated Negative Declaration (MND); the petition for writ of mandate was denied.  Petitioner Clews Horse Ranch argued that an Environmental Impact Report (EIR) was required because of significant impacts in the areas of fire hazards, traffic, noise, recreation, and historic resources, and because the final MND included impacts not disclosed in the draft. Clews Horse Ranch further argued that the City’s approval violated the applicable community land use plan and historic resources provisions of the San Diego Municipal Code (SDMC.). The trial court held that Clews Horse Ranch had failed to exhaust administrative remedies, and in making that finding, concluded that the City’s administrative appeals process did not violate CEQA.  The trial court also rejected Clews Horse Ranch’s arguments, both that the project would have significant impacts as to fire hazards, traffic and transportation, noise, recreation, and historic resources, and that the City had abused its discretion by finding the project exempt from certain historical resources regulations in the SDMC, or by concluding that the project was consistent with the Neighborhood Precise Plan. In making its decision, the trial court opined that Clews Horse Ranch knew that its action was unmeritorious and yet it prosecuted its petition to harass Cal Coast, and for reasons that had nothing to do with environmental concerns.  Clews Horse Ranch simply did not want Cal Coast as a neighbor. (For more information on the underlying CEQA action, see our blog post here.)

Cal Coast then filed a malicious prosecution action against Clews Horse Ranch and the Ranch’s attorneys, alleging that they lacked probable cause and acted with malice when they pursued the CEQA litigation.  In response, Clews Horse Ranch and its attorneys filed a motion to dismiss the action based on California’s anti-SLAPP statute.  The California anti-SLAPP statute gives a defendant the ability to file a motion to dismiss a complaint brought against that party for engaging in a protected activity, including the filing of an environmental lawsuit under CEQA.  The trial court denied the anti-SLAPP motion, finding that Cal Coast established a probability of prevailing on its malicious prosecution claim by presenting evidence that Clews Horse Ranch pursued the CEQA case without probable cause and with malice.  Clews Horse Ranch and its attorneys appealed.  The Fourth District concluded that Cal Coast established a probability of prevailing on its malicious prosecution claim against Clews Horse Ranch (though not against its attorneys), and therefore affirmed the order denying the anti-SLAPP motion as to Clews Horse Ranch.

In finding some merit in Cal Coast’s claim that Clews Horse Ranch’s CEQA claim lacked probable cause, the Fourth District analyzed the evidence presented by Clews Horse Ranch and found that it was “precisely the type of speculative and generalized warnings that do not constitute substantial evidence.”  The Fourth District further noted that Clews Horse Ranch argued that noise impacts would be significant, even though it had not conducted or commissioned any technical studies in support of that claim, and Cal Coast’s technical studies showed clearly that noise impacts would be less than significant.

In finding that Cal Coast established a probability of showing that Clews Horse Ranch acted with malice, the Fourth District focused on evidence that Clews Horse Ranch was opposed to any development at the site, including declarations from past owners indicating that Clews Horse Ranch “consistently and aggressively” opposed any use and development at the project site in the past, even harassing prior owners and deploying “hostile and spiteful behaviors to dissuade the property owners from using or developing their land.”

This case is particularly significant, as it represents the first published case to provide a developer the opportunity to pursue a malicious prosecution claim against petitioners in an underlying CEQA action.  The Fourth District applied the elements of malicious prosecution and expressly acknowledged a potential avenue for redress available to real parties and lead agencies against petitioners who pursue openly meritless CEQA claims with underhanded motives.