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CASE LAW - 2002

Property Manager's Lawsuit For Defamation Dismissed As An Attempt To Punish Free Speech By Association Members. Damon v. Ocean Hills Journalism Club, et al. (2001) 85 Cal.App.4^th 468, 102 Cal.Rptr.2^d 205 [originally in Guralnick & Gilliland's Sixteenth Annual Legislative Update]

CASE HISTORY

Leisure Village at Ocean Hills is a senior residential community with 1633 homes, a golf course, and other recreational amenities. The Ocean Hills Homeowners Association was managed by an outside professional management company until 1996; but in early 1996 the Board voted to become self-managed. Damon was hired as the Association's on-site general manager under the Board's direction.

Damon shortly began attracting criticism from many homeowners, who wanted to return to a professional property management company. These dissenting homeowners began voicing their criticisms of Damon in the Village Voice, a newsletter published by the Ocean Hills Journalism Club, a private homeowners' club in the Ocean Hills community. In the 1997 election, new Board members were elected whose platform included returning to professional management. Two of the new Board members, Terry and Feldman, vocally criticized Damon at Board meetings and questioned his competency and veracity.

By the end of 1997, the seniors were split into two camps - pro-Damon and anti-Damon. This resulted in a "highly emotional atmosphere" in which the Ocean Hills community became "a war zone with verbal salvos being lobbed back and forth." "Hate and discontent" flowed amongst the homeowners. The private Village Voice newsletter reflected the position that Damon should be terminated. On the other hand, the Association's official newsletter published a regular column written by Damon in which he urged the homeowners to remain self-managed.

In early 1998, homeowners who supported Damon initiated a recall election, attempting to remove Terry and Feldman; however, this effort was unsuccessful. Damon then resigned, and the Association returned to professional management after a vote of the homeowners.

CASE HISTORY

Damon, obviously very bitter and resentful about his experience at Ocean Hills, filed a lawsuit for defamation against six homeowners who had written articles or letters published in the Village Voice criticizing his performance, the Ocean Hills Journalism Club as publisher of the Village Voice, as well as Board members Terry and Feldman for their comments made during Board meetings (such as questioning Damon's competency and veracity). The defendants thereafter made a motion to strike Damon's complaint under Code of Civil Procedure § 425.16 (the "anti-SLAPP" law). The trial court thereafter granted the motion to strike, finding Damon's complaint was subject to the anti-SLAPP statute because it arose from defendants' exercise of their free speech rights in connection with a public issue, and that Damon failed to show it was probable that he would prevail on his complaint. Effectively, the trial court's ruling ended Damon's lawsuit. Damon then appealed.

ANALYSIS

Code of Civil Procedure §  425.16 is a procedure for a court to dismiss at an early stage any meritless lawsuit which is intended to chill free speech rights in connection with public issues. This type of non-meritorious litigation is referred to under the acronym SLAPP (a Strategic Lawsuit Against Public Participation). In 1997, the legislature added a provision to § 425.16, mandating that the courts broadly construe the anti-SLAPP statute to encourage participation in matters of public significance and discourage abuse of the judicial process.

As such, when a plaintiff files a lawsuit which the defendant believes is a SLAPP suit, the defendant may immediately move to strike the complaint and, in order to prevail on the motion, must establish to the court that plaintiff's suit arises from an act in furtherance of defendant's right of petition or free speech. Thereafter, unless the plaintiff can show that he/she has reasonable probability of prevailing on the lawsuit, the court will grant to motion to strike and effectively dismiss the lawsuit.

In this case, Damon challenged the dismissal of his lawsuit on the grounds that the Board of Directors meeting should not be considered a public forum, as that term is used within the anti-SLAPP statute. The Court of Appeal answered by stating the meetings of Board of Directors for Homeowner Associations were public forums, since Board meetings are open to all interested parties within the community, serve as a place where Association members can communicate their ideas, and serve as a function similar to that of a governmental body.

The appellate court also held that the Village Voice newsletter was a public forum. Its purpose was to communicate information of interest to the Ocean Hills residents and was distributed to the entire Ocean Hills community. Although the Village Voice advocated only its own particular viewpoint (in this instance, the elimination of Damon), the Court of Appeal found no legal requirement that a news publication provide a "balanced viewpoint" in order to constitute a "public forum".

Next the appellate court analyzed whether the issues of Damon's continued employment, his performance, and whether to return to professional management or remain self-managed should be considered an "issue of public interest." The court noted that § 425.16 has been held to protect speech regarding "private conduct that impacts a broad segment of society and/or affects a community in a manner similar to a government entity." Observing that Homeowners Associations function as "a second municipal government" and that the debate surrounding the Association's management concerned the manner in which the homeowners chose to be governed, it was clearly a "public issue." Additionally, some of the statements were made in the Association's annual elections, which clearly were public issues as they involved a political matter concerning the qualification and conduct of candidates for office.

Finally, Damon claimed that his lawsuit was not intended to interfere with the defendants' free speech; rather, his motivation was only to "vindicate the damage done to his reputation." The appellate court rejected this argument, observing that there was nothing in the anti-SLAPP law requiring an inquiry into plaintiff's "subjective motivations" in filing a lawsuit. The court noted that Damon's lawsuit certainly had the potential to punish the defendants for exercising their free speech rights on topics of public importance. Therefore, the anti-SLAPP law protected the defendants and required Damon's lawsuit to be dismissed.

PRACTICAL APPLICATION

Property managers and Board members are on the "front line" and usually receive criticism from disgruntled owners. Unfortunately, some members disparage managers and/or Board members by alleging unethical or criminal activities, or violations of California law. It is sometimes very difficult to ascertain what is someone's opinion and belief as opposed to a statement of fact which could be slanderous or, if in written form, libelous.

Ultimately, Board members and property managers should consult with an experienced attorney who can analyze the facts and evaluate whether comments by members who have dissenting viewpoints are opinions or criticisms which fall within the protection of the anti-SLAPP legislation or whether they involve more damaging comments which do not deserve the freedom of speech protection. (For a discussion on how to handle "criticism" that escalates into profanities or violence, see our article entitled When Homeowners Attack! on page 101 of this Legislative Update.)

Because Homeowners Associations are considered by the courts to be, in effect, the equivalent of municipal governments, members of the Board of Directors and property managers who implement Board policy are expected to tolerate and even encourage the expression of such criticism in the name of free speech. This is easy to state, but often difficult in practice. However, the Damon case illustrates that courts will dismiss a lawsuit by a Board member or property manager who believes that he/she was slandered/libeled by sharp criticism from dissident homeowners, if the criticism was voiced about matters concerning Association management and was voiced in a Board meeting, campaign materials or a community newsletter. Board members who believe that they have been subjected to slanderous criticisms or accusations should seek guidance from their attorney. However, difficult as it may sometimes be, "rising above" the slings and arrows of criticism in the name of free speech is usually the best approach.

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