Pacaso Inc. v. City of St. Helena

Background

Pacaso Inc. and PAC 6 CA 2021 LLC, referred to together as Pacaso, alleged that they created a co-ownership model for second-home purchases. Pacaso created a separate limited liability company for each property and arranged for up to eight co-owners to hold interests in that company. Pacaso alleged that its homeowners could sell their interests after the first year and were prohibited from renting the properties.

Pacaso alleged that it owned or managed five single-family homes in St. Helena. The City had an ordinance prohibiting the creation of a timeshare project as a form of ownership for certain residential properties. After communications between Pacaso and City officials, City Attorney Ethan Walsh sent a March 16, 2021 letter to St. Helena real estate agents and brokers. The letter described the City’s timeshare and short-term-rental regulations and warned that the regulations applied regardless of whether a use was called a timeshare, fractional ownership, co-ownership, or something else.

Pacaso’s fifth cause of action alleged intentional interference with prospective economic advantage. Pacaso claimed that the letter discouraged agents, brokers, and potential buyers from working with or transacting with Pacaso, harming its business relationships, reputation, and future development. Defendants moved to strike that claim under California’s anti-SLAPP statute, which provides an early procedure for striking claims based on protected speech or petitioning activity.

Analysis

The court applied the anti-SLAPP statute’s two-step test. First, defendants had to show that Pacaso’s claim arose from protected activity. The court held that the March 2021 letter was made in connection with an issue under consideration by a legislative body: the scope and possible application of St. Helena’s timeshare ordinance to fractional ownership of residential property. Because Pacaso’s interference claim was based on the letter itself, the court found that defendants met the first step.

Second, Pacaso had to show a reasonable probability of prevailing on the claim. The court held that Pacaso could not do so because the letter was protected by California Civil Code section 47(a), the official-duty privilege. That privilege protects statements made by a public official while performing policy-making functions within the scope of the official’s duties. The court found that Walsh sent the letter while performing his duties as city attorney to assess and prevent potential violations of the City’s zoning ordinances. The court rejected Pacaso’s argument that sending the letter was merely an operational or ministerial act.

The court also found that limited discovery was not warranted. Pacaso had sought discovery concerning whether sending the letter was a policy-making act protected by the official-duty privilege, but the court found Pacaso’s proposed discovery too general to justify allowing it.

Disposition and Fees

The court granted defendants’ anti-SLAPP motion to strike the fifth cause of action. The court also granted defendants’ request for attorney’s fees and costs and ordered Pacaso to pay $20,126.50. The opinion states that amendment would be futile because the claim was based on privileged protected activity, but the ruling provided in the conclusion is that the motion to strike was granted and the fee amount was ordered paid.