3500 Sepulveda, LLC v. RREEF America REIT II Corp. BBB, No. 18-56620 (9th Cir. 2020)
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This case arises from the parties' dispute concerning a construction project to expand the Manhattan Village Shopping Center in Manhattan Beach, California. The parties' predecessors executed the Construction, Operation and Reciprocal Easement Agreement (the COREA) in 1980. The parties resolved disputes in a Settlement Agreement in 2008 where, under the terms of the settlement agreement, RREEF agreed not to oppose Hacienda's plan to convert office space into restaurants and Hacienda agreed not to oppose RREEF's expansion project subject to certain limitations in the Agreement. At issue is RREEF's project.
The Ninth Circuit affirmed the district court's grant of summary judgment on the nuisance claim and reversed the district court as to the remaining claims. In regard to the claim for breach of contract, the panel concluded 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. In regard to the claim for interference with easement rights, the panel concluded that the Settlement Agreement does not extinguish plaintiffs' easement rights under the COREA, and the district court erred in holding otherwise. In regard to the claim for breach of the covenant of good faith and fair dealing, the panel concluded that 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." In regard to the claim for interference with business and contractual relations, the panel concluded that plaintiffs have raised triable issues concerning whether defendants' construction interfered with Hacienda's tenant contracts, and whether defendants acted with the knowledge that "interference is certain or substantially certain to occur as a result of [their] action."
The panel also reversed the district court's grant of summary judgment as to plaintiffs' request for declaratory relief. In regard to RREEF's counterclaims, the panel concluded that policy considerations weighed against applying the litigation privilege. Finally, the panel concluded that the attorneys' fee question was moot and vacated the district court's order denying the parties' motions for attorneys' fees.
Court Description: 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. 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.
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