A Trio of California Cases Impact Owners of Real Property
[Originally published in The Wendel Report, The Environmental & Real Estate Update, Winter 2010]
This summer, state appellate courts issued several interesting decisions affecting those who own or lease property in California. Below is a brief summary of several of the key decisions.
THRIFTY PAYLESS: The Lease Means What It Says
In a case decided in June, the California Court of Appeal in Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th 1050 held that a lease with a mutual termination right (triggered by the lease not commencing by a specified date) was valid. In the case, the landlord was to use reasonable efforts to obtain approval for the construction of a retail drug store project for Rite Aid on Pacific Coast Highway in Newport Beach. The lease provided that if it had not commenced by June 30, 2008, either the landlord or the tenant could terminate the lease. The landlord was unable to obtain the necessary approvals and following much discussion and some litigation, the landlord terminated the lease. The tenant sued on the grounds that the mutual termination right was not originally intended by the parties, the covenant of good faith and fair dealing prohibited landlord from exercising the termination right and a contract containing a termination right was illusory. The Court of Appeal rejected all of the tenant’s arguments concluding that the lease “meant what it said.” Although not a surprising result, the case does reinforce the concept that parties agreeing to termination rights in leases should treat the rights very seriously.
RALPHS GROCERY: Private Property Is Private
In a case decided in July, the California Court of Appeal in Ralphs Grocery Co. v. United Food and Commercial Workers Union Local 8 (2010) 186 Cal.App.4th 1078 held that Ralphs Grocery was entitled to obtain a preliminary injunction that prohibited picketing on Ralphs’ property. In the Ralphs case, the United Food and Commercial Workers Union picketed in front of a Foods Co. grocery store owned by Ralphs. Ralphs informed the union that the store had rules prohibiting protests within 20 feet of the store entrance and banning all protests and demonstrations during specified hours. After the union ignored the store rules, Ralphs sought an injunction preventing picketing in front of the store. The trial court denied issuing the injunction on the grounds that the Moscone Act (Code Civ. Proc. §527.3) and Labor Code §1138.1 limited the court’s ability to grant an injunction in labor disputes. The Court of Appeal reversed, invalidating both statutes on constitutional grounds and holding that Ralphs (as a private property owner) could prohibit picketing and other speech on its own private property. In reaching its decision, the Court of Appeal relied on the distinction between free speech rights in shopping center common areas and in individual retail stores. Under a long line of California cases, free speech rights under the California Constitution are protected in common areas of shopping centers, even though privately owned (since they are a “public forum” for speech). However, entrance areas and aprons of large retail stores (even if part of a larger retail development) are not a “public” forum – therefore, owners are able to restrict free speech rights in these areas and exclude persons from trespassing on private property. While the Ralphs case reaffirmed the concept that owners can prohibit others from expressing free speech rights on certain “private” property, the case did not further clarify the line between what constitutes “private” property (where speech can be prohibited) and what is a “public forum” on private property (where speech is protected) – see further explanation in the Snatchko case below.
SNATCHKO: A “Public” Forum on Private Property
In the third case, Snatchko v. Westfield LLC (2010) 187 Cal.App.4th 469, modified 2010 DJDAR 14170 (September 3, 2010), the California Court of Appeal (in an opinion authored by recently-appointed Supreme Court Chief Justice Tani Cantil-Sakauye) held that rules prohibiting certain free speech rights in a mall’s common areas violated the California Constitution. In the case, a youth pastor, Matthew Snatchko, sought to discuss his religious views with shoppers in the common area of the Roseville Galleria near Sacramento. The mall’s operator, Westfield, ordered him to stop, citing mall rules requiring him to obtain permission from the mall. One important fact was that the mall did have exceptions from the permitting requirement for commercial activities sponsored by the mall and mall tenants. The Court of Appeal began its analysis by determining that the common area of the Galleria qualified as a “public” forum where persons had free speech rights. In doing so, the Court of Appeal relied on a line of cases dating back to the 1970s (and specifically, Robins v. Pruneyard Shopping Center (1979) 23 Cal.3d 899, that held that the California Constitution protects the right of free speech, reasonably exercised, in a common area of a privately-owned shopping mall, even though the United States Constitution does not guaranty that right. The Court then held the Roseville Galleria’s rules were invalid as they were content-based (i.e., favoring one type of speech over another), not narrowly tailored and no sufficient compelling interest existed. While a shopping center can have narrowly tailored rules, providing ample alternatives of communication that are content-neutral regulation of time, place and manner of speech, the Court of Appeal concluded that the Roseville Galleria’s rules did not meet these standards. While the Snatchko case did not break much new ground, the case serves as an important reminder for mall operators that mall common area rules will need to be thoughtfully prepared and consistently enforced to have any chance of surviving court scrutiny.