In an April 15 opinion, the California Court of Appeal decided that a builder cannot use the anti-SLAPP statute to circumvent fraud-based claims where there were misrepresentations by the builder to the homeowners association regarding repairs for defects at the project.

According to the opinion in Talega Maintenance Corp. v. Standard Pacific Corp., two builders developed a planned community in San Clemente, Calif., that included several hiking trails adjacent to the project. After heavy rains, the trails failed in 2005 and in 2010.

The HOA sued three former employees of the developers. These employees were appointed by the developers to be members of the HOA board of directors at various times since 2003. The HOA claimed that these employee-defendants committed fraud and negligence and that they breached their fiduciary duties as board members.

After the trails failed in 2005, the employee-defendants represented in board meetings that the HOA, rather than the builders, was responsible for making and paying for the repairs.  The HOA submitted evidence that the builders’ representations were accepted without question and that HOA funds were used to effectuate repairs. When the trails failed again in 2010, the board formed an independent board without any builder board members, and hired its own consultants to investigate the causes.That investigation revealed that the builders never completed the trails and that the builders were bound to perform the repairs forever, based on relevant documentation.

In response to the HOA claims, the defendants filed anti-SLAPP motions to target the causes of action for fraud, negligence, and breach of fiduciary duty. The defense took the position that the statements at the HOA meetings were made in a public place or forum in connection with an issue of public interest, which protects them from suit under California Code of Civil Procedure § 425.16(d)(3). The trial court denied the motions stating, “[Defendants] failed to establish that any statements were an exercise of free speech. Additionally, [defendants] failed to establish that statements at issue were made before, or in connection with, an official proceeding authorized by law. Moreover, even if the statements were made in a public forum via a [homeowners association] open board meeting, [defendants] have not demonstrated that they involved a matter of sufficient public interest or an exercise of a free speech right.”

The case did not discuss whether the HOA could rely on the builders’ representations, but rather focused on the applicability of the anti-SLAPP statute.