Graft in Awards of Solid Waste Franchises – How Shocking

A monthly feature, exclusive to NCRA News, from NCRA general counsel and Board member John Moore, concerning recent legal decisions relating in some manner to Zero Waste.

On May 30, 2014, the California Court of Appeal, Second Appellate District, decided an interesting case involving the intersection between the award of a solid waste franchise and the prospective franchisee’s financial contributions to a city two elected officials who would vote to approve the franchise. The case involved the City of Montebello and Arakelian Enterprises, Inc. dba Athens Services (Athens) that had an exclusive contract to provide residential waste hauling services in Montebello since 1962. While the underlying lawsuit filed by the City addressed whether the city officials had violated Government Code Section 1090’s prohibition against city officers being “”financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.” the appeal addressed whether the City’s lawsuit was subject to anti-SLAPP protections. The City also sought an order requiring any appellants found to be financially interested in the Athens contract to disgorge to the City any money they received from Athens. Athens’ executive vice president declared Athens made no promise to contribute to any city council members in exchange for their votes.

Sometime in 2007, while running for city council, Robert Urteaga approached Athens and suggested it submit a proposal to the city council to become the exclusive commercial and industrial waste hauling service in Montebello, in addition to being the City’s exclusive residential waste hauling service. Athens later contributed to Urteaga’s campaign, and he was elected to the city council.

In 2008, Richard Torres, the City Administrator, worked with Athens to negotiate the terms of an exclusive contract, under which Athens would provide improved residential trash hauling services at no increased price and also become the exclusive commercial and industrial waste hauling service beginning in 2016. In exchange for this exclusivity, Athens agreed to make a one-time $500,000 cash payment to the City.

Athens’ proposal was addressed at a city council meeting on July 23, 2008. In a 3-2 vote, Councilmembers Rosemarie Vasquez, Urteaga, and Kathy Salazar voted in favor of the contract and the mayor and another council member against it.

Vasquez ran for reelection in November 2009 and Athens contributed $45,000 to her campaign. She was not reelected. Athens also contributed $37,300 to efforts to defeat the mayor’s reelection campaign, but the mayor was reelected. After the November 2009 election, City voters qualified a special election to recall Urteaga and Salazar. Athens sponsored a “Say No to Recall” campaign to which it contributed $353,912.73. The campaign was unsuccessful, and both Urteaga and Salazar were recalled.

Once approved, the contract required the mayor’s signature to effectuate it. The mayor, however, refused to sign the contract for over six weeks, stating he was attempting to verify its terms and ascertain the legal effect of a pending referendum effort by independent waste haulers in opposition to the Athens contract. On September 12, 2008, the contract was still awaiting the mayor’s signature. Vasquez then signed the contract as Montebello’s mayor pro. tem., stating she was authorized to do so because the mayor’s refusal to execute the contract rendered him “absent” for purposes of the agreement.

Under California law (Code of Civil Procedure Section 425.16), a lawsuit “brought primarily to chill the valid exercise of constitutional rights of freedom of speech and petition for the redress of grievances” can be stricken on motion. Once the motion is filed, all action on the main case stops until the motion is decided and any appeal from such decision is also decided. This “stay” action invites SLAPP motions intended to delay the underlying suit. Now that the appeal is decided, the City’s lawsuit may proceed.

As the Court of Appeal correctly observed, in evaluating an anti-SLAPP motion, it must conduct a two-step analysis. First, it must decide whether the defendant “has made a threshold showing that the challenged cause of action arises from protected activity.” (Taheri Law Group v. Evans (2008) 160 Cal.App.4th 482, 488.) For this purpose, protected activity “includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.” (§ 425.16, subd. (e).)

Second, if the defendant makes this threshold showing, the Court decides whether the plaintiff “has demonstrated a probability of prevailing on the claim.” (Taheri Law Group v. Evans, supra, 160 Cal.App.4th at p. 488.) Only a cause of action that satisfies both prongs of the anti-SLAPP statute–i.e., that arises from protected speech or petitioning and lacks even minimal merit–is a SLAPP, subject to being stricken under the statute.

The defendant city officers argued that their conduct in connection with the Athens franchise was protected speech. The Court disagreed, citing Supreme Court precedent to the effect, “A legislator’s vote and “acts of governance mandated by law, without more, are not exercises of free speech or petition. The Supreme Court reasoned that because a legislator casts his vote as a political representative executing the legislative process on behalf of his constituents, he has no personal right in his vote. A legislator’s act of voting is therefore “conduct engaged in for an independent governmental purpose,” not an act of communication conveying the legislator’s personal message.

With this skirmish out of the way, the Los Angeles County Superior Court may now decide how much financial contribution by a prospective franchisee to a city officer or elected is too much.