Opinion
NO. CS-01-0127-EFS
March 23, 2004
ORDER GRANTING RPS DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT ON THE CITY OF SPOKANE'S NINTH AND TENTH CROSS CLAIMS
On February 27, 2004, the Court conducted a motion hearing in the above-captioned matter. The Court considered RPS Defendants' Motion for Summary Judgment on City of Spokane's Ninth Cross Claim, (Ct. Rec. 1130), and Motion for Summary Judgment on City of Spokane's Tenth Cross Claim, (Ct. Rec. 1133). Eric Stahl appeared for the RPS Defendants and Laurel Siddoway appeared for the City of Spokane. Other Counsel were present as reflected in the Court's Minutes, (Ct. Rec. 1568). After reviewing the motions, memoranda, accompanying submissions, and applicable case law, the Court was fully informed. At the hearing the Court granted the RPS Defendants' Motions for Summary Judgment on the City of Spokane's Ninth and Tenth Cross Claims. This order memorializes and supplement's the Court's oral rulings.
I. CITY OF SPOKANE'S NINTH CROSS-CLAIM
A. PROCEDURAL HISTORYOn April 15, 2002, the Court issued a written order dismissing the City of Spokane's (the "City") Seventh Claim for Relief which alleged the RPS Defendants had a fiduciary or quasi-fiduciary duty to disclose several material facts regarding the risks associated with the RPS transaction, (Ct. Rec. 289). The Court held, in pertinent part:
The existence of a fiduciary duty is a question of law. Miller v. U.S. Bank of Washington, 72 Wash. App. 416, 426 (1994). A fiduciary relationship exists where there is a relationship of confidence and trust that justifies one party to expect that his interests will be protected by the other party. Liebergesell v. Evans, 93 Wn.2d 881, 889-91 (1980). In the absence of such a duty, no heightened disclosure obligations exists. Tokarz v. Frontier Fed. Sav. Loan Assoc., 33 Wash. App. 456, 463-64 (1982). Here, the City has alleged no facts supporting the existence of such a relationship. The City has alleged that heightened disclosure obligations existed because public monies were involved. (Ct. Rec. 6 at ¶ 2.53.) The Court has been unable to find support for this assertion in law. Unless some special relationship existed between the City and the Developers, no heightened duty to disclose existed. Tokarz, 33 Wash. App. at 463-64. The theory of an integrated transaction, which is grounded in contract, imposes no heightened disclosure requirements. Developer's motion to dismiss the City's Seventh Cross-Claim, for "Breach of Duties of `Public/Private Partner'" is granted.
(Ct. Rec. 289 at 5-6).
On August 20, 2002, the Court considered the City of Spokane's Motion to Amend, (Ct. Rec. 370). The City attempted to plead additional facts that would allow its Answer to be amended to include a claim for Breach of Fiduciary or Quasi-Fiduciary duty. The RPS Defendants' argued such an amendment would be fufile based upon the Court's April 15, 2002, order. The Court disagreed and permitted the City to amend its Answer to include a claim for Breach of Fiduciary or Quasi-Fiduciary duty against the RPS Defendants. The August 20, 2002, order reads, in pertinent part:
The City alleges that the repeated characterizations of this transaction by the Developers as a "public/private partnership" impose greater duties of disclosure upon it. Neither the parties nor the Court have identified any authority supporting this position. Typically, "public-private partnership" is a slogan used to generate support for a project which involves expenditure of public monies in conjunction with private investment, such as the revitalization of an older commercial center for a city. While a public entity and a private entity may enter a legally enforceable relationship in a written agreement, which could impose fiduciary obligations on the parties, the City of Spokane and the Developers did not create such a relationship here.
However, it is possible for parties who label their dealings as a "public/private partnership" to conduct themselves in such a way as to create a quasi-fiduciary relationship with a duty to disclose all material facts. A quasi-fiduciary relationship creates a duty to disclose where (1) a special relationship of trust and confidence has been developed between the parties, (2) one party is relying upon the superior specialized knowledge and experience of the other, (3) a seller has knowledge of a material fact not easily discoverable by the buyer, or (4) a statutory duty to disclose exists. Colonial Imports, Inc., v. Carlton N.W., 121 Wn.2d 726, 732 (1993). This Court previously dismissed the City's claim that a relationship of trust and confidence existed. The new factual allegations do not change that conclusion. See Micro Enhancement Int'l, Inc. v. Coopers Lybrand, LLP, 110 Wash. App. 412, 435 (2002) (holding that the fact that one party trusted and had confidence in the other party was insufficient). In addition, the City has not pled a statutory duty to disclose.
The proposed claim alleges that "the Developers were experienced in the ownership and operation of an urban retail mall with adjacent paid parking and, . . . had exclusive dealings with the prospective retail tenants, including Nordstrom and AMC, about the terms on which retail patrons would use the parking garage." (Ct. Rec. 370 Att. ¶ 2.100.) Further, the City alleges "[the Developers represented] that they had done market research that established that the RPS mall would be `hot' and `exciting' and `knock your socks off,' and that such market research suggested that Walker's projections of parking revenue would be met." ( Id. at ¶ 2.103.) Finally, the City alleges that it "was relying upon the Developers' superior knowledge in the area of retail development and their exclusive knowledge of the understandings and expectations of Nordstrom, AMC and other retailers about the terms on which their retail patrons would use the Parking Garage." (Id. at ¶ 2.111.)
The only Washington case interpreting superior knowledge, Hutson v. Wenatchee Federal Savings and Loan Association, 22 Wash. App, 91, 105 (1978), imposed a duty to disclose upon a lender when dealing with "unknowledgeable and uncounseled customers, members of the general lay public who rely on the lender's advice." Id. While this rationale may be distinguishable here, as the City of Spokane is a sophisticated party represented by several attorneys throughout the Parking Garage transaction and not a member of the lay public, the Court cannot find that the allegations, if proven, would be legally insufficient. The City has identified specialized knowledge the Developers possessed and alleged that it relied on that knowledge. The Developer's principal argument, that the City could not have reasonably relied upon their statements due to its size, resources and in-house legal department, is a factual defense, appropriate for resolution at the summary judgment or trial stage rather than on the pleadings. Therefore, the Court finds that the City has adequately alleged the existence of a quasi-fiduciary duty to disclose, and leave to include the breach of quasi-fiduciary duty claim should be granted.
Alternatively, a duty to disclose can arise "where the facts are peculiarly within the knowledge of one person and could not be readily obtained by the other. . . . However, a party cannot be permitted to say that he was taken advantage of, if he had means of acquiring the information. . . ." Oates v. Taylor, 31 Wn.2d 898, 904 (1948). The City has alleged the necessary facts to support such a duty — "[the Developers had] exclusive dealings with the prospective retail tenants, including Nordstrom and AMC, about the terms on which retail patrons would use the parking garage." (Ct. Rec. 370 Att. ¶ 2.100.) Further, the City identifies three items the Developers failed to disclose that fit within those exclusive dealings: "AMC's expectations and/or perceived need for free or low-cost parking for its theater patrons, (5) . . . information concerning the unlikelihood of retailer or third party subsidization of a validation program, particularly at the parking volumes projected by Walker, and (6) . . . the nature of the dispute arising with AMC or the terms of its resolution." ( Id. at ¶ 2.115.) Opposing this claim, the Developers argue that the City could easily have ascertained all these facts. Their assertion is a factual defense, appropriate for resolution at the summary judgment or trial stage rather than on the pleadings.
The Developers also oppose the City of Spokane's motion to add a misrepresentation claim because justifiable reliance is a necessary element. Again, the Developers argue that "[e]very fact alleged by the City as being justifiably relied upon could easily have been ascertained by it." (Ct. Rec. 386 at 10 11. 10-11.) As before, this is a factual defense, not appropriately raised at this juncture. The Court finds that the City has adequately pled a claim for misrepresentation, and leave to amend is therefore granted.
(Ct. Rec. 442, at 5-9). Thus, the Court held the City of Spokane had satisfied the pleading requirements in alleging it relied upon the superior specialized knowledge and experience of the RPS Defendants and that the Developers had knowledge of a material fact not easily discoverable by the City of Spokane. Colonial Imports, Inc. v. Carlton N.W., 121 Wn.2d 726, 732 (1993). The Court further reaffirmed its earlier holding that no special relationship of trust and confidence existed between the parties and that no statutory duty to disclose existed. Id.
On November 21, 2003, the RPS Defendants' filed a Motion for Summary Judgment on City of Spokane's Ninth-Cross Claim, (Ct. Rec. 1130). In their motion, the RPS Defendants' argue inter alia the City has failed to substantiate their allegations with sufficient proof that the RPS Defendants possessed superior specialized knowledge and experience or were aware of material facts not easily discoverable.
On December 22, 2003, the City of Spokane filed a Motion for Sanctions Against the RPS Developer for Failure to Comply with Discovery Order, (Ct. Rec. 1249). In their motion, the City alleged that the RPS Defendants failed to comply with the Court's August 25, 2003, discovery order. Specifically, the City was not provided with requested documents necessary for the completion of their opposition to the RPS Defendants' Motion for Summary Judgment on the City of Spokane's Ninth Cross Claim, (Ct. Rec. 1130), and Tenth Cross Claim, (Ct. Rec. 1133). The City argued it had not received requested documents related to the negotiations between the RPS Defendants and potential tenants that ultimately decided not to rent space within the RPS facility. The City claimed that the details of the negotiations could shed light on the alleged superior specialized knowledge and experience of the RPS Defendants and that the Developers had knowledge of a material fact not easily discoverable by the City
On January 6, 2004, the RPS Defendants filed a Response and Opposition to City of Spokane's Motion for Sanctions Against the RPS Developer for Failure to Comply with Discovery Order, (Ct. Rec. 1306). The RPS Defendants admitted an inadvertent copying error caused the delay and stated the requested materials were delivered on December 30, 2003. On January 21, 2004, the Court issued an order, (Ct. Rec. 1389, which granted in part and denied in part the City's Motion for Sanctions. Specifically, the Court declined to strike the Motions for Summary Judgment or to impose sanctions. Rather, the Court required a certification of the records provided and implemented a revised briefing schedule to accommodate resetting oral argument from January 28, 2004, to February 27, 2004.
B. STANDARD FOR SUMMARY JUDGMENT
Summary judgment will be granted if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. Civ. P. 56(c). When considering a motion for summary judgment, a court may not weigh the evidence nor assess credibility; instead, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A genuine issue for trial exists only if "the evidence is such that a reasonable jury could return a verdict" for the party opposing summary judgment. Id. at 248. In other words, issues of fact are not material and do not preclude summary judgment unless they "might affect the outcome of the suit under the governing law." Id. There is no genuine issue for trial if the evidence favoring the non-movant is "merely colorable" or "not significantly probative." Id. at 249.
If the party requesting summary judgment demonstrates the absence of a genuine material fact, the party opposing summary judgment "may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial" or judgment may be granted as a matter of law. Anderson, 477 U.S. at 248. This requires the party opposing summary judgment to present or identify in the record evidence sufficient to establish the existence of any challenged element that is essential to that party's case and for which that party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Failure to contradict the moving party's facts with counter affidavits or other responsive materials may result in the entry of summary judgment if the party requesting summary judgment is otherwise entitled to judgment as a matter of law. See Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996).
C. DISCUSSION
The issue before the Court is whether the City of Spokane has provided enough evidence on its claim for breach of fiduciary or quasi-fiduciary duty to stave off the RPS Defendants' Motion for Summary Judgment. The Court previously held:
A quasi-fiduciary relationship creates a duty to disclose where (1) a special relationship of trust and confidence has been developed between the parties, (2) one party is relying upon the superior specialized knowledge and experience of the other, (3) a seller has knowledge of a material fact not easily discoverable by the buyer, or (4) a statutory duty to disclose exists. Colonial Imports, Inc. v. Carlton N.W., 121 Wn.2d 726, 732 (1993).
(Ct. Rec. 442, at 6). In addition, the Court previously held that no special relationship of trust and confidence existed between the parties and that no statutory duty to disclose existed. Accordingly, the City must establish material issues of disputed fact exist as to whether it relied upon the superior specialized knowledge and experience of the RPS Defendants or that the Developers had knowledge of a material fact not easily discoverable by the City of Spokane.
The Court finds the City has failed to produce sufficient evidence to demonstrate the existence of a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The City has not provided credible evidence that raises a triable issue as to whether it relied upon the superior specialized knowledge and experience of the RPS Defendants or that the Developers had knowledge of a material fact not easily discoverable by the City of Spokane. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Indeed, the Spokane City Council members in office at the time of the RPS transaction unanimously testified in their depositions that they did not rely upon the RPS Defendants. Similarly, the Court is equally persuaded that there has been an insufficient showing that the RPS Defendants possessed knowledge of material facts not easily discoverable by the City. Accordingly, summary judgment on the City of Spokane's Ninth Cross Claim is appropriate.
II. CITY OF SPOKANE'S TENTH CROSS-CLAIM
The City argues in its tenth cross claim that the RPS Defendants fraudulently induced the Spokane City Council to adopt legislation approving the City's participation in the RPS project. In Sfiley v. Block, 130 Wn.2d 486 (1996), the Supreme Court of Washington announced a nine-part test for fraud. The Plaintiffs must prove the following to prevail at trial: (1) representation of an existing fact; (2) materiality; (3) falsity; (4) RPS Defendants (as speakers) knew of its falsity; (5) RPS Defendants' intent that the Plaintiffs act upon the representation; (6) Plaintiffs' ignorance of its falsity; (7) the Plaintiffs' reliance on its truth; (8) the Plaintiffs' right to rely on the representation; and (9) damages suffered by the Plaintiffs, Id at 505.
The Court identified the applicable summary judgment rules above and will apply the same standard to the City's tenth cross claim.
Previously, the Court found that the City had failed to meet its Celotex burden on the issue of reliance in regards to the ninth cross claim for breach of fiduciary or quasi-fiduciary duty. The Court finds that reliance is an element of the tenth cross claim for fraud and that the City must satisfy its burden to allow the cross claim to proceed to trial. For the same reasons summary judgment on the City's Ninth Cross Claim is appropriate, the RPS Defendants Motion for Summary Judgment on the City's Tenth Cross Claim is granted. Accordingly, for the reasons stated on the record and herein,
The Court is also persuaded the statements made by the RPS Defendants in urging the Spokane City Council to accept the RPS project are constitutionally protected. Since elaboration on this alternative holding is not required given the Court's ruling on the reliance issue, the Court will not address the Noerr-Pennington defense in detail.
IT IS HEREBY ORDERED:
1. RPS Defendants' Motion for Summary Judgment on City of Spokane's Ninth Cross Claim, (Ct. Rec. 1130), is GRANTED.
2. RPS Defendants' Motion for Summary Judgment on City of Spokane's Tenth Cross Claim, (Ct. Rec. 1133), is GRANTED.
IT IS SO ORDERED.
The District Court Executive is directed to enter this Order and to furnish copies to counsel.