Seiller Waterman, LLC v. Bardstown Capital Corp.

643 S.W.3d 68

SEILLER WATERMAN, LLC; Bill V. Seiller; Terry Mauney; Phillip Stewart; Bettie Stewart; Elzie Watson; and Bridgette Watson, Appellants

v.BARDSTOWN CAPITAL CORPORATION and Frank Csapo, Appellees

2020-SC-0312-DG

Supreme Court of Kentucky.

MARCH 24, 2022

COUNSEL FOR APPELLANTS, SEILLER WATERMAN, LLC, and BILL V. SEILLER : Donald Kenneth Brown, Jr., James Patrick Grohmann, O'Bryan, Brown & Toner, PLLC, Louisville.

COUNSEL FOR APPELLANTS, TERRY MAUNEY; PHILLIP STEWART ; BETTIE STEWART; ELZIE WATSON; and BRIDGETTE WATSON: Stephen T. Porter, Louisville.

COUNSEL FOR APPELLEES: Hans George Poppe, Jr., Kirk A. Laughlin, The Poppe Law Firm, Lousville.

OPINION OF THE COURT BY JUSTICE HUGHES

Bardstown Capital Corporation sought to develop Jefferson County residential property into a commercial center, including a mixture of retail, restaurant and office uses. Neighboring homeowners opposed the development, expressing concerns with respect to noise, drainage, and increased automobile traffic. The proposed development was ultimately approved, and the homeowners initiated an appeal of the rezoning ordinance in Jefferson Circuit Court pursuant to Kentucky Revised Statute (KRS) 100.347(3), contesting it on several grounds including the adequacy of notice of the various zoning hearings. After the neighboring homeowners’ unsuccessful zoning appeal, Bardstown Capital filed a complaint against them and their attorneys for wrongful use of civil proceedings and abuse of process.

In granting the homeowners’ motion for summary judgment, the Jefferson Circuit Court determined that the homeowners were entitled to immunity under the Noerr - Pennington doctrine,¹ which protects an individual's right to petition the government for grievances. The Court of Appeals agreed the Noerr - Pennington doctrine applied but applied the "sham" exception to that doctrine to reverse the trial court, holding that a fact-finder must determine the legitimacy of the homeowners’ underlying appeal. On discretionary review, we reverse the Court of Appeals’ holding that summary judgment was improper and remand to the trial court for reinstatement of summary judgment in favor of the homeowners and their attorneys.

FACTS AND PROCEDURAL HISTORY

In 2008 Bardstown Capital Corporation began planning for the development of approximately 43.5 acres of property in southeast Louisville at the intersection of Bardstown Road and Interstate 265. When complete, the proposed development would become an entertainment and shopping center, including a movie theater and retail and restaurant spaces. In August 2009 Bardstown Capital filed an application with Louisville Metro Planning and Design Services requesting a change in zoning of the property from residential to commercial and the approval of its general development plan. Several homeowners on Wingfield Road, which directly adjoins the proposed development site, opposed the zoning change. The homeowners expressed concerns about the impact of such a development, particularly with respect to noise, drainage, and increased automobile traffic, given the close proximity of the development to their homes. Louisville Metro Planning and Design Services scheduled a public hearing on February 4, 2010.² Statutorily-required notice was mailed to the adjoining homeowners and posted on and around the property. A notification of the February 4 hearing was also published in The Courier-Journal.

On February 4, no witnesses were called, no exhibits were presented, and no arguments on either side of the proposed zoning change were advanced. In short, no hearing was held. Instead, the Louisville Metro Planning Commission (Commission) announced that the public hearing was continued to March 4, 2010, but no additional notice of the rescheduled hearing was provided. At the March 4 hearing, three hours of public testimony and evidence was received. At that time, the Commission announced a continuance to March 18. After several additional continuances, five and one-half hours of evidence and testimony was eventually heard on May 20, 2010. On that date the Commission unanimously recommended approval of the zoning change and development plan. The Commission forwarded its extensive written recommendation to the Louisville Metro Council which then passed an ordinance approving the zoning change.

On August 26, 2010, the neighboring homeowners, represented by Seiller Waterman, filed a complaint in Jefferson Circuit Court pursuant to KRS 100.347 contesting the Commission's recommendation to approve the zoning change. The homeowners alleged, among other things, a lack of adequate notice in violation of their due process rights. The appeal sought no damages—it only requested notice and an opportunity to be heard.

A lengthy period of discovery and motion practice ensued and approximately three years later, the homeowners and Bardstown Capital each filed motions for summary judgment. After hearing oral arguments, the trial court granted summary judgment in favor of Bardstown Capital, holding that KRS Chapter 100 provides no support for the homeowners’ position that they were entitled to additional written notices of continued hearing dates. The trial court identified the many ways in which there had been notice of the February 4, 2010 hearing but did not explicitly address the fact that no hearing actually occurred on February 4.³ The Court of Appeals affirmed the trial court. Mauney v. Louisville Metro Council , 2014-CA-000263-MR, 2016 WL 4255017, *1 (Ky. App. Aug. 12, 2016). The appellate court found sufficient proof in the record to conclude that adequate notice of the February 4 hearing was provided. The homeowners did not seek discretionary review by this Court.

On November 4, 2016, three months after the Court of Appeals’ decision, Bardstown Capital filed a complaint against the neighboring homeowners and Seiller Waterman claiming that the 2010 action constituted a wrongful use of civil proceedings.⁴ The complaint alleged that Bardstown Capital offered to purchase the homeowners’ properties for fair market value, which they rejected. Bardstown Capital claimed that the homeowners’ attorney, Bill Seiller, approached counsel for Bardstown Capital and stated their intent to appeal the rezoning approval in order to induce Bardstown Capital to buy the homeowners’ properties for a higher price. In addition, Bardstown Capital claimed substantial damages because of undue delay, including lost profits in excess of $12 million and approximately $74,000 in legal fees. In an amended complaint filed in February 2017, Bardstown Capital added allegations of abuse of process and malicious prosecution.⁵

On August 31, 2017 the trial court dismissed Bardstown Capital's claim for abuse of process based on the statute of limitations because Bardstown Capital did not file the claim within one year of the cause of action accruing. In July 2018, Seiller Waterman and the homeowners amended their answer to assert that Bardstown Capital's complaint was barred by the Noerr - Pennington doctrine, the First Amendment to the United States Constitution and Section 1 of the Kentucky Constitution.⁶

Based on the defenses asserted in the answer, Seiller Waterman and the homeowners moved for summary judgment on the sole remaining claim, wrongful use of civil proceedings, on August 21, 2018. In response, Bardstown Capital argued that the Noerr - Pennington doctrine is inapplicable because zoning rights are statutory, not constitutional. Bardstown Capital asserted that the homeowners initiated the zoning appeal to obtain a price above fair market value for their properties.

On November 28, 2018, the trial court granted summary judgment in favor of Seiller Waterman and the homeowners.

The trial court determined that the Noerr - Pennington doctrine applies and the fact that the bulk of the evidentiary hearing was held without fresh notice conferred a reasonable basis for appeal. Applying Grand Communities, Ltd. v. Stepner , 170 S.W.3d 411 (Ky. App. 2004), a zoning case in which the Court of Appeals applied the Noerr - Pennington doctrine, the trial court reasoned that the homeowners’ motive in filing the appeal was irrelevant. On appeal to the Court of Appeals, Bardstown Capital again argued that the Noerr - Pennington doctrine is inapplicable and that the trial court erred in dismissing its abuse of process claim.

The Court of Appeals affirmed the dismissal of the abuse of process claim and reversed the summary judgment.⁷ The Court of Appeals agreed with the Stepner court's adoption of the Noerr - Pennington doctrine in zoning actions but held that the application of the doctrine's "sham" exception should be determined by a fact-finder. An action is a sham under the Noerr - Pennington doctrine if it is objectively baseless and the subjective intent of the petitioning party was to inhibit competition, not to seek redress from the government. Pro. Real Est. Inv., Inc. v. Columbia Pictures Indus., Inc. (PRE) , 508 U.S. 49, 55, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993).

Having granted discretionary review, heard oral arguments, and carefully considered the record, we reverse the Court of Appeals’ decision and remand to the trial court for reinstatement of the summary judgment.

ANALYSIS

The primary issue before us is the applicability of the Noerr - Pennington doctrine in zoning litigation. On appeal, we review a summary judgment de novo. Shelton v. Ky. Easter Seals Soc'y, Inc. , 413 S.W.3d 901, 905 (Ky. 2013). We must consider whether the trial court "correctly determined that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law." Fluke Corp. v. LeMaster , 306 S.W.3d 55, 59 (Ky. 2010) (citation omitted). To defeat summary judgment, Bardstown Capital must have presented affirmative evidence that a genuine issue of material fact exists. Steelvest, Inc. v. Scansteel Serv. Ctr., Inc. , 807 S.W.2d 476, 480 (Ky. 1991).

Seiller Waterman and...