Wednesday, April 16, 2008

Another Look At Sam Zell's Business Practices

Dianne Jacob Won’t Be Sued Into Silence

I was sued by the owner of the Los Angeles Times for speaking my mind about the business practices of one his companies, ironic because people involved in journalism are usually fierce defenders of free speech.

Sam Zell’s Manufactured Home Communities -- now operating under the name Equity Lifestyle Properties, Inc. -- owns and operates more than 300 mobile home parks in 28 states, including four parks in the district I represent.

At first, it was difficult to take Zell or his lawsuit seriously. There’s something amusing about being sued for defamation by an individual who calls himself the “grave dancer.”

Indeed, a U.S. District Court judge determined the suit had no merit and bounced it out of court.

Later, however, when Zell’s lawyers appealed the case to the 9th U.S. Circuit Court of Appeals, I came to suspect that MHC’s lawsuit wasn’t really about my negative remarks.

Today, weeks after the appeals court dismissed all but a small piece of the case against me, I am convinced that Zell is using our judicial system to bully me and intimidate those who dare question how MHC treats its customers.

In my district, Zell’s customers are my constituents. In 2002, when MHC raised their rents some 25 percent, my constituents came to me in fear. Many were fixed-income seniors petrified of losing their homes in an already tight housing market.

I did my homework and learned a great deal about the landlord behind the increase, a billionaire real estate titan with a deep disdain for bureaucracy, well known to the financial world as a "vulture investor."

Above all, I read about his company's parade of lawsuits slapped against various California municipalities to repeal rent control ordinances, including protracted cases against the cities of Santa Cruz, Santee and San Rafael.

Yet, MHC’s claims against me are different from its other lawsuits. San Diego County doesn't have a rent control ordinance and has shown no interest in pursuing one.

At issue in my case is the "provability" of three remarks I made after MHC’s rent increase was announced: that our local district attorney was interested in looking into MHC’s activities, that MHC lied about fixing a sewage leak in one of its parks and that MHC has a reputation of running people out of older mobile home parks.

This column is an overdue message to seniors in Zell-owned mobile home parks who continue to challenge his exorbitant rent increases, to ethical park owners not afraid to say, out loud, that MHC gives their industry a bad name by crossing the line between profit and plunder and to journalists who continue to cover Zell's activities in the face of hostile depositions and legal fees.

I stand behind my three remarks about Mr. Zell’s company. I'm not afraid of him or his high-priced attorneys.

What I am afraid of is the notion that I don’t have a right to publicly air my opinion of Mr. Zell's business practices. I'm doubly afraid of the message this sends to Americans like me, Americans who speak out when they believe they see wrongdoing, Americans who can't afford to use the legal system as their own personal intimidator.

If I could go back to 2002, I would add one more remark to my list of complaints against MHC. In my opinion, Zell’s company uses the court system to crush jurisdictions that stand in the way of its profits. When MHC doesn’t win on merit, the company tries to price the defendant out of the judicial process with expensive litigation. The city of San Jose, the county of San Luis Obispo and the city of Santee are intimately familiar with this tactic.

MHC’s doctrine of death-by-a-thousand-legal-appeals especially exploits the limited financial resources of cities and counties. Is it lost on Zell that by weighting down our legal system with lawsuits designed to prolong rather than to resolve, he is actually a party to the bloated bureaucracy he so despises?

Zell’s lawyers have called my comments "harmful coming from a powerful local official," and to prevail, they will need to prove that harm in court.

It’s hard for me to believe that my remarks were much of a threat to a man that Forbes lists as the 52nd richest person in America, and I’m prepared to defend my words because I don’t want others sued into silence. More than ever, I believe that MHC does bad business and, in America, I have every right to say so.

Dianne Jacob represents the Second District on the San Diego County Board of Supervisors. Her district encompasses the eastern portion of San Diego County. She said she submitted this piece to the LA Times, which declined to publish it. What do you think about what she wrote? Send your perspective to share with our readers.

Defamation suit against supervisor is revived


A federal appeals court revived a defamation claim yesterday against Supervisor Dianne Jacob and the county that is based on several critical remarks she made about a company that owns mobile-home parks.

The court ruled that Jacob's statements could not necessarily be viewed as pure opinion and therefore were not protected as free speech.

The 2-1 ruling by the 9th U.S. Circuit Court of Appeals reversed a decision by U.S. District Judge Napoleon Jones on one portion of a lawsuit brought in San Diego by MHC Inc., which owns mobile-home parks across the country.

The company sued after Jacob publicly blasted it in 2002 and 2003 over plans to increase rents at three mobile-home parks – Lamplighter Village in Spring Valley and Rancho Mesa and Rancho Valley, both outside El Cajon.

In a separate ruling, the court upheld Jones' decision tossing out the bulk of the case. But the section dealing with a series of statements made by the supervisor will return to the federal court for more hearings.

After MHC announced it was increasing rents at the three parks, Jacob criticized the company in print and on the airwaves. The court focused on three statements in particular: She said MHC had lied about fixing a sewage problem at one of the sites, that it had a reputation for driving out elderly tenants by increasing rents, and that District Attorney Bonnie Dumanis might investigate whether to bring charges against MHC.

The county sought to throw out the defamation claims, saying Jacob's words were protected under the state anti-SLAPP law. SLAPP, or Strategic Lawsuit Against Public Participation, refers to meritless lawsuits that are aimed only at chilling free speech.

Jones ruled that Jacob's statements were all statements of opinion and cannot be the basis of a legal claim. Speech that is opinion is largely insulated from defamation claims.

The appeals court disagreed. Judge Diarmuid F. O'Scannlain wrote that statements about the sewage, Dumanis and the company's reputation could be interpreted by a judge or jury as factual statements. MHC should have a chance to prove the contested statements to be false, according to the law.

But Judge Consuelo Callahan disagreed and said the statements were opinions, adding that MHC had no evidence showing they were false.

Jacob declined to comment, citing the advice of county lawyers.

“We're pleased and look forward to having our day in court,” said David Bradford, a Chicago lawyer for MHC. “The statements that were made were, from our perspective, well over the line.”

The company is now known as Equity Lifestyle Property, and its major shareholder is Sam Zell, the new chairman and chief executive of Tribune Co., which owns the Chicago Tribune and Los Angeles Times.

Senior Deputy County Counsel William Johnson said the county was weighing its next step.

“We're disappointed two of the three judges decided this little piece of the case had to go on,” he said. “We're heartened (that) in the rest of the case, our position was vindicated.”

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