Blk III, LLC v. Skelton

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

BLK III, LLC, Plaintiff/Appellant,

v.

LUKE J. SKELTON, et al., Defendants/Appellees.

No. 1 CA-CV 20-0654
FILED 2-17-2022

Appeal from the Superior Court in Maricopa County
No. CV 2019-56300
The Honorable Andrew J. Russell, Judge

AFFIRMED

COUNSEL

Horne Slaton PLLC, Scottsdale
By Thomas C. Horne
Counsel for Plaintiff/Appellant

Jones, Skelton & Hochuli, PLC, Phoenix
By F. Richard Cannata, Jr.; Diana J. Elston; Eileen Dennis Gilbride
Counsel for Defendants/Appellees Lew

Schneider & Onofry PC, Phoenix
By Dee R. Giles
Counsel for Defendants/Appellees Skelton
Childers Hanlon & Hudson PLC, Phoenix
By Gary L. Hudson, Jr. (Hallin)
Christopher M. Hanlon, Christopher J. Bork (Sigona)
Counsel for Defendants/Appellees Hallin & Sigona

Burch & Cracchiolo PA, Phoenix
By Gregory A. Rosenthal
Counsel for Defendant/Appellee Giammarco

Matheson & Matheson PLC, Scottsdale
By David P. Matheson
Counsel for Defendants/Appellees Haas

Sanders & Parks PC, Phoenix
By Ryan P. Sandstrom, Mark G. Worischeck
Counsel for Defendants/Appellees Satterfield

Jardine Baker Hickman & Houston PLLC, Phoenix
By Bradley R. Jardine
Counsel for Defendants/Appellees McInerney

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 BLK III, LLC v. SKELTON, et al.
Opinion of the Court

OPINION

Presiding Judge Jennifer B. Campbell delivered the opinion of the Court, in
which Judge Samuel A. Thumma and Judge Maurice Portley1 joined.

C A M P B E L L, Judge:

¶1 Plaintiff BLK III, LLC (BLK) appeals from the judgment of the
superior court following the dismissal of its complaint against Luke Skelton
and other defendants (collectively, the Defendants). Because the court
correctly applied Arizona’s strategic lawsuits against public participation
(anti-SLAPP) statute, A.R.S. § 12-752, which provides a special, expedited
mechanism for addressing whether a complaint predicated on public
participation in governmental proceedings may proceed, we affirm.

BACKGROUND

¶2 In 2016, BLK began operating a dining and entertainment
business (BLK Live) that regularly featured live music. When BLK leased
the commercial space for BLK Live, it took the property subject to an
existing conditional use permit the City of Scottsdale had issued to a
previous tenant. Beyond the City’s general noise ordinance, the use permit
also prohibited noise that exceeded the “ambient noise levels consistent to
the use and character of the area.”

¶3 In 2019, BLK sued the Defendants, each of whom lives near
the BLK Live venue. BLK alleged the Defendants “conspired to
intentionally destroy” BLK Live by: (1) orchestrating a “scheme to report
false sound violations” to the Scottsdale Police Department and (2)
soliciting help from members of the Scottsdale City Council in their effort
to have BLK Live’s use permit revoked. According to BLK, the police never
substantiated any of the Defendants’ noise complaints, and many of the
complaints were made “when no live entertainment was occurring.”
Denying that it ever violated the City’s noise ordinance, BLK asserted that

1 The Honorable Maurice Portley, Retired Judge of the Court of
Appeals, Division One, has been authorized to sit in this matter pursuant
to Article 6, Section 3, of the Arizona Constitution.

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Opinion of the Court

it “was forced to” shut down BLK Live because the council “intended to
revoke” the use permit based on the Defendants’ false complaints.

¶4 The Defendants moved to dismiss the complaint pursuant to
A.R.S. § 12-752, arguing BLK filed the complaint in retaliation for the
exercise of their constitutional right to petition the government for redress.
After briefing, the superior court dismissed the complaint with prejudice
and entered a final judgment awarding the Defendants’ their attorneys’ fees
and costs. BLK timely appealed.

DISCUSSION

¶5 BLK challenges the superior court’s dismissal of its complaint.
Characterizing the Defendants’ reports of noise violations as “false” and
“fabricated,” BLK argues the Defendants were not entitled to relief under
A.R.S. § 12-752 because the statute’s special dismissal procedure safeguards
only certain, constitutionally-protected speech.

¶6 We generally review the dismissal of a complaint de novo.
Coleman v. City of Mesa, 230 Ariz. 352, 355-56, ¶¶ 7-8 (2012). But as the
Defendants point out, a motion to dismiss under A.R.S. § 12-752 is not
limited by the evidentiary constraints imposed on motions to dismiss for
failure to state a claim. See Ariz. R. Civ. P. 12(d). In fact, rather than limiting
the scope of review only to the pleadings, A.R.S. § 12-752(B) expressly
instructs a superior court to consider affidavits as part of its dismissal
analysis. Contrary to the Defendants’ contention, however, we need not
apply a deferential standard when reviewing a dismissal under A.R.S.
§ 12-752. In analogous circumstances, when matters outside a motion to
dismiss are presented to and considered by the superior court, as occurred
in this case, we review the court’s ruling under a de novo standard, and
likewise do so here. See Frey v. Stoneman, 150 Ariz. 106, 109 (1986) (“Because
evidence extrinsic to the pleadings was offered to and relied on by the trial
judge in making this decision, the motion to dismiss should have been
treated as one for summary judgment.”); State Comp. Fund v. Yellow Cab Co.
of Phoenix, 197 Ariz. 120, 122, ¶ 5 (App. 1999) (reviewing de novo a ruling
on a motion for summary judgment).

¶7 “When interpreting a statute, our primary goal is to give effect
to the legislature’s intent.” Wilks v. Manobianco, 237 Ariz. 443, 446, ¶ 8 (2015)
(citation and quotation omitted). To derive that intent, we consider the
“statutory language in view of the entire text, considering the context and
related statutes on the same subject.” Nicaise v. Sundaram, 245 Ariz. 566, 568,
¶ 11 (2019). “If the language is clear and unambiguous,” we follow the text

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 BLK III, LLC v. SKELTON, et al.
Opinion of the Court

as written and “need not resort to other methods of statutory construction.”
Indus. Comm’n of Ariz. v. Old Republic Ins. Co., 223 Ariz. 75, 77, ¶ 7 (App.
2009). Only if a statute is ambiguous will we examine “the statute’s history,
context, consequences, and purpose.” Wilks, 237 Ariz. at 446, ¶ 8. When
statutes relate to the same subject or the same general purpose, they
“should be read in connection with, or should be construed with other
related statutes, as though they constituted one law.” Pinal Vista Prop.,
L.L.C. v. Turnbull, 208 Ariz. 188, 190, ¶ 10 (App. 2004) (citation and
quotation omitted). Further, “each word or phrase of a statute must be
given meaning so that no part is rendered void, superfluous, contradictory
or insignificant.” Id.

¶8 In 2006, the legislature enacted A.R.S. § 12-752, which
provides an expedited mechanism for challenging a complaint predicated
on public participation in governmental proceedings. The statute states, in
relevant part:

A. In any legal action that involves a party’s exercise of the
right of petition, the defending party may file a motion to
dismiss the action under this section. When possible, the
court shall give calendar preference to an action that is
brought under this subsection and shall conduct an
expedited hearing after the motion is filed with the court
and notice of the motion has been served as provided by
court rule.

B. The court shall grant the motion unless the party against
whom the motion is made shows that the moving party’s
exercise of the right of petition did not contain any
reasonable factual support or any arguable basis in law
and that the moving party’s acts caused actual
compensable injury to the responding party. In making its
determination, the court shall consider the pleadings and
supporting and opposing affidavits stating facts on which
the liability or defense is based. At the request of the
moving party, the court shall make findings whether the
lawsuit was brought to deter or prevent the moving party
from exercising constitutional rights and is thereby
brought for an improper purpose, including to harass or
to cause unnecessary delay or needless increase in the cost
of litigation. If the court finds that the lawsuit was brought
to deter or prevent the exercise of constitutional rights or
otherwise brought for an improper purpose, the moving

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Opinion of the Court

party is encouraged to pursue additional sanctions as
provided by court rule.

¶9 By its express language, A.R.S. § 12-752 applies only to legal
actions that involve “a party’s exercise of the right of petition.” A related
statute defines the “exercise of the right of petition” as any statement that
“falls within the constitutional protection of free speech” and is: (a) “[m]ade
before or submitted to a legislative or executive body or any other
governmental proceeding”; (b) “[m]ade in connection with an issue that is
under consideration or review”; and (c) “[m]ade for the purpose of
influencing a governmental action, decision or result.” A.R.S. § 12-751(1)(a)-
(c).

¶10 To survive the Defendants’ motion to dismiss under this
statutory framework, BLK needed to: (1) allege specific facts that, if true,
proved either that the Defendants’ statements to the police and council
members did not fall within the ambit of constitutionally-protected speech
or that the Defendants did not make the statements under the
circumstances delineated in A.R.S. § 12-751(1); or (2) show that the
Defendants’ statements to the police and council members did not contain
any reasonable factual support or any arguable basis in law and that the
statements caused BLK actual compensable injury. A.R.S. § 12-752(B).

¶11 We first consider whether the Defendants’ noise complaints
to both the police and council members constituted protected speech. BLK
argues the Defendants’ noise complaints were not constitutionally
protected speech because they were defamatory. The First Amendment
enshrines the right to free speech, protecting the “uninhibited discussion of
public issues,” but the right is not absolute―“[s]ociety has a pervasive and
strong interest in preventing and redressing” defamatory speech. Milkovich
v. Lorain Journal Co., 497 U.S. 1, 22 (1990) (citation and quotation omitted).
Nonetheless, because “the expense of defending a meritless defamation
case” can have “a chilling effect on First Amendment rights,” Read v.
Phoenix Newspapers, Inc., 169 Ariz. 353, 357 (1991), “the superior court must
act as [a] gatekeeper protecting the right to free speech” from
encroachment. Sign Here Petitions LLC v. Chavez, 243 Ariz. 99, 102, ¶ 1 (App.
2017); see also Yetman v. English, 168 Ariz. 71, 79 (1991) (“Given the rigorous
scrutiny required by the first amendment,” the court must “carefully
examine every alleged defamatory statement . . . to ensure that first
amendment concerns are protected.”).

¶12 A defendant is liable for defaming a private person if he
knowingly or recklessly publishes a false and disparaging communication

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Opinion of the Court

concerning that person to a third party. Peagler v. Phoenix Newspapers, Inc.,
114 Ariz. 309, 315 (1977). A statement is not defamatory unless it is capable
of bearing a defamatory meaning.” Yetman, 168 Ariz. at 79. As a matter of
law, a statement is not actionable if it cannot reasonably be interpreted as
stating or implying facts “susceptible of being proved true or false.”
Milkovich, 497 U.S. at 21. Put simply, the plaintiff must show that the
statement is “provable as false before a defamation action can lie.” Turner
v. Devlin, 174 Ariz. 201, 205 (1993). Accordingly, “[t]he key inquiry is
whether the challenged expression, however labeled by [the] defendant,
would reasonably appear to state or imply assertions of objective fact.”
Yetman, 168 Ariz. at 76 (citation omitted).

¶13 In determining whether a statement is defamatory, the court
must consider “the impression created by the words used as well as the
general tenor of the expression, from the point of view of a reasonable
person at the time the statement was uttered and under the circumstances
it was made.” Sign Here Petitions, 243 Ariz. at 105, ¶ 21 (internal quotation
omitted). If a court determines that the publication is incapable of a
defamatory meaning, the claim is subject to dismissal. See Yetman, 168 Ariz.
at 79; see also Reynolds v. Reynolds, 231 Ariz. 313, 317-18, ¶¶ 9, 12 (App. 2013).

¶14 With these principles in mind, we consider the allegations in
BLK’s complaint, along with the declarations BLK submitted in response to
the Defendants’ motion to dismiss. According to BLK, the Defendants made
“hundreds of false sound complaints” that disparaged BLK Live and
portrayed BLK “as an unlawful business operator.” But apart from
describing the complaints as false and disparaging, BLK failed to identify
any actual statement uttered by any of the Defendants.

¶15 Under Arizona Rule of Civil Procedure (Rule) 8(a), a pleading
must give the opposing party “fair notice of the nature and basis of the
claim” by setting forth a short and plain statement that demonstrates
entitlement to relief. Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 6
(2008) (internal quotation omitted). While a court considering a motion to
dismiss must accept as true all well-pled factual allegations and reasonable
inferences, it may not speculate about hypothetical facts. Id. at 419-20, ¶¶ 7,
14. To be sure, “conclusory statements are insufficient to state a claim upon
which relief can be granted,” and “legal conclusions, without any
supporting factual allegations,” fail to satisfy Arizona’s notice pleading
standard. Id. at 419, ¶ 7. This is especially true in a defamation action
because the context and language of an allegedly defamatory statement is
crucial to the court’s analysis. See Phoenix Newspapers, Inc. v. Church, 103
Ariz. 582, 587 (1968). That is, without knowing the precise language of the

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 BLK III, LLC v. SKELTON, et al.
Opinion of the Court

statement allegedly uttered, the court cannot analyze whether the
statement is objectively verifiable as true or false―a critical question in
determining whether a defamation action may lie. Milkovich, 497 U.S. at 21;
Turner, 174 Ariz. at 205; Dube v. Likins, 216 Ariz. 406, 419, ¶ 46 (App. 2007);
Yetman, 168 Ariz. at 81 (explaining a statement is not actionable if it does
not present “the kind of empirical question a fact-finder can resolve”).

¶16 Applying these principles in the context of A.R.S. § 12-752, a
plaintiff cannot survive a motion to dismiss by baldly alleging that a
defendant made defamatory statements devoid of constitutional
protection. Instead, the plaintiff must clearly and specifically allege the
content and context of the challenged statements and why and how they
were defamatory.

¶17 Accepting as true the allegations in BLK’s complaint and the
declarations that BLK submitted in response to the motion to dismiss, it is
possible the Defendants’ noise complaints were false because live
performances at BLK Live did not exceed permitted levels or because the
complaints were about recorded (not live) music at BLK Live or about
music coming from another venue entirely. But BLK did not identify any
specific complaint the Defendants made, nor did it show why any specific
complaint was false. Instead, BLK offered broad summaries of complaints
it asserts the Defendants made, but those summaries lack the requisite
specificity to allow the court to determine that they contained objectively
verifiable statements of fact, as BLK asserts. For this reason, the superior
court properly rejected BLK’s contention that the Defendants’ noise
complaints were not constitutionally protected because they were
defamatory.2

2 BLK bore the burden of alleging specific facts that, if true, proved
that the Defendants’ statements to the police and council members were
defamatory and therefore not constitutionally protected. In response to the
Defendants’ motion to dismiss, BLK could have made the allegations of its
complaint more specific by offering affidavits “stating facts” on which its
claims were based, but it failed to do so. A.R.S. § 12-752(B).
Instead, BLK pointed to the Defendants’ declarations, but the
Defendants’ declarations do not recount the precise language used in any
specific noise complaint. Instead, the declarations generally describe the
music emanating from BLK Live as loud, recognizable, disruptive, audible
over television programming, and stress-inducing. If the content of the
Defendants’ noise complaints was limited to the descriptions set forth in

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Opinion of the Court

¶18 BLK next argues the Defendants’ noise complaints to the
police and two city council members were not protected by A.R.S. § 12-752
because they were not “[m]ade before or submitted to a legislative or
executive body or any other governmental proceeding.” A.R.S.
§ 12-751(1)(a). As defined within A.R.S. § 12-751(2), a “’[g]overnmental
proceeding’ means any proceeding, other than a judicial proceeding, by an
officer, official or body of this state and any political subdivision of this
state, including boards and commissions.”

¶19 Without explanation or legal support, BLK asserts that a
police department “is not a legislative or executive body or any other
governmental proceeding.” BLK also argues that only the city council “as a
whole” is a legislative body and individual council members are not
legislative officials to whom the Defendants could complain under the
safeguards of the anti-SLAPP statute. While there is no dispute that
statements made or submitted to an executive or legislative body during a
formal governmental proceeding satisfy A.R.S. § 12-751(1)(a), statements
made or submitted to an “officer” or “official” during “any proceeding, other
than a judicial proceeding” also fall within the statute. A.R.S.
§ 12-751(2) (emphasis added). Cf. Chamberlain v. Mathis, 151 Ariz. 551, 553,
555, 557-58 (1986) (recognizing police officers as “executive government
officials”). Applying A.R.S. § 12-751(2)’s broad definition of “governmental
proceeding” here, reports to the police and statements made to city council
members during informal community meetings (as well as a letter and
petition submitted to the City) fall within the scope of A.R.S. § 12-752’s
protection. To the extent there is any ambiguity concerning the statute’s
construction, a broad reading of A.R.S. § 12-751(1) is consistent with the
Legislature’s express purpose in enacting the anti-SLAPP provision:

It is the policy of this state that the rights of citizens and
organizations. . . to be involved and participate freely in the
process of government shall be encouraged and safeguarded
with great diligence. The information, reports, opinions,
claims, arguments and other expressions that are provided by
citizens and organizations are vital to effective law
enforcement, the operation of government, the making of
public policy and decisions and the continuation of

the declarations, the complaints were not defamatory as a matter of law.
Rather than conveying objectively verifiable facts, the Defendants’
descriptions are merely subjective statements of perception. In other words,
there is no metric for evaluating the veracity of the Defendants’
descriptions.

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 BLK III, LLC v. SKELTON, et al.
Opinion of the Court

representative democracy. The laws, courts and other
agencies of this state and its political subdivisions shall
provide the utmost protection for the free exercise of these
petition, speech and association rights.

A.R.S. § 12-751, Sec. 2(A). In fact, the Legislature expressly contemplated
that a variety of informal communications would fall under the statute’s
protection, including “distributing flyers, gathering petitions, [and] writing
letters.” Amended Senate Fact Sheet, H.B. 2440, 47th Leg., 2d Reg. Sess.
(Apr. 19, 2006). Given both the plain language of the statute and the
Legislature’s purposes in enacting it, the superior court properly found that
the Defendants’ noise complaints to the police and the two city council
members were “[m]ade . . . or submitted to a legislative or executive body
or [another] governmental proceeding.”

¶20 BLK also argues the Defendants were not exercising “the right
of petition” under A.R.S. § 12-751(1) because their statements were not
“[m]ade in connection with an issue that [was] under consideration or
review” and “for the purpose of influencing a governmental action,
decision or result.” A.R.S. § 12-751(1)(b), (c). Without disputing that its
request to amend the use permit was pending when the Defendants made
their noise complaints, BLK nonetheless contends that the noise complaints
did not pertain to an issue under the City’s consideration because the
“permit dealt with issues other than sound.” But contrary to BLK’s
contention, the use permit expressly imposes its own sound limits on the
commercial space leased for BLK Live, separate from and in addition to the
City’s sound ordinance. And there is no dispute that the Defendants made
their complaints for the purpose of persuading the City to deny BLK’s use
permit request. Therefore, the superior court properly found that the noise
complaints were an exercise of the Defendants’ right of petition under
A.R.S. § 12-751(1).

¶21 Under A.R.S. § 12-752(B), the superior court must grant a
motion to dismiss a complaint that involves a defendant’s exercise of the
right of petition unless the plaintiff shows that the defendant’s statements
(1) did not have “any reasonable factual support or any arguable basis in
law,” and (2) caused it “actual compensable injury.” A.R.S. § 12-752(B).
Here, again, the superior court properly found BLK failed to meet its
statutory burden. Although BLK argues at length that it did not violate the
City’s noise ordinance, the Defendants represented that they reported only
that BLK Live’s music disturbed the peace and enjoyment of their homes.
BLK has not negated that showing. In other words, even if BLK proved it
did not violate the sound ordinance, such evidence would not disprove the

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Opinion of the Court

content of the Defendants’ complaints that the sound coming from BLK
Live disturbed the peace and enjoyment of their homes.

¶22 Because the challenged noise complaints were an exercise of
the Defendants’ right of petition and BLK failed to demonstrate that they
lacked reasonable factual or legal support, the superior court properly
dismissed BLK’s complaint.

CONCLUSION

¶23 For the foregoing reasons, we affirm. Citing A.R.S. § 12-752,
the Defendants asks for their attorneys’ fees and costs incurred on appeal.
Pursuant to A.R.S. § 12-752(D), the court “shall award the moving party
costs and reasonable attorneys fees” if the court grants the motion to
dismiss. Having affirmed the superior court’s dismissal, we award the
Defendants their reasonable attorneys’ fees and costs incurred on appeal,
both conditioned upon compliance with ARCAP 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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