FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

3500 SEPULVEDA, LLC, a Delaware 

limited liability company; 13TH &

CREST ASSOCIATES, LLC, a 

California limited liability company,

Plaintiffs-Counter-DefendantsAppellants,

v.

MACY’S WEST STORES, INC.,

Defendant-Appellee,

RREEF AMERICA REIT II

CORPORATION BBB, a Maryland 

corporation,

Defendant-Counter-ClaimantAppellee,

v.

6220 SPRING ASSOCIATES, LLC, a 

California limited liability company,

Counter-Defendant.

No. 18-56620

D.C. No.

2:17-cv-08537-

R-JPR
2 3500 SEPULVEDA V. RREEF AMERICA REIT II

3500 SEPULVEDA, LLC, a Delaware 

limited liability company; 13TH &

CREST ASSOCIATES, LLC, a 

California limited liability company,

Plaintiffs-Counter-DefendantsAppellees,

v.

MACY’S WEST STORES, INC.,

Defendant,

and

RREEF AMERICA REIT II

CORPORATION BBB, a Maryland 

corporation,

Defendant-Counter-ClaimantAppellant,

v.

6220 SPRING ASSOCIATES, LLC, a 

California limited liability company,

Counter-Defendant-Appellee.

No. 18-56637

D.C. No.

2:17-cv-08537-

R-JPR
3500 SEPULVEDA V. RREEF AMERICA REIT II 3

3500 SEPULVEDA, LLC, a Delaware 

limited liability company; 13TH &

CREST ASSOCIATES, LLC, a 

California limited liability company,

Plaintiffs-Counter-DefendantsAppellees,

v.

MACY’S WEST STORES, INC.,

Defendant,

and

RREEF AMERICA REIT II

CORPORATION BBB, a Maryland 

corporation,

Defendant-Counter-ClaimantAppellant,

6220 SPRING ASSOCIATES, LLC, a 

California limited liability company,

Counter-Defendant-Appellee.

No. 19-55227

D.C. No.

2:17-cv-08537-

R-JPR
4 3500 SEPULVEDA V. RREEF AMERICA REIT II

3500 SEPULVEDA, LLC, a Delaware 

limited liability company; 13TH &

CREST ASSOCIATES, LLC, a 

California limited liability company,

Plaintiffs-Counter-DefendantsAppellants,

v.

MACY’S WEST STORES, INC.,

Defendant,

and

RREEF AMERICA REIT II

CORPORATION BBB, a Maryland 

corporation,

Defendant-Counter-ClaimantAppellee,

6220 SPRING ASSOCIATES, LLC, a 

California limited liability company,

Counter-Defendant-Appellant.

No. 19-55273

D.C. No.

2:17-cv-08537-

R-JPR

OPINION

Appeal from the United States District Court

for the Central District of California

Manuel L. Real, District Judge, Presiding

Argued and Submitted September 2, 2020

Pasadena, California

Filed November 20, 2020
3500 SEPULVEDA V. RREEF AMERICA REIT II 5

Before: Sandra S. Ikuta and Mark J. Bennett, Circuit 

Judges, and Douglas P. Woodlock,* District Judge.

Opinion by Judge Bennett

SUMMARY**

California Law

The panel affirmed the district court’s summary 

judgment on the nuisance claim, and reversed the district 

court as to the remaining claims, in a diversity action 

alleging claims and counterclaims arising from a 

construction project to expand Manhattan Village Shopping 

Center in Manhattan Beach, California.

Plaintiffs are 3500 Sepulveda, LLC and 13th & Crest; 

and defendants are RREEF America REIT II Corporation 

BBB and Macy’s West Stores, Inc. RREEF brought 

counterclaims against plaintiffs and additional 

counterdefendant 6220 Spring Associates, LLC (together, 

counterdefendants are known as “Hacienda”). The parties’ 

predecessors executed a Construction, Operation and 

Reciprocal Easement Agreement (“COREA”) in 1980. In 

2008, the parties resolved various disputes in a Settlement 

Agreement, which included a “Site Plan.”

* The Honorable Douglas P. Woodlock, United States District Judge 

for the District of Massachusetts, sitting by designation.

** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
6 3500 SEPULVEDA V. RREEF AMERICA REIT II

Plaintiffs alleged that defendants violated the COREA. 

Applying California law, the panel held that the district court 

erred in granting summary judgment to defendants on this 

claim. The fact that RREEF had discretion to revise the Site 

Plan did not mean that Hacienda gave up its rights under the 

COREA, especially considering that the Settlement 

Agreement, by its own terms did not amend the COREA.

Plaintiffs alleged that defendants’ Project interfered with 

their easement rights under the COREA. The panel held that 

the Settlement Agreement did not extinguish plaintiffs’ 

easement rights under the COREA, and the district court 

erred in holding otherwise.

Plaintiffs alleged that defendants violated the Settlement 

Agreement’s covenant of good faith and fair dealing. The 

panel held that there was a genuine dispute of material fact 

as to whether RREEF’s construction of a north parking deck 

involved bad faith.

Plaintiffs alleged that defendants’ construction 

encroached on their easement and eliminated essential 

parking, creating a nuisance under California law. The panel 

held that plaintiffs did not point to any specific offensive 

conduct or manner that was not authorized by the City of 

Manhattan Beach. Accordingly, plaintiffs did not raise 

triable issues of fact regarding the nuisance claim, and the 

panel affirmed the district court’s grant of summary 

judgment. 

Plaintiffs alleged that defendants intentionally or 

negligently interfered with Hacienda’s business and 

contractual relations with its tenants. The panel held that 

plaintiffs raised triable issues whether defendants’ 

construction interfered with Hacienda’s tenant contracts, and 
3500 SEPULVEDA V. RREEF AMERICA REIT II 7

whether defendants acted with the knowledge that 

interference would occur as a result of their action. The 

panel reversed the district court’s grant of summary 

judgment. 

The panel also reversed the district court’s grant of 

summary judgment as to plaintiffs’ request for declaratory 

relief on the parties’ rights and duties arising out of the 

Settlement Agreement and the COREA.

Concerning RREEF’s counterclaims, the district court 

granted Hacienda’s motion for summary judgment on the 

basis that RREEF’s counterclaims were barred by 

California’s litigation privilege. The panel disagreed. The 

panel held that policy considerations weighed against 

applying the litigation privilege here. Applying the litigation 

privilege to this case would undermine the Settlement 

Agreement and invite more litigation.

Finally, the panel held the attorneys’ fees question moot, 

and vacated the district court’s order denying the parties’

motions for attorneys’ fees.

COUNSEL

Geoffrey B. Kehlmann (argued) and Robin Meadow,

Greines Martin Stein & Richland LLP, Los Angeles, 

California, for Plaintiffs-Counter-Defendants-Appellants/

Cross-Appellees.

Michael G. Romey (argued), R. Peter Durning Jr., Jamie L. 

Sprague, and Sarah F. Mitchell, Latham & Watkins LLP,

Los Angeles, California, for Defendant-Counter-ClaimantAppellee/Cross-Appellant.
8 3500 SEPULVEDA V. RREEF AMERICA REIT II

OPINION

BENNETT, Circuit Judge:

Before the court are cross-appeals from the district 

court’s orders granting summary judgment (i) to Defendants 

on Plaintiffs’ claims, and (ii) to Counterdefendants on the 

counterclaims. We have jurisdiction under 28 U.S.C. 

§ 1291, and we review the district court’s grant of summary 

judgment de novo, viewing the facts in the light most 

favorable to the non-movant. See Flores v. City of San 

Gabriel, 824 F.3d 890, 897 (9th Cir. 2016). The parties 

agree that California law applies. We affirm in part, reverse 

in part, and remand.

I. Background

Plaintiffs are 3500 Sepulveda, LLC, and 13th & Crest 

Associates, LLC. They brought claims against Defendants 

RREEF America REIT II Corporation BBB (“RREEF”), and 

Macy’s West Stores, Inc. (“Macy’s”). Defendant RREEF 

then brought counterclaims against Plaintiffs and an 

additional Counterdefendant, 6220 Spring Associates, LLC 

(together, Counterdefendants are known as the “Hacienda 

Parties” or “Hacienda”).

The parties’ dispute concerns a construction project to 

expand Manhattan Village Shopping Center (the “Shopping 

Center”) in Manhattan Beach, California. The forty-fouracre Shopping Center includes multiple parcels of land. The 

Hacienda Parties own a 0.7-acre parcel located at 

3500 Sepulveda Boulevard. The Hacienda Building is a 

commercial building located on the 3500 Sepulveda 

property. Hacienda rents its space to commercial tenants, 

including restaurants, retail stores, and offices. Macy’s 
3500 SEPULVEDA V. RREEF AMERICA REIT II 9

owns another single parcel of land, and RREEF owns the 

remaining parcels in the Shopping Center.

The parties’ predecessors executed the Construction, 

Operation and Reciprocal Easement Agreement (the 

“COREA”) in 1980. The COREA defines a “Common 

Area” within the Shopping Center as including the 

“Automobile Parking Area, access roads, driveways, 

Perimeter Sidewalks . . . , and similar areas.” Under the 

COREA, the parties and their permittees have “nonexclusive 

easements over the Common Area of [the parties’] 

respective Tract[s], for the passage and accommodation of 

pedestrians and vehicles.” The easements run with the land. 

Hacienda’s tenants and customers drive through and park in 

the Common Area. The parking lot known as “Lot F” is 

particularly important to Hacienda, as Lot F is located 

“across the drive aisle from the Hacienda Building.”

In 2006, RREEF applied to the City of Manhattan Beach 

(the “City”) for approval to renovate and expand the 

Shopping Center. Around the same time, Hacienda was 

attempting to convert parts of its building from office space 

to restaurants. RREEF and Hacienda vigorously opposed 

each other’s plans for renovation, and various legal disputes 

arose.

The parties resolved those disputes in a Settlement 

Agreement (the “Agreement”) in 2008.1 Under the terms of 

the Settlement Agreement, RREEF agreed not to oppose 

Hacienda’s plan to convert office space into restaurants, and 

1 The parties to the Settlement Agreement are the Hacienda 

Parties—3500 Sepulveda, 13th & Crest, and 6220 Spring (which is a 

Counterdefendant but not a Plaintiff)—and RREEF. Macy’s, which is a 

Defendant to some of the claims but not a Counterclaimant, is not named 

as a party to the Settlement Agreement.
10 3500 SEPULVEDA V. RREEF AMERICA REIT II

Hacienda agreed not to oppose RREEF’s expansion project 

(the “Project”)—subject to certain limitations in the 

Agreement. The current dispute is over RREEF’s Project, 

and Hacienda’s restaurant-conversion plan is irrelevant for 

our purposes.

The Settlement Agreement includes a “Site Plan”—a 

series of drawings that set forth RREEF’s proposed Project 

to expand Macy’s and other retail space, and to construct 

new parking structures. The Site Plan and an additional 

“Parking Plan” lay out, among other things, the available 

retail and parking spaces during and upon completion of 

stages of construction. The Settlement Agreement provides 

that RREEF will submit the Site Plan to the City for 

approval: “RREEF is preparing to amend the RREEF 

Application [to the City] to reflect a revised expansion plan 

for the Shopping Center as generally depicted in the 

[attached] Site Plan.” The Settlement Agreement also gives 

RREEF “discretion” to revise the Site Plan, and it allows 

Hacienda to object to certain material revisions during the 

City’s approval process. Section 6 of the Settlement 

Agreement states that “nothing in this Agreement shall 

constitute an amendment to the . . . COREA.”

The City’s approval process includes circulating the 

proposed plan and environmental impact report for public 

comment and holding public hearings. During this process, 

RREEF submitted multiple revised versions of the Site Plan. 

Hacienda took issue with the new versions, which Hacienda 

believed were materially different from the agreed-upon Site 

Plan in the 2008 Settlement Agreement and would harm 

Hacienda’s interests. In particular, Hacienda was concerned 

that the new plans reduced the amount of available parking 

for Hacienda and its tenants—both during and after the 

completion of construction. Hacienda and its agents 
3500 SEPULVEDA V. RREEF AMERICA REIT II 11

opposed the revised Site Plans in multiple public hearings, 

wrote letters to the City raising similar concerns, and were 

allegedly involved in certain lawsuits challenging the 

Project.

The City approved RREEF’s Project—based on a 

revised Site Plan—in 2017, and construction began soon 

after. Hacienda’s tenants started complaining about the 

construction almost immediately, raising concerns about the 

loss of parking spaces, road closures, and other 

inconveniences. Tenants demanded compensation for lost 

business. They also demanded rent reductions, threatened to 

not renew their leases, and threatened legal action.

In October 2017, Plaintiffs sued Defendants in 

California Superior Court, alleging breach of contract, 

anticipatory breach of contract, breach of the covenant of 

good faith and fair dealing, interference with easement 

rights, nuisance, and intentional and negligent interference 

with business and contractual relations. Plaintiffs’ 

underlying theory is that the current Site Plan is substantially 

different from the agreed-upon Site Plan in the Settlement 

Agreement, and that RREEF’s expansion and construction 

Project violates Plaintiffs’ rights. Defendants removed the 

case to federal court, and RREEF filed counterclaims against 

the Hacienda Parties, alleging breach of contract and breach 

of the covenant of good faith and fair dealing. RREEF’s 

theory is that Hacienda violated the Settlement Agreement 

by opposing the Project.

The parties filed cross-motions for summary judgment, 

and the district court granted both motions and dismissed all 

the claims and counterclaims. The parties then each filed a 

motion for attorneys’ fees, which the district court denied on 

the ground that no party prevailed. This appeal and crossappeal followed. Plaintiffs argue that the district court erred 
12 3500 SEPULVEDA V. RREEF AMERICA REIT II

in granting summary judgment on their claims, and RREEF 

argues that the district court erred in granting summary 

judgment on its counterclaims.

II. Plaintiffs’ Claims

We affirm the district court’s grant of summary 

judgment on the nuisance claim and reverse the district court 

as to the remaining claims.

1. Breach of Contract

Plaintiffs allege that Defendants violated the COREA, 

under which the parties agreed to perform construction work 

“so as not to unreasonably interfere with the use, occupancy 

or enjoyment of the remainder of the Shopping Center or any 

part thereof by any other Party, and any other Occupant of 

the Shopping Center, and the Permittees of any other Party 

and such other Occupants.” The district court granted 

summary judgment to Defendants on this claim. According 

to the district court, Plaintiffs agreed to the Project under the 

Settlement Agreement, and further agreed that RREEF 

would have discretion to revise the Site Plan and execute the 

Project; therefore, Plaintiffs cannot now complain of 

conduct to which they consented.

Plaintiffs point out that section 6 of the Settlement 

Agreement provides that “nothing in this Agreement shall 

constitute an amendment to the . . . COREA,” and argue that 

they have claims under the COREA. The district court, 

however, essentially read section 6 out of the Agreement:

While Section 6 of the Settlement Agreement 

states that the agreement does not constitute 

an amendment to the COREA, the agreement 

would essentially lose all meaning if the court 
3500 SEPULVEDA V. RREEF AMERICA REIT II 13

were to adopt [Hacienda’s] interpretation of 

this section as preserving all of their 

easement rights even during the duration of 

the construction project.

We disagree. We conclude that section 6 can be harmonized 

with the rest of the Settlement Agreement and with the 

COREA. See Cal. Civ. Code § 1641 (“The whole of a 

contract is to be taken together, so as to give effect to every 

part, if reasonably practicable, each clause helping to 

interpret the other.”). Read in conjunction with section 6, 

sections 4 and 5 of the Settlement Agreement provide that 

RREEF has discretion to pursue the Project and alter the Site 

Plan, and Hacienda’s objections to the City are limited to 

RREEF’s material changes. That RREEF has discretion to 

revise the Site Plan does not mean that Hacienda gave up its 

rights under the COREA, especially considering that the 

Settlement Agreement, by its own terms, does not amend the 

COREA.2

2. Interference with Easement Rights

Plaintiffs allege that Defendants’ Project has interfered 

with their easement rights under the COREA. Under 

California law, interference with an easement is actionable 

when the grantor of the easement “unreasonably impede[s] 

the [grantee] in his rights,” Dolnikov v. Ekizian, 165 Cal. 

Rptr. 3d 658, 666 (Ct. App. 2013) (quoting City of Los 

2 The district court stated that Defendants argued below that the 

Settlement Agreement’s release provision “includes Plaintiffs’ claims” 

related to the Project. On appeal, Defendants do not argue that the 

Settlement Agreement’s release provision bars Plaintiffs’ claims in this 

lawsuit, and we do not address this issue. As discussed below, we note 

that the release provision is ambiguous on its face and extrinsic evidence 

is needed to interpret the provision.
14 3500 SEPULVEDA V. RREEF AMERICA REIT II

Angeles v. Howard, 53 Cal. Rptr. 274, 277 (Ct. App. 1966)), 

through actions “that make it more difficult to use an 

easement, that interfere with the ability to maintain and 

repair improvements built for its enjoyment, or that increase 

the risks attendant on exercise of rights created by the 

easement,” id. (emphasis omitted) (quoting Restatement 

(Third) of Property: Servitudes § 4.9 cmt. c (Am. Law Inst. 

2000)).

The district court granted summary judgment to 

Defendants, again concluding that Plaintiffs cannot sue 

Defendants for conduct to which Plaintiffs consented. As 

discussed above, the Settlement Agreement does not 

extinguish Plaintiffs’ easement rights under the COREA, 

and the district court erred in holding otherwise.

3. Breach of the Covenant of Good Faith and Fair 

Dealing

Plaintiffs argue that Defendants violated the Settlement 

Agreement’s covenant of good faith and fair dealing when 

they used their discretion “to unfairly change the site plan 

and engage in unreasonable construction activities.” “There 

is an implied covenant of good faith and fair dealing in every 

contract that neither party will do anything which will injure 

the right of the other to receive the benefits of the 

agreement.” Foley v. Interactive Data Corp., 765 P.2d 373, 

390 (Cal. 1988) (quoting Comunale v. Traders & Gen. Ins. 

Co., 328 P.2d 198, 200 (Cal. 1958)). A party can breach the 

covenant without “breach of a specific provision of the 

contract.” Carma Devs. (Cal.), Inc. v. Marathon Dev. Cal., 

Inc., 826 P.2d 710, 727 (Cal. 1992). Rather, the question is 

whether the party’s conduct, “while not technically 

transgressing the express covenants . . . frustrates the other 

party’s rights to the benefits of the contract.” Racine & 

Laramie, Ltd. v. Dep’t of Parks & Rec., 14 Cal. Rptr. 2d 335, 
3500 SEPULVEDA V. RREEF AMERICA REIT II 15

338 (Ct. App. 1992) (quoting Love v. Fire Ins. Exch., 

271 Cal. Rptr. 246, 256 (Ct. App. 1990)). “The covenant of 

good faith finds particular application in situations where 

one party is invested with a discretionary power affecting the 

rights of another.” Carma Devs., 826 P.2d at 726. The party 

with discretionary power must exercise such power in good 

faith and through “objectively reasonable conduct.” Badie 

v. Bank of Am., 79 Cal. Rptr. 2d 273, 284 (Ct. App. 1998) 

(quoting Lazar v. Hertz Corp., 191 Cal. Rptr. 849, 857 (Ct. 

App. 1983)).

Section 5 of the Settlement Agreement provides that the 

“North Deck may be constructed in two stages—Stage One 

and Stage Two—as depicted on the Site Plan and in 

substantial conformity with [the Parking Plan],” and that 

“the construction of the Parking Decks shall be subject to the 

additional terms set forth in attached Exhibit G.” Exhibit G 

further provides that “[d]uring Stage One construction of the 

North Deck, there shall be not less than 240 parking spaces 

available in the area referenced as ‘Lot F.’” RREEF 

thereafter decided to construct the North Deck as a “unitary 

deck” rather than in stages, and did not maintain the 

240 parking spaces in Lot F.3

Because the Settlement Agreement does not require 

construction of the North Deck in stages, and Exhibit G 

provides for 240 parking spaces during Stage One, RREEF 

has not expressly breached the Agreement by constructing 

the North Deck without maintaining any parking spaces in 

3 Hacienda’s opening brief appears to suggest that its breach of 

covenant claim is based on a theory of anticipatory breach because 

RREEF represented that it did not intend to maintain the 240 parking 

spaces. However, construction of the North Deck has since begun, 

thereby mooting the anticipatory breach theory.
16 3500 SEPULVEDA V. RREEF AMERICA REIT II

Lot F. However, viewing the facts in the light most 

favorable to Plaintiffs, there is a genuine dispute of material 

fact as to whether RREEF’s construction of the North Deck 

involved bad faith. The parties clearly contemplated 

whether construction of the North Deck would cause parking 

shortages for Hacienda and agreed to measures to mitigate 

those expected problems. Notably, Exhibit G does not say 

that its terms are applicable only if the North Deck is 

constructed in stages. Rather, it simply assumes that there 

will be stages of construction. RREEF has not presented any 

evidence that constructing the North Deck as a “unitary 

deck” will eliminate or mitigate the contemplated problems 

regarding parking shortages. Accordingly, Plaintiffs have 

presented sufficient evidence to raise a triable issue as to 

whether RREEF’s construction of the North Deck was 

contrary to “the contract’s purposes and the parties’ 

legitimate expectations.” Carma Devs., 826 P.2d at 728.

4. Nuisance

Plaintiffs allege that Defendants’ construction 

encroached on their easement and eliminated essential 

parking, creating a nuisance under California law. See 

Monks v. City of Rancho Palos Verdes, 84 Cal. Rptr. 3d 75, 

104 (Ct. App. 2008). Defendants argue that the Project was 

constructed in accordance with City regulations; therefore, it 

could not have been a nuisance. See Cal. Civ. Code § 3482 

(“Nothing which is done or maintained under the express 

authority of a statute can be deemed a nuisance.”); Williams 

v. Moulton Niguel Water Dist., 232 Cal. Rptr. 3d 356, 361 

(Ct. App. 2018) (“Although [§ 3482] speaks in terms of ‘a 

statute,’ that term has been broadly interpreted to include 

regulations and other express government approvals.”).

Plaintiffs respond that “even if there were a City 

ordinance approving the expansion project, it would not 
3500 SEPULVEDA V. RREEF AMERICA REIT II 17

expressly allow RREEF to engage in such harmful 

interference as to eliminate all convenient parking for the 

Hacienda Building during a yearlong construction project.” 

While it is true that “although an activity authorized by 

statute cannot be a nuisance, the [m]anner in which the 

activity is performed may constitute a nuisance,” Venuto v. 

Owens-Corning Fiberglas Corp., 99 Cal. Rptr. 350, 359 (Ct.

App. 1971), Plaintiffs do not point to any specific offensive 

conduct or manner that was not authorized by the City. 

Accordingly, Plaintiffs have not raised triable issues of fact 

regarding the nuisance claim, and we affirm the district 

court’s grant of summary judgment.

5. Interference with Business and Contractual 

Relations

Plaintiffs allege that Defendants intentionally or 

negligently interfered with Hacienda’s business and 

contractual relations with its tenants, pointing to tenant 

complaints about RREEF’s construction. The elements of a 

claim of intentional interference are “(1) a valid contract 

between plaintiff and a third party; (2) defendant’s 

knowledge of this contract; (3) defendant’s intentional acts 

designed to induce a breach or disruption of the contractual 

relationship; (4) actual breach or disruption of the 

contractual relationship; and (5) resulting damage.” 

Quelimane Co. v. Stewart Title Guar. Co., 960 P.2d 513, 530 

(Cal. 1998) (quoting Pac. Gas & Elec. Co. v. Bear Stearns 

& Co., 791 P.2d 587, 589–90 (Cal. 1990)). The only 

difference between intentional and negligent interference is 

the defendant’s intent. See Nelson v. Tucker Ellis, LLP, 

262 Cal. Rptr. 3d 250, 264 n.5 (Ct. App. 2020).

We conclude that Plaintiffs have raised triable issues 

whether Defendants’ construction interfered with 

Hacienda’s tenant contracts, and whether Defendants acted 
18 3500 SEPULVEDA V. RREEF AMERICA REIT II

with the knowledge that “interference is certain or 

substantially certain to occur as a result of [their] action.” 

Quelimane, 960 P.2d at 531.

Defendants’ sole argument on appeal is that Plaintiffs’ 

claims fail because a claim of tortious interference “requires 

a ‘wrongfulness’ element, such that the defendant’s 

interfering conduct ‘was wrongful by some legal measure 

other than the fact of interference itself.’” Defendants are 

incorrect. Under California law, there is no additional 

“wrongfulness” element for a claim of interference with 

existing contracts. See id. at 530 (“Because interference 

with an existing contract receives greater solicitude than 

does interference with prospective economic advantage, it is 

not necessary that the defendant’s conduct be wrongful apart 

from the interference with the contract itself.” (citation 

omitted)). Accordingly, we reverse the district court’s grant 

of summary judgment.

6. Declaratory Relief

For the reasons noted above, we also reverse the district 

court’s grant of summary judgment as to Plaintiffs’ request 

for declaratory relief on the parties’ rights and duties arising 

out of the Settlement Agreement and the COREA.

III. RREEF’s Counterclaims

RREEF brought counterclaims against Hacienda for 

breach of contract, breach of the implied covenant of good 

faith and fair dealing, and declaratory relief. RREEF 

contends that Hacienda and its agents engaged in an 

“exhaustive campaign of opposition” to the Project, 

violating the Settlement Agreement’s release provision and 

other provisions governing the parties’ conduct in the City’s 

application-approval process.
3500 SEPULVEDA V. RREEF AMERICA REIT II 19

The district court granted Hacienda’s motion for 

summary judgment on the basis that “RREEF’s 

counterclaims are barred by California’s litigation 

privilege.” We disagree.

In California, the litigation privilege immunizes 

defendants from certain lawsuits based on their privileged 

communications in judicial proceedings and other official 

proceedings, including local city council proceedings. See 

Cal. Civ. Code § 47; Cayley v. Nunn, 235 Cal. Rptr. 385, 387 

(Ct. App. 1987). The litigation privilege traditionally 

applied only to tort claims, and the California Supreme Court 

has not decided whether the privilege applies to contract 

claims. We understand that the California Supreme Court is 

currently considering whether the litigation privilege applies 

to contract claims, and if so, under what circumstances. See 

Doe v. Olson, Cal. Sup. Ct. No. S258498.

“In the absence of [a decision of the highest state court], 

a federal court must predict how the highest state court 

would decide the issue using intermediate appellate court 

decisions, decisions from other jurisdictions, statutes, 

treatises, and restatements as guidance.” In re Kirkland, 

915 F.2d 1236, 1239 (9th Cir. 1990). California’s 

intermediate appellate courts have applied the litigation 

privilege to contract claims in limited situations where “its 

application furthers the policies underlying the privilege.” 

Wentland v. Wass, 25 Cal. Rptr. 3d 109, 114 (Ct. App. 2005). 

These policies include “ensur[ing] free access to the courts, 

promot[ing] complete and truthful testimony, encourag[ing] 

zealous advocacy, giv[ing] finality to judgments, and 

avoid[ing] unending litigation.” Id. at 115.
20 3500 SEPULVEDA V. RREEF AMERICA REIT II

We conclude that the policy considerations weigh 

against applying the litigation privilege here.4 While the 

Settlement agreement did not clearly prohibit Hacienda’s 

prior participation in the municipal and judicial proceedings 

regarding the construction of the Shopping Center, and while 

Hacienda’s right to communicate in such proceedings is a 

matter of public concern, Hacienda willingly limited its 

communications under the Settlement Agreement. See id. at 

116 (“Just as one who validly contracts not to speak waives 

the protection of the anti-SLAPP statute, so too has he 

waived the protection of the litigation privilege.” (citation 

omitted)). California courts that have applied the litigation 

privilege to contract claims did so in the face of weightier 

policy concerns than we face here. See, e.g., Vivian v. 

Labrucherie, 153 Cal. Rptr. 3d 707, 716 (Ct. App. 2013) 

(communication made during investigation of potential 

police misconduct); McNair v. San Francisco, 210 Cal. Rptr. 

3d 267, 281 (Ct. App. 2016) (doctor’s disclosure of public 

safety concerns involving patient who was a bus driver). 

And on the other side of the policy balance are significant 

concerns about the finality of settlements and the stability of 

contract. See Wentland, 25 Cal. Rptr. 3d at 116 (refraining 

from applying the litigation privilege where doing so would 

“not encourage finality [or] avoid litigation”). Applying the 

litigation privilege to this case would undermine the 

Settlement Agreement and invite more litigation.

4 If the California Supreme Court holds otherwise while this case is 

pending, the district court is not bound by our conclusion. See Owen ex 

rel. Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983) (“Our 

interpretation . . . was only binding in the absence of any subsequent 

indication from the California courts that our interpretation was 

incorrect.”).
3500 SEPULVEDA V. RREEF AMERICA REIT II 21

We note that some California courts have also held that 

“the privilege will apply to contract claims only if the 

agreement does not ‘clearly prohibit’ the challenged 

conduct.” Crossroads Invs., L.P. v. Fed. Nat’l Mortg. Ass’n, 

222 Cal. Rptr. 3d 1, 28 (Ct. App. 2017) (quoting 

Labrucherie, 153 Cal. Rptr. 3d at 715). The counterclaims 

here are partly based on the Settlement Agreement’s release 

provision, section 12, and RREEF alleges that Hacienda 

violated section 12 through its involvement in lawsuits 

opposing the Project. We conclude that section 12 is 

ambiguous as to whether it prohibits the lawsuits in question. 

Specifically, the language of section 12 is ambiguous as to 

(i) whether the release covers claims based on future events 

that occur after the date of the Settlement Agreement, and 

(ii) if it does, whether those later-arising claims include 

claims based on future versions of the Site Plan. On the one 

hand, section 12 contains arguably forward-looking 

language: “[Hacienda] releases [RREEF] from . . . [all 

claims] that [the Hacienda Parties] have or may have against 

[RREEF]” (emphasis added). On the other, section 12 

references two specific applications for two specific Site 

Plans, both of which were already in existence at the time of 

the Settlement Agreement’s execution.5

Thus, we conclude that the district court erred in 

applying the litigation privilege to grant summary judgment.

5 Because section 12 is ambiguous, the district court will need to 

consider extrinsic evidence on remand should it need to interpret section 

12. See Winet v. Price, 6 Cal. Rptr. 2d 554, 557 (Ct. App. 1992).
22 3500 SEPULVEDA V. RREEF AMERICA REIT II

Finally, we hold the attorneys’ fees question moot and 

vacate the district court’s January 29, 2019 Order denying 

the parties’ motions for attorneys’ fees.6

The parties are to bear their own costs on appeal.

AFFIRMED in part, REVERSED in part, and 

REMANDED.

6 Hacienda’s Motion to Take Judicial Notice (Dkt. 36) is 

GRANTED. Defendants’ Motion to File Oversized Brief (Dkt. 63) is 

GRANTED.