The U.S. Court of Appeals for the 10th Circuit on Tuesday found that the residents of a mountain community reasonably challenged a land use decision and were not liable for their legal conduct under the First Amendment.

Cordillera is an Eagle County community that had a private lodge and village center. A golf course, a spa and tennis courts were among the amenities in the community. In 2016, CSMN Investments bought the lodge and the village, intending to open an addiction-treatment center. The center would see patients experiencing a range of conditions, including eating disorders and chemical dependency.

Before finalizing the purchase, CSMN Investments asked the county’s planning director if an inpatient facility was allowable. There were 34 possible uses for the property, including medical offices and facilities that were “limited to clinic and outpatient facilities for non-critical care.”

On June 1, 2016, the planning director determined that the county’s policies did allow for an addiction-treatment center at Cordillera because there would be no critical care onsite and it would include clinical treatment.

Community reaction to the news was harsh, with residents saying that the project “should be stopped at all costs” and that people seeking treatment would be “destructive to our neighborhood’s peace of mind, real estate values and carefully cultivated reputation.”

Cordillera’s property owners association and the metropolitan district appealed to the board of county commissioners on the grounds that the treatment center was a violation of allowable uses. The board generally agreed with the planning director’s interpretation, but ordered that the center operate as an outpatient facility. Residents subsequently took the issue to state court, where they lost.

CSMN Investments, meanwhile, sued the property owners and metropolitan district in federal court, alleging that the residents were violating the Americans with Disabilities Act by discriminating against the future clientele of the treatment center. The company also alleged violations of the Fair Housing Act due to the residents’ opposition to letting clients – whom it again described as disabled – live onsite. The residents tried to dismiss the case, saying that the First Amendment conferred immunity on their lawsuit, while CSMN Investments claimed that the residents’ actions at the state level were “sham” petitions that did not deserve immunity.

Judge Judge Gregory A. Phillips, writing for the 10th Circuit panel, explained that the First Amendment’s protection of the right to petition one’s government for a redress of grievances leads to immunity. Originally, the issue arose with companies behaving in a coordinated manner to support or oppose government policies, but whose actions were protected from antitrust violations. 

However, the U.S. Supreme Court recognized that “sham” petitions could make the courts a tool for one party to harass another. Therefore, the court decided that “There may be situations in which a publicity campaign, ostensibly directed toward influencing governmental action, is a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor.”

A court must determine if a lawsuit has a reasonable basis and, if not, what the motivation is for it. Even unsuccessful lawsuits, such as the Cordillera residents’ one against CSMN Investments, may be reasonable because they help legitimize the judicial process for resolving disputes, and their underlying issues may contribute to the evolution of the law, Phillips wrote. He added: “these reasons weigh heavily in favor of broad immunity for petitioning activities, so long as the petitioning has a legitimate basis in the law.”

Phillips continued that just because the residents’ actions at the state level were unsuccessful, it does not mean that they were a sham. “Courts can reasonably question whether the subjective intent is to harass, discriminate, or interfere with legally protected rights,” he explained. “The homeowners had a right to be concerned about a change to the properties’ uses – especially one that restricted public access to a traditionally-open community amenity – and to press for an interpretation that would preserve public access.”

CSMN Investments asked the 10th Circuit to apply a less restrictive test to its determination of a sham petition, one that involved a “pattern of baseless, repetitive claims.” However, the judges rejected the request, noting a chilling effect could ensue.

The case is CSMN Investments LLC. v. Cordillera Metropolitan District et al.