In May last year, the project's real estate arm Flannery Associates sued dozens of landowners for $510 million in damages, claiming that through "endless greed" they worked together to jack up sale prices for their property in violation of federal antitrust law. A number of the ranchers have reached settlements with Flannery, which has already spent more than $800 million on land.
On Friday, March 29, Judge Troy Nunley in Sacramento U.S. District Court denied an attempt by the remaining landowners, who deny price fixing, to get the case thrown out, a significant boost to the controversial and highly publicized development. Nunley cited messages in 2022 between property owners that he said provided evidence to back Flannery's claims of a price-fixing conspiracy. But a legal expert said Flannery will face a much bigger hurdle as the case progresses.
The "California Forever" project, which would see a city rise from farmland near Fairfield, is financially backed by Silicon Valley venture capitalists Marc Andreessen and Michael Moritz, and fellow billionaires LinkedIn co-founder Reid Hoffman and businesswoman Laurene Powell Jobs.
Their plan has drawn nationwide attention and sparked vociferous debate in California over whether the ultra-rich should be building cities, and whether agricultural land should be sacrificed for housing, jobs and economic development. California Forever's initial imagery evoked Mediterranean villages and towns, but renderings released more recently suggest Mountain View with a slight European flavor.
The company plans to put an initiative on the Solano County ballot in November to rezone 18,600 acres for the project. California Forever CEO Jan Sramek has promised thousands of homes in walkable communities, along with offices of major technology companies, but the company and Flannery have received criticism over their aggressive approach.
The lawsuit against ranchers, many multi-generational, provoked outrage among some residents, leading to a series of contentious public meetings.
Nunley's order Friday gave substantial weight to a trio of messages among property owners. Flannery introduced the communications into the case as exhibits.
In a text message, a rancher said a Flannery property lawyer was "bullying the last of the property owners," according to a court filing. The rancher went on to say he had talked with another owner who agreed the "remaining property owners should be in agreement on what we would want to sell our properties" so the lawyer could not "play owners against owners." The rancher concluded by saying, "I think we should have a meeting in the next two weeks to talk."
Nunley wrote in his order that he agreed with Flannery that the message amounted to "direct evidence" of a price-fixing agreement among property owners whose land was sought by Flannery.
The judge also referred to an email exchange between property owners in which one said to another rancher that she heard he talked to a third owner. "That's great that we can support each other!" she wrote.
And Nunley cited another email from an owner to other ranchers, saying Flannery's "hyper-aggressive behavior seems to indicate that we are in a very good position and it is best not to engage with them at this point." The owner continued, "No one is suggesting that we don't sell, the question is when and at what price. Several of the other major land owners in the area are basically taking their time as well and not engaging."
The three messages together create a plausible inference that property owners "agreed amongst themselves to not only coordinate with each other on how much to sell their land to (Flannery) for, but also when would be the most opportune time to do so," Nunley wrote.
Despite the seeming power imbalance between tech billionaires and farmers, antitrust law says a group of property owners could be found liable for price fixing if they entered into a clear agreement to drive prices up, said Santa Clara University law professor and antitrust expert Donald Polden.
But just because Nunley found the messages to be plausible evidence of a possible price-fixing conspiracy does not mean Flannery will be able to win its case or even keep it going until it gets to a jury, Polden said. The messages on their own fall far short of what's required for the case to survive summary judgment, a pre-trial court process that will test the factual basis for Flannery's claims and require much more evidence, Polden said.
"It's going to be an incredibly difficult evidentiary burden," Polden said.
The company, he said, will have to "come forward and say, 'Here's how the conspiracy really worked and here's how the (property owners) engaged in a common enterprise to achieve a market-wide increase of land prices in Solano County.'"
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