Defamation lawsuit by Bill Gallaher and Scott Flater against The Press Democrat dismissed by appellate court

A state appellate court Friday dismissed a defamation lawsuit filed against The Press Democrat by Sonoma County developer Bill Gallaher and his son-in-law, Scott Flater, that challenged the newspaper’s reporting on the unprecedented sum of money spent by Flater to influence the 2016 Santa Rosa City Council election.

Gallaher and Flater sued the newspaper in late 2016 claiming their reputations were harmed in four stories published before that November’s election detailing $195,000 in independent expenditures by Flater to support three council candidates. The articles described historic spending for six open council seats, including a last-minute influx of cash for mailers and other materials.

In a unanimous decision, three justices with the First Appellate District court in San Francisco ruled that Gallaher and Flater failed to prove the stories were false. The justices rejected arguments by Gallaher and Flater that campaign expenditures were a private matter between the donor and the politician, stating that it is “beyond dispute” that elections and campaign spending are of widespread public interest and calling the plaintiffs’ attempt to argue otherwise “frivolous.”

“The Press Democrat articles reporting on Flater’s enormous independent expenditures, explaining Flater’s connection to Gallaher, and raising questions about the source of the funds spent by Flater were clearly in connection with an issue of public interest,” the justices wrote.

Gallaher, 68, and Flater, 42, didn’t respond to messages seeking comment Friday. Their attorneys, Michael Miller and Michael Denison, also did not respond to phone or email messages.

“This is an important decision for journalism, free speech, and a newspaper’s fundamental right and obligation to shine a bright light on issues of public interest,” said Steve Falk, chief executive officer of Sonoma Media Investments, which owns The Press Democrat.

In the runup to the November 2016 election, Flater reported spending $202,574 on independent expenditures in support of three candidates - Jack Tibbetts, Ernesto Olivares and Don Taylor. The amount was equal to 89 percent of the total contributions raised directly in 2016 by all six candidates in the Santa Rosa City Council race combined, according to public records. The final figures, slightly higher than the $195,000 in independent expenditures reported by the newspaper at the time, were not publicly available until two months after the election.

Santa Rosa limits individual campaign contributions to $500, but state law allows donors and groups to spend an unlimited amount on independent expenditures not associated with candidates’ campaigns.

The spending by Flater, who has four children and listed himself as a “homemaker” in campaign filings, raised questions about the source of the money. He is married to Gallaher’s daughter, Molly Flater.

In their lawsuit, Flater and Gallaher claimed the articles were defamatory because they implied Gallaher was the source of the money spent on campaigns by Flater.

In a May 10, 2017, sworn declaration, Flater initially stated that no one, including Gallaher, ever provided him with money to donate to political candidates or make the 2016 independent expenditures. One week later, he modified his sworn declaration, removing the reference to independent expenditures.

The omission suggests the change was intentional, the court ruled. “For all practical purposes, it is a concession that plaintiffs cannot prove the falsity of the alleged implied assertion that Flater’s spending was funded by Gallaher or another source,” the justices wrote.

Amid the litigation, a former general counsel of Gallaher’s company, Oakmont Senior Living, accused his former boss of approaching key employees and offering to reimburse them for political contributions made at his direction.

The chief counsel, Jeffrey Breithaupt, made the claim in a November 2017 court filing and claimed Gallaher would reimburse employees for contributions made “at his direction” to candidates for city council and the Sonoma County Board of Supervisors.

The staggering amount of campaign spending in the November 2016 election led some Santa Rosa City Council members at the time to say they planned to explore ways to level the playing field in future elections, such as district elections, which have since been implemented.

Two of the three candidates supported by Flater - Tibbetts and Olivares - were elected to the City Council. The new council would have been poised to decide the fate of a plan by Gallaher to build nearly 870 homes along Chanate Road, the largest proposed housing project in the city. Last July, a judge voided a 2017 deal to sell the property to Gallaher.

A lawyer for the Press Democrat, Thomas R. Burke, said the justices’ decision affirms the right of newspapers to provide “accurate coverage of political spending.”

“The court of appeals unanimous ruling today is a huge victory for that kind of reporting and is a clear rejection of lawsuits that simply target speech about important public issues like election spending,” Burke said.

In their Friday decision, the appeal court justices ordered Gallaher and Flater to pay attorneys fees, including those accrued on appeal.

The lawsuit also named David McCuan, a Sonoma State University political science professor who was quoted in the stories, and the reporter who wrote them, Kevin McCallum, who has since moved out of state.

“I feel vindicated and relieved,” McCuan said. “I was engaged in free speech, informing the public and doing my job as a public educator.”

Press Democrat Executive Editor Catherine Barnett praised the appeal court justices’ decision.

“For a newspaper our size, this costly legal fight was a risky undertaking,” Barnett said. “So it is especially heartening that the court’s decision vindicates both our reporting and our watchdog role.”

You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com. On Twitter @jjpressdem.