HAVILAH REAL PROPERTY SERVICES, LLC v. VLK, LLC ( 2015 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
Nos. 12-CV-403 & 12-CV-542
HAVILAH REAL PROPERTY SERVICES, LLC,
APPELLANT/CROSS-APPELLEE,
v.
VLK, LLC, ET AL.,
APPELLEES/CROSS-APPELLANTS.
Appeals from the Superior Court
of the District of Columbia
(CAB-2474-08)
(Hon. Todd E. Edelman, Trial Judge)
(Argued September 19, 2013 Decided January 29, 2015)
Eric M. Rome, with whom June L. Marshall was on the brief, for
appellant/cross-appellee.
William J. Carter for appellees/cross-appellants.
Before WASHINGTON, Chief Judge, BLACKBURNE-RIGSBY, Associate Judge,
and NASH, Associate Judge of the Superior Court.*
BLACKBURNE-RIGSBY, Associate Judge: This case presents a question of
first impression in the District of Columbia: Whether the filing of a notice of lis
*
Sitting by designation pursuant to D.C. Code § 11-707 (2001).
2
pendens 1 in connection with litigation over real property is protected by an
absolute or a conditional privilege as a defense to a claim of tortious interference
with contract and/or prospective advantage. Factually, this case is essentially
about a bitter dispute between two companies over the right to purchase certain
real properties for investment purposes, stemming, in large part, from the personal
rivalry between the companies‘ owners over the attention of one man. Vicky Lynn
Karen operated a business venture with her former romantic partner LaMar
Carlson (―Carlson‖), entitled VLK, LLC (―VLK‖), to purchase distressed
properties in the District of Columbia for resale to developers. At some point,
Carlson started dating Joan A. Alderman (―Alderman‖), who also owned a
company, Havilah Real Property Services, LLC (―Havilah‖), which was engaged
in essentially the same type of business as VLK. Karen believed that Carlson was
conspiring with Alderman to buy property that Karen was interested in having
VLK purchase, thereby, in Karen‘s view, hurting VLK‘s business interests to the
benefit of Havilah and Alderman.
1
A lis pendens notice is ―designed to enable interested third parties to
discover the existence and scope of pending litigation affecting the title to or
asserting a mortgage, lien, security interest, or other interest in real property.‖
Heck v. Adamson, 941 A.2d 1028, 1029-30 (D.C. 2008) (citations, internal
quotation marks, and brackets omitted).
3
Karen sued Carlson, Alderman, and Havilah in Maryland in connection with
some of the business deals with which she claimed Carlson and Alderman had
interfered. As part of the Maryland lawsuit, Karen filed lis pendens on fifty-one
Havilah-owned properties in the District of Columbia. Karen ultimately lost the
Maryland lawsuit against Alderman and Havilah, but won against Carlson for
breaching his fiduciary duty to VLK. The case before us followed in the aftermath
of the Maryland lawsuit when Havilah filed suit against VLK and Karen2 in D.C.
Superior Court, alleging that the lodging of lis pendens on thirty-one of the fifty-
one Havilah-owned properties at issue in the Maryland lawsuit was in bad faith and
without probable cause, and amounted to malicious prosecution and tortious
interference with contract and/or prospective advantage.3
VLK filed motions for summary judgment on Havilah‘s claims of malicious
prosecution and tortious interference. The trial judge granted summary judgment
on the malicious prosecution claim, concluding that the filing of thirty-one lis
pendens is not a recognized ―special injury‖ necessary to maintain that cause of
2
For purposes of this opinion, in general, appellees/cross-appellants VLK,
LLC and Karen are collectively referred to as ―VLK.‖
3
Havilah‘s second amended complaint also alleged that the filings of lis
pendens constituted an abuse of process, but that claim was abandoned prior to
trial.
4
action. However, the trial judge denied summary judgment on the tortious
interference claim, determining that such filings were only ―conditionally
privileged‖ in the District of Columbia and did not act as a complete bar against
such a claim. Consequently, the jury rendered a verdict in favor of Havilah on the
sole remaining claim and awarded damages of $602,942.
Both parties appealed. Havilah seeks reversal of the malicious prosecution
decision, claiming that the filing of thirty-one lis pendens satisfied the ―special
injury‖ element. VLK filed a cross-appeal, seeking reversal of the tortious
interference decision on the basis that lis pendens are protected by an absolute
privilege, thereby protected from suit unconditionally. Alternatively, VLK argues,
inter alia, that Havilah failed to present sufficient evidence that VLK had
interfered with any of its specific business relationships, and that Havilah‘s
damages resulting from the filing of lis pendens were incorrectly calculated.4
As we are presented with an issue of first impression in VLK‘s cross-appeal,
we decide to first address VLK‘s arguments before analyzing Havilah‘s sole
4
Additionally, VLK claims the trial court erred in admitting substantial
amounts of hearsay into evidence and that Havilah failed to mitigate damages as a
matter of law. See infra note 8.
5
contention. Based on the forthcoming reasons, we affirm the trial court‘s various
decisions and the jury‘s verdict and award.
We hold that, in the District of Columbia, the act of engaging in litigation is
conditionally privileged against a claim of tortious interference with contract
and/or prospective advantage, meaning that it is a complete defense to such a claim
if the defendant can establish that the prior litigation asserted a legally protected
interest in good faith. If the prior litigation was pursued in good faith and therefore
privileged, then the filing of a lis pendens ancillary to that litigation is also
privileged. The converse is also true; if the litigation was not pursued in good
faith, then the lis pendens is likewise not privileged. In other words, even if the
jury is persuaded that an individual lis pendens may have been filed, in whole or in
part, based on improper motives independent from the litigation, there can be no
liability if the underlying lawsuit itself was asserted in good faith. In this case,
whether VLK filed the Maryland lawsuit in good faith was a factual question for
the jury to decide, and the jury was entitled to conclude that the Maryland lawsuit
was not pursued in good faith and therefore not a privileged act, and thus that VLK
was liable for damages proximately caused by the prior litigation, including
damages occasioned by the filing of the thirty-one lis pendens related to that
litigation.
6
In addition, we conclude that there was sufficient evidence in the record that
VLK‘s filings of notice of lis pendens interfered with Havilah‘s prospective
business, and that the trial court correctly instructed the jury on how to calculate
Havilah‘s damages. And, as to Havilah‘s appeal, we hold that the filing of thirty-
one lis pendens in this case does not meet the high ―special injury‖ standard
needed to maintain a claim of malicious prosecution.
I. Factual Background
In 2004, Vicky Lynn Karen formed VLK, LLC. LaMar Carlson, with whom
she had previously been in a romantic relationship, was a minority member in the
company. VLK purchased distressed properties in Southeast Washington, D.C.,
and sold them to developers for profit. Between 2005 and 2006, VLK purchased
five properties, two of which were formerly owned by a defunct company named
FABCO Investment Company (―FABCO‖).5 Karen claimed that VLK planned to
purchase more FABCO properties, and that she and Carlson discussed a list of
potential FABCO properties to purchase on many occasions.
5
Although FABCO was a defunct company, VLK was able to purchase the
two properties from the surviving widow of the last known officer and stockholder
of FABCO, Anna Bulls.
7
In 2006, the business relationship between Karen and Carlson broke down
and VLK filed suit against Carlson for, among other things, breach of fiduciary
duty and conversion (―Carlson lawsuit‖). Specifically, Karen alleged that Carlson
refused to transfer title to five promissory notes that encumbered one of VLK‘s
properties to VLK after having acted on VLK‘s behalf in negotiating assignment of
those notes. Karen and Carlson subsequently entered into a settlement agreement,
whereby Carlson agreed not to seek or undertake any efforts to directly or
indirectly purchase real property within specifically marked regions (―Restricted
Area‖) without providing VLK the ―corporate opportunity‖6 to first purchase the
6
The ―corporate opportunity doctrine‖ provides that:
[I]f there is presented to a corporate officer or director a
business opportunity which the corporation is financially
able to undertake, is, from its nature, in the line of the
corporation‘s business and is of practical advantage to it,
is one in which the corporation has an interest or a
reasonable expectancy, and, by embracing the
opportunity, the self-interest of the officer or director will
be brought into conflict with that of [the] corporation, the
law will not permit [the officer or director personally] to
seize the [business] opportunity. . . . And, if, in such
circumstances, the interest[s] of the corporation are
betrayed, the corporation may elect to claim all of the
benefits of the transaction for itself, and the law will
impress a trust in favor of the corporation upon the
property, interests, and profits so acquired.
Robinson v. R & R, Inc., 943 F. Supp. 18, 21 (D.D.C. 1996) (emphasis added)
(quoting Guth v. Loft, 5 A.2d 503, 511 (Del. 1939)).
8
property. The settlement agreement was memorialized as an amendment to VLK‘s
operating agreement and the Carlson lawsuit was dismissed without prejudice.
In early 2007, Carlson became romantically involved with Alderman, the
principal member of Havilah. Havilah first purchased properties — lots which
VLK had previously sought to purchase — in January 2007. By mid-2007,
Havilah had rapidly purchased about fifty properties, most of them FABCO
properties. Karen soon learned of Carlson‘s romantic relationship with Alderman,
and suspected that Carlson and Alderman were also working together in a business
capacity to purchase properties for Havilah using business strategies that she and
Carlson had previously devised for VLK. Karen claimed that she entered into an
oral agreement with Carlson, whereby he agreed to resume his former role in VLK.
In exchange, Karen agreed to: ―(1) dismiss the [Carlson lawsuit] with prejudice;
(2) grant Carlson signature authority on VLK‘s bank account; and (3) rescind the
Amendment [limiting Carlson‘s ability to independently purchase properties within
the Restricted Area] to the Operating Agreement.‖ Karen later discovered,
however, that Carlson had not satisfactorily maintained his end of the bargain,
because he transferred $10,000 from VLK‘s account to Havilah in consideration
for a certain piece of property without Karen‘s knowledge or consent.
9
In November 2007, VLK initiated the Maryland lawsuit against Havilah,
Alderman, and Carlson, based on Carlson‘s transfer of the $10,000, and the belief
that Havilah and Carlson had bought various properties that VLK intended to
purchase, including FABCO properties, based on previously developed business
strategies for VLK. VLK claimed these actions amounted to, inter alia, conspiracy
and tortious interference, denying VLK the corporate opportunity to first purchase
the properties. In connection with the Maryland Lawsuit, VLK filed lis pendens on
fifty-one Havilah properties located in the District of Columbia.
During the pendency of the Maryland lawsuit, Havilah filed the instant
action against VLK in Superior Court, along with an emergency motion to cancel
and release the lis pendens on its properties. The motions judge denied Havilah‘s
motion to cancel and release the lis pendens and stayed the proceedings pending
the outcome of the Maryland lawsuit. In February 2009, the jury in the Maryland
lawsuit found in favor of Havilah and Alderman on all counts. However, the jury
found that Carlson had breached his fiduciary duty to VLK. The lis pendens were
released a few days later.
Havilah subsequently recommenced the instant action against VLK for
malicious prosecution and tortious interference, claiming that the filing of lis
10
pendens on thirty-one Havilah-owned properties pursuant to the Maryland lawsuit
was done in bad faith, motivated by Karen‘s romantic feelings for Carlson and
jealousy over his romantic relationship with Alderman, and that these filings
caused the properties to lose value, deterred potential buyers, and placed the
properties at risk of foreclosure. The thirty-one lis pendens at issue concern
properties (1) outside the Restricted Area limitation placed on Carlson, (2) inside
the Restricted Area but acquired after VLK had agreed to release Carlson from the
restraint, or (3) never identified by VLK as properties of interest.
VLK filed motions for summary judgment. As to malicious prosecution,
VLK argued that Havilah failed to support the necessary element of ―special
injury‖ for the claim to survive as a matter of law. As to tortious interference,
VLK claimed that the notices of lis pendens were absolutely privileged. VLK also
argued that Havilah failed to mitigate its damages by rejecting VLK‘s offer to
release the lis pendens if Havilah agreed to enter into an escrow agreement with it
for proceeds from the sale of any property pending final resolution of the Maryland
lawsuit.
In two detailed written orders, the trial court granted VLK‘s motion for
summary judgment as to malicious prosecution, but denied its motions as to
11
tortious interference. The trial court determined that Havilah failed to demonstrate
that the filing of thirty-one lis pendens constituted a ―special injury‖ to survive
summary judgment on the malicious prosecution count. First, the court found that
lis pendens are intrinsic to lawsuits over real property interests and, thus, cannot be
a ―special injury‖ as this court has previously defined the term. See Ammerman v.
Newman, 384 A.2d 637, 639 (D.C. 1978) (defining ―special injury‖ as an injury
―which would not necessarily result in suits to recover for like causes of action.‖).
Second, the trial court determined that the damage suffered by the filing of lis
pendens, namely, diminution of value and difficulty in selling the properties,
seemed ―indistinguishable from the ‗loss of income‘ that [this court] has
specifically excluded from its definition of special injury.‖ Lastly, the trial court
found that it did not matter whether one or thirty-one lis pendens were filed,
because a finding of special injury is not predicated on the number of filings.
The trial court came to a different conclusion on tortious interference.
Regarding the argument that lis pendens were ―absolutely privileged,‖ the trial
court found that, although there was no case law directly on point in the District of
Columbia, it appeared from our case law on related issues that we follow the
―minority rule‖ that such filings are only conditionally privileged, meaning that a
tortious interference claim can be maintained in limited instances where the
12
underlying litigation was filed in bad faith.7 Regarding whether Havilah mitigated
damages, the trial court determined that Havilah‘s refusal to enter into a proposed
escrow agreement with VLK in exchange for the release of lis pendens was not
unreasonable as a matter of law, given that the escrow account gave some control
of Havilah‘s properties to VLK by requiring VLK‘s approval of Havilah‘s land
deals. Further, the trial court concluded that, viewed in the light most favorable to
Havilah as required by the summary judgment standard, Havilah undertook
sufficient measures to mitigate damages by filing motions to cancel the lis pendens
and at least engaging in negotiations over the proposed escrow account.
Consequently, Havilah‘s sole remaining claim of tortious interference went
to trial. At trial, Havilah introduced Karen as a hostile witness, and presented
7
The trial court looked to three primary cases. Specifically, in Casco
Marina Dev., LLC v. District of Columbia, 834 A.2d 77, 84 (D.C. 2003), this court
cited the language from the Restatement (Second) of Torts in formulating the
elements of tortious interference. The Restatement, in turn, adopts the ―minority
rule‖ that such claims may be based on prior civil litigation instituted in bad faith.
See Restatement (Second) of Torts § 767 cmt. c. (1979). In Bowhead Information
Technology Servs., LLC v. Catapult Technology, Ltd., 377 F. Supp. 2d 166, 176
(D.D.C. 2005), the federal court concluded that it believed District of Columbia
courts follow the Restatement and would, therefore, hold that ―colorable suits may
give rise to a tortious interference claim in the limited circumstance where the
defendant brought or threatened to bring suit with the sole intention to harass.‖
Lastly, in Beard v. Edmondson & Gallagher, 790 A.2d 541, 549 (D.C. 2002), in
dicta, this court appeared to note that a tortious interference action based on the
filing of a lis pendens notice was permissible if timely filed.
13
testimony from Arthur Konopka, VLK‘s former attorney who helped it acquire
distressed properties, to testify as an expert witness regarding the legal effects of
lis pendens on real property. Gregory C. Syfax, a real estate appraiser, testified as
an expert witness on behalf of Havilah regarding his calculations of lost value to
Havilah‘s properties that were subject to lis pendens. Carlson testified and denied
providing Alderman with real estate advice on the properties at issue or
confidential information secured from VLK. Lavrne Robinson, Havilah‘s real
estate agent on many of the properties at issue, acknowledged that there was
―active interest in virtually all of the properties‖ — including nine properties with
sales contracts — until the filing of lis pendens, and that he continued to try to sell
the properties even after the lis pendens were filed to no avail. Robinson claimed
that once he made potential buyers aware of the lis pendens on a property, the
buyers lost interest in ―moving forward until the lis pendens was removed.‖ For
example, in one instance, the property was scheduled for closing but did not go
through after the lis pendens was filed. Jean-Marie Sylla, Havilah‘s primary
attorney during the Maryland lawsuit, testified that he advised Havilah against
entering into an escrow agreement with VLK.
Alderman corroborated much of Robinson‘s testimony, stating that she was
successful in marketing her properties prior to the filings of lis pendens. In fact,
14
she claimed that by November 2007, she had sales contracts ―on almost all‖ of her
properties, and that the market was in a ―frenzy‖ as people were buying properties
at ―an alarming rate.‖ However, after the lis pendens were filed, those offers fell
through and interest in the properties diminished. Alderman claimed that the
filings caused the properties to be ―tied up‖ and unsellable, even though she
continued to market them. Lastly, over objection, Havilah proffered numerous
exhibits into evidence for the limited purpose of demonstrating Havilah‘s business
expectancies in the properties at issue and its efforts to mitigate damages after the
lis pendens were filed. The trial court gave a limiting instruction prohibiting the
jury from considering the facts contained within the documents for the truth of the
matter asserted. These exhibits included, inter alia, emails between prospective
buyers and realtors and Havilah, listing agreements, draft sales contracts,
appraisals, internal notes, and draft settlement agreements. In its defense, VLK
presented testimony from Oakleigh J. Thorne, another real estate appraiser, an
expert witness who refuted Syfax‘s appraisal of the change in value of Havilah‘s
properties, and Ronald Early, VLK‘s attorney during the Maryland lawsuit,
regarding his good faith basis for filing that lawsuit.
At the end of the nearly two-week-long trial, the trial court gave the
following jury instruction regarding a claim of tortious interference with
15
prospective advantage: ―The law prohibits one from maliciously interfering with
the business rights of another. Business expectancies, which are commercially
reasonable to anticipate are considered to be property, and therefore, are protected
from unjustified interference. These expectancies need only be probable and
include future contracts and lost opportunities to obtain customers.‖ (Emphasis
added). With regard to the privilege defense, the trial court instructed the jury that:
[I]f you find the plaintiff has established the elements of
the claim of interference with [pro]spective business
advantage by a preponderance of the evidence, the
defendants may avoid liability by proving that the
interference was legally justified or privileged.
In this case[,] the conduct is legally justified and/or
privileged if defendants can establish with respect to the
31 lots at issue in this matter that they believed that they
had a good faith basis for asserting a [bona fide] claim.
In other words, the defendants can demonstrate that their
interference was justified and/or privileged by showing
that they had a good faith belief that they had a legally
protected interest that existed as of the time of the alleged
interference, meaning that at the time the lis pendens
were filed, and that their action[s] were taken to protect
that interest.
Lastly, on the issue of damages calculation, the trial court instructed the jury that:
The measure of damages for the wrongful filing of a lis
pendens is the difference between the fair market value
of the property at the time of the filing of the lis pendens
and its fair market value at the time of its release.
In arriving at a fair market value you may consider the
expert testimony, the contracts that [Havilah] Real
16
Properties Services, LLC, [had] in place at or around the
time of the lis pendens filing and any other evidence
and/or testimony that you deem relevant and persuasive.
You may also award the plaintiff damages to compensate
it for other expenses that you may [find] that it [incurred]
as a result of the lis pendens filings.
After three days of jury deliberation, the jury rendered a verdict in favor of Havilah
and awarded damages of $602,942. These appeals followed.
II. VLK’s Appeal
VLK presents four arguments on appeal, two of which merit full discussion.8
Primarily, VLK argues that the trial court erred in denying summary judgment on
8
We dispose of VLK‘s two other claims summarily. VLK argues that the
trial court erred in admitting Havilah‘s exhibits into evidence because these
documents constituted hearsay and were prejudicial. VLK also claims that the trial
court plainly erred in failing to examine each exhibit individually prior to
admission. Based on the record, we are satisfied with the trial court‘s reasoning in
admitting the documents into evidence, i.e., for the purposes of proving Havilah‘s
business expectancies and demonstrating that Havilah tried to mitigate its damages,
rather than for the truth of the matter asserted, and that, consequently, the
documents did not constitute inadmissible hearsay. See Puma v. Sullivan, 746
A.2d 871, 875-76 (D.C. 2000). Further, any potential prejudice was mitigated by
the trial court‘s jury instruction on how these exhibits were to be analyzed. See
Sherrod v. United States, 478 A.2d 644, 659 (D.C. 1984) (―The jury is presumed,
unless the contrary appears, to follow the [trial judge‘s] instructions.‖). Lastly,
VLK lacks support for its argument that the trial court was required to, sua sponte,
review each exhibit for potential evidentiary issues prior to its admission.
(continued . . .)
17
the tortious interference claim because the filings of lis pendens in connection with
the Maryland lawsuit were absolutely privileged. VLK also argues that, even if the
lis pendens were not absolutely privileged, Havilah presented no evidence that
VLK interfered with any specific business relationship, and that the method for
calculating damages was speculative.
A. Privilege of Lis Pendens Filings as a Defense to a Claim of Tortious
Interference with Contract and/or Prospective Advantage
We review the trial court‘s grant of summary judgment de novo. See
Woodland v. District Council 20, 777 A.2d 795, 798 (D.C. 2001). ―In reviewing a
(. . . continued)
Accordingly, there was no error, much less plain error, on the part of the trial court
in not doing so.
VLK also claims that Havilah‘s refusal to enter into an escrow agreement
with VLK constituted a failure to mitigate damages as a matter of law. This
argument again lacks merit. See generally Trs. of Univ. of Dist. of Columbia v.
Vossoughi, 963 A.2d 1162, 1178 (D.C. 2009) (―[T]he duty to mitigate damages,
bars recovery for losses suffered by a non-breaching party . . . that could have been
avoided by reasonable effort and without risk of substantial loss or injury.‖)
(citations and internal quotation marks omitted). Generally ―[w]hat is a reasonable
effort [to mitigate damages] is a question of fact,‖ Howard Univ. v. Lacy, 828 A.2d
733, 739 n.8 (D.C. 2003) (citations and internal quotation marks omitted), and thus
for the jury to decide. In any event, we cannot say that Havilah‘s actions in filing
the motion to cancel the lis pendens, continuing to market the properties after the
filings, and engaging in negotiations with VLK were unreasonable as a matter of
law. See Nader v. de Toledano, 408 A.2d 31, 42 (D.C. 1979).
18
trial court order granting summary judgment, we conduct an independent review of
the record, and [the] standard of review is the same as the trial court‘s standard in
considering the motion for summary judgment.‖ Joeckel v. Disabled Am.
Veterans, 793 A.2d 1279, 1281 (D.C. 2002). Summary judgment is granted if
there are no genuine issues as to any material fact and the moving party is entitled
to judgment as a matter of law. Id. The party opposing the motion must at a
minimum present enough evidence to make out a prima facie case in support of its
claim. Id. at 1281-82.
The District of Columbia has not conclusively resolved the question of
whether the filing of a notice of lis pendens ancillary to litigation over real
property interests is protected by an absolute or a conditional privilege against a
claim of tortious interference with contract and/or prospective advantage; thus, in
deciding this issue, our review is de novo. See In re Greenspan, 910 A.2d 324, 335
(D.C. 2006). Appellate courts across the country, as well as our trial court, are
divided. Compare Westfield Dev. Co. v. Rifle Inv. Assocs., 786 P.2d 1112, 1117-
18 (Col. 1990) (en banc) (adopting the minority rule that lis pendens are
conditionally privileged), with Albertson v. Raboff, 295 P.2d 405, 409 (Cal. 1956)
(adopting the majority rule that lis pendens are absolutely privileged). See
Georgetown Park Assocs. II, Ltd. P’ship v. Eastbanc, Inc., No. 06-CV-8154, Order
19
Granting Defendants‘ Partial Mot. Dismiss (D.C. Super. Ct. Jul. 30, 2007)
(concluding that absolute privilege, rather than conditional privilege, applied to the
filing of lis pendens).
The majority of jurisdictions have concluded that the filing of lis pendens is
protected by an absolute privilege, so that any subsequent lawsuit for tortious
interference based on such filings is barred as a matter of law, even if the lawsuit
underlying the lis pendens filings was asserted in bad faith or with malice. 9
―Consequently, neither [the plaintiff‘s] motive nor evidence tending to show
motive is relevant‖ in jurisdictions that adopt the absolute privilege rule; rather, the
―only relevant inquiry is whether the lis pendens notices bore a reasonable relation
to the action filed.‖ Birdsong v. Bydalek, 953 S.W.2d 103, 114 (Mo. Ct. App.
1997) (emphasis added). On the other hand, a few states have concluded that the
filing of lis pendens is only conditionally or ―qualifiedly‖ privileged, meaning that
an action for tortious interference arising from such filings are generally barred,
9
See, e.g., Manders v. Manders, 897 F. Supp. 972, 978 (S.D. Tex. 1995);
Zamarello v. Yale, 514 P.2d 228, 230 (Alaska 1973); Woodcourt II, Ltd v.
McDonald Co., 173 Cal. Rptr. 836, 839 (Cal. Ct. App. 1981); Procacci v. Zacco,
402 So. 2d 425, 427 (Fla. Dist. Ct. App. 1981); Ringier Am., Inc. v. Enviro-
Technics, Ltd., 673 N.E.2d 444, 447 (Ill. App. Ct. 1996); Powell v. Stevens, 866
N.E.2d 918, 921 (Mass. App. Ct. 2007); Birdsong, supra, 953 S.W.2d at 13-14;
Lone v. Brown, 489 A.2d 1192, 1197 (N.J. Super. App. Div. 1985); Superior
Constr., Inc. v. Linnerooth, 712 P.2d 1378, 1381-82 (N.M. 1986).
20
but can be maintained if the underlying litigation was brought in bad faith or with
malice.10
VLK makes three arguments in support of its contention that we should
adopt the ―absolute privilege‖ rule: (1) a majority of states have adopted the
absolute privilege rule; (2) public policy supports the adoption of an absolute
privilege rule because publications made during the course of a judicial proceeding
already enjoy an absolute privilege from later claims of defamation; and (3) the
absolute privilege rule is in conformance with this jurisdiction‘s lis pendens statute
because it already provides remedies for filings made in bad faith.
We disagree and conclude that our adoption of the Restatement‘s
formulation of the claim of tortious interference compels us to hold that the filing
of a notice of lis pendens is only protected by a conditional privilege in the District
of Columbia. If the litigation underlying the lis pendens filing was pursued in
good faith, then both it and any notice of lis pendens filed in connection with that
action are privileged and thus cannot form the basis for any valid claim of tortious
10
See, e.g., Warren v. Bank of Marion, 618 F. Supp. 317, 325 (W.D. Va.
1985); Westfield Dev. Co., supra, 786 P.2d at 1117-18; Belliveau Bldg. Corp. v.
O’Coin, 763 A.2d 622, 630 (R.I. 2000); Kensington Develop. Corp. v. Israel, 407
N.W.2d 269, 270 (Wis. Ct. App. 1987).
21
interference. If the underlying litigation is found not to have been pursued in good
faith, then no privilege attaches to the underlying litigation, and a defendant can be
liable for all damages proximately caused by that litigation, including damages
occasioned by the filing of lis pendens related to that litigation. Our acceptance of
the conditional privilege rule comports with other courts that have similarly
adopted the Restatement. We also believe that it is the fairer rule because it
provides an adequate remedy to parties that have suffered harm as a result of
litigation over real property interests filed in bad faith.11
Elements of tortious interference with contract and/or prospective advantage
are derived from the Restatement. To make out a prima facie case of tortious
interference, the plaintiff must demonstrate: ―(1) existence of a valid contractual or
other business relationship; (2) the defendant‘s knowledge of the relationship; (3)
intentional interference with that relationship by the defendant; and (4) resulting
11
Further, we note that because infra Part III we hold that a party cannot
maintain a claim for malicious prosecution based on the filing of lis pendens in a
prior litigation, a party should have some avenue for relief in the District of
Columbia for lis pendens filings made in connection with litigation pursued in bad
faith. Given our precedent and adoption of the Restatement, we conclude that the
better recourse in the District of Columbia for such an aggrieved party is via a
claim of tortious interference. Cf. Albertson, supra, 295 P.2d at 410 (concluding
that even though a lis pendens filing was absolutely privileged against a
disparagement of title claim, damages flowing from the lis pendens may still be
cognizable in the context of a claim of malicious prosecution).
22
damages.‖ Onyeoziri v. Spivok, 44 A.3d 279, 286-87 (D.C. 2012) (citing
Restatement (Second) of Torts § 766 (1979)); see also Casco Marina Develop.,
LLC, supra note 7, 834 A.2d at 84 (―The elements of tortious interference with
prospective business advantage mirror those of interference with contract.‖).
Unlike the common law, the Restatement formulates the claim ―in terms of
whether the interference [was] improper or not, rather than in terms of whether
there was a specific privilege to act in the manner specified.‖ See Restatement
(Second) of Torts § 767 cmt. b (1979) (emphasis added). Thus, the ―motive‖
behind the interference is the key consideration in determining whether recovery
under the tort is available. See Sorrells v. Garfinckel’s, Brooks Brothers, Miller &
Rhoads, Inc., 565 A.2d 285, 290 (D.C. 1989) (adopting Restatement § 767). In
fact, Restatement (Second) of Torts § 773 (1979), explicitly recognizes as an
affirmative defense only interfering conduct amounting to a ―bona fide claim,‖ i.e.,
[o]ne who, by asserting in good faith a legally protected
interest of his own or threatening in good faith to protect
the interest by appropriate means, intentionally causes a
third person not to perform an existing contract or enter
into a prospective contractual relation with another does
not interfere improperly with the other‘s relation if the
actor believes that his interest may otherwise be impaired
or destroyed by the performance of the contract or
transaction.
(Emphasis added). Consequently, contrary to the majority rule, the Restatement
necessarily recognizes only a ―conditional privilege‖ to the filing of litigation and
23
acts taken ancillary to such litigation, such as lis pendens filings. See Restatement
§ 767 cmt. c.
Consistent with our case law and the Restatement‘s construction of the legal
justification and privilege defense, we hold that the recordation of lis pendens
ancillary to litigation over real property interests is only protected by a conditional
privilege against a claim of tortious interference with contract and/or prospective
advantage in the District of Columbia.12 This means that a defendant may avoid
liability if he or she can establish that the notice of lis pendens was filed pursuant
to litigation that was initiated in good faith. See Sorrells, supra, 565 A.2d at 290
(observing that under the Restatement § 766, claims of legal justification are
―vitiated‖ if malice is proved); see also NCRIC, Inc., supra, 957 A.2d at 901;
Onyeoziri, supra, 44 A.3d at 288; Westfield Develop. Co., supra, 786 P.2d at 1118
(―[T]he interferer may still escape liability by establishing, as an affirmative
defense, that he or she was asserting a bona fide claim.‖). Whether the underlying
litigation was undertaken in good faith is a question of fact for the jury to decide.
See Oparaugo v. Watts, 884 A.2d 63, 82 (D.C. 2005); see also Onyeoziri, supra,
44 A.3d at 290.
12
It is also worth mentioning that, although dicta, this court has previously
indicated that a tortious interference claim based on the filing of lis pendens in bad
faith could be maintained. See Beard, supra note 7, 790 A.2d at 549.
24
Our conclusion that lis pendens are only conditionally privileged in the
District of Columbia is in conformance with other jurisdictions that have similarly
adopted the Restatement. For example, like us, the Colorado Supreme Court
concluded that a filing of lis pendens was only conditionally privileged based, in
large part, on Colorado‘s adoption of the Restatement, stating that a privilege
asserted as a defense to a claim of tortious interference must be made in good faith.
See Westfield Dev. Co., supra, 786 P.2d at 1118 (citing Restatement § 733)
(―[W]here the means of alleged interference is the filing of lis pendens, we believe
that a litigant asserting a bona fide claim has a privilege to interfere.‖) (emphasis
added). Similarly, the Rhode Island Supreme Court concluded that a lis pendens
filing is only protected by a conditional privilege and may be overcome upon a
showing of ―actual malice.‖ See Belliveau Bldg. Corp., supra note 10, 763 A.2d at
630 (citing Restatement § 773).13 Conversely, jurisdictions that have not adopted
the Restatement‘s formulation of the tort claim generally apply an absolute
privilege rule to such filings. See generally Manders, supra note 9, 897 F. Supp. at
13
See also See Guerdon Ind., Inc. v. Rose, 399 N.W.2d 186, 187-88 (Minn.
Ct. App. 1987) (citing the Restatement in stating that a conditional privilege
applied to the filing of a notice of lis pendens); McReynolds v. Short, 564 P.2d 389,
393 (Ariz. Ct. App. 1977) (same).
25
977 (concluding simply that ―[t]he privilege of legal justification is an affirmative
defense to a tortious interference claim.‖).14
VLK does point us to decisions from other jurisdictions explaining why, as a
matter of policy, an absolute privilege should apply. In Albertson, a California
case considered by many jurisdictions to be the ―premier‖ decision on this issue,
the court concluded that lis pendens were ―clothed‖ with the same absolute
privilege that blankets publications made during the course of judicial proceedings.
295 P.2d at 408.15 See generally Pond Place Partners, Inc. v. Poole, 567 S.E.2d
881, 894 (S.C. Ct. App. 2002). The Massachusetts case Powell succinctly distilled
Albertson and its progeny‘s reasoning for holding that an absolute privilege should
apply to lis pendens filings, explaining that jurisdictions that have extended the
14
In one possible outlier case, Birdsong, the court concluded that lis
pendens were absolutely privileged but also seemed to adopt the Restatement‘s
definition of tortious interference. 953 S.W.2d at 111, 115. However, it appears
that the Missouri court did not also explicitly adopt Restatement § 733, which
articulates the ―bona fide claim‖ conditional defense.
15
It is worth noting that, in California, Albertson‘s broad holding in favor of
an absolute privilege rule for lis pendens filings has been ―somewhat limited or
‗partially abrogated‘‖ by statutory amendment. La Jolla Grp. II v. Bruce, 149 Cal.
App. 4th 461, 473 (Cal. Ct. App. 2012). The amendment explicitly states that ―[a]
recorded lis pendens is not a privileged publication unless it identifies an action
previously filed with a court of competent jurisdiction which affects the title or
right of possession of real property, as authorized or required by law.‖ Id.
(emphasis added) (quoting Cal. Civil Code § 47 (b)(4) (West 2005)).
26
absolute privilege rule have adopted or accepted one or more of the following
rationales in doing so:
(1) with few exceptions, any publication made in judicial
proceedings enjoys an absolute privilege from
subsequent claims of defamation; (2) the only purpose of
recording a notice of lis pendens is to put prospective
buyers on constructive notice of the pendency of the
litigation; (3) the notice of lis pendens is purely
incidental to the action in which it is filed, refers
specifically to that action, and has no existence apart
from that action; and (4) the recording of a notice of lis
pendens is in effect a republication of the proceedings in
the action and is, therefore, accorded the same absolute
privilege as any other publication in that action.
Powell, supra note 9, 866 N.E.2d at 921. Admittedly, the logic for concluding that
lis pendens filings are absolutely privileged is not unpersuasive.16
While we reject the ―absolute privilege‖ analytical framework that is set
forth in this line of cases, our ruling today –– which makes the privilege status of a
lis pendens filing dependent on the good faith basis of the underlying litigation ––
vindicates many of the same concerns that provide the rationale for those
decisions. Lis pendens filings do serve a socially beneficial function in
16
Some courts, however, may not necessarily view a lis pendens filing as a
communication made in the course of judicial proceedings. See Warren, supra
note 10, 618 F. Supp. at 325 (―such a notice can easily be viewed as an
extrajudicial publication involving merely a private act, and not involving any
function of the court, thus falling outside the scope of protection given to
communications made in the course of judicial proceedings.‖).
27
safeguarding the rights of third parties. As a general rule, litigants should be
incentivized to make such filings without fear of reprisal. However, for the
reasons set forth above, we see no reason to extend such protection, as many of the
―absolute privilege‖ jurisdictions appear to have done, to litigants who have
initiated the underlying litigation in bad faith. In fact, this court has similarly
concluded that publications made during the course of judicial proceedings are
absolutely privileged from subsequent claims of defamation. See Oparaugo,
supra, 884 A.2d at 79 (―Under this jurisdiction‘s rule, an attorney has an absolute
privilege to publish defamatory matter concerning another in communications
preliminary to a proposed judicial proceeding, or in the institution of, or during the
course and as a part of, a judicial proceeding in which he [or she] participates as
counsel, if it has some relation to the proceeding.‖) (brackets in original) (citations
and internal quotation marks omitted). This recognition of an absolute privilege
for judicial publications in the context of a defamation suit is based on the public
policy of ―securing to attorneys as officers of the court the utmost freedom in their
efforts to secure justice for their clients.‖ Id. (quoting Restatement (Second) of
Torts § 586 cmt. a).
Even though we have never considered the privilege in the context of a
tortious interference claim, we recognize that there is some tension with our
28
decision here that litigation and the ancillary filings of lis pendens are only
conditionally privileged, given our prior recognition of an absolute privilege for
publications made during the course of judicial proceedings for defamation. The
Restatement appears to acknowledge this tension as well, stating that ―[u]nlike
other intentional torts [i.e., defamation or slander of title], tortious interference
with contract has not developed a crystallized set of definite rules as to the
existence or non-existence of a privilege to act.‖ Belliveau Bldg. Corp., supra note
10, 763 A.2d at 628 (citing Restatement § 767). Recognizing and acknowledging
what may appear to be some inconsistency, we believe a few key differences
between the two claims warrant the difference in treatment.
First, the reasoning underlying an absolute privilege rule for judicial
publications in a defamation suit is different from the concerns at issue in the
tortious interference context. As previously stated, parties to litigation are granted
an absolute privilege in defamation suits over the publication of any relevant
statements made during the judicial proceedings because attorneys should have
freedom in their efforts to secure ―justice‖ for their clients. See Oparaugo, supra,
884 A.2d at 79. Our recognition of only a conditional privilege for claims of
tortious interference does not go against this stated policy; instead, it seeks to
prevent parties from utilizing the litigation process as a coercive weapon. See
29
Restatement § 767 cmt. b. Put another way, the absolute privilege rule is necessary
in a defamation suit because attorneys should be free to publish statements during
the course of judicial proceedings without fear of being later subject to suit, but
upholding an absolute privilege for a tortious interference claim would go against
the purpose of this claim, which, like the instant case, is to prevent bad faith
litigants from abusing the judicial process solely for the purpose of interfering with
another party‘s business prospects. See, e.g., Warren, supra note 10, 618 F. Supp.
at 325 (―The one holding title to the property . . . deserves the protection of a legal
disincentive against an ill willed creditor who, without justification, wishes to
apply undue pressure by [tying] up the record owner‘s property with a notice of lis
pendens for what could be a period of years.‖). The conditional privilege rule
strikes this balance; it protects litigants with bona fide real property interests from
future lawsuits, while discouraging those who would use a notice of lis pendens as
a coercive, bad faith tactic. See id.
Second, our jurisdiction embraces the Restatement‘s definition of tortious
interference and its defenses, which makes clear that any assertion of privilege
must be conditioned on a ―bona fide claim‖ made in good faith. See Restatement
§ 773. In so doing, we implicitly agree that the public policy of encouraging free
access to the courts, forming the basis of an absolute privilege, must give way, in
30
the context of a tortious interference claim, to the competing public policy concern
of preventing bad faith litigants from abusing the judicial process. See Westfield
Dev. Co., supra, 786 P.2d at 1117 (observing this same dichotomy). Many courts
have recognized that there are simply differing views on this issue, and that it is in
large part determined by how the claim has evolved in their respective
jurisdictions. See Birdsong, supra, 953 S.W.2d at 114. Consequently, the fact that
an absolute privilege applies to publications during judicial proceedings in the
defamation context is not contrary to our decision today in the tortious interference
context.
Finally, we reject VLK‘s assertion that the absolute privilege rule is in
conformance with our lis pendens statute, based on the notion that the statute
already provides adequate remedies for lis pendens filed in bad faith. Under our lis
pendens statute, a party seeking to terminate such filings must bring an action in
the Superior Court to cancel the notice. D.C. Code § 42-1207 (g) (2010 Supp.).17
Pursuant to subsection (h), the trial court may then:
issue an order canceling the notice of pendency of action
prior to the entry of judgment in the underlying action or
proceeding if the court finds any one of the following:
17
We note that subsection (h) of the lis pendens statute was added in 2010,
after the events of the Maryland lawsuit and the release of the thirty-one lis
pendens. Lis Pendens Amendment Act, 2010 D.C. Sess. Law Serv. 18-180 (West).
31
***
(3) The underlying action or proceeding has not
been prosecuted in good faith, with all reasonable
diligence, and without unnecessary delay.
(Emphasis added). Further, under subsection (d), the trial court may impose
sanctions for the filing. ―In determining whether sanctions are appropriate . . . [the
trial court] should assess whether the non-prevailing party‘s filing of lis pendens
was for an improper purpose, or was unwarranted by existing law or a frivolous
argument for the extension, modification, or reversal of existing law, or was
without evidentiary support.‖ 6921 Georgia Avenue, N.W., Ltd. P’ship v.
Universal Cmty. Dev., LLC, 954 A.2d 967, 973 (D.C. 2008). That said, ―[a] trial
court need not make a finding of bad faith in relation to a party‘s filing of lis
pendens in order to exercise its discretion in imposing sanctions. ‖ Id.
This statutorily authorized sanction, which the trial court has discretion to
impose, is not analogous to a common-law claim of tortious interference for
damages. It is a fundamental legal principle that ―[c]ompensatory damages are
intended to redress the concrete loss that the plaintiff has suffered by reason of the
defendant‘s wrongful conduct,‖ State Farm Mut. Auto. Ins. Co. v. Campbell, 538
U.S. 408, 416 (2003) (citations and internal quotation marks omitted), while
sanctions are simply a ―penalty or coercive measure that results from failure to
32
comply with a law, rule, or order.‖ Alabama v. North Carolina, 560 U.S. 330, 340
(2010) (citing Black‘s Law Dictionary 1458 (9th ed. 2009)). Consequently,
because a common law claim of tortious interference intends to restore what was
lost, or otherwise ―make the plaintiff whole,‖ it cannot be said that sanctions offer
comparable relief to ―compensatory damages.‖ See generally Croley v.
Republican Nat’l Comm., 759 A.2d 682, 689 (D.C. 2000) (citation omitted). Since
sanctions and damages serve different purposes, it would be unfounded to hold that
an absolute privilege rule is consistent with our lis pendens statute simply because
the statute authorizes sanctions. Further, it is a ―well-established maxim of
statutory construction that statutory remedies are presumed to be cumulative to the
common law, and do not abolish common law remedies unless so declared in
express terms or by necessary implication.‖ Towers Tenant Asso’n, Inc. v. Towers
Ltd. P’ship, 563 F. Supp. 566, 575 (D.D.C. 1983). Nothing within the language of
our lis pendens statute leads us to conclude that the statute intended to foreclose a
claim of tortious interference in instances such as here.
Accordingly, the trial court did not err in denying VLK‘s motion for
summary judgment on the claim of tortious interference on the basis that only a
conditional privilege applied to the filing of a notice of lis pendens in connection to
the Maryland lawsuit. Consequently, the question of whether VLK was entitled to
33
the privilege defense for the thirty-one notices of lis pendens depended on whether
VLK initiated the underlying Maryland lawsuit in good faith, which was a factual
question for the jury to decide at trial.18 See Oparaugo, supra, 884 A.2d at 82.
B. Evidence of Tortious Interference and Calculation of Damages
We next turn to VLK‘s alternative argument that Havilah failed to present
evidence at trial that it had specific business relationships that it lost as a result of
VLK‘s pursuit of the underlying litigation, or that VLK knew about a particular
relationship and intentionally interfered with it. Because this was a jury trial, we
18
There is some ambiguity, on the record before us, as to whether the trial
court directed the jury to assess the good faith basis of the underlying litigation,
which, as we hold today, would be the proper inquiry, or whether the jury was
improperly invited to assess the motivation of VLK in filing the individual lis
pendens, which would not be actionable if the underlying litigation were found to
be privileged. Much of the case appears to have gone forward on the notion that
the relevant consideration was VLK‘s motivation in filing the individual lis
pendens. See, e.g., Second Amended Complaint at ¶ 51 (―[VLK] intentionally, and
for an improper purpose, interfered with Havilah‘s business relationships,
expectancies, and contracts by filing lis pendens on its properties, thereby inducing
a termination of Havilah‘s contracts, business relationships, and expectancies
thereof.‖). Ultimately, however, we are persuaded that the trial court‘s final jury
instructions sufficiently focused the jury on evaluating the merits of the underlying
litigation. (―In this case[,] the conduct is legally justified and/or privileged if
defendants can establish with respect to the 31 lots at issue in this matter that they
believed that they had a good faith basis for asserting a [bona fide] claim.‖) See
Knight v. Georgetown Univ., 725 A.2d 472, 483 (D.C. 1999) (―Jurors are presumed
to follow their instructions . . . .‖).
34
construe VLK‘s claim as a challenge to the trial court‘s denial of its motion for
judgment as a matter of law.19 Within this substantive claim, we also consider
VLK‘s argument that the trial court erred in instructing the jury to apply the fair
market value method of calculating damages.
―A trial court may grant a motion for judgment as a matter of law only if no
reasonable juror, viewing the evidence in the light most favorable to the prevailing
party, could have reached the verdict in that party‘s favor.‖ NCRIC, Inc., supra,
957 A.2d at 902 (citation and internal quotation marks omitted). VLK‘s argument
that Havilah failed to identify specific business relationships can be disposed of by
reference to our decision in Carr v. Brown, 395 A.2d 79, 84 (D.C. 1978). In Carr,
we stated that under the tort of interference with prospective advantage, ―business
expectancies, not grounded on present contractual relationships but which are
commercially reasonable to anticipate, are considered to be property and therefore
protected from unjustified interference.‖ Id. at 84 (emphasis added) (interpreting
William L. Prosser, Torts § 130 at 949 (4th ed. 1971)). We further observed that
these expectancies are considered reasonable in cases where ―there is a background
of business experience on the basis of which it is possible to estimate with some
19
VLK moved for judgment as a matter of law at the close of Havilah‘s
case and again at the close of evidence. Both motions were denied.
35
fair amount of success both the value of what has been lost and the likelihood that
the plaintiff would have received it if the defendant had not interfered.‖ Id. (citing
Prosser, supra, at 950); see, e.g., Robertson v. Cartinhour, 867 F. Supp. 2d 37, 60
(D.D.C. 2012) (concluding that, under District law, the term ―commercially
reasonable to anticipate,‖ requires ―a probability of future contractual or economic
relationship and not a mere possibility‖).
Here, viewing the evidence in the light most favorable to Havilah, as we
must on appeal, there was sufficient evidence for the jury to conclude that it was
commercially reasonable for Havilah to anticipate selling its thirty-one properties
at issue, sales which were thwarted by VLK‘s initiation of litigation and ancillary
filing of lis pendens. For example, the voluminous amount of documentation that
Havilah proffered into evidence showed that it actively marketed the properties,
and that it had generated genuine interest in the properties prior to the filings of lis
pendens. In addition, Alderman testified that Havilah purchased the properties in
the first half of 2007, a time when people were buying ―properties at an ‗alarming
rate,‘‖ and that it was successful in marketing and selling at least some of the
properties until the lis pendens were filed. Robinson, Havilah‘s real estate agent,
corroborated Alderman‘s testimony, stating that he assisted Alderman in entering
sales contracts for some of the properties at issue, but that deals fell through after
36
the lis pendens were filed. As attested by Konopka, Havilah‘s expert witness on lis
pendens, a lis pendens filing makes it practically impossible for a property to be
sold because of the potential risks involved for buyers. In fact, the marketability of
Havilah‘s properties was recognized by VLK and its attorneys, as evidenced in
emails showing that VLK initiated the Maryland lawsuit, at least in part, due to its
concern that Havilah‘s properties were being sold too quickly and for too high a
profit, and in VLK‘s complaint in the Maryland lawsuit, which claimed that
Havilah had ―sold at least three of [the properties] for a significant profit of several
hundred thousand dollars.‖ (Emphasis in original). From this, the jury could also
infer that VLK knew of Havilah‘s expectancies, and that the litigation and
ancillary lis pendens were aimed at interfering with the sale of Havilah‘s
properties. See, e.g., Nat’l R.R. Passenger Corp. v. Veolia Transp. Servs., Inc., 592
F. Supp. 2d 86, 98-99 (D.D.C. 2009) (―[A] plaintiff must show that an interferer
knew of the business expectancy. An interferer‘s knowledge of a plaintiff‘s
relationship or expectancy may be shown by the interferer‘s conduct or spiteful or
threatening words.‖) (citations omitted). Accordingly, based on the evidence
presented at trial, the jury could reasonably conclude that Havilah had realistic
expectancies in the sale of the thirty-one properties, which were damaged by the
initiation of the litigation and the resulting filing of lis pendens, and that VLK was
conscious of Havilah‘s expectancies.
37
With respect to the issue of damages, VLK essentially argues that the
diminished fair market value method of calculating Havilah‘s damages relied on by
the trial court to instruct the jury was too uncertain and speculative because it was
premised on the ―unfounded‖ assumption that Havilah could have sold all of its
properties during the intervening time that the lis pendens were in place. We
disagree. ―Damages may not be based on mere speculation or guesswork. The
evidence offered must form an adequate basis for a reasoned judgment.‖ Vector
Realty Grp., Inc. v. 711 Fourteenth St., Inc., 659 A.2d 230, 234 (D.C. 1994)
(citations and internal quotation marks omitted). However, damages need not be
calculated with ―mathematical precision‖ so long as they are based on a reasonable
estimate of relevant data. See NCRIC, Inc., supra, 957 A.2d at 902-03.
In this case, the trial court relied on Askari v. R&R Land Co., 225 Cal. Rptr.
285, 291 (Cal. Ct. App. 1986) and Haisfield v. ACP Fla. Holdings, Inc., 629 So. 2d
963, 966 (Fla. 1993), which adopted Askari. In Askari, the court held that a party
who wrongfully files lis pendens on another‘s property is liable for the
consequential damages of the diminished value of the property, based on the
principle that ―if [a] vendee has interfered with the vendor‘s freedom . . . by
retaining possession or asserting an interest in the property, the vendor may include
any additional damages caused thereby in the amount necessary to give him the
38
benefit of his bargain.‖ 225 Cal. Rptr. at 292 (emphasis added). Accordingly,
Havilah‘s entitlement to the diminished fair market value of its properties is not
premised on the ―unfounded‖ assumption that it would have sold all thirty-one
properties, but rather, such damages are to compensate Havilah for its loss of
freedom in utilizing its properties during the period of time when the lis pendens
were active. Havilah is permitted to recover these damages so long as it can prove
that the lis pendens hindered its ability to sell the properties, and that it nonetheless
diligently attempted to sell the property, both of which are adequately reflected in
the record. Id. at 291. We do not believe this method for calculating damages is
unduly speculative, especially given that both Askari and Haisfield, along with the
District of Columbia in the breach of contract for real property context, have
adopted this method of calculation. See Quick v. Pointer, 88 U.S. App. D.C. 47,
47, 186 F.2d 355, 355 (1950) (―The established rule in this jurisdiction is that
damages under these circumstances [i.e., breach of contract for real estate] are the
difference between the contract price and the fair market value of the property.‖)
(footnote omitted).
We also note that diminished fair market value damages are consistent with
the Restatement (Second) of Torts § 774A, which deals with damages in the
context of a tortious interference claim. The Restatement states:
39
(1) One who is liable to another for interference with a contract
or prospective contractual relation is liable for damages for
(a) the pecuniary loss of the benefits of the contract or the
prospective relation;
(b) consequential losses for which the interference is a
legal cause; and
(c) emotional distress or actual harm to reputation, if they
are reasonably to be expected to result from the
interference.
(2) In an action for interference with a contract by inducing or
causing a third person to break the contract with the other, the
fact that the third person is liable for the breach does not affect
the amount of damages awardable against the actor; but any
damages in fact paid by the third person will reduce the
damages actually recoverable on the judgment.
(Emphasis added). Accordingly, under the Restatement, a party is specifically
entitled to any consequential damages, which, in the context of lis pendens filings
made in connection with bad faith litigation, include the diminishment in fair
market value. Askari, supra, 225 Cal. Rptr. at 291; Restatement § 774A cmt. d
(―The plaintiff can also recover for consequential harms, provided they were
legally caused by the defendant‘s interference.‖). Although it appears that we have
not previously adopted this particular Restatement section, given our prior
acceptance of the Restatement as it pertains generally to claims of tortious
40
interference, we think it only logical to also adopt the Restatement‘s method of
calculating damages for claims of tortious interference going forward.20
We recognize that, based on the specific facts of this case, the fair market
value method of calculating damages may appear overly generous to Havilah,
given that the value of property generally fell across the country between 2007 and
2009 due to the subprime mortgage crisis. However, as the Askari court explained:
This rule is not intended to penalize a buyer who files a
lis pendens. Changing conditions in the real estate
market may work to the buyer‘s benefit or to his
disadvantage. For example, if the property has increased
in value when the lis pendens is lifted, the damages the
buyer must pay are accordingly reduced. In some cases
the buyer may pay no damages. The buyer‘s damages
are subject to change because the filing of a lis pendens
does not place valuation of the property in a state of
suspended animation.
225 Cal. Rptr. at 292. Based on the foregoing, we conclude the diminished fair
market value method was not an improper method for calculating damages
stemming from lis pendens filings made in connection with bad faith litigation.
Accordingly, the trial court did not err in instructing the jury to apply the fair
market method in calculating Havilah‘s damages.
20
Colorado, which has accepted the conditional privilege rule based on its
adoption of the Restatement, has cited with approval this particular Restatement
provision. See Westfield Develop. Co., supra, 786 P.2d at 1120.
41
III. Havilah’s Appeal
Havilah‘s sole argument on appeal is that the trial court erred in granting
summary judgment in favor of VLK on the malicious prosecution count because
the filing of a lis pendens, or alternatively the filing of thirty-one lis pendens,
satisfies the ―special injury‖ element for a claim of malicious prosecution as a
matter of law. Principally, Havilah argues that the Restatement (Second) of Torts
recognizes that the filing of lis pendens without probable cause satisfies the
―special injury‖ requirement. Havilah further claims that many other jurisdictions
recognize that a lawsuit for malicious prosecution can be brought based on the
filing of lis pendens in bad faith.
Under the District of Columbia‘s formulation of the malicious prosecution
cause of action, Havilah must present evidence that: (1) the underlying suit
terminated in its favor; (2) there was malice on the part of VLK in filing the
underlying suit; (3) there was a lack of probable cause for the underlying suit; and
(4) that it suffered a special injury as a result of the suit. See Joeckel, 793 A.2d at
1282. ―Special injury‖ is defined as an arrest, a seizure of property, or an injury
―which would not necessarily result from suits to recover for like causes of action.‖
Id. (emphasis added) (citations and internal quotation marks omitted). The last
42
definition of ―special injury‖ is at issue here.21 We have repeatedly held that, in
the District of Columbia, ―injuries to reputation, emotional distress, loss of income,
and substantial expense in defending‖ are outside the scope of what constitutes a
―special injury.‖ Id. (citing Mazanderan v. McGranery, 490 A.2d 180, 182 (D.C.
1984), Epps v. Vogel, 452 A.2d 320, 324 (D.C. 1982), and Morowitz v. Marvel,
423 A.2d 196, 198 (D.C. 1980)) (internal quotation marks omitted). We have
narrowly defined ―special injury‖ as part of this court‘s long-standing policy to
―maintain . . . free access to the courts by persons with grievances who might
otherwise be restrained from seeking redress because of their fear of liability
should they fail . . . .‖ Ammerman, supra, 384 A.2d at 641. The fear is that
―[o]therwise litigation would lead, not to an end of disputing, but to its beginning,
and rights violated would go unredressed for fear of the danger of asserting them.‖
Melvin v. Pence, 76 U.S. App. D.C. 154, 157, 130 F.2d 423, 426 (1942).
Recognizing, however, that ―some sort of balance ha[s] to be struck between
the social interest in preventing unconscionable suits and in permitting honest
21
We disagree with Havilah‘s attempt to analogize a lis pendens filing with
an injunction or a seizure of property because a lis pendens does not in and of itself
restrict property interests. Instead, it is more appropriately characterized as simply
notice to third parties of pending litigation regarding the property. See Heck, supra
note 1, 941 A.2d at 1030 n.1 (―[L]is pendens is still only a notice; unlike a lien, a
person obtains no new property interest through the operation of the lis pendens
doctrine.‖ (citations and internal quotation marks omitted)).
43
assertion[s] of supposed rights[,]‖ Joeckel, supra, 793 A.2d at 1282 (quoting Soffos
v. Eaton, 80 U.S. App. D.C. 306, 307, 152 F.2d 682, 683 (1945)), in certain rare
instances, we have allowed malicious prosecution suits on the basis that a party has
sustained an economic injury beyond what is normally incidental to like causes of
action. Joeckel, supra, 793 A.2d at 1283.
For example, in Soffos, the court concluded that Soffos‘ suit for malicious
prosecution should not have been dismissed because the burden of being
compelled to defend against ―successive unconscionable suits [for possession of
real property] is not [an injury] which would necessarily result in all suits
prosecuted to recover for like causes of action.‖ 80 U.S. App. D.C. at 307, 152
F.2d at 683 (internal quotation marks omitted). The court reasoned that, contrary
to our general stated policy of open courts, ―[n]o one is likely to be deterred from
litigating an honest claim by fear that some future jury may erroneously decide that
he has brought two suits maliciously and without probable cause.‖ Id. (footnote
omitted). Consequently, the court determined that in rare instances where one
party consecutively sues another with malice (meaning at least twice), there is ―no
good reason why the law should tolerate repeated abuse of its processes.‖ Id.
44
Likewise, in Davis v. Boyle Bros., Inc., 73 A.2d 517, 520 (D.C. 1950), the
court concluded that Davis articulated an actionable malicious prosecution claim
because, although there was only one suit filed, the underlying action against Davis
constituted ―what might be termed one suit plus[,]‖ meaning ―[i]t involves
something more than the usual suit brought maliciously and without probable
cause.‖ Id. (emphasis added). Specifically, in Davis, defendant Boyle Bros.
explicitly admitted to Davis that it sued the wrong person for failing to pay for
merchandise purchased at its store, and promised her that the suit would be
dismissed. Id. at 519-20. However, after having admitted its error, Boyle Bros.,
nonetheless, maintained suit against Davis and received a default judgment against
her, and even attempted to have a trial on the merits after the default judgment was
set aside. Id. The appeals court concluded that, under these unique ―one suit plus‖
circumstances, this default ―judgment is not an incident of an ordinary suit
involved in this kind of claim.‖ Id. at 520.
In contrast, any economic injuries stemming from a simple filing of lis
pendens cannot accurately be described as an injury beyond what is normally
incidental to like causes of action that meets our narrow definition of ―special
injury.‖ This is because lis pendens are routinely filed in lawsuits involving real
property interests; its primary purpose is to give third parties‘ constructive notice
45
of pending litigation. See 1st Atl. Guar. Corp. v. Tillerson, 916 A.2d 153, 157
(D.C. 2007). See, e.g., Kerns v. Kerns, 53 P.3d 1157, 1162 (Colo. 2002) (stating
that the filing of lis pendens promotes ―the finality of litigation and economy of
judicial resources‖ (citation omitted)). Moreover, a failure to file a notice of lis
pendens in this jurisdiction actually prevents a plaintiff from later invoking its
protections; namely, that a third party acquiring an interest in the property takes his
or her interest subject to the parties‘ rights as finally determined by the litigation.
See 1st Atl. Guar. Corp., supra, 916 A.2d at 157 (―Most jurisdictions, including the
District of Columbia, have enacted statutes requiring a party to record a notice that
litigation affecting property is pending in order to obtain the benefits of lis
pendens.‖); see also Trustee 1245 13th Street, NW No. 608 Trust v. Anderson, 905
A.2d 181, 185 (D.C. 2006) (―[T]he appellee has valid title to the property by
equitable conversion, undisturbed by the foreclosure action since lis pendens was
not invoked . . . .‖ (footnote omitted)).
In addition, the relevant statute also broadly authorizes the filing of lis
pendens for essentially any action or proceeding ―in either state or federal court in
the District of Columbia, or in any other state, federal, or territorial court, affecting
the title to or tenancy interest in, or asserting a mortgage, lien, security interest, or
other ownership interest in real property.‖ D.C. Code § 42-1207 (a) (emphasis
46
added). In fact, we have interpreted the phrase ―other ownership interest in real
property‖ to encompass even claims of equity. See Heck, supra note 1, 941 A.2d at
1029-30; see, e.g., 18A Am. Jur. 2d Corporations § 666 (2013) (concluding that in
a usurpation of corporate opportunity case, ―the corporation may seek an equitable
forfeiture, requiring the shareholder to return any ill-gotten gains‖) (emphasis
added).
Consequently, unlike the extraordinary facts in Soffos and Davis, the lis
pendens filed pursuant to the Maryland lawsuit, which involved real property
interests, cannot be considered an injury that would ―not necessarily result from
suits to recover for like causes of action.‖ For the same reason, any monetary
losses suffered by Havilah stemming from VLK‘s filing of lis pendens are merely
incidental economic losses. See Joeckel, supra, 793 A.2d at 1283.
We have recognized that our adoption of a narrow ―special injury‖
requirement for malicious prosecution claims is the minority position. In fact, we
have admitted that while we are ―aware that the majority of the states have now
rejected a special injury requirement, [we have] nonetheless opted to affirm our
requirement of the same, in the belief that it best promotes this jurisdiction‘s policy
of encouraging free access to the courts.‖ Morowitz, supra, 423 A.2d at 198. The
47
Restatement (Second) of Torts § 677 (1979), which Havilah argues that we should
embrace, follows the majority view and adopts a much broader interpretation of
―injury.‖ Specifically, that Restatement section, which encompasses the tort of
malicious prosecution, explicitly states that bad actors are liable for ―any material
harm that is caused to the person who is deprived of the possession of his land or
other things by his inability to use them for any legitimate purpose.‖ § 677
(Emphasis added). Thus, under the Restatement‘s formulation, Havilah would not
likely be barred from pursuing a malicious prosecution claim against VLK, given
that the filings of lis pendens did, in some way, deprive Havilah from fully utilizing
its properties for a legitimate purpose.22
However, Havilah is not the first party to ask this court to modify, broaden,
or abandon our ―special injury‖ requirement. We have long ―declined prior
invitations to abandon or modify the special injury rule based on the court‘s long-
held belief ‗that it best promotes this jurisdiction‘s policy of encouraging free
access to the courts.‘‖ Joeckel, supra, 793 A.2d at 1284.
22
In addition to the Restatement, Havilah points us to cases from Maryland
and other jurisdictions — including Rhode Island, New Jersey, North Carolina, and
New York — that appear to state in some fashion that a lis pendens filing may
satisfy the injury component for a malicious prosecution claim.
48
Havilah‘s alternative argument, that even if one lis pendens was insufficient
to constitute a special injury, the filing of thirty-one lis pendens together is so
excessive that such a large number of filings should be deemed a special injury, is
similarly unpersuasive. This case fails to satisfy either narrow exception to the
special injury rule that this jurisdiction has previously recognized. It neither
presents the ―two or more‖ malicious lawsuits scenario envisioned in Soffos, nor
the ―one suit plus‖ case articulated in Davis. Although the Soffos court concluded
that the ―burden of being compelled to defend successive unconscionable suits‖
constituted an injury beyond what was normally incidental to like causes of action,
this court has never held that, without more, the burden of having to defend oneself
against a singular suit, even if unconscionable, qualified as a special injury. 80
U.S. App. D.C. at 307, 152 F.2d at 683.
As Davis makes clear, a malicious prosecution claim involving only one
unconscionable suit, i.e., the ―one suit plus‖ scenario, must involve ―something
more than the usual suit brought maliciously and without probable cause which
ordinarily is commenced[.]‖ 73 A.2d at 520. Here, given the context of the
Maryland lawsuit, which by its nature involved numerous properties in dispute, we
do not believe that any of the injuries alleged, i.e., incidental economic losses
stemming from multiple lis pendens filings, would be unique from similar disputes
49
involving multiple properties. Therefore, the number of lis pendens filed pursuant
to this one lawsuit is not dispositive in determining special injury. To hold
otherwise would be contrary to our narrow construction of ―special injury,‖ and to
our policy of maintaining an open court system, since malicious prosecution claims
arguably could then be brought based simply on the number of causes of action
alleged in a single lawsuit. See Ammerman, supra, 384 A.2d at 641.
Lastly, we also find such an argument arbitrary. As the trial court stated,
―one could not logically argue that [twenty-five] lis pendens notices could not
produce a special injury if [thirty-one] could, or that the injury caused by [fifteen]
notices would be less ‗special‘ in any logical way tha[n] stemming from [twenty-
five], and so on down the slippery slope.‖ For all of these reasons, the trial court
did not err in granting summary judgment on the claim of malicious prosecution.
IV. Conclusion
We affirm the trial court‘s various decisions in this complex civil action. On
the issue of first impression, we hold that, in the District of Columbia, the filing of
a notice of lis pendens is protected by a conditional privilege as a defense to a
claim of tortious interference. Thus, such filings can only be the basis for suit in
50
limited instances where it can be shown that the underlying litigation was for an
improper purpose. Accordingly, the trial court did not err in denying summary
judgment on the claim of tortious interference.
Further, in determining damages for a tortious interference claim stemming
from the wrongful filings of lis pendens, we conclude that the fair market value
method is not speculative and is consistent with the Restatement‘s approach for
damage calculations, which we adopt going forward.
Lastly, we likewise conclude that the trial court did not err in granting
summary judgment in favor of VLK on Havilah‘s claim of malicious prosecution
because the filing of a notice of lis pendens, or alternatively thirty-one lis pendens,
did not constitute a ―special injury‖ as a matter of law.
Affirmed.