Opinion ID: 2774347
Heading Depth: 2
Heading Rank: 2

Heading: VLK’s Appeal

Text: 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, 111718 (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. EnviroTechnics, 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