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Havilah Real Property Services v. VLK, LLC

Court of Appeals of Columbia District

January 29, 2015

HAVILAH REAL PROPERTY SERVICES, LLC, APPELLANT/CROSS-APPELLEE,
v.
VLK, LLC, ET AL., APPELLEES/CROSS-APPELLANTS

Argued: September 19, 2013.

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[Copyrighted Material Omitted]

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Appeals from the Superior Court of the District of Columbia. (CAB-2474-08). (Hon. Todd E. Edelman, Trial Judge).

Affirmed.

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.[*]

OPINION

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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 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

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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.

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 Karen[2] 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 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

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before analyzing Havilah's sole 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.

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.

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

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property. The settlement agreement was memorialized as an amendment to VLK's operating agreement and the Carlson lawsuit ...


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