USING LITIGATION AS A WEAPON:
By ANTHONY J. SEBOK
Monday, Nov. 05, 2001
If, as Clausewitz said, war is the continuation of politics by other means, then in America litigation is often just the continuation of business by other means. But are there limits to what someone can do by using the threat of litigation?
An interesting new case in Florida raises important questions about how far the courts will allow themselves to be used as a weapon in fights between neighbors, businesses, and even environmental groups and corporations.
Wealthy and Wealthier: Fighting Over Fisher Island
Fisher Island, off the Florida coast, is one of the wealthiest places in America. As the Broward Daily Business Review notes, it is home, for example, to Oprah Winfrey and Boris Becker. Recently, the development firm Boca Investors Group tried to buy the entire 216-acre islandwith an eye to selling new homes to more very wealthy but perhaps not as famous people.
As a result, some of the residents of Fisher Island got a case of NIMBY(Not In My BackYard)-itis. Thirteen of them filed a series of lawsuits against Boca Investors Group.
Boca Investors Group subsequently lost the sale. As a result, Fisher Island was bought by a resident for $55 millionwho is, ironically, now going ahead with plans to build exactly the sort of luxury homes Boca Investors Group intended to build.
Suing Back: The Tortious Interference Claim
End of story? Not exactly. Having been sued, and lost the sale, Boca Investors Group sued back. It claimed that the thirteen residents had conspired with their lawyers to use meritless litigation to scare off potential financial backers, and ruin the completion of its purchase of Fisher Island just before closing.
The legal claim was for tortious interference with prospective economic advantage a type of claim that is becoming all too familiar in this country. Boca Investors Group alleged that the residents who hired lawyers and filed lawsuits did so with the intent to improperly interfere with its normal business activity of buying and developing land.
The idea behind a tortious interference claim is as old as capitalism. Even the free market needs "rules of the road," and when someone violates those rules, an injured business can sue in tort for lost profits. Thus, a prospective contract just like a piece of machinery in a factory enjoys the protection of tort law.
Suing Citizens for Speaking Out?
The thirteen Fisher Island residents must have felt the suit against them was straight out of Alice in Wonderland. From their point of view, they were concerned citizens and Boca Investors Group was a big corporation that wanted to ruin their fragile island with too much development. They might reasonable ask: If a developer can punish a citizens' group for speaking out by filing a lawsuit, then what will happen to political organizing and community resistance to corporate America?
For a while, the lawsuit against the residents seemed to be gaining ground. The judge assigned the case in Miami, Judge Thomas Wilson, Jr., refused to dismiss it, forcing the residents to spend millions in dollars in legal fees.
And even worse, from the residents' perspective, after years of discovery, Boca Investors Group found what it believed to be its "smoking gun": a memo that, it alleges, proves that the residents "brainstormed" with their lawyers about what types of suits they could file to derail the closing. The memo was significant because it is the type of evidence that generally can convince a judge to send a lawsuit like this one to a jury.
A Broad Immunity to Brainstorm Possible Suits?
Yet at the last minute, one of the residents' lawyers made a novel argument that convinced the judge to dismiss the whole suit. The lawyer cited an earlier Florida Supreme Court case that said that a lawyer had "complete immunity" to say things, in the course of conducting a lawsuit, that would otherwise constitute tortious interference. Why not, argued this lawyer, extend this absolute immunity to an individual's statements made in preparation of filing a lawsuit, too?
Judge Wilson accepted the argument. Accordingly, he declared that none of the residents could be found to have tortiously interfered with Boca Investors Group based exclusively on evidence that they had threatened to file, or actually filed, meritless lawsuits.
Implications of the Immunity: Malicious Prosecution Claims Alone?
Does Judge Wilson's decision imply that, in Florida, anyone who wants to harry a competitor, or a builder, or a manufacturer who uses objectionable child labor policies, can hire a lawyer to file lawsuits that are not intended to win?
According to the lawyers who argued before Judge Wilson, that seems to be 99% right: Lewis Brown of Gilbrite, Heller & Brown in Miami, who represented the defendants, said that the ruling means that if Boca Investors Group wants to recover their lost profits, they cannot sue for tortious interference, only for "malicious prosecution."
Malicious prosecution is an old and well-established tort as is its private law twin, "wrongful civil litigation." Under these two causes of action, one can sue someone for maliciously initiating a groundless criminal prosecution or civil lawsuit. However, the two are unlikely to give much comfort to Boca Investors Group and others who are similarly situated.
In Florida, as in the rest of the country, the torts of malicious prosecution and wrongful civil litigation are limited by a very high hurdle: The plaintiff must show a "bona fide termination" of the action that is alleged to have been brought in bad faith. In civil cases, the hurdle is often insuperable. In America, where most tort suits are settled, false and malicious lawsuits often do not reach a "bona fide" termination; they settle instead.
That means criminal "malicious prosecution" claims are much easier to win than "wrongful civil litigation" claims. In criminal cases, a "bona fide termination" is often easy to show: false arrests (hopefully) result in either dropped charges or an acquittal.
Accordingly, malicious prosecution is a very useful deterrent to stop people from calling false information into the police (although the police, too, have a way of expressing their dislike of false alarms). A wrongful civil litigation claim such as Boca Investors Group might have brought, in contrast, is much less likely to deter or, in the end, to succeed.
Will Florida Scare Off Investment By Allowing Meritless Lawsuits?
Is this ruling a problem for Florida businesses? It may well be. Imagine that Donald Trump wanted to stop Disney from developing a theme park near his property in Palm Beach and has an army of lawyers at the ready, to file hundreds of lawsuits challenging the parks. Some of the suits are threatened; a few are even filed.
Disney may decided that, rather than fighting the massive suits and incurring huge expense, it will simply pick up its marbles and develop the theme park in another location, where the locals are poorer and less well organized. Is this what Florida wants? Unlikely.
On the other hand, the ruling will predictably have benefits, too. Imagine that Disney next tries to develop its theme park on land in a low-income community land that sits on a lovely bay, where generations of local residents have lived in peace and harmony with the manatees.
If everything were right with the world, the State of Florida, the EPA and the local government would not allow Disney to build the theme park unless a wide range of public concerns were met. But we don't live in a perfect world.
Now imagine that a bright young public interest lawyer were to meet with the local residents and explain that they can bring suit, alleging, for example, some defect in the title to the land Disney bought. The lawyer might point out that while the lawsuit's chance of success might be slim to none, the suit along with a well-coordinated public relations campaign still might drive Disney out of the bay, leaving it for the residents and the manatees.
One virtue of Judge Wilson's new rule, then, is that it makes it easier to protect the manatees against Disney. But it is a rule that sweeps very broadly and can be used by the rich as well as the poor. Moreover, I suspect that if the Florida courts uphold Judge Wilson's radical reinterpretation of the law of tortious interference, it will be Oprah Winfreys and Boris Beckers, and not the manatees, whose backyards will most frequently be protected.