Daily Development for
Thursday, March 18, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

BROKERS; COMMISSION; INTENTIONAL INTERFERENCE: A neighboring landowner has the right to oppose a development application and to appeal its grant. Therefore, absent sham litigation, such opposition cannot be the basis for a broker's claim of intentional interference with its right to collect a commission.

Fraser v. Bovino, 317 N.J. Super. 23, 717 A.2d 20 (App. Div. 1998).

In one of three related cases, a landowner contracted to sell its property contingent upon the buyer's obtaining all necessary approvals to construct a certain number of condominium units. In a separate agreement, the seller agreed to pay a real estate commission. When an owner of adjacent property (who had earlier attempted unsuccessfully to buy the land for itself) objected to the proposed development, it allegedly induced the buyer's engineer to withdraw from the project and then offered the buyer a sum of money to drop the project.

While a zoning board application was pending, the broker sued the adjacent landowner, the original engineering company, and others opposed to the proposed condominium project. In that suit, the broker alleged that the actions taken by certain parties in opposing the development project tortiously interfered with its expected real estate commissions. The zoning board approved the project, but a corporation controlled by the adjacent landowner commenced a court action which, though unsuccessful, expended three years through three courts. These court challenges delayed the project. The buyers were unable to raise additional funds and abandoned the project.

After some procedural difficulties, the original torious interference suit was dismissed and a second similar suit was instituted. This time, the suit was brought in the name of the real estate agency by whom the original broker was employed. It included a number of additional defendants, but was still based on the original claims, although, by this time, the substance of the allegations was that the actions of the neighboring landowner were "baseless and bogus." Shortly thereafter, the selling landowner filed a substantially similar complaint. By reason of various statutes of limitation, most of the seventeen counts in the broker's complaint were dismissed. This left only those counts against the landowner and his company relating to their actions in opposing the application for the condominium development project.

The appellate court upheld the dismissal of these counts. It stated that a neighboring landowner possesses a statutory right to receive notice of a zoning application and to appear in opposition to the requested variances. Consequently, according to the court, an exercise of that statutory right, without more, does not give rise to a cause of action for damages. Likewise, the exercise of a further right to appeal a determination by a zoning board cannot give rise to a cause of action for loss of real estate commissions. The one exception to this immunity is if the conduct at issue is "a mere sham to cover ... an attempt to interfere directly with the business relationships of the competitor."

The court found that the question of whether particular conduct constitutes a mere sham which subjects the actor to potential tort liability, "is answered objectively, without consideration of the actor's underlying motivation, no matter how improper it may be." Following a decision of the United States Supreme Court, the court found that to constitute sham litigation, and thus expose a litigant to loss of its immunity, "the lawsuit must be objectively baseless in the sense that no reasonable litigants ... would conclude that the suit is reasonably calculated to elicit a favorable outcome." Here, the broker could not persuade the court that this very high threshold had been breached.

Although the court had found the statute of limitations or other procedural obstacles barred claimes against the neighboring property owner based upon his efforts to persuade the original project engineer to withdraw, the court did take up a claim of professional malpractice against the engineer based upon an actual withdrawal. The court found found that because the zoning approval was granted with little or no delay caused by the withdrawal, no damage was incurred by the broker by reason of such interference. Similarly, the court found no liability for the engineer's alleged complicity in the monetary offer made to the buyer to not pursue its purchase. Since buyers rejected the proposal, this offer also did not result in any loss of commissions. Presumable similar reasoning was the basis for dismissal in the first lawsuit of claims against the landowner based upon these allegations.

Comment 1: The refusal to inquire into the motive of the landowner in opposing the suit smacks of the NoerrPennington doctrine, which generally immunizes parties who raise legitimate claims against potential competitors in opposition to requests for public approvals. The court noted that New Jersey has not yet recognized general immunity under NoerrPennington, but that application of the concept to interpretation of tortious interference cases is consistent with the spirit of that doctrine.

Comment 2: As to those acts other than the lawsuit opposing the zoning, perhaps the best lesson to be drawn here is that plaintiffs in tortious interference cases must take extra care to demonstrate cause and effect. Evil motives, and even evil acts, are not enough. The plaintiff must show that the evil actor achieved his goal.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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