Havilah Real Property Services, LLC v. Early

ZARNOCH, J. Appellant Havilah Real Property Services, LLC (“Havilah”) is a Maryland limited liability company engaged in the business of buying, selling, and owning real estate. Havilah filed a complaint against attorney Ronald Early and his firm, Lerch, Early & Brewer, Chtd., alleging that Early and the firm (collectively, “the Attorneys”) conspired with one of their former clients to file a frivolous lawsuit against Havilah, thereby engaging in malicious use of process. The Circuit Court for Montgomery County dismissed Havilah’s complaint with prejudice, which Havilah now appeals. For the following reasons, we affirm the judgment of the circuit court.

FACTS AND LEGAL PROCEEDINGS This case is best understood as a story of three separate but related cases. ⁶¹⁸ First, in 2007, Vicky Lynn Karen and VLK, LLC 1 (‘VLK”) retained the Attorneys to represent them. On November 9, 2007, the Attorneys filed a complaint 2 in the Circuit Court for Montgomery County on behalf of VLK against (1) Lamar Carlson, then a member of VLK with whom Karen was formerly romantically involved; (2) Joan Alderman, the principal of Havilah and Carlson’s then-current romantic partner; (3) and Havilah (the “Maryland action”). The essence of the complaint was that Havilah, Carlson, and Alderman had tortiously interfered with VLK’s business prospects by purchasing 48 properties in the District of Columbia. The complaint alleged various counts of fraud, breach of contract, breach of fiduciary duty, and interference with contractual relations, among other counts.

Within a week of filing the complaint, the Attorneys filed 48 lis pendens 3 on D.C. properties owned by Havilah. Havilah sought to terminate the case via motions several times, though all of its attempts were denied: (1) a motion for summary judgment filed on December 15, 2008 and argued at a hearing on January 21, 2009; (2) a motion for judgment filed on February 19; and (3) a renewed motion for judgment filed on February 25. 4 A fourteen-day jury trial conducted from February 9 to February 27, 2009, resulted in a $10,000 jury verdict on March 10, for VLK against Carlson. 5 Havilah was not liable on any of the counts. ⁶¹⁹ While the Maryland action was pending, Havilah and Aider-man filed a complaint 6 against VLK and Karen in the Superi- or Court for the District of Columbia on March 25, 2008. They alleged claims of tortious interference with prospective economic advantage and malicious prosecution. The court later dismissed the malicious prosecution claim, holding that the filing of a lis pendens did not constitute a special injury required to sustain the claim.

A twelve-day jury trial, conducted from January 9 to January 25, 2012, resulted in a verdict for Havilah and Alderman in the amount of $602,942, plus costs and interest, against VLK and Karen. Both sides filed cross-appeals 7 to the D.C. Court of Appeals, which are still pending as of this writing. Finally, we come to the case before us. On May 25, 2012, Havilah filed a complaint in the Circuit Court for Montgomery County against the Attorneys.

The complaint alleged that the Attorneys “knew that there was no probable cause to support” 31 of the 48 lis pendens the Attorneys had filed on Havilahowned properties in the Maryland action. Havilah alleged that Karen and VLK’s intent was to tortiously and maliciously interfere with Havilah’s business relationships in order to punish Karen’s ex-boyfriend, Carlson, the then-current boyfriend of Havilah’s principal, [Alderman] ... and/or, at a minimum, to use Havilah and its properties as leverage to achieve their goals with respect to Carlson, in reckless disregard of the damages those unlawful actions were likely to cause Havilah. On October 19, the circuit court granted the Attorneys’ motion to dismiss the complaint but also granted Havilah leave to amend. ⁶²⁰ Havilah’s amended complaint, filed October 31, included additional allegations as to what the Attorneys knew at the time the 31 lis pendens were filed in the Maryland action. For example, Havilah alleged that the Attorneys knew that “Carlson was Karen’s business partner and ex-lover” and that “Karen remained obsessed with Carlson, and clandestinely observed him and Alderman on occasion.” Havilah also alleged that the Attorneys knew that YLK “had no funds to purchase any of the 31 properties and was no longer actively engaged in acquiring real estate.” Instead, according to Havilah, VLK and Karen sought “to stop Havilah from selling the properties so they could extort money from Havilah and thereby share in the profits despite the fact that they had done no work that would justify any payment.” Ultimately, according to Havilah, the Attorneys “expressed no hesitation and willingly agreed to participate in, and further, Karen’s and VLK’s malicious and tortious goal to harm Havilah and its business interests, and thereby punish Carlson and Aider-man.” Havilah sought at least $980,301 in compensatory damages.

The Attorneys filed a motion to dismiss, or, in the alternative, for summary judgment on November 28, which the circuit court considered at a hearing on February 27, 2013. At the beginning of the hearing, the judge stated “I believe that I actually remember parts of this case, certainly not much of it, but I remember this of Ms. Karen’s case. And I remember that they were buying properties there in Anacostia near the stadium____[B]ut I do have some familiarity with the underlying case here in the State of Maryland. And I actually have some memory of it.” 8 The Attorneys emphasized that Havilah could not establish that there was a lack of probable cause to initiate the Maryland action because the circuit court had “denied three dispositive motions in that lawsuit.” They also argued that the complaint was deficient ⁶²¹ because there was “no proof of actual malice ... [and] no proof of independent harm.” Havilah conceded that it had not alleged actual malice in the complaint and argued that “the malice is imputed by acting outside the box, knowing the facts, and taking actions not justified by the facts.” In an oral ruling, the court found that [T]he court has considered the defendant’s motion to dismiss the amended complaint.

And there is only that one count of conspiracy to commit a malicious prosecution. The court is not satisfied that there’s been the appropriate showing in the pleadings to justify that matter going forward. And that’s kind of by admission of counsel.... And the court for the reasons articulated in the argument, I don’t believe there’s been a sufficient preliminary setting forth of facts for one, there are no specific facts to show that the attorney acted with malice, bad intent, or out of personal interest.

I think the—he has to do that to overcome the qualifying privilege.... I find that Havilah really can’t establish—even the element of lack of probable cause required support in the conspiracy claim against the attorneys. In this case, the court actually has already talked about it in argument here, heard the case, denied a motion for summary judgment, a motion for directed verdict at the close of the plaintiffs case, and a motion for directed verdict at the close of the case as a whole in this case. There was certainly more than probable cause to go forward....

The court dismissed the complaint with prejudice in a written order filed on March 4, 2013. Havilah timely filed this appeal. Additional facts will be discussed below. QUESTIONS PRESENTED Havilah raises five issues 9 on appeal, which we have reordered and reworded as: ⁶²² 1.

Should the Court apply the substantive law of the District of Columbia or the State of Maryland with respect to Plaintiff's claim for Conspiracy (Malicious Use of Process)? 2. Did the Circuit Court err in dismissing Plaintiff’s Complaint due to Plaintiff's failure to allege actual malice on the part of the attorney Defendants? 3. Whether the denial of a Motion for Summary Judgment, or a Motion for Judgment, in the underlying action establishes probable cause as a matter of law in a subsequent action for malicious use of process? 4. Whether Maryland law recognizes that the filing of a lis pendens constitutes a special injury for the purposes of an action for Malicious Use of Process? 5.

If this Court holds that District of Columbia law must be applied, whether collateral estoppel bars this action based on the holding of the Superior Court of the District of Columbia or whether this action must be stayed pending the outcome of the appeal on that issue in the D.C. action? I. Did the circuit court err when it found there was probable cause to bring the Maryland action?

II

Did the circuit court err when it concluded that Havilah’s allegations of “imputed malice” were insufficient?

III

Does Maryland or D.C. substantive law apply when evaluating Havilah’s claim of special injury?

IV

Did the circuit court err when it concluded that the filing of a lis pendens is not a special injury? V. Did the circuit court err when it found that Havilah’s suit is barred by collateral estoppel? Because our answer of “no” to the first two questions conclusively disposes of the appeal, we decline to reach the remaining issues. We therefore affirm the judgment of the circuit court.

STANDARD OF REVIEW When reviewing a motion to dismiss, an appellate court must determine “whether the trial court was legally correct” in concluding that the “alleged facts and permissible inferences” of a complaint “nonetheless fail to afford relief to the plaintiff.” Sprenger v. Public Serv. Comm’n of Md., 400 Md. 1, 21 , 926 A.2d 238 (2007). The reviewing court must ⁶²³ “assume the truth of, and view in a light most favorable to the non-moving party, all well-pleaded facts and allegations contained in the complaint, as well as all inferences that may reasonably be drawn from them.” Parks v. Alpharma, Inc., 421 Md. 59, 72 , 25 A.3d 200 (2011) (Quotations omitted). The court is confined to “the universe of facts pertinent to the court’s analysis of the motion” and focuses on “the four corners of the complaint and its incorporated supporting exhibits, if any.” Id.

(Quotations omitted). DISCUSSION Havilah alleged only one count in its complaint: conspiracy to commit malicious use of process. Because “no action in tort lies for conspiracy to do something unless the acts actually done, if done by one person, would constitute a tort,” we must determine whether Havilah adequately pled that the Attorneys committed the alleged tort of malicious use of process. See Alleco Inc. v. Harry & Jeanette Weinberg Foundation, Inc., 340 Md. 176, 190 , 665 A.2d 1038 (1995) (Quotation omitted).

Malicious use of process 10 has five required elements: (1) a prior civil proceeding must have been instituted by the defendant; (2) the proceeding must have been instituted without probable cause; (3) the prior civil proceeding must have been instituted by the defendant with malice; (4) the proceedings must have been terminated in favor of the plaintiff; and (5) the plaintiff must establish that damages were inflicted upon the plaintiff by arrest or imprisonment, by seizure of property, or other special injury which would not necessari ⁶²⁴ ly result in all suits prosecuted to recover for a like cause of action. See One Thousand Fleet Ltd. P’ship v. Guerriero, 346 Md. 29, 37 , 694 A.2d 952 (1997) (Citations omitted). The circuit judge based his decision to dismiss the complaint on two grounds: (I) Havilah failed to show a lack of probable cause, and (II) Havilah failed to allege malice. We address each basis in turn.

I. Probable Cause In discussing the probable cause element in his oral ruling, the circuit judge referred to the Maryland action and stated that “the court actually has already talked about it in argument here, heard the case, denied a motion for summary judgment, a motion for [judgment] at the close of the plaintiffs case, and a motion for directed verdict at the close of the case.... There was certainly more than probable cause to go forward.... ” Havilah argues that the denials of its motion for summary judgment and motions for judgment in the Maryland action do not “establish probable cause as a matter of law in a subsequent action for malicious use of process.” It contends that the circuit court erred in reaching that conclusion because “the evidence was voluminous” and there was no explanation of the reasons for the denials of the motions. It also emphasizes that there was no evidence that the circuit court, in denying the motions in the Maryland action, “parse[d] its holding as to specific properties” and argues that “while there may have been probable cause for filing the action and the lis pendens as to certain properties, there was no basis in law or fact to support those actions with respect to the 31 properties at issue.” Probable cause, in malicious use of process, “means a reasonable ground for belief in the existence of such state of facts as would warrant institution of the suit or proceeding complained of.” One Thousand Fleet Ltd. P’ship, 346 Md. at 37 , 694 A.2d 952 (Quotation omitted). The lack of probable cause is an “indispensable element[ ],” without which a claim ⁶²⁵ of malicious use of process must fail.

Owens v. Graetzel, 149 Md. 689, 696 , 132 A. 265 (1926). A plaintiff seeking to establish a suit for malicious use of process on the ground of conspiracy between a client and an attorney has the burden of “show[ing] such act or acts as amount to a lack of probable cause and an agreement to bring an action understood by both attorney and client to be groundless, and brought as such.” North Point Const. Co. v. Sagner, 185 Md. 200, 208 , 44 A.2d 441 (1945). A prior judgment against the defendant, now the plaintiff in a malicious use of process case, is generally “conclusive proof of probable cause,” even if the judgment is later reversed on appeal. 11 Owens, 149 Md. at 696 , 132 A. 265 ; see also Clements v. Odorless Excavating Apparatus Co., 67 Md. 461, 463-64 , 10 A. 442 (1887).

Here, however, what the circuit court found in support of probable cause was not a judgment against Havilah, but the denials of its two motions for judgment. 12 When a court denies a motion for judgment, it finds that “the evidence serves to prove a fact or permits an ⁶²⁶ inference of fact that could enable an ordinarily intelligent mind to draw a rational conclusion therefrom in support of the right of the plaintiff to recover.” Cavacos v. Sarwar, 313 Md. 248, 259 , 545 A.2d 46 (1988) (Quotation omitted); see also Md. Rule 2-519(b). Although no Maryland cases have considered whether rulings on motions for judgment have any bearing on a later determination of probable cause, case law of other states sheds some light on the issue. The states that have considered the question generally fall into two camps, with the dividing line being whether a prior ruling is just one factor to consider in a probable cause evaluation or whether it creates a presumption of probable cause. In Kirk v. Marcum, 713 S.W.2d 481, 485 (Ky.Ct.App.1986), the Court of Appeals of Kentucky rejected the contention that “probable cause was established as a matter of law by the trial court’s failure to sustain [the defendant’s] motion for a directed verdict” in the underlying action.

The court afforded no presumption of probable cause “merely because the defendant loses prejudgment motions” because “[i]n ruling on a defendant’s motion for directed verdict the court must draw all fair and rational inferences in favor of the plaintiff and grant the motion only when the evidence is insufficient to support a verdict for the plaintiff.” Id. Arizona likewise takes a narrow view of the persuasiveness of a ruling on a prior motion for judgment and treats the denial of such a motion as just one factor in the probable cause inquiry. 13 See Chalpin v. Snyder, ⁶²⁷ 220 Ariz. 413 , 207 P.3d 666, 672 (Ct.App.2008) (denial of a motion for judgment “is not conclusive evidence that a party initiating a claim had probable cause to bring it for purposes of a malicious prosecution action”). The United States Court of Appeals for the Eighth Circuit provides an example of the alternative “presumption” approach. In Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1080 (8th Cir.1999), the Court of Appeals held that the “rejection of [the plaintiffs] motion for judgment as a matter of law ... fatally undermines its claims for malicious prosecution.” The Court reasoned that because the applicable Federal Rule of Civil Procedure, Rule 50(a), “permits dismissal when ‘there is no legally sufficient evidentiary basis for a reasonable jury to find for’ the non-moving party at the close of that party’s evidence,” 14 the denial of a motion for judgment showed that “reasonable jurors could differ as to whether [the defendant] should prevail.” Id.

In other words, “[i]f reasonable jurors could find in [the defendant’s] favor, it follows that there was probable cause for bringing the counterclaims, that is they were pursued with a reasonable belief of success.” Id. Other courts that have adopted the presumption of probable cause in cases involving the denial of a motion for summary judgment 15 are California, Georgia, and Pennsylvania. See Roberts v. Sentry Life Ins., 76 Cal.App.4th 375 , 90 Cal.Rptr.2d 408, 414 (1999) (“denial of [the] defendant’s summary judg ⁶²⁸ ment in an earlier case normally establishes there was probable cause to sue, thus barring a later malicious prosecution suit”); 16 Davis v. Butler, 240 Ga.App. 72 , 522 S.E.2d 548, 550 (1999) (holding that the “denial of summary judgment constitutes a legal determination that the action has substantial justification, because it is not groundless or frivolous and can proceed to jury trial,” thereby precluding an abusive litigation claim); Meiksin v. Howard Hanna Co., 404 Pa.Super. 417 , 590 A.2d 1303, 1307 (1991) (The denial of a motion for summary judgment “suggests that there was competent evidence of sufficient quantity and quality to demonstrate probable cause for a reasonable