Splash, LLC v. Shullman Family Ltd. Partnership
56 Misc.3d 556, 51 N.Y.S.3d 852 (2017)
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Rule of Law:
Secretly financing a third party's non-frivolous legal challenge against a business competitor, motivated by economic self-interest rather than sole malice, does not constitute 'wrongful means' for a claim of tortious interference with prospective business relations.
Facts:
- Plaintiffs operated a car wash at a premises owned by Shullman Family Limited Partnership (SFLP). Both parties knew the lease would not be renewed upon its expiration on April 30, 2013.
- In 2010, plaintiffs signed a lease for a new, nearby location to relocate their business, contingent upon obtaining the necessary municipal approvals from the Town of Bedford.
- While plaintiffs sought these approvals, SFLP, who planned to open its own car wash at the original location, secretly retained a land use attorney and experts to assist local residents, Dino DeFeo and Greg DiNapoli, in opposing plaintiffs' application.
- SFLP instructed the retained attorney and experts to misrepresent to town officials that they were hired by the residents, concealing SFLP's role as the financier.
- The opposition funded by SFLP contributed to delays in the approval process for plaintiffs' new location.
- In March 2013, plaintiffs alleged that SFLP's agents, while performing a site inspection, punctured the roof of the leased premises, causing a water leak that damaged plaintiffs' property.
Procedural Posture:
- Plaintiffs sued defendants in the Supreme Court of New York, Westchester County (a trial-level court), alleging tortious interference, breach of good faith, property damage, and failure to return a security deposit.
- Separately, nonparty Dino DeFeo, who was secretly funded by the defendants, commenced a CPLR article 78 proceeding in the Supreme Court against the Town of Bedford to annul the municipal approvals granted to the plaintiffs.
- The Supreme Court in the article 78 proceeding annulled the Town's grant of use variances, finding they lacked a rational basis.
- The judgment in the article 78 proceeding was appealed and subsequently affirmed by the Appellate Division, Second Department (an intermediate appellate court).
- After plaintiffs' lease expired and they held over, defendants initiated a summary eviction proceeding in Bedford Town Court, which was granted.
- In the instant action, defendants moved for summary judgment in the Supreme Court to dismiss all of plaintiffs' causes of action.
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Issue:
Does a landlord's secret financing of a non-frivolous lawsuit by a third party against a departing tenant's new business venture constitute tortious interference with business relations through 'wrongful means'?
Opinions:
Majority - Lawrence H. Ecker, J.
No. A landlord's secret financing of a non-frivolous lawsuit against a former tenant's new business does not constitute tortious interference because it does not rise to the level of 'wrongful means.' To prove tortious interference with prospective business relations, a plaintiff must show the defendant's conduct was unlawful, improper, or for the sole purpose of inflicting harm. Here, the defendants' motive was normal economic self-interest—competing with the plaintiffs' new business. The court reasoned that 'wrongful means' includes conduct like crimes, fraud, or frivolous civil suits. Since the legal challenge funded by defendants was not frivolous (it was initially successful in annulling some variances), the conduct was not wrongful. The court further held that concealing the defendants' role as the financial backer did not amount to fraud sufficient to support the tort claim. The claims for breach of the implied covenant of good faith were also dismissed, but the court found that triable issues of fact existed regarding the property damage and security deposit claims, thus denying summary judgment on those counts.
Analysis:
This decision clarifies the 'wrongful means' element required for tortious interference with prospective business relations, particularly in the context of competitive business practices. It establishes that secretly funding a non-frivolous lawsuit against a competitor is not, by itself, wrongful conduct. The ruling provides a degree of protection for businesses using the legal system to challenge competitors, emphasizing that as long as the legal action has some merit and is motivated at least in part by economic self-interest, it will not be considered a tort. This distinguishes legitimate, albeit aggressive, competition from unlawful interference, setting a high bar for plaintiffs who claim a competitor's legal opposition amounts to a tort.
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