Scott E. Mollen

Land Use—Solar Farm Developer Not Protected by New York's Anti-“SLAPP” Suit Statute—Developers' Lawsuits Against Protesters

 The plaintiff, a developer of solar energy projects, had signed an exclusive option agreement to lease a 15-acre parcel of land that is part of a 157-acre property (whole property) owned by the defendant owner (owner). The owner subsequently leased the whole property to a competitor (“A”) of plaintiff. The owner also issued an “estoppel” document, which stated that “A's” lease had priority over the plaintiff's option (estoppel document).

The plaintiff had requested that a town take no action with respect to “A's” zoning and license applications. “A” thereafter sued the plaintiff in the New York State Supreme Court for, inter alia, tortious interference with contract. That claim was subsequently withdrawn.

In the subject federal court action, the plaintiff sought damages, alleging that defendants had filed a “SLAPP” lawsuit (Strategic Lawsuit Against Public Participation) in violation of New York's Civil Rights Law §§70-a and 76-a (Anti-SLAPP statute). The owner counterclaimed for fraud, based on the alleged false representations made by an alleged agent (agent) of plaintiff. The subject court (court) granted “A's” motion to dismiss, on grounds that the state court action did not violate the Anti-SLAPP statute. The court found, inter alia, that the plaintiff was not a “public-interest group…intended to be protected” by the Anti-SLAPP statute.

The plaintiff claimed that it only learned of the subsequent lease to “A” when the plaintiff attempted to exercise its option. The plaintiff alleged that by such time, it had already spent significant monies to advance its project and it had been awarded a $1.05 million grant from New York's renewable energy agency. Although the plaintiff had allegedly attempted to resolve the issues with the defendants, the owner had issued the estoppel document. The plaintiff sought damages for “wasted cost outlays, loss of the state grant, the loss of the value of the development, and wasted time.”

“A” had applied for permits, zoning changes and licenses from a town. The plaintiff had sent letters to the town requesting that it take no action with respect to “A's” pending applications. The plaintiff sought time to resolve the leasing dispute. Thereafter, “A” filed its lawsuit in the New York State Supreme Court.

In the subject federal case, the plaintiff alleged that the tortious interference claim “could not possibly have had a substantial basis in fact and law” and was not “supported by a substantial argument for extension, modification or reversal of existing law,” i.e., the tortious interference claim was “frivolous.” The plaintiff emphasized that “A” had voluntarily dismissed the tortious interference claim after the parties had briefed a dismissal motion.

The plaintiff also contended that “A” had filed its motion to dismiss, “to harass, intimidate, punish, or otherwise inhibit (plaintiff's) free exercise of its speech, petition, or association rights.” The plaintiff further alleged that “A's” CEO had called plaintiff's CEO and cursed and threatened the plaintiff.

The federal court complaint sought damages for breach of contract against the owner and claimed that “A” had filed a SLAPP in violation of New York Civil Rights Law §§70-a and 76-a. “A” moved to dismiss the action. The owner answered and counterclaimed, alleging that he had been misled by the agent, who had purported to work for the owner to obtain the best price for the property, but had secretly been working for plaintiff.

The owner alleged that the plaintiff and the agent sought to “place a cloud on the title” to the owner's property in order to extort payments from the owner. The owner's counterclaim alleged fraud against plaintiff, based on promises that the agent had made about the document that the owner had signed. The owner claimed that he thought the document he had signed was a non-binding document. The plaintiff moved to dismiss that counterclaim.

SLAPP suits are “characterized as having little legal merit but are filed nonetheless to burden opponents with legal defense costs and the threat of liability and to discourage those who might wish to speak out in the future.” SLAPP statutes had been enacted “to protect citizen activists from lawsuits commenced by well-financed public permit holders in retaliation for their public advocacy.” Under New York law, a SLAPP suit is a lawsuit that “seeks damages,…was brought by 'public permitees,' and…is 'materially related' to defendant's efforts to 'comment on' or 'oppose' such permission.”

A defendant asserting an anti-SLAPP counterclaim must “identify…the application or permit being challenged or commented on,' and his communication must have been 'substantially related to such application or permit.'” The court emphasized that a SLAPP suit defendant “must directly challenge an application or permission in order to establish a cause of action under the Civil Rights law.”

The defendants argued that the state lawsuit involved a “legitimate land dispute between the two parties” and “the lawsuit sought to clarify the parties' rights as they related to a piece of land both sides sought to develop.” They contended that such lawsuit, between two sophisticated business entities, was not the type of litigation that was intended to silence a “public-interest opponent's opposition to a development project that the statute was designed to protect.”

The state complaint alleged that the plaintiff's engaged in tortious conduct, including “contacting town officials, members of the…Planning Board and/or Town Board, and town residents for the purpose of obstructing, opposing and interfering with the permitting process for plaintiff's solar project.” The defendants further claimed that the plaintiff had “actively provoked opposition from town residents against plaintiff's solar project” and had “worked to disrupt the town permitting process.” The defendants asserted that the plaintiff had “misused…government processes” and had “caused government and private actors to slow down approval of defendants' projects and limit their ability to raise money for them.”

The plaintiff countered that the defendants' tortious interference claim was lacking in legal merit and was so “nonsensical” that they eventually withdrew it. The plaintiff further argued that such claim was really designed to “harass, intimidate or punish” the plaintiff for exercising its right to oppose the project. The state court had granted the plaintiff's motion to dismiss the lawsuit.

The subject court noted, inter alia, that plaintiff did not challenge the application for permission to construct the solar project, but disclosed the lease dispute and sought a delay in the permitting process until the parties could resolve their dispute. The court noted that the allegations in the letters to the town did not establish that plaintiff “made public any opposition to the program, but instead had raised in a private communication a business dispute.” The plaintiff had asked the town to intervene to protect its “own financial interest, and not to raise a voice about the project.” The court found that the plaintiff had not asserted the “sort of challenge to the existence of a project that would entitle the plaintiff to the protection of the statute” and granted the defendants' motion to dismiss.

The court explained that the plaintiff was not “hardly the sort of public-interest group that the New York Legislature intended to protect with the Anti-SLAPP statute.” The plaintiff was “not a public group trying to protect public land, or a coalition of neighbors concerned about the scope of the solar project, but another business disputing defendants' control of the project.” It emphasized that the plaintiff was a competitor of “A” in a dispute as to which company would have the opportunity to build the solar energy project. The court concluded that the state court dispute “does not fall within the intended purview of the SLAPP statute.”

The court further noted that “unlike most parties that invoke the SLAPP statute,” the plaintiff had not asserted the SLAPP statute as a counterclaim in the state court. The plaintiff had brought the action in federal court, which cost the plaintiff “a filing fee and additional attorney's fees, and which forced the defendants to enter an appearance and defend themselves in another venue.” It acknowledged that the SLAPP statute does not bar such litigation, “causing a new suit to appear in a new forum is activity less in line with a public-interest entity trying to oppose a project the group deems harmful to the community and more in line with savvy business litigation seeking to project business interest and cause complications and increase cost to a competitor.” The court further emphasized that the SLAPP Statute, which must be “construed narrowly,” was “not designed to serve that purpose, and the case could be dismissed on that basis as well.”

Additionally, the court noted that “A” would still have a defense to the subject claim that the state litigation “had a substantial basis in fact and law.” It opined that such issue would be better resolved after discovery and the court declined to rule on such issue.

The court dismissed the counterclaim for fraud. The owner could not establish reasonable reliance on alleged fraudulent misrepresentations when the alleged misrepresentations were explicitly contradicted by the terms of the parties' written agreement.

The owner had signed a lease option agreement with the plaintiff for $1,000. The plaintiff paid the money to the owner. The owner did not allege that the plaintiff's alleged fraud caused him to accept the $1,000 when the value of the consideration he provided in return was higher. The owner had accepted $1,000 and had subsequently signed a lease agreement with “A,” during the option's exclusive period. The court reasoned that the owner “can hardly claim that he lost because he entered into a lease option agreement he supposedly violated.” It opined that the only damages that the owner could have is a “purely speculative loss, and one he is not permitted to recover.” The court further stated that the plaintiff “could sue” the owner for violating the terms of this agreement, as it had done so here. Thus, the court dismissed the counterclaim for failure to state a cause of action.

Comment: This decision is of interest because real estate developers often ask their attorneys if they can sue individuals and/or organizations that oppose their projects. Sometimes, the “visible” opponents include competitors who are funded by “silent” competitors.

Generally, absent tortious conduct such as an assault, trespass, theft of materials, physical damage to a property or defamation, the answer is no. Of course, given various privileges, defamation claims are difficult to establish. The right to protest a real estate project is generally protected by rights of free speech and anti-SLAPP statutes. Moreover, even if a developer would have a viable cause of action, suing project opponents is often counter-productive.

In many cases, developers will characterize the opponents as irresponsible NIMBY (“not in my backyard”) people. When community groups or individual neighbors are sued by developers, the defendants may be viewed as victims who are being bullied by an overly aggressive developer and some public officials are more likely to become involved in the dispute in order to be seen as protectors of their constituents. Moreover, suing a project's opponents may elicit strong negative reactions from judges and the media.

Furthermore, under the Noerr-Pennington doctrine, the antitrust laws protect competitors' rights to oppose a competitor's project. The underlying public policy reasons underlying such protection is that it is often a competitor who has the resources and motivation to identify problems and issues with respect to a proposed project. Therefore, the public benefits when the channels of communication with governmental agencies remain available to all, regardless of motivation. Thus, for instance, supermarket and movie theatre chains and shopping center owners have raised zoning and environmental objections to projects being advanced by their competitors. However, the Noerr-Pennington doctrine will not protect a competitor if their complaints are a complete “sham.”

Here, the court concluded that the essence of the claim was a contract dispute between sophisticated business people and that was not a SLAPP suit situation.

Dynamic Energy Solutions LLC v. Pinney, U.S. District Court for the NDNY, Case No. 3:18-cv-884, decided May 8, 2019, McAvoy, J.

Commercial Landlord Tenant—Corporate Agent Did Not Have Personal Liability Based on His Signature

A respondent moved, inter alia, for an order vacating a judgment which had been issued against him personally. A landlord had commenced a commercial nonpayment action against a respondent corporate tenant and the individual respondent.

The court explained:

[w]hen an agent acts on behalf of a disclosed principal, the agent will not be personally liable for a breach of contract unless there is clear and explicit evidence of the agent's intention to be personally bound”.… even where there is a clause “buried” within a contract that attempts to bind an individual personally whereas the contract was to bind a corporate entity, will not stand to bind the individual personally unless there is a clear intent to so bind that individual personally.

The New York Court of Appeals has previously held

In modern times most commercial business is done between corporations, everyone in business knows that an individual stockholder or officer is not liable for his corporation's engagements unless he signs individually, and where individual responsibility is demanded the nearly universal practice is that the officer signs twice—once as an officer and again as an individual. There is great danger in allowing a single sentence in a long contract to bind individually a person who signs only as a corporate officer. In many situations the signing officer holds little or no stock and if the language of the agreement makes him individually liable his estate may be stuck for a very large obligation which he never dreamed of assuming. We think the better rule is the one used here — that is, that the statement in the contract purporting to bind the signing officer individually is not sufficient for Statute of Frauds purposes without some direct and explicit evidence of actual intent.

The New York Court of Appeals further observed that “'nearly universal practice' is where there are not two separate signatures by the same signatory in question contravenes that signatory intended to be personally bound to the contract and rather solely signed as agent for corporate principal. Generally, in contractual disputes of this ilk, the drafter seeks to bind the non-drafter signatory personally in addition to the corporate principal. However, 'in cases of doubt or ambiguity, a contract must be construed most strongly against the party who prepared it, and favorably to a party who had no voice in the selection of its language.'”

In the subject case, the individual respondent asserted that he had never intended to be “personally bound to the lease agreement and solely signed as officer and agent of the corporate principal.” The landlord had drafted the 13-page, 86 clause, “small font printed lease.” The first page of the lease contained two lines which identified the parties.

One line contained the “typed or computer printed name” of the landlord and on the second line, is the name of the individual respondent and “underneath his manually-printed name is the typed or computer printed corporate principal name….” On the left of the corporate name “is manually-printed…the initials of (the individual's initials). At the bottom on page 8, there are two lines: top line contains a signature and beneath the signature line appears the name of (landlord), with, 'Witness for Owner' at the left of this signature line, on the bottom line appears the name of (corporate respondent), with 'Witness for Tenant' at the left of this signature line. This same identical formatted language is contained on…the last page of lease,…with the very same identical signatures.”

The landlord argued that the individual respondent's signature on the lease without an indication that he was signing “as an officer or agent on behalf of the corporate principal,” was sufficient to indicate that he “signed with the 'intent to be bound personally.'”

The court held that if the landlord sought to bind the individual respondent personally, the landlord, as the drafter of the lease, “should have provided two lines; one for (individual respondent) to bind corporate principal as officer or agent; and second line for (individual respondent) to be bound personally.” It found that the landlord had “failed to so draft this lease to avoid any ambiguity or doubt as to its intent and import as to the meeting of the minds of both signatories.”

The court further reasoned that there is no “explicit or clear evidence” that the individual respondent had intended to be personally bound by the lease. The lease lacked “clear, explicit evidence of agent's intention to be personally bound.” The court also noted that the lease referred to an individual other than the individual respondent, as a guarantor. Additionally, the lease contained additional guarantor language and a signature line, and such line had been left “blank.”

The landlord emphasized that the individual respondent was president of the corporate principal, had appeared in court and was bound by an “in court” stipulation of settlement. However, the individual respondent had not appeared in court on the date of the settlement even though his name had appeared “as appearing party.” Rather, a vice president of the corporate respondent had executed the stipulation and had also hired the corporate respondent's counsel. The court held that the individual respondent did not personally guarantee the lease, dismissed the individual respondent “as an improper party” and vacated the judgment which had been entered against the individual respondent.

295 Broadway Realty v. Alqushi, Civil Court, Kings County, Case No. LT-074035-18/KI, decided May 1, 2019, Roper, J.

Scott E. Mollen is a partner at Herrick, Feinstein.