Clear Water Partners v Benson 2017 WL 376391 (Tenn. App. 2017)

Clear Water is a very interesting case from the standpoint of developers' remedies against neighborhood groups who overreach. Clear Water applied for a zoning change and “use on review” (special exception) to allow the use of its property for a moderately dense residential development and marina. The neighbors vigorously oppose the submissions. Clearwater sued the neighbors for intentional interference with developer's business relationships and tortious interference with its contracts based on residents' alleged misconduct aimed at preventing the development. It did not sue for defamation.

The neighbors filed a motion to dismiss which was granted by the trial court, but on appeal, the Tennessee Court of Appeals reversed. First, I would’ve thought that the doctrine of judicial privilege would have required dismissal of the case, but Judge Andy Bennett, writing for the court, indicated that the parties had agreed that the doctrine only applied to a claim of defamation. Since no such claim was made, judicial privilege is not apply. See Evans v. Nashville Banner Publ'g Co., 1988 WL 105718, for an interesting example of its application.

The allegations by the developer were numerous: the creation of a multiplicity of falls email accounts in order to give the governmental decision makers an inflated idea of the number of people in opposition; flyers containing false and misleading information; and the submission of false and misleading material to the Board of Zoning Appeals, among other things.

The motion to dismiss was based on a number of arguments, including judicial immunity, but also the Anti-Slap Act, Tenn. Code Ann. §4-21-1003. As mentioned above, the judicial immunity doctrine only applies to defamation; the Anti-Slap Act provides immunity, but not if the communications were intentionally false or recklessly false. As a result, although the trial court granted the motion, the Court of Appeals reversed. Thus it appears, that if neighbors using social media tools, deliberately mislead or provide false information to governmental officials, there may be liability to a developer for interference with business relationships or contracts. By the way, the contractual allegations in this case were dismissed for failure to attach a copy of the contracts themselves, but that technical failure would not prevent some future developer from filing a similar case.

Also interesting is the fact that the case was appealed ultimately to the Tennessee Court of Appeals to review the zoning decisions made by the County and its board of zoning appeals. Although the Court of Appeals does not give the citation to that case, I believe it is Benson v Knox County, 2016 WL 2866534. Ultimately, the main part of the development was upheld while the marina was disapproved.

The outcome of the zoning litigation is interesting to me here. If the neighbors engaged in false and misleading communications, should that not have been revealed in the zoning litigation? And if so, was it not taken into consideration by the local government decision-makers in reaching a final conclusion? In effect, is the tort lawsuit not simply retrying the zoning litigation? For example, one of the allegations has to do with delay caused by misrepresentations by the neighbors. Assuming that's the truth, could the delay not also have been occasioned simply by the request of neighboring property owners without the misrepresentation? Those kinds of delays in rezoning applications and hearings before zoning boards are frequent in my experience. It doesn't require anybody to mislead; local government officials often have a leaning in favor of neighbors who vote in elections. That's just part and parcel of making an application for a zoning change or other development. I recognize that the developer could not counterclaim in a common law writ of certiorari appeal for damages, and that there is no technical res judicata; but as a practical matter, it seems to me that the decision of the courts on the zoning issues takes much of the wind out of the sails of the tortious interference case.

One final interesting note about the case is that the neighboring property owners who were sued, faced additional claims resulting from the conduct of their attorney. The allegations were that the Defendants were commanding, directing, and/or knowingly authorizing their attorney, and attorney “explicitly represented to the BZA” that a mock-up created by the Defendants and/or their attorney was “an intentional or reckless factual misrepresentation of the appearance of the development plan approved by the MPC” and that the attorney knew or should have known that the mock-up was false and misrepresented the location, nature, and appearance of the planned development. The court concluded that this was sufficient so that the neighboring property owners could be responsible for the actions of the attorney vicariously as part of a civil conspiracy.

This case is well worth considering. It is extremely interesting, and may be a cautionary tale for neighbors opposing development opportunities. Certainly, misrepresenting the details of any application for development is never a good thing; given the outcome here, it seems that there may be a cottage industry for lawsuits back against neighbors who get a little too creative.

At the same time, I have never been very comfortable with these kinds of cases against neighbors. Ordinarily I think they are mainly intended to scare the neighbors into not opposing the development, and secondly, that they may wind up diverting attention from the main objective, obtaining approval from the local government. But with the advent of this case in January of this year, I’m sure we will see more of these kinds of cases get filed.