Case Notes

On April 27, 2017, CCNA sent a default notice to the landlords, claiming that they had breached the lease by failing to pay for the fire suppression system's upgrades, as required, they said, by the lease. The landlords rejected CCNA's demand for payment, asserting that the system was approved by the tenant after inspection and before the lease was signed, and that there was no default on their part.

Then, on May 13, 2017, the landlords contracted with a third party to sell the leased premises. Part of the sale agreement required that tenant CCNA provide the buyer with an Estoppel Certificate certifying that the landlords were not in default on the lease. CCNA delivered the Estoppel Certificate, but it stated that the landlords were in default because they had not paid for the fire suppression system's upgrades. Because of this, the buyer pulled out of the sale deal.

The landlords filed for a declaratory judgment that it was not responsible for the upgrades, and also asserted a claim for tortious interference with contract against the tenant. CCNA sought, among other things, summary dismissal of the tortious interference claim.

The U.S. District Court for the Western District of North Carolina turned to the U.S. Supreme Court's Ashcroft v. Iqbal, 556 U.S. 662 (2009), decision to guide it in its analysis of the the tenant's motion to dismiss. Iqbal requires the movant seeking dismissal to provide the court with more than mere legal conclusions: “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Also, Iqbal teaches that, to the extent that there are well-pleaded factual allegations, the court should assume their truth and then determine whether they plausibly give rise to an entitlement to relief.

In order to state a claim for relief for tortious interference with contract in North Carolina, a plaintiff must show: 1) a valid contract between the plaintiff and a third person under which that third person agrees to confer benefit on the plaintiff; 2) the defendant's knowledge of the contract; 3) the defendant's intentional action to induce the third party not to perform the contract; 4) a lack of justification for such; and 5) damages. Cupples v. Amsan, LLC, DOCKET NO. 3:04-CV-574-W., 2007 U.S. Dist. LEXIS 24496, 2007 WL 237255 (W.D.N.C Mar. 30, 2007) (citing Embree Construction Group, Inc. v. Rafcor, Inc., 330 N.C. 487, 411 S.E.2d 916 (1992)). It was proof of the fourth element that the tenant claimed was missing from the landlords' allegations.
In order to show the fourth Cupples element — lack of justification — the plaintiff must show the alleged tortfeaser had no “sufficient lawful reason for his conduct.” Childress v. Abeles, 240 N.C. 667, 675, 84 S.E.2d 176 (1954). Also, according to Embree, “interference with contract is justified if it is motivated by a legitimate business purpose, as when the plaintiff and the defendant, an outsider, are competitors.” If the plaintiff wants to show lack of justification, it must prove that there was no motive for the defendant's actions other than malice. Carter v. Ozoeneh, No. 3:08CV614-RJC-DSC, 2010 U.S. Dist. LEXIS 20395, 2010 WL 890260, at *4 (W.D.N.C. Mar. 8, 2010) (citing Privette v. Univ. of N.C., 96 N.C. App. 124, 385 S.E.2d 185, 190 (N.C. App 1989)).

With this background in mind, CCNA argued that the tortious interference claim must necessarily fail because CCNA was justified in disclosing to the potential purchaser in the Estoppel Certificate its belief that the landlords were in default of the lease agreement. But this, said the court, was a defense argument, to be raised to counter the plaintiff's contention that the disclosure in the Estoppel Certificate was made simply to coerce the landlord into paying for the fire suppression system's upgrades. On its face, the complaint sufficiently alleged malice (though not in so many words), and as the question of CCNA's motives could not be definitively answered by the pleadings in the preliminary phase of the proceedings, summary
judgment was inappropriate. For this and other reasons the court denied CCNA's motion for summary judgment.

Court Upholds Conditions Imposed on Zoning Variance

In a New York restaurant owner's article 78 proceeding challenging conditions imposed on a zoning variance, the zoning board of appeals (ZBA) appealed from the trial court's grant of the petition annulling the conditions; the Appellate Division reversed and denied the petition, holding that the conditions were directly related to the proposed restaurant use and were designed to protect neighboring properties. Matter of Bonefish Grill, LLC v. Zoning Board of Appeals, NYLJ 9/29/17, p. 26, col.3 AppDiv, Second Dept. (memorandum opinion).

The restaurant owner planned to demolish the existing building on a leased parcel to build a 5400-square-foot restaurant. The zoning ordinance would have required 54 off-street parking spaces, which the parcel could not accommodate. The restaurant owner then proposed to merge the lot with an adjacent one to take advantage of a provision of the zoning ordinance exempting restaurants from off-street parking requirements whenever the restaurant abuts a municipal parking field — this was based on the fact that the adjacent lot abuts such a municipal field. The restaurant owner then obtained a building permit. However, when the restaurant was substantially completed, the building department discovered that the proposed lot merger had never been completed. The building department then directed the restaurant owner to seek a variance from the off-street parking requirements.

The restaurant owner did so, presenting the ZBA with a license allowing the restaurant to use 40 spaces on the adjoining property between 4 p.m. and 12:30 a.m. on Mondays through Fridays. The ZBA granted the variance on condition that the leaseholder operate the restaurant only during those hours, and that valet parking be mandatory. The restaurant owner then brought a proceeding challenging the conditions imposed by the ZBA, and the trial court sided with the restaurant owner.

In reversing, the Appellate Division held that the ZBA's conditions were proper because they were intended to protect neighboring commercial properties from the anticipated increase in traffic and parking congestion caused by the new restaurant. The Appellate Division also rejected the trial court's conclusion that the ZBA's rationale was not supported by empirical or testimonial evidence. In particular, the court held that the ZBA was entitled to rely on the testimony of local store owners, and on the personal knowledge of members of the ZBA.

Lease Identified

In a commercial landlord's action for breach of contract and to recover on a personal guaranty, the tenant and guarantor appealed from a New York trial court's award of summary judgment to the landlord on the issue of liability. But the Appellate Division affirmed, rejecting the guarantor's contentions that the guaranty was not binding. 82-90 Broadway Realty Corp. v. New York Supermarket Inc., NYLJ 10/20/17, p. 31, col. 4 AppDiv, Second Dept. (memorandum opinion).

The landlord and tenant entered into a lease dated Jan. 15, 2000. In March 2001, the tenant's principal executed a guaranty of the lease “dated on Jan.15, 2001.” The tenant defaulted on the lease, prompting the landlord to bring this action, and to seek summary judgment on the issue of liability. The tenant and guarantor opposed the motion, contending that the landlord had not established the amount due under the lease, and also contending that the guaranty was not binding because it did not refer to the Jan. 15, 2000 lease, because the guaranty was not notarized, and because the guarantor's signature was forged. The trial court granted summary judgment to the landlord, and the tenant
appealed.

In affirming, the Appellate Division first noted that because the summary judgment motion was only on the issue of liability, the landlord did not have to establish the amount owed in order to prevail. The court then held that the typographical error on the guaranty was not sufficient to defeat the summary judgment motion in light of guarantor's failure to produce another lease dated Jan. 15, 2001, to which the guaranty purportedly referred. The court also noted that the guarantor had produced no evidence other than his own affidavit to support his forgery claim, and observed that notarization is not necessary to make a guaranty binding.

Notice of Termination Not Defective for Being Sent By Attorney

In a landlord's commercial holdover proceeding, tenant appealed from a New York Justice Court's denial of its motion for summary judgment dismissing the proceeding. The Appellate Term affirmed, holding that a notice of termination sent by the landlord's attorney was not defective. Port Royal Owners Corp. v. Navy Beach Restaurant Group, LLC, AppTerm, Second Dept, 9/20/17 (memorandum opinion)

The tenant operates a restaurant in Montauk, NY. The landlord's attorney sent the tenant a 20-day notice to cure as a result of ongoing violations of the town code, followed by a notice of termination of the lease. The landlord then brought this holdover proceeding. The tenant sought summary judgment, contending that because the lease did not include language authorizing the attorney to serve the notice to cure and the notice of termination, the notices were defective, and could not support the holdover proceeding. Justice Court denied the motion.

In affirming, the Appellate Term relied on the language of the lease, and noted that the lease did not delineate who could give notice of default, providing only that the tenant would have 20 days “after receipt of written notice to cure such default.” Moreover, the lease did not require the landlord to act personally or through an identified agent in serving the notice of termination. Instead, the lease provided only that “[l]andlord may declare the term of this lease ended and terminated by giving Tenant written notice of such intention.” In light of this language, the notices from the landlord's attorney were sufficient to support the holdover proceeding.

Hearing Required to Determine Whether Lease Denied for Unconstitutional Reasons

On Nov. 9, 2017, the U.S. District Court for the District of Massachusetts declined to summarily dismiss a First Amendment claim brought by Boston Executive Helicopters (BEH) against a Massachusetts government agency it claims retaliated against it for making a complaint to the Federal Aviation Administration (FAA) seeking to protect its rights after it had trouble securing a lease for commercial space at a heliport. Boston Executive Helicopters, LLC v. Town of Norwood, 2017 U.S. Dist. LEXIS 186010 (D. Ma. 2017).

BEH sought a permit to expand its operations at the Norwood Municipal Airport in Norwood, MA, to include the ability to sell jet fuel. This would have put it in direct competition with a company called FlightLevel, the only other provider of jet fuel at the airport, which used all but one of the airport's public ramps. The permit had to be obtained from the Norwood Airport Commission (NAC), a municipal agency of the Town of Norwood overseeing airport operations there.

Norwood Airport's Minimum Standards require any company desiring to obtain a permit to operate as a Fixed-Based Operator (FBO) to make a capital investment in the airport. In order to comply, BEH assumed the lease of 30,000 square feet of land at the airport from a previous lessee and proposed to build a hangar and fuel tanks there. NAC voted to approve BEH's plan for the hangar and underground tanks and, the following day (March 14, 2013) wrote to BEH stating that “[i]f a properly resourced BEH were to apply for FBO status, and obtain a commercial permit from the NAC, then BEH could provide ground-handling services to compete with FlightLevel.” BEH then built a hangar and underground fuel tanks on its leased airport property.

In January 2014, BEH asked NAC to give it space on the only public ramp that was not leased to FlightLevel. On March 17, 2014, NAC sent BEH a lease offer for 6,889 square feet on the ramp. At a public hearing conducted a few weeks later, BEH complained that the space on the public ramp that the NAC had offered was inadequate to allow it to operate a full-service FBO. Nevertheless, at the following public meeting, BEH accepted the offer of 6,889 square feet of ramp while also letting it be known that it would seek additional space in future. NAC treated BEH's complaints about the size of the ramp space as a rejection of the offer to lease, however, and refused to acknowledge BEH's acceptance.

Negotiations moved back and forth, with the hurdles placed before BEH growing over time. In response, BEH filed a complaint with the FAA, and NAC countered by tabling consideration of BEH's lease and FBO permit application “based on a complaint letter received by the Commission … ,” according to meeting notes. BEH sued for, among other things, violation of its First Amendment right to petition a government entity (the FAA) for redress of its grievances.
The defendants moved for summary judgment on the First Amendment claims. The court noted that . to make out a claim for First Amendment retaliation under 42 U.S.C. § 1983, a plaintiff must show “that [it] engaged in constitutionally protected conduct, and that this conduct was a substantial or motivating factor for the adverse … decision.” Padilla-Garcia v. Guillermo Rodriguez, 212 F.3d 69, 74 (1st Cir. 2000).

Once the plaintiff has made a prima facie showing of retaliation, the defendant still can win if it can establish that it would have taken the same action regardless of the plaintiff's protected activity. Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274 (1977). At this stage, there was plausible evidence that NAC retaliated, but also evidence that NAC acted for other reasons when it tabled the consideration of BEH's lease. Thus, summary dismissal of the cause of action would not be appropriate.