Commercial landlord intended to coerce tenant to give concessions beyond those from party’s agreement. Massachusetts SJC decides H1 Lincoln Inc. v South Washington Street LLC (2022)
Court uses word ‘extort’ 26x in decision. Landlord strung tenant along with permit cooperation and tried to grab the land tenants bought. Limitation on liability disregarded.
Landlord wanted to buy neighbors land but couldn’t.
Tenant signed a multi year lease intending to put up a car dealership. Landlord needed to approve the plans. Landlord saw Tenant bought neighbors’ land. Landlord threatened to withhold approval of plans unless the Tenant gave Landlord an option to purchase for $1 what had been neighbor’s land. Landlord said it wouldn’t approve plans unless they were changed. Landlord prepared a lease termination letter with excuses that were found to be not valid. Landlord testified it was ‘fishing for a deal’.
Trial judge found breach of the lease and breach of fair dealing and that threats to terminate and withholding of cooperation for permits was a tactic to extort unwarranted benefits. Actual damages were doubled based on a finding that the conduct was willful or knowing. The Judge ordered the Landlord to permit the Tenant back, the Landlord refused.
When the Landlord agents took the 5th and refused to testify, the Judge made inferences against them.
Was this extortion or just the morals of the marketplace?
Squarely within the established category of unfair conduct the Court called “commercial extortion”.
Extracting undeserved concessions as leverage to destroy the contractual rights of another party is bad faith in Massachusetts. Double damages are warranted, lost profits too.
Limitation of liability
Does not apply to some intentional conduct – willful deception.
Business people should be able to set the warranty terms. When on party intends by its conduct to destroy the deal for the other, the Legislature’s policy of prohibiting such conduct overrules the attempt to limit liability in the contract.
Most business flaps will not be 2x damages. Most negotiated limitation of liability clauses will be upheld.