The deck is stacked pretty high against malicious prosecution claims. While Courts certainly have an interest in stopping harassment through litigation, there is also a strong presumption that parties should have the freedom to make their allegations and arguments in a legal venue. Part of this balance is the requirement to prove special damages in a malicious prosecution matter. Even if someone can successfully show that a case was brought against them with no underlying basis and with improper intent, they still need to demonstrate that they have suffered some special damages beyond just the annoyance and expense of defending the matter in the first place. This unusual requirement for an unusual cause of action is aptly demonstrated in the case of 55 East Washington Development, LLC v. Adam David Lynd, recently decided in the First District Appellate Court. 55 East Washington Development, LLC v. Adam David Lynd, 2022 IL App (1st) 210549-U.
To simplify the facts behind the dispute, a purchase contract was signed for several floors of the Pittsfield building in Chicago. This purchase agreement involved a 2.7 million dollar non-refundable deposit, to be paid by a certain date. The day before that deadline, the buyer accused the seller of misrepresenting the square footage and asked for a time extension. The seller refused to extend the timeline without payment of the 2.7 million. The buyer responded to this by filing a lawsuit against the seller, and recording a notice of the legal dispute (what is formally called a lis pendens). This lis pendens is significant because it gives formal notice that the property is the subject of litigation, potentially creating legal liability for any other buyers if they purchase the property before that litigation is resolved. At any rate, the court dismissed the buyer’s case and removed the lis pendens, and found that the buyer had, basically, manufactured the square footage discrepancy in order to get more time to come up with financing for the purchase.
The prospective seller, 55 East Washington Development, LLC, then filed the malicious prosecution suit against the buyer’s agent, Adam Lynd, which is the subject of the current litigation. The Seller argued that Lynd, through the Buyer, had indeed caused damages to them because the lis pendens had effectively made the property unsellable during the previous lawsuit—that the Buyers legal action was wrongfully brought and caused them special injury. The trial court didn’t find Lynd to be the proper defendant, nor did they buy the special damages argument, and so dismissed the case. The Seller, 55 East Washington, appealed.
The Appellate Court agreed with the dismissal of the malicious prosecution case. It pointed out that malicious prosecution claims are disfavored, as to not discourage people from pursuing legitimate claims for fear of future liability. While the court acknowledges that a lis pendens can, in some cases, create special damages, it finds that it did not in this case. The reason comes down to two main points. First, 55 East Washington never actually tried to sell the property during the earlier lawsuit. It’s decision not put the property back on the market, while surely influenced by the ongoing litigation, was ultimately it’s decision to make, not a result of the lis pendens itself. Secondly, it’s important to remember that the malicious prosecution suit was brought against the Buyer’s agent, not the actual Buyer itself. This is important because any damages that 55 East Washington claimed were caused by the malicious prosecution could have been resolved through contract litigation on the original sale contract itself, or even as a part of the earlier lawsuit that they got dismissed. Because of this, the court found that 55 East Washington’s damages could not support the (again, notably unfavored) malicious prosecution action.