Facts
- Lake Shore Investors owned property intended for a shopping center and negotiated with Rite Aid’s corporate predecessor about leasing space, but no lease was executed.
- Lake Shore leased space to a competing drugstore.
- During Lake Shore’s later contract to sell the property to BTR Realty, Rite Aid asserted it had a valid lease on the property.
- Because of Rite Aid’s asserted lease rights, BTR required Lake Shore to obtain a written release from Rite Aid as a condition of closing.
- Rite Aid refused to provide a release, and BTR withdrew from the purchase agreement.
- Lake Shore sued Rite Aid for injurious falsehood (disparagement of real property) and intentional interference with its land-sale contract.
Issues
- What is the proper measure and scope of compensatory damages for intentional interference with contract under Maryland law?
- What compensatory damages are available for injurious falsehood/disparagement of real property causing loss of a contemplated sale?
- Whether punitive damages are available for interference with contract and injurious falsehood when compensatory damages are awarded and actual malice is shown.
Decision
- The court held that damages for intentional interference with contract are governed by tort principles and are not limited to a contract “benefit-of-the-bargain” formula.
- The court approved recovery for the pecuniary loss of contract benefits and for consequential losses legally caused by the interference; where reasonably expected from the tortious act, emotional distress and reputational harm may also be recoverable.
- For injurious falsehood/disparagement of real property, the court recognized compensatory damages for pecuniary loss from impairment of the property’s vendibility or value, including loss of a specific sale.
- The court held punitive damages may be awarded for both torts when compensatory damages are awarded and the defendant acted with actual malice.
- The appellate disposition affirmed rejection of the trial court’s restrictive damages measure and required further proceedings under the broader tort-damages approach.
Legal Principles
- Intentional interference with contract is a tort; compensatory damages are not confined to contract-based measures tied to the parties’ original expectations.
- Recoverable damages for contract interference may include: (1) pecuniary loss of the contract’s benefits, (2) consequential losses proximately caused by the interference, and, when reasonably expected from the tortious act, (3) emotional distress and (4) reputational harm.
- Injurious falsehood/disparagement of real property supports recovery for pecuniary loss resulting from impaired vendibility or value, including the loss of a particular transaction.
- Punitive damages are available for interference with contract and injurious falsehood when (1) compensatory damages are awarded and (2) the defendant acted with actual malice (ill will, evil motive, or intent to injure).
Conclusion
The court treated both interference with a land-sale contract and injurious falsehood as torts carrying a broad range of compensatory damages beyond contract-style expectation damages, and it permitted punitive damages for each tort upon a compensatory award and proof of actual malice.