First impression: Absolute privilege may apply to lis pendens

Answering a question of first impression, the Virginia Supreme Court unanimously ruled that the filing of a lis pendens is part of a judicial proceeding for purposes of establishing absolute privilege against a defamation claim.

However, Judge William C. Mims was careful to hold that absolute privilege does not apply to non-defamation torts in Virginia.

The court reversed the Fairfax County Circuit Court’s judgment sustaining the demurrers filed by the defendants and remanded for further proceedings.

Mims’s opinion is Givago Growth, LLC, et al. v. iTech AG, LLC, et al. (VLW 021-6-067).

Lis pendens

Constanza Valdez and Givago Growth, LLC entered into a partnership agreement with Artifact, LCC and two individuals on Oct. 7, 2017. Pursuant to the deal, each party would contribute a specific amount to the development of land located at 1409 Cola Drive in McLean, which the parties planned to sell in the future.

Valdez and Givago retained title to the property until the future sale occurred.

Felipe Valdes owned Artifact. To fund their contribution to the partnership, he and the company borrowed $400,000 from iTech AG, LLC. A few months later, Valdes and Artifact defaulted on the loan.

Artifact and iTech then entered into a joint venture agreement with regard to the 1409 Cola Drive property where Artifact agreed to provide a collateral deed of trust on the property to secure iTech’s contribution.

Valdez and Givago were unaware of this agreement.

In July 2018, Valdes informed iTech’s attorney that he could not provide the collateral deed of trust because Valdez and Givago owned the 1409 Cola Drive property. Instead, he assigned any proceeds he would receive from the sale of the property to iTech.

iTech filed a complaint in Fairfax County Circuit Court in September 2018, asserting a claim for specific performance of the joint venture agreement between Artifact, Valdes and iTech. In addition, iTech filed a lis pendens in the land records with respect to the 1409 Cola Drive property.

When the lis pendens was filed, the property was already under contract for sale. The purchasers refused to close on the property due to the lis pendens. Valdez and Givago requested that iTech withdraw the lis pendens to facilitate the sale, but iTech refused and asked them to settle Valdes’s debt.

The sale on the property closed in January 2019, but $812,668.90 of the sale proceeds were held in escrow due to the pending litigation. A few months later, iTech withdrew the lis pendens.

Valdez and Givago filed suit against iTech and its legal representation, alleging malicious abuse of process, slander of title, tortious interference with contractual relations and civil conspiracy, all based on the filing of the lis pendens.

The defendants demurred, arguing that the filing of a lis pendens is entitled to absolute privilege. The court sustained the demurrer and Valdez and Givago appealed.

Privilege limited to defamation

Mims first noted that affirmative defenses such as absolute privilege may not be raised in a demurrer, as a demurrer tests only the facial validity of the allegations in a complaint rather than the validity of affirmative defenses. Therefore, the circuit court erred in sustaining the defendants’ demurrer.

Turning to the merits, he recognized that the rule of absolute privilege “is broad and comprehensive,” and covers “words spoken or written in a judicial proceeding that are relevant and pertinent to the matter under inquiry.”

Lacking precedent in Virginia on the issue of whether the filing of a lis pendens is part of a judicial proceeding for purposes of establishing absolute privilege against a defamation claim, Mims found an analogous situation in the filing of a mechanic’s lien, which the court previously held is subject to a privilege.

“A lis pendens is similarly intertwined with the filing of a complaint,” he wrote. “While not necessary to institute a case, it provides notice of the pending lawsuit to parties who may be interested in the property underlying the suit. Moreover, a lis pendens merely republishes the key information from the complaint. It would therefore be incongruous to extend the privilege to a complaint but not to its associated lis pendens when confronted with the allegation that it has slandered a title.”

However, the circuit court went further and applied the defense of absolute privilege to all four of the causes of action asserted by Valdez and Givago.

“This court has never extended this defense to non-defamation torts … and we decline the invitation to do so today,” Mims wrote. “Absolute privilege does not apply to non-defamation torts in Virginia, specifically including malicious abuse of process, tortious interference with contractual relations and civil conspiracy.”

Fact inquiry remains

The question remained whether the information contained in the lis pendens was sufficiently “relevant and pertinent to the matter under inquiry” for absolute privilege to apply.

Courts favor a liberal rule when considering the degree of relevancy necessary to bring the alleged defamatory matter within the privilege, Mims said, with the goal of the relevancy requirement to ensure that the privilege “may not be abused as a cloak from beneath which to gratify private malice.”

“Whether the lis pendens here was ‘so palpably wanting in relation to the subject matter of the controversy that no reasonable man can doubt its irrelevancy and impropriety’ is a fact-driven inquiry that must be resolved by the trial court,” Mims wrote. “However, we note that the facts alleged in the complaint, if proven true, are concerning and may not satisfy even this ‘liberal rule’ regarding relevancy.”

The circuit court erred in sustaining the defendants’ demurrers, he concluded, reversing the judgment and remanding for further proceedings.

Fairfax attorney Eric F. Schell represented the plaintiffs and Fairfax attorney William L. Mitchell II represented the defendants. Neither responded to a request for comment.