Law360: Mass. Pot Shop's Extortion Suit Survives Anti-SLAPP Appeal

Excerpted from Law360, May 26, 2021

A Massachusetts appellate court on Wednesday upheld the denial of two business owners' anti-SLAPP bid to defeat a marijuana dispensary's extortion suit against them, holding that the claims of "thinly veiled threats" for a payoff adequately describe extortion and not "solely" petitioning activity, as required by the statute.

Haverhill Stem LLC alleged in its suit that the owners of a business next door to the one it was developing as a cannabis dispensary demanded tens of thousands of dollars to drop their opposition to the pot shop. The appeals panel ruled on Wednesday that the owners could not oppose that litigation on anti-SLAPP grounds.

While some elements of the lawsuit could be opposed under an anti-SLAPP motion, not all the allegations could be, and a dismissal would require that the complaint be based entirely on the defendants' petitioning activity, the panel said in an opinion authored by Justice John Englander.

"The complaint thus adequately describes extortion — coercion by improper means that is designed to reap an economic reward," the panel said. "Such actions, in the business context, can be actionable under c. 93A, and given the facts alleged here, the suit is not based solely on petitioning activity as required by the anti-SLAPP cases."

The panel added, "While we acknowledge that there is room for 'rough and tumble' in business negotiations, and that such negotiations could occur in relation to legitimate petitioning activity, the repeated threats alleged here, designed to coerce payment — including threats that portended economic ruin without basis — fell outside any acceptable boundary. The anti-SLAPP motion was properly denied."

Haverhill Stem filed suit in 2019, alleging that defendants Brad Brooks and Lloyd Jennings were attempting to extort the business as it was seeking to establish a marijuana dispensary the downtown area of Haverhill, Massachusetts.

According to the panel's ruling, the litigation is connected to a $30,000 deck the defendants built for the previous owner of the location that Haverhill Stem took over, with the deck having been constructed by the defendants at their own cost to help resolve a dispute they were having with the previous owner.

Once Haverhill Stem took over the location, the defendants demanded $30,000 as compensation for the deck they built, which was presented as a prerequisite for dropping their opposition to the dispensary opening, according to the panel's ruling, which added that the demands for money at one point went up to $75,000.

In May 2019, the defendants and other business owner filed a lawsuit in Massachusetts Land Court against Haverhill Stem and others, seeking to invalidate the Haverhill recreational marijuana zoning bylaws.

The next month, Haverhill Stem and its owner, Caroline Pineau, filed the extortion lawsuit in Massachusetts Superior Court. The dispensary eventually opened last June, according to the panel.

In the anti-SLAPP — or strategic litigation against public participation — motion seeking to dismiss the extortion suit, Brooks and Jennings argued that the suit was an attempt to block their right to petition the government, which the state's anti-SLAPP law specifically protects.

The motion was denied by a Superior Court judge, who concluded that the defendants had failed to show that the claims were "based solely their right to petition," which the appeals panel agreed is the "threshold element" of any anti-SLAPP analysis under Massachusetts law.

Two Massachusetts Supreme Judicial Court's 2019 rulings in 2019 in Blanchard v. Steward Carney Hosp., Inc. held that anti-SLAPP motions must demonstrate a complaint is based solely on petitioning, and "to that end the allegations need to be carefully parsed even within a single count," the panel said.

Haverhill Stem also recently sued the city of Haverhill over a controversial state policy that allows municipalities to charge "community impact" fees.

Scott Schlager of Pierce Atwood LLP, who represents the defendants, told Law360 in an email Thursday that the decision is "unprecedented and deeply troubling in so far as it hampers settlement negotiations. Restricting what one can say or do during settlement talks discourages compromise and could spawn further litigation. Our clients are evaluating seeking further appellate review from the SJC regarding the extent of the absolute litigation privilege and contours of anti-SLAPP jurisprudence."

Chief Justice Mark V. Green and Justices John Englander and C. Jeffrey Kinder sat on the panel for the Massachusetts Appeals Court.

Haverhill Stem and Pineau are represented by Thomas K. MacMillan of MacMillan Law Offices.

Jennings and Brooks are represented by Alvin S. Nathanson of Nathanson & Goldberg PC and Scott Schlager of Pierce Atwood LLP.

The case is Haverhill Stem LLC et al. v. Lloyd Jennings et al., case number 20-P-537, in the Massachusetts Appeals Court.