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Bertsch v. Duemeland: Broker's Negative Statements about Builder Could Be Defamatory

The Supreme Court of North Dakota has considered whether a broker's statements about a builder's alleged inability to close transactions amounted to an actionable defamation claim.

Ron Nelson ("Nelson") was a real estate broker in South Dakota. Hollywood Entertainment retained Nelson to find a store location for it in Bismarck, North Dakota. In 1997, Nelson came to Bismarck to look for possible locations. Nelson talked to a builder that he knew from previous dealings in Bismarck, Lee Bertsch ("Bertsch"). Bertsch told Nelson about a building that he had an option to purchase in Bismarck, and Nelson and Bertsch began talking about leasing part of the building for Hollywood. In October 1997, Nelson and Bertsch executed a "Letter of Intent," which set forth Hollywood's lease terms. The Letter of Intent was not a contract between the parties, and was the first of three steps Hollywood requires a site to pass before Hollywood would execute a formal lease.

A Bismarck broker, George Duemeland ("Duemeland"), allegedly sent a letter to Nelson in late November 1997, informing him that Bertsch's option to purchase had expired without Bertsch obtaining financing to purchase the building. Duemeland then made a "back up offer" to Nelson regarding the space in the building, claiming that he could develop the building for Hollywood. He also wrote that Bertsch has "the reputation of not closing" and also that he may not "be able to pull this project off." Nelson sent to Duemeland a copy of Bertsch's "Letter of Intent" in December 1997.

Bertsch purchased the building in December 1997. However, Hollywood never entered into a lease for space in the building, as the building failed the second step in Hollywood's process used for evaluating whether a property could be used as a Hollywood outlet, according to Nelson. In 1999, Hollywood, through Nelson, gave Bertsch another "Letter of Intent" for the same location, but ultimately selected another location in Bismarck. Bertsch brought a lawsuit against Duemeland, alleging that his remarks to Nelson constituted defamation and also alleging tortious interference with a business relationship as well as misappropriation of trade secrets. The trial court ruled in favor Duemeland, determining that the evidence demonstrated that the statements made by Duemeland were true and also that Bertsch was not harmed by the alleged statements. Bertsch appealed these rulings.

The Supreme Court of North Dakota partially reversed the trial court and sent the case back to the trial court to conduct further proceedings. The court first considered whether the statements made by Duemeland were defamatory. A defamatory statement is defined as, among other things, a statement which is false and injures a person's professional reputation. Truth is a defense to defamation allegations. Bertsch argued that the statements made by Duemeland to Nelson caused Nelson to not pursue a lease with Bertsch. The court reversed the trial court's ruling on the defamation allegations, finding that there was a fact dispute over whether truth was defense to the statement, based on affidavits filed by Bertsch disputing Duemeland's characterization of him. The court found that there was also a fact issue which needed to be resolved over whether the statements harmed Bertsch, as there was testimony which could be construed as showing that the statements may have harmed Bertsch. Thus, the court reversed the trial court's rulings on the defamation allegations.

Next, the court considered the tortious interference with a business relationship allegations. North Dakota law requires proof of actual damages to collect for tortious interference with a business relationship. Since Bertsch could not demonstrate any actual damage from the alleged defamatory statements, the court ruled that the trial court had properly ruled in favor of Duemeland on the tortious interference allegations. The court also found that the trial court had properly dismissed the misappropriation of trade secrets allegations, as the disclosure of the "Letter of Intent" by Nelson to Duemeland did not constitute misappropriation of a trade secret because there was no evidence that Duemeland had made any attempt to obtain the letter from Nelson. Therefore, the court reversed the rulings in favor of Duemeland on the defamation claims and sent the case back to the trial court to resolve the fact dispute involved with the defamation claims.

Bertsch v. Duemeland, 639 N.W.2d 455 (N.D. 2002).