October 7, 2017

Court Clarifies Scope Of Absolute Litigation Privilege; Eckerle v. Katz & Korin

Category: Indiana Law Review | Author: | Share:

The absolute privilege protects attorneys and parties from defamation lawsuits arising from statements that are made in the course of legal proceedings. And as this case shows, Indiana likes to apply that privilege broadly.

In 1995, Newland and Branham formed BCU, a small water and sewer utility. It filed for bankruptcy in 2003. Eckerle represented White River, one of BCU’s investors, in those bankruptcy proceedings. The bankruptcy court confirmed BCU’s liquidation plan and ordered that its creditors be paid 100% of their allowed claims.

Branham filed bankruptcy in 2004, and Eckerle represented Newland in those proceedings. At the same time, Branham sued Newland and others in state court on a breach of contract claim. Branham was eventually awarded almost $400,000 on that claim.

In 2011, Branham sued Newland, Eckerle, and 30 other defendants in state court, asserting criminal offenses related to distribution of certain BCU-related funds as part of BCU’s bankruptcy proceedings. Stewart & Irwin represented Branham in that litigation. It also initiated proceedings supplemental to collect on its breach of contract judgment.

In 2012, BCU reopened its bankruptcy action to file a complaint against Branham and Stewart & Irwin, seeking a declaration that Branham’s suits were precluded by BCU’s bankruptcy. Katz & Korin represented Stewart & Irwin in this proceeding, and moved to dismiss. That motion was granted without prejudice.

After having a motion to intervene in the reopened bankruptcy denied, Eckerle filed a complaint against Katz & Korin, alleging that certain statements Katz & Korin made at a hearing in the bankruptcy court were “defamatory, despicable and completely unfounded charges of bankruptcy fraud.” Katz & Korin moved for summary judgment, arguing that the statements at issue were absolutely privileged. The trial court granted that motion, and Eckerle appealed.

On appeal, the Court noted that Indiana law has long recognized an absolute privilege that protects all relevant statements made in the course of a judicial proceeding, regardless of the truth or motive behind the statements. Eckerle argued that this privilege did not apply for three reasons: (1) they were not relevant, (2) Katz & Korin was not a party to the proceeding, and (3) the filing status of certain documents.

The Court noted that the test for relevance was whether the statements were “relevant and pertinent to the litigation or bear some relation thereto.” But while Eckerle “attempt[ed] to parse and remold the language of the law to fit his argument that the alleged defamatory statements[] were not related” to the reopened bankruptcy action, his complaint alleged that the documents that they were contained in were “intrinsic parts” of that proceeding. “Eckerle cannot have it both ways.”

Here, the alleged defamatory statements related directly to litigation Eckerle mentioned in his Motion to Intervene, as well as litigation underlying AP-128. … As is evidenced in our recitation of the facts, Claim 527, Claim 001, and AP-128 are inextricably linked, as the claims are the result of BCU’s bankruptcy, from which AP-128 stems. Based on this interconnectedness and the relationship between the alleged defamatory statements and actions taken as part of the various legal matters, we conclude the statements at issue are relevant and pertinent to AP-128, and thus that prong of the absolute privilege analysis is satisfied.

The Court also swept aside Eckerle’s arguments that the statements were not privileged because neither Katz & Korin nor Eckerle were parties to the reopened bankruptcy. It noted that Indiana favored a liberal application of the absolute privilege, and that it wasn’t inclined to make distinctions based solely on the speaker’s current status as a nonparty.

Here, S&I was originally a party to AP-128, and was subsequently dismissed without prejudice to allow BCU to pursue sanctions against S&I for its representation of Branham in the earlier bankruptcy action. Law Firm served as counsel for S&I throughout the proceedings. S&I reentered AP-128 as a non-party following BCU’s amended complaint. … Considering our historically liberal approach, we conclude relevant and pertinent statements made by an entity who was first a party, then a nonparty who remains eligible for court sanctions, and who is implicated in another non-party’s motion to intervene, are protected by absolute privilege.

Finally, Eckerle argued that some of the statements at issue were stricken from the record after his motion to intervene was denied, and that this meant that the statements were not privileged. Again, the Court disagreed, noting that the fact that an allegedly defamatory statement has been stricken does not destroy the privilege.

Lessons:

  1. Indiana favors a liberal application of the absolute litigation privilege.
  2. For the purposes of the absolute privilege, a statement is relevant to a legal proceeding if it bears some relation to the proceeding.
  3. A party which has been dismissed with prejudice is protected by the absolute privilege so long as they remain eligible for court sanctions and the action can be refiled against them.
  4. The fact that an allegedly defamatory statement has been stricken as irrelevant does not destroy the absolute privilege.
  5. “An allegation to which privilege does not extend must be so palpably irrelevant to the subject matter of the controversy that no reasonable man can doubt its irrelevancy and impropriety.”