Libco Corp. v. Adams

• Decision Date: 21 September 1981
• Docket Number: No. 80-1325,80-1325
• Citation: 100 Ill.App.3d 314,55 Ill.Dec. 805,426 N.E.2d 1130
• Parties: , 55 Ill.Dec. 805 LIBCO CORPORATION, Clyde Wm. Engle, and Lowell E. Sachnoff, Plaintiffs- Appellants, v. Ware ADAMS, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1130

426 N.E.2d 1130

100 Ill.App.3d 314, 55 Ill.Dec. 805

LIBCO CORPORATION, Clyde Wm. Engle, and Lowell E. Sachnoff Plaintiffs- Appellants, v. Ware ADAMS, Defendant-Appellee.

No. 80-1325.

Appellate Court of Illinois, First District, First Division.

Sept. 21, 1981.

Arnold, Pagniucci, Sachnoff, Schrager, Jones, Weaver, Rubenstein, Ltd., Chicago, for plaintiffs-appellants.

Ware Adams, pro se.

McGLOON, Justice:

Plaintiffs filed an action for damages based on alleged libelous statements contained in a letter. The trial court dismissed the third amended complaint on the ground that the letter was absolutely privileged. Plaintiffs appeal.

On appeal, plaintiffs contend that (1) the communication was not absolutely privileged even though made between two attorneys; (2) the conditional privilege to report judicial proceedings is not applicable to the communication; and (3) the statements cannot be innocently construed.

We affirm.

Plaintiff Clyde Engle is chairman of the board of plaintiff Libco Corporation. Plaintiff Lowell E. Sachnoff is an attorney who represents Libco and Engle in various matters. Defendant Ware Adams is also an attorney.

The action below was predicated on the contents of a letter written by defendant Adams to James Nesland, a Colorado attorney. At the time the letter was written, defendant and Nesland were involved in separate proceedings against, inter alia, Libco and Engle. Nesland represented Outdoor Sports Industries, Inc. (OSI), a Colorado corporation, in an action against Libco and Engle for violation of the Securities Exchange Act. Adams had initiated an action on behalf of the beneficiaries of the Reliable Employee's Profit Sharing Plan Trust against Libco, Engle, and others for violation of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. Adams also represented defendants in another action brought by Libco.

In preparing for litigation, Adams had requested from Nesland a copy of the Securities and Exchange Commission Schedule 13D filed by Libco and Engle. Apparently Libco and/or Engle had purchased shares of OSI stock and under section 78m(d) of the Williams Act (15 U.S.C. § 78m(d)) were required to file a 13D schedule with the target company OSI.

In his letter, Adams thanked Nesland for forwarding the schedules. He explained his legal strategies and theories in the ERISA action. He was prepared to argue that Libco and Engle purchased OSI stock and stock in other corporations with trust funds and that Engle was profiting personally from an unlawful use of the funds. This argument was founded on disclosures in the 13D schedule. He believed that the initial purchase of OSI stock was a prohibited transaction and suggested that, on this basis, Nesland could challenge Engle's voting of shares in OSI. He advised Nesland not to transfer the OSI case from Colorado to Chicago and expressed his reasons for such advice. He also commented on the merits of another case in which he was involved wherein Libco and Sachnoff were his adversaries.

Plaintiffs alleged in the third amended complaint that the contents of the letter were defamatory. In Count I, Libco and Engle alleged that Adams intended to publicly defame them by charging them with illegal business practices. They further alleged that Adams published false statements knowing that the statements were false and that their reputations were injured by the statements in the letter. In Count II, Sachnoff charged that he was defamed by false statements in the letter which portrayed him as a dishonest, untrustworthy, and unethical practitioner, and that his professional reputation was injured thereby. The statements to which plaintiffs objected were set forth in the complaint.

Defendant filed a motion to dismiss the third amended complaint. After reviewing legal memoranda filed by the parties and hearing oral arguments, the trial court granted defendant's motion. The court found that the communication was absolutely privileged and based its finding on the principles set forth in Weiler v. Stern (1978), 67 Ill.App.3d 179, 23 Ill.Dec. 855, 384 N.E.2d 762 and the Restatement of Torts (Restatement (Second) of Torts § 586 (1977).)

Plaintiffs contend that the trial court erred in dismissing the complaint. They recognize that the absolute privilege protects communications between attorneys, but argue that the attorneys must be involved in the same case. Thus, they maintain that defendant's letter to Nesland was not protected by the privilege because Nesland was not involved in litigation with defendant.

The absolute privilege protects anything said or written in a legal proceeding. (Weiler v. Stern (1978), 67 Ill.App.3d 179, 23 Ill.Dec. 855, 384 N.E.2d 762; Macie v. Clark Equipment Co. (1972), 8 Ill.App.3d 613, 290 N.E.2d 912; Restatement (Second) of Torts § 586 (1977).) Out-of-court communications between attorneys are protected (Dean v. Kirkland (1939), 301 Ill.App. 495, 23 N.E.2d 180) as well as communications between attorneys and their clients. (Weiler.) The only requirement is that the communication pertain to proposed or pending litigation. (Weiler; Macie ; Restatement (Second) of Torts § 586, Comment c, at 248 (1977).) The pertinency...