Prince v. Zazove
| Decision Date | 06 April 1992 |
| Docket Number | No. 91-1800,91-1800 |
| Parties | , Bankr. L. Rep. P 74,540 Douglas R. PRINCE, Plaintiff-Appellant, v. Daniel A. ZAZOVE, William A. Brandt Jr., the Official Unsecured Creditors' Committee of Douglas R. Prince and Jane Prince, Richard Schweickert, Chamlin & Associates, Cantwell, Smith & Van Daele, Stephen E. Smith, Paul Root, Neil M. Richter, Arthur S. Levine, Arthur S. Levine & Assoc., Developmental Properties Construction and Wayne Dalton, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
James J. Stamos, argued, Annette J. Regos, Stamos & Trucco, Chicago, Ill., for plaintiff-appellant.
Michael T. Brody, argued, Larry M. Wolfson, Jenner & Block, Chicago, Ill., for defendants-appellees.
Before WOOD, Jr. and KANNE, Circuit Judges, and SHARP, * District Judge.
Basically, this is a cat fight between two dentists over the aborted sale of a dental practice, and an attorney for the Creditors' Committee of one of the bankrupt dentists, Daniel A. Zazove, gets in the middle of it.
To refine these generalizations slightly, the appellant, Douglas R. Prince, is an orthodontist who has quite literally gone on the road, starting in New York and ending in North Dakota. While in Illinois, he filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1101 et seq., in the United States District Court for the Northern District of Illinois in 1981. A plan of reorganization was confirmed in that bankruptcy court in 1983 by which Dr. Prince retained ownership of his Illinois orthodontic practice in exchange for a payment to the Creditors' Committee equal to the value of the practice, net of its liabilities.
Dr. Prince represented the value of the practice, net of its debt, at $7,500.00. The Plan recited Dr. Prince's opinion of the value, but provided that if the debtor and the Creditors' Committee were not able to agree on the value of the practice, the bankruptcy court would conduct a valuation hearing to determine the same.
However, Dr. Prince, having come from the east, decided to move on to the great plains of North Dakota. In April 1983, Dr. Prince bought a practice consisting of two offices in North Dakota for $300,000.00, and for a time commuted between his practices in North Dakota and the Chicago area. However, by the fall of 1983, Dr. Prince decided to stop commuting and practice full time in North Dakota. Prior to the confirmation of the plan of reorganization in 1983, Dr. Prince advertised in a professional publication that his Illinois practice was for sale. Significantly, he chose not to disclose this important fact to the bankruptcy court, the Creditors' Committee or its representatives. None of these entities were advised by Dr. Prince that he had indeed acquired a practice in North Dakota, neither were they advised that he was attempting to sell his practice in Illinois.
Enter Timothy Clare, D.D.S. After a series of meetings and negotiations, Dr. Prince entered into a written contract to sell the Chicago practice to Dr. Clare for approximately $600,000.00 over time. To no one's great surprise, this Clare-Prince agreement turned totally sour, resulting in acrimonious legal maneuvers and disgusting personal conduct by these two alleged professionals.
At the time Dr. Prince entered into this contract with Dr. Clare, he specifically requested that Dr. Clare not tell either appellee Zazove, representing the Creditors' Committee, or anyone else associated with the bankruptcy about the existence of their contractual arrangement. However, Zazove and the Creditors' Committee became aware of the existence of Dr. Clare in June, 1984, when Dr. Clare's attorney, Patrick Kinnally, called Zazove to request information about the Prince bankruptcy. A telephone conversation ensued on July 3, 1984, in which Attorney Kinnally, on behalf of Dr. Clare, requested that Zazove write a letter describing to him the bankruptcy proceedings and authorizing Dr. Clare to preserve the value of the practice. That letter, in its entirety, is attached as an appendix to this opinion. Soon after July 4, 1984, Dr. Clare advised Dr. Prince that he, Dr. Prince, was not to enter the office. When Dr. Prince attempted entry, Dr. Clare called the police after which Dr. Prince promptly left. Protracted and acrimonious negotiations continued between these two dentists and their attorneys. Shortly thereafter, Dr. Prince and Dr. Clare, through their attorneys, negotiated a standstill agreement at a meeting attended by Zazove. After the aforesaid meeting, Zazove promptly filed an adversary complaint in the bankruptcy court to obtain court approval of the sale of the Chicago practice to Dr. Clare. However, before that complaint could be ruled on, Dr. Clare withdrew his offer to purchase. The district court ultimately ruled that the Creditors' Committee had no direct ownership interest in Dr. Prince's Chicago practice and granted summary judgment in favor of Dr. Prince and against the Committee on the Committee's claim that it was entitled to ownership of the practice.
On June 30, 1989, just days short of five years after Zazove wrote his July 3, 1984 letter, Dr. Prince filed the present action against Zazove, William A. Brandt, Jr., the Creditors' Committee's agent, and the individual members of the Creditors' Committee, purporting to allege a state law tort claim for tortious interference with contract. It is undisputed that the substantive law of the State of Illinois applies to that aspect of this case.
Under Illinois law, the elements of a tortious interference with contract claim are as follows: (1) the existence of a valid and enforceable contract between the plaintiff and a third party; (2) the defendant's awareness of the contractual relationship; (3) the defendant's intentional and unjustified inducement of a breach of the contract; (4) a subsequent breach by the third party caused by the defendant's wrongful conduct; and (5) damages resulting from the breach. Wheel Masters, Inc. v. Jiffy Metal Products Company, 955 F.2d 1126, 1129 (7th Cir.1992); George A. Fuller Co., Div. of Northrop Corp. v. Chicago College of Osteopathic Medicine, 719 F.2d 1326, 1330-31 (7th Cir.1983), and Certified Mechanical Contractors, Inc. v. Wight & Co., 162 Ill.App.3d 391, 515 N.E.2d 1047, 113 Ill.Dec. 888 (2d Dist.1987). However, a party who interferes with another party's contract is nonetheless privileged from liability where the party acts "to protect a conflicting interest which is considered to be of equal or greater value than that accorded the contractual rights involved." Langer v. Becker, 176 Ill.App.3d 745, 531 N.E.2d 830, 833, 126 Ill.Dec. 203, 206 (1st Dist.1988). Under such Illinois law, an attorney is privileged to advise a client and to take action on a client's behalf. Boyd Real Estate, Inc. v. Shissler Seed Co., 213 Ill.App.3d 648, 571 N.E.2d 1171, 1174, 157 Ill.Dec. 152, 155 (3d Dist.1991).
After discovery was completed, the defendants there, appellees here, moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. In moving for summary judgment, the defendants raised four issues. First they asked the court to find that the interference with the Prince-Clare contract was privileged. Second, they argued that no evidence implicated the Committee members or Mr. Brandt. Third, they argued that they were immune from liability as quasi-judicial officers. Fourth, they asserted that the "learned intermediary" doctrine applied to avoid liability. On March 6, 1991, the district court granted summary judgment as to the Committee members and Brandt on the basis that they committed no tortious acts. 1 The district court did not address whether they were vicariously liable for Zazove's conduct. The court then found in favor of Zazove and the Committee by determining that they were immune from liability because Zazove had acted reasonably under the circumstances in interfering with the contract and had not acted with malice, thus satisfying the elements of the conditional privilege in Illinois. At issue in this appeal is whether the district court improperly granted summary judgment in favor of the defendants-appellees.
We review a grant of summary judgment de novo. Pro-Eco, Inc. v. Board of Commissioners of Jay County, Indiana, 956 F.2d 635, 637 (7th Cir.1992); Santella v. Chicago, 936 F.2d 328, 331 (7th Cir.1991), and First Wisconsin Trust Co. v. Schroud, 916 F.2d 394, 398 (7th Cir.1990). In examining a grant of summary judgment, we must " 'view the record and all inferences drawn from it in the light most favorable to the party opposing the motion.' " Pro-Eco, 956 F.2d at 637; Kreutzer v. A.O. Smith Corporation, 951 F.2d 739, 743 (7th Cir.1991) (quoting Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir.1990)).
As another preliminary, we deem it necessary to briefly describe the function of the Creditors' Committee, a creature of 11 U.S.C. §§ 1102 and 1103, which read in pertinent part:
§ 1102. Creditors' and equity security holders' committees
(a)(1) As soon as practicable after the order for relief under chapter 11 of this title, the United States trustee shall appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or of equity security holders as the United States trustee deems appropriate.
(2) On request of a party in interest, the court may order the appointment of additional committees of creditors or of equity security holders if necessary to assure adequate representation of creditors or of equity security holders. The United States trustee shall appoint any such committee.
(b)(1) A committee of creditors appointed under subsection (a) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest claims against the debtor of the kinds represented on such...
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