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IN RE PATRIOT SEED

December 1, 2005.

IN RE PATRIOT SEED, INC. Debtor. RICHARD E. BARBER, Trustee Plaintiff/Counterdefendant,
v.
DON BAUER Defendant/Counterplaintiff.



The opinion of the court was delivered by: MICHAEL MIHM, District Judge

ORDER

Before the Court is Plaintiff/Counterdefendant's Motion to Dismiss Defendant/Counterplaintiff's Amended Counterclaim. For the reasons set forth below, the Motion to Dismiss the Amended Counterclaim [#117] is GRANTED.

BACKGROUND

  On September 4, 2003, Patriot Seed, Inc. filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Central District of Illinois. This filing created an estate pursuant to the Bankruptcy Code.

  On November 21, 2003, Patriot Seed, Inc., acting as a Debtor in Possession filed a complaint to avoid and recover a preferential transfer of $2,376.00 from the Defendant/Counterplaintiff, Don Bauer ("Bauer"). During that time, Patriot Seed, Inc. remained in possession of its property and had authority to operate its business. The Chapter 11 case was converted to one for liquidation under Chapter 7 of the Bankruptcy Code on March 16, 2004. At that point, Richard E. Barber ("Barber" or "Trustee") was appointed Chapter 7 Trustee of the bankruptcy estate. The Trustee succeeded to the interests of Patriot Seed, which had been acting as a debtor in possession. Mr. Barber continues to act as Trustee for the estate.

  In response to Patriot Seed's preference action, Bauer filed an Answer and Counterclaim. Subsequently, Barber, as Trustee filed a Motion to Dismiss all claims against Bauer with prejudice. The Motion was granted on May 5, 2005.

  On July 6, 2005, Bauer was granted leave to amend his counterclaim to include a claim for conversion. Bauer filed his amended counterclaim on August 10, 2005, asserting claims of defamation and conversion against Patriot Seed, Inc. In response, Barber, acting as Trustee for Patriot Seed, Inc., filed this Motion to Dismiss the Amended Counterclaim and Bauer filed a response to the Motion. As this issue is now fully briefed, this Order follows.

  STANDARD OF REVIEW

  In resolving a motion to dismiss, this Court must consider all well-pled facts as true and must draw all inferences in favor of the non-moving party. Bontkowski v. First Nat'l Bank of Cicero, 998 F.2d 459, 461 (7th Cir. 1993). In ruling on a motion to dismiss, Courts consider whether relief is possible under any set of facts that could be established consistent with the allegations in the complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). This Court will dismiss a claim only if it is beyond doubt that no set of facts would entitle the Plaintiff to relief. Chaney v. Suburban Bus. Div., 52 F.3d 623, 627 (7th Cir. 1995); Venture Associates. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 432 (7th Cir. 1993).

  DISCUSSION

  Bauer asserts a Counterclaim of defamation and conversion against Patriot Seed, Inc. As the Trustee points out, Bauer's Counterclaim does not clearly define whether he is pursuing his claims against Patriot Seed, Inc. or the Trustee. Although the caption of Bauer's Amended Counterclaim states that his claims are against Patriot Seed, Inc., the Prayer for Relief asks the Court to "enter judgment against the plaintiff-counter-defendant, Patriot Seeds, Inc., or their successor in interest." Accordingly, the Court construes Bauer's claims as claims against Patriot Seed, Inc. or Barber, as the Trustee for the Chapter 7 liquidation, and will refer to them collectively as Plaintiff. The Court will address each claim individually.

  A. Defamation

  Bauer claims that Plaintiff defamed him by filing an action to avoid the $2,376.00 preference and that the filing of this action has defamed his character and caused him to suffer in the eyes of the community. Specifically, Bauer asserts that he has been injured and is entitled to damages because every preference action is reported to credit reporting agencies throughout the country and this reporting has caused him irreparable damage. Bauer further claims that Plaintiff filed this action based on some unknown greed or scheme, that Plaintiff's conduct in filing the preference action is evidence that Plaintiff will resort to any level to destroy Bauer, and that Bauer is damaged on a daily basis as a result of Plaintiff's filing of the preference action. In its Motion to Dismiss, Plaintiff argues that Bauer's defamation claim should be dismissed because a party cannot be held liable for defamation where the sole claim of defamation is the filing of a complaint to recover a preference.

  Even if Bauer could assert a prima facie case of defamation, an issue which the Court does not reach, Plaintiff's Motion to Dismiss Bauer's defamation claim would be granted because Plaintiff's actions in filing the preference action are entitled to absolute privilege. In Illinois, the litigation privilege provides immunity from civil suit for the defamatory statements made preliminary to or during the course of litigation so long as the defamatory matter is pertinent to the litigation. Medow v. Flavin, 336 Ill. App. 3d 20, 32 (1st Dist. 2002). The requirement that statements made in a judicial proceeding be pertinent or relevant is not strictly applied. Id. The litigation privilege attaches "even where the defamatory statement is not confined to specific issues related to the litigation and all doubts should be resolved in favor of finding pertinency." Id. These broad privileges apply in bankruptcy cases. In re Berry Pub. Svcs., Inc., 231 B.R. 676 (Bankr. N.D. Ill. 1999). Based on the limited information in Bauer's Counterclaim and his Response to Plaintiff's Motion to Dismiss, Bauer appears to be claiming that Plaintiff's filing of the preference action is a defamatory statement. This "statement" was clearly made "during the course of litigation" because the Complaint was filed in court under the authority given ...


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