United States District Court, C.D. Illinois, Peoria Division
December 1, 2005.
IN RE PATRIOT SEED, INC. Debtor. RICHARD E. BARBER, Trustee Plaintiff/Counterdefendant,
DON BAUER Defendant/Counterplaintiff.
The opinion of the court was delivered by: MICHAEL MIHM, District Judge
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.
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
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
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).
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.
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 to
Plaintiff by 11 U.S.C. § 704 (1) of the Bankruptcy Code. The
Complaint commenced the litigation and is an integral part of the
litigation. Additionally, the Complaint is "pertinent to the
litigation" because it stated the nature of the claims against
Bauer and served to put Bauer on notice of the pendency of the
preference action against him.
Although Bauer argues in his Response to Plaintiff's Motion to
Dismiss that Plaintiff should not be entitled to the protection
of the litigation privilege because Plaintiff lacked probable cause for bringing the preference action, Bauer's
argument is misplaced. An absolute privilege cannot be overcome
by a showing of improper motivation, knowledge of falsity, or
malice. Geick v. Kay, 236 Ill. App. 3d 868, 875 (2d Dist.
1992). Accordingly, even if Plaintiff did not have probable cause
for bringing the preference action or acted maliciously in doing
so, Bauer's defamation claim would be barred by the absolute
litigation privilege. Therefore, the Court grants Plaintiff's
Motion to Dismiss with respect to the defamation claim.
Bauer's second claim is a claim for conversion. Bauer asserts
that Plaintiff wrongfully assumed control of $2,376.00 of bagged
seed corn that was intended for Bauer, that Plaintiff claimed
ownership of the corn by producing it for sale, and that Bauer
had a right to the corn as Plaintiff owed it to Bauer as payment
for a debt. Bauer then asserts that Plaintiff filed for
bankruptcy protection and claimed that it had already paid the
debt owed to Bauer when in fact Plaintiff concealed its
possession of the corn from Bauer and improperly stored the corn
causing it to deteriorate in value. Bauer asserts that Plaintiff
then improperly sought to recover the full value of the corn in
its preference action filed in the Bankruptcy Court.
Plaintiff argues in response that Bauer's conversion claim
should be dismissed because (1) Bauer has effectively pled
himself out of Court, and (2) to the extent that Bauer's claim is
legitimate, it is properly characterized as a claim in the
bankruptcy proceeding and therefore should be filed in the
Conversion is the "unauthorized deprivation of property from a
person entitled to its possession." Prescott v. Allstate Life
Ins. Co., 341 F. Supp. 2d 1023, 1027 (N.D. Ill. 2004). "The essence of conversion is the wrongful deprivation of one who
has a right to the immediate possession of the object unlawfully
held." Horbach v. Kaczmarek, 288 F.3d 969, 978 (7th Cir. 2002)
(citing In re Thebus, 108 Ill.2d 255, 91 (1985)). To prove
conversion, Bauer must show that: (1) Plaintiff, without
authorization, assumed control of Bauer's property, (2) that
Bauer had a right to the property, (3) that Bauer had an
immediate right to possession of the property, and (4) Bauer
demanded possession of the property. Prescott,
341 F. Supp. 2d at 1027.
Plaintiff argues that Bauer's conversion claim should be
dismissed because any claim that Bauer has is actually a claim
that is subject to the current bankruptcy proceedings. The Court
agrees. In fact, Bauer has filed a Proof of Claim for the
"balance owed for returned seed" with the Bankruptcy Court.
Accordingly, the Court dismisses Bauer's conversion claim because
any claim that Bauer has against Plaintiff with respect to the
seed corn which was the subject of the preference action falls
within the jurisdiction of the Bankruptcy Court. As a result, in
light of this ruling, the Court declines to address Plaintiff's
argument that Bauer's conversion claim should be dismissed
because Bauer has pled himself out of court.
For the reasons set forth above, Plaintiff/Counterdefendant
Barber's Motion to Dismiss is GRANTED and this case is now
© 1992-2006 VersusLaw Inc.