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Advanced Multilevel Concepts, Inc., and Able Direct Marketing v. Hillard M. Sterling

December 5, 2012

ADVANCED MULTILEVEL CONCEPTS, INC., AND ABLE DIRECT MARKETING, PLAINTIFFS,
v.
HILLARD M. STERLING, ESQ.,
FREEBORN & PETERS, LLP, AND DOES 1 THROUGH 30, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiffs Advanced Multilevel Concepts, Inc. ("Advanced"), and Able Direct Marketing ("Able"), both Wyoming corporations, have brought this action against Hillard M. Sterling, Esq., and Freeborn & Peters LLP alleging defamation and intentional interference with prospective economic advantage. Defendants now move to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Because Plaintiffs have not adequately stated claims for defamation or intentional interference, Defendants' motion is granted.

BACKGROUND

This complaint is one part (a smaller part) of an extensive legal battle between the plaintiffs and a company called VitaminSpice ("VS"), its CEO Edward Bukstel ("Bukstel") and Keith Mazer ("Mazer"). The plaintiffs are shell corporations whose corporate counsel is a lawyer named Jehu Hand ("Hand"). Hand was bookkeeper and securities counsel to VS from late September 2009 until early July 2010. On the other side of this suit is Hillard Sterling ("Sterling"), a lawyer, and his former firm Freeborn and Peters ("Freeborn").

Sterling and Freeborn had a client, Mazer. Mazer and Hand are in acrimonious and drawn out litigation against each other concerning ownership of residential property in Antigua and are adversaries in other federal court proceedings.

Advanced and Able acquired a lot of VS shares, over 3 million shares each. Advanced still owns 1,940,000 shares. These plaintiffs do not know much about the factual allegations that they raise here. They are in the "information and belief" category. The beginning of the matter was a Stop Order imposed first on Able's shares and then on Advanced's shares. Plaintiffs believe that these stop orders were wrongfully imposed, and part of the damages Plaintiffs claim are due to the decline in the price of VS shares while the stop orders were in place. In fact, Plaintiffs filed a complaint against VS and Bukstel in the Northern District of California regarding the stop orders. That case was dismissed without prejudice. In the course of that litigation, it came to light that a VS board resolution cited comments made by Sterling about Plaintiffs and Hand as justification for the stop orders.

Mazer was sued in court over claimed fraud in an investment he brokered, and he settled the case for a cash payment. In a different case, Mazer was alleged to have defrauded others in stock transactions he brokered. That case is set for trial.

Mazer v. Hand (the fight over the Antigua property) is pending in Antigua. In Hand v. Mazer, Hand sued Mazer for assault and battery (fist punches to head), but he dismissed it because he turned out not to have long-term brain damage. Sterling is Mazer's lawyer for all the cases in the United States. Hand has also sued VS and Bukstel. Sterling is their lawyer, as he is in another case over a libelous press release.

The current case arose out of disputes over the management of VS, based in part on claims of Bukstel's "apparent alcohol addiction." Hand wrote to the company directors about Bukstel's alleged improprieties and incompetence. On the same day (6 July 2010), Bukstel terminated Hand's relationship with VS as bookkeeper and securities counsel. Around six days later, Bukstel ordered the transfer agent to Stop Order the Able shares for 30 days. Plaintiffs allege, and I accept as fact, that the stop orders were wrongful. (The transfer agent, Stalt Inc. may be liable for imposing the stop order but the agent is not sued here.) Indeed Bukstel, concerned with the legitimacy of the orders, instructed the transfer agent to remove them in late August.

Only then does Sterling come into the case. Bukstel is alleged to have gone to the Internet to find people "who had adverse interests to.Hand." He contacted Sterling upon finding out about the Mazer cases. Plaintiffs infer that Sterling said bad things about Hand for the "sole intended objective.to harm Hand through his clients for purposes of benefitting Sterling's client, [Mazer,] in unrelated litigation against Hand." How this benefits Mazer is not clear to any reader of the complaint and Plaintiffs do not explain this, but it is sufficient that Sterling may have entertained a view that anything that wounds Hand helps Mazer.

Sterling also spoke to Stalt who said Sterling had "some interesting information to say the least."

It is at this point that the complaint against Sterling crosses a line that defeats its purpose. Plaintiffs say, "on information and belief," that during the telephone call Sterling once again pontificated at length.*fn1 Sterling, it is alleged, "insinuated to Stalt that Hand and his clients are serial fraudsters." The only documented statement about Sterling's words appears in a VS directors' "whereas" clause in a resolution, to wit, "Directors.have been notified by Hillard Sterling, an attorney engaged in litigation against Jehu Hand.of potential irregularities with Shareholders represented by Jehu Hand." The Board then resolved to place a stop order on Advanced's shares.

DISCUSSION

This action is in federal court by virtue of diversity jurisdiction. Although state law governs the substantive aspects of Plaintiffs' claims, federal pleading rules apply. See Fishering v. City of Chicago, 2008 WL 834436, *2 (March 27, 2008, N.D.Ill. 2008). When considering a motion to dismiss for failure to state a claim, the court treats all well-pled allegations as true, and draws all reasonable inferences in the plaintiff's favor. Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Factual allegations ...


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