United States District Court, N.D. Illinois, Eastern Division
STEELCAST LIMITED, an Indian Corporation, as a member of STEELCAST LLC, an Illinois LLC, and derivatively on behalf of STEELCAST LLC, Plaintiff,
VAUGHN W. MAKARY, Defendant. VAUGHN W. MAKARY, Counter-Plaintiff,
STEELCAST LIMITED, an Indian Corporation, Counter-Defendant.
MEMORANDUM OPINION AND ORDER
B. KIM UNITED STATES MAGISTRATE JUDGE.
Steelcast Limited, as a member of and derivatively on behalf
of Steelcast LLC (“SLLC”), brings this action
against Defendant/Counter-Plaintiff Vaughn W. Makary,
claiming that Makary breached his fiduciary duties to
Steelcast Limited. Makary in turn filed counterclaims,
alleging slander of title and abuse of process based on what
he characterizes as Steelcast Limited's “baseless
claims” for constructive trust and the recording of
lis pendens notices against Makary's personal
residences. Before the court is Steelcast Limited's
motion to dismiss Makary's counterclaims. For the
following reasons, the motion is granted:
Makary's allegations as true at the pleadings stage and
drawing all reasonable inferences in the light most favorable
to Makary, see Gutierrez v. Peters, 111 F.3d 1364,
1368-69 (7th Cir. 1997), SLLC sold steel castings in the
United States, which Steelcast Limited manufactured in India,
(R. 70, Makary's Countercl. ¶ 5). Steelcast Limited
and Makary & Associates, Inc. were SLLC's only
members, and Makary served as SLLC's manager.
(Id.) Makary did not receive any compensation for
serving as the manager, and SLLC rarely realized a profit.
2015 the parties agreed to dissolve SLLC. (Id.
¶ 7.) At that point SLLC had no cash. (Id.
¶ 8.) Nonetheless, Steelcast Limited demanded that
Makary pay $109, 907.60 for allegedly collected receivables
it is owed. (Id. ¶ 7.) For his part, Makary
demanded that Steelcast Limited reimburse SLLC for United
States taxes that SLLC had paid on Steelcast Limited's
behalf. (Id. ¶ 10.)
recover money allegedly owed to it, Steelcast Limited filed
this lawsuit claiming that Makary breached his fiduciary
duties owed to it. (Id. ¶¶ 12-13; see also
R. 61, Second Am. Compl. (“SAC”) ¶¶
15-16, 22-40.) “[T]o apply pressure in this litigation,
” Makary asserts that Steelcast Limited also filed four
constructive trust claims on his personal residences in
Illinois and Florida. (R. 70, Makary's Countercl.
¶¶ 13, 24-40.) Steelcast Limited then recorded
lis pendens against Makary's residences on
November 3, 2017, “recording notice of this litigation
against Makary for breach of fiduciary duty, [and] describing
the nature of the action as a ‘Lien
foreclosure.'” (Id. ¶ 14 & Ex. 1
at 6.) Makary then filed counterclaims alleging counts of
slander of title and abuse of process. (Id.
¶¶ 1-2, 27-40.) Steelcast Limited now moves to
dismiss these counterclaims pursuant to Federal Rule of Civil
Procedure 12(b)(6). (R. 74, Pl's. Mot. & Mem.)
seeking to have Makary's counterclaims dismissed under
Rule 12(b)(6), Steelcast Limited argues that: (1) the
recording of lis pendens to give notice of
constructive trust claims is an “absolutely privileged
act” shielding them from liability for slander of
title; and (2) the filing of constructive trusts and lis
pendens does not constitute an “irregular use of
the judicial process” for an abuse of process claim.
(R. 74, Pl.'s Mem. at 2-3.) A Rule 12(b)(6) motion to
dismiss tests the sufficiency of the complaint, see Gen.
Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d
1074, 1080 (7th Cir. 1997), rather than the merits of the
case. Under Rule 8(a), all that is required to meet the
sufficiency standard is “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007) (citing Fed.R.Civ.P. 8(a)) (quotation
omitted). Under that standard “[a] pleading that offers
‘labels and conclusions' or a ‘formulaic
recitation of the elements'” of the claim is
insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 555). Instead,
the factual allegations must give the defendants “fair
notice of what the claim is and the grounds upon which it
rests.” Twombly, 550 U.S. at 555 (quotation
omitted). The allegations must also be facially plausible,
meaning that they provide enough factual content to allow
“the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678.
Slander of Title Counterclaim
state a claim for slander of title under Illinois law,
plaintiff must prove a “false and malicious
publication, oral or written, of words which disparage [its]
title to property resulting in special damages.”
Ringier Am., Inc. v. Enviro-Technics, Ltd., 284
Ill.App.3d 1102, 1104-05 (1996) (internal quotations and
citation omitted). “Malice” is defined as
knowledge that “the disparaging statements were false
or that the defendant made the statements in reckless
disregard of their falsity.” Id. at 1105.
Steelcast Limited argues that the filing of lis
pendens cannot give rise to liability for slander of
title because such notices “do no more than
accurately inform [the] reader of the existence of”
claims. (R. 74, Pl.'s Mem. at 2.) As a result, statements
in lis pendens are “in no sense
‘false'” and are absolutely privileged,
according to Steelcast Limited. (Id. (quoting
Ringier, 284 Ill.App.3d at 1106).)
support Steelcast Limited relies upon Illinois decisions
recognizing “a narrow class of cases” extending
the absolute privilege to statements in lis pendens,
“provided the underlying litigation makes allegations
affecting some ownership interest in the subject
property.” Ringier, 284 Ill.App.3d at 1105-06
(noting that the Florida law is the same and citing
Procacci, 402 So.2d at 426); Gordon-Dahm v.
BMO Harris Bank, N.A., 2018 IL App (2d) 170082,
¶ 28. Even when such statements are made with malice,
the privilege “provides complete immunity from civil
action . . . because public policy favors the free and
unhindered flow of such information.” Ringier,
284 Ill.App.3d at 1105. The court in Ringier
It would be anomalous to hold that a litigant is privileged
to make a publication necessary to bring an action but that
he can be sued for defamation if he lets anyone know that he
has brought it, particularly when he is expressly authorized
by statute to let all the world know that he has brought it.
Id. at 1106 (quoting Albertson v. Raboff,
46 Cal. 2d 375, 380 (1956)); see also Gordon-Dahm,
2018 IL App (2d) 170082, ¶ 28 (accord).
tries to distinguish the case law cited by Steelcast Limited,
arguing that the present case “has absolutely nothing
to do with [his] personal real estate whatsoever.” (R.
76, Makary's Resp. at 2.) Makary contends that this case
centers on fiduciary duty claims, not an ownership interest
in his real property or even a fraudulent transfer.
(Id. at 4-5.) Thus, Makary argues that the
statements in the lis pendens do not “affect
some ownership interest in the subject propert[ies]”
and cannot qualify for the privilege. (Id. at 2
(quoting Gordon-Dahm, 2018 IL App (2d) 170082,
¶ 28).) According to him, Steelcast Limited's claims
that Makary used ...