The Corvus Group, Inc. v. Nichols Kaster PLLP et al

Filing 14

MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 5/24/2012. Mailed notice(ca, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE CORVUS GROUP, INC.,
Plaintiff,
v.
NICHOLS KASTER, PLLP, and ANDREW G.
CHASE,
Defendants.

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No. 12 C 1269

MEMORANDUM OPINION AND ORDER
Plaintiff The Corvus Group, Inc. (“Corvus” or “plaintiff”)
sued

defendants

Nichols

Kaster,

PLLP

and

Andrew

G.

Chase

(“defendants”) alleging trade libel (Count I) and violations of the
Illinois Consumer Fraud and Deceptive Business Practices Act, 815
ILCS 505/2 (“ICFA”) (Count II) and the Uniform Deceptive Trade
Practices

Act,

815

ILCS

510/2(a)(8)

(“UDTPA”)

(Count

III).

Defendants allege that “this lawsuit is a retaliation against a
wage and hour law firm, Defendant Nichols Kaster, PLLP and one of
its attorneys Andrew Chase for investigating the overtime practices
of The Corvus Group, Inc.”

Mot. at 1.

This lawsuit stems from

letters sent by defendants to potential clients seeking information
about Corvus.

The letters at issue contained a statement that

defendants “had information” that Corvus “may have failed to
properly pay overtime to some of its employees.”

Defendants have

filed a motion to dismiss, and also requested attorneys’ fees and

costs.

The motion to dismiss is granted for all the reasons that

follow. However, to the extent defendants also argue that they are
entitled to dismissal (and attorney’s fees and costs) under the
Illinois Citizen Participation Act, that argument lacks merit.
With respect to the trade libel/defamation claim, the letters
at issue are absolutely privileged because they were sent as part
of a pre-suit investigation of federal wage and hour claims.
Popp

v.

O’Neill,

the

Illinois

Appellate

Court,

citing

In
the

Restatement (Second) of Torts § 586 (1977), stated, “An attorney at
law

is

absolutely

privileged

to

publish

defamatory

matter

concerning another in communications preliminary to a proposed
judicial proceeding, or in the institution of, or during the course
and as part of, a judicial proceeding in which he participates as
counsel, if it has some relation to the proceeding.”
506, 510 (Ill. App. Ct. 2000).

730 N.E.2d

The court went on to explicitly

hold that attorneys enjoy an absolute privilege concerning any
defamatory statements made by an attorney to a potential client
during a preliminary legal conclusion.

In light of this, I reject

plaintiff’s attempt to argue that the privilege cannot apply here
because there was no existing attorney-client relationship at the
time the letters were sent.
argument

that

the

letters

In addition, I reject plaintiff’s
were

not

part

of

any

“pre-trial

investigation” because they were merely solicitations seeking to
“stimulate further dialog toward a potential future relationship”

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between the law firm and the addressees.

It is clear that the

letters were sent by defendants in an effort to locate additional
plaintiffs for the wage and hour case that was ultimately filed in
federal district court in Ohio. Thus, the statements made in these
letters were pertinent to a possible future legal proceeding and
are therefore absolutely privileged.

See Popp, 730 N.E.2d at 511

(“[A]n attorney’s defamatory statements to a potential client
during a preliminary legal consultation [are protected] as long as
the

statements

are

pertinent

to

a

possible

future

legal

proceeding.”); Atkinson v. Affronti, 861 N.E.2d 251 (Ill. App. Ct.
2006)

(“[T]he

absolute

privilege

which

applies

to

defamatory

statements made by an attorney during pending litigation applies to
prelitigation defamatory statements made in written communications
to a potential litigant.”).
Next, the ICFA claim is dismissed because the ICFA does not
apply to the letters sent by defendants.

The Illinois Supreme

Court has held that the ICFA does not apply to attorneys acting in
their professional capacities.
185, 195, 198 (1998).

See Cripe v. Leiter, 184 Ill. 2d

Because attorneys are governed by state

ethics rules, the ICFA does not apply to them.

Id. at 198.

I am

not convinced by plaintiff’s argument that the defendants “were not
practicing law” because they were merely sending out letters to
potential clients in anticipation of the filing of the complaint in
Ohio. Certainly pre-trial investigation on the part of an attorney

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is part of the practice of law.

The Rule of Professional Conduct

in Illinois (and in Minnesota) govern pre-suit investigations as
well as solicitation letters that attorneys may send in their
practice. Because the state Rules of Professional Conduct regulate
these activities, plaintiff’s ICFA claim is not viable under Cripe.
Turning to plaintiff’s third and final claim, defendants argue
that the UDTPA claim fails because the statements at issue do not
disparage the quality of the plaintiff’s goods or services.

In

response, plaintiff agreed to dismiss this claim because, according
to plaintiff, defendants had ceased using the allegedly defamatory
language in their solicitation letters.

Plaintiff went on to say

that so long as defendants confirmed that the language would not be
used in the future, Count III would be dismissed voluntarily.
Because defendants, in reply, did not address this issue (and did
not confirm that the language would not used in the future) and
instead argued this claim on the merits, I too will address the
claim on the merits.
The goal of the UDTPA is to provide a remedy for disparagement
of a product.

Brown & Williamson Tobacco Corp. v. Jacobson, 713

F.2d 262, 274 (7th Cir. 1983).

So long as the statements at issue

do not disparage the quality of the plaintiff’s goods or services,
no cause of action will lie under the UDTPA.

Allcare, Inc. v.

Bork, 531 N.E.2d 1033, 1037-38 (Ill. App. Ct. 1988). In this case,
I cannot see how the statements at issue, that defendants “have

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information” that Corvus “may have failed to properly pay overtime
to some of its employees,” in any way disparages the quality of
Corvus’s goods or services.

This claim is dismissed.

Finally, defendants argue that this case should be dismissed,
and attorney’s fees and costs awarded, as a “SLAPP” lawsuit in
violation of the Citizen Participation Act, 735 ILCS 110/1, et seq.
(“CPA”).

“SLAPPS,

or

‘Strategic

Lawsuits

Against

Public

Participation,’ are lawsuits aimed at preventing citizens from
exercising their political rights or punishing those who have done
so.”

Wright Development Group, LLC v. Walsh, 939 N.E.2d 389 (Ill.

2010).
the

“SLAPPS use the threat of money damages or the prospect of

cost

of

defending

participation.”

against

Id. at 396.

the

suits

to

silence

citizen

The purpose of the CPA “is to give

relief, including monetary relief, to citizens who have been
victimized by meritless, retaliatory SLAPP lawsuits because of
their ‘act or acts’ made ‘in furtherance of the constitutional
rights to petition, speech, association, and participation in
government.’” Sandholm v. Kuecker, No. 111443, 2012 WL 169708 (Ill.
Jan. 20, 2012) (quoting Wright Dev. Group, LLC v. Walsh, 238 Ill.
2d 620 (2010)).
The CPA applies where (1) the defendants’ acts were in
furtherance of their rights to petition, speak, associate, or
otherwise participate in government to obtain favorable government
action; (2) the plaintiff’s claim is based on, related to, or in

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response to the defendant’s “acts in furtherance”; and (3) the
plaintiff fails to produce clear and convincing evidence that the
defendant’s acts were not genuinely aimed at procuring favorable
governmental action.

Hammons v. Society of Permanent Cosmetic,

2012 WL 955314, at *3 (Ill. App. Ct. Mar. 20, 2012).

The first

requirement is met here. Defendants’ actions in soliciting clients
in anticipation of the filing of a lawsuit are protected under the
First Amendment.

Shapero v. Kentucky Bar Ass’n, 486 U.S. 466,

(1988); California Motor Transport Co. v. Trucking Unlimited, 404
U.S. 508, 510 (1972) (the right of access to the courts is an
aspect of the First Amendment right to petition the government for
redress of grievances); Hytel Group, Inc. v. Butler, 938 N.E.2d 542
(Ill. App. Ct. 2010) (filing of a lawsuit based on unpaid wages was
an exercise of right to petition for redress of grievances).1
However, defendants have not carried their burden in showing
that this lawsuit was “based on, related to, or in response to”
defendants’ exercise of their First Amendment rights, and not
merely to recover damages for any reputational injuries.

In a

recent Illinois Supreme Court case, the court construed the phrase
“based on, related to, or in response to” to mean “solely based on,
relating to, or in response to ‘any act or acts of the moving party
in furtherance of the moving party’s rights of petition, speech,
1

I reject plaintiff’s argument that the letters were not
protected under the First Amendment because they were “libelous.”
As explained above, plaintiff’s claims are meritless.
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association, or to otherwise participate in government.” Sandholm,
2012 WL 169708, at *9 (quoting 735 ILCS 110/15).

“Stated another

way, where a plaintiff files suit genuinely seeking relief for
damages for the alleged defamation or intentionally tortious acts
of defendants, the lawsuit is not solely based on defendants’
rights

of

petition,

government.

speech,

association,

or

participation

in

In that case, the suit would not be subject to

dismissal under the Act.”

Id.

Defendants, in support of their argument that Corvus filed
this lawsuit solely to chill their First Amendment rights, point to
a letter sent by Corvus’s counsel to defendants.

In making their

arguments, defendants cherry-pick language out of the letter in
order to argue that Corvus “threatened [defendants] with meritless
retaliatory litigation.”

Mot. at 14.

However, when read in

context, this letter does not support defendants’ position.

A

close reading of the letter does not establish that Corvus filed
this lawsuit solely to chill defendants’ constitutional rights.
Rather, the letter shows that Corvus had requested that defendants
turn over the “information” referenced in the solicitation letters
so that it could insure that it was complying with all applicable
federal laws.

Further, Corvus notified defendants that “[y]our

failure to comply with this demand will force The Corvus Group to
take such further legal action as it may deem necessary in order to
protect its business reputation and goodwill in the business

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community.”

8/22/11 Letter at 2.

Thus, this letter supports the

notion that this lawsuit was, at least in part, undertaken to
protect Corvus’ reputation and good will in the community. Because
defendants have failed to put forward evidence that Corvus filed
this lawsuit solely because of defendants’ exercise of their First
Amendment rights, the suit is not subject to dismissal under the
CPA.
Finally, defendants request reimbursement for their fees and
costs incurred in defending against the ICFA claim.

The ICFA

expressly allows a court, in its discretion, to award reasonable
attorney’s fees and costs to the prevailing party, which in the
case of a prevailing defendant requires that the court make a
threshold finding that the plaintiff acted in bad faith.
505/10a(c).

815 ILCS

Given the clear holding of the Illinois Supreme Court

in Cripe, I conclude that the ICFA claim was frivolous, and thus
“not warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for establishing
new law.”

Fed. R. Civ. P. 11(b)(2).

As a result, I will award

defendants reasonable attorney’s fees and costs associated with the
ICFA claim.

Defendants have seven (7) days from the date of this

order to file their request, with supporting documentation.
Plaintiff, if it chooses, may file any objections within five (5)
days thereafter.

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ENTER ORDER:

____________________________
Elaine E. Bucklo
United States District Judge
Dated:

May 24, 2012

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