The Boundaries of Litigation Privilege

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Jul/Aug 2003

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Sources abound warning of the vices of gossip, and while most people's experiences confirm those caveats, the
lessons are perhaps nowhere more cemented than in the checks that pass hands following defamation actions.
Professionals of all types have been unfortunate enough to find themselves in such a suit, either for having a loose
tongue or from being subject to the repercussions of reputation-shattering lies. Lawyers must remember that they are
not exempted from the rules of the game of law, and that in some situations they are held to higher standards than
others. In particular, attorneys must exercise diligent restraint from making derogatory publications regarding other
attorneys.

Despite these cautions, a recent case came to the Illinois Appellate Court involving defamation by one law firm of
another firm's reproachable behavior during bankruptcy actions. Edelman, Combs and Latturner v. Hinshaw and
Culbertson, No. 1-01-3638, slip op. (Ill. App. Div. 2003). The defendant's inability to justify its defamatory
publication by relying on either litigation or qualified privilege serves to remind attorneys of their obligation to
carefully discern and stay within the often vague ethical boundaries of professional responsibility. Attorneys must
use their best judgment in determining information permissible to share with others, and that judgment should
comprehensively account for differing circumstances that accompany each defamatory communication. Information
that may be adjudicated as privileged in one instance may be found to be mere defamatory gossip in another
situation due to the uniqueness of events in each case. The best recommendation would be to refrain from making
slanderous communications, even if those communications might be privileged. Moreover, the prospect of two law
firms engaged in an unseemly defamatory action has all of the class of a checkout-counter tabloid.

<h3>What Is Litigation Privilege?</h3>

While the precise extent of litigation privilege may be indeterminate, a number of cases lay a foundation
establishing the privilege's scope. Litigation privilege is an absolute privilege yielding complete immunity from
defamation allegations, and therefore the classification of communications that may be protected by litigation
privilege is necessarily narrow. Litigation privilege generally only extends to defamatory communications
involving litigants or other participants in a trial authorized by law. 53 C.J.S Libel & Slander §72 at 132 (1987).
The defamatory communications must be made during or prior to a judicial proceeding and have some connection or
logical relation to that proceeding. Id. Litigation privilege extends to out-of-court communications between
opposing counsel, between attorneys and their clients, and between attorneys representing different plaintiffs in
lawsuits against the same defendant. However, as we shall see in the discussion of Edelman, the privilege does not

extend to persons without an interest in the lawsuit unless the communication furthers a recognized public interest.

This broad scope of attorney litigation privilege is memorialized in the Restatement (Second) of Torts,
which states that:

<blockquote>
An attorney at law is absolutely privileged to publish false and defamatory matter of another concerning
communications preliminary to a proposed judicial proceeding, or in the institution of, or during the course and as
a part of, a judicial proceeding in which he participates as counsel, if it has some relation to the proceeding. §586 at
247 (1997).
</blockquote>

Litigation privilege is in accord with the public interest of granting citizens the utmost freedom to the courts of
justice in their efforts to attain settlement. Id. at Comment a, 247.

<h3>Use of Litigation Privilege</h3>

<blockquote>
Oh what a tangled web we weave, 
When we first practice to deceive!

—Sir Walter Scott, Marmion. Canto vi. Stanza 17.
</blockquote>

Litigation privilege is perhaps most frequently invoked to protect statements made during the judicial proceedings
by those involved in the suit. In Matthis v. Kennedy, the Minnesota District Court held that allegedly defamatory
statements made by the defendant during a probate dispute regarding the adulterous behavior of the plaintiff with a
third party were protected by litigation privilege because the difference between a marital or adulterous relationship
with the third party was critical as to whether the plaintiff was entitled to money from probate. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6… N.W.2d 413, 419
(Minn. 1954)</a>. The alleged defamation during the judicial proceeding was within the scope of the inquiry and
therefore absolutely privileged. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6…;

Defamation actions like the 1983 case Hagendorf v. Brown adopt the Restatement in upholding litigation privilege
for communications made prior to trial. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… F.2d 1018 (9th Cir. 1983)</a>. In Hagendorf, a student accused his
professor of infringing on the copyright of his term paper. The professor brought suit against the student and the
student's attorney in a defamation action for letters they had sent to his publisher. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… F.2d 1018</a>. The Ninth
Circuit Court of Appeals held that letters written by the defendant's attorney to the plaintiff's publisher demanding
acknowledgement of the defendant's authorship were absolutely privileged because the communication was made
during or prior to a judicial proceeding in order to achieve the object of litigation. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… F.2d at 1019</a>. Litigation
privilege releases the attorney and defendant from defamation liability even if, as found in Hegendorf, the
statements in the communication were determined by a court to be false. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7…;

Cases such as Lerette v. Dean Witter Organization Inc., establish grounds for extending litigation privilege to
communications made prior to the filing of suits. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6… Cal. App. 3d 573, 577 (1976)</a>. In Lerette, the defendant's
counsel, prior to suit, sent an allegedly defamatory letter seeking settlement to a bank where the plaintiff served as
president. The court found that the letter was in accord with the counsel's duty to seek settlement without resorting
to courts. It can be argued that such defamatory letters seeking settlement are protected by litigation privilege
because they are related to a cause of action and are made to achieve the object of a suit. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6…; 60 Cal. App.3d at
577-78 (1976)</a>.

<h3>Limits of Litigation Privilege</h3>

Courts tend to be more liberal in finding litigation privilege arising from communications made during judicial
proceedings than those made outside of judicial proceedings. See <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… v. Hartford Accident & Indemnity Co., 30
Cal. App. 3d 818 (1973)</a>. Like the recent decision in Edelman, a plaintiff law firm in Bradley brought a defamation
action against a defendant law firm for communications made regarding the plaintiff's actions in a past case. The
defendant accused the plaintiff of manufacturing evidence, suborning perjury and generally acting in an
unprofessional and illegal manner during the adjudication of the past suit. The court held that the defamatory
statements uttered outside of court were not privileged because the statements were made to persons without any
interest in present or future suits against the defamed law firm. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…;

Courts have also stuck down litigation privilege defenses due to a lack of intent to commence future litigation. In
Striberg v. Raymond, the Massachusetts Supreme Judicial Court adopted the Restatement (Second) of Torts view
that litigation privilege only applies to communications preliminary to proposed judicial proceedings that are
"contemplated in good faith and under serious consideration." <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… Mass. 105 (1976)</a>; Restatement (Second) of Torts
§586 at Comment e, 248 (1976). Whether future proceedings are contemplated in good faith or under serious
consideration is a question of fact for the jury. In Striberg as well as the more recent Massachusetts case, Meltzer v.
Grant, the juries found that the defendants were not in good faith contemplating future litigation, and therefore
litigation privilege did not apply. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… Mass. 105</a>; Meltzer, 2002 U.S. Dist. LEXIS 5514.

While the privilege does not generally extend to uninterested parties or communications made without intent of
future litigation, the privilege does protect communications made to bar associations regarding attorney's behavior
during litigation. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2… v. Crisona, 283 N.Y.S.2d 62 (1967)</a>. In Sullivan, the plaintiff, an attorney, brought
action against the defendant for alleged libel and malicious prosecution. The defendant had issued a complaint
regarding the plaintiff, an attorney, to the Bar Association of New York City. The plaintiff then brought action
against the defendant on the basis of the complaint. Although the complaint to the bar association was subsequently
dismissed, the court found that absolute privilege attaches to complaints against lawyers before bar associations in
order to further the public interest of ensuring the ethical behavior of attorneys. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2…;

When the defense of litigation privilege fails, attorneys may attempt to invoke the defense of qualified privilege. If
a communication made during or prior to a judicial proceeding is found to be irrelevant to that proceeding, the
communication may still be protected by qualified privilege if the publisher had reasonable or probable cause to
believe the information to be relevant, or if there exists no evidence to indicate the publisher made the
communication with express malice for the defamed party. 53 C.J.S. §73; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… v. Damian, 355 So.2d 809, 811</a>

(Fla. App.) (1977). However, like litigation privilege, the attorney may be better advised to refrain from making
slanderous remarks to begin with rather than rely on the slippery concept of qualified privilege.

<h3>Defamation in the Bankruptcy Arena</h3>

<blockquote>
Loose Lips Sink Ships! 
—National Security Agency WWII Campaign
</blockquote>

Returning to the recent Illinois decision, litigation privilege was the major issue in Edelman, Combs and Latturner
v. Hinshaw and Culbertson, No. 1-01-3638, slip op. (Ill. App. Div. 2003). The plaintiffs alleged that defendants
unlawfully published a legal memorandum to a bankruptcy trustee, two attorneys and "John Doe." The
memorandum allegedly contained false accusations that the plaintiffs engaged in dishonest litigation tactics. The
plaintiffs sought reversal of the trial court's grant of the defendant's motion to dismiss because the defendant's
communications were not protected by absolute or qualified privilege.

Edelman arises from a memorandum the defendant law firm, Hinshaw, distributed after the filing of Frys v. Dayton
Hudson, a consumer protection action.<a href="#2" name="2a">2</a> The memorandum accused the plaintiff's counsel of withholding asset
information in the preceding bankruptcy estate suit In re Frys. The memorandum was distributed in order to revoke
Frys' standing in the consumer protection action by having unethically hidden assets in their previous bankruptcy
estate. Edelman alleged that Hinshaw was aware the information in the memorandum was false. Hinshaw published
the memorandum to the bankruptcy trustee seeking to reopen the bankruptcy estate. In re Frys, No. 98 B 27293
(D. Ill. 1998). Hinshaw also published the document to John Doe and to Osmond and Leopold, two attorneys not
involved in the pending case or previous bankruptcy proceeding. Edelman accused Hinshaw of contacting John Doe
so that Doe would then get in touch with the Attorney Registration and Disciplinary Commission (ARDC), which
would subsequently recommend that other firms cease referring bankruptcy cases to Edelman. Edelman at 2-3.

The Illinois Appellate Court held that the defamatory publication to the bankruptcy trustee was protected by
privilege because the communication was made in relation to the judicial proceeding Frys v. Dayton Hudson. Also,
the communication was made to further the interests of a client, a creditor in the bankruptcy estate (In re Frys), by
increasing the chances that the Frys bankruptcy proceeding would be reopened. Edelman at 6. Additionally, the
court opined that public policy requires there to be a free flow of information to courts, and that the bankruptcy
trustee is analogous to a court in that he performs quasi-judicial functions. <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…;; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… v. Bergman, 700 N.E.2d
1064, 1071</a>. Public policy requires encouraging persons with knowledge of debtors' or creditors' unethical conduct
to impart that knowledge to bankruptcy trustees.

The court found the count against John Doe factually deficient because it failed to identify to whom the libelous
statements were made. Edelman at 9. Additionally, the alleged intent of the communication to John Doe was to
reach the ADRC, and communications with the ARDC regarding attorney's actions during litigation are privileged.
<a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7…;; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7…; 700 N.E.2d at 1071</a>.

However, the court held that privilege did not extend to the publication of the defamatory memorandum to the
attorneys Osmond and Leopold because they had no connection to any related lawsuits. Edelman at 7; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7…;
742 N.E. 2d at 440</a>. The defendant failed to claim that Osmond and Leopold were either opponents of Hinshaw or
shared a common opponent in the pending litigation. Additionally, the defendant failed to demonstrate that
publishing the memorandum served the interest of any client. It is possible the court would have recognized
litigation privilege had the defendant made an attempt to show that the communication to Osmond or Leopold was
in some way relevant to future unfiled lawsuits.

The defendants alternatively relied on qualified privilege for the communication made to the attorneys Osmond and
Leopold. Edelman at 7. However, the defendant did not identify any interest it had in communicating the
information to Osmond or Leopold, nor did the defendant demonstrate any interest Osmond or Leopold might have
in the information beyond gossip. Absent a showing of a recognized public interest in the communication, the
defamatory publication to Osmond and Leopold was not protected by qualified privilege, and therefore the plaintiff
was entitled to continue with its defamation action. Id.

<h3>Play It Safe: Curb Thy Tongue (and More)</h3>

The problem of indeterminate ethical boundaries in litigation privilege can be recognized by analyzing possible
arguments in cases such as Edelman. In that case, whether or not Leopold or Osmond might ever have an interest
in future suits against Hinshaw over the subject of the defamatory memorandum is open to debate. Recipients of
libelous communications may invoke litigation privilege by claiming they hold an interest in future litigation with
the defamed party, even if those suits would not be successful. See <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7…; 707 F.2d 1018</a>. If the jurisdiction
adopts the views of the Restatement (Second) of Torts, the future suit must be contemplated in good faith and under
serious consideration, but "good faith" and "serious" are phrases open to interpretation and questions of fact for
juries. See §586, Comment e at 248. Indeterminacy in litigation privilege also arises when the subject of the
communication is only tangentially related to the dispute. The test for whether an issue is logically related to the
dispute necessarily requires subjective judgment. Further, vagueness in litigation privilege could arise if a
defamatory publication were made during or prior to a lawsuit filed in the incorrect jurisdiction, even though
communications for lawsuits not yet filed are protected by litigation privilege.<a href="#3" name="3a">3</a> Both the plaintiff and the defendant
can take advantage of indeterminacies in the theory of litigation privilege, but neither party should completely rely
on arguments based on nebulous areas of the law. (How often have we advised our clients that the odds of
prevailing in such subjective litigation can be likened to a "crapshoot"?)

While the theory behind litigation privilege may occasionally seem vague, attorneys ought to consider the
privilege's application through past cases. To uphold professional responsibility and the profession's respectability,
attorneys must tread with caution when considering the publication of possibly defamatory information. Past cases
establish a framework that can guide attorneys through the mire of litigation privilege. Resist the temptation to
score one for your ego. By opting for conservative ethics, hopefully gossip, slander and libel will not be words used
to characterize the practice of law.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> Board-certified
in business bankruptcy by the American Board of Certification. <a href="#1a">Return to article</a>

<a name="2">2</a> Edelman
represented debtor Carol Fry in the bankruptcy estate In re Frys, No. 98 B
27293 (1998). Once the estate was closed, Edelman filed a class action consumer
lawsuit, Frys v. Dayton Hudson, which threatened a settlement of $500,000. 99 C
134 (1999). Hinshaw, representing Dayton Hudson in the Frys v. Dayton Hudson

lawsuit, distributed a memorandum detailing Edelman's alleged wrongful
acts in previous suits so that the bankruptcy estate of In re Frys might be
reopened and Frys' standing in the consumer protection suit would be
lost. <a href="#2a">Return to article</a>

<a name="3">3</a> Some
jurisdictions hold that litigation privilege does not apply if the lawsuit has
already been filed but was filed in the incorrect jurisdiction, whereas other
jurisdictions uphold litigation privilege under the same circumstances. The law
seems at odds with itself for some jurisdictions to uphold litigation privilege
for cases not yet filed, but yet strike down litigation privilege for suits
filed in the wrong location. <a href="#3a">Return to article</a>

Journal Authors

Blair R. Lanier

Richard P. Carmody

Journal Date

Tuesday, July 1, 2003 - 12:00

Bankruptcy Rule

2003