In the

United States Court of Appeals

For the Seventh Circuit

No. 00-2519

Marc R. Wilkow,

Plaintiff-Appellant,

v.

Forbes, Inc., and Brigid McMenamin,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 99 C 3477--Blanche M. Manning, Judge.

Argued January 12, 2001--Decided February 20, 2001

 Before Easterbrook, Rovner, and Diane P. Wood, Circuit

Judges.

 Easterbrook, Circuit Judge. Forbes Magazine runs a

column on pending litigation of interest to the

business community. The October 5, 1998, issue of

Forbes covered the grant of certiorari in what

was to become Bank of America National Trust &

Savings Ass’n v. 203 North LaSalle Street

Partnership, 526 U.S. 434 (1999), which presented

the question whether the absolute-priority rule

in bankruptcy has a new-value exception. The

absolute-priority rule, codified in 11 U.S.C.

sec.1129(b)(2)(B)(ii), forbids confirmation of a

plan of reorganization over the objection of an

impaired class of creditors unless "the holder of

any claim or interest that is junior to the

claims of such [impaired] class will not receive

or retain under the plan on account of such

junior claim or interest any property." In other

words, creditors may insist on priority of

payment: secured creditors must be paid in full

before unsecured creditors retain any interest,

and unsecured creditors must be paid off before

equity holders retain an interest. But equity

investors frequently argue that this rule may be

bent if they contribute new value as part of the

plan. Although this court had rejected other newvalue arguments, see Kham & Nate’s Shoes No. 2 v.

First Bank of Whiting, 908 F.2d 1351, 1359-63

(7th Cir. 1990), in 203 North LaSalle we held

that the equity investors could retain ownership
of a commercial office building, in exchange for

about $6 million in new capital over a five-year

period, even though the principal lender would

fall about $38 million short of full repayment.

In re 203 North LaSalle Street Limited

Partnership, 190 B.R. 567 (Bankr. N.D. Ill.

1995), affirmed, 195 B.R. 692 (N.D. Ill. 1996),

affirmed, 126 F.3d 955 (7th Cir. 1997). This was

the decision on which Forbes published a short

column, seven months before the Supreme Court

held the plan "doomed, . . . without necessarily

exhausting its flaws, by its provision for

vesting equity in the reorganized business in the

Debtor’s partners without extending an

opportunity for anyone else either to compete for

that equity or to propose a competing

reorganization plan." 526 U.S. at 454.

 The majority opinion in the Supreme Court

required about 8,000 words to resolve the case--

and without reaching a final decision on the

vitality of the new-value exception (though the

majority’s analysis hog-tied the doctrine). The

majority opinion in this court ran about 9,500

words, with 5,200 more in a dissent. A 670-word

article such as the one Forbes published could

not present either the facts of the case or the

subtleties of the law. What the article lacked in

analysis, however, it made up for with colorful

verbs and adjectives. Taking lenders’ side,

Forbes complained that "many judges, ever more

sympathetic to debtors, are allowing unscrupulous

business owners to rob creditors." According to

the article, a partnership led by Marc Wilkow

"stiffed" the bank, paying only $55 million on a

$93 million loan while retaining ownership of the

building. The full text of this article appears

in an appendix to this opinion. Its core

paragraph reads:

[B]y the mid-1990s, rents were not keeping up

with costs. When the principal came due in

January 1995, Wilkow and his partners pleaded

poverty. To keep the bank from foreclosing,

LaSalle Partnership filed for bankruptcy.

Appraisals of the property came in at less than

$60 million. In theory the bank was entitled to

the entire amount. It suggested selling the

property to the highest bidder. Determined to

keep the building, LaSalle partners asked the

bankruptcy court instead to accept a plan under

which the bank would likely receive a fraction of

what it was owed while the partners would keep

the building. The bank, not the equity holder,

would take the hit.

Wilkow replied with this libel suit under the

diversity jurisdiction, contending that Forbes

and Brigid McMenamin, the article’s author,

defamed him by asserting that he was in poverty
(or, worse, "pleaded poverty" when he was

solvent) and had filched the bank’s money.

According to Wilkow, Forbes should at least have

informed its readers that the bank had lent the

money without recourse against the partners, so

that a downturn in the real estate market, rather

than legal machinations, was the principal source

of the bank’s loss.

 The district court dismissed the complaint under

Fed. R. Civ. P. 12(b)(6) for failure to state a

claim on which relief may be granted. 2000 U.S.

Dist. Lexis 6587 (N.D. Ill. May 12, 2000). That

was a misstep. A complaint is sufficient whenever

the plaintiff could prevail under facts

consistent with the complaint’s allegations, and

defamation is a recognized legal claim. See Cook

v. Winfrey, 141 F.3d 322 (7th Cir. 1998); see

also Walker v. National Recovery, Inc., 200 F.3d

500 (7th Cir. 1999); Bennett v. Schmidt, 153 F.3d

516 (7th Cir. 1998). The body of this complaint

was not self-defeating. Instead the district

judge based her decision on the text of the

article. But when "matters outside the pleading

are presented to and not excluded by the court,

the motion shall be treated as one for summary

judgment and disposed of as provided in Rule 56,

and all parties shall be given reasonable

opportunity to present all material made

pertinent to such a motion by Rule 56." Fed. R.

Civ. P. 12(b). If Wilkow were arguing that he

wanted the additional procedures that precede

summary judgment under Rule 56, we would be

obliged to remand. Yet Wilkow does not ask for

more process, so we treat the case as if the

district court had granted summary judgment.

 In the district court the parties wrangled

about choice of law. Forbes is based in New York,

and Wilkow’s business has its headquarters in

Chicago. The district judge split the difference,

ruling that Illinois law supplies the claim for

relief but that New York law supplies an absolute

privilege for "the publication of a fair and true

report of any judicial proceeding". McKinney’s

New York Civil Rights Law sec.74. According to

the judge, McMenamin’s story is privileged under

New York law as a report of proceedings in 203

North LaSalle Street. The judge added, for good

measure, that the article is protected by the

first amendment because the forceful

characterizations to which Wilkow objects are

opinions rather than facts. See Milkovich v.

Lorain Journal Co., 497 U.S. 1, 20 (1990); Gertz

v. Robert Welch, Inc., 418 U.S. 323, 339-40

(1974); Stevens v. Tillman, 855 F.2d 394, 398-400

(7th Cir. 1988). Forbes did not misstate any of

the details of the situation, and neither

Illinois nor New York requires a reporter to

include all facts (such as the nonrecourse nature
of the loan) that put the subject in the best

light.

 We don’t think it necessary to consider either

constitutional limits on liability for defamation

or privileges under New York law, because this

article is not defamatory under Illinois law in

the first place. (The parties do not contest the

district court’s conclusion that Illinois law

governs the claim and New York law the defense of

privilege.) In Illinois, a "statement of fact is

not shielded from an action for defamation by

being prefaced with the words ’in my opinion,’

but if it is plain that the speaker is expressing

a subjective view, an interpretation, a theory,

conjecture, or surmise, rather than claiming to

be in possession of objectively verifiable facts,

the statement is not actionable." Haynes v.

Alfred A. Knopf, Inc., 8 F.3d 1222, 1227 (7th

Cir. 1993). See also Sullivan v. Conway, 157 F.3d

1092 (7th Cir. 1998) (Illinois law); Bryson v.

News America Publications, Inc., 174 Ill. 2d 77,

100, 672 N.E.2d 1207, 1220 (1996); Stevens, 855

F.2d at 400 ("we do not think [that under

Illinois law] the statements characterized as

’opinions’ are actionable independent of the

factual propositions they imply").

 Characterizations such as "stiffing" and "rob"

convey McMenamin’s objection to the new-value

exception. She expostulates against judicial

willingness to allow debtors to retain interests

in exchange for new value, not particularly

against debtors’ seizing whatever opportunities

the law allows. Nothing in the article implies

that Wilkow did (or even proposed) anything

illegal; Forbes informed the reader that the

district court and this court approved Wilkow’s

proposed plan of reorganization. Every detail in

the article (other than the quotation in the

final paragraph) comes from public documents; the

article does not suggest that McMenamin knows

extra information implying that Wilkow pulled the

wool over judges’ eyes or engaged in other

misconduct. Colloquialisms such as "pleaded

poverty" do not imply that Wilkow was destitute

and failing to pay his personal creditors, an

allegation that would have been defamatory. Read

in context, the phrase conveys the idea that the

partnership could not repay the loan out of rents

received from the building’s tenants. After all,

inability to pay one’s debts as they come due is

an ordinary reason for bankruptcy, and 203 North

LaSalle Street Partnership did file a petition in

bankruptcy. Filing a bankruptcy petition is one

way of "pleading poverty."

 Although the article drips with disapproval of

Wilkow’s (and the judges’) conduct, an author’s

opinion about business ethics isn’t defamatory
under Illinois law, as Haynes and Bryson explain.

Informing the reader about the nonrecourse nature

of the loan might have made Wilkow look better,

but it would not have drawn the article’s sting:

that the partners got to keep the property even

though the bank lost $38 million. The original

deal’s fundamental structure was that the

partnership would repay the loan from rental

income, and that if revenue was insufficient the

bank could choose to foreclose (cutting its loss

and reinvesting at the market rate elsewhere), to

renegotiate a new interest rate with the

partners, or to forebear in the hope that the

market would improve and the full debt could yet

be paid. These options collectively would be

worth more than the market value of the building

on the date of default. Yet the partners refused

to honor these promises to the bank. They

persuaded judges to eliminate the bank’s rights

to foreclose, to renegotiate, or to forebear and

retain the full security interest. The plan of

reorganization stripped down the security

interest, prevented the bank from foreclosing,

and required it to finance the partnership’s

operations for the next decade, at a rate of

interest below what the bank would have charged

in light of the newly revealed riskiness of the

loan. If the real estate market fell further

during that time, so that the partnership could

not repay even the reduced debt, then the bank

was going to lose still more money. The present

value of the promises made to the bank in the

plan of reorganization therefore was less than

the appraised value of the building. But the

partners stood to make a great deal of money if

the market turned up again (as it did), for they

had shucked $38 million in secured debt while

retaining most appreciation in the property’s

value. Whether that was a sound use of bankruptcy

reorganization, independent of the plan’s newvalue aspects, is open to question. See National

Bankruptcy Commission, Final Report 661-706k

(Oct. 20, 1997).

 A reporter is entitled to state her view that

an ethical entrepreneur should have offered the

lender a better bargain, such as allowing the

bank to foreclose and take its $55 million with

certainty, avoiding the additional risk that this

plan fastened on the lender. Foreclosure would

have had serious consequences for the partners,

who would have lost about $20 million in

recaptured tax benefits. These potential losses

created room for negotiation. Armed with the newvalue exception, however, the partners were able

to retain the tax benefits, sharing none with the

bank in exchange for its approval of a

restructuring, while depriving the bank of a

security interest that would have been valuable

when the market recovered. Although a reader
might arch an eyebrow at Wilkow’s strategy, an

allegation of greed is not defamatory; sedulous

pursuit of self-interest is the engine that

propels a market economy. Capitalism certainly

does not depend on sharp practices, but neither

is an allegation of sharp dealing anything more

than an uncharitable opinion. Illinois does not

attach damages to name-calling. See Stevens, 855

F.2d at 400-02 (collecting cases, including

examples such as "sleazy" and "rip-off").

Wilkow’s current and potential partners would

have read this article as an endorsement of

Wilkow’s strategy; they want to invest with a

general partner who drives the hardest possible

bargain with lenders. By observing that Wilkow

used every opening the courts allowed, Forbes may

well have improved his standing with investors

looking for real estate tax shelters (though

surely it did not help his standing with

lenders). No matter the net effect of the

article, however, it was not defamatory under

Illinois law, so the judgment of the district

court is

affirmed.

Appendix

Have the courts gone too far in protecting

debtors against creditors? In this case

it sure looks like it.

Stiffing the creditor

By Brigid McMenamin

 IT HAPPENS EVERY DAY: Business seeks refuge in

bankruptcy; owner and creditors make a deal--

leaving owner in charge.

 Presumably the creditors are satisfied that they

got the best possible deal under the

circumstances. But what if the owner tries to

shaft them by offering only pennies on the

dollar? These days, often as not, courts are

siding with the bankrupt owners and forcing

creditors to accept almost whatever deal the

bankrupt party offers them.

 In short, many judges, ever more sympathetic to

debtors, are allowing unscrupulous business

owners to rob creditors.

 Unless a creditor is prepared to spend years

battling it out in court, he usually caves in.

Forget the old rule that in bankruptcy creditors

enjoy "absolute priority" over debtors.
 The U.S. Supreme Court will soon test the

limits of this leniency. It has agreed to review

a case in which the Bank of America National

Trust & Savings Association claims it was stiffed

by a real estate partnership led by Marc Wilkow

of M&J Wilkow, Ltd., a Chicago-based manager of

strip malls and offices.

 The bank is asking the Court to nix a

bankruptcy plan under which it might receive as

little as $55 million for its $93 million lien

against a Chicago office building. Under Wilkow’s

plan the bank must give up as much as 40% of its

claim while Wilkow and his partners get to keep

the building.

 A lot rides on an eventual Supreme Court

decision. That’s why eight outsiders have filed

friend-of-the-court briefs, including the

American Bankers Association, the American

Council of Life Insurance, the American College

of Real Estate Lawyers and the Solicitor General.

 The whole mess started in 1987 when Bank of

America began lending 203 N. LaSalle Street

Partnership $93 million to build a sleek building

in Chicago with a 15-floor, 547,000-square-foot

office space. The place was soon humming, 98%

leased to everything from Coopers & Lybrand to

the American Civil Liberties Union.

 But by the mid-1990s, rents were not keeping up

with costs. When the principal came due in

January 1995, Wilkow and his partners pleaded

poverty. To keep the bank from foreclosing,

LaSalle Partnership filed for bankruptcy.

Appraisals of the property came in at less than

$60 million. In theory the bank was entitled to

the entire amount. It suggested selling the

property to the highest bidder. Determined to

keep the building, LaSalle partners asked the

bankruptcy court instead to accept a plan under

which the bank would likely receive a fraction of

what it was owed while the partners would keep

the building. The bank, not the equity holder,

would take the hit.

 Yet federal judge Paul Plunkett blessed

LaSalle’s plan. Bank of America will get as

little as $55 million plus interest--and even

that in monthly payments over seven to ten years.

 What happened to the old "absolute priority

rule"? To get around that, the partners used a

controversial "new value" concept in which the

owners agree to kick in fresh capital in return

for equity.

 To validate the concept, the owners proposed to

put in $6.1 million in fresh capital, over five
years.

 Nice deal--for the debtor. The bank takes an

up-to-$38 million haircut, and the owner throws

in just $4.1 million in present value.

 In September 1997 the federal appeals court

that heard the case deferred to the lower court’s

decision. So the bank petitioned the Supreme

Court to step in. On May 4 it agreed.

 Bank of America’s argument has been boosted by

a February ruling from a federal appeals court in

New York that found in favor of the creditors in

a similar situation. With two such recent

conflicting rulings and so much at stake,

arguments before the Supreme Court will be heard

on Nov. 2.

 Realizing the Court could rule against the

partnership, Wilkow says he is willing to sweeten

his offer. "The time to talk settlement is when

there’s a cloud of uncertainty over everyone’s

head," he explains.

[McMenamin’s article was accompanied by a

photograph of the 203 North LaSalle Street

building captioned "Chicago’s 203 North LaSalle

Street, Stiffing the bank with court approval."]