Opinion ID: 69784
Heading Depth: 2
Heading Rank: 1

Heading: Burden of Proof to Show Lack of Justification

Text: The allocation of the burden of proof is a legal issue reviewed de novo. Grilletta v. Lexington Ins. Co., 558 F.3d 359, 364 (5th Cir.2009). Marathon asserts that the district court misapplied Illinois substantive law on the placement of the burden of proof for justification, and that the district court erred by requiring Marathon to come forward with summary judgment evidence to support the lack of justification. Marathon claims that the district court failed to assess the status of Illinois law to determine whether the law was clear or whether an Erie guess was necessary; instead, observing that the state law was confusing, the court misapplied Illinois authorities. Additionally, Marathon avers that the district court incorrectly held that use of the word privilege in the complaint was enough to implicate the existence of a statutory or common law privilege. Ford initially insists that  as the district court held  whether Marathon or Ford had the burden of proof, Marathon failed to demonstrate a genuine issue of material fact. Ford then contends that Marathon bears the burden of proving lack of justification under Illinois law for two reasons: Ford's actions were privileged, and Marathon specifically raised the issue of privilege in its pleadings, thereby conferring upon itself the burden of proving lack of justification. As Illinois intermediate courts, the district court, and the parties all admit, there is rampant confusion in this area of the law. Roy v. Coyne, 259 Ill.App.3d 269, 196 Ill.Dec. 859, 630 N.E.2d 1024, 1030 (1994). However, [i]n Illinois ... where the conduct of a defendant in an interference with contract action was privileged, it is the plaintiff's burden to plead and prove that the defendant's conduct was unjustified or malicious. HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 131 Ill.2d 145, 137 Ill.Dec. 19, 545 N.E.2d 672, 677 (1989). Thus, as the Illinois Supreme Court noted, the threshold question on the burden of proof is whether the defendant's conduct is privileged. See id. (Therefore, before we can determine who has the burden of pleading justification (or a lack thereof), we must first decide whether the defendants' conduct here was protected by a privilege.). The Illinois Supreme Court will recognize a privilege in intentional interference with contract cases where the defendant was acting to protect an interest which the law deems to be of equal or greater value than the plaintiff's contractual rights. Id. (citing Swager v. Couri, 77 Ill.2d 173, 32 Ill.Dec. 540, 395 N.E.2d 921, 927 (1979)). The Illinois Supreme Court has repeatedly recognized a privilege for corporate officers and directors to use their business judgment and discretion on behalf of their corporations. The existence of the privilege was based upon [the] recognition that the duty of corporate officers and directors to their corporations' shareholders outweighs any duty they might owe to the corporations' contract creditors. Id. at 677; see also Swager, 32 Ill.Dec. 540, 395 N.E.2d at 927 (privilege of corporate officer to exercise business judgment and discretion applies to decision to dissolve entity); H.F. Philipsborn & Co. v. Suson, 59 Ill.2d 465, 322 N.E.2d 45, 50 (1974) (privilege of corporate officer to obtain loan with better terms than in allegedly broken contract); Loewenthal Secs. Co. v. White Paving Co., 351 Ill. 285, 184 N.E. 310, 315 (1932) (privilege of corporate officer to refuse to bid on work in attempt to force creditor to waive contractual rights). In addition, the Court has extended that reasoning to recognize a privilege for hospital management to their hospital. See HPI Health Care Servs., 137 Ill.Dec. 19, 545 N.E.2d at 677 (privilege of hospital managers to decline to pay hospital's contract creditors). The district court noted that Illinois law is less than clear on the issue of burdens of proof on justification. Attempting to traverse the legal confusion, the district court held: First, if Marathon's prima facie case must follow the elements of tortious interference, as stated by the HPI Court, then Marathon has the burden of proving a lack of justification as part of its case. Second, even if Marathon only bears the burden of proving the lack of justification when privilege is established by the complaint, the Court finds Marathon's complaint establishes the issue of privilege. Third, even if Marathon's complaint does not establish privilege and justification is Ford's burden  as an affirmative defense  the Court finds that Ford has established such a defense and that Marathon has failed to show the existence of a genuine issue of material fact in rebuttal. The district court went on to conclude that the factual allegations in Marathon's complaint established Ford's privilege because Marathon alleges that Defendants have no justification or privilege for interfering with any of these contracts or relationships, and a section of the complaint was titled There is No Legitimate Business Reason or Justification For Defendants' Conduct, in which Marathon alleges facts to imply a lack of justification or legitimate business judgment. The approach employed by the district court, and discussed by one Illinois Court of Appeals, in which the mere allegation in the complaint that the defendant acted without privilege then serves to introduce privilege, misses the mark. [3] See Zdeb v. Baxter Int'l, Inc., 297 Ill.App.3d 622, 231 Ill.Dec. 871, 697 N.E.2d 425, 433 (1998) (criticizing Roy v. Coyne, 259 Ill. App.3d 269, 196 Ill.Dec. 859, 630 N.E.2d 1024 (1994)). Application of the proper privilege analysis, however, results in the same outcome. Ford's actions fall squarely within the parameters of the Illinois Supreme Court's caselaw on corporate officer privilege. Here, Ford's officers and directors made the decision regarding the rating change in accordance with their business judgment and the company benefitted from the challenged action. As the Illinois Supreme Court has observed, [t]he situation alleged here does not present an instance of `outsiders intermeddling maliciously in the contracts or affairs of other parties.' Fellhauer v. City of Geneva, 142 Ill.2d 495, 154 Ill.Dec. 649, 568 N.E.2d 870, 880 (1991) (quoting Loewenthal Secs. Co., 184 N.E. at 310). Thus, because the conduct of [Ford] was privileged, it is the plaintiff's burden to plead and prove that the defendant's conduct was unjustified.... HPI Health Care Servs., 137 Ill.Dec. 19, 545 N.E.2d at 677. On that basis, the district court did not err in ruling that HPI required Marathon to negate justification.