Opinion ID: 179414
Heading Depth: 2
Heading Rank: 1

Heading: Indiana's Absolute Litigation Privilege and the Texas Lawsuit

Text: We review de novo a district court's grant of summary judgment. See Lewis v. Downey, 581 F.3d 467, 472 (7th Cir.2009). A grant of summary judgment is appropriate where there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c). On appellate review, we review the facts and inferences in the light most favorable to the nonmoving party. See Haefling v. UPS, 169 F.3d 494, 497 (7th Cir.1999). Indiana law has long recognized an absolute privilege that protects all relevant statements made in the course of a judicial proceeding, regardless of the truth or motive behind the statements. Hartman v. Keri, 883 N.E.2d 774, 777 (Ind. 2008). The purpose for the privilege is to preserv[e] the due administration of justice by providing actors in judicial proceedings with the freedom to participate without fear of future defamation claims. Id. (citations and internal quotation marks omitted). In the words of one Indiana court, the privilege recognizes that the public['s] interest in the freedom of expression by participants in judicial proceedings, uninhibited by the risk of resultant suits for defamation, is so vital and necessary to the integrity of our judicial system that it must be made paramount to the right of the individual to a legal remedy when he has been wronged. Miller v. Reinert, 839 N.E.2d 731, 735 (Ind.Ct.App. 2005) (citation omitted). In determining whether a statement is relevant and pertinent, such that it is absolutely privileged, Indiana courts favor a liberal rule. Id. Only those allegations that are so palpably irrelevant to the subject matter of the controversy that no reasonable man can doubt [their] irrelevancy and impropriety are not covered by the privilege. Id. The allegations at issue asserted that Doe and Principal (meaning Rain and Paramount) trafficked in intellectual property stolen from Rolls-Royce and formed an enterprise with the defendants in that case to replicate Rolls-Royce engine parts and undercut Rolls-Royce's business. There can be no doubt that those allegations were pertinent and relevant to the [Texas] litigation, as Fifth Circuit precedent required Rolls-Royce to allege the existence of an enterprise in order to plead its RICO claim. See St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 439 (5th Cir.2000). Moreover, because the alleged enterprise was an association-in-fact (as opposed to a legal entity), Rolls-Royce was required to show evidence of an ongoing organization, formal or informal, that functions as a continuing unit over time through a hierarchical or consensual decision-making structure. Id. at 441. Thus, the requirements for applying Indiana's absolute privilege are satisfiedthe allegations were made in the course of a judicial proceeding to which they were relevant. Appellants nevertheless contend that Rolls-Royce is not immune from liability because the privilege does not extend beyond defamation and other similar tort claims to encompass breach of contract claims. No Indiana court has addressed whether the absolute privilege precludes not only tort liability, but also contractual liability. Faced with a novel question of state law and no authority from the state courts, we shall examine the reasoning of courts in other jurisdictions addressing the same issue and applying their own law for whatever guidance about the probable direction of state law they may provide. Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 635 (7th Cir.2007). Courts in a number of other jurisdictions have concluded that the absolute litigation privilege is applicable to breach of contract actions, at least where immunity from liability is consistent with the purpose of the privilege. See Kelly v. Golden, 352 F.3d 344, 350 (8th Cir.2004) (holding that Missouri's absolute privilege precluded liability for an alleged breach of a nondisparagement/confidentiality agreement based on statements made in a judicial proceeding); Ellis v. Kaye-Kibbey, 581 F.Supp.2d 861, 880-81 (W.D.Mich.2008) (predicting that the Michigan Supreme Court would hold that the absolute litigation privilege preclude[s] breach-of-contract liability [for] one who gives testimony or produces information in a judicial proceedingat least to the extent that such action was necessary to comply with a subpoena or other order (and perhaps even if the communication was made in court in a judicial proceeding but not required by any subpoena or court order)); Wentland v. Wass, 126 Cal.App.4th 1484, 1492, 25 Cal.Rptr.3d 109 (2005) (whether the litigation privilege applies to an action for breach of contract turns on whether its application furthers the policies underlying the privilege); Tulloch v. JPMorgan Chase & Co., 2006 WL 197009, at  (S.D.Tex. Jan.24, 2006) (concluding that Texas law of absolute privilege bars all claimsregardless of the legal theories on which they are basedseeking defamation damages, meaning damages for injuries flowing from the communication of allegedly false statements during a judicial proceeding). We find that approach to be sound and conclude that the Indiana Supreme Court would likely apply similar reasoning. Therefore, the question becomes whether applying the litigation privilege in this case would promote the due administration of justice and free expression by participants in judicial proceedings. We conclude that it would. The application of the privilege here allows Rolls-Royce to pursue its claims against third parties without fear of future legal liability arising out of its efforts to protect its intellectual property rights. By contrast, the failure to apply the privilege would frustrate the underlying policy by discouraging Rolls-Royce from exercising its fundamental right to resort to the courts to protect its rights. Appellants contend that Indiana's policy favoring the enforcement of contracts counsels against applying the litigation privilege here. Appellants waived this argument by failing to raise it before the district court. See Mote v. Aetna Life Ins. Co., 502 F.3d 601, 608 n. 4 (7th Cir.2007). Moreover, we do not find appellants' argument persuasive. Appellants frame the inquiry as whether the non-disparagement provision is enforceable. But the agreement's enforceability is not at issue. Rather, the question is whether to impose liability for a violation of that agreement. Under the circumstances presented, we believe that the Indiana Supreme Court would refuse to impose liability based on the absolute litigation privilege. As noted above, applying the privilege here advances its underlying purpose. In addition, appellants' breach of contract claim is largely indistinguishable from a tort claim alleging injury flowing from statements made in a judicial proceeding. While appellants technically seek liquidated damages under the settlement agreement, any damages they suffered were caused solely by the fact that the statements were (allegedly) tortious. Consequently, imposing liability here would allow appellants to circumvent the privilege by recasting what essentially is a tort claim as a breach of contract action. Appellants also argue that Rolls-Royce waived the absolute privilege by agreeing to the non-disparagement clause. Because appellants did not raise a waiver argument below, they are barred from doing so here. See Mote, 502 F.3d at 608 n. 4. Finally, appellants request that we certify the question of whether Indiana's absolute litigation privilege applies to breach of contract claims to the Indiana Supreme Court. Certification is appropriate only when `the case concerns a matter of vital public concern, where the issue will likely recur in other cases, where resolution of the question to be certified is outcome determinative of the case, and where the state supreme court has yet to have an opportunity to [decide] . . . the issue.' State Farm Mut. Auto. Ins. Co. v. Pate, 275 F.3d 666, 672 (7th Cir.2001) (quoting In re Badger Lines, Inc., 140 F.3d 691, 698-99 (7th Cir.1998)). Even where, as here, there is no clear guidance from a state court, . . . certification is neither mandated nor always necessary. Id. at 673. Because the procedure is not without costs to the litigants and to the state court which already must contend with a crowded docket of its own[,] . . . we approach the decision to certify with circumspection. Id. at 671. Under the circumstances of this case, we do not believe that certification is warranted. While the resolution of the question is outcome determinative, the question has not arisen before in Indiana's appellate courts. If and when it arises again, the state courts will be free to reach their own conclusion, of course, and can tell us if our prediction of Indiana law was correct. Without seeing an obstacle to future state court resolution of the issue, we see no need to require the parties to go through another round of briefing and argument in this litigation. Finally, although not a primary factor, we are entitled to take into account whether the request for certification to the state court came from the party who chose federal jurisdiction in the first place. Brown v. Argosy Gaming Co., L.P., 384 F.3d 413, 417 (7th Cir.2004). As we have explained, it's not a proper alternative to proceeding in the first instance in state court to sue in federal court but ask that the suit be stayed to permit certifying the interpretive issue to the state court, thus asking that the suit be split between two courts. Doe v. City of Chicago, 360 F.3d 667, 672 (7th Cir.2004). Here, appellants had the option of bringing their case in Indiana state court. That they chose to proceed in federal court undermines their request for certification.