Court Opinion

ID: 9585117
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:56:37.955299+00
Date Added: 2024-06-11T15:28:29.842455
License: Public Domain

CUDAHY, Circuit Judge,
dissenting.
After Giant Screen and Sky High executed an agreement to co-produce an IMAX film about Vikings, Sky High sought and obtained additional financing by perpetrating a fraud on the defendant CIBC: it forged signatures on a series of documents through which Giant Screen appeared to guarantee CIBC’s loan to Sky High. Not surprisingly given these rather inauspicious beginnings, things did not end well. Sky High failed to deliver the film on time, CIBC sent Giant Screen a letter demanding repayment and Giant Screen disclaimed knowledge of the fraudulent documents by means of which Giant Screen appeared to have guaranteed the loan. CIBC made some preliminary inquiries into Giant Screen’s allegations of fraud, but gave up when Giant Screen said it would answer CIBC’s questions only if ordered to do so by a court. Without inquiring further, CIBC made a series of statements to its insurer that lie at the center of this dispute. Most pertinently, it stated that Giant Screen was “still in default of its payment obligations.”
As I read this statement, and the other statements that are at issue here, I find myself incapable of the sort of indignation that seems to animate the majority opinion. According to the majority, CIBC’s statement suggests that “Giant Screen’s contractual word to meet an obligation is meaningless” (Maj. Op. at 533-34), and “triggers notions of collection and bankruptcy proceedings.” (Maj. Op. at 534.) To my ear, the statement does no such thing. CIBC has not said that Giant Screen is incapable of paying; it has not even stated that Giant Screen lacked an excuse for nonpayment. It has said only that Giant Screen simply has not paid, and that payment was due. What, then, has led my colleagues to conclude that this is defamatory?
It seems safe to say that my colleagues have not based their decision on specific Illinois precedent. Indeed, given that we are sitting in diversity, one can’t help but be struck by the majority’s indifference to the fact that Illinois courts have stated that “[ajllegations of outstanding debts and the failure of a business venture are neither necessarily injurious to a person’s business reputation nor indicative of a lack of integrity in business dealings.” Makis v. Area Publ’ns Corp., 77 Ill.App.3d 452, 32 Ill.Dec. 804, 395 N.E.2d 1185, 1189 (1st Dist.1979). It appears to be widely accepted, both in Illinois and elsewhere, that the mere statement that someone has failed to perform under an agreement does not, without more, implicate one’s ability, business integrity or solvency. See, e.g., Springer v. Harwig, 94 Ill.App.3d 281, 49 Ill.Dec. 850, 418 N.E.2d 870, 872 (1st Dist. 1981) (lawsuit charging a person with failure to perform under an agreement “does not, in itself, charge him with lack of ability or integrity in his business.”); Am. Needle & Novelty, Inc. v. Drew Pearson Mktg., Inc., 820 F.Supp. 1072, 1075-76 (N.D.Ill.1993) (statement that plaintiff has knowingly breached an agreement and is delinquent in payments “while discourteous ... do[es] not, in obviously and naturally harmful words, constitute a serious charge of incapacity or misconduct.”); Union Pac. R.R. Co. v. Vill. of S. Barrington, *539958 F.Supp. 1285, 1300 (N.D.Ill.1997) (allegation that plaintiff breached contract is not a serious charge of incapacity or misconduct that would support an action for defamation per se); see also Makofsky v. Cunningham, 576 F.2d 1223, 1236 (5th Cir.1978) (assertion that buyer was “in default” of purchase agreement is not defamatory per se, “especially when, as here, [the words] are employed merely to claim a deposit made as a security for contractual performance.”); Williams v. Gulf Coast Collection Agency Co., 493 S.W.2d 367, 369 (Mo.Ct.App.1973) (the general rule is that it is not defamatory per se to state that a person owes a debt which is long past due where this charge does not affect the person in his business); Patton v. Jacobs, 118 Ind.App. 358, 78 N.E.2d 789, 790-91 (1948) (statement that a person who is not a merchant owes a debt and refuses to pay is not defamatory per se); Demmel v. Triumph of Europe, Inc., 26 Misc.2d 1070, 208 N.Y.S.2d 463 (N.Y.Sup.Ct.1960) (assertion that plaintiff failed to perform his contracts would not tend to hold plaintiff to ridicule or aversion and was not calculated to prejudice him in seeking a livelihood).1
The majority’s decision is no more compelled by the general principles of the law of defamation than it is required by specific Illinois precedent. The law of defamation in Illinois is unremarkable: defamation tends to cause such harm to the reputation of another that it lowers that person in the eyes of the community or deters third persons from associating with him. See Tuite v. Corbitt, 224 Ill.2d 490, 310 Ill.Dec. 303, 866 N.E.2d 114, 121 (2006). Statements are defamatory per se when they impute inability or want of integrity in business, or in one’s performance of employment duties. Id. The mere recitation of this definition, however, does not settle much. At most, CIBC’s statements are agnostic with respect to Giant Screen’s “integrity” and its “business ability.” Thus, it seems to me that we are required under Illinois’ “innocent construction rule” to hold the statement to be non-defamatory. See Tuite, 310 Ill.Dec. 303, 866 N.E.2d at 121 (a statement is not defamatory if it is “reasonably capable of an innocent construction.”).
The majority pays lip service to the innocent construction rule, but dismisses as “unreasonable” any innocent interpretation of CIBC’s statements. (Maj. Op. at 533-34.) I disagree. It seems to me that CIBC’s statements are obviously (and reasonably) capable of innocent construction. The innocent construction of its statements would be as follows: Giant Screen did not perform an action required by contract; it may subjectively believe that performance wasn’t due, and this belief may even be reasonable, or at any rate, excusable; however, its nonperformance has resulted in a loss to CIBC for which CIBC is entitled to insurance compensation. Again, one doesn’t have to strain to see this interpretation — this is more or less what CIBC actually said.
The innocent construction rule seems to embody the principle that courts should, *540where reasonable, strive to minimize the set of statements that can give rise to potential tort liability. This makes a great deal of economic sense. The risk of taking unavailing breach of contract claims to be defamatory is that we will make it harder, rather than easier, for people in business to interact. Even when the prospect of ultimately being found liable seems remote, as seems to be the case here, our law unnecessarily increases the cost of business if ordinary business communications have the potential to foist on speakers the cost of standing trial to prove that their statements were true, or were not reckless in their possible falsity.
In the light of all this, I think our decision today is ill-advised. It seems to me very likely that harsher words than the ones at issue here have passed between business associates without the parties coming to blows or contacting their lawyers. Again, because parties apparently rarely see the need to litigate over such trivialities, it is hardly clearly established as a matter of law that the words like “default” give rise to tort liability when they are embedded in sentences that might conceivably be false. In spite of this, the majority today holds what, to my knowledge, no court has ever held: namely, that one defames a business associate as a matter of law by saying that this associate is “in default.” In assigning such treacherous consequences to the use of this rather bloodless and at any rate unremarkable word, the majority has dug a new and hidden pitfall for civil discourse among businesspeople. This result, in other words, is both imprudent and unnecessary. I respectfully dissent.

. In Quality Granite Constr. Co., Inc. v. Hurst-Rosche Eng'rs, Inc., 261 Ill.App.3d 21, 198 Ill.Dec. 528, 632 N.E.2d 1139 (5th Dist.1994), an Illinois court refused to overturn a jury's finding that a letter stating that the plaintiff "may be considered in default” was defamatory. Id. at 1143. However, in that case, the defendant also accused the plaintiff of failing "to complete the project in a timely manner, substandard workmanship, reluctance to complete punch list items and inability to interpret the contract documents, plans and specifications as bid.” Id. at 1141. It is probably not irrelevant that the jury also found that the defendant’s statement was made to pressure the plaintiff into forfeiting its claims for additional compensation. Id.