The United States District Court for the Northern District of Illinois recently dismissed a counterclaim for slander of title arising out of the filing of lis pendens, finding that the act was protected by an absolute privilege.  See Steelcast Ltd. v. Makary, 2019 WL 4934697 (N.D. Ill. 2019).  Plaintiff brought an action on behalf of an LLC for which plaintiff and defendant were the only members.  Plaintiff claimed that defendant, as the LLC manager, breached its fiduciary duties by not paying certain receivables to plaintiff.  As part of the lawsuit, plaintiff filed constructive trusts claims and lis pendens against defendant’s properties based on the claim that defendant diverted LLC funds to renovate these properties, and “to apply pressure in this litigation.”  Defendant then counterclaimed for slander of title and abuse of process based on the filing of the lis pendens, arguing that the claim that defendant diverted funds to renovate properties was “knowingly baseless.”  Defendant further argued that the filing of the lis pendens was malicious because plaintiff’s claim was for breach of fiduciary duty, not a fraudulent transfer of funds, and the claim had nothing to do with the properties.  Plaintiff moved to dismiss the counterclaim.

The Court granted the motion and dismissed the counterclaim.  First, the Court found that the act of filing the lis pendens was shielded by an absolute privilege because it was related to plaintiff’s claim in the litigation that defendant diverted funds to these properties, regardless of how “baseless” defendant thought the claim was.  The Court further found that a slander of title claim requires that the statements be both false and malicious, and “[u]nder Illinois law, a mere recitation of a party’s claims in a lawsuit cannot be ‘false’ or capable of ‘form[ing] the basis of liability’ for a slander claim.”  Second, the Court dismissed the counterclaim for abuse of process, finding that the filing of a lis pendens was not an “act in the use of legal process not proper in the regular prosecution of the proceedings.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.