Opinion
Cause No. IP99-1725-C-M/S.
April 25, 2001
William C Barnard, Sommer Barnard, Indianapolis, IN., for Plaintiffs.
G Ronald Heath, 01 Johnson Smith Heath LLP, Indianapolis, IN., for Defendants.
Steven A Johnson, Steven A Johnson Associates, Merriville, IN., for Defendants.
Robert E Stochel, Hoffman Stochel, Crown Point, IN., for Defendants.
ORDER ON MOTION TO DISMISS COUNTERCLAIM
This matter began as a lawsuit by Associates Financial Services Company (hereinafter "Associates") against its former legal counsel, Bowman, Heintz, Boscia, and Vician, P.C. ("Bowman Heintz") and one of its principals, Glenn S. Vician ("Vician"). Associates is engaged in the consumer lending business. In its suit, Associates alleged that, among other things, Bowman Heintz and Vician knowingly and voluntarily disclosed confidential information concerning Associates to counsel for a putative class of consumer debtors for the purpose of facilitating the filing of class action litigation against Associates. The suit also alleged that Vician thereafter assisted one class member in obtaining an improper default judgment of over $500,000 against Associates by providing the key (albeit inaccurate) testimony on both liability and damages, and by concealing the entire matter from Associates, in breach of fiduciary duties and express contractual obligations owed to Associates. In the lawsuit, Associates alleged claims for breach of fiduciary duty, breach of contract, legal malpractice, and indemnity.
In response, Bowman Heintz and Vician filed several counterclaims against Associates, including claims for fraud, tortious interference with a contractual relationship, tortious interference with a business relationship, criminal conversion, defamation, and abuse of process. Associates has filed a motion to dismiss all counterclaims against it under FED. R. CIV. P. 12(b)(6). The Court will now consider the merits of that motion.
I. FACTUAL BACKGROUND A. EVENTS LEADING UP TO THE COUNTERCLAIMS
The Court will only recite those facts that the parties discussed in their arguments. Although the Court recognizes Bowman Heintz and Vician have alleged other facts in support of their counterclaims, they are not relevant for purposes of resolving the present motion. The relevant facts, viewed in the light most favorable to Bowman Heintz and Vician, are as follows: Associates is a Delaware corporation with its principal place of business in Irving Texas. Complaint ¶ 2. Bowman Heintz is a legal professional corporation in the state of Indiana, with its principal place of business in Lake County, Indiana. Counterclaim ¶ 1. Vician is a lawyer admitted to practice in Indiana, and has been an employee, shareholder, and president of Bowman Heintz. Id. ¶ 2. In October 1996, a representative of Associates communicated with Gerald E. Bowman of Bowman Heintz about attending a business meeting to discuss the proposed sale of certain financial asset accounts by Associates. Id. ¶ 3. Bowman attended the meeting, where an Associates representative proposed to him the sale of some of its charged-off financial asset accounts. Id. ¶ 4. Associates also represented to Bowman that it anticipated referring some collection files to Bowman Heintz through the National Attorney Network, separate from the consumer loan accounts that were being offered for sale. Id. ¶ 5.
Sometime before October 31, 1996, Vician and an authorized representative of Associates also discussed the proposed sale of financial asset accounts. During the discussions the Associates representative advised that there were no known problems with the balances on any of the accounts, that the accounts had been "scrubbed" for bankruptcies, and that "most" of the financial asset accounts had hard copy files for verification of the indebtedness. Id. ¶ 10. Vician and Bowman Heintz relied on the representations of the Associates representative that there were no problems with the loan balances and that "most" of the financial asset accounts included hard copy file information that would be delivered with the sale of the financial asset accounts. Id. ¶ 11. At the time the Associates representatives made the representations to Vician, they knew or had known that those representations were false. Id. ¶ 12. Vician and Bowman Heintz would not have agreed to set up American Assignment for the purpose of purchasing Associates' financial asset accounts if they had known the truth about the inaccuracy of the balances and the general lack of availability of hard copy files on such accounts. Id. ¶ 13.
That same month, Bowman Heintz told Associates that some of its principals were forming an investment company to be known as American Assignment Company, LLC ("American Assignment"). The principals decided to establish this entity so it could actually purchase the financial asset accounts from Associates. Id. ¶ 6. Bowman Heintz further advised Associates that because American Assignment had no collection staff, it would refer collection of the accounts it purchased to Bowman Heintz. Id. ¶ 7.
On or around October 31, 1996, Articles of Organization of American Assignment were completed and filed with the Indiana Secretary of State. That same day, American Assignment entered a contingency fee agreement with Bowman Heintz, under which American Assignment employed Bowman Heintz to collect its financial asset accounts. Id. ¶ 8. The contingency fee agreement provided that Bowman Heintz had a contractual attorney's lien on any sums generated or collected as a result of its collection of American Assignment's financial asset accounts. Id. ¶ 9.
Around that same time Associates executed and delivered to American Assignment two Financial Asset Sale Agreements for the sale of the accounts to American Assignment. Id. ¶ 14. Vician, as Manager of American Assignment, executed the agreements and delivered a check payable to Associates in the sum of $36,937.96 as consideration. Id. ¶ 15. Mary Kinsey, as the authorized representative of Associates, executed two separate Bills of Sale to American Assignment and thereby transferred all of Associates' rights, title, and interest in such financial asset accounts to American Assignment. Id. ¶ 16.
Associates shipped financial information on approximately 400 financial asset accounts to Bowman Heintz at Merrillville, Indiana, on behalf of American Assignment, as well as hard copy files for nearly 50% of the financial asset accounts that were sold. Id. ¶ 17. On or around November 30, 1996, Associates again executed and delivered to American Assignment two Financial Asset Sale Agreements for the sale of additional accounts to American Assignment. Id. ¶ 19. Kinsey again executed two separate Bills of Sale to American Assignment, thereby transferring all of Associates' rights, title, and interest in such financial asset accounts to American Assignment. Id. ¶ 20. That same day, Associates shipped financial information on approximately 400 more financial asset accounts sold to Bowman Heintz at Merrillville, Indiana, on behalf of American Assignment, as well as hard copy files for nearly 50% of the financial asset accounts that were sold. Id. ¶ 21.
B. THE SPECIFIC COUNTERCLAIMS 1. Fraud
Associates made representations of past or existing facts regarding the status of the financial asset accounts, including that there were no problems with the loan balances on the accounts and that most of the accounts included hard copy file information that would be delivered with the sale of the accounts. Id. ¶ 24. Associates made the representations for the purpose of inducing Bowman Heintz and its shareholders to purchase the financial asset accounts from it. Id. ¶ 25. Associates' representations with respect to the status of the financial asset accounts were false, and at the time they were made, Associates knew they were false. Id. ¶ 26. Bowman Heintz and Vician relied upon the representations made by Associates to their detriment, and have suffered injuries and damages as a result. Id. ¶¶ 27-28.
2. Tortious Interference with a Contractual Relationship
American Assignment, which had developed a business of collecting delinquent consumer loan accounts, entered into a contract with Bowman Heintz to collect the delinquent accounts it had purchased from Associates. Id. ¶ 30. Associates interfered with the contractual relationships of Bowman Heintz and Vician by interfering in the collection process on accounts owned by American Assignment that it had purchased from Associates, and by soliciting payments from American Assignment debtors and failing to report the receipt of payments that were actually due and owing American Assignment. Id. ¶ 31. Associates further interfered with the contractual relationships of Bowman Heintz by intentionally communicating with certain American Assignment account debtors — on accounts that Bowman Heintz was collecting and in which Associates had no legal right or authority to negotiate settlements — in an attempt to have them tender payment and settlements directly to Associates. Id. ¶ 32. Bowman Heintz had a contract with American Assignment that allowed for an attorney's lien on the proceeds of any collections. Id. ¶ 33.
Bowman Heintz suffered damages as a result of Associates wrongfully negotiating settlements without the permission or authority of it or American Assignment and in failing to report the receipt of payments and settlements. Id. ¶ 35. Associates further damaged Bowman Heintz by wrongfully compromising balances and reducing, through settlement, the amount of monies that Bowman Heintz might otherwise have collected on various collection accounts that American Assignment owned. Id. ¶ 36.
In an attempt to cover up the receipt of money that was actually due and owing to American Assignment and Bowman Heintz, Associates provided Bowman Heintz with the wrong information as to the actual date that a delinquent account had been settled. Id. ¶ 37. Bowman Heintz and Vician believe that an agent or employee of Associates attempted to release and vacate a judgment and garnishment order that had been rendered on behalf of American Assignment against a debtor on a delinquent consumer loan account that American Assignment had purchased from Associates. American Assignment had no notice of and did not consent to the attempt to vacate the judgment and garnishment order. Id. ¶ 38.
In addition, in December 1999, an employee, agent, or someone acting in concert with Associates mailed from an Associates office in Texas copies of Associates' complaint in this matter to several of Bowman Heintz' collection clients, including Ford Motor Credit Company ("Ford") and Chrysler Credit Corporation ("Chrysler"). Bowman Heintz has a long-standing contractual relationship with both companies to collect delinquent consumer loan accounts. Id. ¶ 39. By mailing copies of the complaint, Associates interfered with Bowman Heintz' contractual relationship with those companies. It also contends that Associates mailed the complaints in an effort to cause those clients to sever their contractual relationship with Bowman Heintz and find other attorneys to represent them in their collection efforts. Id. ¶ 40.
3. Tortious Interference with Business Relationships
Associates' mailing of the complaint to Ford and Chrysler was an attempt to smear and ruin the business and professional reputations of Bowman Heintz and Vician, and was done for the purpose of intimidation, to assert economic duress, and for reasons other than advancing the merit of the complaint Associates filed in this matter. Id. ¶¶ 42-43. The mailing of the complaint to clients of Bowman Heintz and Vician caused them injuries and damages. Id. ¶ 44.
4. Criminal Conversion
Associates knowingly and intentionally exerted unauthorized control over sums of money to which Bowman Heintz was legally entitled pursuant to its contractual interest and attorney's lien. Id. ¶ 46. Because of Associates' conduct, Bowman Heintz and Vician have suffered injuries and damages. Id. ¶ 47.
5. Defamation
Between March 1997 and November 1997, Bowman Heintz and Vician learned of information that Associates had taken money, solicited payments, and negotiated settlements on accounts that American Assignment had purchased. Associates had failed to obtain authority from American Assignment to negotiate settlements or to actively solicit payments from consumer debtors on accounts owned by American Assignment. Id. ¶ 50. Bowman Heintz and Vician made several oral and written demands upon Associates between May and September 1997 for an accounting of all money taken by it and for the delivery of all payments it made on accounts owned by American Assignment. Id. ¶ 51. During 1997, Associates refused to provide a full and complete accounting to American Assignment, and failed to deliver to American Assignment all of the monies it had taken on accounts it did not own. Id. ¶ 52.
By August 1997, Vician learned from an employee of Associates that Associates had taken money and solicited payments on certain financial asset accounts owned by American Assignment, and that Associates was not reporting such payments and was not delivering the money to American Assignment within 45 days of receipt as required by the Financial Asset Sales Agreement. Id. ¶ 53. Around that same time, Vician learned that an Associates employee had attempted to release and vacate a judgment and garnishment order that had been rendered on behalf of American Assignment regarding a financial asset account American Assignment owned without providing notice to or obtaining the consent of American Assignment. Id. ¶ 54.
In November 1997, when Vician learned that someone filed a claim against American Assignment in Franklin County Circuit Court, he prepared and sent to Associates by first-class mail a written notice of the claim. Id. ¶ 55. The following month, Vician received a subpoena to testify at a hearing in that matter. Vician attended the hearing and testified truthfully. Id. ¶ 56.
In and after February 1998, Associates made and published numerous false statements, both orally and in writing, about the conduct of, statements by, and actions of Vician as they relate to Associates.
Some of the false statements included the following:
a. That Vician had not prepared and sent written notice to Associates of the lawsuit filed in Franklin Circuit Court prior to the date that a default judgment was rendered against Associates in that proceeding.
b. That Vician had provided privileged or confidential information about Associates and that Vician had obtained privileged or confidential communications from Associates in the context of an attorney/client relationship.
c. That Vician had breached fiduciary duties allegedly owed to Associates.
d. That Associates had the legal right to solicit payments and to negotiate settlements on accounts owned by American Assignment and they published such statements to gain a pecuniary advantage over Vician.
e. That Vician and/or Bowman Heintz had alleged "comprehensive" knowledge of Associates' loan origination practices and loan servicing practices.
f. That Vician had allegedly provided false testimony and/or false arguments or evidence to the Franklin Circuit Court and/or other tribunals about Associates and/or its business relationship to American Assignment.
Id. ¶ 57. Associates knew or should have known that its statements about Vician were false and inflammatory, and it made the statements to cause injury to and damage to Vician's reputation. Id. ¶ 58. The false statements published to others regarding Bowman Heintz and Vician have caused permanent and irreparable injuries to Bowman Heintz and Vician's reputation. Id. ¶ 59.
6. Abuse of Process
Various pleadings Associates filed are part of a scheme or practice to cover up its fraudulent and illegal conduct, including an illicit practice to solicit payments and settlements on accounts that it no longer owned. Id. ¶ 62. In an effort to harass and interfere with Bowman Heintz clients' contractual and business relationships, Associates mailed copies of the complaint to partners, clients, and business associates of Bowman Heintz and Vician who have no interest in this litigation. Id. ¶ 63. Associates acted with malice and is using this litigation as mere economic leverage to try and enforce a settlement or resolution of other litigation that Bowman Heintz and Vician are undertaking against Associates. Id. ¶ 64.
The mailing of the complaint in this matter to partners, clients, and business associates of Bowman Heintz and Vician who have no interest in this litigation was also done in an attempt to subvert the judicial process and to impose economic duress and leverage. Id. ¶ 67. Associates' real purpose of this lawsuit is to suppress and control Bowman Heintz and Vician, who are in a substantially inferior economic position to Associates. Id. ¶ 68. Associates' abuse of process caused Bowman Heintz and Vician to suffer injuries and damages. Id. ¶ 69.
II. RULE 12(b)(6) STANDARDS
Fed.R.Civ.P. 12(b)(6) permits the dismissal of a claim for "failure to state a claim upon which relief may be granted." United States v. Clark County, Indiana, 113 F. Supp.2d 1286, 1290 (S.D.Ind. 2000). When considering a motion under this rule, the Court must examine the sufficiency of plaintiffs' complaint, not the merits of the lawsuit. Id. Dismissal is appropriate only if it appears to a certainty that the plaintiffs cannot establish any set of facts which would entitle them to the relief sought. The Court shall accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff. Id.
III. DISCUSSION A. FRAUD
To state a claim for fraud, a plaintiff must plead that a defendant made a false statement: (1) of past or existing material fact; (2) with knowledge that it was false or made recklessly without knowledge of its truth or falsity; (3) for the purpose of inducing the other party to act upon it; (4) upon which the other party did justifiably rely and act; and (5) that proximately caused injury to the other party. Epperly v. Johnson, 734 N.E.2d 1066, 1073 (Ind.App. 2000). Although both Bowman Heintz and Vician appeared to have alleged a fraud claim, they indicate in their brief that Bowman Heintz is the only party asserting such a claim.
Associates argues that because it was American Assignment — and not Bowman Heintz — that purchased the accounts based upon the allegedly fraudulent information, Bowman Heintz is not the proper party to be asserting this claim. Bowman Heintz avoids that issue by asserting that its fraud claim is really premised upon three other actions it took in reliance on Associates' misrepresentations: (1) it set up American Assignment as an LLC to purchase the accounts, which it never would have done absent Associates' misrepresentations; (2) it entered a contingency fee agreement with American Assignment to collect on the accounts; and (3) it sued debtors on accounts that it later learned had either been paid off or contained improper balances, subjecting it to liability under the Fair Debt Collections Practices Act ("FDCPA").
Two of Bowman Heintz' claims can be disposed of easily. First, it is well settled under Indiana law that a corporation is a legal entity separate from its shareholders. See McQuade v. Draw Tite, Inc., 659 N.E.2d 1016, 1020 (Ind. 1995). It was certain principals of Bowman Heintz — not the corporation itself — who decided to form American Assignment to purchase the accounts from Associates. Thus, if anyone were damaged by setting up American Assignment to purchase the accounts, it was the individual principals. Under those circumstances, Bowman Heintz simply is not the proper party to file a claim for damages and the Court will dismiss that part of its fraud claim.
Similarly, Bowman Heintz' claim that it subjected itself to liability under the FDCPA after suing debtors of accounts that had already been paid off or contained improper balances must be dismissed. There are no allegations of this sort anywhere in the counterclaims. As a result, the Court will not consider such a claim and dismisses that portion of Bowman Heintz' fraud claim.
That leaves Bowman Heintz' third fraud allegation, that it entered into a contingency fee agreement with American Assignment to collect the accounts in reliance upon Associates' representations. After reviewing the facts alleged in the counterclaim and drawing all reasonable inferences from them in a light most favorable to Bowman Heintz, it appears that Associates made representations to members of Bowman Heintz about the quality and status of the financial asset accounts. After members of Bowman Heintz set up American Assignment to actually purchase the accounts, Bowman Heintz then entered into a contingency fee agreement with American Assignment to collect the accounts. Bowman Heintz entered the agreement in reliance upon Associates' representations about the accounts, and Bowman Heintz was harmed when it later was either unable to collect the accounts or collected less than it had anticipated based upon Associates' representations. At least with respect to Bowman Heintz' allegations regarding the entering of the contingency fee agreement, it appears that it has pleaded sufficient facts to state a claim for fraud. Accordingly, the Court DENIES Associates' motion with respect to that particular fraud claim.
It seems that for this claim to succeed, Bowman Heintz will need to produce evidence that someone acting on behalf of Bowman Heintz — other than Vician — actually relied upon the misrepresentation when deciding to enter the contingency fee agreement. If Vician is the only person to whom Associates made the misrepresentations, it is doubtful that Bowman Heintz could succeed on this theory because by the time it decided to enter the contingency fee agreement, Vician had left to form American Assignment (and presumably was no longer acting on Bowman Heintz' behalf). The Court presumes that discovery and further factual development will allow the parties to flesh out this issue.
B. TORTIOUS INTERFERENCE WITH A CONTRACTUAL RELATIONSHIP
Associates also seeks dismissal of Bowman Heintz' and Vician's claim for tortious interference with a contract because they have not pleaded "breach" of any contract. To state a claim for tortious interference with contractual relationship, a plaintiff must allege (1) the existence of a valid and enforceable contract, (2) the defendant's knowledge of the existence of the contract, (3) the defendant's intentional inducement of breach of the contract, (4) the absence of justification, and (5) damages resulting from the defendant's wrongful inducement of the breach. Morgan Asset Holding Corp. v. CoBank, ACB, 736 N.E.2d 1268, 1272 (Ind.App. 2000). Bowman Heintz and Vician cite ¶¶ 25-27, 31-32, 34, and 36 of their counterclaim in support of their allegation of a breach. After reviewing those paragraphs, however, the Court concludes that there are no allegations of a breach of any contractual relationship. Accordingly, the Court GRANTS Associates' motion to dismiss the claim for tortious interference with a contractual relationship.
C. TORTIOUS INTERFERENCE WITH A BUSINESS RELATIONSHIP
Bowman Heintz and Vician also allege that Associates' mailing of copies of its complaint to their business associates amounted to tortious interference with a business relationship. To state such a claim, they must plead the following: (1) the existence of a valid relationship; (2) the defendant's knowledge of the existence of the relationship; (3) the defendant's intentional interference with that relationship; (4) the absence of justification; and (5) damages resulting from defendant's wrongful interference with the relationship. Levee v. Beeching, 729 N.E.2d 215, 222 (Ind.App. 2000). In addition, a plaintiff must show that the defendant engaged in some illegal conduct. Id.
Associates argues that Bowman Heintz' and Vician's claim fails because they have not alleged any illegal conduct on its part. In response, Bowman Heintz and Vician first argue that they were not required to plead "illegal" conduct. This is not an accurate statement of Indiana law. See Levee, 729 N.E.2d at 222 (requiring plaintiff to show defendant had engaged in some illegal conduct). Bowman Heintz and Vician further argue that they have pleaded the following illegal conduct: (1) that Associates filed its lawsuit to thwart and/or delay Bowman Heintz' and Vician's efforts to obtain verification of the rebates on loan balances being collected on behalf of American Assignment; and (2) that Associates mailed copies of the complaint to Bowman Heintz' and Vician's business associates in an attempt to smear and ruin their business reputations and to intimidate and exert economic duress on them. Counterclaim ¶¶ 22, 43.
Although Indiana courts have not defined "illegal" for purposes of this tort, the Levee court did conclude that defamation was not sufficiently "illegal" conduct to support such a claim. 729 N.E.3d at 222. As a result, to the extent Bowman Heintz and Vician claim that Associates interfered with their business relationships by defaming them, that is insufficient to amount to "illegal" conduct required for a tortious interference with business relationship claim.
On the other hand, the Court found no case — and the parties did not cite it to one — discussing whether Associates' action in filing this lawsuit for alleged improper reasons could amount to "illegal" conduct that would support a tortious interference with a business relationship claim. The Seventh Circuit has recognized that "courts interpreting Indiana law have held that non-criminal illegal acts are sufficient." See Syndicate Sales, Inc. v. Hampshire Paper Corp., 192 F.3d 633, 641 (7th Cir. 1999). Here, it is difficult to tell from the limited facts whether Associates' alleged conduct was sufficient to be considered "illegal." As a result, it would not be proper to dismiss that claim at this stage of the litigation, and the Court DENIES Associates' motion to dismiss the tortious interference with a business relationship claim.
It also is unclear to what extent Associates allegedly tried to intimidate and exert economic duress on Bowman Heintz and Vician. After further factual development, it is possible that those allegations could amount to "illegal" conduct sufficient to support their claim, which is an additional reason not to grant Associates' motion to dismiss that claim.
D. CRIMINAL CONVERSION
Bowman Heintz and Vician claim that Associates committed criminal conversion by exerting unauthorized control over money to which Bowman Heintz was legally entitled pursuant to its attorney's lien. Counterclaim ¶ 46. This claim apparently stems from the money Associates improperly collected from debtors on accounts that it had previously sold to American Assignment. To establish a claim for conversion, a plaintiff must plead the elements found in the criminal conversion statute. Anderson v. Indianapolis Indiana AAMCO Dealers Advertising Pool, 678 N.E.2d 832, 838 (Ind.App. 1997), citing DBC Capital Fund, Inc. v. Snodgrass, 551 N.E.2d 475, 478 (Ind.App. 1990). Under I.C. § 35-43-4-3, the criminal conversion statute, "[a] person who knowingly or intentionally exerts unauthorized control over property of another person commits criminal conversion. . . ." Id. In addition, property is that "of another person" if the other person has "a possessory or proprietary interest in it, even if an accused person also has an interest in that property." I.C. § 35-41-1-23.In this case, Bowman Heintz only obtained a property interest, if at all, on "any sums generated or collected" as a result of its collection activities. In other words, it had no property interest in the debtors' payments until it actually collected those payments. As a result, even assuming Associates exerted unauthorized control over sums of money by inducing the debtors to pay it instead of American Assignment, it did not exert such control over any property of Bowman Heintz. Accordingly, Bowman Heintz' and Vician's conversion claim fails as a matter of law and the Court GRANTS Associates' motion to dismiss with respect to that claim.
E. DEFAMATION
To maintain an action for defamation, a plaintiff must prove a communication with four elements: (1) defamatory imputation; (2) malice; (3) publication; and (4) damages. Branham v. Celadon Trucking Services, Inc., 744 N.E.2d 514, 522 (Ind.App. 2001), citing Northern Indiana Public Serv. Co. v. Dabagia, 721 N.E.2d 294, 301 (Ind.App. 1999), trans. denied (2000). A communication is defamatory per se under well-settled common law rules if it imputes: (1) criminal conduct; (2) a loathsome disease; (3) misconduct in a person's trade, profession, office, or occupation; or (4) sexual misconduct. Id. In addition, the defamatory nature of the communication must appear without resort to extrinsic facts or circumstances. Id. The determination of whether a communication is defamatory is a question of law. Id. Of course, not all defamation is actionable. For example, true statements never give rise to liability for defamation. Id.
In this case, Bowman Heintz and Vician allege that Associates included false statements in their complaint and then mailed it to several of Bowman Heintz' business associates in an effort to gain leverage and to cause economic injuries. Associates contends that any statements in its judicial complaint — false or not — are privileged and cannot form the basis of a defamation action. Under Indiana law, statements made by parties in pleadings and other court filings are absolutely privileged if they are pertinent and relevant to the litigation. American Dry Cleaning Laundry v. State of Indiana, 725 N.E.2d 96, 98 (Ind.App. 2000). After reviewing the statements in Associates' complaint, the Court concludes that they were relevant to its claims for breach of fiduciary duty, legal malpractice, and breach of contract. Because such statements were pertinent and made in the course of litigation, they are covered by the privilege.
Bowman Heintz and Vician also claim, however, that Associates defamed them by mailing copies of the complaints to their business associates. Under Indiana law, the absolute privilege is abrogated when the statements are not relevant and pertinent to the litigation or do not bear some relation thereto. Van Eaton v. Fink, 697 N.E.2d 490, 494 (Ind.App. 1998). The Court concludes that Bowman Heintz and Vician have stated a claim that the act of mailing the complaint to persons unrelated to the litigation is not protected by the absolute privilege. As one court has recognized, defendants cannot hide behind the protective shield of their complaint to disseminate defamatory statements about another. See Asay v. Hallmark Cards, Inc., 594 F.2d 692, 698 (8th Cir. 1979) (". . . . while a defamatory pleading is privileged, that pleading cannot be a predicate for dissemination of the defamatory matter to the public or third parties not connected with the judicial proceeding. Otherwise, to cause great harm and mischief a person need only file false and defamatory statements as judicial pleadings and then proceed to republish the defamation at will under the cloak of immunity."). Accordingly, because the mailing of the complaint to Bowman Heintz' and Vician's business associates was not privileged, dismissing that portion of the defamation claim at this stage would be improper and the Court DENIES Associates' motion.
F. ABUSE OF PROCESS
The tort of abuse of process is comprised of two elements: (1) ulterior purpose or motives; and, (2) a willful act in the use of process not proper in the regular conduct of the proceeding. Town of Orland v. National Fire Casualty Co., 726 N.E.2d 364, 371 (Ind.App.), trans. denied, 741 N.E.2d 1249 (2000). Bowman Heintz and Vician allege that Associates filed its lawsuit — which contained allegations that Associates knew to be false — to use it for economic leverage to try and enforce a settlement or resolution of other litigation that Bowman Heintz and Vician are undertaking against Associates. In response, Associates maintains that it cannot be liable for abuse of process because the filing of the complaint was a legitimate use of the judicial system. The Court disagrees. Bowman Heintz and Vician's allegations that Associates intentionally filed a complaint containing false allegations simply to gain economic leverage over them are sufficient to state a claim for abuse of process. Cf. Executive Builders, Inc. v. Trisler, 741 N.E.2d 351, 359 (Ind.App. 2000) (evidence supported jury verdict against developer for abuse of process where developer issued a number of false statements in complaint against property owner, and evidence showed that the true purpose of the complaint was to use the litigation as a sham for asserting false and malicious allegations against him to damage property owner's integrity and reputation). Accordingly, the Court DENIES Associates' motion to dismiss the abuse of process claim.
IV. CONCLUSION
After considering the parties' arguments, the Court partially grants Associates' motion to dismiss. In particular, the Court GRANTS the motion with respect to the following counterclaims of Bowman Heintz and/or Vician:
(1) the claim for fraud with respect to the formation of American Assignment as an LLC and suing of debtors on accounts that had either been paid off or contained improper balances;
(2) the claim for tortious interference with a contractual relationship;
(3) the claim for criminal conversion; and (4) the claim for defamation, to the extent that it relates to the statements contained in Associates' pleadings in this matter.
The Court DENIES Associates' motion to dismiss with respect to the following counterclaims of Bowman Heintz and/or Vician:
(1) the claim for fraud, to the extent it is premised on the fact that Bowman Heintz entered into a contingency fee agreement with American Assignment in reliance upon Associates' misrepresentations;
(2) the claim for tortious interference with a business relationship;
(3) the claim for defamation, to the extent it is premised upon the allegation that Associates mailed a copy of its complaint to Bowman Heintz' and Vician's business associates in an attempt to "smear" their reputations; and (4) the claim for abuse of process.