RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Heavrin v. Nelson, et al. No. 03-5892
ELECTRONIC CITATION: 2004 FED App. 0312P (6th Cir.)
File Name: 04a0312p.06 Chicago, Illinois, for Appellees. ON BRIEF: James A.
Earhart, Louisville, Kentucky, for Appellant. Timothy S.
Harris, Alexander Terras, PIPER RUDNICK LLP, Chicago,
UNITED STATES COURT OF APPEALS Illinois, Edward H. Stopher, BOEHL, STOPHER &
GRAVES, Louisville, Kentucky, for Appellees.
FOR THE SIXTH CIRCUIT
_________________ _________________
DONALD HEAV RIN , X OPINION
Plaintiff-Appellant, - _________________
-
- No. 03-5892 DAVID A. NELSON, Circuit Judge. This is an appeal
v. - from the dismissal of a complaint for failure to state a claim
> upon which relief can be granted. The complaint purported
, to assert state-law causes of action for fraud, perjury, and
DAVID NELSON , et al., -
Defendants-Appellees. - outrage based on the defendants’ having filed allegedly false
proofs of claim in a bankruptcy proceeding and having given
N allegedly false testimony in a criminal trial. Because
Appeal from the United States District Court statements contained in legal pleadings and testimony given
for the Western District of Kentucky at Louisville. in legal proceedings are privileged under Kentucky law, and
No. 01-00537—Charles R. Simpson III, District Judge. because we are not persuaded that the privilege is inapplicable
in the circumstances presented here, we shall affirm the order
Argued: August 3, 2004 of dismissal.
Decided and Filed: September 13, 2004 I
Before: NELSON and COOK, Circuit Judges; ROSEN, The plaintiff, Donald Heavrin, was legal counsel to Triple
District Judge.* S Restaurants and its principals, Robert Harrod and Michael
Macatee, in a commercial loan transaction.1 The lender was
_________________ Boeing Capital Corporation. For collateral, Triple S assigned
to Boeing “key man” insurance policies on the lives of
COUNSEL
ARGUED: James A. Earhart, Louisville, Kentucky, for 1
Appellant. Timothy S. Harris, PIPER RUDNICK LLP, The facts summarized here are drawn primarily from Mr. Heavrin’s
complaint, the allegations of which must be taken as true for purposes of
this app eal. See Memphis Area Local, American Postal Workers Union
v. Memp his, 361 F.3d 89 8, 901 (6 th Cir. 2004). We have supplemented
*
the allegations of the com plaint with add itional background facts set forth
The Honorable Gerald E. Rosen, United States District Judge for the in the decisio n in a related case, Un ited States v. H eavrin, 144 F. Supp.2d
Eastern District of Michigan, sitting by designation. 769, 773 -75 (W .D. Ky. 2001).
1
No. 03-5892 Heavrin v. Nelson, et al. 3 4 Heavrin v. Nelson, et al. No. 03-5892
Messrs. Harrod and Macatee. The Harrod policy was later Mr. Heavrin’s trial that the $250,000 was not paid in
transferred, subject to Boeing’s interest, to the Robert Harrod settlement of a lender liability claim. The trial ended in a
Irrevocable Trust. Mr. Heavrin (who was Mr. Harrod’s step- judgment of acquittal. See United States v. Heavrin, 144 F.
son as well as his attorney) and Heavrin’s step-sister were co- Supp.2d 769, 784 (W.D. Ky. 2001).
trustees and co-beneficiaries of the trust. The transfer to the
trust occurred in June of 1994. After the criminal charges against him were dismissed, Mr.
Heavrin sued Boeing, Mr. Nelson, and Mr. Anderson in a
By that time, the relationship between Triple S and Boeing Kentucky court. Boeing removed the case to federal district
had become rocky. Boeing asserted claims of default, and court on diversity grounds. Heavrin subsequently filed a
Triple S, Mr. Harrod, and Mr. Macatee asserted claims of second amended complaint, adding as defendants several
lender liability. corporate entities affiliated with Boeing.
On September 2, 1994, Mr. Harrod died. Mr. Heavrin then The second amended complaint set forth three substantive
negotiated a settlement of Mr. Harrod’s claim against Boeing, counts: fraud, perjury, and outrage. The fraud count was
under which $250,000 of the proceeds of the Harrod life subtitled “False and Misleading Proofs of Claim” and was
insurance policy would be paid to the Harrod Trust. The rest based on exactly that – Boeing’s filing of false proofs of
of the proceeds — $1.75 million — was to be paid to claim in the Triple S bankruptcy. The perjury count was
Boeing. Defendants David Nelson and Daniel Anderson, who based on Mr. Nelson’s false testimony in Mr. Heavrin’s
were employees of Boeing, participated in the negotiation of criminal trial. The claim of outrage was based on the same
this settlement. conduct complained of in the previous counts.
On September 30, 1994, Triple S filed for bankruptcy. On motion by the defendants, the district court dismissed
Boeing submitted a proof of claim that did not reflect a the complaint for failure to state a claim. As to the fraud
reduction of the indebtedness in the amount of Harrod’s life count, the court held that a federal statute prohibiting the
insurance. Boeing later filed an amended proof that reduced filing of false bankruptcy claims, 18 U.S.C. § 152(4), does
the claim by $1.75 million. not create a private right of action, and that Mr. Heavrin did
not plead common-law fraud with the requisite degree of
After a failed attempt to collect $2 million in insurance particularity. The court held further that the absolute
proceeds from Boeing, the trustee in bankruptcy filed an privilege afforded to testimony in a judicial proceeding
adversary proceeding to recover the $250,000 paid to the precluded a civil action based on perjury. Finally, the court
Harrod Trust. Named as defendants in the adversary held that the wrongdoing alleged in the complaint did not rise
proceeding were the trust itself, Mr. Heavrin, and Heavrin’s to the level of outrageous conduct under Kentucky law.
step-sister. In the course of the adversary proceeding, one or
more representatives of Boeing denied that the $250,000 had Mr. Heavrin moved for reconsideration and for leave to file
been paid in settlement of a lender liability claim. a third amended complaint. After those motions were denied,
Mr. Heavrin filed this timely appeal.
Mr. Heavrin was prosecuted criminally on charges of
transferring, concealing, and laundering money that should
have been part of the bankruptcy estate. Nelson testified at
No. 03-5892 Heavrin v. Nelson, et al. 5 6 Heavrin v. Nelson, et al. No. 03-5892
II The fraud count rests explicitly and exclusively on the false
proofs of claim. As we have seen, the count is subtitled
It has long been the law in Kentucky, as in “practically all “False and Misleading Proofs of Claim.” In keeping with that
jurisdictions,” that “the testimony of a witness given in the subtitle, the pleading describes the alleged fraud as “[t]he
course of a judicial proceeding is privileged and will not actions of defendants . . . in filing the false and misleading
support a cause of action against him.” McClarty v. Bickel, proof of claims” and asserts that Mr. Heavrin was injured
159 S.W. 783, 784 (Ky. 1913); cf. Bryant v. Kentucky, 490 “[a]s a result of the false and fraudulent Proof of Claim.” No
F.2d 1273, 1274 (6th Cir. 1974). Likewise, “statements in other false representations are specifically alleged.3 If Mr.
pleadings filed in judicial proceedings are absolutely Heavrin intended to allege a broader fraudulent scheme, of
privileged when material, pertinent, and relevant to the which the proofs of claim were mere evidence, he did not do
subject under inquiry.” Schmitt v. Mann, 163 S.W.2d 281, so with the particularity required by Rule 9(b), Fed. R. Civ.
283 (Ky. 1942). P. See Minger v. Green, 239 F.3d 793, 800 (6th Cir. 2001)
(holding that Rule 9(b) applies to diversity actions in federal
The proofs of claim filed by Boeing in the Triple S court).
bankruptcy and the testimony given by Mr. Nelson in Mr.
Heavrin’s criminal trial were plainly material to those The perjury count, of course, is based solely on testimony
proceedings. It follows, we believe, that “[n]o civil action in a legal proceeding. And the outrage count is predicated on
will lie” against Boeing on the basis of those proofs of claim the same facts as the fraud and perjury counts. We see no
or that testimony. McClarty, 159 S.W. at 784.2 basis for concluding that any of these claims arises from
conduct that is not protected by the judicial-proceeding
Mr. Heavrin advances two arguments for not applying the privilege.
judicial-proceeding privilege in the case at bar.
Mr. Heavrin’s second argument is that notwithstanding the
First, Mr. Heavrin contends that his claims are not based on judicial-proceeding privilege, Kentucky Revised Statute
Boeing’s false proofs of claim or on Mr. Nelson’s false 446.070 allows civil recovery for the conduct complained of
testimony, but rather on a “fraudulent course of conduct” of here. K.R.S. 446.070 provides that
which the proofs of claim and Nelson’s testimony are merely
evidence. This contention cannot be squared with the text of “[a] person injured by the violation of any statute may
Mr. Heavrin’s complaint. recover from the offender such damages as he sustained
2 3
The judicial-proceeding privilege is most often invoked as a defense The general allegations of the complaint, which are incorporated by
to claims of defamation, but its applicatio n is not limited to that context. reference into the fraud count, include an allegation that “[t]hroughout the
Mc Clarty and Bryant involved claims of malicious prosecution. See Adversary Proceedings . . . the defendants, and each of them, consistently
Mc Clarty, 159 S.W . at 784 ; Bryant, 490 F.2d at 1274. Courts in other denied a lender liability claim had existed.” The complaint does not
jurisdictions have applied the privilege in actions alleging intentional specify the setting in which (or the audienc e to whom ) these
infliction of emotional distress, see Kachig v. Boothe, 99 Cal. Rptr. 393, representations were mad e, although the next pa ragraph refers to
403 (Cal. C t. App. 1971), and slander of title, see Wendy ’s of So uth “deposition testimony” that was “similar” to M r. Nelson’s testim ony in
Jersey, Inc. v. Blanchard Management Corp., 406 A.2d 1337, 1340 (N.J. the crimina l trial. Dep osition testimony, no less than statements contained
Super. Ct. Ch. Div. 1979). in proofs of claim, is protected by the judicial-proceeding privilege.
No. 03-5892 Heavrin v. Nelson, et al. 7 8 Heavrin v. Nelson, et al. No. 03-5892
by reason of the violation, although a penalty or 446.070. Having found no case in which the statute was held
forfeiture is imposed for such violation.” to trump the privilege, however, we are unwilling to reject
what is implicit in the cited decisions.
As interpreted by Kentucky’s highest court, K.R.S. 446.070
“creates a private right of action for the violation of any AFFIRMED.
statute,” provided that “the plaintiff belongs to the class
intended to be protected by the statute.” State Farm Mutual
Automobile Insurance Co. v. Reeder, 763 S.W.2d 116, 118
(Ky. 1988); cf. Baker v. White, 65 S.W.2d 1022, 1023-24 (Ky.
1933) (interpreting Kentucky Statute 466, the predecessor of
K.R.S. 446.070), and Hackney v. Fordson Coal Co.,
19 S.W.2d 989, 990 (Ky. 1929) (same). Mr. Heavrin
maintains that the conduct alleged in his complaint violates
Chapter 523 of the Kentucky Penal Code, the chapter
prohibiting perjury and related offenses, and that he is within
the class of persons protected thereby.
To accept Mr. Heavrin’s argument that K.R.S. 446.070
authorizes civil recovery in the circumstances presented here,
we would have to conclude that the statute abrogates the
judicial-proceeding privilege. But Kentucky courts have
consistently recognized the privilege notwithstanding K.R.S.
446.070. Kentucky Statute 466, an almost identical forebear
of K.R.S. 446.070,4 is a “very old” statute; it was cited by the
highest court of Kentucky as early as 1900. Reeder, 763
S.W.2d at 118. Yet, as we have seen, the judicial-proceeding
privilege has remained vital in Kentucky. See Schmitt, 163
S.W.2d at 283, and McClarty, 159 S.W. at 784, as well as
Reed v. Isaacs, 62 S.W.3d 398, 399 (Ky. Ct. App. 2000) (no
civil action for lying to grand jury), and Lawson v. Hensley,
712 S.W.2d 369, 370 (Ky. Ct. App. 1986) (no civil action for
perjury). It is true that these decisions do not expressly hold
that the judicial-proceeding privilege survives K.R.S.
4
K.S. 466 provided that “[a] person injured by the violation of any
statute may recover from the offender such damage as he may sustain by
reason of the violation, although a penalty or forfeiture for such violation
be thereby im posed.”