Daily Development for
Tuesday, October 29, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

CONSTITUTIONAL LAW; FREE SPEECH; "SLAPP SUITS:" Lawyer and client may be subject to sanctions and liable in tort for bringing an action for tortious interference against a defendant who has challenged validity of public procedure to create a special purpose district.

Village of Lake Barrington v. Hogan, 649 N.E.2d 1366 (Ill. 1995), also discussed under the heading "Zoning and Land Use; Procedure; Notice."

The special purpose district in question appeared to be a water improvement district formed within a portion of the Village. The improvements in the district were to be financed by bonds secured by tax revenues on property within the district. Several landowners within the district raised loudly, through their lawyer, certain questions concerning the propriety of forming the district and certain failures of notice preceeding the district's formation. The lawyer threatened litigation, but did not bring suit to challenge the validity of the district.

As a consequence of the lawyer's threatened lawsuit, the bond underwriters ultimately withdrew from the financing scheme, and the Village apparently missed out on an attractive interest rate opportunity. The Village sued the landowners for a declaratory judgment clarifying the validity of the district and also for tortious interference with the Village's prospective economic advantage. The landowners counterclaimed for damages and a declaration that the district was invalid. The court never tells us the basis for the landowners' counterclaim, but it appears to be a form of abuse of process based upon the tortious interference claim made by the Village.

Held: District invalid in part, but even if it had been valid, Village had no right to a tortious interference claim. Sanctions against Village and its attorney affirmed, and landowner's abuse of process (?) counterclaim against Village's attorney may proceed. Village Mayor, however, enjoys qualified immunity and cannot be sued because he reasonably relied upon advice of counsel in making the claim.

The essence of the "SLAPP suit" finding is that the landowners had a privilege to allege defects in the public agency activity leading to the formation of the district. The privilege is part of their right to raise important issues of public interest. Landowners, in hiring an attorney to challenge the validity of the district, were simply raising their First Amendment right for redress of grievances.

The Village argued that it was insulated from liability by the Noerr-Pennington doctrine, a Supreme Court concept arising in the antitrust context that permits parties to litigate legitimate public issues even if the effect is to discourage competition. The court acknowledged that the doctrine has been extended to cover local governmental bodies engaged in litigation over public issues. But the landowners established that the tortious interference claim fell within the "sham suit" exception to the Noerr-Pennington doctrine because the claim made by the Village was "baseless." The court held that it is not necessary for the baseless claim to be part of a scheme. A single lawsuit filed without foundation for the purpose of punishing or discouraging another from raising legitimate public issues may be actionable.

Further, the fact that some elements of the Village's lawsuit - such as the declaratory relief claim - had a legitimate basis did not insulate the tortious interference claim from scrutiny.

Comment: It's rare that a city will get into such gunslinging against its critics, but it is refreshing to see a high court discourage such actions. Note that, as it turned out, the complaints of the landowners were not completely frivolous. The court indeed severed some of the landowners from the district. But the court did reject the basic claim of invalidity raised by the landowners. That didn't matter. They had the right to complain.

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