A trial court properly dismissed defamation and tortious interference claims brought by an attorney who had represented indigent mothers in Genesee County child-protective proceedings, the Michigan Court of Appeals has ruled.

According to the Court of Appeals, the attorney’s claims had to be dismissed because she did not establish 1) there was a genuine issue of material fact about whether the alleged defamatory statements had actually been made and 2) there was any interference with a contractual business relationship.

In Bauer v Hammon (Docket No. 339703), the plaintiff attorney had contracted with Genesee County under the entity “Attorneys for Indigent Mothers, PLLC” (AIM) to represent indigent mothers in child-protective cases. When the time came to renew the contract, the defendants - attorneys who had previously worked for AIM - competitively bid against the plaintiff for the contract.

After losing the bid, the plaintiff sued the defendants for defamation, claiming they had falsely told individuals in the legal community and in the courts that the plaintiff had embezzled or stolen money from AIM. The plaintiff later amended her complaint to include claims for: 1) common law defamation; 2) statutory defamation; 3) exemplary and punitive damages; 4) civil conspiracy to defame; 5) intentional interference with contractual relations between the plaintiffs and Genesee County; 6) intentional interference with a business expectancy; and 7) concert of action.

The trial court granted summary disposition to the defendants. The Court of Appeals affirmed the dismissal.

Competitive Contract

The plaintiff in the case was attorney Jill Creech Bauer, as well as the legal entities she owned (Jill Creech Bauer Legal Services, PLLC, and AIM). The defendants were attorneys Jessica Hammon, Erica Edgington, Nicholas D’Aigle, Law Offices of Jessica J. Hammon, PLLC and Attorneys for Indigent Defense, PLLC.

The initial term of the AIM contract with Genesee County ran from November 1, 2011, to October 31, 2012, with an option to extend the contract.

The individual defendants were engaged and paid by the plaintiff to provide services and legal representation under AIM’s contract with the county. The business relationships were not memorialized in writing.

Various disputes arose regarding payment for the legal services provided under the AIM contract. In 2014, after one of the defendants saw the plaintiff’s bank statement, the defendants alleged the plaintiff had improperly withdrawn $11,000 in contractual monies from AIM for her own personal benefit.

In late 2014 or early 2015, certain defendants (Hammon, D’Aigle, Edwards and Stipes) formed their own entity, Attorneys for Indigent Defense, PLLC, so they could competitively bid against the plaintiff for the 2015 contract renewal with Genesee County. The plaintiff lost the bid.

The plaintiff then filed this action, alleging various improprieties by the defendants, including tortious interference and defamation. The trial court granted summary disposition for the defendants. The plaintiff appealed.

Statements Not Defamatory

In its decision, the Court of Appeals explained the plaintiff raised claims of common law and statutory defamation against defendants Hammon and D’Aigle, alleging they had published false statements to third parties implying the plaintiff’s criminal act of theft or embezzlement.

“In support of their defamation claims, plaintiffs refer to four general categories of false statements,” the Court of Appeals said. “First, plaintiffs maintain that, in communications between defendants, Hammon regularly described Bauer’s financial activities as dishonest and falsely accused her of stealing. Plaintiffs produced several emails in which defendants communicated about perceived improprieties in Bauer’s handling of AIM funds. This category of statements was not directly addressed by the trial court, but defendants characterize these statements as internal discussions that do not satisfy the requirement for third-party publication. Plaintiffs contend that the ‘internal’ nature of the discussions is irrelevant because the statements were published to persons other than Bauer, i.e., the other AIM members.”

The Court of Appeals disagreed with the plaintiff’s argument, explaining that a “qualified privilege” exists for bona fide communications that concern any subject matter in which the party communicating has an interest, or in reference to which he has a duty to a person having a corresponding interest or duty. “The privilege for such communications encompasses circumstances in which the underlying duty is of a moral or social character.”

According to the Court of Appeals, the elements of a qualified privilege are: 1) good faith, 2) an interest to be upheld, 3) a statement limited in its scope to this purpose, 4) a proper occasion and 5) publication in a proper manner and to proper parties only. “A plaintiff may overcome a qualified privilege only by showing that the statement was made with actual malice, i.e., with knowledge of its falsity or reckless disregard of the truth.”

General allegations of malice are insufficient to establish a genuine issue of material fact, the Court of Appeals stated. “This privilege is clearly applicable to the communications between defendants, as Hammon and the other AIM members had an obvious interest in the proper disposition of the funds that were provided by the county for payment of their services. Accordingly, plaintiffs did not offer evidence of an unprivileged communication to a third party with respect to this category of statements.”

Next, the Court of Appeals addressed the second category of statements on which the plaintiff based her defamation claim: Hammon’s conversations with Judge Michael Theile. “Plaintiffs contend that Hammon told Judge Theile that Bauer embezzled money, offering emails Hammon sent to other defendants as evidence that these statements were made,” the Court wrote. “In one email, Hammon said, ‘I was talking with Judge Theile about it and though he promised me he would [sic] talk about it to anyone he said that we may soon be in a position where we HAVE to grieve her.’ In a later email, Hammon wrote: ‘I plan to meet with Judge Theile about how he thinks we should proceed if and when she doesn’t answer [a demand for accounting]. He already knows what is going on and will probably have some insight into how to approach the judges if we need to.’”

Neither email indicated “with any specificity” what Hammon might have discussed with Judge Theile, the Court of Appeals observed. “Judge Theile recalled having a conversation with Hammon about obtaining an accounting and the details of the AIM Contract, during which he suggested that Hammon speak with court administrator Barbara Menear for that purpose. He testified that his conversations with Hammon concerned ensuring the proper disclosure and distribution of funds from a government contract, and he unequivocally indicated that there were no allegations or suggestions of embezzlement or theft.”

Based on the evidence, “the trial court did not err by finding that plaintiffs failed to produce evidence of false and defamatory statements arising from Hammon’s conversations with Judge Theile,” the Court of Appeals concluded. “Instead, the evidence merely indicates that Hammon may have expressed concern about Bauer’s handling of the AIM Contract, but did not assert that Bauer embezzled money or engaged in other misconduct as a matter of fact.”

The Court of Appeals then addressed the conversations between Menear, Hammon and D’Aigle about opening the 2015 contract for rebidding. “Menear did not recall Hammon or D’Aigle disparaging Bauer, but had the impression that there was dissension within the group,” the Court wrote. “When questioned whether she had heard any ‘comments about financial improprieties’ involving AIM or Bauer, Menear responded: ‘I do remember something about the appeals, but I don’t know the machinations within AIM as to who was doing the appeals. That’s with Ms. Bauer, how her team delivered the scope of work. I remember Ms. Hammon saying something about she thought there were less appeals than maybe Ms. Bauer was saying there were. What that translates into with respect to workload or money, I have no idea.’”

Moreover, “Menear clarified that Hammon did not indicate that Bauer had misappropriated or taken funds from the AIM Contract and that the dispute seemed to arise from allocation of appellate work,” the Court of Appeals emphasized. “Again, this evidence does not demonstrate publication of false or defamatory statements of criminal misconduct, but rather discussions from which Menear inferred that Hammon and D’Aigle may have been dissatisfied with their working relationship with Bauer.”

In conclusion, the Court of Appeals turned to those statements purportedly made by D’Aigle’s wife to paralegal Debra Mudge. “The trial court rejected plaintiffs’ reliance on Mudge’s testimony, in which Mudge indicated that ‘she [Mrs. D’Aigle] said we saw some bank statements of Attorney Bauer’s and believe she is stealing money from the fund, the indigent mothers fund,’” the Court said. “The trial court reasoned that Mudge’s testimony amounted to inadmissible hearsay. We disagree with the trial court’s conclusion in this regard, as evidence of an out-of-court statement offered to prove that the statement was made, rather than as substantive evidence of the truth of the matter asserted, is not hearsay.”

“Nonetheless,” the Court of Appeals continued, “the trial court reached the right result. Mrs. D’Aigle was not a party to the case, and there was no evidence presented from which we will attribute to defendants statements published by Mrs. D’Aigle.”

Based on the foregoing, the Court of Appeals held: “In sum, because plaintiffs failed to present evidence demonstrating the existence of a genuine issue of material fact as to whether defendants made unprivileged defamatory statements concerning plaintiffs to third parties, the trial court did not err by granting summary disposition with respect to plaintiffs’ defamation claims.”

Contractual Relationship: No Interference

The Court of Appeals continued by refuting the plaintiff’s claim that the defendants had wrongly interfered in her business relationship with Genesee County. In so finding, the Court noted that the elements of tortious interference are: 1) the existence of a contract, 2) a breach of the contract and 3) an unjustified instigation of the breach by the defendant.

“Initially, plaintiffs have been unable to establish any wrongdoing by defendants, having failed to support their claims of defamation,” the Court of Appeals said. “In addition, plaintiffs cannot support their claim regarding interference with the AIM Contract because it was completed without breach by either party.”

Looking at the bidding process for the 2015 contract renewal and the defendants’ efforts to win the contract, the Court of Appeals said the plaintiff was unable to establish a wrongful interference with business relations or expectancies. “First, plaintiffs have not established wrongdoing, by the asserted acts of defamation, as a required element for the tort of interference with a business relationship or expectancy. … Second, plaintiffs did not have a valid expectation that the AIM Contract would be renewed indefinitely.”

Moreover, the contracts did not include enforceable restrictions on the defendants’ ability to compete with the plaintiff for the contract with Genesee County, the Court of Appeals observed. “Even if defendants are construed to be the agents of plaintiffs, they did not interfere with the existing AIM Contract, which terminated when it expired, and there is no complaint that defendants failed to fulfill their obligations to plaintiffs with regard to the provision of assigned legal services under the AIM Contract. Defendants, even if deemed to be plaintiffs’ agents, were not precluded from competing with plaintiffs for the 2015 Contract.”

The Court of Appeals concluded, “Competition does not equate to interference, particularly when plaintiffs have not established either a right or an expectancy that the AIM Contract would be renewed.”