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Seventh Circuit affirms remand of lawyer's defamation suit against two attorneys; says it was "troubled" by circuit court injunction

By Jonathan Bilyk | Aug 11, 2014

Two Chicago attorneys will need to mount a defense against a Homewood lawyer's defamation suit in a Cook County courtroom, after the Seventh Circuit Court of Appeals earlier this month determined federal housing laws did not give them grounds to remove the matter.

On Aug. 1, the federal appeals panel found in favor of attorney Ernest B. Fenton, who practices out of Homewood, on the issue of jurisdiction in his dispute with attorneys Kelli Dudley and Andrew Sidea.

The panel's decision affirms an earlier ruling rendered by U.S. District Court Judge Rebecca Pallmeyer, who had determined Dudley and Sidea had failed to demonstrate why the suit Fenton brought against them should be removed to federal jurisdiction.

Judge Joel M. Flaum wrote the opinion, with judges Daniel A. Manion and John Daniel Tinder concurring.

The case stems from a foreclosure action brought against Tonya Davis in 2010. Davis hired Fenton to represent her, but later accused him of taking her money while doing “virtually nothing to help her keep her home.”

She also claimed his “inferior service” “targeted her … because of her race” in violation of the federal Fair Housing Act.

Davis hired Dudley and Sidea, both of whom are listed as attorneys with firms bearing their own names in records, to sue Fenton in 2013 for malpractice.

This case, according to the panel's opinion, is stayed in federal court pending arbitration. Records show a judge denied Davis' request to put the case back on the active docket, as well as a request Fenton made for sanctions.

Soon after that suit was filed, Fenton sued Dudley and Sidea in the Cook County Circuit Court, claiming they were spreading false information about him to potential clients.

In addition to defamation, his complaint includes claims of conversion and tortious interference with a business relationship, as well as a request for an injunction and an award of several hundred thousand dollars in damages.

Dudley and Sidea sought to remove Fenton's case against them to federal court in July 2013, arguing that his suit interfered with their abilities to represent their client in her complaint against him.

The circuit court, three days after Dudley and Sidea filed their notice of removal and despite acknowledging the removal proceedings, granted Fenton’s request for an injunction, ordering the two attorneys “to stop defaming Fenton and to cease contact with any of his current or former clients," according to the panel's opinion.

The panel did not name the circuit court judge in its ruling, but records show Cook County Circuit Judge Loretta Eadie-Daniels entered an order on July 17, 2013, which was three days after the two attorneys filed their removal request.

Since then, records show that Circuit Judge Kathy Flanagan entered an order in the case in May 2014 and a hearing is set for next month before Associate Judge Robert J. Clifford.

In August 2013 in federal court, Fenton asked Pallmeyer to remand the matter back to state court, which she did in January after determining she did not have jurisdiction under the Fair Housing Act.

The Seventh Circuit's recent ruling affirming Pallmeyer’s decision came with some rather strong language, chiding the state court for failing to cease the proceeding until the federal court decided if removal was proper.

“We are troubled that a state court would disregard [the federal law’s] clear command, especially because the face of the injunction order reveals that the state court recognized that the defendants had initiated removal,” Flaum wrote.

The panel's decision, however, does not address the injunction directly, except to say that, under federal law, such rulings arising after a removal notice has been filed would be void.

Despite the misstep by the circuit court, the panel said it believes Dudley and Sidea’s attempt to remove the case to federal court “founders at the first step.”

The two attorneys cited language in the Fair Housing Act that they contend would have prohibited Fenton from taking action to “coerce, intimidate, threaten or interfere with” them trying to help Davis bring her claim.

Thus, they said, their case should be removed under an exception granted in federal law pertaining to civil rights cases.

The Seventh Circuit, however, said federal civil rights laws do not provide immunity to people to commit crimes.

The panel did not weigh in on the merits of Fenton’s case, but said Dudley and Sidea fell short in demonstrating both that federal law gives them a right to “engage in the conduct Fenton accuses them of” and that the law would shield them from “being hauled into court on such grounds.”

While civil rights precedent has given others protections from litigation, Flaum said “the Fair Housing Act gives Dudley and Sidea no comparable right to commit defamation or interfere with a business relationship, even in service of their Fair Housing claim."

The panel heard arguments in the case in May. Records show Cincinnati attorney Robert Brand Newman argued on behalf of Dudley and Sidea, as well as their firms, and Homewood attorney Brandon Loggins represented Fenton.

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