As a reminder, this post is my own opinion and not that of any other organization. Longer disclaimer here.
Right now in the litigation, we have four major threads.
A. The claim by EC against DA alleging defamation.
B. The motion for a temporary restraining order by EC.
C. The removal of the case to federal court.
D. The counterclaim by EC against DA alleging abuse of process.
This post discusses Thread D. Ellora’s Cave has filed its reply to DA’s abuse of process counterclaim. You can read read the filing here.
This is structured much the same way as DA’s answer. In order to understand what they’re denying and what they’re admitting, just go paragraph by paragraph, comparing to DA’s counterclaim. You’re not going to find anything surprising in this if you do. Ellora’s Cave admits that it is incorporated in Ohio and does business in Summit County, and denies that it filed the litigation for the purposes of silencing and intimidating critics. Yawn; everyone expected that.
The only part of marginal interest is the defenses, so those who want to understand what they’re saying can go below the jump.
EC lists five defenses.
1. Failure to state a claim upon which relief can be granted.
I talked about the standard for failure to state a claim in my last post. A complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662 (2009), quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
The elements of a claim of abuse of process in Ohio are: (1) that a legal proceeding has been set in motion in proper form and with probable cause; (2) that the proceeding has been perverted to attempt to accomplish an ulterior purpose for which it was not designed; and (3) that direct damage has resulted from the wrongful use of process.
In order for the counterclaim to be dismissed for failure to state a claim, it must lack factual allegations that would support the above elements.
The counterclaim states:
- On September 26, 2014, Ellora and Jasmine filed an action against Dear Author and co-Defendant Lampe for injunctive relief, libel, and libel per se in the Court of Common Pleas, Summit County, Ohio, Case No. CV-2014- 09-4421 (the “State Court Action”).
That looks like a factual allegation that demonstrates that a legal proceeding was set in motion in proper form and with probable cause.
10. Knowing that their claims were baseless, Ellora and Jasmine sued Dear Author in an attempt to silence criticisms of their business practices, and to intimidate other authors, editors, and cover artists with the purpose of deterring them from attempting to reclaim monies owed them by Ellora and Jasmine.
That looks like a factual allegation that would support the claim that the proceeding has been perverted to attempt to accomplish an ulterior purpose.
12. This continued litigation has caused and will continue to cause Dear Author significant financial harm in the form of attorneys’ fees and costs associated with the ongoing litigation.
And that looks like a factual allegation from which one can conclude that direct damage has resulted.
These factual allegations may not be proven later in the litigation–we’ll have to wait to find this out–but I doubt this claim will be dismissed for failure to state a claim unless there is something about the tort of abuse of process that I’m missing. Always a possibility.
2. Jurisdiction and venue are improper in this court.
This is thread C: EC has moved to remand to state court. Once the remand motion is settled, this defense will go poof.
3. Defendant’s counterclaims are barred by the doctrines of “unclean hands” and waiver and estoppel.
I’m going to break this down into a discussion first of the unclean hands doctrine, and then waiver and estoppel.
I need to give you a little historical grounding to fully understand the unclean hands doctrine and what I think about this defense. Once upon a time, back in the days that I write romance novels about (well, mostly; it depends on the book, actually), there were two separate courts (there were more courts than that, but let’s just concern ourselves with the two for now). There were courts of law and courts of equity. This is going to be overly simplistic, but basically, courts of law and courts of equity had different powers. A court of law could order you to pay someone money you owed. Courts of equity were concerned with acts of fundamental fairness, and were the ones who would order nonmonetary acts that would make things more fair.
A note on legal shorthand: You would say that an action in a court of law was seeking a remedy “at law” or “a legal remedy,” and that an action in a court of equity was seeking a remedy “at equity” or “an equitable remedy.”
So, for instance, imagine you had a contract with your neighbor that they would sell you their fine pasture land for 20 pounds. You paid them 20 pounds, but they didn’t sign over the property deed. What do you do?
Well, you could go to a court of law and demand that they give you your money back, plus any profits you’d have made on the land. Or you could go to a court of equity and demand that they hand over the property deed. You couldn’t ask for money and your property deed, even if you’d lost money not being able to raise cows on the land due to your neighbor’s delay, because you had to choose one court or the other.
A sense of fairness pervaded all legal proceedings held in a court of equity. So if you went to a court of equity and said, “I demand that my neighbor hand over the property deed!” your neighbor might respond, “I was going to, but you threatened to kill me if I came near you, and I’ve been too scared to give it to you.”
That’s a defense of “unclean hands.” The basic idea behind it is that a court of equity is concerned with fairness, and if bad things happen to you because you were a jerk in the first place, you deserve what you get. Or, in other words: “The doctrine of unclean hands requires a showing that the party seeking relief engaged in reprehensible conduct with respect to the subject matter of the action.” Coughlin v. Summit County Board of Elections, 136 Ohio St.3d 371 (Ohio 2013).
So in order to prevail with this defense, Ellora’s Cave will have to show that Dear Author “engaged in reprehensible conduct.”
But before we get to that point, there’s a threshold inquiry. I didn’t just tell you all that history just to dump the unclean hands definition out there and run away. The defense of “unclean hands” originates from equitable principles and was historically used in actions at equity. But in the mid-nineteenth century, courts started merging as courts of law and equity. That’s why Ellora’s Cave could ask the state court both for a temporary injunction against Dear Author as well as for money damages–because today, our courts are both courts of equity and courts of law, and so you can ask the court to exercise its powers both as a court of law (the money damages) and a court of equity (the injunction).
Most of the time, modern lawyers don’t have to remember that once upon a time, courts of law and courts of equity were not the same. And some modern lawyers do not, in fact, remember this. But it does occasionally matter, because the merger of law and equity courts was not complete. Sometimes, equitable defenses are only available as a defense to claims made at equity, and not for claims made at law.
So what remedy does Dear Author request?
WHEREFORE, counterclaimant Dear Author respectfully requests the following relief:
- Compensatory damages in excess of $75,000;
- Punitive damages in excess of $225,000, or three times the amount of compensatory damages;
- Actual damages to fully reimburse Dear Author for the attorneys’ fees and costs incurred in litigation against the causes of action in the State Court Action;
- Any and all attorneys’ fees and costs associated with the litigation of this countersuit; and
- Any other relief that this Honorable Court deems necessary, just, and proper.
These are by and large requests for money damages–that is, for remedies at law, not at equity. The only one that is arguably a remedy at equity is #5. In other words, Ellora’s Cave is using an equitable defense as a shield against a remedy at law.
So before we ask if Dear Author has unclean hands, there’s a threshold question: Can equitable defenses shield Ellora’s Cave from a remedy at law?
There’s actually a lengthy academic paper detailing where unclean hands can be used to shield against remedies at law, and it varies from state to state.
Unluckily for Ellora’s Cave, Ohio appears to have a clear rule in place that the unclean hands defense is not available for remedies at law: “The general rule is that actions for monetary relief are legal, not equitable. In this case, plaintiff has brought suit for monetary damages under the legal theory of breach of contract. Thus, the equitable jurisdiction of this court has not been invoked. Defendant’s reliance upon the equitable defense is, therefore, misplaced.” O’Brien v. Ohio State University, 139 Ohio Misc.2d 36 (Ct. Claims Ohio, 2006). (Please excuse my crap citations but I have no idea where my Bluebook is.)
So regardless of the merits of this particular defense, it appears that the defense is simply not available under these circumstances.
As a note, I’m not a huge torts person, and I’m not willing to go to the mat for remedy questions except in contract law, so it’s possible I’ve messed up something somewhere. But I don’t think that’s hugely likely.
For those who are confused by the law/equity distinction (and don’t feel badly if that is you because most law students find this a very confusing concept), imagine that we are having a fight and the combatants can use both psychic and physical weapons. If someone uses a sword, you need to block it with a wooden shield. If someone threatens you with a psychic blast, you need to use a psychic shield.
Ellora’s Cave just deployed a psychic shield to block a hit from a physical sword. It doesn’t matter how good the psychic shield is. It may be impenetrable to all psychic attacks. It may be shiny and perfect, but it’s still not going to stop the steel blade that’s about to cleave them in two.
Waiver and estoppel
Waiver and estoppel are related concepts so I’ll cover them together.
Waiver is usually divided into express or implied waiver. Express waiver is one where someone has explicitly agreed to something. You’ve probably seen tons of waivers. For instance, Microsoft’s Terms & Conditions state: “LIMITATION ON AND EXCLUSION OF DAMAGES. YOU CAN RECOVER FROM MICROSOFT AND ITS SUPPLIERS ONLY DIRECT DAMAGES UP TO THE AMOUNT YOU PAID FOR THE SOFTWARE. YOU CANNOT RECOVER ANY OTHER DAMAGES, INCLUDING CONSEQUENTIAL, LOST PROFITS, SPECIAL, INDIRECT OR INCIDENTAL DAMAGES.” (Shouty caps theirs).
That’s an express waiver. It says outright that if their software fails and you lose the book that you just wrote as a result, you can’t sue them for the six months of work that you lost because of their buggy software. (But you won’t let that happen because you back up your work, right? Right?)
There’s also implied waiver. We saw implied waiver being argued in Thread C regarding the remand. Ellora’s Cave claims that because Dear Author agreed to a TRO hearing in state court, one can imply that they intended to waive their right to litigate in federal court. Implied waiver basically says that the person’s actions evidence an agreement to waive a claim or a right.
Finally, there’s estoppel. Estoppel basically says, “Normally, you’d have a right to do this thing, but you did something that means you can’t.”
As an example of estoppel: Imagine that you have a statute of limitations that says that you have three years to bring a claim. Four years ago, your financial advisor robbed you of $10,000. Since then, he’s been doctoring the bank statements that he sends to you so you don’t realize that he took the money. The financial advisor could be estopped from asserting the statute of limitations if you sued him, since the reason you didn’t bring the action was because of his additional actions.
It should be obvious that there’s no express waiver of abuse of process here. I can’t imagine a circumstance under which Dear Author and Ellora’s Cave would have agreed that Dear Author wouldn’t sue for abuse of process. Maybe Jane bought something from Ellora’s Cave, but I seriously doubt that such a thing exists, and if it does, good luck enforcing a waiver of liability that covers intentional torts completely unrelated to the product attached to the T&C.
I’m kind of at a loss as to how EC would develop either an implied waiver or an estoppel claim. I’m trying to imagine conduct that a court would ever say allows another party to abuse the legal system… and…no, I have a good imagination but it’s just not that good. It’s already difficult to waive liability for intentional torts. (An “intentional tort” is a bad thing that you do on purpose, as compared to bad things you let happen by accident. You can waive liability for accidents, but stuff that you intend to do is treated differently. For instance, imagine you have a contract that says, “I’ll give you $20,000 but if you don’t pay me back by Thursday at 3 PM, I will murder you.” The court is never going to say, when your family brings a wrongful death suit, that you waived the right not to be murdered. In general, courts don’t want to make purposeful wrongdoing easier.)
But this is not just an intentional tort; it’s an intentional tort that says that people are misusing the power of the government. I can’t imagine a circumstance under which a court would say, “Your conduct means that you have lost the right to not have the legal system perverted against you for improper purposes.” That seems like a fundamental due process problem for the person who would be barred from claiming the benefit of the legal system, and on the court’s side of things, courts don’t like being told that they have to be someone else’s bitch.
It could just be that I’m not creative enough to come up with an argument. It’s possible. Torts is not my bag. I could be completely wrong, and I welcome corrections or discussion.
Let’s just say I’m really curious to see if Ellora’s Cave will develop this defense into something that has marginal coherence. But I’m left with the sneaking suspicion that defense #3 is just word salad, defense edition. These are things that Ellora’s Cave threw out to preserve their right to later develop these defenses, but I’m not convinced they’ve given these defenses much consideration or thought. I’d be surprised if these actually show up as players in the litigation.
4. Defendant’s counterclaim is frivolous and without merit and is made for the improper purposes of (a) promoting vexatious litigation and (b) bolstering the jurisdiction of this court, thereby entitling Plaintiffs to attorney fees.
I’ve said that I think it’ll be hard to prove the counterclaim–proving that Ellora’s Cave was motivated by intimidation and silencing is pretty hard. But that doesn’t make it frivolous; it just makes it hard to prove.
(For what it’s worth, I think it’s more likely that Dear Author will find proof that Ellora’s Cave acted to pervert the legal process than that Ellora’s Cave will find proof that Dear Author acted with actual malice. That’s based on a purely utilitarian basis: Even assuming that both are bad actors (which I don’t think we can assume in either case), Jane is legally savvy enough to know the standard for defamation and to know that her personal emails can be discovered, and I doubt she’s stupid enough to generate discoverable evidence inculpating herself. I’m not convinced the same can be said for the Ellora’s Cave principals.)
I also have to admit that I do not understand how the counterclaim could possibly bolster the jurisdiction of the court. If the amount in controversy in the original suit was under $75,000, that might be the case, but EC doesn’t seem to have taken that tack. The counterclaim is mentioned not once in the remand discussion. How on earth could it have anything to do with jurisdiction?
5. Plaintiffs reserve the right to raise additional defenses as discovery progresses.
That one’s self-evident.