Donald Heav Rin v. David Nelson

*The Honorable Gerald E. Rosen, United States District Judge for the
Eastern District of Michigan, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0312P (6th Cir.)
File Name: 04a0312p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
DONALD HEAV RIN,
Plaintiff-Appellant,
v.
DAVID NELSON, et al.,
Defendants-Appellees.
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No. 03-5892
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 01-00537—Charles R. Simpson III, District Judge.
Argued: August 3, 2004
Decided and Filed: September 13, 2004
Before: NELSON and COOK, Circuit Judges; ROSEN,
District Judge.*
_________________
COUNSEL
ARGUED: James A. Earhart, Louisville, Kentucky, for
Appellant. Timothy S. Harris, PIPER RUDNICK LLP,
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1The 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 (6th Cir. 2004). We have supplemented
the allegations of the complaint with add itional background facts set forth
in the decisio n in a related case, Un ited States v. H eavrin, 144 F. Supp.2d
769, 773 -75 (W .D. Ky. 2001).
Chicago, Illinois, for Appellees. ON BRIEF: James A.
Earhart, Louisville, Kentucky, for Appellant. Timothy S.
Harris, Alexander Terras, PIPER RUDNICK LLP, Chicago,
Illinois, Edward H. Stopher, BOEHL, STOPHER &
GRAVES, Louisville, Kentucky, for Appellees.
_________________
OPINION
_________________
DAVID A. NELSON, Circuit Judge. This is an appeal
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
outrage based on the defendants’ having filed allegedly false
proofs of claim in a bankruptcy proceeding and having given
allegedly false testimony in a criminal trial. Because
statements contained in legal pleadings and testimony given
in legal proceedings are privileged under Kentucky law, and
because we are not persuaded that the privilege is inapplicable
in the circumstances presented here, we shall affirm the order
of dismissal.
I
The plaintiff, Donald Heavrin, was legal counsel to Triple
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

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No. 03-5892 Heavrin v. Nelson, et al. 3
Messrs. Harrod and Macatee. The Harrod policy was later
transferred, subject to Boeing’s interest, to the Robert Harrod
Irrevocable Trust. Mr. Heavrin (who was Mr. Harrod’s step-
son as well as his attorney) and Heavrin’s step-sister were co-
trustees and co-beneficiaries of the trust. The transfer to the
trust occurred in June of 1994.
By that time, the relationship between Triple S and Boeing
had become rocky. Boeing asserted claims of default, and
Triple S, Mr. Harrod, and Mr. Macatee asserted claims of
lender liability.
On September 2, 1994, Mr. Harrod died. Mr. Heavrin then
negotiated a settlement of Mr. Harrod’s claim against Boeing,
under which $250,000 of the proceeds of the Harrod life
insurance policy would be paid to the Harrod Trust. The rest
of the proceeds — $1.75 million — was to be paid to
Boeing. Defendants David Nelson and Daniel Anderson, who
were employees of Boeing, participated in the negotiation of
this settlement.
On September 30, 1994, Triple S filed for bankruptcy.
Boeing submitted a proof of claim that did not reflect a
reduction of the indebtedness in the amount of Harrod’s life
insurance. Boeing later filed an amended proof that reduced
the claim by $1.75 million.
After a failed attempt to collect $2 million in insurance
proceeds from Boeing, the trustee in bankruptcy filed an
adversary proceeding to recover the $250,000 paid to the
Harrod Trust. Named as defendants in the adversary
proceeding were the trust itself, Mr. Heavrin, and Heavrin’s
step-sister. In the course of the adversary proceeding, one or
more representatives of Boeing denied that the $250,000 had
been paid in settlement of a lender liability claim.
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
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Mr. Heavrin’s trial that the $250,000 was not paid in
settlement of a lender liability claim. The trial ended in a
judgment of acquittal. See United States v. Heavrin, 144 F.
Supp.2d 769, 784 (W.D. Ky. 2001).
After the criminal charges against him were dismissed, Mr.
Heavrin sued Boeing, Mr. Nelson, and Mr. Anderson in a
Kentucky court. Boeing removed the case to federal district
court on diversity grounds. Heavrin subsequently filed a
second amended complaint, adding as defendants several
corporate entities affiliated with Boeing.
The second amended complaint set forth three substantive
counts: fraud, perjury, and outrage. The fraud count was
subtitled “False and Misleading Proofs of Claim” and was
based on exactly that – Boeing’s filing of false proofs of
claim in the Triple S bankruptcy. The perjury count was
based on Mr. Nelson’s false testimony in Mr. Heavrin’s
criminal trial. The claim of outrage was based on the same
conduct complained of in the previous counts.
On motion by the defendants, the district court dismissed
the complaint for failure to state a claim. As to the fraud
count, the court held that a federal statute prohibiting the
filing of false bankruptcy claims, 18 U.S.C. § 152(4), does
not create a private right of action, and that Mr. Heavrin did
not plead common-law fraud with the requisite degree of
particularity. The court held further that the absolute
privilege afforded to testimony in a judicial proceeding
precluded a civil action based on perjury. Finally, the court
held that the wrongdoing alleged in the complaint did not rise
to the level of outrageous conduct under Kentucky law.
Mr. Heavrin moved for reconsideration and for leave to file
a third amended complaint. After those motions were denied,
Mr. Heavrin filed this timely appeal.

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No. 03-5892 Heavrin v. Nelson, et al. 5
2The judicial-proceeding privilege is most often invoked as a defense
to claims of defamation, but its application is not limited to that context.
Mc Clarty and Bryant involved claims of malicious prosecution. See
Mc Clarty, 159 S.W . at 784 ; Bryant, 490 F.2d at 1274. Courts in other
jurisdictions have applied the privilege in actions alleging intentional
infliction of emotional distress, see Kachig v. Boothe, 99 Cal. Rptr. 393,
403 (Cal. C t. App. 1971), and slander of title, see Wendy ’s of So uth
Jersey, Inc. v. Blanchard Management Corp., 406 A.2d 1337, 1340 (N.J.
Super. Ct. Ch. Div. 1979).
II
It has long been the law in Kentucky, as in “practically all
jurisdictions,” that “the testimony of a witness given in the
course of a judicial proceeding is privileged and will not
support a cause of action against him.” McClarty v. Bickel,
159 S.W. 783, 784 (Ky. 1913); cf. Bryant v. Kentucky, 490
F.2d 1273, 1274 (6th Cir. 1974). Likewise, “statements in
pleadings filed in judicial proceedings are absolutely
privileged when material, pertinent, and relevant to the
subject under inquiry.” Schmitt v. Mann, 163 S.W.2d 281,
283 (Ky. 1942).
The proofs of claim filed by Boeing in the Triple S
bankruptcy and the testimony given by Mr. Nelson in Mr.
Heavrin’s criminal trial were plainly material to those
proceedings. It follows, we believe, that “[n]o civil action
will lie” against Boeing on the basis of those proofs of claim
or that testimony. McClarty, 159 S.W. at 784.2
Mr. Heavrin advances two arguments for not applying the
judicial-proceeding privilege in the case at bar.
First, Mr. Heavrin contends that his claims are not based on
Boeing’s false proofs of claim or on Mr. Nelson’s false
testimony, but rather on a “fraudulent course of conduct” of
which the proofs of claim and Nelson’s testimony are merely
evidence. This contention cannot be squared with the text of
Mr. Heavrin’s complaint.
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3The general allegations of the complaint, which are incorporated by
reference into the fraud count, include an allegation that “[t]hroughout the
Adversary Proceedings . . . the defendants, and each of them, consistently
denied a lender liability claim had existed.” The complaint does not
specify the setting in which (or the audienc e to whom ) these
representations were mad e, although the next pa ragraph refers to
“deposition testimony” that was “similar” to M r. Nelson’s testim ony in
the criminal trial. Dep osition testimony, no less than statements contained
in proofs of claim, is protected by the judicial-proceeding privilege.
The fraud count rests explicitly and exclusively on the false
proofs of claim. As we have seen, the count is subtitled
“False and Misleading Proofs of Claim.” In keeping with that
subtitle, the pleading describes the alleged fraud as “[t]he
actions of defendants . . . in filing the false and misleading
proof of claims” and asserts that Mr. Heavrin was injured
“[a]s a result of the false and fraudulent Proof of Claim.” No
other false representations are specifically alleged.3 If Mr.
Heavrin intended to allege a broader fraudulent scheme, of
which the proofs of claim were mere evidence, he did not do
so with the particularity required by Rule 9(b), Fed. R. Civ.
P. See Minger v. Green, 239 F.3d 793, 800 (6th Cir. 2001)
(holding that Rule 9(b) applies to diversity actions in federal
court).
The perjury count, of course, is based solely on testimony
in a legal proceeding. And the outrage count is predicated on
the same facts as the fraud and perjury counts. We see no
basis for concluding that any of these claims arises from
conduct that is not protected by the judicial-proceeding
privilege.
Mr. Heavrin’s second argument is that notwithstanding the
judicial-proceeding privilege, Kentucky Revised Statute
446.070 allows civil recovery for the conduct complained of
here. K.R.S. 446.070 provides that
“[a] person injured by the violation of any statute may
recover from the offender such damages as he sustained

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No. 03-5892 Heavrin v. Nelson, et al. 7
4K.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.”
by reason of the violation, although a penalty or
forfeiture is imposed for such violation.”
As interpreted by Kentucky’s highest court, K.R.S. 446.070
“creates a private right of action for the violation of any
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.
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446.070. Having found no case in which the statute was held
to trump the privilege, however, we are unwilling to reject
what is implicit in the cited decisions.
AFFIRMED.

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