## Facts

- Howard Moe sold a boat-manufacturing business and later remained involved with the company as an employee/consultant.
- After the sale, the company experienced serious financial difficulties and prepared to seek Chapter 11 bankruptcy protection.
- The company retained attorney Arnold Robbins to prepare and file the Chapter 11 bankruptcy petition.
- After the bankruptcy filing, the company’s chief executive officer, Joseph Wise, circulated a letter to creditors and vendors and also sent it to a newspaper reporter.
- The letter sought cooperation from creditors during the Chapter 11 process, requested cancellation of certain contracts, and attributed the company’s financial collapse to Moe.
- The letter asserted that Moe had misrepresented projected profit margins and permitted the company to enter contracts at prices below cost, leading to layoffs and financial failure.
- Moe sued Wise and Robbins for defamation, alleging the statements in the letter were false and harmed his reputation.
- Robbins moved to dismiss, arguing that his involvement with the letter was protected by the common-interest qualified privilege because the communication related to the shared interests of the debtor and its creditors in the reorganization.
- The trial court agreed, concluded the qualified privilege applied and was not abused, and dismissed Moe’s defamation claim against Robbins.
- Moe appealed the dismissal as to Robbins.

## Issues

1. Whether a Chapter 11 debtor (and its counsel) and the debtor’s creditors share a sufficient common interest such that statements to creditors about the causes of the business’s failure are protected by the common-interest qualified privilege.
2. Whether Moe produced evidence creating a triable issue that Robbins abused the qualified privilege (for example, by acting with malice, knowing falsity, reckless disregard, or by publishing beyond the group sharing the common interest).

## Decision

- The Court of Appeals of Washington (Division II) affirmed the dismissal of Moe’s defamation claim against Robbins.
- The court held that, in the Chapter 11 context, the debtor and its creditors share a common interest in understanding the causes of the business’s financial failure and the circumstances relevant to reorganization.
- Because the letter was directed to creditors (and related recipients) in connection with obtaining cooperation during the Chapter 11 process, Robbins’s participation in preparing/editing the communication fell within the common-interest qualified privilege.
- The court found no sufficient showing that Robbins abused the privilege; the record did not support a reasonable inference that Robbins acted with the kind of fault that defeats the privilege or that his conduct exceeded what the shared-interest communication allowed.
- As a result, the qualified privilege barred Moe’s defamation claim against Robbins, and dismissal was proper.

## Legal Principles

- A common-interest qualified privilege protects allegedly defamatory communications made in good faith on a subject in which the speaker and the recipient share a common interest.
- In a Chapter 11 proceeding, the debtor and its creditors share a common interest in information bearing on the business’s failure and the prospects for reorganization; communications to creditors on those topics may fall within the privilege.
- The privilege is qualified, not absolute; it can be lost if the plaintiff shows abuse, such as:
  - statements made with malice or an improper purpose,
  - knowing falsity or reckless disregard for truth,
  - or unnecessary publication to persons who do not share the relevant common interest.
- Where an attorney’s conduct consists of assisting with or editing a communication made for the debtor-creditor shared purpose connected to reorganization, and the plaintiff does not show abuse, the privilege defeats a defamation claim.

## Conclusion

Moe v. Wise holds that communications to creditors in a Chapter 11 setting about the causes of a debtor’s financial collapse may be protected by the common-interest qualified privilege, and that an attorney who assists with such a communication is not liable for defamation absent evidence that the attorney abused the privilege through malice, knowing falsity, reckless disregard, or publication outside the shared-interest group.


Moe v. Wise, 989 P.2d 1148 (1999)