Developer Scott Chappelle Sues ELi for Reporting on His Criminal Indictment, Business Practices

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Alice Dreger for ELi

After Chappelle's company lost the downtown East Lansing properties in a foreclosure action, the vacant buildings were demolished and the properties redeveloped by a different developer.

For the first time in nearly seven years of bringing investigative and community news to the people of East Lansing, East Lansing Info — a local nonprofit news-service corporation — is being sued.

In April, East Lansing real estate developer Scott Chappelle and his business Chappelle Development Company filed a libel suit against the news publication and against its Executive Director and Publisher Alice Dreger in the 22nd Circuit Court of Michigan in Ann Arbor.

Among other claims, Chappelle argues that ELi’s reporting has caused his lenders to be concerned about the “risk profile” of his company, Strathmore Development.

On Friday, May 28, ELi’s and Dreger’s attorney, Brian Wassom of Warner Norcross and Judd, formally responded and asked Judge Timothy P. Connors to dismiss the case via summary disposition — that is, without a trial — or else to transfer the case to Ingham County Circuit Court, where the involved parties do business.

Wassom told the Court in his response, “Plaintiff Chappelle is one more in a long line of disgruntled criminal defendants using state defamation and tort law as a weapon to retaliate against journalists doing their duty to keep the public informed on matters of public concern.”

Chappelle’s lawsuit against ELi focuses on ELi’s report about a federal indictment that charged Chappelle with fraud and an essay published on Public Response two days after that, both of which Dreger authored. (Former East Lansing resident Elliot Singer is also named in the suit for his related statements. Singer did not respond to ELi’s request for comment on the suit.)

Chappelle is a long-time real estate developer whose companies have included Strathmore Development Company and Terra Holding, among others. He was centrally involved with the failed downtown East Lansing redevelopment project known for years as “City Center II.”

The rear of one of the commercial properties in a photo taken at the time of the foreclosure action.

By 2015, the downtown properties that Chappelle had owned and hoped to redevelop were foreclosed by the lender and later sold to Chicago-based DRW Convexity, developers who have since built The Abbot and The Graduate Hotel on the two major East Lansing properties along Grand River Ave.

DRW Convexity has built The Abbot (foreground) and The Graduate Hotel (left) on the properties that had been sold following foreclosure. (Photo by Gary Caldwell for ELi.)

On June 4, 2020, the United States Department of Justice announced a federal indictment charging Chappelle with “tax evasion, filing false documents with the Internal Revenue Service (IRS), making false statements to IRS Criminal Investigation (IRS-CI) agents, and mortgage fraud.” This indictment was the basis for the ELi report to which Chappelle now objects.

Before filing the suit, Chappelle’s lawyer — R. Christopher Cataldo of the Jaffe, Raitt, Heuer & Weiss firm — sent a letter to ELi demanding retraction. Dated March 15, the letter came just as Chappelle’s federal criminal case appeared headed to trial.

In response to Chappelle’s actions, ELi contacted attorney Brian Wassom, with whom ELi had previously connected through the D.C.-based Reporters Committee for Freedom of the Press. That organization “protect[s] First Amendment freedoms and the newsgathering rights of journalists” according to its website.

“Brian is an outstanding legal defender of the freedom of the press, particularly in Michigan, and we are very fortunate to have him defending us in this case,” Dreger said in a statement. “I think anyone reading his response to the suit will see he has made an excellent case for why the suit should be dismissed, and quickly dismissed.”

Chappelle’s suit includes four claims: defamation, invasion of privacy, injurious falsehood, and “tortious interference with business relationships.”

In the introduction of ELi’s response, Wassom explains why ELi is asking the court to deny these claims.

“As a matter of law, however, the two publications with which Chappelle takes issue . . . are not defamatory. Rather, the Reports are accurate accounts of public records, substantially true, non-actionable opinion and/or otherwise protected by the First Amendment. Further, Chappelle’s ‘tag-along’ claims are barred by the same privileges and constitutional protections,” Wassom writes.

Chappelle’s suit says it is filed in Washtenaw County because the servers that host the ELi website are physically located there. But, Wassom argues, the venue should be Ingham County, because that is where the businesses involved are located and where the properties at issue are also located.

Writes Wassom in the answer to the suit, “Chappelle’s choice to file in this [Washtenaw County] Court on such flimsy grounds is an embarrassingly transparent attempt to avoid having this case decided by judges who know him and the properties at issue, and who (in the case of Judge [Joyce] Draganchuk) have ruled against him in prior litigation over the same issues that underlie this case.”

The property at 100 W. Grand River Ave. had become a public eyesore by the time of the foreclosure. Chappelle challenged the legality of the foreclosure, and Judge Draganchuk ruled against him.

The response from Wassom also addresses individually each of the passages Chappelle presented as supposedly defamatory, explaining why they fail to meet the legal standards, and outlines a factual timeline of Chappelle’s dealings in and around East Lansing.

Specifically addressing the allegation of “tortious interference with business relationships,” which Chappelle claims is due to his lenders becoming concerned after ELi published its reporting  — Wassom wrote that it fails for two reasons.

For one, ELi didn’t actually cause a “breach or termination” of any business relationship, but only caused concern with Strathmore Development’s lender, Premier Bank, according to Chappelle’s filing.

Beyond that, Wassom argues (with italics), “It also strains credulity to the point of absurdity to assert that it is Defendants’ news reporting, and not Chappelle’s federal indictment for mortgage fraud, that has caused his lender ‘concern.’”

ELi seeks to dismiss this case both to defend its reporting, but also as a measure of pragmatism.

“Just to be clear, anyone can file a lawsuit, whether or not it has legal merit,” Dreger said. “But this kind of suit can be a serious drain on resources for a small local news organization like ELi, which is nonprofit and runs on a $175,000-per-year budget that is almost entirely reader-funded. I have already had to give many hours of my time to assist our attorney in understanding the complex history of the City Center II and Park District projects, which underlie the reporting to which Mr. Chappelle’s suit refers.”

Federal court records show Chappelle’s fraud trial has been pushed back to a start date of July 26, 2021, following a motion from Chappelle to delay the trial.

Wassom notes that Chappelle’s counsel in his criminal proceeding asked for a delay in the trial’s start because Covid-19 had allegedly rendered Chappelle unfit to participate in the legal discussions.

Chappelle’s lawyer stated that, because of Covid, Chappelle “appeared to counsel to be unfocused and incapable of having a meaningful discussion” about his criminal case. His attorney declared him “presently unable to participate actively in preparing for his defense or making important decisions about a possible negotiated resolution.”

Notes Wassom, “These representations were made to the federal court only 12 days before Chappelle’s lawyers filed this case” against ELi and Dreger.

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