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A N 8 8 D 8 B 1 AR SINCE www. NYLJ.com Volume 256—NO. 120 Thursday, December 22, 2016 Southern District Civil Practice Roundup Expert Analysis Attorneys Beware—Limited Immunity From Defamation Suits

hen civil litigation turns written statements made by attor- ugly, it sometimes neys in connection with a proceeding devolves into allegations before a court ‘when such words and of defamation not just writings are material and pertinent between the parties, but to the questions involved.’” He noted againstW their lawyers as well. In light that this broad immunity extends By And of the broad privilege cloaking state- Edward M. Judith L. even to out-of-court statements in ments made in the litigation process, Spiro Mogul most contexts, and that it “‘embraces the incidence of defamation allega- anything that may possibly or plau- tions against lawyers is surprising. Group, formerly one of Russia’s sibly be relevant or pertinent,’” to We discuss below the parameters of largest exporters of crude oil. The the subject matter of the litigation. the litigation privilege, and the nar- parties accused each other, both Id. (quoting Grasso v. Matthew, 164 row exceptions that litigants have in and out of court, of various acts A.D.2d 476 (3d Dept. 1991)). Finally, been able to exploit, as discussed of self-dealing and impropriety. At Judge Kaplan observed that the New in a pair of recent cases from the issue on the motions to dismiss were York Court of Appeals in Front had U.S. District Court for the Southern defendant Feldman’s counterclaims extended the litigation privilege to District of New York. counsel’s pre-litigation statements “pertinent to a good faith anticipated Absolute v. Qualified Privilege Although absolute in name, litigation,” although the protection in In a decision filed in September in that instance is a more limited quali- Yukos Capital v. Feldman, 2016 WL the absolute privilege accorded fied immunity. 4940200 (S.D.N.Y. Sept. 14, 2016), statements made in the context Kaplan applied those standards Judge Lewis A. Kaplan explained of a legal proceeding is not to the allegedly defamatory state- the contours of the litigation privi- ments made by counsel in Yukos. In lege, underscoring the slight, but entirely absolute. his counterclaim, Feldman alleged meaningful difference between the that the outside lawyers told various near absolute privilege accorded and third-party claims against the Yukos employees and other individ- parties and their counsel for state- Yukos directors and their outside uals that Feldman had stolen from ments made once litigation is com- counsel for a series of statements Yukos while acting as one of its direc- menced and the qualified privilege made in the run-up to the litigation tors, or that he was a thief. Judge for similar statements if made prior and after it was commenced. Kaplan held that because those to the commencement of contem- Quoting Front, Inc. v. Khalil, 24 N.Y. statements were made after the liti- plated litigation. 3d 713 (2015), a recent decision from gation was commenced, they were The Yukos litigation arose the New York Court of Appeals which protected by absolute immunity. He out of the breakup of the Yukos in turn cited its 1897 decision in You- found that a statement made by one mans v. Smith, 153 N.Y. 214, Judge of the Yukos lawyers to a principal Kaplan explained that “for well over of Yukos’ litigation adversary was Edward M. Spiro and Judith L. Mogul are principals one hundred years” New York has similarly privileged, and dismissed of Morvillo Abramowitz Grand Iason & Anello P.C. and co-authors of “Civil Practice in the Southern District of provided “absolute immunity from the defamation claims against New York,” 2d Ed. (Thomson West 2015). liability for defamation…for oral or the lawyers based on statements Thursday, December 22, 2016 allegedly made after the litigation Stukuls v. State of New York, 42 N.Y.2d maliciously and solely for the pur- had commenced. 272 (1977)). pose of harming the plaintiff. One of By contrast, Kaplan declined the three lawsuits had already been to dismiss the defamation claim Not Entirely Absolute dismissed, with the judge declining against one of the outside attorneys Although absolute in name, the to impose sanctions. Judge Koeltl based on a statement he made to a absolute privilege accorded state- held that the court’s decision not Yukos consultant the week before ments made in the context of a legal to impose sanctions was a sufficient the litigation was commenced, to proceeding is not entirely absolute. basis to determine that the suit was the effect that Feldman had used As Judge John Koeltl explained in a not an “objective sham filed for the his position as an insider to secure a decision filed earlier this year in Fry- sole purpose of disseminating false personal benefit. Judge Kaplan con- dman v. Verschleiser, 172 F.Supp.3d information.” He held however, that cluded that it is entirely proper for 653 (S.D.N.Y. 2016), New York law the allegation that the sole purpose an attorney to gather information in recognizes a narrow exception to of the other two lawsuits was mali- anticipation of litigation, and that the rule of absolute immunity where cious could not be resolved on a the statement was likely protected the litigation itself is brought mali- motion to dismiss, and permitted by a qualified privilege. He went on ciously and solely for the purpose the claim to proceed on that basis. to find that that conclusion did not of defaming the plaintiff. Id. at 672 Judge Koeltl did not discuss the end the matter, because the quali- (citing, e.g., Riel v. Morgan Stanley, plausibility standard articulated by fied privilege can be overcome by 2007 WL 541955 (S.D.N.Y. Feb. 16, the Supreme Court in Bell Atlantic a showing of malice. 2007) (Griesa, J.). Corp. v. Twombly, 550 U.S. 544 (2007), Noting that qualified privilege but presumably he found the alle- is an affirmative defense, Judge gations sufficiently plausible to sur- Kaplan cited the general proposi- The litigation privilege is vive a motion to dismiss. See Biro tion that on a motion to dismiss, v. Conde Nast, 807 F.3d 541 (2d Cir. dismissal based on an affirmative intended to provide a zone of 2015) (holding that Twombly would defense is not appropriate. He rec- protection to permit attorneys to not permit an implausible defama- ognized some division within New speak freely and zealously rep- tion claim—in that case against a York courts on whether pre-answer public figure—to proceed to discov- dismissal of defamation claims on resent their clients without fear ery in order to rebut the assertion qualified privilege grounds can be of reprisal. Litigants nevertheless of qualified immunity). proper, but concluded that the Sec- ond Circuit has weighed in against persist in asserting defamation Conclusion dismissal in such circumstances, claims against counsel. The litigation privilege is intended citing Boyd v. Nationwide Mut. Ins., to provide a zone of protection to 208 F.3d 406 (2d Cir. 2000) for the permit attorneys to speak freely proposition that it is important to That decision arose in the context and zealously represent their clients distinguish between disposing of of a bitter dispute between former without fear of reprisal. Litigants a case on a 12(b)(6) motion and partners in a real estate investment nevertheless persist in asserting disposing of a case on summary trust in which, as Judge Koeltl put defamation claims against counsel. judgment. it, “each party has used judicial and Courts have permitted such claims He adopted Boyd’s observation extra-judicial scorched earth prac- to proceed, at least past the motion that “‘a plaintiff may allege facts sug- tices to torment the other party.” to dismiss stage, where the claim is gestive enough to warrant discovery, Among the multiple claims asserted based on a pre-litigation statement even where those facts alone would by plaintiff were claims for defama- by an attorney, in which case it is not establish a cause of action for tion based in part on the allegation covered only by a qualified immu- defamation.’” Judge Kaplan declined that the defendant had previously nity, or when the plaintiff plausibly to dismiss the claim, concluding that filed three defamatory lawsuits alleges that the underlying litigation Feldman “should have the opportuni- against plaintiff that in turn led to was motivated solely by malice. ty to prove through discover[y] that defamatory newspaper accounts ‘malice was the one and only cause’ that resulted in the loss of plaintiff’s for the statement even though doing business. Reprinted with permission from the December 22, 2016 edition of the NEW YORK so ‘might be well-nigh impossible.’” The plaintiff alleged that the alle- LAW JOURNAL © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 2016 WL 4940200, at *7 (quoting gations in the lawsuits were made or [email protected]. # 070-12-16-32