New York Court of Appeals Clarifies Scope of Defamation Privilege for a Lawyer’s Pre-Litigation Statements

February 27th, 2015

A lawyer crafts a demand letter to make a special point: she represents a client who’s been wronged and she is prepared to take aggressive steps to make that wrong right.  She is bound by the rules of professional conduct, of course, and a bad faith letter may expose her to professional discipline.  But can a demand letter that goes too far—for example, by threatening litigation that has no basis in fact—also put her at risk of a civil defamation suit?  New York’s highest court answered that question this week with a “maybe.”  When it comes to an actual and ongoing litigation, an absolute privilege shields lawyers from defamation suits.  In Front v. Khalil, the Court of Appeals said that a lawyer’s statements made in connection with future litigation are entitled only to a qualified privilege—a privilege that can be lost if the lawyer acts unethically.

A Lawyer’s Letter

The background facts in Front are similar to many of the cases we have written about on this blog.  An employer suspected its employee of stealing proprietary information when the employee quit to work for the employer’s competitor.  The opinion gives a little color about the employee’s alleged malfeasance; according to the employer, the employee was caught copying the firm’s computer files, including client contacts and other proprietary information, onto an external hard drive shortly after the employee gave his resignation notice.  Presumably outraged, the employer hired a lawyer and the lawyer sent the employee (and later forwarded to the competitor) a cease-and-desist letter.  Among other things, the letter accused the employee of misappropriating trade secrets and illegally diverting business opportunities, and it demanded that the employee return the proprietary information and refrain from contacting the employer’s clients.

The employee and the competitor ignored the employer’s demands, so the employer sued them both.  Then the case took an unusual turn: the employee filed a third-party defamation suit against the employer’s lawyer based on the accusations in the letter that the lawyer had forwarded to the competitor.  The Supreme Court dismissed the defamation claim, holding that because the lawyer’s statements were made in the context of prospective litigation, they were absolutely privileged—i.e., that they could not form the basis of a defamation claim regardless of the lawyer’s motivation in sending the letter.  The First Department affirmed.

The Court of Appeals Affirms the Result but Clarifies the Privilege

The New York Court of Appeals affirmed the dismissal but held that a lawyer’s statements regarding prospective litigation are protected by a qualified, not absolute, privilege.  The qualified privilege is a lesser form of protection; it is lost where a would-be defamation plaintiff proves that the statements were “not pertinent to a good-faith anticipated litigation.”

If the outcome in Front was the same under either standard, what’s the significance of this case?  On one level, it shows the court’s reluctance to extend the absolute privilege farther than necessary.  Traditionally, a lawyer’s statements during an actual, ongoing litigation have been afforded an absolute privilege for public policy reasons: the risk of a defamation suit could chill a lawyer’s advocacy and hamper a court’s search for the truth.  By declining to extend the absolute privilege to statements made in connection with prospective litigation, the court in Front recognized the importance of protecting a lawyer’s freedom to advocate for her client but reasoned that the qualified privilege provides adequate protection.

On another level, the decision shows that unethical demand letters (or other types of pre-litigation statements) may expose a lawyer to defamation liability.  The court explained that the qualified privilege does not protect “attorneys who are seeking to bully, harass, or intimidate their client’s adversaries by threatening baseless litigation or by asserting wholly unmeritorious claims, unsupported in law and fact, in violation of counsel’s ethical obligations.”  And, the court cautioned that attorneys should take extra care in corresponding with “unrepresented potential parties who may be particularly susceptible to harassment….”

The practical impact of this ruling remains to be seen, but in the meantime it serves as a reminder that lawyers who cross ethical lines can face serious consequences.