In January 2013, Kelle Azzopardi, a former Giorgio Armani Corp. executive assistant, sued the Italian fashion company in New York State Court, alleging she had been sexually harassed by a female Armani executive, Laura Giulini, and fired in retaliation for complaining about it. In that lawsuit, Azzopardi said she was let go after reporting to the company’s human resources department that she was “incessantly verbally and sexually” harassed by Giulini, who also allegedly exposed herself to Azzopardi.

The complaint alleged that the harassment started in May 2012, when Azzopardi’s desk was moved close to Giulini’s office. At some point in June, Giulini purportedly called Azzopardi into her office and asked her to close the door. Giulini then removed her pants, which left Azzopardi feeling “extremely uncomfortable,” according to the suit. Armani fired Azzopardi in September, citing performance issues. The suit alleged that Armani created a hostile work environment in violation of New York State and New York City human rights laws, and contained claims of discriminatory and retaliatory discharge under those laws. Azzopardi sought damages that would account for lost wages due to the allegedly improper firing, as well as punitive damages. That case is still pending.

In response to that case, Giulini filed a counterclaim, alleging that that Azzopardi’s claim amounted to libel and slander. The counterclaim claimed that Azzopardi’s claims were baseless, false, and malicious. The Court agreed in part with Giulini; however, it dismissed the counterclaim on the grounds that even if the claims were false and malicious, they were still protected speech under the judicial proceedings privilege against defamation claims. The Court wrote: “While the four counterclaims for libel appear to meet the pleading requirements for such a claim, the issue on this motion is whether the statements are protected by the absolute privilege accorded to statements made in connection to judicial proceedings.” The Court explained that judicial proceedings are occasions where speech is protected by an absolute privilege against defamation claims. Regardless of whether participants in judicial proceedings have been motivated by malice or an ulterior motive, or have otherwise made statements in bad faith, their speech is protected by an absolute privilege to ensure that the judicial search for truth is not hindered or compromised by the threat of a defamation claim. The Court explained that Giulini’s statements in her affidavit that the allegations in Azzopardi’s complaint are false and that the action was commenced to extort money were insufficient to defeat the privilege. Therefore, the Court dismissed the counterclaim.

This case presents an interesting challenge for employers: When an employee makes claims in a lawsuit that are patently false, is there any recourse for the accused? Although the judicial proceedings privilege may bar a defamation counterclaim, there are options. If, after the case is resolved in its favor, the employer can prove the claims were knowingly false and/or asserted for an ulterior motive, it may have claims for malicious prosecution and/or abuse of process. It may also be able to have the court impose sanctions against the employee under the applicable rules of civil procedure. Another option for employers is to move to have all pleadings in a case placed under seal. Under most of the applicable rules, litigants must show “good cause” to justify sealing, and case law interpreting this standard has generally mandated a demonstration of “compelling circumstances.” While it may not work in every instance, moving to place salacious (and otherwise defamatory) material under seal can be a good way to protect all parties involved. Of course, if the initial complaint making the allegations is not filed under seal, the damage may already have been done.