Front v. Khalil: New York’s Highest Court Holds That Pre-Litigation Statements Made by Attorneys Cannot be the Subject of Defamation Claims Unless the Statements Were “Not Pertinent to a Good-Faith Anticipated Litigation”
On February 24, 2015, the Court of Appeals of New York resolved a split among New York’s intermediate appellate courts over whether attorneys can be liable for defamation for their statements prior to the commencement of a lawsuit. The Court ruled that, unlike statements made by attorneys during the course of litigation – which are protected by an absolute privilege that applies irrespective of the attorney’s motive – pre-litigation statements are subject to a qualified privilege. Under this qualified privilege, attorneys will not be subject to a claim for defamation for pre-suit statements they make and that they communicate to third parties if those statements are “pertinent to a good-faith anticipated litigation.”1
Front, Inc., an architecture and engineering firm, allegedly discovered that an employee was stealing proprietary information, sharing it with a competitor and diverting business to the competitor. After Front terminated the employee, Front’s attorneys sent a cease-and-desist letter to the former employee claiming that he had engaged in misconduct and demanding that he return all confidential information and refrain from contacting any of Front’s clients.2 Front’s attorneys also sent a copy of that letter to the competitor (the former employee’s new employer).3
Front later filed suit against the former employee and the competitor, seeking damages for the misappropriated proprietary information and interference with Front’s business. The former employee responded by filing a third-party complaint against Front’s attorneys, alleging defamation based on statements the attorneys made about the former employee in the pre-suit letter that the attorneys shared with the new employer.4 In the third-party complaint, the former employee stressed that Front’s lawyers had not qualified their assertions of misconduct with qualifiers such as “upon information and belief,” but rather recited the claims as fact.5
The Supreme Court, New York County, granted Front’s attorneys’ motion to dismiss the third-party complaint on the grounds that the pre-suit statements were absolutely privileged and thus could not give rise to a claim for defamation.6 The Appellate Division, First Department affirmed on these grounds, holding that “an absolute privilege attaches to the statements made by [Front]’s counsel . . . because they were issued in the context of ‘prospective litigation.’”7
The Court of Appeals affirmed the First Department’s decision, but on a different standard than the First Department had applied. Resolving a split among three of the Departments of the Appellate Division,8 the Court held that statements made by attorneys prior to the formal commencement of litigation are subject to a qualified privilege, not an absolute privilege as the First Department had held.9 The Court announced the following qualified privilege standard: if the attorney’s pre-litigation statements are “pertinent to a good-faith anticipated litigation,” they cannot be the subject of a defamation claim.10
In reaching its decision, the Court confirmed the long-standing rule in New York that attorneys are absolutely immune from defamation suits for statements (oral or written) that they make in connection with pending litigation, regardless of whether the statement is made in or out of court.11 New York courts adopted this rule over a century ago for the policy reason that attorneys should be able to represent their clients zealously during judicial (or quasi-judicial) proceedings without fear of reprisal.12 This absolute protection applies “irrespective of an attorney’s motive for making” the statements.13 Observing that sending cease-and-desist letters prior to filing suit is a common practice, the Court emphasized that “[w]hen litigation is anticipated, attorneys and parties should be free to communicate in order to reduce or avoid the need to actually commence litigation.”14 Affording a privilege to communications made in anticipation of litigation thus can encourage settlement between the parties, saving the resources of private litigants and potentially eliminating the need for judicial intervention.15 The Court stressed the potential chilling effect on pre-litigation settlement communications if no privilege applied.16
The Court held, however, that the privilege extended to pre-litigation statements could be abused and therefore should be a qualified one.17 The Court articulated the following standard: “statements made prior to the commencement of litigation are privileged,” but the privilege is lost if “the statements were not pertinent to a good-faith anticipated litigation.”18 The Court explained that the privilege would not extend to statements made by “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.”19
- Clarification of Standard: The Court’s opinion clarifies the governing standard for attorneys engaged in pre-litigation communications in New York. The standard will likely be clarified further in subsequent cases, but appears to include three factors: (i) that the claims in the litigation are not wholly unmeritorious and asserted merely to bully, harass or intimidate; (ii) that the speaker, in good faith, anticipates that litigation will, or at least reasonably may, be brought; and (iii) that the statements are “pertinent” to that anticipated litigation.
- Risks Associated with the Court’s Adoption of Qualified Privilege: The Court’s refusal to adopt the First Department’s rule of absolute privilege means that lawyers must be careful in how pre-suit communications shared with third parties (or “published”) are drafted, and should be sure there is enough evidence to support a good-faith basis for believing the truth of what is being asserted. In light of the uncertainties inherent in establishing the elements of a qualified privilege defense, attorneys drafting cease-and-desist letters that they intend to publish to a third party should consider whether to use appropriate qualifiers as to the basis of their understanding concerning the facts asserted.
- Application to Client Statements: The absolute privilege afforded to statements made during judicial proceedings extends to all participants in the litigation, including the parties themselves.20 The Court’s opinion does not address whether the qualified privilege for pre-litigation communications applies only to attorneys, or to their clients and other nonlawyers as well.
- Potential Parallels with Standards Triggering Document Retention Obligations: The qualified privilege standard announced by the Court (“pertinent to a good-faith anticipated litigation”) is similar to the standard articulated by a number of authorities for determining whether a party is obligated to retain litigation-related documents, which sometimes has been phrased as “anticipation of litigation.”21 The rationale enunciated by the Court of Appeals for allowing a privilege for pre-litigation statements, however, includes the avoidance of unnecessary litigation. As a result, it cannot be presumed that courts will interpret the standards the same way. In light of the potential similarity of the standards, however, parties might conclude, as a matter of prudence, to implement document retention measures before sending any pre-suit cease-and-desist or demand letters.
- Pre-Suit Communications with Unrepresented Parties: The Court noted that because unrepresented parties may lack the resources or sophistication to consider and respond to communications from attorneys, attorneys should “exercise caution” in any pre-litigation communications with unrepresented parties.22 Lower courts may scrutinize more closely the applicability of a qualified privilege defense to any pre-suit communications with unrepresented parties in particular.
- Scope of Privilege Outside New York: A number of states, including California and Massachusetts, recognize an absolute privilege for pre-litigation communications made by attorneys.23 A Texas appellate court has also applied an absolute privilege for pre-litigation statements, and the Delaware Court of Chancery has stated, in dictum, that an absolute privilege may apply to pre-suit attorney communications. 24 Before sending any communications where privilege might be a consideration, parties should consider the applicable law under a choice-of-law analysis.