Can an attorney write a cease-and-desist letter without being sued for defamation?

Front, Inc. v Khalil,

___ NY3d ___, 2015 NY Slip Op 01554 [2015]
Once litigation has begun, an attorney’s statements are absolutely privileged – the attorney cannot be sued for defamation. (With a caveat – see below) What about statements made during the run-up to actual litigation? Specifically, what about accusations made in a cease-and-desist letter? Are these privileged as well? And, if so, is the privilege absolute or qualified? This is, strictly speaking, not a procedural issue, yet it relates so closely to the preliminary stages of many lawsuits that it is worth discussion here.

The Court of Appeals held here that comments made by attorneys to prospective adversaries in anticipation of good-faith litigation are entitled to a qualified privilege. The privilege is lost where the statements were not made in good faith, and

“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.”

So here, where a defendant made a third-party defamation claim against the plaintiff’s attorney based on good-faith statements in a cease-and-desist letter, the statements were privileged and the third-party complaint was dismissed.

The underlying claim in this action was that the defendant Khalil had, shortly after notifying his employer that he intended to resign, wrongfully downloaded many computer files containing projects, client information and other proprietary belonging to his then-employer, the plaintiff Front. It was alleged that Khalil had done so in order to aid his soon-to-be employer Eckersley O’Callaghan Structural Design, one of Front’s competitors.

Front retained counsel, Meister Seelig & Fein, LLP. One of their attorneys, the defendant Kimmel, sent a cease-and-desist letter to Khalil, accusing him of stealing Front’s proprietary information, stealing Front’s business, and other improprieties. The letter also stated that Khalil had violated the Economic Espionage Act, and that he had violated his immigration status. It concluded with a demand to cease-and-desist from using the stolen information, return the information and not contact Front’s clients. Kimmel then wrote to Eckersley O’Callaghan, accusing it of conspiring with Khalil in his improper acts, and making the same demands to cease-and-desist. A copy of the letter to Khalil was enclosed.

Of course, Khalil and Eckersley O‘Callaghan neither ceased nor desisted, and Front sued them for misappropriation of trade secrets, unfair competition, conspiracy and other wrongful conduct. Khalil instituted a third-party action against Kimmel and Meister Seelig for defamation based upon the letter, also making claims of business torts. There were mutual motions to dismiss, but the motion that concerns us was the one by Kimmel and Meister Seelig to dismiss Khalil’s third-party action, for failure to state a cause of action.

Supreme Court found the letter to have been “absolutely privileged,” as it related to the lawsuit begun by Front shortly thereafter, and since the statements in the letter were substantially identical to those made in Front’s complaint. The Appellate Division agreed that the letter was absolutely privileged, as having been made in connection with prospective litigation.

The Court of Appeals found that the letter was indeed privileged, but that the privilege was not absolute, drawing a distinction between statements made during pending litigation and those made while the litigation is only in prospect.

Absolute privilege attaches to statements made by attorneys in the course of litigation where the statements are “material and pertinent to the questions involved.” (Youmans v Smith, 153 NY 214 [1897]) The privilege is said to be absolute, yet it can fail when the statements are so defamatory as to allow the inference of malice. The basis of the privilege is that permitting defamation claims against attorneys acting in good faith impedes the search for the truth which is at the heart of litigation, and holding them privileged allows attorneys to represent their clients without reprisal. The privilege applies, regardless of the attorney’s motive.

Whether a similar privilege applies to pre-litigation statements was an open question in the Court of Appeals. The Court held that extending pre-litigation statements some form of privilege served the same ends as the privilege for statements during litigation. It noted that attorneys commonly communicate with their clients’ potential adversaries in an attempt to avoid litigation, and such efforts are to be encouraged, not “chilled” by the potential for generating defamation claims against counsel. The Court was reluctant, however, to extend a full and absolute privilege, finding it unnecessary to achieve the goal of open communication, and also finding it inadvisable to protect possibly abusive, harassing, baseless or non-meritorious statements or threats of litigation. A qualified privilege, subject only to the requirement that the statements be pertinent to good-faith anticipated litigation, was held sufficient.

The claims and threats of litigation made by Kummel in the cease-and-desist letters here having been in good faith, the qualified privilege applied. Even though the courts below had erred in applying an absolute privilege, the third-party defamation action was properly dismissed.

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