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New York Court of Appeals Rules That Pre-Litigation Cease and Desist Letters Are Subject to a Qualified Privilege in Libel Actions
February 26, 2015 download PDF
In Front, Inc. v. Khalil, 2015 N.Y. Slip Op.
01554, 2015 WL 750965 (N.Y. Feb. 24, 2015), the New York Court of
Appeals settled an open question of New York law concerning
immunity for lawyers who send pre-litigation "cease and desist"
letters. Specifically, the Court held that such
communications are protected by a qualified privilege in defense of
a defamation claim "if the statements are pertinent to a good-faith
anticipated litigation." 2015 WL 750965 at 2.
The defendant in Front, Inc. v. Khalil was a
former employee of the plaintiff who resigned to work for a
competitor engineering firm. After an investigation, counsel
for the plaintiff sent letters to Khalil, alleging that he had
attempted to steal confidential company information,
misappropriated trade secrets and otherwise committed ethical
violations. The letter ended with a demand that Khalil "cease
and desist" such activities. Counsel also provided a copy of
the letter to Khalil's employer. Receiving no response,
Front, Inc. commenced an action against both Khalil and his
employer. Khalil thereafter commenced a third-party action
for libel against the lawyer and law firm that had sent the
pre-litigation demand letters. On motions to dismiss, the New York
Supreme Court dismissed the libel claims, holding that the letters
were "absolutely privileged." The Appellate Division, First
Department affirmed.
The Court of Appeals affirmed, though it rejected the lower courts'
application of an "absolute privilege" to pre-litigation
communications. The Court noted the longstanding rule in New
York that statements by attorneys in connection with court
proceedings are protected by an absolute immunity "when such words
or writings are material and pertinent to the questions
involved." Youmans v. Smith, 153 N.Y. 214,
219 (1897) (quoted in Front, Inc., 2015 WL 750965 at 3). The
Court explained the rationale behind this rule as permitting
attorneys to speak freely in order to zealously represent their
clients without fear of reprisal. 2015 WL 750965 at 4.
The Court of Appeals, however, rejected the rule of absolute
privilege with respect to pre-litigation communications and instead
enunciated a rule of qualified privilege. In doing so, the
Court recognized that pre-litigation communications, such as cease
and desist letters, often are sent to avoid litigation and "should
be encouraged and not chilled by the possibility of being the basis
for a defamation suit." Id. at 4. Yet
concerned that an absolute privilege "has the potential to be
abused," the Court endorsed the rule of qualified privilege which
"should only be applied to statements pertinent to a good-faith
anticipated litigation." Id. Thus, going
forward, "the privilege is lost where [the libel plaintiff] proves
that the statements were not pertinent to a good-faith anticipated
litigation." Id. Applying this new rule to the
letters in question, the Court held that the pre-litigation letters
were pertinent to an anticipated litigation and thus affirmed the
dismissal of the third-party complaint. Id. at
5.
The Court of Appeals' decision in Front, Inc. v.
Khalil limits absolute privilege as a defense to libel
actions to statements made in court proceedings and applies
qualified privilege to pre-litigation communications. While
this limitation should not affect most cease and desist letters
sent in anticipation of litigation, it bears noting that the
Court's rationale for applying only a qualified privilege to
pre-litigation communications is that qualifying the privilege
"ensures that 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." 2015 WL 750965 at 4. This rule
could prove useful for companies that may be the recipient of
baseless pre-litigation demands.