Defamation Case, Arising From Threat of Discrimination/Hostile Work Environment Lawsuit, Survives Motion to Dismiss

In Chang v. Arroyave, No. 55459/2020, 2020 N.Y. Slip Op. 50910(U), 2020 WL 4690002 (Sup Ct Westchester Cty Aug. 12, 2020), the court denied defendant’s motion to dismiss plaintiff’s defamation claim.

The court summarized the facts as follows:

On or about April 2, 2020, attorneys for Sonia Arroyava issued a letter for settlement purposes only to Chang K. Park, the CEO of Universal Remote Control, Inc. The letter, for settlement purposes only, enclosed a draft complaint to the United States District Court for the Southern District of New York, entitled Arroyave v. Universal Remote Control, Inc., Jin Chang, et al. The draft complaint asserts allegations regarding gender discrimination, race discrimination, hostile work environment, national origin, retaliation, and violations of Title VII of the Civil Rights Act of 1964 and the New York State Human Rights Law. The draft complaint asserted that Arroyava, a female, was an employee of Universal Remote, and Chang, an Asian male, was a vice president of finance for Universal Remote. The letter states it was being sent in a good faith attempt to resolve the matter prior to litigation.

The plaintiff, Chang, subsequently commenced this action seeking damages for defamation, alleging, inter alia, that “Arroyava made the defamatory statements to Chang’s employer knowing they were false in order to extract a monetary payment for her claims and that the statements are defamatory per se.”

Defendant filed a pre-answer motion to dismiss plaintiff’s complaint for failure to state a claim, under CPLR 3211(a)(7). The court denied the motion.

Defendant argued, based on Front v. Khalil, 24 NY3d 713 (2015), that the complaint fails to state a cause of action, noting that the alleged defamatory statements were made in a letter by counsel, before litigation, describing the basis of the anticipated complaint, and seeking a possible pre-litigation resolution.

Plaintiff opposes, arguing that a qualified privilege defense does not apply because (1) no litigation was commenced by the defendant in the three months since the statements were made (and thus the communication is not a “pre litigation” communication), and (2) the threatened lawsuit was based on “false claims” and would be filed in bad faith.

Here is the law, as summarized by the court:

The law provides absolute immunity from liability for defamation based on oral or written statements made by attorneys in connection with a proceeding before a court “when such words and writings are material and pertinent to the questions involved” (Strujan v Kaufman & Kahn, LLP, 168 AD3d 1114, 1116 [2d Dept 2019] quoting Front, Inc. v Khalil, 24 NY3d 713, 718 [2015] [internal citations omitted] ).

However, extending privileged status to communication made prior to anticipated litigation has the potential to be abused (Front, Inc. v Khalil, 24 NY3d at 719). Applying an absolute privilege to statements made during a phase prior to litigation would be problematic and unnecessary to advance the goals of encouraging communication prior to the commencement of litigation (Front, Inc. v Khalil, 24 NY3d at 719). Thus, statements made by attorneys prior to the commencement of litigation are protected by a qualified privilege (Front, Inc. v Khalil, 24 NY3d at 719).

[T]he privilege should only be applied to statements pertinent to a good faith anticipated litigation. This requirement 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. Therefore, we hold that statements made prior to the commencement of an anticipated litigation are privileged, and that the privilege is lost where a defendant proves that the statements were not pertinent to a good faith anticipated litigation.

Applying the law, the court concluded that while the challenged statements in the proposed draft complaint “may be subject to a qualified privilege, the complaint states a cause of action for defamation”, finding that “[a]ccording the plaintiff the benefit of every favorable inference, the allegations in the complaint sufficiently infer that the challenged statements were not pertinent to a good faith anticipated litigation and therefore, the qualified privilege has been lost.”

The court also denied defendant’s motion to dismiss the complaint under CPLR 3211(a)(1), which applies “where …  documentary evidence utterly refutes the complaint’s factual allegations, conclusively establishing a defense as a matter of law.” Here, the court concluded that “[d]efendant has not conclusively established through [the proposed draft complaint and correspondence] that the challenged statements were pertinent to a good faith anticipated litigation.”

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