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Current Developments in the Commercial Divisions of the
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Posted: December 21, 2017

Motion to Dismiss Defamation Claims Granted Based on Qualified Privilege

On December 7, 2017, Justice Ostrager of the New York County Commercial Division issued a decision in L.Y.E. Diamonds Ltd. v. Gemological Institute of America Inc., 2017 NY Slip Op. 32576(U), dismissing a defamation claim on a motion to dismiss based on qualified privilege, explaining:

In a defamation action, such as this, a qualified privilege negates any presumption of implied malice flowing from a defamatory statement, and places the burden of proof on this issue upon the plaintiff. A qualified privilege may be found where a statement is fairly made by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his own affairs, in a matter where his interest is concerned. One such conditional, or qualified, privilege extends to a communication made by one person to another upon a subject in which both have an interest. The privilege underscores a public policy in favor of the flow of information between persons sharing a common interest. Occasions conditionally privileged afford a protection based upon a public policy which recognizes that it is essential that true information shall be given whenever it is reasonably necessary for the protection of one’s own interests, the interests of third persons, or certain interests of the public. In prior actions sounding in defamation, this common-interest privilege has been extended to members of a board of directors, constituent physicians of a health insurance plan, and members of a faculty tenure committee.

Defendants GIA and Moses (the “GIA Defendants”) assert that any liability stemming from the Alert is protected by a qualified common-interest privilege. In response, plaintiffs argue that even if the GIA defendants are protected by a qualified privilege, that such a privilege must be pleaded as an affirmative defense and cannot be asserted in a pre-answer motion to dismiss. The First Department has held, however, that such a privilege can be found at the pleading stage. Here, the GIA Defendants have presented documentary evidence of their client agreements with plaintiffs which were in effect at the time of the Alert. The client agreements clearly state that GIA maintains the right to make public via GIA’s website or otherwise, the names of clients it reasonably suspects of treating diamonds. Indeed, as the Amended Complaint and motion papers make crystal clear, GIA undoubtedly protects the interests of third persons in the diamond industry. The Alert was intended to serve that public function by warning interested parties of potentially treated diamonds, pursuant to GIA’s client agreement with plaintiffs. A qualified privilege therefore shields the GIA Defendants from liability unless plaintiffs can allege malice in more than merely conclusory terms.

As discussed at length during oral argument, plaintiffs’ Amended Complaint epitomizes the type of conclusory allegations of malice that are insufficient to overcome the moving defendants’ qualified common-interest privilege. The Amended Complaint states that defendants published defamatory statements with malice without alleging any facts to support an inference that GIA “spoke out of spite or ill will, and that such malicious motivation was the one and only cause for the publication. Thus, plaintiffs’ conclusory allegations of malice are insufficient to overcome the privilege, and the causes of action sounding in defamation and trade libel are dismissed as to the GIA Defendants.

(Internal quotations and citations omitted).

Civil litigation can involve claims that cause real reputational harm, but not every statement can be the subject of a defamation claim. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about whether statements about you or your business can be the basis for a claim for defamation.

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