Commercial Division Blog
Court of Appeals Holds that Qualified Litigation Privilege Applies to Pre-Litigation Statements
On February 24, 2015, the Court of Appeals issued a decision in Front, Inc. v. Khalil, 2015 NY Slip Op. 01554, holding that statements made by attorneys prior to the commencement of litigation are protected by a qualified privilege if the statements are pertinent to a good-faith anticipated litigation.
In Front, Inc., counsel for plaintiff sent the defendant and, later, the defendant's prospective employer, a letter accusing the defendant (its former employee) of attempting to steal the plaintiff's "confidential and proprietary information," conducting an "illegal competing side business," misappropriating trade secrets, and other misconduct and threatening to sue. The defendant commended a third-party action for defamation against the plaintiff's counsel.
The trial court determined that the letter was absolutely privileged, because the letter "clearly related to the litigation initiated by" the plaintiff and "the demands made in the letters . . . substantially reflect the causes of action and relief requested" in the main action. The First Department affirmed on substantially the same grounds. The Court of Appeals granted leave to appeal. It affirmed, resolving a split between the Appellate Divisions, explaining:
The rationale supporting the application of privileged status to communication made by attorneys during the course of litigation is also relevant to pre-litigation communication. When litigation is anticipated, attorneys and parties should be free to communicate in order to reduce or avoid the need to actually commence litigation. Attorneys often send cease and desist letters to avoid litigation. Applying privilege to such preliminary communication encourages potential defendants to negotiate with potential plaintiffs in order to prevent costly and time-consuming judicial intervention. Communication during this pre-litigation phase should be encouraged and not chilled by the possibility of being the basis for a defamation suit.
Nonetheless, as a matter of policy, the courts confine absolute privilege to a very few situations. We recognize that extending privileged status to communication made prior to anticipated litigation has the potential to be abused. Thus, 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. To ensure that such communications are afforded sufficient protection the privilege should be qualified. Rather than applying the general malice standard to this pre-litigation stage, the 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.
(Internal quotations and citations omitted) (emphasis added). The Court of Appeals went on to hold that the statements at issue met the standard for the qualified privilege.