Qualified Privilege Bars Defamation Claim

On February 26, 2019, the First Department issued a decision in L.Y.E. Diamonds, Ltd. v. Gemological Inst. of Am., Inc., 2019 NY Slip Op. 01360, holding that a defamation claim was barred by qualified privilege, explaining:

The motion court correctly dismissed, pursuant to CPLR 3211(a)(1), the defamation and trade libel causes of action on the ground that the statements at issue were protected by a qualified privilege.

GIA and Moses produced client agreements that conclusively demonstrate that they made the challenged statements in the discharge of some public or private duty, legal or moral, or in the conduct of their own affairs, in a matter where their interest was concerned. In the agreements, plaintiffs acknowledged GIA's stated duty to serve the public and to maintain its trust in the diamond trade, acknowledged that the duty could be executed by, among other things, public disclosure of information about the diamonds that GIA inspected, including GIA's reasonable suspicions about the quality of the diamonds, and further acknowledged that GIA could make such public disclosures at its discretion and without their prior authorization.

. . .

Plaintiffs argue that, even where a qualified privilege has been conclusively established, a plaintiff should have an opportunity to show common-law or constitutional malice to defeat it. They raise the reasonable concern that holding the plaintiff to the allegations in the complaint, where the defendant has established the affirmative defense on a pre-answer motion to dismiss, deprives the plaintiff of an adequate opportunity to defeat the affirmative defense. However, holding these particular plaintiffs to the allegations in their amended complaint does not present the risk of unfair surprise. As a result of motion practice on the original complaint, plaintiffs were aware of defendants' qualified privilege arguments. Yet, rather than amending the complaint to allege facts that would establish malice, they continued to assert only the most conclusory allegations of malice. Plaintiffs rely on Whelehan v Yazback (84 AD2d 673 [4th Dept 1981]). However, this Court has determined that conclusory allegations do not suffice.

Nor do the arbitration proceedings buttress the malice allegations, as those proceedings post-date the statements at issue and shed no light on whether defendants made the statements with the requisite disregard for the truth. In any event, plaintiffs acknowledge that the arbitration resulted in a monetary award against them.

Plaintiffs failed to show that the court applied an incorrect standard in determining the motion to dismiss the amended complaint. Their argument consists of conclusory statements without supporting facts, such as the assertion that it was "entirely possible" that defendants sought to defame them with malice. Nor do these conclusory statements suffice to justify further discovery.

(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.