Wednesday, September 13, 2017

Defamation case involving extortion allegations can proceed

Defamation cases are a way to reclaim your reputation. The problem is that the court system is an unwieldy way to accomplish that, and defamation cases are often met with motion practice that will prolong the agony and cost you money and even more anguish.

The case is Friedman v. Bloomberg LP, decided on September 13. Friedman was recruited to work as "head of risk" for a purported hedge fund and moved to the Netherlands, where the company was based. He then came to believe the company had fraudulently induced him to work there and that the company was actually a "kickback and money laundering operation" for Libyan dictator, Ghaddafi. Friedman says he was inexplicably fired shortly after he voiced concerns about the company's practices. He then sued the company for fraudulent inducement, seeking $499,401,000 in damages, back pay and bonuses. Bloomberg, LP, then published a story about the lawsuit, and Friedman next sued Bloomberg for defamation because (1) the article said he was suing for $500 million and (2) the article quoted his former employer stating that Friedman had repeatedly tried to extort money from the company and that he was fired for gross misconduct.

Here are the issues. First, Connecticut allows plaintiffs to sue nonresidents and foreign companies in Connecticut if the lawsuit has some connection to that state, except for defamation cases. This means plaintiff cannot sue the foreign company in this case. Friedman says the defamation exception violates the First Amendment's right to petition the government for grievances. The Court of Appeals (Walker, Hall and Chin) says:

A plaintiff’s right of access to courts is not violated when, as here, a state’s long‐arm statute does not provide for jurisdiction over certain out‐of‐state defendants. Indeed, “[t]here is nothing to compel a state to exercise jurisdiction over a foreign [defendant] unless it chooses to do so, and the extent to which it so chooses is a matter for the law of the state as made by its legislature.”
Nor is there an equal protection violation. New York has a similar law. The Second Circuit has already blessed that law. "One rational basis for excluding defamation actions against out‐of‐state defendants is “to avoid unnecessary inhibitions on freedom of speech” and that '[t]hese important civil liberties are entitled to special protections lest procedural burdens shackle them.'” In addition, the New York exception for defamation actions was initially intended, at least in part, to ensure that “newspapers published in other states [would not be forced] to defend themselves in states where they had no substantial interests.”

The Court does have authority to decide the case against Bloomberg, however. Friedman does not state a claim that Bloomberg had defamed him in stating he was suing his former employer for "as much as $500 million," as the lawsuit pretty much seeks that amount in damages/relief. As for the statement in the article that plaintiff had repeatedly tried to extort money from his former employer, that statement is actionable because it suggests plaintiff had committed a crime. This is not rhetorical hyperbole. A reasonable reader could also think that Friedman's "gross misconduct" consisted of those multiple extortion attempts.

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