Friday, January 10, 2014

Holds on Holds: Can Sending Litigation Holds to Certain Third Parties Constitute Defamation or Tortious Interference?



by Robert B. Fitzpatrick

 Photo courtesy of ediscoverylawreview.com


In International Portfolio v. Purplefish, LLC, No. 12-06748 (Pa. Sup. Ct. Dec. 24, 2013), the Pennsylvania Superior Court recently held that a party that sent “litigation holds” to the opposing party’s business associates and clients did not, in so doing, unlawfully defame or tortiously interfere with the other party’s business. For plaintiffs’ attorneys handling cases against large employers, in which the employer’s customers or suppliers may become involved in the litigation, the International Portfolio decision is an important one because it provides room to distribute litigation holds without fear of tort claims.

The case involved a hedge fund that brought Racketeer Influenced and Corrupt Organizations (RICO) Act and fraud claims against the company that managed its debt portfolios. In a move that has become a prudent and standard practice in litigation, the hedge fund’s counsel sent litigation hold letters to other clients and associates of the defendant company, explaining what the litigation involved and the duty to preserve any documents potentially related to the litigation. 

The defendant company then brought suit in state court against the fund for defamation and tortious interference with contractual relations, alleging that the letters were not sent in the normal course of litigation proceedings - which would merit both the judicial and the litigation privilege - but were sent only to “defame, disparage, and harm Appellants.” The company argued that the facts mirrored those of Bochetto v. Gibson, 860 A.2d 67 (Pa. 2004), in which an attorney faxed a complaint to a reporter, and was later found liable for defamation.

The trial court dismissed the claims with prejudice. On appeal, the Pennsylvania Superior Court, in a December 24, 2013 opinion by Judge Joseph D. Seletyn, affirmed the trial court’s order of dismissal. Expounding on the reasons for the judicial and litigation privileges, Judge Seletyn quoted from the Pennsylvania Supreme Court’s opinion in Binder v. Triangle Publications, Inc., 275 A.2d 53, 442 Pa. 319, 324 (Pa. 1971):

“The reasons for the absolute privilege are well recognized. A judge must be free to administer the law without fear of consequences. This independence would be impaired were he to be in daily apprehension of defamation suits. The privilege is also extended to parties to afford freedom of access to the courts, to witnesses to encourage their complete and unintimidated testimony in court, and to counsel to enable him to best represent his client’s interests.”

            The court distinguished the facts of the case from those in Bochetto, reasoning that Bochetto’s activities were outside the regular course of normal judicial proceedings, while the attorneys for the fund in this instance were acting well within the regular course of proceedings by sending litigation holds with the intention of preserving evidence for litigation.

            The case, though unpublished, again demonstrates that attorneys are generally well within their rights to send litigation holds to third parties, even if those third parties are clients or business associates of the other party. No need to put holds on holds.


Please be sure to visit our website at http://RobertBFitzpatrick.com

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