What Do eBay, The “40 Year-Old Virgin,” And The Litigation Privilege Have In Common?

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Jonah hillNot much, but please keep reading.

In the movie, the 40-Year-Old-Virgin, an almost unrecognizable Jonah Hill has a very small, but funny, part. He plays a customer at the “We Sell Your Stuff On Ebay” store, which is owned by Steve Carell’s character’s love interest, played by Catherine Keener. According to IMDB.com, Hills plays “Ebay Customer,” who is, to say the least, having trouble understanding how the store works. He wants to buy some "wonderful" shoes that he found at the store. Keener's character explains that she does not actually sell any of the items in her store at the store, she sells them on eBay. Hill's character just doesn't get it, eventually telling Keener's character that he just wanted to buy the shoes and take them home, but that she was "making it extremely difficult" for him to do so.

The recent Appellate Division decision, XCalibur Communications v. Karcich, involved a dispute over the sale of the plaintiff’s merchandise on eBay. No word on whether any of those sales involved shoes like the ones Hill’s character was looking to buy, but the decision helps clarify the scope of the litigation privilege, which is broader than many people think. 

The litigation privilege protects attorneys and parties from defamation claims arising out of statements made in the course of a lawsuit. This means, in its simplest terms, that a defendant cannot sue a plaintiff for the allegations the plaintiff makes against the defendant in a lawsuit. But it is broader than that. It applies to (1) any statements made in a judicial proceeding, (2) by counsel or a party, (3) “to achieve the objects of the litigation," and which (4) "have some connection or logical relation to the action.” And, it applies “even if the words are spoken maliciously, without any justification or excuse, and from personal ill will or anger.”

In XCalibur, a dispute arose between plaintiffs and two individuals. Plaintiffs were supposed to act as “trading assistants” for one of the individuals, helping him sell his merchandise on eBay. But when the relationship between the parties soured, plaintiffs sued. The individuals countersued, claiming that plaintiffs owed them money for sales made and that plaintiffs refused to return unsold merchandise. Defendant represented the individuals in the lawsuit.

After plaintiffs sued, defendant, on behalf of his clients, wrote twice to eBay to notify the company that plaintiffs refused to pay his clients for merchandise sold and refused to return unsold merchandise. He further notified eBay that his clients had been induced to hire plaintiffs based on the “conditions of the EBay Trading Assistant Program and representations on eBay’s website concerning the program.” Finally, defendant asked eBay how it intended to handle the matter.

When plaintiffs learned of the letters, they added a defamation claim against defendant to their complaint. Defendant moved to dismiss, citing the litigation privilege. The trial court granted the motion, and the Appellate Division affirmed.

The Appellate Division held that the statements in defendant's letters were covered by the litigation privilege. They were made by counsel after plaintiffs sued and defendants countersued, therefore they satisfied the first two elements of the litigation privilege test. Turning to the final two elements, the Appellate Division observed that a statement need not be directly relevant or material to an issue before a court, and need not be admissible into evidence, to be covered by the privilege. It is enough that the statement "have some references to the subject of the inquiry" or a "general frame of reference and relationship to the subject matter of the action. This is a broad standard, but the Appellate Division cautioned that it is not limitless, noting that a statement "so wanting in relation to the subject matter of controversy as that no reasonable man can doubt its irrelevant and impropriety" would not be covered by the privilege.

In XCaliber, the Appellate Division held that defendant's letters to eBay satisfied this broad standard and were thus protected under the litigation privilege. It held that the "detailed version of events set forth in the letters reflecting [defendant's] clients' position regarding plaintiff's alleged actions were related to the action pending between plaintiffs and defendant's clients." It further held that defendant asked eBay how it intended to respond to the allegations, which was consistent with "a thorough and searching investigation of the truth, and, therefore, essential to the achievement of the objects of the litigation." Finally, the Appellate Division held that eBay's response could have led to a claim against eBay or, at least, an investigation into the company's policies, which could have supported defendant's clients' claims against plaintiffs. For all of these reasons, the Appellate Division concluded that the letters were "meant to achieve the objects of the litigation between the parties," and were therefore protected by the litigation privilege.

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