Report

NY Commercial Litigation Report, September 2019
(Vol. 9)

Where Advocacy Meets Business

With Malice Toward One … Second Circuit: Sarah Palin Sufficiently Alleged Actual Malice to Avoid Dismissal in Libel Action Against the New York Times.

Palin v. New York Times Co., 933 F.3d 160 (2d Cir. 2019).

To survive a motion to dismiss in U.S. federal court, a plaintiff must allege sufficient facts to state a “plausible” (as opposed to, merely a possible or conceivable) claim for relief.  But courts typically cannot consider evidence outside the four corners of the complaint on a motion to dismiss.  And in no event may the court decide issues of witness credibility or otherwise choose between competing inferences from the available evidence.  Those determinations are exclusively reserved for the jury at trial.

The Second Circuit recently addressed the interplay between these basic rules of U.S. civil procedure in the context of a libel lawsuit by former Alaska governor and vice presidential nominee Sarah Palin against the New York Times.  A 2017 editorial in that newspaper drew a link between the shooting of Congresswoman Gabrielle Giffords and several others and a map published by Palin’s political action committee (“PAC”), which superimposed crosshairs over several Democratic congressional districts, including the district of the Congresswoman targeted in the shooting.  In fact, no link between the map and the shooting had been established.  Palin sued the Times for defamation shortly thereafter.

When the Times moved to dismiss Palin’s lawsuit for failure to state a claim, the district court had to determine whether Palin’s complaint sufficiently alleged that the Times acted with “actual malice” (that is, with knowledge of, or reckless disregard for, the falsity of the claimed link between the map published by Palin’s PAC and the subsequent shooting).  The case then “took an unusual procedural turn” when the district court decided to hold an evidentiary hearing to ascertain whether Palin’s allegations of malice were plausible.  Based on the testimony of the editorial’s author, the district court dismissed the complaint, finding that the author’s “behavior is much more plausibly consistent with making an unintended mistake and then correcting it than with acting with actual malice.”

The Second Circuit reversed, cautioning that “district courts are not free to bypass rules of procedure that are carefully calibrated to ensure fair process to both sides.”  Specifically, the court found that “it is not the district court’s province to dismiss a plausible complaint because it is not as plausible as the defendant’s theory.”  The court emphasized that it took “no position on the merits of Palin’s claim,” and that in light of “the First Amendment’s crucial constitutional protections,” her “evidentiary burden at trial” would be “high.”  But because Palin had “cleared [the plausibility] hurdle” to defeat dismissal, the Second Circuit remanded the case to the district court “for further proceedings consistent with this opinion.”

Read the court’s full decision here.

Freedom’s Just Another Word for Something Left to Waive … New York Court of Appeals: Freedom of Contract Allows for Waiver of Right to Seek Declaratory Judgment.

159 MP Corp. v. Redbridge Bedford, LLC, 33 N.Y.3d 353 (2019).

In sweeping language, New York’s highest court recently reaffirmed freedom of contract as “a pillar of the common law” “deeply rooted” in the state’s public policy.  Recognizing “New York’s status as the preeminent commercial center in the United States, if not the world,” the Court of Appeals emphasized that “the enforcement of commercial contracts according to the terms adopted by the parties … promotes certainty and predictability and respects the autonomy of commercial parties in ordering their own business arrangements.”

Applying these principles, the Court declined to invalidate on public policy grounds a party’s contractual waiver of its right to seek a declaratory judgment.  The Court acknowledged that freedom of contract is not without limits, explaining that courts must “balanc[e] the public interests favoring invalidation of a term chosen by the parties against those served by enforcement of the clause.”

But invalidation of a contract on public policy grounds is the exception, not the rule, and is justified only where “the interests favoring invalidation are stronger” than the public policy favoring enforcement of the parties’ bargain.  Absent coercion, unconscionability or illegality, the mere “fact that a contract term may be contrary to a policy reflected in the Constitution, a statute or a judicial decision does not render it unenforceable.”  Instead, courts typically uphold a contracting party’s waiver of a legal right unless the right being waived is statutory and the statute itself “expressly preclude[s] waiver.”

A three-judge dissent would have invalidated the contractual waiver, arguing that a waiver of declaratory judgment does not benefit society as a whole because it results in increased uncertainty over the meaning of contract terms.

Read the court’s full decision here.

Gray Area in the Black Market … New York Court of Appeals: Divided Court finds no personal jurisdiction over gun dealer based on out-of-state sales of handguns that later cause injury in New York.

Williams v. Beemiller, Inc., No. 25, 33 N.Y.3d 523 (N.Y. May 9, 2019).

Defendants in U.S. litigation frequently challenge the court’s power to adjudicate the plaintiff’s claims against them based on lack of “personal jurisdiction.”  Where the defendant resides, is incorporated, or has its principal place of business outside the forum state, personal jurisdiction exists only if the defendant has the necessary “minimum contacts” with that state.  The minimum contacts requirement derives from the due process clause of the United States Constitution.  And the lynchpin of the minimum contacts inquiry is whether the defendant “purposefully avail[ed] itself of the privilege of conducting activities within the forum state” (for example, by directing business toward the state).

In a 4-3 decision, a sharply divided New York Court of Appeals held that an Ohio gun dealer was not amenable to suit in New York in a shooting victim’s personal injury action.  The dealer sold nearly 200 pistols to a buyer in Ohio, allegedly knowing that the buyer might open a gun store in Buffalo, New York.  The buyer never opened the gun store, but he did bring the pistols to Buffalo and sold one of them illegally to a gang member there.  The gang member then used the handgun in the shooting that injured the plaintiff.

The Court of Appeals held that these facts fell “short of demonstrating purposeful availment.”  Despite the buyer’s “stated aspiration to open a gun shop in Buffalo,” the Court found no evidence in the record to support the plaintiff’s theory that, “merely by selling handguns to [the buyer], [the Ohio gun dealer] intended to serve the New York market.”  In short, the gun dealer took no “purposeful action, motivated by the . . . wish to sell [his] products” in New York.

The dissenting judges protested that “[t]he majority’s approach shields gun traffickers and their suppliers from civil liability in New York.”  They emphasized that the Ohio dealer’s activities were “aimed at New York State inasmuch as [the dealer] knew that [the buyer] had ties to Buffalo, and . . . planned on opening a store” there.  On that basis, the dissent would have found that the Ohio dealer was subject to personal jurisdiction in New York (both as a matter of New York law and under the constitutional minimum contacts standard).

Read the court’s full decision here.

EDITORS
Charles Scibetta
PARTNER
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Andreas Frischknecht
PARTNER
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CONTRIBUTORS
Rainbow Willard
ASSOCIATE
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R. Matthew Burke
ASSOCIATE
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New York Commercial Litigation Report Archive | Illustrations by Hank Blaustein

 

This blog post is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

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