Lawyer Defaming Other Lawyer Case Goes Forward

Lawyer's Claim She Was Defamed by Another Attorney Goes Forward
The New York Law Journal by Mark Hamblett  -  May 21, 2012

An attorney who warned against what she says was an art gallery's wrongful assertion of copyright has cleared a hurdle on her claim she was defamed when a gallery trustee, a fellow lawyer, denigrated her legal advice.  Kerry Connolly, of Manhattan, claims her reputation as an attorney was damaged when Lelia Martin Wood-Smith complained that Connolly's advice that artists retain the copyright in their sold works was incorrect and cost the trust overseeing the Allan Stone Gallery "hundreds of thousands of dollars."  Wood-Smith moved to dismiss on a number of grounds, including that her comments did not demonstrate actual malice.  But Magistrate Judge James Francis issued a report and recommendation for Southern District Judge Deborah Batts, saying the defamation case should go forward in Connolly v. Wood-Smith, 11 Civ. 8801.  When renowned art dealer and collector Allan Stone died in 2006, his interest in the gallery was vested in the C.S. Marital Trust, which is controlled by Wood-Smith, of Florida, in her role as independent trustee.  Stone's daughter, Claudia Stone, was the director of the gallery.

In 2010, Wood-Smith instructed Claudia Stone to add a legend to invoices for the sale of two paintings indicating that the gallery still retained the copyright to the paintings.  Stone sought Connolly's advice, and the answer was that the artists rights organization that represented the painter insisted the artist retained the copyright after sale. Even if that opinion was incorrect, Connolly relayed, and the paintings had entered the public domain, it would be a violation of the Copyright Act for the gallery to assert it retained the copyright.  Connolly drafted two memoranda for the gallery on the subject of an artist's retention of copyright and, on March 8, 2011, wrote an e-mail to Wood-Smith raising other concerns about false assertion of copyright under state law.  When Stone expressed opposition to some of Wood-Smith's actions, she was fired as director of the gallery.  Connolly submitted invoices for her legal work, but she was never paid and she filed suit on Sept. 28, 2011, to obtain her fees.  After she filed suit, Connolly was informed by Stone that Wood-Smith had circulated an e-mail to members of the Stone family saying Connolly's "ongoing advice on copyright 'was incorrect' and 'had cost the Trust hundreds of thousands of dollars.'"  In her amended complaint, Connolly charged Wood-Smith was motivated by "malice and spite," when she made the statements. Connolly also said Wood-Smith retaliated against her because her position on copyright undermined Wood-Smith, who was trying to hang on to her position as independent trustee—a position that was the subject of litigation in Westchester County Surrogate's Court.  On Nov. 3, Wood-Smith's attorney, Laurie Berke-Weiss, sent an e-mail to Connolly saying the gallery wanted to work out an agreement on the matter and pay her fee plus interest.  But on Dec. 1, Berke-Weiss informed Connolly the gallery was going to charge her with malpractice.

In addition to defamation, Connolly asserted a claim under the Stored Communications Act, because Wood-Smith persuaded the administrator of the gallery's e-mail system to provide Wood-Smith with the passwords to all gallery e-mail accounts, enabling her to read all e-mails, which Connolly claimed was a violation of the attorney-client privilege.  Magistrate Judge Francis recommended the Stored Communications Act claim be dismissed.  But the claim in defamation should go forward, he said in his 35-page report, as Connolly has adequately pleaded that the e-mail was defamatory in that Wood-Smith's comments "disparaged" Connolly in her profession and "impugned" her competence.  "Furthermore, because the statements qualify as defamation per se, the plaintiff need not prove special damages to prevail on her claim," he said.  Wood-Smith had claimed the "single instance" defense to the defamation claim, which holds that where a publication charges that a professional person committed a "single error in judgment," the law presumes that their reputation is not damaged.  Francis, however, noted the doctrine has been read narrowly in recent years and has been applied in cases of errors, mistakes or lapses in judgment. Here, he said, it was "inaccurate" for Wood-Smith to claim, in a memo to the court, that Connolly "merely accuses [her] of saying that [plaintiff] gave incorrect advice on a particular matter."  "The Amended Complaint alleges that the defendant characterized the plaintiff's 'ongoing legal advice' as incorrect, which, by its terms, implies more than a 'single dereliction,'" Francis said. "Moreover, the pleadings refer to three occasions on which Ms. Connolly provided the advice that purportedly 'cost the Trust hundreds of thousands of dollars.'"  Francis then knocked down Wood-Smith's argument that her statements were protected as expressions of opinion. "The statements at issue in this case are unaccompanied by a recitation of the facts on which they are based, and as alleged, 'imply the existence of undisclosed underlying facts,'" he said, quoting the New York Court of Appeals in Gross v. New York Times, 82 N.Y.2d 146 (1993). "A reasonable reader would infer that Ms. Wood-Smith 'knows certain facts[] unknown to the audience'—specifically, why the plaintiff's legal advice was incorrect and how it cost the Trust hundreds of thousands of dollars—which support her statements and are detrimental to Ms. Connolly."  Accepting Connolly's assertions to be true for purposes of the motion, he said "the statements were not protected expressions of 'pure opinion.'"  Finally, the court rejected Wood-Smith's assertion of qualified privilege due to her role as independent trustee.  Connolly, he said, "has pled sufficient facts from which it may be inferred that Ms. Wood-Smith published the alleged statements with actual malice, including that: the plaintiff proffered 'legal advice [that] directly questioned and challenged a fraudulent plan [to assert copyright over paintings] that [the defendant] proposed to implement.'"  Berke-Weiss and Jessica Tischler of Berke-Weiss & Pechman represent Wood-Smith. Hung Ta represents Connolly.  Mark Hamblett can be contacted at mhamblett@alm.com.