Continue Caution When Speaking of Former Employees—Even During Litigation!

Nevada has for a long time recognized an absolute privilege for defamatory statements made during the course of judicial and quasi-judicial proceedings.  That is why an employer can safely say things about a former employee which might otherwise be defamatory in court papers, unemployment claim responses or in a deposition or on the witness stand.  That privilege applies even when the motives behind the statements are malicious and made with knowledge of their falsity.

Therefore the law provides strong protection for employers who make statements in court or administrative proceedings.  But what about while the court case is pending—can the employer say those things directly to the press before they are even written in court papers or uttered in a deposition or from the witness stand?  Before the Nevada Supreme Court’s May 30, 2014 ruling in Jacobs vs. Adelson the answer would be “maybe”.

Now we know that there is no absolute litigation privilege for statements made directly to the media—even where those statements are likely to soon be made in a pending court proceeding.  Former Las Vegas Sands (LVSC) employee Steven Jacobs was suing LVSC and Sands China Ltd. for wrongful termination.  Jacobs’ court complaint contained a number of unflattering allegations about Sheldon Adelson.

While the Court was considering a motion to dismiss that had been filed by LVSC and Sands China the Wall Street Journal published an online article about the case.  According to the article, Mr. Adelson provided the paper with an email response which contained (not surprisingly) some unflattering statements about Jacobs and his claims.

Jacobs then amends his lawsuit to add a defamation claim against Mr. Adelson personally based on his alleged statements to the Wall Street Journal.  I’m guessing that Mr. Adelson’s lawyers felt relatively confident, (as would I and the three dissenting members of the Nevada Supreme Court), that the defamation claim would be barred by the absolute litigation privilege.  The respected and level-headed trial judge Elizabeth Gonzalez also agreed that the privilege applied and summarily dismissed the claim.

The Nevada Supreme Court in a 4-3 ruling held that because the statement was made to the media and the media was “neither a party to the lawsuit nor inextricably intertwined with the lawsuit” there was no absolute privilege.  In other words the media did not have an “interest in the outcome” of the case— something the court requires before applying the privilege.

The case was sent back to the trial court.  Of course this doesn’t mean that Jacobs wins.  Truth is always a complete defense and there is a type of qualified privilege and other defenses that could be raised.  But those things still subject the speaker to defend a long and expensive court case—and to think twice about speaking freely during the litigation process—just the things the absolute privilege was supposed to help folks avoid.

Just think about the absurdity of this result:  had Mr. Adelson first filed an affidavit in court containing the allegedly defamatory statements in it and then in response to the Wall Street Journal article sent the paper a link to the document or a copy of the document itself he would have been home free: bingo-absolute privilege! The Culinary Union made that law in a case filed against it by another casino magnate.

Justice Michael Cherry in a well-written dissent recognizes that we are in a era of an unrelenting 24 hour news cycle:

Through the media’s access to the judicial process, Jacobs was allowed to tell his side of the story with impunity. To say that Adelson must wait to respond through a legal channel is absurd. There is no reason to constrain Adelson’s response to future legal briefs and motions. It makes no difference if Adelson’s statements were made in his legal briefs or directly to the media—the result is the same, widespread dissemination to the public. Adelson should not be subject to defamation claims in this instance merely based on the platform that he used.

Ok so I’m in the company of three very smart Supreme Court justices when I say the case was wrongly decided.  But employers need to live with this new the law and here are some reminders:

• Continue to be detailed and honest in administrative filings and testimony with the Courts, the Employment Security Department and other government agencies.
• Don’t discuss employee or former employee issues with other employees unless they have a business need to know.
• Respond to employment verification/reference requests only with dates of employment and positions held.
• When an employee or former employee has filed a court case against the company do not make statements to the press about the employee or former employee.  Once you have filed papers with the court you (or preferably your attorney) should direct the media to your court filings.

Of course it sometimes is bad business to remain mute in the face of scandalous allegations by a disgruntled former employee—whether as part of a lawsuit or in some other context.  Get legal counsel involved right away—there are several low risk ways to publicly respond and you should do so.