United States: Federal Court Allows Mass Email Defamation Claim To Proceed

In a lawsuit combining the financial fallout of the decline of traditional telephone directories with the perils of mass company emails, the Eastern District of New York ruled late last week that a former executive's defamation claim based on an email sent to thousands of employees regarding his termination can go forward.

The case, McCusker v. Hibu PLC et al., which originated in Pennsylvania state court but has since been transferred to federal court in New York, involves a variety of claims by James McCusker, a former President and CEO of one of the defendants, stemming from his termination in 2013. According the Complaint (accessible here), hibu (formerly Yellowbook Inc., publisher of the Yellow Pages) suffered extended financial struggles as the Internet led to a steep decline in the profitability of traditional print directories. McCusker claims that he was terminated after he voiced dissent to strategies and conduct relating to attempts by hibu to change the company's direction. He further claims that the company fabricated a cause for his termination in order to avoid paying him contractual severance benefits.

"To add insult to injury," McCusker alleged, on the day of his termination, defendant Mike Pocock, CEO of defendant hibu PLC, sent an email to nearly 5,000 hibu employees, stating that McCusker had been dismissed "following a thorough investigation into [his] conduct . . . that the Company considered to be disloyal and against the interests of its employees and other stakeholders." The email also stated that the company was "considering what further action to take, including legal proceedings . . . to protect its interests." The email was republished by hibu employees on various online forums and blogs.

In denying Defendants' motion to dismiss McCusker's defamation claim, the Court found that, under Pennsylvania law, the email could have defamatory meaning because it gave the impression that McCusker had engaged in unethical, possibly criminal, conduct. The Court further said that whether or not the statements in the email were true was not appropriately addressed on a motion to dismiss.

The Court agreed with Defendants that the email appeared to be conditionally privileged under Pennsylvania law as a communication among employers regarding an employee's discipline and termination. Such a privilege would normally mean that a statement could not be the basis of a defamation claim, but those protections can be removed if the privilege is abused. Here, the Court found that McCusker had raised an issue as to whether the publication of the email was abusive of that privilege, taking specific note that the email went to thousands of hibu employees, not just senior management.

The Court also disagreed with Defendants' assertion that the email's statements were mere opinions. Pointing to case law that an opinion can still be actionable if reasonably understood to be based on undisclosed defamatory facts justifying that opinion, the Court found that, read objectively, the email implied that McCusker had engaged in unscrupulous, corrupt, possibly illegal conduct, and that "there is more to the story than what is being conveyed to employees."

And so, there is more to the story of McCusker's defamation claim, too, as, having defeated the motion to dismiss, it will now move into discovery.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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