Hugel v. Milberg ( 1999 )

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit











No. 98-1653



                            MAX HUGEL,



                      Plaintiff, Appellant,



                                v.



          MILBERG, WEISS, BERSHAD, HYNES & LERACH, LLP,

                  GOLD, BENNETT & CERA, LLP,

       SHAPIRO, HABER & URMY, LLP, AND WOLF, POPPER, LLP,



                     Defendants, Appellees.







          APPEAL FROM THE UNITED STATES DISTRICT COURT



               FOR THE DISTRICT OF NEW HAMPSHIRE



        [Hon. Steven J. McAuliffe, U.S. District Judge]







                             Before



                     Lynch, Circuit Judge,

          Coffin and Campbell, Senior Circuit Judges.









     Andrew D. Dunn with whom Daniel E. Will was on brief for

appellant.

     William L. Chapman with whom Pamela E. Phelan was on brief for

appellees.











April 12, 1999











  COFFIN, Senior Circuit Judge. Appellant Max Hugel

contends that he was defamed by allegations in a complaint filed in

a federal securities fraud lawsuit (the "Presstek litigation") to

which he was not a party.  He brought suit in state court seeking

damages for defamation and legal malpractice.  The defendants, four

law firms, removed the case to federal court and then moved to

dismiss.  Concluding that neither of Hugel's claims was viable, the

district court granted the motion.  The court wrote a thoughtful

opinion recognizing that certain aspects of the defamation claim

were close, but explaining that the privilege given by New

Hampshire law to statements made in judicial proceedings protected

the challenged allegations.  We agree with the court's reasoning on

that issue, and see no need to reiterate its analysis.  We add only

a few brief comments.  We also hold that, because the privilege

bars any civil damages based on protected statements, the district

court properly dismissed the malpractice claim as well.

A. Defamation Claim

  As the district court recognized, New Hampshire law

provides "very broad protection" to statements made in the course

of judicial proceedings.  See Order at 9.  A statement falls

outside the privilege only if it is "'so palpably irrelevant to the

subject matter of the controversy that no reasonable man can doubt

its irrelevancy or impropriety,'" McGranahan v. Dahar, 408 A.2d

121, 126 (N.H. 1979) (citation omitted), and all doubts are to be

resolved in favor of pertinency and application of the privilege,

id. at 127.  It is the breadth of this protection that persuaded

the district court that the privilege applied to all of the

challenged statements, though some of them "approach the protective

limit of the privilege." Order at 8.

     We agree with the district court that certain of the

objectionable statements   in particular, those alleging organized

crime links   were connected only obliquely to the underlying fraud

charges.  These allegations, however, were contained in a

background description of the intimate association between Hugel

and a key Presstek litigation defendant, Robert Howard.  The two

men served together as president and vice president of Howard's

company, Centronics, and they allegedly engaged in reciprocal stock

manipulations for each other's benefit on five occasions.  The

additional allegation that Hugel was involved in organized crime

reasonably may be viewed as more than an attempt to establish

"guilt by association."  In light of Hugel's close relationship

with Howard, the allegation that Hugel had serious criminal ties,

combined with the assertions that Centronics had dealings with Las

Vegas casinos that were linked to organized crime or "frequently

subject to federal organized crime investigations," reinforces an

inference that Howard was involved in ongoing, illegal activities.

Such an inference is relevant to whether Howard knowingly

participated in the securities fraud charged in the Presstek

lawsuit.  Though characterizing Hugel as an organized crime figure

may have been at the margin of relevance, we cannot say that the

statements were so "palpably irrelevant" that, giving them the

benefit of any doubt, they fell outside the privilege.

     We wish to emphasize that, in rejecting appellant's

defamation claim, we do not condone quick resort to reputation-

harming allegations at the far reaches of relevancy.  Here, the

defendants' decision to file an amended complaint deleting all

references to Hugel raises some question as to their level of

certainty regarding the original statements.  Fed. R. Civ. P. 11

(b)(3) imposes a duty on attorneys to certify that, "to the best of

[their] knowledge, information, and belief, formed after an inquiry

reasonable under the circumstances," the allegations and other

factual contentions in a pleading have evidentiary support.

Ensuring the integrity of their representations is a serious

responsibility that attorneys may not take lightly, and we caution

against the deliberate or careless use of unsubstantiated

allegations, notwithstanding their relevance.

     B. Legal Malpractice Claim

     Although the absolute privilege for statements made in

judicial proceedings was recognized in McGranahan in the context of

a defamation claim, the language of that opinion, subsequent case

law, and policy considerations make it clear that the privilege

bars any civil claim for damages based on statements protected by

the privilege.  In McGranahan, the court noted "the general rule .

. . that statements made in the course of judicial proceedings are

absolutely privileged from civil actions, provided they are

pertinent to the subject of the proceeding," 408 A.2d at 124

(emphasis added).  The court reiterated this general statement of

the rule in another defamation case, Pickering v. Frink, 461 A.2d

117, 119 (N.H. 1983), and recently confirmed it in a case raising

claims of, inter alia, negligence, fraud, and intentional

infliction of emotional distress, see Provencher v. Buzzell-Plourde

Ass., 711 A.2d 251, 255 (N.H. 1998) (citing McGranahan and

Pickering).  We thus think it clear that the Supreme Court of New

Hampshire views the privilege to extend to any civil claim arising

from statements made in the course of a judicial proceeding.

     In addition to the explicit language to that effect, the

policy underlying the privilege requires that civil claims other

than for defamation also be extinguished.  The rule's absolute bar

"reflects a determination that the potential harm to an individual

is far outweighed by the need to encourage participants in

litigation, parties, attorneys, and witnesses, to speak freely in

the course of judicial proceedings."  McGranahan, 408 A.2d at 124.

This policy would be nullified if individuals barred from bringing

defamation claims could seek damages under other theories of

liability.  Moreover, as the district court observed, Hugel's

malpractice claim is, in essence, a claim that he was defamed by

allegations in the Presstek complaint.  In these circumstances,

Hugel's malpractice claim unquestionably is barred by the

privilege.  Compare Blanchette v. Cataldo, 734 F.2d 869, 877 (lst

Cir. 1984) (holding that similar privilege under Massachusetts law

bars any civil action based on the statements); Correllas v.

Viveiros, 572 N.E.2d 7, 17-19 (Mass. 1991) ("A privilege which

protected an individual from liability for defamation would be of

little value if the individual were subject to liability under a

different theory of tort.").

     C. Certification

     Hugel moved to certify both the defamation and legal

malpractice issues to the New Hampshire Supreme Court, claiming

that each implicates an unresolved question of state law.  We

disagree that there is any uncertainty warranting certification.

     As discussed in Section A on the defamation issue, the

standard for evaluating statements made during the course of

judicial proceedings is clear: an absolute privilege attaches if

the statements are "pertinent to the subject of the proceeding,"

see McGranahan, 408 A.2d at 124.  Hugel's assertion that

certification is necessary because the New Hampshire Supreme Court

has not had occasion to provide further guidance on the standard

misses the mark.  As the district court recognized, "[w]hen state

law is sufficiently clear to allow [a federal court] to predict its

course, certification is both inappropriate and an unwarranted

burden on the state court."  Order at 11 n.2 (citing Armacost v.

Amica Mut. Ins. Co., 11 F.3d 267, 269 (lst Cir. 1993)).  See alsoMarbucco Corp. v. Suffolk Construction Co., 165 F.3d 103, 105 (lst

Cir. 1999) ("It is inappropriate . . . to use certification 'when

the course state courts would take is reasonably clear.'") (quoting

Porter v. Nutter, 913 F.2d 37, 41 n.4 (lst Cir. 1990)). The New

Hampshire court cannot be charged with failure to make its standard

reasonably clear.  Although we may err in applying that standard,

we act within the range of discretion entrusted to us.

     The malpractice issue as we have resolved it involves a

similarly straightforward application of unambiguous state case

law.  There is no need for certification.

     Accordingly, the judgment of the district court is

affirmed.