Hugel v. Milberg ( 1999 )


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  • 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.