Boice v. Unisys Corp.

• Decision Date: 23 March 1995
• Docket Number: No. 939,D,939
• Citation: 50 F.3d 1145
• Parties: Eugene BOICE, John Di Palermo, and Robert Wahrman, Plaintiffs-Appellees, v. UNISYS CORPORATION, Defendant-Appellant. ocket 94-7682.
• Court: U.S. Court of Appeals — Second Circuit

Page 1145

50 F.3d 1145

Eugene BOICE, John Di Palermo, and Robert Wahrman Plaintiffs-Appellees, v. UNISYS CORPORATION, Defendant-Appellant.

No. 939, Docket 94-7682.

United States Court of Appeals Second Circuit.

Argued Jan. 31, 1995.

Decided March 23, 1995.

Lawrence B. Pedowitz, New York City (Carol Miller, Wachtell, Lipton, Rosen & Katz, of counsel), for defendant-appellant.

Jean M. Mahserjian, Clifton Park, for plaintiffs-appellees.

Before: MESKILL, McLAUGHLIN, and JACOBS, Circuit Judges.

McLAUGHLIN, Circuit Judge:

On this appeal, we must decide whether a person, who in response to a subpoena turns over documents to a government official, knowing that the documents contain libelous statements, enjoys an immunity from a suit for defamation. If so, is the immunity absolute or qualified?

The district court (Con. G. Cholakis, Judge ) held that such a person was not absolutely immune from defamation suits arising out of the surrender of documents under a subpoena from the New York State Inspector General. The court concluded that Unisys enjoyed only a qualified privilege and could not avail itself of the absolute privilege because the Inspector General did not act in a judicial or quasi-judicial capacity.

We find that New York has long accorded an absolute privilege from defamation suits to those who produce evidence under compulsion of a governmental subpoena. Thus, we reverse.

BACKGROUND

On review of this denial of a motion to dismiss, we accept as true all the facts pled in the plaintiffs' complaint.

The plaintiffs, Eugene Boice, John DiPalermo, and Robert Wahrman, were employed by the New York State Department of Social Services. The defendant, Unisys Corporation, is a vendor of computer equipment and it does business with the Department of Social Services.

Between 1988 and 1991, several Unisys employees submitted hundreds of phony expense vouchers to Unisys's accounting department, seeking "reimbursement" for expenses that were never incurred. These unscrupulous employees falsely claimed in the vouchers that they had entertained the plaintiffs on a near daily basis, ostensibly to drum up business.

In September 1992, the New York State Inspector General began an inquiry into the entertainment of state employees. See N.Y. State E.O. No. 103 (Oct. 4, 1987) (granting the Inspector General power to investigate fraud, abuse and corruption in state agencies). During the investigation, the Inspector General served a subpoena upon Unisys, requiring that a Unisys official personally appear at a private hearing, and bring with him copies of "all expense reports ... relating to ... entertainment expenses provided to New York State employees from January 1, 1988 to the present." The subpoena contained the usual language that a personal appearance was not necessary if Unisys sent the documents by mail. It warned, however, that failure to comply would make Unisys "liable to the penalties prescribed by law."

Before Unisys produced the documents, a Unisys employee tipped off plaintiff DiPalermo about the subpoena and the falsified vouchers. DiPalermo promptly called Unisys and demanded that it tell the Inspector General that the plaintiffs' names had been falsely placed on the vouchers. Unisys assured DiPalermo that it would send the Inspector General a letter explaining that the vouchers were phony. Despite its promise, Unisys turned the documents over to the Inspector General (in lieu of giving testimony) The plaintiffs sued Unisys in New York Supreme Court claiming civil rights infringement, intentional infliction of emotional distress, and defamation. On this last claim, the plaintiffs alleged that Unisys libeled them by producing the vouchers knowing that they falsely named plaintiffs. The complaint further alleged that Unisys refused to explain that the vouchers were falsified because it was trying to cover up infractions that Unisys itself had committed.

without any accompanying explanation. As a result, the Inspector General began investigating the plaintiffs.

Unisys removed the action to the United States District Court for the Northern District of New York based on diversity jurisdiction. Unisys then moved to dismiss the entire complaint. Regarding the defamation claim, Unisys asserted that it enjoyed an absolute privilege from suit for defamation arising out of the documents produced to the Inspector General because: (1) the Inspector General's proceeding was quasi-judicial; and (2) the document production was compelled by subpoena.

The district judge granted Unisys's motion in part, and dismissed the civil rights and emotional distress claims. It refused to dismiss the defamation claim, however, ruling that Unisys's privilege not to be sued for defamation was qualified only, and not absolute. The judge found that the absolute privilege was not available because the Inspector General's investigation did not have enough quasi-judicial attributes to prevent abuse of the privilege. In reaching this conclusion, the district judge noted that: (1) the Inspector General has no remedial enforcement powers of his own; and (2) the investigation lacked procedural safeguards such as the right to cross-examine and the ability to appeal determinations of fact. The court did not address Unisys's compelled evidence argument.

DISCUSSION

I. Appellate Jurisdiction

There is a question whether we have jurisdiction to review the district court's interlocutory order. Federal appellate jurisdiction exists over certain important interlocutory orders that regard matters collateral to the claims asserted at trial. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225, 93 L.Ed. 1528 (1949). Thus, we may review an interlocutory order "if it (1) conclusively determines the question presented, (2) resolves an important issue that is completely collateral to the merits, and (3) concerns a right that would be effectively unreviewable after a final judgment on the merits." In re Pan Am Corp., 16 F.3d 513, 515 (2d Cir.1994) (citing Gulfstream v. Mayacamas Corp., 485 U.S. 271, 276, 108 S.Ct. 1133, 1136, 99 L.Ed.2d 296 (1988)); see Swint v. Chambers County Comm'n, --- U.S. ----, ----, 115 S.Ct. 1203, 1208, 131 L.Ed.2d 60 (1995).

We find that the denial of a motion to dismiss for absolute privilege is immediately appealable. The absolute privilege assures a citizen that he cannot be sued for defamation on the basis of his response to the subpoena. Indeed, immunity and privilege serve the same purpose: to encourage the possessor to execute his responsibilities fully, without fear of being sued later for civil damages. Compare Mitchell v. Forsyth, 472 U.S. 511, 525, 105 S.Ct. 2806, 2814, 86 L.Ed.2d 411 (1985) ("[T]he essence of absolute immunity is its possessor's entitlement not to have to answer for his conduct in a civil damages action."); with Briscoe v. LaHue, 460 U.S. 325, 333, 103 S.Ct. 1108, 1114, 75 L.Ed.2d 96 (1983) ("A witness's apprehension of subsequent damages liability might induce ... self-censorship.").

Because the immunity is designed to insulate an individual from litigation, an order denying total immunity is conclusive, and meets the first Gulfstream prong. The second prong is met because the existence of absolute immunity, a privilege against suit, is entirely separate from the merits of the claim. See Mitchell, 472 U.S. at 528-29, 105 S.Ct. at 2816-17 ("[T]he Court has recognized that a question of immunity is separate from the merits of the underlying action for purposes of the Cohen test."). And, the third prong is satisfied because the "essence" of the immunity is a right not to go to trial, see id. at 525, 105 S.Ct. at 2814, and it would be

toothless if the holder could not obtain interlocutory review. See generally Digital Equipment Corp. v. Desktop Direct, Inc., --- U.S. ----, ----, 114 S.Ct. 1992, 1998, 128 L.Ed.2d 842 (1994) ("A fully litigated case can no more be untried than the law's proverbial bell can be unrung....").

II. Absolute Versus Qualified Privilege

Public policy requires that certain communications, though defamatory, are privileged, and may not serve as the basis for a defamation action. See Park Knoll Assocs. v. Schmidt, 59 N.Y.2d 205, 208, 464 N.Y.S.2d 424, 451 N.E.2d 182 (1983). Two types of privileges are recognized: qualified and absolute. The difference between the two is relevant only when the party asserting the privilege has acted in bad faith. The holder of a qualified privilege may be sued for defamation if he published the statements with malice. See Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir.1994); Stukuls v. State of New York, 42 N.Y.2d 272, 275, 397 N.Y.S.2d 740, 366 N.E.2d 829 (1977). One who enjoys the absolute privilege, in contrast, may not be sued no matter how malicious his state of mind. See Park Knoll Assocs., 59 N.Y.2d at 208-09, 464 N.Y.S.2d 424, 451 N.E.2d 182.

Vintage case law demonstrates that New York bestows an absolute privilege upon those whom the government compels to give evidence. See, e.g., Hirshfield v. Henley, 228 N.Y. 346, 349, 127 N.E. 252 (1920) (witness who gives compelled testimony to Commissioner of Accounts enjoys same privileges as one who testifies in court); McLaughlin v. Charles, 14 N.Y.S. 608, 610 (3d Dep't 1891) ("The witness testified under compulsion, and he is entitled to the protection that what he says as a witness shall not be a cause of injury to him."); Newfield v. Copperman, 42 N.Y.Super.Ct. 302, 305 (1877) (witness compelled by subpoena to make statement to fire marshal was absolutely privileged not to be sued for defamation). See generally Bio/Basics Int'l Corp. v. Ortho Pharm. Corp., 545 F.Supp. 1106, 1116 (S.D.N.Y.1982) (New York confers the absolute privilege upon any witness who testifies before a legislative committee with the power to issue a subpoena).

In Hirshfield, for example, the New York Court of Appeals held that a witness subpoenaed by the New York City Commissioner of...