Finkelstein v. HEMISPHERX BIOPHARMA, 99-CV-338.

Citation774 A.2d 332
Decision Date14 June 2001
Docket NumberNo. 99-CV-338.,99-CV-338.
CourtCourt of Appeals of Columbia District
PartiesFINKELSTEIN, THOMPSON & LOUGHRAN and Donald J. Enright, Appellants, v. HEMISPHERX BIOPHARMA, INC., Appellee.

Steven R. Becker, with whom Pamela A. Bresnahan was on the brief, Washington, DC, for appellants.

Conrad M. Shumadine, of the bar of the State of Virginia, pro hac vice, with whom Eugene J. Comey, Sharon M. Schroer, Elizabeth A. Wieser, Washington, DC, Gary A. Bryant, and Wendy E. Giberti were on the brief, for appellee.

Before TERRY, RUIZ and GLICKMAN, Associate Judges.

GLICKMAN, Associate Judge:

Appellee Hemispherx Biopharma, Inc. ("Hemispherx") sued appellants Donald J. Enright and his law firm Finkelstein, Thompson & Loughran, claiming that Enright slandered it when he solicited one of Hemispherx's shareholders as a client in order to bring a potential shareholders' derivative or class action lawsuit against Hemispherx. Invoking the absolute privilege recognized in this jurisdiction for defamatory statements by an attorney that are preliminary to a proposed judicial proceeding, appellants moved to dismiss the defamation count of the complaint. The trial court denied the requested relief, and appellants filed the instant interlocutory appeal.

The principal issues we address are whether we have jurisdiction, and if so whether the so-called "judicial proceedings privilege" may extend to statements made by an attorney in an initial consultation with a prospective client from whom the attorney is "soliciting" employment. We hold that we do have jurisdiction, because the denial of a claim of absolute immunity from suit is immediately appealable under the collateral order doctrine. We further hold that the judicial proceedings privilege is available, if its requirements are met, to cover statements made by an attorney to a prospective client in a pre-retention meeting.

Applying the latter holding to the complaint in this case, we conclude that on the facts as alleged, Enright's statements to Hemispherx's shareholder were absolutely privileged as a matter of law. Accordingly, we reverse the denial of appellants' motion to dismiss.


As alleged in its complaint,1 Hemispherx is a publicly traded corporation engaged in experimental drug research and development. The company's principal focus has been the clinical testing and promotion of an anti-viral compound known as Ampligen for the possible treatment of chronic fatigue syndrome, hepatitis and other serious medical conditions. Preliminary results allegedly have been encouraging, and the FDA has granted Ampligen investigative new drug status.

In September 1998, however, an analyst named Manuel P. Asensio published over the Internet a "strong sell recommendation" for Hemispherx's common stock, along with a research report that severely criticized the company and its Chief Executive Officer, Dr. William A. Carter. According to the complaint, the report was libelous and contained numerous misstatements and omissions of material fact. Nonetheless, Asensio's comments were picked up and reported in the September 28, 1998, issue of Business Week. Within a matter of days, the price of Hemispherx's stock, which was traded on the American Stock Exchange, dropped from around $13 per share to approximately $5 per share.2

Prior to September 28, 1998, shareholders posted messages concerning Hemispherx on an electronic bulletin board devoted to the company that was maintained on the "Yahoo!" Internet site. On or about that date, the complaint alleges, appellants Finkelstein, Thompson & Loughran, a Washington, D.C. law firm (hereinafter, "FTL"), and Donald J. Enright, an attorney associated with that firm, sent an unsolicited electronic mail message to a shareholder (identified only as "Shareholder A") who had previously posted a message on the Hemispherx bulletin board. The message to Shareholder A stated that FTL "handles plaintiffs' class action law suits in the securities field" and that it is "investigating Hemispherx Biopharma Inc. at this time." The message invited Shareholder A to contact Enright if he was "interested in discussing this matter further."

Shareholder A, who was not a client of Enright or FTL, apparently was interested in discussing "this matter" with them, for he telephoned Enright in response to the e-mail message and spoke with him for nearly an hour. The following day, Shareholder A sent Hemispherx a letter recounting what Enright said to him, together with contemporaneous notes of the conversation. Shareholder A also transmitted a report to the Hemispherx bulletin board at Yahoo!

According to Shareholder A, Enright said that he "specializes in finding `bogus' companies to sue." He had been in communication with Asensio, and he claimed that he agreed with Asensio's report on Hemispherx except for minor details. Enright said that Ampligen was "a drug looking for a disease." It had "been around" for over ten years, and had been considered as a possible treatment for one disease after another; this, Enright said, "was no way a `real' pharmaceutical company went about pursuing new drug research." Enright reportedly added that Hemispherx had no proprietary rights to Ampligen, and that therefore anyone would be able to make and sell the drug after it received FDA approval. Further, Enright allegedly stated that Dr. Carter was less than trustworthy,3 and that he and other Hemispherx executives might be transferring money into secret accounts and passing off warrants so as to leave a shell company for the shareholders. Enright suggested that his law firm could recover the shareholders' losses by pursuing any directors' and officers' liability insurance that Hemispherx had in place.

The complaint claims that Enright's statements that Hemispherx had no proprietary rights in Ampligen, and that Carter and other executives might be secreting money and issuing warrants to cheat the shareholders by leaving them with a shell company, were false and misleading. The first count of the complaint charges appellants with defamation; and it alleges that "Enright's statements were made with malice, in that they were made with knowledge of or with reckless disregard for the truth." A second count charges that Enright also violated Rule 7.1(b) of the District of Columbia Rules of Professional Conduct, by making materially false and misleading statements in soliciting Shareholder A as a potential client. The complaint seeks an order enjoining FTL and Enright from soliciting its shareholders as their clients in class or derivative litigation based on false and misleading statements, and an award of compensatory damages "in excess of $5,000."

Appellants moved to dismiss the complaint pursuant to Super. Ct. Civ. R. 12(b)(6). They sought dismissal of the defamation count on the principal ground that Enright's statements were absolutely privileged as statements preliminary to a proposed judicial proceeding. In opposition, Hemispherx argued that in the District of Columbia the judicial proceedings privilege had never been held to protect statements made by an attorney in the course of soliciting a client, and that the privilege is properly limited to "statements made in the regular course of an existing or imminent judicial proceeding ... in which the attorney is acting as counsel."4

The trial court denied the motion to dismiss the defamation count without opinion. FTL and Enright promptly noted this appeal.5


Along with the overwhelming majority of the States, the District of Columbia has long recognized an absolute privilege for statements made preliminary to, or in the course of, a judicial proceeding, so long as the statements bear some relation to the proceeding. We have adopted the articulation of the so-called "judicial proceedings" privilege that is set forth in § 586 of the RESTATEMENT (SECOND) OF TORTS (1977):

An attorney at law is absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding, or in the institution of, or during the course and as a part of, a judicial proceeding in which he participates as counsel, if it has some relation to the proceeding.

See McBride v. Pizza Hut, Inc., 658 A.2d 205, 207-08 (D.C.1995)

; see also Arneja v. Gildar, 541 A.2d 621, 623 (D.C.1988) ("[f]or the absolute immunity of the privilege to apply, two requirements must be satisfied: (1) the statement must have been made in the course of or preliminary to a judicial proceeding; and (2) the statement must be related in some way to the underlying proceeding"); Mohler v. Houston, 356 A.2d 646, 647 (D.C.1976) (per curiam) (citing § 586 of the 1938 version of the Restatement of Torts); Brown v. Collins, 131 U.S.App. D.C. 68, 71, 402 F.2d 209, 212 (1968) (noting that the Restatement of Torts states "the American rule that no defamation action may be grounded on ... statements preliminary to or in the course of a judicial proceeding so long as the defamatory matter `has some relation' — a standard broader than legal relevance — to the proceeding").

The judicial proceedings privilege is "based upon a public policy of securing to attorneys as officers of the court the utmost freedom in their efforts to secure justice for their clients." RESTATEMENT (SECOND) OF TORTS § 586 comment a. To that end, the privilege is absolute rather than qualified: it "protects the attorney from liability in an action for defamation irrespective of his purpose in publishing the defamatory matter, his belief in its truth, or even his knowledge of its falsity." Id. The intent of the privilege is not, of course, to encourage lawyers to defame, nor to protect lawyers who do so in bad faith, though in some instances that may be a regrettable (indeed, a deplorable) side effect of recognizing the existence of the privilege. Rather, the intent of the privilege is to free honorable lawyers to render candid...

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