New York Defamation Claim Deemed Frivolous Based Upon Admission in Assurance Agreement
June 3, 2008
Colleen A. Sorrell- New York
A federal judge in Upstate New York decided to award sanctions against the plaintiff’s counsel for asserting and then pursuing a frivolous defamation claim.
Plaintiff Frederick Geiger operated a towing service, which was party to a contract with the town of Greece, New York. The contract provided that Geiger’s company would receive towing and service assignments from the 911 dispatcher, and that the plaintiff could charge fees for towing and storage under a specified fee schedule.
A few years into the relationship, a town citizen complained that she had been overcharged for towing service. The town investigated, determined that the plaintiff had overcharged and then removed the plaintiff from its list of tow truck operators. In addition, the town asked the New York state attorney general to investigate. The attorney general’s investigation concluded that 126 consumers had been overcharged by the plaintiff. Based upon these findings, the plaintiff entered into an assurance agreement with the attorney general, with the plaintiff’s counsel participating in the negotiations. This agreement settled the claims and avoided a statutory proceeding. Under the agreement, the plaintiff paid $6,336.70 as restitution to the consumers and $4,000 in penalties. In the agreement, the plaintiff admitted that he had charged consumers fees in excess of the rates established in the towing agreement and also charged additional unauthorized fees. Importantly, the assurance agreement recited that by these actions, the plaintiff “engaged in deceptive acts and practices. These actions also constituted fraud under [New York law].”
Two months after the assurance agreement was signed, the attorney general issued a press release announcing the settlement terms, the 126 refunds to be made and that additional refunds would be made to consumers who file legitimate requests within the next month. The following day, Gannett’s Rochester Democrat and Chronicle newspaper published a news story, “Towing service to repay charges,” which contained the statement that the plaintiff “routinely ripped off his customers.” That same day, the plaintiff brought a defamation action against the newspaper in the U.S. District Court for the Western District of New York, alleging that the article wrongly described the assurance agreement because, according to the plaintiff’s counsel, the plaintiff had not admitted any wrongdoing.
Gannett moved to dismiss the claim on grounds that the article was a fair and true reporting of an official proceeding, and mirrored the attorney general’s press release. The court agreed with Gannett. It determined that the attorney general’s investigation was an official proceeding, that in the assurance agreement the plaintiff admitted committing 126 instances of fraud and dishonesty, and that the newspaper article was a fair and true report of the proceeding and was therefore privileged under New York law. The court dismissed the lawsuit, and subsequently denied the plaintiff’s motion for reconsideration.
Gannett filed a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure, on grounds that the plaintiff’s counsel had filed a frivolous defamation claim. On March 17, 2008, District Court Judge Siragusa granted the motion, finding that the assurance agreement was clearly an admission of guilt by the plaintiff, and observing that “Plaintiff’s counsel obstinately refuse to admit that the Assurance says what it says.” The court sanctioned the plaintiff’s counsel by awarding Gannett attorneys’ fees of $5,000.
For more information, email Colleen A. Sorrell at colleen.sorrell@hklaw.com or call toll free, 1.888.688.8500.