Few will dispute that D&O litigation in the HOA context is often emotionally charged. Defamation cases, in particular, are perhaps the most volatile of all. Why? Because defamation, by definition, is a claim based on damage to one’s reputation. When one’s reputation or integrity is harmed, it is often perceived as irreparable by the victim, resulting in the mantra: “As a matter of principle, I’ve got to sue in order to clear my good name.”

From a defense perspective, this type of D&O claim presents numerous challenges. While there are decades of legal precedent involving defamation, only in recent years, courts have begun to define the parameters of a defamation in the HOA context. There are countless nuances, and it is often difficult to predict how judges at both the trial court and appellate level will rule. There are, of course, basic First Amendment protections, enunciated in a variety of U.S. Supreme Court cases that, in some situations, may make recovery very difficult even for victims of the most egregious defamatory statements. Yet the decisions from many state jurisdictions often reflect differing interpretations of the Supreme Court cases as applied in the HOA context.

There are many basic strategies and legal defenses that may apply irrespective of the state jurisdiction in which the defamation case has been filed. Consider, for example, the following:

Early Resolution/Mediation. Mediation is especially beneficial in defamation litigation. Lawsuits are often filed as a knee-jerk reaction to an offensive statement(s). Plaintiffs often fail to adequately consider the potential cost of litigation. More important, they may be unaware that much of their own personal background and private affairs may become the subject of “discovery” or investigation by the defense. For example, in order to negate the claims that the plaintiff’s reputation has actually been harmed, intense scrutiny of employment, medical and psychological history of the plaintiff may be permitted. Likewise, defendants (e.g. individual board members, managers, etc.) may be unaware of the impact the litigation will have on their personal lives, interference with their work, etc. as well as the stigma of simply being sued. An effective mediator, at the inception of the litigation, may be able to address the intense emotional views of the parties, evaluate the relative strengths and weaknesses and broker a prompt resolution.

Is the Statement Defamatory? Not surprisingly, many HOA defamation cases arise from statements such as: Joe, the manager, “got a kickback” or “Joe mismanaged our money” or Joe is “stupid and uneducated” or Mary, the owner of a management company “has no prior management experience.” If the court finds that the alleged statement was merely a statement of “opinion” and not a statement of “fact,” the plaintiff may have no remedy. The accusation that Mary is a “lousy manager” is more a statement of opinion, while Mary has “no prior experience” is a statement of fact. Also, statements intended as humor or parody and even caricatures may be defamatory. Yet some hate filled statements (e.g. derogatory statements about one’s race or religion) in some state jurisdictions, constitute non-actionable “name calling.”

Legal Privileges. Absolute and Conditional. Many statements, even the most offensive may be “protected” (i.e. cannot be the basis of a lawsuit), as result of various legal“ privileges.” For example, statements made in the course of a lawsuit (e.g. in court or in a deposition) are “absolutely privileged” which means that the plaintiff may not recover irrespective of the falsity or viciousness of the statement. In fact, statements made in “anticipation” of litigation may also be protected by this so-called “litigation privilege.” However, case authority in various jurisdictions has not clearly defined at what point one can confidently say litigation is "anticipated.” Given the evolving nature of this defense, one should not rely heavily on out of state authority. The statutory and case law of the particular state in which the litigation is pending must be carefully scrutinized.

Some statements, even if false or defamatory, may also be “conditionally privileged.” The “common interest” privilege is a type of “conditional privilege.” This privilege will surely be the subject of more defamation cases in the HOA context. It may provide protection for members who make statements which, while false, were made in good faith with the intent of protecting the association community.

Constitutional Privileges. Among the most fascinating legal developments in this area have evolved from U.S. Supreme Court cases dealing with “public or quasi public figures.” Briefly, where one is considered a “public figure” he or she may not recover damages for defamation unless the statement was made with malice (i.e. made with knowledge of the falsity or with reckless disregard of the truth). This defense has also been extended to “limited” public figures. In the HOA context, there is now authority in some (but not all) jurisdictions for the proposition that the “quasi public” nature of an HOA will support a ruling that certain plaintiffs (e.g. board presidents, managers, etc.) are “limited public figures” which may thereby create an additional obstacle for recovery in defamation cases. Judicial recognition that an individual affiliated with a HOA, may in certain circumstances, be a “quasi public figure” is thus an extremely important legal development.

Conclusion. Claims of defamation will be no stranger to HOA’s in the future. The challenge will be to resolve such cases as promptly as possible. Mediation will often be the most effective means of doing so especially where emotions are so intense. Legal challenges also continue to create new precedent which will help define the scope of liability. Also, out of state legal authority while not binding, may have persuasive value in those jurisdictions where a particular issue has not been decided.

This article was written by Leonard Siegel, Kulick, Gottesman, Mouton & Siegel, LLP.