Fischkoff v. Iovance Biotherapeutics, Inc.
339 F. Supp. 3d 383 (2018)
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Rule of Law:
New York common law's absolute privilege from defamation actions, typically reserved for communications made in judicial or quasi-judicial proceedings, does not apply to routine corporate filings with regulatory bodies like the SEC (e.g., Forms 10-K and 10-Q) unless those filings are a preliminary step in an actual quasi-judicial process where the defamed party has a mechanism to challenge the statements.
Facts:
- In February 2016, Steven Fischkoff, a medical doctor, was hired by Iovance Biotherapeutics, Inc. as its Vice President and Chief Medical Officer.
- Fischkoff's Employment Agreement stipulated that if he were fired 'for cause' (defined as material breach or improper use of confidential information), he would only be entitled to accrued or vested compensation.
- In January 2017, Iovance's Human Resources informed Fischkoff he was in material breach of his agreement, and later that day, Iovance CEO Maria Fardis placed him on a Performance Improvement Plan (PIP).
- On February 22, 2017, Fardis extended the PIP period, and four days after the extended PIP expired in late March 2017, Iovance terminated Fischkoff's employment, alleging he failed the PIP.
- Fischkoff alleges that he properly performed his duties and that Iovance fabricated reasons for his termination to avoid paying him contractually due money.
- On November 2, 2017, Iovance publicly filed a Form 10-Q with the SEC, stating that Dr. Fischkoff was terminated 'for cause' as defined in his employment agreement.
- On March 12, 2018, Iovance filed a Form 10-K with the SEC, repeating the same statement that Fischkoff was terminated 'for cause'.
Procedural Posture:
- Steven Fischkoff initiated a lawsuit against Iovance Biotherapeutics, Inc. and Maria Fardis in the United States District Court for the Southern District of New York.
- Fischkoff's initial complaint included claims for breach of contract, New York Labor Law violations, retaliation, and breach of the implied covenant of good faith and fair dealing.
- Fischkoff subsequently filed a motion for leave to amend his complaint to add a claim for defamation.
- Iovance Biotherapeutics, Inc. and Maria Fardis opposed Fischkoff's motion, arguing that the proposed defamation claim would be 'futile' because the statements at issue were subject to absolute privilege under New York common law.
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Issue:
Does New York common law's absolute privilege from defamation apply to statements made in mandatory Securities and Exchange Commission (SEC) Forms 10-K and 10-Q when those filings are not part of a specific quasi-judicial proceeding that provides the defamed party with a mechanism to challenge the statements?
Opinions:
Majority - Gabriel W. Gorenstein
No, New York common law's absolute privilege does not apply to statements made in mandatory SEC Forms 10-K and 10-Q because these routine filings are not alleged to be part of a specific quasi-judicial proceeding where the defamed party would have a mechanism to challenge the statements. The court, guided by New York Court of Appeals precedent, particularly Rosenberg v. MetLife, Inc. and Stega v. N.Y. Downtown Hosp., held that absolute privilege is narrowly applied to communications made during judicial or quasi-judicial proceedings. Stega clarified that for absolute immunity to apply in a quasi-judicial context, the proceeding must offer a mechanism for the defamed party to challenge the allegedly false statements. The Rosenberg case applied absolute privilege to a Form U-5 because it initiated an NASD investigative process where the employee could challenge the statements. In this case, Iovance failed to demonstrate that Forms 10-K and 10-Q, which are routine corporate financial filings, constitute a preliminary or ongoing step in an SEC quasi-judicial proceeding or that Fischkoff had any opportunity to challenge the 'for cause' termination statement within the context of those filings. The court distinguished this situation from cases where filings or statements were directly linked to an investigative or adjudicative process and explicitly rejected Iovance's broad argument that merely because the SEC can be considered a 'quasi-judicial body,' all filings with it are absolutely privileged, noting that the privilege requires a 'proceeding' with procedural safeguards for the defamed party.
Analysis:
This case significantly clarifies the narrow application of absolute privilege in New York, particularly in the context of corporate filings with regulatory bodies. It reinforces the principle established in Stega that the mere existence of a regulatory agency with quasi-judicial functions is insufficient; the specific communication must be part of an actual 'proceeding' that includes mechanisms for the defamed party to contest the statements. This ruling protects individuals from potentially defamatory statements in routine corporate disclosures that lack the adversarial safeguards inherent in judicial or specific quasi-judicial processes, thereby potentially increasing accountability for companies in their public reporting. Future cases will need to demonstrate a direct link between the alleged defamatory statement and an ongoing adjudicative or investigative proceeding with built-in procedural protections to successfully invoke absolute privilege.
