Second Circuit Ruling on Jurisdiction in Libel Tourism Matter

On March 3, 2008, the U.S. Court of Appeals for the Second Circuit affirmed the decision of the Court of Appeals of New York that New York’s long-arm statute did not confer jurisdiction over a Saudi citizen who sued a U.S. author under English libel law. Author Rachel Ehrenfeld had asked the U.S. District Court for the Southern District of New York to declare that statements in her book did not create liability under United States or New York defamation law, and that Khalid Salim a Bin Mahfouz’ English default libel judgment was unenforceable here. NAA had joined an amicus brief addressing the issue of “libel tourism” and urging the court to find jurisdiction over parties who sue for defamation outside New York and obtain judgments that can be satisfied only in New York.

In a parallel development, the New York State Legislature in February 2008 passed a bill to counteract chilling effects on speech of the New York Court of Appeals’ December 2007 ruling that the state lacked jurisdiction over “libel tourists.” The “Libel Terrorism Protection Act,” S. 6687 (N.Y. 2008), was introduced January 9 by State Senate Deputy Majority Leader Dean Skelos (R-Nassau) and Assemblyman Rory I. Lancman (D-Queens). The bill adds defamation judgments obtained in a jurisdiction outside the United States to the existing reasons for non-recognition of a foreign judgment (such as a judgment rendered without due process of law), unless a New York court determines the foreign state’s defamation law satisfies freedom of speech and press protections guaranteed by the United States and New York Constitutions. The Act amends the state long-arm statute to provide New York courts with jurisdiction, for rendering declaratory relief, over a non-domiciliary who obtains a foreign defamation judgment against a New York resident, if the publication was in New York and the resident has assets or must take actions within the state to satisfy the judgment.

The case involved Rachel Ehrenfeld, a U.S. citizen and director of the U.S.-based American Center for Democracy, whose book, Funding Evil: How Terrorism is Financed and How to Stop It, published in 2003 solely in the United States by a U.S. publisher, alleged that a Saudi Arabian subject, Khalid Salim a Bin Mahfouz, had financially supported Al Qaeda in the years preceding the September 11 attacks. Bin Mahfouz sued Ehrenfeld for libel in England, where a small number of books sold, but where libel actions lie without proving falsity or actual malice as required under U.S. libel law. When Ehrenfeld did not appear, Bin Mahfouz obtained a default judgment for damages, injunction against publication in the United Kingdom, a “declaration of falsity”, and an order that Ehrenfeld and Bonus Books publish a correction and apology. On December 8, 2004, Ehrenfeld sought declaratory judgment that the statements in her book did not create liability under United States or New York defamation law, and the English default judgment was unenforceable here. NAA joined an amicus brief before the U.S. District Court for the Southern District of New York, asking the court to declare the English default judgment unenforceable. An English defamation judgment is unenforceable under U.S. law and default judgment without proving falsity would permit Bin Mahfouz (who has sued for defamation in the UK 29 times) to intimidate authors, the brief said.

The district court granted Bin Mahfouz’ motion to dismiss for lack of personal jurisdiction under New York law, on April 25, 2006. The court acknowledged that liability based on de minimis availability of works abroad could chill speech, but Bin Mahfouz’s contacts with the state, such as a cease-and-desist letter and a website on the case, were not sufficiently purposeful transactions of business to create jurisdiction. The New York statute deals only with purposeful transactions that invoke benefits and protections of New York law, or with tortuous conduct.

On July 12, 2006, NAA joined an amicus brief before the U.S. Court of Appeal for the Second Circuit, supporting Ehrenfeld’s appeal. On June 8, 2007, the U.S. Court of Appeals for the Second Circuit found the case ripe, but certified the question of jurisdiction to the state high court, New York Court of Appeals. On December 20, 2007, the New York Court of Appeals ruled that the existing state long-arm statute did not confer personal jurisdiction over a person simply because they sue a New York resident in a foreign jurisdiction, have contacts with the state stemming from the lawsuit, or whose suit results in acts that must be performed by the defendant in New York. The court said it was not called to opine on the practice of procuring libel judgments in foreign jurisdictions to chill free speech in the United States, but to determine whether Bin Mahfouz’ New York contacts established a basis for jurisdiction. The key was whether the defendant “purposefully avails itself of the privilege” of conducting activities in the state, invoking “benefits and protections” such that it should “reasonably expect to defend its actions” there. In contrast, Bin Mahfouz sought to assert rights under English law, which required a demand letter and service of documents, and did not “seek to consummate a New York transaction.” The court rejected the argument that enforcement of the judgment in New York would itself satisfy a finding of jurisdiction.

After the New York Court of Appeals decision in late 2007, the Second Circuit asked the parties to comment in letter briefs on the state high court decision. Ehrenfeld urged the federal appeals court to assert personal jurisdiction over Bin Mahfouz on grounds that the New York court’s construction of the jurisdiction statute was violative of the First Amendment. On March 3, 2008, the U.S. Court of Appeals for the Second Circuit affirmed the decision of the Court of Appeals of New York that New York’s long-arm statute did not confer jurisdiction over a Saudi citizen that sued a U.S. author under English libel law. The Second Circuit found Ehrenfeld’s First Amendment argument unavailing, because Ehrenfeld had not sufficiently raised the argument before. She had argued that enforcement of the English judgment in the United States would contravene the First Amendment, and that Bin Mahfouz’s contacts with New York were a scheme to abridge her free speech rights. She had argued that free speech implications of the case compelled certification of the jurisdictional issue to the New York Court of Appeals. However, she did not argue that the First Amendment would compel jurisdiction “regardless of the reading by the Court of Appeals of the state long-arm statute… Her failure to mount an attack on First Amendment grounds against denial of personal jurisdiction over defendant Mahfouz at any prior stage of this prolonged litigation in the federal courts amounts to a waiver of the claim.” The court also declined to defer judgment until the state legislature acted on the proposed amendment because its chances were “speculative.” In the end, the Second Circuit said it could not “disregard the decision of New York’s highest court on a controlling jurisdiction issue” involving New York law.

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