Ehrenfeld v. Mahfouz
THE FACTS
The issue: Can a New York author use New York law to shield herself from an unfavorable libel judgment won by a foreign national in a libel-friendly foreign country?
The parties: American author Rachel Ehrenfeld is the plaintiff in the U.S. lawsuit and Khalid Salim A Bin Mahfouz, president of The National Commercial Bank of Saudia Arabia, is the defendant.
British court ruling: Mr. Mahfouz won “substantial damages,” an injunction against publication of Ms. Ehrenfeld’s book in the UK and a “declaration of falsity.”
U.S. court ruling: The 2nd U.S. Circuit Court of Appeals ruled that New York state courts should decide whether the state’s long-arm statute confers jurisdiction against Mr. Mahfouz.
New York Court of Appeals ruling: New York law does not confer jurisdiction because Mr. Mahfouz has not availed himself of the New York law and, therefore, has not engaged in a business transaction in the state.
OVERVIEW
Controversies that grow out of the war on terrorism often involve conflicts between liberty and security. That’s not the case with the efforts of an American author, Rachel Ehrenfeld, to avoid the chilling effect of a libel judgment won against her in a British court.
Both freedom and security are on Ms. Ehrenfeld’s side, argue the Online News Association and other Internet and press organizations, which filed a friend-of-the-court brief on her behalf. “National security depends” on Ms. Ehrenfeld and other authors having the freedom to print allegations about terrorist financing without worrying about court judgments against them in libel-friendly countries, such as the United Kingdom, the brief states.
In June of 2007, a three-judge panel of the 2nd U.S. Circuit Court of Appeals – Judges Feinberg, Leval and Cabranes – asked New York’s state courts to decide if the New York long-arm statute provides the personal jurisdiction required for Ms. Ehrenfeld to haul Mr. Mahfouz into a U.S. court to remove the legal cloud created by the British libel judgment. In December 2007, the New York Court of Appeals ruled 6-0 that New York’s law did not confer personal jurisdiction because Mr. Mahfouz had not engaged in a business transaction in New York.
THE CASE
Ms. Ehrenfeld, director of the U.S.-based American Center for Democracy, wrote a 2003 book titled, “Funding Evil: How Terrorism is Financed and How to Stop It.” She alleged that Khalid Salim A Bin Mahfouz of Saudi Arabia had financially supported al-Qaida in the years preceding the 9/11 attacks. Mr. Mahfouz was president of The National Commercial Bank of Saudi Arabia.
Mr. Mahfouz claimed that the allegations were false and defamatory. Instead of suing Ms. Ehrenfeld in the United States where she lives and works and sells most of her books, Mr. Mahfouz sued in England where only 23 copies of the book had been purchased over the Internet.
The amicus brief filed by ONA and other organizations argues that Mr. Mahfouz filed the suit in England “to avoid the application of United States libel law,” which would require him to prove falsity or actual malice. Ms. Ehrenfeld explained that she chose not to appear in court in the UK because of the cost of defending herself, the difficult position authors face under British law and her objection to libel tourism. Mr. Mahfouz won from the English court “substantial damages” (about $18,000 each to Mr. Mahfouz and his two sons), an injunction against publication of the book in the UK and a “declaration of falsity.”
Ms. Ehrenfeld went into federal court in the United States seeking a declaratory judgment that Mr. Mahfouz could not win his libel claim under New York or federal law and that the judgment of the English court was not enforceable for constitutional and public policy reasons. She claimed that federal courts could use New York law to exercise personal jurisdiction over Mr. Mahfouz because he had transacted business in New York by purposefully projecting himself into the state in furtherance of a "foreign litigation scheme" to chill her speech.
Ms. Ehrenfeld noted that Mr. Mahfouz’s lawyers had contacted her in New York by mail and e-mail and that she had been served with court papers in her New York apartment. She claimed that one process server had said, "You had better respond, Sheikh bin Mahfouz is a very important person, and you ought to take very good care of yourself."
A lower court dismissed her case for lack of personal jurisdiction. The 2nd U.S. Circuit Court of Appeals asked Mr. Mahfouz if he would pledge not to try to enforce his British judgment in the U.S. He declined to promise, and the panel of the 2nd Circuit revived Ms. Ehrenfeld’s claim. It ruled that New York state courts should decide whether the state’s long-arm statute reaches Mr. Mahfouz. The long-arm law applies to a person outside the state who “transacts any business within the state” leading to a lawsuit.
The New York Court of Appeals wrote that the law requires some act by which a person purposely avails himself of the law of New York. It ruled that the letters, e-mails and service of process relating to the suit did not amount to such purposeful acts and that Mr. Mahfouz, therefore, was not transacting business under New York law.
Mr. Mahfouz’s actions in New York were not an attempt to avail himself of New York law, but instead to assert his rights under English law, the court wrote. The court rejected Ms. Ehrenfeld’s argument that the threat of future enforcement of the British libel judgment already had chilled her speech and that of other authors writing about terrorism. The court said this still did not amount to the purposeful availment of New York law.
The court acknowledged that its decision was at odds with the 9th Circuit’s 1996 decision in Yahoo! v. La Ligue Contre Le Racisme et L'Antisemitisme (433 F3d 1199). The 9th Circuit found personal jurisdiction in a case where French civil rights organizations had won a French court decision requiring Yahoo! to prevent French users from accessing Web sites about Nazism. The difference, the New York court said, was that California’s long-arm statute exercised a state’s jurisdictional power to the furthest boundaries of the U.S. Constitution’s due process requirements, while New York’s law did not. The New York legislature can pass a new law like California’s, if it chooses, the court noted.
EHRENFELD’S ARGUMENT
Courts have ruled that noncommercial activity can qualify as a “business transaction.” They also have ruled that a single transaction in New York may be enough – even if the person never entered New York – as long as there is a “substantial relationship” between the transaction and the claim in the lawsuit. Ms. Ehrenfeld argued that Mr. Mahfouz’s repeated service of letters and court papers provided sufficient contacts related to the cause of action.
U.S. courts have regularly refused to enforce libel judgments from libel-friendly courts against American authors. Ms. Ehrenfeld and her press allies were asking the court to go one step further by removing the shadow cast by the judgment.
The mere existence of the foreign judgment – even without the likelihood of enforcement – causes damage to Ms. Ehrenfeld, the amici argue. The judgment harms her reputation, makes it more difficult to find a publisher and generally chills her research and writing. The amicus brief concludes that “litigation against U.S. publications and authors in foreign countries constitutes a clear threat to the ability of the U.S. press to vigorously investigate and publish news and information about the most crucial issues before the U.S. public.”
IMPACT FOR ONLINE JOURNALISTS
“Libel tourism” is an important issue to U.S. authors and media, both print and electronic. If rich libel plaintiffs can go to plaintiff-friendly countries such as the UK to win big judgments, then the protection that American constitutional law affords in libel cases will be undermined.
But Douglas Lee, writing for the First Amendment Center, argues that the New York court’s decisions may not be that important. He points out that the case is about a fine point of civil procedure, not the First Amendment. For that reason, he writes, the case is not as harmful as it might be. (See the article.)
On the other hand, if the mere threat of a foreign libel judgment has the chilling effect on free speech that Ms. Ehrenfeld claims, then a ruling that prevents U.S. authors from availing themselves of the protection of U.S. law against libel tourists could limit the robustness of free discussion of important issues of public concern.
