Collins v. Travers Fine Jewels Inc. et al

Filing 60

OPINION & ORDER: Defendants filed an answer on June 20, 2016, asserting two counterclaims. Plaintiff now moves to dismiss defendants second counterclaim, for defamation, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiff's motion is GRANTED. Plaintiff's motion to dismiss defendants' defamation counterclaim for failure to state a claim is GRANTED without prejudice. SO ORDERED. (Signed by Magistrate Judge Sarah Netburn on 3/28/2017) (anc)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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3/29/2017

JAMES COLLINS,
Plaintiff,

16-CV-03780 (SN)
OPINION & ORDER

-againstTRAVERS FINE JEWELS INC., et al.,
Defendants.
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SARAH NETBURN, United States Magistrate Judge:

Plaintiff James Collins commenced this action on May 20, 2016, asserting claims of
breach of contract, violations of the Uniform Commercial Code, fraudulent misrepresentation,
negligence, fraud, unfair and deceptive trade practices, and false advertising claims against
defendants Travers Fine Jewels Inc. and Sam Kassin. Defendants filed an answer on June 20,
2016, asserting two counterclaims. Plaintiff now moves to dismiss defendants’ second
counterclaim, for defamation, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Plaintiff’s motion is GRANTED.
BACKGROUND
The relevant portion of defendants’ June 20, 2016 Answer and Counterclaims are:
Upon information and belief, Plaintiff published and distributed inaccurate,
libelous and defamatory statements as to the value of the jewelry purchased by him
over a period of time from Travers.
The allegations of value were inaccurate and incorrect, and were procured by
Plaintiff in an effort to demean, insult and vilify Defendants.
Plaintiff knew or had reason to know that the alleged appraisals inaccurately
described the items purchased by him from Defendants.

As a result of such false statements, Defendants were damaged in their business
and in their reputation in the amount of at least $500,000, together with such
punitive charges as the Court shall direct.
Answer, Affirmative Defenses and Counterclaims ¶¶ 23–26 (ECF No. 21). Plaintiff moved to
dismiss this defamation counterclaim on the ground that defendants failed to state a claim.
DISCUSSION
I.

Standard of Review
“A motion to dismiss a counterclaim is evaluated under the same standard as a motion to

dismiss a complaint.” Radiancy, Inc. v. Viatek Consumer Prods. Grp., Inc., 138 F. Supp. 3d 303,
313 (S.D.N.Y. 2014). The allegations in the counterclaim are accepted as true and all reasonable
inferences are drawn in the counterclaimant’s favor. See McCarthy v. Dun & Bradstreet Corp.,
482 F.3d 184, 191 (2d Cir. 2007). To survive a motion to dismiss under Rule 12(b)(6), a
counterclaim must allege facts that, accepted as true, “state a claim for relief that is plausible on
its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). This standard “require[s] enough facts to ‘nudge [the] claims across the
line from conceivable to plausible.’” Id. (quoting Twombly, 550 U.S. at 557). “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Iqbal, 556 U.S. at 678.
At the outset, the Court identifies those allegations that, because they are mere legal
conclusions, are not entitled to the assumption of truth. See Iqbal, 556 U.S. at 679. Defendants’
allegations that the purported statements were “libelous and defamatory” are “naked assertions
devoid of further factual enhancement.” Iqbal, 556 U.S. at 678; see also Twombly, 550 U.S. at
545 (a claim repeating “labels and conclusions, and a formulaic recitation of the elements of a
cause of action” will not suffice). Accordingly, the Court does not consider the portion of

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paragraph 23 of the Answer and Counterclaims that simply recites the statements as “libelous
and defamatory.” Answer, Affirmative Defenses and Counterclaims ¶ 23 (ECF No. 21).
The remaining allegations assert that plaintiff “published and distributed” statements
concerning the value of jewelry, that those statements were “inaccurate and incorrect,” and that
plaintiff “procured” these statements “in an effort to demean, insult and vilify” defendants. Id. ¶¶
23–25. Defendants further refer to these statements as “appraisals.” Id. ¶ 25.
II.

Elements of Defamation
Defamation claims in federal court are governed by the liberal pleading requirements of

Rule 8 of the Federal Rules of Civil Procedure. See DiFolco v. MSNBC Cable, LLC, 622 F.3d
104, 110–11, 113–14 (2d Cir. 2010). Although New York law sets a heightened pleading
standard for defamation claims, New York pleading requirements do not apply to a defamation
claim in federal court. See Pasqualini v. MortgageIT, Inc., 498 F. Supp. 2d 659, 671–72
(S.D.N.Y. 2007) (applying federal pleading requirements to defamation claims). Under Rule 8’s
liberal pleading requirements, a claimant need only provide a “short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The claimant need
not plead in haec verba the allegedly defamatory words. See Yukos Capital S.A.R.L. v.
Feldman, 15 Civ. 4964 (LAK), 2016 WL 183360, at *1 (S.D.N.Y. Jan. 11, 2016). Rule 8,
however, still requires that the pleading be specific enough to afford the opposing party
“sufficient notice of the communications complained of to enable him to defend himself.”
Germain v. M&T Bank Corp., 111 F. Supp. 3d 506, 537 (S.D.N.Y. 2015) (internal citation and
quotation marks omitted).
The elements of a defamation claim in New York are: (1) a false statement about the
claimant; (2) published to a third party without authorization or privilege; (3) through fault

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amounting to at least negligence on the part of the publisher; (4) that either constitutes
defamation per se or caused special damages. See Thai v. Cayre Grp., Ltd., 726 F. Supp. 2d 323,
329 (S.D.N.Y. 2010) (citing Gargiulo v. Forster & Garbus, Esqs., 651 F. Supp. 2d 188, 192
(S.D.N.Y. 2009)). A defamation claim is sufficient if it “identif[ies] the allegedly defamatory
statements, the person who made the statements, the time when the statements were made, and
the third parties to whom the statements were published.” Yukos Capital S.A.R.L., 2016 WL
183360, at *1.
Certain statements are privileged and cannot be defamatory under New York law. First,
opinions are absolutely protected. See Chau v. Lewis, 771 F.3d 118, 128–29 (2d Cir. 2014). The
New York Court of Appeals has advanced a four-factor test for differentiating statements of
protected opinion from those asserting or implying actionable facts. See Immuno AG. v. J.
Moor-Jankowski, 77 N.Y.2d 235 (1991). These are: (1) “an assessment of whether the specific
language in issue has a precise meaning which is readily understood or whether it is indefinite
and ambiguous”; (2) “a determination of whether the statement is capable of being objectively
characterized as true or false”; (3) “an examination of the full context of the communication in
which the statement appears”; and (4) “a consideration of the broader social context or setting
surrounding the communication including the existence of any applicable customs or
conventions which might signal to readers or listeners that what is being read or heard is likely to
be opinion, not fact.” Celle v. Filipino Reporter Enterprises Inc., 209 F.3d 163, 178-79 (2d Cir.
2000) (quoting Steinhilber v. Alphonse, 68 N.Y.2d 283, 292 (1986)). The burden rests with the
party claiming defamation to establish that the disputed statement is not protected opinion. See
Celle, 209 F.3d at 178.

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Second, absolute privilege attaches to all communications made in the course of a judicial
proceeding and that are pertinent to the pending proceeding, such as statements in a complaint.
See Long v. Marubeni Am. Corp., 406 F. Supp. 2d 285, 293–95 (S.D.N.Y. 2005) (statements
made “prior to, in the institution of, or during the course of a judicial proceeding” are
privileged). The standard of a statement’s pertinence “is ‘extremely liberal,’ such that ‘any
doubts are to be resolved in favor of pertinence.’” Feist v. Paxfire, Inc., 11 Civ. 5436 (LGS),
2017 WL 177652, at *4 (S.D.N.Y. Jan. 17, 2017) (quoting Flomenhaft v. Finkelstein, 8 N.Y.S.3d
161, 164 (1st Dep’t 2015)). The burden is upon the party alleging defamation to “conclusively,
and as a matter of law, establish the impertinency . . . of the statement.” Id. (citing Grasso v.
Mathew, 564 N.Y.S.2d 576, 578 (3d Dep’t 1991)).
A claimant must also allege either special damages or defamation per se. Special
damages consists of “the loss of something having economic or pecuniary value which must flow
directly from the injury to reputation caused by the defamation[.]” Celle, 209 F.3d at 179
(internal citation and quotation marks omitted). Special damages must be “fully and accurately
stated, with sufficient particularity to identify actual losses.” Thai, 726 F. Supp. 2d at 330
(internal citation and quotation marks omitted). This particularity requirement is strictly applied,
as defamation claims will be dismissed for failure to allege special damages with the requisite
degree of specificity. See Emergency Enclosures, Inc. v. Nat’l Fire Adjustment Co., Inc., 68
A.D.3d 1658, 1660 (4th Dep’t 2009). Statements that are defamatory per se are actionable
without proof of special damages. Generally, a statement that “tend[s] to injure the plaintiff in
his or her trade, business or profession” is defamatory per se. Albert v. Loksen, 239 F.3d 256,
271 (2d Cir. 2001). Also, “[w]here a statement impugns the basic integrity or creditworthiness of
a business, an action for defamation lies and injury is conclusively presumed.” Celle, 209 F.3d at

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180 (internal citation and quotation marks omitted); see also Kforce, Inc. v. Alden Personnel,
Inc., 288 F. Supp. 2d 513, 517 (S.D.N.Y. 2003).
III.

Defendants Fail to State a Defamation Claim
Defendants’ defamation counterclaim fails to state a claim. First, defendants have failed

to identify the purportedly false statements. Their Answer suggests that the allegedly defamatory
statements were the plaintiff’s “appraisals.” Id. ¶ 25 (plaintiff knew “that the allege appraisals
inaccurately described the items purchased”). But in applying the Steinhilber analysis, any
“appraisals” would be construed as privileged statements of opinion. Statements as to how
specific jewelry pieces should be valued cannot be “objectively characterized as true or false”;
instead, appraisals are understood in the “broader social context” as subjective determinations
that hinge on the individual appraiser’s ability and the methods applied to estimate the value.
Steinhilber, 68 N.Y.2d at 292. Indeed, the ultimate value of an item may depend on how the
appraiser describes inherently subjective features, such as the quality and rarity of the gemstone
and the quality of the manufacture. A jewelry’s value may also depend on whether the appraiser
is determining the fair market value, the replacement value or the resale value. Defendants have
not asserted, let alone satisfied, their burden that the statements were not opinions. See Celle,
209 F.3d at 178.
In opposing the motion to dismiss, defendants offer the affidavit of defendant Sam
Kassin. Of course, on a motion to dismiss, the Court is limited to the four corners of the
pleading. See Capogrosso v. Troyetsky, 14 Civ. 381 (KNF), 2015 WL 4393330, at *2 (S.D.N.Y.
July 17, 2015) (refusing to consider affidavits submitted in support of defendant’s Rule 12(b)(6)
motion “because it is a matter outside the pleadings”). But even if the Court relied upon the
affidavit to better understand the defendants’ counterclaim, such reliance would establish that the

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alleged defamatory statements trigger the absolute privilege afforded to judicial documents. In
the only paragraph that addresses the defamation counterclaim, Kassin offers that the plaintiff
“stated that the jewelry was ‘not merchantable,’ was falsely described, was sold after misleading
representations and that the value was ‘grossly inflated.’” See Affidavit of Sam Kassin ¶ 8. The
terms “not merchantable” and “grossly inflated” are quoted from the plaintiff’s complaint,
suggesting that the plaintiff’s defamatory statement is the complaint. See Complaint ¶¶ 37, 42.
Thus, to the extent, defendants’ counterclaim is based on the allegations set forth in the
plaintiff’s complaint, it is protected and cannot form the basis of a defamation claim. See Long,
406 F. Supp. 2d at 293–95.
Thus, the counterclaim fails to identify adequately the alleged defamatory statement; and
any discernable statements are privileged as a statement of opinion (the appraisals) or a statement
contained within a judicial filing (the complaint).
Second, defendants have not provided enough factual allegations concerning publication
of the statements to a third party or the context in which the statement was made to provide
notice to the plaintiff. Germain, 111 F. Supp. 3d at 537. Defendants merely allege that the
statements were “published and distributed” but do not describe the medium of publication and
distribution and to whom the statements were allegedly made. Defendants also fail to specify
when exactly the statements were made, instead asserting vaguely that plaintiffs made the
statements “over a period of time.” Answer, Affirmative Defenses and Counterclaims ¶ 23 (ECF
No. 21). A party claiming defamation must plead when the statements were made so that
opposing party has an opportunity to assert a defense based on New York’s one-year statute of
limitations for defamation claims. See Goldman v. Barrett, 15 Civ. 9223 (PGG), 2016 WL
5942529, at *9 (S.D.N.Y. Aug. 24, 2016). That the Court must assess for itself whether the

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statute of limitations has run and whether plaintiff has a viable defense speaks to just how
threadbare defendants’ allegations are.
Third, defendants have not alleged with any particularity the damages suffered that would
allow either plaintiff or the Court to identify the actual losses incurred. See Thai, 726 F. Supp. 2d
at 330 (internal citation and quotation marks omitted). Because defendants have not alleged
special damages, they must therefore allege defamation per se. According to defendants,
plaintiff’s allegations of the purchased items’ were “inaccurate and incorrect” as to the value of
the jewelry he purchased. Answer, Affirmative Defenses and Counterclaims ¶ 24 (ECF No. 21).
But statements of value concerning specific pieces of jewelry, made by a disgruntled customer,
do not denigrate defendants’ business existence, reputation or integrity. See Kforce, Inc., 288 F.
Supp. 2d at 517. Such statements of value cabined to particular items, rather than encompassing
defendants’ profession or general trustworthiness, does not constitute defamation per se.
According, plaintiff is entitled to dismissal on defendants’ defamation counterclaim.
CONCLUSION
Plaintiff’s motion to dismiss defendants’ defamation counterclaim for failure to state
a claim is GRANTED without prejudice.
SO ORDERED.

DATED:

March 28, 2017
New York, New York

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