Libel plaintiffs resort to British court system

Mixing Internet distribution with favorable British libel laws have led plaintiffs to take advantage of courts in the United Kingdom.

From the Winter 2008 issue of The News Media & The Law, page 25.

By Matthew Pollack

Recently, it has become difficult to distinguish international libel suits from geography lessons.

Rachel Ehrenfeld, a U.S. citizen, wrote a book, "Funding Evil: How Terrorism is Financed — and How to Stop It," and published it with Bonus Books, a U.S. publisher based solely in the United States. But that did not stop Khalid Salim a Bin Mahfouz, a Saudi Arabian businessman and banker, from bringing a defamation suit against her in a British court.

Bin Mahfouz took exception to allegations that he was responsible for transferring tens of millions of dollars to accounts controlled by terrorists, including both the International Islamic Relief Organization, branches of which the United States has designated as terrorist entities, and the Muwafaq Foundation, described by the U.S. Treasury Department as "an Al-Qaeda front."

Rather than face the daunting standard imposed in libel cases by the U.S. Supreme Court’s seminal holding in New York Times v. Sullivan, Bin Mahfouz chose to forgo the American court system altogether. In the United States, the burden of proof falls upon a public figure to prove that the allegedly defamatory statements were not just false, but also that the speaker acted with either actual knowledge that the defamatory statement was false or with a reckless disregard for the truth or falsity of the statement.

British laws, however, continue to place the burden on the defendant to prove that any allegedly defamatory statements are actually true and therefore immune to a libel suit.

It becomes pretty clear why Bin Mahfouz would favor filing suit in a British court, but less certain why a British court would accept a case between an American and a Saudi about a book published only in the United States. Thanks to the United Kingdom’s relatively low threshold for establishing jurisdiction, however, Bin Mahfouz was able to ride the information super highway across the Mediterranean Sea and into the British high court.

A crucial issue for British courts to accept jurisdiction is whether there is significant circulation of the material within the United Kingdom. The Internet effectively makes it a non-issue. The court ultimately took jurisdiction of the case after Bin Mahfouz showed that British citizens purchased 23 copies of the book and that a full chapter was available online via ABC News’ Web site.

According to Jason Criss, an attorney who represented a coalition of media organizations who submitted an amicus brief in support of Ehrenfeld in a related case over enforcement of the judgment, Britain’s relatively low bar to establish jurisdiction through the Internet results in an easily manipulated standard that grants plaintiffs the opportunity to establish jurisdiction over a defendant on their own.

"I am aware of cases where the only accessing is by a plaintiff or a prosecutor, where there is no independent or third party access." Criss said. "Anybody could be hauled into a British Court."

Even though the English High Court of Justice found that it had jurisdiction over the suit, Ehrenfeld never conceded the point. Rather than waste resources fighting a law that was stacked against her, Ehrenfeld refused to respond to the suit and the British court entered default judgment in Bin Mahfouz’ favor.

The court ultimately enjoined future publication of the work in the United Kingdom, demanded that Ehrenfeld and her publisher apologize to Bin Mahfouz and awarded Bin Mahfouz the cost of his legal fees and £30,000 in damages.

With that, Ehrenfeld became another statistic in the disturbing trend of libel forum shopping. Since 2002, Bin Mahfouz has sued or threatened to sue for libel at least 36 times in British courts. Every media outlet or publisher he sued or threatened to sue has apologized, retracted and paid fines.

Beyond that, Bin Mahfouz’ suits are causing institutional changes as well. A recent survey jointly conducted by the American Bar Association and the International Chamber of Commerce reported that more than half of all media companies surveyed adjusted their operations to account for the risk of Internet jurisdiction.

Bin Mahfouz’ strategy, according to Ehrenfeld’s attorney Daniel Kornstein, has had its desired effect; the oversees verdicts and settlements have kept his name out of the media in the United States.

"This chills what Dr. Ehrenfeld can write and what other people can write and what publishers will and will not publish on the subject," Kornfield said. "It is hard to imagine a more public issue in our time that would demand more public exposure, but publishers are not covering this as much now."

As media organizations tailor their practices to account for the more restrictive libel standards in other jurisdictions, not only do the speakers need to fear the laws of foreign lands, but so does the American public.

The broad support for free speech afforded by the First Amendment essentially becomes inapplicable when plaintiffs can turn to foreign courts to skirt its demands.

In the end, the First Amendment cannot protect the free flow of information if foreign courts will simply dam the river and stunt its stream.

Deporting Verdicts

Following the default judgment against her, Ehrenfeld sought a declaratory judgment from a federal court in New York stating that Bin Mahfouz could not enforce it in the United States.

Ehrenfeld argued that enforcing the judgment would be contrary to public policy and offered litigants an end-run around the constitutional bulwark that is the First Amendment.

Theoretically, the case law was with her. Plaintiffs typically have not gotten very far when seeking to enforce foreign libel decisions.

In Bachan v. India Abroad Publications, a New York state court refused to enforce a British libel verdict holding that the standard of proof in British defamation cases violated the U.S. constitution and chilled the media.

Likewise, in Telnikoff v. Matusevitch, a Maryland state court held that "recognition of English defamation judgments could lead to wholesale circumvention of fundamental public policy."

In both of those cases, though, the plaintiffs sought out the American courts to enforce their foreign judgment, availing themselves of the benefits of the state.

Bin Mahfouz, though a millionaire hundreds of times over, is not likely interested in the relatively meager damage verdict.

He has yet to try to enforce the judgment and has acknowledged that he has no plans to file an action in the United States seeking to enforce any aspect on the English libel judgment.

Unless he does seek enforcement, Ehrenfeld has no recourse in the American court system, the New York Court of Appeals ruled. The court was answering a certified question from the U.S. Court of Appeals in New York (2nd Cir.).

Even though Bin Mahfouz once maintained apartments in New York, was connected to entities that did business in the state, used the mail systems in the state, and operates a Web site accessible in the state, the court had no jurisdiction over the Saudi.

Presumably, the Second Circuit will now dismiss the suit, leaving the default judgment untouched and intact.

"It’s almost paradoxical that the nonenforcement is more harmful than the enforcement," Kornstein said. "By not seeking to enforce the judgment, then we lose our opportunity to be in an American court to seek relief."

Because it is unlikely that Bin Mahfouz will seek to enforce the judgment, the British holding will follow Ehrenfeld everywhere she goes, she argues, whether by affecting her credibility with a publisher or her credit with a bank.

Undressed by the British courts and turned away by American courts, Ehrenfeld’s lone hope of redemption may come from the New York state legislature.

In the wake of the state supreme court’s determination that Ehrenfeld could not challenge the British court verdict, New York state Sen. Dean Skelos and Assemblyman Rory Lancman introduced the Libel Terrorism Protection Act, which takes on the state supreme court’s decision head on.

The law, which the sponsors hope will pass through the legislature before the Second Circuit dismisses Ehrenfeld’s suit, will specifically give New York state courts jurisdiction over any person who obtains a judgment for defamation over a terrorism-related claim outside of the United States.

It also specifies that any defamation judgment obtained in a jurisdiction that does not afford the same freedom of speech and press protections as the U.S. and New York state constitutions will not be recognized by state courts.

"It is outrageous that an American author can be dragged into court overseas on phony baloney libel charges," Lancman said. "This legislation will protect our reporters and authors from being dragged into jurisdictions that don’t respect freedom of speech and of the press as we do here in the United States."

Adding that he believed the law could play a key role in the war against terrorism, Lancman said that the legislation "will send a message to journalists and authors to continue their writing without fear from retribution oversees."

Criss agrees with Lancman’s sentiment, concluding that the bill’s provisions could provide a valuable legal option for speakers who are otherwise hamstrung by libel plaintiffs who obtain foreign verdicts to chill speech.

"What you have right now is a situation where plaintiffs can secure the proverbial Sword of Damocles in a foreign libel verdict where they can chill speech without defendants getting their day in court," Criss said. "This could go a long way in combating that problem."

Vacation Over?

Some believe that Bin Mahfouz may need to find another destination to continue his chilling legal tactic.

Just last year, Britain’s House of Lords handed down a decision that could significantly increase the level of protections afforded to defendants in defamation suits. In Jameel v. Wall Street Journal Europe, the court clarified a previous decision to explain that plaintiffs cannot recover damages for statements about matters of public interest that are a product of responsible journalism.

Although the ruling seems to offer protections that did not exist before, many attorneys are hesitant to tout the decision too strongly.

"It is certainly a substantial step but its effect will really depend on how it is going to be enforced at the trial," Kornstein said. "We are going to need a few years to see the effect — to see it evolve and be applied."

Even with the Jameel decision, Criss still sees the United Kingdom as a potential breeding ground for defamation claims.

"No one believes that this will bring U.K. defamation law in line with American law," Criss said, adding that the costs associated with fighting suits abroad may continue to dissuade American defendants from challenging legal action taken against them.

And beyond that, one positive British decision does little in the grand scheme of libel tourism.