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Zagami, LLC v. Cottrell

October 3, 2008


On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1068-07.

The opinion of the court was delivered by: Parrillo, J.A.D.



Argued September 10, 2008

Before Judges Parrillo, Lihotz and Messano.

In these back-to-back matters summarily remanded to us from the Supreme Court's grant of leave to appeal, we are asked to decide whether defendants in a defamation action are accorded absolute immunity for statements they made in connection with a municipal liquor license renewal proceeding. We hold that under the circumstances of this case, defendants are entitled to assert the litigation privilege and, therefore, to dismissal of plaintiff's complaint with prejudice.

By way of background, plaintiff Zagami, LLC (Zagami) is a limited liability company that owns a restaurant, bar and grill (Landmark Americana), liquor store (Landmark Liquors), and night club (The Spot), operating out of the same facility at 1 Mullica Hill Road in the Borough of Glassboro. The facility is located near Rowan University's campus, as well as a residential neighborhood where defendants Mary Ann Cottrell and Luis Perez live. In fact, Perez lives across the street from plaintiff's establishment.

As a retail dispenser of alcoholic beverages, plaintiff is a regulated entity subject to State supervision and municipal licensure under the New Jersey Alcoholic Beverage Control Act (Act), N.J.S.A. 33:1-1 to -97. See, e.g., N.J.S.A. 33:1-3; N.J.S.A. 33:1-12. As such, plaintiff is the holder of a plenary retail consumption license issued by the Borough of Glassboro, which is a Faulkner Act community governed by a mayor-council form of government. Sometime in 2006, plaintiff applied for renewal of its liquor license for 2006-2007. Voicing their objections, on June 9, 2006, defendants wrote to the Borough Council requesting to be heard on plaintiff's application. On June 16, 2006, the Borough solicitor, pursuant to N.J.A.C. 13:2-7.5, provided defendants and plaintiff written notice of the time and place for the scheduled hearing, inviting them to testify and further explaining that the purpose of the hearing was to "tak[e] . . . testimony and/or [receive] other evidence with respect to written objections to the renewal of the existing liquor licenses held by Landmark Tap and Grill/Landmark Liquors . . . ."

Following publication of notice, a license renewal hearing was held on June 27, 2006, presided over by the mayor. The Borough solicitor was present as was plaintiff's attorney. The hearing was recorded*fn1 . During the hearing, defendants aired a variety of complaints concerning plaintiff's operation, focusing mainly on violations of the municipal fire code, alcoholic beverage control (ABC) regulations, and the criminal laws. As to the latter two, defendants claimed that plaintiff, among other things, served minors and intoxicated individuals; ran a "go-go bar"; failed to display maximum occupying limits; aided and abetted assaults and batteries by its bouncers and other employees; and bribed public officials with free meals and drinks. When asked if they wished to enter any documents or reports into the record, defendants declined. Plaintiff's attorney was given the opportunity to respond, and he disputed the allegations made by defendants. Afterwards, the Borough Council passed a resolution authorizing renewal of plaintiff's retail consumption license. Pursuant to N.J.A.C. 13:2-17.1, on September 14, 2006, defendants filed an appeal with the New Jersey Division of Alcoholic Beverage Control, and the matter was transmitted to the Office of Administrative Law, where it proceeded through the normal course.

On June 26, 2007, on the eve of the one-year anniversary of its liquor license renewal, plaintiff filed a complaint against defendants, alleging defamation and the related torts of commercial disparagement/trade libel, interference with business relations and civil conspiracy. The complaint detailed statements made by defendants in their June 9, 2006 written objection, June 27, 2006 hearing, and September 14, 2006 appeal that plaintiff claimed to be both false and maliciously uttered. Defendants moved to dismiss, maintaining that their statements were made in the course of a quasi-judicial proceeding and therefore immune from a civil damage action, shielded by the absolute litigation privilege. Although the ensuing oral argument on defendants' motions seemed to properly focus on whether sufficient safeguards attended the municipal proceeding for the privilege to attach, the Law Division judge ultimately denied the motion as premature, pointing to factual issues surrounding defendants' mental states at the time the alleged defamatory statements were uttered. Following our denial, the Supreme Court granted defendants' motions for leave to appeal and summarily remanded the matters to us for consideration on the merits.

As a threshold matter, the present state of the law of libel and defamation recognizes the delicate balance between guaranteeing constitutionally-protected free speech on the one hand and protecting an individual's reputational interest on the other. Dairy Stores, Inc. v. Sentinel Publishing Co., 104 N.J. 125, 135-36 (1986). But, as Judge Pressler noted, "[t]hat accommodation must be heavily weighted in favor of the right of free speech when its subject is a matter of public concern reasonably invoking public debate." LoBiondo v. Schwartz, 323 N.J. Super. 391, 407 (App. Div. 1999). Consequently, our common law recognizes that some otherwise defamatory statements should be "privileged," that is, immune from liability and not actionable. Dairy Stores, Inc., supra, 104 N.J. at 136.

Certain statements made in the course of judicial, administrative, or legislative proceedings are absolutely privileged because of "the need for unfettered expression critical to advancing the underlying government interest at stake in those settings." Erickson v. Marsh & McLennan Co., Inc., 117 N.J. 539, 563 (1990); see also Hawkins v. Harris, 141 N.J. 207, 213 (1995); Rainier's Dairies v. Raritan Valley Farms, Inc., 19 N.J. 552, 558 (1955). One purpose is to encourage open channels of communication and the presentation of evidence in judicial proceedings, which is a fundamental adjunct of the right of access to such proceedings. Hawkins, supra, 141 N.J. at 216-17. Our adherence to the doctrine of "litigation immunity" has been explained thus:

The doctrine that an absolute immunity exists in respect of statements, even those defamatory and malicious, made in the course of proceedings before a court of justice, and having some relation thereto, is a principle firmly established, and is responsive to the supervening public policy that persons in such circumstances be permitted to speak and write freely without the restraint of fear of an ensuing defamation action, this sense of freedom being indispensable to the due administration of justice. [Fenning v. S.G. Holding Corp., 47 N.J. Super. 110, 117 (App. Div. 1957) (citations omitted).]

Although the English rule of immunity, from whence our doctrine derives, "affords a true, absolute privilege without regard to the relevancy of the statements to the subject matter of the proceedings[,]" New Jersey, like the majority of American jurisdictions, requires that the "defamatory matter uttered have some relation to the nature of the proceedings." Hawkins, supra, 141 N.J. at 215 (citation omitted). This, however, is the only qualification to the rule of absolute immunity. Otherwise it extends to witnesses, parties and their representatives, as well as other participants in such proceedings, id. at 214-15, and insulates the defamer not only from a defamation action but, as ...

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