The Volokh Conspiracy

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From Neuman v. Global Security Solutions, Inc., decided today by Judge Denise Cote (S.D.N.Y.):

Phil Neuman has sued defendants Global Security Solutions, Inc. ("GSS") and Werner Hellmann …. Hellman, the owner of GSS, called Colin Connor, a business associate of Neuman's. The call was recorded. Hellman stated that he had been hired to investigate Neuman. Hellman explained that he had found "collected insurance commissions, unlicensed, [and] unregistered companies," and that Neuman had "a lot of history here of fraud."

Hellman then asked Connor a series of questions about his relationship with Neuman, and about companies that Neuman purportedly owned, but which did not appear to be registered. Hellman suggested that his experience investigating organized crime made him suspicious of Neuman's activities. Connor largely declined to answer Hellman's questions. Eventually, Hellman asked Connor "You don't think I know what's going on here? … I know exactly what's going on here." Connor then ended the telephone call.

The defendants contend that the "history of fraud" to which Hellman alluded is confirmed by the allegations of fraud in a series of lawsuits involving Neuman. Several of these lawsuits were brought by former business associates who accused Neuman of deliberately failing to fulfill his financial obligations under agreements with them. Neuman has also been sued by two employees for the termination of their employment under allegedly false pretenses. Some of these cases are ongoing and many have been settled. Only one case has reached a final judgment on the merits: a default judgment in Nevada state court against Neuman for purchasing a car and then keeping it without making any payments….

Summary judgment must … be granted to the defendants, because the plaintiff has not shown that Hellman's statement is false. Neuman argues that Hellman's accusation of fraud is unfounded, because no case against Neuman has resulted in a final judgment finding that he committed fraud. In fact, one case has; a Nevada court issued a default judgment against Neuman for fraudulently purchasing a car and then refusing to make payments.

Regardless, however, it is not necessary for a defendant in a defamation action to show that his statements have been validated by judicial findings — the burden is on the plaintiff to show that the statements are false. Neuman has not carried that burden. He has presented no evidence regarding the multiple allegations of fraud levied against him in other cases, has failed to specifically deny most of the allegations of fraud made in those lawsuits, and has not addressed his purported ownership of various unregistered companies. In other words, although Neuman has tried to undermine the defendants' basis for making the allegedly defamatory statement, Neuman has presented no evidence to affirmatively show that the statement is false.

It may, of course, be difficult for Neuman to demonstrate that he has no history of fraud. It is hard to prove a negative, particularly when the statement could apply to a broad range of potential conduct over a long period. But that difficulty is by design. The requirement that a plaintiff prove the falsity of an allegedly defamatory statement is intended to "provide breathing space" for true speech by denying liability when "the evidence is ambiguous" or the "speech is unknowably true or false." Here, even if Hellman's statement is potentially false, Neuman has not provided evidence to show that falsity….