PUTTING THE BRAKES ON LIBEL TOURISM: EXAMINING THE EFFECTS TEST AS A BASIS FOR PERSONAL JURISDICTION UNDER NEW YORK S LIBEL TERRORISM PROTECTION ACT

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1 PUTTING THE BRAKES ON LIBEL TOURISM: EXAMINING THE EFFECTS TEST AS A BASIS FOR PERSONAL JURISDICTION UNDER NEW YORK S LIBEL TERRORISM PROTECTION ACT Michelle Feldman * INTRODUCTION In 2003, Dr. Rachel Ehrenfeld wrote a book entitled Funding Evil: How Terrorism Is Financed and How to Stop It, 1 in which she reported that Khalid bin Mahfouz, a Saudi banker and billionaire, 2 aided and abetted al Qaeda in carrying out the 9/11 attacks by financing Osama bin Laden and al Qaeda throughout the 1990s. 3 The book was published in the United States, but twenty-three copies were purchased in England over the Internet. 4 Based on those twenty-three copies, bin Mahfouz brought a libel action in England against Ehrenfeld and her publisher, claiming that Ehrenfeld s statements were false and harmed his reputation in England. 5 While bin Mahfouz was not an English citizen, 6 he had threatened or commenced libel litigation in England more than thirty times 7 because he preferred its plaintiff-friendly libel * J.D. Candidate (June 2010), Benjamin N. Cardozo School of Law. I would like to thank my family for rarely, if ever, chilling my speech; Burton N. Lipshie for his expert guidance in developing this Note; Victoria Elman and Scott Danner for their insightful comments and suggestions throughout the Note-writing process; and last, but certainly not least, Joshua Moskovitz, my editor and friend, for going the extra mile in editing my Note and for his love of civil procedure, which proved contagious. 1 RACHEL EHRENFELD, FUNDING EVIL: HOW TERRORISM IS FINANCED AND HOW TO STOP IT (2003). 2 Bin Mahfouz died August 23, See Douglas Martin, Khalid bin Mahfouz, Saudi Banker, Dies at 60, N.Y. TIMES, Aug. 27, 2009, middleeast/27mahfouz.html. 3 EHRENFELD, supra note 1, at 22, 35-39; Affidavit of Rachel Ehrenfeld 27, Ehrenfeld v. Bin Mahfouz, No. 04 Civ (S.D.N.Y. Apr. 26, 2006), 2006 WL [hereinafter Ehrenfeld Affidavit]. 4 Ehrenfeld v. Bin Mahfouz, 9 N.Y.3d 501, 507 (2007). 5 Id. at See Brief for Amazon.com et al. as Amici Curiae Supporting Plaintiff at 15, Ehrenfeld v. Bin Mahfouz, No. 04 Civ (S.D.N.Y. Apr. 26, 2006), 2006 WL See Ehrenfeld Affidavit, supra note 3,

2 2458 CARDOZO LAW REVIEW [Vol. 31:6 laws. 8 Bin Mahfouz had built a reputation in the journalism circuit as a libel tourist, a forum shopper with a passport. Ehrenfeld did not appear in the English action. 9 As a result, the English court entered default judgment against her, awarding damages to bin Mahfouz and enjoining Ehrenfeld from further publishing the allegedly defamatory statements in England. 10 Ehrenfeld then filed suit against bin Mahfouz in federal district court in New York. 11 She sought a declaratory judgment that, under federal and New York law, bin Mahfouz could not prevail on the libel claim against her and that the English default judgment was invalid. 12 But Ehrenfeld would not have her day in court. The district court granted bin Mahfouz s motion to dismiss for lack of personal jurisdiction. 13 The court found that New York s long-arm jurisdiction statute 14 did not extend as far as the Federal Constitution permitted and the facts did not satisfy the statute s limited enumerated grounds for personal jurisdiction. 15 On Ehrenfeld s appeal, the Second Circuit 8 See discussion infra Part I.A. 9 Ehrenfeld, 9 N.Y.3d at See id. at Id. 12 See id. 13 See id. 14 At the time Ehrenfeld was heard, New York s long-arm statute provided: As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent: 1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or 2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; or 3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or 4. owns, uses or possesses any real property situated within the state. N.Y. C.P.L.R. 302(a) (McKinney 2006). That statute also conferred jurisdiction over a nonresident defendant in certain matrimonial actions and family court proceedings. See N.Y. C.P.L.R. 302(b). 15 See Ehrenfeld, 9 N.Y.3d at 506. The statute s first enumerated ground for jurisdiction, transacting business in New York, N.Y. C.P.L.R. 302(a), was the only one that could have served as a basis for personal jurisdiction over bin Mahfouz. However, the court was unable to find that bin Mahfouz s contacts with New York constituted a transaction of business within the meaning of the statute: [T]he overriding criterion necessary to establish a transaction of business is some act by which the defendant purposefully avails itself of the privilege of conducting activities within New York. When a defendant engages in purposeful activity here, personal jurisdiction is proper because it has invoked the benefits and protections of

3 2010] LIBEL TOURISM 2459 certified the question to the New York Court of Appeals whether New York s jurisdictional statute conferred personal jurisdiction over bin Mahfouz. 16 In that decision, Ehrenfeld v. Bin Mahfouz, New York s highest court acknowledged the need to protect New York residents from the alleged chilling effect of foreign libel judgments, 17 but stated that the authority to extend jurisdiction over libel tourists had to come from the legislature. 18 In 2008, the New York Legislature responded to the Ehrenfeld decision by enacting the Libel Terrorism Protection Act. 19 The Act provides that New York state courts need not enforce foreign libel judgments if the defamation law applied in the foreign adjudication provided less free speech protection than does U.S. law. 20 It also amends New York s long-arm statute by asserting jurisdiction over libel tourists to the full extent permitted by the Federal Constitution. 21 The our laws. Ehrenfeld, 9 N.Y.3d at 508 (internal quotation marks, citations, and alterations omitted). The court held that bin Mahfouz s contacts, stemming entirely from the English lawsuit, did not constitute a transaction of business or purposeful availment of the benefits and protections of New York laws; to the contrary, bin Mahfouz s contacts were meant to assert his rights under English law. Id. at Ehrenfeld also argued that jurisdiction over bin Mahfouz was available under CPLR 302 because bin Mahfouz had previously owned two New York City condominiums, but the court held that this was insufficient to confer jurisdiction over bin Mahfouz because the cause of action did not arise out of his ownership of such real property. Id. at 509 & n See Ehrenfeld, 9 N.Y.3d at See discussion infra Part I.B. 18 Ehrenfeld, 9 N.Y.3d at N.Y. Laws ch. 66, 3 (codified at N.Y. C.P.L.R. 302, 5304 (McKinney 2008)). The name of the Act is somewhat curious. A commentator posited: I take it that they re trying to protect against something they label libel terrorism (which is itself something of a misuse of terrorism, it seems to me, even if it s understood as a play on libel tourism ). Posting of Eugene Volokh to The Volokh Conspiracy, (Jan. 30, 2008, 16:21 EST). 20 N.Y. C.P.L.R (McKinney 2008). The Libel Terrorism Protection Act provides that a judgment in a foreign country is not conclusive if the cause of action resulted in a defamation judgment obtained in a jurisdiction outside the United States, unless the New York court first determines that the defamation law applied in the foreign court s adjudication provided at least as much protection for freedom of speech and press in that case as would be provided by both the United States and New York constitutions. N.Y. C.P.L.R. 5304(b)(8). 21 Subsection (d), added to CPLR 302, provides in pertinent part: The courts of this state shall have personal jurisdiction over any person who obtains a judgment in a defamation proceeding outside the United States against any person who is a resident of New York or is a person or entity amenable to jurisdiction in New York who has assets in New York or may have to take actions in New York to comply with the judgment, for the purposes of rendering declaratory relief with respect to that person s liability for the judgment, and/or for the purpose of determining whether said judgment should be deemed non-recognizable pursuant to section fiftythree hundred four of this chapter, to the fullest extent permitted by the United States constitution, provided: 1. the publication at issue was published in New York, and 2. that resident or person amenable to jurisdiction in New York (i) has assets in New York which might be used to satisfy the foreign defamation judgment, or (ii) may

4 2460 CARDOZO LAW REVIEW [Vol. 31:6 Act is retroactive, which means Ehrenfeld could take another bite at the apple. 22 However, it remains to be seen whether a New York court will reach a different outcome under the Act in Ehrenfeld s case or one similar. This Note examines libel tourism international forum shopping by libel plaintiffs and whether the Libel Terrorism Protection Act will realize its intended objective of protecting the First Amendment rights of New York residents. The answer to this question depends upon whether New York can exercise personal jurisdiction over libel tourists. A state s jurisdiction over any defendant is subject to the constitutional demands of due process under the Fourteenth Amendment. Thus, the Act, which has been celebrated by proponents of free speech across the country for rescuing the First Amendment rights of New York citizens, 23 can only go as far as the Constitution permits, and indeed, is at risk of being interpreted to have no effect. Part I of this Note compares the libel laws of the United States and the United Kingdom, as the latter is a popular destination for libel tourism. It then describes the chilling effect of libel tourism on U.S. speech and introduces New York s Libel Terrorism Protection Act. Part II provides an overview of the constitutional framework for determining personal jurisdiction over libel tourists, concluding that constitutional due process requirements may limit the Act s efficacy. This Part then analyzes a Ninth Circuit decision, 24 the reasoning of which, New York courts may adopt in order to find jurisdiction over libel tourists, and concludes that the decision was an unwarranted departure from Supreme Court precedent. Part III argues that under existing Supreme have to take actions in New York to comply with the foreign defamation judgment. N.Y. C.P.L.R. 302(d) (emphasis added). 22 See N.Y. C.P.L.R. 302(d)(2) ( The provisions of this subdivision shall apply to persons who obtained judgments in defamation proceedings outside the United States prior to and/or after the effective date of this subdivision. (emphasis added)). 23 See, e.g., Adam Cohen, Editorial, Libel Tourism : When Freedom of Speech Takes a Holiday, N.Y. TIMES, Sept. 15, 2008, at A24 ( The New York State Legislature passed a bill that some are calling Rachel s Law, which blocks enforcement of libel judgments from countries that provide less free-speech protection than the United States. ); see also Samuel A. Abady & Harvey Silvergate, Rachel s Law: NY s Libel Tourism Fix, N.Y. POST, Feb. 25, 2008, available at lawnys_libel_tourism_fix_99158.htm?page=0 ( In effect, this renders all foreign libel judg-ments [sic] unenforceable in New York, as no court outside the United States abides by our First Amendment protections. ). Even the New York Governor s press release that immediately followed the Act s enactment touted the effectiveness of the legislative measure, stating that it close[d] off a legal loophole that left New York writers and artists vulnerable to defamation judgments entered against them in foreign courts of law unsympathetic to freedom of speech. Press Release, N.Y. Governor David Paterson, Governor Paterson Signs Legislation Protecting New Yorkers Against Infringement of First Amendment Rights by Foreign Libel Judgments (May 1, 2008), available at press/press_ html. 24 Yahoo! Inc. v. La Ligue Contre Le Racisme et L Antisemitisme, 433 F.3d 1199 (9th Cir. 2006) (per curiam).

5 2010] LIBEL TOURISM 2461 Court precedent, the Act does nothing in the very case it was intended to overrule. This Part then proposes that New York courts adopt a new gloss on the Supreme Court s framework, which would vindicate the First Amendment rights of Americans while protecting the due process rights of libel tourists. I. LIBEL TOURISM: FORUM-SHOPPING IN THE GLOBAL ECONOMY A. Differences in Libel Jurisprudence Between the United States and the United Kingdom Libel is the publication of a defamatory statement, usually in written or visual form. 25 An action for libel requires a libelous statement that causes reputational harm. To bring a libel suit in a particular jurisdiction, a plaintiff must have suffered damages there. In other words, the plaintiff must have had a reputation in that territory and must show that the libelous material was published there. 26 Under the single publication rule, if a single edition of a book containing a defamatory statement is published nationally or even internationally, a plaintiff is limited to choosing only one jurisdiction of publication in which to sue. 27 Naturally, most plaintiffs choose the jurisdiction that is most favorable to them. With modern commerce and the Internet in particular, publications may be disseminated throughout the world despite the fact that an author published the work in one country. 28 Even if a minimal number of copies of an author s work are disseminated in a foreign country, in either written or electronic form, a court there may be able to exercise jurisdiction over the author 29 and apply that country s substantive laws, 25 Defamation is an umbrella term, defined as [t]he act of harming the reputation of another by making a false statement to a third person. BLACK S LAW DICTIONARY 448 (8th ed. 2004). It follows that in order for defamation to be actionable, the statement in controversy must be false. Libel and slander are types of defamation, and although the distinction between the two has been somewhat uncertain throughout history, most authorities agree that libel is defamation in written or visual form, while slander is oral or aural defamation, that is, defamation conveyed by sound. Id.; see also PROSSER AND KEETON ON THE LAW OF TORTS 112, at 786 (W. Page Keeton et al. eds., 5th ed. 1984); LIBEL, SLANDER, AND RELATED PROBLEMS 2.3, at (Robert D. Sack & Sandra S. Baron eds., 2d ed. 1994). 26 RESTATEMENT (SECOND) OF TORTS 577A (1977). To constitute a publication, the libelous material must be either intentionally or negligently communicated to one other than the individual defamed. Id. 27 Id. 28 Heather Maly, Note, Publish at Your Own Risk or Don t Publish at All: Forum Shopping Trends in Libel Litigation Leave the First Amendment Un-Guaranteed, 14 J.L. & POL Y 883, 885 (2006). 29 Douglas W. Vick & Linda Macpherson, An Opportunity Lost: The United Kingdom s Failed Reform of Defamation Law, 49 FED. COMM. L.J. 621, 623 (1997) ( It is easy under

6 2462 CARDOZO LAW REVIEW [Vol. 31:6 which may not provide the same protections guaranteed by the U.S. Constitution. 30 In effect, American authors are not absolutely guaranteed their constitutional free speech rights. In the United States, the First Amendment holds a near sacred place in society. 31 As a result, under U.S. libel law, freedom of expression is accorded more value than the right to protect one s reputation. 32 American courts generally apply an initial presumption of truth, placing on the plaintiff the burden to prove by clear and convincing evidence not only the falsity of the defendant s statement, but also that the statement was made with actual malice, that is, with knowledge that it was false or with reckless disregard of its falsity. 33 English law for English courts to exercise jurisdiction over libel claims even in cases where relatively few copies of an allegedly defamatory publication reach the United Kingdom.... ). Indeed, Ehrenfeld is a prime example of such a case. Ehrenfeld s book was published in the United States and only twenty-three copies were purchased in England via the Internet. See Ehrenfeld v. Bin Mahfouz, 9 N.Y.3d 501, 504 (2007). 30 See generally ANDREW BELL, FORUM SHOPPING AND VENUE IN TRANSNATIONAL LITIGATION 90 (2003) (finding that the lack of uniformity in procedural laws, substantive principles, and choice of law rules across the international legal system may lead to very different results in a particular legal dispute depending on the forum in which that dispute is tried). 31 The First Amendment ensures that: Congress shall make no law... abridging the freedom of speech, or of the press.... U.S. CONST. amend. I. 32 See, e.g., N.Y. Times Co. v. Sullivan, 376 U.S. 254 (1964). Even a false statement may be deemed to make a valuable contribution to public debate, since it brings about the clearer perception and livelier impression of truth, produced by its collision with error. Id. at 279 n.19 (quoting JOHN STUART MILL, ON LIBERTY (Basil Blackwell 1947) (1859)). The Court also recognized that such public debate could damage the reputations of public officials, but concluded that occasional injury to the reputations of individuals must yield to the public welfare. Id. at 281 (internal quotation marks omitted). 33 See id. at ; Marc A. Franklin & Daniel J. Bussel, The Plaintiff s Burden in Defamation: Awareness and Falsity, 25 WM. & MARY L. REV. 825, (1984). With respect to burden shifting, the Supreme Court has, however, drawn a distinction between plaintiffs who are public officials or public figures and plaintiffs who are private individuals. Compare New York Times, 376 U.S. at (adopting a constitutional rule that prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless [the public official] proves that the statement was made with actual malice ), and Curtis Publ g Co. v. Butts, 388 U.S. 130 (1967), and Associated Press v. Walker, 388 U.S. 162 (1967) (extending the New York Times rule to public figures), with Gertz v. Welch, 418 U.S. 323, (1974) (holding that in the case of private plaintiffs, states may define for themselves the appropriate standard of liability for defamation, so long as they do not impose liability without fault ). Gertz implied that states had discretion to adopt merely a negligence standard (as opposed to the constitutional rule), and to place the burden on the defendant to prove that the defamatory statement was true, rebutting the presumption of falsity. However, while the Supreme Court has distinguished between public and private plaintiffs, Franklin and Bussel argue that, in practice, no difference should exist between the standards applied to each. Franklin & Bussel, supra, at 855. The authors cite Wilson v. Scripps-Howard Broadcasting Co., a case in which the United States Court of Appeals for the Sixth Circuit held that it was error for the trial court to presume falsity and place the burden of proof on the defendant as per the common law rule. 642 F.2d 371 (6th Cir. 1981). The court held, rather, that falsity was one of the elements that must be proved to establish the defendant s fault. Id. at One of the bases for the court s holding was its concern that [a] presumption of falsity... permits liability without fault in the close case, in which the jury is uncertain. Id. at 375. In other words, under the common law rule, where the defendant could not rebut the presumption of

7 2010] LIBEL TOURISM 2463 The country most famous (or infamous, depending on one s perspective) for its friendliness to libel plaintiffs is England. 34 Like all democratic nations, England values free expression and political speech in particular, but freedom of speech there does not have the same constitutional origins or statutory protections that it has in the United States. 35 In libel lawsuits, English courts place utmost importance on the protection of the plaintiff s reputation, 36 applying an initial presumption of falsehood, 37 and placing the burden on defendants to prove the truth of their allegations or to raise an affirmative defense of privilege. 38 A plaintiff can establish a prima facie case of defamation falsity, the defendant would be liable, even if the statement was nonetheless true and made without the defendant s fault. Such an outcome would fly in the face of the constitutional principle stipulated by the Supreme Court in Gertz that courts may not impose liability without fault. Thus the Wilson court concluded that the burden of proof must be placed on the plaintiff in the case of private plaintiffs as well as public ones. Id. at Sarah Lyall, Where Suing for Libel Is a National Specialty; Britain s Plaintiff-Friendly Laws Have Become a Magnet for Litigators, N.Y. TIMES, July 22, 2000, at B7 ( [B]ecause of its plaintiff-friendly libel laws, London is not-so-affectionately known among lawyers as a town called Sue. [England] is becoming the libel capital of the world.... The U.K. is probably the best plaintiff jurisdiction anywhere, and as a consequence we get increasingly sophisticated plaintiffs looking at which country is best to sue in and being increasingly attracted to the U.K. ). 35 See Reynolds v. Times Newspapers Ltd., [2001] 2 A.C. 127, 200 (H.L. 1999) (appeal taken from Eng.) ( Freedom of expression will shortly be buttressed by statutory requirements. ). Indeed, the first English law to protect freedom of expression was ratified in October 2000 as part of a statutory scheme enacted to give further effect to the rights and freedoms guaranteed under the European Convention on Human Rights. See Human Rights Act, 1998, c. 42, Long Title (Eng.). It directs courts to have particular regard to the importance of the Convention right to freedom of expression in cases implicating such right. Id. 12(4). However, this requirement is based on the Convention s characterization of that right, which expressly contemplates that it may be restricted, e.g., in the interest of protecting the reputation of others. Id. sched. 1, pt. I. Thus, viewed in its context, this statutory buttress does not provide the fortification sought by English journalists. 36 See Reynolds, [2001] 2 A.C. at Prompted by the British media, the British government reviewed its defamation law and considered whether to adopt the New York Times rule, but ultimately declined to adopt it. See Russell L. Weaver & Geoffrey Bennett, Is the New York Times Actual Malice Standard Really Necessary? A Comparative Perspective, 53 LA. L. REV. 1153, (1993) (citing SUPREME COURT PROCEDURE COMM., REPORT ON PRACTICE AND PROCEDURE IN DEFAMATION (1991)). In rejecting the New York Times defense, the English Supreme Court Procedure Committee fully recognized that the adoption of such a defense in the United States has led to a fundamental distinction between defamation law, as applied within... the United States, and its English counterpart. Id. at 1163 (quoting SUPREME COURT PROCEDURE COMM., REPORT ON PRACTICE AND PROCEDURE IN DEFAMATION (1991)). 38 See Vick & Macpherson, supra note 29, at In some cases, the defendant may claim a justification or privilege, which, if established, will save the defendant from having the burden to prove the truth of the statement. For example, the defendant may try to invoke the fair comment exception, if the statement was a comment or opinion, made without malice, on a matter in the public interest. The statement must also be based on fact and the opinion must have been reasonable based on the facts. See Reynolds, [2001] 2 A.C. at 193; DUNCAN AND NEILL ON DEFAMATION 12.01, (Sir Brian Neill & Richard Rampton eds., 2d ed. 1983). A second exception is a narrow absolute privilege that applies mainly to comments made by members of Parliament, but may also be invoked as a defense by members of the press for fair and accurate

8 2464 CARDOZO LAW REVIEW [Vol. 31:6 merely by showing that the defendant voluntarily published a defamatory statement referring directly or indirectly to the plaintiff, 39 regardless of whether the defendant intended to defame the plaintiff 40 or acted in bad faith. 41 Furthermore, plaintiffs in England typically receive substantial damages awards 42 and are reimbursed by the losing defendant for their legal fees and costs, which often approach the size of the verdict. 43 Armed with this knowledge, libel plaintiffs flock to England, engaging in a type of forum shopping that has been coined libel tourism. 44 B. The Rise of Libel Tourism After the Fall of 01 Libel tourism first came to the attention of media lawyers and journalists in the early 1990s. The rise of the Internet and e-commerce made it inevitable that publications would transcend international borders. Since publication in a particular forum is generally a prerequisite to bringing a libel action there, libel plaintiffs began to have more choices as to fora (and, therefore, substantive libel law) than they ever had before. Britain quickly emerged as a top destination. 45 The events of September 11, 2001, which prompted much investigation and writing about terrorism and its funding, were the impetus for the growth of libel tourism in recent years. Many wealthy Muslim businessmen have been named in connection with such financing, spurring a flurry of reporting of judicial proceedings. Maly, supra note 28, at 901. Finally, the defendant may avail herself of a qualified privilege exception when she has reported on a government entity, recognizing the importance in a democratic society of fostering open criticism of the government. DUNCAN AND NEILL ON DEFAMATION, supra, 14.01, This privilege, however, is rather vague and is recognized by British courts on a case-by-case basis. Id See Vick & Macpherson, supra note 29, at 624 (citing Newstead v. London Express Newspaper Ltd., [1940] 1 K.B. 377, ). 40 See id. at 625 (citing Cassidy v. Daily Mirror Newspapers, Ltd., [1929] 2 K.B. 331, 354). 41 See id. at 625 & n.16 ( The plaintiff is required to plead that the statements were published maliciously, but this is a formality, as malicious intent is not a necessary element for recovery. (citing Bromage and Another v. Prosser, (1825) 107 Eng. Rep. 1051, 1055 (K.B.))). 42 Weaver & Bennett, supra note 37, at , 1170; see also Vick & Macpherson, supra note 29 at (arguing that the decisive role given to juries in English defamation cases is responsible for exorbitant damage awards) ( Damage awards (and settlements) in defamation cases routinely surpass 50,000 ($75,000), and a few cases have topped 1,000,000 ($1,500,000). ). 43 Vick & Macpherson, supra note 29, at 627; see also Werner Pfennigstorf, The European Experience with Attorney Fee Shifting, 47 LAW & CONTEMP. PROBS. 37 (1984); Writ Large; Libel Tourism, THE ECONOMIST, Jan. 10, 2009, at (noting that the cost of libel litigation in England begins at $200,000 and can cost upwards of $1 million once litigation is underway). 44 Ehrenfeld v. Bin Mahfouz, 9 N.Y.3d 501, 507 (2007). 45 Doreen Carvajal, Britain: A Destination for Libel Tourism, INT L HERALD TRIB., Jan. 20, 2008, available at

9 2010] LIBEL TOURISM 2465 defamation suits in England against American journalists and authors. 46 The late Khalid bin Mahfouz was one of the most frequent tourists on the English libel circuit. The Saudi citizen and former president and CEO of the National Commerce Bank of Saudi Arabia 47 had sued or threatened to sue more than two dozen writers and publishers for defamation. 48 One of those writers was Rachel Ehrenfeld, who refused to be bullied. Ehrenfeld opted not to appear in bin Mahfouz s English libel suit because of the cost of litigating in England, the procedural barriers facing a libel defendant under English law and her disagreement in principle with [bin Mahfouz s] alleged attempt to chill her speech in New York by suing in a claimant-friendly libel jurisdiction to which she lacked any tangible connection. 49 Instead, Ehrenfeld chose to vindicate her free speech rights in her home country, where she was entitled to greater speech protections than in England. 50 However, Ehrenfeld was thwarted by the New York courts finding that they lacked jurisdiction over bin Mahfouz. The dismissal of her case created a public outcry: Would New York ever be able to curb the harmful effects of libel tourism? Before exploring a possible answer to this question, it is worthwhile to first explore why libel tourism is dangerous. C. Why Libel Tourism Is a Threat: The Chilling Effect Even if libel tourists obtain favorable judgments in England against Americans, U.S. courts are not required to enforce foreign judgments that are contrary to U.S. public policy. 51 Thus far, American courts have refused to recognize most foreign libel judgments on the ground that they are repugnant to the First Amendment. 52 New York, along with several other states, even promulgated a law providing that a 46 See id. 47 See Ehrenfeld, 9 N.Y.3d at 504; Bin Mahfouz Information, FAQs, Khalid Bin Mahfouz, (last visited June 25, 2010). 48 See Carvajal, supra note See Ehrenfeld, 9 N.Y.3d at See id. at See, e.g., Loucks v. Standard Oil Co. of N.Y., 224 N.Y. 99, 111 (1918) (Cardozo, J.) ( The courts are not free to refuse to enforce a foreign right... unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal. ). 52 Maly, supra note 28, at 916; see id ( [C]ourts have held that differences among [libel laws in] foreign nations in [terms of] standards of proof and protection of speech are sufficient to qualify as repugnant. ); see also Telnikoff v. Matusevitch, 702 A.2d 230 (Md. 1997); Bachchan v. India Abroad Publ ns, Inc., 585 N.Y.S.2d 661 (N.Y. Sup. Ct. 1992). See generally Cohen, supra note 23 ( If foreign libel judgments can be enforced in American courts, there will be a race to the bottom ; writers will only have as much protection as the least pro-free-speech nations allow. ).

10 2466 CARDOZO LAW REVIEW [Vol. 31:6 foreign judgment need not be conclusive if the cause of action on which the judgment is based is repugnant to the state s public policy. 53 Furthermore, libel tourists generally do not attempt to enforce their foreign judgments in the United States. So why are Americans so worried about libel tourism? One clue can be found in the fact that libel tourists rarely try to enforce their foreign judgments in the United States. This suggests that their goal is not recovery of damages or enforcement of the terms of the foreign judgment, but is the foreign judgment itself. 54 Indeed, American journalists and authors claim that the very existence of a foreign libel judgment chills speech otherwise protected by the First Amendment. For example, Ehrenfeld claimed that some of her publishers with considerably deeper pockets had assets abroad and thus would not be protected by the U.S. s policy of not enforcing such judgments. 55 As a result, Ehrenfeld said publishers shied away from publishing her work, 56 and that bin Mahfouz s lawsuits had a similar impact on the work of other authors. 57 In order to remain publishable, journalists and authors faced with this dilemma naturally self-censor their work; they will choose not to publish all the information revealed by their research out of fear of being sued. 58 But the concern is not limited to the speech rights of 53 N.Y. C.P.L.R (McKinney 2008). 54 See Thomas F. Gleason, Who Should Fix the Libel Tourism Problem?, 239 N.Y.L.J. 3 (2008). 55 See Ehrenfeld Affidavit, supra note 3, In her affidavit, Ehrenfeld stated: Mahfouz [s] posting on his website about the judgment in the English action has clearly discouraged some U.S. publishers from publishing my work. I sent a very well researched and referenced article about a Saudi-owned company to two publications that have published everything that I have sent them before. Each has declined to publish the article and been uncharacteristically evasive in giving reasons for their refusal. Id. 25(a). 57 For example it has been reported that Mahfouz s litigiousness is the chief reason why publisher Secker & Warburg in early 2004 decided not to publish Craig Unger s acclaimed book concerning the Saudi royal family House of Bush: House of Saud in England. Id. 25(c); see also Sarah Lyall, Are Saudis Using British Libel Law to Deter Critics?, N.Y. TIMES, May 22, 2004, at B7, available at (reporting that Secker & Warburg, Unger s British publisher, canceled publication due to its fear of being sued). Lyall also reported that publication of Ehrenfeld s book in Britain was also canceled due to British publishers fear of a libel lawsuit after a legal threat by one of the Saudis she wrote about. Lyall, supra note 34. As we now know, this measure may have been sufficient to insulate the British publisher from liability, but it was not sufficient to insulate Ehrenfeld. 58 Ehrenfeld elaborated: Many of those who have succumbed to Mahfouz s threats and have issued the corrections and apologies Mahfouz has demanded.... A recent compelling example of self-censorship is Gerald Posner s new book on the Saudis, Secret of the Kingdom, published by Random House in May 2005, which improbably contains no reference to either Mahfouz or the Muwafaq Foundation. Similarly, Rita Katz, who is

11 2010] LIBEL TOURISM 2467 individual journalists and authors. The ultimate losers of libel tourism are members of the American public, who are deprived of critical information about terrorism and its funding. 59 D. New York s Response to Libel Tourism: The Libel Terrorism Protection Act Concerned with the chilling effects of libel tourism, the New York State Senate quickly responded to the New York Court of Appeals Ehrenfeld decision by introducing a bipartisan bill that would extend the jurisdictional reach the Court of Appeals found lacking. 60 The explicit purpose of the bill, which became known as the Libel Terrorism Protection Act, was to overrule Ehrenfeld. 61 The bill purported to protect New York citizens, publishers, and media outlets from local enforcement of foreign defamation judgments designed to inhibit their being sued by other Saudis over the contents for her book Terrorist Hunter, published by HarperCollins, has reacted by becoming reluctant to return phone calls or s. As a result of Mahfouz s aggressive English litigation strategy, Loretta Napoleoni removed everything she had in the hard copy edition of her book Modern Jihad that connected Mahfouz to al Qaeda or terror financing for the May 2005 paperback version re-titled Terror Incorporated. Ehrenfeld Affidavit, supra note 3, 25(b). 59 Id. 25(d). Indeed, this concern informed the Supreme Court s decision to adopt a rule that would presume the truth of an allegedly libelous statement and place a heavy burden of proof on the plaintiff: A rule compelling the critic of official conduct to guarantee the truth of all his factual allegations and to do so on the pain of libel judgments virtually unlimited in amount leads to a comparable self-censorship.... Under such a rule, would-be critics of official conduct may be deterred from voicing their criticism, even though it is believed to be true and even though it is in fact true, because of doubt whether it can be proved in court or fear of the expense of having to do so. They tend to make only statements which steer far wider of the unlawful zone. The rule thus dampens the vigor and limits the variety of public debate. New York Times Co. v. Sullivan, 376 U.S. 254, 279 (1964) (citations and footnote omitted). 60 See S. 6687, 231st Leg., Reg. Sess. (N.Y. 2008) (enacted). Ehrenfeld was decided on December 20, 2007, a bill seeking to legislatively overrule Ehrenfeld was introduced to the New York Senate on January 9, 2008, and the Libel Terrorism Protection Act was signed into law on April 28, See id. Shortly after, on May 6, 2008, Senators Arlen Specter, Joseph Lieberman, and Charles Schumer introduced a bipartisan bill that would create a federal cause of action, giving American authors and publishers who were subject to a foreign defamation action that same rights that New York s Libel Terrorism Protection Act confers. See Free Speech Protection Act of 2008, S. 2977, 110th Cong. 3(b) (2008). In addition, the Federal Act would allow American authors to countersue for damages suffered due to decreased opportunities to publish and other effects of speech chilling. Id. 3(a). Moreover, if a jury found that the foreign suit was an attempt to intentionally suppress protected speech, it could award treble damages. Id. 3(d). However, the bill never became law. Free Speech Protection Act of 2008, S. 2977, 110th Cong. (2008), available at congress/bill.xpd?bill=s (last visited June 25, 2010). 61 See Introducer s Memorandum in Support of S. 6687, 231st Leg., Reg. Sess. (N.Y. 2008).

12 2468 CARDOZO LAW REVIEW [Vol. 31:6 freedom of expression. 62 Its putative effect would be to put an end to the harmful chill on First Amendment speech. 63 The state legislature voted unanimously to enact the law. 64 The Libel Terrorism Protection Act provides that New York courts need not enforce foreign libel judgments if the foreign law provides less free speech protection than does U.S. law. 65 It also amends CPLR 302, New York s long arm personal jurisdiction statute, giving New York courts jurisdiction to issue declaratory judgments against foreign libel tourists. 66 The Act thus establishes a new basis for personal jurisdiction in New York over nonresident defendants (the libel tourist plaintiffs) by extending personal jurisdiction over any person who obtained a judgment in a defamation action outside the U.S. against a New York resident or a resident or a person amenable to jurisdiction in New York. 67 Jurisdiction also requires that the following conditions are met: The publication at issue was published in New York, and the resident has assets in New York or may have to take actions in New York to comply with the foreign judgment. 68 Finally, the Act provides that personal jurisdiction under those circumstances would reach to the fullest extent of the Constitution. 69 While the Act carried New York courts past one hurdle, namely the limited enumerated grounds for jurisdiction under former CPLR 302, 70 the Act is nevertheless constrained by the Due Process Clause of the Fourteenth Amendment. 71 The question thus remains: Under the Libel Terrorism Protection Act, would there be personal jurisdiction over a defendant like bin Mahfouz in New York for the declaratory 62 Id. 63 See id. Addressing the Ehrenfeld case in the bill s sponsor memo, New York State Senator Dean Skelos stated: The Saudi businessman has cleverly withheld actually attempting to enforce the judgment against Dr. Ehrenfeld in New York, lest he trigger the potential that an American court will refuse to enforce the English judgment. But he has already accomplished his goal. Dr. Ehrenfeld feels the weight of self-censorship every working moment; her publishers suddenly backing away from publishing her work. Dr. Ehrenfeld s intellectual detention has no end in sight. Id. 64 Kelly O Connell, Internet Law NY Libel Terrorism Protection Act 2008, INTERNET BUS. L. SERVICES, May 15, 2008, &s=latestnews. 65 See N.Y. C.P.L.R 5304 (McKinney 2008); see also supra note See supra note See N.Y. C.P.L.R. 302(d) (McKinney 2008). 68 Id. 69 Id. 70 See, e.g., Vasquez v. Torres Negron, 434 F. Supp. 2d 199, 201 (S.D.N.Y. 2009) ( Because CPLR 302 does not reach as far as the constitution permits, if a defendant is amenable to longarm jurisdiction in New York, the constitutional standard is satisfied. ). 71 No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law.... U.S. CONST. amend. XIV, 1.

13 2010] LIBEL TOURISM 2469 judgment action of a plaintiff like Ehrenfeld, or do constitutional limitations forestall such jurisdiction? In other words, does the Libel Terrorism Protection Act do anything at all? II. DUE PROCESS LIMITATIONS ON PERSONAL JURISDICTION PRESENT A CHALLENGE TO ENDING THE CHILLING EFFECT The Libel Terrorism Protection Act amended CPLR 302 making it coextensive with federal due process limitations. While commentators applaud the Act for establishing a basis for personal jurisdiction over libel tourists, 72 the jurisdiction it confers is subject to constitutional parameters. As such, even under amended CPLR 302, if a court determines that the exercise of personal jurisdiction over a party like bin Mahfouz in New York would violate his federal constitutional due process rights, Ehrenfeld s case would be dismissed. 73 In analyzing the jurisdictional question, a court must apply the constitutional doctrine of personal jurisdiction developed by the U.S. Supreme Court. 74 A. The Supreme Court s Constitutional Personal Jurisdiction Doctrine and the Effects Test The requirement of personal jurisdiction is a constitutional limitation on the power of a state posed by the due process rights of the individual. 75 At common law, a state s jurisdiction was defined by physical territory and such jurisdiction traditionally extended over only those persons and property present within the state s borders. 76 In 1945, however, the Supreme Court developed a proxy for actual presence in a state the notion that a defendant s contacts with the forum state could render that defendant amenable to the state s jurisdiction, notwithstanding the defendant s physical absence from the state See, e.g., Abady & Silvergate, supra note 23 (stating that the bill would empower New York courts to assert jurisdiction over anyone who obtains a foreign libel judgment against a New York publisher or writer (emphasis added)). 73 The Libel Terrorism Protection Act is retroactive. See supra note The constitutional personal jurisdiction doctrine must be applied in all the courts federal and state in a state where the relevant long-arm statute is co-extensive with the Constitution, as is the case in New York after the Libel Terrorism Protection Act. 75 Yahoo! Inc. v. La Ligue Contre Le Racisme et L Antisemitisme, 433 F.3d 1199, 1228 (9th Cir. 2006) (per curiam) (O Scannlain, J., concurring in the judgment) (citing Omni Capital Int l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987)). 76 See Pennoyer v. Neff, 95 U.S. 714 (1877). 77 See Int l Shoe Co. v. Washington, 326 U.S. 310, (1945) ( [T]he terms present or presence are used merely to symbolize those activities of the [defendant] s agent within the state which courts will deem to be sufficient to satisfy the demands of due process. Those demands

14 2470 CARDOZO LAW REVIEW [Vol. 31:6 Since 1945, the constitutional inquiry with respect to personal jurisdiction over absent defendants has focused on the contacts between the defendant, the forum, and the litigation. 78 If the foreign defendant has a substantial, continuous, and systematic presence in the forum state, the court may exercise general jurisdiction over the defendant. 79 In other words, the defendant may be sued for any claim in that state. 80 If, however, the defendant s contacts are not sufficient to warrant an exercise of general jurisdiction, a court may nonetheless exercise specific jurisdiction over the defendant. 81 This means that the defendant may be sued only for claims arising out of, or related to, the defendant s contacts with the forum state. 82 In order to comport with due process, of specific jurisdiction must meet three requirements: (1) The defendant must have certain minimum contacts with the forum state; (2) such contacts must be related to the litigation; and (3) the assertion of jurisdiction must be reasonable, such that it does not offend traditional notions of fair play and substantial justice. 83 may be met by such contacts of the [defendant] with the state of the forum as make it reasonable, in the context of our federal system of government, to require the [defendant] to defend the particular suit which is brought there. (citations omitted)). Of course, physical presence of the defendant as a basis for personal jurisdiction is still good law; a state can exercise personal jurisdiction over a defendant served with process while physically present in the forum state, even if such presence is transient. See Burnham v. Superior Court, 495 U.S. 604 (1990). 78 See Shaffer v. Heitner, 433 U.S. 186, 204 (1977). 79 See Int l Shoe, 326 U.S. at 318 ( [T]here have been instances in which the continuous corporate operations within a state were thought so substantial and of such a nature as to justify suit against [the corporation] on causes of action arising from dealings entirely distinct from those activities. ). 80 See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952). 81 See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984). 82 See id. 83 See Int l Shoe, 326 U.S. at 316 (internal quotation marks omitted). [T]o the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue. Id. at 319. The Supreme Court later enunciated several factors to be considered in determining whether the exercise of jurisdiction is reasonable. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985) ( [C]ourts in appropriate cases may evaluate the burden on the defendant, the forum State s interest in adjudicating the dispute, the plaintiff s interest in obtaining convenient and effective relief, the interstate judicial system s interest in obtaining the most efficient resolution of controversies, and the shared interest of the several States in furthering fundamental substantive social policies. (internal quotation marks and alterations omitted)); see also World- Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). While these factors may establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required, a defendant would carry a heavy burden in trying to convince the court that jurisdiction is unreasonable where sufficient minimum contacts have been established. See Burger King, 471 U.S. at But see Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 116 (1987) (holding that where the plaintiff was not a resident of the forum state and the defendant was a Japanese manufacturer, jurisdiction was unreasonable because there would be a

15 2010] LIBEL TOURISM 2471 The Supreme Court has interpreted minimum contacts to require one of two things: Either the defendant must have purposefully availed herself of the privilege of conducting business or other activities within the forum state, thereby invoking the benefits and protections of its laws; 84 or the defendant must have purposefully directed her tortious or otherwise wrongful conduct at the forum state, where the plaintiff suffered the resulting harm. 85 The former is known as purposeful availment and the latter is known as the effects test. 86 The Supreme Court first adopted the effects test in Calder v. Jones. 87 Shirley Jones, an actress, brought a libel action in California state court against defendants South and Calder, both Florida residents. 88 The defendants, employees of the National Enquirer, a Florida corporation, wrote and published an article reporting that Jones drank so heavily she could not fulfill her professional obligations. 89 California s long-arm statute permitted personal jurisdiction over a nonresident defendant to the fullest extent allowed by the Federal Constitution. 90 Thus, the question was whether it was constitutional for a California court to exercise jurisdiction over the defendants. The Court held that California s jurisdiction over the defendants satisfied due process on the ground that the defendants purposefully caused tortious injury to Jones in California. 91 The National Enquirer heavy burden on the defendant, while the interest of the plaintiff in litigating in the forum state and the interest of the forum state in adjudicating the case were slight). 84 See Hanson v. Denckla, 357 U.S. 235, 253 (1958). In Burger King, the Supreme Court explained the rationale behind the purposeful availment requirement: [It] ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the unilateral activity of another party or a third person. Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a substantial connection with the forum State. Thus where the defendant deliberately has engaged in significant activities within a State, or has created continuing obligations between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by the benefits and protections of the forum s laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well. 471 U.S. at (citations and footnotes omitted). 85 Calder v. Jones, 465 U.S. 783, (1984). 86 See, e.g., Best Van Lines, Inc. v. Walker, 490 F.3d 239, 243, 247 (2d Cir. 2007). 87 See Calder, 465 U.S. at See id. at Id. at , & n Id. at 786 n.5 (citing CAL. CIV. PROC. CODE ). 91 The Supreme Court expressly approved of and adopted the effects test employed by the California Court of Appeal. See id. at 787 n.6. The California Court of Appeal had held that a valid basis for jurisdiction existed based on the effects in California of the defendants allegedly tortious Florida conduct, performed with the intent to cause injury to Jones in California. The test established by the California Court of Appeal, derived from the RESTATEMENT (SECOND) OF CONFLICT OF LAWS 37 (1971), is couched in the requirement that the action must be taken with the intent to cause tortious injury: If a defendant commits an act or omission outside the forum state with the intent to