Ever had a client’s friend or business associate badmouth you about the fees you’re charging? It may hurt, professionally as well as financially, but it’s not actionable, a state appeals court says.

A two-judge panel ruled Thursday that a defamation claim was properly dismissed because the speaker was protected by the “common interest” privilege, which allows generally free discussion of private concerns within a limited, relevant audience.

The judges found a lack of actual malice on the defendant’s part, such as would have defeated the privilege. That absence of malice was also sufficient to support dismissal of a separate claim for tortious interference with a business relationship, the Appellate Division held in Sarmasti v. Emanuel, A-1667-11.

According to facts accepted as true for summary judgment purposes, Vafa Sarmasti, a lawyer with offices in Fairfield and New York, was retained in 2005 by Dr. Khash Vosough, a partner in several medical ventures in Wayne — Comprehensive Women’s Healthcare Corp., SA Healthcare Management, SurgiAide and SAIP Investments.

Vosough and his colleagues thereafter decided to terminate the relationship with Sarmasti, concerned about his lack of experience in business and intellectual property, his delays in performing services and their belief that their matters were not a priority to him.

In February 2009, Sarmasti wrote to Vosough that he was withdrawing as counsel to CWHC, in litigation against a hospital, because of “rumors circulating in the Iranian community … that I am overcharging your group for the services … provided.”

In July 2009, Sarmasti sued Joshua Emanuel, who owned a part of SA Healthcare and SAIP Investments, after learning of a conversation between Emanuel and Vosough the previous year, in which Emanuel told Vosough that Sarmasti was “engaged in fraudulent billing, and willfully and falsely billed for services … not provided.”

Essex County Superior Court Judge Torkwase Sekou dismissed Sarmasti’s defamation claim on summary judgment, largely relying on the common interest privilege, even though Emanuel initially failed to plead that privilege as an affirmative defense.

Appellate Division Judges Carmen Messano and Marie Lihotz agreed, saying, “While this appeal does not raise important issues of public policy, we are convinced that the interests of justice were served by the judge’s consideration of the issue based upon the motion record before her.” They noted that under the Supreme Court’s ruling in McNeil v. Legislative Apportionment Commission, 177 N.J. 364 (2003), the pleading requirement was not absolute.

As for application of the privilege, the judges cited Bainhauer v. Manoukian, 215 N.J. Super. 9 (App. Div. 1987), which held that “in particular situations … private people [should] be able freely to express private concerns to a limited and correlatively concerned audience.”

In Bainhauer, the appeals court said there are three factors that determine whether a statement is protected by the common interest privilege: the appropriateness of the occasion on which the statement was made, the legitimacy of the interest sought to be protected or promoted and the significance of the information to the recipient.”

In this case, Emanuel was “integral” to Vosough’s operations and also had ownership interests in SA Healthcare Management and SAIP Investments. He was concerned about being billed by Sarmasti for a phone call that Emanuel thought occurred while he was in Malta and unreachable. Later, after the suit had been filed, Emanuel acknowledged that he was wrong and that the phone call occurred while he was in Florida.

“Applying the Bainhauer factors to the facts presented, it is apparent that defendant’s statements allegedly made to Vosough during the phone conversation of July 31, 2008, were privileged,” the judges said. “The occasion was appropriate since Sarmasti was discussing the bill with Vosough; the interest sought to be protected — charging for services allegedly not performed — was legitimate; and the information was pertinent to Vosough.”

Nor was there an apparent abuse of the privilege. “This record fails to raise a jury question as to whether clear and convincing evidence exists demonstrating that defendant made his statements to [the client] with reckless disregard for their truth,” Messano and Lihotz said.

Since Emanuel was not acting out of malice when he made the statement to Vosough, the judges found, Sarmasti had failed to establish one of the essential parts of a claim of tortious interference with a business relationship — that the defendant acted with malice.

Sarmasti contended that the false allegation of improper billing “poisoned the well,” leading ultimately to his resignation as counsel in February 2009. He argued that the record failed to demonstrate that Emanuel was acting as Vosough’s agent; rather, he had a separate motivation to get Sarmasti fired.

But the judges said “the record demonstrates that defendant was not only acting as Vosough’s business agent throughout, but also that Sarmasti himself viewed defendant as the person he needed to speak to about the billing discrepancy.”

Sarmasti, who represented himself and his firm, says he has not decided whether to appeal to the Supreme Court. “I respectfully disagree with the [Appellate Division's] approach in reaching its conclusion,” he says.

Emanuel’s lawyer, Michael Epstein, who runs a firm in Rochelle Park, was away from his office and could not be reached for comment. •

Michael Booth is a reporter for theNew Jersey Law Journal, a Legal affiliate.