Case Notes: The High Cost of Defamation at a Bronx Condo

Defamation can harm co-op and condo budgets as much as it harms reputations. What is defamation? If someone damages the reputation of another person by verbal statements (called slander) or in writing (called libel), the offending party is guilty of defamation, and the injured party can bring an action and demand compensation.

But there is a significant legal exception. The courts will allow people to express opinions, no matter how obnoxious (or false), even when they might border on defamation – if they are made within a closely knit group whose members have a “common interest.” All of this came into play in the interesting case of Keeling v. Salvo, et al.

Cheryl Keeling was a unit-owner and board member at the Promenade West condominium in the Riverdale section of the Bronx, and for many years she also managed this property, among others. Silvina Salvo, another unit-owner, is the current chairperson of the board’s Finance Committee. In May 2014, Salvo demanded bank statements from Keeling, and, by implication, accused Keeling of mismanaging the condo’s funds. Yet, when Salvo reviewed the books and records with Keeling, she found no irregularities. She also learned that the condo agreed that Keeling would not pay common charges in return for managing the condo association and that the condo owed Keeling money for fees that were due her. But Salvo failed to issue a report which would have caused any questions about Keeling to subside.

 A year later, a special meeting of unit-owners was called to remove Keeling from the board. Prior to that meeting, Salvo stated to the unit-owners in writing that Keeling had not paid her common charges for a number of years, and she repeated the statement at the meeting. Salvo further stated that Keeling refused to turn over the condo’s books and records. Though these false statements might seem actionable as defamation, Salvo claimed the “common interest” privilege. It has long been held that this privilege applies in disputes in co-ops and condos, which is why most defamation actions in co-ops or condos rarely succeed.

However, there is an exception to this exception. The common-interest privilege cannot be used if there was malice when the statement was made. Malice is usually proven if there was a high degree of awareness of the fact that the statements were false. Interestingly, courts have held that there is a critical difference between not knowing whether something is true and being highly aware that it is probably false. Only the latter will establish reckless disregard of the truth, which is a prerequisite for establishing malice.

 The court found that Keeling proved that she produced the condo’s books and records and that she had responded to Salvo’s questions. In fact, Salvo even conceded in writing that the documents showed no irregularities and that the condo owed Keeling money. Yet Salvo continued to make such statements. All of this, according to the court, showed that Salvo had made her statements with enough recklessness to show malice.

Keeling included another complaint in her lawsuit. She also alleged defamation per se, which is a false statement that damages the victim’s business reputation. The important issue is that if a person claims defamation, there must be special harm done; however, no special harm needs to be shown if it is considered defamation per se. So if one's business reputation is harmed, it will be assumed that there are damages, and the aggrieved party does not have to prove the extent of such damages.

The court agreed with Keeling that Salvo was guilty of defamation per se. It also recognized that Keeling was in the management business and that her dismissal from the board would be interpreted by the real estate community as an indication that there must have been misconduct. Further, since Keeling managed buildings, the claim that she had refused to turn over the condo’s books and records – which was held to be false by the court – would certainly create a question about her integrity. Finally, the court recognized that the statements and accusations by Salvo would cast doubt on Keeling’s honesty in connection with other people’s money, and this would certainly be enough to fulfill the requirements for a successful lawsuit alleging defamation per se. A lose-lose for Salvo.

The lesson here is clear: Even in a co-op or condo with common interests, spewing falsehoods, innuendos or dangerously reckless statements can be very costly if the court rules against the party making such statements. Words are weapons. Board members, shareholders and unit-owners should always wield them with care.

Andrew P. Brucker is a partner at the law firm Armstrong Teasdale. The statements and views in this article are his own and not necessarily those of the firm.