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Date: 04-05-2022

Case Style:

Svetlana Lokhova v. Stefan A. Halper

Case Number: 21-1655

Judge: Niemeyer

Court: United States Court of Appeals for the Fourth Circuit on appeal from the Eastern District of Virginia (Fairfax County)

Plaintiff's Attorney: Steve Biss

Defendant's Attorney: Terrance Gilroy Reed

Description: Alexandria, Virginia plaintiff personal injury lawyer represented Plaintiff, who sued defendant on defamation and tortious interference theories.

Svetlana Lokhova, a Russian-born author and academic, first sued Stefan A. Halper and others in May 2019, alleging acrimoniously and unprofessionally in an excessively long complaint that Halper was the source for news stories accusing her of being a Russian spy and of having an affair with General Michael Flynn in furtherance of her mission. On Halper’s motion, the district court dismissed the action, primarily because it was facially untimely. Halper also filed a motion for sanctions, asserting that Lokhova and her attorney, Steven Biss, had brought the action in bad faith. The court denied that motion but warned Biss that should he “file further inappropriate pleadings or pursue frivolous post-judgment litigation against any of these defendants, sanctions might well be justified.”

Roughly ten months later, Lokhova, again with Biss as her attorney, commenced this action based on facts that arose after the district court’s warning, alleging that Halper and his attorney contacted the publishers of Lokhova’s then-forthcoming book with the sole purpose of causing her book contract to be cancelled. The complaint alleged that in doing so, Halper and his counsel defamed Lokhova and tortiously interfered with her contract, causing its cancellation. She demanded $5 million in compensatory damages.

Before filing a motion to dismiss, motion for summary judgment, or any other response to the complaint, Halper filed a motion for sanctions. The district court granted the motion and imposed sanctions on Lokhova and Biss, jointly and severally, dismissing the action and awarding Halper attorney’s fees. The court found that two letters that Halper had sent to the publishers were protected by an absolute litigation privilege under Virginia law, rendering the complaint “frivolous and without merit.” Accordingly, it concluded that Lokhova and Biss “violated both Rule 11 [of the Federal Rules of Civil Procedure] and the Court’s admonition in [the earlier litigation]” in commencing this action.

While the exchanges between the parties over the course of the two lawsuits have been heated, we conclude that the complaint filed in this action was not frivolous and therefore its filing did not justify the imposition of sanctions. Accordingly, we reverse and remand for further proceedings.

Outcome: At bottom, we conclude that the district court abused its discretion in finding Lokhova’s complaint frivolous and concluding on that basis that its filing violated Rule 11. The judgment of the district court — as reflected in its orders of May 5, 2021 and July 9, 2021 — is therefore reversed and the case remanded for further proceedings. We also deny the parties’ cross-motions for sanctions filed in this appeal.

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