Tort – Defamation – Insulting Words – Loan 'Default' Letter

A “default” letter sent to borrowers and others associated with an overdue loan is absolutely privileged against a defamation claim because the letter is written in anticipation of legal proceedings.

The issue here is whether the judicial proceedings privilege extends to communications made prior to the commencement of litigation during the course of extrajudicial investigation relating to anticipated civil litigation. On this issue the Supreme Court has yet to speak.

It is necessary that counsel have the ability to investigate the circumstances of a possible cause of action before filing suit. Indeed, when an attorney tenders a pleading to the court, he gives his assurance that it is filed in good faith and not for delay. When a party is not represented by counsel and files a pleading, he is bound by the same rules governing the filing of pleadings by counsel. Virginia Code § 8.01-271.1 imposes even more expansive duties than the rules, and further provides that a pleading filed in violation of its provisions may result in sanctions against the attorney, the party, or both. Clearly, Virginia law requires investigation of potential causes of action prior to the initiation of a suit. Should these inquiries be the basis of later actions for defamation, the policy of encouraging citizens to bring their disputes to the court for resolution would be frustrated, the policy of encouraging the settlement of disputes prior to litigation would be compromised, and the freedom to speak freely about the matters in controversy would be limited.

The court therefore holds that the Restatement (Second) of the Law of Torts Sects. 586 and 587 accurately reflect the law of Virginia. In determining whether the privilege applies in the case at bar, a two-step analysis must be followed. First, the occasion of the communication must be examined to determine if the statement was made preliminary to a proposed judicial proceeding, or in the institution of, or during the course and as a part of a judicial proceeding. Second, a court must evaluate the content of the statement to determine it if has some relation to a proceeding that is contemplated in good faith and under serious consideration.

Here, the court finds that the default letter in question was sent preliminarily to proposed legal proceedings and that the letter was related to a proceeding that was contemplated in good faith and under serious consideration. The court grants summary judgment to defendants on the two counts alleging defamation per se by the two letters.

Emotional distress

Plaintiffs also allege that defendants’ negligent actions caused emotional disturbance and physical injury to plaintiff, in that she suffered a physical injury when she fell to the floor from shock and fright after reading the foreclosure letter sent by defendants. They allege she continues to suffer from post-traumatic stress disorder.

The demurrer to the claim for emotional distress also is sustained.

Long v. Old Point Bank of Phoebus (Poston) Law No. L96-1048, Feb. 25, 1997; Norfolk Cir. Ct.; Carl W. Isbrandtsen, J.A. Stalnaker, Jerrold G. Weinberg, Walter D. Kelly Jr. for the parties VLW 097-8-108,23 pp.