Eleventh Circuit Slaps Sanctions On Plaintiffs For Pursuing Libel Suit Based On Intra-Corporate Memorandum

The Eleventh Circuit Court of Appeals has reversed the ruling of an Atlanta federal district court and ordered that sanctions be imposed on plaintiffs who filed a libel lawsuit based on an internal corporate memorandum. Koly v. Enney (11th Cir., March 7, 2008). The case involves a rare instance in which Rule 11 sanctions were imposed for bringing an unjustified libel lawsuit, and may indicate an increased willingness by courts to punish plaintiffs who use the courts to chill the speech of "whistleblower" corporate officers or employees.

The suit involved a claim brought by M.S. Koly ("Koly") and Delcath Systems, Inc. ("Delcath"), alleging a single count of libel against Elizabeth Enney ("Enney"). The plaintiffs alleged that Enney, who was the Regional Vice Chairman of the non-profit organization the Rolls Royce Owners Club ("RROC"), circulated a libelous memorandum to other Club leaders stating