UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 21-1655

SVETLANA LOKHOVA,

Plaintiff - Appellant,

v. STEFAN A. HALPER,

Defendant - Appellee.

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Leonie M. Brinkema, District Judge. (1:20-cv-01603-LMB-MSN)

Argued: January 26, 2022 Decided: April 5, 2022

Before NIEMEYER, AGEE, and DIAZ, Circuit Judges.

Reversed and remanded by published opinion. Judge Niemeyer wrote the opinion, in which Judge Agee and Judge Diaz joined.

ARGUED: Steven Scott Biss, LAW OFFICE OF STEVEN S. BISS, Charlottesville, Virginia, for Appellant. Terrance Gilroy Reed, LANKFORD & REED, PLLC, Alexandria, Virginia, for Appellee. ON BRIEF: Robert D. Luskin, PAUL HASTINGS LLP, Washington, D.C.; Robert K. Moir, LANKFORD & REED, PLLC, Alexandria, Virginia, for Appellee. NIEMEYER, Circuit Judge:

This appeal arises from the imposition of sanctions under Federal Rule of Civil Procedure 11 for the filing of a complaint alleging state law torts of defamation and tortious interference with contract that the district court found to be frivolous.

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

2 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.

I

In May 2019, Lokhova, by her counsel Biss, commenced the earlier action against Halper and several news organizations in the district court. The complaint alleged that Halper was a veteran political operative and the source of untrue defamatory statements, pu