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Adobe PDF0(9 Z6Times New Roman Regular@XX3:i+00U0d:AZ&Century Gothic Z[\]_K<<C BdLevel 1Level 2Level 3Level 4Level 5(D3$ >'S!..     (D3$ >'S!..     ($$   1  ````)!dxdx d >'S!..     _      XX8 ? XXdd8B.` hp x XBQ@?f=X@X6?==@?fCARNEGIEINTERNATIONAL h     * p INTHE  CORPORATION,etal.,   h      p      B+ ` hp x XB  * p CIRCUITCOURT t   9%` ` hp x X9Plaintiffs   h      V   X<( ` hp x ` ` X<* p FOR 8   X?+ ` hp x X?v.   `     h       j  h* p BALTIMORECITY  L  hGRANTTHORNTON,_LLP_,etal. h       .    * p CaseNo.:24C00002639    P ` ?+ ` hp x X?Defendants   h          P ` ?+ ` hp x X? X* ` * *  * h *  *  * p *  *  * x * f   X  MEMORANDUMOFDECISION  ?f==6? *z   X?X= ?f  Q    Xc$XX X?ThismattercomesbeforetheCourtonGrantThornton,_LLP_sMotionfor B  SummaryJudgmentonCountEightoftheComplaint,PlaintiffsE.DavidGable , ( Gable)andLowell_Farkas_( _Farkas_)ResponsetoGrantThorntonsMotionfor  SummaryJudgment,GrantThorntonsReplythereto,andtheSupplemental  Briefsfiledbybothpartiesontheissueofabsoluteimmunity.Asnopartyhas  requestedahearingonthismatter,anduponconsiderationoftheaforesaid  motionandbriefs,anduponfindingthatthestatementsmadebyGrant n ThorntonintheForm8KResponseareentitledtoabsoluteimmunity,thisCourt X grantsGrantThorntonsMotionforSummaryJudgmentastoCountEightofthe B! Complaint. ,#|!    Background  %f # m   PlaintiffGablewastheformerChairmanofCarnegieInternational 'P"% Corporation,Inc.( Carnegie)andPlaintiff_Farkas_ԀwasitsPresidentandChief (:$' ExecutiveOfficer.InMay,2000CarnegieandPlaintiffsGableand_Farkas_,intheir *$&) individualcapacities,filedaComplaintagainstGrantThorntonamongothers. ,(+ _OnOctober2,2001theCourtdismissedallclaimsbroughtbyGableandFarkas  againstGrantThornton,exceptforCountEightfordefamation.OnOctober18,  2001theCourtbifurcatedGablesandFarkasdefamationclaimfrom  Carnegiesclaims.CarnegiesclaimsproceededtotrialandonApril6,2005 n  judgmentwasenteredinfavorofDefendantGrantThorntononallof X  Carnegiesclaims.TheCourtalsoenteredjudgmentinfavorofGrantThornton B  onPlaintiffsGableandFarkasdefamationclaimuponfindingthattheyfailedto ,|  pursuetheclaim.PlaintiffsGableandFarkasmovedtoamendoralterthe f  judgmentwhichmotionwasgrantedonAugust10,2005.PlaintiffsGableand P FarkasdefamationclaimagainstGrantThorntonwastherebyrestored.Even : beforethisCourtalteredthejudgment,GrantThorntonfiledaMotionfor $ SummaryJudgmentastoCountEightfordefamation.    PlaintiffsGableandFarkaspremisetheirdefamationclaimupon  statementsmadebyGrantThorntoninaForm8KresponsefiledwiththeUnited  StatesSecuritiesExchangeCommission( SEC).GrantThorntonisan | accountingfirmthatCarnegiehadengagedasitscertifyingaccountantin f! January,1998.OnoraboutSeptember23,1999CarnegieinformedGrant P#  ThorntonthatitwasterminatingGrantThorntonsengagementasthe :% " companyscertifyingaccountants.Section229.304of17C.F.R.,asdiscussedin $'t"$ greaterdetailbelow,requiresapubliclytradedcompanytofileaForm8Kwith )^$& theSECinformingitofachangeintheregistrantscertifyingaccountantsand *H&( thereasontherefore.OnSeptember24,1999GrantThorntonreceivedadraft ,2(* versionofCarnegiesForm8Kwhichstatedasthereasonforthechangethat  Carnegie hasgeneralbusinessdisagreementswithGrantThornton8.  CarnegiefileditsForm8KonSeptember28,1999.      Section229.304of17C.F.R.alsorequirestheaccountanttofilearesponse n  letterwhichisappendedtotheregistrantsForm8Kstating whetheritagrees X  withthestatementsmadebytheregistrantinresponsetothisItem304(a)and,if B  not,statingtherespectsinwhichitdoesnotagree.OnOctober11,1999Grant ,|  ThorntonfileditsForm8Kresponseletter.InitsForm8Kresponse,Grant f  Thorntonstatedthatthereindeedhadbeendisagreements.Insupportthereof, P itwrotethat informationhadcometoitsattentionsuggestingthatCarnegies : uppermanagementhasbeenindifferenttoitsfinancialreportingresponsibilities $ underthefederalsecuritieslawsand,thus,itcould nolongerrelyuponthe  representationsofthemanagementofCarnegieincludingitsChairman,  Gable,andCEO,Farkas.ItisthesetwostatementsthatPlaintiffsGableand  Farkasclaimweredefamatory. |   XOnOctober13,1999Carnegie,withGableasthesignatory,filedan f! amendedForm8K.TheamendedversionretortstheaccusationsofGrant P#  ThorntonandpresentsingreaterdetailCarnegiesrenditionoftheevents :% " leadingtoitsterminationofGrantThornton. $'t"$  X  InitsMotionforSummaryforSummaryJudgment,inadditiontoattacking )^$& certainelementsoftheclaimfordefamation,GrantThorntonassertsthateither *H&( itsForm8Kresponsestatementswereabsolutelyprivileged,orinthealternative ,2(* theyweresubjecttoaqualifiedprivilege.BecausethisCourtholds,asamatter  oflaw,thatGrantThorntonsForm8Kresponsestatementswereentitledtoan  absoluteprivilegeforthereasonssetforthbelow,itneednotaddresswhether  thestatementswereentitledtoaqualifiedprivilege. n     Analysis  X   ӀIndecidingamotionforsummaryjudgment,theCourtmustfirstdecide B  whetherthereisagenuinedisputeastoanymaterialfact,andifnot,then ,|  decidewhethereitherpartyisentitledtojudgmentasamatteroflaw.Maryland f  Rule"  7XTXXXc$'"<"  "  Xc$XX7XT5201;""  "  Vogelv.Touhey"j#  "  ,151Md.App.682,704(2003)(citationsomitted); P "#  "  Okwav.Harper"$  "  ,360Md.161(2000).Amaterialfactisonetheresolutionof < whichwillsomehowaffecttheoutcomeofthecase."  Vogel"7%  "  3&,151Md.App.at704 & (citing"~&  "  &Kingv.Bankerd"8'  "  ',303Md.98,111(1985);"'  "  (Millerv.FairchildIndus.,Inc."w(  "  (,97  Md.App.324(1993),"%)  "  j)certdenied")  ,333Md.172(1993).TheCourtmustdetermine  issuesoflaw,butresolvenodisputedissuesoffact."  "  Beattyv.Trailmaster  Products"#+  "  ,330Md.726,737(1993). ~   Intheinstantmattertherearenogenuineissuesofmaterialfact.Theonly h! materialfactrelevanttotheissueofabsoluteimmunityiswhethertheGrant R#  Thorntonmadetheallegeddefamatorystatementsinan8Kresponse.Grant <% " ThorntondoesnotarguethatitdidnotmakethestatementsandPlaintiffsGable &'v"$  andFarkasdonotarguethatthestatementswerenotcontainedinan8K )`$& response.Therefore,becausetherearenodisputedissuesofmaterialfact,this  Courtwillresolvethiscaseasamatteroflaw."+  "  "/  "  "i/  "  "/  &   p      MXc$XXXc$AbsolutePrivilege#Xc$XXMXc$}0#    X  Marylandhaslongrecognizedtheexistenceofanabsoluteprivilegefor n  defamatoryutterancesmadeduringthecourseofjudicialproceedingsor X  containedindocumentsdirectlyrelatedtosuchproceedings.Caldor,Inc.v. B  Bowden,350Md.632,648(1993)(citationsomitted).Thisprivilegeprotectsthose ,|   personspublishingthedefamatorystatementfromliabilityevenwheretheir f  motivesaremaliciousandmadewiththeknowledgeofthestatementsfalsity. P Id.Whethersuchaprivilegeshouldattachisamatterofpublicpolicyand : requiresbalancing thepublicinterestinfreedisclosureagainsttheharmto $ individualswhomaybedefamed.Id.at649.Theunderlyingrationaleforthe  absoluteprivilegeistoencourageparticipantsinvolvedinthejudicialsearchfor  truth todosowithoutbeinghamperedbythefearofprivatesuitsfor  defamation.Id.'70 |  X  Havingadopteda broadviewoftheprivilege,Marylandhasalso f! extendedthis importantprivilege[]toadministrativeandotherquasijudicial P#  proceedingswhen therearesufficientjudicialsafeguardssoastominimize :% " thelikelihoodofharmtopotentiallydefamed(orotherwiseinjured)individuals $'t"$ whowouldhavenolegalremedy.Imperialv.Drapeau,351Md.38,45(1998); )^$& Gershv.Ambrose,291Md.188,192(1981).Thus,thedecisionwhethertoafford *H&( absoluteimmunitytostatementsinanadministrativeproceedingistobemade ,2(*  onacasebycasebasisandinlargepartturnsontwofactors:(1)thenatureof  thepublicfunctionoftheproceedingand(2)theadequacyofprocedural  safeguardswhichwillminimizetheoccurrenceofdefamatorystatements.  Imperial,351Md.at46(citationsandinternalquotationmarksomitted).Based n  ontheanalysisofthesetwofactorsbelow,thisCourtholdsthatGrantThorntons X  statementinthe8KresponseimplicatingGableandFarkasisentitledtoan B  absoluteprivilege. X?XXXc$& f  ,|      X?XX X?Xc$XX X?    *;  A.NatureofthePublicFunction*;; X;Ԍ f  ЌXc$XXXc$ X?XXXc$     Xc$XX X?  IndeterminingwhethertoaffordthestatementscontainedinGrant P Thorntons8Kresponseabsoluteimmunity,thisCourtmustweighthepublic : functionservedbytheSECandthepurpose(s)servedbythe8KFormagainst $ theharmsufferedbythePlaintiffsresultingfromanydefamatorystatements.  SeeCaldor,Inc.,350Md.at649.'f ,;    TheMissionoftheU.S.SecuritiesandExchangeCommissionistoprotect  investors,maintainfair,orderly,andefficientmarketsandfacilitatecapital | formation.Seehttp://www.sec.gov/about/whatwedo.shtl(January5,2006). f! TheSECisafederaladministrativeagencyvestedwiththeresponsibilityto P#  enforceboththeSecuritiesActof1933,15U.S.C.77aetseq.,andtheSecurities :% " ExchangeActof1934,15U.S.C.78aetseq.Thelawsandrulespromulgatedby $'t"$ theSEC )^$&  X?XXXc$&   9%` ` hp x X9 X?XX X?Xc$XX X?  &A  derivefromasimpleandstraightforwardconcept:all *H&( investors8shouldhaveaccesstocertainbasicfacts +=') aboutaninvestmentpriortobuyingit.Toachievethis, ,2(* theSECrequirespubliccompaniestodisclose -')+ meaningfulfinancialandotherinformationtothe  public.Thisprovidesacommonpoolofknowledgefor  allinvestorstousetojudgeforthemselveswhetherto  buy,sell,orholdaparticularsecurity.Onlythroughthe  steadyflowoftimely,comprehensive,accurate  informationcanpeoplemakesoundinvestment y  decisions.http://www.sec.gov/about/whatwedo.shtl n  (January5,2006).&ALB݌ c  ЌXc$XXXc$ X?XXXc$   X` ` X   :B?+ ` hp x X?Xc$XX X?Tothisend,thereportingrequirementsareakeycomponentofthesecurities B  laws. TheSECsreportingrequirementisdesignedtoprovideinvestorswiththe ,|  informationnecessarytomakeinformeddecisions,andprovidestheSECwitha f  basistopolicetheactionsofcompaniessubjecttotherequirement.Abellav. P BarringerResources,Inc.,615A.2d288,(N.J.Super.1992). :     Forinstance,publiclytradedcompaniesmustreportquarterlyfinancial $ statementsinForms10QandyearlyfinancialresultsinForms10K.See15U.S.C.  78m;17C.F.R.240.13a1&13a13.Form10Kincludesfinancialstatements  independentlyauditedbyacertifiedpublicaccountant,suchasGrant  Thornton,aswellastheaccountantsopinionastowhetherthecompanyhas | compliedwithGenerallyAcceptedAccountingPrinciples. f!   XPubliccompaniesmustalsoreportextraordinaryeventsastheyoccuron P#  aForm8K.See15U.S.C.78m;17C.F.R.240.13a11.Oneoftheeventsthey :% " mustreportisachangein,oradisagreementwith,accountantsonaccounting $'t"$ andfinancialdisclosure.See17C.F.R.229.304.Aspartofthedisclosurethe )^$&  registrantmust statewhethertheformeraccountantresigned,declinedto *H&(  Xstandforreelectionorwasdismissed,whether therewereanydisagreements   withtheformeraccountantonanymatterofaccountingprinciplesorpractices,  financialstatementdisclosure,orauditingscopeorprocedure,andif  somethinghascausedtheaccountant tobeunwillingtorelyon n  managementsrepresentations8.Id.at229.304(a)(1)(i),(iv)&(v)(C)(1)(ii). X  Reportingoftheseeventsismandatoryandincludeasituationinwhichthe B   accountantweretoresignorbedismissedafterinformingthe[company]that ,|  hehaddiscoveredfactswhichledhimtonolongerbeabletorelyon f  managementrepresentationsorwhichmadehimunwillingtobeassociated P withstatementsmadebymanagement.SecuritiesExchangeActReleaseNo. : 11147,AccountingSeriesReleaseNo.165,1974SECLexis2100,*9(Dec.20, $ 1974), NoticeofAmendmentstoRequireIncreasedDisclosureofRelationships  BetweenRegistrantsandTheirIndependentPublicAccountants.  TheSECpromulgatedthesereportingrulestodiscourage thepracticeof  changingaccountantsinordertoobtainmorefavorableaccounting | treatment.Id.at*2.Itisessentialthatinvestorsreceivethisinformationina f! timelymannerbecausesuchinformationismaterialtoinvestmentdecisions. P#  Reportingofdisagreementsprovidesinvestorswith anearlywarningof :% " potentiallytroublesomeareasandtheprompt disclosureoftheformer $'t"$ accountantsconcernswouldbeinthepublicinterestandaidinthe )^$& protectionsofinvestors.SECFinalRules,53F.R.12924(April20,1988);SEC *H&( ProposedRules,53F.R.12948(April20,1988). ,2(*   Becausethereportingofsuchevents,includingwhethertheauditors  haveinformedthecompanythatitcan nolonger8relyonmanagements  representations,iscrucialtotheprotectionoftheinvestingpublic,the  accountantisrequiredtorespondtotheregistrants8Kdisclosure.17C.F.R. n  229.304(a)(1)(v)(B)&(a)(3). Theregistrantshallrequesttheformeraccountant X  tofurnishtheregistrantwithaletteraddressedtotheCommissionstating B  whetheritagreeswiththestatementsmadebytheregistrantinresponsetothis ,|  Item304(a)and,ifnot,statingtherespectsinwhichitdoesnotagree.17C.F.R. f  229.304(a)(3).Theregistrantmustthenappendtheaccountantsresponseto P its8Kreport.Id. :   ThestatementsGrantThorntonexpressedinits8Kresponseletterwere $ preciselythoseillicitedbyItem304.GrantThorntondisagreedwiththe  statementsCarnegiemadeinthe8KFormregardingthedissolutionoftheir  relationshipandprovideditsreasonstherefore:It couldnotrelyuponthe  representationsofmanagementandthat UpperManagementhasbeen | indifferenttoitsfinancialreportingresponsibilitiesunderthefederalsecurities f! laws.Because,assetforthsupra,theSECfunctionsingreatparttoensurethat P#  investorscanmakeinformedinvestmentdecisionsandhasdeterminedthata :% " changeinaccountantsismaterialtothosedecisions,thisCourtholdsthatan $'t"$ accountants8KresponseletterplaysanintegralandessentialroleintheSECs )^$&  publicfunctioninprotectingtheinvestingpublic. *H&(  X?XXXc$& ^$      X?XX X?Xc$XX X?    ]  B.AdequacyofProceduralSafeguards]^ omr^Ԍ  ЌXc$XXXc$ X?XXXc$     Xc$XX X?  TheCourtsinquiry,however,doesnotendthere.Itmustalsoexamine   theadequacyofproceduralsafeguardswhichwillminimizetheoccurrenceof  defamatorystatements.Imperial,351Md.at46(citationsandinternal n  quotationmarksomitted).Traditionally,theabsoluteprivilegeappliedto X  testimonyduring,anddocumentspreparedforusein,apendingjudicialor B  quasijudicialproceeding.SeeDiBlasiov.Kolodner,233Md.512,522(1964); ,|  Adamsv.Peck,288Md.1,89(1980);Caldor,Inc.v.Bowen,330Md.632,650 f  653(1993).Thisprivilegehassubsequentlybeenextendedtostatementsmade P priortothecommencementofanyformalproceedingandwhichtendto : initiatetheinvestigativeprocess.SeeImperialv.Drapeau,351Md.38(1997); $ Minerv.Novotny,304Md.164(1985);Reichartv.Flynn,374Md.361(2003).  Whenreviewedthesecasesappeartoturnontwofactors:(1)whetherstrong  incentivesexistthatminimizethelikelihoodthatthestatementwouldbe  defamatorysuchasthestatementhavingbeenmadeunderoath,and(2) | whetherthesubjectofthestatementwouldbeentitledtothesamerightsheor f! shewouldreceiveinajudicialproceedingsuchasanadministrative P#  proceedingundertheMarylandAdministrativeProcedureAct,Md.Code,State :% " Government10101etseq.SeeId.'^$] $'t"$ _  Asathresholdmatter,Plaintiffsfirstcontendthatthestatementsmadeby )^$& GrantThorntonontheForm8Kresponsewereneitherpartofanofficial *H&( proceedingortheformalmechanismforinitiatingsuchaproceeding.Plaintiffs ,2(* arguethatthestatementsweremoreakintothe ordinarypublicmeeting  analysisemployedbytheCourtofAppealsinGershtorejectanapplicationof  absoluteprivilege.ThisCourtdisagrees.  8 l<`   InGersh,theCourtofAppealsrefusedtoextendanabsoluteprivilegeto n   voluntary$  $ital   X?XXXc$: 9  1      Xc$XX X?Ԁstatementsmadebyawitnesstestifyingatapublichearingbefore X  theBaltimoreCityCommunityRelationsCommission.Gersh,291Md.at196.As B  partofhistestimony,andinresponsetoquestioningfromtheCommission,the ,|  witnessaccusedanotherofcriminaloffenses.Id.at189.TheCourtreasoned, f  however,thatthehearingitselflackedanyadequateproceduralsafeguards, P and,thus,morecloselyresembledan ordinarypublicmeetingratherthana : quasijudicialproceeding.Id.TheCourtofAppeals,citingtheU.S.Supreme $ CourtsdecisioninButzv.Econonmou,438U.S.478(1978),explainedthatan  absoluteprivilegecouldattachtostatementsmadeinadministrativehearings  whenthoseproceedingscontainproceduralsafeguardssimilartothosepresent  injudicialproceedings.Id.at193.TheCourtofAppealscitedseveralofthe | safeguardsitconsideredimportant:(1)whethertheproceedingsare f! adversarial,(2)whetherthetrieroffactisindependentandinsulatedfrom P#  politicalinfluence,(3)whetherthepartiesmaypresentevidence,(4)whether :% " theadministrativejudgemakesrulingsontheadmissionofsuchevidence,and $'t"$ (5)whethertheadministrativejudgemayissuesubpoenas.Id.Findingthat  thosesafeguardswerenotpresentinthehearingbeforetheCommission,it  refusedtoextendtheprivilegetothathearing  f%  XXc$XXXc$  %q  Gersh,however,dealtexclusivelywithapplicationoftheprivilegeto n  testimonyduringanactualhearing,notwithstatementsthatcouldinitiatean X  investigationand/orasubsequenthearing.TheCourtofAppealshasheldthat B  statementsinacomplaintthattriggeranadministrativeinvestigationwiththe ,|  potentialofsubsequentproceedingssimilartothoseundertheMaryland f  AdministrativeProcedureAct,canbeentitledtoanabsoluteprivilege,atleast P totheextentthatthedeclarantwassubjecttopenaltiesforfalsestatementsin : thecomplaint.SeeImperialv.Drapeau,351Md.38(1997);Reichartv.Flynn,374 $ Md.361(2003);Minerv.Novotny,304Md.164(1985)(partiallypremisedonthe  factthatthedeclarantwassubjecttocriminalpenaltiesforknowinglyfalse  statementsinthesworncomplaint).%qq݌  Ќ  XXc$XXXc$  %  XXc$XXXc$  %v  ݀InMiner,asheriffbroughtadefamationsuitagainstacitizenwhofileda | swornbrutalitycomplaintagainsthimwiththesheriffsoffice.Miner,304Md.at f! 166.Afterconductinganinternalinvestigation,thesherriffsofficeconcluded P#  thatthesheriffhadcommittednomisconduct,and,therefore,nosubsequent :% " proceedingensued.Id.TheCourtdeterminedthatthefilingofthesworn $'t"$ complaintinitiatedanadministrativedisciplinaryproceedinggovernedby )^$& MarylandCode,Art.27,727734D,generallyknownasthe LawEnforcement *H&( OfficersBillofRights( LEOBR).Id.at17273.InfindingthattheLEOBR ,2(* providedadequateproceduralsafeguardstheCourtofAppealsnoted:(1)that  theComplaintwasmadeunderoath,(2)onewhoknowinglyfiledafalse  complaintwassubjecttocriminalliability,(3)thesubjectwasinformedofthe  investigation,and(4)thesubjectwasentitledtolegalrepresentationeven n  duringtheinvestigativephase.Id.at174.Italsoobservedthatshouldthe X  internalinvestigationhaverecommendeddisciplinaryactionagainsttheofficer B  theLEOBRprovidedthefollowingsafeguards:(1)theofficerwouldbeentitledto ,|  ahearing,(2)thathearingwouldbeadversarial,(3)theofficerwouldbe f  entitledtolegalrepresentation,(4)summonsescompellingthetestimonyof P witnessescouldissue,(5)anofficialrecordwouldbemaintained,and(5)the : rulesofevidenceweresimilartothosefollowedbyacourtoflaw.Id.at175. $ Basedonthesefactors,theCourtofAppealsheldthatadequateprocedural  safeguardswereinplacetominimizethepossibilityofadefamatorycomplaint.  Id.at176.%vv݌  Ќ  XXc$XXXc$  %  XXc$XXXc$  %  Inasimilarcase,ahighschoolfemalestudentcomplainedthatacoach | madeimpropersexualcommentstoheranddiscriminatedagainstfemale f! athletes.Reichertv.Flynn,374Md.361(2003).Sheandherparentsexpressed P#  theirconcernsorallytotheprincipalandinlettersdirectlytootherschool :% " officialsinaccordancewiththeschoolsystemsregulationentitled Sexual $'t"$ Harassment,III.B.3.a.Thatregulationprovided Any8studentwhobelieves )^$& thatsheorhehasbeensubjectedtosexualharassmentshouldreportsuch *H&( conductpromptly.Id.at363n.1.Eventhough theallegeddefamation[in ,2(* theinitialcomplaint]occurredbeforeahearingortrialcouldtakeplace,an  absoluteprivilegeattachedtothesestatementsbecauseoftheprocedural  safeguardsaffordedthesubject.Id.at377.Shouldanydisciplinaryactionhave  beentaken,thesubjecthadatleasttwolevelsofappeal,oneofwhichwas n  governedbytheMarylandAdministrativeProcedureAct,andtherightto X  judicialreview.Id.SeealsoImperial,351Md.at5054(holdingthataninformal B  complaintintheformofalettersenttoaCongresswomanandtheGovernor ,|  wasentitledtoabsoluteimmunitybecausetheletterinitiatedaninternal f  investigationandprocessundertheMarylandAdministrativeProcedureAct).%2݌ P Ќ  XXc$XXXc$  XTheinstantcaseisunlikeGershinseveralsignificantregardsandmore : closelyresemblesthefactualscenariosofMiner,Reichert,andImperialinthat $ theallegeddefamatorystatementswereprecursorstoanypotentialhearing.  First,thestatementsmadebyGrantThornton,unlikethoseinGersh,werefar  fromvoluntary:GrantThorntonwasrequiredtoissuethesestatementsin  accordancewith17C.F.R.229.304.Section229.304(a)(1)(v)(A)of17C.F.R. | requiredCarnegietodeclareinthe8KwhetherGrantThorntonhad advised f! [Carnegie]thatinformationhascometotheaccountantsattentionthathas P#  ledittonolongerbeabletorelyonmanagementsrepresentations. :% " WhenCarnegiefailedtosostate$   X?XhXc$$  ; 9  2      Xc$XX X?Ԁinthe8Kform,Section229.304(a)(3) $'t"$ thenrequiredGrantThorntontostateinaresponselettertothe8K whetherit )^$& agreeswiththestatementsmadeby[Carnegie]inresponsetothisItem304(a) *H&( and,ifnot,statingtherespectsinwhichitdoesnotagree.Intheresponse  letter,GrantThorntonreportedwhatCarnegiehadfailedtoreport,i.e.thatit  couldnolongerrelyonCarnegiesmanagementsrepresentations,asabasis  forthechangeinauditors.GrantThorntonessentiallydisagreedwiththe n  reasonsCarnegiesetforthinits8Kandprovidedfurtherexplanationthat X  Carnegiehadbeenunderadutytoreport.Thus,thestatementsmadeby B  GrantThorntoninthe8Kresponsewererelevanttothecircumstances ,|  underlyingthechangeinauditors,andtherefore,wererequiredbySection f  229.304(a)(3). P TheCourtofAppealshasstatedindictathat publicationsrequiredby : lawareentitledtoabsoluteprivilege.Gohariv.Darvish,363Md.42,55n.13 $ (2001)citing,DanB.Dobbs,TheLawofTorts41314(2001);SeealsoFirstState  BankofFloodwoodv.Jubie,847F.Supp.695,709(D.Minn.1993)(holdingthat  absoluteprivilegeattachedtobankreportsfiledwiththeFederalBureauof  Investigationallegingapparentviolationsofbankinglawsasrequiredbyfederal | regulation);SeegenerallyRestatement(Second)ofTorts,592A( Onewhois f! requiredbylawtopublishdefamatorymatterisabsolutelyprivilegedtopublish P#  it.).Thereissoundreasoningforsuchanapplicationoftheprivilege:it :% " eliminatestheconundrumofwhethertoreportatonesownfinancialperil,or $'t"$ nottoreportorfalselyreportandriskenforcementproceedingsbythe )^$& appropriateenforcementagency.Consideringtheimportanceofthe8Ksrole *H&( inprovidinginvestorswithanearlywarning,auditorssuchasGrantThornton ,2(* shouldbeencouragedtotimelyfilewhattheybelieveisanaccurateresponse.  Therefore,thatGrantThorntonsstatementswererequiredbylaw,notjust  encouragedasinReichert,makesthestatementsqualitativelydifferentfromthe  voluntaryonesinGersh. n  %  XXXc$XXXc$  %  Second,GrantThorntons8KresponsecouldhavetriggeredanSEC X  investigationwithasubsequentproceedingshouldtheSEChavedetermined B  thatdisciplinaryactionwaswarranted.GrantThorntonreportedinits8K ,|  response,asitwasrequiredtodo,thatitcouldnolongerrelyonmanagements f  representationsandthatthiswasthecauseforthechangeinauditors.Asin P MinerandReichart,the8Kwasreportedtotheagencyinchargeofenforcing : thesecuritieslaws,theSEC.Thisresponsefunctionsasan earlywarningdevice $ notonlytoinvestors,butalsototheSEC.TheSECisempoweredtobring  enforcementactionsinfederalcourtandbeforeadministrativelawjudges.See  SecuritiesExchangeActof193421(d)(1),15U.S.C.78u(SECmaybring  actioninfederalcourtforinjunctiverelief);21C,15U.S.C.78u3(SECmay | seekceaseanddesistorders afternoticeandopportunityforhearing). f! IncludedinthelawsthattheSECisempoweredtoenforcearethosethat P#  prohibitthemakingofafalseormisleadingstatementtotheSEC.See,e.g., :% " Rule12b20,17C.F.R.240.12b20( Inadditiontotheinformationexpressly $'t"$ requiredtobeincludedinastatementorreport,thereshallbeaddedsuch )^$&  furthermaterialinformation,ifany,asmaybenecessarytomaketherequired *H&( statements,inlightofthecircumstancesunderwhichtheyaremade,not  misleading.).%݌     XXXc$XXXc$  %  XXXc$XXXc$  %֞  ClearlytheSEChasdeemedwhetheranaccountanthasinformeda  registrantthatitcannolongerrelyonmanagementsrepresentationstobe n  materialbyrequiringitsdisclosureinan8K.Failuretoprovidesuchinformation X  wouldconstituteanomissionofmaterialinformation,theabsenceofwhich B  wouldcausethe8Ktobemisleading.Theomissionofsuchinformationwould ,|  subjecttheregistranttoinvestigationbytheSECwiththepotentialforfurther f  proceedings.See15U.S.C.78u.Moreover,anobviouspurposeofthe P accountants8Kresponseistoprovideacheckonthedeclarationsofthe : registrant.Thus,likethecomplaintsinMiner,ReichertandImperial,Grant $ Thorntons8KresponsecouldcertainlytriggeraninvestigationbytheSECand,if  warranted,furtherproceedings.%֞*݌  Ќ  XXXc$XXXc$  0X (?+ ` hp x X?Third,justasinMiner,adequateproceduralsafeguardsexistattwo(2)  separatelevels.Thefirstlevelminimizesthelikelihoodofanaccountantmaking | afalsestatementinthe8Kresponseitself.Accountantsaresubjectto f! sanctionsunderthesecuritieslaws.Pursuantto17C.F.R.201.102(e),theSEC P#  maydisciplineaccountantswhopracticebeforeitfor unethicaland :% " improperconductorfor lackingcharacterorintegrity.Indeed,theSEChas $'t"$ institutedadministrativeproceedingsagainst,andimposedsanctionson, )^$&  accountantsforfalselystatinginan8Kresponsethatithadnodisagreements *H&( withthecompany.SeeIntheMatterofLangford,SecuritiesExchangeAct  ReleaseNo.38249,1997SECLexis28625(Feb.6,1997).   Moreover,theMarylandStateBoardofPublicAccountancymay  reprimandanaccountantorrevokehisorherlicenseiftheaccountant isguilty n  offraudordishonestyinthepracticeofaccountancy, hashadtherightto X  practice8beforeanyunitofthefederalgovernmentrevokedorsuspended, B   hasbeensanctionedbyanyunitof[the]federalgovernmentforanactor ,|  omissionthatdirectlyrelatestothefitnessofthe8licenseetopracticepublic f  accountancy,or violatesaruleofprofessionalconductwhichprovidesthat P  alicenseemaynotintheperformanceofprofessionalservicesknowingly : misrepresentfacts.MDCode,BusinessOccupations&Professions,2315; $ COMAR09.21.06.Thus,similartothesworncomplaintinMiner,GrantThornton  wouldhavebeensubjecttosanctionsandpenaltiesforanyfalsestatementsin  the8Kresponse.ThisCourtisconvincedthatthisfirstlevelofprocedural  safeguardswouldsignificantlydeteraccountants,suchasGrantThornton,from | makingfalseanddefamatorystatementsinan8Kresponse. f!  (B+ ` hp x XB%  X0Xc$XXXc$  %ŭ  ݀Evenmoreimportantly,thesecondlevelaffordsthesubjectofthe P#  allegeddefamatorystatementssafeguardssimilartothoseinajudicial :% " proceedingorproceedingundertheMarylandAdministrativeProcedureAct.If $'t"$ theSEChaddecidedtoinstituteenforcementordisciplinaryproceedings )^$& againstCarnegie,orPlaintiffsGableandFarkasasCarnegiesmanagement, *H&( basedonGrantThorntons8Kresponse,theresultantadministrativeproceeding ,2(* wouldhavecontainedmanyofthejudicialproceedingcharacteristicsthe  CourtofAppealsfoundimportantinGershandMiner.Theproceedingswould  havebeenadversarial.Thepartieswouldhavebeenentitledtocounselandto  presentevidence.17C.F.R.201.102,320.Witnessesmusttestifyunderoath n  andaresubjecttocrossexamination.Id.at201.325,326.Subpoenas X  compellingwitnessestotestifycouldhavebeenissued.Id.at201.232.The B  hearingofficecouldhavestrickencertainevidenceasimpertinentor ,|  scandalousorexcludeditasirrelevantorimmaterial.Id.at201.320,152(f), f  111.Thehearingsarepublicandrecorded.Id.at201.301,302.Hearing P officershaveallthepowersidentifiedinthefederalAdministrativeProcedure : Act.Id.at201.111.Theycanbeexcludedforbiasandarethusindependent. $ Id.at210.112.Finally,justasinReichert,PlaintiffsGablesandFarkascould  haveappealedanadversedecisiondirectlytotheSECwhosereviewwould  havebeensubjecttojudicialreview.17C.F.R.201.410,411.%ŭ݌  Ќ  0XXc$XXXc$  0Ӏ  ShouldtheSEChavedecidedtoinstituteadministrativeproceedings, | theseproceduralsafeguardswouldhaveservedtominimizethelikelihoodofa f! defamatorystatementinan8KresponseandanyharmPlaintiffswouldhave P#  sufferedfromanypotentiallydefamatorymarks. :% "   Lastly,thisCourtmustaddressthepotentialharmPlaintiffsmayhave $'t"$ sufferedfromthesimplefilingofGrantThorntons8Kresponse.Thecomplaint )^$& filedinMiner,andtoalesserextentthecomplaintsinReichertandImperial, *H&( wereconfidential.Thesecomplaints,therefore,werelesslikelytoresultin ,2(* immediateharmtothesubjectsreputationoutsidetheinvestigation.Unlike  thesecomplaints,GrantThorntons8Kresponsedidnotjustexposethesubject  toinvestigationandpossiblesubsequentproceedings:itwasavailabletothe  generalpublic. n    However,thisCourtisstillconvincedthatadequateprocedures X  minimizedthelikelihoodofharm.First,asdiscussedsupra,GrantThorntonwas B  subjecttopenaltiesforanyfalsestatementsitmadeinthe8Kresponse.Equally ,|  important,though,Carnegieanditsuppermanagementwerenotonlyentitled f  to,butwererequiredto,offertheirownrenditionofwhyitsrelationshipwith P GrantThorntonwasterminated.ItevenamendeditsForm8Ktoretortthe : allegedlydefamatorystatementsGrantThorntonexpressedinits8Kresponse. $ TheamendedForm8KwasquitedetailedandPlaintiffGablewasthesignatory.  Carnegieanditsuppermanagement,includingPlaintiffsGableandFarkas,had  achancetoprovidethelastwordandavailedthemselvesoftheopportunity.   XGrantThorntonsresponsewasalsoappendedtoCarnegiesForm8K. | Thus,managementspositionregardingthechangeinauditorswaspresented f! simultaneouslywithGrantThorntons.Investorshadtheopportunitytoreview P#  bothexplanationsandmakeinformeddecisions.Therefore,thisCourt :% " concludesthatthepresentationofbothexplanationssimultaneouslyfunctions $'t"$ asanadequatesafeguardtominimizeanypotentialharmtothePlaintiffs. )^$&  X   *H&(    &       Xc$XXXc$      Conclusion  Ԍ  Ќ    Xc$XXXc$    ConsideringthegreatimportancetheSECplaysinprotectingthe  investingpublicandthematerialinformationtheForm8Kprovidestothe  investingpublic,publicpolicydictatesthatanaccountantwhodivulges n  informationrequiredbythesecuritylawsshouldnothavetodosounderthe X  threatofdefendingadefamationsuit.Moreover,significantprocedural B  safeguardsexistthatminimizethelikelihoodthatthesubjectofsuchastatement ,|  wouldsufferanyharmwithoutredress.First,anaccountant,suchasGrant f  Thornton,facessignificantpenaltiesforanyknowinglyfalsestatementsitwould P provideinan8Kresponseletter.Second,shouldanystatementsmadeinan8 : Kresponsetriggeradministrativeproceedings,thesubjectofthestatementis $ affordedmanyoftheprotectionsheorshewouldreceiveinajudicial  proceeding.AsaresultthisCourtholds,asamatteroflaw,thatthestatements  madebyGrantThorntoninitsForm8Kresponseletterareentitledtoan  absoluteprivilege.Accordingly,thisCourtwillgrantGrantThorntonsMotionfor | SummaryJudgment.'t f!  XAnOrderreflectingthisdecisionisattached. P#   X   `     h     __________________________ $'t"$   Date   `     h     KayeA.Allison (i#%   hJudge )^$&  h?=XXc$6?==?6Xc$X=6?Xc$XX6Xc$  +2') ?=XXc$6?==?QQCARNEGIEINTERNATIONAL h     * p INTHE  B.` hp x XBCORPORATION,etal.,   h      p     Q B+ ` hp x XB  * p CIRCUITCOURT    9%` ` hp x X9Plaintiffs   h      f   X<( ` hp x ` ` X<* p FOR H   X?+ ` hp x X?v.   `     h      * z  h* p BALTIMORECITY  \  hGRANTTHORNTON,LLP,etal. h       >    * p CaseNo.:24C00002639    P ` ?+ ` hp x X?Defendants   h          P ` ?+ ` hp x X? X* ` * *  * h *  *  * p *  *  * x * v   X  ORDER  ?f==6? :   X?X= ?f  Q  XXc$XX X?UponconsiderationofGrantThornton,LLPsMotionforSummary R  JudgmentonCountEightoftheComplaint,PlaintiffsE.DavidGable( Gable) < andLowellFarkas( Farkas)ResponsetoGrantThorntonsMotionforSummary & Judgment,GrantThorntonsReplythereto,andtheSupplementalBriefsfiledby  bothpartiesontheissueofabsoluteimmunity,andasnopartyhasrequesteda  hearingonthismatter,?=XXc$6?==?itisthis_____dayofMarch,2006bytheCircuitCourtfor  BaltimoreCityhereby ~  ORDERED 6Xc$X=6?Xc$XX6Xc$ԀthatGrantThorntonsMotionforSummaryJudgmentonCount R EightoftheComplaintis GRANTED forthereasonssetforthintheaccompanying     * p CaseNo.:24C00002639    P ` ?+ ` hp x X?Defendants   h          P ` ?+ ` hp x X? X* ` * *  * h *  *  * p *  *  * x * v   X  JUDGMENT  ?f==6? :   X?X= ?f  QXc$XX X?  ForthereasonsstatedintheMemorandumofDecisionfiled V contemporaneousherewithandthisCourtsApril6,2005Memorandum, @ judgmentisenteredfortheDefendantsandagainstthePlaintiffswithcoststo * bepaidbythePlaintiffs.         `     h     __________________________    Date   `     h     KayeA.Allison w   X -p x X-Judge l    X X?XXXc$