The Court of Appeals today ruled that comments made by a hospital official to a federal agency investigator were not protected by absolute privilege, allowing to go forward a defamation lawsuit against a lower Manhattan hospital and its former acting chief medical officer.

The court, on a 4-2 vote, reversed a decision of the Appellate Division.

Dr. Jeanetta Stega, a medical researcher, sued what was then New York Downtown Hospital and its former acting chief medical officer, Stephen Friedman, for defamation among other claims. New York Downtown Hospital in July 2013 became the sixth campus of NewYork-Presbyterian Hospital known as Lower Manhattan Hospital.

Stega sought damages after Friedman told an investigator from the U.S. Food and Drug Administration that Stega's work while serving as chair of the hospital's Institutional Review Board was “tainted.”

John Beranbaum, Stega's attorney from Beranbaum Menken in Manhattan, said the decision is a step forward for Stega's career.

“The Court of Appeals' decision is heartening to Dr. Stega who now is able to restore her reputation, which had been so sullied by the hospital,” Beranbaum said. “The decision is also timely in that in an increasingly uncivil age where character assassination by way of social media is commonplace, the Court of Appeals has underscored the importance of citizens being able to defend their good names whether in an administrative proceeding or in court.”

The case stems from events in 2011, when Stega developed a patent application and clinical trial research protocol for a drug developed by Luminant Bio-Sciences. Dr. Leonard Farber, an oncologist in private practice, worked with Stega on the drug at the time.

Stega also worked at New York Downtown Hospital as a medical researcher in 2011. Top officials at the hospital did not object to her involvement in the project when she ran it past them, according to the court's decision.

Luminant paid Stega $50,000 for her work with the drug, which she deposited into a bank account called “Stega Research Group,” the court said.

Farber and Stega had to get permission from the hospital's Institutional Review Board for the study to go forward. Stega, who was also chair of the board at the time, recused herself from the approval process, the court said. The board ultimately approved the trial.

Tensions rose between Farber and Stega after the trial was approved, the court said. Farber accused Stega of stealing the trial from him and pocketing money from Luminant that belonged to him.

Farber told the hospital's CEO Jeffrey Menkes that Stega had improperly taken money from Luminant. Stega was fired after an investigation from the hospital found she violated the hospital's conflict of interest policy by taking money from Luminant, the court said.

That led Stega to file a complaint with the FDA in March 2012 over her firing and the oversight of patients supervised by the hospital's Institutional Review Board. An investigator from the FDA then interviewed people involved in the incident at the hospital, including Stega and Friedman.

According to the investigator's report, Friedman “felt that the IRB and their approvals were tainted and therefore the hospital removed Dr. Stega.” Friedman also told the investigator that Stega pressured Farber to admit a patient to the trial that Farber didn't believe would be approved by the IRB, the court said. Stega then allegedly told Farber that “I am the IRB”, according to the court's decision.

Stega responded to those claims with a defamation lawsuit against Friedman and the hospital. Stega also sued based on other factors, like emotional distress, but those claims were dismissed by a lower court and not appealed.

The question before the court was whether the conversation between Friedman and the FDA investigator was a quasi-judicial process and therefore protected by absolute privilege, which would leave Friedman off the hook for the defamation lawsuit.

The case originated in Manhattan Supreme Court, which ruled that the investigation was not part of a quasi-judicial process, and therefore the suit should go forward.

The Appellate Division disagreed, saying “statements to such an investigator must be protected by an absolute privilege.” The appellate court also said such compliance proceedings by the FDA, as was the case here, should “qualify as a quasi-judicial process by an administrative agency.”

In Wednesday's opinion, Court of Appeals Judge Eugene Fahey cited the 1978 high court decision in Toker v. Pollak, holding that absolute privilege only applies in situations similar to a court proceeding. Stega was not given an opportunity to respond to Friedman's statements, Fahey said.

“The significance of Toker is that, for absolute immunity to apply in a quasi-judicial context, the process must make available a mechanism for the party alleging defamation to challenge the allegedly false and defamatory statements,” Fahey wrote.

Judge Jenny Rivera in a dissent said the Toker court was affirming the right to absolute privilege in cases where it furthers the public interest.

“We have never required that the subject of a communication be a participant in the proceeding, much less that the subject have an opportunity to challenge the alleged defamatory statement within the confines of that very proceeding,” Rivera wrote.

Christopher Porzio from Nixon Peabody's offices in Jericho represented Friedman and the hospital in the case. He could not be reached for comment Wednesday.