Opinion
110867/08.
Decided June 4, 2009.
Wesley Wang by, Judith H. Weil and Steven Benjamin Ross, Ross and Asmar LLC, New York, Ny.
James Cawley, Joshua S Androphy and Christopher W Meyer, Whiteman Osterman and Hanna LLP One Commerce Plaza, Albany, NY.
Marcos Brodsky, John F Bolton and Daniel C Gibbons, Nixon Peabody, Jericho, NY.
Nicolas Stephan, Lisa D Haber, Gilberti Stinaiano Heintz Smith PC, Syracuse, NY.
John F Bolton, Nixon Peabody, Jericho, NY.
These connected Actions arise due to the publication of two articles allegedly defaming plaintiffs. The articles, published in Forbes magazine (September 15, 2008), and the New York Post (August 12, 2008), related to the ongoing troubled relationship among the parties who worked together as traders until 2005.
For the purposes of this omnibus motion, the complaint captioned Stephan and Brodsky v Cawley, Index No. 111247/08 will be referred to as Action No. 1, the complaint captioned Stephan and Brodsky v Goldberg, Index No. 111247/08 will be referred to as Action No. 2, and the complaint captioned Wang v Cawley, Index No. 602327/08 will be referred to as Action No. 3.
This omnibus decision addresses the motions of the defendants James Cawley (Cawley) and Lewis Goldberg (Goldberg), a spokesperson for Cawley, in each of the above-captioned Actions to dismiss the respective complaints for failure to state a claim upon which relief can be granted, and for lack of the requisite specificity for claims of defamation.
In 2004, by vote of the Board of Directors, defendant Cawley was removed from his position as Chief Executive Officer (CEO) of the company Axiom Global Partners (Axiom), where he worked with plaintiffs. In 2005, after arbitration, he was restored to his position.
After Cawley returned as CEO, the plaintiffs left Axiom to form Phoenix Partners Group, LP (Phoenix), and plaintiffs Wesley Wang (Wang) and Nicholas Stephan (Stephan) began dissolution proceedings against Axiom. See Stephan and Wang v Cawley, et. al., Index No. 108226/05, Transcript of June 20, 2005, 41:9-44:19, Supreme Court, New York County, Hon. Walter Tolub (the Dissolution Proceeding). In October of 2005, as part of the settlement of the Dissolution Proceeding, Cawley agreed to certain payments to the parties, and all parties agreed not to disparage each other in the future (the Settlement Agreement).
In 2007, IDX Capital LLC (IDX), for which Cawley had become CEO, commenced extant litigation against Wang and Phoenix, claiming that Wang sent emails to a potential buyer of IDX, and, as a result, the transaction was never consummated. See IDX Capital, LLC, et. al. v Phoenix Partners Group LLC, et. al, Index No. 102806/07, Supreme Court, New York County, Hon. Richard B. Lowe, III (the IDX Litigation). The parties expect that some of the same allegations made in this matter with regard to Stephan, defendant Marcos Brodsky (Brodsky), and Wang, will be also made in the IDX Litigation.
Cawley and Goldberg move, pursuant to CPLR 3211 (a) (7), to dismiss portions or the entirety of the respective complaints for failure to state a claim upon which relief can be granted, and, pursuant to CPLR 3016 (a), for lack of the requisite specificity in the claims for defamation.
Action No. 1 ( Stephan and Brodsky v Cawley , Index No. 111247/08)
Allegedly, on a date prior to July 18, 2008, Cawley spoke to a reporter for Forbes magazine named Emily Lambert (Lambert). The complaint in Action No. 1 states that Cawley slandered and defamed Stephan by saying or documenting to Lambert, among other things, that Stephan used cocaine, engaged in and covered up misconduct, impeded the sale of Axiom, knew but did not inform the other members of Axiom that Van Eck Absolute Return Advisors Corp. had transferred its interest in Axiom, tried to destroy Axiom and its corporate records, raided Axiom customer accounts and brought them to Phoenix, submitted a false and misleading verified petition against Cawley in the Dissolution Proceeding, and wanted Patrick Nihan, a former IDX employee, to continue to work for IDX, so that he could pass confidential and proprietary information to Phoenix concerning IDX's operations.
The complaint in Action No. 1 also states that Cawley, through his communications with Lambert of Forbes, slandered Brodsky, a principal of Phoenix who had also worked at Axiom, by saying that Brodsky submitted alleged fraudulent expense reports (approved by Stephan), engaged in illegal and improper trading, provided confidential trading information to a trader at a large commercial bank in exchange for commissions and business, provided a trader at a large commercial bank with an improper and competitive advantage from which the trader could profit to the detriment of other participants in the marketplace, and improperly favored a trader at a large commercial bank.
Action No. 1 seeks recovery for breach of the Settlement Agreement (first cause of action), and for slander and defamation due to the statements about Stephan (second cause of action), and about Brodsky (third cause of action). Cawley moves, pursuant to CPLR 3211 (a) (7) and CPLR 3016 (a), to dismiss the second and third causes of action. The second and third causes of action must be dismissed because the complaint fails to: (i) offer the particular words that are the subject of the action ( Manas v VMS Assoc. , 53 AD3d 451 , 454-455 [1st Dept 2008]); (ii) specify the time and manner of the alleged defamation ( Geddes v Princess Props. Intl., 88 AD2d 835 [1st Dept 1982]); or (iii) show that Cawley engaged in affirmative acts to cause the complained of publication ( Sassower v Finnerty, 96 AD2d 585, 587 [2nd Dept 1983]).
A claim for defamation requires no less than a statement, in haec verba, of the particular defamatory words claimed to have been uttered by defendants. See CPLR 3016 (a); Manas v VMS Assoc., 53 AD3d at 454-455; Gardner v Alexander Rent-A-Car, 28 AD2d 667 (1st Dept 1967). Here, the complaint not only fails to particularize the words that were allegedly used, but indicates that the words were either stated or documented to Lambert by Cawley. Such imprecise qualification or paraphrasing not only opens the complaint to the question of whether the words were ever published, but also renders the complaint defective as a matter of law. See Ramos v Madison Sq. Garden Corp., 257 AD2d 492, 493 (1st Dept 1999); Murganti v Weber, 248 AD2d 208, 208-209 (1st Dept 1998); Gardner, 28 AD2d at 667.
Plaintiffs' reliance on Pappalardo v Westchester Rockland Newspapers, 101 AD2d 830 (2nd Dept 1984), affd 64 NY2d 862 (1985), is misplaced. There, the defendant was the newspaper, and the court found that the annexation of the purported libelous words in the form of the actual article referred to as libelous satisfied the specificity mandate. Here, Forbes is not a defendant. See also Sassower v New York News, 101 AD2d 1020, 1021 (4th Dept 1984) (attachment of actual article subject of the complaint is sufficient to state a cause of action against the defendant newspaper).
Further, plaintiffs do not specify any time or manner of communication of the alleged defamatory material. See Seltzer v Fields, 20 AD2d 60, 64 (1st Dept 1963) ("present practice requires that plaintiff allege the time, manner, and the persons to whom the publication was made). Here, the complaint simply offers that the commentary occurred some time before July 18, 2008, and that the defamatory words were either said or documented. Thus, neither the time, nor the manner has been pled with any particularity.
In addition, the Forbes article does not contain the words or the innuendo proffered by the complaint. "Courts will not strain to find defamation where none exists." Dillon v City of New York, 261 AD2d 34, 38 (1st Dept 1999) (citations omitted). Moreover, as there is no indication or allegation that Cawley engaged in any affirmative acts causing the Forbes article to be published, his mere alleged slanderous statements to Lambert could not be the proximate cause of any injury allegedly sustained by Stephan and Brodsky due to the publication. See Sassower v Finnerty, 96 AD2d at 587; Lewis v Chemical Found., 233 App Div 287 (4th Dept 1931).
Action No. 2 ( Stephan and Brodsky v Goldberg , Index No. 111247/08)
The complaint in Action No. 2 ( see Index No. 111247/08, supra) focuses on an article, based upon an interview with defendant Goldberg, Cawley's spokesperson, published in the New York Post on August 12, 2008. The complaint states that Goldberg defamed and slandered the plaintiffs Stephan and Brodsky, per se, by telling the author of the article that they: (i) made threats against Cawley and his wife; (ii) were being investigated by the Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI) in relation to the threats; and (iii) were trying to "throw the media and the rightful investigative bodies off the scent of the investigation."
Goldberg moves, pursuant to CPLR 3211 (a) (7), to dismiss the complaint in its entirety for failure to demonstrate slander per se, for failure to plead special damages, or, pursuant to CPLR 3016 (a), for lack of the requisite specificity in the claim for defamation or slander per se. The complaint must be dismissed because it fails to indicate that the words complained of: (i) impute a crime or injure plaintiffs in their trade, business or profession ( Moore v Francis, 121 NY 199, 203 [1890]; Harris v Hirsh, 228 AD2d 206, 208 [1st Dept], lv denied 89 NY2d 805); (ii) rise to the level of slander per se ( Liberman v Gelstein, 80 NY2d 429, 435 ["only statements regarding serious, as opposed to minor, offenses are actionable as defamation per se"] [citation omitted]); or (iii) are capable of slanderous meaning ( Armstrong v Simon Schuster, 85 NY2d 373, 380 ["the legal question for the court on a motion to dismiss is whether the contested statements are reasonably susceptible of a defamatory connotation"] [citation omitted]).
As noted above, annexation of the purported libelous words in the form of the actual article is effective only where there is at least an allegation that the defendant engaged in affirmative acts causing the article to be published. See Sassower v Finnerty, 96 AD2d at 587; Lewis, 233 App Div at 287. Here, as the New York Post article offers direct quotes from Goldberg, and the nonmovant is entitled to the benefit of every favorable inference upon a motion to dismiss ( Caniglia v Chicago Tribune-New York News Syndicate, 204 AD2d 233, 233-234 [1st Dept 1994]), the court will assume, for purposes of this motion only, that offering quotes to the newspaper constituted an affirmative act. As plaintiffs have not claimed special damages ( see Aronson v Wiersma, 65 NY2d 592, 594; Restatement [Second] of Torts § 575), the court turns to a determination of whether the quotes constitute slander per se ( Silsdorf v Levine, 59 NY2d 8, 12-13, cert denied 464 US 831).
In this context, the words apparently offered by Goldberg would constitute slander per se only if they impute the commission of a serious crime or tend to injure the plaintiffs in their trade, occupation or profession. See Moore v Francis, 121 NY 199, 203 (1890); Harris, 228 AD2d at 208-209.
Plaintiffs argue that the New York Post article says that the SEC and FBI are investigating plaintiffs, and that plaintiffs were trying to "muddy the waters" in an effort to throw the SEC off the scent of their investigation. They maintain that these statements are defamatory per se, and the average reader would, being aware that the SEC is the federal agency that has the power to investigate and enforce violations of laws and regulations that govern the financial industry, and being aware that the FBI is a law enforcement body with the power to investigate criminal activity, presume that anyone being investigated had, indeed, committed a crime.
Even if the general allegation that plaintiffs are being investigated would be interpreted by the average reader as imputing unlawful behavior, it is incapable of conveying that a serious crime has been committed. For the purposes of determining whether a statement is slanderous per se, "the law distinguishes between serious and relatively minor offenses, and only statements regarding the former are actionable without proof of damage. See Liberman v Gelstein, 80 NY2d at 435. "To be actionable as slander per se, words imputing the commission of a crime must be of the level of an indictable offense upon conviction of which punishment may be inflicted. Merely stating that there is a complaint against someone does not satisfy this requirement." Tourge v City of Albany, 285 AD2d 785, 786 (3rd Dept 2001) (citation and internal quotation marks omitted). The vague statement that plaintiffs are being investigated fails to identify any indictable offences that were imputed by the article, or the alleged commentary underlying it.
While the average reader may or may not pay close attention to the differences between being investigated, being indicted, and being convicted of a crime, it is this court's position that, given the high level of proof required to maintain an action for slander per se, a statement that there is an investigation does not automatically imply guilt. Rather, such a statement implies that guilt has not been established; an investigation may result in charges, or no charges. Even upon indictment, the average reader should understand that "in our system of law, a person is presumed innocent until proven guilty." Rinaldi v Holt, Rinehart Winston, 42 NY2d 369, 390, cert denied 434 US 969 (1977).
Reading the language of the article fairly and naturally, the tenor does not import a criminal or disgraceful charge ( Church v Tribune Assn., 135 App Div 30), and does not constitute slander per se. As such, the complaint against Goldberg is dismissed in its entirety.
Action No. 3 ( Wang v Cawley , Index No. 602327/08)
The complaint in Action No. 3 addresses a statement allegedly made to Lambert of Forbes, on a date prior to July 18, 2008, that Wang had been fired from at least two previous jobs because he had been found "passed out at his desk" from drug use. The complaint also states that Cawley defamed Wang by saying that Wang threatened his wife, and by saying or providing documentation that Wang submitted a false or misleading verified petition in the IDX Litigation, brought the Dissolution Proceedings in order to publicly disparage Cawley, and wanted Patrick Nihan, a former IDX employee, to continue to work for IDX, so that he could pass confidential and proprietary information to Phoenix concerning IDX's operations.
In addition, Action No. 3 states that on October 9, 2005, Cawley violated the Settlement with Wang by telling Ken Forrester, a former employee of Axiom, that Wang had run rampant at Axiom, had been fired from every job he ever had, and deleted files, put viruses on computers, and physically destroyed Axiom equipment. Wang seeks to recover for breach of the Settlement Agreement (first cause of action), and for slander and defamation due to the statements made to Lambert and Forrester (second cause of action).
Cawley moves, pursuant to CPLR 3211 (a) (7), 3016 (a), and 215 (3), to dismiss the second cause of action because the complaint does not set out any exact, actionable words, that are not barred by the statute of limitations. The second cause of action is dismissed because the complaint does not allege any serious crime tending to injure Wang in his trade, occupation or profession. See Moore v Francis, 121 NY at 203 (1890); Harris v Hirsh, 228 AD2d at 208-209. In addition, the statements allegedly made to Forrester are non-actionable as beyond the applicable one-year statute of limitations for defamation actions. CPLR 215 (3).
The complaint, with regard to statements made to Lambert, is insufficient to satisfy the particularity requirements of CPLR 3016 (a). The complaint offers that Cawley stated to Lambert that Wang had been fired from at least two previous jobs because he had been "passed out at his desk" from drug use. Notably, the whole statement is not contained in quotation marks. This alone is not dispositive, because the complaint does sets forth, in unqualified terms ( Liffman v Booke, 59 AD2d 687, 687 [1st Dept 1977]), the words upon which the defamation cause of action is premised. Taub v Amana Imports, 140 AD2d 687, 689 (2nd Dept 1988).
However, Wang argues that the statement is sufficient to sustain the complaint because it is slanderous per se. Wang offers the observation that "passed out at his desk" is certainly a state that would tend to be a negative in connection with an employee's ability to work as a credit default swap broker. Wang concludes that the statement therefore injures him in his profession, trade, or business, and is actionable.
The court cannot agree with this analysis. It is not beyond belief that someone, anyone, could be passed out at a desk. As these words alone offer no reason why Wang was passed out, they offer no direct implication as to his ability to perform his job. In addition, if the state were perpetual, there might be a problem with ability to work, but the complaint does not state that Wang was passed out "on numerous occasions" as offered in Wang's memorandum, but only implies that Cawley said Wang was found in that state twice. Finally, there is no indication in the complaint of how this alleged statement to Lambert injured Wang. It has not been alleged that Lambert is a potential client of Wang, and the statement itself appears nowhere, neither directly nor by implication, in the Forbes article.
The coloring, in Wang's memorandum, of the statement with the explanation that Wang was "passed out at his desk" due to drug use, does not change this outcome because, first, it is not a direct quotation, but second it is a statement about general character or qualities, and not specifically about Wang's profession. Liberman, 80 NY2d at 436. A slander per se action requires the intimation of a serious indictable crime Harris v Hirsh, 228 AD2d at 209 ("use of drugs does not constitute a crime in New York, much less a 'serious' crime. Only the possession and/or sale of controlled substances and the use and/or possession of drug paraphernalia and hypodermic needles is proscribed" [emphasis in original]); Tourge v City of Albany, 285 AD2d at 786.
The contention that Cawley falsely accused Wang of threatening his wife is also not slanderous per se. See Liberman, 80 NY2d at 436 (under a cause of action for defamation, a threat to kill one's family "is a relatively minor offense in the New York Penal Law — not even a misdemeanor — and thus the harm to the reputation of a person falsely accused of committing [such] harassment would be correspondingly insubstantial"). Meanwhile, the remaining statements in the complaint are all qualified as being either stated or documented to Lambert by Cawley. As such, they are indefinite and non-actionable. See Ramos, 257 AD2d at 493; Murganti, 248 AD2d at 208-209; Gardner, 28 AD2d at 667.
With regard to the statements that Cawley allegedly made to Forrester, they are "[l]oose, figurative or hyperbolic statements, [which] even if deprecating [Wang], are not actionable." Dillon, 261 AD2d at 39 (citation omitted); accord Kaye v Trump , 58 AD3d 579 , 579 (1st Dept 2009). But in all events, as they were allegedly made in 2005, recovery for slander is barred by the applicable statute of limitations. CPLR 215 (3) (action to be commenced within one year).
Wang's contention that he is entitled to postpone dismissal of this cause of action because he awaits discovery through Letters Rogatory and an Open Commission is unavailing. First, the Order to Show Cause requesting such Letters and Commission has been denied. Second, it has herein been determined that the alleged comments are not capable of sustaining a cause of action for defamation. Moreover, Wang has not demonstrated that further facts may exist which would substantiate opposition to the motion to dismiss. CPLR 3211 (d) ("[s]hould it appear . . . that facts essential to justify opposition may exist but cannot then be stated" a continuance may be ordered); Amigo Foods Corp. v Marine Midland Bank-New York, 39 NY2d 391, 395 (1976).
Conclusion
The three complaints addressed in this omnibus decision fail to state a cause of action for defamation or slander per se. The complaints do not offer, in haec verba, particular defamatory words claimed to have been published by Cawley. CPLR 3016 (a); Manas, 53 AD3d at 454-455; Gardner, 28 AD2d at 667. Where such words are arguably offered, they do not rise to the "per se" level, and, in any event, are qualified. Ramos, 257 AD2d at 493; Murganti, 248 AD2d at 208-209; Gardner, 28 AD2d at 667. Finally, in the considered view of this court, the words are incapable of defamatory meaning. Silsdorf, 59 NY2d at 12-13.
The court notes that the remaining parties to this action are also parties to a Settlement Agreement, made in open court ( see Stephan and Wang v Cawley, et. al., Index No. 108226/05, Transcript of June 20, 2005, 41:9-44:19, Supreme Court, New York County, Hon. Walter Tolub), entered into as of October 2005. Under that Settlement, the parties agreed not to disparage each other in the future. Id. at 43:5. As the causes of action for breach of the Settlement Agreement in Action No. 1 and Action No. 3 are extant, the plaintiffs apparently remain with recourse for the alleged defamatory and/or slanderous statements.
Accordingly, it is hereby
ORDERED that, with reference to the action captioned Stephan and Brodsky v Cawley, Index No. 111247/08, the motion of defendant James Cawley, pursuant to CPLR 3211 (a) (7) and 3016 (a), to dismiss is granted, and the second and third causes of action of the complaint are dismissed; and it is further
ORDERED that the defendant, James Cawley, is directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry; and it is further
ORDERED that, with reference to the action captioned Stephan and Brodsky v Goldberg, Index No. 111247/08, the motion of defendant Lewis Goldberg, pursuant to CPLR 3211 (a) (7) and 3016 (a), to dismiss is granted, and the complaint is dismissed with costs and disbursements to defendant as taxed by the Clerk of the Court; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly; and it is further
ORDERED that, with reference to the action captioned Wang v Cawley, Index No. 602327/08, the motion of defendant James Cawley, pursuant to CPLR 3211 (a) (7), to dismiss is granted, and the second cause of action of the complaint is dismissed; and it is further
ORDERED that the defendant, James Cawley, is directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry.