Opinion
7167-03.
Decided November 19, 2004.
Hartman Craven, LLP, New York, New York, Counsel for Plaintiff.
Mark M. Aarons, Esq., Groton, New York, Counsel for Defendant.
BACKGROUND
This action arises from a contract whereby Defendant Vormittag Associates, Inc. ("Vormittag") agreed to provide Plaintiff United States Luggage with new computer hardware and software to manage United State Luggage's operations. Vormittag was supposedly taking existing computer software and modifying it to meet the specific needs of United States Luggage.
The new computer system did not function as promised and this litigation ensued. United States Luggage alleges causes of action for fraud and breach of contract. Vormitting has counterclaimed for trade libel, tortious interference with contract and fraud.
United States Luggage chief executive officer, Richard Krulik, ("Krulik") is a member of "The Executive Committee" ("TEC") which is a business organization whose membership is limited to chief executive officers or primary decision makers of business which have over five million dollars in sales annually. Membership is on an invitation basis.
TEC meets monthly to discuss and share marketing ideas and strategies, personnel issues and other business related issues. Defendant believes that certain statements relating to its claim of trade libel were made at meetings of the TEC.Defendant further asserts that Plaintiff posted certain defamatory material on the TEC website.
Defendant has demanded a copy of the of the text of the material that Plaintiff posted on the TEC website. Defendant has also requested the names of the individuals in the TEC subgroup to which Krulik belongs.
Plaintiff has refused to produce this information. Plaintiff asserts that the TEC rules make any material posted on the TEC website and any statements made at TEC meeting and to TEC members relating to TEC business confidential.
DISCUSSION
CPLR 3101(a) provides for full disclosure by a party to an action of ". . . all matter material and necessary in the prosecution of the action . . . regardless of the burden of proof." CPLR 3101(b) provides that privileged material shall not be subject to discovery.
In determining whether the material sought through discovery is "material and necessary", the court must determine if the material demanded has any bearing on the issues raised in the case. The court must determine if the demanded information and material will ". . . assist preparation for trial by sharpening the issues and reducing delay and prolixity." Allen v. Crowell-Collier Publishing Co., 21 NY2d 403, 406 (1968). Discovery must be provided for material that can be used as evidence in chief, for rebuttal or for cross-examination. Id.; and Wind v. Eli Lilly Co., 164 AD2d 885 (2nd Dept., 1990).
Discovery is permitted of material that is not admissible in evidence provided that the material may lead to the discovery of admissible evidence. Southampton Taxpayers Against Reassessment v. Assessor of the Village of Southampton, 176 AD2d 795 (2nd Dept., 1991); and Fell v. Presbyterian Hospital in the City of New York, 98 AD2d 624 (1st Dept., 1983).
The party seeking discovery has the burden of establishing that the production of the demanded material or information will lead to admissible evidence while the party opposing the discovery has the burden of establishing that the material is irrelevant, privileged and/or confidential. Crazytown Furniture, Inc. v. Brooklyn Union Gas, 150 AD2d 420 (2nd Dept., 1989); and Herbst v. Bruhn, 106 AD2d 546 (2nd Dept., 1984).
In this case, Defendant has established that the material demanded is material and necessary. Defendant's counterclaim is premised upon material posted on the TEC website and statements made by Krulik either at meetings of TEC or on the telephone. Krulik testified at his deposition that he posted certain information on the TEC website, that he had telephone conversations with other people regarding the material posted on the website and that he discussed the situation which gives rise to this litigation at TEC meetings. Krulik has refused to provide the material posted on the TEC website and to provide the names of the members of the subgroup of TEC of which he is a member asserting that TEC's rules make the website and the membership list confidential.
Trade libel involves knowingly publishing false and derogatory material regarding one's business designed to prevent others from doing business with the defamed party or otherwise interfering with its business relationships. Waste Distillation Technology, Inc v. Blasland Bouck Engineers, P.C., 136 AD2d 633 (2nd Dept., 1988). The party alleging trade libel must establish that the publication of the false material was a substantial factor in inducing others to not deal with it. Id. Without the material posted on TEC's website and the names of the parties who reviewed this material, Vormittag cannot establish either of these elements of trade libel. The demanded information is undeniably "material and necessary" to Vormittag's trade libel counterclaim.
When deciding whether to compel disclosure of allegedly confidential information, the court must weigh and balance between the litigants need for the information and the damage that will or might result from the disclosure of confidential information. See gen'lly, Brady v. Ottaway Newspapers, Inc., 63 NY2d 1031 (1984).
In this case, Vormittag's need for the information is self-evident. Its claim for trade liable is based largely, if not exclusively, on the information United States Luggage posted on the TEC website and the statements made by Krulik at TEC meetings and in response to the information posted on the TEC website.
United States Luggage has failed to establish that any damage will or might result from the disclosure of this information.
TEC is a private organization. The basis for asserting that the material is confidential is the organization's rules. There is no public benefit that will result from keeping this material confidential. Maintaining the confidentiality of this information would essentially immunize United States Luggage from suit. It would set a dangerous public policy of allowing private organizations to insulate themselves from scrutiny by the public or the Court. If such an approach were adopted then private organizations or their members could wrong or harm those outside the organization with impunity. Such a rule which invites mischief must be avoided.
In the circumstances presented in this case, Vormittag's need for the information far outweighs the claim that the material is confidential.
Accordingly, it is,
ORDERED, that within 15 days of the date of this order United States Luggage shall produce a true and complete copy of all material posted on the TEC website regarding Vormittag during the period from 1999 to present and provide to Vormittag the names of all the members of the sub-group of TEC in which Krulik is or was a member for that period; and it is further,
ORDERED, that Krulik shall appear for a further deposition if demanded by the Defendants within 30 days of the production of the material to be provided in accordance with the provisions of this Order.
This constitutes the decision and Order of the Court.