Karp v. Hill & Knowlton, Inc.

• Decision Date: 25 March 1986
• Docket Number: No. 85 Civ. 7841 (GLG).,85 Civ. 7841 (GLG).
• Citation: 631 F. Supp. 360
• Parties: Stephen I. KARP, Plaintiff, v. HILL AND KNOWLTON, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

631 F. Supp. 360

Stephen I. KARP, Plaintiff, v. HILL AND KNOWLTON, INC., Defendant.

No. 85 Civ. 7841 (GLG).

United States District Court, S.D. New York.

March 25, 1986.

Butler, Fitzgerald & Potter, P.C., New York City (Stuart Potter and James M. Davis, of counsel), for plaintiff.

Kornstein, Veisz & Wexler, New York City by Howard S. Veisz and Marian E. Lindberg, for defendant.

OPINION

GOETTEL, District Judge:

The events that culminated in the statements that are the subject of this action for defamation began in February 1985, when Buckingham Corporation ("Buckingham"), an importer and distributor of wines and liquors, commenced an action against the plaintiff herein, Steven I. Karp ("Karp"), a former senior vice-president of Buckingham. The suit charged that, while in Buckingham's employ, Karp had surreptitiously agreed with two of Buckingham's suppliers to form a new corporation to distribute their products independently of Buckingham. In addition, it charged that Karp had misappropriated confidential information and trade secrets from Buckingham.¹ The complaint against Karp purported to state claims for breach of fiduciary duty, tortious interference with contract, breach of a continuing duty of confidentiality, unfair competition, misappropriation of a corporate opportunity, and tortious interference with prospective business opportunity.

After filing the action, Buckingham quickly moved by order to show cause for a preliminary injunction (1) enjoining Karp from entering into any relationship with Buckingham's former suppliers; (2) enjoining him from divulging any confidential trade information belonging to Buckingham; and (3) requiring Karp to return to Buckingham all Buckingham documents in his possession. In a memorandum decision dated March 15, 1985, this Court concluded that Buckingham had demonstrated a likelihood of success on most, if not all, of its claims against Karp. Buckingham v. Karp, No. 85-0931, slip op. (S.D.N.Y. March 15, 1985). It further concluded that Buckingham would suffer irreparable harm were Karp to continue to solicit its suppliers and to use its confidential documents and information. The motion for preliminary relief was, therefore, granted.

On May 22, 1985, a divided Court of Appeals for the Second Circuit reversed our decision. Although unpersuaded by most of Karp's substantive arguments, the Court of Appeals did not believe that injunctive relief was warranted since irreparable harm had not been demonstrated. Buckingham Corp. v. Karp, 762 F.2d 257 (2d Cir.1985).

On the date of the Court of Appeals' decision, defendant Hill & Knowlton, Buckingham's public relations agent, composed the press release that is the subject of this action. The release stated in full:

The U.S. Court of Appeals, Second Circuit, yesterday vacated a preliminary injunction against Stephen I. Karp. John W. Anderson, president and chief executive officer of Whitbread North America, Inc., today issued the following reply:

Yesterday's decision in no way questions the merits of our case against Mr. Karp.

The ruling supports our claims that Mr. Karp defrauded Buckingham and that substantial relief should be granted. The Court of Appeals simply said that the misappropriation of confidential documents and information was, in and of itself, insufficient to justify a preliminary injunction against Mr. Karp before a trial on the merits.

The Appellate Court did not question the District Court's finding that Buckingham is likely to succeed in demonstrating that Mr. Karp breached his fiduciary duty to the company; indeed, the majority opinion acknowledged that it was "unpersuaded by most of Mr. Karp's arguments." The court went so far as to suggest that Buckingham would do better to seek permanent injunctive relief and monetary damages from Mr. Karp in a trial on the merits.

We will continue to pursue vigorously our actions against Mr. Karp, Rothschild, Alko, and Abraham and Joel Buchman.

Defendant's Memorandum in Support of Motion to Dismiss, Exhibit A (emphasis in original).

The following morning, a Hill & Knowlton employee read the release over the phone to Patricia Kennedy, the publisher of Alcoholic Beverage Executives' Newsletter. Ms. Kennedy incorporated portions of the press release in an 11 paragraph article in the May 24 issue of the newsletter.

Karp brought this action for libel against Hill & Knowlton on October 4, 1985. The complaint alleged, inter alia, that Hill & Knowlton's statement that "the ruling supports our claim that Mr. Karp defrauded Buckingham....," later incorporated in Ms. Kennedy's article, defamed Karp.²

Hill & Knowlton now moves to dismiss this action on two grounds.³ First, it argues that the statement in issue is absolutely privileged within the meaning of section 74 of the New York Civil Rights Law as a "fair and true report of a judicial proceeding." N.Y.Civ.Rights Law § 74 (McKinney 1976).⁴ It also contends that the statement is a nondefamatory expression of opinion that cannot give rise to a libel claim. We find, for the reasons stated below, that these two privileges immunize Hill & Knowlton from this action for defamation.

I. Discussion

Hill & Knowlton's statement, "The ruling supports our claims that Mr. Karp defrauded Buckingham....," actually contains two potentially libelous assertions. The first is that Buckingham had claimed that Karp defrauded it. The second is that the Court of Appeals' ruling supported this claim. The twofold nature of the defendant's statement is critical to our analysis of the defendant's motion.

A. Civil Rights Law § 74

Where, as here, the essential judicial documents — in this case, the complaint and the Second Circuit's opinion — are before us, it is for the Court, in the first instance, to decide whether a publication is protected under section 74 as a fair report of those documents.⁵ Phillips v. Murchison, 252 F.Supp. 513, 520 (S.D.N.Y.1966), aff'd in part and rev'd in part, 383 F.2d 370 (2d Cir.1967), cert. denied, 390 U.S. 958, 88 S.Ct. 1050, 19 L.Ed.2d 1154 (1968); George v. Time, Inc., 259 App.Div. 324, 19 N.Y. S.2d 385, 386 (1st Dep't 1940), aff'd, 287 N.Y. 742, 39 N.E.2d 941 (1942) ("The issue as to whether the article was a fair and true report was an issue of law for the court."); Ford v. Levinson, 90 A.D.2d 464, 454 N.Y.S.2d 846 (1st Dep't 1982) (same); Gurda v. Orange County Publications Division of Ottoway Newspapers, Inc., 56 N.Y.2d 705, 436 N.E.2d 1326, 451 N.Y.S.2d 724 (1982), adopting, 81 A.D.2d 120, 439 N.Y.S.2d 417, 421 (2d Dep't 1981) (Mollen, J., concurring in part and dissenting in part) (same). Only if the Court determines that an issue of fact remains does the question become one for the jury. In this instance, the Court is able to resolve these issues as a matter of law.

1. "The ruling supports ..."

Hill & Knowlton's statement as to the import of the Second Circuit's ruling is unprotected by section 74. That section immunizes fair and true reports of judicial proceedings in order to "... encourage the dissemination of information concerning the judicial branch of government and thereby ... serves the public interest 'in having proceedings of courts of justice public, not secret, for the greater security thus given for the proper administration of justice.'" Gurda v. Orange County Publications Division, supra, 439 N.Y.S.2d at 424 (quoting Lee v. Brooklyn Union Publishing Co., 209 N.Y. 245, 248, 103 N.E. 155 (1913)). Hill & Knowlton's one word assessment of the Second Circuit's opinion does not publish that opinion, or otherwise expose the public to the workings of the judicial system. Rather, it conclusionally evaluates the circuit court's opinion. The Civil Rights Law does not protect such bald-faced commentary about the judicial branch and the proceedings therein. Freeze Right Refrigeration and Air Conditioning Services, Inc. v. City of New York, 101 A.D.2d 175, 475 N.Y.S.2d 383, 388-89 (1st Dep't 1984); see also Branca v. Mayesh, 101 A.D.2d 872, 476 N.Y.S.2d 187, 188-89 (2d Dep't 1984) (Implicitly holding section 74 inapplicable to commentary.).

2. "our claim that Karp defrauded Buckingham...."

When a report of a pleading is the subject of a request for immunity under section 74, a comparison of the pleading and the subsequent report of that pleading is the starting point for the analysis. See, e.g., Ford v. Levinson, supra, 454 N.Y.S.2d at 847; Phillips v. Murchison, supra, 252 F.Supp. at 520. "For a report to be characterized as 'fair and true' within the meaning of section 74 ... it is enough that the substance of the report be substantially accurate." Holy Spirit Association for the Unification of World Christianity v. New York Times Co., 49 N.Y.2d 63, 399 N.E.2d 1185, 1187, 424 N.Y.S.2d 165, 167 (1979).

Hill & Knowlton claims that it accurately described the contents of Buckingham's complaint. Karp, in turn, asserts that Hill & Knowlton inaccurately depicted the complaint, which did not in fact assert a claim for fraud. However, the absence of an explicit allegation of fraud is not dispositive. Section 74 does not require that a defendant report the exact words of the complaint or the exact language of each count. Although Buckingham did not purport to state a claim for fraud, Hill & Knowlton's characterization of Buckingham's claim was substantially accurate.

Although the complaint did not purport to allege a claim for fraud, it alleged facts sufficient to support such a claim. In order to state a claim for fraudulent concealment, a plaintiff must allege "knowledge, a relationship between the parties that creates a duty to disclose, and intent to deceive and defraud by non-disclosure." Fidenas A.G. v. Honeywell, Inc., 501 F.Supp. 1029, 1039 (S.D.N.Y.1980) (citing 24 N.Y.Jur. Fraud and Deceit §§ 104-106 (1962)). The complaint alleged each of these elements. Buckingham's complaint alleged that Karp failed to disclose his agreement with Rothschild and Alko to his employer, to whom he owed...