Bridge CAT Scan Associates v. Ohio-Nuclear Inc.

• Decision Date: 14 May 1985
• Docket Number: No. 84 Civ. 0539 (EW).,84 Civ. 0539 (EW).
• Citation: 608 F. Supp. 1187
• Parties: BRIDGE C.A.T. SCAN ASSOCIATES and Harbor C.A.T. Scan Associates, P.C., Plaintiffs, v. OHIO-NUCLEAR INC. d/b/a Technicare Corporation and Johnson & Johnson, Inc., Defendants. TECHNICARE CORPORATION, Third-Party Plaintiff, v. John E. MURPHY, Sigmund Weiss, Harold Peller, Paul Slotwiner, Morris Goldfarb, Aaron Goldfarb, Zurich Gelender, John R. Jakobson, Peter Jakobson, Bernard Ellman, Daniel Brodsky, Nathan C. Brodsky and Lawrence Helfant, Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

608 F. Supp. 1187

BRIDGE C.A.T. SCAN ASSOCIATES and Harbor C.A.T. Scan Associates, P.C., Plaintiffs, v. OHIO-NUCLEAR INC. d/b/a Technicare Corporation and Johnson & Johnson, Inc., Defendants.

TECHNICARE CORPORATION, Third-Party Plaintiff, v. John E. MURPHY, Sigmund Weiss, Harold Peller, Paul Slotwiner, Morris Goldfarb, Aaron Goldfarb, Zurich Gelender, John R. Jakobson, Peter Jakobson, Bernard Ellman, Daniel Brodsky, Nathan C. Brodsky and Lawrence Helfant, Third-Party Defendants.

No. 84 Civ. 0539 (EW).

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

May 14, 1985.

COPYRIGHT MATERIAL OMITTED

Patterson, Belknap, Webb & Tyler, New York City, for defendants and third-party plaintiff; David F. Dobbins, Esther Koslow, Emily R. Remes, Daniel A. Nardello, New York City, of counsel.

Hurley, Kearney & Lane, Brooklyn, N.Y., for third-party defendant, John E. Murphy; Kevin M. Kearney, Brooklyn, N.Y., of counsel.

OPINION

EDWARD WEINFELD, District Judge.

Third party defendant John E. Murphy ("Murphy") moves, pursuant to Rule 12(b)(6) Fed.R.Civ.P., to dismiss the claims of Technicare Corporation ("Technicare") or, in the alternative, pursuant to Rule 56, for summary judgment. The claims against Murphy are the only ones remaining in this action formerly replete with claims and counterclaims by and against numerous parties. Technicare has settled its differences with all other parties to this lawsuit. It opposes Murphy's motion for dismissal or summary judgment on the grounds noted hereafter.

BACKGROUND

Technicare is a manufacturer and distributor of medical and diagnostic devices. It seeks recovery against Murphy for: trade libel, intentional interference with business relations and contract, prima facie tort, and civil violations of RICO. Murphy is a former Technicare employee who, prior to his discharge, was responsible for arranging financing for prospective Technicare customers. In essence, Murphy is alleged to have conspired with the other parties to this lawsuit in a campaign to "smear" Technicare's reputation and that of its products by disseminating false statements to the public about Technicare's version of a sophisticated item of medical diagnostic equipment known as a C.A.T. Scanner.

A proper understanding of Technicare's claims against Murphy requires they be placed in context, with a brief history of the litigation between Technicare and one of the original plaintiffs in this action, Bridge C.A.T. Scan Associates ("Bridge"). In essence, Technicare's present claims are based upon a prior lawsuit brought by Bridge and a series of alleged threats and related conduct which led thereto.

It began with a simple contractual dispute. In October 1980, Bridge contracted to purchase a Technicare Delta Scan 2020 which, like other C.A.T. Scanners, produces an image of internal body organs without invading the body. Bridge, a limited partnership of nonphysicians, purchased the Delta Scan 2020 as a tax shelter and leased it for operation to Harbor C.A.T. Scan Associates, P.C. ("Harbor"). Although Bridge accepted the machine on delivery and Harbor put it to use, Bridge never paid for the Delta Scan 2020. Instead, it complained to Technicare that the machine was defective, caused distorted images, and was not operational for long periods of time ("downtime") and that its X-ray tubes burned out prematurely.

After various modifications of the initial contract were negotiated, the parties' dispute reached its peak in the summer of 1982. According to Technicare, Bridge's management consultant, Harold Peller ("Peller"), and its general partner, Sigmund Weiss ("Weiss"), made oral threats to Technicare's Vice-President for Sales on at least three occasions. The substance of these purported threats was that unless Technicare agreed to resolve its dispute with Bridge, Bridge would launch a "public relations campaign" against Technicare, utilizing the services of an advertising agency, purchasing advertising space in The Wall Street Journal and other trade publications, and taking whatever steps were necessary to publicize the alleged shortcomings of Technicare's equipment and service.

On October 12, 1982, Weiss addressed a letter to the Chairman of the Board of Technicare's parent company, Johnson & Johnson ("J & J"), allegedly repeating and amplifying the prior oral threats ("October 12th letter"). In essence, the letter stated that if the contractual dispute was not resolved, Bridge was prepared to proceed "legally, publicly, and otherwise" in exposing the widespread threat to patient safety caused by Technicare's C.A.T. Scanners. Claiming that Bridge did not seek to expose these difficulties to the general public and was "only interested in resolving its own problem with J & J and minimizing its losses," the letter continues: "as we have stated to Technicare management, if we must do battle we will proceed in a grander scale than Technicare can envision.... We will not stop with public disclosure of our findings, but will institute a class action suite sic forthwith."

Consistent with its promise, Bridge commenced a class action in the Eastern District of New York on March 1, 1983. The complaint alleged various defects in Technicare's Delta Scan 2020 machines and sought recovery on several different legal bases, including breach of contract, breach of warranty, and negligent design. On March 21st, Bridge filed an amended complaint asserting similar claims with respect to the Delta Scan 2060. On that day, Bridge's counsel sent a letter to Technicare customers informing them of the pending suit, seeking information as to their difficulties with their machines, and holding out the possibility of the recovery of "substantial damages" to purchasers of a C.A.T. Scanner "with inherent design ... defects."

At or about the time the original and amended class action complaints were filed, Bridge's counsel allegedly disseminated them to newspaper reporters. Articles summarizing the complaint's allegations appeared in the Wall Street Journal and the Columbus Post Dispatch, and in June of 1983, a New York Times article discussed the lawsuit in connection with an FDA investigation of Technicare's C.A.T. Scanners.

Attached as Exhibit A to the amended complaint was a list of Technicare purchasers and pricing information ("Customer and Pricing List"). Based upon a claim that the Customer and Pricing List incorporated trade secrets and confidential information, Technicare instituted a separate action ¹ in the Eastern District ("the trade secret action") naming not only Bridge and associated individuals but also the movant here, Murphy. Technicare alleged that Murphy, a former Technicare employee, had stolen the pricing and customer list and given it to Bridge and its agents for the purpose of assisting them in injuring Technicare's business and reputation. That action was ultimately dismissed with prejudice upon consent of the defendants, including Murphy, to an injunction preventing dissemination of the information contained in Exhibit A to the amended class action complaint. A consent judgment was entered on January 19, 1984.

After voluntarily dismissing their class action complaint filed in the Eastern District, Bridge and Harbor instituted this action, asserting once more claims for breach of contract, defective manufacture and design, and fraud, but upon an individual rather than class basis. In response, Technicare asserted counterclaims against the Bridge and Harbor partnerships and third party claims against Bridge's limited and general partners, Harbor's President, Bridge's management consultant, and Murphy (hereinafter the "Bridge defendants"). These Technicare counterclaims and third party claims are the ones at issue on this motion. As noted above, Technicare seeks recovery for trade libel, intentional interference with business relations and/or contract, prima facie tort, and civil violations of RICO.

DISCUSSION

Murphy's principal argument upon this motion is that Technicare "merely" alleges he misappropriated trade secrets. He contends that such an allegation is insufficient to warrant recovery under any of Technicare's asserted tort or statutory causes of action, and in any event, any claim based thereon has already been litigated in the prior trade secrets action. Accordingly, Murphy moves to dismiss for failure to state a claim upon which relief may be granted, or for summary judgment on grounds of res judicata.

Murphy is correct that the only conduct specifically attributed to him in the complaint is the misappropriation of trade secrets. However, this neither entitles him to a dismissal, nor bars Technicare's claims as a matter of res judicata. Technicare alleges not only that Murphy stole its trade secrets, but also that he was a member of a conspiracy, and acted in concert with the other Bridge defendants, in an attempt to smear the reputation of Technicare and its widely distributed products.² The purported conspiracy is based on the dissemination of allegedly libelous statements to the public and Technicare's customers. That Murphy's role in this conspiracy may have been limited or slight is of no consequence. A conspirator is liable for the acts of other members of the claimed conspiracy as if they were his own, whether he plays a minor or major role in the common scheme.³

Technicare has raised an issue of fact as to Murphy's participation in the alleged scheme to "smear" its products' reputation. Murphy's own deposition testimony indicates that, while at Technicare, he was involved in arranging financing for the Bridge/Harbor project and that, after leaving, he had various meetings with the principals of Bridge and Harbor to discuss possible "business ventures," and also had meetings with Bridge's counsel where litigation with Technicare was discussed. Furthermore, Technicare has submitted the deposition of Bridge's general partner, Sigmund Weiss, who testified that it was Murphy who drafted the October 12th...