Inflight Newspapers, Inc. v. Magazines in-Flight

• Decision Date: 17 December 1997
• Docket Number: No. 97-CV-5933 (JS).,97-CV-5933 (JS).
• Citation: 990 F.Supp. 119
• Parties: INFLIGHT NEWSPAPERS, INC., and Inflight Advertising, Inc., Plaintiffs, v. MAGAZINES IN-FLIGHT, LLC, Magazines In-Flight, Inc., Marc Passarelli, Stephen Sergi, James Newton, Jody Dykstra, Elise Antonelli, Scott T. Guido, Edgar Escobar, Elvis Bran and Jan Kuliwoski, Defendants.
• Court: U.S. District Court — Eastern District of New York

990 F.Supp. 119

INFLIGHT NEWSPAPERS, INC., and Inflight Advertising, Inc., Plaintiffs, v. MAGAZINES IN-FLIGHT, LLC, Magazines In-Flight, Inc., Marc Passarelli, Stephen Sergi, James Newton, Jody Dykstra, Elise Antonelli, Scott T. Guido, Edgar Escobar, Elvis Bran and Jan Kuliwoski, Defendants.

No. 97-CV-5933 (JS).

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

December 17, 1997.

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Barry I. Slotnick, J. Lawrence Crocker, Philippa M. Haggar, Michele Levy, Sarah Crossen, Slotnick, Shapiro & Crocker, LLP, New York City, for plaintiffs.

M. Allan Hyman, Certilman Balin Adler & Hyman, East Meadow, NY, for Stephen Sergi, defendant.

Lee M. Albin, Keith H. Richman, Kenneth H. Godt, Albin & Richman, Garden City, NY, for all other defendants.

MEMORANDUM AND ORDER

SEYBERT, District Judge.

Pending before the Court are the objections submitted by all parties in the instant action to the Report and Recommendation of United States Magistrate Judge Michael L. Orenstein dated November 10, 1997 (hereinafter "R & R").

BACKGROUND

On October 15, 1997, plaintiffs Inflight Newspapers, Inc. and Inflight Advertising, Inc. (collectively "Inflight") petitioned this Court for a temporary restraining order alleging violations of (1) the Sherman Act, 15 U.S.C. § 2; (2) the Clayton Act, 15 U.S.C. §§ 15, 26; (3) the Lanham Act, § 15 U.S.C. § 1501 et seq.; and (4) supplemental New York State law claims. The suit arises from the establishment by the individual defendants, former officers and employees of Inflight, of two new corporations, Magazines InFlight, LLC, and Magazines In-Flight, Inc. (collectively "MIF"). Specifically, defendant MIF is alleged to have infringed upon Inflight's name and logo, and the individual defendants have purportedly violated non-competition and non-disclosure covenants through the use of trade secrets and other proprietary information of Inflight, and in so doing, have been unjustly enriched. Furthermore, the individual defendants, as former officers and employees of Inflight, are alleged to have breached their fiduciary duties of care, loyalty, and good faith, and to have diverted a corporate opportunity and to have tortiously interfered with Inflight's customer contracts. The Court denied the temporary restraining order application and referred the matter to Magistrate Judge Orenstein to conduct a hearing and to issue a Report and Recommendation on the plaintiffs' motion for a preliminary injunction. An exhaustive three week hearing was held and the testimony of 24 witnesses and the introduction of 108 exhibits were received into evidence. The facts underlying this action were adduced after a hearing before the Magistrate and are set forth fully in Magistrate Orenstein's report, read into the record on November 10, 1997, which thoroughly outlined the claims raised and the supporting evidence introduced.

Magistrate Orenstein recommended enjoining and restraining the named defendants "and their agents, employees, attorneys or successors or anyone in active concert or participation with them who shall receive actual notice ... from: (a) carrying on or engaging in any business which obtains magazines and newspapers, which binds such magazines into covers and distributes such magazines and newspapers to airlines and others, and (b) using any of plaintiffs' trade secrets, proprietary information or other confidential data ... and (c) using a logo in the shape of a globe or sphere with an airplane circling or crossing such globe or sphere, and (d) stating in any publication in any manner so as to imply that defendants or defendant business entities are the successors to or affiliated with Inflight Newspaper, Inc. or Inflight Advertising Inc." R & R 1, 2.¹

Upon plaintiffs' application, and pending resolution of the objections to Magistrate Orenstein's Report and Recommendation, the Court has preliminarily adopted the Report and Recommendation. Now, upon reviewing de novo the Magistrate's findings and recommendations to which objection is made, as required pursuant to 28 U.S.C. § 636(b)(1)(C) and Federal Rule of Civil Procedure 72(b), the Court adopts the Report and Recommendation in its entirety.

Objections were separately submitted by the plaintiffs, defendant Stephen Sergi, and all other defendants (the "MIF defendants"). At the outset, the Court admonishes the MIF defendants for what is, essentially, a 50 page brief in opposition to the Magistrate's Report and Recommendation. My individual rules clearly state that memoranda of law are limited to 20 double-spaced pages and that memoranda that exceed the page limitations will not be considered by the Court. Nevertheless, the MIF defendants submitted a 21 page brief, outlining their objections and providing legal analysis to support their arguments, as well as a 31 page "Memorandum of Law" that merely expands further the same grounds delineated in the defendants' 21 page objection brief and attempts to add new arguments not mentioned in the MIF defendants' objections brief. Accordingly, the Court will disregard the MIF defendants' "Memorandum of Law" and will address only arguments raised in the objection brief. This approach is fair to both the plaintiffs and defendant Sergi who were able to comply with my rules and page limitations.

DISCUSSION

I. THE STANDARD FOR THE ISSUANCE OF A PRELIMINARY INJUNCTION

In order to obtain a preliminary injunction, the movant must establish that (a) it will suffer irreparable harm in the absence of an injunction and (b) either (i) a likelihood of success on the merits or (ii) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of the hardships tipping decidedly in favor of the moving party. Tom Doherty Assocs., Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 33 (2d Cir.1995).

A. Irreparable Harm

Because a preliminary injunction is a drastic measure, Borey v. National Union Fire Ins. Co., 934 F.2d 30, 33 (2d Cir.1991), "the showing of irreparable harm is the `single most important prerequisite for the issuance of a preliminary injunction.'" Frank Brunckhorst Co. v. G. Heileman Brewing Co., Inc., 875 F.Supp. 966, 974 (E.D.N.Y. 1994) (citing Bell & Howell v. Masel Supply Co., 719 F.2d 42, 45 (2d Cir.1983)); see also Reuters Ltd. v. United Press Int'l, Inc., 903 F.2d 904, 907 (2d Cir.1990).

1. The Defense of Laches

Preliminary injunctions normally are granted "under the theory that there is an urgent need for speedy action to preserve a party's rights." Museum Boutique Intercontinental, Ltd. v. Picasso, 880 F.Supp. 153, 164 (S.D.N.Y.1995). In the context of granting a preliminary injunction, therefore, the district court should generally consider delay in assessing irreparable harm. Tom Doherty, 60 F.3d at 39 (citation omitted); Citibank, N.A. v. Citytrust, 756 F.2d 273 (2d Cir.1985). Magistrate Orenstein concluded that there was no laches on plaintiffs' part because, despite a three month delay in seeking injunctive relief, the plaintiffs conducted an investigation in order to collect sufficient information to satisfy the demonstration of irreparable harm. Tr. 1, 14-18, 2352.

The MIF defendants seem to argue that because the Court denied the plaintiffs a TRO on finding there was no immediate threat of irreparable harm, that somehow plaintiffs are now precluded from establishing irreparable harm to secure a preliminary injunction. Defendant Sergi argues that the plaintiffs should have promptly moved for injunctive relief as soon as Mrs. Lehner became aware of MIF's existence in August 1997. Because the plaintiffs chose to wait until they lost the contract from American Airlines, the defendants argue that they assumed the risk of defendants' continued operations and should be estopped from obtaining equitable relief when they are guilty of gross laches.

The Court finds that the record reflects sufficient evidence to rebut a finding of laches that would bar a finding of irreparable harm. As Magistrate Orenstein correctly found, beginning on July 16, 1997, the plaintiffs, through counsel, sent the key defendants a letter with regard to their activities. Defs. Ex. W. Defendants Sergi, Newton and Passarelli then responded through their own attorney on July 22, 1997, which expressed a willingness to cooperate with Inflight. Pls. Ex. 32. It was not until August 1997 that plaintiffs actually became aware of the possible threat posed by MIF. Then, as the Magistrate found, it was not until September 30, 1997 that plaintiffs realized the extent of the threat when it lost its leading client, American Airlines. It was at that time that the possible threat of MIF manifest itself as the actual threat. Within two weeks, plaintiffs moved for their temporary restraining order and the instant motion for a preliminary injunction. To the extent the defendants may have suffered any prejudice during this time, the Magistrate also found, and the defendants do not now dispute, that their investment initiated as early as July 16, 1997, well before it was reasonable for the plaintiffs to seek this type of drastic relief. Accordingly, the Court finds that the Magistrate's ruling as to laches was well reasoned and supported in the record and thus any delay is not a bar to granting this injunction. See also Playboy Enterprises v. Chuckleberry Publ'g, Inc., 486 F.Supp. 414, 434-35 (S.D.N.Y.1980) ("parties should not be encouraged to sue before a practical need to do so has been clearly demonstrated").

2. Inadequate Remedy at Law

In addition to a showing that the plaintiffs did not unduly delay resorting to injunctive relief, also essential to a showing of irreparable harm is the unavailability or at least inadequacy of a money damages award. See, e.g., Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, 102 S.Ct. 1798, 1803, 72 L.Ed.2d 91 (1982) (stating "the basis for injunctive relief in the federal courts has always been irreparable injury and...