Mandelblatt v. Perelman

Decision Date05 April 1988
Docket NumberNo. 86 Civ. 7829 (RLC).,86 Civ. 7829 (RLC).
Citation683 F. Supp. 379
PartiesMichael MANDELBLATT, Plaintiff, v. Ronald O. PERELMAN, Howard Gittis, Bruce Slovin, Fred L. Tepperman and Frederick W. McNabb, Jr., Defendants.
CourtU.S. District Court — Southern District of New York

Rhoades and Rhoades, P.C., Brewster, N.Y., for plaintiff; Daniel Rhoades, of counsel.

Skadden, Arps, Slate, Meagher & Flom, New York City, for defendants; Vaughn C. Williams, of counsel.

ROBERT L. CARTER, District Judge:

OPINION

This is one of a growing number of suits seeking to redress adverse employment action on a theory of defamation.1 Plaintiff Michael Mandelblatt brought suit in diversity against four directors of the Revlon Group, Inc. (Revlon) and its General Counsel, alleging that they defamed him in connection with the termination of his consulting arrangement with Revlon. Defendants move for summary judgment on the ground that plaintiff consented to the publication of their allegedly defamatory statements.

BACKGROUND

Revlon (formerly known as Pantry Pride, Inc.) came under the control of the MacAndrews & Forbes Group, Inc., on June 11, 1985. Shortly thereafter, plaintiff entered into a consulting agreement ("the Agreement") with Pantry Pride. Under the terms of the Agreement, plaintiff resigned his positions as officer and director of Pantry Pride, and of its subsidiary, Devon Stores, Inc., and, effective August 1, 1985, took on consulting responsibilities "in connection with the management, operation and possible disposition of the business of ... Devon." Williams Aff't, Ex. A, at 3.

The Agreement provided for the termination of plaintiff's services on June 11, 1986, unless sooner terminated by, among other events, plaintiff's discharge for cause. Cause for plaintiff's discharge was declared to arise upon

(A) the willful and continued failure by plaintiff to substantially provide the services to be provided by him hereunder ..., after demand for substantial performance is delivered by the Board of Directors of Pantry Pride that specifically identifies the manner in which such Board of Directors believes plaintiff has not substantially performed his consulting services, (B) the willful engaging by plaintiff, in his capacity as a consultant, in gross misconduct materially injurious to Pantry Pride monetarily or otherwise or (C) the conviction of plaintiff for a felony under federal or state law.... No act, or failure to act, on plaintiff's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of Pantry Pride....

Agreement, ¶ 7(d). As a matter of procedure, the Agreement stipulated that a discharge for cause should not be effective unless plaintiff first received (1) reasonable notice, (2) an opportunity to be heard, together with counsel, before the Board of Directors, and (3) a Notice of Termination, stating that "in the good faith opinion of the Board of Directors plaintiff was guilty of conduct set forth in clause (A), (B) or (C)," quoted above. Id. The Notice of Termination was required to "indicate the specific termination provision ... relied upon and ... set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination ... under the provision so indicated." Id., ¶ 7(f).

At a March 5, 1986, meeting of Pantry Pride's Board of Directors, defendant Perelman, Chairman of the Board, "requested defendant McNabb to report to the Board with respect to certain developments relating to plaintiff's performance...." Williams Aff't, Ex. B (Minutes of March 5 Meeting). The Board then unanimously resolved to authorize the appropriate corporate officers "to advise plaintiff that there is a reasonable basis for the Board to consider terminating him for cause as that term is defined in the Agreement ..., and to offer him the opportunity to be heard before the Board...." Id. By letter dated March 6, 1986, defendant Gittis notified plaintiff of the Board's intention to consider terminating him, and gave him a week in which to advise Pantry Pride of his desire to be heard by the Board. Defendant Gittis wrote:

management has submitted and will submit to the Board of Directors substantiation of its view that your conduct with respect to discouragement of prospective purchasers of Devon and otherwise establishes that you have willfully engaged in gross misconduct materially injurious to Pantry Pride constituting cause for your discharge pursuant to the provisions of Section 7(d)(B) of the Agreement.

Williams Aff't, Ex. C.

Plaintiff's attorney requested an opportunity to be heard, and defendant McNabb confirmed, by letter dated May 15, 1986, that the Board would hear plaintiff at its May 20 meeting. Defendant McNabb indicated in that letter that

the Company's evidence will show that in conversations with defendant Slovin, President of MacAndrews & Forbes, its legal counsel, and with at least three prospective purchasers of Devon Stores, plaintiff demonstrated a clear design to interfere, and in fact interfered, with Pantry Pride's efforts to sell Devon Stores.

Williams Aff't, Ex. E. At the May 20 meeting, plaintiff was presented with "the Company's evidence," which included five affidavits. Williams Aff't, Ex. F. In one of those affidavits, defendant Slovin swore that

plaintiff approached defendant Perelman, Chairman of the Board for Pantry Pride Inc. and sought a lucrative, long-term employment contract for himself. I was told by Mr. Perelman that he told plaintiff to work it out with me. Plaintiff told me in or around January, 1986 that he was looking for a three year agreement for himself escalating from $300,000 to $400,000 per year with large additional incentives if Devon was sold.... I was opposed to a long-term extension of the Agreement because over the course of the several months immediately preceding these discussions, plaintiff told me on numerous occasions that he didn't like his job and that he thought Devon was an inferior company.... When I declined to offer him a long-term extension, plaintiff told me that unless I gave into sic his demands he would have no enthusiasm in managing the business and would not actively assist in its sale throughout the remainder of our Agreement's term. I considered this to be a breach of our Agreement and told plaintiff that I thought his threats were inappropriate for a person in his position....

Slovin Aff't, ¶ 8. Defendant Slovin went on to report two occasions on which plaintiff had allegedly discouraged potential purchasers of Devon, id., ¶¶ 9-11, and concluded by stating that "I am convinced that plaintiff acted in bad faith and with the avowed purpose of sabotaging the sale of Devon." Id., ¶ 13.

At the conclusion of the May 20 Board meeting, it was resolved as follows:

That in the good faith opinion of the Board of Directors ..., plaintiff has violated clause B of Subsection 7(d) of the Consulting Agreement ... by reason of his threats to fail to perform his duties under the Agreement unless he were awarded a new and more lucrative contract coupled with his demonstrated lack of cooperation with and discouragement of prospective purchasers of Devon Stores, Inc. following the Corporation's refusal to accede to his improper demands.
That the Board of Directors finds that the misconduct of plaintiff described in the foregoing resolution was willful in that it was not engaged in by him in good faith and with a reasonable belief that his actions and omissions were in the best interests of the Corporation and further that such misconduct was "materially injurious" to the Corporation in that it impeded corporate efforts to sell Devon Stores, Inc.

Williams Aff't, Ex. M at 10 (Minutes of May 20 Meeting). This language was repeated essentially verbatim in the Notice of Termination sent to plaintiff on May 20 over the signature of defendant McNabb.

DISCUSSION

While plaintiff contends that his discharge was unjust, his complaint sounds in tort, not contract. He alleges that

among other things, each defendant caused breach of the agreement with plaintiff, sought to terminate his services, and told third parties, or caused third parties to be told, orally or in writing or both, that plaintiff was discharged "for cause," and his services were terminated because he was guilty of willful misconduct.
Defendants did this or caused it to be done by, among other things, adopting and approving directors' minutes, writing or causing to be written, one or more letters or affidavits or both, and causing publication of all thereof to third parties.

Complaint, ¶¶ 14-15. He seeks to recover for injury to "his reputation, his income, and his ability to obtain the kind of employment he had previously." Id., ¶ 19. While plaintiff's language is far from precise, the court must construe it "so ... as to do substantial justice." Rule 8(f), F.R.Civ.P. See FRA S.p.A. v. Surg-O-Flex of America, Inc., 415 F.Supp. 421, 424 (S.D.N.Y. 1976) (Tenney, J.) ("The principle of liberal construction of pleadings embodies the Federal Rules' fundamental design to preserve the substance of an action from failing because of irregularities and peccadilloes in form").

A strict reading of the complaint might lead one to suppose that its scope is limited to claims based on defamatory statements made subsequent to plaintiff's termination, but it admits of a more generous construction: namely that "each defendant ... sought to terminate plaintiff's services" by publishing defamatory statements about him to the Board of Directors prior to his discharge. The court must hesitate to read between the lines of a plaintiff's pleading where to do so would result in prejudice to the defendant. Here, however, defendants had full notice of the extent of plaintiff's claims at least as early as plaintiff's deposition, when plaintiff explained that he was relying on defendants' pre-discharge statements to...

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