Rothstein v. Carriere
| Decision Date | 24 June 2004 |
| Docket Number | Docket No. 02-7731. |
| Citation | 373 F.3d 275 |
| Parties | Theodore ROTHSTEIN, Plaintiff-Appellee, v. Mark CARRIERE, Defendant-Appellant, and Multi-Media Distributing Co. Inc., Leisure Time Entertainment, Inc., and Leisure Time Products, Inc., Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
Randy M. Friedberg, Olshan, Grundman, Frome, Rosenzweig & Wolosky LLP, New York, N.Y. (Thomas J. Fleming, on the brief, Arthur M. Schwartz, Cindy Schwartz, Schwartz & Goldberg P.C., Denver, CO, on the brief) for Defendant-Appellant Mark Carriere.
Elkan Abramowitz, and Noah D. Genel, Morvillo, Abramowitz, Grand, Iason & Silberberg, P.C., New York, N.Y. (Robert F. Katzberg, Kaplan & Katzberg, New York, NY, on the brief), for Plaintiff-Appellee Theodore Rothstein.
Before: WALKER, Chief Judge, POOLER, Circuit Judge, and GLEESON, District Judge.1
In the early 1990s, Mark Carriere and Theodore Rothstein were both engaged in the pornography business. Both were also under investigation by the federal government. In 1994, after Carriere was indicted on obscenity charges, he agreed to cooperate with the government's ongoing investigation of Rothstein. On March 18, 1994, as part of that cooperation, Carriere told the government that Rothstein controlled a company in Brooklyn, New York that produced and distributed obscene videos.
In February 1996, Rothstein was indicted on obscenity charges in the Northern District of Florida. The government dismissed the charges in 1997. Rothstein then brought this action against Carriere in the United States District Court for the Eastern District of New York, alleging that Carriere lied about him to the government. A jury found that Carriere was liable for malicious prosecution. It awarded Rothstein $1,000,000 in punitive damages and compensatory damages in an amount that was subsequently adjusted by the district court to $128,078.19.
We reverse and remand with instructions to enter judgment for Carriere.
Sometime prior to October 1990, Jimmy Whitaker, a Special Agent with the Federal Bureau of Investigation ("FBI"), entered a video store in Tallahassee, Florida. Whitaker was conducting an investigation into possible violations of the federal obscenity laws. During the search, Whitaker discovered a collection of obscene videos that had been shipped to the store by Multi-Media Distributing Co., Inc. ("Multi-Media"), Carriere's Indiana company. As a result of the seizure of those videos, and after some further investigation, a search warrant was executed in October 1990 at Multi-Media's Indiana offices. Among other things, $548,000 in cash was seized from a safe.
After that search, Special Agent Matthew Pellegrino, who had taken over responsibility for the investigation from Agent Whitaker, received (in an undercover capacity) a catalogue from a Multi-Media-related company that offered obscene videos for sale. The catalogue stated that the videos were distributed by Bizarre Video. These events led to a second search of Multi-Media's offices, in July 1991. This search revealed, among other things, that Carriere was doing business with a New York company named Bizarre Video/Bean Blossom ("Bizarre"). Specifically, labels and invoices seized during the searches revealed that Bizarre had supplied obscene videos to Carriere and Multi-Media. On some of the invoices, the preprinted name "Star" had been crossed out, and the name "Bizarre" was written by hand. The investigators then turned their attention to identifying the owners and principals of Bizarre.
Rothstein was the owner of Star Distributors ("Star"), a pornography business located at 20-40 Jay Street, Brooklyn, New York. Star's offices were on the same floor of the same building as the offices of Bizarre, and both companies used the same space to store videos and shipping labels. On July 23, 1992, the investigators obtained a warrant to search the offices of both Star and Bizarre. During the search of the adjacent offices, Morton Gordon told the agents that he was the president and sole owner of Bizarre, and Nathan Grama identified himself as the president of Star.
The investigation commenced by Agent Whitaker in the Tallahassee video store resulted in multiple federal prosecutions of Carriere. The cash seized from the 1990 search of Multi-Media's offices produced a tax prosecution in the Northern District of Indiana. In August 1991, Carriere pled guilty to evading personal income taxes. He was sentenced principally to a three-year term of probation and a $250,000 fine. In April 1992, Carriere was charged with obscenity in the Northern District of Florida. Pursuant to Rule 20 of the Federal Rules of Criminal Procedure, the case was transferred to the Central District of California, where Carriere pled guilty to an obscenity charge arising out of the obscene videos Multi-Media had shipped to Tallahassee. His sentence in that case included another three-year probationary term, with a special condition of four months in home detention, and a $3,000 fine.
In January 1994, Carriere was indicted yet again on obscenity charges, this time in the Western District of Kentucky. Facing the prospect of a prison sentence in what was his third federal prosecution in as many years, Carriere decided to offer his cooperation to the government.
At that time, Gene Malpas was the Department of Justice prosecutor in charge of the ongoing investigation into Rothstein — specifically, into Rothstein's connection with Bizarre. Malpas and Pellegrino believed that there was an obvious connection between Rothstein and Gordon, and between Bizarre and Star. They based that view on (1) the physical proximity of the two companies' offices, i.e., they shared a floor in the same Brooklyn building; (2) Bizarre's use of Star's shipping invoices; and (3) bank records showing unexplained money transfers between the two companies.2 In short, Malpas believed that "Mr. Rothstein had much more connection to ... Bizarre than would appear on any paperwork."
On March 18, 1994, Carriere was debriefed by Pellegrino and Malpas. Pellegrino's memorandum summarizing the interview reveals that Carriere gave the investigators the following information:
— Carriere had agreed with Bizarre to send Bizarre's promotional material to a group selected from Carriere's mailing list.
— The agreement originated with Carriere's former sales manager, Donald "Sandy" Sarnblad, who was a good friend of Rothstein's.
— According to Sarnblad, Rothstein had come to Sarnblad seeking to have Multi-Media sell Bizarre videos.
— Carriere finally agreed (after several importunings by Sarnblad) to include a page of Bizarre video titles in one of his mail order catalogues.
— The Bizarre titles sold well but were too expensive, so Carriere suggested that Sarnblad make a "cash deal" with Rothstein. Sarnblad did so, resulting in a substantial price break.
— To generate the cash for the Bizarre purchases, Multi-Media wrote checks to cash, cashed them, and delivered the cash to Rothstein in New York.
— Rothstein controlled Bizarre. All price discussions were with Rothstein. Although Gordon handled the "nuts and bolts" of the video sales, any matter of importance had to be decided by Rothstein. When Rothstein visited California (where Carriere had an office), he would discuss Bizarre business with Carriere. They would do the same when Carriere visited Rothstein's office in Brooklyn.
On February 7, 1996, 23 months after Carriere was debriefed by Pellegrino and Malpas, a grand jury in the Northern District of Florida returned a seven-count indictment charging Rothstein, Gordon, Sarnblad and Bizarre with various obscenity charges. All defendants were charged with conspiring to distribute obscene Bizarre videotapes.
As part of his cooperation, Carriere supplied Multi-Media documents to Malpas. In particular, Malpas asked Carriere for any records reflecting the delivery of cash to Rothstein for the Bizarre videotapes. Carriere produced records showing that Eric Gutterman, a longtime sales employee at Multi-Media, had delivered cash to New York. Carriere also facilitated an interview of Gutterman by Malpas and Pellegrino. When interviewed, Gutterman confirmed that he had delivered cash to Bizarre. Specifically, Gutterman stated that he had brought significant amounts of cash to New York and delivered it to Gordon at Bizarre's offices.
On January 13, 1997, Malpas made a motion to dismiss all charges against Rothstein and Sarnblad. The motion stated no reason for the relief it sought. On January 17, 1997, the district court granted the motion on a form order that provided no reason for the dismissal.
Although neither the prosecutor nor the court stated a reason for the dismissal, the record reveals that it was pursuant to an agreement between the parties. On November 18, 1996, Robert Katzberg, who is Rothstein's counsel in this case, and who was paid by Rothstein to represent Sarnblad in the criminal case, sent Malpas a letter referencing "our agreement that the government will dismiss the ... indictment against defendants Donald Sarnblad and Theodore Rothstein" in exchange for an affidavit from Sarnblad. The letter enclosed a draft of Sarnblad's affidavit for Malpas's approval.
Three days later, Katzberg wrote another letter to Malpas, stating:
Sarnblad's affidavit admitted that as a Multi-Media employee, he was...
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