Williams v. Poulos
| Decision Date | 03 September 1992 |
| Docket Number | Civ. No. 92-0069-B. |
| Parties | George WILLIAMS, et al., Plaintiffs, Ralph Dyer, Intervener, v. Richard POULOS, et al., Defendants. |
| Court | U.S. District Court — District of Maine |
John S. Whitman, Richardson & Troubh, Portland, Me. and Allen S. Rugg, Kutak, Rock & Campbell, Washington, D.C., for plaintiffs.
E. Stephen Murray, Murray, Plumb & Murray, Portland, Me., for intervenor-plaintiff Dyer.
John A. McArdle, III, Daniel G. Lilley Law Offices, Portland, Me., for defendants Bowers, Rodrigue and Robichaud.
Peter T. Marchesi, Wheeler & Arey, P.A., Waterville, Me., for defendants Leighton and Probe.
Peter J. Detroy, III, Norman, Hanson & Detroy, Portland, Me., for defendants Poulos and Campbell, Poulos, Campbell & Zendzian.
This matter is before the Court on the Plaintiffs' and Intervener's motions for a preliminary injunction. The Plaintiffs and Intervener allege that the Defendants intercepted and recorded telephone conversations in violation of federal and state law. See 18 U.S.C. §§ 2510-2521 and 15 M.R.S.A. §§ 709-713. The Plaintiffs and Intervener request that the Defendants be preliminarily enjoined from making any use or disclosure of the contents of those recordings. See 18 U.S.C. § 2520(b)(1) (). For the reasons and subject to the conditions stated below, the motions are GRANTED.
Williams v. Poulos is the most recently filed action in a string of related civil lawsuits and bankruptcy appeals, all of which can be traced to the demise of Consolidated Auto Recyclers, Inc. ("CAR").
Founded in 1988, CAR dismantled automobiles and resold used parts. By May 1990, CAR employed approximately one hundred forty people and operated throughout New England and in Atlantic Canada. Twenty employees worked in CAR's East Vassalboro, Maine headquarters, including Wayne Bowers, Rodney Rodrigue and John Robichaud who owned over 95% of CAR's stock. All three were members of the board of directors. In addition, Bowers was Chief Executive Officer and Treasurer and Rodrigue was President.
To finance its early growth and business operations, CAR developed a banking relationship with Casco Northern Bank. In February 1990, Casco Northern elected not to increase CAR's lines of credit. CAR found itself in a serious financial bind because the firm had already spent the additional money it expected to receive.
To finance continued expansion and business operations, CAR issued various forms of debt to a venture capital firm, Allied Capital Corporation and certain of its subsidiaries and affiliates ("Allied").1 Although Allied invested some money in CAR beginning in late 1989, the bulk of Allied's approximately $4,500,000 investment was made after CAR's banking relationship with Casco Northern soured.
In May 1990, while CAR's financial condition deteriorated, Bowers, Rodrigue and Robichaud approached Richard Poulos, a lawyer with Poulos, Campbell & Zendzian. At the end of their meeting, Poulos told Bowers, Rodrigue and Robichaud that they needed a "workout guy" not a lawyer.
In May, Rodrigue hired Michael Leighton and Probe Investigative Services to install a telephone surveillance system able to monitor a single, preselected telephone line at CAR's headquarters throughout the course of a business day. According to Rodrigue, CAR's phone bill was almost $1,000,000 per month, a cost Rodrigue wanted to bring under control.
Leighton examined the telephone system used by CAR and determined that he lacked the skill and expertise to fabricate an appropriate monitoring system. Leighton sought advice and assistance from Jonathan Broome of Old England Electronics, Inc. Broome's principal business is repairing consumer electronics; he is not an authorized telephone system technician. Although Broome considered the request highly unusual and noted that CAR was unwilling to reveal why it wanted or needed the system, he was assured by Leighton that "everything was legal."
After discovering that there was no commercially available equipment designed to permit the interception and recording Rodrigue desired, Broome custom-designed a system to meet Rodrigue's specifications. Conversations were recorded with a hi-fi video-cassette recorder capable of running for six to eight hours.2 Broome attached the VCR to CAR's telephone system with an interface which he described as a "shielded, isolated, impedance matching system" with a limiter capable of tying together two very dissimilar pieces of equipment: a VCR and a commercial telephone system. Broome indicated that it took "quite a bit of time and fiddle" to design the interface. Once attached, the interface, which "clipped on," had to be manually moved from one telephone line to another, permitting the recorder to identify and record from one preselected line at a time.
CAR was unable to quickly resolve its financial difficulties. Casco Northern declared CAR in default on May 29, 1990. Two days later, Allied also declared CAR in default.
On June 17, working after hours, Leighton and Broome installed the telephone monitoring system in a utility closet in CAR's headquarters, running an unobtrusive wire to the phone system. Probe submitted a bill for the work.
CAR's security officer, David Fisher, was instructed to deliver the tapes of recorded conversations to Wayne Bowers each day for review. Bowers indicated that he made cassette tapes of all telephone conversations he believed could be used to demonstrate impropriety after determining whether or not they were related to the business affairs of CAR.
By June 20, Bowers, Rodrigue and Robichaud had begun targeted taping of CAR's Chief Financial Officer, Richard Lee. Hired on Allied's recommendation, Rodrigue and Bowers doubted Lee's loyalty. According to Rodrigue, the tapes made did not substantiate their doubts about Lee's loyalty.
On June 27, while Rodrigue was in Washington negotiating with Allied, he learned that Lee had been communicating directly with Allied, violating instructions he had received from Bowers, Rodrigue and Robichaud. Rodrigue telephoned CAR's headquarters, requesting that tapes of Lee's conversations be prepared for review when he returned. The message was garbled, and David Fisher interpreted it as an instruction to remove the telephone taping system.
On June 28, 1990, Bowers, Rodrigue and Robichaud entered into an agreement with Allied effectively transferring control of CAR. Allied was given three seats on the board, to balance the three held by Bowers, Rodrigue and Robichaud. Ralph Dyer was hired as Chief Executive Officer of CAR at Allied's suggestion. Dyer also served as the seventh member and Chairman of the Board. Forty-three percent of the Allied's voting stock was transferred by Bowers, Rodrigue and Robichaud to a voting trust for which an Allied employee served as trustee.3
After Rodrigue returned to Maine and learned the telephone surveillance system had been removed, he ordered that it be reinstalled. Rodrigue instructed Fisher to target Jim Starr, an outside accountant auditing CAR for Allied. According to Bowers, Rodrigue and Robichaud, Starr was targeted because he was spending an excessive amount of time talking with girlfriends. No tapes exist, however, on which Starr is talking with a girlfriend.
On June 29, Bowers, Rodrigue and Robichaud met with Ralph Dyer. During the course of several hours of orientation, Dyer was reportedly informed that CAR "randomly" monitored telephone calls of employees. Dyer denied that he was informed that telephone calls were randomly monitored. Rather, Dyer says he was told that "sales pitches" were monitored.
Dyer's relationship with Bowers, Rodrigue and Robichaud was strained from the beginning. By July 10, Rodrigue and Robichaud were feuding openly with Dyer. On July 17, Dyer obtained a temporary restraining order barring Rodrigue and Robichaud from CAR's headquarters. Rodrigue responded by ordering Michael Leighton and Probe Investigative Services to conduct an investigation of Dyer. Rodrigue paid Probe with a personal check.
The first tapes of Ralph Dyer's conversations were made on July 18, the day after the TRO issued. Bowers, Rodrigue and Robichaud acknowledge that they were explicitly targeting Dyer by July 19.
Bowers, Rodrigue and Robichaud were also taping and keeping copies of conversations made by Allied personnel at CAR to Allied's headquarters in Washington, DC, including telephone calls to Allied's in-house counsel. There are no indications that Allied knew of or consented to monitoring of its telephone conversations. According to Bowers and Poulos, however, the decision to continue targeted monitoring of Dyer and Allied personnel was based on information obtained by listening to tapes of conversations involving only Allied personnel.
On July 21, Bowers, Rodrigue and Robichaud returned to Poulos, Campbell & Zendzian to meet again with Richard Poulos and his partner, John Campbell. In a two to three hour meeting, Bowers, Rodrigue and Robichaud told Poulos that they had taped and were continuing to tape telephone calls at CAR, indicated what they had learned from the tapes, and offered to play the tapes for Poulos. Poulos declined to listen to the tapes, but did not advise Bowers, Rodrigue and Robichaud to stop taping. By the end of the meeting, Bowers, Rodrigue and Robichaud had entered into a limited purpose representation agreement with Poulos to secure his help in regaining control of CAR, dealing with the board meeting scheduled for July 23, and responding to the TRO. Bowers, Rodrigue and Robichaud agreed to pay Poulos a $5000 retainer.
On July 22, Campbell drafted and delivered a letter to CAR indicating that Bowers, Rodrigue and Robichaud would be boycotting the CAR board meeting the following day.
On July 23, the board meeting was held telephonically so that the Allied employees in Washington, DC...
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Williams v. Poulos
...served as CAR's President. court in conjunction with Allied's motion for preliminary injunctive relief, see Williams v. Poulos, 801 F.Supp. 867, 868-72 (D.Me.1992) ("Poulos I"), and after the conclusion of the bench trial. See Williams v. Poulos, Civ. No. 92-0069-B, slip op. at 3-10 (D.Me. ......