Matter of Morgan Keegan & Co., Inc. v Eavis

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Matter of Morgan Keegan & Co., Inc. v Eavis 2012 NY Slip Op 30625(U) March 2, 2012 Supreme Court, New York County Docket Number: 102772/2011 Judge: Lucy Billings Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY tmP LLb f h T L~Lr!rW J Z ~i PRESENT: J.S. cr PART 4 4 nr.L1 Justice 102772/Nv INDEX NO. MOTION DATE MOTION SEQ. NO. (901 MOTION CAL. NO. The following papera, numbered 1 to rZ were read on this motion to" PAPER$ NUMBERED Notlce of Motion/ Order to Show Cause - AffidavitB - Exhibits ... .. cn Y z 0 cn a W P= z Answering Affidavits - Exhibits , Repiylng Affidavits 0 Yes Cross-Motion: . 0 No Upon the foregoing papers, It la ordered that this motion The c o u r t g r a n t s respondent P e t e r Eavis's motion to quash t h e subpoena to take his deposit,ion in Fairfax Financial Holdinqs Ltd. v. S.A.C, C,apital M9t., LLC, Docket No. MRS-L-2032-06-4197 (N.J. Super. Ct. Law Div. Morris Co.), pursuant to t h e accompanying decision. RightB Law § N.Y. Civ. 79-h. J. S C. . Check one: !dFINAL DISPOSITION Check if appropriate: - 0 DO NOT POST [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 4 6 - _ _ _ _ _ _ _ _ - - - - - - - - - - - - - - - - - - - - - - - --X - -- In the Matter of t h e Application of MORGAN KEEGAN & CO., INC., Ind x N . 102772/20 Petitioner DECISION AND ORDER -againstFor an order pursuant to C . P . L . R . 3102(e) authorizing service of a subpoena ad testificandum on § PETER EAVIS, Respondent Pursuant to a commission issued in the action entitled Fairfax Financial Holdinqa Limited, et al. v. S.A.C. Capital Manaqement, LLC, et al., Docket No. MRS-L-2032-06-4197,pending in the Superior Court of New Jersey, Law Division, Morris County APPEXRANCES : For Petitioner Ira J. Hammer Esq. Schwartz Simon Edelstein & Celso LLC 845 3rd Avenue, New York, NY 10022 For Respondent Carolyn K. Foley Esq. Davis Wright Tremaine LLP 1633 Broadway, New York, NY 10019 BILLINGS , J. : I. BACKGROUND On March 8, 2011, upon petitioner's ex Darte application, the court (Silver, J.) ordered Peter Eavis, a journalist residing in New York, to comply with a subpoena to testify at a deposition in New York in an action in New Jersey Superior Court, Fairfax morgan.138 1 [* 3] Holdinqs Ltd., et al. v. S.A,C. Can i t a 1 Mqt., LLC, et al. Fairfax Holdings is a publicly traded Canadian insurance corporation. Petitioner, a Tennessee investment bank, and its employee John Gwynn are two of the multiple defendants named in the New Jersey action, commenced in 2006. In e a r l y 2011, the New Jersey Superior Court authorized petitioner to seek Eavis's deposition. Eavis now moves to quash the subpoena for his deposition. In the New Jersey action, the plaintiff Fairfax Holdings claims that all the defendants, including petitioner here and its employee Gwynn, acted in concert to disseminate false information about Fairfax Holdings' finances and the value of its stock to the financial media, so as to profit by s h o r t selling the stock. The latest amended complaint in the New Jersey action, the Third Amended Complaint dated July 27, 2008, r e f e r s to seven articles minutely scrutinizing and raising questions about Fairfax Holdings' finances that appeared between January and mid-May 2003 under Eavis's byline on TheStreet.com., a financial news and analysis website. The Third Amended Complaint further alleges that information about Fairfax Holdings provided to TheStreet.com originated either with petitioner's employee Gwynn or with codefendants designated the Rocker defendants and that the codefendant David Rocker held a financial interest in the TheStreet.com website. Petitioner presents t h e seven articles by Eavis between January and mid-May 2003 in opposition to Eavis's motion to quash morgan.138 2 [* 4] the subpoena. Three of the articles, dated February 3 , February 1 2 , and March 12, 2003, cite negative information and negative views about Fairfax Holdings as reported by Gwynn. The journalist Eavis is not a party to the New Jersey action and has not otherwise been s u e d f o r defamation by any of the parties to that action. The limitations period of one year for defamation actions in both New York and New Jersey has expired. C.P.L.R. § 2 1 5 ( 3 ) ; N.J. Stat. Ann. 5 2A:14-3. Neither has Fairfax Holdings named him as a participant in t h e conspiracy alleged in the New Jersey action, nor has petitioner sought to implead him as a third party defendant in that action. 11. EAVIS'S MOTION TO QUASH THE SVBPOENA Eavis has moved to quash petitioner's subpoena and for a protective order pursuant to C . P . L . R . Rights Law § 5 3103, New York Civil 79-h, and New Jersey Statutes Annotated 5 2 A : 8 4 A - 21(b). Under New Jersey law, a reporter's journalistic privilege is absolute. Maressa v. New Jersey Mgnthly, 89 N.J. 176, 189, 445 A.2d 3 7 6 , 383 ( 1 9 8 2 ) . At o r a l argument of the motion to quash, the parties stipulated that Eavis would appear with his attorney in response to the subpoena and provide testimony limited to authenticating copies produced by petitioner of TheStreet.com articles written by Eavis. He subsequently has complied with that stipulation. Nevertheless, petitioner still seeks to question Eavis on three subjects to which he does not agree. The disputed areas of inquiry include (1) Eavis's rnorgan.138 3 [* 5] background; ( 2 ) the standards, procedures, and practices Eavis employs in writing articles; and (3) whether the opinions in the articles in question were his own opinions and he believed in the accuracy of those opinions. Eavis maintains that these areas of inquiry represent an attempt to circumvent the journalist's privilege afforded h i m under New York's "Shield L a w , " Civil Rights Law § 79-h, to show that he wrote t h e articles in question in furtherance of the conspiracy against Fairfax Holdings t h a t forms the basis f o r the New Jersey action. Both parties here recognize that the many other parties in the New Jersey action would be entitled to attend any deposition of Eavis and would not be bound by a stipulation from petitioner and Gwynn restricting the deposition's permissible scope. C.P.L.R. 5 3113(c). Hence these other parties' cross-examination of Eavis easily could foil any attempt by the parties here to limit the deposition to subjects not protected by New York Civil Rights Law Baker v. Goldman Sachs & Co., § 79-h. - F . 3 d - 2012 W 470290 at " 4 , L 5 (2d Cir. Feb. 15, 2012). 111. THE REPORTER'S PRIVILEGE IJNDER NEW YORK L A W In New York, a news reporter's qualified privilege regarding non-confidential news gathering materials derives from New York State Constitution Article 1, Section 8, as well as New York Civil Rights Law 5 79-h, based on a tripartite test "more demanding than the requirements of CPLR 3101(a) . I 1 O'Neill v. Oakqrove Constr., 71 N.Y.2d 521, 527 (1988). Under the tripartite t e s t , discovery may be ordered only if t h e litigant demonstrates, clearly and specifically, that morgan.138 4 [* 6] the items sought are (1) highly material, (2) critical to the litigant's claim, and (3) not otherwise available. Accordingly, if the material sought is pertinent merely to an ancillary issue in the litigation, not essential to the maintenance of the litigant's claim, or obtainable through an alternative source, disclosure may not be compelled . . . . I . (citations omitted). These requirements subsequently were d incorporated into an amended Civil Rights Law 5 7 9 - h , which affords an absolute privilege for confidential news gathering materials, N.Y. Civ. Rights,Law 5 7 9 - h ( b ) , and a qualified privilege for non-confidential new gathering materials. N.Y. Civ. Rights Law § 79-h(c). To overcome the privilege for non- confidential materials, the party seeking the evidence still must meet the statute's three-pronged test formulated by the Court of Appeals. O'Neill v. Oakqrove Constr., 71 N.Y.2d at 527. InC. v . Vacco, 232 A . D . 2 d 2 9 1 , 2 9 2 (1st Dep't 1996). See CBS Petitioner has not shown why it is entitled to depose Eavis under any of these criteria. A. Eavis's Backqrovnd Regarding the first of the three disputed areas of questioning, Eavis himself offers that he worked for TheStreet.com from January 1998 until late 2 0 0 4 as a reporter and journalist "engaged in gathering, preparing, collecting, writing and editing news published by TheStreet.com on its public website and on its subscription service." Aff. of Peter Eavis 1 2. Petitioner has not shown that it is unable to discover Eavis's further background, nor described any efforts to acquire this information, through sources in t h e public domain, including the morgan.138 5 [* 7] internet, f o r example. Neither has petitioner shown why this information is "highly material" or "criticalv1 its defense in to the New Jersey action. 527. O'Neill v. OakqrQve Constr., 71 N.Y.2d at In any event, having failed to show that information regarding Eavis's background is otherwise unavailable, petitioner is not entitled to depose him on this subject. CBS Inc. v. Vacco, 232 A . D . 2 d at 292; Flynn v. NYP Holdinqg, 235 A.D.2d 907, 909 (3d Dep't 1997). In fact it borders on incredulous that petitioner would insist it needs Eavis's deposition for this purpose. E. Eavis's Standards, Procedures, and Practices In support of petitioner's request to depose Eavis to discover the standards and procedures he employs in writing articles, petitioner likewise fails to satisfy the three criteria of O'Neill v. OakqrQve Constr., 71 N.Y.2d at 527, and New York Civil Rights Law § 79-h(c). Eavis's seven TheStreet.com articles about Fairfax Holdings on their face illustrate his work standards and methods for accuracy and thoroughness, without requiring a deposition. The articles themselves show that, in writing them, Eavis followed the movement of Fairfax Holdings' shares on the New Y o r k Stock Exchange and studied in minute detail i t s annual reports, its other financial reports, including balance sheets, its insurance and reinsurance coverage, its source of dividend payments, its subsidiaries' finances, and its press releases. He submitted questions directly to Fairfax Holdings in connection with each article and attempted to follow morgan.138 6 [* 8] telephone conversation with Fairfax Holdings' chief executive or other personnel. Eavis participated in telephone conferences with Fairfax Holdings' chief executive on topics ranging from a reinsurance deal to release of its fourth quarter earnings. Eavis read and investigated Gwynn's negative reports about Fairfax Holdings; consulted related reports and news stories in other publications and wire services, such as Dow Jones Business News and Business Wire; and also consulted government insurance regulators addressing the financial soundness of a Fairfax Holdings subsidiary. TO a l l these tasks Eavis demonstrates he applied a knowledge of the stock market, corporate finance, and corporate governance, yet allowed that hiB analyses might be incorrect. L a s t but not least, each of his articles about Fairfax Holdings includes the footnote: "In keeping with TSC's editorial policy, Peter Eavis doesn't own or short individual s t o c k s . He also doesn't invest in hedge funds or other private investment: partnerships. He welcomes your feedback and invites you to send any to peter.eavis@realrnoney.com." Aff. of Ira J. Hammer Ex. 1. Faced with the transparency of Eavis's reporting and articles, petitioner has not shown that h i s deposition on the procedures he followed in writing his TheStreet.com articles satisfies any of the criteria for disclosure set f o r t h in O'Neill v. Oakqrove Constr., 7 1 N.Y.2d at 527, and Civil Rights Law 5 7 9 - h ( c ) . rnorgan.138 7 [* 9] C. Whether the Opinions in Eavis's Articles Were His Own and Eavis Believed in Their Accuracy Petitioner's final request, t o question Eavis about his state of mind--whether the opinions expressed in his TheStreet.com articles were his opinions and whether he believed they were accurate--is not supportable by logic or law. By affixing his byline at the head of each TheStreet.com article, Eavis explicitly represented that t h e opinions expressed in the article were his opinions. His subjective state of mind in publishing those opinions is irrelevant. of V.S., Inc., 495 F. Supp. 5 8 2 , 588 In re Consumers Union (S.D.N.Y.1980) * Moreover, a question about the accuracy of an opinion is a contradiction in terms; an opinion is neither t r u e nor f a l s e . G r o s s v. New York Times Co., 82 N.Y.2d 146, 153 (1993); Guerrero v , Ca rva, 10 A.D.3d 105, 111 (1st Dep't 2004). See Mann v, Abel, 10 N.Y.3d 271, 276 (2008); Brian v. Richardson, 87 N.Y.2d 46, 5 1 (1995); Sandals Resorts Intl. Ltd. v. Goosle, Inc., 86 A.D.3d 32, 39-40 (1st Dep't 2011) . D. Further Reasons to Quash the Subpoena Fairfax Holdings' Third Amended Complaint in the New Jersey action, particularly 17 26, 28, 32, 33, 47, 59, 62, 63, 85, 88, 96, 9 7 , and 1 1 1 - 3 7 , details the alleged roles of petitioner, Gwynn, and co-defendants Rocker Partners L.P. and David Rocker, the primary owner and manager of Rocker Partners L . P . , in a conspiracy to downgrade and short Fairfax Holdings' s t o c k . The Third Amended Complaint describes their roles in inducing TheStreet.com and Eavis t o publish adverse financial information rnorgan.138 8 [* 10] and misinformation about Fairfax Holdings, by providing the website and its byliner false and misleading analyses of Fairfax Holdings' finances. Plaintiff Fairfax Holdings portrays the Rocker defendants as exercising strong influence over TheStreet.com website, in which David Rocker held " a substantial equity investment." Aff. of Carolyn K. Foley Ex. 3 7 85. Petitioner, G w y n n , Rocker Partners, and Rocker each possess independent knowledge of any information each provided to TheStreet.com and to Eavis. Thus they are independent alternative sources for such information. Petitioner has not shown that it sought and failed to obtain this information from these other parties in the New Jersey litigation, which h a s been ongoing since 2006, and thus has not ruled them out as sources other than Eavis for the information. According to the Third Amended Complaint 1 136, Gwynn continued to publish negative reports about Fairfax Holdings through November 2004, without further reports or articles about Fairfax Holdings by Eavis. In the final analysis, petitioner seeks information from Eavis's deposition identifying David Rocker or another person as the secret, confidential source who induced him to write his TheStreet.com articles about Fairfax Holdings. That information is absolutely privileged pursuant to Civil Rights Law 5 79-h(b). Beach v Shanlev, 62 N.Y.2d 241, 251 (1984). Even if this absolutely privileged information is not petitioner's objective, and even if the journalist's deposition is limited to non-privileged topics such as the procedures and 9 morgan.138 . . . [* 11] practices followed in writing his articles, as recognized above the deposition would "have the effect of compelling crossexamination within the privilege." Baker v. Goldman Sachs - F.3d - 2012 WL 470290 at " 5 . , & ro., Cross-examination of a deponent is not limited to the scope of direct examination by the party that sought the deposition. C.P.L.R. 5 3113(c). Nor may his attorney o b j e c t to questioning or otherwise participate in the deposition. Thompson v. Mather, 70 A.D.3d 1436, 1438 (4th Dep't 2010). Eavis is relegated to simply claiming his journalist's privilege, which he does by this motion. The risk of cross-examination within the scope of the privilege is particularly acute in relation to Eavis's deposition, because the adversary of petitioner and Gwynn, Fairfax Holdings, as well as many co-defendants in the New Jersey action, all are entitled to participate in the deposition, but have not agreed to limit their cross-examination of Eavis. Nothing therefore prohibits their cross-examination from likely if not necessarily trenching on Eavis'B privilege as a journalist granted by Civil Rights Law 5 79-h. This risk further supports quashing the subpoena served on Eavis. B3ker v. Goldman Sachs co.,- F.3d -, IV. & 2012 WL 470290 at *4-5. CONCLUSION For all the foregoing reasons, the court grants respondent Peter Eavis's motion to quash the subpoena to take his deposition in Fairfax Financial Holdinqs Ltd. v. S.A.C. Capital Mqt., LLC, Docket No. MRS-L-2032-06-4197 ( N . J . Super. Ct. Law D i v . Morris morgan.138 10 [* 12] Co.). This decision constitutes the court's o r d e r . The court will mail copies to t h e attorneys for the parties in this proceeding. DATED: March 2 , 2012 LUCY BILLINGS, J.S.C. morgan.138 11

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