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Finkelstein v. Wachtel

United States District Court, S.D. New York
Apr 21, 2003
00 Civ. 2672 (JSM) (S.D.N.Y. Apr. 21, 2003)

Summary

relying on Von Gutfeld for the conclusion that a consultant's statements that a failing company's former chairman and chief executive officer was a “crook” who ran a “very dirty business” must be viewed as loose, figurative, or hyperbolic

Summary of this case from Restis v. Am. Coal. Against Nuclear Iran, Inc.

Opinion

00 Civ. 2672 (JSM)

April 21, 2003


OPINION ORDER


Plaintiff Edward Finkelstein asserts claims of tortious interference with prospective economic advantage and slander against defendants. After a trial of these claims on May 28-31, 2002, the jury was unable to reach a verdict and the Court declared a mistrial. Defendants then moved to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. Rule 12(b)(1), and for judgment as a matter of law pursuant to Fed.R.Civ.P. Rule 50(b)(2)(B).

Facts

Plaintiff was Chairman of the Board and Chief Executive Officer of CWT Specialty Stores from February 24, 1997 to March 17, 1999. In February 1999, it came to light that CWT's financial statements had been overstated with respect to inventory on hand and receivables, and that a false borrowing base certificate had been submitted to CWT's primary lender, Foothill Capital. This precipitated a crisis with Foothill, which, upon finding itself over advanced, threatened to stop extending funds to CWT. CWT, which was in precarious financial condition and would have been unable to continue its operations for any period of time without such credit, seriously contemplated filing for bankruptcy protection. When Leonard Tessler, the "lead" or "activist" outside director of CWT, was informed of this situation, he retained Defendant William Wachtel and his firm to investigate the situation and advise and guide the outside directors as they dealt with the crisis. In addition, the company looked to its own counsel, Goodwin Procter, to the accounting firm of Deloitte Touche, and to Kahn Consulting, a crisis management firm designated by Foothill, both to determine what exactly had happened, and for advice on how to deal with the situation.

In this context, the Board decided to attempt to find a buyer for CWT that would provide adequate capital to satisfy Foothill and enable CWT to continue in business. In late February or early March 1999, Mr. Wachtel heard that the Gindi brothers might have an interest in acquiring CWT, and arranged for them to attend a presentation given by Mr. Finkelstein and to visit a number of CWT's retail stores. He also agreed that if the Gindis acquired CWT, he would personally invest $1.5 million in return for a 25% interest in the restructured company and a seat on the Board.

Subsequently, the Gindis made an offer to acquire CWT in exchange for a $6.3 million credit guarantee. Mr. Wachtel disclosed his personal interest in this offer to Mr. Tessler, but did not himself inform the other outside directors of his personal involvement in the transaction. Shortly thereafter, on March 8, while CWT and the Gindis were actively negotiating and preparing the documents necessary to effect the proposed transaction, Mr. Finkelstein informed the Board and its advisors that Schottenstein Stores Corporation ("SSC") was interested in the possibility of acquiring CWT for $7.5 million, and would also consider giving shareholders warrants at a strike price to be negotiated. That same day, Jay Schottenstein delivered a letter to Mr. Finkelstein confirming this interest and stating that "[a] formal offer for the CWT shares will be made if SSC is satisfied after completing its standard due diligence review." In that letter, Mr. Schottenstein stated that SSC would need until March 12 to complete its due diligence. Mr. Finkelstein delivered copies of this letter to the outside directors on March 9. It was understood that if SSC acquired CWT, Mr. Finkelstein would invest $.5 million into this deal, and would continue his employment with CWT. Nevertheless, on March 9, the CWT Board voted to enter into the deal offered by the Gindis, rather than waiting several days for SSC to complete its due diligence.

Mr. Finkelstein charges that during the telephonic Board meeting at which the Board reached this decision, Mr. Wachtel stated that a delay might result in losing the Gindi offer, and did not disclose to the outside directors (other than Mr. Tessler), his own interest in that offer. Mr. Finkelstein's tortious interference claim against Mr. Wachtel arises out of this event.

The deal with the Gindis was closed on March 17, 1999. Mr. Finkelstein resigned as Chairman of the Board and CEO of CWT on that date, and Mr. Wachtel joined the Board of the new company, Cherry Holdings, Inc., which began to run the business under the name of Cherry Webb. Mr. Wachtel also was retained as counsel for the new company.

Mr. Finkelstein's slander claim against Mr. Wachtel is based on a subsequent incident. At some time after the Gindis took over the management of Cherry Webb, Mr. Wachtel, who was then a member of the Board of Cherry Holdings, Inc. and counsel for Cherry Webb, met with Elisa Schindler, an employee of Cherry Webb, and stated to her that Mr. Finkelstein was a "crook", who should be "taken away in shackles", and that the "Attorney General of Massachusetts was going to be involved." Ms. Schindler was shocked and upset by these statements, but did not agree with them and did not repeat them to anyone until she revealed them in her deposition, taken later in Wisetex Trading Ltd v. Irwin Gindi and William B. Wachtel, 00 Civ. 2671 (JSM).

The 12(b)(1) motion

Plaintiff invoked the jurisdiction of this Court on the basis of diversity, alleging that Defendants were citizens of New York and that he was a citizen of the state of Connecticut on the date he filed the Complaint, April 6, 2000. Defendants first challenged Plaintiff's claim of Connecticut citizenship, and hence this Court's subject matter jurisdiction, on the eve of trial. Consequently, the Court allowed testimony and evidence to be introduced at trial with respect to Plaintiff's citizenship, and, when the jury failed to reach a verdict, permitted additional informal discovery related to the issue. Defendants now move to dismiss for lack of subject matter jurisdiction, arguing that Plaintiff's Connecticut home was merely a weekend residence, and that his contacts with Connecticut were insufficient to establish domicile.

For purposes of determining whether diversity jurisdiction exists, citizenship is determined as of the time the action is commenced. Linardos v. Fortuna, 157 F.3d 945, 947 (2d Cir. 1998). A party's citizenship depends on his domicile. Id., 157 F.3d at 948. Domicile is defined as "the place where a person has `his true fixed home and prinicpal establishment, and to which, whenever he is absent, he has the intention of returning.'" Id. In order to change one's domicile, a person must have "residence in a new domicil; and, second, the intention to remain there." Id. Therefore, a party's intention is key to a finding of domicile, and therefore of citizenship for purposes of establishing diversity jurisdiction. Furthermore, "[a] party alleging that there has been a change of domicile has the burden of proving the `required intent to give up the old and take up the new domicile, coupled with an actual acquisition of a residence in the new locality,' and must prove those facts `by clear and convincing evidence.'" Palazzo v. Corio, 232 F.3d 38, 42 (2d Cir. 2000).

Plaintiff proferred evidence that he owned a home in Litchfield, Connecticut from April 1982 to March 31, 2000. At that time, he sold that home and rented a house in Cornwall Bridge, Connecticut for the following 14 months. In April 2000, he was registered to vote in Connecticut, and had a Connecticut driver's license. He filed his 1999 and 2000 tax returns as a Connecticut resident. He also received bills related to his Connecticut homes at his Connecticut address. Plaintiff has submitted a Declaration stating that on April 6, 2000, it was his intention that his primary residence was his Connecticut home and that he viewed his New York apartment as a secondary residence.

Defendants contend that even if Mr. Finkelstein was domiciled in Connecticut prior to April 2000, his sale of his home in Litchfield, Connecticut on March 30, 2000, evidences his intent not to remain in Connecticut. They allege further that 6 both of his Connecticut residences were merely weekend homes, and that he lived primarily at the apartment that he leased at 985 Fifth Avenue in New York City from 1994 to April 2002. In support of this contention, Defendants point to the fact that Mr. Finkelstein continued to work in New York and spent 178 days in New York in 2000, and to his various contacts with New York: receipt of telephone and other bills relating to his New York apartment, using a New York garage and dry cleaner, relationships with various doctors, lawyers, a bank, a broker and a tax preparer in New York, donations to the New York Public Library, and maintenance of a box and attendance at performances at Carnegie Hall.

While Plaintiff had substantial New York contacts, these contacts do not outweigh the evidence that Plaintiff voted and paid taxes as a Connecticut resident, and maintained a residence there. Defendants have failed to make in a clear and convincing showing that Plaintiff changed his domicile to New York prior to the filing of his Complaint on April 6, 2000, especially given the importance that must be given to expressions of intent when making this determination. Accordingly, the Court has subject matter jurisdiction over this action.

Defendants' 50(b) Motion

In deciding a motion for judgment as a matter of law pursuant to Fed.R.Civ.P. Rule 50(b), "a trial court must view the evidence in a light most favorable to the nonmovant and grant that party every reasonable inference that the jury might have drawn in its favor. It `cannot assess the weight of conflicting evidence, pass on the credibility of the witnesses, or substitute its judgment for that of the jury.'" Purgess v. Sharrock, 33 F.3d 134, 140 (2d Cir. 1994). Such a motion will be granted only if the Court finds that the evidence is so overwhelmingly in favor of the moving party that "reasonable and fair minded men could not arrive at a verdict against the moving party." Diesel v. Lewisboro, 232 F.3d 92, 103 (2d Cir. 2000).

Tortious Interference with Prospective Economic Advantage

The Second Circuit has held that in order to state a claim for tortious interference with prospective economic advantage, a plaintiff must show (1) business relations with a third party; (2) defendants' interference with those business relations; (3) that defendants acted with the sole purpose of harming the plaintiff or used dishonest, unfair, or improper means; and (4) injury to the relationship. Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994). Even assuming that this standard controls, as opposed to the perhaps more stringent requirement imposed by the New York Courts, that the plaintiff must show that an actual contract would have been entered but for the defendants' improper acts, see D'Andrea v. Rafla-Demetrious, 3 F. Supp.2d 239, 250 (E.D.N.Y. 1996), aff'd, 146 F.3d 64 (1998) (citing, inter alia, Fine v. Dudley D. Doernberg Co., Inc., 203 A.D.2d 419, 610 N.Y.S.2d 566 (2d Dep't 1994)); but see Vigoda v. DCA Productions Plus, Inc., 293 A.D.2d 265, 266, 741 N.Y.S.2d 20, 23 (1st Dep't 2002), the Plaintiff must at least show that "particular prospective business relations were lost due to the defendant's improper interference." Id., 3 F. Supp.2d at 250 (E.D.N.Y. 1996) (emphasis added). As the D'Andrea Court stated,

"A cause of action for interference with prospective economic advantage contemplates a defendant who has interfered with specific precontractual relations or a prospective relationship between the plaintiff and a third party that would have proceeded to some sort of binding, if not contractual, relationship but for the defendant's interference."
3 F. Supp.2d at 251 (emphasis added).

Thus, it would seem that while the Second Circuit may have imposed a less stringent standard with respect to the type of business relationship that must be shown, it has not altered the "but for" requirement set forth in the New York cases. See, e.g., Commercial Data Servers, Inc. v. IBM, 166 F. Supp.2d 891, 898 (S.D.N.Y. 2001) ("Plaintiff must specify `some particular, existing relationship through which plaintiff would have done business but for the allegedly tortious behavior.'").

At trial, Plaintiff did not present evidence that would support an inference that "but for" Wachtel's nondisclosure of his interest in the Gindi offer, the Board would have (1) agreed to postpone its decision regarding that offer in order to permit SSC to perform the due diligence that it required prior to making an offer for CWT, and (2) ultimately would have accepted the SSC offer instead of the Gindi offer. However, the following evidence demonstrated that there is no reason to believe that but for Mr. Wachtel's failure to disclose his interest in the Gindi offer, the SSC offer would have been accepted. As of March 8 and 9, CWT was faced with an immediate crisis: Foothill had threatened to cut off all disbursements of funds to CWT, those funds were essential to the continued day to day operation of CWT, and without those payments CWT could not even meet its payroll and would have to close its doors immediately. Foothill had given CWT until March 9 to demonstrate that the problems were being resolved. When Mr. Finkelstein telephoned on March 8 to report the possibility that SSC would make an offer for CWT if given until March 12 to perform due diligence, Foothill, CWT's advisors, and others were working on the documents related to the proposed Gindi transaction, and the Gindis were "sitting there with their counsel." Mr. Monheit of Kahn Consulting and Mr. Cole of Foothill stepped out of the room to speak with Mr. Schottenstein and then came back and said, "let's just get the [Gindi] deal done."

Mr. Wachtel testified, "[T]he bank had given us to that Wednesday to fish or cut bait."

Mr. Wachtel testified, "But from the bank's point of view, which was fed up already and in some measure was not particularly enamored with the idea of doing business with Ed Finkelstein, they had their private conversation, came back into this room where all the people were working on the documents and just said let's get the deal done." This testimony was not disputed in any way.

Moreover, Mr. Tessler, to whom the four other outside directors looked for guidance, testified that he knew that Mr. Wachtel was part of the Gindi group, and that this fact did not affect his view either as to the merits of accepting the Gindi proposal or the need to go forward with that decision on March 9. Mr. Tessler testified further that the outside directors did take the SSC deal seriously during the March 9 Board meeting, but that "we made the decision to proceed with the Gindi deal because it was prepared to close immediately thereafter." It also is undisputed that none of the outside directors was disturbed or suggested that the Gindi deal should be set aside once they learned of Mr. Wachtel's personal involvement with the Gindi group.

In fact, Mr. Tessler testified that Mr. Wachtel sought his advice about CWT's business prospects when he was deciding whether to make a personal investment in the Gindi deal. Mr. Wachtel testified that he also asked Mr. Tessler whether he or other shareholders wanted to participate in the hope that the Gindis would gain additional confidence in the transaction if people who were already involved in the company were willing to put up some money. He also testified that subsequent to March 9, there were discussions with Mr. Finkelstein about the possibility of his participating in the Gindi deal, but that while Mr. Finkelstein expressed interest in working as a consultant, he did not want to make an equity investment at that point.

In light of all of this uncontradicted testimony, Plaintiff cannot establish that Defendants' allegedly wrongful failure to disclose Mr. Wachtel's involvement to all of the outside directors proximately caused the Board's decision to accept the Gindi offer on March 9, rather than waiting to see whether a firm offer would be forthcoming from SSC on March 12.

To make out a case of tortious interference with prospective business relations, Plaintiff also must show that the alleged interference was effected through wrongful means or with the sole purpose of harming the Plaintiff. "Wrongful means" include "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degree of economic pressure." American Preferred Prescription v. Health Management, 252 A.D.2d 414, 678 N.Y.S.2d 1, 5 (1st Dep't 1998). "They do not, however, include persuasion alone although it is knowingly directed at interference with the contract." Jabbour v. Albany Medical Center, 237 A.D.2d 787,789, 654 N.Y.S.2d 862, 864 (3rd Dep't 1997).

Mr. Finkelstein did not present evidence sufficient to support this element of the cause of action. First, the evidence simply would not allow a rational juror to conclude that Defendants acted for the sole purpose of harming Mr. Finkelstein. The evidence was undisputed that Mr. Wachtel revealed his involvement in the Gindi offer to all of the people who were working on CWT's behalf to resolve the crisis at hand. These included, in addition to Mr. Tessler, the attorneys from Goodwin Procter who were representing CWT, CWT's consulting accountants, Deloitte Touche, Messrs. Monheit and Kearns of Kahn Consulting, Mr. Cole of Foothill, the attorneys from Kaye Scholer who were representing the Gindi group, and the attorneys representing Foothill. In addition, Mr. Wachtel's name was prominently included in the papers prepared and executed in connection with the deal. This behavior is inconsistent with a conscious intent to hide Mr. Wachtel's involvement in the deal.

There was no suggestion at trial that Mr. Finkelstein, who was still Chairman of the Board and Chief Executive Officer of CWT was denied access to these documents prior to, or during the March 9 Board meeting.

It also was undisputed at trial that Mr. Tessler was delegated to retain an attorney and did retain Mr. Wachtel on behalf of all of the outside directors, and at all times acted for, and served as a conduit for information to the other outside directors. In this context, no one ever suggested that Mr. Wachtel should meet with the other outside directors or give them information directly, although he did participate in conference calls during which he answered their questions. This delegation to Mr. Tessler of responsibility for disseminating information to the other outside directors was completely consistent with past dealings of the company. In fact, Mr. Finkelstein himself testified that when the accounting problems that precipitated the crisis first came to his attention, he called Mr. Tessler to let him know of the problem, but did not alert any of the other outside directors.

Events must be viewed in the particular context in which they occurred — not in some theoretical vacuum. Viewed in that light, there is no evidence that indicates that Mr. Wachtel's failure to specifically disclose his participation in the Gindi deal to the other outside directors was anything more than, at worst, a negligent oversight. It certainly cannot be found to be an intentional action taken solely in order to harm Mr. Finkelstein.

Moreover, Mr. Wachtel's failure to disclose his participation in the Gindi deal to all of the independent directors does not, in this particular situation, rise to the level of "wrongful means" within the meaning of the applicable case law. Plaintiff contends that Mr. Wachtel's failure in disclosure violated the Code of Professional Responsibility, DR 5-104. As of March 9, 1999, that provision stated:

A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise professional judgment therein for the protection of the client, unless the client has consented after full disclosure.

The amended version of DR 5-104 cited by Plaintiff, which required that advice and waiver of a conflict be in writing, did not take effect until June 30, 1999, more than three months after the events charged in this cause of action. 22 NYCRR § 1200.23. It also is not entirely clear that this provision applies to the situation before the Court. The provision, by its terms, governs a business transaction "with a client." In this case, Mr. Wachtel entered into business transactions with the Gindis and with CWT — not with his clients, the outside directors.

Assuming without deciding that Plaintiff could base a claim of "wrongful means" on a violation of DR 5-104, even though he was not Mr. Wachtel's client, Plaintiff's claim fails because, under the circumstances of this case, a reasonable attorney would have believed that by making disclosure of his interest to Mr. Tessler he had satisfied his obligations pursuant to DR 5-104.

Although Defendants argue that Plaintiff's claim under this provision fails because Mr. Wachtel had no fiduciary duty to Mr. Finkelstein, it would be rare to find such a duty present in a case of tortious interference with prospective business relations with a third party. If defendants owed a fiduciary duty to a plaintiff, that plaintiff would be in a position to assert a direct claim of breach against the defendants and would not need to rely on such a cause of action.

Finally, Plaintiff's tortious interference theory rests in part on the notion that Mr. Wachtel was dishonest when he said or implied that the Gindi deal might be lost if it wasn't accepted immediately, given that he was a member of that group. However, there has been no showing that Mr. Wachtel, with a 25% interest in the deal, could control the group and prevent it from walking away from the deal, if it chose to do so, before it was accepted by the CWT Board. Consequently, no evidence was presented to demonstrate that Mr. Wachtel's statement that "a bird in the hand is worth two in the bush," was in fact dishonest or misleading.

Since Plaintiff failed to present evidence that would permit a reasonable juror to find in Plaintiff's favor with respect to a number of elements of his claim of tortious interference with prospective business relations, the Court finds that this claim must be dismissed as a matter of law.

Slander

Plaintiff contends that Mr. Wachtel's statements to Elisa Schindler that Mr. Finkelstein was a "crook" who "should have been taken out in shackles," that "the Attorney General of the state of Massachusetts was going to be involved" and that it was going to be "very dirty business" constituted slander per se.

Under New York law, the elements of a cause of action for slander are (1) an oral defamatory statement of fact, (2) regarding the plaintiff, (3) published to a third party by the defendant, and (4) injury to the plaintiff. Boyd v. Nationwide Mutual Ins. Co., 208 F.3d 406, 409 (2d Cir. 2000). The element of injury is Unpresumed if the defamatory statement falls within the category of slander per se. Id. A false accusation of serious crime constitutes slander per se. Id. If a plaintiff is a public figure, he also must prove his claim by clear and convincing evidence and show that the defendants acted with actual malice. New York Times v. Sullivan, 376 U.S. 254, 280, 84 S.Ct. 710, 726 (1964); Dancer v. Bergman, 246 A.D.2d 573, 668 N.Y.S.2d 213, 214 (2nd Dep't), app. dism., 92 N.Y.2d 876 (1998). At trial, the Court ruled that Mr. Finkelstein was not a public figure, and consequently that Plaintiff need not prove malice.

Contrary to Plaintiff's contention, however,,"there is simply no special rule of law making criminal slurs actionable regardless of whether they are asserted as opinion or fact." Gross v. New York Times Co., 82 N.Y.2d 146, 155, 603 N.Y.S.2d 813, 819 (1993).

Defendants contend that Plaintiff's claim must be dismissed because Mr. Wachtel's statements were mere expressions of opinion rather than of fact. As the New York Court of Appeals stated in Gross v. New York Times Co., 82 N.Y.2d 146, 603 N.Y.S.2d 813 (1993),

"The dispositive inquiry, under either Federal or New York law, is `whether a reasonable [listener] could have concluded that [the statements were] conveying facts about the plaintiff.' Since falsity is a necessary element of a defamation cause of action and only `facts' are capable of being proven false, `it follows that only statements alleging facts can properly be the subject of a defamation action."

Id., 82 N.Y.2d at 152-53, 603 N.Y.S.2d at 817 (internal citations omitted).

In deciding whether an allegedly defamatory statement is one of fact, the New York courts engage in a three part test. First, the court must define the words as they are commonly understood. Next, it must ask whether the statement was subject to verification. Third, the court is to apply a "type of speech" test that examines the "general tenor" of the statement to discover whether in the context of the specific setting in which it is uttered it would be understood as "loose, figurative [or] hyperbolic," and "would signal to observers that no actual facts were being conveyed." 600 West 115th Street Corp. v. Von Gutfeld, 80 N.Y.2d 130, 139-140, 589 N.Y.S.2d 825, 829-30 (1992), cert. denied, 508 U.S. 910 (1993); Polish American Immigration Relief Committee, Inc. v. Relax, 189 A.D.2d 370, 596 N.Y.S.2d 756, 758 (1st Dep't 1993). Put another way, "the courts are obliged to consider the communication as a whole, as well as its immediate and broader social contexts, to determine whether the reasonable listener or reader is likely to understand the remark as an assertion of provable fact." Gross v. New York Times Co., 82 N.Y.2d at 155, 603 N.Y.2d at 819.

Application of this test to Mr. Wachtel's remarks to Ms. Schindler leads inevitably to the conclusion that Mr. Wachtel's statements must be viewed as "loose, figurative [or] hyperbolic,' and "vigorous epithet," see Polish American, 596 N.Y.S.2d at 758, and did not create the impression, nor was the impression received, "that actual facts were being conveyed." Von Gutfeld, 589 N.Y.S.2d at 830. The terms "crook" and "very dirty business" are colloquial, loose, figurative terms that do not necessarily convey to the listener that Plaintiff had, in fact, engaged in criminal behavior.

On the other hand, the statements that Mr. Finkelstein "should have been taken out in shackles" and that "the Attorney General was going to be involved" could convey to the reasonable listener the impression that Plaintiff had engaged in serious criminal behavior and that the speaker might have information that was not publicly available. However, the fact that Mr. Wachtel said that he was investigating what really happened and needed Ms. Schindler's cooperation to find out the truth created a context in which he also made clear that he did not know all of the facts of the matter. In addition, to the extent that Mr. Wachtel's statement that the Massachusetts Attorney General "was going to be" involved and that it "was going to be very dirty business," the statements are predictions of future events, which obviously could not have been proven to be either true or false at the time that they were uttered.

Ms. Schindler also characterized Mr. Wachtel's statements to her as rambling and "all across the board," a fact that was held to add support to the conclusion that pejorative remarks were statements of opinion rather than of fact in Von Gutfeld, 589 N.Y.S.2d at 832.

The New York and federal courts frequently have held that pejorative statements similar to those at issue here were not actionable because they could not, in the context, be viewed as conveying facts as opposed to opinions. For example, in Greenbelt Cooperative Publishing Assoc. v. Bresler, 398 U.S. 6, 14, 90 S.Ct. 1537, 1541 (1970), the Supreme Court held that the term "blackmail," used during a public hearing to describe a developer's bargaining position was not actionable. Similarly, in Von Gutfeld, 589 N.Y.S.2d 825, the Court of Appeals dismissed a defamation action based on defendant's statements that plaintiff's proposed actions "denigrated" their building, that "they have an illegal lease" and that the situation was "as fraudulent as you can get and it smells of bribery and corruption." In Polish American, 596 N.Y.S.2d 756 (1st Dep't 1993), the Appellate Division dismissed an action based on statements that plaintiff organization was a "madhouse" and consisted of "false do-gooders" and "thieves who should have been put to prison long ago," on the basis that a reasonable reader would have understood these assertions to be expressions of opinion.

While the Greenbelt, Von Gutfeld and Polish American cases are unlike the one before the Court in that they involved statements in public fora — either public hearings or written publications — regarding issues of public concern, and therefore implicated the courts' concern with protecting freedom of public debate, statements made in those situations also carried a greater possibility of public harm to the plaintiffs. This is highly relevant in light of the New York Court of Appeals' admonition that the courts should

avoid the "hypertechnical parsing" of written and spoken words for the purpose of identifying "possible `fact[s]' that might form the basis of a sustainable libel action. The core goal of `exercises' such as this is to protect the individual's historic right to vindicate reputation without impairing our "cherished constitutional guarantee of free speech."

Gross v. New York Times Co., 82 N.Y.2d at 156, 603 N.Y.S.2d at 819-20.

Finally, the testimony proferred by all of the individuals involved in this incident supports the conclusion that they all understood Mr. Wachtel's remarks to be statements of opinion. Mr. Wachtel testified that when he made the derogatory statements about Mr. Finkelstein, he was stating what he understood to be the opinion of Steve Cole of Foothill. Ms. Schindler stated that she understood the statements to be Mr. Wachtel's opinion, and that she thought Mr. Wachtel was trying to get her to agree with him, but that the statements did not affect her opinion of Mr. Finkelstein. The very fact that Mr. Wachtel appeared to be soliciting Ms. Schindler's agreement with the statements implies that they were opinions, or at least an acknowledgement that he did not view them as expressing established facts. Thus, there is no testimony to the effect that anyone who was present when the statements were made regarded them as anything other than statements of opinion — intemperate as they may have been, nor that the opinion of the one person who heard the statement was negatively affected by it.

There was no evidence that would support the conclusion that Mr. Wachtel's statement was not an accurate statement of Mr. Cole's opinion of Mr. Finkelstein.

Ms Schindler testified that "the conversation took place in such a form that he was stating his opinion and trying to solicit my opinion back."

Even though injury is presumed in a case of slander per se, it is important to note that the Supreme Court has stated that "[t]he first remedy of any victim of defamation is self-help — using available opportunities to contradict the lie or correct the error and thereby to minimize its adverse impact on reputation." Gertz v. Robert Welch, Inc., 418 U.S. 323, 344, 94 S.Ct. 2997, 3009 (1974). Where, as here, there is clear evidence that there has been no damage to the Plaintiff's reputation, and no showing of malice, a finding of liability would entitle the Plaintiff only to nominal damages.

Defendants also argue that Mr. Wachtel's words, even if defamatory, are protected by a qualified privilege. Under New York law, a qualified privilege attaches to "good faith communications of a party having an interest in the subject, or a moral or societal duty to speak . . . if made to a party having a corresponding interest or duty." Boyd v. Nationwide Mutual Ins. Co., 208 F.3d 406, 410 (2d Cir. 2000). As an attorney for Cherry Webb and a member of the Board of Cherry Holdings, Inc., who had been delegated to investigate exactly how the problems with CWT's financial statements had come about, and to evaluate Cherry Webb's contracts and dealings with Wisetex, Mr. Wachtel's communications with another Cherry Webb employee, made within the context of that investigation, would be protected by a qualified privilege.

Plaintiff argues that the qualified privilege does not apply, however, because there was no legitimate investigation in progress at the time that Mr. Wachtel made his statements to Ms. Schindler. Plaintiff obviously is correct that a qualified privilege is

`forfeited if the defendant steps outside of the scope of the privilege or abuses the occasion.' Moreover, a defendant exceeds the scope of the privilege if the defamatory statement is made `in furtherance of an improper purpose.'

Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994).

Thus, to rebut the presumption of good faith created by the privilege, a Plaintiff must show that defendants abused the privilege either by acting beyond its scope, acting with common law malice, or acting with "knowledge that the statement was false or with a reckless disregard as to its truth." Boyd v. Nationwide Mutual Ins. Co., 208 F.3d at 410.

No evidence was adduced at trial, however, other than Plaintiff's opinion, to would show that Mr. Wachtel was not engaged in a legitimate investigation that was considered necessary or at least prudent by either Foothill or the new owners of Cherry Webb or both. There also was no evidence, as discussed in detail above, from which a reasonable juror could conclude that the statements were made with malice, i.e., with knowledge of or reckless disregard for their falsity.

Accordingly, Plaintiff's claim of slander fails as a matter of law.

Conclusion

For the foregoing reasons, Defendants' motion to dismiss the Complaint for lack of subject matter jurisdiction is denied. Defendants' motion to dismiss this action pursuant to Fed.R.Civ.P. Rule 50(b)(2)(B) is granted.

SO ORDERED.


Summaries of

Finkelstein v. Wachtel

United States District Court, S.D. New York
Apr 21, 2003
00 Civ. 2672 (JSM) (S.D.N.Y. Apr. 21, 2003)

relying on Von Gutfeld for the conclusion that a consultant's statements that a failing company's former chairman and chief executive officer was a “crook” who ran a “very dirty business” must be viewed as loose, figurative, or hyperbolic

Summary of this case from Restis v. Am. Coal. Against Nuclear Iran, Inc.
Case details for

Finkelstein v. Wachtel

Case Details

Full title:EDWARD FINKELSTEIN, Plaintiff, v. WILLIAM WACHTEL and WACHTEL MASYR…

Court:United States District Court, S.D. New York

Date published: Apr 21, 2003

Citations

00 Civ. 2672 (JSM) (S.D.N.Y. Apr. 21, 2003)

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