Opinion
Sequence Number: 001 Index No.: 115654/05 PC No. 19489
06-05-2010
MITCHELL MOSALLEM,Plaintiff, v. ROBERT L. BERENSON, GREY GLOBAL GROUP, INC., GREY WORLDWIDE, INC., GREY ADVERTISING, INC., STEVEN FELSHER, EDWARD H. MEYER, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP and WPP GROUP, pic,Defendants.
IRA GAMMERMAN, J.
Motion sequence 001, 002, 003 and 004 are hereby consolidated for disposition.
In motion seq. 001, defendants Grey Global Group, Inc., Grey Worldwide, Inc., Grey Advertising, Inc., WPP Group, pic (together, Grey), and the individual defendants Robert L. Berenson, Steven Felsher and Edward H. Meyer, move to dismiss the complaint of plaintiff Mitchell Mosallem (Mosallem) pursuant to CPLR 3211 (a) (1), (5), (7) and (8). The remaining defendant, Skadden Arps, Slate, Meagher & Flom LLP (Skadden), also moves (seq. 002) to dismiss the complaint pursuant to CPLR 3211 (a) (1), (5) and (7).
Motion seq. 003 is a motion to partially seal the record, pursuant to 22 NYCRR 216.1, with regard to a book of 44 documents that Mosallem submitted in opposition to the defendants' motions to dismiss. In motion seq. 004, Jim Edwards, a Senior Editor of Brandweek, a business magazine covering the advertising industry, acting pro se and as a proposed third-party intervenor in the case, moves to compel a ruling and order on defendants' motion to seal the book of exhibits or to lift what he term's the court's de facto seal of the documents.
FACTUAL BACKGROUND
Mosallem's claims in this action arise out of his former employment at Grey as the director of graphic services. In the Spring of 2001, the Antitrust Division of the United States Department of Justice (DOJ) commenced an investigation of alleged bid-rigging and the payment of kickbacks in connection with Grey awarding business to print vendors. As a result of the DOJ investigation, Mosallem was indicted in December 2002 and later pled guilty in open court before the Hon. Thomas P. Griesa of the Southern District of New York to charges that he, among other things, conspired to: (1) restrain trade by rigging bids from vendors for graphic services to Grey clients and allocating the contracts to certain vendors, including The Color Wheel Inc. (Color Wheel); (2) charge Grey clients in excess of amounts appropriately chargeable for such services; and (3) obtain secret kickbacks from vendors in cash, goods and other services, which he failed to report as income on his income taxes for 1996 through 2000. During the DOJ investigation and the subsequent criminal proceedings, Mosallem was represented by Paul Bergman, Esq., a white-collar criminal defense attorney.
Graphic services involves the printing, retouching and separation of advertisements appearing in newspapers and magazines.
On April 8, 2003, Mosallem entered into a voluntary Plea Agreement with the government. He pled guilty to each of count of the indictment. In paragraph 8 of the Plea Agreement, he specifically stipulated that the "combined adjusted offense level applicable to the offenses with which he is charged in the Superceding Indictment is level 26 (63-78 months)..." Rubin Affirm., Exh. 3, at 4. This level was reduced by three levels, from 29 to 26, based on
Mosallem's recognition and affirmative acceptance of personal responsibility for his criminal conduct--basically for pleading guilty and avoiding the expense of trial at the public's expense. Mosallem also acknowledged, in paragraph 13, that his actual sentence would be decided by Judge Griesa, who was not bound by the Plea Agreement.
At the sentencing hearing on November 13, 2003, Judge Griesa sentenced Mosallem to 70 months in prison. The Judge had these comments with respect to the sentence:
It is not my practice to deliver lectures at the time of sentencing. I want to say though that I am going to go up above the 63 months and I am imposing a total sentence of 70 months and I want to explain that and aside from other considerations that of course relate to the obvious matter of the offenses that were committed, the added factor which I believe has to be taken into account is that Mr. Mosallem contributed very substantially to other people who never, in my view, have violated the law and all ended up being convicted felons and that is tragic and it means that the offenses that Mr. Mosallem committed had a wideranging affect beyond simply the financial effect on [Grey's clients].
Lewis Affirm., Exh. F: Nov. 13, 2003 Transcript, at 28-29.
On November 10, 2005, while he was still incarcerated, Mosallem commenced this civil action. His pro se complaint alleges that the defendants: (i) manipulated and withheld documents and information to be provided in response to government subpoenas; (ii) suborned perjury by witnesses making statements to the government; and (iii) leaked confidential information to the government and third parties to insulate Grey senior management from criminal liability by lending the false appearance that plaintiff, exclusively on his own authority, had masterminded and managed the corrupt practices at Grey that were the target of the DOJ's criminal investigation.
Mosallem asserts that he was damaged as a result of the defendants' actions, because he received "a substantially heavier sentence" for his wrongdoing than he would have otherwise, on the basis that he was deemed to have been the ringleader behind the corruption at Grey. See Complaint, \ 12. More specifically, he contends that Judge Griesa "imposed a discretionary, further 7 months of incarceration upon plaintiff in addition to the 63-months sentence per the plea agreement, specifically for allegedly masterminding GREY's illegal bid-rigging, kickback, and overcharging activities and for corrupting other executives into criminal conduct they would not have otherwise undertaken." Id., ¶38.
The first cause of action alleges that Skadden and Grey breached a joint defense agreement. In the second cause of action, Mosallem sues Skadden for breach of fiduciary duty. The three remaining claims purport to state claims against Grey and the individual defendants for abuse of process (third), fraud (fourth), and defamation (fifth). Mosallem seeks $4 million in damages on all five causes of action.
DISCUSSION
Breach of a Joint Defense Agreement
Mosallem claims that Grey and Skadden breached a joint defense agreement by failing to provide him with competent and effective assistance in his defense and/or impeding him in the conduct of his own effective defense. More specifically, the complaint alleges that, after Mosallem was charged with antitrust violations, mail fraud and other charges, he entered into a joint defense agreement with Grey, whereby both parties agreed to be represented nonexclusively by Skadden, and Grey agreed to pay for Mosallem's retention of private counsel. See Complaint, ¶15.
Defendants deny that the parties entered into any agreement regarding legal representation, and contend that the only agreement the parties signed was a written "Common
Interest Agreement," in or about April of 2001, which was signed by Skadden on behalf of Grey Global Group, Inc. and Grey Worldwide; Paul B. Bergman, P.C., on behalf of Mosallem; and Frank H. Wright & Associates, P.C. on behalf of Joseph Payne, a/k/a Joe Panaccione, Mosallem's former top deputy. Mosallem, in response, does not deny that this is the joint defense agreement that he refers to in his complaint.
The complaint fails to allege that Grey breached any of the obligations set forth in the Common Interest Agreement. That agreement specifically states that its purpose is only "to ensure that the exchanges and disclosures of defense materials contemplated herein do not diminish in any way the confidentiality of the defense materials and do not constitute any waiver of any privilege." Rubin Affirm., Exh. 5, at 2. It also makes clear that shared defense materials shall remain confidential, but that "information belonging to or independently developed by each of the undersigned or their clients shall not be immune from disclosure to third parties by virtue of the fact that the information has been shared with parties to this agreement." Id., ¶ 4. The agreement also specifically provides that "[t]hat neither we [meaning counsel] nor our clients are required to share defense materials with one another." Id., ¶ 3.
The complaint alleges three purported breaches of the Common Interest Agreement, See Complaint, ¶ 40. The first alleged breach is that Grey and/or Skadden withheld incriminating documents that had been subpoenaed by the government. While this may amount to contempt on the part of Grey for failing to fully and properly respond to DOJ-issued subpoenas, it does not state a claim for breach of the Common Interest Agreement, because the agreement does not obligate any attorney or his or her client to assist or support any other attorney or client, nor does the agreement in any way limit or proscribe the manner in which the attorneys chose to respond to subpoenas or defend their clients.
Second, the complaint alleges that Skadden "suborned perjury" and provided the government with Grey witnesses, specifically John Steinmetz, Mosallem's personal assistant (who was subsequently indicted), Mary Cafferty, his secretary, and Pat Hansmann, his administrative assistant. However, the complaint fails to describe what and whose testimony was false, and how Skadden induced such perjured testimony. The fact that witnesses employed by Grey in the graphic services department were required to give testimony in response to government-issued subpoenas fails to state any cognizable claim for damages against Grey's outside counsel.
Third, the complaint alleges that Skadden disclosed to the government and others prejudicial information that Mosallem revealed to Skadden in confidence. While this allegation is very troubling, the only information he alleges that was improperly leaked are his personal financial records, the "Gabe Casas List," and a comprehensive understanding of the meaning of the list. What Mosallem fails to allege is why any of this information was protected from disclosure to the government. With respect to the Gabe Casas List, Mosallem appears to claim that the disclosure of this list and/or its meaning was wrongful at the same time that he claims that he himself wanted to share it with the government, because it showed that the Vice Chairman and General Manager of Grey, defendant Robert L. Berenson, received $17,481 worth of gifts from Color Wheel and that Grey's Chairman, President and Chief Executive Office of Grey, defendant Edward H. Meyers, received $2,398 worth of photographic and other printing work. Yet, these facts were known to the government and even reported in the press.
Gabriel Casas was a Color Wheel salesman and, according to the complaint, it fell to him to keep track of the cost of excess work Color Wheel performed for Grey's clients and the cost of gifts, entertainment and other benefits for executives at Grey. See Complaint, ¶ 17.
Even if Grey and/or Skadden did disclose confidential information it gleaned from the plaintiff to the government, the claim must be dismissed on public policy grounds when a plaintiff's injury is a direct result of his knowing and intentional participation in a serious criminal act, he cannot seek civil compensation for the loss. Manning v Brown, 91 NY2d 116, 120 (1997); Barker v Kallash, 63 NY2d 19, 25 (1984). This rule stems from the basic principle that one may not profit from his own wrong. Barker v Kallash, 63 NY2d at 25, citing Riggs v Palmer, 115 NY 506 (1889). Here, the plaintiff's only alleged injury is that he received a longer prison sentence than he should have as a result of the defendants' wrongful actions. Even if defendants were guilty of some type of malfeasance vis-a-vis the Common Interest Agreement, public policy prevents Mosallem's recovery of monetary damages for suffering any portion of his prison sentence.
In Kiely v Raytheon Co. (105 F3d 734 [1st Cir 1997]), a case with very similar facts, Kiely, the former employee of a defense contractor, Raytheon Co., attempted to sue Raytheon after both were criminally convicted of using classified government defense documents. In dismissing Kiely's claim that Raytheon breached a joint defense agreement by undertaking a clandestine course of action to exculpate itself by falsely claiming that the employee acted alone and contrary to Raytheon policy, the Court of Appeals ruled that there was no causal connection between Kiely's damages basically his indictment and conviction and any breach of the joint defense agreement by Raytheon, and that "the law presumes that Kiely's conviction was based on his own illegal acts." 105 F3d at 739. Here, too, the law must presume that Mosallem's prison sentence was based on his own illegal conduct. To hold otherwise would "lessen the effect of the punishment determined by the criminal justice system." Id.
Mosallem also cannot prove causation, because his own actions were the cause of the prison sentence he received. The claim that he received a longer sentence than the 63-month sentence called for under his Plea Agreement (see Complaint, ¶ 38) is based on his misrepresentation of the Plea Agreement. That agreement called for a sentence ranging from 63 to 78 months, and unambiguously provides that the actual sentence was entirely within the discretion of Judge Griesa. Mosallem actually received a sentence that was seven months less than the maximum end of the range, and less than what the government asked Judge Griesa to impose. See Lewis Affirm., Exh. F: Nov. 13, 2003 Transcript, at 15-16.
Accordingly, the first cause of action alleging a breach of the Common Interest Agreement is dismissed, but with leave to replead. Mosallem has alleged, in his opposing papers, that Grey breached a separate agreement, made in March 2001, to pay all of his legal fees arising from the criminal investigation, and a third contract, negotiated in December 2001, to employ Mosallem as a consultant for the company, and that even though Mosallem performed all the consulting services as agreed upon, Grey failed to compensate him for those services. Thus, plaintiff is granted leave to replead these two breach of contract claims against defendant Grey Global, Inc.
The complaint does allege an agreement by Grey "to pay for plaintiff's retention of private counsel" after plaintiff was charged with antitrust violations and mail fraud (Complaint, 15), but does not allege that this agreement was breached.
Breach of Fiduciary Duty
Mosallem's second cause of action purports to state a claim against Skadden for breach of fiduciary duty created by its role as joint counsel for Mosallem and Grey. This claim must be dismissed for two independent reasons.
First, the plain terms of the Common Interest Agreement refute Mosallem's contention that a non-exclusive attorney-client relationship existed between him and Skadden. The agreement expressly provides that there was no "agency, ratification, joint venture, conspiracy or other express or implied relationship between or among the parties." Rubin Affirm., Exh. 6 thereto, ¶ 13.
Second, a criminal defendant cannot sue his attorney for money damages for alleged malpractice and/or breach of fiduciary duty because his guilty plea, and not any alleged attorney misconduct, constitutes the proximate cause, as a matter of law, of damages suffered. Carmel v Lunney, 70 NY2d 169 (1987). Indeed, in order to recover damages for legal malpractice arising from a criminal representation, the client must be able to establish his innocence. See Britt v Legal Aid Socy, Inc., 95 NY2d 443, 446 (2000); Carmel v Lunney, 70 NY2d at 173. Mosallem does not claim that he is innocent of the crimes of which he was charged. Even if he did, his guilty plea prevents him, as a matter of law, from collaterally attacking his conviction and sentencing in this civil setting. Kaplan v Sachs, 224 AD2d 666, 667 (2d Dept), appeal dismissed, Iv denied 88 NY2d 952 (1996); see also Doyle v Ruskin, 230 AD2d 888, 889 (2d Dept 1996), appeal dismissed 90 NY2d 883 (1997).
Abuse of Process
Plaintiffs third cause of action alleges that Grey and the individual defendants "engaged in an abuse of process to pervert the course of a federal investigation to protect themselves from criminal charges by conspiring to frame plaintiff as the highest-ranking GREY mastermind and corrupting influence responsible for the corrupt practices and illegalities under investigation by federal probe." Complaint, ¶ 45.
Abuse of process is an intentional tort governed by a one-year statute of limitations. CPLR 215; Spinale v 10 West 66th Street Corp., 291 AD2d 234, 235 (1st Dept 2002); Beninati v Nicotra, 239 AD2d 242 (1st Dept 1997). Mosallem received his prison sentence on November 13, 2003; therefore, any action that could possibly form the basis of an abuse of process claim took place more than one year before this action was commenced on November 10, 2005. Thus, the third cause of action must be dismissed as time-barred.
In addition, the claim must be dismissed because the complaint fails to allege that any defendant caused any legal process to be issued. The tort of abuse of process has been defined "as the misuse or perversion of regularly issued legal process for a purpose not justified by the nature of the process." Board of Educ. of Farmingdale Union Free School Dist. v Farmingdale Classroom Teachers Assn., Local 1889 AFT AFL-CIO, 38 NY2d 397, 400 (1975); see also Roberts v Pollack, 92 AD2d 440, 444 (1st Dept 1983) ("The essence of the tort of abuse of process lies in the improper use of process, viz., unlawful interference with one's person or property under color of process"). It has three essential elements: "(1) regularly-issued process, either civil or criminal, (2) an intent to do harm without excuse or justification, and (3) use of the process in a perverted manner to obtain a collateral objective." Curiano v Suozzi, 63 NY2d 113, 116 (1984). The complaint is devoid of any allegations that any process was issued or caused to be issued by the defendants and refers only to alleged misconduct by the defendants in responding to government-issued subpoenas. In addition, the complaint fails to allege that the defendants intended to do harm to Mosallem without excuse or justification; rather, the complaint itself alleges that defendants' alleged purpose in the way they responded to the government's subpoenas was to protect Grey senior management from criminal liability.
Fraud
In the fourth cause of action, which is asserted against Grey and the three individual defendants, Mosallem alleges that "Defendants made false representations of fact as part of the cover-up at GREY, relating to plaintiff's alleged ringleader role in the illegal activities at Grey" (Complaint, ^| 48) and that this was done in order to "induce plaintiff to act or refrain from certain actions in his defense" (id., ¶ 50). Mosallem was allegedly harmed because, as the scapegoat, he was sentenced by Judge Griesa to a discretionary, further seven months of incarceration. Id., ¶ 52.
In addition to the public policy reasons previously cited for why this claim for monetary damages must be dismissed, the fraud cause of action fails to plead fraud with the level of specificity required by CPLR 3016 (b). The complaint fails to set forth the specific factual representations that Mosallem alleges to have been falsely made, does not allege which of the defendants made them or to whom and when they were made, or how Mosallem relied on them to his detriment. The '"mere recitation of the elements of fraud is insufficient to state a cause of action.'" Friedman v Anderson, 23 AD3d 163, 166 (1st Dept 2005), quoting National Union Fire Ins. Co. of Pittsburgh, Pa. v Robert Christopher Assoc., 257 AD2d 1, 9 (1st Dept 1999).
Mosallem's fraud claim further fails because the complaint does not adequately plead that any of the defendants' alleged misrepresentations were the direct and proximate cause of his claimed injury. See Friedman v Anderson, 23 AD3d at 167; Laub v Faessel, 297 AD2d 28, 30-31 (1st Dept 2002). Mosallem freely agreed to a sentencing range of 63 to 78 months, and the sentencing judge chose the mid-point of the range, because of the offenses Mosallem committed and the added factor that Mosallem "substantially contributed" to others becoming felons, not that he was the "ringleader" or "mastermind" of the corruption at Grey. See Complaint, ¶ 56.
Defamation
Mosallem's fifth cause of action against the defendants, labeled as defamation in the complaint's prayer for relief, alleges that the defendants "made false representations of fact to third-parties... as part of the cover-up at GREY, relating to plaintiff's alleged ringleader role in the illegal activities at GREY." Complaint, ¶ 54. An action for slander or libel must be commenced within one year of the defamatory act. CPLR 215 (3); Priore v New York Yankees, 307 AD2d 67, 73 (1st Dept), Iv denied 1 NY3d 504 (2003); Goldberg v Sitomer, Sitomer & Porges, 97 AD2d 114 (1st Dept 1983), affd 63 NY2d 831 (1984), cert denied 470 US 1028 (1985). Since Mosallem does not deny that the alleged cover-up took place prior to his sentencing on November 13, 2005, this claim is time-barred.
The defamation claim is also not pled with particularity required by CPLR 3016 (a). The complaint fails to set forth the "actual defamatory words" allegedly giving rise to the defamation (Johnson v Markman, 288 AD2d 165 [1st Dept 2001]), and does not give any details as to the "time, place and manner of publication" (Khan v Duane Reade, 7 AD3d 311, 312 [1st Dept 2004]). Therefore, even if the defamation claim is not time-barred, it must be dismissed for failure to plead such a claim with the legally-required specificity.
Claims Against Grey Advertising, Inc. and WPP Group, pic
Defendant Grey Advertising, Inc. is not a proper party to this action. The undisputed documentary evidence offered by defendants establishes that the company no longer exists. On July 13, 2000, Grey Advertising, Inc. filed a certificate of amendment with the Secretary of State of Delaware officially changing its name to Grey Global Group Inc. Rubin Affirm., Exh. 6. Then, on March 7, 2005, Grey Global Group Inc. was merged into Abbey Merger Corporation, which was a wholly-owned subsidiary of WPP Group, pic. Id., Exh. 7. Upon the merger, Abbey Merger Corporation changed its name to Grey Global Group Inc. Id., Exh. 8. Thus, when this lawsuit was commenced in November 2005, Grey Advertising, Inc. no longer existed. Billy v Consolidated Mack Tool Corp., 51 NY2d 152, 164 (1980).
Defendants argue that the complaint must be dismissed as against defendant WPP Group, pic for two reasons. First, it is argued that WPP Group, pic was not properly served with the summons and complaint. This defendant is a foreign corporation, not authorized to do business in New York. Defendants contend that it was served by regular international mail addressed to its headquarters in the United Kingdom, attaching a copy of a cover letter from Mosallem dated December 16, 2005 to the Chief Executive Officer of WPP Group, pic, by which he encloses a copy of the complaint in this action (there is no indication from the letter that the summons was also enclosed) and offering to settle the matter. See Rubin Affirm, Exh. 10. However, there is an affidavit of service on file with the court that states that the summons and complaint were served on WPP Group, pic on March 3, 2006 by personal delivery to an employee and agent, Agnes Brisco, at 124 Park Avenue, 4th Floor, New York, New York 10017, and WPP Group, pic does not offer any challenges to this service.
Even if the March 2006 service is invalid, defendants fail to establish that the service by international mail in December 2005 is invalid. Article 10 (a) of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Convention) states: "[pjrovided the State of destination does not object, the present Convention shall not interfere with (a) the freedom to send judicial documents, by postal channels, directly to persons abroad." In Sardanis v Sumitomo Corp. (279 AD2d 225, 228 [1st Dept 2001]), the First Department held that the term "send" in the Hague Convention does not include service of process, and thus service of process cannot be made on a foreign corporation by registered mail, adopting the reasoning of the Third Department in Reynolds v Woosup Koh (109 AD2d 97, 98-100 [3d Dept 1985]). However, both Courts were very much influenced by the fact that Japan, the country at issue in those cases, "has clearly indicated its preference for personal service by objecting to paragraphs (b) and (c) of Article 10, which would permit a form of foreign substituted'service of judicial documents.'" Id. at 229. In Russell v Arthur Trask Co. (125 AD2d 136 [3d Dept 1987]), the Third Department held that service in a foreign country by mail pursuant to the Hague Convention cannot be determined without information in the record as to whether the country where service was attempted made any objections to the Hague Convention. Defendants fail to inform the court whether the United Kingdom has objected to any portion of article 10 of the Hague Convention. Thus, the motion to dismiss the complaint against WPP Group, pic pursuant to CPLR 3211 (a) (8) is denied without prejudice.
Dismissal against WPP Group, pic is, however, appropriate for failure to state a cause of action pursuant to CPLR 3211 (a) (7). Grey Global Group, Inc. is a wholly-owned subsidiary of WPP Group, pic, which did not acquire Grey Global Group, Inc. until March 2005. WPP Group, pic, as a parent corporation, cannot be held liable for the torts of its subsidiary absent some basis for a court of equity to disregard the separate legal personalities of the two corporations and assign liability to the parent corporation (Billy v Consolidated Mack Tool Corp., 51 NY2d at 163; Garcia v Union Carbide Corp., 176 AD2d 219, 219-20 [1st Dept 1991]), and no such basis is argued in this case.
Sealing the Book of Exhibits
On September 26, 2006, Mosallem belatedly submitted a book of 44 documents that he deemed to be exhibits to his earlier affidavit submitted in opposition to defendants' motions to dismiss. Although Mosallem's opposing affidavit does not actually refer to any exhibits, these documents purport to be the documents referred to in paragraph 10 of his complaint which Mosallem alleges shows that Grey senior management was aware of bid-rigging, kickbacks and client-overcharging and that such was standard operating procedure at the company. The Grey defendants move to seal the book of exhibits, arguing that Mosallem does not rightfully possess the documents, that it contains information that may be misconstrued by the media and that the documents are confidential business records and irrelevant to this lawsuit.
Although submitted late, the court accepted the filing in view of plaintiff's pro se status. See Montes v Manufacturers Hanover Trust Co., 197 AD2d 357, 358 (1st Dept 1993) (procedural rules will generally be applied more liberally where a plaintiff represents himself pro se).
There are two types of documents in the book of exhibits. The first type of documents are documents that were produced by Grey to the government in response to grand jury subpoenas, and then turned over by the government to Mosallem to assist in his defense. They are marked with a "Grey-3rd" Bates stamp (nos. 5-34, 38, 41-44). Most of these documents (nos. 9-15, 19-31, 32, 33-34) relate to an unfair dismissal proceeding brought in London by Roy Wilson, the former Chief Financial Officer of Grey's London office (Grey-London), which Grey's counsel contends is a "closed tribunal." Rubin Affirm., ¶ 14. For example, Document 32 is the Compromise Agreement settling the dispute in June 2000; it requires both Wilson and Grey to keep the terms of the agreement confidential unless required to do so by law. Some of the documents are marked "Confidential" or "Strictly Private & Confidential." Docs, 16-18 are correspondence relating to Grey-London's termination of Chris Loizides of Cronulla Creative & Management Services Limited in October 1998, two of which are marked "Strictly Confidential." All of these London documents presumably relate to Mosallem's claim that "[fjhere was a major 'illegal' discount scheme with Grey's primary print supplier Color Wheel that mirrored Grey London's 'illegal scheme.'" Mosallem 4/24/06 Aff., ¶ 9. In addition to documents relating to Grey-London, there are a handful of Bates-stamped documents (37, 41-43) relating to Grey's New York office. Doc. 43 is an inter-office memorandum, labeled "Confidential," from Grey's general counsel confirming and summarizing a privileged discussion with Mosallem and other Grey executives.
The rest of the documents are Grey business documents, such as interoffice memoranda, invoices and correspondence ranging in date from 1990 to 2000, and are also offered to show "the fact that defendant Grey participated in and had knowledge of kickback and bid-rigging schemes involving the overcharging of clients for services in violation of contractual agreements." Pis. Opp. to Defs.' Motion to Seal, at 1-2. Some of these documents are also marked "Highly Confidential," i.e., Doc. 3 which is an internal memorandum from Berenson to Meyer discussing Berenson's thoughts in rejecting a business proposal made by a printing vendor.
The First Amendment, as applied to the states by the Fourteenth Amendment, grants to the public and the press a qualified right of access to civil court proceedings. Banco Labs., Ltd. v Chemical Worts of Gedeon Richter, Ltd., 274 AD2d 1, 6-7 (1st Dept 2000); Matter of Ruben R.,
219 AD2d 117, 121-23 (1st Dept), lv denied 88 NY2d 806 (1996). "The statutory and common law of this State have long recognized that civil actions and proceedings should be open to the public in order to ensure that they are conducted efficiently, honestly, and fairly." Matter of Conservatorship of Br owns tone, 191 AD2d 167, 168 (1st Dept 1993); see also Gryphon Domestic VI, LLC v APP Intl. Fin. Co., B.V., 28 AD3d 322, 324 (1st Dept 2006), Iv denied 10 NY3d 705 (2008). "Confidentiality is clearly the exception, not the rule...." In Re Will of Hofmann, 284 AD2d 92, 93-94 (1st Dept 2001). The strong presumption in favor of openness places the burden on the party seeking to seal records and close hearings to show that the public's right of access is outweighed by competing interests. Danco Labs., Ltd., 21A AD2d at 8. "Generally, this Court has been reluctant to allow the sealing of court records even where both sides to the litigation have asked for such sealing.... Consequently, a court is always required to make an independent determination of good cause before it may request a grant for sealing." Gryphon Domestic VI, LLC, 28 AD3d at 324.
Section 216.1 of the Uniform Rules permits the sealing of court records upon a written finding of good cause. 22 NYCRR § 216.1(a). "In determining whether good cause has been shown, the court shall consider the interests of the public as well as of the parties." Id.
The Grey defendants argue that the public interest in this case is "mere curiosity," because the documents are all several years old, contain confidential information relating to Grey's business practices and are irrelevant to the issues in this lawsuit. The Grey defendants rely on Grain Communications, Inc. v Hughes (135 AD2d 351 [1st Dept 1987], affd 74 NY2d 626 [1989]), in which the First Department found no "showing of any legitimate public concern, as opposed to mere curiosity, to counterbalance the strong public interest in encouraging the settlement of private litigation and the resultant prejudice to the settling parties, which would ensue from disclosure of trade secret information." Id. at 352. Grain Communications is partially distinguishable, because the documents at issue in that lawsuit were deemed to be trade secrets. There is no claim that any of the documents contain any of Grey's trade secrets, nevertheless they do contain what the Grey defendants have deemed to be confidential business records, and, in one instance, like Crain Communications, a confidential agreement settling a private employment dispute. Despite the confidential imprimatur on the documents, as the Grey defendants admit, the documents at issue herein are all several years old, making it somewhat unlikely that public disclosure would cause harm to their present-day business.
Edwards contends that the press has a strong and important interest in this case that transcends mere curiosity. He points out that his publication, Brandweek, has been reporting on the ethics scandal at Grey and the subsequent criminal investigation for several years, contending that Brandweek has reported on these events because its readers the clients and employees of advertising agencies such as Grey and the advertising industry in general have a strong and obvious interest in understanding industry billing practices. However, the age of the documents also cuts across the argument that there is any legitimate public interest in the documents.
With regard to the Grey documents subpoenaed by the DOJ, the Grey defendants argue that sealing is required in order to protect the sacrosanct secrecy of federal grand jury proceedings and that even though the documents were subpoenaed during a grand jury investigation, they remain the property of Grey.
Rule 6 (e) of the Federal Rules of Criminal Procedure "embodies a long established policy of the federal courts to maintain the secrecy of grand jury proceedings." United States v
Interstate Dress Carriers, Inc., 280 F2d 52, 54 (2d Cir 1960), citing United States v Procter & Gamble Co., 356 US 677, 681 (1958). Documents as well as oral testimony may come within Rule 6 (e)'s proscription against disclosure as "matters occurring before the grand jury." United States v Interstate Dress Carriers, Inc., 280 F2d at 54, citing Fed R Crim Proc 6 (e). However, documents subpoenaed by the grand jury evoke "different, and less exacting considerations than... transcripts of grand jury testimony." Securities and Exchange Commn. v Everest Mgt. Corp., 87 FRD 100, 105 (SD NY 1980); see also United States v Lartey, 716 F2d 955, 964 (2d Cir 1983).
Edwards argues that there has been no showing that any of the DOJ-subpoenaed documents would compromise the secrecy of any grand jury proceedings, and that the grand jury probe ended many years ago and has either resulted in convictions or been otherwise terminated. "[T]he interests in grand jury secrecy, although reduced, are not eliminated merely because the grand jury has ended its activities." Douglas Oil Co. v Petrol Stops Northwest, 441 US 211, 219 (1979). Indeed, one of the interests served by preserving grand jury secrecy is the prevention of harm to the reputation of those who are investigated, but ultimately exonerated by the grand jury. Id. at 219 n 10; United States v Proctor & Gamble Co., 356 US at 681-82 n 6. Since the book of exhibits are being offered precisely to show that Mosallem's criminal activity was at the direction of other, more senior Grey executives, none of whom were indicted by the grand jury, public disclosure of the subpoenaed documents may well undermine a key rationale for grand jury secrecy.
The Grey defendants also maintains that sealing is warranted, because Mosallem wrongfully possesses all of the documents. With respect to the DOJ-subpoenaed documents, there is no question that they were turned over to him by the government to assist in his defense. Mosallem counters that he paid for the copies, and that defendants were aware of his possession of them and did not seek their return after his criminal proceeding terminated. However, he admits that "[t] hereafter ownership of the documentation was under contentious debate between counsel for both parties." Pis. Opp. to Defs.' Motion to Seal, at 3. His retention is clearly unlawful since "[d]ocuments subpoenaed during a grand jury investigation remain the property of the entity that produced them." In re Grand Jury Investigation, 59 F3d 17, 19 (2d Cir 1995); United States v Interstate Dress Carriers, Inc., 280 F2d at 54, supra. The rest of the Grey business documents were obtained by Mosallem during the course of his employment at Grey, and there is no claim that he did not have rightful access to them during his employment. However, the Grey defendants contend that, by failing to return these documents at the termination of his employment and by now attempting to use them to sue the Grey defendants in a civil case, he has misappropriated the documents in violation of his common-law duty not to misappropriate his employer's property.
Edwards maintains that even if Mosallem in under such a common-law duty, it would be virtually impossible for any former employee to sue their employer if they were banned from bringing forth copies of documents legitimately obtained during the course of their employment. He further argues that even if Grey is damaged by Mosallem's misuse of its documents, it has legal remedies it may seek such as damages, sanctions or an injunction, but that this is not a reason to deprive the press of its access to routine litigation documents by shoe-horning an employment law remedy into "good cause" to seal a court file under Uniform Rule 216.1.
Edwards' views of the law with respect to an employee's duty of loyalty and the propriety of self-help evidence gathering by employees for use in contemplated litigation against their soon-to-be former employers is misplaced. Employees, even former employees, have a common-law duty not to divulge confidential or proprietary information that they gained through their employment. Willis v DeFelice, 299 AD2d 240 (1 st Dept 2002). Even in employment discrimination cases, the employee may not use material for the litigation improperly obtained outside the discovery process. Fayemi v Hambrecht and Quist, Inc., 174 FRD 319, 323 (SD NY 1997); see also Appel v Fischbach Corp., Inc., 1998 WL 470497, at *7 (ED NY Aug 10, 1998) ("Where an employee has taken company documents for the purpose of preparing for anticipated litigation, the remedy has been dismissal of the employee's complaint or an order that the employee return those documents"), affd 189 F3d 460 (2d Cir 1999).
Thus, while Mosallem's initial possession of the documents in the book of exhibits was not wrongful, his continued possession of all of the documents following the termination of his employment and subsequent guilty plea is in violation of his duty of loyalty to Grey. The proper course of action was Mosallem's return of all Grey business documents, and use of the discovery process to litigate his claims herein. Nothing in the book of exhibits refutes the legal arguments defendants have made in support of their motions to dismiss, and the court has now dismissed all of Mosallem's claims, with leave to replead two contract claims that have nothing to do with anything in the book of exhibits. Thus, the only justification for allowing them to become a part of the public record in this case, and thus provide access to the press, is to harm or embarrass the Grey defendants in some manner. Mindful of Mosallem's pro se status and lack of legal advice regarding the propriety of submitting the documents in the first place, the court is unwilling to sanction by court order the disclosure of confidential business documents to the press and subject
Mosallem to possible monetary damages, of which he may not be fully cognizant, without a stronger showing of public interest.
An additional factor that favors sealing is the fact that, given the court's ruling on defendants' motions to dismiss, the Grey defendant will not have any opportunity to challenge in this lawsuit Mosallem's contentions regarding what the documents prove or do not prove. See Matter of Estate of R.R., Jr., 153 Misc 2d 747, 749-50 (Sur Ct, Rensselaer County 1992) (sealing a legal settlement because three of the defendants offered to settle without admitting liability, and the court felt the public would construe the settlement as an admission of guilt).
For these reasons, the court finds that the Grey defendants have demonstrated "good cause" for sealing the book of exhibits, and their motion is granted. Edwards' motion is, therefore, denied as moot.
CONCLUSION AND ORDER
For the foregoing reasons, it is hereby
ORDERED that the motion (seq. 001) of defendants Grey Global Group, Inc., Grey Worldwide, Inc. Grey Advertising, Inc., WPP Group, pic, Robert L. Berenson, Steven Felsher and Edward H. Meyer to dismiss the complaint is granted, and the complaint is dismissed as against these defendants; and it is further.
ORDERED that the motion (seq. 002) of defendant Skadden, Arps, Slate, Meagher & Flom LLP to dismiss the complaint is granted and the complaint is dismissed as against this defendant; and it is further.
ORDERED that plaintiff is granted leave to serve and file an amended complaint so as to replead the first cause of action for breach of contract against Grey Global Group, Inc. within 45 days after service of a copy of this order with notice of entry; and in the event that plaintiff fails to serve and file an amended complaint within such time, leave to replead shall be deemed denied and the Clerk is directed to enter judgment dismissing the action with prejudice against all defendants with costs and disbursements; and it is further.
ORDERED that the motion (seq. 003) by defendants Grey Global Group, Inc., Grey Worldwide, Inc. Grey Advertising, Inc., WPP Group, pic, Robert L. Berenson, Steven Felsher and Edward H. Meyer to partially seal the record in this action is granted, and the Clerk of the Court is directly to seal the velo-bound book of 44 documents submitted by the plaintiff on or about September 25, 2006 in opposition to defendants' motions to dismiss, access to be granted only to the parties and their counsel for purposes of appellate review, if any; and it further.
ORDERED that the motion (seq. 004) by Jim Edwards, pro se, to compel a ruling and order on the motion to partially seal the record is denied as moot.