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noting that "the analysis for coercion and duress [is] the same"
Summary of this case from Quinio v. AalaOpinion
Civil Action No. CV 00-6618(DGT)
April 1, 2004
AMENDED MEMORANDUM AND ORDER
Background
The plaintiffs in this action are Playboy Enterprises International, Inc. ("PEII"), Playboy Entertainment Group, Inc. ("PEGI") and Playboy.com (collectively "plaintiffs"). PEII is a Delaware corporation with its principal place of business located in Chicago, Illinois. PEII is an international multimedia entertainment company that publishes Playboy magazine. PEGI is a Delaware corporation and is a wholly owned subsidiary of PEII. Playboy.com is a Delaware corporation and is a wholly owned subsidiary of PEII. The defendants are On Line Entertainment, Inc. ("OLE") and Mario Cavalluzzo ("Cavalluzzo") (collectively "defendants"). OLE is a New York corporation with its principal place of business located in Elmont, New York. Cavalluzzo is a citizen of the State of New York residing within the Eastern District of New York who directs and controls the business activities of OLE.
PEII through its wholly owned subsidiary, PEGI, is the producer of a cable television series entitled "Sex Court," which airs on the subscription television services "Playboy TV," which is broadcast in the United States, and "Playboy TV Networks," which is broadcast internationally. PEGI is also the producer of a video cassette compilation bearing the Sex Court mark, which is distributed for sale throughout the United States and internationally via theplayboy.com web site, which is owned and operated by plaintiff Playboy.com.
In their complaint, plaintiffs alleged that defendants have sought improperly to profit from Playboy's investment in marketing the Sex Court trademark. Plaintiffs claimed that OLE registered the Internet domain name sexcourt.com after the Sex Court series became popular and the name and mark Sex Court became associated in the public mind with plaintiffs' television series. Plaintiffs further alleged that defendants began using and continued to use the sexcourt.com domain name in connection with an Internet Web site that is, in fact, unrelated to Playboy or the Sex Court series, but attempted to convey to Internet users that it is connected to the television series. Plaintiffs suggested that defendants attempted to lure Internet users seeking information about the Sex Court television show and to then entice users to link to sexually explicit commercial Internet sites that charge subscription fees for access to their contents. Thus, plaintiffs alleged that "defendants seek simultaneously to trade off of the goodwill the SEX COURT mark has come to enjoy among consumers, and to reduce the value of that goodwill by improperly associating that name with services from unrelated sources." Complaint, ¶ 8. The action resulted in the commencement of a jury trial in this district on April 7, 2003.
On April 9, 2003, prior to the conclusion of the jury trial, defendants entered into a Settlement Agreement ("April 9 settlement agreement") with plaintiffs. That same day, both parties' counsel presented and affirmed an accompanying Permanent Injunction Upon Consent Against Defendants to the court. The injunction was signed by counsel for both parties, and was entered by the court on April 10. On April 16, defendants served upon plaintiffs a Notice of Motion requesting "an Order (1) setting aside the April 9, 2003 settlement agreement; (2) vacating the April 10 consent injunction and judgment; and (3) setting a date for a new trial, in the interest of justice, on the basis of mistake, duress, misrepresentation and fraud." On April 21, plaintiffs submitted a cross-motion by letter requesting that the docket entries be sealed. On April 23, plaintiffs submitted a cross-motion for an order to show cause requesting that the court enforce the Permanent Injunction and Settlement Agreement by: (1) ordering Mr. Cavalluzzo to immediately deliver all rights, passwords and title to the www.sexcourt.com andwww.pamelaandersonlee.net domain names to Playboy; and (2) to pay Playboy's costs and attorneys' fees associated with the preparation of the papers related to the cross motion. Memorandum of Law in Support of Playboy's Motion for an Order to Show Cause ("Pl. Mem. of Law for OSC") 1-2.
Discussion (1) Motion to Set Aside Settlement, Vacate Consent Judgment and Order a New Trial
Defendants' Memorandum of Law is limited to conclusory statements, general statements of law, and appeals to the "interests of justice," yet fails to advance clearly delineated legal arguments. Defendants' brief states that "[a] settlement agreement should be set aside if it is induced by fraud, collusion, mistake, accident, intimidation, coercion or duress." Memorandum of Law in Support of Counterclaimants' Motion to Set Aside April 9 Settlement ("Def. Mem. of Law") 1. The cases cited by defendants in support of this assertion state that settlement agreements must be construed under general principles of contract law. See, e.g. Downes v. O'Connell, 103 F. Supp.2d 579, 582 (E.D.N.Y. 2000) ("Settlement agreements are contracts and must therefore be construed according to general principles of contract law."); see also Willgerodt v. Hohri, 953 F. Supp. 557, 561 (S.D.N.Y. 1997); Hest v. New Amsterdam Casualty, 268 F. Supp. 623 (D.S.C. 1967). Accordingly, defendants request "that the settlement agreement be set aside due to mistake, misrepresentation, duress and Playboy's fraudulent use of the [March] consent injunction . . . to induce settlement." Def. Mem. of Law 4.Defendants are correct that a settlement agreement should be construed as a contract. See Goldman v. Commissioner, 39 F.3d 402, 405 (2d Cir. 1994) (holding that a "settlement agreement constituted a contract" and that "general principles of contract law must govern its interpretation."); Torres v. Walker, 356 F.3d 238, 245 (2d Cir. 2004) ("Settlement agreements are contracts and must therefore be construed according to general principles of contract law.") (quoting Red Ball Interior Demolition Corp. v. Palmadessa, 173 F.3d 481, 484 (2d Cir. 1999)). The April settlement agreement contains a choice of law provision stating that the "Agreement shall be governed by, and construed and interpreted in accordance with, the substantive laws of the State of New York, without regard to conflicts or choice of law principles." Gioconda Decl. Ex. A (April settlement agreement) ¶ 18. Thus, New York contract law governs. Under New York law, "[o]nly where there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation." Hallock v. State, 64 N.Y.2d 224, 230, 474 N.E.2d 1178, 485 N.Y.S.2d 510 (N.Y. 1984); see also Downes, 103 F. Supp.2d at 582 ("The court will set aside or modify the terms of a settlement reached in open court only upon a showing of good cause, such as fraud, collusion, mistake, accident, or lack of authority.").
Although the Second Circuit has repeatedly applied local contract law when construing settlement agreements as contracts, see, e.g., Schurr v. Austin Galleries of Illinois, Inc., 719 F.2d 571, 574 (2d Cir. 1983) (holding that "[f]or purposes of enforcement, a consent judgment should be construed and interpreted as a contract," and reviewing the contract under New York contract law), Torres, 356 F.3d at 245 (holding that a stipulation of dismissal memorializing a private settlement agreement was subject to the rule that "[s]ettlement agreements are contracts" and interpreting the language of the stipulation under New York contract law), the circuit court has not specifically addressed the question of whether it is appropriate, as a matter of public policy, to apply local contract law to settlement agreements reached in the context of litigation over a federal question. See Ciaramella v. Reader's Digest Ass'n, 131 F.3d 320, 322 (2d Cir. 1997) (declining to decide the question whether New York or federal common law determines whether the parties reached a settlement of claims brought under the ADA, ERISA, and state law because there is no material difference between the applicable state law or federal common law standard); Landau v. American Int'l Group, Inc., No. 97-9365, 1998 WL 712430 (2d Cir. 1998) ("We need not address the question of whether federal common law or New York law governs the interpretation of the Agreement with respect to its validity as a release of rights under a federal statute, because the content of federal common law in this context would in any event be supplied by New York law."). Since the circuit has repeatedly applied New York contract law in reviewing settlement agreements, and because New York law is the applicable law under the choice of law clause in the April settlement agreement, the agreement has been reviewed under New York contract law.
Although defendants do not explicitly invoke Rule 60(b) of the Federal Rules of Civil Procedure in their initial brief, Plaintiffs' Memorandum of Law responds to defendants by arguing that defendants fail to meet the requirements of Rule 60(b). Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Set Aside the Settlement Agreement ("Pl. Mem. of Law") at 1, 2, 4, 7, 16. In their Reply, defendants argue that they are "moving in the first instance to set aside the settlement agreement under contract law, due to specific allegations of misconduct by Playboy and other circumstances," and that after the settlement is vacated, Rule 60(b) permits vacation of the consent judgment. Defendants' Reply Memorandum of Law 3. Both the contract law arguments and the Rule 60(b) arguments are analyzed below.
As noted, although defendants' memorandum of law is not presented as a series of discrete arguments, the arguments in the memorandum break down into two. First, defendants argue that the settlement agreement should be set aside based on fraud, misrepresentation, duress, or mistake since plaintiffs "intentionally and impermissibly" made reference during cross examination of Mr. Cavalluzzo to the March 2003 permanent injunction by stipulation, in breach of the March 2003 settlement agreement ("March settlement agreement"), so as "to poison [the jury's] opinion of Mr. Cavalluzzo." Def. Mem. of Law 2. Alternatively, also based on this alleged breach of the March settlement agreement, defendants argue that the April 9 settlement should be set aside because had the court had access to a copy of the March settlement agreement on April 9, when the cross examination of Mr. Cavalluzzo took place, "the Court seeing that Playboy had impermissibly poisoned the jury, would no doubt have granted a mistrial and likely would have awarded costs to Mr. Cavalluzzo." Def. Mem. of Law 3.
Second, defendants argue that the settlement should be set aside because they entered into the settlement agreement under duress and that following the Court's admonition of defense counsel, "Playboy acted swiftly to coerce Cavalluzzo into settlement, utilizing his weakened position to induce a settlement with him that would not otherwise have been reached." Def. Mem. of Law 4. Defendants state several additional grounds for setting aside the settlement based on the above facts, namely collusion, accident, intimidation, and coercion. Def. Mem. of Law 1, 4. Only plaintiffs' second argument based on the court's admonition of defense counsel may fairly be characterized as coercion, though for these purposes the analysis for coercion and duress are the same and both are dealt with in section (1)(b) below. With regard to the remaining claims, defendants have failed to make even a prima facie showing in support of their conclusory allegations of collusion, accident, or intimidation.
(a) Alleged Breach of March Settlement Agreement
Defendants contend that during the cross examination of Mr. Cavalluzzo on April 9, plaintiffs breached the March settlement agreement by "intentionally and impermissibly" making reference in front of the jury to the permanent injunction by stipulation agreed to by the parties as part of the March settlement. Def. Mem. of Law 2. Defendants argue that this constituted a breach of the provision of the March settlement agreement by which the parties agreed that the settlement and injunction "shall not be used as evidence at trial." Gioconda Decl. Ex. C. Defendants further contend that plaintiffs "used this illegally obtained upper hand as a sword to persuade Mr. Cavalluzzo to dramatically change his settlement position." Def. Mem. of Law 2. Defendants conclude that "[i]t would be inequitable to allow Playboy to benefit by its breach of the March agreement, and there being no delay in this application [it would be] just to place the parties into the same position they were [sic] before the April 9th agreement." Def. Mem. of Law 3.
Although defendants contend that the parties should be restored to their pre-settlement positions because plaintiffs breached the March settlement agreement, it would be inappropriate to set aside the April settlement agreement in this instance because the March settlement agreement was not actually breached. The parties agreed that the settlement and the permanent injunction would "not be used as evidence at trial."Gioconda Decl. Ex. C. But in this instance, the reference to the permanent injunction was not actually introduced as substantive evidence; it was merely used to impeach testimony given by Mr. Cavalluzzo at trial.
Plaintiffs allege that at trial Cavalluzzo began to perjure himself on the witness stand when he refused to acknowledge thatwww.sexyworkers.com was his website, and when he denied that he ever used the Playboy trademark as a metatag in the keywords of that website. Pl. Mem. of Law 12; Gioconda Decl. Ex. G (containing April 7, 2003 Tr. 504:4-10, 507:3-14). Plaintiffs have alleged that defendants own the website www.sexyworkers.com and, in their Amended Complaint, charged defendants with infringing and diluting Playboy's rights in relation to that site by using the Playboy trademark in the metatags of that website. On March 10, 2003, defendants consented to be permanently enjoined from this conduct and the charges relating towww.sexyworkers.com were voluntarily dismissed from the complaint. In order to impeach Cavalluzzo on the issue of his previously-admitted ownership of the sexyworkers.com website, as well as his use of Playboy as a metatag on the site, plaintiffs' attorney asked: "Sir, were you charged in this case with a separate charge of having Playboy listed in your metatag keyword for Sexy Workers.Com and you agreed to a permanent injunction, you agreed to take it out. . . ." Defendants objected and were overruled. In reviewing the transcript of the cross examination of Mr. Cavalluzzo, it is clear that plaintiffs' reference to the March permanent injunction by consent was used properly to impeach Mr. Cavalluzzo and was not introduced as evidence.
It is well-established in this circuit that impeachment by counsel of inconsistent or perjured testimony does not constitute "evidence," for questioning by counsel never constitutes evidence. Washington v. Schriver, 225 F.3d 45, 61 (2d Cir. 2001); Tolbert v. Queens College, 242 F.3d 58, 75 (2d Cir. 2001). Thus, the provision of the settlement agreement providing that settlement and the permanent injunction would "not be used as evidence at trial" was not breached.
Defendants argue that "[i]f a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party, upon which the recipient is justified in relying, the contract is voidable by the recipient," Def. Reply Mem. of Law 6 (quoting Restatement (Second) of Contracts § 164 (1981)), and that "Playboy's misrepresentation was both fraudulent and material and therefore satisfies both of the requirements for the voiding of the contract, either one of which was sufficient to cause rescission." Id. This is indeed the law in New York. See, e.g., Seneca Wire Mfg. Co. v. A. B. Leach Co., 247 N.Y. 1, 7-8, 159 N.E. 700, 702 (1928) ("a contract may be rescinded for fraud or misrepresentation"); see also Horn Waterproofing Corp. v. Bushwick Iron Steel Co., 66 N.Y.2d 321, 325, 488 N.E.2d 56, 58, 497 N.Y.S.2d 310, 312 (1985) ("[W]here there is a real and genuine contest between the parties and a settlement is had without fraud or misrepresentation . . . such settlement should be upheld."). In this instance, since the agreement was not breached and since plaintiffs did not misrepresent the contents of the March settlement agreement to the court, there was no fraud or misrepresentation. Thus, the allegations of misrepresentation and fraud with respect to this claim must fail. Likewise, any claim of mistake, misconduct, or duress based on the alleged breach of the settlement agreement must also fail.
Defendants also argue that had the court had access to a copy of the March settlement agreement on April 9, when the cross examination of Mr. Cavalluzzo took place, "the Court seeing that Playboy had impermissibly poisoned the jury, would no doubt have granted a mistrial and likely would have awarded costs to Mr. Cavalluzzo." Def. Mem. of Law 3. There is no ground for a mistrial in this case. Defendants had the opportunity to move for a mistrial during the trial and chose not to do so. In fact, at trial the court gave defendants the option of moving for a mistrial if they felt it was warranted. Gioconda Decl. Ex. G (containing April 7, 2003 Tr. at 505:8-506:11) ("Mr. BOSTANY: I don't have a copy of the settlement agreement with me, Judge, but I can bet you that what [plaintiffs' counsel] is doing is laying grounds for a mistrial because there is an agreement we have entered into and [plaintiffs' counsel] refuses to produce his copy, I don't have my copy with me. . . . THE COURT: I will let it in. We will look at the agreement tomorrow. If you're right, you can renew your application."). Defendants chose not to move for a mistrial; instead, they entered into the April settlement agreement and consented to a permanent injunction in open court. Gioconda Decl. Ex. H (containing April 10, 2003 Tr. at 2:19-20).
Furthermore, as previously pointed out, Playboy properly impeached defendant Cavalluzzo's testimony upon cross examination. Thus, the reference to the March settlement agreement for this purpose does not provide a sufficient reason to set aside the April 9 settlement agreement. The Federal Rules of Evidence clearly state that although evidence of a settlement "is not admissible to prove liability for [a] claim," the evidence need not be excluded "when the evidence is offered for another purpose." Fed.R.Evid. 408. Courts have held that evidence otherwise excludable pursuant to Rule 408 is admissible for the purposes of impeachment. See, e.g., Cochenour v. Cameron Savings and Loan, 160 F.3d 1187, 1190 (8th Cir. 1998) (an offer to compromise may be used to rebut a party's prior testimony); Reichenbach v. Smith, 528 F.2d 1072, 1075 (5th Cir. 1976) ("Rule 408 codifies a trend in case law that permits cross-examination concerning a settlement for the purpose of impeachment."); Tribune Co. v. Purcigliotti, No. 93-7222, 1996 WL 337277 (S.D.N.Y. June 19, 1996) (settlement discussions may be used for impeachment). Therefore, evidence of a settlement could properly be used to impeach a witness on cross-examination. Had defendants wanted to exclude the use of the settlement for impeachment purposes, at a minimum an explicit provision was required assuming the parties could agree to distort the truth-finding function in this way. Furthermore, as discussed above, questioning by an attorney does not constitute evidence. The court, in its preliminary instructions to the jury, explained as much when it stated that upon cross-examination of a witness "what is evidence in the case are the responses to the questions not the questions themselves." Pl. Mem. of Law 13 (citing Tr. at 17:6-9). Defendants' assertion that plaintiffs "impermissibly poisoned the jury" is simply untrue. It is clear that the reference during cross examination to the permanent injunction by stipulation that accompanied the March settlement agreement was appropriate and does not constitute a grounds for mistrial.
Consequently, defendants' contention that the court "would no doubt have granted a mistrial" if it had been aware of the terms of the settlement agreement is not at all a foregone conclusion. In fact, it is highly unlikely that plaintiffs' line of questioning would have resulted in a mistrial. For these reasons, defendants' argument that the April settlement agreement should be set aside because the court would have granted a mistrial must also fail.
And even if these facts provided sufficient grounds for a mistrial, it is clear that defendants were given the option of moving for a mistrial but opted to settle the claim instead. Defendants' request that the settlement be set aside is an inappropriate attempt to relitigate a case that already went to trial and was deliberately settled by both parties prior to the trial's conclusion. If defendants felt that plaintiffs' conduct amounted to misconduct justifying a mistrial, defendants should not have agreed to settle. Rather, defendants should have created a clear record in the course of trial and either moved for a mistrial or raised the issue of plaintiffs' misconduct on appeal if the jury had rendered an unfavorable verdict.
(b) Court's Admonition of Defense Counsel
Defendants also allege that Mr. Cavalluzzo entered into the settlement agreement under duress and that "[f]ollowing the Court's threat to disbar his attorney, Playboy acted swiftly to coerce Cavalluzzo into settlement, utilizing his weakened position to induce a settlement with him that would not otherwise have been reached." Def. Mem. of Law at 4. The relevant portion of the transcript is as follows:
Q. Let's talk for a moment about these invoices. Now, these invoices that you have that say On Line on them and Bigcoin on them from January of 1998, I asked you at your deposition — well, it wasn't me, actually, another lawyer asked you at your deposition when Bigcoin was formed and when On Line was formed. Do you recall that testimony?
A. Right.
Q. I read some of it earlier today. You testified at your deposition last summer that Bigcoin wasn't even formed until late `98 and On Line wasn't even formed until late `98?
A. I don't think I testified to On Line. I probably said I don't know. How would I testify to something I don't know?
Q. Were you asked this question and did you give this answer under oath just last summer —
MR. BOSTANY: This was read already and already reviewed on direct and voir dire.
THE COURT: Overruled. Go ahead.
Q. "Question: You're saying we provided a service that On Line paid for. Who is we? "Answer:" This is you talking under oath. "Bigcoin. That was not until late `98 though and On Line Entertainment wasn't formed until late `98." That was your testimony?
MR. BOSTANY: Objection. Did you read the entire thing? I think he said I guess and maybe —
THE COURT: Folks, please step inside. Do not discuss the case. (The jury exits the court room.)
THE WITNESS: Outside?
THE COURT: You can stay right there.
What do you think, this is a stage? Do you think this is a stage? Do you think I give you admonitions repeatedly, repeatedly, repeatedly because I don't mean them, because I am trying to make life difficult for you? Do you realize you have some responsibilities here? This is not Vaudeville, this is not stich, this is a court of law. If this happens again you will not be a member of this court of law. I am serious, this is not a game. You don't invent evidence with your commentary.
MR. BOSTANY: Judge, if we read back the exact language —
THE COURT: You just keep your mouth shut. You have a responsibility to abide by my rulings and I've done my best to show my patience to you in this case. You don't create evidence by innuendo and snide comments. You don't litigate in this courtroom by that kind of behavior. I will not have it again. I am warning you for the last time. (Recess taken.)
THE COURT: Bring them in.
MR. BOSTANY: Judge, I wanted to read from the transcript, if that's possible, before the jury came in.
THE COURT: Read what transcript?
MR. BOSTANY: If I can read either now or after the jury comes in. I don't want to do the wrong thing.
THE COURT: What do you want to do?
MR. BOSTANY:I just want to read the portion of the testimony from the transcript.
MR. DESMARAIS: Your Honor, he can do it on redirect.
THE COURT: The question is have you read from it and did you read it incompletely? If you have, make it complete.
MR. BOSTANY: Thank you, Judge. (The jury enters the courtroom.)
THE COURT: Thank you. Please be seated, folks.
I'm sorry for the interruption. I'm sure you can appreciate the stresses confronting all counsel in a case of this sort. They have significant responsibilities to their respective clients, as well as the Court. Occasionally it requires the Court to intervene. If it does, it has nothing to do with the merits of the issues that will be decided and I want you to keep that firmly in mind.
All right sir, please continue.
Gioconda Decl. Ex. G (containing Tr. 456:17-459:13).
This dialogue makes clear that defendants did not enter into the April 9 settlement agreement under duress. "Under New York law, which governs, `[a] contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will.' [A]nd duress may take the form of unlawful restraint of property or use of wrongful economic compulsion to force a party to yield to demands that would otherwise be rejected." First National Bank v. Pepper, 454 F.2d 626, 632 (2d Cir 1972) (quoting Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124, 130, 324 N.Y.S.2d 22, 25, 272 N.E.2d 533, 535 (1971)); see also McIntosh v. Consolidated Edison Co., No. 96-3624, 1999 WL 151102, at *2 (S.D.N.Y. Mar. 19, 1999) (holding that "[t]o void a contract based on duress, one of three circumstances must be present: duress by physical compulsion, duress by threat, or duress by undue influence. Duress may not be found merely from the existence of a difficult bargaining position or the pressure of financial circumstances. To succeed on a theory that an agreement was procured by duress, a plaintiff must show that he was compelled to agree to its terms by way of wrongful and oppressive conduct that precluded the plaintiff from the exercise of his own free will.") (citations omitted), aff'd 2001 WL 1669111 (2d Cir. June 8, 2000). Defendants have failed to meet the burden of proving duress by physical compulsion, duress by threat, or duress by undue influence.
Likewise, defendants have failed to prove coercion, for in this context coercion is merely a form of duress. See Citibank, N.A. v. Real Coffee Trading Co., N.V., 566 F. Supp. 1158, 1162 (S.D.N.Y. 1983) ("To set aside an agreement on the ground that it was the product of economic duress, the party making the claim must make a convincing showing that the agreement was coerced by means of a wrongful threat such that the exercise of free will was precluded."); Record Club of America, Inc. v. United Artists Records, Inc., 611 F. Supp. 211, 216 (S.D.N.Y. 1985) (equating coercion with economic duress and holding that "there was no coercion because plaintiff's clear alternative to entering into the side agreements was to proceed to trial"), vacated and remanded on other grounds, 890 F.2d 1264 (2d Cir. 1989).
There is no merit to defendants' argument that the court's reprimand of defense counsel, outside the presence of the jury, constituted duress or was in any way improper. In fact, even after reprimanding defense counsel for his conduct, the judge favorably responded to defense counsel's objection by instructing plaintiffs' counsel to read the complete transcript of the relevant portion of the deposition that was the subject of cross examination. Moreover, though the jury was not present during the admonition of defense counsel, the judge immediately issued an instruction to the jury, upon its return, to the effect that they should not allow the conduct of counsel to affect their determination of the merits of the case. The conduct of the court in no way requires the setting aside of the settlement agreement. Even if the court's conduct amounted to coercion, intimidation, or duress — and it does not — the proper remedy would be for the lawyer to create a record and take an appeal from an unfavorable verdict. It certainly does not serve the interests of justice to allow a party who fears an unfavorable trial outcome because of a judge's presumed hostility to settle the claim prior to its conclusion, and to then move to set aside the settlement and have the case retried. Since the settlement agreement was not procured by duress or coercion, it cannot be voided or set aside on this basis.
In order to give defendants the benefit of the doubt, and since plaintiffs treat defendants' motion as a Rule 60(b) motion, the motion will be analyzed as Rule 60(b) motion as well. Under Rule 60(b), the Federal Rules of Civil Procedure provide that
[T]he court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence . . .; (3) fraud . . ., misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.
Fed.R.Civ.P. 60(b). Here, defendants do not specify which of the six bases for relief under Rule 60(b) they seek to invoke. However, a review of defendants' submissions reveals that only clauses (1), (3) and (6) are potentially applicable as there is no claim of newly discovered evidence and the judgment plaintiffs seek to vacate is not void nor has it been satisfied.
As a general matter, there is a strong interest in the finality of judgments, especially when the parties have entered into a settlement agreement. See Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986) ("Properly applied Rule 60(b) strikes a balance between serving the ends of justice and preserving the finality of judgments."). Because Rule 60(b) "allows extraordinary judicial relief, it is invoked only upon a showing of exceptional circumstances." Nemaizer, 793 F.2d at 61; see also Mendell In Behalf of Viacom, Inc. v. Gollust, 909 F.2d 724, 731 (2d Cir. 1990) ("Motions under Rule 60(b) are addressed to the sound discretion of the district court and are generally granted only upon a showing of exceptional circumstances."). "Courts typically require that the evidence in support of the motion for relief [under Rule 60(b)] be `highly convincing,' that a party show good cause for the failure to act sooner, and that no undue hardship be imposed on other parties." Jedrejcic v. Croatian Olympic Committee, 190 F.R.D. 60, 77 (E.D.N.Y. 1999) (quoting Gonzalez v. Gannett Satellite Info. Network, Inc., 903 F. Supp. 329, 331 (N.D.N.Y. 1995), aff'd, 101 F.3d 109 (2d Cir. 1996)).
To grant relief under Rule 60(b) "a court must find that (1) the circumstances of the case present grounds justifying relief and (2) the movant possesses a meritorious claim in the first instance." Jedrejcic, 190 F.R.D. at 77 (quoting Cobos v. Adelphi Univ., 179 F.R.D. 381, 385 (E.D.N.Y. 1998)). Moreover, in a Rule 60(b) motion, "[a] movant's burden is even more formidable where the movant has made a deliberate choice to enter into a settlement agreement as opposed to having litigated the case on the merits and lost." Rand Int'l Leisure Prods., Ltd. v. TekSource, L.C., No. 97-319, 1998 WL 372356 at *1 (E.D.N.Y. July 2, 1998) (citing Nemaizer, 793 F.2d at 63); see also Ackermann v. United States, 340 U.S. 193, 198, 71 S.Ct. 209, 95 L.Ed. 207 (1950) ("There must be an end to litigation someday, and free, calculated, deliberate choices are not to be relieved from.").
Defendants' claims that the court would have granted a mistrial if it had access to the March settlement agreement could be interpreted as a motion to set aside the April 9 settlement based on "mistake." Fed.R.Civ.P. 60(b)(1). See Tarkington v. United States Lines Co., 222 F.2d 358, 360 (2d Cir. 1955) (holding that "mistake" under Rule 60(b) has been held to include mistakes of law by the district court); Gey Assocs. Gen. P'ship v. 310 Assocs. (In re 310 Assocs.), 346 F.3d 31, 35 (2d Cir. 2003) (holding that Rule 60(b)(1) is available for a district court to correct mistakes of law, as well as mistakes of fact). As discussed earlier in section (1)(a) of this Memorandum and Order, there were no mistakes of law or fact in the trial leading up to the April 9 settlement. Thus, defendants have failed to make the showing of mistake required under Rule 60(b)(1).
Defendants' contention that the settlement agreement should be set aside because it was breached and because plaintiffs "intentionally and impermissibly" made reference in front of the jury to the settlement agreement and permanent injunction in order "to poison [the jury's] opinion of Mr. Cavalluzzo," could be interpreted as a motion to set aside the April 9 settlement based on "fraud . . . misrepresentation, or other misconduct of an adverse party." Fed.R.Civ.P. 60(b)(3). See also Walther v. Maricopa Intern. Inv. Corp., No. 97-4816, 2002 WL 31521078, at *3 (S.D.N.Y. Nov. 12, 2002) (citing Stewart v. O'Neill, No. 00-8560, 2002 WL 1917888, at *1 (S.D.N.Y. Aug. 20, 2002) (quoting Fleming v. N.Y.U., 865 F.2d 478, 484 (2d Cir. 1989))) ("With respect to a Rule 60(b)(3) motion specifically, the moving party must demonstrate, by clear and convincing evidence, that `material misrepresentations' were made and cannot use the motion simply `as an attempt to relitigate the merits' of the case."); Walther, 2002 WL 31521078, at *3 (citing Chnapkova v. Koh, No. 88-6144, 1992 WL 203906, at *2 (S.D.N.Y. Aug.7, 1992)) ("In addition to demonstrating fraud or other misconduct by clear and convincing evidence, the movant must also show that `this conduct prevented [the movant] from fully and fairly presenting his case.'"). Moreover, "Rule 60(b)(3) is typically `invoked where material information has been withheld or incorrect or perjured evidence has been intentionally supplied.'" Walther, 2002 WL 31521078, at *3 (citing Matter of Emerg. Beacon Corp. v. Barr, 666 F.2d 754, 759 (2d Cir. 1981)). As explained in section (1)(a) of this Memorandum and Order, defendants have failed to make a showing of fraud, misrepresentation, or misconduct. Thus, defendants fail to make the showing required under Rule 60(b)(3).
Defendants' claim of duress could also be construed as a Rule 60(b)(6) motion, which provides that Rule 60(b) may be invoked for "any other reason justifying relief from the operation of the judgment" that is not listed in clauses (1) through (5) of the rule. See McIntosh v. Consolidated Edison Co., No. 96-3624, 1999 WL 151102, at *2 (S.D.N.Y. Mar. 19, 1999) (denying a motion to set aside a settlement agreement under Rule 60(b)(6) and holding that "[t]o void a contract based on duress, one of three circumstances must be present: duress by physical compulsion, duress by threat, or duress by undue influence. Duress may not be found merely from the existence of a difficult bargaining position or the pressure of financial circumstances. To succeed on a theory that an agreement was procured by duress, a plaintiff must show that he was compelled to agree to its terms by way of wrongful and oppressive conduct that precluded the plaintiff from the exercise of his own free will.") (citations omitted), aff'd 2001 WL 1669111 (2d Cir. June 8, 2000). As explained in section (1)(b) of this Memorandum and Order, defendants have failed to meet the burden of proving duress by physical compulsion, duress by threat, or duress by undue influence. Therefore, defendants have failed to make a showing of duress that could amount to a "reason justifying relief from the operation of the judgment" under Rule 60(b)(6).
None of the other claims raised by defendants could fall under Rule 60(b)(6) because clause (6) is inapplicable when plaintiffs' asserted grounds for relief are recognized in clauses (1) and (3) of the rule. See Nemaizer v. Baker, 793 F.2d 58, 63 (2d Cir. 1986) (relief under Rule 60(b)(6) is only appropriate when "the asserted grounds for relief are not recognized in clauses (1)-(5) of the rule."); Cobos v. Adelphi Univ., 179 F.R.D. 381, 386 n. 5 (E.D.N.Y.1998) ("Clauses (1) and (6) are mutually exclusive."); Interactive Edge, Inc. v. Martise, No. 97-3354, 1998 WL 35131 at *4 (S.D.N.Y. Jan. 30, 1998) (noting the sixth subsection "is properly invoked only . . . when the asserted grounds for relief are not recognized in clauses (1)-(5)") (quoting Nemaizer, 793 F.2d at 63).
Thus, defendants' motion also fails when treated as a Rule 60(b) motion.
(2) Cross-Motions
Plaintiffs have filed two cross-motions in this case. The first cross-motion is a request that the docket entries be sealed since the very existence of the Settlement Agreement, as well as its contents, are intended to be confidential by the written, express agreement of the parties. April 21, 2003 Letter from Joseph C. Gioconda. Since the April 9 Settlement Agreement resulted in the dismissal of a trial that is on the public record, the existence of the settlement agreement cannot be deemed to be confidential and thus there is no reason to file under seal documents that simply make reference to the settlement agreement. Thus, the motion is granted in part and denied in part. As per the terms of the April 9 Settlement Agreement, any copies of the April 9 Settlement Agreement itself, including those contained as attachments to papers filed in this motion, shall be filed under seal. All other papers, including those making reference to the April 9 Settlement Agreement, do not have to be filed under seal. The second cross-motion is for an order to show cause requesting that the court enforce the Permanent Injunction and Settlement Agreement by: (1) ordering Mr. Cavalluzzo to immediately deliver all rights, passwords and title to the www.sexcourt.com andwww.pamelaandersonlee.net domain names to Playboy; and (2) to pay Playboy's costs and attorneys' fees associated with the preparation of the papers related to the cross motion. At a conference held in open court on April 30, 2003, the defendants agreed that the domain names listed in the order to show cause were in their possession and that this was a moot issue. April 30, 2003 Tr. 17:21-18:4, 19:10. Therefore, the motion for an order to show cause is denied as moot.
Conclusion
Accordingly, defendants' motion to set aside the April 9 settlement, to vacate the April 10 permanent injunction and judgment, and to set a date for a new trial is denied.
Plaintiffs' cross-motion requesting that the docket entries be sealed is granted in part and denied in part, to the extent that any copies of the April 9 Settlement Agreement itself, including those contained as attachments to papers filed in this motion, shall be filed under Seal, while all other papers, including those making reference to the April 9 Settlement Agreement, do not have to be filed under seal.
Plaintiffs' cross-motion for an order to show cause is denied as moot.
The Clerk of the Court is directed to close the case.
SO ORDERED.