The opinion of the court was delivered by: BONSAL
Plaintiffs Edward White and North American Research & Development Corporation ("North American"), of which White is or was the majority stockholder, commenced this action in New York State Supreme Court, New York County against eight present or former employees of the Securities and Exchange Commission ("Commission"), together with Robert Metz, a reporter for the New York Times, and Harry Bray, director of the Ontario Securities Commission. The complaint alleges that the defendants conspired to and did intentionally injure and maliciously harass the plaintiffs, and seeks damages in the amount of $10 million. The action was removed to this Court pursuant to 28 U.S.C. § 1442.
By Opinion filed October 9, 1969, Judge McLean granted motions for summary judgment dismissing the complaint as to all the Commission defendants, except Jaegerman, finding that since the acts of which plaintiffs complained were performed by these defendants in the course of their official duties, they were immune from suit. As to Jaegerman, Judge McLean held that although many of plaintiffs' claims appeared to be related to matters within the scope of Jaegerman's immunity, a question of fact existed with respect to Jaegerman's alleged communication of information to Metz.
Defendant Bray was not served, and the action against Metz was dismissed by consent on May 1, 1974. Plaintiffs' case against Jaegerman was tried by the Court without a jury on October 2 and 3, 1974. After completion of plaintiffs' case, Jaegerman moved to dismiss the complaint pursuant to F.R. Civ. P. 41(b). Under F.R. Civ. P. 41(b) this Court has the power to decide the case on the merits and, unlike a jury case, need not consider plaintiffs' evidence in a light most favorable to plaintiffs. 5 J. Moore, Federal Practice P 41.13, at 1155 (2d ed. 1974). See also Huber v. American President Lines, 240 F.2d 778, 779 (2d Cir. 1957). Nevertheless, in reaching the decision hereinafter set forth, the Court has interpreted the evidence in a light most favorable to plaintiffs.
Plaintiffs characterize their claims against Jaegerman as "harassment" and violation of civil rights. However, they have not cited any legal authority which supports recovery of damages on such theories in the factual context of the present action.
In 1967 Jaegerman was Chief Investigative Counsel for the Commission. On July 19, 1967 he received an anonymous phone call advising him that White and a group of Canadian stockbrokers were engaged in perpetrating a stock fraud in the United States. As a result of the investigation by Jaegerman and others on the staff, the Commission suspended trading in North American stock on July 20, 1967. The scheme to sell unregistered North American stock in the United States is detailed in Securities and Exchange Commission v. North American Research and Development Corp., 280 F. Supp. 106 (S.D.N.Y. 1968), affirmed as to White and North American, 424 F.2d 63 (2d Cir. 1970). White and North American were eventually found to have violated the registration and antifraud provisions of the securities acts and were permanently enjoined from future violations of these acts. Securities and Exchange Commission v. North American Research and Development Corp., 375 F. Supp. 465 (S.D.N.Y. 1974), appeal docketed, No. 74-1750, 2d Cir., June 3, 1974.
An official of the federal government charged with duties which require the exercise of discretion is immune from damage suits for action taken within the scope of his authority. Doe v. McMillan, 412 U.S. 306, 36 L. Ed. 2d 912, 93 S. Ct. 2018 (1973); Barr v. Matteo, 360 U.S. 564, 3 L. Ed. 2d 1434, 79 S. Ct. 1335 (1959); Galella v. Onassis, 487 F.2d 986 (2d Cir. 1973); Ove Gustavsson Contracting Co. v. Floete, 299 F.2d 655 (2d Cir. 1962), cert. denied, 374 U.S. 827, 10 L. Ed. 2d 1050, 83 S. Ct. 1862 (1963); Gregoire v. Biddle, 177 F.2d 579 (2d Cir. 1949), cert. denied, 339 U.S. 949, 94 L. Ed. 1363, 70 S. Ct. 803 (1950). To sustain their claims against Jaegerman, plaintiffs must therefore show that he acted outside the limits of the broad investigative responsibilities with which he was charged. See 17 C.F.R. § 202.5(a). Plaintiffs have attempted to make such a showing by introducing evidence on six incidents of alleged "harassment."
"Leaking" of Nonpublic Information to Metz
Since approximately 1966, Metz has written a financial column in the New York Times called "Market Place." Relying primarily on Metz's column of August 1, 1967, plaintiffs contend that Jaegerman "leaked" to Metz nonpublic and false information about North American in violation of plaintiffs' rights. Plaintiffs concede that Metz's subsequent columns on North American "are sometimes repetitious and contain some material not originating with Jaegerman." Plaintiffs' Post-Trial Memorandum, at 9.
Sometime prior to August 1, 1967, Terry Robards, another reporter for the Times, advised Metz that trading in North American stock had been suspended and suggested that it might be worth following up. Robards had earlier recommended Jaegerman as a source of information, and Metz had spoken to Jaegerman a number of times prior to discussing matters relating to North American.
On or about July 31, 1967, Metz called Jaegerman to inquire about North American. At his deposition, Metz testified that Jaegerman provided factual information for the August 1 column and that during their conversation Jaegerman indicated that he was referring to "official papers" which he had in the case. However, Metz also testified that in addition to Jaegerman, there may have been another source for the August 1 column, whose name Metz refused to disclose, and that prior to writing the column he may have seen a brochure distributed by North American.
Although Commission regulations denominate certain matters as nonpublic, see e.g. 17 C.F.R. §§ 203.2, 203.5, members of the Commission's staff have authority to render advice and assistance to members of the public. See e.g. 17 C.F.R. § 202.1(d). Since protection of investors against fraudulent schemes would appear to be one object of such authority, members of the Commission's staff must necessarily exercise discretion as to matters which may be disclosed in an effort to safeguard the public. Neither the testimony of Metz as to the information furnished him by Jaegerman nor a reading of the Metz columns indicates that Jaegerman provided Metz with nonpublic information or otherwise abused his discretion.
However, even if Jaegerman did "leak" nonpublic information to Metz, plaintiffs have not shown any basis for recovery of damages. The truth of the matters contained in the Metz articles having been established in the Commission's injunctive action against White and North American, plaintiffs concede not only that they have no basis for recovery on a theory of defamation, but also "that if the instant case is narrowed to the Jaegerman -- Metz transactions, it would become moot." Plaintiffs' Memorandum of Law, at 5. Moreover, other than possible injury to reputation, plaintiffs' have not established that they suffered any damages as a result of any "leaking" of information by Jaegerman to Metz. Trading in North American stock had been suspended by the Commission prior to the publication of the Metz articles and was not permitted to resume until after the Commission ...