The opinion of the court was delivered by: MISHLER
Memorandum of Decision and Order
In this diversity action plaintiff, Harold Glantz, seeks compensatory and punitive damages from the defendants, Cook United, Inc. ("Cook") and the members of Cook's Board of Directors, for injuries sustained by reason of the defendants' publication of allegedly libelous statements. Both the corporate and individual defendants moved to dismiss the complaint on the ground that it fails to state a claim upon which relief may be granted, Fed.R.Civ.P. 12(b)(6), and the individual defendants moved on the additional ground that the court lacks jurisdiction over their person, Fed.R.Civ.P. 12(b)(1). The affidavits of the parties' attorneys offered in support of and in opposition to the motion presented matters outside the complaint. Accordingly, pursuant to Fed.R.Civ.P. 12(b), the court advised the lawyers that defendants' 12(b)(6) motion would be treated as one for summary judgment under Fed.R.Civ.P. 56 and gave the parties the opportunity to submit further affidavits. For the reasons which follow, the court grants summary judgment in favor of the defendants and dismisses the complaint.
Sometime in the Spring of 1979, several stockholders of Cook formed a committee known as the "Stockholders Protective Committee of Cook United, Inc." (the "Committee"). The Committee's purpose was to secure the election of its own slate of candidates to seats on Cook's Board of Directors by obtaining the proxies of the company's shareholders. Pursuant to this plan, the Committee nominated Robert Brindle and Philip Levy as its candidates for the contested seats.
On April 26, 1979, Cook brought suit against the Committee and its members in the United States District Court for the Southern District of New York, alleging that the Committee had violated several of the federal securities laws and rules, particularly those pertaining to proxy solicitations. On May 21, 1979, in an extensive written opinion, Judge Cannella granted summary judgment in favor of the Committee. Cook United, Inc. v. "Stockholders' Protective Committee of Cook United, Inc.", No. 79 Civ. 2189 (S.D.N.Y. May 21, 1979).
Thereafter, on May 24, 1979, Martin M. Lewis, as chairman of Cook's Board of Directors, mailed a letter to approximately 6,000 to 10,000 shareholders. This letter, referred to by the parties as the "Cook letter," serves as the hub of the instant action. It advised the shareholders of the outcome of the Southern District action, and further stated:
We have previously written to you concerning Committee nominees Robert Brindle and Philip Levy. The litigation has revealed the existence of a contact between them, of which we were previously unaware: one Harold Glantz. Here is some additional information concerning these men which we believe may be of interest to you.
The Court (Judge Cannella) found that Mr. Brindle was introduced to Sanford Fishbein of the Committee by Glantz. In pretrial proceedings in the litigation, it had been developed that this Mr. Glantz was a business associate of Brindle's in connection with a proposal Brindle had made to the Company last year to acquire a number of the Company's properties and form them into "mini amusement parks" to be run by Mr. Glantz. Mr. Glantz's involvement did not surface at that time.
Although we had urged that Mr. Glantz's activities made him a "participant" on behalf of the Committee, the Court was not persuaded. However, the Court suggested that we could, if we believed it desirable to do so, present to the shareholders the information we uncovered with respect to Mr. Glantz, so that you could be the judge of its significance.
.... In the course of our inquiries we also uncovered a letter concerning Mr. Glantz written on March 12, 1975 by New York City Commissioner of Investigations Nicholas Scoppetta. The full text of Commissioner Scoppetta's letter is enclosed for your consideration. However, we want to call attention to the Commissioner's conclusion, which states:
In conclusion, the Department's investigation has revealed that in addition to derogatory information gleaned from other sources, according to the State Investigation Commission, Harold Glantz has apparently been an associate of high-level organized crime figures and has apparently served as an agent for them in their encroachment on legitimate business interests.
The above paragraph was set off from the rest of Lewis' letter and printed in bold type. The letter continued:
As you can see from the attached, Commissioner Scoppetta suggested that these findings should be considered by the City of New York in determining whether it would be in the best interests of the City to continue business discussions with Mr. Glantz. The City apparently determined not to do so, and Glantz sued Scoppetta in New York State Supreme Court claiming that the letter was "false and defamatory." However, on July 28, 1977, Justice Alexander of that Court dismissed Glantz's complaint, finding that Glantz had offered "not even a scintilla of evidence" to support his charge of malice against Commissioner Scoppetta.
Lewis' letter then stated, in italicized form:
This is the same Mr. Glantz whom Committee nominee Brindle planned to bring in to the deal he proposed last year-a deal Brindle testified he still thinks is a "good idea" for the Company and the same Mr. Glantz who introduced Mr. Brindle to the Committee.
The complaint in this action, which was filed on June 12, 1979, alleges that the Cook letter was written by Lewis, "individually and on behalf of the Board of Directors," "in an attempt to discredit Brindle and Levy in the eyes of the shareholders and to prevent their election to the Board of Directors," and "contained false, malicious, libelous and defamatory statements concerning plaintiff." (Par. 27). Specifically, in paragraphs 29 and 30, the complaint recites the gravaman of the plaintiff's claims:
29. By such publication, defendant Lewis individually and on behalf of the Board of Directors, stated and intended to state that plaintiff was and is a criminal, that plaintiff was and is a "front" for high-level organized crime figures in encroaching upon legitimate business; and that plaintiff is associated with organized crime figures.
30. Defendant Lewis individually and on behalf of the Board of Directors of defendant Cook, knowing, willfully and intentionally failed to advise the shareholders of defendant Cook: (1) none of the statements contained in the Scoppetta letter has been substantiated; (2) there is no evidence that plaintiff is now or ever has been a criminal, associated with high-level organized crime figures, or a "front" for high-level organized crime figures; and (3) the complaint filed by plaintiff against Scoppetta was not dismissed on its merits.
The complaint further makes the alternative allegations that the defendants published the letter "in a negligent manner" (Par. 32); "in a grossly irresponsible manner;" "with malice in fact ... in that the defendant LEWIS intended to harm plaintiff by such publications" (Par. 33); and "with actual malice in that same was published with knowledge of its falsity or with reckless disregard as to its truth" (Par. 34).
The affidavit submitted by defendants' counsel states that during the course of discovery in the Southern District action
Cook learned that ... Glantz ... was a close business associate of one of the Committee members, Philip Levy. Indeed, we learned that Mr. Glantz shared office space with Mr. Brindle, that it was he who had introduced Mr. Brindle into the Committee at Mr. Levy's suggestion, and that Glantz had attended meetings in this connection with one Sanford Fishbein, the principal organizer of the Committee. Moreover, Mr. Brindle testified that Mr. Glantz had an interest in a real estate venture Brindle had first proposed to Cook in 1978, and which Brindle was still interested in pursuing. While Glantz himself was not a Cook shareholder, his wife was a stockholder of record of Cook common stock.
The affidavit further states that "in view of ... Glantz's role in the proxy contest," Cook undertook "a review ... of the public record files concerning Mr. Glantz." In the course of this review, it discovered the libel action brought by Glantz against Scoppetta which was referred to in the Cook letter. Glantz v. Scoppetta, No. 7400/77 (Sup.Ct.N.Y.Co. Mar. 11, 1977). Appended to the complaint in that action was the basis of that suit, viz., a March 12, 1976 letter by Commissioner Scoppetta to Alfred Eisenpreis, Administrator of the Economic Development Administration. It is the quotation from that letter in, and that letter's enclosure with, Cook's May 24, 1979 letter to its stockholders, which plaintiff complains of here.
The defendants' attorney's affidavit then recites that judgment dismissing the Supreme Court action was entered on December 6, 1977, pursuant to a written opinion by Justice Alexander issued on July 28, 1977. The opinion, appended as an exhibit to the affidavit, stated that since Scoppetta wrote the letter "while acting within the scope of his official capacity as Commissioner of Investigation," "he (was) accorded absolute immunity under the clear doctrine of Cheatum v. Wehle, 5 N.Y.2d 585, 186 N.Y.S.2d 606, 159 N.E.2d 166 ...." Justice Alexander went on to state that even if Scoppetta were not entitled to absolute immunity, summary judgment in his favor would nonetheless be appropriate, since "plaintiff has contented himself with bare denials. Not even a scintilla of evidence is offered in support of the chanrge of mailce (sic); ...." Finally, as is pertinent here, the defendants' attorney's affidavit states that in the Southern District action, while Judge Cannella found that Glantz was not a "participant" in the Cook proxy contest, he "suggested that Cook could, if it desired to do so, inform its shareholders of the information it had discovered concerning those whom were claimed to have been "participants' including Mr. Glantz. Because of Mr. Glantz' activities in support of the proxy contest and because both of Glantz' friends on the Committee, Messrs. Brindle and Levy, became Committee nominees to the Board of Directors of Cook, Cook decided to do so." The May 24, 1979 letter followed.
It is against this factual background that defendants' motion to dismiss was presented. Three grounds in support thereof are raised: (1) the publication of the May 24, 1979 letter was absolutely privileged under § 74 of the New York Civil Rights Law in that it constituted "a fair and true report of (a) judicial proceeding ...," viz., Glantz v. Scoppetta ; (2) the publication was privileged as a communication made in the course of business by a corporation to its shareholders; and (3) the plaintiff can not complain of the republication of statements which he placed on the public record in the first instance.
In response, plaintiff raises several factual contentions and legal arguments. First, he contends that defendants should not be entitled to the protection of § 74 of the Civil Rights Act for the consequences of their "reporting" the state libel action since, under § 3016(a) of the New York Civil Practice Law and Rules, the plaintiff was required to plead the defamatory words, i. e., the Scoppetta letter, in haec verba.
Thus to allow the privilege to be invoked in cases such as these would open "plaintiffs in defamation actions (to) the terrible risk that the defamatory language appearing in their pleadings may, with impunity, be published by anyone whether or not connected with the libel action under the cloak of § 74. ... (T)his result was clearly not intended by the Legislative ...." Plaintiff's Memorandum of Law, p. 8.
Next, plaintiff argues that even if § 74 can be applied generally to reports of libel proceedings, on the facts of the instant case, the Cook letter did not constitute a "fair and true report" of the Supreme Court action. According to the plaintiff, defendant improperly failed to advise their shareholders that Justice Alexander "never addressed ... the issue of the truth of the allegations contained in the Scoppetta letter ...." Sorkin Affidavit, Para. 10. Indeed, he claims that the Cook letter never revealed the fact that Justice Alexander dismissed the action on the ground that Scoppetta was absolutely privileged to publish the alleged libelous statements, Plaintiff's Memorandum at 12, and that it "was not dismissed on the merits." Complaint, Para. 48. Moreover, by reporting Justice Alexander's finding that plaintiff had failed to substantiate his claim of malice, defendants mislead the Cook shareholders by neglecting to advise them that "in the context of a libel claim, malice is a term of art ...." Id.
Finally, plaintiff argues that Cook cannot claim that the allegedly libelous statements were privileged as communications made to shareholders in the course of business, since plaintiff was not involved with the subject matter of the communication, i. e., the proxy contest between Cook and the Committee. In support of this claim, plaintiff's attorney's affidavit asserts that at the time the Southern District action was filed, Brindle was in the process of constructing a recreational facility which would then be leased to a company of which Glantz was a principle. This transaction had nothing to do with Cook. The affidavit further asserts that in 1978, Brindle proposed to Cook that he purchase some properties which Cook was seeking to dispose of. Brindle intended to develop these as recreation facilities and then lease them to Glantz. "Once Cook disposed of these facilities, Cook would have nothing to do with the arrangement between Brindle and Glantz." Sorkin Affidavit, Para. 14, 15.
The affidavit further states that Levy was a close friend of Glantz. He asked Glantz to join the Committee and suggested that Glantz speak to another member of the Committee, one Sanford Fishbein. Glantz, after speaking to Fishbein, declined to join the Committee, but suggested to Fishbein that Brindle might be ...