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REEVES v. ABC

March 15, 1983

GEORGE C. REEVES, Plaintiff,
v.
AMERICAN BROADCASTING COMPANIES, INC., ROONE ARLEDGE and EVERETT ERLICK, Defendants, vs. JOSEPH O. GIAIMO, Counterclaim Defendant.



The opinion of the court was delivered by: WERKER

MEMORANDUM DECISION

HENRY F. WERKER, D.J.

 This is a diversity action in which plaintiff George C. Reeves ("Reeves") alleges causes of action sounding in breach of contract, fraudulent misrepresentation, libel and prima facie tort. The matter presently is before the court on the motions of Reeves and counterclaim defendant Joseph O. Giaimo ("Giaimo") for an order pursuant to Fed. R. Civ. P. 12(b)(6) dismissing the first, third, fourth and sixth counterclaims asserted by defendants Roone Arledge ("Arledge") and Everett Erlick ("Erlick") *fn1" and on the motion made by Arledge and American Broadcasting Companies, Inc. ("ABC") pursuant to Fed. R. Civ. P. 56 for summary judgment on the fourth cause of action alleged in the complaint.

 FACTS

 For the present purposes, the relevant facts are as follows. Reeves formerly was employed by ABC as the Senior Vice President, Theatrical Motion Pictures and Television Affairs, for ABC Entertainment, a division of ABC. One of his duties in that capacity was to supervise the contracts department of ABC Entertainment. Sometime in August 1979, Jennifer Martin ("Martin"), an attorney assigned to the contracts department, began to question certain payments that ABC had been making to Spelling-Goldberg Productions ("Spelling-Goldberg"), the producer of the television series "Charlie's Angels." Martin apparently became convinced that these payments were part of a conspiracy to divert money rightfully owed to Natalie Wood and Robert Wagner, who shared the profits from the Charlie's Angels show with Spelling-Goldberg. Martin circulated to her superiors memoranda setting forth her charges and eventually complained to the office of the Los Angeles District Attorney. That office and the Securities and Exchange Commission ("SEC") thereafter commenced investigations, but no criminal or civil charges ever were brought.

 The complaint alleges that it was the plan of Erlick and Arledge to foster the formation of an unfavorable public impression of ABC by maintaining a code of silence with regard to the Martin charges. Reeves claims that Erlick and Arledge intended to create an inference that ABC was guilty of wrongdoing and selected him to be the scapegoat to shoulder the blame. According to Reeves, the purpose of the plan was to place ABC in an unfavorable light in the hopes of bringing about the removal of Elton Rule ("rule"), the President of ABC, so that Erlick and Arledge could advance in the corporate hierarchy. The fourth cause of action listed in the complaint charges that, as part of the plan to depose Rule, Reeves was defamed in an ABC news report that was televised, under the supervision of Arledge, nationwide from Washington, D.C. on the evening of August 25, 1980. The substance of the report as quoted in the complaint is reproduced in the appendix to this decision. The complaint charges that the news report was broadcast for the purpose of causing the public to believe that he had engaged in criminal activity and improperly and dishonestly had performed his duties at ABC.

 The counterclaims allege that Giaimo, Reeves' attorney, acting on behalf of himself and Reeves, defamed Arledge and Erlick in conversations with newspaper reporters. Specifically, the counterclaims charge that, prior to the commencement of this action, Giaimo discussed the allegations of the complaint with a New York Daily News columnist and a reporter for the New York Post and stated that, among other things, Arledge and Erlick had tjried to embarrass Rule in order to gain higher positions at ABC. According to the counterclaimants, Giaimo made the statements with the expectation and intent that they would be published by the reporters. The countervlaims also allege that, when speaking to the New York Daily News columnist, Giaimo comparied the power struggle at ABC with "Network," a motion picture about corrupt practices in a fictitious television industry, and stated that the situation was worse at ABC.

 DISCUSSION

 The Counterclaims

 The first issue to be decided is whether the counterclaims are compulsory. Giaimo contends that they are not and therefore must be dismissed as against him because there is no diversity of citizenship between him and the counterclaimants. If the counterclaims are compulsory under Fed. R. Civ. P. 13(a), they are within the court's ancillary jurisdiction and no independent basis of federal jurisdiction is required. E.g., Harris v. Steinem, 571 F.2d 119, 121-22 (2d Cir. 1978); Newburger, Loeb & Co. v. Gross, 563 F.2d 1057, 1070 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 54 L. Ed. 2d 782, 98 S. Ct. 769 (1978); Establissement Tomis v. Shearson Hayden Stone, Inc., 459 F. Supp. 1355, 1364 (S.D.N.Y. 1978). On the other hand, if the counterclaims are permissive, they would have to be dismissed as against Giaimo because of the absence of an independent jurisdictional predicate. Harris v. Steinem, 571 F.2d 119, 122 (2d Cir. 1978); Newburger, Loeb & Co. v. Gross, 563 F.2d 1057, 1070-71 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 54 L. Ed. 2d 782, 98 S. Ct. 769 (1978); Establissement Tomis v. Shearson Hayden Stone, Inc., 459 F. Supp. 1355, 1364 (S.D.N.Y. 1978).

 According to Fed. R. Civ. P. 13(a), a counterclaim is considered compulsory "if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim." In the Second Circuit, the standard for determining whether a claim is compulsory is the "logical relation" test." Newburger, Loeb & Co. v. Gross, 563 F.2d 1057, 1071 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 54 L. Ed. 2d 782, 98 S. Ct. 769 (1978). Under this test, the court must

 analyze whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit. . . . [P]recise identity of issues and evidence between claim and counterclaim is not required.

 Harris v. Steinem, 571 F.2d 119, 123 (2d Cir. 1978) (citations omitted). In addition, even if the counterclaim withstands the logical relation test, it still may be categorized as permissive if it is "based solely on the filing of the main complaint and allegedly libelous publications thereafter." Id. at 125.

 The court finds that the counterclaims are compulsory. They certainly meet the logical relation test. The counterclaims and many of the allegations of the complaint arise out of the same set of operative facts, that is, the purported scheme engaged in by Arledge and Erlick to advance their positions at ABC. Reeves claims that, in the course of that alleged scheme, Arledge and Erlick committed misrepresentation, defamation and prima facie tort. Arledge and Erlick assert that Giaimo's conversations with the press regarding the scheme were false and defamatory. Thus, one of the main focal points of the resolution of the issues raised in the complaint and the counterclaims will be whether such a scheme existed. The court therefore finds that the interests of judicial economy and fairness would best be served by permitting the complaint and the counterclaims to be adjudicated in one lawsuit. Furthermore, the counterclaims are based not upon the complaint or subsequent defamations, but rather upon alleged defamations that occurred before the complaint was filed.They therefore do not fall within the rule of Harris v. Steinem, see p. 5 supra. Accordingly, no independent jurisdictional predicate is needed over the counterclaims against Giaimo.

 The next question is whether the counterclaims are premature. It is well-settled that a cause of action for malicious prosecution arising out of the filing of the complaint is premature and therefore cannot be asserted as either a compulsory or a permissive counterclaim. 3 Moore's Federal Practice P13.13 (1982). In this case, however, the counterclaims do not contain any allegation that ...


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