The opinion of the court was delivered by: EDELSTEIN
EDELSTEIN, District Judge :
This is a class action alleging securities fraud, common law fraud and a pattern of racketeering activity. Plaintiffs allege that defendant Steven A. Mishkin ("Mishkin") and others engineered an intricate investment fraud, involving numerous investment trusts and several corporations. On March 2, 1984, plaintiffs' attorneys sought leave to apply for an order, pursuant to Rule 23(d) of the Federal Rules of Civil Procedure, prohibiting defendant Mishkin, his attorneys, agents or employees from communicating, directly or indirectly, with members of the class for the purpose of discouraging participation in or otherwise obstructing this class action. Plaintiffs' application was precipitated by the discovery of a letter, dated December 12, 1983, allegedly sent by Mishkin over the signature of Edward I. Winer ("Winer") to 117 class members. Plaintiffs' attorneys also sought costs and other sanctions against Mishkin for his conduct with respect to the letter, and such other relief as the court deems just and proper.
On March 7, 1984, an evidentiary hearing was commenced to determine the validity of plaintiffs' charges. Plaintiffs' counsel outlined some of the alleged acts on the part of defendant Mishkin which, in plaintiffs' view, constitute a continuing pattern of covert interference with and obstruction of this class action
and of other judicial proceedings in this district involving Mishkin. The alleged acts include false and misleading communications to class members, threats, subornation of perjury, and other in terrorem tactics. Based on the statement by plaintiffs' attorney that all witnesses necessary for the hearing were not present, the court adjourned the hearing on the motion for Rule 23(d) sanctions until March 15, 1984,
so that the court could ascertain all facts relevant to plaintiffs' application and to the question of what other measures, if any, the court should consider in the conduct of this class action. The court further specifically informed all parties that if at the conclusion of the evidentiary hearing, the court found that there had been subornation of perjury or other wrongful conduct by any defendant herein, the court would not hesitate to impose the full panoply of sanctions available.
The hearing was resumed on March 20, 1984 and further sessions were held on March 21st, 27th and April 4th, 1984. At the last session of the hearing, the court expressly invited Winer and Mishkin to review the transcripts of their respective testimony at the hearing and granted each of them leave to submit an affidavit to amplify, correct or recant any hearing testimony. On April 25, 1984, Mishkin filed a brief affidavit, which in substance reaffirmed his hearing testimony. On April 18, 1984, Winer filed a ten page affidavit which does not contradict but rather amplifies Winer's hearing testimony.
After hearing the testimony and observing the demeanor of Mishkin, Winer and other witnesses at the hearing and after considering the aforesaid affidavits as well as Winer's prior affidavit sworn to March 6, 1984, all exhibits received into evidence at the hearing and the parties' proposed findings of fact and conclusions of law, the court finds the following facts established by at least a fair preponderance of the credible evidence.
Mishkin was Winer's attorney, investment adviser and confidant for almost thirty years, and was involved in almost every aspect of Winer's business and personal planning. This attorney-client relationship continued until at least February 27, 1984, and as to certain matters involving Winer's company, Associated Button Company, even thereafter. Winer affidavit of April 4, 1984 at P 16. In the course of this relationship, Winer developed what he described as "blind trust" in Mishkin, which may explain much of Winer's subsequent conduct as found below. Hearing Transcript [hereinafter "Tr."] at 358.
At a pretrial conference held on November 21, 1983, the court granted plaintiffs' counsel leave to send notice to all then known members of the class, advising them of their possible right to claim reimbursement for some of their losses from the Clients' Security Fund of the State of New York ("Security Fund").
The letter, dated December 5, 1983, was sent by plaintiffs' attorneys and received by Mishkin and Winer shortly after December 5, 1983. Tr. at 237-38, 257.
Although the December 5, 1984 letter and enclosures were truthful and accurate, Winer was so angered by the letter and enclosures that he threw them away after reading them. Tr. at 334. He then telephoned Mishkin and offered to write a reply letter to be sent to all persons who had received the December 5th letter from plaintiffs' attorneys. Mishkin told Winer to "hold off." Winer Affidavit of March 6, 1984 ["Winer Aff. 3/6"], at P 9.
Winer's angry reaction to the December 5, 1983 letter was based on what he heard from people who had attended the Chapter XI bankruptcy proceedings involving Mishkin and Highcrest Management Company, Inc. ("Highcrest") and from statements that Mishkin had made to him. Tr. at 336, Winer Aff. 4/18 at P 7. At the time he received the letter, Winer had not seen the complaint or amended complaint herein, nor any other document filed in this action. Tr. at 321. Mishkin earlier had told Winer: (1) that if given the chance, he could "come back and repay everybody eventually"; (2) that he was being harrassed by this class action and by plaintiffs' attorneys and "could not concentrate on getting his figures together and on getting things done that had to be done"; and (3) that the firm of Bailey & Hoeniger (the firm representing the plaintiffs herein, now Bailey, Marshall & Hoeniger) was trying to destroy him.
Prior to and during December 1983, Mishkin represented Winer in negotiations involving a proposed acquisition by Winer's Associated Button Company and the two had frequent telephone conversations regarding this transaction. Winer Aff. 3/6 P. 4; Tr. 208, 320. On December 10, 1983, a telephone conversation took place between Mishkin and Winer, during which Mishkin, who was then at his office in Ossining, New York, stated that he would stop off at Winer's house on his way home to Katonah, and that he had something he wanted to show Winer. Tr. at 303, 337-38. Mishkin arrived at Winer's house that afternoon and presented to Winer for his signature a letter, in Winer's name, which was to be sent to the members of the class. Tr. at 303-09, 339-40. Winer's wife Audrey was present when Mishkin arrived and spoke with Mishkin. Mishkin asked Winer to read the letter and to determine whether there were any changes that he wanted to make. Mishkin had not previously told Winer that he was writing any letter for Winer's signature, nor had Mishkin previously discussed with Winer any of the letter's language. Tr. at 337-39. Although Winer was somewhat shocked that Mishkin had drafted the letter for his signature, Winer read the letter and found that it accurately reflected the feelings he had conveyed to Mishkin -- feelings which were based largely or wholly on what Mishkin previously had told Winer. Tr. at 307-09, 339-42. Winer then signed the letter and Mishkin took it. Plaintiffs' Exhibit 2.
During the meeting at Winer's house, Mishkin and Winer discussed the persons to whom the letter would be sent and how it would be reproduced and mailed. Both Winer and Mishkin had a copy of the list of Mishkin's and Highcrest's creditors from the bankruptcy proceedings. It was clear to Winer that his agreement with Mishkin was that the letter would be sent to all creditors/class members on this list. Mishkin stated at the meeting that he would have the letter reproduced and mailed out for Winer by the Ossining Business Service ("OBS"). Winer Affidavit 3/16 at P 10; Tr. at 343-44. Mishkin admonished Winer that it would be "inappropriate" for Mishkin to be connected in any way with this letter. Tr. at 340; Winer Affidavit 3/6 at P 15.
Mishkin did not submit the full list of investor-creditors in the bankruptcy proceedings to OBS for mailing of the Winer letter. He redacted the list in order to remove duplications and the names of individuals whom he considered to be "hostile," including, but not limited to, the names of the plaintiffs in this class action. Mishkin did not advise Winer that he redacted the list, and thus Winer continued to believe that Mishkin had sent the letter to all creditor/class members. Tr. at 107-08; Winer Affidavit 3/6 at P 11.
On or about Monday, December 12, 1983, Mishkin directed his employee, Patricia Hackett, a bookkeeper, to deliver the letter and the revised list of creditors/class members to OBS for reproduction and mailing to the 117 persons and entities remaining on the revised list. Tr. at 66-69. Mishkin previously had used OBS for reproduction of documents; however, most previous deliveries to and pickups from OBS were made for Mishkin by his driver employee, Franco Cirino. OBS did not know on December 12, 1983 that Patricia Hackett was Mishkin's employee, but, to the contrary, assumed that she was acting on behalf of the purported author and signatory of the letter, Winer. Tr. at 54-58, 82. The Court finds that Mishkin's use of Patricia Hackett and his conduct of the transaction with OBS was for the purpose of hiding his identity and his connection with the Winer letter. Tr. at 218.
Ms. Hackett delivered the letter and the revised list to OBS with instructions to reproduce the letter and to mail it to the 117 entities and persons on the list. Pursuant to Ms. Hackett's Instructions, OBS placed Winer's name and return address on 117 envelopes, addressed them, inserted a copy of the letter in each envelope and mailed them on or about December 12, 1983 to each of the 117 persons and entities on the redacted list. Ms. Hackett paid OBS fifty dollars in cash for the work. This fifty dollars was taken from Mishkin's petty cash fund. Tr. at 56, 60-61, 65, 69-70.
The letter written by Mishkin in the name of Winer and sent out to 117 members of this class action was materially false and misleading in several respects, and was known by Mishkin to be false and misleading at the time he prepared the letter.
Among its false and misleading statements are the following: (a) the statement that the law firm of Bailey and Hoeniger "is also conducting or supporting a vicious campaign seeking to discredit Mr. Mishkin and destroy his reputation and professional practice"; (b) the statement that the law firm has "created a massive and complicated lawsuit including a bank and other innocent persons as defendants"; and (c) the statement that Winer -- who, as previously found, did not draft the letter -- would seek "independent and qualified counsel to represent [the] interests . . ." of the class members to whom the letter was sent.
Hoeniger dated December 5, 1983, as I have.
This law firm represents four "investors" who have started a class action against Stephen A. Mishkin and others.
In my opinion, this law firm is not only seeking a monetary recovery for investments made by its clients, as well as substantial legal fees for itself, but is also conducting or supporting a vicious campaign seeking to discredit Mr. Mishkin and destroy his reputation and his professional practice. They have also created a massive ...