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KARP v. HILL & KNOWLTON

March 25, 1986

STEPHEN I. KARP, Plaintiff,
v.
HILL AND KNOWLTON, INC., Defendant



The opinion of the court was delivered by: GOETTEL

GOETTEL, D.J.:

 The events that culminated in the statements that are the subject of this action for defamation began in February 1985, when Buckingham Corporation ("Buckingham"), an importer and distributor of wines and liquors, commenced an action against the plaintiff herein, Steven I. Karp ("Karp"), a former senior vice-president of Buckingham. The suit charged that, while in Buckingham's employ, Karp had surreptitiously agreed with two of Buckingham's suppliers to form a new corporation to distribute their products independently of Buckingham. In addition, it charged that Karp had misappropriated confidential information and trade secrets from Buckingham. *fn1" The complaint against Karp purported to state claims for breach of fiduciary duty, tortious interference with contract, breach of a continuing duty of confidentiality, unfair competition, misappropriation of a corporate opportunity, and tortious interference with prospective business opportunity.

 After filing the action, Buckingham quickly moved by order to show cause for a preliminary injunction (1) enjoining Karp from entering into any relationship with Buckingham's former suppliers; (2) enjoining him from divulging any confidential trade information belonging to Buckingham; and (3) requiring Karp to return to Buckingham all Buckingham documents in his possession. In a memorandum decision dated March 15, 1985, this Court concluded that Buckingham had demonstrated a likelihood of success on most, if not all, of its claims against Karp. Buckingham v. Karp, No. 85-0931, slip op. (S.D.N.Y. March 15, 1985). It further concluded that Buckingham would suffer irreparable harm were Karp to continue to solicit its suppliers and to use its confidential documents and information. The motion for preliminary relief was, therefore, granted.

 On May 22, 1985, a divided Court of Appeals for the Second Circuit reversed our decision. Although unpersuaded by most of Karp's substantive arguments, the Court of Appeals did not believe that injunctive relief was warranted since irreparable harm had not been demonstrated. Buckingham Corp. v. Karp, 762 F.2d 257 (2d Cir. 1985).

 On the date of the Court of Appeals' decision, defendant Hill & Knowlton, Buckingham's public relations agent, composed the press release that is the subject of this action. The release stated in full:

 
The U.S. Court of Appeals, Second Circuit, yesterday vacated a preliminary injunction against Stephen I. Karp. John W. Anderson, president and chief executive officer of Whitbread North America, Inc., today issued the following reply:
 
Yesterday's decision in no way questions the merits of our case against Mr. Karp.
 
The ruling supports our claims that Mr. Karp defrauded Buckingham and that substantial relief should be granted. The Court of Appeals simply said that the misappropriation of confidential documents and information was, in and of itself, insufficient to justify a preliminary injunction against Mr. Karp before a trial on the merits.
 
The Appellate Court did not question the District Court's finding that Buckingham is likely to succeed in demonstrating that Mr. Karp breached his fiduciary duty to the company; indeed, the majority opinion acknowledged that it was "unpersuaded by most of Mr. Karp's arguments." The court went so far as to suggest that Buckingham would do better to seek permanent injunctive relief and monetary damages from Mr. Karp in a trial on the merits.
 
We will continue to pursue vigorously our actions against Mr. Karp, Rothschild, Alko, and Abraham and Joel Buchman.

 Defendant's Memorandum in Support of Motion to Dismiss, Exhibit A (emphasis in original).

 The following morning, a Hill & Knowlton employee read the release over the phone to Patricia Kennedy, the publisher of Alcoholic Beverage Executives' Newsletter. Ms. Kennedy incorporated portions of the press release in an 11 paragraph article in the May 24 issue of the newsletter.

 Karp brought this action for libel against Hill & Knowlton on October 4, 1985. The complaint alleged, inter alia, that Hill & Knowlton's statement that "the ruling supports our claim[] that Mr. Karp defrauded Buckingham . . . .," later incorporated in Ms. Kennedy's article, defamed Karp. *fn2"

 Hill & Knowlton now moves to dismiss this action on two grounds. *fn3" First, it argues that the statement in issue is absolutely privileged within the meaning of section 74 of the New York Civil Rights Law as a "fair and true report of [a] judicial proceeding." N.Y. Civ. Rights Law ยง 74 (McKinney 1976). *fn4" It also contends that the statement is a non-defamatory expression of opinion that cannot give rise to a ...


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