The opinion of the court was delivered by: Stanton, District Judge.
Plaintiffs sue defendant Harold W. Buirkle for defamation and
for tortious interference with a contract and with a business
relationship. At the close of plaintiffs' presentation of their
case to the jury, the court directed a verdict for defendant.
This case is a skirmish in the battle between plaintiff
William R. Harris and Mr. Edwin E. Wells, Jr. (not a party to
this lawsuit) for the shares in Arochem International, Inc. and
Arochem Corporation ("Arochem") held by "Victory" (comprising
Victory Oil Company, Victory Holding Company and the Crail Fund
— none of whom is a party to this lawsuit) which might
give Harris or Wells control of Arochem.
Defendant Buirkle is an ally of Mr. Wells, with whom he made
an October, 1989 Joint Litigation Agreement (Joint Tr. Exh. 21)
in which Buirkle agreed to help Wells finance his litigation
expenses and related costs of preserving Wells' rights in
Arochem, and received rights to purchase an equity interest in
Arochem if Wells succeeded in buying out Victory's and Harris'
interest. Id. Buirkle has advanced $1,850,000 to Wells
under that agreement. (Stipulated Facts ¶ 11).
In 1987, Mr. Wells had helped plaintiff Harris obtain
financing from Victory to enable Harris to form Arochem, in
return for which Mr. Wells and Victory collectively received a
portion of Arochem's common stock. Mr. Harris, a Connecticut
resident, is Arochem's founder, chairman, president and
majority shareholder. Arochem is in the petroleum and
petrochemical business and has its executive offices in
Connecticut. (Stip. Facts ¶¶ 1, 3, 5).
Beginning in 1988, disputes concerning Arochem's operation
arose among the three parties. Because of these disputes,
Victory decided to sell its interest in Arochem either to Wells
or to Harris. Wells claims that sometime in March, 1989 he made
a binding agreement with Victory to purchase its interest.
(Stip. Facts ¶¶ 4-6).
On April 13, 1989, Victory filed suit in the United States
District Court for the Central District of California seeking,
among other things, a declaration that it was free to sell its
interest in Arochem to persons other than Wells. Wells answered
and counterclaimed, alleging that Victory had (i) repudiated
its contract to sell him its interest in Arochem, (ii)
repudiated its contractual obligation to obtain his consent to
Victory's sale of its Arochem interests, and (iii) denied, in
bad faith, the existence of its contract to sell him its
Arochem interest. On July 17, 1989, Harris sued both Wells and
Victory in the United States District Court for the District of
Connecticut. On August 28, 1989, Wells sued Harris in the same
court and also asserted derivative claims against Victory.
(Stip. Fact ¶¶ 7, 9).
Then at Mr. Wells' request, Robert Johnson, Eric Johnson, and
Sherry Hutchinson of Victory met with Edwin Wells and defendant
Buirkle in Los Angeles, California, on December 20 and 21,
1989. Before beginning their discussions, the participants
signed a Memorandum (Joint Tr. Exh. 70) which stated in part:
The undersigned have agreed to meet together to
attempt to resolve business and legal disputes
between and among themselves, including settlement
of claims that have been or might be brought in
litigation presently pending between and among
them in California and Connecticut. It is the
intention of the parties that the meeting shall be
deemed a compromise negotiation within the meaning
of Rule 408 of the Federal Rules of Evidence. As a
condition of participating in these settlement
discussions, the participants have each agreed
that all discussions at such meeting, to be held
on December 20 and 21, 1989, in Los Angeles,
California, shall be confidential settlement
discussions, to be used solely for the purposes of
At the meeting, Mr. Wells urged that Victory should sell its
Arochem interest to him, rather than to Mr. Harris, who (he
claimed) was looting Arochem, putting the money into offshore
accounts, and preparing to escape from the jurisdiction of the
United States courts. According to plaintiffs, defendant
Buirkle not only endorsed these statements (Johnson Trial
Testimony at 22-28), but at the close of the December 20
discussion, Mr. Buirkle also stated that it was ironic that
they were talking about "buying Mr. Harris out, when in fact we
should be putting him in jail." (Id. at 28).
The next day, the participants were joined by Mr. Wells'
attorney, Mr. Connell, and by Victory's attorney, Mr. Singer.
Buirkle presented Wells' offer to purchase Victory's interest
in Arochem. Although Wells offered less money than Harris,
Wells' offer included releases from litigation against Victory
for its alleged association with Harris' looting and lack of
effort to remove him from Arochem's management (Id. at
30-36). Mr. Connell stated that he was a "tough, East Coast
litigator" (Id. at 36), and that his client Wells
would sue Victory if it sold to Harris, and the lawsuit would
We would be brought up in front of a jury. I would
be cross-examined by him and be made to show that
I was a party to thefts of the company, thefts
that could have aggregated as much through that
period of time as 40 million dollars; generally
indicating that you better take a good, hard look
at the portion of the consideration that's not
cash, i.e., that is the releases, don't
underestimate the value of those.
And his role in this meeting was to convey to us
how valuable, how important it was for us not to
go up against him and up against Mr. Wells and to
take their deal otherwise a lot of bad things
would happen to us.
Apparently, Victory felt that the meeting was a "set up;"
that its purpose was not to discuss settlement of the
litigation between Wells and Victory, but rather to provide a
forum for Wells and Buirkle to malign Harris and urge
acceptance of their competing offer (See Johnson Tr.
Test. at 26; cf. at 35, 85; Pl. Mem. on Privilege at
On January 11, 1990 Mr. Harris and his representatives met in
New York City with Eric Johnson of Victory and others to
complete the sale of Victory's interest in Arochem to Harris.
The parties had resolved most of the open issues, and seemed
prepared to close the transaction, when Mr. Johnson privately
told Mr. Harris that Victory would not proceed with the sale
because of Wells' and Buirkle's statements at the December 20
and 21, 1989 meeting (Id. at 37-46, Harris Tr. Test.
The closing was postponed until February, while Victory
investigated Mr. Harris' finances and management of Arochem. By
the time the investigation was finished and Victory was once
again ready to sell its Arochem interest to Mr. Harris, the
corporate parent of his source of financing
(Drexel Burnham ...