United States District Court, E.D. New York
April 1, 2004.
PLAYBOY ENTERPRISES INTERNATIONAL, INC., PLAYBOY ENTERTAINMENT GROUP, INC. and PLAYBOY.COM, INC. Plaintiffs, -against- ON LINE ENTERTAINMENT, INC. and MARIO CAVALLUZZO, Defendants
The opinion of the court was delivered by: DAVID TRAGER, District Judge
AMENDED MEMORANDUM AND ORDER
The plaintiffs in this action are Playboy Enterprises International,
Inc. ("PEII"), Playboy Entertainment Group, Inc. ("PEGI") and Playboy.com
(collectively "plaintiffs"). PEII is a Delaware corporation with its
principal place of business located in Chicago, Illinois. PEII is an
international multimedia entertainment company that publishes
Playboy magazine. PEGI is a Delaware corporation and is a wholly
owned subsidiary of PEII. Playboy.com is a Delaware corporation and is a
wholly owned subsidiary of PEII. The defendants are On Line
Entertainment, Inc. ("OLE") and Mario Cavalluzzo ("Cavalluzzo")
(collectively "defendants"). OLE is a New York corporation with its
principal place of business located in Elmont, New York. Cavalluzzo is a
citizen of the State of New
York residing within the Eastern District of New York who directs
and controls the business activities of OLE.
PEII through its wholly owned subsidiary, PEGI, is the producer of a
cable television series entitled "Sex Court," which airs on the
subscription television services "Playboy TV," which is broadcast in the
United States, and "Playboy TV Networks," which is broadcast
internationally. PEGI is also the producer of a video cassette
compilation bearing the Sex Court mark, which is distributed for sale
throughout the United States and internationally via the
<playboy.com> web site, which is owned and operated by plaintiff
In their complaint, plaintiffs alleged that defendants have sought
improperly to profit from Playboy's investment in marketing the Sex Court
trademark. Plaintiffs claimed that OLE registered the Internet domain
name <sexcourt.com> after the Sex Court series became popular and
the name and mark Sex Court became associated in the public mind with
plaintiffs' television series. Plaintiffs further alleged that defendants
began using and continued to use the <sexcourt.com> domain name in
connection with an Internet Web site that is, in fact, unrelated to
Playboy or the Sex Court series, but attempted to convey to Internet
users that it is connected to the television series. Plaintiffs suggested
that defendants attempted to lure Internet users seeking information
about the Sex Court television show and to then entice users to link to
sexually explicit commercial Internet sites that charge subscription fees
for access to their contents. Thus, plaintiffs alleged that "defendants
seek simultaneously to trade off of the goodwill the SEX COURT mark has
come to enjoy among consumers, and to reduce the value of that goodwill
by improperly associating that name with services from unrelated
sources." Complaint, ¶ 8. The action resulted in the commencement of
a jury trial in this district on April 7, 2003.
On April 9, 2003, prior to the conclusion of the jury trial, defendants
entered into a Settlement Agreement ("April 9 settlement agreement") with
plaintiffs. That same day, both parties' counsel presented and affirmed
an accompanying Permanent Injunction Upon Consent Against Defendants to
the court. The injunction was signed by counsel for both parties, and was
entered by the court on April 10. On April 16, defendants served upon
plaintiffs a Notice of Motion requesting "an Order (1) setting aside the
April 9, 2003 settlement agreement; (2) vacating the April 10 consent
injunction and judgment; and (3) setting a date for a new trial, in the
interest of justice, on the basis of mistake, duress, misrepresentation
and fraud." On April 21, plaintiffs submitted a cross-motion by letter
requesting that the docket entries be sealed. On April 23, plaintiffs
submitted a cross-motion for an order to show cause requesting that the
court enforce the Permanent Injunction and Settlement Agreement by: (1)
ordering Mr. Cavalluzzo to immediately deliver all rights, passwords and
title to the <www.sexcourt.com> and
<www.pamelaandersonlee.net> domain names to Playboy; and (2) to pay
Playboy's costs and attorneys' fees associated with the preparation of
the papers related to the cross motion. Memorandum of Law in Support of
Playboy's Motion for an Order to Show Cause ("Pl. Mem. of Law for OSC")
Motion to Set Aside Settlement, Vacate Consent Judgment
and Order a New Trial
Defendants' Memorandum of Law is limited to conclusory statements,
general statements of law, and appeals to the "interests of justice," yet
fails to advance clearly delineated legal arguments. Defendants' brief
states that "[a] settlement agreement should be set aside if it is
induced by fraud, collusion, mistake, accident, intimidation, coercion or
duress." Memorandum of Law in Support of Counterclaimants' Motion to Set
Aside April 9 Settlement ("Def. Mem. of Law") 1. The cases cited by
defendants in support of this assertion state that settlement agreements
must be construed under general principles of contract law. See,
e.g. Downes v. O'Connell, 103 F. Supp.2d 579, 582 (E.D.N.Y.
2000) ("Settlement agreements are contracts and must therefore be
construed according to general principles of contract law."); see
also Willgerodt v. Hohri, 953 F. Supp. 557, 561 (S.D.N.Y. 1997);
Hest v. New Amsterdam Casualty, 268 F. Supp. 623 (D.S.C. 1967).
Accordingly, defendants request "that the settlement agreement be set
aside due to mistake, misrepresentation, duress and Playboy's fraudulent
use of the [March] consent injunction . . . to induce settlement." Def.
Mem. of Law 4.
Defendants are correct that a settlement agreement should be construed
as a contract. See Goldman v. Commissioner, 39 F.3d 402, 405 (2d
Cir. 1994) (holding that a "settlement agreement constituted a contract"
and that "general principles of contract law must govern its
interpretation."); Torres v. Walker, 356 F.3d 238, 245 (2d Cir.
2004) ("Settlement agreements are contracts and must therefore be
construed according to general principles of contract law.") (quoting
Red Ball Interior
Demolition Corp. v. Palmadessa, 173 F.3d 481, 484 (2d Cir.
1999)). The April settlement agreement contains a choice of law provision
stating that the "Agreement shall be governed by, and construed and
interpreted in accordance with, the substantive laws of the State of New
York, without regard to conflicts or choice of law principles." Gioconda
Decl. Ex. A (April settlement agreement) ¶ 18. Thus, New York
contract law governs.*fn1 Under New York law, "[o]nly where there is
sufficient to invalidate a contract, such as fraud, collusion,
mistake or accident, will a party be relieved from the consequences of a
stipulation made during litigation." Hallock v. State, 64 N.Y.2d 224,
230, 474 N.E.2d 1178, 485 N.Y.S.2d 510 (N.Y. 1984); see
also Downes, 103 F. Supp.2d at 582 ("The court will set
aside or modify the terms of a settlement reached in open court only upon
a showing of good cause, such as fraud, collusion, mistake, accident, or
lack of authority.").
Although defendants do not explicitly invoke Rule 60(b) of the Federal
Rules of Civil Procedure in their initial brief, Plaintiffs' Memorandum
of Law responds to defendants by arguing that defendants fail to meet the
requirements of Rule 60(b). Plaintiffs' Memorandum of Law in Opposition
Defendants' Motion to Set Aside the Settlement Agreement ("Pl. Mem.
of Law") at 1, 2, 4, 7, 16. In their Reply, defendants argue that they
are "moving in the first instance to set aside the settlement agreement
under contract law, due to specific allegations of misconduct by Playboy
and other circumstances," and that after the settlement is vacated,
Rule 60(b) permits vacation of the consent judgment. Defendants' Reply
Memorandum of Law 3. Both the contract law arguments and the Rule 60(b)
arguments are analyzed below.
As noted, although defendants' memorandum of law is not presented as a
series of discrete arguments, the arguments in the memorandum break down
into two. First, defendants argue that the settlement agreement should be
set aside based on fraud, misrepresentation, duress, or mistake since
plaintiffs "intentionally and impermissibly" made reference during cross
examination of Mr. Cavalluzzo to the March 2003 permanent injunction by
stipulation, in breach of the March 2003 settlement agreement ("March
settlement agreement"), so as "to poison [the jury's] opinion of Mr.
Cavalluzzo." Def. Mem. of Law 2. Alternatively, also based on this
alleged breach of the March settlement agreement, defendants argue that
the April 9 settlement should be set aside because had the court had
access to a copy of the March settlement agreement on April 9, when the
cross examination of Mr. Cavalluzzo took place, "the Court seeing that
Playboy had impermissibly poisoned the jury, would no doubt have granted
a mistrial and likely would have awarded costs to Mr. Cavalluzzo." Def.
Mem. of Law 3.
Second, defendants argue that the settlement should be set aside
because they entered into the settlement agreement under duress and that
following the Court's admonition of defense counsel, "Playboy acted
swiftly to coerce Cavalluzzo into settlement, utilizing his weakened
position to induce a
settlement with him that would not otherwise have been reached."
Def. Mem. of Law 4. Defendants state several additional grounds for
setting aside the settlement based on the above facts, namely collusion,
accident, intimidation, and coercion. Def. Mem. of Law 1, 4. Only
plaintiffs' second argument based on the court's admonition of defense
counsel may fairly be characterized as coercion, though for these
purposes the analysis for coercion and duress are the same and both are
dealt with in section (1)(b) below. With regard to the remaining claims,
defendants have failed to make even a prima facie showing in
support of their conclusory allegations of collusion, accident, or
(a) Alleged Breach of March Settlement Agreement
Defendants contend that during the cross examination of Mr. Cavalluzzo
on April 9, plaintiffs breached the March settlement agreement by
"intentionally and impermissibly" making reference in front of the jury
to the permanent injunction by stipulation agreed to by the parties as
part of the March settlement. Def. Mem. of Law 2. Defendants argue that
this constituted a breach of the provision of the March settlement
agreement by which the parties agreed that the settlement and injunction
"shall not be used as evidence at trial." Gioconda Decl. Ex. C.
Defendants further contend that plaintiffs "used this illegally obtained
upper hand as a sword to persuade Mr. Cavalluzzo to dramatically change
his settlement position." Def. Mem. of Law 2. Defendants conclude that
"[i]t would be inequitable to allow Playboy to benefit by its breach of
the March agreement, and there being no delay in this application [it
would be] just to place the parties into the same position they were
[sic] before the April 9th agreement." Def. Mem. of Law 3.
Although defendants contend that the parties should be restored to
their pre-settlement positions because plaintiffs breached the March
settlement agreement, it would be inappropriate to set aside the April
settlement agreement in this instance because the March settlement
agreement was not actually breached. The parties agreed that the
settlement and the permanent injunction would "not be used as evidence at
trial."Gioconda Decl. Ex. C. But in this instance, the reference to the
permanent injunction was not actually introduced as substantive evidence;
it was merely used to impeach testimony given by Mr. Cavalluzzo at trial.
Plaintiffs allege that at trial Cavalluzzo began to perjure himself on
the witness stand when he refused to acknowledge that
<www.sexyworkers.com> was his website, and when he denied that he
ever used the Playboy trademark as a metatag in the keywords of that
website. Pl. Mem. of Law 12; Gioconda Decl. Ex. G (containing April 7,
2003 Tr. 504:4-10, 507:3-14). Plaintiffs have alleged that defendants own
the website <www.sexyworkers.com> and, in their Amended Complaint,
charged defendants with infringing and diluting Playboy's rights in
relation to that site by using the Playboy trademark in the metatags of
that website. On March 10, 2003, defendants consented to be permanently
enjoined from this conduct and the charges relating to
<www.sexyworkers.com> were voluntarily dismissed from the
complaint. In order to impeach Cavalluzzo on the issue of his
previously-admitted ownership of the <sexyworkers.com> website, as
well as his use of Playboy as a metatag on the site, plaintiffs' attorney
asked: "Sir, were you charged in this case with a separate charge of
having Playboy listed in your metatag keyword for Sexy Workers.Com and
you agreed to a permanent injunction, you agreed to take it out. . . ."
Defendants objected and were overruled. In reviewing the transcript of
the cross examination of Mr. Cavalluzzo, it is clear that plaintiffs'
reference to the March
permanent injunction by consent was used properly to impeach Mr.
Cavalluzzo and was not introduced as evidence.
It is well-established in this circuit that impeachment by counsel of
inconsistent or perjured testimony does not constitute "evidence," for
questioning by counsel never constitutes evidence. Washington v.
Schriver, 225 F.3d 45, 61 (2d Cir. 2001); Tolbert v. Queens
College, 242 F.3d 58, 75 (2d Cir. 2001). Thus, the provision of the
settlement agreement providing that settlement and the permanent
injunction would "not be used as evidence at trial" was not breached.
Defendants argue that "[i]f a party's manifestation of assent is
induced by either a fraudulent or a material misrepresentation by the
other party, upon which the recipient is justified in relying, the
contract is voidable by the recipient," Def. Reply Mem. of Law 6 (quoting
Restatement (Second) of Contracts § 164 (1981)), and that
"Playboy's misrepresentation was both fraudulent and material and
therefore satisfies both of the requirements for the voiding of the
contract, either one of which was sufficient to cause rescission."
Id. This is indeed the law in New York. See, e.g., Seneca Wire
& Mfg. Co. v. A. B. Leach & Co., 247 N.Y. 1, 7-8,
159 N.E. 700, 702 (1928) ("a contract may be rescinded for fraud or
misrepresentation"); see also Horn Waterproofing Corp. v. Bushwick
Iron & Steel Co., 66 N.Y.2d 321, 325, 488 N.E.2d 56, 58,
497 N.Y.S.2d 310, 312 (1985) ("[W]here there is a real and genuine contest
between the parties and a settlement is had without fraud or
misrepresentation . . . such settlement should be upheld."). In this
instance, since the agreement was not breached and since plaintiffs did
not misrepresent the contents of the March settlement agreement to the
court, there was no fraud or misrepresentation. Thus, the allegations of
misrepresentation and fraud with
respect to this claim must fail. Likewise, any claim of mistake,
misconduct, or duress based on the alleged breach of the settlement
agreement must also fail.
Defendants also argue that had the court had access to a copy of the
March settlement agreement on April 9, when the cross examination of Mr.
Cavalluzzo took place, "the Court seeing that Playboy had impermissibly
poisoned the jury, would no doubt have granted a mistrial and likely
would have awarded costs to Mr. Cavalluzzo." Def. Mem. of Law 3. There is
no ground for a mistrial in this case. Defendants had the opportunity to
move for a mistrial during the trial and chose not to do so. In fact, at
trial the court gave defendants the option of moving for a mistrial if
they felt it was warranted. Gioconda Decl. Ex. G (containing April 7,
2003 Tr. at 505:8-506:11) ("Mr. BOSTANY: I don't have a copy of the
settlement agreement with me, Judge, but I can bet you that what
[plaintiffs' counsel] is doing is laying grounds for a mistrial because
there is an agreement we have entered into and [plaintiffs' counsel]
refuses to produce his copy, I don't have my copy with me. . . . THE
COURT: I will let it in. We will look at the agreement tomorrow. If
you're right, you can renew your application."). Defendants chose not to
move for a mistrial; instead, they entered into the April settlement
agreement and consented to a permanent injunction in open court. Gioconda
Decl. Ex. H (containing April 10, 2003 Tr. at 2:19-20).
Furthermore, as previously pointed out, Playboy properly impeached
defendant Cavalluzzo's testimony upon cross examination. Thus, the
reference to the March settlement agreement for this purpose does not
provide a sufficient reason to set aside the April 9 settlement
agreement. The Federal Rules of Evidence clearly state that although
evidence of a settlement "is not admissible to prove liability for [a]
claim," the evidence need not be excluded "when the evidence is offered
for another purpose."
Fed.R.Evid. 408. Courts have held that evidence otherwise
excludable pursuant to Rule 408 is admissible for the purposes of
impeachment. See, e.g., Cochenour v. Cameron Savings and
Loan, 160 F.3d 1187, 1190 (8th Cir. 1998) (an offer to compromise
may be used to rebut a party's prior testimony); Reichenbach v.
Smith, 528 F.2d 1072, 1075 (5th Cir. 1976) ("Rule 408 codifies a
trend in case law that permits cross-examination concerning a settlement
for the purpose of impeachment."); Tribune Co. v. Purcigliotti,
No. 93-7222, 1996 WL 337277 (S.D.N.Y. June 19, 1996) (settlement
discussions may be used for impeachment). Therefore, evidence of a
settlement could properly be used to impeach a witness on
cross-examination. Had defendants wanted to exclude the use of the
settlement for impeachment purposes, at a minimum an explicit provision
was required assuming the parties could agree to distort the
truth-finding function in this way. Furthermore, as discussed above,
questioning by an attorney does not constitute evidence. The court, in
its preliminary instructions to the jury, explained as much when it
stated that upon cross-examination of a witness "what is evidence in the
case are the responses to the questions not the questions themselves."
Pl. Mem. of Law 13 (citing Tr. at 17:6-9). Defendants' assertion that
plaintiffs "impermissibly poisoned the jury" is simply untrue. It is
clear that the reference during cross examination to the permanent
injunction by stipulation that accompanied the March settlement agreement
was appropriate and does not constitute a grounds for mistrial.
Consequently, defendants' contention that the court "would no doubt
have granted a mistrial" if it had been aware of the terms of the
settlement agreement is not at all a foregone conclusion. In fact, it is
highly unlikely that plaintiffs' line of questioning would have resulted
in a mistrial. For these reasons,
defendants' argument that the April settlement agreement should be
set aside because the court would have granted a mistrial must also fail.
And even if these facts provided sufficient grounds for a mistrial, it
is clear that defendants were given the option of moving for a mistrial
but opted to settle the claim instead. Defendants' request that the
settlement be set aside is an inappropriate attempt to relitigate a case
that already went to trial and was deliberately settled by both parties
prior to the trial's conclusion. If defendants felt that plaintiffs'
conduct amounted to misconduct justifying a mistrial, defendants should
not have agreed to settle. Rather, defendants should have created a clear
record in the course of trial and either moved for a mistrial or raised
the issue of plaintiffs' misconduct on appeal if the jury had rendered an
(b) Court's Admonition of Defense Counsel
Defendants also allege that Mr. Cavalluzzo entered into the settlement
agreement under duress and that "[f]ollowing the Court's threat to disbar
his attorney, Playboy acted swiftly to coerce Cavalluzzo into settlement,
utilizing his weakened position to induce a settlement with him that
would not otherwise have been reached." Def. Mem. of Law at 4. The
relevant portion of the transcript is as follows:
Q. Let's talk for a moment about these invoices.
Now, these invoices that you have that say On
Line on them and Bigcoin on them from January
of 1998, I asked you at your deposition
well, it wasn't me, actually, another lawyer
asked you at your deposition when Bigcoin was
formed and when On Line was formed. Do you
recall that testimony?
Q. I read some of it earlier today. You testified
at your deposition last summer that Bigcoin
wasn't even formed until late `98 and On Line
wasn't even formed until late `98?
A. I don't think I testified to On Line. I
probably said I don't know. How would I testify
to something I don't know?
Q. Were you asked this question and did you give
this answer under oath just last summer
MR. BOSTANY: This was read already and already
reviewed on direct and voir dire.
THE COURT: Overruled. Go ahead.
Q. "Question: You're saying we provided a service
that On Line paid for. Who is we? "Answer:"
This is you talking under oath. "Bigcoin. That
was not until late `98 though and On Line
Entertainment wasn't formed until late `98."
That was your testimony?
MR. BOSTANY: Objection. Did you read the
entire thing? I think he said I
guess and maybe
THE COURT: Folks, please step inside. Do not
discuss the case. (The jury exits
the court room.)
THE WITNESS: Outside?
THE COURT: You can stay right there.
What do you think, this is a stage? Do you
think this is a stage? Do you think I give you
admonitions repeatedly, repeatedly, repeatedly
because I don't mean them, because I am trying
to make life difficult for you? Do you realize
you have some responsibilities here? This is
not Vaudeville, this is not stich, this is a
court of law. If this happens again you will
not be a member of this court of law. I am
serious, this is not a game. You don't invent
evidence with your commentary.
MR. BOSTANY: Judge, if we read back the exact
THE COURT: You just keep your mouth shut. You
have a responsibility to abide by my rulings
and I've done my best to show my patience to
you in this case. You don't create evidence by
innuendo and snide comments. You don't litigate
in this courtroom by that kind of behavior. I
will not have it again. I am warning you for
the last time. (Recess taken.)
THE COURT: Bring them in.
MR. BOSTANY: Judge, I wanted to read from the
transcript, if that's possible, before the jury
THE COURT: Read what transcript?
MR. BOSTANY: If I can read either now or after
the jury comes in. I don't want to do the wrong
THE COURT: What do you want to do?
MR. BOSTANY:I just want to read the portion
of the testimony from the transcript.
MR. DESMARAIS: Your Honor, he can do it on
THE COURT: The question is have you read
from it and did you read it incompletely? If
you have, make it complete.
MR. BOSTANY: Thank you, Judge. (The jury
enters the courtroom.)
THE COURT: Thank you. Please be seated, folks.
I'm sorry for the interruption. I'm sure you
can appreciate the stresses confronting all
counsel in a case of this sort. They have
significant responsibilities to their
respective clients, as well as the Court.
Occasionally it requires the Court to
intervene. If it does, it has nothing to do
with the merits of the issues that will be
decided and I want you to keep that firmly in
All right sir, please continue.
Gioconda Decl. Ex. G (containing Tr. 456:17-459:13).
This dialogue makes clear that defendants did not enter into the April
9 settlement agreement under duress. "Under New York law, which governs,
`[a] contract is voidable on the ground of duress when it is established
that the party making the claim was forced to agree to it by means of a
wrongful threat precluding the exercise of his free will.' [A]nd duress
may take the form of unlawful restraint of property or use of wrongful
economic compulsion to force a party to yield to demands that would
otherwise be rejected." First National Bank v. Pepper,
454 F.2d 626, 632 (2d Cir 1972) (quoting Austin Instrument, Inc. v. Loral
Corp., 29 N.Y.2d 124, 130, 324 N.Y.S.2d 22, 25, 272 N.E.2d 533, 535
(1971)); see also McIntosh v. Consolidated Edison Co., No.
96-3624, 1999 WL 151102, at *2 (S.D.N.Y. Mar. 19, 1999) (holding that
"[t]o void a contract based on duress, one of three
circumstances must be present: duress by physical compulsion,
duress by threat, or duress by undue influence. Duress may not be found
merely from the existence of a difficult bargaining position or the
pressure of financial circumstances. To succeed on a theory that an
agreement was procured by duress, a plaintiff must show that he was
compelled to agree to its terms by way of wrongful and oppressive conduct
that precluded the plaintiff from the exercise of his own free will.")
(citations omitted), aff'd 2001 WL 1669111 (2d Cir. June 8,
2000). Defendants have failed to meet the burden of proving duress by
physical compulsion, duress by threat, or duress by undue influence.
Likewise, defendants have failed to prove coercion, for in this context
coercion is merely a form of duress. See Citibank, N.A. v. Real
Coffee Trading Co., N.V., 566 F. Supp. 1158, 1162 (S.D.N.Y. 1983)
("To set aside an agreement on the ground that it was the product of
economic duress, the party making the claim must make a convincing
showing that the agreement was coerced by means of a wrongful threat such
that the exercise of free will was precluded."); Record Club of
America, Inc. v. United Artists Records, Inc., 611 F. Supp. 211, 216
(S.D.N.Y. 1985) (equating coercion with economic duress and holding that
"there was no coercion because plaintiff's clear alternative to entering
into the side agreements was to proceed to trial"), vacated and
remanded on other grounds, 890 F.2d 1264 (2d Cir. 1989).
There is no merit to defendants' argument that the court's reprimand of
defense counsel, outside the presence of the jury, constituted duress or
was in any way improper. In fact, even after reprimanding defense counsel
for his conduct, the judge favorably responded to defense counsel's
objection by instructing plaintiffs' counsel to read the complete
transcript of the relevant portion of the deposition that was the subject
of cross examination. Moreover, though the jury was not present during
the admonition of defense counsel, the judge immediately issued an
instruction to the jury, upon its return, to the effect that they should
not allow the conduct of counsel to affect their determination of the
merits of the case. The conduct of the court in no way requires the
setting aside of the settlement agreement. Even if the court's conduct
amounted to coercion, intimidation, or duress and it does not
the proper remedy
would be for the lawyer to create a record and take an appeal from
an unfavorable verdict. It certainly does not serve the interests of
justice to allow a party who fears an unfavorable trial outcome because
of a judge's presumed hostility to settle the claim prior to its
conclusion, and to then move to set aside the settlement and have the
case retried. Since the settlement agreement was not procured by duress
or coercion, it cannot be voided or set aside on this basis.
(c) Fed. Rule Civ. P. 60(b)
In order to give defendants the benefit of the doubt, and since
plaintiffs treat defendants' motion as a Rule 60(b) motion, the motion
will be analyzed as Rule 60(b) motion as well. Under Rule 60(b), the
Federal Rules of Civil Procedure provide that
[T]he court may relieve a party . . . from a final
judgment, order, or proceeding for the following
reasons: (1) mistake, inadvertence, surprise, or
excusable neglect; (2) newly discovered
evidence . . .; (3) fraud . . ., misrepresentation,
or other misconduct of an adverse party; (4) the
judgment is void; (5) the judgment has been
satisfied, released or discharged, or a prior
judgment upon which it is based has been reversed
or otherwise vacated, or it is no longer equitable
that the judgment should have prospective
application; or (6) any other reason justifying
relief from the operation of the judgment.
Fed.R.Civ.P. 60(b). Here, defendants do not specify which of the
six bases for relief under Rule 60(b) they seek to invoke. However, a
review of defendants' submissions reveals that only clauses (1), (3) and
(6) are potentially applicable as there is no claim of newly discovered
evidence and the judgment plaintiffs seek to vacate is not void nor has
it been satisfied.
As a general matter, there is a strong interest in the finality of
judgments, especially when the parties have entered into a settlement
agreement. See Nemaizer v. Baker, 793 F.2d 58, 61 (2d
Cir. 1986) ("Properly applied Rule 60(b) strikes a balance between
serving the ends of justice and preserving the finality of judgments.").
Because Rule 60(b) "allows extraordinary judicial relief, it is
invoked only upon a showing of exceptional circumstances."
Nemaizer, 793 F.2d at 61; see also Mendell In
Behalf of Viacom, Inc. v. Gollust, 909 F.2d 724, 731 (2d Cir. 1990)
("Motions under Rule 60(b) are addressed to the sound discretion of the
district court and are generally granted only upon a showing of
exceptional circumstances."). "Courts typically require that the evidence
in support of the motion for relief [under Rule 60(b)] be `highly
convincing,' that a party show good cause for the failure to act sooner,
and that no undue hardship be imposed on other parties." Jedrejcic v.
Croatian Olympic Committee, 190 F.R.D. 60, 77 (E.D.N.Y. 1999)
(quoting Gonzalez v. Gannett Satellite Info. Network, Inc.,
903 F. Supp. 329, 331 (N.D.N.Y. 1995), aff'd, 101 F.3d 109 (2d Cir.
To grant relief under Rule 60(b) "a court must find that (1) the
circumstances of the case present grounds justifying relief and (2) the
movant possesses a meritorious claim in the first instance."
Jedrejcic, 190 F.R.D. at 77 (quoting Cobos v. Adelphi
Univ., 179 F.R.D. 381, 385 (E.D.N.Y. 1998)). Moreover, in a
Rule 60(b) motion, "[a] movant's burden is even more formidable where the
movant has made a deliberate choice to enter into a settlement agreement as
opposed to having litigated the case on the merits and lost." Rand
Int'l Leisure Prods., Ltd. v. TekSource, L.C., No. 97-319, 1998 WL
372356 at *1 (E.D.N.Y. July 2, 1998) (citing Nemaizer, 793 F.2d
at 63); see also Ackermann v. United States,
340 U.S. 193, 198, 71 S.Ct. 209, 95 L.Ed. 207 (1950) ("There must be an end to
litigation someday, and free, calculated, deliberate choices are not to
be relieved from.").
Defendants' claims that the court would have granted a mistrial if it
had access to the March settlement agreement could be interpreted as a
motion to set aside the April 9 settlement based on "mistake."
Fed.R.Civ.P. 60(b)(1). See Tarkington v. United States Lines
Co., 222 F.2d 358, 360 (2d Cir. 1955) (holding that "mistake" under
Rule 60(b) has been held to include mistakes of law by the
district court); Gey Assocs. Gen. P'ship v. 310 Assocs. (In re
310 Assocs.), 346 F.3d 31, 35 (2d Cir. 2003) (holding that
Rule 60(b)(1) is available for a district court to correct mistakes of law, as
well as mistakes of fact). As discussed earlier in section (1)(a) of this
Memorandum and Order, there were no mistakes of law or fact in the trial
leading up to the April 9 settlement. Thus, defendants have failed to
make the showing of mistake required under Rule 60(b)(1).
Defendants' contention that the settlement agreement should be set
aside because it was breached and because plaintiffs "intentionally and
impermissibly" made reference in front of the jury to the settlement
agreement and permanent injunction in order "to poison [the jury's]
opinion of Mr. Cavalluzzo," could be interpreted as a motion to set aside
the April 9 settlement based on "fraud . . . misrepresentation, or other
misconduct of an adverse party." Fed.R.Civ.P. 60(b)(3). See also
Walther v. Maricopa Intern. Inv. Corp., No. 97-4816, 2002 WL
31521078, at *3 (S.D.N.Y. Nov. 12, 2002) (citing Stewart v.
O'Neill, No. 00-8560, 2002 WL 1917888, at *1 (S.D.N.Y. Aug. 20,
2002) (quoting Fleming v. N.Y.U., 865 F.2d 478, 484 (2d
Cir. 1989))) ("With respect to a Rule 60(b)(3) motion specifically, the
moving party must demonstrate, by clear and convincing evidence, that
`material misrepresentations' were made and cannot use the motion simply
`as an attempt to relitigate the merits' of the case.");
Walther, 2002 WL 31521078, at *3 (citing Chnapkova v.
Koh, No. 88-6144, 1992 WL 203906, at *2 (S.D.N.Y. Aug.7, 1992)) ("In
addition to demonstrating fraud or other misconduct by clear and
convincing evidence, the movant must also show that `this conduct
prevented [the movant] from fully and fairly presenting his case.'").
Moreover, "Rule 60(b)(3) is typically `invoked where material information
has been withheld or incorrect or perjured evidence has been
intentionally supplied.'" Walther, 2002 WL 31521078, at *3
(citing Matter of Emerg. Beacon Corp. v. Barr,
666 F.2d 754, 759 (2d Cir. 1981)). As explained in section (1)(a) of
this Memorandum and Order, defendants have failed to make a showing of
fraud, misrepresentation, or misconduct. Thus, defendants fail to make
the showing required under Rule 60(b)(3).
Defendants' claim of duress could also be construed as a Rule 60(b)(6)
motion, which provides that Rule 60(b) may be invoked for "any other
reason justifying relief from the operation of the judgment" that is not
listed in clauses (1) through (5) of the rule. See McIntosh v.
Consolidated Edison Co., No. 96-3624, 1999 WL 151102, at *2
(S.D.N.Y. Mar. 19, 1999) (denying a motion to set aside a settlement
agreement under Rule 60(b)(6) and holding that "[t]o void a contract
based on duress, one of three circumstances must be present: duress by
physical compulsion, duress by threat, or duress by undue influence.
Duress may not be found merely from the existence of a difficult
bargaining position or the pressure of financial circumstances. To
succeed on a theory that an agreement was procured by duress, a plaintiff
must show that he was compelled to agree to its terms by way of wrongful
and oppressive conduct that precluded the plaintiff from the exercise of
his own free will.") (citations omitted), aff'd 2001 WL 1669111
(2d Cir. June 8, 2000). As explained in section (1)(b) of this Memorandum
and Order, defendants have failed to meet the burden of proving duress by
physical compulsion, duress by threat, or duress by undue influence.
Therefore, defendants have failed to make a showing of duress that could
amount to a "reason justifying relief from the operation of the judgment"
under Rule 60(b)(6).
None of the other claims raised by defendants could fall under
Rule 60(b)(6) because clause (6) is inapplicable when plaintiffs' asserted
grounds for relief are recognized in clauses (1) and (3) of the rule.
See Nemaizer v. Baker, 793 F.2d 58, 63 (2d Cir. 1986) (relief
under Rule 60(b)(6) is only
appropriate when "the asserted grounds for relief are not recognized in
clauses (1)-(5) of the rule."); Cobos v. Adelphi Univ.,
179 F.R.D. 381, 386 n. 5 (E.D.N.Y.1998) ("Clauses (1) and (6) are mutually
exclusive."); Interactive Edge, Inc. v. Martise, No. 97-3354,
1998 WL 35131 at *4 (S.D.N.Y. Jan. 30, 1998) (noting the sixth subsection
"is properly invoked only . . . when the asserted grounds for relief are
not recognized in clauses (1)-(5)") (quoting Nemaizer, 793 F.2d
Thus, defendants' motion also fails when treated as a Rule 60(b)
Plaintiffs have filed two cross-motions in this case. The first
cross-motion is a request that the docket entries be sealed since the
very existence of the Settlement Agreement, as well as its contents, are
intended to be confidential by the written, express agreement of the
parties. April 21, 2003 Letter from Joseph C. Gioconda. Since the April 9
Settlement Agreement resulted in the dismissal of a trial that is on the
public record, the existence of the settlement agreement cannot be deemed
to be confidential and thus there is no reason to file under seal
documents that simply make reference to the settlement agreement. Thus,
the motion is granted in part and denied in part. As per the terms of the
April 9 Settlement Agreement, any copies of the April 9 Settlement
Agreement itself, including those contained as attachments to papers
filed in this motion, shall be filed under seal. All other papers,
including those making reference to the April 9 Settlement Agreement, do
not have to be filed under seal. The second cross-motion is for an order
to show cause requesting that the court enforce the Permanent Injunction
and Settlement Agreement by:
(1) ordering Mr. Cavalluzzo to immediately deliver all rights,
passwords and title to the <www.sexcourt.com> and
<www.pamelaandersonlee.net> domain names to Playboy; and (2) to pay
Playboy's costs and attorneys' fees associated with the preparation of
the papers related to the cross motion. At a conference held in open
court on April 30, 2003, the defendants agreed that the domain names
listed in the order to show cause were in their possession and that this
was a moot issue. April 30, 2003 Tr. 17:21-18:4, 19:10. Therefore, the
motion for an order to show cause is denied as moot.
Accordingly, defendants' motion to set aside the April 9 settlement, to
vacate the April 10 permanent injunction and judgment, and to set a date
for a new trial is denied.
Plaintiffs' cross-motion requesting that the docket entries be sealed
is granted in part and denied in part, to the extent that any copies of
the April 9 Settlement Agreement itself, including those contained as
attachments to papers filed in this motion, shall be filed under Seal,
while all other papers, including those making reference to the April 9
Settlement Agreement, do not have to be filed under seal.
Plaintiffs' cross-motion for an order to show cause is denied as moot.
The Clerk of the Court is directed to close the case.