UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
January 12, 2006
JUDITH SHANGOLD AND RONNIE NIEDERMAN, PLAINTIFFS,
THE WALT DISNEY COMPANY, DISNEY ENTERPRISES INC., DISNEY INTERFINANCE CORP., WALT DISNEY PICTURES & TELEVISION, MIRAMAX BOOKS, MIRAMAX FILM CORP., MICHAEL CHABON, DISNEY CHILDREN'S BOOK GROUP, L.L.C. AND DISNEY PUBLISHING WORLDWIDE, INC., DEFENDANTS.
The opinion of the court was delivered by: William H. Pauley III, District Judge
MEMORANDUM AND ORDER
Defendants move to dismiss this action on the grounds that Plaintiffs fabricated evidence and perpetrated a fraud on this Court. The motion implicates the inherent authority of a court to safeguard the integrity of the judicial process and effect the orderly administration of justice. For the reasons set forth below, Plaintiffs' misconduct requires that the policy favoring adjudication on the merits yield to the need to preserve the integrity of the courts.
Plaintiffs Judith Shangold and Ronnie Niederman are the authors of a
series of treatments written for a children's animated theatrical
feature titled Starmond the Wizard and Starmond (collectively,
"Starmond").*fn1 In 1989, they wrote the first
treatment of the series
("T1"). (Complaint, dated Nov. 25, 2003 ("Compl.") ¶ 24; Affidavit of
Joanna R. Swomley, dated June 1, 2005 ("Swomley Aff.") Ex. 2: T1;
Swomley Aff. Ex. 27: Starmond Timeline; Swomley Aff. Ex. 35: Revised
Starmond Timeline.) T1 was submitted to Disney and on May 25, 1994,
rejected as "an unexciting, confusing and mostly listless fairy tale .
. . that does little to merit further consideration." *fn2
(Swomley Aff. Ex. 3: Coverage, dated May 25, 1994.)
In April or May of 1995, Plaintiffs allege they revised T1 to add a baseball storyline in five pages of handwritten notes ("T1a"). (Deposition of Judith G. Shangold, dated Nov. 29, 2004 ("Shangold Dep.") at 22-24; Compl. ¶ 29; Swomley Aff. Ex. 35.) Plaintiffs maintain that they submitted T1a along with T1 to Disney on June 16, 1995. (Compl. ¶¶ 31-35; Shangold Dep. at 22-24, 63, 72, 242-43; Deposition of Ronnie Niederman, dated Nov. 30, 2004 ("Niederman Dep.") at 41, 134; Swomley Aff. Ex. 5: Letter from Shangold to David E. Vogel, dated June 16, 1995.)
T1a is replete with the term "Palm Pilot," referring to a handheld computer that functions as a personal organizer with wireless capability. (Swomley Aff. Ex. 29: T1a.) However, handheld devices with that name did not exist at the time Plaintiffs claim they created T1a. Prior to November 1995, the handheld organizer to which Plaintiffs refer was known internally at Palm Computing, Inc. ("Palm") as the "Taxi." (Deposition of Robert Haitani, dated Jan. 18, 2005 ("Haitani Dep.") at 16; Declaration of Robert Haitani, dated June 28, 2005 ("Haitani Decl.") ¶ 6; Andrea Butter & David Pogue, Piloting Palm: The Inside Story of Palm, Handspring, and the Birth of the Billion-Dollar Handheld Industry (2002) ("Piloting Palm") 128.) It was not until November 1995 -- approximately five months after Plaintiffs allegedly submitted T1a to Disney -- that Palm learned from a trademark registration search that it could not use the name "Taxi" and renamed the product the "Pilot." (Haitani Dep. at 16; Haitani Decl. ¶ 6; Piloting Palm 128.) Indeed, the Pilot was not unveiled to the public until January 1996 and did not become available for shipment to customers until April 9, 1996. (Haitani Dep. at 16-18; Haitani Decl. ¶¶ 7-8; Piloting Palm 135-38, 150.) Further, Palm only coined the term "PalmPilot" in March 1997 with its second generation of the device and the wireless capability Plaintiffs reference in T1a was not available until May 1999. (Swomley Aff. Ex. 37: palmOne, Inc. Historical Timeline.)
Moreover, Shangold did not mention T1a, baseball or a "Palm Pilot" in her June 16 cover letter to Disney, nor did Plaintiffs in the requisite Disney submission agreement that they completed. (Swomley Aff. Ex. 5.) On June 29, 1995, Disney returned "Starmond the Wizard" (T1) to Plaintiffs' then attorneys. (Swomley Aff. Ex. 9: Letter from Allison Brecker to Elizabeth Corradino, Esq., dated June 29, 1995.) The records of Plaintiffs' former counsel contained only Disney's letter and T1, not T1a or any story about baseball. (Swomley Aff. ¶ 11.)
In 1997, Plaintiffs revised T1, but did not include a baseball theme ("T2"). (Compl. ¶ 35; Swomley Aff. Ex. 13: T2.) Four years later, Plaintiffs' agent, the Claudia Menza Literary Agency ("CMLA"), submitted T2 to Disney. (Compl. ¶ 43; Swomley Aff. Ex. 11: Letter from CMLA to Disney, dated Apr. 24, 2001.) Once again, Disney rejected T2, concluding that it "ultimately falls short in terms of its story." (Swomley Aff. Ex. 12: Coverage, dated May 14, 2001.)
In July 2001, Plaintiffs created another Starmond treatment ("T3") that purportedly incorporated T1a's baseball storyline. (Compl. ¶ 47; Swomley Aff. Ex. 35.) CMLA sent T3 to Disney on August 6, 2001. (Compl. ¶ 48; Swomley Aff. Ex. 27; Swomley Aff. Ex. 35.) On September 15, 2001, Disney rejected T3, commenting that it was "a submission of remarkable incomprehensibility." (Swomley Aff. Ex. 14: Disney Coverage, dated Sept. 15, 2001.)
In 2002, Disney's Miramax Books subsidiary published Summerland, a novel by Pulitzer Prize-winning author Michael Chabon ("Chabon"). Chabon began writing what would eventually evolve into Summerland in 1989 and first developed a baseball theme for the novel in 1999. (Deposition of Michael Chabon, dated Jan. 4, 2005 ("Chabon Dep.") at 76-77.) On January 10, 2001, Miramax Books acquired the rights to Summerland from Chabon. (Swomley Aff. Ex. 20: Letter from Devereux Chatillon to Martin Garbus, Esq., dated Mar. 6, 2003.)
In the autumn of 2002, Chabon appeared on NBC's Today show to publicize his novel. By happenstance, both Shangold and Niederman watched Chabon's Today show interview and concluded that his novel Summerland mirrored their Starmond storyline. (Compl. ¶¶ 54-57; Shangold Dep. at 185-86.) Plaintiffs contacted Menza to convey their concerns and then annotated a copy of Summerland to identify perceived similarities with Starmond. (Shangold Dep. at 186.) Plaintiffs and Menza also created a timeline of Starmond's development and their dealings with Disney that referred to T1, T2 and T3, but not T1a. (Swomley Aff. Ex. 27; Deposition of Claudia Menza, dated Dec. 7, 2004 ("Menza Dep.") at 167.)
In January 2003, Plaintiffs and Menza, through their attorneys, contacted Miramax Books asserting that Chabon used T3 in creating Summerland. (Swomley Aff. Ex. 28: Letter from Chatillon to Garbus, dated Jan. 30, 2003; Swomley Aff. Ex. 22: Facsimile from Menza to Garbus, dated Jan. 28, 2003.) Miramax Books rejected their claim, explaining that Plaintiffs' own timeline indicated that T2 and T3 were delivered to Disney after Miramax Books acquired the rights to Summerland. (Swomley Aff. Ex. 28; see also Swomley Aff. Ex. 27.)
That revelation placed particular importance on when Plaintiffs first conceived a baseball theme for Starmond. Menza informed Plaintiffs' attorneys that Plaintiffs first developed the baseball storyline in 1995 with T1a. (Menza Dep. 171-73, 248.) Menza and Plaintiffs then revised their timeline to reflect the purported creation of T1a in 1995 and forwarded the new timeline to Disney. (Menza Dep. at 169, 171-72, 251-52; Swomley Aff. Ex. 35; Swomley Aff. Exs. 31-32: Letters from Garbus to Chatillon.) Plaintiffs also drafted several plot outlines comparing the Starmond treatments to Summerland, some of which referred to T1a while others did not. (Swomley Aff. Exs. 24-26, 33-34: Plot Outlines.) Certain of those outlines were furnished to Disney. (Swomley Aff. Ex. 20.) By letter dated March 6, 2003, Miramax Books reiterated its position of noninfringement:
As I told you, Summerland came to Miramax Books in a fairly unique way, Michael Chabon's agent, Mary Evans sent around a detailed outline and sample chapters . . . to several publishers as the basis of a book auction in January 2001. No publisher, including us, gave Michael any material, ideas, or anything else concerning the Summerland book proposal -- it all came from Chabon and was a project that Chabon had been working on for several years. While Miramax was not originally among the publishers included in the auction, Miramax Books' President, Jonathan Burnham, persuaded Mary that we should be. We bought the book rights the same night we received the proposal. That was January 10, 2001.
The only treatment that you showed me that has any mention of baseball is your clients' "third" treatment, which was sent to Disney in September of 2001, many months after the book was purchased based on the detailed material from Chabon that we had received. (Swomley Aff. Ex. 20.)
The linchpin of Plaintiffs' misappropriation theory is the baseball theme. Because Plaintiffs contend that T1a was the earliest introduction of a baseball storyline, the time of its delivery to Disney is critical to their claims. There is no evidence, apart from Plaintiffs' deposition testimony and their revised timeline, that they sent T1a to Disney in 1995. To the contrary, there is voluminous, independent and irrefutable evidence that Plaintiffs did not create T1a at that time.
Nevertheless, confronted with overwhelming evidence that T1a was fabricated for this litigation, Shangold and Niederman persist with only self-serving ipse dixits that they created T1a in 1995. Indeed, Plaintiffs go so far as to assert that PalmPilot wireless capability was commonplace in the spring of 1995. (Niederman Dep. at 98.) Defendants submit uncontroverted evidence that it was not. (Swomley Aff. Ex. 37.) Defendants have demonstrated clearly and convincingly that Plaintiffs engaged in a fraud by fabricating T1a, a timeline and plot outlines and then bolstering that false evidence with perjurious testimony.
This Court has the inherent power to do whatever is reasonably necessary to deter abuse of the judicial process and assure a level playing field for all litigants. See Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991) (A court has authority to "manage [its] own affairs so as to achieve the orderly and expeditious disposition of cases." (internal quotation and citation omitted)); Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1117-18 (1st Cir. 1989); Martina Theatre Corp. v. Schine Chain Theatres, Inc., 278 F.2d 798, 801 (2d Cir. 1960). Indeed, "tampering with the administration of justice . . . involves far more than an injury to a single litigant. It is a wrong against the institutions set up to protect and safeguard the public, institutions in which fraud cannot complacently be tolerated consistently with the good order of society." Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246 (1944); see also Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1325 (2d Cir. 1995) ("The concept of 'fraud on the court' embraces only that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases." (internal quotation and citation omitted)); Gleason v. Jandrucko, 860 F.2d 556, 559 (2d Cir. 1988) ("[F]raud on the court . . . threatens the very integrity of the judiciary and the proper administration of justice.").
Fraud on the court must be established by clear and convincing evidence. See Aoude, 892 F.2d at 1118; Scholastic, Inc. v. Stouffer, 221 F. Supp. 2d 425, 439 (S.D.N.Y. 2002); McMunn v. Mem'l Sloan-Kettering Cancer Center, 191 F. Supp. 2d 440, 445 (S.D.N.Y. 2002). Whether dismissal is appropriate as a sanction is within the discretion of the district court. See Dodson v. Runyon, 86 F.3d 37, 39 (2d Cir. 1996). The Second Circuit, however, has "long recognized that dismissal is a harsh remedy, not to be utilized without a careful weighing of its appropriateness . . . [and] repeatedly noted that one of the factors that should inform a trial court's decision is the suitability of lesser sanctions." Dodson, 86 F.3d at 39; Cerruti 1881 S.A. v. Cerruti, Inc., 169 F.R.D. 573, 583 (S.D.N.Y. 1996). "Because dismissal sounds the death knell of the lawsuit, district courts must reserve such strong medicine for instances where the defaulting party's conduct is correspondingly egregious." Aoude, 892 F.2d at 1118 (internal quotation and citation omitted). In determining the appropriate sanction for fraud on the court, courts in this district have considered: "(1) whether the misconduct was the product of intentional bad faith; (2) whether and to what extent the misconduct prejudiced the other party; (3) whether there is a pattern of misbehavior, rather than an isolated instance; (4) whether and when the misconduct was corrected; and (5) whether further misconduct is likely to continue in the future." McMunn, 191 F. Supp. 2d at 446; see also Stouffer, 221 F. Supp. 2d at 444. "[W]hen a party lies to the court and his adversary intentionally, repeatedly, and about issues that are central to the truth-finding process, it can fairly be said that he has forfeited his right to have his claim decided on the merits." McMunn, 191 F. Supp. 2d at 445.
In their Complaint, Plaintiffs allege that in 1995, they created T1a to add a baseball storyline to T1 and then in June of that year, submitted both T1 and T1a to Disney.
(Compl. ¶¶ 29-33.) Both Shangold and Niederman reiterated that claim during their depositions. (See Shangold Dep. at 22-24, 63, 72, 242-43; Niederman Dep. at 41, 134.) Plaintiffs perpetuated their fraud on this Court by including references to T1a in their revised timeline and plot outlines. (See Swomley Aff. Exs. 33-35.) Plaintiffs' machinations might have gone undetected were it not for their casual references to a technological device that was unknown at the time they claimed to have drafted T1a. The six separate references to a "Palm Pilot" in T1a, supposedly submitted to Disney with T1 in June 1995, reveal that those crucial notes were manufactured long after Plaintiffs claim to have written them. (See Swomley Aff. Ex. 29.)
The independent evidence establishes that not only was the Pilot unknown to the public in June 1995, it was unknown within Palm, which referred to the product internally as the Taxi. (See Haitani Dep. at 16; Haitani Decl. ¶ 6; Piloting Palm 128.) This handheld personal organizer was not introduced to the public until Palm participated in a tradeshow in January 1996. (See Haitani Dep. at 16-18; Haitani Decl. ¶ 7; Piloting Palm 135-38.) Moreover, the first shipment of Pilots was not ready until April 9, 1996, nearly one year after Plaintiffs allegedly sent T1a to Disney. (See Piloting Palm 150.)
Plaintiffs offer nothing to refute this evidence. Instead, they obfuscate with a non sequitur that Palm sold an earlier version of the handheld device known as a "Zoomer" in 1993. That argument ignores the fact that T1a does not mention a Zoomer, but refers six times to a "Palm Pilot." Plaintiffs also point to certain presales of Pilots discussed in Piloting Palm. Here again, Plaintiffs' argument is unavailing because presales of Pilots did not occur until the end of 1995 and early 1996. (See Piloting Palm 132; Haitani Decl. ¶ 7.)
That the term "Palm Pilot" did not exist in the English lexicon in June 1995 is compelling evidence that T1a did not exist at that time. This is particularly poignant in view of Plaintiffs' testimony that they expected their audience to know what a "Palm Pilot" was. (Niederman Dep. at 99.) But that is not the only evidence. Shangold's June 16 letter and the executed submission agreement make no reference to T1a. Further, Plaintiffs' explanation that they did not have time to type T1a is not credible. The notion that Plaintiffs would not memorialize their baseball storyline in a typewritten treatment, the submission agreement or in Shangold's transmission letter cannot be explained. (Transcript of Oral Argument on July 15, 2005 at 24-26.)
This leads the Court ineluctably to conclude that Plaintiffs fabricated evidence and manipulated the judicial process. Their egregious conduct was prolonged and calculated to advance their claims. Even now, in the face of indisputable evidence, Plaintiffs do not relent. Because Shangold and Niederman have tainted evidence at the heart of their dispute with Defendants and then sought to conceal it, they have forfeited their right to litigate this case and no sanction short of dismissal will suffice to deter future misconduct. McMunn, 191 F. Supp. 2d at 445; see also Stouffer, 221 F. Supp. 2d at 440.
Defendants also seek an award of attorneys' fees. It is within this Court's discretion "to fashion an appropriate sanction for conduct which abuses the judicial process." Chambers, 501 U.S. at 44-45; see also Dodson, 86 F.3d at 39. For more than two years, Plaintiffs have imposed substantial burdens on Defendants including attorneys' fees, costs and the attendant inconvenience and distraction of defending this litigation. Accordingly, this Court concludes that an award of attorneys' fees and costs is appropriate in an amount to be determined upon further submissions from the parties. See Stouffer, 221 F. Supp. 2d at 444 (award of attorneys' fees and costs "appropriate given the fact that [defendant] has engaged in a pattern of intentional bad faith conduct and failed to correct her fraudulent submissions, even when confronted with evidence undermining the validity of those submissions"); Cerruti, 169 F.R.D. at 584 (attorney fees' and costs appropriate because "defendants' conduct led plaintiffs' counsel on an arduous chase"); see also McMunn, 191 F. Supp. 2d at 462.
For the foregoing reasons, Defendants' motion to dismiss this action with prejudice is granted. Further, this Court awards attorneys' fees and costs to Defendants in an amount to be determined after further submissions.
WILLIAM H. PAULEY III U.S.D.J.