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Janet Baker and James Baker v. Goldman Sachs & Co.

February 15, 2012

JANET BAKER AND JAMES BAKER, PLAINTIFFS-APPELLANTS,
v.
GOLDMAN SACHS & CO., GOLDMAN SACHS GROUP, INC., AND GOLDMAN SACHS & CO., LLC, DEFENDANTS-APPELLEES,



Appeal from an order entered by the United States District Court for the Southern District of New York Barbara Jones, Judge, granting a motion to quash a subpoena pursuant to New York's journalists' "Shield Law." We affirm.

The opinion of the court was delivered by: Winter, Circuit Judge:

11-1591-cv

Baker v. Goldman Sachs & Co., et al.

Argued: August 23, 2011

JESSE EISINGER, Non-Party Movant-Appellee.

19 Before: WINTER, MINER, and HALL, Circuit Judges.

15 James and Janet Baker appeal from Judge Jones's quashing of 16 a subpoena directed to Jesse Eisinger, a former Wall Street 17 Journal ("WSJ") reporter. Her decision was based on New York's 18 journalists' Shield Law, New York Civil Rights Law § 79-h. We 19 affirm.

20 New York's Shield Law provides journalists an absolute 21 privilege from testifying with regard to news obtained under a 22 promise of confidentiality but only a qualified privilege with 23 regard to news that is both unpublished and not obtained under a 24 promise of confidentiality. N.Y. Civ. Rights Law § 79-h(b)-(c) 25 (McKinney 2011). It is the qualified privilege that is at issue 26 on this appeal.

27 Under this privilege, reporters "who, for gain or 28 livelihood, [are] engaged in . . . writing . . . news intended 29 for a newspaper" are protected from coerced disclosure of "any 30 unpublished news obtained or prepared . . . in the course of 31 gathering or obtaining news . . . , or the source of any such 2 1 news, where such news was not obtained or received in 2 confidence." N.Y. Civ. Rights Law §§ 79-h(a)(6), (c); 3 Guice-Mills v. Forbes, 819 N.Y.S.2d 432, 434 (N.Y. Sup. Ct. 2006) 4 ("[The] Shield Law[] protects professional journalists from 5 contempt citations when they refuse to disclose information 6 obtained by them during the course of their reporting."). The 7 qualified privilege applies only to unpublished information.

8 A party seeking unpublished "news" may overcome the 9 qualified privilege by making "a clear and specific showing that 10 the news: (i) is highly material and relevant; (ii) is critical 11 or necessary to the maintenance of a party's claim, defense or 12 proof of an issue material thereto; and (iii) is not obtainable 13 from any alternative source." N.Y. Civ. Rights Law § 79-h(c).

14 To determine that unpublished news is either "critical or 15 necessary within the meaning of § 79-h, there must be a finding 16 that the claim for which the information is to be used virtually 17 rises or falls with the admission or exclusion of the proffered 18 evidence." In re Application to Quash Subpoena to Nat'l Broad. 19 Co., 79 F.3d 346, 351 (2d Cir. 1996) (internal quotation marks 20 omitted) (also stating that the critical or necessary clause must 21 mean something more than "useful"). "The test is not merely that 22 the material be helpful or probative, but whether or not . . 23 the action may be presented without it." In re Am. Broad. Cos., 24 735 N.Y.S.2d 919, 922 (N.Y. Sup. Ct. 2001) (internal quotation 25 marks omitted).

1 The underlying action in this matter was brought by the 2 Bakers against Goldman Sachs & Co., et al., and is currently 3 ongoing in the District of Massachusetts. The Bakers' claims 4 arose out of Goldman's service as the Bakers' financial advisor 5 in a June 2000 sale of their company, Dragon Systems ("Dragon") 6 to Lernout & Hauspie ("L&H") in exchange for L&H stock that soon 7 became worthless. The Bakers' various legal theories assert that 8 Goldman breached a duty to discover an accounting fraud at L&H. 9 In particular, they claim that Goldman failed to exercise proper 10 diligence in investigating and analyzing both L&H's customer 11 relationships and a significant spike in L&H's revenue from Asian 12 customers before its acquisition of Dragon.

13 The Bakers seek to depose Eisinger regarding two articles 14 published in the WSJ. The first article, which he authored 15 alone, was published on February 16, 2000 -- just before the 16 L&H/Dragon deal was announced in March -- and principally quoted 17 a Lehman Brothers analyst who raised concerns about L&H's 18 earnings and stock valuation.

19 The second article, published in August 2000, was written by 20 Eisinger and several co-authors and concerned L&H's Asian 21 earnings. It stated that L&H's CEO had "volunteered the names of 22 about a dozen Korean customers" in May "while being questioned 23 about Asian sales by a reporter," and "[s]ubsequently, the 24 company disclosed more names" to the WSJ. App. 58. It also 25 reported that the WSJ contacted and received responses from 13 of 4 1 the approximately 30 customers supplied by L&H and found that 2 "some companies that L&H [had] identified as Korean customers 3 [said] they [did] no business at all with L&H. Others [said] 4 their purchases [had] been smaller than L&H says." Although the 5 article identified many of the companies that responded and 6 described the responses, it did not provide specifics concerning 7 the ...


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