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In re Application of Morgan Keegan & Co., Inc.

Supreme Court, New York County

March 2, 2012

In the Matter of the Application of Morgan Keegan & Co., Inc., Petitioner
Peter Eavis, Respondent.

For Petitioner Ira J. Hammer Esq. Schwartz Simon Edelstein & Celso LLC.

For Respondent Carolyn K. Foley Esq. Davis Wright Tremaine LLP.

Lucy Billings, J.


On March 8, 2011, upon petitioner's ex parte application, the court (Silver, J.) ordered Peter Eavis, a journalist residing in New York, to comply with a subpoena to testify at a deposition in New York in an action in New Jersey Superior Court, Fairfax Holdings Ltd., et al. v. S.A.C. Capital Mgt., LLC, et al. Fairfax Holdings is a publicly traded Canadian insurance corporation. Petitioner, a Tennessee investment bank, and its employee John Gwynn are two of the multiple defendants named in the New Jersey action, commenced in 2006. In early 2011, the New Jersey Superior Court authorized petitioner to seek Eavis's deposition. Eavis now moves to quash the subpoena for his deposition.

In the New Jersey action, the plaintiff Fairfax Holdings claims that all the defendants, including petitioner here and its employee Gwynn, acted in concert to disseminate false information about Fairfax Holdings' finances and the value of its stock to the financial media, so as to profit by short selling the stock. The latest amended complaint in the New Jersey action, the Third Amended Complaint dated July 27, 2008, refers to seven articles minutely scrutinizing and raising questions about Fairfax Holdings' finances that appeared between January and mid-May 2003 under Eavis's byline on, a financial news and analysis website. The Third Amended Complaint further alleges that information about Fairfax Holdings provided to originated either with petitioner's employee Gwynn or with co-defendants designated the Rocker defendants and that the co-defendant David Rocker held a financial interest in the website.

Petitioner presents the seven articles by Eavis between January and mid-May 2003 in opposition to Eavis's motion to quash the subpoena. Three of the articles, dated February 3, February 12, and March 12, 2003, cite negative information and negative views about Fairfax Holdings as reported by Gwynn.

The journalist Eavis is not a party to the New Jersey action and has not otherwise been sued for defamation by any of the parties to that action. The limitations period of one year for defamation actions in both New York and New Jersey has expired. C.P.L.R. § 215(3); N.J. Stat. Ann. § 2A:14-3. Neither has Fairfax Holdings named him as a participant in the conspiracy alleged in the New Jersey action, nor has petitioner sought to implead him as a third party defendant in that action.


Eavis has moved to quash petitioner's subpoena and for a protective order pursuant to C.P.L.R. § 3103, New York Civil Rights Law § 79-h, and New Jersey Statutes Annotated § 2A:84A-21(b). Under New Jersey law, a reporter's journalistic privilege is absolute. Maressa v. New Jersey Monthly, 89 N.J. 176, 189, 445 A.2d 376, 383 (1982).

At oral argument of the motion to quash, the parties stipulated that Eavis would appear with his attorney in response to the subpoena and provide testimony limited to authenticating copies produced by petitioner of articles written by Eavis. He subsequently has complied with that stipulation. Nevertheless, petitioner still seeks to question Eavis on three subjects to which he does not agree.

The disputed areas of inquiry include (1) Eavis's background; (2) the standards, procedures, and practices Eavis employs in writing articles; and (3) whether the opinions in the articles in question were his own opinions and he believed in the accuracy of those opinions. Eavis maintains that these areas of inquiry represent an attempt to circumvent the journalist's privilege afforded him under New York's "Shield Law, " Civil Rights Law § 79-h, to show that he wrote the articles in question in furtherance of the conspiracy against Fairfax Holdings that forms the basis for the New Jersey action. Both parties here recognize that the many other parties in the New Jersey action would be entitled to attend any deposition of Eavis and would not be bound by a stipulation from petitioner and Gwynn restricting the deposition's permissible scope. C.P.L.R. § 3113(c). Hence these other parties' cross-examination of Eavis easily could foil any attempt by the parties here to limit the deposition to subjects not protected by New York Civil Rights Law § 79-h. See Baker v. Goldman Sachs & Co., ___ F.3d ___, 2012 WL 470290 at *4-5 (2d Cir. Feb. 15, 2012).


In New York, a news reporter's qualified privilege regarding non-confidential news gathering materials derives from New York State Constitution Article 1, Section 8, as well as New York Civil Rights Law ยง 79-h, based on a tripartite test "more demanding than the requirements of CPLR ...

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