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Anderson News, L.L.C. and Lloyd v. American Media

April 23, 2013


The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge:


Plaintiffs Anderson News, L.L.C. and Lloyd Whitaker (collectively, "Anderson") filed an Amended Complaint on September 7, 2012, alleging that "After business hours on or about January 29, 2009, key employees of certain defendants -- ostensible competitors -- including Dennis Porti [("Porti")] of [Curtis Circulation Company ("Curtis")] and Michael Cvrlje [("Cvrlje")] of [Time/Warner Retails Sales & Marketing, Inc. ("TWR")], met at [Hudson News Distributors L.L.C.'s ("Hudson")] office in North Bergen, New Jersey. David Parry [("Parry")] of [The News Group, LP ("News Group")] -- a competitor of Hudson -- and John Rafferty [("Rafferty")] of [Distribution Services, Inc. ("DSI")], also were present at that January 29 meeting at Hudson's offices." (Am. Compl. at ¶ 63 ("Paragraph 63").) Defendants contend that there is no evidentiary support for Anderson's allegation, that it is false, and that, despite repeated requests from Defendants, Plaintiffs have refused to retract it. Defendants now move to strike Paragraph 63 and to sanction Anderson and its counsel, pursuant to Federal Rule of Civil Procedure 11(b)(3). Anderson responds that the Court should impose Sanctions upon Defendants for bringing a frivolous motion. For the following reasons, both motions are denied.


On March 16, 2009, Anderson, a magazine wholesaler, commenced this action by filing its initial complaint against Defendants -- magazine publishers, distributors and wholesalers -- alleging that Defendants engaged in anti-competitive conduct in violation of 15 U.S.C. §§ 1 and 15, and asserting various common-law claims. On January 26, 2010, TWR told Anderson that paragraph 55 of its Complaint*fn1 ("Paragraph 55") was not true, and requested either that it be withdrawn or that Anderson confirm that there was a sufficient basis for the allegation contained therein. TWR also informed Anderson that it would be willing to discuss the allegation further if Anderson provided additional details regarding the alleged meeting. (Wilson Decl. Ex. A.) In a February 2010 phone call with TWR, Anderson identified Cvrlje, senior vice president of sales and logistics at TWR, as a participant at the meeting and stated that it occurred on January 29, 2009. (Wilson Decl. at ¶ 4.) On March 8, 2010, TWR advised Anderson that Cvrlje denied attending the meeting and provided a copy of his E-Z Pass records for the day in question. (Wilson Decl. Ex. B.) Anderson continued to stand by the allegation, noting that the E-Z Pass records did not "conclusively establish that Crvlje was not present at the Bergen meeting" and that Crvlje "could have participated by telephone or video conference." (Wilson Decl. Ex. C.)

In April 2010, Hudson requested that several of Anderson's allegations, including Paragraph 55, be withdrawn. (See Wilson Decl. Ex. D.) Anderson responded that it had "revisited and investigated" the bases of its allegations and, in relevant part, and it continued to stand by its assertions in Paragraph 55. (Id.)

This Court dismissed the Complaint on August 2, 2010. Anderson News, L.L.C. v. Am. Media, Inc., 732 F. Supp. 2d 389 (S.D.N.Y. 2010). On August 16, 2010, Anderson moved for reconsideration of the dismissal and filed a proposed amended complaint, which contained an assertion almost identical to Paragraph 63, quoted infra. DSI wrote to Anderson on September 7, 2010, stating that Rafferty, national marketing director for DSI, could not have attended the meeting on January 29, 2010 because he had undergone heart surgery one week earlier, had only been released from the hospital on January 28, 2010, and did not return to work until March 2, 2009. (Keyko Decl. Ex. A.) On September 18, 2010, DSI provided Anderson with Rafferty's affidavit, stating that on January 29, 2009, he "remained at home recovering," was "under doctor's orders not to attend to work and was in no condition to do so," and that he "did not attend an alleged business meeting in New Jersey on January 29, 2009." (Keyko Decl. Ex. B.) On September 22, 2010, Anderson agreed to amend its allegation to state that the meeting occurred "on or about January 29, 2009," rather than on January 29, 2009 and that it would "reconsider" DSI's request if DSI submitted additional affidavits with fuller details. (Keyko Decl. Ex. C.) In response, DSI provided Anderson a September 30, 2010 affidavit from Michael Porsche ("Porsche"), president of DSI, who denied attending the meeting personally and wrote that he asked "every DSI employee who likely might have attended such a [sic] alleged meeting . . . had one occurred," but that each such employee had denied their attendance. (Keyko Decl. Ex. D.) Nevertheless, Anderson continued to stand by its allegation. (See Wilson Decl. Ex. E.)

The Second Circuit reversed this Court's dismissal of the case on April 3, 2012, and found that Anderson's proposed amended complaint was "sufficient to make Anderson's antitrust claim plausible." Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 189 (2d Cir. 2012). On September 7, 2012, Anderson filed its Amended Complaint, containing Paragraph 63. TWR wrote to Anderson on October 4, 2012, requesting that Anderson withdraw Paragraph 63, or face Rule 11 sanctions. (Wilson Decl. Ex. G.) On October 24, 2010, Anderson refused, stating that Paragraph 63 was "based on, among other things, information provided by a credible, confidential witness" (Wilson Decl. Ex. H), which, upon request, it refused to identify.*fn2

(Wilson Decl. Ex. K.)

On November 5, 2012, Defendants filed the instant motion and accompanying affidavits, seeking to strike Paragraph 63 and to impose sanctions on Anderson. Specifically, Cvrlje's affidavit stated that during the relevant time period, he did not visit Hudson's office; did not attend, "in person or otherwise," any meetings with any representative of Curtis or DSI; and although he did meet and speak with representatives of Hudson and News Group, he never spoke or met with representatives of Hudson and News Group together. (Cvrlje Aff. ¶¶ 4-6.) James Cohen, president of Hudson, and Ronald Clark, chief operating officer of Hudson, stated they were not aware of any meeting on or about January 29, 2009, between the individuals identified in Paragraph 63 at Hudson's office, nor were they aware of any Hudson employees or representatives attending such a meeting. (Cohen Aff. ¶¶ 4. 6; Clark Aff. ¶¶ 4. 6.) Finally, Porti, president of Curtis, stated that he did not attend "any . . . meeting of the type alleged in Paragraph 63," nor is he aware of any other Curtis employee or representative attending or participating in such a meeting. (Porti Aff. ¶¶ 4-7.) An additional affidavit was submitted to the Court on February 5, 2013, from Parry, president of News Group, stating that he did not attend or participate in a meeting on or about January 29, 2009 at Hudson's offices, nor has he ever attended a meeting at which Porti, Cvrlje, and Rafferty were present. (Parry Aff. ¶¶ 3-4.)

In January 2013, Anderson disclosed that Paragraph 63 was based upon information provided by James Gillis ("Gillis"), with whom Anderson had repeatedly met and corresponded throughout the time period in which Defendants challenged the veracity of Paragraph 63 (Gorecki Decl. ¶¶ 12, 16, 20, 22-23, 29; Gorecki Decl. Ex. G; Gorecki Supp. Decl. ¶¶ 8-9), and provided Defendants with a copy of an affidavit submitted by Gillis. (Hr'g Tr. at 7, Jan. 9, 2013; see also Gillis Aff.) Gillis currently works as a consultant to magazine publishers, wholesalers and retailers, and previously served as the president of Source Interlink Companies, Inc., a subsidiary of which is a magazine wholesaler ("Source Interlink"). (Gillis Aff. ¶¶ 1-2.) Gillis first learned of the alleged meeting in 2009 from Michael Sullivan ("Sullivan"), who was then the chief executive officer of a magazine distributor, and is currently the president and chief executive officer of Source Interlink. (Id. at ¶ 6.) Subsequently, Gillis spoke to Cvrlje, Parry and Porsche, none of whom denied that the meeting had occurred. (See id. at ¶¶ 7, 9; Gillis Dep. at 59-62.) Despite numerous requests from Anderson over several years, Gillis declined to identify Sullivan as the source of his information until September 27, 2012, describing his source only as a "well-placed, very knowledgeable, 'high ranking' executive in the . . . magazine industry, with whom he had been good friends for many years." (Gorecki Supp. Decl. ¶¶ 4-5.)

The Court directed expedited discovery with respect to Paragraph 63, including the deposition of Gillis, which took place on January 29, 2013. (See Hr'g Tr. at 17-18.) Following the Gillis deposition, both parties submitted supplemental briefs on the cross-motions for sanctions. Defendants also submitted an affidavit from Sullivan denying that he told Gillis that the alleged meeting occurred, who attended it, or having any knowledge of its occurrence or who might have attended it. (Sullivan Aff. ¶ 4.) He did, however, acknowledge "mention[ing] to Mr. Gillis that [he] had heard a rumor that a meeting had taken place in or around the Hudson News offices." (Id.)


I.Motion to Strike Paragraph 63

Motions to strike, which may be made pursuant to Fed. R. Civ. P. 12(f), are "disfavored" and "granted only if 'there is a strong reason to do so.'" Roe v. City of N.Y., 151 F. Supp. 2d 495, 510 (S.D.N.Y. 2001) (quoting Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976)). The movant bears the burden of demonstrating that "'(1) no evidence in support of the allegations would be admissible; (2) that the allegations have no bearing on the issues in the case; and (3) that to permit the allegations to stand would result in prejudice to the movant.'" Id. (quoting Koch v. Dwyer, No. 98 Civ. 5519, ...

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