Opinion
109358/2008.
Decided September 15, 2008.
Patton Boggs LLP, By: Philip M. Smith, Esq., New York NY, for the Petitioner.
Paul, Weiss, Rifkind, Wharton Garrison LLP, By: Hallie S. Goldblatt, Esq., New York NY, for the Respondent.
In this special proceeding, petitioner seeks an order permitting pre-action discovery pursuant to CPLR 3102 (c). For the reasons which follow, the petition is granted as set forth below.
Petitioner is a co-founder, a shareholder, and a former member of the board of directors of Global Cash Access Holdings, Inc. (GCAH), a public company listed on the New York Stock Exchange. Respondent Deloitte Touche LLP ("Deloitte") is the outside auditor for GCAH. In about November 2007, petitioner learned from members of the GCAH Audit Committee that they had been informed by Deloitte representatives that Deloitte had received information suggesting that GCAH had engaged in improper business transactions, and that he himself was suspected of being involved in serious wrongdoing and in criminal activities (Pet. ¶¶ 3-6). Deloitte threatened to withdraw as GCAH's auditor unless an independent internal investigation was completed to Deloitte's satisfaction (Pet. ¶ 8). The GCAH Audit Committee retained Skadden Arps Slate Meagher Flom LLP to conduct the independent investigation (Pet. ¶ 9). That investigation found no evidence of petitioner having engaged in wrongful conduct or that he was a suspect or under investigation by law enforcement officials (Pet. ¶ 11).
According to respondent's attorney, in November 2007 Deloitte came into possession of an official FBI intelligence bulletin which contained serious allegations of improper conduct by GCAH, and allegations that petitioner had engaged in serious criminal activity (Goldblatt Aff. ¶ 4). Deloitte obtained the document from a source having "a clear interest in ensuring that [GCAH] was not engaged in misconduct" (Goldblatt Aff. ¶ 6). When Deloitte sought to authenticate the document, it was informed by the United States Attorney's Office that the bulletin was for official use only and should not have been distributed outside of law enforcement (Goldblatt Aff. ¶ 8). Deloitte was instructed initially not to provide GCAH with a copy of the bulletin nor identify the FBI as the maker of the document (Goldblatt Aff. ¶ 9).
Petitioner believes he has been seriously defamed and intends to commence litigation seeking damages against the persons who published the defamatory statements (Pet.. ¶¶ 7, 12). He argues he has a claim of defamation per se, because the statements charged him with serious crimes and injured him professionally (Memo of Law 4, citing Liberman v Gelstein, 80 NY2d 429). He contends that the accusations of serious professional wrongdoing and criminal activity have been determined to be without foundation, and that the source of the document did not attempt to verify the truth before turning it over to Deloitte. He has sought a copy of the document from Deloitte, as well as the identity of the source.
Deloitte has refused to provide petitioner with the identity of the source of the statements or with the FBI bulletin, and has been repeatedly told by the U.S. Attorney's Office and the FBI not to produce the bulletin or to describe it other than as now described herein (Goldblatt Aff. ¶¶ 13, 15-18). In addition, a July 29, 2008, letter from the FBI General Counsel to Deloitte's attorney demanded to be immediately informed if Deloitte is directed to produce the document, and further demands the document's return and the destruction of all copies (Goldblatt Aff. 19). However, petitioner's attorney was recently informed by one of the FBI contacts referred to in Deloitte's papers, that the FBI is aware of the instant proceeding and "has no present intention of intervening" (Harrison Aff. ¶¶ 3-4).Indeed, as of today, the FBI has not sought to intervene in this proceeding.
Petitioner seeks an order compelling respondent to identify the name and address of the source, to produce the document, and to maintain the confidentiality of the defamatory statements until petitioner reveals them (Petitioner's Reply Memo of Law at 10).
A petition for pre-action discovery should be granted only when the petitioner demonstrates a meritorious cause of action and that the information sought is material and necessary to the actionable wrong ( Holzman v Manhattan Bronx Surface Trans. Oper. Auth., 271 AD2d 346, 346 [1st Dept. 2000]). Pre-action discovery is available for the petitioner to assist in framing a complaint or identifying a prospective defendant ( Application of Dack, 101 Misc 2d 490, 494 [Sup. Ct., Monroe County 1979], citing 7 Carmody-Wait 2d, NY Prac, § 42:13, p 23). When discovery is sought so as to identify a prospective defendant or to help frame a complaint, the petitioner must show a good cause of action by affidavit ( Application of Dack, at 494, citing 3A Weinstein-Korn-Miller, NY Civ Prac, par 3102.14; L-Tron Corp. v Davco Systems, 60 AD2d 25, 28 [4th Dept. 1977]).In New York, there are six elements that must be established to successfully plead defamation: (1) a defamatory statement of fact, (2) regarding the plaintiff, (3) published to a third party by the defendant, (4) which is false, (5) made with some degree of fault, (6) and causes injury (2 NY PJI2d 3:23, at 200 [2008]). Even where a statement is defamatory, the courts recognize that the public interest is served by shielding certain communications from litigation, rather than risk their never being stated ( Liberman v Gelstein, 80 NY2d 429, 437, citation omitted). Thus, an affirmative defense to a claim of defamation is that the statement was made on a privileged occasion.
A statement may be qualifiedly or conditionally privileged when it is "made by one person to another upon a subject in which both have an interest" ( Liberman v Gelstein, at 437, citing Stillman v Ford, 22 NY2d 48, 53). This common interest privilege arises when the speaker makes a "good-faith, bona fide communication upon a subject in which he or she has an interest, or a legal, moral or societal interest to speak, and the communication is made to a person with a corresponding interest" ( Grier v Johnson, 232 AD2d 846, 847 [3d Dept. 1996]; see, Park Knoll Assocs. v Schmidt, 59 NY2d 205, 210 [2d Dept. 1982]). The interest "must be expressed in a reasonable manner and for a proper purpose'" ( Toker v Pollak, 44 NY2d 211, 219, quoting Prosser, Torts [4th ed], § 115, p. 786). The privilege will be lost where the statement was not made for its stated purpose or if it was made with malice, that is to say with ill will, spite, or culpable recklessness ( Shapiro v Health Ins. Plan of Greater NY, 7 NY2d 56, 61).
Deloitte contends that the source who provided the bulletin shares a common interest with Deloitte and with the GCAH Audit Committee in investigating the allegations made in the bulletin, "particularly as the alleged wrongdoing concerned GCAH and implicated [Deloitte's] professional obligations as its outside auditor." (Respondent Memo of Law at 8). It argues that the communication is thus privileged and may not form the basis of an action for defamation. It also argues that the communication is "exactly of the type" that is protected by the privilege, citing Liberman v Gelstein, supra, 80 NY2d 429 (statements about landlord between two tenants were in common interest of building's board of governors); Dillon v City of NY, 261 AD2d 34 (1st Dept. 1999) (statements about employees prepared for internal employee reviews); Grier v Johnson, supra, 232 AD2d 846 (statements by police officer to campus authorities about individual known to be a drug user protected by common interest in campus safety); Moore v Dormin, 252 AD2d 421 (1st Dept.), lv denied 92 NY2d 816 (1998).
Petitioner is, of course, at a great disadvantage in opposing this branch of Deloitte's motion, as he is forced to rely on the assertion of Deloitte that the source of the FBI document has a common interest with Deloitte and with GCAH. Deloitte has produced the FBI intelligence bulletin, as well as a description of the source, to the court for an in camera review. Upon review, the court finds that the description of the contents of the document set forth in respondent's papers is accurate. In addition, the contents of the bulletin c ould support an argument that the source identified as providing the bulletin to Deloitte shares an interest with Deloitte in the allegations contained in the bulletin as concern GCAH. However, the allegations in the bulletin concerning petitioner go beyond the allegations of wrongdoing by GCAH. It is speculative to suggest that the source and Deloitte shared a common interest as concerns petitioner himself. Any common interest can be spelled out as part of an affirmative defense by the defendants in the action.
Deloitte's additional argument that petitioner has not alleged that the bulletin was conveyed through malice or that it was known that the contents of the bulletin were false as concerns petitioner, is somewhat disingenuous, given that petitioner currently has insufficient knowledge to make such arguments, and will not be addressed.
Deloitte's second argument that disclosure of the identity of the source and production of the document would violate public policy which seeks to protect whistleblowers and confidential informants, is also unavailing. This argument properly belongs to the FBI, which has not sought intervention in this proceeding ( see Cirale v 80 Pine St. Corp., 35 NY2d 113, 118-119 [holding that a determination that the public interest privilege should apply "requires that the governmental agency must come forward and show that the public interest would indeed be jeopardized by a disclosure of information"]). Deloitte's reliance on the reasoning in John Z. v The Superior Court of Contra Costs County, 1 Cal. App. 4th 789 (Ct.App., 1st Dist. 1991), involving a utility company, is not persuasive (Respondent Memo of Law at 11-12). In John Z., the appellate court described the court's "broad authority" to protect the identities of informants whose safety would be jeopardized by disclosure, and after undertaking a balancing test of the competing interests, found that in this particular instance, the threat of danger to an informant who had advised Pacific Gas and Electric Company of alleged fraud by the company's contractors, outweighed the "meager showing" by the contractors as to why they needed to know the informant's name. Here, Deloitte has not posited any threat of danger, nor has the FBI intervened to make such a claim. Although Deloitte argues that individuals might be chilled from approaching a company's outside auditor with information relevant to a public company's reporting or other legal obligations (Respondent Memo of Law at 11), on balance the petitioner should be granted access to the information necessary to frame his complaint and to identify the correct defendant. Accordingly, it is
ADJUDGED that the petition is granted as follows:
Respondent is directed to provide petitioner with both a copy of the FBI intelligence bulletin at issue, and the name and address of the source as identified in the document submitted for in camera review, within ten (10) days of service of notice of entry of this order, and is further ordered to maintain the confidentiality of the contents of the FBI bulletin until such time that petitioner reveals them; and it is further
ORDERED that all proceedings are stayed for fifteen (15) days after entry of this order so that respondent may inform the FBI that it has been ordered to produce the bulletin. Upon expiration of the stay, respondent's counsel should contact the Part Clerk to retrieve the copy of the bulletin produced for in camera review.
The foregoing shall constitute the decision, order and judgment of this court. Courtesy copies of this decision are being mailed to counsel.