Galasso Langione & Botter, LLP v Liotti (2008 NY Slip Op 51837(U))

Galasso Langione & Botter, LLP v Liotti

2008 NY Slip Op 51837(U) [20 Misc 3d 1143(A)]

Decided on August 19, 2008

Supreme Court, Nassau County

Palmieri, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

The motion by the defendant pursuant to CPLR 3211(a)(7), or, in the alternative, CPLR 3212 to dismiss the complaint, for a filing injunction and pursuant to 22 NYCRR § 130-1 for sanctions (seq. no. 003) is denied. The cross motion by the plaintiffs pursuant to CPLR 3212(e) for partial summary judgment on the issue of liability and for an immediate trial on damages (seq. no. 004) is denied. The motion by the defendant for recusal/disqualification of this Court and related relief, and pursuant to CPLR 2221 for renewal and reargument of the plaintiffs' motion to strike affirmative defenses and counterclaims, decided by order of this Court dated May 12, 2008, and to strike the plaintiffs' note of issue (seq. no. 005) is granted to the extent that renewal is granted, and upon renewal the Court adheres to its prior determination. The motion is otherwise denied. The cross motion by the plaintiffs pursuant to 22 NYCRR § 130-1 for additional sanctions (seq. no. 006) is denied.Any stays previously granted are vacated and the parties are to proceed as directed in this order.

The factual background of this case was set forth the decision and order of this Court dated May 12, 2008, and will not be repeated here. However, for ease of review the key statements plaintiffs allege in their complaint were made to a newspaper reporter, and attributed to the defendant in Newsday's October 25, 2007 edition, are as follows: [*2]

The Court now turns to the motions and cross motions before it. Given the heated nature of this case, it has elected to review all papers submitted to form as complete a record as possible, including a sur-reply by the defendant.

Recusal (005)

Because that branch of motion no. 005 seeking recusal/disqualification of this Court, if granted, would cause a reassignment of all other applications submitted therewith, it will be addressed first. The plaintiffs oppose the request. It should be noted that this case was randomly assigned to this Court pursuant to court rules after Justice LaMarca recused himself.

Absent a basis for disqualification under Judiciary Law § 14, which concerns a judge's interest in a matter, a judge's actions as counsel to a party, or consanguinity with a party, that judge is the "sole arbiter" as to whether recusal is appropriate. Schwartzberg v Kingsbridge Heights Care Center, 28 AD3d 465 (2d Dept. 2006). The key factor in such a determination should be whether the Court's impartiality might reasonably be questioned. See, Matter of Independence Party State Comm. of State of NY v Berman, 20 AD3d 423 (2d Dept. 2005).

In the present case this Court harbors no ill will towards, nor any desire to aid, any party to this action. Further, and even assuming for purposes of this application the accuracy of every statement made by defendant regarding his history and contacts with the undersigned and with the Court's Law Secretary, nothing points to any animus directed against him by either one, nor any favoritism. The defendant certainly does complain about the decision and order dated May 12, 2008, and even links it to an alleged bias against him, but the proper way to address alleged errors by the Court found therein is by way of a motion to renew or reargue, which has been made and is decided below. An appeal is also available. Accordingly, a recusal here would amount to little more than a shirking of the Court's responsibility to fairly decide matters that come before it, and is therefore denied.

Recusal having been denied, the Court now turns to the substance of the other applications before it. Inasmuch as all such applications are inextricably intertwined and involve the same parties as adversaries, the Court will review all such submissions as a whole, and apply all such submissions as appropriate to the particular motion or cross motion under review, for do otherwise would cause unnecessary gaps in the record of each such application. For example, the defendant has annexed certain motion papers submitted to the Court which led to the May 12 order to his present motion to dismiss and for summary judgment (003), and not to the papers submitted in support of his motion seeking renewal and [*3]reargument (005). It should be noted that because one of the individual plaintiffs and the defendant in the criminal case, Anthony Galasso, are brothers, the Court will occasionally refer to the latter by his first name to avoid confusion.

Renewal and Reargument (005)

That branch of motion no. 005 that is for reargument and renewal is granted to the extent that renewal is granted on the submission of affidavits by Anthony Galasso, and is otherwise denied. Upon renewal the Court adheres to its original determination.

Reargument is denied. The major complaint made by the defendant focuses on the dismissal of his affirmative defense of truth, in that he contends that the Court accepted without question the plaintiffs' allegations in the absence of a hearing, trial or oral argument, and made findings of fact. However, the Court simply applied ordinary summary judgment standards to the motion, in which a prima facie showing made by the plaintiffs concerning the falsity of defendant's statements about them were not met by sufficient opposing proof. It is also relevant to note at this juncture that allegations of defamation actions present, in the first instance, an issue of law for judicial determination. Silsdorf v Levine, 59 NY2d 8, 12-13 (1983), cert denied 464 US 831 (1983); Dillon v City of New York, 261 AD2d 34 (1st Dept. 1999).

The conclusory denials made in the answer, stressed by the defendant here, were not and are not now sufficient to oppose the plaintiffs' motion for summary judgment on the counterclaims and to dismiss affirmative defenses. CPLR 3212(b); see, Gutman v Gutman, 51 AD2d 535 (2d Dept. 1976). Once the burden of proof shifts to the opposing party, there must be evidence to support those denials. See, e.g., Fleet Credit Corp. v. Harvey Hutter & Co., Inc., 207 AD2d 380 (2d Dept. 1994); Toth v. Carver Street Associates, 191 AD2d 631 (2d Dept. 1993). No direct denial of having made the subject statements, by way of affidavit or affirmation, ever was made by the defendant. Further, although the Court did consider the guilty plea of Anthony Galasso this was not the only proof submitted or relied upon in finding that the plaintiffs had made out their prima facie showing that the defendants' statements about them were not true. Thus, the defendant's argument that Anthony Galasso's plea did not exonerate the plaintiffs from all responsibility, even if true, does not amount to a misapprehension on the part of the Court regarding the proof placed before it.

To the extent that the defendant also questions the Court's conclusions regarding his other affirmative defenses and counterclaims, and dismissal of the third-party action against Frederick K. Brewington, there is nothing presented that was not or could not have been advanced at the time of the original motion. See, Foley v Roche, 68 AD2d 558, 567-568 (1st Dept. 1979).

Nevertheless, on this application for reargument the Court will address actual malice as an element of a defamation claim, in that the defendant advances New York Times v Sullivan (376 US 254 [1964]). This is, of course, the landmark case which established the need to demonstrate such malice (defined by the Court as making the defamatory remark with knowledge of its falsity, or in reckless disregard of whether it was true or false) in [*4]certain cases where First Amendment rights were implicated by a defamation action. Id., at 280.

However, in general this standard applies only where allegedly defamatory statements are made regarding public figures. It is true that otherwise private individuals can by their own actions become public figures for the limited purpose of a defamation action. Gertz v Robert Welch, Inc., 418 US 323 (1974); see, Armstrong v Simon & Shuster, 280 AD2d 430 (2d Dept. 2001). If this were the case and plaintiffs were public figures or "limited purpose" public figures, the defendant's claim that his words were not spoken with actual malice would provide him with a defense under New York Times v Sullivan. However, in the instant case the plaintiffs were not public figures, and there is little more than unfounded speculation, as opposed to evidence, that the plaintiffs affirmatively sought out media attention for themselves such that they might be considered "limited purpose" public figures.

Finally, and though not stressed either by the defendant or the plaintiffs, the Court has also considered the possibility that a qualified privilege may have existed stemming from the fact that the defendant was commenting on a matter of public interest or concern. This is a variety of the "common interest" privilege discussed in the prior decision of this Court, which also requires a plaintiff to demonstrate malice, and absent such demonstration can shield a speaker from liability if he or she had a legal, moral or social duty to speak to someone who had a corresponding interest in the matter.^[FN1]

However, statements intended for dissemination as matters of public interest which have been found to be shielded are those made by spokespersons for public officials (Wyllie v District Attorney of County of Kings, 2 AD3d 714 [2d Dept. 2003]; Santivicca v City of Yonkers [2d Dept. 1987]), are made by private individuals at a public forum where the very purpose of the meeting is to air the issues that the speaker addresses (Paskiewicz v National Assn. for Advancement of Colored People, 216 AD2d 550 [2d Dept. 1995]), or are statements that address a matter of larger public concern. See, Sheridan v Carter, 48 AD3d 444, 446 (2d Dept. 2008) [statements presented "within the broader context of the allegedly pervasive abuse and exploitation of domestic workers, a matter of legitimate public concern"]. The Court can find no sound basis for extending this existing law to cover the present case. To do so effectively would mean that almost any public statement made by an attorney regarding a matter that essentially concerns only private parties would carry a qualified privilege. Accordingly, there is no basis for reargument. CPLR 2221(d).

The Court grants renewal based upon the affidavits of Anthony Galasso. ^[FN2] In the exercise of its discretion, the Court will accept these statements in the interests of justice. [*5]See, Adzer v Rudin Mgmt. Co., Inc., 50 AD3d 1070 (2d Dept. 2008); Heaven v McGowan, 40 AD3d 583, 586 (2d Dept. 2007). The initial affidavit is dated March 28, 2008, the same day as the first set of motions were submitted, and thus, although apparently prepared timely, was not placed before the Court. Defendant has also asserted that he initially withheld an affidavit from Anthony because he did not wish to harm the plaintiffs, and that such an affidavit would contain "harmful revelations." Nevertheless, upon review these affidavits are inadequate to change the result of the prior motions.

It is undisputed that Anthony Galasso pled guilty to the entire, multi-count indictment against him. A copy of his February 28, 2008 plea allocution has been submitted. Count one accused him of grand larceny in the first degree, specifically, stealing property "in excess of $1,000,000" from Stephen Baron, a client of plaintiff law firm. He stated that he did this by falsifying bank statements and withdrawing money. Count two accused him of stealing "more than $1,000,000" from the plaintiff law firm itself, the length of which conduct, Liotti told the criminal Court (Peck, J.), would "probably be determined by the length of his employment with the firm which began in the early 90s."

When Anthony was asked by the Assistant District Attorney whether "he did this on his own" with respect to both counts, Liotti objected. However, the Court directed Anthony to answer the question, and he responded "Yes". Later, Liotti stated that "there may be parts of the language in various counts that he disagrees with, but he is agreeing to those elements and pleading guilty to those elements under law with respect to each one of those counts." He also objected to the Assistant District Attorney's inquiry as to whether Anthony was solely responsible, but the Court asked Anthony, "Did anyone help you?" and Anthony answered, "No".

Viewed against this sworn allocution, the Court must reject Anthony's affidavits to the extent they might be read to support the defendant's statement to a reporter in October of 2007 that Anthony "didn't do anything that he was not instructed to do by his superiors", and that "whatever he did, he did with their full knowledge and consent". There is little distinction to be made between this circumstance and another, more common one in civil litigation, where courts routinely reject specific content found in affidavits when a party's statement varies in material respects from testimony given at an earlier examination before trial or hearing. See, Hughes-Berg v Mueller, 50 AD3d 856 (2d Dept. 2008); Central Irrigation Supply v Putnam Country Club Assocs., LLC, 27 AD3d 684 (2d Dept. 2006); Abramov v Miral Corp., 24 AD3d 397 (2d Dept. 2006).

Further, the defendant's argument that Anthony admitted to certain thefts and that he acted alone as to those, but that with respect to "other monies he acted at the direction of the Galasso law firm" finds no evidentiary support in the record, including Anthony's affidavit. While the latter is replete with tales of alleged ethical violations and questionable practices, Anthony nowhere directly states (let alone provides supporting detail) that any other person participated in the actual theft of any client funds, which formed a principal part of the criminal case Liotti was defending at the time he made his statements to the press. [*6]

The other reported statements made by defendant in October 2007, regarding "dipping into company accounts" as being a common practice among the firm's attorneys, and questioning a "straw man" hypothetical denial by the firm that they "never went to a concert or sporting event using this money" are not directly connected to the theft of Mr. Baron's funds. Therefore, even assuming that these latter statements do not directly concern the theft of these particular funds (and that "this money" refers to the other, unidentified "company accounts" and not Baron's), and further assuming that they are true, they would not shield the defendant from the effect of the first two ("Anthony didn't do anything that he was not instructed to do by his superiors. Whatever he did, he did with their full knowledge and consent."). They alone are sufficient to support the defamation claim, as discussed below. Accordingly, Anthony's affidavits, to the extent they are offered to support what Mr. Liotti said about plaintiffs' complicity in the theft of client funds, is contradicted by his own sworn testimony before Judge Peck, and thus is insufficient to change the result of the prior motions. Indeed, as noted above Anthony never directly states here that the plaintiffs consented to or knew about the thefts for which he pled guilty. He says only that he told his attorney about it at the time Mr. Liotti was representing him, which as set forth below is of use to the latter as the opponent of a summary judgment motion, but provides no basis for changing the result of the May 12, 2008 decision and order. The Court therefore adheres to its prior determination.

Given the foregoing, all other relief sought by the defendant in motion sequence no. 005 is denied.

Defendant's Motion to Dismiss/Summary Judgment and Sanctions (003),

Plaintiffs' Motion for Partial Summary Judgment (004)

In support of this motion, brought pursuant to CPLR 3211(a)(7) or, in the alternative, CPLR 3212, the defendant contends that a defamation claim, either as defamation or defamation per se, either is not stated or is without merit. In his moving affidavit, the defendant claims as a factual matter that "if I did make the alleged statement" he did not know the content was false because he was relying on discussions with Anthony, whose own affidavits recite that he gave the defendant the information later repeated. In addition, Liotti states that the statements merely raised questions about the need for further investigation by the District Attorney's Office. He further claims that the plaintiffs themselves helped to generate publicity about the case, and infers that they must have called the press to the courthouse the day the statements were made because neither he nor the District Attorney's Office did so. Finally, he contends that Brewington, plaintiffs' attorney, is motivated by a personal animus against him, and has made use of the press "to further his own ends."

With regard to the law, the defendant contends that the statements do not constitute defamation per se, were not "of and concerning" the plaintiffs, are privileged as made in the courthouse in connection with a judicial proceeding, and that the statements themselves would not be considered defamatory by any reasonable person. [*7]

The plaintiffs cross move for partial summary judgment, alleging that they have made out their prima facie case of defamation per se, and that this case should therefore proceed to trial on the issue of damages only.

Initially, the Court's determination of motion sequence no. 005, upholding its prior decision dated May 12, 2008, means that all the affirmative defenses have been stricken except for the fifth (plaintiffs' reputation already "besmirched" by media accounts indicating it breached fiduciary duties by failing to properly oversee escrow accounts) and ninth (plaintiffs are public figures, and no malice existed on defendant's part). Dismissal of these defenses was not sought by the plaintiffs at the time the initial motions were made.

The elements of a cause of action in defamation are a false statement of and concerning the plaintiff, published without privilege or authorization to a third party, constituting fault as judged by, at minimum, a negligence standard, causing special harm or constituting defamation per se. Salvatore v Kumar, 45 AD3d 560 (2d Dept. 2007); Dillon v City of New York, 261 AD2d 34 (1st Dept. 1999), supra; see also Springer v Viking Press, 60 NY2d 916 (1983).

To the extent the defendant seeks dismissal pursuant to CPLR 3211(a)(7) it is denied. Reading the allegations of the complaint together with the proof submitted by the plaintiffs (see, Guggenheimer v Ginzburg, 43 NY2d 268, 274-275 [1977]) the Court finds that a cause of action in defamation is stated. The Court notes that although the names of the individual plaintiffs were not recited in the subject defamatory remarks, use of the term "superiors" and "attorneys" in describing the alleged wrongdoers, in conjunction with the reference to the "Galasso firm" are sufficient to conclude that the remarks were "of and concerning" all the plaintiffs. Further, the issues of whether these remarks amounted to defamation per se were decided in favor of the plaintiffs on the prior motion to dismiss the second affirmative defense.The bases available to defendant pursuant to CPLR 3212 are contained in the affirmative defenses not dismissed, as set forth above, and, of course, any proof that the plaintiffs cannot make out an element of their claim as a matter of law. With regard to the remaining two affirmative defenses, the ninth cannot be asserted for the reasons set forth above, that is, there is no proof advanced that the plaintiffs were public figures or became limited public figures for the purpose of this litigation by dint of their own actions. Further, to the extent that the defendant relies on the second affirmative defense, no admissible proof that the reputation of the plaintiffs had already been sullied by media accounts other than the defendant's statement is submitted.

In any event, and as discussed above, the allegation that the plaintiffs mishandled client escrow funds or failed to properly supervise the person who did so does not affect so much of the statement that Anthony acted at their instruction and/or consent in stealing money. That is a far more serious charge, and one that is more easily understood by the public at large than violations of the rules for handling escrow accounts. Thus, even assuming that there had been damage done to the plaintiffs' reputation, there is no evidence [*8]at all that before the subject statements were made stories already were in circulation that would cause a third party to believe that they had been involved in the theft itself.

Given the foregoing, the only basis for summary judgment on behalf of the defendant would be admissible proof that he did not act intentionally or recklessly in disseminating the falsehood noted in the preceding paragraph, that is, that the plaintiffs were involved in Anthony's criminal acts, and/or that he was not negligent in failing to ascertain whether or not the plaintiffs were involved before speaking.See, Restatement [Second] of Torts,

§ 580B(d). ^[FN3] The only proof advanced in support of defendant's claim that he did not know that what he was saying was false are Anthony's affidavits, in which Anthony avers that he did tell Liotti, as his attorney, that the plaintiffs were involved.

As indicated above, these statements to his attorney, if made, were later proven false at the plea allocution. On the present record there is an insufficient basis for the Court to find, as a matter of law, that before speaking to the press the defendant had a reasonable basis for believing that what Anthony was telling him about the plaintiffs' involvement in his crime was true. Liotti therefore has not made out a required showing that in repeating these serious charges against the plaintiffs in public he was not acting in a reckless or negligent manner.Accordingly, the Court concludes that the defendant has not made out a prima facie showing that he is entitled to judgment as a matter of law dismissing the action, requiring denial of his motion without regard to the strength of the opposing papers. See, e.g., Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 (1985).

The plaintiffs' motion for partial summary judgment on the issue of liability also is denied. Based upon the record before it, as discussed above, the Court finds that the proof submitted makes out a prima facie case of defamation on behalf of the plaintiffs against the defendant, thus shifting the burden to the defendant to demonstrate that issues of fact exist meriting a trial. GTF Marketing, Inc. v. Colonial Aluminum Sales, Inc., 66 NY2d 965 (1985); Zuckerman v. City of New York, 49 NY2d 557 (1980). Further, the defendant cannot rely on the affirmative defenses asserted by him in his answer, and is not entitled to dismissal of the action.

However, the Court is bound to review defendant's proof more favorably as the opponent of the summary judgment motion than as a proponent, accepting the evidence submitted as true and drawing every reasonable inference in his favor therefrom. Nicklas v Tedlen Realty Corp., 305 AD2d 385 (2d Dept. 2003); Rizzo v. Lincoln Diner Corp., 215 AD2d 546 (2d Dept. 1995). Thus, notwithstanding the defects in Anthony's affidavits, his averment that he told Liotti of plaintiffs' alleged involvement in his acts, combined with Liotti's own implicit denial that at the time they were made he did not know that the statements about the plaintiffs were false, are sufficient to defeat the motion. [*9]

It is well-established that in reviewing motions for summary judgment the Court generally is not to determine matters of credibility, and therefore the state of Liotti's knowledge at the time his statements were made, which bears directly on his recklessness or negligence, cannot be determined on these papers. See generally, Barr v County of Albany, 50 NY2d 247, 254 (1980); James v. Albank, 307 AD2d 1024 (2d Dept. 2003); Heller v. Hicks Nurseries, Inc., 198 AD2d 330 (2d Dept. 1993). This is to be distinguished from the use of Anthony's affidavits to prove that the plaintiffs were in fact involved in his criminal acts, concerning which they are rejected for the reasons stated above.

Further, as no discovery has been conducted, and the attorney-client privilege was not waived by Anthony until submission of the present motions and cross motions, the record is not fully developed with regard to the crucial communications between lawyer and client. Accordingly, disclosure should proceed in this case, as narrowed by this decision and order and the decision and order dated May 12, 2008. The parties are directed to appear for a Preliminary Conference in the basement of the courthouse on September 22, 2008.

The cross motion by plaintiffs for additional sanctions against Liotti (motion seq. no. 006), stemming from his motion for recusal, reargument/renewal and other relief is denied. In view of the Court's review of Anthony's affidavits in support of renewal, motion sequence no. 005 cannot be seen as wholly frivolous.

The stay of the hearing for sanctions as directed in the decision and order dated May 12, 2008, arising from the commencement of the third-party action against the plaintiffs' attorney, is vacated. Upon the plaintiffs' compliance with the Court's directions found in the May 12 order, the parties are to report for the hearing in the Calendar Control Part on October 1, 2008.