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1 UNITED STATES DISTRICT COURT
2 NORTHERN DISTRICT OF NEW YORK
3 ---------------------------------------------
4 NXIVM CORPORATION, et al.
5
6
7
8 Plaintiffs,
9 -versus- 03-CV-976
10 (ORAL ARGUMENT)
11
12 THE ROSS INSTITUTE, et al.
13
14
15 Defendants.
16 ---------------------------------------------
17
18 TRANSCRIPT OF PROCEEDINGS held in and for
19 the United States District Court, Northern District of
20 New York, at the James T. Foley United States Courthouse,
21 445 Broadway, Albany, New York 12207, on MONDAY,
22 SEPTEMBER 8, 2003, before the HON. THOMAS J. McAVOY,
23 United States District Court Judge.
24
25
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
2
1 APPEARANCES:
2
3 FOR THE PLAINTIFF:
4
5 TOBIN, DEMPF LAW FIRM
6 BY: KEVIN A. LUIBRAND, ESQ.
7 - and -
8 SCHMEISER, OLSEN LAW FIRM
9 BY: ARLEN L. OLSEN, ESQ.
10
11
12
13 FOR THE DEFENDANT ROSS INSTITUTE:
14
15 GLEASON, DUNN LAW FIRM
16 BY: THOMAS F. GLEASON, ESQ.
17
18
19
20 FOR THE DEFENDANT STEPHANIE FRANCO:
21 RIKER, DANZIG LAW FIRM
22 BY: ANTHONY J. SYLVESTER, ESQ.
23
24
25
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 3
1 (Court commenced at 10:30 AM.)
2 THE CLERK: NXIVM Corporation, et al. versus
3 the Ross Institute, et al., 03-CV-976.
4 May I have the appearances for the plaintiff.
5 MR. LUIBRAND: For the plaintiffs, Kevin
6 Luibrand from Tobin & Dempf in Albany.
7 THE COURT: All right.
8 MR. OLSEN: For the plaintiffs, Arlen Olsen
9 from Schmeiser & Olsen.
10 THE CLERK: On behalf of the defendant.
11 MR. SYLVESTER: Yes, good morning, your Honor.
12 Anthony J. Sylvester from Riker, Danzig, on both matters, for
13 the defendant Stephanie Franco.
14 MR. GLEASON: Thomas F. Gleason, in both
15 matters, on behalf of the Ross Institute, Rick Ross and Paul
16 Martin, and Wellspring Retreat, Inc. and I think that's it.
17 THE COURT: All right. The plaintiffs' motion
18 is brought by separate order to show cause for preliminary
19 injunction preventing the defendants from disseminating
20 information about the plaintiffs' business. So Mr. Luibrand
21 why should the Court issue injunctions in this case?
22 MR. LUIBRAND: Your Honor, throughout
23 commerce, businesses have forever tried to protect certain
24 materials and ideas that they don't -- and they have the
25 right to protect those under certain circumstances. And I'm
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 4
1 going to address one portion of the issues, pertaining to
2 Miss Franco, and Mr. Olsen is going to address the
3 intellectual property issues.
4 THE COURT: Okay.
5 MR. LUIBRAND: There are numerous ways you can
6 protect your materials and your ideas and your documentation.
7 Prominent, of course, is copyrights and patents and
8 trademarks, and if you are dealing person to person, you can
9 be protected by confidentiality agreements. This company,
10 this business has all those. It has utilized every available
11 vehicle to protect the privacy and confidentiality of its
12 documents.
13 With respect to Miss Franco, she attended a
14 training program of the plaintiffs' business. At the time
15 she attended it, she wasn't forced to go. She came a long
16 distance to want to go. And when she arrived, she was told
17 if you want to participate in the program, you are going to
18 be given access to information and you are going to be given
19 written materials, and you are to keep those confidential.
20 She was interviewed beforehand. And the business goes at
21 great length to protect the confidentiality of its materials
22 and methodologies. They interviewed her beforehand. She
23 agreed to and did sign a written agreement.
24 THE COURT: The Court has reviewed it.
25 MR. LUIBRAND: Yes. And it's broad and it
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 5
1 captures anything that she derives from the program. She
2 leaves the program and then, after having signed the
3 agreement and paid her fee, she's given the materials. And
4 she leaves having signed a confidentiality agreement, she
5 leaves and breaches the confidentiality agreement. She
6 admits now that she breached it. She tries to limit, I
7 suppose, the breadth of the breach because she says she gave
8 it to just her brother. But Mr. -- her other brother has
9 submitted an affidavit saying no, she gave it to Mr. Ross.
10 And Mr. Ross' affidavit says he received it from her. So
11 either she gave it to Mr. Ross or she gave it to Mr. Ross
12 through her brother. But, in any event, it reaches the hands
13 of Mr. Ross. She breached her confidentiality agreement by
14 that act and that constitutes a breach of contract. And two
15 things occur with respect to that.
16 One is, she agreed in the original agreement
17 that an injunction would issue or she would agree to
18 injunctive relief in the event she did breach the agreement.
19 That's a clause which she signed as part of her contract.
20 Secondly, those materials are protected. And
21 the plaintiffs do not have to tell anyone why they want the
22 materials protected, but they do want them protected. And I
23 will give you some of the reasons they want them protected.
24 First off, if you read the affidavit -- I know your Honor
25 reads everything thoroughly, but the affidavit of Mr. Raniere
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 6
1 shows the effort he undertook to review those materials and
2 the kind of skill and aptitude he has in developing those
3 materials. He spends a lot of time and money and effort to
4 develop and protect these materials. They're now out there
5 and they're out there as easy as some guy sitting in Jersey
6 City in an apartment at a computer has put their materials
7 out for everybody to see. And Mr. Olsen will address the
8 scope of that, but their materials are now available to
9 anybody who wants them, descriptions of them, substantial
10 wholesale quotes from the materials are out there.
11 Secondly, and, again, this refers to Miss
12 Franco, because we don't have to -- the plaintiff doesn't
13 have to show the reason they want it confidential, somebody
14 can take snippets of that and mock it and ridicule it and
15 make fun of it, and they have -- part of the process is they
16 have a bowing, that's an exact adaptation of what you do in
17 Martial Arts, and that's where that comes from. And you hold
18 that out there separately, and, again, that's protected
19 copyrighted confidential material, you get that out on a
20 website or get that out in a complete international domain,
21 that causes harm because somebody could take that information
22 like Mr. Ross did and try to draw all kinds of inferences
23 from it and can add a few other facts, which he does, and,
24 again, which Mr. Olsen will address.
25 There is a substantial likelihood of success
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 7
1 on the case against Miss Franco. The equities balance
2 completely against her. She indicated at paragraph 10 of her
3 affidavit she doesn't want to have to be constrained from
4 talking about what she's learned in the program. She has not
5 returned the materials to us or the Court. The record shows
6 she sent a copy that she redacted; she still has an original
7 set of materials. She's shown no reluctance, despite a
8 confidentiality agreement, to release it to whoever she
9 chooses she wants to. That's why the injunction should
10 issue.
11 The damages that flow, and I have a -- one
12 very specific example, and I will -- I've been trying to come
13 up with some analogies, and I have a perfect analogy. And
14 that is, if I were -- as a lawyer, if I had a substantial
15 competitor locally, Mr. Smith, and I put out -- if I had a
16 website called pornographers.com and I put on that website
17 Mr. Smith's name and under that I put a description of what
18 he does, if I run Mr. Smith's name, someone else, looking for
19 a lawyer, they find Mr. Smith on pornographers.com, they're
20 not going to go to Mr. Smith, and I'll never know and
21 Mr. Smith will never know how many people did that.
22 THE COURT: But the defendants weren't
23 competitors, so that analogy doesn't hold water.
24 MR. LUIBRAND: Oh, the defendants --
25 THE COURT: Right.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 8
1 MR. LUIBRAND: I think that does hold water.
2 THE COURT: They're not in competition with
3 NXIVM.
4 MR. LUIBRAND: Your Honor, they're in
5 different competition.
6 THE COURT: Do they offer the same kind of
7 program that develops the skills that NXIVM says they
8 develop?
9 MR. LUIBRAND: They're trying to take the
10 people that participate in the program.
11 THE COURT: The program, right.
12 MR. LUIBRAND: And supposedly this is their
13 schtick, to deprogram them.
14 THE COURT: That's not competition.
15 MR. LUIBRAND: It's taking them away from the
16 business. They're not doing the same thing, but they've also
17 put the entire concept and ideas and information out on the
18 web so anyone can get the information.
19 THE COURT: I understand that.
20 MR. LUIBRAND: So -- and I talked about the
21 pornographers.com in the sense of the disparagement; that
22 just putting them on that website is disparaging because,
23 going back to Attorney Smith, no one will go to Smith if he's
24 on pornographers.com.
25 THE COURT: I understand the certain
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 9
1 similarity of concept there because the defendant is saying
2 that your business is a cult, and that's similar in some
3 people's mind to being associated with pornography; they're
4 both bad things. And the Court understands how that can be
5 hurtful. But you've got to remember, it's got to be hurtful
6 in such a way that's covered by the various statutes and
7 provisions and case law that will protect you from that
8 stuff. I understand your argument.
9 MR. LUIBRAND: And I agree, your Honor. And
10 there's a number of other factual assertions on the website.
11 He characterizes -- he says -- I mean being called a cult is
12 a statement of fact, that's not an opinion. Being called a
13 pornographer is a statement of fact. You are a pornographer.
14 That's a statement of fact. It's ruinous. Because this has
15 such a wide reach, and it's an international website. Anyone
16 can get on a website.
17 THE COURT: Oh, yeah.
18 MR. LUIBRAND: And anybody out there could say
19 I'm interested -- if I'm a company and say you five people
20 are going up to Albany because you are going to do this
21 executive success program, it's a great program, you'll do
22 wonderful, and they go home that night and they say that's a
23 cult, that's mind control, I'm not going to do that; and we
24 would never know that happened; we have no ability to
25 calculate damages or the extent of loss; we have no way to
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 10
1 even, to even be able to trace who those people were.
2 THE COURT: What would the damages be, loss of
3 profits?
4 MR. LUIBRAND: Loss of income. We wouldn't be
5 able to find all the people whose income we lost, because
6 anybody could find that information, because the
7 persuasiveness of the Internet and being unable to trace it
8 back to the damages. That's what's happened. By putting it
9 out on the Internet; she's changed the damages component all
10 together.
11 THE COURT: Supposing we didn't have the
12 Internet and supposing we were back to when the world was
13 comparatively sane and they drew pictures and posted them in
14 an auditorium and, same kind of thing as a website, same
15 thing as materials on a website, but they put them in an
16 auditorium in, say, Albany, New York, and the public was
17 allowed to come there and see them; does the fact that now
18 it's on the Internet, does that somehow change the law
19 involved?
20 MR. LUIBRAND: It changes the ability to be
21 able to calculate damages substantially.
22 THE COURT: So it changes the quantum of
23 damages, doesn't it?
24 MR. LUIBRAND: That's right. Not just the
25 quantum, but the ability to calculate.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 11
1 THE COURT: You can't add them up, so you
2 don't know how much there are? You don't know who else --
3 MR. LUIBRAND: That's right.
4 THE COURT: You can't add the amount you lost
5 because you'll never know about it, except the people in your
6 program are decreasing, perhaps.
7 MR. LUIBRAND: That's right. And we face a
8 double-edge because the business has been going straight up
9 and now, well, if it doesn't grow as quickly or if it levels
10 off, you know, we're then into mathematical computations and
11 a statistical analysis as opposed to where are the people
12 that have now rejected it.
13 And in connection with that, I also want to
14 point out, your Honor, that Mr. Ross says that this is, this
15 is a very small portion of his website, this is very minor to
16 him. He just takes the information that he develops and then
17 changes it -- and Mr. Olsen will address that -- and then
18 puts it on his site. But he's got lots of other companies
19 and things that he does. He says this is very minor to him,
20 very insignificant. And in the balance, besides irreparable
21 harm, the alternative is that -- is the -- it's not
22 significant in terms of balancing. Let me get the exact
23 language, your Honor.
24 (Pause.)
25 MR. LUIBRAND: It's the second alternative to
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 12
1 the need to establish irreparable harm. There is a second
2 way to do it or second way to prove the entitlement to the
3 injunction. I have it in my brief, your Honor, I'll find it
4 before we're done. But in any event --
5 THE COURT: You're talking about the balancing
6 of the hardships?
7 MR. LUIBRAND: The balancing of the hardships,
8 your Honor. I want to get the exact language.
9 THE COURT: Okay.
10 (Pause.)
11 MR. LUIBRAND: Well, there's no hardship to
12 him, no hardship whatsoever.
13 THE COURT: So it can't tip in his favor?
14 MR. LUIBRAND: It can't tip in his favor under
15 those circumstances. And they can't stand up with the First
16 Amendment because it happens to be in commerce, Mr. Ross is
17 in possession of our materials because Ms. Franco stole them.
18 So he can't say well, I have a First Amendment right or he
19 can't adequately advance that using essentially stolen
20 materials or contractually stolen, not illegally stolen, but
21 contractually stolen materials falsely revealed to him.
22 THE COURT: Do you got case law that refers to
23 that?
24 MR. LUIBRAND: When I sit down, I'll remind
25 myself of it and let the Court know.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 13
1 THE COURT: All right.
2 Okay. Mr. Olsen.
3 MR. OLSEN: Olsen, yes. I would like to
4 answer a question that you just had about whether there's
5 case law on that.
6 THE COURT: If A breaches a contract with B
7 and B goes out and disseminates material that he got as a
8 result of the breach, the person that now publishes that is
9 precluded from asserting a First Amendment right if he knew
10 the materials were taken, or if he didn't know they were
11 taken, but they were, then how does that work?
12 MR. OLSEN: That would fall under the trade
13 secret law. So if somebody were to take a trade secret, say
14 the Coca Cola trade secret, they shouldn't be able to go out
15 and disseminate it and use it after they've disseminated it.
16 THE COURT: But the third person is precluded
17 from raising the argument because somebody unlawfully took
18 it? There's case law that says that?
19 MR. OLSEN: I'm sorry, your Honor?
20 THE COURT: If somebody wrongfully -- if an
21 employee of Coca Cola who wrongfully purloins the secret goes
22 out and gives it to a third person, the third person who's
23 not a party to the arrangement between the Coca Cola employee
24 and Coca Cola itself, but he comes into possession of these
25 materials and puts it out there, and he says wait a minute, I
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 14
1 got a First Amendment right to criticize this Coke formula
2 because it's lousy, it ruins my teeth, which is essentially
3 what we're dealing with here, you are saying that they can't
4 raise the First Amendment because the materials were
5 wrongfully taken?
6 MR. OLSEN: Well, in this case, the facts in
7 this case are that Mr. Ross is what we consider an agent of
8 Miss Franco.
9 THE COURT: Okay.
10 MR. OLSEN: And Mr. Ross is acting on her
11 behalf. It's clear that from the facts -- well, going back
12 on the facts, Mr. Sutton and Miss Franco come from a very
13 wealthy family and they have a very successful business and
14 basically they want Mr. Sutton to spend more time in their
15 business instead of with our client's program, and so they
16 would have to find a way to discredit it, so the family goes
17 out and hires the Ross Institute, he's a hired gun
18 essentially, and they hire Paul Martin and John Hochman to
19 write these disparaging articles. They're actually being
20 paid to do all these activities.
21 THE COURT: What evidence do you have of that?
22 MR. OLSEN: What's that?
23 THE COURT: What's the evidentiary basis for
24 that?
25 MR. OLSEN: The evidentiary basis for?
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 15
1 THE COURT: The contract between the Suttons
2 and Ross or Miss Franco and Ross?
3 MR. OLSEN: In the Ross affidavit --
4 THE COURT: Mm-hmm.
5 MR. OLSEN: -- Mr. Ross says that we -- that
6 Mr. Martin was retained by the Suttons. That is in the
7 defendants' affidavit itself.
8 THE COURT: Okay.
9 MR. OLSEN: It says that they were retained.
10 That's the evidentiary basis for that, your Honor.
11 THE COURT: Okay.
12 MR. OLSEN: With respect to the -- with the
13 copyright issue, we have shown that there's a prima facie
14 case of copyright infringement. That's not in dispute.
15 There's access to the work. In fact, they provided the work
16 to you in Stephanie Franco's affidavit. And in addition,
17 there was substantial similarity. They've not rebutted that
18 there was substantial similarity and, in fact, in the
19 defendants' brief they said they took the very heart of our
20 work, they went right to the guts of what we had, and they
21 have it posted out there on the Internet. All we're left
22 with is an affirmative defense on the defendants' part as far
23 as the copyright goes.
24 And as far as irreparable harm goes, the
25 fourth factor the Supreme Court said is the most critical
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 16
1 factor in the weighing of the four facts together. And
2 that's the effect upon the market by their copyright
3 infringement. So they take the guts of our work, they post
4 it out there on the Internet, and it's out there for all of
5 our competitors and all of our potential students to see so
6 they can go out and take it. It's a very unique method. And
7 they have copyrighted it, patents pending, they have trade
8 secrets. It's a very unique technology. In it they use
9 things like rituals, bowing to their instructor or to the
10 president of the company. They don't say in the press he
11 bows back at them, just like in a Martial Arts school.
12 They're taking it and twisting it. They wear sashes, as they
13 do in Martial Arts school, they wear belts. They're a
14 multi-million dollar a year business. They have
15 20 billionaires, stated in a recent Times Union article, that
16 have signed up for the course and taken it. They have a
17 market to a very sophisticated clientele. They teach
18 principles such that, in order to succeed, you have to have
19 honesty and integrity; that people are accountable for their
20 own choices. In fact, one of the mission statements of the
21 course is that it teaches people not to steal, not to copy; I
22 put that in my initial brief; that you should not copy and
23 that copying is theft. And now we're here in Court going
24 exactly against what they're trying to teach their students.
25 They teach -- in teaching people that they're accountable for
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 17
1 their choices, I'm sure your Honor would appreciate if many
2 of the people coming through here realized that they were
3 accountable for their choices. Prisons are full of people
4 who think they're victims of society. I mean we're teaching
5 people good things. We don't want people coming in here and
6 going into prison; we want people to be successful in
7 business. We teach people that they shouldn't control --
8 THE COURT: So it's kind of a mixed motive
9 case, right?
10 MR. OLSEN: Well, it's essentially --
11 THE COURT: Your company wants to make people
12 better, but they want to make money doing it; right? That's
13 a mixed motive. I think it is.
14 MR. OLSEN: Sure. And they want the people to
15 make money that are making money. Exactly right.
16 THE COURT: More mixed motive.
17 MR. OLSEN: A lot of the cases cited go to the
18 Scientology cases. This isn't a religion. This is more
19 along the lines of a Dale Carnagie or a Stephen Covey, Tony
20 Robbins type of organization. These are people teaching how
21 to succeed in business.
22 Going back to the fair use defense, though,
23 the first factor in the fair use defense is the nature and
24 purpose of the work. Now, if you look at how much of the
25 work they took, they only took about 400-something words out
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 18
1 of 5,000. They had 400 of their own words out of 5,000
2 words. That goes to the transformative nature of their work.
3 They're not out there trying to make criticism, comment;
4 they're trying to put the work out there on the Internet for
5 people to use. They could have done the same thing by taking
6 little snippets or by changing the expression. Instead, they
7 put it out on the Internet with very little change. Whether
8 or not this is a First Amendment protective right, whether
9 its criticism or comment, it's a bad faith act in inducing
10 Stephanie Franco to produce the contract. They shouldn't be
11 able to come in here and say please save us by equity of the
12 fair use defense when they have unclean hands. That isn't
13 right.
14 Another thing we're concerned about, and we
15 just found out about, is that they're using meta tags.
16 That's buried language they use on the Internet which is used
17 in the code to drive people to their website and their using
18 our copyrighted materials using meta tags. If you put in
19 language from our commission statement, the first six hits
20 are going to be the Ross website. Based on that, they should
21 have to take all of it off, because it's hard for us to
22 understand what is in the meta tags themselves. We need --
23 we don't know what they have in there of our copyrighted
24 material because it's hidden from the public eye, but it will
25 drive people to their website, and they're using our
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 19
1 copyrighted material against us to drive people to their
2 website. So, your Honor, we think that the scope of the
3 injunction should also include the meta tags and anything
4 that's unseen from the public eye.
5 The scope of the relief we would like is,
6 first of all, we would like the registered copyrights off the
7 website. Second, we would like what Stephanie Franco
8 provided in her affidavit, Exhibit C, we would like to get
9 that, we would like to get that removed, and the information
10 there, we don't want any of that copyrighted material being
11 exposed. And finally, in the broadest sense, -- well, I need
12 to explain this. What they've done is taken a copyrighted
13 work and taken a portion of it, thrown it out there on the
14 Internet, and by throwing it out there on the Internet, they
15 created a publicity stir so that people are commenting and
16 criticizing upon it. Now we're forced to go back into the
17 press and defend ourselves. So that's going to cause us to
18 further disclose information which we consider confidential
19 and proprietary. And the only way it's going to end is if we
20 put our whole work out there to examine, just like I
21 explained to you, the bowing, and the guy bows back, and we
22 have to go out there and explain that to the press. And that
23 puts us in an awkward position. So by him having this
24 confidential information which he got through breach and he's
25 out there criticizing and commenting about us, we're being --
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 20
1 we're not -- we're having to disclose further and further
2 information, and that's irreparably harming us by making us
3 put more information out there that we normally wouldn't have
4 to put out. So we would like the scope of the injunction to
5 be broad and to any criticism or comments that goes to the
6 confidential information that was received via the breach of
7 contract.
8 Thank you, your Honor.
9 THE COURT: Thank you, Mr. Olsen.
10 Mr. Sylvester.
11 MR. SYLVESTER: Good morning, your Honor.
12 THE COURT: Good morning.
13 MR. SYLVESTER: With the Court's indulgence, I
14 would like to stay here; I have my materials spread out.
15 THE COURT: That's fine.
16 MR. SYLVESTER: Thank you.
17 Your Honor, before I launch into, if you will,
18 my prepared comments, I just want to reply to a couple of
19 things I just heard.
20 THE COURT: Okay.
21 MR. SYLVESTER: I'm -- I heard this morning
22 that there's something called meta tags. I received papers
23 approximately 4 PM on Friday; I don't recall there was any
24 reference in the papers to that. I don't know if there's
25 anything in the record with regard to meta tags, if you will,
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 21
1 so I wasn't prepared to address that specific issue.
2 Secondly, I'm not aware of anything in the
3 record which gives the Court any detail regarding Miss
4 Franco's financial status, her family, her family's business,
5 etcetera, etcetera, and yet I've heard comments this morning
6 with regards to that as well.
7 Your Honor, also that there has been a comment
8 that Miss Franco has retained copies of the so-called
9 copyrighted materials. At paragraph 27 of her -- this thing
10 (indicating), the large affidavit, she advises the Court that
11 the original is in the possession of her lawyer; it's in my
12 office; she doesn't have a copy.
13 Your Honor, I'll address the Lanham Act case
14 first, and that's the case that was initially filed. The
15 relief sought with regard to Miss Franco is set forth in
16 paragraphs B and C of your Honor's order to show cause. And
17 it essentially, with regard to paragraph B, wants to prevent
18 Miss Franco, and the other defendants as well, from
19 utilizing, displaying, relaying, describing, explaining,
20 characterizing, disseminating and/or commenting with regard
21 to any NXIVM materials, any of their information, etcetera,
22 orally or in writing. Paragraph C asks that all copies as
23 well as any notes with regards to any copies and originals
24 and so forth be returned. The overriding standard, as your
25 Honor has already articulated in its most recent opinion, on
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 22
1 an order to show cause and seeking a preliminary injunction
2 is that this is extraordinary remedy. Plaintiffs are seeking
3 to change the status quo. They need to show clear or
4 substantial likelihood of success on the merits. They also
5 must show, as your Honor has already pointed out in your
6 opinion, with regard to irreparable harm, such harm has to be
7 likely, imminent, not capable of being remedied by money
8 damages. Now I would like to take these two prongs of what
9 has to be shown in reverse order and start with irreparable
10 harm.
11 The papers and the record before this Court do
12 not demonstrate that there is irreparable harm if the
13 injunction does not issue. First, I want to make a point on
14 delay. It appears from the papers submitted by plaintiffs,
15 Mr. K.'s certification, that he knew in December 2002
16 that Mr. Ross allegedly had the papers and he was advised
17 specifically, he claims, in December 2002, that Mr. Ross was
18 going to put those materials on his website, and apparently
19 he said you shouldn't do that. That was December 2002. This
20 action was filed August of 2003. The alleged harm here is,
21 number one, loss of enrollees; number two, reduced income;
22 number three, building project delay; number four, injury to
23 good will; and number five, the fact that Miss Hawn, who's a
24 well-known movie star, declined to come and speak at the
25 annual celebration that NXIVM holds in August in this area.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 23
1 THE COURT: Now they've added further
2 disclosure of their private materials in order to answer
3 criticism.
4 MR. SYLVESTER: All right. And that as well,
5 your Honor.
6 THE COURT: All right.
7 MR. SYLVESTER: There is no evidence, though,
8 of any of these elements. They're unsubstantiated. They're
9 conclusory. And there's also no causal link that ties, other
10 than Miss Hawn, who apparently, through some representative,
11 stated there was an article or something on television, that
12 because of that, it wasn't in her best interests, so to
13 speak, according to the agent, that she wanted to attend.
14 But other than that -- and that still doesn't relate to my
15 client, Miss Franco. Other than that, there's nothing in the
16 record by which the Court can find any of these damages have
17 been suffered and, more particularly, that there's a causal
18 link somehow to anything Miss Franco did.
19 Now, your Honor, the absence of irreparable
20 harm really puts an end --
21 THE COURT: Well, if Miss Franco's family, at
22 her behest, retained Mr. Ross to disseminate these materials,
23 as urged to the Court this morning, was she the principal and
24 was Ross the agent for the dissemination?
25 MR. SYLVESTER: Your Honor, that is another
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 24
1 issue that -- I can't read my own handwriting, but it's the
2 hired gun allegation. There's nothing in the record to
3 support that. Miss Franco's certification is she didn't know
4 Mr. Ross had a website at the time that the materials were
5 shared with her brother.
6 THE COURT: What was Mr. Ross doing at the
7 family meeting?
8 MR. SYLVESTER: Well, he was at the meeting,
9 as Miss Franco says, with regard to the family concerns with
10 regard to Mr. Sutton, Michael Sutton.
11 THE COURT: Because he was attending the
12 program and they were worried that he needed to be
13 deprogrammed?
14 MR. SYLVESTER: Well, your Honor, I don't know
15 that deprogram would be the word that I would use. My
16 understanding is that Miss Franco did not retain Mr. Ross.
17 THE COURT: All right.
18 MR. SYLVESTER: This wasn't addressed in our
19 papers. I would be happy to put in some sort of a
20 certification she didn't retain Mr. Ross; she was asked to
21 come to what amounted to a family meeting.
22 THE COURT: All right.
23 MR. SYLVESTER: Okay?
24 THE COURT: All right.
25 MR. SYLVESTER: Your Honor, now with regard
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 25
1 to, they talked about likelihood of success on the merits,
2 and first on the Lanham Act claim, we submit they cannot make
3 a showing that would succeed on the Lanham Act claim,
4 particularly on this record. She does not have a website,
5 Miss Franco, it's not alleged, to have made any
6 misrepresentations by way of commercial speech or otherwise.
7 She does not engage in commercial activity or speech and
8 she's not a competitor, and she did not use, quote, materials
9 in commerce, close quote. As I heard many of the arguments
10 this morning, although the initial comments get with the
11 factual basis with regard to claims against Miss Franco, for
12 all intents and purposes, it seems like the problem here is
13 the website and what has flowed from the website, at least
14 that's the way I understand it. Miss Franco doesn't have any
15 connection whatsoever to that website.
16 THE COURT: You are telling me basically that
17 the fact that your client took confidential materials and
18 they ended up, at least in part, on a website, those two
19 things are really not connected because she's not the person
20 who accomplished their being shown on a website?
21 MR. SYLVESTER: Well, that gets -- that's sort
22 of my argument to some extent in the other case, your Honor.
23 THE COURT: Okay.
24 MR. SYLVESTER: Matter number 12 on your
25 calendar, but that is correct.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 26
1 THE COURT: All right.
2 MR. SYLVESTER: And there is an overarching
3 First Amendment right.
4 THE COURT: Assert that if you are a
5 wrongdoer, you can't assert that you don't have clean hands?
6 MR. SYLVESTER: Well, your Honor, what they
7 claim here, and in a nutshell what they really claim, as I've
8 heard, is that the words are criticism and commentary. The
9 knub of this is that what is, if anything, causing harm, it's
10 the criticism, the commentary, and so forth. That is
11 protected speech. The Pentagon papers were not -- were
12 allegedly purloined and The New York Times was able to print
13 the Pentagon papers in 1971; the Supreme Court found that's
14 protected. And any criticism or commentary with regard to
15 governmental activities with regard to the war in Vietnam
16 that could flow from publishing the Pentagon papers was
17 protected speech as well.
18 THE COURT: Nobody said the person who
19 purloined the papers hired The New York Times to print them,
20 as the plaintiffs are saying.
21 MR. SYLVESTER: Well, your Honor, there's
22 nothing in the record to support the notion that Miss Franco
23 hired Mr. Ross; there's nothing in the record whatsoever.
24 THE COURT: All right. You already told me
25 that. I'm just confirming what you are saying.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 27
1 MR. SYLVESTER: Now, your Honor, with regard
2 to the document, whether it's an agreement or not, whether --
3 passing on, whether it's too vague or ambiguous, the document
4 that Miss Franco signed, the document states that adequate
5 remedies, quote, may not exist, close quote. Doesn't say
6 they don't exist, but I think that, I respectfully submit
7 that the document itself is of no moment here. Your Honor is
8 not bound by that document. Your Honor must independently
9 find, I submit, that plaintiffs have a real risk of
10 irreparable harm. And there was a case, the Marchio case,
11 footnote on page 585, which addresses that issue.
12 So, your Honor, I want to turn to the
13 copyright part of the case.
14 THE COURT: Sure.
15 MR. SYLVESTER: In the copyright case, I have
16 a couple introductory comments. One, the copyrights were
17 just registered last month, as I understand it. Number two,
18 there's nothing in the record to show that in the last two
19 years that any effort has been made to have Miss Franco
20 return any of those materials. Number three, it appears,
21 again, that the actual materials are not the problem.
22 If you cut through what the argument is, the
23 problem is the commentary, and these are now my prepared
24 comments, but if they're confirming what I heard today,
25 commentary, criticism and scrutiny, it's not the content, for
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 28
1 example, the treatise the Face of the Universe or the
2 description of the handshake that is problematic, as I read
3 the papers, it's what someone is saying about those
4 particular items. The fact that it's being called a, quote,
5 cult, close quote, is the knub of the problem, as I see it,
6 for the plaintiff. And that is, that is fair game under the
7 First Amendment, again. But that still doesn't relate to
8 Miss Franco in any way, shape or form. There's no allegation
9 whatsoever that she's out there telling anyone anything.
10 And next, your Honor, they complain that Miss
11 Franco's affidavit included a copy of the materials. I mean,
12 that's what this is all about, your Honor. We submitted them
13 to the Court. I have difficulty understanding that argument
14 because attached to the second complaint, and this wasn't
15 filed under seal, are the copyrighted materials. It's now a
16 matter of public record.
17 THE COURT: Probably should have been filed
18 under seal.
19 MR. SYLVESTER: I'm not suggesting how it
20 should have been filed, but as far as I know it was not. And
21 plaintiffs filed --
22 THE COURT: Same thing with Franco's papers.
23 MR. SYLVESTER: Pardon me?
24 THE COURT: Same thing with your papers
25 probably.
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 29
1 MR. SYLVESTER: Well, your Honor, I submit
2 that there was no request in this case for anything to be
3 filed under seal, and plaintiffs themselves have seen that
4 the matter -- that the public record has now been
5 supplemented by the alleged copyrighted materials.
6 Now, your Honor, turning to the complaint, I
7 had a chance to read it again over the weekend, when I wanted
8 to be watching tennis I was reading this, but nonetheless, it
9 strikes me that there's no showing whatsoever that can be
10 made as to the likelihood of success on the merits as to one
11 count with regard to Miss Franco's. Parties tortiously
12 interfered with the agreement between NXIVM and Miss Franco.
13 She cannot as a matter of law interfere with her own
14 contract. So that count goes.
15 The next count runs through paragraph number
16 56 with regards to Miss Franco. I see Stephanie Franco's
17 name in two places there, paragraphs 1 through 56. Paragraph
18 17 identifies upon information and belief she's a resident
19 residing at New Jersey and committed the acts upon which this
20 claim is based in the jurisdiction of this Court. Paragraph
21 40 says plaintiffs will suffer irreparable harm by the
22 actions of defendants Ross, Ross Institute, Mr. Martin,
23 Wellspring Retreat, and Stephanie Franco and have no adequate
24 remedy at law. You go to paragraph 56, there's nothing else
25 that mentions Miss Franco. I probably could have written a
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 30
1 one-page brief, and if I wrote this brief on Sunday, I would
2 have. They cannot show any likelihood of success on the
3 merits because there's no claim against her.
4 Now, where's the cure that I see that
5 plaintiffs try to -- or does give to the Court with regard to
6 the fatal defect in the complaint? It's in the brief. At
7 pages 13 and 14 of the brief they discuss what the affidavits
8 say, that she did this, she did that, she's a bad person,
9 blah, blah, blah. And I don't mean to demean the comments,
10 but as I understand the cause of action, those affidavits
11 have nothing at all to do with the claim against her and any
12 possibility, much less probability of success on the merits.
13 You cannot cure a defect in the operative pleading by putting
14 it in a brief or putting it in an affidavit, and I have case
15 law to that effect, but I think --
16 THE COURT: That's all right.
17 MR. SYLVESTER: So, your Honor, you don't even
18 have a claim against her. Now, if you want to, and if I need
19 to address what the brief says, the brief says well, she's a
20 contributory infringer. Nothing, nothing about her act in
21 the complaint. Nothing under federal Rule 8 that would put
22 us on notice that she's a contributory infringer. And
23 putting aside -- there is an additional paragraph, by the
24 way, your Honor, in the second count which talks about her
25 inducing, but that's in the second count, it's not
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 31
1 incorporated by reference into the first count, so it's of no
2 importance to the first count. But, in any event, paragraph
3 60, and it's pled upon information and belief, so it's --
4 even if you want to be indulgent and take paragraph 60 and
5 rewrite the complaint for the plaintiffs, your Honor, and put
6 paragraph 60 back before 56, it still doesn't end up in any
7 different place because it's pled upon information and belief
8 in any event.
9 Now, your Honor, with regard to the
10 contributory infringement argument that's made in the brief,
11 there are two things in the reply brief of some interest.
12 First, paragraph -- page 1 states, and this is the
13 plaintiffs' brief, whether directly contributory or induced,
14 the evidence suggests Miss Franco participated in the copying
15 and dissemination of plaintiffs' contractually confidential
16 work. That's not enough. The fact that evidence might
17 suggest isn't enough. The burden is to make a clear showing
18 of likelihood of success on the merits.
19 Now, what is being attempted here is to group
20 all the defendants together. In fact, we're sitting at one
21 table; perhaps I should have sat at the table behind.
22 THE COURT: That would have impressed me.
23 MR. SYLVESTER: I would have been thinking
24 ahead. The bottom line is they're trying to group the
25 defendants together, and the argument is made that Mr. Ross
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 32
1 is somehow an agent for Miss Franco. There's nothing in the
2 record to support that. But the reply brief runs counter to
3 that very argument. On page 4 the statement is made
4 universal understanding is good evidence that by giving
5 Jeffrey Sutton the confidential information, Miss Franco
6 created an agency relationship based on personal authority.
7 This agency relationship makes Miss Franco liable for
8 infringement perpetrated by her brother when he gave the
9 documents to Mr. Ross. In their papers they're saying that
10 the principal agent relationship is Miss Franco, Mr. Sutton,
11 who's not a party in this litigation. Here today, they're
12 trying to leap frog over Mr. Sutton and somehow create an
13 agency principal relationship with Mr. Ross. And there's
14 nothing in the record to support that. There's nothing in
15 the record to support that she induced Mr. Ross to do
16 anything. In fact, contrary is the case. Paragraphs 8, 35
17 and 36 of Miss Franco's affidavit, unrebutted, she never
18 spoke to Mr. Martin. Paragraphs 9 and 37 of her affidavit,
19 unrebutted, she never utilized plaintiffs' materials.
20 Paragraph 10, she never copied plaintiffs' materials.
21 Paragraph 12, she does not have a website, previously said to
22 your Honor, that's paragraph 11 of her affidavit, and has not
23 obtained any commercial benefit by publication, paragraph 38.
24 These are not disputed.
25 Your Honor, with regard to fair use, I think
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 33
1 that I'm going to pass that to my colleague, but the bottom
2 line is you have a presumption; there can't be any
3 presumption of irreparable harm here because there's no
4 showing that Miss Franco infringed or contributorily
5 infringed. In fact, it's not even in the complaint.
6 And I think that ends my presentation on the
7 copyright.
8 THE COURT: All right.
9 MR. SYLVESTER: I do want to make one other
10 point. I read in my brief last night a sentence in the brief
11 that says materials had been provided to Mr. Sutton in
12 February 2003. That is incorrect. It's December 2002. I
13 wanted to correct that, your Honor.
14 THE COURT: All right. That's fine.
15 Mr. Gleason.
16 MR. GLEASON: Can I stay here too? Thank you,
17 Judge McAvoy.
18 THE COURT: Sure. I don't have West Nile, but
19 you can stay there too.
20 MR. GLEASON: All right, I'll come up.
21 Judge, the basic point we want to make is
22 these cases are a blatant affront to the First Amendment. A
23 review of all the papers, and there's a lot of them now,
24 boils down to a few basic points. They are these:
25 The plaintiffs claim they have copyrighted
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 34
1 materials which they wish to keep secret. The defendants
2 have criticized the plaintiffs' organization. The defendants
3 have criticized the ideas, my clients have criticized the
4 ideas of the plaintiffs' organization, criticized it through
5 documents or web posts, character which can only be described
6 as critical. I think it's obvious if you look at the
7 documents attached to the plaintiffs' papers that the items
8 are critical and the plaintiffs' object to it. The problem
9 that the plaintiffs have is that there's a First Amendment to
10 the U.S. Constitution; that this is America. They seek to
11 use the Lanham Act and the Copyright Act as a method to stop
12 critical comments of their organization, and they simply
13 can't do it. They've placed much of the copyright material
14 before the Court anyway. You mentioned yourself, your Honor,
15 they're not sealed. It's there. It's a matter of public
16 record and public comment now. And besides that, the
17 criticism in this case is absolutely fair use. The reason
18 it's fair use is because of several things. One -- well, let
19 me first talk about the injunction before I even get to the
20 fair use that relates to the idea of no likelihood of success
21 on the merits, change in the status quo that's sought,
22 seeking to take matter of public debate outside the public
23 domain, seeking a legal prior restraint. Constitutionally, I
24 don't believe it's permissible to try and forestall public
25 debate on a matter of public interest by withholding
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 35
1 information from the public or enjoining its further
2 publication. If in the case of the Pentagon papers you
3 couldn't have an injunction that would result in a prior
4 constraint, it's difficult to conceive how you could in this
5 case, preventing further web postings of material that they
6 allegedly have such a proprietary interest in.
7 There's no irreparable harm, certainly, your
8 Honor. The irreparable harm can't be proved by describing
9 the results of legitimate criticism. If, if we write a
10 theatre review and pan a movie, it's certainly going to do
11 some damage to the marketability of that film nationwide.
12 That's not a basis for alleging irreparable harm. The
13 affidavits on harm can't be conclusory or make assumptions
14 that can't possibly be proved by the documents in the record
15 such as this alleged loss of business. The harm to the
16 public, however, which both my adversaries have mentioned as
17 not being in existence, are actually quite substantial. When
18 you remove matters from public debate, you are causing severe
19 public harm. And that is actually the embodiment of the
20 principles of the First Amendment. I would like just briefly
21 to talk about what this case is about in that regard.
22 Mr. Raniere and his organization, they claim
23 they are the proponents of this new species of thought, this
24 new idea that allows people to succeed at business where they
25 otherwise wouldn't succeed. He calls himself the vanguard,
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 36
1 and his colleague, she's called the prefect. Bowing
2 procedures, special handshakes, they have hand colored --
3 special colored scarves; they have what appears to be a
4 secret organization. The only admission requirements of the
5 secret organization appear to be substantial payments and a
6 requirement to maintain confidentiality. And they obviously
7 do not wish to have any of these ideas discussed in public or
8 subjected to public criticism. Now, if they're such great
9 ideas, why are they so afraid of that? That in and of itself
10 makes it a matter of comment. And if you are doing that kind
11 of thing in America, and particularly in New York, you better
12 expect some people to make fun of you and perhaps at least
13 criticize you in a way that you might not like. But that's
14 not something that is prohibited by the Copyright Law or the
15 Lanham Act or any other law that I've ever seen. And, in
16 fact, it's directly contrary to the First Amendment. The
17 issue in this case is not whether the criticisms of my
18 clients are correct but, rather, whether there's a right to
19 speak them and whether or not there should be an injunction
20 prohibiting people from commenting on the materials that are
21 now placed within the public record. And I submit to your
22 Honor there is a -- there's clearly no basis for the relief
23 they've requested.
24 I will just briefly talk about their arguments
25 regarding fair use and the trade secrets and the alleged
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 37
1 copyright. First, I think you have to look at the nature and
2 the use of the allegedly infringed material. There's no
3 question on a review of it that it is critical. In fact,
4 that's the primary basis for their objection. They're not
5 really looking to stop piracy, they're looking to stop
6 criticism, and that's a really different thing, and that is
7 not something that gets them away from the defense of fair
8 use. The argument that they make that it's minimally
9 transformative, that there's only a little bit of change in
10 the material really relates to the character of what they're
11 actually publishing. You can't -- first of all, it's totally
12 transformative in this sense. They say this is a good
13 program, we say it's a bad program. I mean, I don't know how
14 you can make it more transformative than that. Even aside
15 from the character of the transformation, you have to look at
16 the way the material is coming out and the way it appears in
17 the record. If you didn't quote this stuff, you would have a
18 hard time actually convincing people that you are
19 legitimately criticizing them, because you have to quote the
20 stuff so you won't be accused of misrepresenting it. That's
21 really the nature of this kind of criticism. The criticism
22 actually also is in the sense of the whole. You can't really
23 criticize something on the whole without quoting from
24 substantial portions of it. But all of those lead to the
25 simple basic conclusion regarding this stuff, and that is
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 38
1 they want to hold it secret, and we've criticized it, and
2 that is not something you can protect under the Copyright
3 Law. The Copyright Law allows for fair use. No one would
4 mistake these critical articles that they're complaining of
5 as an appropriation of their work. Claiming now I'll go read
6 the Ross website and get all the information I would get
7 instead of going to this course, frankly, your Honor, is a
8 ridiculous proposition because anybody looking at the website
9 would know it's a critical thing. These businesses are not
10 in competition, your Honor, as you mentioned earlier, they do
11 not engage in the same type of business. It's like a
12 self-help Richard Robbins, Steve Covey kind of program that
13 they engage in. My client is actually criticizing them. If
14 they say well, he's in business, if that defense were to
15 succeed, then certainly any news organization would be
16 subject to the same offense, and because of that they're
17 going to be involved, news organization are going to be
18 involved in criticism of public figures or other people in
19 the public domain.
20 Also, your Honor, as indicated in the
21 affidavit of Rick Ross which is submitted with our papers,
22 this wasn't done in bad faith. He didn't seek to induce the
23 release of these -- this information knowing there is a claim
24 of trade secrets accompanying it. It's just not bad faith.
25 It's not bad faith certainly because it's highly critical,
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 39
1 which I think they could contend.
2 Regarding the unpublished nature of the
3 defense of fair use, an interesting point, if you look at the
4 case they refer to, that was a case where there was a
5 prepublication of an autobiography of Gerald Ford and the
6 scoop of getting that material out there first really was
7 done by a direct competitor in the same business that
8 significantly undermined the very thing that the plaintiff in
9 that case was selling by appropriation. In this case, we're
10 much more like the theatre review, the theatre review who
11 criticizes a publication. You are not putting information
12 regarding the new movie on the Internet because you want to
13 appropriate the value of the publication of that movie, you
14 are putting it on there because you want to criticize it.
15 Even if it's not published, that's not critical and not a
16 determinative factor, and it's irrelevant because it's in the
17 public record, it hasn't been sealed. And now I don't know
18 if we're filing electronically in this Court...
19 THE COURT: Not yet.
20 MR. GLEASON: We will be. If we were, it
21 would be instantaneously on the website now and for the world
22 to see. I don't think there's a First Amendment or Copyright
23 or any other basis for the plaintiff to withhold this
24 material.
25 Finally, the substantiality of the copying
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 40
1 that I've addressed in the first point regarding fair use and
2 the effect on the market, the effect that they allege on the
3 market, your Honor, is not appropriation. Effect is the
4 effect of criticism. So I return to the first point that I
5 made. This case -- actually both of these cases are a
6 blatant affront to the First Amendment. They don't like
7 criticism. And if their ideas were so good, they shouldn't
8 be afraid of criticism. Even if they are afraid of
9 criticism, the law provides no remedy in this Court to enjoin
10 publication.
11 THE COURT: Okay. Thank you, Mr. Gleason.
12 We're going to take five minutes here.
13 MR. LUIBRAND: Your Honor, could I just
14 briefly respond to a couple of points?
15 THE COURT: What's briefly mean?
16 MR. LUIBRAND: I only need three minutes.
17 THE COURT: Three minutes?
18 MR. LUIBRAND: Three minutes.
19 THE COURT: I'll give you three minutes.
20 MR. LUIBRAND: Thanks, Judge.
21 Your Honor, the principal problem with all of
22 what Mr. Gleason says is that, with the Pentagon papers and
23 with anything else, the materials that this person obtained
24 were obtained pursuant to a confidentiality agreement; that's
25 the only reason they had them in their hands. If I'm buying
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 41
1 a corporation and I sign a confidentiality agreement to go
2 into that corporation and kick the tires and look around and
3 look at the books, I can't sign a confidentiality agreement
4 and then go and take the materials and say, you know, that
5 company runs lousy, it's a crappy company, they should be
6 bankrupt, and the widgets they make are terrible widgets; I'm
7 criticizing the company, but I've got the materials under a
8 confidentiality agreement which I agreed to keep
9 confidential.
10 The reason they have the materials is because
11 Miss Franco got them and she gave them to -- in the affidavit
12 of Mr. Ross she was a participant in the meetings -- she gave
13 the materials to him; she gave -- there's multiple copies of
14 the book, says she loaned the workbook to her brother, Sutton
15 later sent me copies of the workbook. She knew it was going
16 to be sent to Ross. And if she's sitting in the room and she
17 doesn't know what he's going to do with it, she better find
18 out.
19 This whole argument about theatre review, when
20 you get business -- internal business documents pursuant to a
21 confidentiality agreement and then you just go and throw them
22 out essentially on the Internet or have your person throw
23 them out on the Internet is wrong and the First Amendment
24 doesn't apply to that contract. And they can't run around
25 and put their First Amendment hat on and claim well, the
UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 42
1 First Amendment protects everything. If you sign a
2 confidentiality agreement, it's confidential, and you can't
3 give out the materials. If you don't like the program and
4 you hate it and you want to criticize it, that's up to you,
5 but you can't do it pursuant to confidential materials that
6 you got.
7 THE COURT: Okay. We're going to take five
8 minutes. I'll be right back.
9 (Brief recess at 11:25 AM.)
10 (Court reconvened at 11:32 AM.)
11 (Bench decision rendered.)
12 (Court adjourned at 11:50 AM.)
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UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR
NXIVM v THE ROSS INSTITUTE 43
1 C E R T I F I C A T I O N
2
3
4 I, BONNIE J. BUCKLEY, RPR, Official Court
5 Reporter in and for the United States District Court,
6 Northern District of New York, do hereby certify that I
7 attended at the time and place set forth in the heading
8 hereof; that I did make a stenographic record of the
9 proceedings held in this matter and caused the same to be
10 transcribed; that the foregoing is a true and correct
11 transcript of the same and whole thereof.
12
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15 ____________________________
16 BONNIE J. BUCKLEY, RPR
17 Official Court Reporter
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20 DATED: SEPTEMBER 19, 2003
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UNITED STATES DISTRICT COURT REPORTER - NDNY
BONNIE J. BUCKLEY, RPR