New York Court Quashes Sheldon Adelson’s Third-Party Subpoena to Wall Street Journal

DWT Media Law May 10, 2013 Comments Off on New York Court Quashes Sheldon Adelson’s Third-Party Subpoena to Wall Street Journal
New York Court Quashes Sheldon Adelson’s Third-Party Subpoena to Wall Street Journal

Photo of Sheldon Adelson: Julie Jacobson, Associated Press 

By Laura R. Handman and Camille Calman

On May 28, 2013, Justice Donna Mills of the New York Supreme Court granted Dow Jones & Company’s motion to quash a third-party subpoena served on the Wall Street Journal by billionaire casino magnate Sheldon G. Adelson.  In re Wall Street Journal v. Adelson, 2013 NY Slip Op. 31165(U) (Sup. Ct. N.Y. Ctny. May 31, 2013).  Justice Mills held that the materials Adelson sought were protected by the qualified privilege granted to non-confidential newsgathering materials by the New York State Constitution and by the Shield Law, New York Civil Rights Law § 79-h, and that Adelson had failed to overcome the privilege under the statute’s three-part test.

The Subpoena and The Underlying Litigations

Adelson, the chairman and CEO of the Las Vegas Sands Corporation (“LVSC”) is embroiled in not one but two litigations in two jurisdictions involving former employee Steven C. Jacobs, who was LVSC’s former top executive for its Macau, China operations until he was fired in July 2010.  Jacobs has sued LVSC and its majority-owned subsidiary, Sands China, in Nevada state court for wrongful termination.  Jacobs v. Las Vegas Sands Corp., No. A627691-B (Nev. Dist. Ct. Clark Ctny.).  A defamation claim that Jacobs added to his case against LVSC and Adelson, involving statements that Adelson made to the Wall Street Journal about the reasons for Jacobs’s dismissal and the suit, has already been dismissed on the grounds that the statements were protected by Nevada’s absolute litigation privilege.  (Jacobs’s appeal of that dismissal is pending in Nevada Supreme Court.)

Merits discovery is currently stayed in the Nevada action jurisdictional discovery continues over whether the parent exercises sufficient control over the subsidiary that the court may exercise jurisdiction over Sands China.   The Nevada court sanctioned defendants with a $25,000 fine and Jacobs’s legal fees in connection with a discovery dispute.

During that discovery dispute, the court requested status reports from the parties.  Jacobs’s June 2012 status report, and his attached Declaration, described numerous categories of documents that he believed would show LVSC’s control over Sands China Ltd., and that he believed existed but had not been produced.  Among those categories was “LVSC Prostitution Strategy for Macau.”  In his Declaration, Jacobs wrote:

Emails and documents missing from Defendants’ production demonstrate LVSC’s Executive Management’s control and direction from Las Vegas over acts of prostitution on Sands China’s properties.  As background, shortly after my arrival to Macau in May 2009, I launched “Operation Clean Sweep” designed to rid the casino floor of loan sharks and prostitution.  This project was met with concern as LVSC Senior Executives informed me that the prior prostitution strategy had been personally approved by Adelson.  Missing documents include but are not limited to e-mails and notes between myself and Mike Leven concerning Adelson’s direct involvement, e-mails between Mark Brown and Senior LVSC Executives/Board members confirming the implementation of the strategy and highlighting its “success.”  Hard copies of these files were kept in my office drawer in a folder labeled “Outrageous.”  Again, these documents and e-mails will demonstrate control by LVSC executives from las Vegas on matters of great import.

This statement (the “Prostitution Declaration”) was widely reported in the press the day after it was made, including but by no means limited to, in the Wall Street Journal.  Indeed, Adelson filed a defamation suit in the U.S. District Court for the Southern District of New York against the National Jewish Democratic Council and its top officers for citing the Prostitution Declaration as support for its public call for Mitt Romney and other Republican candidates in the 2012 elections to stop accepting donations from Adelson.  Adelson v. Natl Jewish Democratic Council, No. 12-cv-6052 (S.D.N.Y.).

Adelson also sued Jacobs for defamation in a Florida state court.  Adelson v. Jacobs, No. 12-28537 CA 20 (Fla. Cir. Ct. Miami-Dade Cnty.).  The sole defamatory statement alleged in the complaint is the Prostitution Declaration.  Adelson and Jacobs have conducted merits discovery in the Florida action, including depositions of both parties; the terms of their Stipulated Confidentiality Order in the Florida action allow them to use any material they obtain in discovery to be used in the Nevada action.

Following Jacobs’s deposition, Adelson issued a subpoena in the Florida action under the Uniform Interstate Deposition and Discovery Act and N.Y. CPLR § 3119 to non-party Wall Street Journal in New York, seeking a deposition of the person with the most knowledge regarding communications between Jacobs and the Wall Street Journal.  He also sought all communications between Jacobs and the Wall Street Journal from January 1, 2010 through the present; all documents provided by Jacobs to the Wall Street Journal from January 1, 2010 through the present; and all phone records reflecting calls between Jacobs and the Wall Street Journal from July 1, 2010 through the present.

After the New York motion to quash was filed, but before it was decided, Adelson filed a motion in Florida court seeking a Letter of Request under the Hague Convention, seeking production from Wall Street Journal reporter Kate O’Keeffe (a U.S. citizen based in Hong Kong) of much of the same material that he sought in the New York subpoena and an opportunity to ask her questions about any of her communications with Jacobs.  Adelson did not notify the New York court of this Florida motion; nor did he tell the court that, after the New York motion was filed, he had filed a libel suit against O’Keeffe individually in Hong Kong, arguing that he was defamed by an article written in the Wall Street Journal by O’Keeffe and another reporter that called him “a scrappy, foul-mouthed billionaire from working-class Dorchester, Mass.”

The Parties’ Arguments

Dow Jones argued that the subpoena should be quashed because New York’s Shield Law provided a qualified privilege as to any non-confidential newsgathering materials, including all of the materials sought by Adelson.  (Dow Jones reserved its right to make a subsequent argument that the materials requested by Adelson included confidential material, which is subject to an absolute protection under the Shield Law.)  The qualified privilege can be overcome only if the party seeking discovery shows that the material sought is “highly material and relevant,” “critical or necessary to the maintenance of a party’s claim” and “not obtainable from any alternative source.”  Material is “critical or necessary” only if the plaintiff’s claim “virtually rises or falls with the admission or exclusion of the proffered evidence.”

Dow Jones argued that the claim could not possibly rise or fall on any communications between Jacobs and the Wall Street Journal, because the case falls of its own weight regardless of any material the Wall Street Journal could provide.  Specifically, the underlying Florida lawsuit is patently untenable because the Prostitution Declaration is protected, under either Florida or Nevada law, by the absolute privilege accorded to statements made in the course of litigation proceedings.  (Ironically, Adelson himself had successfully invoked the litigation privilege in response to the now-dismissed defamation claim Jacobs filed against him in the Nevada action.)  The material is also irrelevant; the subpoena’s stated reason for needing this discovery – the assertion that the Prostitution Declaration was “the culmination of a long-standing effort by Defendant Jacobs to smear Plaintiff Adelson’s name” – was nowhere mentioned in the Amended Complaint in the Florida action, and the material would shed no light on whether the Prostitution Declaration was false or Jacobs’s mental state when he made it.  Furthermore, Adelson could not show the materials were unobtainable from alternative sources, since he had already sought (and in some cases obtained) the same materials from Jacobs.

Adelson countered that the Prostitution Declaration should not be protected by the absolute litigation privilege because it was not relevant to the subject of inquiry of the Nevada action, and that in such instance, the privilege can be overcome by a showing of express malice.  Dow Jones pointed out that, under Florida case law, the Prostitution Declaration was well within the absolute litigation privilege because Jacobs’s description of categories of missing documents related directly to the Nevada jurisdictional dispute.

Adelson also argued that the information he sought from Dow Jones was relevant to whether Jacobs exhibited a pattern of long-term leaking of information harmful to Adelson and bore Adelson express malice.  Whether Jacobs “leaked” the Declaration to reporters was similarly immaterial, since the Declaration was filed in the public record of a court case that was being closely followed in the press, particularly given Adelson’s prominence as a major Republican donor in the 2012 Presidential election cycle.  He argued that he was not required to accept at face value Jacobs’s testimony and document production, and was entitled to seek third-party discovery to supplement the record.  He suggested that Jacobs’s failure to move to dismiss the Florida action demonstrated that Dow Jones was wrong about the suit’s viability.  (Dow Jones suggested in court papers that perhaps Jacobs had not so moved because both parties were using the discovery process in the Florida action to circumvent the Nevada merits discovery stay).

Dow Jones also argued that Adelson had not met the minimum standards for third-party discovery under N.Y. CPLR § 3101(a)(4), which requires that evidence have heightened relevance and be unobtainable from alternative sources before it may be subpoenaed from any non-party in New York.

The Court’s Decision

Justice Mills based her decision entirely on Dow Jones’s Shield Law argument, holding that Adelson failed to meet any of the three prongs to overcome the qualified privilege.  Her decision does not discuss whether the underlying Florida lawsuit has merit or whether Adelson met the CPLR standard for non-party discovery.

The decision sets forth the tripartite test under the statute, and held that “[r]espondent Sheldon Adelson has not shown why he is entitled to the material sought, nor the deposition he seeks under any of these criteria.”  Justice Mills did not find the material sought either highly material or critical to Adelson’s Florida suit.  Furthermore, even if he had met the first two prongs, Justice Mills found that Adelson “fails to demonstrate that such information is ‘not obtainable from any alternative source,’ to wit, Mr. Jacobs himself.”  The court granted the relief requested by Dow Jones.

Current Status

Adelson’s motion to the Florida court requesting the issuance of a Letter of Request under the Hague Convention remains pending, as does Adelson’s defamation suit against Kate O’Keeffe in Hong Kong.  Adelson has argued that the issuance of a Letter of Request is a mere ministerial act that the court is all but bound to perform; Dow Jones argues that the court is required in every case to determine whether a Letter of Request is appropriate, and that in this case it is not because the discovery requested would be improper under the laws of New York, Florida, Hong Kong, and under the First Amendment.  Dow Jones has provided the Florida court with a copy of the New York decision and urged that the New York decision have collateral estoppel effect, or, at a minimum, inform the Florida court as it considers the discovery demands directed to the Journal’s reporter.

Originally published in the June 2013 issue of the MLRC MediaLawLetter

Laura R. Handman and Camille Calman of Davis Wright Tremaine LLP, and Jason Conti, Vice President and Associate General Counsel, represented Dow Jones & Co.  Sheldon G. Adelson is represented by Kendall Coffey, Daniel F. Blonsky and Benjamin H. Brodsky  of Coffey Burlington (Miami) and David M. Olasov of Olasov + Hollander LLP (New York).


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