2nd Circuit: WSJ reporter shielded by privilege
The 2nd Circuit decided yesterday that a former Wall Street Journal reporter couldn’t be compelled to testify in a business lawsuit, recognizing that even permitting questioning on a non-privileged matter would open the door to delving into privileged material on cross-examination.
The decision affirmed a federal judge’s order quashing a subpoena directed to Jesse Eisinger.
James and Janet Baker subpoenaed Eisinger in their lawsuit against Goldman Sachs. Goldman Sachs had acted as the Bakers’ financial advisor when they sold their company, Dragon Systems, to Lernout & Hauspie (L&H) in exchange for L&H stock. That stock became worthless and the Bakers in their lawsuit alleged that Goldman Sachs breached a duty to discover accounting fraud at L&H.
The Bakers wanted Eisinger to testify because he had written a couple of articles for The Wall Street Journal on problems at L&H. In particular, his reports indicated that L&H’s list of Asian customers was largely illusory.
According to the Bakers, Eisinger’s testimony would demonstrate that it should have been a fairly simple matter for Goldman Sachs to determine that L&H was smoke and mirrors.
Eisinger invoked New York’s journalists’ shield law in an effort to quash the subpoena.
The state’s shield law provides journalists an absolute privilege from testifying with regard to news obtained under a promise of confidentiality, but only a qualified privilege when the news is both unpublished and not obtained under a promise of confidentiality.
Here, Eisinger only claimed a qualified privilege, but that would be enough.
The district court found that the information sought was covered by the shield law and that the Bakers failed to overcome the privilege by establishing through “clear and convincing evidence” that the testimony “would be critical and relevant” to the maintenance of their claim.
In particular, the lower court found that Eisinger’s testimony would require disclosure of the “unpublished details of the newsgathering process” and that the scope of questions could not be realistically confined to published information.
In appealing the quashing of their subpoena, the Bakers before the 2nd Circuit tried to finesse the issue by assuring the court that the only question that their lawyer would ask Eisinger was whether his published reports, which are not subject to the qualified privilege, were “accurately reported.”
But the court pointed out that such a question would necessarily be followed by cross-examination and that “such cross-examination would have to dwell on the inferences that the question is intended to support and thus would enter the area of the privilege.”
The court explained:
Subpoenas seek attendance and testimony at a deposition or trial to be questioned about matters relevant to the underlying litigation. The compulsion applies to both testimony on direct and cross-examination on that subject matter. The would-be cross-examiner is not required to seek a second subpoena to ask questions within the scope of the direct. This is so even when the witness asserts a privilege.
In upholding the quashing of the subpoena, the court noted that, should Eisinger be compelled to testify, it was “absolutely clear” that there would be a need for cross-examination within the area of the privilege. In conclusion, the court said:
[The Bakers’] position, if adopted, would undermine the privilege created by New York’s statutory shield law. If the proposed question was allowed to be asked and answered on the ground that it sought information outside the protected area, the cross-examiner could then easily overcome the privilege by showing a critical need to establish Goldman’s defense to the inferences to be drawn from the answer. The result would turn the statute on its head by allowing an evasion of the privilege through a question deliberately framed to be (supposedly) outside the scope of the privilege to have the effect of compelling testimony on cross-examination within the privilege. We decline to follow a route leading to this result.
– Pat Murphy
