Transcript of injunction proceeding
September 8, 2003
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?
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