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Klayman v. Judicial Watch

March 24, 2009


The opinion of the court was delivered by: Alan Kay United States Magistrate Judge


Pending before the Court is Defendants' Motion for Sanctions for Plaintiff's Failure to Comply with Court Order [218]. Plaintiff did not respond to the motion. After reviewing Defendants' Motion and the record in this case, the Court issues the following Memorandum Opinion.

I. Background

Plaintiff Larry Klayman ("Klayman") is the former Chairman and General Counsel of Judicial Watch, Inc. ("Judicial Watch"), a non-profit organization that was founded "in 1994 as a public interest watchdog to investigate and prosecute government corruption and abuse." (Second Am. Compl. [12] ¶¶ 2, 7, 20.) Klayman left Judicial Watch in 2003. (Id. ¶ 28.) In anticipation of his departure, the parties entered into a Confidential Severance Agreement on September 19, 2003. (See Am. Countercl., Ex. A [86-2].) Judicial Watch agreed, inter alia, to pay Klayman a lump sum of $400,000 as severance pay and continue his family health insurance coverage for a period of one year. (Id. ¶¶ 2, 3.) The Severance Agreement contained a "NonDisparagement" clause; Klayman and Judicial Watch each agreed not to "directly or indirectly, disseminate or publish, or cause or encourage anyone else to disseminate or publish, in any manner, disparaging, defamatory or negative remarks or comments about" the other party. (Id. ¶ 17.) Each party agreed to reimburse the other for expenses and Klayman re-affirmed and acknowledged a $78,810 debt that his law firm, Klayman and Associates, P.C., owed to Judicial Watch. (Id. ¶ 10, 11.)

The Severance Agreement contained a provision addressing the treatment of confidential information and Judicial Watch property. (Id. ¶ 4.) The confidentiality provision provided, in relevant part:

A. Confidential Information. Klayman agrees that all non-public information and material, whether or not in writing concerning Judicial Watch, its operations, programs, plans, relationships, donors, prospective donors, clients prospective clients, past or current employees, contracts, financial affairs or legal affairs (collectively, "Confidential Information") are confidential and shall be the exclusive property of Judicial Watch to which Klayman has no right, title or interest. . . . Klayman agrees that after the Separation Date [September 19, 2003], he shall not disclose any Confidential Information to any person or entity or use Confidential Information for any purpose without written approval by an officer of Judicial Watch, unless and until such Confidential Information has become public knowledge through no fault or conduct by Klayman.

D. Client and Donor Information. . . . Klayman expressly agrees and acknowledges that, following the Separation Date, he shall not retain or have access to any Judicial Watch donor or client lists or donor or client data. (Id. ¶ 4(A), (D).) Finally, the Severance Agreement contained a non-competition and non-solicitation provision under which Klayman was prohibited from engaging in specified business activities, including working for a Judicial Watch competitor and soliciting Judicial Watch donors for contributions to a competitor, for a period of two years. (Id. ¶ 5.) Judicial Watch agreed to "pay Klayman $200,000 in consideration of his agreement not to compete or solicit." (Id. ¶ 6.)

On April 12, 2006, Klayman and Louise Benson,*fn2 a Judicial Watch supporter and donor, brought suit against Judicial Watch and its President, Thomas J. Fitton. (See Compl. [1].) Klayman later amended his Complaint to name Paul Orfanedes, the Secretary and a director of Judicial Watch, and Christopher Farrell, another director of Judicial Watch, as defendants. (See Second Am. Compl.) In Counts Six, Seven and Eight, Klayman alleges that Judicial Watch breached various obligations owed to him under the Severance Agreement and in Count Nine he alleged that Judicial Watch defamed him by disseminating allegedly false statements to Judicial Watch employees and the media.*fn3 (Id. ¶¶ 66, 115-162.) In Count Four, Klayman also brings a claim under Section 43(a) the Lanham Act, which provides:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1)(A)-(B).

Defendants have asserted counter-claims against Klayman. (See Am. Countercl. [86].)

They allege that Klayman breached the Severance Agreement by failing to reimburse Judicial Watch for expenses, as required by Paragraph 10, failing to pay the outstanding balance of his law firm's debt, as required by Paragraph 11, and violating the non-disparagement provision through his remarks about Judicial Watch and Fitton. (Id. ¶¶ 69-79, 117-124.) Defendants further allege that subsequent to his departure from Judicial Watch, Klayman used "Confidential Information" in violation of Paragraph 4 of the Severance Agreement and that he violated the non-compete clause of Paragraph 5. (Id. ¶¶ 125-138.) Defendants ...

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