Court transcript of hearing on Motion to obtain Preliminary Injunction

0001
1 U.S. DISTRICT COURT
DISTRICT OF NEW JERSEY - NEWARK
2 DOCKET NO. CV 05-68 (DMC)
3
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4 PATRICK BYRNE, et al, :
5 Plaintiffs, : TRANSCRIPT
6 vs. : OF
7 LOUIS CALASTRO, et al, : MOTION
8 Defendants. :
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9
10 Place: U.S. District Court
50 Walnut Street
11 Newark, New Jersey 07102
12 Date: March 15, 2005
13 B E F O R E:
14 HONORABLE MARK FALK, J.D.C.
15 TRANSCRIPT ORDERED BY:
16 VINCENT M. GIBLIN, ESQ.
Kroll Heineman & Giblin
17 Metro Corporate Campus I
99 Wood Avenue South, Suite 307
18 Iselin, New Jersey 08830
19
20
21
22
23 Diana Pawlikowski
AudioEdge Transcription, LLC
24 425 Eagle Rock Avenue
Roseland, New Jersey 07068
25 (973) 618-2310
0002
1 A P P E A R A N C E S:
2
3 VINCENT M. GIBLIN, ESQ.,
(Kroll Heineman & Giblin) and
4 JOHN T. COYNE, ESQ.
(McElroy Deutsch Mulvaney & Carpenter, LLP),
5 Attorneys for the Plaintiffs.
6
7 WILLIAM J. DE MARCO, ESQ.,
(William J. DeMarco, Esq.),
8 Attorney for Defendant Rosado.
9
10 ANGELO R. BISCEGLIE, JR., ESQ.,
(Bisceglie & Friedman, LLC)
11 Attorney for Defendant Calastro.
12
13 RANDALL RASEY, ESQ.,
(Barton, Barton & Plotkin, LLP),
14 Attorney for Defendant Salerno.
15
16 ROBERT MONTECALLO, ESQ.,
(Biagiotti Marino & Montecallo, PC),
17 Attorney for Defendant Jastrzebski, DDS.
18
19 MICHAEL S. BUBB, ESQ.,
(Michael S. Bubb, PC),
20 Attorney for Defendant Gambardella.
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0003
1 I N D E X
3/15/05
2
3 ARGUMENT Page
4 By Mr. Giblin 5, 24
5 By Mr. DeMarco 19, 24
6 COURT DECISION 25
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0004
1 (Proceedings commence at 10 o'clock a.m.)
2 THE COURT: All right. This is the case
3 of Byrne v. Calastro, et al. It's Docket 05-68.
4 Can I have appearances, please?
5 MR. GIBLIN: Good morning, Judge. Vincent
6 Giblin, with the law firm of Kroll, Heineman,
7 Giblin, on behalf of plaintiffs. With me at counsel
8 table is John Coyne, with McElroy, Deutsch, Mulvaney
9 & Carpenter.
10 THE COURT: All right.
11 MR. GIBLIN: Good morning.
12 MR. DE MARCO: Good morning, Judge.
13 William J. DeMarco for Michael Rosado, the
14 defendant.
15 THE COURT: Good morning.
16 MR. BISCEGLIE: Angelo Bisceglie, from the
17 firm of Bisceglie & Friedman, on behalf of Mr.
18 Calastro.
19 THE COURT: Good morning.
20 MR. RASEY: Randall Rasey from the law
21 firm of Barton, Barton & Plotkin on behalf of
22 Defendant Salerno.
23 THE COURT: Good morning.
24 MR. MONTECALLO: Good morning, Your Honor.
25 Robert Montecallo representing Defendant Dennis
0005
1 Jastrzebski.
2 THE COURT: Okay.
3 MR. BUBB: Good morning, Judge. My name
4 is Michael Bubb. I'm here for Defendant
5 Gambardella.
6 THE COURT: How do you do?
7 MR. BUBB: Good morning.
8 THE COURT: All right. Mr. Giblin, this
9 is your application and I'm happy to hear from you.
10 MR. GIBLIN: Sure, Judge. Just as a
11 procedural matter, the Court entered a motion to
12 stay depositions a couple of weeks ago, and after a
13 colloquy with the Court, Mr. DeMarco was
14 collectively representing all defendants. The issue
15 of subsequent briefing presented itself, ad the
16 impact of what the stay of the depositions, the
17 effect of that, and how we were to treat the factual
18 basis that was supposed to be heard before Judge
19 Cavanaugh. We had a preliminary application or a
20 preliminary injunction motion seeking to remove
21 these defendants, three of them, from their status
22 as fiduciaries. In light of the posture, being the
23 preliminary inunction, credibility, documents, there
24 were some weighty issues that have to be resolved at
25 this preliminary basis.
0006
1 Defendants have argued in the first
2 instance. They quote the Fifth Amendment waiver
3 issue in the footnote, but, primarily, they're
4 arguing law of the case.
5 And I'd just like to direct the Court to
6 the transcript, Page 50. It's in my certification
7 to Your Honor behind Tab 4. After a colloquy with
8 myself and Mr. DeMarco trying to figure out what
9 should the -- the next step would be, the Court
10 framed the issue as follows. And I'm just picking
11 up on 50, Line 7. You asked what issues would,
12 essentially, you know, be presented to the Court.
13 And the Court says -- and I'm just going to leave
14 out some of the interruptions, but the first thing
15 was, striking these affidavits that are submitted to
16 Judge Cavanaugh on the preliminary injunction.
17 Mr. DeMarco says: "Yes. Yes. That was
18 an issue that was supposed to be there."
19 The second piece was, again, dealing with
20 this waiver argument, and you specifically asked:
21 "And the argument is that they were
22 submitted," --
23 "They" being the certifications.
24 -- "after the grand jury subpoenas; hence,
25 a waiver occurred."
0007
1 Mr. DeMarco, again, to the Court:
2 "Yes, Judge. In light of that, what we
3 have done is we've submitted a motion asking Your
4 Honor to declare a waiver, and in the alternative,
5 asking for the striking of the affidavits."
6 In light of the words and Mr. DeMarco's
7 concessions, the law of the case doesn't really seem
8 to be a real issue, number one; and, number two,
9 throughout Your Honor's colloquy and argument, you
10 specifically made reference to the fact that these
11 very affidavits went out before you. So even if you
12 find the law of the case did apply, this new
13 evidence or subsequent evidence gives you the
14 complete discretion to revisit this, make the
15 finding based on the actual evidence, the
16 certifications, and as you can tell as we get into
17 the merits, Judge, key to any decision about the
18 Fifth Amendment is what subject matter was actually
19 put into the certifications, because the defendants
20 in this case control the scope of the waiver, and
21 without the certifications before Your Honor, it was
22 impossible to even entertain what would have been
23 waived, what would have been preserved, and that was
24 specifically reserved for subsequent briefing.
25 With regard, Judge, to the merits of the
0008
1 Fifth Amendment. Through the procedural posture
2 that is laid out in our brief, Mr. DeMarco's
3 concessions at oral argument, it's clear that these
4 defendants knew that a criminal investigation was
5 pending, was about to be initiated by the U.S.
6 Attorney's Office.
7 Briefly, Judge, I.H.O. Vaira (phonetic)
8 in late December specifically referenced these
9 defendants, specifically talked about corruption,
10 fraud, highest organized crime. I don't want to
11 belabor the record with the findings, but based on
12 his findings, which were released in late December,
13 the plaintiffs immediately filed an order to show
14 cause before Judge Cavanaugh basically advancing
15 those findings and the documents were behind it. If
16 they didn't have notice of the criminal
17 investigation with I.H.O. Vaira , who specifically
18 directed the plaintiffs in the International Union
19 to go to the U.S. Attorney's Office, and the
20 Attorney General's Office clearly based on the
21 allegations in the verified complaint and order to
22 show cause, they knew.
23 As part of the expedited discovery order,
24 Judge, document productions and depositions were
25 expressly contemplated. Judge Cavanaugh made a
0009
1 decision that he wanted a full-blown evidentiary
2 hearing. He exercised judicial caution at the TRO
3 and said, I want it all before me, documents,
4 depositions, and the like. With that expedited
5 discovery order, Judge, the defendants had to know
6 and did know that any affidavit, any document,
7 ultimately they would be called to account for that.
8 On January 28th, Judge, about two weeks
9 after the U.S. Attorney's Office gave us the first
10 indication of what they thought of the case through
11 the form of a federal grand jury subpoena, they
12 decided to put their state of mind in this case.
13 Their defense is one of ignorance. Their defense is
14 one of reliance. All that was done after the grand
15 jury subpoena.
16 And just to really clarify or bing the
17 point home, I'm just going to use Mr. DeMarco's own
18 words. Page 8 of the transcript, Mr. DeMarco
19 argues:
20 "Now attached to our papers is the
21 subpoena that was served by the U.S. Government.
22 It's obvious"--
23 And that's his word, Judge, --
24 -- "obvious that the U.S. Government is
25 doing an investigation."
0010
1 And then this is what's key.
2 "It's conducting an investigation into
3 these individuals."
4 And that sentence is Page 8, Line 8 and 9.
5 The vehicle that brought their knowledge
6 to bear was the grand jury investigation, and
7 there's really no more -- there's no argument.
8 There's no anything to say except for Mr. DeMarco's
9 own words. He admits, these defendants know, and
10 the record all supports that the grand jury subpoena
11 at that point in time presented these individuals
12 with the first opportunity to consider whether to
13 join issue with the plaintiffs in the application to
14 remove, whether to file certifications, or whether
15 simply to pack up their tent and get out of Dodge
16 and go forward. They were counseled, Judge. Mr.
17 Bisceglie drafted the affidavit. Mr. Grossman
18 joined in on it. They, on the advice of counsel,
19 decided, here is what we're going to do. We're
20 going to put certifications in claiming ignorance,
21 reliance, and everything else, and in so doing, they
22 made the broadest of labors that could be possible.
23 They had the opportunity. Mr. DeMarco last time
24 made a distinction between preparation of an
25 affidavit and the filing of an affidavit. He
0011
1 himself said they were working on those very
2 affidavits prior to January 14th, the date of the
3 grand jury subpoena. As they were doing their
4 investigation and dealing with their clients, they
5 had the absolute discretion what to put in there or
6 even whether to join issue with us. This was a
7 four-week process for these defendants on what they
8 were going to do and what was going to happen. And
9 as we point out in our papers, Judge, the legal
10 decision -- actually strike that. The decision made
11 by these defendants on the advice of counsel was
12 ignorance. We can straddle our civil obligations
13 and maintain control over the funds and
14 simultaneously look at the U.S. Attorney's Office
15 and say, we didn't know.
16 The decision now, Judge, is one that's
17 interesting. They want to revisit that issue.
18 Plaintiffs asked for 27 boxes of documents or took
19 27 boxes of documents. And as you can tell from our
20 moving papers, Judge, Mr. Calastro's argument, hey,
21 I didn't know what was going on here, all these
22 hires happened well before I was ever a trustee.
23 That's not true, and it's not true not because of
24 some certification that the plaintiffs put in, it's
25 true because the own -- Mr. Calastro's own signature
0012
1 and his adoption of the minutes. We know in 1995
2 based on the very minutes produced by these
3 defendants that Mr. Calastro actually approved John
4 Fritzsch's employment. He approved the very salary
5 that he was going to receive, and, more importantly,
6 he approved the key paragraph that says, subject to
7 the approval of the trustees, Mr. Fritzsch can do
8 certain things, including all these other, you know,
9 fixing compensations and running the day-to-day
10 management. It is inconceivable for him now, based
11 on the very documents, to walk -- to basically
12 change his position now.
13 We've done our work, Judge. We went
14 through the documents, and now that those documents
15 completely undercut the merits argument, the
16 conversations, and the advice of counsel and what
17 the wanted to put in issue, now they want to change.
18 Now it's, hey, these documents are going to kill
19 us. These documents are a problem. How are we
20 going to straddle our obligation now in the civil
21 action to sit here with the U.S. Attorney's Office.
22 So in light of that history, Judge, it's clear, it's
23 clear that a waiver occurred.
24 More importantly, --
25 THE COURT: Mr. Giblin, let me just say
0013
1 this. I may have invited inadvertently this -- as
2 you quoted, this issue regarding waiver, and I
3 appreciate how -- your position on it. I've
4 considered it carefully and I've heard your
5 arguments and I wanted to let you put them on the
6 record. But just so we're clear, I am finding and I
7 believe that my stay ruling mooted the issue of
8 waiver, and I'm not going to find -- I do not find a
9 waiver in this case. I don't think I need to
10 address that issue because I think implicit in my
11 ruling was an exercise of the Court's discretion not
12 to force the parties to address -- to choose the --
13 to take the Fifth Amendment or to proceed in the
14 case. So I'd appreciate it -- I'm happy to hear
15 from you, but I'd like to focus on striking the
16 affidavits.
17 MR. GIBLIN: Sure, Judge.
18 THE COURT: Because that is what I'm here
19 -- that is what I am prepared to decide today.
20 MR. GIBLIN: Okay. Judge, striking the
21 affidavits, in light of the Court's ruling, is the
22 only way to balance or preserve elemental fairness
23 and prevent gamesmanship before Judge Cavanaugh.
24 What you do have -- and, again, this has no impact
25 on the waiver -- is a deliberate decision of these
0014
1 defendants to put certifications in and not provide
2 us the opportunity to depose them. What we just
3 went through, Judge, especially with Mr. Calastro,
4 how is it that you can put a certification in
5 claiming ignorance when you have this documentary
6 trail that's there.
7 In our circuit, Judge, we have to -- it's
8 not just an automatic rule. The Court is vested
9 with discretion in what to do in this case, and
10 we've put Graystone Nash before the Court, 25 F.3d,
11 187. In that case, the Third Circuit reversed. I
12 think it was Judge Walwin (phonetic) who,
13 essentially applied an automatic rule saying these
14 affidavits should be stricken.
15 What's clear -- what was clearly at issue
16 in Graystone is clearly not at issue here. In
17 remanding to Judge Cavanaugh, what you had was the
18 SEC as a party. That was a big factor for the Third
19 Circuit. The second issue was the fact that there
20 was nobody representing these defendants. So when
21 you're reviewing their decision to invoke the Fifth
22 Amendment, the Court said, and it's even in the back
23 passage at Page 193, and this is the Third Circuit:
24 "The decision to invoke or waive the Fifth
25 Amendment is not always self-evident, and
0015
1 it requires serious consideration of the
2 consequences. Counseling by a lawyer
3 familiar with te ramifications of a
4 particular case and the intricacies of law
5 in this are is highly desirable, but here,
6 defendants receive the benefit of such
7 carefully considered advice."
8 That's a factor, Judge, that we don't have
9 here. We have these individuals represented by
10 skilled labor attorneys that decided to join issue.
11 One other factor, Judge, is there they
12 were dealing with summary judgment. Here we're
13 dealing with a preliminary injunction. Summary
14 judgment, all that had to be created was a factual
15 issue, a genuine issue of material fact. Here,
16 Judge, in the preliminary context, in this context,
17 resolution of credibility is key.
18 The last thing also is, those defendants
19 in that case provided specific detailed
20 certifications challenging the SEC's case. Here,
21 according to Mr. DeMarco, we had something known as
22 a proactive litigation, you know, affidavit.
23 So just on the facts, Judge, to the extent
24 that defendants want to argue that the reversal has
25 meaning, we understand that we have the balancing
0016
1 test, but the case, in and of itself, doesn't really
2 have the persuasiveness, as I think the defendants
3 will argue, and, more importantly, with the presence
4 of the attorneys with private plaintiffs or private
5 parties, you know, battling it out in this case
6 without the benefit of the SEC, and the fact that
7 they actually put specific detailed certifications
8 in, those are issues that actually cut in favor.
9 Judge, the prejudice that's going to be
10 visited upon the plaintiffs in this case is the
11 deprivation of determinative evidence in our search
12 for the truth, and that is expressly recognized in
13 Nash and it's expressly recognized in the First
14 Circuit case of Sarafino v. Hasbro (phonetic), 82
15 F.3d, 515.
16 In that case, Judge, there were -- and we
17 cited it in our brief. There were two private
18 litigants. Basically it was an employment
19 discrimination case. When the issue of certain
20 transactions and kickbacks came into issue, the
21 plaintiff actually invoked his Fifth Amendment
22 right. In that case, Judge, the Court, after laying
23 the Graystone factors, dismissed the case in toto,
24 kicked the defendant out of court because it found
25 that there was no valid alternate means in that case
0017
1 to obtain the very evidence that was so critical
2 there.
3 And that's very similar to our case,
4 Judge. There's no dispute that there's a lot of
5 documents. There's no dispute that the documents
6 are probative. There's no dispute that it lays out
7 the same financial improprieties that was there in
8 Hasbro. But the key piece, Judge, is the answer
9 from Mr. Calastro, the answer from Mr. Salerno, and
10 the answer from Mr. Rizzo, what did you know. And
11 it's critical in this case because there's linkage
12 between our obligation for the merits before Judge
13 Cavanaugh in irreparable harm. The very fiscal
14 improprieties under the case law show irreparable
15 harm, and to deprive us of that critical evidence is
16 -- it's prejudice for us. And I'm not just saying
17 that, you know, as an advocate, Judge.
18 In the Sarafino case at 519 under a
19 heading called Alternate Means, the Court made the
20 same determination in striking the case or
21 dismissing it. The District Court -- and I'll read
22 to the Court:
23 "The District Court found that there are
24 no company records or other Hasbro
25 employees whose information could
0018
1 effectively substitute for the responses
2 of George Sarafino, who's the plaintiff,
3 himself."
4 The First Circuit agreed, and this is
5 what's key, Judge. Even if a paper trail might show
6 some irregularities, it's a poor proxy for
7 Sarafino's testimony. And all that we're asking,
8 Judge, is to recognize how critical this information
9 is to us and how the most powerful evidence that we
10 could advance to Judge Cavanaugh is the very words
11 of these defendants. And all we're saying is, don't
12 saddle us, don't handcuff us, don't let the decision
13 of these defendants that was based on the advice of
14 counsel be an opportunity for them to deprive us of
15 what we need, which is their words. And in light of
16 the fact that there is no substitution for this, we
17 ask the Court to level the playing field and strike
18 their affidavit.
19 One other thing, Judge. Unlike Hasbro,
20 we're not asking for the Court to find that these
21 defendants should be removed because of their
22 affidavits. We're not asking you to make a merits
23 determination. The Fifth Amendment, especially in
24 its context, says that the cost or penalty to a
25 defendant can't be, you know, unconstitutional. But
0019
1 specifically in Hasbro and all the cases, it's
2 saying it's also not costless. And here, all we're
3 asking, Judge, again, is not the removal, not
4 adverse inferences, not any of that. If they want
5 to invoke the Fifth Amendment, they want to protect
6 themselves, hey, that's okay, there's serious
7 charges here and they should be, especially, you
8 know, whetted to protecting their rights.
9 But all that we're saying, Judge, is just
10 strike their affidavits. Let us argue to the Court
11 based on the documents, based on, you know, our own
12 certifications. And in reality, Judge, they have
13 the same ability. The documents, whether they
14 support us or support them, the written record is
15 the written record. They want to say they didn't
16 know? Don't put it in a certification where I have
17 to then defeat that. Go to the records and show the
18 absence of the information. Go to the employment
19 agreement, say, hey, my signature is not here. Go
20 to the minutes and say, look, I wasn't the chair
21 man. They have the same exact ability that we do as
22 we sit here today to say, here are the documents. I
23 know, Judge, that the documents support us and I
24 know the reason that they are pushing so hard not to
25 have the depositions, it's because documents are so
0020
1 damning to them. But you know what? Instead of
2 giving them the ability to rely on self-serving
3 affidavits with these self-imposed limitations on
4 what their fiduciary obligations are, these
5 conclusory statements about what they knew and what
6 they didn't know, do what we're forced to do in this
7 context, Judge, because of the Fifth Amendment, go
8 to the documents.
9 THE COURT: Anything further, Mr. --
10 MR. GIBLIN: No, Judge. I think that
11 covered it.
12 THE COURT: Thank you very much.
13 MR. DE MARCO: Your Honor, may I?
14 THE COURT: Sure.
15 MR. DE MARCO: The Nash case has been
16 cited by my adversary. And the Third Circuit
17 remanded the Nash case back to the District Court
18 for further hearings. Now let's look at what
19 they're really looking for. What they're saying is
20 they want you to strike the statements and
21 certifications that was submitted by these
22 defendants. So what will Judge Cavanaugh have in
23 front of him? He'll have the documents from the
24 plaintiff and a bunch of silent defendants who can't
25 argue. Now the District -- or the Circuit Court
0021
1 said when they remanded it in Nash, in doing so the
2 Third Circuit also noted that since the preclusion
3 sanction did not level the playing field, but tilted
4 it in strongly -- strongly in favor of the
5 plaintiff, we believe the remedy here went beyond
6 that which was equitable under the circumstances.
7 So they want -- that's what they're asking you to
8 do, something that the Court says don't do, because
9 if you do it, you're not leveling the playing field.
10 When my adversary said "level the playing field," to
11 myself I had to chuckle. If you do what he's
12 asking, where the playing field is tilted, it --
13 tremendous to his advantage. What do we have to do
14 with at the hearing? Nothing, because we have
15 nothing before the Court.
16 Now he also makes mention about the 30
17 boxes of documents or 27 boxes he had. And he
18 commented how the certifications or affidavits that
19 were submitted were contradicted by those documents;
20 I'll bring that before Judge Cavanaugh. It appears
21 to me that if that's true, he should want these
22 affidavits. He should say, look, Judge, this is
23 what these people said and look what these documents
24 say. They contradict everything. I mean, the
25 affidavits are in his favor. And it is true, Your
0022
1 Honor, that they have all these boxes, and they have
2 these boxes and they can develop any sort of factual
3 case before the Court that the documents will allow
4 them to. And they could use those to contradict our
5 clients, they could use it to establish irreparable
6 harm in the documents themselves. And, Your Honor,
7 you know, this -- one minute, Judge.
8 In the brief on Page 11, in our brief, I
9 think it succinctly represents what the
10 certification was submitted for. The certifications
11 that we submitted were to defeat the argument of
12 irreparable harm. That's what they were submitted
13 for. Now if in fact they don't do that or they
14 don't approach doing that or there's something in
15 there that can be used against my client or any of
16 the defendants at another date and deposition, so be
17 it. They could still use those certifications.
18 They can -- when depositions continue, and we know
19 that we have until June and we'll be back here again
20 to revisit the issue, those certifications could be
21 used against our client. The certification could be
22 used the 28th when we argue before Judge Cavanaugh.
23 They could be used against our clients. Those
24 certifications were issued, they were signed,
25 whatsever on them, we live with them. We have to
0023
1 live with it. We're not saying, Judge, number five,
2 the certification, please excise that because we
3 want to exercise our privilege in that. We're not
4 here saying that. They are what they are, they've
5 been submitted, use them. The Court can use them,
6 my adversary can use them to contradict, to cross-
7 examine, anything he'd like. You're not leveling
8 the playing field by striking those. By striking
9 them, you're tilting it to an unimaginary level to
10 the plaintiffs. I mean, you know, Judge, on an
11 order to show cause, if we go there and there's
12 nothing submitted, what are we going to argue? What
13 would you let us argue?
14 THE COURT: Well, Counsel, you can make
15 whatever arguments there are based on documents or
16 other witnesses, obviously --
17 MR. DE MARCO: That's true. That's true.
18 THE COURT: -- from that --
19 MR. DE MARCO: And so can the other side.
20 THE COURT: Right.
21 MR. DE MARCO: They have the
22 certifications and they can say, for instance, a
23 thing came up about an employment agreement. Well,
24 Your Honor, Mr. Smith said that this happened and we
25 have the agreement that said it didn't happen. That
0024
1 seems to be in their favor, not ours, so he should
2 look forward to using it.
3 One other things, Your Honor. This is an
4 interesting issue, and I thin since we're here, I'd
5 like to discuss this. The stay granted by the Court
6 is a limited one. And you said that it was limited
7 to the three people, and plaintiffs can conduct
8 further discovery if they'd like. They can depose
9 other defendants. They can depose anybody they
10 like. Somebody else can come, you know, on another
11 motion raising the Fifth. I mean, I don't know
12 what's going to happen. I can't foretell the
13 future. But there has not been any notice to take
14 anyone's deposition. They could have done that. I
15 mean, look, there's no doubt in those 27 boxes there
16 were other names mentioned. Other people had to be
17 involved. They could have deposed them. They
18 didn't do that.
19 For those reasons, Your Honor -- oh.
20 Thank you. Thank you.
21 They also have the benefit of an
22 operational audit that was done by an accounting
23 firm, which clearly is an independent firm. They
24 have the numbers, they have everything there, Your
25 Honor, that could be used on the 28th. And, quite
0025
1 frankly, it's not -- it's their accountants. It's
2 not that we sent our accountants in to do the
3 operational audit, it's their accountants. And for
4 those reasons, Your Honor, I don't think the Court
5 should decide to strike those affidavits.
6 THE COURT: Thank you.
7 MR. GIBLIN: Judge, just one thing.
8 THE COURT: Okay.
9 MR. GIBLIN: The expedited discovery
10 order, which Mr. DeMarco wasn't around when it was
11 signed, was specifically limited to depositions of
12 the parties in interest, the two plaintiffs, and
13 then the three people we were seeking to remove.
14 And if you remember, this was initially returnable
15 on a very short schedule. So the extent he's saying
16 -- Mr. DeMarco is saying that we didn't go out and
17 pursue relevant evidence, it wasn't an issue back
18 then. It was a very discreet issue, that the Judge
19 wanted documents and deposition of these parties to
20 serve for him in particular. So in light of that,
21 the notion that there is collateral sources out
22 there for us is just not meaningful.
23 MR. DE MARCO: That's inaccurate, Judge.
24 They have all the time in the word to send subpoenas
25 out to depose people, and if somebody wanted to
0026
1 quash the subpoena on a deposition or one of the
2 defendants were against the depositions, they could
3 move before the Court. But that's not accurate.
4 The order indicates there will be expedited
5 discovery. It doesn't limit it to anyone.
6 Thank you.
7 THE COURT: All right. No one else wants
8 to be heard, I take it
9 I have considered the briefing and also
10 the arguments. Interestingly, I don't think ana
11 case has been cited by either side, and I have found
12 none, that addresses the precise issue that we're
13 dealing with here. The case law deals with what a
14 court may do when a party invokes the Fifth
15 Amendment. In a somewhat delicate exercise of the
16 Court's discretion, I stayed the discovery of three
17 of the defendants so that they did not have to make
18 the choice of whether to invoke the Fifth Amendment
19 or not at this point in the case, given the pendency
20 of a criminal investigation. So there's really no
21 case that's right on point.
22 On the other hand, I think that the case
23 law including the SEC v. Graystone Nash case is
24 instructive in certain ways, and maybe analogous.
25 And just to quote from that case:
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1 "In a civil trial, a party's invocation of
2 the privilege may be proper, but it does
3 not take place in a vacuum. The rights of
4 the other litigant are entitled to
5 consideration as well."
6 Likewise, when there has been a stay so
7 that the party -- this is not from the case, this is
8 me speaking -- that, likewise, where there has been
9 a stay which relieves a party of having to make that
10 determination, I think the Court has discretion to
11 try to level the playing field and to make things
12 fair.
13 And also from Graystone:
14 "A trial court must carefully balance the
15 interest of the party claiming protection
16 against self-incrimination and the
17 adversary's entitlement to equitable
18 treatment."
19 So I think that that kind of language
20 forms a background in which to consider this issue.
21 The stay that I entered is limited. All
22 parties have access to whatever sources of proof
23 there are out there. But I think it comes down to
24 an issue of basic fairness, and that is that I don't
25 think it's fair to allow the defendants to submit
0028
1 sworn statements and pick and choose, essentially,
2 what they say and then, through the Court, allowing
3 a stay based on the motion -- and Mr. DeMarco
4 clearly stated last time that were the stay not
5 imposed, that the Fifth Amendment would be claimed
6 by the defendants. I don't think it's fair to then
7 prevent depositions or cross-examination on those
8 issues.
9 I'm going to grant the motion and strike
10 the affidavits of the -- I believe it's the three
11 individuals, Mr. Calastro, Salerno, and Mr. Rizzo.
12 I just don't think it's fair to preclude the
13 plaintiff from testing the veracity and the
14 circumstances of whatever is included in those
15 affidavits. And I also don't think it's feasible or
16 proper to get into a more detailed analysis of the
17 precise parts of the affidavit that may be
18 permissible or may not be permissible.
19 I don't think that either side is terribly
20 hamstrung with this ruling. I think that the
21 proceeding can proceed before Judge Cavanaugh.
22 Counsel can make whatever legal and factual
23 arguments they can based on the record, but I am
24 going to, once again, exercise the discretion
25 afforded to the Court under the case law, which --
0029
1 to strike these affidavits and have them not
2 considered on the preliminary injunction proceeding
3 before Judge Cavanaugh. And let me just see. I
4 guess, essentially, what I'm finding is that
5 plaintiffs' entitlement to equitable treatment
6 outweighs the interests of the defendants at this
7 point. They have not claimed the Fifth Amendment
8 and I have spared them having to do so in what I
9 think was a rather close call, discretionary call.
10 And I think that certainly courts have
11 authority to strike an affidavit under certain
12 circumstances. That's U.S. v. Parcels of Land, 903
13 F.2d 36. I also do look to some of the First
14 Circuit authority, apart from that case that
15 suggests that when a -- the Fifth Amendment has been
16 claimed, that the Court may have discretion to limit
17 the testimony from those parties.
18 So I'm going to grant that aspect of the
19 motion. And, as I said, I -- the request -- the
20 issue about waiver has been decided. It's moot, and
21 it's -- there's no decision today on it.
22 If you'll submit an appropriate order.
23 MR. GIBLIN: Thank you, Judge.
24 MR. DE MARCO: Thank you, Judge.
25 THE COURT: Thank you.
0030
1 (Proceedings adjourned at 10:30 a.m.)
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1 C E R T I F I C A T I O N
2
3 I, Diana Pawlikowski, the assigned
4 transcriber, do hereby certify that the foregoing
5 transcript of proceedings in the U.S. District
6 Court, District of New Jersey, on March 15, 2005,
7 from 10:00 a.m. to 10:30 a.m., is prepared in full
8 compliance with the current Transcription Format for
9 Judicial Proceedings and is a true and accurate non-
10 compressed transcript of the proceedings to the best
11 of my knowledge and ability.
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14 Diana Pawlikowski, AD/T #393 Date
15 AudioEdge Transcription, LLC
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Web published as a service to my LIUNA brothers and sisters so they have the facts about corruption in LIUNA and their duty to eliminate it.

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