Federal Appeals Court Says NY Shield Law Protects Former WSJ Reporter

Image via WikipediaIn a 12-page decision, a three-judge panel of the United States Circuit Court of Appeals for the Second Circuit last week ruled an ex-Wall Street Journal reporter was protected by New York's shield law from having to testify in a former client's civil suit against Goldman Sachs.

In Baker v. Goldman Sachs et al. (Case No. 11-cv-1591), the appellate court affirmed U.S. District Court for the Southern District of New York Judge Barbara Jones's quashing of a subpoena of former WSJ scribe Jesse Eisinger, whom the court held was  privileged against having to testify under New York Civil Rights Law sec. 79-h.

Eisinger was targeted for a deposition based on articles he wrote for the Journal on February 16, 2000, and in August 2000, concerning Belgian software company Lernout & Hauspie. Some of the company's executives were jailed for misrepresenting the company's revenues and the entity went bankrupt. Plaintiffs James and Janet Baker, whose company, Dragon Systems, produces Dragon Dictation voice-recognition software, sued Goldman Sachs for allegedly failing to exercise due diligence regarding Lernout & Hauspie, which merged with the Bakers in a stock deal. The L&H shares became worthless after the company went belly-up.

Eisinger's articles at issue concerned a Lehman Brothers analyst who raised doubts about L&H's stock valuation and revenues and quoted sources regarding L&H's Asian earnings, respectively. Under New York's shield law, reporters have a qualified privilege against having to disclose unpublished information not obtained under a promise of confidentiality, but are absolutely privileged when news is acquired under a promise of confidentiality.

The Second Circuit panel said the Baker case involved a qualified privilege, which the plaintiffs did not overcome, the Court held, because they failed to show a critical need for the information, that the information sought was material and relevant to their lawsuit and that the information in question was unavailable from an alternative source.

The case is reported on in depth by the Reporters Committee for Freedom of the Press Website (www.rcfp.org).