Nicholas Malfitano May 18, 2015, 1:07pm


PHILADELPHIA – Separate defamation lawsuits filed by the former ex-president and head of operations for a struggling publishing company over an email issued to thousands of employees by the CEO which they say falsely accused them of disloyalty have been transferred.

The cases are now heading to federal court in New York per a ruling made by Judge Nitza I. Quinones Alejandro, of the U.S. District Court for the Eastern District of Pennsylvania, last month.

Due to diversity of citizenship, the cases, which plaintiffs James McCusker and Mark Cairns originated in the Bucks County Court of Common Pleas early last October against Hibu, were removed to the Eastern District Court of Pennsylvania.

The defendants in this matter filed a motion for dismissal of all claims on October 17.

The defendants cited the plaintiffs’ employment agreement, which reads in part:

“The parties agree that any legal action or proceedings between them relating to this Agreement shall be brought in the courts of the State of New York or the federal courts located in the State of New York, and the parties hereby consent to the sole and exclusive jurisdiction of such courts in any legal action or proceeding arising under this Agreement.”

Further, counsel for the defense stated the email at the center of the lawsuit merely stated how terminations affect changes in employee responsibilities and reporting relationships and made “statements of opinion” with regard to the reasons for the terminations.

McCusker, of Doylestown, and Cairns, of Ambler, both seek compensatory and punitive damages in excess of $50,000 from Hibu, an international company formerly known as Yellowbook, its CEO Mike Pocock and the board of directors.

At the time of their termination, McCusker and Cairns had been accused of sharing confidential information with Hibu’s former CEO, Joe Walsh, as part of a plot to buy out the company, charges that both plaintiffs deny in their separate complaints.

Walsh served as CEO to Yellowbook from 1987 to his termination in 2011. During that time, the company, like most print media, were caught off-guard by the popularity of the Internet and the effect it would have on the industry, the suit says.

Yellowbook derived most of its revenue from ad sales for its ubiquitous Yellow Pages directories delivered to households throughout the United States.

Declining sales in the 2000s forced the United Kingdom-based parent company, Yell Group, to take substantial bank loans in 2009 to help with the company’s restructuring. In 2010, the chairman of the board of directors instructed Walsh to find parties interested in buying the company’s U.S. assets, the complaint says.

Walsh formed a group of private investors and offered to purchase the assets for $2 billion in December 2010, an offer that was rejected by the board of directors shortly after the January 2011 appointment of Pocock as the new CEO.

Throughout the spring and summer of 2011, Pocock formulated a plan to transition Yellowbook, now known as Hibu, into the digital marketplace.

His strategy relied on the potential success of partnerships with Microsoft and Znode, an e-commerce provider. The plan projected a revenue mix of 75 percent digital and 25 percent print by 2015, along with growth of revenues, earnings and cash flow, an additional 1.5 million customers and reductions in expenses.

Initially kept to help the implementation of the strategy, Walsh’s employment was terminated in October 2011.

The claim says that Hibu continues its struggle to meet the projections and obligations from the 2009 loans and that the partnership with Microsoft failed to create any favorable products or services or generate considerable revenue for the company.

On March 6, 2013, both McCusker and Cairns were terminated from Hibu based on allegations that they shared confidential information with Walsh.

The complaint says that the company used phone records detailing repeated phone calls to Walsh as evidence, but McCusker and Cairns claim that Walsh remains a close friend and that they were never directed to sever all ties with their former mentor.

Following their termination, Pocock sent an email to the company’s 5,000 employees detailing the reasons for McCusker and Cairns firing, making the false accusation public knowledge and libeling their reputation, they claim.

Both plaintiffs state that no evidence of disclosure had been presented, and the company made the false accusations in order to avoid its obligation to provide severance packages to the executives, a violation of the Pennsylvania Wage Payment and Collection Law.

Defense counsel labeled the email as “privileged communication” — and thus, could not be used to support an allegation of defamation in a court of law.

Alejandro agreed, rejecting the plaintiffs’ assertions that that the forum selection clause is inapplicable because “it is contained in a letter agreement between Plaintiff and ‘Yellowbook, Inc.,’ and not Defendants, and its scope does not reach Plaintiffs claims.”

“As the party seeking to overcome an otherwise enforceable forum selection clause, Plaintiff bears the burden of showing that the public-interest factors ‘overwhelmingly’ weigh in favor of venue in this forum, as opposed to the forum in the State of New York,” Alejandro said.

“Plaintiff, however, makes no attempt to meet this burden and, instead, focuses solely on the arguments as to the scope of the clause addressed - an argument rejected. Based on the arguments made and the factual allegations in the complaint, this Court finds that Plaintiff has not met his burden to substantiate exceptional circumstances to warrant disregarding the parties' contractual choice of forum.”

With that, Alejandro chose not to dismiss the complaint in its entirety as the defense had suggested, but used this rationale to transfer the case to federal court in New York on April 8.

The plaintiffs are collectively represented by Clifford E. Haines of Haines & Associates in Philadelphia.

The defendants are represented by David J. Woolf, Dennis M. Mulgrew, Jr., and William M. McSwain of Drinker Biddle & Reath, also in Philadelphia.

U.S. District Court for Eastern District of Pennsylvania case 2:14-cv-05670

U.S. District Court for Eastern District of Pennsylvania case 2:14-cv-05671

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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