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GULATI v. ZUCKERMAN

October 25, 1989

JACK D. GULATI and FIDELITY TECHNOLOGIES CORPORATION
v.
LAWRENCE H. ZUCKERMAN; VIATEK, INC., A PENNSYLVANIA CORPORATION; GREGORY S. BAUMANN; HARRY J. DIAMOND; and BARRY D. YEAKEL



The opinion of the court was delivered by: CAHN

 EDWARD N. CAHN, UNITED STATES DISTRICT JUDGE

 The plaintiffs in this defamation action are Jack Gulati, a citizen of Pennsylvania, and Fidelity Technologies Corporation (FTC), a Pennsylvania corporation of which Gulati is president. The defendants are Viatek, Inc., a Pennsylvania corporation; Lawrence H. Zuckerman, Viatek's president; Gregory S. Baumann and Harry J. Diamond, employees of Viatek; and Barry P. Yeakel, a former employee of Viatek. The individual defendants are all citizens of Pennsylvania.

 This action was originally filed in the Court of Common Pleas of Lehigh County. The case was removed to federal court, by motion of the defendants, under 28 U.S.C. ยง 1442(a)(1), which permits removal of a suit brought against

 
any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office. . . .

 The defendants have filed a motion to dismiss or, in the alternative, a motion for summary judgment, together with supporting affidavits. Since I will rely in part upon materials outside the pleadings in rendering my decision on the defendants' motion, I will treat the motion as one for summary judgment.

 According to the allegations in the plaintiffs' complaint and to the unchallenged averments in the affidavits submitted by the defendants, the relevant facts of the case are as follows. Plaintiff Gulati was the president of Viatek, Inc., until November 9, 1987. The plaintiffs' defamation claim rests, in the main, upon two incidents which followed Gulati's termination as an employee of the defendant corporation.

 In a letter dated May 26, 1988, defendant Zuckerman, the current President of Viatek, wrote to the Office of Regional Counsel of the United States Small Business Administration requesting, under the Freedom of Information Act, copies of Gulati's applications to Small Business Administration assistance programs. In the letter, Zuckerman stated that the Board of Directors of Viatek "strongly suspected Mr. Gulati of having conducted his job in an unethical and corrupt manner -- committing illegal acts, including perjury -- . . ." Complaint, Exhibit A. He also expressed suspicion that Gulati had violated his employment contract and nondisclosure agreement with Viatek. Id. Zuckerman's letter to the Small Business Administration forms the basis of the first count of the Complaint.

 Counts Two through Five of the Complaint rest on statements made by the defendants to investigative agencies of the Department of Defense. *fn1" Viatek, a defense contractor, holds a facility security clearance, which qualifies it for access to certain classified information. As a cleared contractor, Viatek is subject to the requirements of the Defense Industrial Security Program (DISP). The company's compliance with security requirements is monitored by the Defense Investigative Services (DIS), which conducts security inspections of contractor personnel and facilities.

 On December 4, 1987, in the course of a scheduled inspection of Viatek, the DIS learned that Gulati had been dismissed from his position. At the time of the inspection, there was some discussion of whether it would be appropriate for Viatek to file an "adverse information report," under paragraph 6(b)(1) of the Department of Defense's Industrial Security Manual for Safeguarding Classified Information, regarding Gulati. This paragraph directs contractors to submit reports "of any information coming to their attention concerning any of their employees who have been cleared or who are in the process of being cleared for access to classified information, which indicate that such access or determination may not be clearly consistent with the national interest." Department of Defense, Industrial Security Manual for Safeguarding Classified Information para. 6(b)(1) (1989). *fn2" This reporting requirement, which is not obviated by the discharge of an employee, is quite broad. Footnote 13 to paragraph 6(b)(1) states that:

 
As a general rule, any information that reflects adversely on the integrity or character of the employee, which suggests that his or her ability to safeguard classified information may be impaired, should be reported to DISCO [Defense Industrial Security Clearance Office]. . . . The following are some examples of the types of information . . . which should be reported to DISCO: criminal activities; bizarre or notoriously disgraceful conduct; treatment for mental or emotional disorders; excessive use of intoxicants; use of illegal, controlled substances . . .; and excessive indebtedness or recurring financial difficulties. These examples are not all inclusive, but are intended only to serve as a sample of the types of information which should be reported. Only information which has been confirmed by the contractor as fact need be reported. . . . If there is doubt whether information should be reported, furnish the information to DISCO for evaluation.

 Viatek indicated that it would decide whether to file such a report after completing an internal investigation of Gulati's suspected misconduct. On March 23, 1988, the DIS learned that FTC, a corporation headed by Gulati, had applied for a facility security clearance. An agent of the DIS contacted defendant Zuckerman to ask whether he intended to submit the adverse information report. After discussion of the allegations against Gulati, it was determined that submission of the report would be appropriate. The report was filed at DISCO on March 31, 1988. The report, as summarized by the plaintiffs, accused Gulati of illegal and unethical business practices, violation of his employment contract and nondisclosure agreement, theft of Viatek trade secrets and Viatek property, misrepresentation of Viatek as a minority owned business, misrepresentation of his son as an engineer for the purpose of meeting government contract requirements and obtaining consulting fees, perjury, and other assorted misdeeds. Complaint at 5-7.

 The following month, the Personnel Investigations Center (PIC) began an investigation of Gulati. *fn3" On June 1, 1988, the DIS industrial security field office chief and a DIS special agent visited Viatek and interviewed a number of Viatek personnel, including defendants Zuckerman, Baumann, Diamond, and Yeakel. The four defendants made statements similar to those which appear in the adverse information report.

 The defendants press their motion for summary judgment on three grounds. First, they argue, a defense contractor is entitled to partake of federal official immunity when it cooperates with the government in a security investigation. Second, they argue that they are entitled to immunity under state law. Third, they ...


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