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VACCARO v. MSG

March 31, 1992

AUGUSTIN A. VACCARO, EDGAR THAYER and PACE MOTOR SPORTS, INC., Plaintiffs,
v.
MSG (ILLINOIS), INC., Defendant.



The opinion of the court was delivered by: BRIAN BARNETT DUFF

MEMORANDUM OPINION

 Pending before this court is Defendant's motion to compel discovery. At deposition, Defendant wanted to dispose Plaintiff Augustin A. Vaccaro regarding a conversation he had with Wayne Kabak. Vaccaro failed to answer questions regarding his conversation with Mr. Kabak on the grounds of attorney-client privilege.

 Background

 In July, 1986, Pace Motor Sports, Inc. ("Pace") and SRO Motor Spots Corp. ("SRO") formed a joint venture called SRO/Pace Promotions ("the Old Venture"). The Old Venture was in the business of promoting and producing live motorized sporting events such as supercross motorcycle races and tractor pulls. In December, 1988, SRO was dissolved and its assets were distributed equally among its two shareholders, Edger Thayer and Augustin Vaccaro. following the dissolution of SRO, the solve venturers of the Old Venture were Pace, Thayer and Vaccaro (the three plaintiffs in this action).

 In 1989, the Old Venture sold 65% of its assets to the Madison Square Garden Corporation ("the Garden"). The unsold interest that retained by Pace (17.5%), Thayer (8.75%) and Vaccaro (8.75%). The closing of this transaction occurred on September 27, 1989 with the execution of a new joint venture agreement. The sole venturers of the New Venture were MSG (Illinois), Inc. (a wholly-owned subsidiary of the Garden, referred to herein as "MSG") and the three plaintiffs, Pace, Thayer and Vaccaro.

 The Old Venturers were advised by Josephson International, Inc. ("JII") during the negotiations with MSG regarding the sale of the Old Venture's assets and the formation of the New Venture, JII served as the "exclusive financial advisor" to Pace, Thayer and Vaccaro. Marvin Josephson and Wayne Kabak, JII's in-house counsel, provided advisory services on JII's behalf during the negotiations. Through July 14, 1989 (when the letter of intent was signed), Mr. Kabak was the only lawyer assisting the plaintiffs with the transaction.

 By terms of the new Joint Venture Agreement, Pace, Thayer and Vaccaro (the minority venturers) turned over effective control of the operation of the New Venture to MSG. The New Joint Venture Agreement also provides that the minority venturers possess a right t sell their respective interests in the New Venture to MSG (a right of "Extraordinary Put") in the event that MSG elected to proceed with an "Extraordinary Business" without the consent of the minority venturers. "Extraordinary Business" is defined by the New Joint Venture Agreement as any business or activity which is either outside the scope of the Venture Business or requires extraordinary capital expenditures.

 In 1980, MSG negotiated a Television Program Production Agreement with GRB Entertainment on behalf of the New Joint Venture for the purpose of producing a syndicated television show. Previously, the Old Venture had presold television programs of its events before incurring the production expenses associated with programs. According to the plaintiffs, MSG's decision to enter into the television production contract was an activity requiring extraordinary capital expenditures and hence was "Extraordinary Business." The minority shareholders subsequently filed suit against MSG alleging that because the production agreement constituted "Extraordinary Business," MSG was bound to purchase the minority venturers' interests in the New Joint Venture.

 In December, 1990, Mr. Vaccaro contacted Mr. Josephson of JII for advice regarding his decision to exercise the Extraordinary Put and require MSG to buy his interest. Mr. Josephson advised Vaccaro that he had the right to exercise the put. Vaccaro then asked Mr. Josephson if he could ask some questions of Mr. Kabak, JII's in-house counsel. Mr. Josephson said he would not mind Mr. Vaccaro's contacting Mr. Kabak. Vacarro then spoke with Mr. Kabak and the latter drafted Vaccaro's put letter. At his deposition, the attorney for MSG asked Vaccaro questions relating to his discussion with Mr. Kabak. Those deposition questions were objected and and MSG has moved to compel discovery.

 Discussion

 Although Plaintiffs argue that the attorney-client privilege shields the Vaccaro-Kabak discussion from discovery, Mr. Vaccaro admitted at his deposition that Wayne Kabak was not his attorney:

 
Q: Did you speak to anyone other than Mr. Thayer about the GRB deal prior to sending this [put] letter of December 21, 1990?
 
A: Yes.
 
Q: Other than your attorney, did you speak ...

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