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"Defendant and cross-complainant, Michelangelo Delfino, submits this Settlement Conference Statement pursuant to Local Rules of Court.




Plaintiffs blindly pursue litigation which, regardless of the outcome of the trial, they cannot win. So whether by trial, or through appeal, Dr. Michelangelo Delfino will always exercise his First Amendment rights to publically speak the truth and to publish his opinions on the Internet. Even if plaintiffs were to win everything at trial, they cannot defeat this elementary principle. And, if they should fail to win everything at trial, plaintiffs face total financial devastation flowing from such ultimate failure. There is no down side for Dr. Delfino if he loses, but in their attempts to unjustly silence Dr. Delfino, plaintiffs have placed their entire corporate and personal liquidities at stake.


1. Statement of Facts


In April 1999, the (original) plaintiff, Varian Associates, divided into three separate and distinct corporate entities (two of which were substituted in as plaintiffs). Anticipating opposition to this plan, Varian was concerned about anything that might raise stockholder and investor resistance to this corporate reorganization. Varian’s concern included unsympathetic Internet postings (called “flaming1”) that was occurring on two Internet public forums: Yahoo! and Stock Talk.


Having terminated Dr. Delfino (after 10 years of service) the previous October, which roughly coincided with the start of some of those postings, Varian Associates suspected that it was Dr. Delfino that was doing the “flaming1.” In Varian’s reasoning, some of those postings, especially on the Stock Talk forum, poked fun at the same supervisors and Human Resource person that were involved in Dr. Delfino’s termination.


In February 1999, Varian and two of its supervisors, brought suit against Dr. Delfino for various unfair business practices as to the corporation, and defamation, impersonation and false light claims by the supervisors. Basing its “unverified” complaint almost entirely upon ‘information and belief”, Varian undertook a broad stroke character assignation and attack upon Dr. Michelangelo Delfino, who was once one of Varian’s foremost scientific researchers. Dr. Delfino was accused of everything from sabotage of a chemical lab, to making funny faces at a supervisor (Susan Felch), to singing in the hallways.


However, the fact is that it was Dr. Delfino who had complained to Varian that Mrs. Felch was harassing him at work. Varian simply dismissed his complaints, choosing to believe one of their own, supervisor Felch, over Dr. Delfino and several other witnesses who supported his assertions. After his complaint was summarily denied, Mrs. Felch was re-energized and renewed her complaints against Dr. Delfino. Varian claims her complaints were the basis for his subsequent termination. At his termination, Varian provided Dr. Delfino with a modest severance package in exchange for a release of claims2. This agreement included the material representation by Varian that it would not oppose Dr. Delfino’s unemployment application submitted to EDD. Varian immediately breached that agreement by filing a protest letter with EDD opposing his attempt to obtain benefits, and by charging Dr. Delfino with misconduct and harassment of Varian personnel.


Dr. Delfino has cross-complained for rescission of the release, and for retaliatory and wrongful discharge from his employment.


1. Of course, Varian was demonstrably wrong. It originally named 8 other poster aliases in the complaint. But during discovery, plaintiff learned these other aliases were not Delfino, and quietly dismissed those individuals from the action.

2. Unknown to Dr. Delfino, and only known to plaintiffs Felch and Varian, Varian had placed a hidden camera in Mrs. Felch's office and directed at the entrance to the men's bathroom, hoping to capture Delfino engaging in hand gestures while he was utilizing the men's room. This invasion of privacy claim was not released by Delfino.


2. Summary of Proceedings


Varian originally sued in state court (Santa Clara County), which then was removed by defendant to federal court. A TRO was issued by the state court, which remained in place until judge Whyte could hear the motion for preliminary injunction.


In the state court action, defendant had asserted his Fifth Amendment privilege at his deposition. Once in federal court, and after an unsuccessful motion for “use” immunity.


The preliminary injunction, substantially modified from what was requested by plaintiffs, was granted by judge Whyte, who noted that plaintiffs had not had the opportunity to depose defendant since his 5th Amendment waiver, and hence was disinclined to give much weight to defendant’s declaration denying any wrongful conduct. Judge Whyte noted that he might entertain defendant’s motion for modification after plaintiff had re-deposed defendant. Judge Whyte was of the opinion that some of the postings could be subject to prior restraint as “commercial speech.” He later found that there was no commercial activity.


Plaintiffs then amended their complaint to name a new defendant, Mary Day, a close friend, co-worker and neighbor of Dr. Delfino.


Plaintiffs and defendants each made motions for summary judgment in federal court. However, only defendants’ motion was granted. Judge Whyte ruled that there was no commercial activity, and hence there were no federal claims that could be pursued under the Lanham Act. He granted judgment against plaintiffs on the Lanham Act and remanded the case back to state court.


Back in superior court, plaintiffs filed a third amended complaint, from which defendants immediately filed a motion to dismiss under the anti-SLAPP statute. Judge Rushing heard and denied that motion, ruling that the motion was too late (he incorrectly thought it had to be filed in the first 60 days of the litigation), and that granting of the federal preliminary injunction3 meant that plaintiffs were likely to prevail at trial.


Pursuant to statute, both Day and Delfino have appealed that denial to the Sixth DCA. It is awaiting oral argument sometime in January 2002.


3. The Ninth Circuit ruled that the preliminary injunction was void ab initio due to the lack of any federal jurisdiction, and ordered the preliminary injunction dissolved. Both the federal court, and the state appellate courts, have all recently ruled that a defendant has the right to assert the anti-SLAPP statute whenever the complaint is amended, and that the granting of a preliminary injunction is not determinative of whether an action is a SLAPP suit or not, as it involves different standards and proofs of issues.


3. Undisputed Matter


Not unexpectedly, just about every factual matter in this case remains hotly in dispute. Dr. Delfino has candidly admitted to posting approximately 60 messages on the Yahoo! message board, none of which are sufficiently outlandish or unprivileged to create a cause of action for the plaintiffs.


4. Issues of Fact


a. Was Dr. Delfino the author/publisher of the messages on the Stock Talk message board?

b. What damage, if any, as any plaintiff suffered?

c. Did Varian retaliate against Dr. Delfino for his having made harassment complaints against Mrs. Felch?

d. What damages did Dr. Delfino suffer?

e. Are any postings by Dr. Delfino provably false?

f. Can “malice” be proven against Delfino by clear and convincing evidence?

g. Did Varian videotape Delfino going to the bathroom.

i. Does Varian have any commercial claims for unfair competition or false advertising?

j. Are plaintiffs intended third party beneficiaries of Yahoo!?

k. Did Varian breach the agreement with Delfino?

l. Were the postings done by Dr. Delfino made in connection with public issues or concerns, or in connection with this litigations, and hence not subject to plaintiffs’ defamation claims.

m. Has Varian conspired to suppress and conceal the identities of persons whom they know to have posted on the Internet and to which they have accused Delfino of posting?

n. Has Varian destroyed and hidden evidence of their invasion of Delfino’s privacy?

o. Did Felch and Zdasiuk conspire to wrongfully terminate Delfino in order to protect their own positions within the newly organized companies by eliminating Dr. Delfino’s and his advocation of certain technological advancements within the company, in favor of inferior and unworkable technologies advocated by Felch and Zdasiuk.

p. Is the maintenance of this lawsuit designed merely to acquire the patent rights of the post-employment invention of Dr. Delfino and Mary Day?4

q. There are many more additional factual disputes, but these illustrate how diametrically opposed the parties are.

4. This is probably the true crux of the case. While Varian claims it is not in competition with Delfino's company, it is probably because it does not have this technology incorporated into Delfino and Day's invention. This invention would be of great benefit to mankind, in that it would prevent post-surgical clotting and scarring of internal arteries and veins, and would do so at a fraction of the cost of other methodologies currently employed that are far less successful. Varian has felt compelled to demean and insult Delfino in order to justify its reluctance to pursue such technologies. Since the expensive and massive equipment manufactured by Varian would be obsolete with Delfino's invention, and because the profit margin is so high for Varian in its current product line, it is no wonder that publically Varian disavows the practicality of the invention, while privately coveting the day that it might be able to exercise a writ of execution to collect the patent. Delfino's concern is that hs invention might then be suppressed by Varian because there is less profit in it. If that occurs, then it is all of society that will suffer because of this lawsuit.


5. Issues of Law


a. Are the offending postings privileged and/or truthful?

b. Is the decision of the CUIAB binding upon Varian in the present action (collateral estoppel and issue preclusion).


6. Relief Sought


Varian seeks a permanent injunction against Dr. Delfino, together with financial and punitive damages.


Dr. Delfino seeks monetary damages the invasion of his privacy, and for breach of the agreement.


7. Prior Settlement Discussions


Varian once offered to drop the lawsuit, waive fees and costs in exchange for entry of a permanent injunction, which was rejected by Delfino.


Dr. Delfino seeks to enforce his First Amendment rights to post his opinions and truthful matters, together with the recovery of all of his litigation costs, a public apology, and assurances that Varian will not continue to harass him in the future. Delfino has also offered to assign his interest in a patent of a medical device, necessary for Varian to obtain in order to manufacture such a device.


8. In Limine Motions


Defendant will request that the trial court:


1. Exclude purported expert witness testimony;

2. Exclude purported video tape evidence;

3. Exclude divorce, prior employment, stale issues from evidence.

4. Exclude any evidence from direct or indirect testimony of plaintiffs’ lawyers or legal assistants.

5. Reserves the right to make such additional in limine motions has trial preparation and analysis direct.


9. Settlement Analysis


Settlement is the only way plaintiffs can ever “win.” Dr. Delfino believes he has been wrongfully accused, that this is just a corporate SLAPP suit hiding behind the skirts of Felch and Zdasiuk’s defamation claims, and that the First Amendment is, and always will be, worth fighting for with all of his life and energy. He is more than willing to go all the way to protect his rights.


10. Discrete Issues


If the appeal from the denial of the anti-SLAPP motion is granted, but this trial occurs first with a different result, which controls?


11. Current Settlement Position


Defendants have made a CCP 998 offer of compromise. It basically requires plaintiffs to drop their lawsuit, issue a public apology, pay defendants $5,000,000 a year for five years, and in exchange Delfino will drop his cross-complaint, and defendants would assign their invention to plaintiffs and agree to never post any message on the Internet about plaintiffs Susan Felch or George Zdasiuk. Each party would bear their own fees and costs. Delfino and Day would agree to not file malicious prosecution or abuse of process claims against plaintiffs.


Dated: October 8, 2001


Glynn P. Falcon, Attorney for

Michelangelo Delfino"

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