JOHN BABISH'S DEFENSE: PART III
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
PARACELSIAN, INC. , a Delaware AFFIDAVIT OF
Corporation, JOHN MOSS
HINCHCLIFF
Plaintiff
97-CV-604 (RSP) (GJD)
v.
JOHN G. BABISH,
Defendant.
STATE OF NEW YORK
)ss.:
COUNTY OF TOMPKINS)
JOHN MOSS HINCHCLIFF, being duly sworn, says:
1. I am an attorney and member of True, Walsh & Miller, LLP, attorneys for defendant, John Babish. I submit this affidavit in opposition to plaintiff's motion for a preliminary injunction,
2. Plaintiff's complaint and its other papers submitted in support of its motion asserts that Dr. Babish removed company records, including trade secrets, marketing plans, advertising programs, financial information and proprietary data and know-how, See,
e.g., Complaint 115-17.
3. On May 7, 1997, I reviewed all of the papers and materials Dr. Babish removed when he left the employ of Paracelsian. I did not attempt to create a detailed inventory, but I did make the following observations. There are 16 plastic storage boxes, 1 large
"bankers" box, 5 small "bankers" boxes, 2 photocopy paper boxes, and one small box that was filled with copies of one of Dr. Babish's published papers. I also observed computer disks with labels indicating that the disks were personal software disks,
archived Cornell University papers, Dr. Babish's copies of old correspondence, copies and drafts of Dr. Babish's publications and research papers, and the like. The labels suggest that the disks also included old Paracelsian material such as the 5-year plan that
Dr. Babish prepared in 1991, prior to the company's initial public offering (which plan formed the basis for the prospectus when the company went public in 1992). None of the labels on the disks suggested that the disks contained any of Paracelsian's proprietary
scientific data, marketing plans or the like. There were also two wooden boxes with a few dozen transparencies (slides) of the type that would be used at a seminar or meeting.
4. Several of the boxes contained Dr. Babish's lecture outlines, grant applications, textbooks, professional magazines and other papers from his days as a Cornell University professor. Many of the papers dated to the mid-1980's and earlier. Other boxes were filled with Ph.D. dissertations from students that Dr. Babish advised. One
box was filled with what appeared to be the contents of Dr. Babish's desk drawers: miscellaneous family photos, loose paper clips and coins, the plastic "tombstone" from when Paracelsian went public. Another box contained framed family photos and a computer cable. Two boxes contained several 3-ring notebooks that contain slides and
papers from public presentations and lectures that Dr. Babish has given over the years. Several of these relate to presentations made as Chief Scientist for Paracelsian, but the notebooks appear to contain only materials that were presented publicly. One box contained old papers from Dr. Babish's work at Cornell University and old Paracelsian materials, including a hard copy of the 1991 5-year plan and copies of the company's annual report and prospectus. That box also had copies of several letters that Dr. Babish had received from potential sources of andrographilide (a derivative of a traditional
Chinese medicine), but they appear to be of a general nature and certainly do not contain any nonpublic information. The box also had several copies of an October 1996 evaluation of Paracelsian that apparently was prepared by a Wall Street analyst, together
with a copy of a cover fax that Dr.
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Babish sent with the evaluation to members of the Board of Directors.
5. In the front cover of one 3-ring binder I found a January 31, 1997 fax to Dr. Babish that covers an engagement letter between Paracelsian and East-West Herbs, Ltd. This document has a two-page attached addendum titled "AndroVir Production and Marketing Plan Outline." I have returned the original of this document to Paracelsian's attorney, and I have kept a copy in my office for use in this litigation. Dr. Babish no longer has a copy. I do not know whether the company considers this document "confidential," but it is of no use or value to Dr. Babish (indeed, as he notes in his
affidavit, he did not realize he had it).
6. In one of the boxes containing copies of published papers I found a document entitled "AndroVir Clinical Trial Protocol Number 96/02/3M01." This document dates from March 1996 and apparently relates to an animal study (the subject was a dog). I have returned the original of this document to plaintiff's counsel, and again, I have kept a copy in my office in case it is needed in this litigation. Dr. Babish did not retain a copy.
7. Apart from the documents identified in paragraphs 5 and 6, my review of the materials did not uncover any documents that contain what I considered to be proprietary or trade secret information or information within the definition of "confidential information" contained in the Confidentiality Agreement (submitted as
Exhibit C to the Pinnisi Affidavit).
8. One box contained Dr. Babish's divorce papers, separation agreement and other personal papers having nothing to do with Paracelsian or with Dr. Babish's work as a scientist. One box contained a file relating to a lawsuit that apparently is still pending against Paracelsian and Dr. Babish (and others). Dr. Babish is represented by counsel separate from Paracelsian's counsel, and the file includes copies of litigation papers and correspondence with counsel.
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9. By letter dated May 9, 1997, I have advised plaintiff's counsel that he is welcome to conduct his own inspection at any mutually convenient time of any of the materials. To protect Dr, Babish's attorney-client privilege in the separate suit mentioned in the preceding paragraph, and because the divorce and other personal papers are obviously not Paracelsian's, I do not intend to permit an inspection of the items identified in paragraph 8, although I will make those documents available to the Court for its in camera inspection should the Court so wish.
10. When I reviewed the trade confirmations for Dr. Babish's stock sales, I found two confirmations for transactions that are not reflected on the Form 4's attached as exhibit D to the Pinnisi affidavit. Specifically, there was a trade on January 24, 1997 of
5,000 shares at 2.03125 per share and another on January 31, 1997 of 7,500 shares at 1.8333 per share. Copies of these trade confirmations are included in Exhibit H.
11. I obtained a daily price history for Paracelsian stock from a database maintained by CompuServe. A printout of the daily price and volume information from January 1, 1997 through May 6, 1997 is submitted as Defendant's Exhibit N. I have annotated the printout to reflect Dr. Babish's trades (using the trade dates) and also to reflect the dates on which news of Dr. Babish's resignation was released and the date on which news of T. Colin Campbell's resignation was released. The stock price did not drop under $1.00 per share until about three weeks after the press release announcing Dr. Babish's
resignation.
12. On May 12, 1997, I downloaded Paracelsian's 1996 Annual Report from the SEC database available through the World Wide Web. Attached as Exhibit Q is an excerpt from that annual report showing that as of December 18, 1996 there were 11, 669,604 outstanding shares of common stock. I also conducted an on-line inquiry into other
public companies using names
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beginning with "Para." I found listings for: Paracelsian, Paradigm, Paradise, Paragon, Paramark, Parametric, Paramount, Paranet, and Paravent.
13. I also had a first level trademark search conducted against the name ParaDocs. There are several companies who have registered trademarks for "Paradox" with products that included computer database software, soft drinks, hair care products and cosmetics, optical goods, apparel, and sporting equipment.
14. Paracelsian's counsel has admitted that its "investigation" of Dr. Babish did not begin until after Mr. Hecht (the NYC attorney representing Dr. Babish and other shareholders) sent the April 15 demand letter (Exhibit B). Paracelsian's counsel has also admitted that this lawsuit was a response to that demand letter. Copies of the
interchange of correspondence between Mr. Pinnisi and Mr. Hecht are submitted as Defendant's Exhibit R.
JOHNMOSS HINCHCLIFF
Bar Roll No. 501246
Sworn to before me on
May 12, 1997.
DAWN M L. TORDEL
Notary Public, State of New York
No. 4974956
Qualified in Tompkins County
Commission Expires November 26, 1998 |
