that the New Jersey Supreme Court would follow this uniform line of cases.
Hartford has produced evidence showing that Sidney Cooper, the company's secretary-treasurer, had substantial information prior to the inception of the policy on March 25, 1988 that Pagnotta, Cooper's plant manager, had committed fraudulent and dishonest acts. In particular, it has submitted an internal memorandum of Norman Jaspan Associates, Inc., a private investigation firm retained by Cooper. The memo, dated March 16, 1988, describes a meeting the previous day between Sidney Cooper and several Jaspan representatives. First Affidavit of Thomas R. Pattison, Esq., Exhibit B.
This memorandum shows that Cooper Sportswear, particularly Sidney Cooper, had sufficient information about Pagnotta's dishonest conduct to trigger the exclusionary provisions of Sections 7 and 15. It was prepared by Jaspan employee William J. Luby, who met March 15, 1988 with Sidney Cooper and Norman Jaspan, president of the firm, to discuss "information which had surfaced implicating James Pagnotta." Id. at 1.
As a threshold matter, the Court concludes that there are no hearsay or multiple hearsay problems with the Jaspan memo. The Court notes that, in the final Pre-Trial Order of October 20, 1992, entered by United States Magistrate Judge Stanley R. Chesler, Cooper objects to the admissibility of the memo as hearsay and double hearsay. Pre-Trial Order at 27, 38. The parties, however, have stipulated that any documents produced by Jaspan Associates at its April 16, 1992 deposition, including the March 16, 1988 memo, are considered prepared and maintained by Jaspan "in the ordinary course of that company's business." Id., Exhibit E. The author of the memo, Luby, had knowledge of what transpired at the meeting, having attended it, and was keeping a routine record of it. The memo, therefore, qualifies under the hearsay exception for "records of regularly conducted activity." Fed. R. Evid. 803(6).
Furthermore, any statements by Cooper employees quoted in the memo, tending to show knowledge of Pagnotta's dishonesty, qualify as "admissions by party-opponent," considered non-hearsay under Fed. R. Evid. 801(d)(2). As the relevant portions of the memo only quote statements by Cooper employees, these "admissions" cure any potential multiple hearsay problems within the memo.
According to the memo, Sidney Cooper told Jaspan representatives of several instances where Pagnotta's honesty was called into question by Cooper employees. First, Mary Perez of customer relations told Cooper that "she knew that Pagnotta was stealing. She claimed that she did not know how, but was sure about her information." First Pattison Affidavit, Exhibit B, at 1. Second, Cooper said he approached Jimmy Nash, a longtime employee, and asked "about rumors that Pagnotta was stealing from the company. Nash turned White and said, 'Please, don't ask me about it.'" Nash also reportedly told Cooper that a supervisor, Arthur White, after being told by Cooper to "keep an eye on the back of the building," told Nash "the company should be looking at the front of the building instead." Id. As Cooper and Nash were discussing Pagnotta, the warehouse manager, at the time, this statement could be reasonably construed to be a reference to him.
Third, Cooper told the Jaspan representatives that he believed Pagnotta, four days earlier, had sold two leather jackets and a skirt to a saleswoman from the Ideal Zipper Co. for $ 400, but at first misled Cooper by saying he sold them for the full price of $ 500, before revising his story. Cooper said he suspected that Pagnotta had "pocketed the difference" of $ 100. Id.
According to the memo, Cooper asked the Jaspan representatives for two undercover "placements" within the factory: a woman to work in the warehouse and retail store and a male warehouseman. Id. at 2. From the context of the memo, it is clear that Cooper intended that these two undercover Jaspan employees keep an eye on Pagnotta.
In summary, the memo shows that, while Cooper's application was pending, and before the inception of the Hartford policy on March 25, 1988, Sidney Cooper had substantial information, if not knowledge, about Pagnotta's commission of dishonest acts. The fact that Cooper asked Jaspan Associates to send two undercover operatives to watch Pagnotta at the warehouse indicates that Cooper, far from discounting this information, was taking it very seriously. Compare Harris W. Hall Company, Inc. v. Security Ins. Co., 289 So. 2d 832, 834 (La. Ct. App. 1974) (supervisor discounted evidence of dishonesty out of trust for the suspected employee). The memo further demonstrates that Cooper's information about Pagnotta's dishonesty concerned a series of acts, not an isolated incident. Compare Salley Grocer Co. v. Hartford Accident & Indemnity Co., 223 So. 2d 5, 8 (La. Ct. App.), writ refused, 222 So. 2d 883 (La. 1969) (no information that employee had engaged in a consistent course of dishonest conduct).
Cooper does not dispute the authenticity of the Jaspan memo. Nor does it dispute that Sidney Cooper said what the memo indicates he said. The company, instead, characterizes the information as mere "unsubstantiated rumors." Opposition memorandum at 14. The Court, however, finds that the statements by Cooper in the memo, as a matter of law, show that he had sufficient "information," if not "knowledge," to trigger the exclusionary effects of Section 7 of the policy. As a legal matter, the policy never applied to Pagnotta when it took effect March 25, 1988.
Section 7 excludes coverage for any employee from the time the employer has "knowledge or information" that the employee has acted fraudulently or dishonestly. Here, the insured had such "knowledge or information" prior to the issuance of Hartford's policy. Hartford, therefore, is entitled to summary judgment and the dismissal of Cooper's complaint.
The policy provision in question should be enforced for the additional reason that it simply embodies the equitable concept that it is unfair to impose upon an insurer the risk of loss from an employee whom the employer knows or has ample reason to suspect is dishonest, but continues to employ.
For the reasons discussed above, the Court grants Hartford's motion for summary judgment. An appropriate order follows.
WILLIAM G. BASSLER, U.S.D.J.
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