Strip Club’s Contractors Lose Defamation Claim

(CN) - Promoters and vendors for the Manhattan strip club Cheetah's before federal agents raided it cannot sue CBS News for defamation, an appeals court ruled.

The dispute erupted from a 2011 federal indictment that accused members and associates of the Bonnano and Gambino crime families of having trafficked women from Europe and Russia to work in strip clubs.

Because the women were also forced into sham marriages for citizenship purpose, the federal investigation was called "Operation Dancing Brides." The Cheetah Club was one of the clubs searched by federal agents.

After the raid, Kathryn Brown reported for CBS-2 News outside the club.

"This strip club here, Cheetah's in Midtown, they say is at the center of the operation," she reported. "Cheetah's advertises exotic women and the ... federal authorities say it is run by the Mafia."

Cheetah's attorney David Carlebach appeared on a CBS-2 broadcast later in the day, telling Brown, "There is absolutely no La Cosa Nostra, as you say, connection."

Times Square Restaurant Group and Times Square Restaurant No. 1 Inc., which book the club's dancers and provide its food and beverages, respectively, took offense.

Denying any involvement in any organized crime, the businesses and three officers associated with them sued CBS News for defamation.

Though the contractors claimed that the news report was false, misleading and malicious, CBS countered that the nothing about its reporting concerned the plaintiffs.

The Manhattan Supreme Court agreed with CBS, finding no mention of the Times Square management companies or the individual plaintiffs in the report about Cheetah's.

The Appellate Division's First Judicial Department affirmed 3-2.

"Plaintiffs' relation to Cheetah's is peripheral, and the public at large would have no reason to think they were implicated in the federal investigation," Justice Peter Tom wrote for the majority.

The Aug. 4 ruling notes that Cheetah's owner Sam Zherka is being held without bail on charges of fraud, income tax fraud and witness tampering.

"Zherka, as the owner of Cheetah's, is in a position of ownership and control, not plaintiffs," Tom wrote. "The Times Square plaintiffs are not identified in the news reports as being operated by organized crime, and their capacity as vendor's to Cheetah's hardly serves to equate them with those identified by the report as 'The Mafia.'"

Cheetah Club's corporate parent, Three Amigos SJL Rest. Inc., had joined the Times Square plaintiffs in the lawsuit but is not a party to the appeal.

The dissent found that the individual officers had a better case than the businesses

These individuals sufficiently alleged that they belonged to a "small and exclusive group" that ran the club and had frequent visible interaction with the club's dancers, vendors, officials and customers, according to the dissent.

"Here, there are sufficient facts pleaded at this early stage in the litigation to reasonably connect the individual plaintiffs with the following statement: 'it (meaning Cheetah's) is run by the Mafia,'" Justice Barbara Kapnick wrote, joined by Justice Rosalyn Richter.

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