FIRST INDUSTRIAL, L.P. v. GENERAL INSURANCE COMPANY OF AMERICA

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1705-10T1

FIRST INDUSTRIAL, L.P.

(as successor in interest

to CHERRY HILL INDUSTRIAL

SITES, INC.),

Plaintiff-Appellant,

v.

GENERAL INSURANCE COMPANY

OF AMERICA (a Safeco Company),

HARLEYSVILLE INSURANCE COMPANY

OF NEW JERSEY, PENNSYLVANIA

GENERAL INSURANCE COMPANY (as

successor to certain liabilities

of American Employers' Insurance

Company),

Defendants-Respondents.

__________________________________________________________

Argued June 7, 2011 Decided August 29, 2011

Before Judges Graves, Messano and Waugh.

On appeal from Superior Court of New Jersey,

Law Division, Camden County, Docket No.

L-4651-09.

Carl A. Salisbury argued the cause for appellant

(DL Rothberg & Associates, P.C., attorneys;

Mr. Salisbury and Debra L. Rothberg, of

counsel; Ms. Rothberg and Jeffrey J. Berezny,

on the brief).

Margriet A. Schaberg argued the cause for

respondent Harleysville Insurance Company of

New Jersey (Riker Danzig Scherer Hyland &

Perretti LLP, attorneys; Lance J. Kalik, of

counsel; Ms. Schaberg and Mr. Kalik, on the

brief).

Elaine Whiteman Klinger argued the cause for

respondent Pennsylvania General Insurance

Company (Christie, Pabarue, Mortensen and Young,

attorneys; Ms. Klinger, on the joint brief).

Michael J. Frantz, Jr., argued the cause for

respondent General Insurance Company of America

(Borowsky and Borowsky, LLC, attorneys; Mr. Frantz,

on the joint brief).

PER CURIAM

Plaintiff First Industrial, L.P. appeals from an order dated October 1, 2010, denying its request for an order preventing "the showing, producing, admitting, disseminating, disclosing and copying" of an allegedly privileged letter inadvertently produced during discovery. Leave to appeal was granted by this court on November 19, 2010. We now reverse and remand for further proceedings.

This case arises out of "environmental property damage" at an industrial complex owned by plaintiff's predecessor in interest, Cherry Hill Industrial Sites, Inc. (CHIS). Plaintiff informed the New Jersey Department of Environmental Protection of the property's condition and agreed to "investigate and remediate" the damage. Plaintiff, as successor to CHIS's insurance policies, filed claims with defendants General Insurance Company of America (General Insurance) and Harleysville Insurance Company (Harleysville), demanding "defense and indemnification" for losses sustained in connection with the remediation. Thereafter, from 2000 to 2007, the parties negotiated plaintiff's claims, but a satisfactory resolution was not reached. As a result, plaintiff filed a complaint against General Insurance and Harleysville in April 2007.

On November 24, 2008, the parties entered into a "Cooperation Agreement" (the Agreement) and plaintiff's complaint was dismissed without prejudice. Pursuant to the Agreement, the parties attempted to negotiate "an amicable resolution of the claims." However, negotiations were again unsuccessful, and plaintiff refiled its complaint on February 6, 2009. Pennsylvania General Insurance Company (Pennsylvania General) was added as a defendant.

During discovery, plaintiff produced at least 50,000 pages of documents. Included was a letter dated January 26, 2005, from one of plaintiff's attorneys, Debra L. Rothberg, to Jon Raleigh, Director of Business Management at First Industrial Realty Trust, Inc. (the January 2005 letter). In bold typeface across the top of the letter was the following statement: "PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION AND ATTORNEY-WORK PRODUCT."

Due to the extensive amount of discovery, the court entered an order on February 24, 2010, instructing the parties to submit "a privilege log and copies of all documents withheld from production." The order indicated that the court would "make an independent determination of all claims of privilege" after an in camera review. Plaintiff submitted a privilege log on March 15, 2010, listing approximately 100 documents that were privileged under the attorney client privilege or the work product doctrine. Although the privilege log included eleven communications between Rothberg and Raleigh, the January 2005 letter was not one of them.

On August 5, 2010, during a deposition of Michael Reese, plaintiff's "corporate designee," counsel for Pennsylvania General questioned Reese about the January 2005 letter. Plaintiff's counsel instructed Reese not to answer the question:

It's clear to me that's a privileged document, it was a document that was written by Counsel for First Industrial to a member of the litigation control group. It contains legal advice, it seems clear to me, for whatever reason, inadvertently, that document was produced when it should have been withheld. . . . It's going to be my position that we should be able to pull this document back as having been inadvertently produced. . . . If and when that issue gets resolved it would have to be resolved by the Court.

Counsel for Pennsylvania General agreed not to further question Reese about the letter because the privilege issue had to be "resolved by the Court."

One month later, on September 7, 2010, defendants filed a motion to compel the deposition of Rothberg. Defendants argued that "Rothberg was intimately involved with both the development of the facts in the underlying environmental claim and the submission of these claims to the insurers," and the January 2005 letter was relevant to defendants' "bad faith claims" and their "affirmative defense relating to plaintiff's breach of the duty to cooperate in the investigation of the claims." Plaintiff cross-moved for a protective order regarding allegedly privileged information in the January 2005 letter.

On October 1, 2010, without the benefit of oral argument, the court denied both motions from the bench. The court, however, only gave a statement of reasons for denying the motion to compel the deposition. An order memorializing the denials was entered the same day.

Plaintiff filed a motion for leave to appeal the October 1, 2010 order. While the motion was pending, the trial court filed "a written statement of reasons for the disposition" pursuant to Rule 2:5-6(c), which included the following:

Upon review of the transcript it has come to the Court's attention that the Court overlooked placing its reasons on the record for the denial . . . of plaintiff's motion for a Protective Order.

. . . .

As a result of the contentious nature of the discovery proceedings and allegations raised by the parties[,] the Court has not yet completed a full review of all of the documents, therefore, the Court determined that whether the alleged documents were privileged or not would be decided when it reviewed all of the documents and that the only instant harm would be the deposition of plaintiff's counsel. Therefore the Court granted plaintiff's motion protecting [its] attorney from deposition but denied the motion as to privilege until the Court could conduct a full review of all documents as granting that part of the motion at the time would have been premature.

Plaintiff presents the following arguments on appeal:

POINT I:

THE TRIAL COURT ERRED AND COMMITTED AN ABUSE OF DISCRETION BY DENYING PLAINTIFF'S CROSS-MOTION FOR A PROTECTIVE ORDER OVER THE ATTORNEY-CLIENT COMMUNICATION BATES STAMPED FILP001645-FILP001649. THE TRIAL COURT'S RULING UNDERMINES THE ATTORNEY-CLIENT PRIVILEGE AND RPC 4.4, SUBJECTS PLAINTIFF TO IRREPARABLE HARM AND HAS A CHILLING EFFECT ON THE UNDERLYING LITIGATION.

POINT II:

THE TRIAL COURT JUDGE SHOULD BE DISQUALIFIED FROM HEARING THIS APPELLATE ISSUE ON REMAND UNDER R. 1:12-1.

Appellate courts generally apply "an abuse of discretion standard to decisions made by [the] trial courts relating to matters of discovery." Pomerantz Paper Corp. v. New Cmty. Corp., __ N.J. __, __ (2011) (slip op. at 32) (citing Bender v. Adelson, 187 N.J. 411, 428 (2006)). Therefore, we "defer to a trial court's disposition of discovery matters unless the court . . . based [its decision] on a mistaken understanding of the applicable law." Rivers v. LSC P'ship, 378 N.J. Super. 68, 80 (App. Div.) (citing Payton v. N.J. Tpk. Auth., 148 N.J. 524, 559 (1997)), certif. denied, 185 N.J. 296 (2005).

Plaintiff first argues the January 2005 letter is protected by the attorney-client privilege, and the trial court abused its discretion by denying its motion for a protective order. In response, defendants argue that the letter is not privileged and, alternatively, plaintiff waived its right to assert that privilege.

"If a claim of privilege is disputed, an in camera review by the court of the allegedly privileged material is ordinarily the first step in determining the issue." Pressler & Verniero, Current N.J. Court Rules, Comment 6 to R. 4:10-2 (2011) (citing Loigman v. Kimmelman, 102 N.J. 98 (1986)). "When a New Jersey trial court reviews documents in camera, it must make specific determinations regarding plaintiff's access to them, including an expression of reasons for the court's rulings." Seacoast Builders Corp. v. Rutgers, 358 N.J. Super. 524, 542 (App. Div. 2003) (internal quotation marks omitted); see also Hartz Mountain Indus., Inc. v. N.J. Sports & Exposition Auth., 369 N.J. Super. 175, 183 (App. Div.) (stating that in camera proceedings "impl[y] the necessity of recorded fact-finding by the trial judge"), certif. denied, 182 N.J. 147 (2004). Critically, "[t]he trial court must examine each document individually, and explain as to each document deemed privileged why it has so ruled." Seacoast, supra, 358 N.J. Super. at 542.

In this case, it is clear that the trial court misapplied its discretion when it failed to conduct an in camera hearing prior to ruling on plaintiff's cross-motion. The court's actions were inconsistent with established case law, as well as its prior February 24, 2010 order, which stated it would "make an independent determination of all claims of privilege" after an in camera review. Additionally, the court's Rule 2:5-6(c) amplification provided no substantive basis for denying plaintiff's motion. Consequently, an in camera hearing is necessary to determine if the January 2005 letter is privileged. See Rosenberg v. State Dept. of Law and Pub. Safety, 396 N.J. Super. 565, 581 (App. Div. 2007) (remanding privilege dispute for a new in camera hearing because the trial court failed to make "specific factual findings" regarding the applicability of the claimed privilege).

In its second point, plaintiff argues that the trial court judge should be disqualified. We decline to address this issue because it was not presented to the motion judge. See State v. McCabe, 201 N.J. 34, 45 (2010) ("Motions for disqualification must be made directly to the judge presiding over the case.").

Reversed and remanded. Jurisdiction is not retained.