PETER F. DIPAOLO v. NEW JERSEY PHYSICIANS UNITED RECIPROCAL a New Jersey reciprocal exchange and CRYSTAL EVANS

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
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                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-3097-17T2


PETER F. DIPAOLO,

          Plaintiff,

v.

NEW JERSEY PHYSICIANS
UNITED RECIPROCAL EXCHANGE,
a New Jersey reciprocal exchange,

          Defendant-Respondent,

and

CRYSTAL EVANS,

          Intervenor-Appellant.


                    Argued September 26, 2018 - Decided October 26, 2018

                    Before Judges Ostrer and Currier.

                    On appeal from Superior Court of New Jersey, Law
                    Division, Essex County, Docket No. L-1580-13.
             William D. Levinson argued the cause for appellant
             (Martin Kane & Kuper, attorneys; James D. Martin, of
             counsel; William D. Levinson, on the briefs).

             Anthony Argiropoulos argued the cause for respondent
             (Epstein Becker & Green, PC, attorneys; Anthony
             Argiropoulos and William Gibson, on the brief).

PER CURIAM

      In this bad faith action, plaintiff Peter F. DiPaolo, M.D. sued his medical

malpractice insurer, defendant New Jersey Physicians United Reciprocal

Exchange (NJ PURE), alleging it did not make a good faith effort to settle the

underlying medical malpractice suit within the policy limits. Crystal Evans, the

plaintiff in the underlying malpractice case, received a substantial jury verdict

that was subsequently reduced to a judgment against DiPaolo. She intervened

in the bad faith action.

      NJ PURE served a subpoena duces tecum on Evans's counsel, seeking

communications and documents made by and exchanged between Evans's

counsel and DiPaolo's counsel after the verdict in the underlying case. Both

counsel claimed the common interest privilege barred the production of any

communications and documents. The trial judge disagreed and ordered counsel

to produce the requested communications and documents. Because Evans and

DiPaolo share a common interest in recouping the judgment from NJ PURE, the


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requested material is privileged, and we, therefore, reverse the September 18,

2017 trial court order.

       After a jury awarded Evans $3,801,200 1 for injuries sustained as a result

of DiPaolo's deviation from the applicable medical standard of care, a judgment

was entered against him totaling $5,256,767.72. Following an unsuccessful

appeal, NJ PURE paid the $1,000,000 medical malpractice insurance policy

covering DiPaolo.      A judgment of $4,800,0002 remained in place against

DiPaolo.

       As a result, DiPaolo brought this action, contending NJ PURE did not

make a good faith effort to settle the medical malpractice case within his policy

limits, resulting in the substantial judgment against him. He asserts NJ PURE

is responsible for the judgment. As intervenor, Evans also seeks a determination

that NJ PURE is obligated to pay the entire outstanding judgment against

DiPaolo.




1
  The total verdict was $5,590,000. The jury allocated 68% of the fault to
DiPaolo.
2
    The judgment includes the accrued interest.


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      During discovery, NJ PURE served a subpoena duces tecum on Evans's

trial counsel and his law firm.3 The subpoena sought:

            1. All documents or communications, including records
            of any telephone communications, between [trial
            counsel] and [DiPaolo's counsel] relating to or
            concerning the Underlying Action.

            2. All documents or communications, including records
            of any telephone communications, between [trial
            counsel] and [DiPaolo's counsel] relating to or
            concerning This Action.

            3. All documents or communications, including records
            of any telephone communications, between [trial
            counsel] and [DiPaolo's counsel] concerning or relating
            to settlement in the Underlying Action.

      Evans objected to the subpoena, alleging that under the common interest

doctrine, any communications and documents between counsel, that occurred

after the jury's verdict, were privileged. The parties agreed that the privilege

was waived for any communication or documents before the verdict.4

      During oral argument of NJ PURE's motion to compel production of the

requested subpoenaed items, Evans's counsel argued that Evans and DiPaolo had


3
   In the same order under review here, Evans's trial counsel was disqualified
from representing her in the bad faith action because of the likelihood he would
be a material witness. There was no appeal from that part of the order.
4
  Different counsel represented DiPaolo during the underlying medical
malpractice trial.
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a common purpose in this action: each sought to prove the bad faith of NJ PURE

and collect the judgment. The attorneys had collaborated in their common

interest by communicating about strategy, settlement possibilities, and the scope

of questioning of the defense witnesses. Counsel cited to O'Boyle v. Borough

of Longport5 to support his assertion of the common interest privilege.

        In granting NJ PURE's motion, the trial judge stated that he did not see a

common interest.       He found O'Boyle inapplicable because there was no

"economic commonality" between the parties. We granted leave to appeal from

the court's order. 6

        We review the applicability of an evidentiary privilege de novo. See Paff

v. Div. of Law,  412 N.J. Super. 140, 149 (App. Div. 2010); Manalapan Realty,

L.P. v. Twp. Comm. of Manalapan,  140 N.J. 366, 378 (1995) ("A trial court's

interpretation of the law and the legal consequences that flow from established

facts are not entitled to any special deference.").

        Under our broad discovery rules, a party is generally permitted to obtain

any materials that are relevant to the subject matter of the action, so long as the



5
     218 N.J. 168 (2014).
6
  Subsequent to our order, DiPaolo assigned Evans all of his causes of action
and rights to any recovery against NJ PURE.
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materials are not privileged. R. 4:10–2(a). Here, Evans asserts the attorney-

client privilege bars the production of any communication and documents

exchanged between her counsel and DiPaolo's attorney. We agree.

      The attorney-client privilege protects communications between a client

and his or her attorney. N.J.S.A. 2A:84A–20; N.J.R.E. 504. Communications

are privileged if they take place in the course of a professional relationship and

are intended to be confidential. Coyle v. Estate of Simon,  247 N.J. Super. 277,

281-82 (App. Div. 1991). Ordinarily, the attorney-client privilege is waived

when confidential communications are revealed to a third party. O'Boyle,  218 N.J. at 186 (citations omitted).

      However, not every disclosure serves to waive the privilege. Rather,

"courts have interpreted [the waiver] principle in a commonsensical way,

fashioning a 'common interest' doctrine which protects communications made to

a non-party who shares the client's interests." Laporta v. Gloucester Cty. Bd. of

Chosen Freeholders,  340 N.J. Super. 254, 261 (App. Div. 2001) (quoting In re

State Com'n of Investigation,  226 N.J. Super. 461, 466 (App. Div. 1988)). The

common interest doctrine permits "the free flow of information between or

among counsel who represent clients with a commonality of purpose," and

"offers all parties to the exchange the real possibility for better representation


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by making more information available to craft a position and inform decision -

making in anticipation of or in the course of litigation." O'Boyle,  218 N.J. at
 197 (citing In re Grand Jury Subpoenas,  902 F.2d 244, 249 (4th Cir. 1990)).

      In adopting the common interest doctrine expressed in LaPorta, the

O'Boyle Court articulated its requirements: (1) the parties must share a common

purpose, though it is not necessary for their interests to be identical: (2) it is "not

necessary for actual litigation to have [been] commenced"; (3) the common

interest may arise during civil proceedings; and (4) there is no requirement for

"the common interest [to] be legal rather than purely commercial."  218 N.J. at
 193-94, 198 (citing LaPorta,  340 N.J. Super. at 262).

      Evans and DiPaolo assert that the common interest doctrine protects their

post-verdict communications and documents. They contend they have economic

interests that are in "perfect alignment [as] [Evans] seeks to collect the excess

verdict and [DiPaolo] seeks to have [NJ PURE] pay the excess verdict." In

contrast, NJ PURE posits there is no common interest because Evans had no

claims asserted against NJ PURE prior to the assignment of rights from DiPaolo;

instead, Evans has a debtor-creditor relationship with DiPaolo.

      A review of the record reveals that the O'Boyle test has been satisfied and

that a common interest exists between Evans and DiPaolo that prevents the


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disclosure of their respective counsels' communications and documents. The

communications were made in the course of anticipated and actual litigation and

Evans and DiPaolo share the common purpose of seeking an order for NJ PURE

to pay the outstanding judgment.         The disclosures were intended to be

confidential and were not made to a third party "in a way inconsistent with

keeping it from an adversary." O'Boyle,  219 N.J. at 192.

      We are not persuaded by NJ PURE's argument that even if the common

interest doctrine applies, the attorney-client privilege can be pierced under In re

Kozlov,  79 N.J. 232, 243-44 (1979). In certain limited circumstances, to pierce

a privilege: (1) there must be "a legitimate need . . . to reach the evidence sought

to be shielded;" (2) the evidence must be relevant and material to an issue in the

case; and (3) there must be a finding, by a fair preponderance of the evidence,

that the information sought cannot be obtained from a less intrusive source. Ibid.

      Here, NJ PURE has not demonstrated the required need for the

communications and documents. The issue in the bad faith action is whether

Evans and DiPaolo could have achieved a settlement prior to the verdict. All

parties have agreed that any communication and documents relating to pre -

verdict discussions are not privileged and they have produced those materials.

As a result, NJ PURE is unable to meet the strict Kozlov requirements. See


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State v. Mauti,  208 N.J. 519, 537 (2012) (holding Kozlov did not create a "broad

equitable balancing test pursuant to which any privilege is subject to piercing if

the adversary 'needs' relevant evidence that cannot be obtained from another

source.").

      Lastly, we reject NJ PURE's argument that counsel for Evans and DiPaolo

waived the attorney-client privilege when they placed their communications

with each other "at issue" in bringing the bad faith litigation. NJ PURE would

be correct if it sought the communications between counsel in the underlying

medical malpractice case. Those communications are at issue in this suit and

therefore not privileged.    Here, however, NJ PURE seeks access to the

communications between counsel in this litigation.          As explained, such

communications are privileged.

      Reversed and remanded for further proceedings.          We do not retain

jurisdiction.




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