This matter was remanded to this court by the Appellate Division of the Superior Court (71 N.J. Super. 360 (1962)) for a hearing and determination of the issue involved, namely, whether an attorney-client relationship existed between Paul E. Doherty and Metalsalts Corporation (Metalsalts), defendants on the counterclaim and third-party complaint, at the time the defendant Doherty made a certain investigation which resulted in the submission of his report to the board of directors of said corporation on February 10, 1961.
In the main action Metalsalts brought suit to compel the defendant therein, Robert O. Weiss, to perform an alleged agreement to assign his interest in a patent application to the corporation. Weiss contested Metalsalts' right to the relief sought; counterclaimed against the corporation and brought a third-party action against certain directors and stockholders thereof, including Paul E. Doherty, seeking damages for an alleged libel and slander based on statements contained in the minutes of the meetings of the board of directors and stockholders.
The corporation and individual third-party defendants in their answer asserted the alleged defamatory statements were true and were privileged.
Weiss, who was president, a director and an employee under an employment contract with Metalsalts, was removed as president of the corporation on November 19, 1960. He
continued to be a director and an employee. Weiss demanded arbitration on the issue of his removal as president under the terms of his employment contract.
Thereafter, in January 1961, the defendant John B. Elliott, chairman of the board of directors, requested the defendant Paul E. Doherty to conduct an investigation of Weiss. Mr. Doherty, a New Jersey attorney and a member of the firm of New York attorneys who were retained by Metalsalts as general counsel, made the investigation. Mr. Doherty was also a stockholder of the corporation. In April 1961, subsequent to the acts complained of, he was elected a director and secretary of the corporation.
On February 10, 1961 Mr. Doherty made an oral report of his investigation at a meeting of the board of directors. As a result of said report Weiss was discharged as an employee.
The material facts of Mr. Doherty's report were set forth in the minutes of the meeting of the board of directors which were prepared by Mr. Doherty as "secretary of the meeting." The alleged defamatory remarks contained in the minutes are the basis of the libel and slander action brought by Weiss.
In determining the issue before this court, I deem it important to consider the chronological sequence of events in the litigation between the parties. The demand for arbitration of his removal as president of Metalsalts was made by Weiss on November 17, 1960. The answer thereto by the corporation was made on December 2, 1960. The request by John B. Elliott, chairman of the board of directors, to Paul E. Doherty to conduct an investigation of Robert O. Weiss was made in January 1961. The oral report of Mr. Doherty's investigation was presented to the board of directors and set forth in the minutes at the meeting of the board held on February 10, 1961. Metalsalts instituted its suit against Weiss in this court on April 25, 1961. The counterclaim and third-party complaint alleging libel and slander was filed on May 1, 1961. The arbitration proceeding instituted by Mr. Weiss was conducted by the American Arbitration Association at hearings held on May 1, 8 and 17, 1961.
On June 7, 1961, pursuant to our court rules, R.R. 4:16-1 et seq. , Mr. Doherty appeared for oral examination by deposition under pretrial discovery proceedings. When he was interrogated concerning the investigation he made of Mr. Weiss at the request of Mr. Elliott and the report thereof contained in the minutes of the directors' meeting of February 10, 1961, Mr. Doherty refused to answer. His contention was that as attorney for Metalsalts Corporation he is bound by the attorney-client privilege and has no right to divulge communications had with his client without the latter's consent, which has not been given.
At the hearing conducted by this court the testimony of Mr. Doherty was taken and there were received in evidence the deposition of Mr. Doherty taken June 7, 1961 and the record and transcript of the arbitration proceedings above mentioned. The last-mentioned exhibits contain the testimony ...