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Berrie v. Berrie

Decided: January 7, 1983.


Hamer, J.J.D.R.C. (temporarily assigned).


[188 NJSuper Page 276] The issue presented here is the extent to which a nonparty should be compelled to disclose in discovery proceedings information which the deponent considers confidential but which may provide collateral or supportive evidence of the value of a property subject to equitable distribution in the present case. The question is raised on a motion by Wallace Berrie, plaintiff's brother, to quash a subpoena duces tecum. The motion to quash is granted.

It now appears that some years ago plaintiff Russell Berrie and his brother Wallace Berrie were in the toy business together. There was a parting of the ways on apparently less than cordial terms. Since then, the fraternal relationship has been estranged. Wallace moved to California and established Wallace Berrie & Co., Inc. Russell Berrie, plaintiff here, is the president and owner of 80% or more of the capital stock of Russ Berrie & Co., Inc., headquartered in New Jersey. In this divorce action against his wife, defendant Kathy Berrie, Russell Berrie's business interests are subject to equitable distribution. N.J.S.A. 2A:34-23.

Russ Berrie & Co., Inc. and Wallace Berrie & Co., Inc. are both in the business of distributing toys and novelties. Neither is a public corporation. For at least the past ten years the companies have been major and fierce competitors. Within the past year Wallace Berrie sold his minority shareholder interest in the California company to the two remaining principals.

When it was learned that Wallace would be in New Jersey for a family wedding, plaintiff sought leave to take his deposition "in connection with the financial issues raised by the present proceedings; . . . ." The purported basis of the application was that Wallace "engaged in a very similar or identical [business] to that of his brother, plaintiff in this case" and that the recent sale of his interests "would constitute the closest and most useful comparable for the purpose of the determination by this Court . . . of the market value of plaintiff's business interest." Although there was no reference thereto in the application, R. 4:79-5 prohibits taking the deposition of a nonparty in a matrimonial action except by leave of the court for good cause shown. The certification of plaintiff's counsel stated:

It probably is so that the person whose deposition is sought to be taken would not willingly give any information concerning said sale unless he is served within the State of New Jersey which subpoena was issued pursuant to an order of this Court.

Wallace Berrie had no notice that plaintiff was seeking leave of the court to depose him. Defendant did oppose the request on the basis that the information was irrelevant and immaterial.

When pretrial discovery is sought to be restricted, the principle generally applied permits the widest latitude in the use of discovery tools, Blumberg v. Dornbusch, 139 N.J. Super. 433 (App.Div.1976); Meyers v. St. Francis Hosp., 91 N.J. Super. 377 (App.Div.1966); Martin v. Educational Testing Service, Inc., 179 N.J. Super. 317, 327 (Ch.Div.1981), where the information sought will aid in the preparation of the case or otherwise facilitate proof of progress at trial. Bzozowski v. Penn.-Reading Seashore Lines, 107 N.J. Super. 467, 473 (Law Div.1969). "Parties may obtain discovery regarding any matter not privileged, which is relevant to the pending action." R. 4:10-2(a). The relevance standard does not refer only to matters which would necessarily be admissible in evidence but includes information reasonably calculated to lead to admissible evidence. Stout v. Toner, 125 N.J. Super. 490 (Law Div.1973); Pressler, Current N.J. Court Rules, Comment R. 4:10-2 (1983). Carefully conducted discovery can significantly reduce or even eliminate factual disputes otherwise requiring resolution at trial.

Valuation of plaintiff's interest in Russ Berrie & Co., Inc., is a material fact in the ultimate disposition of this case. He asserts that evidence of a comparable sale is one method of proving such value. Evidence concerning comparable sales is generally part of the testimony of an expert witness. See N.J. Sports & Exposition Auth. v. Cariddi, 84 N.J. 102, 104 (1980). Comparable sales are not necessarily direct indicia of value but are offered as supportive of the reasoning by which the expert arrives at his opinion of value. It is the opinion, not the value of the comparable, which is the direct or primary evidence. Trenton v. Penn.-Jersey Auto Stores, Inc., 90 N.J. Super. 221, 224 (App.Div.1966). While the cases cited and most reported decisions concerning comparable values involve real property, logic would not exclude the approach in other evaluations. The market value of shares of stock of corporations listed on a stock exchange can be determined by reference to published market reports, i.e., comparable sales. See In re Romnes Estate, 79 N.J. 139, 145 (1978). The use of this approach to value a closely held corporation no

doubt has practical difficulties but is theoretically possible. While the value of Wallace Berrie & Co., Inc. is not direct evidence of a material fact, such value, if proven, and if the two companies are shown to be "comparable," may be relevant in establishing the value of Russ Berrie & Co., Inc.

Without considering but without foreclosing at that time a possible objection by Wallace to disclosing anything, this court concluded that the information sought could be or could lead to relevant evidence of a material fact. Therefore, an order was entered permitting Wallace to be subpoenaed for deposition purposes. The subpoena was required to be accompanied by a copy of the order which included the following:

This application has been considered and this order is granted solely on the basis that R. 4:79-5 requires permission of the court to depose one who is not a party to the action. This order shall not be construed as directing or requiring that Wallace Berrie disclose any confidential information.

Any uncertainty about Wallace's legal response to the subpoena quickly disappeared. The application to quash ensued immediately. His affidavit and the affidavit of Harris Toibb (one of the two remaining principals and a 50% owner of the California company) allege that the information sought may be irrelevant and immaterial and is "confidential, corporate and financial information." They state that although there are some similarities between the two companies, the dissimilarity of the ownership interests of the two brothers in the respective companies, marketing practices and licensing agreements, among other things, would negate any comparability. Also, within four days after the subpoena was served upon Wallace, an action was brought by the California company in a California court naming Wallace ...

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