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In re Grand Jury Subpoenas Duces Tecum Served

Decided: November 15, 1989.


On appeal from Superior Court of New Jersey, Law Division, Sussex County.

King, Shebell and Baime. The opinion of the court was delivered by Baime, J.A.D.


We granted the State's motion for leave to appeal from an order of the Superior Court, Law Division, quashing two subpoenas ad testificandum served upon Zulima V. Farber and Stephen H. Skoller, members of the law firm of Lowenstein, Sandler, Kohl, Fisher & Boylan (Lowenstein). The subpoenas, as amplified in a letter sent by the Sussex County Prosecutor, direct the attorneys to appear before the Sussex County Grand Jury and testify with respect to their activities in connection with their representation of the Sussex County Board of Freeholders. A separate subpoena duces tecum was served upon Ms. Farber ordering her to produce various related documents. It later developed, however, that the documents described in the subpoena did not exist. The Law Division's order thus pertains solely to the subpoenas ad testificandum.


The salient facts are not in dispute. For approximately one year, the Sussex County Grand Jury has been investigating allegations focusing upon the operation of the Sussex County Adjuster's Office. The investigation was apparently triggered by news reports containing allegations that the Adjuster had failed to execute her duty to review periodically the financial status of institutionalized Sussex County residents and legally responsible relatives. The purpose of these periodic reviews is

to determine whether and to what extent such patients or those legally responsible for their welfare are obliged to pay for the medical and psychiatric services rendered. Also the subject of the grand jury's inquiry are allegations that confidential medical records had been released improperly in the course of a political campaign. The grand jury has reviewed hundreds of documents and has heard numerous witnesses. Apparently two members of the Sussex County Board of Freeholders and the Adjuster have been advised that they are targets of the investigation and have been given the appropriate warnings. See State v. Vinegra, 73 N.J. 484, 488-489, 376 A.2d 150 (1977). The grand jury's term has been extended several times.

On January 24, 1989, the Lowenstein firm was retained by the Board of Freeholders to serve as special counsel.*fn1 Under the Board's resolution, the firm is to render "professional legal services in connection with the review of the present policies and procedures of the Adjuster's Office. . . ." According to the resolution, the articulated objective of the Board and hence the principal mission of the firm under its retainer is to "bring [the practices] of the . . . Adjuster's Office into compliance with . . . current laws and regulations. . . ." In the course of performing its services, the Lowenstein firm interviewed numerous County employees, examined a plethora of documents, engaged in extensive legal research and prepared several preliminary reports. Although the circumstances surrounding its disclosure are not fully revealed in the record, one of the preliminary reports was publicly released by a freeholder. Our examination of that report discloses that it contains a thorough review of State statutes and regulations and makes various recommendations

to correct the deficiencies found to exist in the Adjuster's Office.

On May 23 and 24, 1989, Ms. Farber and Mr. Skoller were served with subpoenas commanding that they appear and give testimony before the grand jury. Although the subpoenas were silent with respect to the nature of the subject matter to be explored, a letter subsequently sent to the attorneys by the Sussex County Prosecutor's Office revealed the parameters of the proposed inquiry. According to the letter, "among the areas to be covered shall be the charter for [the attorneys'] activities . . ., what it has done and [what it] plans to do with respect to the reorganization of the . . . Adjuster's Office. . . ." The letter also contains an oblique reference to the firm's "billings" for the legal services rendered. One of the subpoenas also included a demand for the production of documents, including correspondence between the attorneys, the Board and the Adjuster. In its brief submitted to us in this appeal, the State concedes that the attorneys "were subpoenaed . . . to explain their activities with respect to their engagement by the County." Essentially the same representation was made in proceedings in the Law Division.

In any event, the Lowenstein firm filed a timely motion to quash the subpoenas on the basis that the attorneys' appearance before the grand jury would intrude upon the attorney-client privilege. It also argued that much, if not all, of the attorneys' proposed testimony, as outlined in the prosecutor's letter, was protected as "work product."

The questions raised were argued extensively in the Law Division. In addition, the prosecutor submitted an affidavit which was, and remains, sealed, describing in great detail much of what had transpired before the grand jury.*fn2 The Law

Division rendered a lengthy and thoughtful oral opinion in which it found that the subpoenas significantly encroached upon the attorney-client relationship, and the attorneys had thus properly invoked the evidentiary privilege. More specifically, the court determined that the attorney-client privilege was applicable notwithstanding the fact that the Board was a public entity, that the public official immunity statute (N.J.S.A. 2A:81-17.2a) provided no statutory compulsion for the attorneys to testify, and that the premature release of the "preliminary report" did not constitute a waiver of the Board's rights. While acknowledging the general rule that requires a witness to appear and assert the privilege in response to a particular question, the Law Division concluded that adherence to this practice in this case would have a serious "chilling effect" on the attorney-client relationship. An order quashing the subpoenas was entered accordingly.

The State contends on appeal that the attorney-client privilege is not applicable to governmental entities. Noting that it is the duty of every public employee to appear and testify upon matters directly related to the conduct of his office, see N.J.S.A. 2A:81-17.2a1, the State argues that Ms. Farber and Mr. Skoller, having been retained as "special" county counsel, are obliged to honor the grand jury's subpoenas. Alternatively, the State asserts that the Lowenstein firm did not serve in the

capacity of a lawyer in providing services to the Board, but instead acted as "management consultants." The State thus claims that communications between the Board and members of the Lowenstein firm did not fall within the purview of the privilege. The State also contends that the privilege was waived by reason of the release of the "preliminary report," and because public policy considerations compel full disclosure. Finally, the State contends that the attorneys were obliged to appear before the grand jury ...

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