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In re Petition of Margena Burnett for an Q Order /Q for Issue of Subpoenas

August 27, 1993

IN THE MATTER OF THE PETITION OF MARGENA BURNETT FOR AN ORDER FOR ISSUE OF SUBPOENAS IN THE STATE OF NEW JERSEY UNDER ORDER AND COMMISSION ISSUED IN THE ACTION ENTITLED "STATE OF FLORIDA DEPARTMENT OF INSURANCE, AS RECEIVER OF GUARANTEE SECURITY LIFE INSURANCE COMPANY, PLAINTIFF, V. MERRILL LYNCH, PIERCE, FENNER & SMITH, ET AL., DEFENDANTS," PENDING IN THE CIRCUIT COURT OF THE FOURTH JUDICIAL CIRCUIT OF THE STATE OF FLORIDA IN AND FOR DUVAL COUNTY, CASE NO. 91-17911-CA, DIVISION C


Menza, J.s.c.

Menza

The respondent, A.M. Best Company, (Best) moves to quash a subpoena duces tecum which seeks production of certain insurance documents, and a subpoena ad testificandum, which seeks testimony relative to those documents. Both subpoenas were served upon Best by petitioner, Margena Burnett (Burnett).

Burnett is the wife of a former member of the board and director of the Guarantee Security Life Insurance Co. (GSLIC), which the State of Florida has placed in receivership. She has also occupied various positions in GSLIC affiliates and has served as the assistant to the chairman of Transmark USA, Inc., GSLIC's parent corporation.*fn1 The Florida Department of Insurance, as receiver of GSLIC, has brought suit against Margena Burnett alleging that she and others, in order to conceal GSLIC's insolvency, misrepresented GSLIC's financial condition to the Securities and Exchange Commission, the public, the company's policy holders, the insurance brokerage community and various insurance

rating services. The complaint against Burnett and the other persons includes causes of action for fraud, conspiracy to defraud, civil theft, breaches of fiduciary duties, breach of contract and negligence. Burnett contends she did not misrepresent the financial well-being of GSLIC and she alleges that the materials which she seeks from Best will support her contentions.

Best produces several insurance trade publications, including a weekly newsletter entitled "Best's Insurance Management Reports," a monthly magazine entitled "Best's Review" and an annual insurance rating report entitled, "Best's Insurance Reports, Health Life." Each year, Best gathers information from various insurance companies which it uses to rate the financial condition of the companies. These ratings are published in Best's annual report. From 1983 through 1991, GSLIC and its affiliates WPLIC and ALIC provided Best with information which Best used to rate these companies in its annual report.

Burnett now seeks the production of these documents, which she contends are relevant to the Florida litigation. Specifically, she contends that these documents will demonstrate that she did not misrepresent to the public the financial condition of GSLIC or its affiliates.

On April 8, 1993, this court entered an ex parte order pursuant to R. 4:11-4, on a petition by Burnett, authorizing the issuance of a subpoena duces tecum to Best requiring it to produce certain insurance documents received from GSLIC, WPLIC and ALIC. The order also authorized the issuance of a subpoena ad testificandum requiring certain officers of Best to testify regarding those documents.

Best now moves for an order quashing the subpoena, contending that it is entitled to a privilege from divulging the requested information under the First Amendment and the New Jersey Shield Law, N.J.S.A. 2A:84A-21.

Burnett opposes Best's motion, contending that the information acquired by Best was gathered for the sole purpose of it being

used in Best's annual publication, which she contends is not a news medium protected by either the First Amendment or the New Jersey statute. Specifically, she contends that the annual report does not fit the definition of news medium because it is disseminated only to Best subscribers and not to the general public and because the financial information contained in the report is not "news" within the meaning of the statute.

The question presented then is whether Best's annual report qualifies as a "news medium" so as to afford Best protection from divulging the information sought by Burnett under the First Amendment and the New Jersey Shield Law.

This is a novel question which has not been decided by the courts in this state. There are, however, cases from other jurisdictions which have addressed the scope of the privilege afforded by the First Amendment and by similar state statutes which are helpful in the determination of this case. Most of them suggest that a broad interpretation should be given to the privilege.

In Lovell v. City of Griffin, 303 U.S. 444, 452, 58 S. Ct. 666, 669, 82 L. Ed. 949 (1938), the United States Supreme Court made it clear that the First Amendment privilege should encompass all kinds of information disseminated through all kinds of publications: "The liberty of the press is not confined to newspapers and periodicals . . . . The press in its historic connotation comprehends every sort of publication which affords a vehicle of information and opinion."

In Branzburg v. Hayes, 408 U.S. 665, 705, 92 S. Ct. 2646, 2668, 33 L. Ed. 2d 626 (1972), the Court reiterated that proposition, stating: "The informative function asserted by representatives of the organized press . . . is also performed by lecturers, political pollsters, novelists, academic researchers and dramatists." It includes: "The lonely pamphleteer who uses carbon paper or a mimeograph just as ...


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