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Amazing Wall Covering, Inc. v. Merchants Ins. Group

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


November 15, 1999

AMAZING WALL COVERING, INC.,
PLAINTIFF,
V.
MERCHANTS INS. GROUP,
DEF./THIRD PARTY PLAINTIFF
V.
NISSIM SEDAKA
THIRD PARTY DEFENDANT

OPINION

Before the Court is a motion by plaintiff, Amazing Wall Covering, Inc., and third party defendant, Nissim Sedaka, to quash a subpoena served upon movant's counsel, Thomas Chaseman, Esq., and for sanctions to recover counsel fees and expenses. Defendant/third party plaintiff, Merchants Insurance Group, filed opposition to the motion. The Court heard oral argument on October 25, 1999. For the reasons set forth below, the motion is denied.

Background

This matter stems from a coverage dispute involving a fire insurance policy issued by Merchants Insurance Group ("Merchants") to Amazing Wall Covering, Inc. ("Amazing Wall"). On August 21, 1996, a fire occurred at the business premises of Amazing Wall, a paint and wallpaper store in Saddle Brook, New Jersey. (Chaseman Aff. at ¶3) Merchants denied coverage for Amazing Wall's fire losses, accusing its principal, third party defendant Nissam Sedaka, of committing "dishonest and/or criminal acts such as to cause the . . . loss." (Id. at ¶7) Additionally, Merchants maintained that Amazing Wall's fire insurance policy was void as a result of "fraud and intentional concealment and misrepresentations of material facts in connection with the acquisition of the insurance." (Id. at ¶8) More specifically, defendant alleges that Mr. Sedaka, in order to secure insurance coverage on behalf of Amazing Wall, provided false information *fn1 to Merchants' agent, Vincent Perna, during the application process. (Kallman Aff. at ¶3)

In a deposition on July 1, 1999, counsel for Mr. Sedaka and Amazing Wall, Thomas Chaseman, questioned Mr. Perna about Mr. Sedaka's application process. (Id. at ¶4) More than once during the course of questioning this witness, Mr. Chaseman revealed on the record certain communications he had with his client regarding his client's conversations with Mr. Perna during the application process:

"Q. Mr. Sedaka has indicated to me that the first time you came to his office you didn't ask him any questions on the application, but at that time the only thing you asked him for was the information regarding the insurance policy, which he gave you at that time. Do you agree with that or is that not the case as far as you recall?

Mr. Kallman: Object to the form of question.

A. No. I don't agree with that. I think he's mistaken. (Chaseman Aff. at ¶12, Exh. F)

"Q. Lets look at the estimated annual sales receipts line. Mr. Sedaka told me that he told you that his past sales and receipts was in the neighborhood of 40 to 50,000 dollars. Do you disagree with that?

Mr. Kallman: Objection to the form of the question, what he told you. Who cares? Just ask him the question.

Mr. Chaseman: That's a perfectly fine question." (Kallman Aff. at ¶4, Exh. A)

On July 21, 1999, counsel for Merchant's served a subpoena on Mr. Chaseman to appear for a deposition and to produce records

pertaining to the conversations with Nissim Sedaka relevant to the conversations between Nissim Sedaka and Vincent Perna of United Assurance, Inc. in connection with the acquisition of insurance by Amazing Wall Coverings from Merchants Mutual Insurance Company, including but not limited to all notes of conversations between you and Mr. Sedaka. (Chaseman Aff. at ¶14)

As a result, Mr. Chaseman filed the instant motion to quash the subpoena.

Discussion

Mr. Chaseman strenuously argues that the information encompassed by the subpoena is not subject to discovery because it is protected by the attorney-client privilege. The attorney-client privilege is the "oldest of the privileges for confidential communications known to the common law." Upjohn Co. v. United States, 449 U.S. 383, 389 (1980). It is "deeply embedded in our jurisprudence and formed a part of the common law of England prior to the birth of this country." United Jersey Bank v. Wolosoff, 196 N.J. Super. 553, 561, 483 A.2d 821 (App. Div. 1984). The privilege "recognizes that sound legal advice or advocacy serves public ends and rests on the need to `encourage full and frank communication between attorneys and their clients.'" Id.

Federal Rule of Evidence 501 *fn2 provides that where a federal court is sitting in diversity jurisdiction, issues involving privilege are to be be analyzed under state law. In re Ford Motor Co., 110 F.3d 954 (3d Cir. 1997). In New Jersey, the attorney-client privilege has been codified at N.J.S.A. 2A:84-20, and is also embodied in New Jersey Rule of Evidence 504. The privilege protects "communications between lawyer and client [made] in the course of that relationship and in professional confidence." N.J.R.E. 504. In other words, the privilege "accords a shield of secrecy" to confidential communication made within the attorney client relationship. Hannan v. St. Joseph's Hosp. and Med. Ctr., 318 N.J. Super 22, 27, 722 A.2d 971 (App. Div. 1999).

The parties in the case sub judice do not dispute the applicability of the privilege to the communications at issue. Merchants argues, however, that to the extent the information sought by its subpoena is privileged, movants waived the protections of the privilege when Mr. Chaseman revealed the contents of the communications during Mr. Perna's deposition. N.J.S.A. 2A:84A-29 (N.J.R.E. 530) provides in part that

a person waives his right or privilege to refuse to disclose or to prevent another from disclosing a specified matter if he or any other person while the holder thereof has . . . (b) without coercion and with knowledge of his right or privilege, made any disclosure of any part of the privileged matter or consented to such a disclosure made by anyone.

As a general rule, the attorney-client privilege belongs to the client and the client possesses the ability to waive it. See, e.g., In re Selser, 15 N.J. 393, 404, 105 A.2d 395 (1954). Such a waiver can be either express or implied through conduct or words inconsistent with the confidentiality upon which the privilege is premised. See, e.g., Wolosoff, 196 N.J. Super. at 567 (finding an implied waiver of attorney- client privilege where confidential communications were made a material issue in a judicial proceeding). The question now before this Court is whether an attorney, who is acting within the scope of the legal representation sought by the client, waives the privilege when he makes intentional disclosures to third parties in pursuit of the client's interest.

No New Jersey court has addressed this issue. The parties have not cited, and the Court has not found any cases based on facts similar to those presented here. Other courts have found, however, that an attorney may, in appropriate circumstances, possess the implied authority to waive the privilege on behalf of his client. See, e.g., United States v. Mierzwiki, 500 F. Supp. 1331, 1334 (D. Md. 1980)("Although the attorney-client privilege is personal to the client, it may be waived by counsel acting with authority of the client."); Perrignon v. Bergen Brunswig Corp., 77 F.R.D. 455 (N.D. Ca. 1978) ("An attorney may waive the attorney-client privilege on behalf of his client . . . if he, on behalf of his client, either voluntarily discloses or voluntarily consents to disclosure of part of the privileged communication."); Sprader v. Mueller, 121 N.W.2d 176, 180 (Minn. 1963) (acknowledging that voluntary disclosure by counsel waives privilege unless counsel has acted in bad faith toward client). See generally, Rice, Attorney-Client Privilege in the United States §9:2 (1993) and cases cited therein.

Authorized by his client to take the necessary steps to favorably advance the litigation in this matter, Mr. Chaseman made a strategic choice to divulge privileged communications for the benefit of his client. While the Court needs not speculate as to what end Mr. Chaseman hoped this strategy would eventually lead, it is clear his disclosure of privileged material was neither a result of inadvertence, see Trilogy Comm., Inc. v. Excom Realty, Inc., 279 N.J. Super. 442, 652 A.2d 1273 (Law Div. 1994) (holding that counsel's inadvertent disclosure of privileged attorney-client communication did not waive privilege), nor an act of bad faith toward his client, see Sprader, 121 N.W.2d at 180.

Moreover, by injecting the privileged material into the record, Mr. Chaseman has put the substance of the communication at issue in this action. See Wolosoff, 196 N.J. Super. at 567 (recognizing the "at issue" waiver of attorney client privilege). The effort made by Mr. Chaseman during the deposition to press forward with his manner of questioning despite Mr. Kallman's objections *fn3 evinces his intention to place his communication with Mr. Sedaka at issue. To allow his client to now erect a wall of privilege and prevent further disclosure would be unjust. As the Wolosoff court noted:

[There is an] inherent inequity in permitting plaintiff to use the privilege as a sword rather than a shield. If permitted to do so, plaintiff could divulge whatever information is favorable to its position and assert the privilege to preclude disclosure of the detrimental facts. The resulting half-truth that would be revealed might well be more disabling than a total distortion. We are persuaded that "when confidential communications are made a material issue in a judicial proceeding, fairness demands waiver of the privilege." 196 N.J. Super at 567 (citations omitted).

The information sought by the subpoena is relevant to defenses asserted in this matter. The portions of the communications already divulged by Mr. Chaseman suggest a possibility of collusion between Mr. Sedaka and Mr. Perna in submitting a false insurance application to defendant. *fn4 Mr. Chaseman's statements have opened the door, and fairness dictates that Merchants be permitted to explore this avenue further. To the extent that the attorney-client privilege applied to the information embraced by the subpoena, Mr. Chaseman has waived it. For this Court to hold otherwise would be to ignore the "inherent inequity in permitting [a party] to use the privilege as a sword rather than a shield." See Wolosoff, 196 N.J. Super. at 567. Accordingly, the motion to quash is denied.

Conclusion

The motion by plaintiff, Amazing Wall Covering, Inc., and third party defendant, Nissim Sedaka, to quash a subpoena served upon movant's counsel, Thomas Chaseman, Esq., and for sanctions to recover counsel fees and expenses is denied. An appropriate order follows.

JOEL A. PISANO UNITED STATES MAGISTRATE JUDGE

Orig: Clerk

cc: Hon. Alfred M. Wolin

All parties

file

ORDER

Before the Court is a motion by plaintiff, Amazing Wall Covering, Inc., and third party defendant, Nissim Sedaka, to quash a subpoena served upon movant's counsel, Thomas Chaseman, Esq., and for sanctions to recover counsel fees and expenses. Defendant/third party plaintiff, Merchants Insurance Group, filed opposition to the motion. The Court heard oral argument on October 25, 1999. For the reasons set forth in the attached opinion,

IT IS on this 15th day of November, 1999, ORDERED that the motion to quash the subpoena and for sanctions is DENIED.

JOEL A. PISANO UNITED STATES MAGISTRATE JUDGE

Orig: Clerk

cc: Hon. Alfred M. Wolin

All parties

File


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