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Horon Holding Corp. v. McKenzie

June 06, 2001


On appeal from Superior Court of New Jersey, Law Division, Hudson County, L-1954-94.

Before Judges Wallace, Jr., Carchman and Parrillo.

The opinion of the court was delivered by: Carchman, J.A.D.


Argued May 9, 2001

In this post-judgment collection matter, movant Edward P. McKenzie, a member of the bars of New Jersey, New York and South Carolina (movant), but neither a party nor attorney in the underlying action, appeals from an order denying his motion to quash a post-judgment discovery subpoena (subpoena). Plaintiff Horon Holding Corporation,*fn1

the judgment creditor, sought to compel movant to answer questions concerning the whereabouts of his brother and sister-in-law, the judgment-debtors, defendants Kenneth and Barbara McKenzie (defendants; Kenneth; Barbara) in order to facilitate the enforcement of plaintiff's multi-million dollar judgments against them.

Movant contends that the motion judge erred in denying his motion to quash and in ordering him to answer such questions because he has previously represented defendants in other matters in both New York and New Jersey, any information they may have conveyed to him concerning their addresses is protected by the attorney-client privilege, and: (1) plaintiff failed to demonstrate the propriety of and need for movant's deposition under the standard set forth in Kerr v. Able Sanitary and Environmental Services, Inc., 295 N.J. Super. 147, 158-59 (App. Div. 1996); and (2) the order compels movant to violate the privilege and the attorney ethics rules and laws of New Jersey, New York, and South Carolina.

We disagree and conclude that the attorney-client privilege does not apply under these circumstances because defendants' flight from enforcement of the judgments and movant's cooperation in withholding their whereabouts to that end constitutes a fraud upon the court under Fellerman v. Bradley, 99 N.J. 493 (1985), that movant's disclosure of that information does not breach his client confidentiality obligations under the Rules of Professional Conduct, and that New York and South Carolina law need not be considered.

These are the integrated facts and procedural background of this appeal. Movant has represented defendants in various unspecified real estate transactions in both New York and New Jersey. On August 19, 1998, judgment on a promissory note was entered against Kenneth in favor of plaintiff in the amount of $4,376,734.87. On July 28, 1999, judgment on a related fraudulent conveyances claim was entered against both defendants in favor of plaintiff in the amount of $1,543,524.72. Although a restraining order was also entered to preclude their further transfers or conveyances of any assets, defendants, along with their assets, effectively vanished after the trial. Defendants' location has not been established, and a warrant has been issued for Barbara's arrest.

On March 3, 2000, plaintiff's attorney served a subpoena on movant pursuant to R. 4:59-1(e), commanding his appearance on March 22 with "[a]ll documents in [movant's] possession or in the possession of [his] firm which contain any information regarding any temporary or permanent residence, business or mailing address of Kenneth or Barbara McKenzie at any time subsequent to December 1, 1997." Movant moved to quash the subpoena alleging, in essence, that plaintiff was needlessly harassing him in light of the parties' post-judgment settlement negotiations and movant's prior attorney-client relationship with defendants.

Movant's certification stated, in relevant part:

I consider any and all information I have about Kenneth and/or Barbara McKenzie to be protected by the attorney/client privilege. Any information that I may have received at any time from either Kenneth or Barbara McKenzie has been expressed to me by them in their capacity as clients in conjunction with seeking and receiving legal advice from me as their attorney, with the express expectation that all such information remain confidential.

. . . As an attorney I am subject to the ethical rules and laws of New York, New Jersey and South Carolina. Additionally, I am subject to the American Bar Association Rules. In each instance ethical rules and laws prohibit me from disclosing client confidences.

According to plaintiff, the Florida address Kenneth provided in response to an information subpoena served at the May 1999 fraudulent conveyances trial belonged to a resort hotel where Kenneth no longer resided. Both before and after the trial, plaintiff employed a variety of measures to determine defendants' true address and the scope of their assets in order to enforce the judgments. These efforts included commissioning four separate asset and location searches by three private investigations firms, serving subpoenas on various financial institutions, performing title searches, consulting with postal employees, submitting numerous postal forwarding information requests, mailing numerous letters by regular and certified mail, analyzing the return notations, searching the internet for names, prior addresses, and telephone numbers, and deposing defendants' accountant. Despite their scope, those efforts were met with limited success. Although "some leads and potential addresses" had developed, along with information concerning an offshore trust maintained for Barbara's benefit, ...

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