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Travelers of New Jersey A/S/O Michelle Matsuk, Simon Hanin v. Gil and Francine Weisman

March 15, 2012

TRAVELERS OF NEW JERSEY A/S/O MICHELLE MATSUK, SIMON HANIN, GLENDA HANIN, MELVIN HOLLOWAY, AND LIBERTY MUTUAL A/S/O BRADLEY BISK, PLAINTIFFS-RESPONDENTS,
v.
GIL AND FRANCINE WEISMAN, PRECISION CARS OF ATLANTIC CITY, R&S IMPORTS, AND RICH FIRE PROTECTION, DEFENDANTS-RESPONDENTS, AND MERCEDES-BENZ, USA, LLC, DEFENDANT-APPELLANT.



On appeal from an interlocutory order of the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-16977-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 12, 2011 -

Before Judges A. A. Rodriguez, Sabatino, and Fasciale.

By leave granted, defendant Mercedes-Benz USA, LLC ("MBUSA") appeals from the interlocutory order dated March 23, 2011 requiring MBUSA to produce in discovery in full, without redaction, certain internal materials that MBUSA contends are shielded by attorney-client and work product privileges. The March 23, 2011 order followed a remand by this court of an earlier interlocutory appeal concerning the same allegedly-privileged materials. See Travelers of N.J. v. Weisman, No. A-4040-09 (App. Div. Feb. 16, 2011).

For the reasons set forth in this opinion, we remand this matter to the trial court a second time for further consideration of the privilege issues on an item-by-item basis. To aid the trial court in such additional review, and in recognition of the voluminous nature of the materials and the multiple and overlapping grounds of privilege being asserted by MBUSA, we direct that MBUSA furnish the trial court with an amplified privilege log that more fully explains the basis for the privilege(s) being asserted as to each item at issue, particularly the withheld e-mail communications. We further note the trial court's authority to appoint a special discovery master to undertake a more comprehensive review of the materials, and to suggest appropriate classifications and redactions for the trial court's consideration. We also confirm the trial court's ability, on reasonable terms and conditions within its discretion, to appoint a technical adviser to assist in the additional review of the materials. Finally, we set forth several legal principles to help guide certain discrete aspects of the trial court's additional review.

I.

The dispute over the privileges asserted by MBUSA in this litigation arises from a fire on September 16, 2005. The fire destroyed parts of the Crown Key Yacht Club condominiums in Ventnor. Plaintiffs*fn1 allege that a defective or negligently-repaired Mercedes-Benz SL500 caused the fire when it spontaneously combusted. The vehicle was owned by Gil and Francine Weisman, who resided in one of the condominium units. Relying on this theory, the owners of the damaged condominiums and their insurers brought suit against the Weismans and MBUSA. The Weismans also sued MBUSA on the same general theory.

We incorporate by reference the facts and procedural history set forth in more detail in our February 2011 initial opinion. See Travelers of N.J., supra, slip op. at 5-14. We add the following summary of the most pertinent background, including an update of relevant events that have transpired since February 2011.

The extensive damage to the Weismans' SL500 apparently hindered the development of direct evidence to corroborate plaintiffs' theory that problems with the vehicle had caused the fire. Consequently, plaintiffs have sought to prove liability against MBUSA circumstantially. In particular, plaintiffs contend that the SL500 model owned by the Weismans shared relevant components with other Mercedes-Benz models that have been involved in vehicle fires.

To support such a theory of liability, plaintiffs rely upon the deposition testimony of an MBUSA technical employee, Thomas Brunner ("Brunner"), in which he acknowledged that the SL500 transmission and engine components were used in other Mercedes-Benz models. Accordingly, plaintiffs have attempted to obtain, through discovery from MBUSA, factual information about other vehicle fires that MBUSA has investigated, in the hope of confirming their contention that "the car's Active Body Control [(ABC)] system, brake lines or fuel lines penetrated the fire wall and may have leaked, causing flammable fluids to contact hot surfaces."

In August 2009, plaintiffs obtained an order from the trial court compelling MBUSA to produce documents relating to its internal investigations of vehicle fires. That discovery order required MBUSA to produce "all internal fire investigation files" from 2001 to 2006 with respect to certain designated models. The order further required MBUSA to create a privilege log, and submit copies of the documents that MBUSA withheld on the basis of privilege to the court for in camera review.

MBUSA represents that in response to the August 2009 order, it produced to plaintiffs about "4,000 pages of documents from [its] internal fire investigation[s.]" MBUSA further contends that those pages were "in addition to the 48,000 pages of material it had already produced in discovery." Even so, MBUSA has withheld or redacted hundreds of other materials, claiming that they are privileged on various grounds. Principally, MBUSA invokes the privileges for confidential attorney-client communications and attorney work product.*fn2 See generally N.J.S.A. 2A:84A-20 and N.J.R.E. 504 (defining the attorney-client privilege to encompass "communications between [a] lawyer and his client in the course of that relationship and in professional confidence"); K.L. v. Evesham Twp. Bd. of Educ., 423 N.J. Super. 337, 354 (App. Div. 2011) (noting that the work product privilege extends to a document "if its use for litigation was the dominant purpose of preparing the document and if the attorney's belief that litigation would ensue was objectively reasonable"); see also R. 4:10-2(c) (similarly recognizing the qualified work product privilege).

In February 2010, MBUSA submitted copies of the withheld documents and a privilege log to the trial court for in camera review. The privilege log noted that MBUSA had withheld several general categories of documents, for which it claimed either (or both) attorney-client and work product privileges: investigation reports prepared by a technical employee, addressed to the MBUSA Legal Department; attached questionnaires that each such technical employee completed; photographs taken by the technical employee that contained his or her notations; and various e-mails between the MBUSA Legal Department and the MBUSA employees. MBUSA also redacted two other categories of allegedly-confidential material: certain customer "personal information"; and allegedly-proprietary "business information."

According to MBUSA, claims arising out of vehicle fires inherently have a substantial likelihood of resulting in litigation, and therefore its Legal Department has been involved in internally investigating all such fire claims. In particular, MBUSA represents that its Legal Department directed a product analysis engineer, technical specialist, or service parts operation manager to investigate each vehicle fire, and to prepare an investigation report, which MBUSA asserts was always done "in anticipation of litigation." Such investigation reports typically included a questionnaire that the technical employee was required to complete, as well as any photographs upon which the employee may have made notes. The reports sometimes contain an employee's "observations," and according to MBUSA, "may also contain his [or her] findings and opinions as to the cause of the fire as well as an explanation for the bases for such findings and opinions." The reports were labeled "Privileged and Confidential Attorney Work Product," and were typically addressed to a member of the MBUSA Legal Department.

To support its contentions of privilege, MBUSA submitted to the trial court a certification of Mark H. Kelly, a member of the company's Legal Department. Kelly asserted in his certification that "[a]ll of the activities undertaken by MBUSA's technical employees . . . are done at the direction of MBUSA's Legal Department in anticipation of litigation, or where litigation has been commenced, as part of the litigation." According to Kelly, the MBUSA Legal Department also communicates with the technical employee about an investigation "in furtherance of the . . . investigation and in anticipation of litigation[.]"

Specifically, Kelly described the Legal Department's role in the vehicle fire investigations as follows:

8. Initial notice of a fire incident is typically first received at MBUSA by either the Legal Department or the Customer Assistance Center ("CAC"), from one of the following four sources: (1) a customer reporting a fire incident; (2) an insurance carrier making a subrogation claim; (3) an attorney making a claim either pre-litigation or by way of a Complaint or Summons; or (4) an authorized Mercedes-Benz dealer.

9. Matters received by the Legal Department are assigned to the Products Analysis Department for a vehicle inspection on behalf of the Legal Department and for other engineering and technical assistance as required.

10. At the standing direction of the Legal Department, matters received by the CAC are immediately forwarded to the Legal Department, usually in the form of a "Customer Assistance Summary" or other e-mail.

11. In addition, the CAC is directed by the Legal Department to provide the initial intake information to the Product Analysis Department to facilitate the assignment of an investigator as part of the longstanding directive from the Legal Department to the Product Analysis Department to inspect fire involved vehicles and to provide technical assistance to the Legal Department in its investigation of fire incidents.

Kelly explained that the Legal Department had developed the questionnaire forms the technical employees must complete and attach to their investigation reports. Kelly also stated that MBUSA produced to plaintiffs the "complete master set" of the photographs relative to the vehicle fires, but refrained from identifying to plaintiffs those photographs that a technical employee selected to include in his or her report.

Following an initial in camera review, the trial court entered an order on March 25, 2010, requiring MBUSA to produce all of the disputed documents without redaction. We granted MBUSA leave to appeal that initial determination. After oral argument, we remanded the privilege issues to the trial court for further consideration. Travelers of N.J., supra, slip op. at 20-24. In particular, we instructed the trial court to denote whether each of the documents respectively fell within the attorney-client privilege and, if so, to make particularized findings as to each document found to be so privileged. Id. at 22-24. We also instructed that if the trial court found certain documents to be privileged, it should then determine whether such privilege should be overcome under the multi-part standards of In re Kozlov, 79 N.J. 232 (1979).*fn3 See Travelers of N.J., supra, slip op. at 23.

Following our remand order, the trial court performed a second in camera review of the documents. As a result of that second review, the trial court again concluded that the withheld MBUSA documents should be produced in their entirety. In its accompanying letter opinion dated March 23, 2011, the trial court did not specify which, if any, documents were privileged and, if so, why they were privileged. In essence, the trial court impliedly treated all of the documents withheld by MBUSA as subject to a privilege*fn4 and, then based upon that generic premise, undertook a ...


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