On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-11-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Cuff, Lihotz and St. John.
This is a wrongful termination action. We review an order permitting plaintiff to file an amended complaint asserting fraudulent transfer claims against defendants, his former employers. A second order requires defendants' accountant to disclose their personal financial information, and a third order permits discovery of advice provided to defendants by their former attorney. We affirm the order permitting the amended complaint but direct the trial judge to consider whether the fraudulent transfer claims should be severed from the wrongful termination claim, or bifurcated at trial, if introduction of evidence to support the fraudulent transfer claims would cause undue prejudice to defendants. We also affirm the order denying the motion to quash the subpoena directed to defendants' accountant but reverse the order denying the motion to quash the subpoena to defendants' attorney.
Defendant Creative Dimensions in Education, Inc. (Creative) provides tutoring for college entrance examinations. Defendants Andrea Blumenthal and Jay Blumenthal own and operate Creative. In June 2003, defendants hired plaintiff Robert W. Gilvey as a tutor, and promoted him to Assistant Director of Marketing and Development. Five months later, in November 2004, defendants demoted plaintiff to tutor and terminated him on February 1, 2008.
Plaintiff filed a five count complaint seeking compensatory and punitive damages. He alleged that his termination violated the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, because he was terminated in early February 2008 while recovering from a fall (Counts One and Two). He also alleged his termination violated the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14, because defendants terminated him in retaliation for his complaints that defendants had violated the Employment Retirement Income Security Act (ERISA), 29 U.S.C.A. §§ 1001-1461, by failing to inform him of his eligibility to participate in an individual retirement account, for his complaints that his compensation violated the state wage and hour laws, and his complaints about copyright infringement (Count Three). Plaintiff also alleged defendants' conduct violated the implied covenant of good faith and fair dealing (Count Four) and the wage and hour laws (Count Five).
Defendants filed an answer denying all claims and a three-count counterclaim asserting intentional infliction of emotional distress, unfair competition, and breach of contract claims. Defendants also filed an amended counterclaim asserting a Fair Trade Act claim, N.J.S.A. 56:4-1 to -2.
During the course of discovery, plaintiff served a subpoena duces tecum on defendants' accountant seeking financial documents and information concerning defendants. On September 10 and October 27, 2010, plaintiff deposed the Blumenthals in the course of which Jay Blumenthal stated he relied on advice received from their attorney regarding issues related to employee compensation.
In response to defendants' motion for a protective order to quash the subpoena duces tecum served on the accountant, the motion judge granted the motion in part and barred discovery of the Blumenthals' personal financial information. According to the order dated October 19, 2010, defendants' accountant was required to produce documents concerning the financial condition of the business, unless defendants waived their claim for economic damages with respect to the unfair competition claim against plaintiff. Defendants voluntarily dismissed their counterclaim on November 18, 2010.
On November 19, 2010, plaintiff served a subpoena duces tecum on Linda Niedweske, an attorney retained by defendants to provide legal services on general employment matters. Defendants moved to quash this subpoena and this motion was denied by order dated January 25, 2011. An order dated January 21, 2011, also permitted plaintiff to file an amended complaint to assert a claim for fraudulent transfer, a claim for aiding and abetting fraudulent transfer, and a demand to pierce the corporate veil of Creative. This same order required defendants to produce the previously requested personal financial information requested in the July 2010 subpoena that had been barred by a prior order. The motion judge denied a stay of the January 21 and 25, 2011 orders pending appeal; this court granted leave to appeal.
We commence our discussion with the order granting plaintiff leave to file an amended complaint that alleges defendants Blumenthal have engaged in fraudulent transfers and also that each has aided and abetted such transfers. Defendants' argument implies a fraudulent transfer action is not ripe until entry of judgment on the underlying wrongful termination claim. We disagree.
"The purpose of the Fraudulent Transfer Act [(FTA)], N.J.S.A. 25:2-20 to -34, is to prevent a debtor from placing his or her property beyond a creditor's reach." Gilchinsky v. Nat'l Westminster Bank N.J., 159 N.J. 463, 475 (1999) (footnote omitted). The fundamental premise of the FTA is to prevent a person exposed to a claim of another from defeating the claimant's ability to be made whole. Ibid. Most cases discussing fraudulent transfers arise in the context of a subsequent action to set aside transfers and recover transferred assets filed following entry of judgment. See, e.g., Banco Popular No. Am. v. Gandhi, 184 N.J. 161, 168-69 (2005) (complaint seeking to set aside asset transfers filed following entry of judgment in favor of mortgagee); Gilchinsky, supra, 159 N.J. at 470-71 (same); Johnson v. Lentini, 66 N.J. Super. 398, 402-03 (Ch. Div. 1961) (same). Nevertheless, as demonstrated by the definition of claim, creditor, debt and debtor,*fn1 ...