WILLIAMS et al v. BASF CATALYSTS LLC et al
Filing
334
OPINION & ORDER modifying the Court's previous June 8, 2017 Order referring the case to Special Master Judge Brown. (ECF No. 319). Judge Brown has declined to serve as a Special Master. Accordingly, the Court has determined to appoint Roberto A. Rivera-Soto (former N.J. Supreme Court Justice) as the Special Master in place of Judge Brown. The Order appointing the Special Master will be so Amended, etc. Signed by Chief Judge Jose L. Linares on 8/3/17. (cm, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT Of NEW JERSEY
KIMBERLEE WILLIAMS, eta!.,
Civil Action No. 11-1754
Plaintiff,
OPINION AND ORDER
V.
BASF CATALYSTS, LLC, etal.,
Defendants.
LINARES, Chief District Judge
This matter comes before the Court by way of Plaintiffs’ objections to this Court’s June 7,
2017 Order appointing a Special Discovery Master under federal Rule of Civil Procedure 53.
(ECF No. 317, 321). Pursuant to federal Rule of Civil Procedure 7$, no oral argument was heard.
I.
Factual Background
The Court will rely upon the factual background contained in its decision in Williams v.
BASf Catalysts LLC, 2016 U.S. Dist. LEXIS 46273 (D.N.J. Apr. 5, 2016). In summary, Plaintiffs
allege, inter alia, that BASf Catalysts LLC and its attorneys at the firm Cahill Gordon & Reindel
conspired to prevent thousands of litigants that claimed injuries due to asbestos exposure from
attaining fair tort recoveries.
Plaintiffs alleged that BASF’s predecessor, Engelhard Corp.
(“Engeihard”), with the help of its attorneys from Cahill, destroyed or hid tests and reports that
documented the presence of asbestos in Engelhard’s talc. (SAC, ECF No. 15$ at
¶J 256;
25$(a)-
(f)). Plaintiffs commenced this action subsequent to the revelations brought about by the Fathiano
v. Ace Scientific Supply Co., No. MID-L-2976-09 (N.J. Super. Ct. Law. Div.) case concerning the
concealed and destroyed documents. (SAC, ECf No. 15$ at ¶ 244, 248(a)).
II.
Procedural History
On March 28, 2011, Plaintiffs Kimberlee Williams, Nancy Pease, Marilyn L. Holley,
Donna Ware, Donnette Wengerd and Rosanne Chernick filed this putative class action. (Cornpl.,
ECF No. 1.) Plaintiffs filed a First Amended Class Action Complaint (“FAC”) on August 4, 2011,
alleging violation of the New Jersey Racketeer Influenced and Corrupt Organizations Act (“NJ
RICO”), fraud, fraudulent concealment, civil conspiracy, fraud upon the court, unjust enrichment,
and violation of New York Judiciary Law
§
487. (ECF No. 70). Defendants moved to dismiss
(ECF Nos. 77-80, 83), and on December 12, 2012, the Honorable Stanley R. Chesler, U.S.D.J.
granted the motions and dismissed the FAC in its entirety. (ECf Nos. 129, 130.)
Plaintiffs appealed the dismissal of three claims: (1) fraud; (2) fraudulent concealment; and
(3) violation of NJ RICO. Williams v. BA$F Catalysts LLC, 765 F.3d 306, 2014 U.S. App. LEXIS
16999 (3d Cir. 2014); see also Concise Summary of the Case at 4, 765 F.3d 306 (3d Cir. 2014)
(USCA 3d Cir. No. 13-1089, ECF No. 3111143049, Jan 22, 2013). On September 3,2014, the
United States Court of Appeals for the Third Circuit (“Court of Appeals”) affirmed in part and
reversed in part, and remanded for further proceedings. (ECF No. 136.)
As an initial matter, the Court of Appeals found that New Jersey law applied and that the
parties waived their right to argue otherwise. Id. at 3 16-17. Substantively, the Court of Appeals
affirmed the District Court’s dismissal of the NJ RICO count, Id. at 3 23-24, but reversed with
respect to the fraud and fraudulent concealment claims, concluding that the FAC “properly
allege[d]” the requisite elements-- “namely that BASF and Cahill lied about and destroyed the
asbestos evidence to plaintiffs’ detriment.” Williams, 765 F.3d at 311, 3 17-23. However, the
2
Court of Appeals declined to rule on whether the FAC sufficiently stated a claim against the
individual Defendants. Id. at 324.
On June 25, 2015, United States Magistrate Judge Joseph A. Dickson held a status
conference and permitted Plaintiffs to amend their complaint in accordance with the Court of
Appeals’ Opinion and mandate. (See ECF No. 156, Tr. of 6/25/15 Status Conf. at 8:24.) On July
16, 2015, PLaintiff filed their Second Amended Complaint (“SAC”). (ECF No. 158).
Plaintiffs SAC asserts a cause of action against all Defendants under the law of New Jersey,
Fraudulent Concealment (Count I) Fraud and Deceit (Count II) and a derivative liability claim for
Civil Conspiracy (Count III). (SAC, ECF No. 158 at
¶
299-337). Plaintiffs seek, inter alia,
compensatory and punitive damages. (Id.). On January 22, 2016, Defendants moved to dismiss
the SAC. (ECF Nos. 166-178). On April 5,2016, this Court denied Defendants’ motion to dismiss
the SAC.
l
On February 2, 2017, the parties appeared before Judge Dickson for a case status
conference. (ECF No. 236). On February 16, 2017, counsel for Defendants BASF Catalysts LLC
submitted their position on the issue of whether Plaintiffs waived their attorney client privilege
and work product protection “by placing ‘at issue’ plaintiffs’ reliance on what their former counsel
allegedly told them, (or did not tell them) regarding what plaintiffs’ former counsel allegedly
understood regarding Engelhard’s defenses and the merits of plaintiffs’ allegations, especially as
to reliance on counsel.” (Def. Ltr. 2/16/17, ECF No. 242 at 1). On March 1, 2017, Plaintiffs
submitted a letter addressed to Judge Dickson concerning their position on the scope of discovery.
(P1. Br., ECf No. 249). On April 14, 2017, Defendants’ provided a response to Plaintiffs’ March
On April 5, 2016, this Court also decided that the SAC sufficiently stated claims against the individual Defendants.
Williams v. BASf Catalysts LLC, 2016 U.S. Dist. LEXIS 46273 (D.N.J. Apr. 5,2016).
3
1, 2017 letter. (Def.
Opp.,
ECF No. 2$9).2 Plaintiffs filed a reply on May 12, 2017. (P1. Rep.,
ECF No. 30. On June 8, 2017, the Court entered an Order appointing Garrett Brown, U.S.D.J.
(ret.) as a Special Master. There, the Court ordered that the “special master shall oversee the
schedule for completion of discovery and all discovery disputes and motions related thereto
pursuant to procedures for practice that the special master may establish and modify as necessary”
and address the issues currently in contention. (Order, ECF No. 3 19 at 4).
On June 13, 2017, Plaintiffs filed a letter requesting that the Court “modify and clarify the
Special Master Order”. (P1. Ltr 6/13/17, ECf No. 321 at 1). In the section entitled, “Objection
No. 1,” Plaintiffs argue that a Special Master should not be appointed at this time as an Article III
judge should determine the scope of discovery because it is a “fundamental issue of law” not
appropriate for the review of a Special Master. (Id.). Plaintiffs assert that “the cornerstone of
discovery here is whether discovery of Plaintiffs’ causes of action are limited as directed by the
Third Circuit Court of Appeals or should be substantially enlarged as BASF insists to permit
detailed discovery into the merits of thousands of cases that ended decades ago.” (Id.). In the
section entitled “Objection No. 2,” Plaintiffs raised their issues concerning the Special Master’s
compensation rate and the allocation of costs to each party. (Id. at 3-4).
As set forth in more detail below, discovery will not necessarily be allowed into the “merits
of thousands of cases” but neither will it be restricted or limited as Plaintiffs’ propose.
Accordingly, this will resolve Plaintiffs’ application to modify and clarify the Special Master
Order. (Order, ECF No. 319). A Special Master will undertake all of the tasks set forth in the June
2
on March 1. 2017, Defendants Cahill Gordon and Reindel LLP, Howard G. Sloane, and Ira J. Dembrow’s filed a
notice ofjoinder in BASF’s february 16. 2017 letter brief.
4
8, 2017 Order. (Id.). This Opinion will define, generally, the scope of discovery in this matter
and set forth some guidelines regarding the scope and the concomitant privilege issues.
III.
Discussion
A.
Objection No. 1
While the Court disagrees that a District Judge must preliminarily set the scope of
discovery,3 the Court will engage in said discussion considering Plaintiffs’ objections to date, the
age of this case, and in the interest of moving it along. While a resolution of these issues would
normally fall to the Magistrate Judge (contrary to Plaintiffs’ objection on page 1 of their June 13,
2017 letter), the Court has conferred with Judge Dickson and taken the step of authoring this
Opinion to avoid any unnecessary further delay by appeals.
1.
Scope of Discovery
The parties agree that the issue concerning the scope of discovery pertains to the two
substantive claims under the law of New Jersey, Fraud and Deceit (Count I) and Fraudulent
Concealment (Count II).
(P1. Br., ECf No. 249 at 5). The Court will first address the scope of
discovery and whether the Defendants are entitled to any discovery of the underlying cases.
a)
Standard of Law
federal Rule of Civil Procedure 26(b) defines the scope of discovery.
(b) Discovery Scope and Limits.
(1) Scope in General. Unless otherwise limited by court order, the
scope of discovery is as follows: Parties may obtain discovery
regarding any nonprivileged matter that is relevant to any party’s
claim or defense and proportional to the needs of the case,
considering the importance of the issues at stake in the action, the
Of course, a district judge can and will set the scope of discovery, but the case law cited by both Plaintiffs and
Defendants, as well as this Court’s prior experience, shows that there is no such blanket requirement. Indeed, such a
requirement would defeat the purpose of having a Special Master appointed in many cases, to say nothing of the role
of magistrate judges in this district and elsewhere as defined by statute, General Orders of this Court, and this Court’s
practice.
5
amount in controversy, the parties’ relative access to relevant
information, the parties’ resources, the importance of the discovery
in resolving the issues, and whether the burden or expense of the
proposed discovery outweighs its likely benefit. Information within
this scope of discovery need not be admissible in evidence to be
discoverable.
Fed. R. Civ. P. 26 (b)(1)
Issues relating to the scope of discovery permitted under Rule 26 rest in the sound
discretion of the court. Wisniewski v. Johns—Manville Coip., $12 F.2d 81, 90 (3d Cir. 1987). In
considering whether evidence is relevant, the Court considers whether the evidence has “a
tendency to make a fact more or less probable than it would be without the evidence” and “the fact
is of consequence in determining the action.” Fed. R. Evid. 401. Rule 26 is to be construed
liberally in favor of disclosure, as relevance is a broader inquiry at the discovery stage than at the
trial stage. Tele—Radio Sys. Ltd. v. Dc forest Elecs., Inc., 92 F.R.D. 371, 375 (D.N.J. 1981).
“Although the scope of discovery under the Federal Rules is unquestionably broad, this right is
not unlimited and may be circumscribed.” Bayer AG v. Betachem, Inc., 173 F.3d 188, 191 (3d
Cir. 1999).
Rule 26 was amended effective December 1, 2015 to require that the discovery be
proportional to the needs of the case and take into account the burdens created by the discovery
proceedings. See Fed. R. Civ. P. 26 advisory committee’s note to 2015 amendment; see also Mylan
Pharms. V Ce/gene Coip., Civ. No. 14-2094, 2016 U.S. Dist. Lexis 66393, at *16 (D.N.J. May
20, 2016) (discussing the 2015 amendment). The present amendment moves the proportionality
factors to the forefront of Rule 26, but does not change any of the analysis applied to the scope of
discovery issues:
This change reinforces the obligation of the parties to consider these
factors in making discovery requests, responses or objections.
Restoring the proportionality calculation to Rule 26(b)(1) does not
6
change the existing responsibilities of the court and the parties to
consider proportionality, and the change does not place on the party
seeking discovery the burden of addressing all proportionality
considerations. Nor is the change intended to permit the opposing
party to refuse discovery simply by making a boilerplate objection
that it is not proportional. The parties and the court have a collective
responsibility to consider the proportionality of all discovery and
consider it in resolving discovery disputes.
Fed. R. Civ. P. 26 advisory committee’s note to 2015 amendment.
When addressing the scope of discovery under the revised Rule 26(b)(1), the Court must
consider a number of factors: (1) the importance of the issues at stake in this action; (2) the amount
in controversy; (3) the parties’ relative access to relevant information; (4) the parties’ resources;
(5) the importance of the discovery in resolving the issues; and (6) whether the burden or expense
of the proposed discovery outweighs its likely benefit. fed. R. Civ. P. 26(b)(l). Discovery
requests may still be curtailed to protect a person from whom discovery is sought from “annoyance,
embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1).
Courts
determine the proportionality of discovery on a case by case basis with the aforementioned factors,
and “no single factor is designed to outweigh the other factors in determining whether the
discovery sought is proportional.” Empirs Ins. Co. e. Daybreak Express, Inc., Civ. No. 16-4269
(JLL/SCM), 2017 U.S. Dist. LEXIS $6224, at *5 (D.N.J. June 5, 2017) (citing Bell v. Reading
Hosp., 2016 U.S. Dist. LEXIS 4643, at *2 (E.D. Pa. Jan. 14, 2016))
To establish a fraudulent concealment claim, a plaintiff must show the following:
(1) the defendants had a legal obligation to disclose the evidence
in connection with an existing or pending litigation;
...
(2) the evidence was material to the litigation;
(3) plaintiff could not reasonably have obtained access to the
evidence from another source;
7
(4) defendant intentionally withheld, altered, or destroyed the
evidence with purpose to disrupt the litigation; and
(5) plaintiff was damaged in the underlying action by having to re/v
on an evidential record that did not contain the evidence defendant
concealed.
Rosenblit, 166 N.J. at 406—07; see also Williams, 765 F.3d at 320—2 1 (emphasis added).
New Jersey recognizes the common-law fraud cause of action. A plaintiff seeking to
recover for fraud and deceit must allege five elements:
(1) a material misrepresentation of a presently existing or past fact;
(2) knowledge or belief by the defendant of its falsity;
(3) an intention that the other person rely on it;
(4) reasonable reliance thereon by the other person; and
(5) resulting damages.
Banco Popular N Am. v. Gandi, 184 N.J. 161, 172—73, (N.J. Sup. Ct. 2005) (emphasis added)
(quotation marks and citation omitted); see also Williams, 765 F.3d at 317.
b)
Defendants’ Discovery Demands
The discovery currently at issue are Defendants interrogatories and document demands and
Defendants subpoenas served on non-parties. On October 23, 2015, Defendant BASF served
document requests and interrogatories to each named Plaintiff. (Def Ltr. 2/16/17, ECF No. 242
at 4)4
Defendants argue that the discovery was “designed to elicit basic documents and
information” concerning Plaintiffs’ claims. (Id.). Defendants state that they sought the discovery
to test “plaintiffs’ allegations that [were] the purported withholding of evidence and
misrepresentations by Engelhard and Cahill that caused plaintiffs to dismiss or settle their
“Defendant BASF attached a copy of the discovery propounded on Plaintiff Kimberlee Williams as Exhibit A to
Defendant BASf’s February 16, 2017 letter. See, e.g., Ix. A (1023/15 BASf Req., ECF No. 242-1).
8
underlying asbestos cases for amounts too low, rather than some failure of proof unrelated to the
alleged fraudulent conduct.” (ECF No. 242 at 5). Defendants contend that they are entitled to
inquire whether “plaintiffs’ counsel actually knew of the purported misstatements, whether those
purported misstatements were material to plaintiffs’ litigation decisions, or whether plaintiffs
settled their cases for reasons unrelated to the asbestos content of Emtal talc, including because
plaintiffs were unable to prove exposure to Emtal talc or did not actually suffer from an asbestos
related disease, among other potential failures of proof.” (ECF No. 242 at 3). furthenriore,
Defendants argue that they are “entitled to disprove plaintiffs’ allegations that their counsel relied
or made (or failed to make) particular litigation decisions in the underlying asbestos cases based
on certain alleged misstatements.” (ECF No. 242 at 8). As part of their defense, Defendants intend
to show, inter cilia, “that any alleged withholding of evidence in plaintiffs’ decedents’ underlying
cases did not materially affect those cases—and certainly not in any unifonn way that could allow
for class certification.” (ECF No. 242 at 8).
Plaintiffs, however, argue that the scope of discovery should focus, iiiter a/ia, on the
following issues raised in the SAC:
•
Whether BASF and Cahill destroyed and/or concealed
evidence that Emtal talc contained asbestos.
Whether BASF and Cahill routinely and systematically
•
made false and misleading statements that Erntal talc did not contain
asbestos.
•
Whether BASF and Cahill routinely and systematically
made false and misleading statements that there was no evidence
that Emtal talc contained any asbestos.
Whether BASF and Cahill’s spoliation of evidence had the
•
capacity to and did adversely affect and hamper the prosecution of
asbestos claims against BASF.
BASF and Cahill’s reasons or motives for their fraud and
•
spoliating evidence.
•
What BASF and Cahill each sought, achieved and gained
from the spoliation of evidence and misrepresentation scheme.
9
.
Did the Representative Plaintiffs have an asbestos injury
claim that BASF and Cahill targeted and affected in the course and
conduct of their fraudulent asbestos defense scheme?
(P1. Br., ECF No. 249 at 3-4). Additionally, Plaintiffs “seek a rightful collection of remedies for
compensatory and punitive damages, as well as declaratory and equitable relief available under
the law.” (ECF No. 249 at 3). Plaintiffs indicate that discovery into the aforementioned issues will
resolve the “core issues” and will “materially advance the resolution of both the claims of the
representative Plaintiffs’ and the claims of the putative class members’ alike as they are common
and essential issues to both groups’ claims.” (Id.).
c)
Relevance
Plaintiffs argue that the discovery propounded by Defendants is not relevant nor
proportionate to claims in this issue. (P1. Br., ECF No. 249 at 14, P1. Rep., ECF No. 308 at 11).
Plaintiffs assert that the purpose of the SAC was not to revive the old claims but rather to address
BASF and Cahill’s conduct before, during, and after the underlying action.
(Id. at 14-15).
Plaintiffs further argue that “this case is now all about what BASF and Cahill wrongfully did to
eliminate or reduce as much as possible BASF’s asbestos liability exposure in response to
foreseeable or occurring litigation, the likes of which by the early to mid
-
1980s had already
impacted the bottom line of many peers of BASF.” (Id. at 15).
(1)
Count I- Fraudulent Concealment (Spoliation).
Plaintiffs’ Arguments:
Plaintiffs argue that reliance is not an element required under the tort of fraudulent
concealment. First, Plaintiffs assert that in Williams v. BASf Catalyst, 765 F. 3d at 32 1-322, “the
Third Circuit recognized the difference between requiring Plaintiffs to show they would have
otherwise succeeded on their underlying claims versus a requirement that they provide a general
10
explanation of asbestos claim fundamentals (which they satisfied in the course of their pleadings’
allegations).” (P1. Rep., ECF No. 308 at 9). Plaintiffs aver that the Court of Appeals explained
that a “fraudulent concealment does not require reliance on an adversary’s representations.”
Williams v. BASf Catalyst, 765 F. 3d at 323. Accordingly, Plaintiffs argue that in this case, BASF
and Cahill’s conduct “shuts the door as to any proof needed about reliance.” (Id.). Plaintiffs
contend that they do not have the necessary evidence in the underlying case because Defendants
destroyed or concealed it. (Id.). Therefore, “it is obvious and self-evident that the plaintiff had to
go forward ‘relying’ on a record that does not contain the evidence concealed by defendants.” (Id.).
Additionally, Plaintiffs contend that the New Jersey Supreme Court in Rosenblit v.
Zimmerman, 166N.J. 391, 766A.2d749, (N.J. Sup. Ct. 2001)heldthatreliancewasnotarequisite
element for an actionable fraudulent concealment claim. (P1. Rep. ECF No. 308 at 11). Plaintiffs
argue that the court in Rosenblit “did not intend to import ‘reliance’ back into the cause of action
as a requisite part of proving causation between the defendant’s spoliation and the victim’s
resulting injury.” (Id.). Furthermore, Plaintiffs assert that, according to Rosenblit, the fact finder
“need be presented only with sufficient contextual information concerning what the underlying
litigation was about and how and why what was spoliated, or what was misrepresented, fit in and
mattered.” (P1. Br., ECF No. 249 at 15). Plaintiffs argue that the holding in Rosenblit does not
require a “whole redo and presentation of’ the underlying case at issue. (Id. at 15-16).
Finally, Plaintiffs assert that the type of discovery the Defendants want to conduct
“contradicts the deterrence and punishment goals and purposes of allowing Fraudulent
Concealment actions.” (P1. Br., ECF No. 249 at 16) (citing Rosenblit, 166 N.J. at 40$). Plaintiffs
assert that Defendants forfeited their right to take discovery “when it chose to spoliate evidence
and then repeatedly make fraudulent misrepresentations in the course of litigation to affect that
11
litigation.” (Id. at 16). In support of its
argument,
Plaintiffs cite to Abtrax Pharms. v. Etkins-Sinn,
139 N.J. 499 (N.J. Sup. Ct. 1995).
In Abtrax, the trial court determined that, during the course of the litigation, plaintiff had
willfully concealed relevant documents. Id. at 502. In addition to awarding counsel fees and
expenses, the trial court also dismissed the plaintiffs complaint with prejudice. Id. The Supreme
Court of New Jersey, in review of the lower court’s decision to dismiss plaintiffs case, held that
the trial court’s decision to dismiss plaintiffs complaint was justified. Id. at 52 1-522. There, the
Supreme Court held the following:
In exceptional circumstances, however, interests other than
prejudice can shifi the balance in favor of dismissal as a sanction.
A litigant that deliberately obstructs full discovery corrupts one
of the fundamental precepts of our trial practice--the assumption by
the litigants and the court that all parties have made full disclosure
of all relevant evidence in compliance with the discovery rules. A
litigant who willfully violates that bedrock principle should not
assume that the right to an adjudication on the merits of its claims
will survive so blatant an infraction. Wholly apart from the prejudice
caused by Abtrax’s discovery violations, the conclusion is
inescapable that Abtrax’s failure to comply with discovery demands
and orders, if undetected, would have afforded Abtrax an unfair
advantage at trial, because of Abtrax’s familiarity with facts and
documents that had never been disclosed to Elkins. Prevention of
such an unfair advantage is a basic premise of our discovery rules.
AbtraxPharms., 139 N.J. at 52 1-522.
Defendants’ Arguments:
Defendants, on the other hand, contend that the elements of fraudulent concealment tort
numbers two (“the evidence was material to the litigation”) and five (“plaintiff was damaged in
the underlying action by having to rely on an evidential record that did not contain the evidence
defendant concealed”) require discovery into the underlying litigation. (Def.
Opp., ECf No. 289
at 13). Defendants argue that a fraudulent concealment claim will “involve consideration of the
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substantive counts” in order to determine “the ‘true impact of the spoliated items’ in light of the
‘particular facts and circumstances of the litigation.” (Def. Opp., ECF No. 289 at 14) (citing
Robertet flavors, Inc. v. fri-farm Const., Inc., 1 A.3d 658, 671 (N.J. Sup. Ct. 2010). Defendants
aver that “[t]o know whether withheld or destroyed evidence was ‘material,’ one has to know
something about the underlying case. (Def. Opp., ECf No. 289 at 14). Similarly, Defendants
contend that in order to determine whether plaintiff was “damaged” in the underlying action by
not having the evidence that was allegedly destroyed or withheld, “one again has to have an
understanding of the underlying case and whether it was meritorious.” (Id.). Defendants further
argue that they are entitled to discovery in order to prove their theory that “even if the allegedly
concealed evidence had been available for plaintiffs and their counsel to review, Plaintiffs’
underlying personal injury claims still would have failed. (Id. at 15).
furthermore, Defendants assert that Plaintiffs are mischaracterizing the Court of Appeals
decision in Williams v. BA SF catalysts LLC, 765 F.3d 306 (3d Cir. N.J. Sept. 3,2014). Defendants
note that the Williams analysis was decided under the motion to dismiss standard. Therefore, the
Court of Appeals was required to “accept as true the Amended Class Action Complaint’s well pled
allegations.” (Def. Opp., ECF No. 289 at 25) (citing Williams, 765 F.3d at 311). Defendants point
to the Court of Appeals’ discussion on the motion to dismiss. The Court of Appeals explained,
“[o]f course, discovery may exonerate [defendants] and, in any event, [they] will have the
opportunity to contest the truth of those allegations in a later stage of the lawsuit.” (ECF No. 289
at 25) (citing Williams, 765 F.3d at 324). Furthermore, as to Plaintiffs’ argument that the Court of
Appeals held that the underlying claims were not relevant, Defendants contend that the Court of
Appeals merely held that the Rooker-feldman doctrine did not bar the remaining claims in the
13
Second Amended Complaint because plaintiffs were seeking “independent torts” rather than
seeking review of the state court judgments. (ECf No. 289 at 25)
As to Plaintiffs’ analysis of Rosenbilt, Defendants argue that Plaintiffs have misread
Rosenblit. Defendants assert that Rosenblit is “straightforward” as “a plain reading of the New
Jersey Supreme Court’s opinion makes clear that an evaluation of the underlying litigation is
required in evaluating a fraudulent concealment claim.”
(Id. at 26).
Defendants argue that
Rosenbtit “makes clear that a plaintiff must demonstrate a very particular type of harm in order to
prove up a fraudulent concealment claim, namely, that the defendant destroyed or concealed
‘material’ evidence and the ‘plaintiff was damaged in the underlying action by having to rely on
evidential record that did not contain the evidence defendant concealed.” (Id. at 27).
Defendants also note that the New Jersey Supreme Court has expressed that discovery into
the underlying claims is necessary in its Rosenblit Opinion. Defendants contend that Rosen but
instructed that “in evaluating a fraudulent concealment claim ‘the fundamentals of the underlying
litigation will also require exposition.” (Def. Opp., ECF No. 289 at 14).
As to Plaintiffs’ argument that Defendants forfeited their right to discovery, Defendants
argue that Plaintiffs’ arguments are misguided, and if accepted, “would turn the fundamentals of
due process on their head”. (Id. at 23). Defendants contend that Plaintiffs have not proven their
case for fraud or fraudulent concealment. (Id. at 23). Defendants assert that they are entitled to
“challenge” the allegations made against them and conduct discovery. (ECF No. 289 at 24). In
support of their argument, Defendants cite to Hicks v. Feeney, 850 F. 2d 152, 156 (3d Cir. 1988).
There, the Court held that “plaintiff must prove his case, as well as give the defendant an
opportunity to prepare against it.” Id. at 156.
14
Furthermore, Defendants argue that Plaintiffs’ interpretation of Abtrax runs contrary to the
Supreme Court’s decision and underlying reasoning as “[n]othing in Abtrax supports plaintiffs’
position that a litigant forfeits the right to discovery based on untested and unproven allegations
against it.” (ECF No. 289 at 24). Defendants contend that Plaintiffs ignore the fact that the trial
court inAbtrax made “specific findings of spoliation based on actual discovery into the validity of
the allegations.” (ECF No. 289 at 24). Specifically, the trial court in Abtrax “sat through four days
of trial, heard lengthy arguments on three separate dates regarding the issue of dismissing Abtrax
complaint with prejudice, and reviewed relevant documents.” Abtiax Pharms., 655 A. 2d at 519520. Additionally, the trial court permitted plaintiff to conduct additional discovery and submit
additional documents on the issue of spoliation when plaintiffs moved to reconsider. Id.
(ii)
Count II- Common Law Fraud claim
Plaintiffs also argue that the claims for fraud against Defendants do not require proof that
the Plaintiffs relied on Defendants’ misrepresentations. Plaintiffs assert that “Plaintiffs fraud
claims is predicated upon Defendants’ scheme of false statements, suppression of evidence and
threats in advance of, and during, litigation to gain voluntary dismissals (with and without nominal
token settlement payments) and involuntary dismissals of asbestos claims.” (P1. Rep., ECF No.
308 at 15) (citing Williams, 765 F. 3d at 319-320). Plaintiffs argue that the “discovery is not
relevant or proportionate to this case,” and contend that documents from Defendants’ files
produced in the related New Jersey Superior court matter, as well as the documents filed with the
courts handling the underlying cases, BASF, and Cahill essentially admit that other asbestos cases
were “repeatedly and voluntarily dismissed based upon BASF’s uniform representations that there
was not any asbestos in Emtal talc and no evidence to the contrary existed.” (P1. Rep., ECF No.
308 at 15-16). Therefore, Plaintiffs assert that, under these circumstances, “the element of reliance
can be presumed or objectively proven on a universal basis.”
(Id.).
Additionally, Plaintiffs argue that if this Court does not find that “BASF’s attorney’s
admissions regarding their success in gaining wide acceptance of BASF/Cahill’s false
representations and resulting dismissals of claims against BASf establishes outright, or dispenses
with the need for, individualized proof of reliance, Plaintiffs then intend to seek certification of an
issues class under Rule 23(c)(4) directed to proving on behalf of the class the first three elements
of Plaintiffs fraud.” (Id.).
Defendants contend they are entitled to test the allegations made against them, and assert
that Plaintiffs are required to establish “reasonable reliance” and “resulting damages” from the
alleged misrepresentations in order to prove their fraud claim. (Def.
Opp.,
ECF No. 289 at 15).
In support of their argument, Defendants cite to Banco Popular N. Am. v. Gandi, 184 N.J. 161,
(N.J. Sup. Ct. 2005). There, the Court explained that “misrepresentation and reliance are the
hallmarks of any fraud claim, and a fraud cause of action fails without them.” (ECF No. 289 at
16) (citing Banco Popular N. Am., 184 N.J. at 175).
IV.
Analysis
Discovery of some of the underlying proceedings is necessary to resolve the issues
pertaining to Count I (Fraudulent Concealment) and Count II (Fraud and Deceit). In Count I,
Plaintiffs seek to prove that Defendants intentionally destroyed or withheld material evidence that
Defendants had a duty to disclose, that Plaintiffs were not able to access such evidence on their
own, and that Plaintiffs were damaged by the destruction or concealment of such evidence. (SAC,
ECF No. 158 at 137). In Count II, Plaintiffs allege that Defendants misrepresented that the talc
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products did not contain asbestos and/or that Defendants did not have in their possession any
record or test results that concluded that the talc product contained asbestos.
The Court will address both Count I and II together as there is no structural or analytical
differences for the purposes of detennining the scope. Plaintiffs’ arguments miss the point of the
scope of relevant discovery under Federal Rule of Civil Procedure 26(b). Furthermore, the Court
disagrees with Plaintiffs’ interpretation of the Court of Appeals Opinion in Williams v. BASf
Catalysts LLC, 765 F.3d 306 (3d Cir. 2014). (P1. Rep., ECF No. 308 at 11). The issues concerning
the scope of discovery were not presented to the Court of Appeals, nor was the Court of Appeals
in the position of reviewing such issues due to the state of litigation and issues before it. But it is
noteworthy that the Court of Appeals reasoned:
[T]his is a motion to dismiss. Courts must accept as true the
plaintiffs allegation and draw inferences in the plaintiffs’ favor.
Inferring from plaintiffs’ choice of counsel unfavorable facts about
plaintiffs’ beliefs runs contrary to this rule. Third, as noted, the tort
of spoliation requires a plaintiff to prove he or she was hanTied in
the underlying action by having “to rely on an evidential record that
did not contain the evidence defendant concealed. “Rosenblit, 766
A. 2d at 758. The tort does not require reliance on an adversary ‘s
representations. Indeed a lawyer or litigant who destroys or
conceals evidence may be liable even if he or she makes no
representations to his or her adversaries at all.
Williams v. BA$F Catalyst, 765 F. 3d at 32 1-323 (emphasis added).
First, Plaintiffs’ focus on reliance ignores that causation, an element of every tort, still
creates an issue for discovery. Defendants are entitled to explore, through discovery, the link by
causation between Defendants’ conduct and Plaintiffs’ damages. Second, the quote above does
not necessarily mean reliance is not an element of the tort of spoliation; rather, it only means
concealment may be found when concealment has occurred without active misrepresentation. The
fact that an attorney or a litigant says nothing in the face of a duty to say something may support
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a claim of fraudulent concealment. But most importantly, for the discussion here, the resulting
effects of that silence will give rise to discovery of those effects in subsequent litigation pursuant
to Federal Rule of Civil Procedure 26(b).
Finally, the Court of Appeals did not write “reliance” out of the tort. Instead, the Court of
Appeals recognized that Plaintiffs must prove that decisions were made in the underlying case that
would have been different if they had known evidence had been destroyed or otherwise concealed:
“Accordingly the plaintiffs did not have to allege facts to show that they ‘would have succeeded
in proving their asbestos injury claims against BASf,’ as the District Court held,
...
but rather
facts to show that BASF and Cahill’s destruction of evidence harmed their case.” Williams v.
BASF Catalyst, 765 F. 3d at 32 1-322. Additionally, the Court of Appeals reasoned:
Indeed, the complaint states enough facts regarding the
consequences of defendants’ spoliation that it has raised a
“reasonable expectation that discovery will reveal real evidence”
that plaintiffs have been harmed by BASf and Cahill’s misconduct.
Williams v. 3ASf Catalyst, 765 F. 3d at 32 1-323 (emphasis added). The analysis by the Court of
Appeals clearly acknowledges the need for discovery into how the Defendants’ alleged misconduct
affected the Plaintiffs’ underlying cases. Without discovery, there will be no answers to the
questions raised by the Court of Appeals. Accordingly, Defendants are well within their rights,
pursuant to Federal Rule of Civil Procedure 26, to explore these issues in discovery.
This Court also disagrees with Plaintiffs interpretation ofRosenblit. In Rosenblit, the court
held:
If, however, the spoliation is not discovered until after the
underlying action has been lost or otherwise seriously inhibited, the
plaintiff may file a separate tort action. In such an action, plaintiff
will be required to establish the elements of the tort of fraudulent
concealment. To do so, the/lindamentals ofthe underlying litigation
will also require exposition.
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Rosenblit, 166 N.J. at 40$ (emphasis added). A plain reading of the Supreme Court’s decision
makes clear that “exposition” of the underlying litigation is required. Id.
Finally, the Court disagrees with Plaintiffs’ reading ofAbtraxas the Federal Rules of Civil
Procedure 26 permits for the discovery of claims and defenses.
Fed. R. Civ. P. 26(b)(1). As
discussed above, the litigants in Abtrax did not forfeit their rights as the Court permitted discovery
on the issue of fraudulent concealment. Abtrctxfharms., 655 A. 2d at 5 19-520.
The sat-ne analysis applies to Count II. Contrary to Plaintiffs’ argument, the elements of
“reliance” and “resulting damages” have not been proven. (P1. Rep., ECF No. 30$ at 15-16). The
Court of Appeals merely held that the SAC sufficiently states a claim for fraud. Williams v. BA$F
Catalyst, 765 F. 3d at 318. Additionally, the Court of Appeals held that the New Jersey’s litigation
privilege did not “foreclose liability” for any statements made in the course of asbestos-injury
litigation. Williams v. BASf Catah’st, 765 F. 3d at 317-320. As noted above, the Court of Appeals
did not decide issues pertaining to the discovery of the claims.
The scope of discovery will focus on the alleged wrongful conduct and any alleged hann
following from that conduct. In order to resolve the issues Plaintiffs identified, i.e. “[w]hether
BA$F and Cahill’s spoliation of evidence had the capacity to and did adversely affect and hamper
the prosecution of asbestos claims against BASF” (P1. Br., ECF No. 249 at 3-4), the scope of
discovery i-nay include inquiry as to why Plaintiffs settled or dismissed their underlying claims.
To fully explore this issue, Defendants will be entitled to discover what Plaintiffs and their counsel
knew, and were told, and whether any knowledge, or lack thereof, contributed to Plaintiffs’
decisions on resolving the underlying case.5
See Section 2 infra. Attorney Client Privilege.
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Such discovery may include some of the facts arising from the underlying cases; however,
the purpose of this discovery does not require a complete “redo” of the underlying claims and
defenses. The court’s analyses in Rosenblit and Abtrax do not mean that, generally speaking, this
Court must re-open the underlying proceedings for the purposes of allowing the parties to prove
or disprove the merits of the underlying cases. Accordingly, the Special Master should examine
with care Plaintiffs’ objections to discovery requests that assert exceed the parameters of the scope
set forth herein. As is always the case, discovery requests must be tailored to the relevant issues
in a case, subject to a rigorously applied proportionality analysis. This Court declines to set forth
a “one-size fits all approach” to the discovery in this matter. Counsel, as always, will be required
to meet and confer and should be able to resolve most of the disputes regarding discovery. If the
meet and confer process has not resolved a dispute, the Special Master assigned to this case shall
address each discovery request and objection in due course.
2.
Attorney Client Privilege
Defendants raise the issue “[wjhether Plaintiffs have waived the attorney-client privilege
and work product protection by placing ‘at issue’ plaintiffs’ reliance on what their former counsel
allegedly told them (or did not tell them) regarding what plaintiffs’ former counsel allegedly
understood regarding Engelhard’s defenses and the merits of plaintiffs’ underlying asbestos
cases.” (ECF No. 242 at 1). It appears that Defendants are entitled to the infonTlation as Plaintiffs
raised these issues in their SAC. (SAC, ECf No. 158 at
¶J 12, 19, 228, 230, 329).
Both the
Court of Appeals, as well as this Court, have found that the attorney-client privilege is waived
when “the client has made a conscious decision to inject the advice of counsel as an issue in the
litigation.” Glenmede Trust C’o. v. Thompson, 56 F.3d 476, 486 (3d Cir. 1995). See a/so In re G
IHoldings, Inc., 218 f.R.D. 428, 431-32 (D.N.J. 2003) (“Once a party places attorney-client
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communications at issue, that party waives the privilege with regard to all communications on the
same subject matter.”). The waiver here may not be a complete waiver, but rather a limited waiver
that penrilts Defendants access to previously privileged information that Plaintiffs have put at issue
by relying on what the underlying counsel was told and the nature of advice given by counsel as a
result of what counsel was led to believe. Moreover, the Court agrees with Plaintiffs that such
information should be “tightly define{d] and control[led]” pursuant to Federal Rule of Evidence
502(d). (P1. Rep., ECF No. 308 at 21).
The extent of any such waiver, and the information to be produced, will be subject to the
Special Master’s review as outlined above. Accordingly, the Special Master shall ascertain, and
apply all relevant law to the documents and objections concerning the attorney client privilege and
detenriine what discovery (by way of written and testimonial), if any, Plaintiffs shall produce
pursuant to the federal Rule of Civil Procedure 26. Furthermore, the Special Master will address
whether the Court should enter an order defining and controlling or otherwise protecting such
infonTlation and how such infonnation is divulged pursuant to Federal Rule of Evidence 502(d).
B.
Objection No. 2- Going to expense considerations
1.
Special lIaster Compensation Rate:
Plaintiffs argue that if the Court does not detennine the scope of discovery, the expenses
involved in compensating the Special Master will “become prohibitive.” (ECF No. 321 at 3). As
the Court has decided the scope of discovery, this issue is now moot.
2.
Application to Third Parties and Calculating Pro Rata Shares:
The allocation of costs to the parties is addressed in this Court’s prior Order and will not
be revisited. The Special Master will resolve all matters concerning the allocation of costs.
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3.
Appeals deadline:
As to the time for appeals from the Special Master’s Orders, the parties shall abide by the
time deadlines contained in Local Civil Rule 70.1(c)(l).
C.
Appointment of Special Master
This Opinion and Order modifies the Court’s previous June 8, 2017 Order referring the
case to Special Master Judge Brown. (ECF No. 319).
Judge Brown has declined to serve as a
Special Master. Accordingly, the Court has determined to appoint Roberto A. Rivera-Soto (former
N.J. Supreme Court Justice) as the Special Master in place of Judge Brown. The Order appointing
the Special Master will be so Amended.
Date:
JE L.
LINARES
€Iief Judge, United States District Court
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