CHARLTON et al v. WELLS FARGO BANK, N.A. et al

Filing 206

OPINION. Signed by Judge John Michael Vazquez on 12/19/2016. (jr)

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

ANNA CHARLTON & GARY FRANCIONE,
Plaintiffs,
Civil Action No. 11-6572
V.

OPINION

WELLS FARGO BANK, N.A. et al.,
Defendants.

John Michael Vazguez, U.S.D.J.

For the reasons stated below, the Court determines that the video surveillance evidence in
the above matter is not admissible at trial. Despite the fact that the evidence was disclosed late,
the Court originally exercised its discretion and ruled that the video would be admissible.
However, in fairness to Plaintiffs, the Court also permitted them to take limited discovery
concerning the surveillance. During this discovery process, defense counsel has defied the Court’s
Order, attempted to circumvent another ruling, taken conflicting positions, and generally expressed
a sentiment that he is unwilling to work in good faith on the Court-ordered discovery. As a result,
the Court is again exercising its discretion and ruling that the video is inadmissible, thereby
mooting any outstanding discovery issues.
A.

FACTUAL AND PROCEDURAL HISTORY
This is a personal injury case. On August 16, 2010, Plaintiff Anna Chariton allegedly

slipped while viewing a property in South Orange, New Jersey. The legal representation of
Defendants Century 21 Gemini, LLC, and Glenn Miller (collectively “Century 21”) has been

provided by their insurance company, Liberty Mutual Insurance Group (“Liberty Mutual”).
Liberty Mutual has also paid for Century 21’s counsel, and counsel’s letterhead indicates that the
lawyers of the firm are “[e]mployees of Liberty Mutual Insurance Group.” Liberty Mutual hired
an investigator, Anthony Lemma, to conduct video surveillance of Ms. Charlton after the close of
the discovery. The surveillance resulted in a video dated October 23, 2013 (“October23 video”).
Century 21 contends that this evidence demonstrates that Ms. Charlton’s walk and gait are not as
impaired as she claims, specifically in regards to her need for a cane. Mr. Lemma also conducted
surveillance November 7, 2013, but asserted that he was unable to video Ms. Charlton because it
was raining heavily. Plaintiffs contest this assertion, alleging that the weather conditions were not
nearly as severe as Mr. Lemma stated.
In preparation for trial, Plaintiffs filed a motion in ilmine to keep the October 23 tape out
of evidence. D.E. 170. Plaintiffs argued that allowing the video to be used as evidence violated
the Federal Rules of Civil Procedure and a prior Court Order. Plaintiffs also maintained that the
video should be barred because it encompassed attorney-client privileged information; Plaintiffs’
counsel, Henry Furst, Esq., was present for part of the surveillance of Ms. Charlton and appears in
a portion of the video. The October23 video does not contain sound so discussions between Mr.
Furst and Ms. Charlton cannot be heard. Id.

Century 21 and Defendant Field Asset Service

(“FAS”) opposed the motion, and the Court held oral argument.

D.E. 171, 172, 181.

On

September 22, 2016, the Court issued an Order which permitted Century 21 to use the October23
tape at trial but required the redaction of certain portions in which Plaintiffs’ counsel and Ms.
Charlton were standing still and speaking. D.E. 182. The Court also permitted the parties to take
limited discovery as to Mr. Lemma’s surveillance, including the weather conditions on November
7,2013, since Lemma’s surveillance occurred and was disclosed after the close of fact discovery.

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Id. Century 21 declined to take additional discovery. Plaintiffs’ counsel, however, decided to
depose Mr. Lemma and also issued him a subpoena to produce documents.
On October 11, 2016, Century 21’s counsel, Mario Colitti, Esq., wrote to the Court and
objected to a subpoena that Plaintiffs served on Mr. Lemma, claiming that it was a “classic fishing
expedition” and the information sought was “overbroad” and “irrelevant.” D.E. 184.

As noted,

Mr. Colitti’s firm letterhead clearly states that counsel are “[e]mployees of Liberty Mutual
Insurance Group.” Id. Mr. Colitti indicated that he wished to file a motion to quash the subpoena
but sought guidance from the Court. Id. Mr. Furst responded that the information sought was
relevant to Mr. Lemma’s credibility and the facts surrounding the surveillance. D.E. 188. In an
effort to expedite the issue, the Court did not require a formal motion. Instead, the Court issued
an order on October 14, 2016, which struck the first category of documents sought from the
subpoena. The Court permitted the remainder of the categories to stand as they did not implicate
any applicable privilege and appeared reasonably calculated to lead to the discovery of admissible
evidence. D.E. 186. Generally speaking, the categories related to Mr. Lemma’s payments from
Liberty Mutual, surveillance invoices, documents related to Plaintiffs, and Mr. Lemma’s
surveillance equipment. Id. No party sought reconsideration of the Order, nor did any party
appeal.
Thereafter, Mr. Lemma was deposed. He did not, however, produce all the information
sought by the subpoena. Pertinent to this matter, Mr. Lemma did not produce his I 099s or invoices
to Liberty Mutual. Mr. Lemma apparently testified that he did have such information, including
I 099s and possibly over one hundred invoices. The I 099s were reportedly held by his accountant.
Mr. Lemma apparently indicated that he would produce such information after the deposition, but
he did not.

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On November 3,2016, Mr. Colitti wrote to Plaintiffs’ counsel and copied the Court. D.E.
187. In the letter, Century 21’s counsel stated that the second and third items listed in the Lemma
subpoena would not be produced. Among other things, counsel indicated that the pertinent law
did not support disclosure of Mr. Lemma’s tax returns (although tax returns were not sought by
the subpoena and the Court did not order production of such on October 14). Id. Mr. Colitti again
concluded that there was “no legal justification” for the demands in the subpoena, which was a
“fishing expedition.” Id, Again. Mr. Colith took this position although the Court previously found
the pertinent information to be discoverable and ordered it produced.
Plaintiffs’ counsel responded. At the outset, Mr. Furst noted that Century 21’s attorney
had not engaged in a meet and confer, as evidenced by the copying of the Court on the November
3 correspondence. D.E. 188. Plaintiffs’ counsel also noted that Mr. Lemma had indicated that
Mr. Colitti was also acting as his (Lemma’s) lawyer. Id. As to the substance of the November 3
Letter. Plaintiffs’ counsel stated that the financial information sought was relevant to Mr. Lemma’s
potential bias and that Mr. Lemma’s testimony as to his viewing of Ms. Charlton on November
13. 2013 was questionable at best since certified weather reports contradicted Mr. Lemma’s
position. Plaintiffs’ attorney asked that the October23 tape be suppressed as a result of the failure
to follow the Court’s October 11 Order. Id.
As a result, the Court held an on-the-record telephone conference with counsel on
November 9, 2016. Mr. Colitti acknowledge that he had not made a motion for reconsideration,
nor appealed, the Court’s October II Order concerning Mr. Lemma’s subpoena.

The Court

inquired as to what basis Mr. Colitti had for deciding that the Court’s October 11 Order was not
going to be followed. As to lack of “legal justification,” the Court also asked whether the October
II Order qualified as an appropriate legal basis. The Court also queried Mr. Colitti as to why he

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had cited cases concerning tax returns when the Court had not ordered those to be produced.
Counsel had no satisfactory answer in response to any of these queries. The Court then strongly
cautioned Mr. Colitti about defying the Court’s orders in the future. The Court emphasized that
the appropriate course of redress when Mr. Colitti disagreed with the Court’s rulings was either to
file a motion for reconsideration or, alternately, seek leave to appeal. However, counsel’s sna
sponte decision not to follow the Court’s orders would not be countenanced.
Plaintiffs’ counsel inquired as to whether the information sought from Mr. Lemma could
instead be produced by Liberty Mutual. Mr. Colitti strenuously objected, noting that Liberty’
Mutual had not been served with the subpoena and that Liberty Mutual was not a party to the case.
In addition, Mr. Colitti once again said that the information was irrelevant. The Court
explained that it was not making a determination as to the information’s admissibility at trial.
Instead, the Court was ordering that the information be produced in discovery because it could, at
a minimum, lead to the discovery of admissible evidence. The Court further clarified that once
the information was produced, the parties would be free to argue its admissibility, at which time
the Court would render a decision in light of the relevant facts.
During the telephone conference, Mr. Colilti also stated that he did not represent Mr.
Lemma. This claim, that Mr. Colitti did not represent Mr. Lemma, was repeated verbally several
times by Mr. Colitti. Mr. Colitti, however, sent several letters to the Court apparently on behalf
of Mr. Lemma. D.E. 184 (objecting to the subpoena served upon Mr. Lemma and requesting
guidance on filing a motion to quash); D.E. 187 (refusing to produce information subpoenaed from
Mr. Lemma); D.E. 193 (indicating that Defendants had complied with the order addressed to Mr.
Lemma and indicating that Mr. Lemma was providing a certification as required by the Court).

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Following the conference, the Court entered an Order on November 9, 2016. D.E. 191.
The Court did not grant Plaintiffs’ request to suppress the October 23 video. The November 9
Order required Mr. Lemma to comply with the subpoena by November 14, 2016. The Order
thither indicated that if he did not possess the information sought, Mr. Lemma was to certify that
he conducted a reasonable search and describe the search that he undertook, including the relevant
dates of any search. Id.
Mr. Lemma did not comply with the November 9 Order.

Instead, the Court received

another round of letters from counsel. On November 17, 2016, Plaintiffs’ counsel indicated that
it had received nothing from Mr. Lemma and, instead, Liberty Mutual, provided certain I 099s that
it had issued to Mr. Lemma. A representative of Liberty Mutual also provided a certification
regarding the production. Plaintiffs’ attorney again asked that the October23 video be suppressed.
D.E. 192. Century 21’s lawyer replied the next day. Mr. Colitti claimed that “Idlefendants have
fully complied with the Court’s November 9 order[.j” D.E. 193. (emphasis in original). As
noted, the November 9 Order was directed to Mr. Lemma, not Liberty Mutual, due in part to Mr.
Colitti’s strong objections during the November 9 conference as to whom he represented. Mr.
Colitti continued that Mr. Lemma was unavailable on November 14 due to assignments but
provided his certification the day before, on November 17. DR 193. Mr. Colitti then indicated
that Century 21 was amending the pre-trial order to name Mr. Furst as a potential fact witness in
the case. Id, Mr. Furst filed a response on November 21, 2016. D.E. 195. Among other things,
Plaintiffs’ counsel noted that Mr. Lemma’s November 17 certification did not comply with the
November 9 Order and was drafted by defense counsel, despite Mr. Colliti’s claims that he did not
represent Mr. Lemma. Id.

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The Court held yet another on-the-record telephone conference with counsel on December
1, 2016. The Court first asked Mr. Colitti why he added Mr. Furst to the witness list. Mr. Colitti
replied that since the Court ordered that the portions of the video in which Mr. Furst appeared be
redacted from the October23 video, Mr. Furst was now a fact witness as to what occurred during
those redacted portions. The Court expressed exasperation, noting that Mr. Colitti had previously
defied one of the Court’s orders and was now engaging in a transparent “end run” around the
Court’s ruling concerning the October 23 video. The Court ruled that Mr. Furst would not be a
witness for such purposes. The Court once again cautioned Mr. Colitti about the necessity of
following the Court’s rulings and seeking redress through the appropriate avenues if Mr. Colitti
disagreed. The Court once again explained that Mr. Colitti was not free to disregard the Court’s
decisions.
As to Mr. Lemma’s failure to comply with the November 9 Order, Mr. Colitti again
acknowledged that he had not sought a reconsideration or appeal of the Order.

Practically

speaking, the Court asked why neither Mr. Colitti or Mr. Lemma sought a short continuance before
the due date of November 14, 2016 because Mr. Lemma was not available. The Court noted that
it would have a granted a short extension if Mr. Lemma had pre-existing business that prevented
Moreover, the Court inquired as to what had

him with meeting the November 14 deadline.

prevented Mr. Lemma from gathering the information before November 14 if he knew that he
would be unavailable that day. Not receiving a satisfactory explanation, the Court issued an Order
to Show Cause on December 2, 2016, which required Mr. Lemma to appear on December 13,
2016. D.E. 198. Mr. Lemma was ordered to show cause as to why he had not complied with the
Court’s November 9 Order and to also bring copies of any information that he possessed that was
responsive to the subpoena. Id. The Court ffirther indicated that it would reserve decision on

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Plaintiffs’ motion to exclude the October 23 video until the Order to Show Cause matter was
resolved.
On December 13, 2016, Mr. Lemma appeared along with all counsel. Mr. Lemma first
explained that he has asked his accountant for copies of the responsive l099s and that his
accountant had requested to receive them from the IRS.’ Although he apparently testified at his
deposition that he possessed invoices submitted to Liberty Mutual, Mr. Lemma represented during
the hearing that he was mistaken and that lie actually destroyed the invoices as cases resolved.
Instead, Mr. Lemma produced a spreadsheet which contained information concerning the invoices
that he had delivered to Liberty Mutual during the time period provided in the subpoena.
Mr. Furst. in response, asked if Liberty Mutual had copies of the invoices. Mr. Colitti
stated that Liberty Mutual was not a party to the case, that the case was ready to be tried, and that
such information had no chance of ever being admissible. The Court explained that while Mr.
Colitti may feel that the case is ready to be tried, that decision is left to the Court. The Court
further stated that the case is not ready to be tried because the discovery issue has not been resolved
to the Court’s satisfaction. The Court reiterated that it was trying to find a sensible compromise
so that the information could be exchanged and trial could begin. The Court also, once again,
clarified that it was not making any determination as to admissibility at that juncture. Instead, the
Court was attempting to get the relevant information to Plaintiffs.

Once Plaintiffs had an

opportunity to review the information, the Court would rule upon admissibility if either party made
the necessary motion. The Court, however, emphasized that a pecuniary relationship between Mr.

Although Mr. Lemma apparently testified at his deposition that his accountant kept copies of the
1099s, Mr. Lemma explained on December 13 that his accountant had actually destroyed them. If
neither Mr. Lemma nor his accountant had copies of the I 099s, the Court would not have required
Mr. Lemma to retrieve the information from the IRS, but Mr. Lemma did so of his own accord.
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Lemma and Liberty Mutual certainly had the potential to be admissible, if for nothing more than
cross-examination, depending upon the nature of the information. Mr. Colitti did not appear to
comprehend the Court’s comments, and instead argued that such information would never be
admissible.
B.

ANALYSIS
The Court is at a loss and does not foresee any successifil resolution of the discovery issues.

At the outset, the Court is surprised, to say the least, that so much time and effort has been
expended on this issue. The information sought in the subpoena should have been produced before
Mr. Lemma’s deposition and this case should be ready for trial.
In initially deciding whether the October 23 tape should be barred from use at trial the
Court exercised its discretion under the Meyers v. Pennvpack factors, which are used to determine
whether evidence should be excluded as a discovery sanction pursuant to Fed. R. Civ. P. 37.
Astrazeneca AR v. Mut. Pharn;. Co., Inc.. 278 F. Supp. 2d 491, 504 (E.D. Pa. 2003). As discussed

in the Court’s motion in ilmine Order (D.E. 182), the factors are as follows: (1) the prejudice or
surprise in fact of the party against whom the excluded evidence would have been offered; (2) the
ability of that party to cure the prejudice; (3) the extent to which allowing such evidence would
disrupt the orderly and efficient trial of the case or of other cases in the court; (4) any bad faith or
willftilness in failing to comply with the court’s order; and (5) the importance of the excluded
evidence. Astrazeneca AB. 278 F. Supp. 2d at 504 (citing Meyers v. Peniwpack Woods Home
Ownership Ass ‘n, 559 F.2d 894, 904-05 (3d Cir. 1977)). At that time, the Court determined that
excluding the evidence as a sanction was not justified. D.E. 182. Mr. Colitti’s conduct, however,
has changed the Court’s analysis. Mr. Colitti has reffised to comply with numerous court orders,
starting with his initial decision to surreptitiously take video surveillance of Plaintiff after the close

9

of discovery. ,( Wachtcl

1’.

Health Net, Inc., 239 F.R.D. 81, 104-06 (D.N.J. 2006) (granting

motion to strike previously unproduced discovery as a discovery sanction pursuant to the Meyers
v. Pcnnvpack factors). Moreover, this unwillingness to comply with the Court’s directions has

continued despite numerous warnings from the Court.
Mr. Colitti defied the Court’s October 11 Order, determining that certain information
would not be produced and that there was no legal justification to produce. A court order as a
basis for legal justification should be self-evident. Mr. Colitti then attempted to circumvent the
Court’s ruling concerning the redaction of Mr. Furst from the October23 video: he put Mr. Furst
on his witness list. When asked why. Mr. Colitti frankly admitted that Mr. Furst was now a fact
witness to the events that had been redacted from the video. Mr. Colitti does not appear to be able
to appreciate the difference between his advocacy position (the information is not discoverable)
and the Court’s determination (that it is). Moreover, when Mr. Colitti disagrees with the Court’s
orders, he does not seek appropriate redress. such as by way of a motion for reconsideration.
Although of lesser importance, Mr. Colitti has continued to advocate on Mr. Lemma’s
behalf, including writing Mr. Lemma’s certification and submitting numerous letters to the Court,
while at the same time maintaining that he does not represent Mr. Lemma. Mr. Lemma says
otherwise. But regardless of whether Mr. Colitti is actually representing Mr. Lemma, Mr. Colitti
is responsible for Mr. Lemma’s actions in this litigation. New Jersey Rule of Professional Conduct
5.3 provides that “a lawyer having direct supervisory authority over the nonlawyer shall make
reasonable efforts to ensure that the person’ conduct is compatible with the professional
obligations of the lawyer.” Further, under RPC 5.3 a lawyer can be held responsible for the
nonlawyer’s improper actions. See in re Complaint of PAID Litters. inc., 215 F. Supp. 2d 519

10

(D.N.J. 2003) (concluding that attorney violated RPC 5.3 for his failure to properly oversee
investigator’s work).
Moreover, Mr. Colitti argued strenuously on November 9 that Liberty Mutual could not be
required to produce information.
Meighan

i’.

Despite the dubious validity of this proposition, see, e.g.,

TransGzrnrd I,,s. Co. of Am., Inc.. 298 F.R.D. 436, 446 (N.D. Iowa 2014) (ordering

insurance company to produce surveillance video); Richardson v. Cuccinello, No. 09-1543, 2009
WL 4280735, at *1 (M.D. Pa. Nov. 30, 2009) (reftising to quash subpoena seeking claim file that
was served on defendant’s insurance company), Mr. Colitti then caused Liberty Mutual to produce
such information after the Court ordered that it be produced by Mr. Lemma. Then, on December
13. Mr. Colitti fell back to the position that Liberty Mutual does not have to produce anything
because they are not a party. Liberty’ Mutual cannot have it both ways. Mr. Colitti and his “captive
law firm” are essentially in-house counsel for Liberty Mutual. See, e.g., Consolidated Edison Co.
ofN V., Inc. v. Lexington Ins. (‘a, No. 14-6547, 2015 WL 4611206. at*2 (S.D.N.Y. July30, 20I5)
(equating captive law firm with in-house counsel); Hartford (‘as. Ins. Co. v. A & Al Assocs., Ltd.,
200 F. Supp. 2d 84, 90 (D.R.l. 2002) (same). As in-house counsel, Mr. Colitti, his law firm, and
Liberty Mutual are clearly subject to all discovery provisions of the Federal Rules of Civil
Procedure. See, e.g., Rune

“.

El DuPont de Nemours & Co.. 2008 WL 4514092, at *7..9 (D.N.J.

Sept. 30, 2008) (denying motion for a protective order as to non-legal communications between
in-house counsel and several corporate employees). Liberty Mutual cannot direct the defense of
this case for Century 21, including hiring Mr. Lemma, and take the position that its relevant and
unprivileged documents are not subject to discovery.
More thndamentally. Liberty Mutual has acted as an agent of Century 21 in this case as to
matters that are discoverable. Liberty Mutual has undertaken the defense for Century 21. In doing

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so, Liberty Mutual hired Mr. Lemma to conduct surveillance of Ms. Charlton. Once Liberty
Mutual voluntarily took these steps, it became an agent of Century 21 at least as to the issue of
surveillance and any related discovery. See, e.g.. Oklahoma

i’.

Tyson Foods, Inc.. 262 F.R.D. 617,

629 (N.D.Okla. 2009) (“A party is charged with knowledge of what its agents know, or what is in
records available to it, or even, for purposes of Rule 33, information others have given it on which
it intends to rely in its suit. A party must disclose facts in its attorney’s possession even though
the facts have not been transmitted to the party.” (quoting 8B Wright & Miller, § 2177)).
Mr. Colitti does not appear to appreciate the difference between discoverable information
and admissible evidence. The video arose because Century 21 decided to video Ms. Charlton after
the close of fact discovery. The Court originally permitted the October23 video to be introduced,
but Plaintiffs raised a legitimate concern as to why Mr. Lemma failed to videotape on the later date
ofsun’eillance. November 7, 2013; Mr. Lemma claims that it was raining too heavily to videotape.
Critically, Plaintiffs have information which contradicts Mr. Lemma’s claim. See, e.g., D.E. 188I (certified weather report from November 7, 2013). The Court understands why this failure to
video may be important to Plaintiffs. Presumably, Plaintiffs want to be able to argue to the jury
that the reason that the videotape was not taken on November 7, 2013 is because Mr. Lemma
observed Ms. Charlton ambulating in a manner consistent with her claimed injuries. If true, then
the failure to videotape could be used to counteract any impact of the October 23 video, which
Century 21 and FAS want to introduce to show the opposite

—

that Ms. Charlton is not as physically

limited as she claims.
To this end, Mr. Lemma’s invoices may be relevant at trial.

The invoices could

demonstrate that this was the only time that Mr. Lemma failed to take video surveillance.
Conversely, the invoices could demonstrate that Mr. Lemma regularly failed to take video

12

surveillance despite the weather. If true, Plaintiffs may have a plausible argument that this was a
common practice engaged in by Mr. Lemma on behalf of Liberty Mutual, that is, intentionally not
recording evidence if it was determined to be unhelpful to the defense. Similarly, Liberty Mutual’s
payments to Mr. Lemma may be relevant at trial to potential bias.
(Acetanzinophen) Marketing, Sales Practices & Prods. Liab. Litig.,
1569719, at *9_b

---

See, e.g., In re Tylenol
F. Supp. 3d

---,

2016 WL

(E.D. Pa. Apr. 19, 2016) (concluding that evidence relating to employee

compensation was admissible and relevant to show employees’ bias or conflict of interest); Ala.
Elec. Pension Fund v. Phannacia Corp., No. 03-1519, 2005 WL 6429128, at *1 (D.N.J. Aug. 5,
2005) (concluding that defendants’ payments to authors for research and report “is relevant
because they may expose bias in the Defendants’ research of their product”).
Century 21 disagrees with the Court’s analysis, which it has a right to do. But it cannot do
so in disregard of the Court’s rulings and attempts to reach a reasonable resolution of issues.
Century 21 undertook the surveillance and produced the October 23 video after the close of fact
discovery. Any resulting delay in the discovery process was due to its own actions. Given the
actions and comments by Century 21’s counsel, as set forth above, the Court does not reasonably
believe that continued attempts to resolve this issue will bear fruit. As a result, the Court is
exercising its discretion pursuant to the Meyers

i’.

Pennypack factors, and the October 23 video is

excluded from evidence. This obviates the need to call Mr. Lemma as witness and the outstanding
discovery issues are now moot.
An appropriate form of Order accompanies this Opinion.
Dated:

December 19, 2016

JOKNM1CHAEL VAZQZ, S.D.J.

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