MARGULIS v. THE HERTZ CORPORATION

Filing 111

OPINION regarding defendant's assertion of the common interest privilege. Signed by Magistrate Judge Mark Falk on 10/28/16. (LM, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

DANIEL MARGULIS, individually and on
behalf of all others similarly situated,
Civil Action No. 14-1209 (JMV)
Plaintiff,
v.

THE HERTZ CORPORATION,
OPINION
Defendant.

FALK, U.S.M.J.
Before the Court is Plaintiff’s application to compel documents Defendant has
withheld as protected by the common-interest “privilege.” A total of 12 letters have
been submitted on this and related discovery issues. Based on the reasons that follow,
Defendant’s blanket invocation of the common-interest “privilege” is
unavailing—because, as is explained below, the supposed common-interest
“privilege” is not a privilege, but rather a doctrine that allows parties to share
otherwise attorney-client or work-product protected communications with parties that
share a common interest without waiving the underlying protection. Because
Defendant has attempted to invoke a “privilege” that does not independently exist, the
universal withholding of documents on this basis is not sustainable. Defendant will

have an opportunity to re-review the documents and determine whether they are
protected by the attorney-client privilege or work-product doctrine and renew its
application.
BACKGROUND
Plaintiff, Daniel Margulis, commenced this putative class action on February
25, 2014, alleging that Hertz is conducting a broad-ranging currency conversion
scheme, which he labels “dynamic currency conversion” (“DCC”), to defraud its
customers who rent vehicles abroad. Plaintiff alleges that Hertz quotes customer rates
for vehicle rentals without including any currency conversion fee, charges the fee
directly to the customer’s credit card, and then falsely claims the customer specifically
chose the currency conversion and subsequent overcharge. Plaintiff claims that he
was the victim of Hertz’s DCC practices in connection with two car rentals—one in
the United Kingdom and one in Italy. The operative Complaint contains claims based
on this alleged scheme for (1) breach of contract; (2) unjust enrichment; (3) fraud; and
(4) violations of the New Jersey Consumer Fraud Act.
On August 1, 2014, Hertz moved for judgment on the pleadings pursuant to
Rule 12(c) and for failure to join indispensable parties pursuant to Rule 12(b)(7),
claiming that two Hertz subsidiaries—Hertz U.K. Ltd. and Hertz Italiana S.r.l.—were
necessary parties to the action because they were the entities that contracted with
Plaintiff. Hertz also contends that these entities, not Hertz, provide DCC service in
foreign countries.
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On April 30, 2015, the Honorable Madeline C. Arleo, U.S.D.J., denied Hertz’s
Rule 12 motion. No effort was made to add the alleged indispensible parties to the
case.
Discovery is ongoing and contentious. The parties have discovery disputes
before the Court, and a hearing on some of those disputes is scheduled in the next few
weeks.
Chief among the parties’ discovery disputes is Defendant’s withholding of
approximately 25 documents on grounds of the “common-interest privilege.” The
documents and a privilege log were submitted on September 28, 2016. The
communications at issue are alleged to be communications between Hertz employees
and employees of a company identified as Monex, which is an independent Irish
company that is Hertz’s DCC vendor.
The issue of the applicability of the common-interest doctrine to these
documents has been briefed. The parties include arguments regarding the individual
elements of the common-interest rule, some of which may have merit, were it
established that the rule applies at all. However, there is an inescapable threshold
issue which resolves the dispute at this time: There is no such thing as an independent
common-interest privilege.

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DECISION
This case is in federal court based on the Class Action Fairness Act, which is
an extension of federal diversity jurisdiction. (See Compl., ¶ 3.) When a case is
based on federal diversity jurisdiction, courts are to decide issues of privilege based on
state law. See, e.g., In re Ford Motor Co., 110 F.3d 954, 965-66 (3d Cir. 1997).1
Therefore, New Jersey law applies.
Defendant contends that, under New Jersey law, “the common-interest
privilege applies and protects communications between two parties who exchange
information ‘due to actual or anticipated litigation’ and share ‘a common-interest.’”
(Def’s Letter dated May 20, 2016, at 4.) Defendant relies on the New Jersey Supreme
Court’s decision in O’Boyle v. Boro. of Longport, 218 N.J. 168 (2014), the leading
case on this subject.
O’Boyle makes clear that the common-interest rule is not an independent
privilege. It is a waiver-related doctrine; an exclusion to the general rule that
disclosure of a privileged communication results in waiver of the privilege:
All agree, however, that the common interest rule does
not create a new privilege. Rather, it permits
disclosure of privileged material, attorney-client
confidential communications or work product, to third
parties without waiving any privilege as long as the

The work-product doctrine is always federal. See United Coal Companies v. Powell
Const. Co., 839 F.2d 958, 966 (3d Cir. 1988) (“Unlike the attorney-client privilege,
the work-product privilege is governed, even in diversity cases, by a uniform federal
standard.”).
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applicable features of the common interest rule in the
jurisdiction are satisfied.
Id. at 198.
Documents may be withheld on attorney-client privilege or work-product
grounds. The common-interest rule allows the withholding party to share that
privileged communication with others that are within a community of
interest without waiving the underlying privilege. In order to avoid waiver of
privilege protection when sharing protected communications, the disclosure of
privileged information must be (1) made due to actual or anticipated litigation, (2) for
the purpose of furthering a common interest, and (3) made in a manner not
inconsistent with maintaining confidentiality against adverse parties. Id. at 199 (citing
LaPorta v. Gloucester County, 340 N.J. Super. 254, 262 (App. Div. 2001).
Therefore, the first question is always whether an underlying communication is
privileged to begin with, whether it be attorney-client, work-product, or otherwise.
See O’Boyle, 218 N.J. at 198. If that is established, the Court may then consider
whether the privileged document was shared with someone and whether such sharing
was permissible.
Here, no showing of underlying privilege has been made. The privilege log
refers to “Documents Withheld Under Common Interest Privilege.” (September 28,
2016 Letter at Tab A.) The log continues by identifying the applicable privilege for
documents as the “common interest privilege.” Id. As explained, this does not work.

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The claiming party must articulate how each document withheld is privileged from
disclosure. The Court is not in a position to make this determination from what has
been presented. Is the communication between an attorney and that attorney’s client?
Is the communication for purposes of receiving or providing legal advice?
The email documents provided seem innocuous and likely not privileged, but more
importantly, the requisite specific information is not provided and therefore the Court
cannot make an informed analysis of the subject. See, e.g., N.J.S.A. 2A:84A-20; In re
Kozlov, 79 N.J. 232, 243 (1979).
CONCLUSION
Determining whether these emails are protected by the common-interest
doctrine is premature and, in fact, impossible without determining whether they are
privileged in the first place. For that reason, Defendant’s invocation of the commoninterest doctrine is premature and DENIED WITHOUT PREJUDICE. If Defendant
has a basis to assert an actual privilege with respect to any of the communications
withheld, it shall identify same, with as much detail as possible. If it cannot make this
showing, the documents should be produced immediately.

s/Mark Falk
MARK FALK
United States Magistrate Judge
DATED: October 28, 2016
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