GREGORY et al v. GREGORY
OPINION & ORDER granting in part and denying in part 33 Motion to Compel; granting in part and denying in part 34 Motion to Compel; granting in part and denying in part 34 Motion to Quash; granting in part and denying in part 34 Motion for Protective Order; granting in part and denying in part 35 Motion for Protective Order. Third parties LeClairRyan and Cipolla & Co. need not respond to the subpoenas absent further Order from this Court. Signed by Magistrate Judge Cathy L. Waldor on 10/17/16. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Action No. 2:15-cv-0320 (WHW)(CLW)
ROBERT GREGORY, SAMUEL
GREGORY, and CHRISTOPHER
OPINION & ORDER
W. PATRIC GREGORY, III,
WALDOR, United States Magistrate Judge
THIS MATTER comes before the Court on the following motions and related filings:
Plaintiffs Robert, Samuel, and Christopher Gregory (Plaintiffs) move pursuant to
Rule 37(a) of the Federal Rules of Civil Procedure to compel the production of
documents withheld by Defendant Patric Gregory III (Defendant) on the basis of
relevance, attorney-client privilege, and work product privilege. Defendant crossmoves pursuant to Rule 26(c) for a protective order concerning the information
Defendant moves pursuant to Rule 37(a) to compel production of documents
withheld by Plaintiffs on the basis of relevance and proportionality.
Plaintiffs move pursuant to Rule 45(d) to compel compliance with subpoenas
issued to third-parties LeClairRyan and Cipolla & Co. Defendant moves to quash
the subpoenas and for a protective order.
ECF Nos. 33-40. The Court held oral argument on June 9, 2016 and, for the reasons set forth
below, grants the motions in part and denies the motions in part.
Summary of Allegations and Procedural History
This case arises from allegedly defamatory statements made in the aftermath of an
arbitrated dispute among siblings involved in a family business. The parties to this dispute are four
of the eight surviving grandchildren of William P. Gregory, Sr., who in 1902 founded New Jersey
Galvanizing and Tinning Works, Inc. (NJG), a company “in the business of hot dip galvanizing of
structural steel and steel components.” Am. Compl. ¶¶ 4-6, 9, ECF Nos. 15-2 and 33-2. 1 The
Gregory siblings’ father, William P. Gregory, Jr., subsequently took over NJG and operated it until
1982. Id. at ¶ 9. In or around 1976, William P. Gregory, Jr. transferred an equal amount of NJG
shares to each of his children. Id. at ¶ 15. The parties to the transfer entered into an Option
Agreement, which provided terms by which NJG could call for the redemption of the transferred
shares. Id. at ¶ 17. In 1980, Defendant redeemed all of his stock in NJG in connection with his
purchase of another galvanizing company, but the remaining Gregory siblings kept their shares.
Id. at ¶ 19. Plaintiff Robert Gregory has served as President of NJG since 1990. Id. at ¶ 1.
The Stock-Redemption Arbitration
In 2008, Robert Gregory offered to purchase his siblings’ outstanding shares of NJG
common stock. Id. at ¶ 21. Robert withdrew his offer on August 31, 2008 after his siblings failed
to respond. Id. at ¶ 22. In August 2011, NJG called the outstanding stock in accordance with the
Option Agreement. Id. at ¶ 23. The Gregory siblings who not parties to this action, i.e., Michael
Gregory, Mary Gregory O’Connor, Elizabeth Gregory, and James Gregory (Claimants), then filed
suit (the Arbitration) against Plaintiffs and NJG and Five Roses, LLC (another company owned
The Court’s recitation of Plaintiff’s allegations does not constitute an acceptance of the truth of any such allegations,
although some are undisputed by the parties. See, e.g., Answer, at ¶¶ 41-42, ECF No. 7.
by Robert) alleging, among other things, shareholder oppression and breach of fiduciary duty. Id.
at ¶ 24. Defendant was not a party to that action. Id. at ¶ 7. On June 6, 2013, an arbitrator issued
relief against NJG in an Abbreviated Reasoned Decision. Id. at ¶ 25.
In February 2014, Defendant distributed a binder (the Binder) to fifteen members of the
Gregory family describing his “fact-based take” on his siblings’ stock-redemption dispute and the
Arbitration. Id. at ¶ 39-41. Defendant also distributed the Binder to several people outside the
Gregory family, including Attorney Michael Haratz, Joseph Cipolla, Roger Gesswein, and Real
O. Roy. Denner Decl. Ex. D at 2-3, Apr. 8, 2016, ECF No. 33-2. The Binder included various
statements that Plaintiffs claim are false and defamatory, including that:
a) Plaintiffs engaged in a “persistent pattern of malfeasance, deceit, and selfdealing,”
b) Plaintiffs “engaged in business practices that have bordered on criminal,”
c) “In order to pay as little as possible to Claimants for the redemption of their
share, the Management of [NJG] deliberately violated financial and accounting
conventions— and the law—in an effort to understate the company’s value,”
d) “[Five Roses LLC] became a convenient conduit to funnel assets out of NJG and
into a parallel firm owned and controlled exclusively by Robert and his handpicked
e) [Five Roses LLC and NJG] are one in the same . . . [e]xcept when it comes to
f) “The only reason these transfers were made was to depress the reported value of
NJG and thereby depress the value of the redemption of shares,”
g) “The bookkeeping for both companies was designed to deceive,” and
“[accounting entries] were ‘made up,’ with no support whatsoever, all in an effort
to depress and conceal the true value of NJG,” and
h) Robert was guilty of accepting an “illegal kickback” from a business called USA
Am. Compl. ¶ 42 (brackets and quotations in original).
The Instant Defamation Action
On December 24, 2014, Plaintiffs filed a one-count complaint against Defendant in the
Superior Court of New Jersey, Essex County, Law Division alleging defamation stemming from
Defendant’s allegedly false and defamatory statements in the Binder. Compl., ECF No. 1-2. On
January 16, 2015, Defendant removed the action to this Court. Notice of Removal, ECF No. 1. On
March 4, 2015, Defendant filed an Answer asserting fourteen affirmative defenses, which include
claims that the statements in the Binder are protected by conditional or absolute privileges. 2
Answer, ECF No. 7. On July 31, 2015, Defendant filed a motion for judgment on the pleadings
under Federal Rule of Civil Procedure 12(c), arguing that his statements are protected by a
qualified “common-interest” privilege. Mot. Dismiss, ECF No. 15. On October 21, 2015, The
Honorable William H. Walls, U.S.D.J., denied Defendant’s motion. Gregory v. Gregory, 2015 WL
6408016 (D.N.J. Oct. 21, 2015), ECF No. 22. The District Judge held that a qualified privilege
was unavailable based on the face of the complaint, but left open the possibility that such a
privilege could be established as the case progresses. Id. at 9-13.
Defendant’s Role in the Arbitration and His Relationship with Attorney Michael
Haratz and Joseph Cipolla
Claimants were represented in the Arbitration by LeClairRyan, with Michael Haratz
serving at lead counsel. Pls.’ Br. Supp. Mot. Compel 4, ECF No. 33-5. Joseph Cipolla, Jr. of
Cipolla & Co., LLC, acted as an expert witness concerning the valuation of the Claimants’ equity
interests in NJG. Id. Defendant did not have any communications with Attorney Haratz or Mr.
Cipolla until March 2013. Def.’s Opp’n 8-10, ECF No. 35-1. Defendant asserts that he decided to
testify as an expert on behalf of Claimants in the Arbitration after receiving a call from Mr. Cipolla
and conducting an investigation into the circumstances surrounding the dispute. Id. Defendant
claims that the arbitrator did not permit Defendant to testify because Claimants were late in
identifying him and because he did not submit an expert report. Id. at 10 n.2. Plaintiffs, on the
The Answer refers to the Amended Complaint, which is the operative pleading in this matter but does not have its
own docket entry; the Amended Complaint appears at ECF Nos. 15-2 and 33-2.
other hand, allege that Defendant was actually offered as a fact witness, and note that Defendant
appears on a document submitted during the Arbitration entitled “Claimants Updated List of Fact
Witnesses.” Denner Decl. Ex. B at 3, Apr. 29, 2016, ECF No. 39-1. Mr. Cipolla did not mention
Defendant in the expert report he produced in the Arbitration, except in noting that Defendant
purchased Highway Safety, Corp. from NJG in 1980. Pls.’ Br. Supp. Mot. Compel 4, ECF No. 335; Denner Decl. Ex. E at 14, Apr. 8, 2016, ECF No. 33-2.
Defendant made several payments to LeClairRyan and Mr. Cipolla for services rendered
in the Arbitration, including:
a) $63,205.12 to Mr. Cipolla between June 12, 2013 and October 1, 2013;
b) $202,151.64 to LeClairRyan between August 23, 2013 and March 18, 2015; and
c) $245,204.83 to the Arbitration Claimants.
Pls.’ Br. Supp. Mot. Compel 4, ECF No. 33-5; Denner Decl. Exs. O-Q, Apr. 8, 2016, ECF No. 332. In December 2013, Defendant retained LeClairRyan in connection with the Binder. Def.’s
Opp’n 10, 16, ECF No. 35-1. Defendant claims that he had “completed or largely completed” the
Binder before retaining LeClairRyan and that LeClairRyan did not assist in the Binder’s
preparation. Id. at 10, 16. Attorney Haratz, now with Haratz Law, LLC, represents Defendant in
Plaintiffs’ Motion to Compel and Defendant’s Cross-Motion for a Protective Order
Rule 37(a) Motion to Compel
A party seeking discovery may move to compel production if another party “fails to
produce documents . . . as requested under Rule 34.” Fed. R. Civ. P. 37(a)(3)(B)(iv). Motions to
compel discovery fall within the sound discretion of the Court. Drippe v. Tobelinski, 604 F.3d 778,
783 (3d Cir. 2010) (citing In re Fine Paper Antitrust Litig., 685 F.2d 810, 817-18 (3d. Cir. 1982)).
A party objecting to a discovery request must specifically state the grounds for its failure
to respond. Harcum v. Leblanc, 268 F.R.D. 207, 209-10 (E.D. Pa. 2010) at 210 (citing Joseph v.
Harris Corp., 677 F.2d 985, 992 (3d Cir. 1982)). The objecting party must further specifically
identify any responsive materials that are being withheld on the basis of that objection. Fed. R.
Civ. P. 34(b)(2)(C); Scranton Products, Inc. v. Bobrick Washroom Equip., Inc., 2016 WL
3193482, at *12 (M.D. Pa. June 3, 2016). After a properly asserted objection, the party seeking
discovery has the burden to show that the discovery falls within the ambit of Rule 26. Harcum,
268 F.R.D. at 210 (citing Momah v. Albert Einstein Medical Ctr., 164 F.R.D. 412, 417 (E.D. Pa.
Rule 26(c) Motion for Protective Order
Like orders issued under Rule 37(a), the decision whether to issue a protective order is
within the sound discretion of this Court. Glenmede Trust Co. v. Thompson, 56 F.3d 476, 483 (3d
Cir. 1995) (citing Pansy v. Borough of Stroudsburg, 23 F.3d 772, 787-91 (3d Cir. 1994)). A
protective order may restrict the extent or manner of discovery where necessary “to protect a party
or person from annoyance, embarrassment, oppression, or undue burden or expense.” Pearson v.
Miller, 211 F.3d 57, 65 (3d Cir. 2000) (citing Fed. R. Civ. P. 26(c)).
The party seeking the protective order must typically demonstrate good cause to limit
discovery. Pansy, 23 F.3d at 786. However, Rule 26(c) requires no additional showing of good
cause unless the party seeking discovery first demonstrates relevance. Bell v. Lockheed Martin
Corp., 270 F.R.D. 186, 195 (D.N.J. 2010), aff'd, 2010 WL 3724271 (D.N.J. Sept. 15, 2010). Once
relevance is established, the party seeking protection can satisfy its burden by showing that an
evidentiary privilege protects the information sought. See O’Blenis v. Nat'l Elevator Indus.
Pension Plan, 2015 WL 3866229, at *4 (D.N.J. 2015) (issuing protective order based on attorneyclient privilege).
Scope of Discovery
Under Fed. R. Civ. P. 26(b)(1), a party has the right to obtain discovery regarding any
nonprivileged matter that is relevant to any party’s claim or defense. Relevance “encompass[es]
any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue
that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978);
Green v. Cosby, 314 F.R.D. 164, 171 (E.D. Pa. 2016). However, a party does not have an unlimited
right to discovery, and access may be constrained under certain circumstances. Bayer AG v.
Betachem, Inc., 173 F.3d 188, 191 (3d Cir. 1999) (citing Hickman v. Taylor, 329 U.S. 495, 507
The scope of discovery in this matter therefore encompasses any nonprivileged matter
related to Plaintiffs’ defamation claim or any of Defendant’s affirmative defenses. To prove their
case, Plaintiffs must show “(1) that [D]efendant[ ] made a false and defamatory statement
concerning [Plaintiffs]; (2) that the statement was communicated to another person (and not
privileged); and (3) that [D]efendant acted negligently or with actual malice.” Gregory, 2015
WL 6408016, at *3 (citing G.D. v. Kenny, 15 A.3d 30 (N.J. 2011)). To determine whether a
statement is defamatory, the Court must “consider the content, verifiability, and context of the
challenged statement[ ].” Id. (citing Murphy v. Millennium Radio Group LLC, 650 F.3d 295, 310
(3d Cir. 2011)).
Defendant contends that the statements in the Binder are protected by privilege. Answer
12, ECF. No. 7. New Jersey recognizes a qualified “common-interest” privilege that applies to any
“communication made bona fide upon any subject-matter in which the party communicating has
an interest, or in reference to which he has a duty, if made to a person having a corresponding
interest or duty, although it contains criminatory matter which, without this privilege, would be
slanderous and actionable.” Gregory, 2015 WL 6408016, at *3 (quoting Professional Recovery
Services, Inc. v. General Elec. Capital Corp., 642 F. Supp. 2d 391, 400 (D.N.J. 2009)). To
determine whether a qualified privilege applies, the Court looks to “(1) the appropriateness of the
occasion on which the defamatory information is published, (2) the legitimacy of the interest
thereby sought to be protected or promoted, and (3) the pertinence of the receipt of that information
by the recipient.” Id. (quoting Professional Recovery Services, 642 F. Supp. 2d at 400). Further,
even if a “common-interest” privilege applies, it can be lost through abuse if “(1) the publisher
knows the statement is false or the publisher acts in reckless disregard of its truth or falsity; (2) the
publication serves a purpose contrary to the interests of the qualified privilege; or (3) the statement
is excessively published.” Id. (quoting Williams v. Bell Tel. Lab., Inc., 623 A.2d 234 (N.J. 1993)).
Disputed Documents Requests 3
Electronic Communications Between Defendant and Attorney Haratz, LeClairRyan,
Joseph Cipolla, Jr., and/or Cipolla & Co., LLC and all Documents Representing,
Referring, or Relating to Those Communications (Plaintiffs’ Document Requests Nos. 1417).
Defendant objects to these requests on the basis of relevance, attorney-client privilege, and
Plaintiffs assert that these documents are relevant to (1) Defendant’s intent in creating the
Binder, (2) the applicability of the “common-interest” privilege asserted by Defendant, (3) whether
In addition to seeking documents, Plaintiffs’ motion also argues that Defendant’s privilege logs are deficient under
Fed. R. Civ. P. 26(b)(5). Pls.’ Br. Supp. Mot. Compel 16-18, ECF No. 33-5. Defendant has since supplemented these
logs, Suppl. Sun Decl. Ex. D, Apr. 22, 2016, ECF No. 35-2, and that issue appears to be moot. Pls.’ Reply 3, ECF No.
39. Plaintiffs’ grievances concerning Defendant’s classification of certain documents as privileged will be addressed
Defendant was in privity with Claimants and thus estopped from re-litigating findings made in the
arbitration, and (4) Defendant’s credibility. Pls.’ Br. Supp. Mot. Compel 20, ECF No. 33-5. More
specifically, Plaintiffs contend that the documents directly relate to the circumstances surrounding
the Binder’s creation, including when Defendant decided to create Binder; with whom Defendant
consulted; what information Defendant relied on; Defendant’s role in the Arbitration; Defendant’s
interest in the Arbitration; Defendant’s “alliance with the Claimants”; and Defendant’s “bias
against Plaintiffs.” Pls.’ Reply 5, ECF No. 39. Plaintiffs claim that these circumstances are critical
to Defendant’s assertion of a “common-interest” privilege. Id. Defendant does not specifically
address these claims, except to state that the documents do not relate to the truthfulness of the
statements in the Binder. 4 Def.’s Opp’n 6, 31, ECF No. 35-1.
Consistent with Plaintiffs’ arguments on this point, the Court finds that the requested
documents plainly are relevant as to the truth of the Binder’s contents and likewise relate to or
could reasonably lead to another matter that relates to the issues of intent and the “commoninterest” privilege. Oppenheimer Fund, 437 U.S. at 351 (1978). Accordingly, the documents must
be produced unless a privilege applies.
Attorney-Client Privilege and Work Product
This Court sits in diversity and therefore must apply New Jersey law to determine issues
of attorney-client privilege. Fed. R. Evid. 501; In re Human Tissue Products Liab. Litig., 255
F.R.D. 151, 156 (D.N.J. 2008) (citing In re Ford Motor Co., 110 F.3d 954, 965 (3d Cir. 1997)).
New Jersey’s attorney-client privilege attaches to communications made between lawyers and
clients “in the course of that relationship and in professional confidence.” N.J.S.A. 2A:84A–
Defendant does however contend that, with regard to the issues of intent and privity, the requested documents do not
have “sufficient relevance or probative value” to pierce any applicable attorney-client privilege. Def.’s Opp’n 30, ECF
No. 35-1. As set forth below, no attorney-client privilege applies so the Court need not address this argument.
20; N.J.R.E. 504; Hedden v. Kean Univ., 82 A.3d 238, 244 (N.J. Super. App. Div. 2013). All
communications made in the lawyer-client relationship are presumed to have been made in
professional confidence. Hedden, 82 A.3d at 244 (citing N.J.R.E. 504(3)). However, “[b]ecause
the privilege may be employed to obstruct the search for truth, the privilege is not absolute and
care must be taken to insure that the privilege is not abused.” Orion Corp. v. Sun Pharm. Indus.,
Ltd., 2010 WL 686545, at *8 (D.N.J. Feb. 22, 2010) (citing United Jersey Bank v. Wolosoff, 483
A.2d 821 (N.J. Super. App. Div. 1984)). Defendant has the burden of proving the attorney-client
privilege applies to the communications at issue. Hedden, 82 A.3d at 245.
Though the privilege is not limited to legal advice, it extends only to “situations in which
lawful legal advice is the object of the relationship.” O'Boyle v. Borough of Longport, 94 A.3d
299, 309 (N.J. 2014). Ordinarily, disclosure of an otherwise protected communication to a thirdparty waives the privilege. Id. (citing Stengart v. Loving Care Agency, Inc., 990 A.2d 650 (N.J.
2010)). However, the privilege survives if disclosure to the party is “necessary to advance the
representation.” Id. (citing Rawlings v. Police Dep't of Jersey City, 627 A.2d 602 (1993)). New
Jersey courts have applied this “necessary communications” doctrine to experts and consultants
hired to assist an attorney’s representation. Tractenberg v. Twp. of W. Orange, 416 N.J. Super.
354, 376, 4 A.3d 585, 598 (App. Div. 2010) (citations omitted). On the other hand, the privilege
does not extend to fact witnesses. See Wagi v. Silver Ridge Park W., 580 A.2d 1093, 1100 (N.J.
Super. Law. Div. 1989).
Unlike issues of attorney-client privilege, a uniform federal work product doctrine applies
even in diversity cases. Human Tissue Products, 255 F.R.D. at 157 (citing United Coal Cos. v.
Powell Const. Co., 839 F.2d 958, 966 (3d Cir. 1988)). Fed. R. Civ. P. Rule 26(b)(3) sets forth a
three step analysis to determine whether the work product doctrine applies, and thus protects
certain documents from discovery. First, the doctrine attaches to (1) documents and tangible things
that (2) are prepared in anticipation of litigation (3) by or for another party or its representative.
Fed. R. Civ. P. 26(b)(3)(A). Second, the seeking party can override the protection by showing (1)
the documents are otherwise discoverable, (2) the party has a substantial need for the materials,
and (3) the party cannot obtain a substantial equivalent without undue hardship. Id.; Memory Bowl
v. N. Pointe Ins. Co., 280 F.R.D. 181, 186 (D.N.J. 2012) (citing In re Cendant Corp. Sec. Litig.,
343 F.3d 658, 663 (3d Cir. 2003)). Finally, there is near absolute protection for the “mental
impressions, conclusions, opinions, or legal theories of a party’s attorney or other representative
concerning the litigation.” Fed. R. Civ. P. 26(b)(3)(B); Memory Bowl, 280 F.R.D. at 186 (citing
Cendant Corp., 343 F.3d at 663). In contrast to waiver of attorney-client privilege, “disclosure to
a third party does not necessarily waive the protection of the work-product doctrine.” In re Chevron
Corp., 633 F.3d 153, 165 (3d Cir. 2011) (citation omitted). The doctrine is only waived if “material
is disclosed in a manner inconsistent with keeping it from an adversary” Id. (citation omitted).
Defendant has produced two privilege logs identifying documents he is withholding on the
basis of attorney-client or work-product privilege. The first relates to privilege arising from this
suit (“Defendant’s Log,” Denner Decl. Ex. U, Apr. 8, 2016, ECF No. 33-3), while the second
relates to privilege arising from the Arbitration (“Claimants’ Log,” Id. at Ex. V). The parties have
broken down the disputed documents into three categories, which are addressed in turn.
i. Communications between Defendant and Attorney Haratz, LeClairRyan, Joseph Cipolla, Jr.,
and/or Cipolla & Co., LLC concerning the representation of Claimants in the Arbitration
prior to entry of the Award on June 6, 2013
Defendant claims that these communications are protected by the attorney-client privilege
held by Claimants and further asserts that his involvement in the communications did not constitute
a third-party waiver based on the “necessary communications” doctrine. Def.’s Opp’n 20, ECF
No. 35-1. These communications are only privileged if Defendant can show he was “necessary to
advance the representation” of the Claimants in the Arbitration, as defined by New Jersey law.
O’Boyle, 94 A.3d at 309. The Court finds that Defendant has failed to meet his burden in this
regard. The parties disagree on Defendant’s role in the Arbitration, and the only piece of evidence
properly before the Court indicates that Defendant was offered as a fact witness, and not an expert
witness. 5 Denner Decl. Ex. B at 3, Apr. 29, 2016, ECF No. 39-1. Therefore, the attorney-client
privilege was waived as to any communications including or copying Defendant. See Wagi, 580
A.2d 1093, 1100; O'Boyle, 94 A.3d at 309.
Defendant also asserts that these communications are protected by the work product
doctrine. 6 Based on a review of the Claimants’ Log, the Court agrees that the disputed
communications dated June 6, 2013 were likely intended for use in Arbitration by or for the
Claimants or their representatives, Attorney Haratz and Mr. Cipolla. Therefore, the work product
doctrine applies unless Plaintiffs can show that they have a substantial need for the materials and
cannot obtain a substantial equivalent without undue hardship. Memory Bowl, 280 F.R.D. at 186.
Though Plaintiffs have demonstrated that the documents are discoverable under the broad
relevance standard of Rule 26(b)(1), they have not made the requisite showing that their need for
these communications is “substantial” or that they cannot obtain the information therein by a less
intrusive means. See F.T.C. v. Boehringer Ingelhein Pharm., Inc., 778 F.3d 142, 155 (D.C. Cir.
2015), cert denied, 136 S.Ct. 925 (2016) (citations omitted) (“burden is generally met if [party]
demonstrates that the materials are relevant to the case, the materials have a unique value apart
The Court makes no findings of fact concerning Defendant’s role in the Arbitration, and merely holds that Defendant
has not met his burden of showing that the attorney-client privilege applies. See Hedden, 82 A.3d at 245.
If otherwise properly asserted, “work-product protection applies to documents prepared for a different case so long
as the two cases are closely related in parties or subject matter.” Louisiana Mun. Police Employees Ret. Sys. v. Sealed
Air Corp., 253 F.R.D. 300, 309 (D.N.J. 2008).
from those already in the [party]’s possession, and “special circumstances” excuse the [party]’s
failure to obtain the requested materials itself.”)
Finally, since Claimants and their representatives did not disclose the communications “in
a manner inconsistent with keeping it from an adversary,” they did not waive work product
protection by involving Defendant. Chevron Corp., 633 F.3d at 165. Accordingly, a protective
order shielding documents numbered 2-9, 11-17, 19-20, and 23-24 in Claimants’ Log is
appropriate, but only to the extent that those documents concern the Arbitration. To the extent that
the documents contain any other information, they must be appropriately redacted and produced
by Defendant. This includes information not protected by the work product privilege that otherwise
may have been protected by the attorney-client privilege had it not been waived.
ii. Communications between Defendant and Attorney Haratz, LeClairRyan, Joseph Cipolla,
Jr., and/or Cipolla & Co., LLC after June 6, 2013 concerning the representation of
Claimants in the post-Arbitration confirmation proceedings.
As to attorney-client privilege, the Court again holds that Defendant has failed to meet his
burden. In addition to the reasoning set forth above, the Court agrees with Plaintiffs in that there
has been no showing that Claimants’ attorney would have reason to consult Defendant after the
Arbitration Award had been entered. Pls.’ Reply 8, ECF No. 39. The post-Arbitration proceedings
primarily concerned a purported ambiguity in the terms of the Award. See Gregory v. Gregory, A1490-13T2, at 21-24 (N.J. Super. App. Div. Apr. 16, 2015), ECF No. 33-2. Defendant’s expertise
concerning the galvanizing industry would hardly have been “necessary to advance” the Claimants
representation in this regard. Again, the necessary communications doctrine does not apply, and
the attorney-client privilege was waived as to any communication on which Defendant was
included or copied.
As to work product, the Court’s above analysis concerning the pre-Award communications
applies here as well. Thus, a protective order is appropriate for documents numbered 25-35, 3764, 73-75, 77-78, 86-144, 146-174, 176-199, 201-220, 222-240, 242, 244-248, 250-252, 254-370,
and 373-399 in Claimants’ Log, but only to the extent that those documents concern the
Arbitration, the post-Arbitration proceedings in the New Jersey Superior Court, or the current
lawsuit. To the extent that the documents contain any other information, they must be appropriately
redacted and produced by Defendant.
Communications in and after December 2013 between Defendant and Joseph Cipolla
and/or Cipolla & Co., LLC concerning the creation and content of the Binder.
Unlike the previous two categories, Defendant holds any applicable attorney-client
privilege covering these communications, and the inquiry is whether disclosure to Mr. Cipolla
waived the privilege. Again, Defendant has failed to show that the “necessary communications”
doctrine applies. Other than a single statement that that these communications “are similarly
shielded from discovery,” Def.’s Opp’n 29-30, ECF No. 35-1, Defendant makes no indication if
or how Mr. Cipolla was necessary to advance his representation. Indeed, the only information
Defendant gives concerning the nature of that representation is an assertion that his attorney did
not assist in the Binder’s preparation. Id. at 10, 16. The “necessary communications” doctrine
therefore does not apply, and the attorney-client privilege was waived as to any communication
on which Mr. Cipolla was included or copied.
As to work-product, the Court finds that these communications were not “prepared in
anticipation of litigation” and are thus are not protected. Fed. R. Civ. P. 26(b)(3)(A). The
communications being withheld date back to January 2014, eleven months before this suit was
filed. Denner Decl. Ex. U, Apr. 8, 2016, ECF No. 33-2. Although the communications relate to
the preparation of the Binder now the subject of this litigation, “[t]he mere fact that litigation
eventually ensues does not, by itself, cloak materials . . . with the protection of the work product
privilege.” Binks Mfg. Co. v. National Presto Indus., Inc., 709 F.2d 1109, 1118 (7th Cir. 1983);
see also Leonen v. Johns–Manville, 135 F.R.D. 94, 97 (D.N.J. 1990) (“the mere fact that litigation
does eventually occur, does not by itself bring documents within the ambit of the work-product
doctrine.”) Defendant has made no showing that these communications were made for any purpose
other than the preparation and publication of the Binder. Consequently, Defendant must produce
documents numbered 24, 30, 35-40, 42, 46-48, and 53-54 in Defendant’s Log.
Documents Representing, Relating or Referring to Contracts or Agreements Between or
Among Defendant and Claimants Relating to the Arbitration (Plaintiffs’ Document Request
Plaintiffs argue that that these documents are relevant to “further clarify Defendant’s role
and interest in [the Arbitration],” and to permit further inquiry as to whether Defendant’s status as
a competitor had any impact on either the financing of Claimants’ case, or his publication of the
Binder. Pls.’ Br. Supp. Mot. Compel 25-26, ECF No. 33-5. Defendant does not specifically object
to this request in his opposition papers, and the Court finds that this request relates to the intent
element of Plaintiffs’ defamation claim. Plaintiffs assert that “Defendant has produced promissory
notes between each of the Claimants and him, as well as the consideration for those promissory
notes,” but Defendant has not produced any documents “representing, referring, or relating” to any
agreements made by Defendant to cover the costs and expenses of the Arbitration. Pls.’ Reply 23, ECF No. 39. Defendant therefore must produce the requested documents or certify that none
Defendant’s Motion to Compel
Disputed Document Requests
Documents, other than the Arbitration Award and Abbreviated Reasoned Decision,
demonstrating statements in the Binder are defamatory, and various other documents
related to issues already decided at the Arbitration (Defendant’s Document Requests Nos.
11, 24, 25, 28, 29, 34, 35, 36, 41-51).
Plaintiffs first argue that the documents withheld are not relevant to this case because they
relate to issues that Defendant is estopped from litigating. Pls.’ Opp’n 2, ECF No. 36. In essence,
Plaintiffs allege that Defendant was in privity with Claimants and thus is precluded from relitigating any issue decided in the Arbitration. Id. By seeking to withhold discovery on the basis
of preclusion, Plaintiffs are asking the Court to rule on the merits of their Complaint without a
complete record or an appropriate motion. The Court declines to do so at this stage, and Plaintiffs
do not cite any authority giving it the right to withhold documents based on an unproven theory of
preclusion. As such, Plaintiffs’ objection on relevance grounds is not “properly asserted.” Harcum,
268 F.R.D. at 210.
Plaintiffs next request that they “be permitted to fully explore the details of the privity
claim before being asked to produce the documents.” Pls.’ Opp’n 5, ECF No. 36. This request,
which essentially seeks a bifurcation of discovery, is not properly before the court. Regardless, the
Court is not convinced that bifurcating the issue would “expedite and economize” the case or
prevent prejudice to one or more parties. See Fed. R. Civ. P. 42(b); Loreaux v. ACB Receivables
Mgmt., Inc., 2015 WL 5032052 (D.N.J. Aug. 25, 2015). Plaintiffs’ request is therefore denied.
In addition to their objection on relevance grounds, Plaintiffs argue that these requests are
not proportional to the needs of this case because all responsive documents were already produced
to Attorney Haratz or inspected by Joseph Cipolla during the Arbitration. Pls.’ Opp’n 2, ECF No.
36. Discovery material must be "proportional to the needs of the case." Fed. R. Civ. P. 26(b)(1).
The Court may limit the discovery of relevant information if the documents sought are
“unreasonably cumulative or duplicative” or can be obtained from a more convenient source. Fed.
R. Civ. P. 26(b)(2)(C)(i); Bayer AG v. Betachem, Inc., 173 F.3d 188, 191 (3d Cir. 1999). Discovery
may be similarly limited if the burden of a request will likely outweigh its benefits, taking into
consideration “the needs of the case, the amount in controversy, the parties’ resources, the
importance of the issues at stake in the action, and the importance of the discovery in resolving the
issues.” Fed. R. Civ. P. 26(b)(2)(C)(iii); Takacs v. Union Cty., 2009 WL 3048471, at *1 (D.N.J.
Sept. 23, 2009).
Beyond their vague representation that certain documents were produced in the Arbitration,
Plaintiffs do not present any specific facts concerning those documents or their alleged prior
production. The Court will not issue a blanket order precluding relevant discovery based on such
an objection when there is no way of telling what documents are being withheld or when the
documents were produced. In addition to these practical issues, Plaintiffs objection does not
comply with the Federal Rules, which require an objecting party to specifically identify any
documents being withheld. Fed. R. Civ. P. 34(b)(2)(C); Scranton Products, Inc., 2016 WL
3193482, at *12. Finally, Plaintiffs have made no argument that they would be burdened by
producing these documents. See In re Subpoena to Rehberger, 2013 WL 2243081, at *4 (D.N.J.
May 21, 2013) (dismissing objection that discovery was “unreasonably duplicative” because
responding party did not show she would be burdened by potentially repetitive testimony).
Accordingly, it must be concluded that Plaintiffs objections to Defendants’ Document
Requests numbered 11, 24, 25, 28, 29, 34, 35, 36, and 41-51 are without merit. Plaintiffs are
ordered to produce all documents being withheld in response to these requests or certify that none
NJG QuickBooks general ledgers in native format for all of the years in which they exist
between 2006 and 2013 (Defendant’s Document Request No. 39)
Plaintiffs object to this request on relevance and proportionality grounds. As to relevance,
Plaintiffs make two arguments. First, Plaintiffs contend that Defendant’s “conclusions” in the
Binder were drawn from expert reports submitted as evidence in the Arbitration, which were
partially based on NJG QuickBooks through March 2013. Pls.’ Opp’n 8, ECF No. 36. Therefore,
they argue, the QuickBooks beyond this date have no relevance to the truth of statements contained
in the Binder. Id. Defendant does not specifically respond to this argument, but argues that the
QuickBooks generally relate to statements in the Binder alleging financial management and tax
accounting improprieties at NJG. Def.’s Reply 8, ECF No. 40. The Court agrees with Defendant
in that the financial improprieties alleged in the Binder extend beyond the time period
contemplated by the Arbitration. See Binder 23, ECF No. 15-2 (“Robert established a pattern of
claiming as business expenses personal items completely unrelated to business. . . . This pattern of
payments continued from October 2012 to July 2013.”) The NJG QuickBooks through July 2013
are therefore relevant to this litigation.
Plaintiffs additionally argue that the documents are not relevant because Defendant “should
be estopped from re-litigating those matters conclusively decided in the Arbitration” Pls.’ Opp’n
9, ECF No. 36. For the reasons set forth above, this argument lacks merit.
Plaintiffs make three discernible arguments contending that discovery should be limited on
proportionality grounds. First, Plaintiffs argue that the requested QuickBooks were produced in
the prior arbitration. Id. at 8. Again, Plaintiffs have not certified to any facts concerning the prior
production, and the Court will not preclude discovery on this ground.
Second, Plaintiffs contend that they should not be required to produce the QuickBooks in
native format because they already produced them in static format in this litigation. Id. “A party
need not produce the same electronically stored information in more than one form.” Fed. R. Civ.
P. 34(b)(1)(E)(iii). However, “[a] document request may specify the form or forms in which
electronically stored information is to be produced.” Fed. R. Civ. P. 34(b)(1)(C). “[I]t is not a valid
ground for objection that relevant, non-privileged, electronic data can be produced in paper form,
when the requesting party has specified production in an electronic format.” Jaso v. Bulldog
Connection Specialists LLC, 2015 WL 11144603, at *6 (S.D. Tex. Oct. 15, 2015) (citations
omitted); see Rowe Entm’t, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 428 (S.D.N.Y.
2002). Defendant specifically requested the QuickBooks in native format, and Plaintiffs must
Finally, Plaintiffs argue that producing the QuickBooks in native format “is a burdensome
process that may require the retention of an outside vendor” and indicate that they will consent to
production if Defendant assumes the expenses. Pls.’ Opp’n 8, ECF No. 36. Generally, the party
responding to discovery must bear the expense of complying with a discovery request. Juster
Acquisition Co., LLC v. N. Hudson Sewerage Auth., 2013 WL 541972, at *3 (D.N.J. Feb. 11, 2013)
(citing Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 283 (S.D.N.Y. 2003)). Shifting the cost
of discovering electronic information is only appropriate when a party is seeking data that it not
reasonably accessible without undue burden or expense on the responding party. Id. Plaintiffs bear
the burden of persuading the Court that the information sought is not reasonably accessible. Fed.
R. Civ. P. 26(b)(2)(B); Bagley v. Yale Univ., 307 F.R.D. 59, 65 (D. Conn. 2015). Plaintiffs have
not satisfied their burden. Beyond stating that the production may require the use an outside
vendor, Plaintiffs have not submitted any evidence concerning the cost of retrieving the
QuickBooks, much less evidence showing that the cost would be “excessive or unwarranted.”
Bagley, 307 F.R.D. at 65. Plaintiffs are ordered to produce NJG QuickBooks general ledgers in
native format for all of the years in which they exist between 2006 and July 2013, with the parties
being advised that (meet and confer language re cost-shifting)
NJG’s Bank Statements and Cancelled Checks from 2006-2013
Defendant requests “access to cancelled checks and bank statements of NJG for . . . 2006
through 2013. Def.’s Br. Supp. Mot. Compel 8-9, ECF No 34-1. Plaintiffs ask that the Court deny
Defendant’s request for the same reasons outlined in their objection to producing the QuickBooks.
Pls.’ Opp’n 9, ECF No. 36. Based on the reasoning set forth above, Plaintiffs are ordered to permit
the inspection of NJG’s bank statements and cancelled checks from 2006 to July 2013.
Documents Relating to Plaintiffs’ Damages (Defendant’s Document Request No. 16)
Plaintiffs do not object to this request and produced responsive documents after the instant
motions were filed. Id.; Denner Decl. Ex. A, Apr. 22, 2016, ECF No. 36-1. To the extent they have
not already done so, Plaintiffs are ordered to turn over any remaining documents responsive to this
request or certify that none exist.
Documents Relating to USA Iron Inc. (Defendant’s Document Requests No. 22 & 23)
Plaintiffs do not object to these requests, but state that all responsive documents have
already been produced. Pls.’ Opp’n 6, ECF No. 36. Defendant contends that there may be more
documents that Plaintiffs have not produced. Def.’s Reply 13, ECF No. 40. Specifically, Defendant
requests “documentation reflecting the acquisition/disposition of stock in USA Iron.” Id. Plaintiffs
are ordered to turn over any remaining documents responsive to this request or certify that none
Robert Gregory’s State and Federal Personal Income Tax Returns for 2006-2013
(Defendant’s Document Requests No. 26, 27, 30, 31)
Plaintiffs have produced Robert Gregory’s tax returns for 2011, but object to production of
the other requested returns on relevance grounds. Pls.’ Opp’n 6-7, ECF No. 36. “Public policy
favors the nondisclosure of income tax returns.” Robinson v. Horizon Blue Cross-Blue Shield of
New Jersey, 2013 WL 6858956, at *3 (D.N.J. Dec. 23, 2013), aff'd, 2014 WL 3573339 (D.N.J.
July 21, 2014) (citing DeMasi v. Weiss, 669 F.2d 114, 119 (3d Cir. 1982)). When contemplating a
motion to compel production of tax returns, this Court applies a two-part test to balance the tax
payer’s privacy expectations and the liberal discovery policy of the Federal Rules of Civil
Procedure. Id. (citing Farmers & Merchants Nat'l Bank v. San Clemente Fin. Group Sec., 174
F.R.D. 572, 585 (D.N.J.1997). First the Court determines whether the tax returns are relevant to
the litigation. Id. If so, the objecting party can avoid disclosure by showing the availability of
reliable financial information from other sources. Farmers & Merchants, 174 F.R.D. at 585.
Defendant argues that the tax returns bear on the truth of statements made in the Binder
concerning unaccounted compensation allegedly paid to Robert Gregory. Def.’s Br. Supp. Mot.
Compel 16, ECF No 34-1. Page 23 of the Binder provides:
Payroll records have not matched [Robert Gregory’s] personal W2s and those of a favored few, including his brother. In fiscal year
ending March 31, 2013 alone, for example, he paid about $604,000
to himself ($225,000) and to other “W-2” employees ($379,000)
from NJ G’s operating account (not its regular payroll account),
thereby circumventing federal and state tax withholding
requirements and FICA payment and reporting obligations. Then in
April 2013, NJG paid Robert another $125,000, again
circumventing payroll services and therefore required tax
withholding. In addition to this $350,000 for the first seven months
of 2013, payroll records show that NJG paid Robert a salary of
$76,000- not only additional compensation but also a fig leaf to
disguise his main source of personal income.
In addition, for the fourteen years ending 2012, Robert's unreported
compensation included matches to his 401(k) account and nearly
$280,000 in premiums for life insurance coverage and ownership
(through fiscal year ended March 31, 2013) that have benefited NJG
in no way whatsoever.
Binder 23, ECF No. 15-2. The Court agrees that the requested tax returns directly relate to the truth
of the above statements. Plaintiff has not made any showing that reliable financial information is
available from other sources, other than stating that “Form W-2s for 2006-2010 were already
produced in [the Arbitration].” Pls.’ Opp’n 7, ECF No. 36. Again, the Court will not preclude
discovery on that basis. For the reasons set forth above, Plaintiffs are ordered to produce Robert
Gregory’s State and Federal Personal Income Tax Returns for the years 2006-2013.
Life Insurance Policies and Declarations (Defendant’s Document Request No. 40)
Plaintiffs produced documents responsive to this request after the instant motions were
filed. Id.; Denner Decl. Ex. A, Apr. 22, 2016, ECF No. 36-1. Plaintiffs are ordered to turn over
any remaining responsive documents or certify that none exist.
Plaintiffs’ Motion to Compel Compliance with Subpoenas and Defendant’ Motion to
Finally, as to the subpoenas issued by Plaintiff to LeClairRyan and Cipolla & Co., 7 the
Court will stay the subpoenas based on Defendant’s representation that documents responsive to
the subpoenas are or will be in Defendant’s possession. Def.’s Br. Supp. Mot. Compel, 2-3, ECF
No 34-1 (citing Sun Decl., Exs. D-F). Subject to valid assertions of privilege and consistent with
this Order as well as the parties’ obligations under the Federal Rules of Civil Procedure, the third
parties therefore need not respond to the subpoenas, with Plaintiffs permitted to seek leave of Court
to lift this stay upon a showing of good cause and after seeking such documents from Defendant.
Both non-parties indicated that they joined Defendants’ positions and “will abide by the directives of the Court on
these applications.” Letters, ECF Nos. 37-38.
In light of the foregoing, the pending motions are granted in part and denied in part, with
the parties afforded forty-five (45) to comply with this Order. The Court will hold a teleconference,
to be initiated by Plaintiffs, on Friday, November 18, 2016 at 12:30 PM.
ACCORDINGLY, IT IS on this 17th day of October, 2016,
ORDERED that the parties’ motions (ECF Nos. 33, 34, 35) are denied in part and granted
in part; and
ORDERED that third parties LeClairRyan and Cipolla & Co. need not respond to the
subpoenas absent further Order from this Court; and
FURTHER ORDERED that the Clerk shall terminate ECF Nos. 33, 34, and 35.
s/Cathy L. Waldor
CATHY L. WALDOR
United States Magistrate Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?