KELLEY v. ENHANCED RECOVERY COMPANY, LLC et al

Filing 7

OPINION. Signed by Judge William H. Walls on 10/20/2015. (anr)

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

FIRST MERCURY INSURANCE CO.,
Plaintiff,

OPINION

v.

:

Civ. No. 2:12-cv-06527 (WHW)

JAY S. MARKOWITZ, ESQ., JIMMY
MASARWA, TWO JAYS REAL ESTATE,
INC., MOHAMMED ABBASI, NORA
ABASSI, ABBASI REALTY, INC.,
Defendants.

Walls, Senior District Judge

Defendants Jimmy Masarwa, Jay Markowitz, and Two Jays Real Estate, Inc. (“Two
Jays”) appeal an order by Magistrate Judge Waldor ruling that Markowitz waived attorney-client
privilege with respect to an email sent to his attorneys during a previous litigation. Decided
without oral argument under Federal Rule of Civil Procedure 78, this motion is denied because
the Magistrate Judge’s order was not clearly erroneous or contrary to law.
FACTUAL AND PROCEDURAL BACKGROUND

The factual background of this case was discussed in detail in the Court’s May 14, 2014
opinion denying Defendants’ motion for partial summary judgment, ECF No. 54, and is recited
here only as relevant to the present motion. Plaintiff First Mercury Insurance Company (“first
Mercury”) provides professional insurance to lawyers and issued a policy covering Defendant
Markowitz, subject to certain exclusions. Id. at 1-2. Markowitz was sued in state court by his
business partner, Defendant Masarwa, and their company, Two Jays, over legal advice he gave to

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Masarwa relating to a real estate transaction involving Two Jays. Id. at 2-3. first Mercury and its
adjuster, Crum & Forster, initially defended Markowitz through the law firm Capehart &
Scatchard. Id. at 3-4. They later withdrew their defense after determining that the action was not
covered by Markowitz’s professional liability policy because his role at Two Jays was allegedly
not limited to client representation but instead included a business function. Id. Markowitz then
entered into a consent agreement with Masarwa and Two Jays in which he assigned to them any
claims he might have against First Mercury. Id. at 5. first Mercury brought this action on
October 16, 2012, seeking a declaratory judgment that it was not obligated to provide coverage
to Markowitz. See Compl., ECF No. 1.
The dispute now before the Court arose during discovery. Masarwa and Two Jays served
a document request on first Mercury on April 11, 2013 seeking records of any communications
between Markowitz and First Mercury, Crum & Forster, or Capehart & Scatchard relating to the
underlying state court litigation. See Paone Aff. Ex. G. Plaintiff objected, claiming that any such
documents would be privileged. See Paone Aff. Ex. H. On May 29, 2013, Markowitz provided a
letter to Masarwa’s counsel stating in part that “[b]ased upon the settlement entered into between
myself and your clients.
litigation.

.

.

.

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and considering my duty to cooperate in connection with your

I have agreed to waive any attorney/client privilege I have or may have with First

Mercury, Crum & Forster, and/or Capehart Scatchard.” Paone Aff. Ex. I.
On June 26, 2013, Markowitz wrote another letter addressed to Capehart, enclosing his
original letter and requesting that Capehart forward a copy of his file from the underlying
litigation to Masarwa’s counsel. Id. He informed Capehart that his original letter had waived
“any attorney/client privilege that applies to any of the materials I am requesting you to send to”
Masarwa’s counsel. Id. Masarwa’s counsel mailed Markowitz’s letters to Capehart along with a

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letter of their own asking for, among other things, “copies of all correspondence and emails
between your firm and Mr. Markowitz.” Id. Capehart attorney Peter Bejsiuk produced the
requested documents to Masarwa’ s counsel, including an email in which Markowitz had said that
he believed he originally started Two Jays as a 50% shareholder before withdrawing. Second
Paone Aff., Ex. A, ECF No. 70.
But Bejsiuk produced the email not just to Defendants but also to counsel for First
Mercury. Cocoziello Letter, ECF No. 62 at 4. On January 20, 2015, First Mercury moved for an
order ruling that Markowitz waived any claim to attorney-client privilege for the disputed
communications. ECF No. 67. Masarwa and Two Jays opposed the motion, arguing that
disclosure of the email did not waive privilege under the common interest rule. ECF No. 6$.
They moved for an order barring Plaintiff from using the email or any other communications
between Markowitz and Capehart relating to the underlying suit. Id. These motions were argued
before Magistrate Judge Waldor on March 27, 2015, and Plaintiffs motion was granted on
September 1. ECF Nos. 77-78. Defendants now bring this appeal. ECF Nos. 78-79.
STANDARD OF REVIEW
Under the Federal Magistrates Act, a magistrate judge’s resolution of a nondispositive
matter will be set aside if it is “clearly erroneous or contrary to law.” 2$ U.S.C.

§ 636(b)(l)(A);

Fed. R. Civ. P. 72(a); Cipollone v. Liggett Group, Inc., 785 F.2d 110$, 1120 (3d Cir. 1986). A
magistrate’s finding of fact is clearly erroneous “when, although there is evidence to support it,
the reviewing court on the entire evidence is lefi with the definite and firm conviction that a
mistake has been committed.” Lo Bosco v. Kure Engineering Ltd., $91 F. Supp. 1035, 1037
(D.N.J. 1995) (quoting United States v. Gypsum Co., 333 U.S. 364, 395 (1948)). A magistrate’s
“ruling is contrary to law if the magistrate judge has misinterpreted or misapplied applicable

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law.” Kounelis v. Sherrer, 529 F. Supp. 2d 503, 518 (D.N.J. 2008). The “phrase ‘contrary to law’
indicated plenary review as to matters of law.” Haines v. Liggett Group Inc., 975 F.2d 81, 91 (3d
Cir. 1992).
DISCUSSION

In 0 ‘Boyle v. Borough ofLongport, the Supreme Court of New Jersey held that the
common interest rule shields a disclosure of privileged documents to another party if”(l) the
disclosure is made due to actual or anticipated litigation; (2) for the purposes of furthering a
common interest; and (3) the disclosure is made in a manner not inconsistent with maintaining
confidentiality against adverse parties.” 21$ N.J. 168, 190, 201 (2014). “The person asserting the
privilege.

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.

bears the burden to prove it applies to any given communication.” Horon Holding

Corp. v. McKenzie, 341 N.J. Super. 117, 125 (App. Div. 2001).
The Magistrate Judge applied the 0 ‘Boyle test and found that the communications at
issue here were not disclosed in a manner that was consistent with maintaining confidentiality
against Plaintiff. See Letter Order at 5-7. Quoting Markowitz’s letter, she noted that Markowitz
expressly “agreed to waive any attorney/client privilege [he had] or may have with First Mercury
Insurance Company, Crum & Forster, and/or Capehart Scatchard.” Letter Order at 6. Based on
this statement, she found that “Markowitz, an attorney himself, acting in conjunction with
counsel for Masarwa and Two Jays should have realized that by issuing a blanket waiver of
privilege to Bejsiuk, he risked disclosing these documents to other parties.” Id. She emphasized
that Defendants had failed to take measures to prevent disclosure to First Mercury and had
served First Mercury with a document request asking for production of “the documents for which
they are now seeking to claim privilege.” Id. The Magistrate Judge also found that Bejsiuk’s
eventual disclosure to First Mercury was evidence that Markowitz’s “directions were not made

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in a maimer to preserve confidentiality of the material and to prevent disclosure to adverse
parties.” Id. at 6.
Defendants argue that other language in the Markowitz’s letter implied that disclosure
was authorized only for the limited purpose of ref easing communications to his codefendants.
ECF No. 78 at 9-10. Specifically, Markowitz wrote to Masarwa’s counsel that he was waiving
privilege “[biased upon the settlement entered into between myself and your clients.. and
.

considering my duty to cooperate in connection with your litigation...

.“

Paone Aff. Ex. I. He

also wrote that the letter was “confirmation of my waiver of attorney/client privilege so that any
documents requested.. may be produced to you.” Id. Defendants also point out that the
.

privilege belonged to Markowitz and could not have been waived by Masarwa’s initial document
request. ECF No. 81 at 3. They also maintain that Bejsiuk’s disclosure of the documents to
Plaintiff could not have been anticipated because the New Jersey Rules of Professional Conduct
prohibit a lawyer from revealing information relating to client representation without that client’s
consent. ECF No. 78 at 10-11 (citing N.J. R. Prof. Conduct 1.6(a)).
In 0 ‘Boyle, the court ruled that the communications at issue were shielded and noted that
the attorney had taken steps to minimize the risk of “even an inadvertent disclosure.” 218 N.J. at
200. In contrast, Markowitz’s statement that he had waived “any attorney/client privilege that
applies to any of the materials I am requesting” heightened the risk of inadvertent disclosure
even when read together with his other statements in his letters. Paone Aff. Ex. I (emphasis
added). This risk was raised even further because his letters were written after Masarwa’s request
for these documents had been served on First Mercury, which increased the likelihood that the
documents might be formally produced to counsel for all parties if clear instructions to the
contrary were not given. Additionally, the fact that Bejsiuk, an attorney, produced the disclosed

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material to Plaintiff is circumstantial evidence that Markowitz’s instructions were not given in a
maimer that was consistent with preserving confidentiality. The rule that an attorney may not
reveal information relating to client representation without that client’s consent is of minimal
relevance here because Markowitz’s letter can be and was read as having provided that consent.
The Supreme Court of New Jersey recognized that, in such a case, the “inquiry invariably
devolves to an examination of the nature of the disclosure itself.” O’Boyle, 218 N.J. at 192.
Examining the nature of the disclosure here, and weighing the evidence presented by both sides,
the Court is not convinced that Defendants met their burden to establish that the disclosure was
protected by the common interest rule. It follows that the Magistrate Judge’s application of

o ‘Boyle was not contrary to law.
CONCLUSION

Plaintiffs’ motions to set aside the Magistrate Judge’s order, ECF Nos. 78 and 79, are
DENIED. An appropriate order follows.

Date: October, 2015

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