New Cases on N.J. Supreme Court's Docket Test Privilege, Deposition Boundaries
Henry Gottlieb08-31-2009
Aggressive lawyering at two of New Jersey's high-profile litigation firms -- Sills Cummis & Gross and Nagel Rice -- is under attack in cases the state Supreme Court has added to its agenda for the term that begins Sept. 14.
A case in which Sills Cummis of Newark, N.J., is facing sanctions and disqualification gives the court an opportunity to make significant refinements in the law governing companies' control over employees' electronic communications.
And the issue in a case against Bruce Nagel of Nagel Rice of Roseland, N.J., is whether he or his client should pay a frivolous pleading fee award to an opponent.
The two appeals were among 23 the court added to its docket on Aug. 24 along with the usual smattering of criminal matters, two eminent domain disputes and a product-liability case being followed closely by construction lawyers.
The central issue in Stengart v. Loving Care Agency, Inc., A-16-09, is whether a company defended by Sills Cummis in a discrimination suit owns the e-mails the plaintiff sent to her lawyer on a company computer before the suit, or whether the communications are privileged.
Either way, should Sills Cummis have looked at them before notifying the plaintiff's lawyers at Short Hills, N.J.-based Budd Larner?
Lower courts split on the issue. A trial judge ruled that because the e-mails were sent from a computer owned by the company they were the company's property, more so because there were policies warning employees that the company had a right of access to information generated by the computers.
But an appeals court reversed in June, ruling that the attorney-client privilege trumped the company's rights to the material. The panel remanded the case for a determination of whether Sills Cummis should be disqualified and sanctioned for looking at the material once it saw a law firm was the recipient of the messages.
What makes the case particularly worthy of the attention of lawyers who deal with electronic-age legal issues is the finding by appeals judges that employees using company computers for e-mails have an expectation of privacy for matters unless the employer's interests are affected.
"The past willingness of our courts to enforce regulations unilaterally imposed upon employees is not limitless; the moral force of a company regulation loses impetus when based on no good reason other than the employer's desire to rummage among information having no bearing upon its legitimate business interests," Judge Clarkson Fisher wrote in an opinion joined by Judges Linda Baxter and Christine Miniman.
WHO FOOTS FEE FOR FRIVOLOUS CASE?
In Rabinowitz v. Wahrenberger, A-1-09, the Court is reviewing a finding that Nagel, on behalf of his plaintiff in a medical malpractice suit, pursued frivolous pleadings against the defense lawyer in the case, Judith Wahrenberger of Wahrenberger, Pietro & Sherman in Springfield, N.J.
The suit claimed that Wahrenberger's questioning of the plaintiff at a deposition about the circumstances of the alleged malpractice was unnecessarily callous and inflicted emotional distress. But trial courts and an appellate panel ruled that Wahrenberger's questions were privileged, that she was just doing her job and that the suit against her was frivolous.
As for who should pay the fee award to Wahrenberger, the appeals court found that the record couldn't support a finding that Nagel's clients "were bent on continuing this suit," and it assessed the $11,630 counsel fee award against Nagel.
While Nagel appealed most of the rulings against him, including the dismissal of his suit, the sole issue identified in the Supreme Court's Aug. 24 notice was whether it was appropriate to require Nagel, not the client, to pay the fee award.
Wahrenberger did not appeal an appeals court finding that Nagel didn't deserve to be whacked with an additional $2,500 sanction.
NEW ANGLES TO TAKINGS ISSUES
Once again, eminent domain law will be prominent on the court's docket, though the two cases listed go beyond the hot-button issue of whether a taking is legal.
They are about tenants' rights and whether a condemnation award can be enhanced by the value of beachfront added by the Army Corps of Engineers.
Long Branch v. Liu, A-9-09, is about the value of a building in a spot targeted for a redevelopment that included rented space to a nightclub and to hot dog and pizza vendors.
The city offered $900,000, the owner claimed up to $2.8 million and a jury split the difference closer to the city's number and awarded $1.45 million.
When Long Branch filed its condemnation complaint it said there was 125 feet from the high-water mark of the ocean to the property. But 93 square feet of beach was added to the frontage under a replenishment project undertaken by the state and federal governments. That moved the high water 256 feet eastward and made the property more valuable, the owner argued.
The appeals court opinion devoted a slim three paragraphs to its rejection of the argument. It noted that public money paid for the improvements and said, "We can perceive no policy justification which would permit defendants to reap such a private monetary benefit from those public efforts."
Despite the lack of discussion in the appellate decision, the Supreme Court listed the dispute over the addition as one of the issues it would review.
Long Branch's lawyer, Paul Fernicola of Red Bank, N.J., says the lack of discussion in the appeals court opinion suggests it was an easy call for the panel.
But Liu's lawyer, Peter Wegener of Bathgate, Wegener & Wolf in Lakewood, N.J., says there is no current law on the subject and that the Supreme Court has reason to look at the issue. He says the replenishment occurred before the condemnation action was filed and that the deed says clearly that the property extends to the high water mark.
Compensating Liu for the additional land is no different than compensating the owner of a commercial real estate whose value has increased by the construction of better roads or other infrastructure near the property, Wegener says.
The second takings case, Iron Mountain Information Management v. Newark, A-100-08, raises this question: When property is taken under the Local Redevelopment and Housing Law, is a commercial tenant with an option to purchase and right of first refusal in its lease agreement entitled to the same notice as the property owner?
The appellant is a tenant in a vast warehouse in a downtown section of Newark that the city designated as a blighted area as a first step toward redevelopment. The tenant had a right to fight the blight designation but missed the deadline for doing so and claimed the failure was caused by a lack of notice.
But the appeals court ruled the Local Redevelopment and Housing Law doesn't require towns to give notice of blight designation to commercial tenants, even to ones like the plaintiff that have an option to purchase the property.
Appellant lawyer William Ward of Carlin & Ward in Florham Park, N.J., says it's true the tenant still retains the right to object when the property is condemned. But to make a tenant wait until then without giving adequate notice of the blight designation "unreasonably places that tenant under a cloud of condemnation, and leaves it at risk of losing its interest in the property without having had a fair opportunity to contest the basis for the taking," Ward says in his petition for certification.
SUITS OVER DEFECTIVE HOME COMPONENTS
In a product-liability case that produced a split in the Appellate Division, Dean v. Barrett Homes, A15-09, the question is whether a home is an integrated "product" whose damage by a component is nonrecoverable under laws barring product-liability suits when the harm is to the product itself.
The homeowner in the case alleged his house suffered water damage from faulty Exterior Insulation Finishing System and sought to recover $150,000 from the manufacturer for repairs.
The Appellate Division had a mixed reaction. All members of a three-judge panel agreed that the homeowner had reason to know about problems caused by EIFS and could have bowed out of buying the home or sought a warranty from the seller. These were sufficient grounds to let the EIFS manufacturer out of the case, the judges said.
But the panel split on the key issue of whether the economic loss rule and the Products Liability Act, which bars recovery for damage to the product itself, applied to the case.
Allowing such recoveries in a tort action would subject the manufacturer to unending liability, Judge Philip Carchman wrote in the majority opinion.
But Judges Jack Sabatino and Marie Simonelli said in a concurrence that it would be better to treat component parts in a house as discrete products subject to potential strict liability.
Among the lawyers watching the case closely are John Sawyer and Joseph Gumina at Stark & Stark in Lawrenceville, N.J., who represent a homeowner in a case similar to Dean .
They think it's unreasonable to regard a house as "the product itself" in a liability case. "That view of the house would, under a literal reading of the Product Liability Act, confine homeowners to their warranty remedies whenever a defective component failed to spread devastation beyond the house itself," the Stark & Stark lawyers wrote in an analysis in the New Jersey Law Journal after the Dean decision.