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A party in a civil dispute that knowingly withholds relevant documents from a discovery process voluntarily waives its privilege rights to those documents, a Philadelphia judge has ruled. The decision came a year after the Superior Court reversed a different judge’s order — in the same case — imposing waiver of privilege as a sanction for the lack of disclosure. “If we condone such behavior,” Common Pleas Judge Sandra Mazer Moss wrote in General Refractories Co. v. Fireman’s Fund Insurance Co., “litigants would have no incentive to disclose sensitive information for in-camera review unless or until opposing parties discovered their deceptions and informed us. This would be an egregious violation of public policy.” The underlying dispute began when General Refractories filed a claim for coverage of legal expenses under its policy with insurance provider Fireman’s Fund Insurance, the opinion said. General Refractories, based in Bala Cynwyd, used to produce heat-resistant materials containing asbestos and has been the target of thousands of lawsuits related to its use of the material. In 1994, company president and general counsel Barry Katz said, General Refractories shed its manufacturing component and has since devoted its resources to defending itself in the asbestos torts. According to the opinion, General Refractories filed a claim for $15 million under its Fireman’s policy; the insurer claimed that $5 million was the limit under the company’s policy. General Refractories filed suit against Fireman’s in April 1998. In June 1999, Common Pleas Judge John W. Herron granted Fireman’s 20 days to comply with General Refractories’ discovery requests. After the deadline passed, the opinion said, Fireman’s then-counsel “inaccurately” claimed on two separate occasions that Fireman’s had produced all relevant, non-privileged documents. In November 1999, General Refractories filed a sanctions motion, alleging that Fireman’s had not disclosed all relevant documents. After a discovery court hearing, Common Pleas Judge Mark I. Bernstein ruled that a Fireman’s official had, in the opinion’s words, “intentionally and willfully concealed” documents relevant to the case. Katz said that the documents in question related to Fireman’s internal assessments of General Refractories’ policy limit and whether it was obligated to cover General Refractories’ claim. Bernstein granted General Refractories’ sanctions motion, and ordered Fireman’s to produce the documents. “Pursuant to this order,” Mazer Moss wrote, “numerous highly relevant documents were ‘found’ by [Fireman's] and ‘voluntarily’ submitted to [General Refractories].” Bernstein, after an in-camera review, subsequently issued an April 2000 opinion imposing waiver of privilege as a sanction on Fireman’s, in light of its discovery violations. Fireman’s appealed that sanction, along with five other discovery sanctions, to the Superior Court. The Superior Court upheld the five discovery sanctions but found Bernstein’s imposition of waiver to be an abuse of discretion, according to the opinion. On remand, Bernstein issued a September 2002 order asking General Refractories to explain why Fireman’s privilege should be overruled, the opinion stated. In March 2003, Fireman’s filed a motion to recuse Bernstein, which was granted. Mazer Moss, the new judge, ultimately agreed with General Refractories’ argument that Fireman’s had effectively waived privilege rights to the documents in question when they violated the original discovery order. “This decision was made on a substantive basis and not as a sanction,” Mazer Moss wrote. Fireman’s counsel in the matter, David F. Abernethy of Drinker Biddle & Reath, said that they have appealed Mazer Moss’ decision. Katz said that appeal would further delay disposition of the case, which is scheduled to be heard in January. He has filed a motion to quash Fireman’s appeal. “I think the opinion was well-reasoned,” Katz said. “It sends a message to litigants and attorneys that they need to be forthcoming in their disclosures as required by the rules of discovery.” (Copies of the six-page opinion in General Refractories Co. v. Fireman’s Fund Insurance Co ., PICS NO. 03-1574, are available fromThe Legal Intelligencer . Please call the Pennsylvania Instant Case Serviceat 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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