Opinion
DOCKET NO. A-5918-10T2
06-18-2012
LLOYD GOLDMARK and ELIZABETH GOLDMARK, Plaintiffs-Respondents, v. THOMAS MELLINA, BETH MELLINA, STEVEN NEEDLE and NEEDLE POINT HOMES, LLC, Defendants, and BRACH EICHLER, L.L.C., Appellant.
Brach Eichler, appellant pro se (Bob Kasolas, of counsel and on the brief). Wacks & Hartmann, attorneys for respondents (Christopher E. Hartmann, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher, Nugent and Carchman.
On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-2053-08.
Brach Eichler, appellant pro se (Bob Kasolas, of counsel and on the brief).
Wacks & Hartmann, attorneys for respondents (Christopher E. Hartmann, on the brief). PER CURIAM
In this appeal, Brach Eichler, L.L.C., contends that the trial judge abused her discretion in imposing a sanction against the firm in the amount of $5,502.50, based on the firm's failure to timely produce certain documents sought in discovery. Because the record supports the judge's conclusion that the firm failed to take adequate precautions to prevent the temporary disappearance of two critical e-mails, we reject Brach Eichler's arguments and affirm.
In 2007, the parties entered into a contract by which plaintiffs Lloyd and Elizabeth Goldmark (hereafter "purchasers") agreed to purchase, for $4,100,000, a home in Westfield to be constructed by defendants Thomas Mellina, Beth Mellina, Steven Needle, and Needle Point Homes, LLC (hereafter "sellers"); purchasers provided a $1,000,000 deposit. Disputes arose during construction. Sellers' counsel at the time, Robert Kraus, Esq., wrote to his counterpart on February 6, 2008, suggesting that purchasers buy the property in its existing stage and complete the construction with their own suppliers and contractors. Purchasers rejected this but the parties met to discuss settlement and settlement documents were later drafted. The alleged settlement, however, was never finalized, and Kraus was terminated by sellers and replaced by current counsel.
Current counsel was, at the time, affiliated with another law firm. It is not clear when Brach Eichler assumed the role of counsel for sellers; however, since Brach Eichler does not claim that the other law firm is responsible for the imposed sanctions, the involvement of the other firm is not relevant.
Purchasers commenced this suit, claiming their construction disputes had been settled and, pursuant to their settlement agreement, purchasers were entitled to the return of their deposit; sellers resisted this contention and claimed purchasers breached the contract. Prior to trial, the property was sold to another buyer for a lower price than that which the purchasers agreed to pay; sellers returned the deposit to the purchasers.
The matter proceeded to a non-jury trial. Among other things, Judge Frederic Kessler was required to decide: whether the matter had been settled and whether the settlement should be enforced; and, if not, whether the contract was breached or repudiated and, if so, by whom. The trial judge found that a settlement agreement had not been reached but also held that sellers had repudiated and breached the contract, thereby entitling purchasers to retain the deposit that had been returned prior to trial.
Of relevance to the matter at hand, Judge Kessler relied upon and quoted extensively two e-mails, between Kraus and the sellers, dated March 4 and 31, 2008. Although these documents did not persuade the judge that the parties' disputes had been amicably settled, Judge Kessler, as explained in his thorough written opinion, greatly relied on the two e-mails in finding that sellers cancelled the contract.
The efforts expended by purchasers in seeking these two e-mails in discovery lie at the heart of the present controversy. Early in this suit's history, the purchasers served a subpoena on Kraus, seeking the non-privileged portions of his file. Cross-motions resulted in the rescheduling of Kraus's deposition and an order requiring the production of a privilege log, pursuant to Rule 4:10-2(e).
Prior to his deposition, Kraus forwarded his file to sellers' current counsel, who reviewed the file and returned it to Kraus. Because Kraus was seriously ill, his deposition was videotaped. The log was provided when the deposition commenced; it identified, among other documents, the two March 2008 e-mails exchanged by Kraus and defendant Beth Mellina (hereafter "Mellina"). Because sellers insisted these e-mails and other identified documents were privileged, they were not turned over at the deposition.
Subsequent motions led first to the entry of an order requiring an in camera inspection. In her written decision of November 4, 2009, Judge Kathryn A. Brock observed that the two March 2008 e-mails were not in the materials provided for inspection. Sellers' current counsel responded that he did not make copies of Kraus's file when previously provided for his review and the alleged privileged documents were not in his firm's possession; he also represented to the court that Mellina did not have possession of copies of the two e-mails. In the course of these proceedings, sellers' counsel first asserted that he did not "discuss [with Kraus] what ought to be in the privilege log." Upon further questioning by the judge, counsel acknowledged that he was sure he "discussed the log" with Kraus, and then asserted that what occurred took place a year earlier and he could not "possibly remember" what he discussed with Kraus.
By this time, Kraus had passed away.
In light of the uncertainty about the location of the two e-mails, purchasers were permitted to amend their complaint to add a claim of fraudulent concealment, and discovery was reopened. When re-deposed, Mellina claimed she deleted all sent and received e-mails and, therefore, no longer had copies of the e-mails. Purchasers hired a forensic specialist to search the hard drive on Kraus's computer and the network at Kraus's former law firm; the e-mails were eventually found on that firm's server back-up tapes.
The e-mails were then delivered to the judge, who, after an in camera review, ordered that they be turned over to purchasers. The judge also granted purchasers' motion to impose sanctions on Brach Eichler and Mellina because their failure to preserve the e-mails resulted in additional and unnecessary efforts by purchasers. In her August 27, 2010 order, Judge Brock directed Brach Eichler and Mellina to pay the forensic specialist's $900 fee, as well as reasonable attorneys fees to be quantified after trial.
The twelve-day non-jury trial before Judge Kessler took place in October and November 2010. As noted earlier, the two e-mails greatly influenced the judge's determination of the issues. The judge quoted extensively from both e-mails. Kraus's e-mail summarized for sellers "the negotiated settlement." Mellina's response revealed to Kraus that she had spoken to her husband and that they were "in accord with your summary of the negotiated settlement." Judge Kessler also found
Mrs. Mellina's attempt to explain away this e-mail was preposterous. She essentially claimed that no agreement was reached, that everything Mr. Kraus wrote [in his e-mail] was incorrect, and that when she spoke to her husband, they were both opposed to the
terms contained in [Kraus's e-mail] -- yet she sent her e-mail because Mr. Kraus was terminally ill and needed their support. According to Mrs. Mellina, she told Mr. Kraus that she accepted the settlement when in fact she was opposed to it, and she also lied to him about having obtained her husband's approval. Not only is this wholly implausible, but my observations of Mrs. Mellina's demeanor during this testimony added to my skepticism. I likewise did not believe the testimony of Mr. Mellina that he opposed the settlement and told his wife so.
Rather, I find that the e-mail from Mrs. Mellina accurately reflected the view of the Mellinas on March 4 -- that they were in favor of the settlement and wanted the agreement with the Goldmarks terminated so they could find another buyer and "get on to something else." Whether Mrs. Mellina forgot about her e-mail or simply did not expect it to surface (since she had deleted her copy, and Mr. Kraus'[s] copy had disappeared), it appears that she did not anticipate that it would be produced.
After trial, Judge Brock considered purchasers' request for the quantification of the fees referred to in the August 27, 2010 order; Brach Eichler and Mellina sought reconsideration. The judge denied reconsideration and awarded purchasers $11,005, which consisted of $10,075 in attorneys fees, $30 in costs, and $900 for the forensic specialist. The judge allocated the award equally, so that Mellina and Brach Eichler were held responsible to pay to purchasers $5,502.50 each.
Mellina has not appealed, but Brach Eichler has, arguing:
We have omitted Point I, which solely discusses the standard of appellate review, and renumbered the remaining arguments.
I. [SELLERS'] COUNSEL FULLY COMPLIED WITH R. 4:10-2(e)(1) BY ROBERT KRAUS PREPARING A PRIVILEGE LOG FOR INSPECTION BY PLAINTIFFS, WHICH PRECLUDES THE AWARD OF SANCTIONS BECAUSE IT DISCLOSED THE PRIVILEGED MATERIALS IN QUESTION, COMPLIED WITH THE SEPTEMBER 12, 2008 CONSENT ORDER, ALLOWED THE COURT TO PERFORM AN IN CAMERA REVIEW TO DETERMINE IF THE DOCUMENTS SHOULD BE DISCLOSED, AND BECAUSE R. 4:10-2(e) DOES NOT REQUIRE THE COPYING OR MAINTENANCE OF A THIRD-PARTY'S FILE.We find no merit in these arguments and affirm.
II. [SELLERS'] COUNSEL FULLY COMPLIED WITH R. 4:18-1(a) BY KRAUS PRODUCING THE PRIVILEGED DOCUMENTS IN HIS POSSESSION, CUSTODY AND/OR CONTROL AS THEY WERE KEPT IN THE ORDINARY COURSE OF BUSINESS, AND [THEY WERE] ORGAN[IZ]ED AND LABELLED BY CATEGORIES IN RESPONSE TO THE SUBPOENA SERVED UPON ROBERT KRAUS.
III. NOT ONLY DID [SELLERS'] COUNSEL COMPLY WITH THE COURT RULES, BUT MR. KRAUS CONFIRMED UNDER OATH HIS ENTIRE FILE WAS IN HIS POSSESSION AND THAT HE WOULD KEEP THE FILE SAFEGUARDED IN RESPONSE TO [PUR-CHASERS'] COUNSEL'S REQUEST TO DO SO.
IV. NO CASE LAW SUPPORTS THE COURT'S AWARD OF SANCTIONS SINCE [SELLERS'] COUNSEL DID NOTHING DELIBERATELY IMPROPER TO CONDUCT DISCOVERY OF THE EMAILS.
V. JUDGE BROCK HERSELF FOUND THAT [SELLERS] DID NOTHING IMPROPER OR WRONG THAT RESU[LT]ED IN THE TWO EMAILS MISSING, BUT STILL ERRO[NE]OUSLY AND WITHOUT LEGAL BASIS SANCTIONED COUNSEL SIMPLY BECAUSE HE DID NOT COPY MR. KRAUS'[S] FILE.
VI. [PURCHASERS] LOST THE ISSUE OF WHETHER A SETTLEMENT EXISTED AT TRIAL BASED UPON THE FACE OF THE NON-PRIVILEGED DOCUMENTS IN THE RECORD, AND ARE THUS NOT ENTITLED TO ANY SANCTIONS OR FEES DUE TO THEIR WASTEFUL EFFORT PURSUING PRIVILEGED DOCUMENTS TO PROVE A SETTLEMENT THAT NEVER EXISTED.
VII. THE TRIAL COURT ERRED IN AWARDING $5,502.50 TO [PURCHASERS] AS SANCTIONS SINCE THE ONLY FEES [PURCHASERS] SHOULD HAVE INCURRED IN SUBPOENAING THE TWO EMA[I]LS FROM [KRAUS'S LAW FIRM] WAS ONE HOUR OF THEIR COUNSEL'S TIME TO PREPARE AND SERVE A SUBPOENA, AND $900 FOR THE COMPUTER FORENSIC SPECIALIST TO OBTAIN THE EMAILS FROM [KRAUS'S LAW FIRM'S] HARD DRIVE/BACKUP TAPES.
The discovery issue that gave rise to the controversy now at hand stems from the assertion of an attorney-client privilege over documents germane to the claims asserted in the trial court. Purchasers asserted, among other things, that the parties reached a settlement prior to the commencement of the suit and that sellers took steps to terminate their contract. Thus, communications between the parties and their attorneys prior to suit regarding the alleged settlement and the positions taken by the parties, through their counsel, were highly relevant. Sellers, however, also had a colorable claim that the communications between them and their attorney were insulated by the attorney-client privilege. Thus, a privilege log was necessary to protect the parties' competing interests in the disposition of those documents and the judge properly directed its preparation.
Upon taking the position that relevant material is privileged or subject to protection from discovery, a litigant has the obligation of maintaining and eventually disclosing the material as directed by the court. See, e.g., R. 4:10-2(e)(1). It would make a mockery of our discovery rules to allow a party or its counsel -- after identifying privileged information -- to destroy or carelessly lose or misplace the materials in question. Here, the judge was not required to find that Brach Eichler knowingly allowed the disappearance of the e-mails in order to impose a sanction. The matter was clearly one of interest to the purchasers, and counsel was obligated to protect against what either deliberately or accidentally occurred here.
Sellers' counsel's obligation to preserve those documents pending the court's further direction arose at that moment, if not sooner, see RPC 3.4(a), and was particularly enhanced in this case because one of the parties to those communications was terminally ill.
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Even if our court rules do not expressly provide a remedy for these particular circumstances, our judges possess the inherent authority to require a party or the party's attorney to compensate a party damaged in this manner. See Lang v. Morgan's Home Equip. Corp., 6 N.J. 333, 338-39 (1951); Seacoast Builders Corp. v. Rutgers, The State Univ., 358 N.J. Super. 524, 549 (App. Div. 2003); Summit Trust Co. v. Baxt, 333 N.J. Super. 439, 450 (App. Div.), certif. denied, 165 N.J. 678 (2000). As Chief Justice Vanderbilt wrote for the Court in Lang, supra, 6 N.J. at 338, our liberal discovery procedures are "essential to any modern judicial system in which the search for truth in aid of justice is paramount and in which concealment and surprise are not to be tolerated." Sanctions to enforce conduct that runs counter to these important principles are "inherent in our courts" and limited "only to the requirement that they be just and reasonable in the circumstances." Id. at 338-39. After careful consideration, we are satisfied that the imposition of sanctions, as well as their amount, were just, reasonable and well-deserved.
We find Brach Eichler's other arguments to be without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing
is a true copy of the original on
file in my office.
CLERK OF THE APPELLATE DIVISION