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As a general rule, New Jersey courts prefer the broadest possible discovery to allow lawsuits resolve on their own merits.  While there are limitations built into the permissive rules on discovery for both parties and nonparties, only with a specific, factual showing of those limitations will a court step in to restrict discovery.  In Alt. Glob. One, LLC v. Feingold, 2024 N.J. Super. LEXIS 95 (App. Div. Oct. 30, 2024), the Appellate Division reinforced the rule that, without more, a nonparty’s claims of lack of relevancy or materiality cannot restrict a party’s right to broad pretrial discovery.

Feingold arises out of a Florida lawsuit filed by several corporate entity Plaintiffs against two individual Defendants for the conversion of certain investments in the businesses.  In an effort to obtain information about the Defendants’ conduct, the corporate Plaintiffs served a subpoena on non-party New Jersey resident Daniel Amaniera, to depose him in New Jersey.  Amaniera, a business rival of the Plaintiff entities, opposed the subpoena with a Motion to Quash, asserting that because he was a competitor of the Plaintiffs, the subpoena was an effort to bully and harass him and to obtain confidential business information.  Amaniera’s Motion to Quash went on to say that his (Amaniera’s) testimony is irrelevant as he has no information related to the Defendants.  Plaintiffs’ Opposition to Amaniera’s Motion included several affidavits that linked the business dealings between Amaniera, the Defendants, and the Plaintiff entities.  The trial court, referring to the broad discovery rules, denied the Motion to Quash and allowed the deposition to proceed.

On Amaniera’s appeal, the Appellate Division affirmed.  The Court’s opinion emphasized the liberality of discovery rules to allow the broadest possible pretrial discovery to ensure the proper outcome of litigation depends on a case’s merits.  The Court did note that a party’s broad right to discovery is not unlimited, pointing out that claims of “annoyance, embarrassment, oppression, or undue burden,” or demands seeking trade secrets or confidential information can outweigh the general presumption of discoverability.  However, such claims of shelter from the discovery rules require that claimant show good cause, that the claim be specific and well-articulated, and that the claim not be based on broad allegations of harm.  The Court found here, that all of Amaniera’s claims of harassment and privilege lacked any specificity.  Moreover, they found that his claims of lacking of relevancy and materiality also carried no weight because he had no genuine interest in the outcome of the litigation.  Ultimately, the burden of non-party Amaniera in sitting for his deposition did not outweigh the benefits to the Plaintiff business entities in their right to broad pre-trial discovery.

New Jersey practitioners should take note that the critical component of this matter was not the Court’s continued support of broad pretrial discovery, but the Court’s emphasis and implicit acknowledgment that when a party or non-party can provide specific facts to support their claims of harassment, embarrassment, confidentiality, or privilege, there is a line to be drawn; yet where that line stands requires a more specific and egregious showing than what Amaniera was able to provide herein.

On August 23, 2024, the Appellate Division rendered an interesting unpublished Opinion in the matter of Reid v. McKeon, No. A-2519-22, on the issue of whether an insurance carrier can be forced to pay a jury verdict rendered against insured Defendants who subsequently declared bankruptcy, IF that Plaintiff never filed a claim against the insurance carrier.

On May 10, 2012, Plaintiff Maxine A. Reid (hereafter “Plaintiff”) became injured when Defendant John McKeon, operating a vehicle owned by Defendant Joyce McKeon (John and Joyce McKeon hereafter “Defendants”) and insured by CURE Auto Insurance Company (hereafter “CURE”), struck Plaintiff’s vehicle in the rear.  Plaintiff commenced suit which resulted in a trial, at which Defendants stipulated to liability, and the jury returned a verdict in favor of Plaintiff in the amount of $250,000.00.  CURE’s relevant insurance policy issued to Defendants had a $100,000.00 policy limit.

After the jury verdict was affirmed on appeal, Defendants sought CURE’s payment of the entire $250,000.00 verdict.  However, Defendants subsequently filed for Chapter 7 bankruptcy, listing said injury judgment as a debt.  Special counsel then, on behalf of the Trustee, brought a “bad faith” claim against CURE and a legal malpractice claim against Defendants’ counsel retained by CURE.  This suit was settled, with a “full dismissal” in exchange for CURE’s payment of $220,000.00 to the Bankruptcy Estate.  From this, the Trustee then made payment to Plaintiff in the amount of $111,664.89 and, per 11 U.S.C. Section 727, discharged Defendants’ $250,000.00 debt to Plaintiff.

Nonetheless, thereafter, Plaintiff attempted to recover additional funds from CURE despite that CURE was never a party to the underlying action or any other connected claims.

To those ends, Plaintiff filed a Motion to Enforce Judgment pursuant to Rule 4:42-1, in which Plaintiff’s counsel acknowledged that Plaintiff and CURE had “never achieved” any settlement.  Plaintiff further contended that CURE was still obligated to pay Plaintiff the $100,000.00 policy limit, and that any payment received from the Bankruptcy Trustee was regarding the “excess verdict” and to settle the malpractice claim against Defendants’ counsel retained by CURE.

In response, CURE had taken the position that it was not obligated to pay the contractual policy limits and argued that Plaintiff was attempting to enforce a judgment that did not exist against CURE, and to collect a debt already paid and discharged in Defendants’ Chapter 7 bankruptcy.  CURE further argued that Plaintiff had no standing to assert a claim against CURE, and that Plaintiff was improperly seeking a “double recovery” in circumvention of the Bankruptcy Code.

Trial Court ruled that CURE was to pay Plaintiff the $100,000.00 policy limit.  Notably, though neither side had mentioned or briefed this issue, Trial Court independently found support for its ruling by N.J.S.A. 17:28-2, providing that in event of a bankruptcy, “an action may be maintained by the injured person against the corporation under the terms of the policy for the amount of the judgment in the action not exceeding the amount of the policy.”  Accordingly, Trial Court granted Plaintiff’s “Motion to Enforce Judgment”, and CURE appealed.

The Appellate Division found “no support in the plain language of either Rule 4:42-1(b) or (c) for the order entered  by the court on plaintiff’s motion,” observing that these provisions do not provide for the enforcement of a judgment or order as requested by Plaintiff, and, in any event, there was never any judgment or order that could be enforced against CURE.  (Opinion Pg. 11).  While Rule 4:59-1 provides for enforcement of judgments and Rule 1:10-3 provides for enforcement of orders, Plaintiff had not implicated them; again, because no judgments or orders were entered against CURE in the first place.

Emphatically, the Appellate Division further found that Trial Court erred in relying on Rule 4:42-1(b) and (c) because CURE had not been a party to the underlying action, and thus this “denied CURE of all the due process protections that are incorporated in our Rules of Court for individuals or entities against whom a judgment in sought.” (Opinion Pg. 13).

While the Appellate Division did note that N.J.S.A 17:28-2 may provide Plaintiff with a claim against CURE; significantly, Plaintiff had simply never pursued one, and thus the Appellate Division interpreted the “maintenance-of-an-action provision in N.J.S.A. 17:28-2 to require that an injured party seeking relief from an insurance carrier under the statute must first file a complaint… and properly serve the pleading… ” to apply, and accordingly provide “all the procedural requirements, rights, safeguards, and remedies afforded to the parties to a civil proceeding under our Rules of Court.  The court’s order depriving CURE of the action required under N.J.S.A. 17:28-2 was therefore entered in error.”  (Opinion Pg. 13).

Notwithstanding, the Appellate Division was careful to stress that it offered no opinion on the merits of Plaintiff’s claim or CURE’s defenses.  Rather, “(w)e do not foreclose plaintiff from initiating and maintaining an action against CURE based on its claim under N.J.S.A. 17:28-2 or otherwise, but any such action shall be subject to any and all defenses that may be interposed by CURE.”  (Opinion Pg. 15).

Accordingly, this unpublished opinion is a useful case study of the respective applicability of Rule 4:42-1 and N.J.S.A. 17:28-2 as to the issue of potential insurance carrier liability in the context of a bankruptcy by an insured subsequent to entry of a verdict.