KARL HALLIGAN VS. BEDERSON, LLP (L-1494-19, HUDSON COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0980-20
KARL HALLIGAN,
Plaintiff-Respondent,
v.
BEDERSON, LLP, SEAN
RAQUET, CPA, CFE, JOHN
O'CONNOR, and HARRY
HODKINSON,
Defendants-Respondents,
__________________________
ANDREW R. TURNER,
Appellant.
__________________________
Argued April 14, 2021 – Decided June 1, 2021
Before Judges Fuentes and Whipple.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Hudson County,
Docket No., L-1494-19.
Andrew R. Turner, appellant, argued the cause pro se.
Steven Menaker argued the cause for respondent
(Chasen Lamparello Mallon & Cappuzzo, PC,
attorneys; Steven Menaker, on the brief).
PER CURIAM
On leave granted, appellant, Andrew Turner, an attorney, appeals the Law
Division's October 16, 2020 order denying his motion to quash a subpoena. We
affirm. We have drawn the following relevant facts from the record.
Halligan I.
Karl Halligan was the plaintiff during the two prior suits against the
defendants. Halligan sued his former business partners, John O'Connor and
Harry Hodkinson. Halligan, O'Connor, and Hodkinson formed two companies:
Park Avenue Bar & Grill, LLC (Park Avenue), a restaurant and tavern; and H&H
Real Estate Investments, LLC (H&H),1 where Halligan was the managing
member. For numerous reasons, Halligan's relationships with O'Connor and
Hodkinson cooled, as early as when Park Avenue originally opened.
When Halligan filed his complaint in Halligan v. O'Connor (Halligan I),
Docket No. HUD-C-55-12, he sought back salary, or management compensation
payments, from the LLCs, O'Connor, and Hodkinson. Turner represented
O'Connor and Hodkinson, and filed an answer and counterclaim seeking to
1
H&H owned the building where Park Avenue operated.
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dissociate Halligan from both businesses. Halligan's claims, and Hodkinson and
O'Connor's counterclaims, were heard in a multi-day bench trial in the Chancery
Division in 2013. This trial resulted in a judgment denying Halligan's attempt
to force Hodkinson and O'Connor to sell their interest and his request for a
valuation of the members' interest in the businesses. But the judge did grant
Halligan's request for equity compensation, pro-rated salary compensation
starting in April 2007, and reimbursement for taxes paid on behalf of the
businesses.
The court denied O'Connor and Hodkinson's counterclaims for various
personal and business accountings and monetary compensation from Halligan,
but granted their request to dissociate Halligan from the businesses, with time
for him to receive his interest and allocations. A modified judgment was entered
on March 18, 2014, and Halligan relinquished management of the businesses to
O'Connor and Hodkinson on March 21.
After Halligan relinquished management, Park Avenue filed for
bankruptcy, starting with Chapter 11 reorganization, which was converted into
a Chapter 7 liquidation that December. Bruce Levitt represented Park Avenue
for the bankruptcy proceedings. On October 3, 2014, Turner wrote to O'Connor,
Hodkinson, and Sean Raquet, a forensic accountant, during the bankruptcy
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proceedings to suggest O'Connor and Hodkinson work with Raquet and his firm,
Bederson, LLP, to determine how money was spent during Halligan's
managerial role. Turner advised that Levitt should also be apprised of Raquet's
involvement, as bankruptcy counsel.
On November 3, 2014, O'Connor responded to this email, copying his
wife, Elizabeth O'Connor; Hodkinson; Hodkinson's wife, Denise Hodkinson;
appellant; and Raquet. O'Connor had found evidence in the businesses' records
showing Halligan paid for personal birthday parties, sports tickets, vehicles,
vacations, and other entertainment or goods out of company funds. Eight days
later, O'Connor sent nineteen pages of statements purporting to show Halligan
improperly using the partners', or businesses' funds.2
Hours after O'Connor sent the list of Halligan's alleged misappropriations,
Raquet wrote to O'Connor telling him Levitt would prepare the documents to
have him represent same in the bankruptcy proceedings. 3 Raquet also told
O'Connor the "Bederson report" would serve a dual purpose; once in the
2
Denise, Elizabeth, Raquet, Hodkinson, and appellant were copied on this
email.
3
This email appears to be between only Raquet and O'Connor, based on the
record provided.
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bankruptcy process and once in the ongoing litigation between the three
partners.4
On November 17, 2014, Raquet submitted the Bederson report to Levitt.
The report alleged Halligan converted between $1,490,000 and $1,820,000 from
Park Avenue, and the bankruptcy trustee sought to recoup this amount through
an adversarial proceeding against Halligan. In essence, it was only the Bederson
report that supported these figures. Further, the Bederson report was also used
in November by appellant, on behalf of the businesses, to move to partially
vacate Halligan's judgment because he purportedly improperly failed to plead
the LLCs as defendants and lied about his compensation from the companies.
To resolve the improper pleading and the motion to vacate, the co urt
allowed Halligan to amend his complaint and include Park Avenue and H&H on
March 20, 2015, and issued a conforming order on April 6, 2015. On August
25, 2015, Halligan filed the amended complaint only against H&H, the Park
Avenue assets were sold in May 2015 as a part of its Chapter 7 liquidation.
Halligan retained Gwyneth Murray-Nolan in this proceeding, and Turner
represented O'Connor and Hodkinson. The property H&H owned was sold for
4
Turner, Hodkinson, and Elizabeth were copied on this email.
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$1,100,000, and the net proceeds, $845,151.56, were deposited into Murray-
Nolan's trust account.
In July 2017, Murray-Nolan moved for the payment of her counsel fees
and submitted a certification declaring that O'Connor and Hodkinson retained
her to represent H&H, and that she had their approval. Hodkinson's
accompanying certification, prepared by Murray-Nolan, stated that he executed
her retainer agreement, was satisfied with her firm's representation, and
requested her bill be paid.
That same month, on July 26, 2017, Hodkinson informed the trial court he
and O'Connor were having a conflict, which led to them not speaking for at least
a year prior. Hodkinson also stated he did not actually approve of Murray-Nolan
being awarded counsel fees. Eventually, on July 26, 2019, the court allowed
Halligan to withdraw his funds from the escrow account to satisfy his prior
judgment.
Halligan II.
While the order to withdraw funds was pending, Halligan filed the instant
case, Halligan v. O'Connor (Halligan II), Docket No. HUD-L-1494-19, on April
11, 2019, alleging fraud and intentional misrepresentation against O'Connor,
Hodkinson, Raquet, and Bederson for how they presented the report and the list
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of alleged improper charges Halligan made. Turner was served two subpoenas
duces tecum, with the latest being August 28, 2020. The subpoenas seek
documents related to Turner's correspondence, draft reports, representation, or
communications.
Hodkinson appeared for his deposition in this case on September 8, 2020,
wherein he waived the attorney-client privilege as to himself and Turner. Turner
then moved to quash the subpoena seeking appellant's oral deposition and
relevant documents on September 25, 2020, which was denied by the court on
October 16, 2020. This appeal followed.
I.
We review a trial court's decision to quash a subpoena under a deferential
standard of review; therefore, decisions regarding "discovery matters are upheld
unless they constitute an abuse of discretion." In re Custodian of Records,
Criminal Div. Manager, 214 N.J. 147, 162-63 (2013) (citing Pomerantz Paper
Corp. v. New Cmty. Corp., 207 N.J. 344, 371 (2011)). Although a trial court's
decision regarding the assertion of a privilege may call for de novo review, the
court here did not order disclosure of privileged materials, directly or
inferentially, besides those from Hodkinson, who waived his privilege.
Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
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Generally, parties may discover non-privileged information "which is
relevant to the subject matter involved in the pending action." R. 4:10-2(a). If
the discovery requests are "reasonably calculated to lead to the discovery of
admissible evidence," an opponent's objection that the information will be
inadmissible at trial is unavailing. Id. Nonetheless, "the scope of discovery is
not infinite." K.S. v. ABC Prof'l Corp., 330 N.J. Super. 288, 291 (App. Div.
2000).
Here, Turner argues the court committed plain error by allowing
Halligan's attorney to seek records of communications between himself and
O'Connor. But that is simply not what the court's order did or said. The trial
court's evaluation of the communication was straightforward in this regard:
Denied as this [c]ourt finds Mr. Hodkinson did in fact
waive his privilege in regard to his own
communications with former attorney [appellant] per
page [eleven] of his September 8, 2020 deposition. In
Fellerman v. Bradley the Court emphasized "the
privilege belongs to the client, rather than the attorney."
99 N.J. 493, 498 (1985). Moreover, N.J.S.A.[ ]2A:84-
20 explains, "[a] communication made in the course of
the relationship between lawyer and client shall be
presumed to have been made in professional confidence
unless knowingly made within the hearing of some
person whose presence nullified the privilege." Here,
the [c]ourt will allow the subpoena as to the
communications between Turner and Hod[kinson], as
well as any communications sent to or had in the
presence of non-clients including, Sean Raquet, Denise
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Hodkinson, Elizabeth O'Connor, Bruce Levitt, and
Bederson, LLP.
[(Emphasis added).]
Turner argues although Hodkinson waived the privilege, O'Connor did
not, thus he essentially asserts a blanket privilege over any discovery that may
involve himself and O'Connor, on O'Connor's behalf. Based on our review of
the record, the elements necessary for Turner to assert the attorney-client
privilege, which O'Connor did expressly preserve, are not present in the order
entered by the court. Moreover, had the court granted Turner's motion, the court
would have foreclosed Halligan's ability to depose him regarding non-privileged
information. R. 4:10-2(a). Instead, Turner may assert the privilege in response
to questions or document requests that would require him to reveal properly
confidential communications on a question-by-question basis.
Turner also argues certain emails Hodkinson produced during discovery
between himself and others are privileged, which indicates alternative
availability of the sought communications, including:
- [F]rom Turner to O'Connor, on which Hodkinson and
third parties5 were copied, recommending that Raquet
be retained to perform "a forensic trail of monies
5
The third parties referred to here are Denise Hodkinson and Elizabeth
O'Connor.
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funneled through the business under Mr. Halligan's
term of operation";
- [F]rom O'Connor to Raquet, on which third parties
and Turner were copied, reporting on his compilation
of information for Raquet's report;
- [F]rom O'Connor to Raquet, on which third parties
and Turner were copied, forwarding nineteen pages of
Quick Books account entries listing the "offending
payments"; and,
- [F]rom Raquet to O'Connor, a third party, and Turner,
advising that his report could be used "in both the
[b]ankruptcy process and the [s]tate [c]ourt litigation."
II.
"[T]here is a presumption that a communication made in a lawyer -client
relationship has been made in professional confidence[,]" and where
"applicable, '[the privilege] must be given as broad a scope as its rationale
requires.'" Hedden v. Kean Univ., 434 N.J. Super. 10, 12 (2013) (quoting United
Jersey Bank v. Wolosoff, 196 N.J. Super. 553, 561 (App. Div. 1984)).
Ordinarily, the attorney-client privilege is waived when confidential
communications are revealed to a third party. O'Boyle v. Borough of Longport,
218 N.J. 168, 186 (2014) (citations omitted). Here, the court allowed the
communications that included Denise Hodkinson, Elizabeth O'Connor, Raquet,
and Bederson to be discoverable as to Turner vis-à-vis the non-party disclosure
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exception to the privilege. The court did not, however, require Turner to
disclose those communications with O'Connor that did not include the third
parties. Turner made no attempt to explain why the spouses of the parties were
included here, and accordingly, we defer to the court's interpretation of whether
Denise and Elizabeth were third parties for the purpose of vitiating the privilege.
In re Custodian of Records, Criminal Div. Manager, 214 N.J. at 162-63 (citing
Pomerantz Paper Corp., 207 N.J. at 371).
"[T]he privilege accords the shield of secrecy only with respect to
confidential communications made within the context of the strict relation of
attorney and client." United Jersey Bank, 196 N.J. Super. at 562. Here, the
court recognized, as did our Supreme Court in State v. Mauti, that "any party is
free to waive a privilege." 208 N.J. 519, 537-38 (2012). Under N.J.R.E. 530, a
privilege may be explicitly waived by contract, or by making or consenting to
disclosure of privileged communications, "without coercion and with knowledge
of [the client's] right or privilege." Hedden, 434 N.J. Super. at 15 (quoting
N.J.R.E. 530). "[O]ur courts have also recognized that a privilege may be
waived 'implicitly' where a party puts a confidential communication 'in issue' in
a litigation." Mauti, 208 N.J. at 532 (quoting Kinsella v. Kinsella, 150 N.J. 276,
300 (1997)).
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N.J.S.A. 2A:84A-20(2)(c) provides that the attorney-client privilege shall
not extend to "a communication relevant to an issue of breach of duty by the
lawyer to his client." Hodkinson expressly waived any privilege between
himself and appellant, and the court did not suggest that a privilege objection to
questions outside of appellant's communications with Hodkinson within the
subpoena was unavailable. In short, given our court's preference for broad
discovery, appellant may not avoid testimony or document production on non-
privileged topics.
In sum, the court has not ordered Turner to disclose privileged
communications to anyone, and objections based on privilege are still available.
R. 4:14-3(c). The subpoena even noted Turner may claim a privilege for
refusing to produce documents or testimony, and it provided instructions for
how to proceed. This means Turner's conversations, held jointly with O'Connor
and Hodkinson, would remain confidential because O'Connor has not waived
the privilege—as the court order provided.
Affirmed.
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