Key Points

• New Jersey courts must now take a closer look at each withheld investigation document before ordering production.
• The decision gives employers a stronger basis to protect privileged materials tied to outside-counsel investigations.
• Employers should think carefully about how litigation defenses may put workplace investigation materials at issue.

The New Jersey Appellate Division recently clarified whether documents and communications related to a workplace investigation must be produced in litigation.

In C.S. v. Brick Recycling Company, Peter DeCenzo, Jr., and M.R., the Court concluded that a trial court must conduct a detailed review of each document that is being withheld to determine whether the document should be produced in discovery.

This is an important decision that all employers must be aware of if they retain outside counsel to conduct a workplace investigation.

Background

In June 2023, the plaintiff, C.S., complained to defendant DeCenzo, the owner and president of defendant Brick Recycling (Brick), that a manager, M.R., was stalking and sexually harassing him. A couple of months later, in August, DeCenzo authorized an outside law firm to investigate C.S.’s allegations against M.R. An attorney at that firm, Ellen Horn, conducted the investigation. C.S. resigned from Brick before the investigation concluded.

Horn issued her report on Oct. 17, 2023. The report was 45 pages and consisted of interviews with C.S., M.R., a witness, an evaluation of the credibility of witnesses, and analysis of the relevant information. Horn concluded the harassment claim by C.S. was substantiated.

One week later, C.S. filed a complaint alleging violations of the New Jersey Law Against Discrimination and intentional infliction of emotional distress. The defendants filed an answer listing 49 affirmative defenses, including that the defendants “acted in good faith, without malice, and with the reasonable belief that their actions were reasonable under the existing facts and circumstances.”

The case proceeded to discovery, where Brick produced Horn’s final investigatory report, but withheld many other documents that preceded the report, including: letters between Horn and DeCenzo, a draft agreement Horn prepared for the company and M.R. to sign, a partial draft of the report, Horn’s notes taken during a meeting and call with DeCenzo and during a re-interview of C.S. (plus other witnesses), and Horn’s retainer agreement with the company. Brick listed all of these documents on a privilege log. The trial court concluded that none of these documents were protected from disclosure and thus were required to be produced in discovery.

Reversed on Appeal

The Appellate Division reversed the trial court and provided both a framework for this issue going forward and helpful case-specific comments.

The Court found the trial court must conduct a line-by-line analysis to determine what, if anything, must be redacted to preserve privilege (attorney-client and/or work product) and whether the material in the document is “sufficiently related to an employer’s affirmative defense” to be considered for disclosure. The Court determined this ultimately is the key inquiry — whether the information in question would support or impeach the employer’s affirmative defense.

For privileges to attach, it is not required that the investigation begin before the lawsuit is filed – here, the investigation was “sufficiently close” before the filing of the lawsuit.

The Court also identified Horn as acting both as an investigator and legal advisor to the company, thereby creating the existence of the attorney-client privilege. Although the Court stopped short of a ruling, it questioned why a draft report would be subject to disclosure and analogized to the general bar on producing draft expert reports. The Court thus did not establish a categorical rule, but its reasoning strongly supports that draft reports will likely not be discoverable.

The Court also included some instructions on remand. The Court noted that because the trial court conducted no analysis as to whether the defendants waived some or all of the applicable privileges by asserting an affirmative defense, the trial court must do that in the first instance on remand. And the Court ordered that on remand C.S. would be required to submit in writing how the documents being withheld would assist in the prosecution of his case, keeping in mind that C.S. resigned before the end of the investigation and thus no remedial action could have been taken with respect to his employment based on the investigation’s conclusions.

What this Means for New Jersey Employers

This is an important case for New Jersey employers because it establishes that when an employer engages outside counsel to investigate and in subsequent litigation asserts an affirmative defense, all documents related to that investigation are not per se discoverable. A meticulous, line-by-line analysis of the withheld documents must take place before any documents are produced, whether in full or in redacted form. In addition:

• This ruling should encourage workplace investigations conducted by outside counsel because it is unlikely that all documents will be discoverable, including drafts of the final report.
• The Court rejected the argument that prior caselaw mandated a waiver of the privilege when in litigation an employer relies on an investigation and instead held that each document in question must be reviewed line-by-line to determine whether it contains privileged information.
• Affirmative defenses in an answer matter. If an employer raises an affirmative defense that encompasses the workplace investigation, trial courts will consider whether that affirmative defense waives any privilege.
• Under these facts, the Court recognized that the outside counsel was acting both as an investigator and legal adviser to the company in light of the timing of the investigation and the filing of the complaint.

For more information about this alert, please contact the author, Ian Gillen at 609.895.7066 or igillen@foxrothschild.com, or any member of the firm’s Labor & Employment Department.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author(s) and not necessarily this law firm or its clients. Prior results do not guarantee a similar outcome.