RIALTO-CAPITOL CONDOMINIUM ASSOCIATION, INC. v. THE BURLINGTON INSURANCE COMPANY, 2:19-cv-12811

Rialto-Capitol Condominium (Plaintiff) alleges extensive façade defects and obtained a consent judgment for $5,000,000 against CCC Renovation (CCC) as part of a settlement; CCC assigned its insurance claims against its carriers (Burlington, Scottsdale) to Plaintiff.
Plaintiff sued insurers (removed to federal court on diversity grounds) seeking coverage/indemnity for the consent judgment and breach of contract/bad faith claims.
Prior to settlement enforcement litigation, CCC owner Robinson Agudelo (represented by Robert D. Brown/Stahl) gave a deposition in which his recollection about signing and the fairness of the consent judgment was inconsistent.
Plaintiff subpoenaed Stahl for all communications between Stahl (and Brown) and Agudelo/CCC about the settlement; Stahl moved to quash under Fed. R. Civ. P. 45(d)(3)(A)(iii) asserting attorney-client privilege; Plaintiff (joined by Scottsdale) moved to compel, contending waiver based on Agudelo’s testimony and need to prove settlement reasonableness.
The court applied New Jersey privilege law (as this is a diversity case), found the subpoena sought privileged material, and concluded Plaintiff failed to meet New Jersey’s Kozlov/Leonen three‑part waiver test (need, relevance/materiality, no less intrusive means).
Result: Stahl’s motion to quash granted and Plaintiff’s motion to compel denied.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the subpoena requires disclosure of privileged attorney-client communications	Communications are necessary to prove the settlement was reasonable and enforceable; Agudelo’s testimony waived privilege	Subpoena seeks privileged communications protected by attorney-client privilege; Rule 45 requires quash for privileged matter	Court quashed subpoena under Rule 45(d)(3)(A)(iii); privilege protects the communications
Whether Agudelo’s deposition testimony waived the attorney-client privilege (put communications at issue)	Agudelo contradicted a document he signed, thus placing communications where counsel "explained" the judgment at issue and waiving privilege	Agudelo’s testimony was inconsistent due to lapse of time, he did not deny signing, and his statements do not sufficiently put confidential communications at issue	No waiver found; Plaintiff failed to show Agudelo’s testimony created the requisite need to overcome privilege
Whether Plaintiff exhausted or identified less intrusive means to obtain the information (Kozlov prong 3)	Stahl’s refusal leaves court order as the only way to obtain the communications	Plaintiff made no effort to obtain the information from non-privileged sources; less intrusive alternatives exist	Plaintiff failed to show by a fair preponderance that the information is unobtainable by less intrusive means; third prong not satisfied

In re Ford Motor Corp., 110 F.3d 954 (3d Cir. 1997) (federal courts sitting in diversity apply state law to resolve privilege issues)
State v. Mauti, 208 N.J. 519 (N.J. 2012) (implicit waiver where party places privileged communication "in issue")
In re Kozlov, 79 N.J. 232 (N.J. 1979) (New Jersey’s qualified privilege test: need, relevance/materiality, no less intrusive means)
Leonen v. Johns-Manville, 135 F.R.D. 94 (D.N.J. 1990) (applies Kozlov three-prong framework in discovery context)
Griggs v. Bertram, 88 N.J. 347 (N.J. 1981) (insurer who wrongfully refuses defense is liable for reasonable, good-faith settlements against the insured)
United Jersey Bank v. Wolosoff, 196 N.J. Super. 553 (App. Div. 1984) (privilege protects confidential attorney-client communications to promote candid counsel-client exchanges)