(temporarily assigned) delivered the opinion of the Court.
Dеfendant Horizon Healthcare Services, Inc., New Jersey’s largest health insurer, maintains a two-tiered provider-hospital system known as OMNIA approved by the Department of Banking and Insurance.
Capital Health Sys., Inc. v. Dep’t of Banking & Ins.,
445
N.J.Super.
522, 532,
In discovery, the chancery judges in the two matters required Horizon’s turnover to plaintiffs of the same or similar materials despite Horizon’s objections. The Appellate Division granted leave to appeal and reversed those discovery orders by way of a reported decision,
Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc.,
446
N.J.Super.
96,
Plaintiffs’ claims are based on the clear disadvantage of being placed in Tier 2 because Horizon “adopted strong financial incentives to encourage” its subscribers “to go to Tier 1” hospitals, i.e., seven large hospital systems referred to as “Alliance partners.” These Alliance partners agreed to financial concessions on reimbursement in return for sharing in the savings expected from OMNIA and an increase in patient-volume. And Horizon “aggressively promoted Tier 1 hospitals as providing better care at a lower cost.”
Horizon retained McKinsey & Company to assist in the selection of the Alliance partners. McKinsey’s May 20, 2014 report identified and рrioritized potential Alliance partners through the use of broad criteria. McKinsey also assisted Horizon in the scoring of hospitals. Plaintiffs claim that the method and manner of Horizon’s tiering of hospitals constituted a breach of their network hospital agreements (NHAs), which contain Horizon’s representations that each hospital “shall participate in new networks or subnetworks” and “in new products,” provided the hospital “meets all criteria and standards established and evaluated by Horizon.” Plaintiffs also claim that Horizon breached the implied covenant of good faith and fair dealing, and assert other tort and contract theoriеs, as well. In both suits, the chancery judges entered orders to show cause without restraints, directed expedited discovery, and executed confidentiality orders, the terms of which were consented to by the parties; these confidentiality orders prohibited the use of proprietary information for any business, commercial, competitive, or personal purpose and limited disclosure to counsel, the parties, and outside experts.
Discovery disputes quickly arose. Saint Peter’s moved for Horizon’s production of the McKinsey report, the Alliance agreements, documents relating to the formulation of Tier 1 criteria, the partnеrship and performance scores for all Tier 1 hospitals, its own partnership and performance scores, and information regard
ing communications between Horizon and the Alliance partners. Horizon argued these materials were irrelevant and confidential. After an in camera review, Chancery Judge Frаnk M. Ciuffani ordered — subject to the confidentiality order — Horizon’s production of the unredacted McKinsey report, the Tier 1 hospital scores, the Alliance agreements, minutes of the board of director’s meetings, and written communications between Horizon and Robert Wood Johnson University Hospital (RWJ),
1
an Alliance partner which neighbors
The proceedings in the Capital Health matter were not dissimilar. Chancery Judge Robert P, Contillo examined the McKinsey report in camera and authorized some redactions prior to turnover. The judge also limited disclosure of proprietary information to each hospital’s attorney, each hospital’s CFO and CEO, one “technical person,” and each hospital’s outside consultant. Plaintiffs later sought production of the Alliance agreements and communications between Horizon and the Alliance partners regarding OMNIA. Horizon argued these materials were irrelevant and contained confidential, proprietary and trade secret information. Judge Contillo ordered a turnover subject to some redac-tions.
The Appellate Division granted leave to appeаl and reversed the discovery orders in both matters. Although the panel cited the deferential standard of review applicable in discovery matters,
Capital Health Sys., supra,
446
N.J.Super.
at 114,
Following the Appellate Division’s published decision, Saint Peter’s pursued additional discovery. Judge Ciuffani ordered a turnover of other alleged proprietary materials, concluding that the Appellate Division’s decision was limited to certain specific documents and that information relating to Hоrizon’s criteria for rating the hospitals was relevant to the theory that Horizon had crafted and implemented the tiering process to reach a predetermined result. The judge also required that MeKinsey comply with Saint Peter’s subpoena and that Horizon produce the discovery turned over in the Capital Health mаtter that Saint Peter’s had requested.
Through a series of expedited orders, the Appellate Division granted Horizon’s and McKinsey’s motions for a stay and for leave to appeal. The panel determined the orders compelling additional discovery were inconsistent with its prior determination in the first appeal аnd that Saint Peter’s had failed to alter the panel’s “prior assessment” of Saint Peter’s “likelihood of success” on the merits. The panel did not dispose of the interlocutory appeal it permitted, no doubt because we had already granted leave to appeal its earlier published determination.
Our disposition of these interlocutory appeals from the Appellate Division’s published opinion and later unpublished orders is driven by the familiar abuse-of-discretion standard applicable when appellate courts review discovery orders: appellate courts are not to intervene but instead will defer to а trial judge’s discovery rulings absent an abuse of discretion or a judge’s
misunderstanding or misapplication of the law.
Pomerantz Paper Corp. v. New Cmty. Corp.,
207
N.J.
344, 371,
In ruling on the discovery disputes in the Saint Peter’s action, Judge Ciuffani invoked and applied these principles when he compelled a turnover of the discovery in question. In his opinion, which the Appellate Division quoted at length,
Capital Health, supra,
446
N.J.Super.
at 108-09,
The panel recognized that the maintainability of plaintiffs’ claims was not before it but nevertheless found it “[could] not avoid analyzing those claims in assessing the relevancy of the information” sought.
Id.
at 115,
We conclude the Appellate Division exceeded the limits imposed by the standard of appellate review both by assessing the information’s relevance against the panel’s own disapproving view of the merits and by giving no apparent weight or consideration to the protections afforded by the confidentiality orders. Having closely examined the record, we reject the Appellate Division’s determination that the chancery judges encharged with these matters abused their discretion. It was not an abuse of discretion for the chancery judges to find the information sought was relevant to plaintiffs’ claims that Horizon violated either the NHA’s contractual terms, or the overarching implied covenant
In his initial decision compelling the turnover of the unredacted MeKinsey report, Tier 1 hospital scores, Alliance agreements, and other related materials, Judge Ciuffani cogently explained, as recounted in the Appellate Division’s opinion,
id.
at 107-09,
MoEinsey worked with Horizon at every stage of OMNIA’s formation and development. MoEinsey developed suggested structures for the proposed tiered network and, with Horizon, jointly developed the criteria that Horizon should consider in evaluating hospitals for the preferred Tier 1. McEinsey never suggested geographic exclusivity as a criterion and, in fact, proposed a model for OMNIA in Middlesex County that did not rely on having only one Tier 1 partner.
Saint Peter’s subpoenaed McEinsey to obtain documents related to its work for Horizon on the formation and development of OMNIA, including the development of the proposed structure of the tiered networks, the development of the criteria, and how and when that criteria changed. Saint Peter’s is looking for information regarding the timing of when the hospitals were rated each time, the conversations between Horizon and McEinsey regarding the ratings, who at Horizon ordered the changes in criteria and their weights, and who at Horizon was involved in these discussions.
Saint Peter’s alleges that Horizon pre-selected KWJ as thе Tier 1 partner for the Middlesex County area, and adjusted the criteria for Tier 1 participation to obtain a predetermined result. In so doing, Horizon [is alleged to have] breached the explicit terms of the [NHA], which guaranteed that Saint Peter’s could participate in any new network, subnetwork, or product introduced by Horizon as long as it met the “criteria and standards” for participation. Horizon [is] also [alleged to have] breached the implied covenant of good faith by arbitraitly choosing criteria, and then changing them ex post facto in order to exclude Saint Peter’s fi’om tire preferred Tier 1 network.
The timing of changes to the criteria or the hospital ratings are all relevant to the preselection[-]of[-]partners theory and whether Horizon adjusted the criteria to obtain a predetermined result. Moreover, information on who at Horizon knew about [or] participated in these changes [or both,] in order to deprive Saint Peter’s of its bargained-fоr right of participation is also relevant to [the claim of] Horizon’s bad faith and its intent to harm Saint Peter’s.
The ... [Confidentiality [o]rder already in place in this action sufficiently protects any confidentiality interest Horizon purports to have in these documents.
In short, Judge Ciuffani found, as Judge Contillo similarly determined in the companiоn
The chancery judges’ determinations were soundly and logically reached and should not have been second-guessed because the Appellate Division harbored a different view of the mеrits. We have never held that, when dissemination may be adequately protected by a confidentiality order, a party’s right to relevant discovery is governed by a court’s impression of that party’s likelihood of success on the related claim or defense.
The orders under review in these interlocutory appeals are reversed, and the matters remanded to the trial courts for further proceedings.
Notes
The judge required that Horizon produce not only its Alliance agreement with RWJ, but also the rate agreement, letter of intent, and template, while limiting — "for the eyes оf St. Peter's counsel only” — the specific rates. Turnover of the Alliance agreements with other hospitals was subject to any applications by those hospitals for a protective order; no affected Alliance partner sought relief from disclosure.
Whether the class of recipients of the specific rates — so far ordered turned over only "for the eyes of St. Peter's counsel” — might be appropriately expanded in the future is not before us.