The Pennsylvania Rules of Civil Procedure are modeled after their federal counterparts and share much of the same language. Both contain provisions codifying the attorney work-product doctrine, and both use the phrase “prepared in anticipation of litigation” in defining the scope of this privilege. Despite this seemingly similar language, however, a stark distinction has emerged between the two.

Specifically, in the Federal Rules of Civil Procedure, this language affirmatively requires that materials be prepared in anticipation of litigation for them to be privileged. In contrast, as the Pennsylvania Supreme Court recently recognized, this identical phrase in Pa.R.C.P. 4003.3 does not impose such a requirement. See BouSamra v. Excela Health, 210 A.3d 967 (Pa. 2019).

The seminal case relating to the work-product doctrine is Hickman v. Taylor, 329 U.S. 495 (1947), which arose from the sinking of a tugboat in the Delaware River. The cause of the accident was unknown, but it resulted in the deaths of five crew members. In the wake of these events, the owners of the tugboat hired a law firm, who interviewed the survivors “and took statements from them with an eye toward the anticipated litigation.” When the representatives of the decedents sought these notes, the lawyers for the tugboat refused on the grounds of privilege. The district court disagreed, holding that they were not privileged, but the U.S. Court of Appeals for the Third Circuit then reversed.

On appeal, the Supreme Court analyzed this issue of great importance under the then recently enacted Federal Rules of Civil Procedure. The court discussed the delicate balance found in American jurisprudence that values liberal discovery, juxtaposed with a lawyer’s need for “a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel.” The court ultimately espoused a view of the work-product doctrine that is still largely in force today; absent a strong showing of a particularized need, an attorney’s notes and memoranda prepared in anticipation of litigation will almost always be privileged. In the case before it, the court held that such a showing had not been made, and that the interview notes of the tugboat survivors were privileged work-product.

Long a doctrine at common law, the work-product privilege now has explicit rules. Fed.R.Civ.P 26(a)(3)(A) provides that “ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial …” Pennsylvania’s counterpart Pa.R.C.P. 4003.3 states that “a party may obtain discovery of any matter discoverable … even though prepared in anticipation of litigation or trial … [but this] shall not include disclosure of the mental impressions of a party’s attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories.”

Importantly, the federal rule begins by describing what is not discoverable, while the Pennsylvania begins by defining what is discoverable. That is, unlike its federal counterpart, the Pennsylvania rule states that a potential work product is discoverable even if it is prepared in anticipation of litigation. Pa.R.C.P. 4003.3 then exempts from this discoverability a broad category of documents and other work-product materials, without requiring that such materials be prepared in anticipation of litigation. This structural distinction is at the heart of the disparate approaches that state and federal courts have taken to this language, despite both rules containing the phrase “prepared in anticipation of litigation.”

Federal courts have long applied a strict, formalistic interpretation to the federal work-product rule, requiring materials be prepared in anticipation of litigation to be privileged. Pennsylvania courts, beginning with Bagwell v. Pennsylvania Department of Education, 103 A.3d 409 (Pa. Commw. 2014) and culminating with Bousamra, have also taken a textualist approach to Pa.R.C.P. 4003.3 as well. But, given the inverse structural framework of the rules, this has resulted in the opposite outcome; in Pennsylvania, it is irrelevant for work-product purposes whether materials are prepared in anticipation of litigation.

Bagwell dealt with a Right-to-Know-Law request by a plaintiff who sought records pertaining to the Sandusky scandal and related investigation. This investigation had been conducted by outside counsel, and the plaintiff argued that its purpose was mere fact-finding, not to prepare for litigation. The state refused this request on privilege grounds, citing the attorney-client and work-product privileges.

On appeal, the Pennsylvania Commonwealth Court characterized the plaintiff’s construction of Pa.R.C.P. 4003.3 as “novel” and stated that “the anticipation of litigation part of the work-product doctrine is not an absolute requirement.” Recognizing that “materials prepared in anticipation of litigation” is merely an example of the rule’s coverage, the court held that materials “do not need to be prepared in anticipation of litigation for work-product privilege to attach.” Applying this interpretation, the court held that the sought-after records were within the scope of the work-product privilege.

Bagwell was a significant departure from the traditional interpretation of the analogous federal rule, but one that would quickly be followed. Three years later, in another case dealing with the Sandusky scandal, the Pennsylvania Superior Court would come to an identical interpretation of Pa.R.C.P. 4003.3. In Estate of Paterno v. National Collegiate Athletic Association, 168 A.3d 187 (Pa. Super. 2017), the plaintiffs also sought records relating to the outside counsel investigation, claiming that these records would demonstrate “an unreliable rush to judgment” on the part of defendants in levying punishment against the late Joe Paterno. As in Bagwell, the defendants in Paterno claimed privilege based on the work-product doctrine.

Quoting Hickman, the Superior Court in Paterno outlined the policy rationales still involved in privilege determinations, namely the need for attorneys to protect their mental impressions, conclusions, opinions and memoranda. The court recognized that Pa.R.C.P. 4003.3 “does not limit work product protection to materials prepared in anticipation, rather, materials prepared in anticipation are not automatically protected.” The Superior Court in Paterno explicitly rejected plaintiffs’ reliance on the analogous federal rules, which “cabins work product protection to matters prepared in anticipation of litigation.” Ultimately, the Superior Court agreed with the Commonwealth Court in Bagwell that “mental impressions are protected regardless of whether they are prepared in anticipation of litigation.”

Two years later, the Pennsylvania Supreme Court had the opportunity to consider this issue in BouSamra. In a case largely about waiver, the court was tasked with determining what materials were discoverable following an investigation into a cardiology practice in Westmoreland County. The allegations against this practice were that it was performing medically unnecessary stenting, a charge that the physicians involved obviously disputed. When the defendants went public with these allegations, plaintiff sued for defamation and tortious interference with contractual relations. During discovery, a dispute arose over the discoverability of an email from outside counsel forwarded by the defendant to its public relations consultant, which the plaintiff claimed waived any applicable privilege.

While tangential to the core issue of waiver, the Supreme Court in BouSamra explicitly held that “the purpose of the work product doctrine is to protect the mental impressions and processes of an attorney acting on behalf of a client, regardless of whether the work product was prepared in anticipation of litigation.” To support this statement, the majority cited Bagwell, Paterno, and like cases. In a footnote, the majority emphasized that Pa.R.C.P. 4003.3’s use of “even though” before “prepared in anticipation of litigation” made this language inclusive, not exclusive for discovery purposes. The rule’s later exemption of a broad class of work-product materials from discovery, however, does not reference any litigation requirement. Turning to the main issue of waiver, the court held that the defendant had waived the attorney-client privilege through its actions, but remanded for further factual development on the potential waiver of the work-product privilege.

Justice Christine Donohue, joined by Justices Debra Todd and Kevin Dougherty, concurred with the majority’s attorney-client privilege waiver analysis. But she took issue with the majority’s “dicta” that an attorney’s mental impressions and processes are privileged, regardless of whether the work-product was prepared in anticipation of litigation. In an 852-word footnote, Donohue outlined her deep skepticism of the distinction between the divergent state and federal interpretations of “prepared in anticipation of litigation.” Despite Donohue’s impassioned concurrence, later decisions have clearly treated BouSamra’s “dicta” in this regard as more than dicta. E.g., Carlino East Brandywine v. Brandywine Village Associates, 260 A.3d 179, 205 (Pa. Super. 2021); Ford-Bey v. Professional Anesthesia Services of North America, 229 A.3d 984, 993 (Pa. Super. 2020).

While superficially similar, Pa.R.C.P. 4003.3 and Fed.R.Civ.P 26(a)(3)(A)’s joint use of the phrase “prepared in anticipation of litigation” should not be confused as establishing the same requirements. A more comprehensive review of these rules reveals that they are describing very different scopes. Namely, the federal rule limits the work-product privilege to these materials, while the Pennsylvania rules impose no such requirement. While these materials are not automatically protected in Pennsylvania, Pa.R.C.P. 4003.3’s later exemption for “conclusions, opinions, memoranda, notes or summaries, legal research or legal theories” adopts an expansive scope for the work-product privilege. And while the Pennsylvania Supreme Court’s opinion in BouSamra is not without its critics, it is now the black-letter law of the state that an attorney’s mental impressions and conclusions are covered by the work-product privilege, regardless of whether these materials were prepared in anticipation of litigation.

Edward T. Kang is the managing member of Kang Haggerty. He devotes the majority of his practice to business litigation and other litigation involving business entities. Contact him at ekang@kanghaggerty.com.

Kang Haggerty associate Ryan Kirk served as co-author of this article.

The attorney-client privilege, the oldest evidentiary privilege known to the common law, is an exception to one of the main policies behind the paramount rule of evidence that relevant evidence is admissible at trial. In this regard, the attorney-client privilege is an obstruction to the search for the truth. The privilege protects confidential attorney-client communications made for the purposes of obtaining legal advice. While many attorney-client communications are confidential, they are not privileged unless they were made for obtaining legal advice. The attorney-client privilege is designed to facilitate free attorney-client communications without the fear of unwanted disclosure so that clients can receive competent legal advice from their lawyers.

Although its title should be self-evident, in reality, the attorney-client privilege is often perverted by litigators to be strategically used as a sword. The privilege is often abused, particularly in the context of the corporate attorney-client privilege. And the courts in the commonwealth provide very little guidance on addressing potential attorney-client privilege abuse issues. See, e.g., Zack Needles, “Justices Won’t Hear First-Impression Attorney-Client Privilege Issue,” The Legal Intelligencer, (April 4, 2019).

The Attorney-Client Privilege ‘Ruse’

During a recent deposition where I was examining an adverse party, counsel used an attorney-client privilege “ruse” to preclude my examination of the adverse party. The adverse party, who was a director of the defendant-corporation, testified about his corporation’s business practice.  The corporation’s business practice was a material issue in the case. I had a chain of email communication between all directors, including the adverse witness, that directly contradicted the witness’s testimony and supported my theory. Although the email communication involved only the directors (and they were discussing their business practice), counsel asserted the attorney-client privilege over the email chain and instructed the witness not to answer my questions. Apparently, according to counsel, because the email communication involving a business matter was forwarded to the corporate lawyer (and there no evidence showing that the email was forwarded to the corporate lawyer), the entire email chain was “protected” under the attorney-client privilege.

Fortunately, the court disagreed with counsel at a later hearing, finding that the email chain was not privileged. Unfortunately, the attorney-client privilege ruse was not an isolated event. Many litigators, especially those who are representing corporate clients, abuse attorney-client privilege to preclude what is discoverable information, as in, Gillard v. AIG Insurance, 609 Pa. 65, 88 (2011) (noting “the ‘ruse abuse,’ in which ordinary business matters are disguised as relating to legal advice”) (quoting Gregory C. Sisk & Pamela J. Abbate, “The Dynamic Attorney-Client Privilege,” 23 GEO. J. LEGAL ETHICS 201, 230–35 (2010)).

There are three frequently used tactics to invoke the attorney-client privilege ruse. First, existing facts are given to a lawyer. Second, a lawyer is invited to a business meeting. Third, a lawyer is copied on business communications. With very limited exceptions, none of the three types of communications are privileged.

Facts Shared With a Lawyer Are Not Privileged

The attorney-client privilege protects only confidential communications between a client and attorney. (Interestingly, until the 2011 Gillard decision, many Pennsylvania courts held that only confidential communications made by a client to her counsel were privileged but that confidential communications made by counsel to client were not privileged.) The attorney-client privilege does not protect any underlying information that exists independently of the attorney-client communication. In other words, the underlying information does not become “privileged” information just because it was given to a lawyer, see Upjohn v. United States, 449 U.S. 383, 385 (1981). The attorney-client privilege does not protect mere facts the client communicates to her lawyer, as in Pennsylvania Department of Education v. Bagwell, 114 A.3d 1113, 1124 (Pa. Cmwlth. 2015) (citing Upjohn). Thus, even if a client shared underlying facts with his lawyer for the purposes of obtaining legal advice, while the client’s communications are privileged, the underlying facts do not become privileged just because they were shared with the lawyer.

Business Discussions Are Not Privileged

Counsel in the example I mentioned above also argued that the email exchange between the adverse party and his fellow directors was privileged because the business discussions contained in the email exchange were gathered by the directors for the purposes of seeking legal advice. The business discussions, even if they were gathered for the purposes of seeking legal advice, are not privileged. The other two frequently used tactics of the attorney-client privilege ruse—a lawyer sits in a business meeting or a lawyer is copied on a business communication—is commonly invoked in the context of the corporate attorney-client setting.

In the corporate attorney-client setting, a lawyer is invited to sit or even participate in a business meeting (such as a directors’ meeting or shareholders’ meeting) or a lawyer is being copied on business communications. The corporation then claims that all communications are privileged because the lawyer either was at the meeting or was copied on the communications. Unless all of the elements of the attorney-client privilege are met—e.g., the confidential communication made for the purposes of obtaining legal advice—neither situation warrants the protection of the attorney-client privilege. A lawyer’s sitting in a business meeting, even if the lawyer participates in the discussions, does not make the discussions privileged simply because of the lawyer’s presence at the meeting. In such a situation, the attorney-client privilege would protect the discussions only if the predominant purpose of the meeting was to obtain legal advice. If, on the other hand, the predominant purpose of the meeting was business discussions, the discussions are not privileged. Even if a business decision can be viewed as both business and legal evaluations, the business aspects of the decision are not protected simply because legal considerations are also involved, as in International Cards v. Mastercard International, (S.D.N.Y. Aug. 27, 2014).

Similarly, where communications (such as emails) “are predominantly business communications sent from one businessperson to other business people, with multiple other business people and one in-house attorney copied in the ‘cc’ field,” the communications are not privileged. “A corporation cannot be permitted to insulate its files from discovery simply by sending a ‘cc’ to in-house counsel.” Communications between business people do not become privileged just because a lawyer is copied on the communications, see Kramer v. Raymond, Civ. No. 90-5026 (E.D. Pa. May 29, 1992). In a communication involving both legal and business matters, the communication will be protected by the attorney-client privilege only if the “communication’s primary purpose is to gain or provide legal assistance.”

The Kramer court makes clear that business communications made “at meetings attended or directed by attorneys are not automatically privileged as a result of the attorney’s presence.”  Similarly, the “business communications are not protected merely because they are directed to an attorney.” Rather, for the attorney-client privilege to apply to what would otherwise be business communications, the party seeking to prevent disclosure (i.e., the corporation) “must clearly demonstrate that the communication in question was made for the express purpose of securing legal not business advice,” (quoting AAMCO Transmissions v. Marino, (E.D. Pa. Sept. 24, 1991). Moreover, the party who is seeking to prevent disclosure has the burden to establish clearly that the communication was made for the express purpose of obtaining legal advice. Merely stating that a communication was made at the meeting with a lawyer’s presence, that a communication was shared with a lawyer, or that a communication was made at a lawyer’s instruction is not sufficient to establish the attorney-client privilege, as in Custom Designs & Manufacturing v. Sherwin-Williams, 39 A.3d 372, 376 (Pa. Super. Ct. 2012) (“the party invoking a privilege must initially ‘set forth facts showing that the privilege has been properly invoked.’”). If the party fails to establish clearly that the communication was made for the express purpose of obtaining legal advice, the burden never shifts to the other party to challenge the attorney-client privilege.

Conclusion

The attorney-client privilege is an exception to the general rule that relevant evidence is admissible. Unfortunately, some litigators, especially those who represent corporate parties, use the attorney-client privilege ruse to prevent disclosure of relevant information. Compounding the attorney-client privilege ruse is that the courts in Pennsylvania provide little guidance in addressing the abuse. As a result, some litigators invoke improper attorney-client privilege for communications that are not privileged, especially at depositions leading to the derogation of the search for the truth. Until the Pennsylvania Supreme Court issues clear guidance on invoking the privilege properly—perhaps by issuing a stern warning to those who use the attorney-client privilege ruse—practitioners should prepare to argue and persuade the trial court why the attorney-client privilege does not apply to nonprivileged materials. To do so, practitioners should learn to recognize a ruse in the first place.

Edward T. Kang is the managing member of Kang Haggerty LLC. He devotes the majority of his practice to business litigation and other litigation involving business entities.

Reprinted with permission from the April 11, 2019 edition of “The Legal Intelligencer” © 2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

Courts have long recognized that the attorney-client privilege extends to corporations, as in Upjohn v. United States, 449 U.S. 383 (1981). Because a corporation can act only through its agents, usually officers, a corporation’s attorney-client privilege generally applies to communications between the corporation’s authorized agents and counsel. As the U.S. Supreme Court explained in Upjohn, however, it is the corporation that holds the corporate attorney-client privilege, not individual officers.

In sale of business transactions, the seller corporation either sells some or all of its business by means of a merger or a sale of assets. In these transactions, particularly when they involve small and midsized corporations, counsel may represent both the selling corporation and its shareholders in negotiating the terms of sale, participating in due diligence, and completing the transaction. Unless the sale transaction is carefully negotiated and documented, however, the selling corporation could end up unwittingly transferring to the buyer its pre-merger, privileged communications with counsel relating to the merger transaction itself. This may not sound so terrible—especially in cases involving a selling corporation that ceases to exist after the transaction—until there is litigation between the buying corporation and individual owners of the selling corporation arising from the transaction.

Litigation between a buying corporation and selling corporation (or owners of the selling corporation) over a sale of business transaction is all too common, especially when the selling corporation fails to meet the buyer’s pre-deal expectations. Such an unhappy buyer would likely claim that the selling corporation misrepresented its financials, and that the individual owners of the selling corporation, who are often also the officers, intentionally concealed the company’s true financial condition from the buyer.

In this sort of litigation, the owners’ communications with others before the sale transaction become the focus. To the selling corporation’s astonishment, the buying corporation could claim that the buying corporation, not the selling corporation, now owns all pre-merger communications between the selling corporation and others, including privileged communications between the selling corporation and its counsel. Much to the selling corporation’s dismay, the buying corporation would be right.

When there is litigation between the parties after a sale transaction, courts have concluded that the buying corporation, at least in the context of a merger, will acquire all rights to the attorney-client privileged communications of the selling corporation. Unless precautions are taken, such a development would expose all presale discussions between the selling corporation and its counsel to disclosure and use in the litigation. That’s exactly what happened in Great Hill Equity Partners IV v. SIG Growth Equity Fund I, 80 A.3d 155 (Del. Ch. 2013).

In Great Hill, a number of investors (the buyer) sued the selling corporation, Plimus Inc., its shareholders and representatives (collectively, the seller), alleging the buyer had been fraudulently induced into acquiring Plimus. A discovery dispute arose over whether the seller or the buyer controlled the privileged communications between Plimus and its counsel about the pre-merger negotiations.

The Delaware Court of Chancery concluded that under Delaware law in a sale of a corporation by means of reverse merger, the attorney-client privilege belongs to the surviving corporation, including all privileged communications of the sold corporation and its counsel concerning the merger transaction. The court viewed the question as one of statutory interpretation of Delaware General Corporation Law (DGCL) Section 259, which provides that upon a merger, “all property, rights, privileges, powers, franchises, and all and every other interest shall be thereafter as effectually the property of the surviving or resulting corporation.” The court found that the plain statutory language uses the broadest possible terms to make certain that “all” assets of any kind belong to the surviving corporation after the merger. The court added that the term “privileges” has a commonly understood meaning and that “one of the most obvious examples is the attorney-client privilege.”

Chancellor Leo E. Strine Jr. authored the opinion in Great Hill and later, in 2014, was appointed chief justice of the Delaware Supreme Court. Consequently, it is likely that the Delaware Supreme Court would take the same position if presented with the same question.

As noted in the Great Hill case, which was published in 2013, the Supreme Court also addressed this issue as early as 1985: “When control of a corporation passes to new management, the authority to assert and waive the corporation’s attorney-client privilege passes as well. New managers installed as a result of a takeover, merger, loss of confidence by shareholders, or simply normal succession, may waive the attorney-client privilege with respect to communications made by former officers and directors,” as in Commodity Futures Trading Commission v. Weintraub, 471 U.S. 343, 349 (1985). Yet, as noted in the Great Hill case, some courts have taken a different approach regarding the attorney-client privilege issue. In Tekni-Plex. v. Meyner & Landis, 89 N.Y.2d 123 (1996), for example, the New York Court of Appeals adopted a more practical approach, holding that the question of whether the attorney-client relationship transfers to the buying corporation “turns on the practical consequences rather than the formalities of the particular transaction.”

In its analysis, the Tekni-Plex court grouped the selling corporation’s pre-merger attorney-client communications into two categories: general business communications and communications relating to the merger negotiations. The court held that the attorney-client privilege relating to general business communications passed to the new management. The attorney-client privileged communications relating to the merger negotiations, however, did not. The court reasoned that, since the buyer and seller naturally have an adversarial relationship—at least during the negotiations of merger—it would undermine the purpose of the attorney-client privilege to conclude otherwise.

Many courts in recent years, however, have declined to follow the Tekni-Plex approach, and have instead followed the Delaware Chancery Court’s approach as outlined in Great Hill, including U.S. District Judge Gerald McHugh of the Eastern District of Pennsylvania in NewSpring Mezzanine Capital II L.P. v. Hayes, (E.D. Pa. Dec. 9, 2014); also Novack v. Raytheon, (Mass. Super. Oct. 24, 2014). (Author’s note: I argued, unsuccessfully, in the NewSpring matter the court adopt the Tekni-Plex approach. Over my argument that the Tekni-Plex approach was more sensible than the Great Hill approach, the court decided to adopt the Great Hill approach.) Since Pennsylvania’s merger statute, 15 Pa.C.S.A. Section 336(a), uses statutory language similar to DGCL Section 259, it seems likely the result would be the same under Pennsylvania law.

• How do I ensure the attorney-client privilege of the selling corporation stays with the selling corporation?

To avoid the risk of opening a Pandora’s box of confidential information in sale of business disputes, counsel should be sure that the transaction documents specifically address the fate of privileged communications relating to pre-merger negotiations.

In Great Hill, the court acknowledged that parties to a merger can contractually exclude “pre-merger attorney-client communications regarding the negotiation of the transaction from the assets to be transferred to the surviving corporation and explicitly acknowledging that the attorney-client privilege for those documents would belong solely to the seller after the merger.” The same thing can be accomplished in an asset sale by including a provision in the asset sale agreement on “excluded assets” that explicitly indicates that the seller retains all rights to the attorney-client privilege related to any excluded assets and with respect to all communications concerning the asset sale agreement, as in Postorivo v. AG Paintball Holdings,C.A. Nos. 2991-VCP, 3111-VCP (Del. Ch. Feb. 7, 2008).

Often in a sale of business transaction, the same counsel will undertake to jointly represent the selling corporation and its shareholders, thereby creating a co-client privilege among each client and the attorney representing them jointly. If a joint representation is involved, the engagement letter should clearly address the scope and limitations of the common representation. In particular, the engagement letter should, if appropriate, clearly state that the joint representation and engagement shall end upon completion of the transaction and that all rights to the co-client privilege shall be retained solely by the selling shareholders and relinquished by the selling corporation to the other co-clients. Otherwise, the selling corporation’s interest in the co-client privilege could be conveyed by operation of law to the buyer, which may have undesirable consequences.

For example, while waiving the joint-client privilege requires the consent of all joint clients, according to the Restatement (Third) of the Law Governing Lawyers Section 75(2), under the co-client privilege, one of the co-clients “may unilaterally waive the privilege as to its own communications with a joint attorney, so long as those communications concern only the waiving client; it may not, however, unilaterally waive the privilege as to any of the other joint clients’ communications or as to any of its communications that relate to other joint clients,” as in In re Teleglobe Communications, 493 F.3d 345, 363 (3d Cir. 2007), as amended (Oct. 12, 2007).

By thinking ahead and planning carefully, counsel to sellers in merger and asset sales can put in place contractual arrangements to assure that their confidential transaction-related attorney-client communications remain in the control of the selling group and inaccessible to the buyer. •

Reprinted with permission from the March 22 edition of The Legal Intelligencer”© 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com

As a brief background, plaintiff, Gary Miller Imports, Inc., filed the action alleging that the defendants, brothers Carter, Brent, and Kevin Dolittle, who were minority shareholders of plaintiff, had been embezzling extra pay, vacation pay, and bonus payments, stealing cars, and engaging in racketeering activity. Before the lawsuit, the Dolittle brothers had formerly retained the Macdonald Illig firm as corporate counsel for Gary Miller Imports, Inc., to assist in the company’s next steps arising out of a failed deal with Mazda and Chevrolet.

Upon the start of this present action, the Dolittle brothers once again engaged the Macdonald Illig firm. The motion to compel arose after plaintiff sought from the firm communications under the belief that these communications pertained to the corporation. The plaintiff believed that the information the communications contained related to the defendants acting as corporate agents. Also, plaintiff argued that the law firm had even billed the corporation for its services for this action.

In order for a corporate officer to assert his or her claim of attorney-client privilege with communications with corporate counsel, five steps set forth in In re: Bevill, Bressler & Schulman Asset Management Corp. must apply. Summed up, this test enables the determination of whether there exists a clear distinction as to communications related to the corporation and to the individual.

In the opinion by Judge Cohill, he states that there is no reason to doubt that the firm’s representation of the minority shareholders, the Dolittle brothers, was in the capacity of representing them as individuals. Concurrently, the Judge agreed with defendants’ argument that there does in fact exist a distinction between the communications, for after review of the eight documents, the legal counsel sought were as individuals and not acting for the corporation. As such, the Bevil test applies, and the communications are considered privileged.

2014 has been a staple year in Pennsylvania in determining the level of privilege extended to attorney communications with experts and clients. As noted in our two past blog entries, the courts have leaned towards more protection towards attorney-expert communications (read here and here), and now it has truly defined further the limits of what corporations can seek from shareholders in the event of a dispute.