Pittsburgh History and Landmarks Foundation, a Pennsylvania Non-Profit Corporation v. A.P. Ziegler, Jr. M.S. Bibro and J.R. Norris
161 A.3d 394
Pa. Commw. Ct.2017Background
- Derivative suit by former board members against current officers and boards of two related Pennsylvania nonprofit corporations alleging mismanagement and breach of fiduciary duty.
- Boards appointed a joint Independent Investigating Committee (with independent counsel) which investigated and recommended dismissal of the derivative action; defendants moved to dismiss based on that report.
- Plaintiffs sought discovery of all materials provided to or generated by the Investigating Committee, including privileged legal opinions; trial court ordered broad production and allowed Plaintiffs to interview former General Counsel Anne Nelson.
- Defendants appealed the discovery order insofar as it required disclosure of materials arguably protected by the attorney-client privilege and the work-product doctrine.
- Commonwealth Court vacated the trial court’s order and remanded, holding that the trial court failed to perform the required Garner-style “good cause” inquiry under the ALI Principles/Restatement framework before ordering disclosure; court rejected broad application of fiduciary-duty and common-interest exceptions but recognized a limited Garner-based exception.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether former board members can obtain communications from before suit that otherwise would be privileged | Plaintiffs: fiduciary duties and need to test committee independence justify disclosure of pre-suit, contemporaneous communications | Defendants: privilege belongs to corporation; former members lack standing to waive; disclosure would eviscerate privilege | Court: Garner-based exception may apply to pre-suit, contemporaneous communications but trial court must conduct a "good cause" balancing before disclosure; remand for that inquiry |
| Whether communications between Investigating Committee and its counsel are discoverable when report supports a motion to dismiss | Plaintiffs: ALI §7.13 requires disclosure of related legal opinions submitted to court | Defendants: §7.13(e) does not create blanket waiver; committee counsel communications remain privileged except limited formal opinions | Court: §7.13 permits limited waiver—if committee files report/opinion in support of dismissal, related legal opinions tendered to court must be disclosed; but trial court must limit scope and protect work product |
| Whether fiduciary-duty or common-interest/co-client exceptions compel disclosure | Plaintiffs: fiduciary duty and co-client/common-interest exceptions apply to reveal communications | Defendants: these exceptions do not apply; trial court conflated doctrines; exceptions are narrow | Court: rejected broad application of fiduciary-duty and common-interest exceptions here; preferred targeted Garner-style approach over expansive fiduciary exception |
| Whether Plaintiffs may interview former general counsel Anne Nelson about communications/advice | Plaintiffs: Nelson can testify about contemporaneous advice and communications | Defendants: communications remain privileged; Nelson was corporate counsel, not Plaintiffs’ counsel | Court: interview limited—if Garner-based good-cause shown, discussion restricted to contemporaneous, pre-suit communications; post-committee communications and committee counsel work product remain protected |
Key Cases Cited
- Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997) (adopted ALI Principles for judicial handling of derivative actions and limited discovery on motions to dismiss)
- Commonwealth v. Blystone, 119 A.3d 306 (Pa. 2015) (collateral-order appeal principles for discovery orders implicating privilege)
- Joy v. North, 692 F.2d 880 (2d Cir. 1982) (courts should not permit dismissal of derivative suits based on secret documents)
- Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970) (framework for "good cause" balancing to pierce corporate attorney-client privilege in derivative suits)
- In re Teleglobe Commc’ns Corp., 493 F.3d 345 (3d Cir. 2007) (co-client/adverse-litigant exception to joint-representation privilege)
- Gillard v. AIG Ins. Co., 15 A.3d 44 (Pa. 2011) (recognizing tension between privilege and truth-seeking; privilege contours)
- Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343 (U.S. 1985) (control of corporate privilege follows control of corporation)