Pittsburgh History & Landmarks Found. v. Ziegler
200 A.3d 58
Pa.2019Background
- Derivative plaintiffs (former trustees) sued current trustees of two nonprofit corporations (Pittsburgh History and Landmarks Foundation and its subsidiary) alleging improper removal/reconstitution of boards and related misconduct; plaintiffs sought to litigate derivative claims on behalf of the corporations.
- The reconstituted boards formed an Independent Investigation Committee (IIC) that investigated plaintiffs’ demand and recommended not to pursue litigation; current management moved to dismiss the derivative counts under Cuker’s ALI-based framework.
- Plaintiffs served document requests; defendants produced many documents but withheld materials (including legal opinions and communications) as attorney-client privileged; plaintiffs moved to compel production and to speak with the corporations’ former general counsel, Anne Nelson.
- Trial court ordered broad production (all materials provided to or generated by the IIC, including legal opinions) and allowed pre-deposition communication with Nelson; trial court relied on fiduciary and common-interest/co-client theories to defeat privilege.
- Commonwealth Court vacated and remanded, concluding trial court erred on fiduciary and co-client exceptions and directing a Garner-style "good cause" balancing to determine whether privilege should be pierced for documents contemporaneous with the alleged misconduct; limited production of "related legal opinions" required under ALI §7.13(e) was recognized.
- Pennsylvania Supreme Court rejected adoption of Garner’s qualified good-cause privilege (and Restatement §85 approach) as inconsistent with Pennsylvania law and predictability of the statutory privilege, but affirmed that fiduciary and co-client exceptions did not apply on the facts and remanded for proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pennsylvania should adopt Garner’s "good cause" qualified attorney-client privilege in derivative suits | Garner test should apply; ALI §7.13 and its Comment incorporate Garner; allows plaintiffs to show good cause to overcome privilege | Garner creates a subjective, unpredictable qualified privilege inconsistent with 42 Pa.C.S. §5928 and Pennsylvania precedent | Court rejected Garner and Restatement §85 approach as incompatible with Pennsylvania law and the need for predictability in the privilege |
| Scope of disclosure under ALI §7.13(e) ("related legal opinions") when management files committee report in support of dismissal | §7.13(e) requires production of related legal opinions provided to board/IIC; plaintiffs read it broadly to include preexisting opinions submitted to IIC | Defendants read §7.13(e) narrowly: only requires producing the committee report and formal legal opinions tendered to the court; preexisting privileged opinions need standard privilege protection | Court held ALI §7.13(e) provides a framework that permits limited disclosure (e.g., related formal legal opinions to prevent opinion-shopping) but does not mandate wholesale waiver; remand for trial court to apply Cuker/ALI principles consistent with opinion |
| Applicability of fiduciary-exception (trustee/beneficiary analogy) to compel corporate privileged materials | Plaintiffs say board members/trustees of nonprofit are akin to trustees and thus cannot assert privilege against the corporation/its representatives | Defendants say fiduciary exception applies only in trust contexts (beneficiary relationship) and plaintiffs were former trustees, not beneficiaries | Court affirmed Commonwealth Court: fiduciary exception did not apply on these facts; derivative structure does not fit the trust-based fiduciary exception |
| Applicability of co-client/common-interest exception and ability to interview former in-house counsel (Anne Nelson) | Plaintiffs argue prior joint representation or common interest during tenure waived privilege re: contemporaneous materials; thus they should access documents and speak with Nelson about pre-litigation events | Defendants assert entity-is-client rule: current management controls the corporation’s privilege; co-client/common-interest doctrines do not convert former directors into holders of corporate privilege; broad waiver would chill counsel-client communications | Court rejected co-client/common-interest exceptions as grounds to compel production here; allowed remand for limited fact-specific inquiry under Cuker/ALI framework (but not Garner) |
Key Cases Cited
- Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir.) (proposes nine-factor good-cause test for piercing corporate privilege in derivative suits)
- Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997) (adopts ALI Principles sections governing derivative suits and business judgment framework)
- Weintraub v. United States, 471 U.S. 343 (U.S. 1985) (current management control presumption: corporation as client acts through management)
- Upjohn Co. v. United States, 449 U.S. 383 (U.S. 1981) (purpose of attorney-client privilege to encourage frank communications)
- Gillard v. AIG Ins. Co., 15 A.3d 44 (Pa. 2011) (Pennsylvania privilege analysis and use of Restatement provisions)
- Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, 95 A.3d 1264 (Del. 2014) (Delaware Court adopting Garner-like approach to derivative privilege issues)