Pace-O-Matic, Inc. v. Eckert Seamans Cherin & Mellott, LLC, Civil Action 1:20-cv-00292
| Decision Date | 16 November 2021 |
| Docket Number | Civil Action 1:20-cv-00292 |
| Court | U.S. District Court — Middle District of Pennsylvania |
| Parties | PACE-O-MATIC, INC., Plaintiff, v. ECKERT SEAMANS CHERIN & MELLOTT, LLC, Defendant. |
MEMORANDUM
This is a diversity action in which the plaintiff, Pace-O-Matic, Inc. (“POM”) has brought a state-law breach of fiduciary duty action against the defendant, Eckert Seamans Cherin & Mellott, LLC (“Eckert”). POM, a Wyoming corporation with a principal place of business in Georgia, is a former client of Eckert, a law firm based in Harrisburg, Pennsylvania. POM claims that Eckert breached its professional duties of loyalty and confidentiality by undertaking the concurrent representation of another client in litigation against POM. For relief, POM seeks an award of compensatory and punitive damages plus declaratory and injunctive relief against Eckert.
We previously considered and ruled on several discovery motions by POM, Eckert, and two subpoena recipients, Greenwood Gaming & Entertainment, Inc. d/b/a Parx Casino (“Parx”), and Hawke McKeon & Sniscak, LLP (“HMS”). (Doc. 44; Doc. 48; Doc. 50; Doc. 52.) Following written briefing, oral argument, and an in camera review of an agreed-upon selection of purportedly privileged or protected documents, we sustained in part and overruled in part various objections by Eckert, Parx, and HMS, directing that various categories of documents be produced to POM in response to its discovery requests and subpoenas. (Doc. 87, Doc. 105; Doc 88, Doc. 105.)[1]
Eckert Parx, and HMS appealed that discovery ruling to the district judge presiding over this case. (Doc. 93; Doc. 95; Doc. 97.) The appeal was limited to a single category of documents, as to which we had found attorney-client privilege inapplicable on judicial estoppel grounds. (See Doc. 87, at 32-42; Doc. 93; Doc. 95; Doc. 97.)[2] The appellants did not challenge our ruling with respect to the other categories of documents. (See Doc. 93; Doc. 95; Doc. 97.) Following an exchange of briefs (Doc. 94; Doc. 96; Doc. 98; Doc. 107; Doc. 108; Doc. 109; Doc. 110), the presiding district judge reversed our estoppel ruling on procedural grounds and recommitted the matter for additional briefing and further consideration. (Doc. 113; Doc. 114.)[3]
POM, Eckert, Parx, and HMS have now submitted additional briefing on the issue of judicial estoppel. (Doc. 128; Doc. 129; Doc. 130; Doc. 131; Doc. 134; Doc. 135; Doc. 136; Doc. 137.) Upon consideration of the parties' arguments, and reinspection in camera of the purportedly privileged or protected documents at issue, we reach the same conclusion for essentially the same reasons.
POM develops, produces, and licenses electronic “skill games” sold in Pennsylvania and elsewhere. Beginning in 2016, POM engaged Eckert to represent it in Virginia with respect to litigation over whether those skill games were illegal gambling devices under Virginia law. That representation was limited to Virginia, as Eckert represented other clients with adverse commercial interests in Pennsylvania. One of those other clients was Parx, with which Eckert had a prior existing attorneyclient relationship.
In June 2018, POM filed a lawsuit concerning its skill games in the Commonwealth Court against the City of Philadelphia and the Pennsylvania Department of Revenue; that case was assigned Docket No. 418 MD 2018. In July 2018, POM filed a second lawsuit concerning its skill games in the Commonwealth Court against the Pennsylvania State Police; that case was assigned Docket No. 503 MD 2018. On November 20, 2019, the Commonwealth Court issued an opinion in Case No. 418 denying a motion for summary disposition by the Pennsylvania Department of Revenue, which had the effect of placing both actions on an active litigation schedule.
On December 12, 2019, POM filed a motion for a preliminary injunction against the Pennsylvania State Police in Case No. 503. POM sought to enjoin the state police from seizing its skills games from its customers. On December 18, 2019, Parx and another casino filed an amicus brief in opposition to POM's motion for a preliminary injunction. Parx appeared through counsel of record Kevin McKeon of HMS and Adrian King of Ballard Spahr, LLP (“Ballard”).[4] On January 15, 2020, the Commonwealth Court held a hearing on POM's application for a preliminary injunction. On February 14, 2020, the casinos filed applications to intervene in both of POM's Commonwealth Court cases.[5]
At some point in January 2020, POM learned that Eckert was involved in representing Parx in connection with the Commonwealth Court cases and requested that it withdraw from that representation. Eckert declined and instead withdrew from representing POM in the Virginia matters. On February 20, 2020, POM filed the complaint in this action, alleging that Mark Stewart and other attorneys at Eckert had been behind the litigation efforts of Parx in both Commonwealth Court cases, despite a conflict of interest. POM claimed that Eckert's representation of Parx in the Commonwealth Court cases, directly adverse to POM, amounted to a breach of its fiduciary duties to POM as its client-namely, its professional duties of loyalty and confidentiality.
POM has served interrogatories and requests for production seeking information and documents reflecting communications concerning the Commonwealth Court cases exchanged between Eckert attorneys on the one hand and Parx, HMS, and their agents on the other hand. Eckert has objected, asserting attorney-client privilege and workproduct protection with respect to various documents identified on a 30-page privilege log. POM has moved to compel the production of these documents, and Eckert has moved for a protective order precluding production of these documents.
POM also served non-party subpoenas on HMS and Parx, seeking any similar documents that were in their possession. HMS and Parx have entered their appearances here and moved to quash the subpoenas or for a protective order, asserting attorney-client privilege and work-product protection with respect to documents identified on their own privilege logs. Parx has further adopted the privilege logs of Eckert and HMS with respect to any documents in the possession of the two law firms, but which might belong to Parx as client.
Following oral argument, the parties met and conferred to winnow the list of documents to be submitted for in camera review. Those documents were submitted and reviewed by the court in camera. Based on that review, we granted each of the motions in part and denied each in part. Among the documents produced for in camera inspection were email messages and SMS text messages concerning the POM Commonwealth Court litigation, exchanged between Stewart and other Eckert attorneys on the one hand and other attorneys or corporate representatives for Parx on the other hand. These communications all concerned efforts by Parx to participate in the Commonwealth Court litigation-first as an amicus curiae with respect to a motion by POM for preliminary injunctive relief, and then later as an intervenor seeking full party status, but at all times in direct opposition to the interests of the petitioner, POM, which was also a client of Eckert at the time.
In our prior ruling with respect to these documents, we found attorney-client privilege inapplicable on judicial estoppel grounds. Eckert, Parx, and HMS appealed that portion of our ruling, but they did not challenge our ruling with respect to other categories of documents. On appeal, the presiding district judge reversed our estoppel ruling on procedural grounds and recommitted the matter to us for further consideration.
On remand, we directed the parties to brief the issue of judicial estoppel, which they have done. We have also reinspected the purportedly privileged documents in camera.
A. Attorney-Client Privilege
This is a diversity case. Therefore, Pennsylvania state law governs whether attorney-client privilege applies to the documents at issue. See Fed. R. Evid. 501; United Coal Cos. v. Powell Constr. Co., 839 F.2d 958, 965 (3d Cir. 1988). See generally 42 Pa. Cons. Stat. Ann. § 5928 (“In a civil matter counsel shall not be competent or permitted to testify to confidential communications made to him by his client, nor shall the client be compelled to disclose the same, unless in either case this privilege is waived upon the trial by the client.”).
“Because the attorney-client privilege obstructs the truth-finding process, it is construed narrowly.” Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414, 1423 (3d Cir. 1991); see also Harrisburg Auth. v CIT Capital USA, Inc., 716 F.Supp.2d 380, 387 (M.D. Pa. 2010) (). For the attorney-client privilege to attach to a communication, “it must be ‘(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.'” In re Teleglobe Commc'ns Corp., 493 F.3d 345, 359 (3d Cir. 2007) (quoting Restatement (Third) of the Law Governing Lawyers § 68 (2000) [hereinafter, “Restatement (3d) Lawyers”]). “‘Privileged persons' include the client, the attorney(s), and any of their agents that help facilitate attorney-client communications or the legal representation.” Id. at 359 (citing Restatement (3d) Lawyers § 70). “A communication is only privileged if it is made ‘in confidence.'” Id. at 361 (citing Restatement (3d) Lawyers § 68). “[I]f persons other than the client, its attorney, or their agents are...
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