Pace-O-Matic, Inc. v. Cherin
| Docket Number | Civil Action 1:20-cv-00292 |
| Decision Date | 01 December 2023 |
| Parties | PACE-O-MATIC, INC., Plaintiff, v. ECKERT SEAMANS CHERIN & MELLOTT, LLC, Defendant. |
| Court | U.S. District Court — Middle District of Pennsylvania |
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.
This is one of a series of discovery disputes that the parties have been unable to resolve without a court ruling. See e.g., Pace-O-Matic, Inc. v. Eckert Seamans Cherin & Mellott, LLC, No. 20-cv-00292, 2021 WL 602733 (M.D. Pa. Feb. 16, 2021), rev'd in part & , 2021 WL 1264323 (M.D. Pa. Apr. 6, 2021), on remand, 2021 WL 5330641 (M.D. Pa. N o v . 1 6, 2021), aff'd, 2022 WL 2441556 (M.D. Pa. July 5, 2022), rev'd, No. 22-2445, 2023 WL 7491133 (3d Cir. Nov. 13, 2023).
In response to Rule 34 requests for production served by POM, Eckert produced a 116-page privilege log describing 1,010 responsive email messages withheld from disclosure, including the legal basis for withholding each document. Based on the information set forth in that privilege log, POM filed a letter challenging Eckert's assertion of attorney-client privilege and work-product protection with respect to 120 of these documents. (Doc. 295.) Eckert filed a responsive letter. (Doc. 298.)
Upon review of these letters, the presiding United States district judge granted the plaintiff's request for an in camera review of the documents at issue. She directed Eckert to submit copies of the challenged documents for in camera review. She also directed POM to file a reply letter. (Doc. 300.)
As directed, POM filed its reply letter (Doc. 304), and Eckert submitted a tabbed binder containing copies of the 120 challenged documents for in camera review (see Doc. 305). Shortly thereafter, the discovery dispute was referred to the undersigned United States magistrate judge for resolution. (Doc. 313.)
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 Greenwood Gaming & Entertainment, Inc. d/b/a Parx Casino (“Parx”), with which Eckert had a prior existing attorney-client 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. POM of Pa., LLC v. Pa. Dep't of Revenue, No. 418 MD 2018 (Pa. Commw. Ct. filed June 8, 2018). About one month later, POM filed a second lawsuit concerning its skill games in the Commonwealth Court against the Pennsylvania State Police. POM of Pa., LLC v. Pa. State Police, No. 503 MD 2018 (Pa. Commw. Ct. filed July 20, 2018). On November 20, 2019, the Commonwealth Court issued an opinion in the first case denying an application for summary relief by the state department of revenue, which had the effect of placing both actions on an active litigation schedule. See POM of Pa., LLC v. Pa. Dep't of Revenue, 221 A.3d 717 (Pa. Commw. Ct. 2019) (); see also POM of Pa., LLC v. Pa. State Police, No. 503 M.D. 2018, 2019 WL 6173719 (Pa. Commw. Ct. Nov. 20, 2019) ().
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 skill 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 Hawke McKeon & Sniscak, LLP (“HMS”) and Adrian King of Ballard Spahr, LLP (“Ballard”).[1] 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 as parties in both of POM's Commonwealth Court cases.
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.
In connection with an earlier discovery dispute, we conducted an in camera review of other documents responsive to POM's discovery requests and third-party subpoenas. Among the documents produced for that earlier 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.
Our initial February 2021 ruling concerned several categories of documents withheld from production, two of which are relevant to the current dispute. One category was transmittal messages, which “are not privileged unless they reveal the client's confidences.” See Pace-O-Matic, 2021 WL 602733, at *8. A second category was communications concerning legislative, lobbying, or public relations services, which are generally not privileged. See Id. at *9-*10. Eckert, Parx, and HMS appealed a portion of our initial ruling concerning another category of documents, as to which we had found Eckert, Parx, and HMS judicially estopped from asserting attorney-client privilege. But Eckert, Parx, and HMS did not challenge our ruling with respect to any other categories of documents, including our rulings with respect to transmittal messages and communications predominantly concerned with legislative, lobbying, or public relations services. See Pace-O-Matic, 2021 WL 1264323, at *2; see also Pace-O-Matic, 2022 WL 2441556, at *2; Pace-O-Matic, 2021 WL 5330641, at *1.
Meanwhile, HMS-attorney McKeon filed praecipes for withdrawal of appearance in both Commonwealth Court cases on December 13, 2021. On January 11, 2022, the Commonwealth Court denied previously filed motions by POM to disqualify McKeon from both cases on the ground that his recently filed praecipes for withdrawal rendered the motions moot, and it directed another HMS attorney of record and the firm itself to withdraw their appearances as well, which they did a few days later. The state appellate court also struck the proposed intervenors' amicus brief in Case No. 503, and it struck their applications to intervene in both cases, but without prejudice to refiling similar applications to intervene prepared by counsel without a conflict of interest. In June 2022, now represented by other counsel of record, Parx and other casinos filed renewed applications to intervene in both Commonwealth Court cases.
The two Commonwealth Court cases brought by POM involved different defendants, but essentially identical legal issues. In February 2023, POM appears to have opted to pursue its claims exclusively in Case No. 503, filing a praecipe of discontinuance in Case No. 418. Both defendants (the Pennsylvania Department of Revenue and the City of Philadelphia) and the proposed intervenors (Parx and other casino operators) filed appeals to the Supreme Court of Pennsylvania, each of which was ultimately quashed for lack of jurisdiction because the state department of revenue's counterclaim against POM remained pending, notwithstanding POM's discontinuance of its own claims. See POM of Pa., LLC v. Pa. Dep't of Revenue, Docket Nos. 10 EAP 2023, 11 EAP 2023, 12 EAP 2023 (Pa. quashed July 21, 2023) (per curiam).
Meanwhile the other Commonwealth Court case, Case No. 503, moved forward, and a hearing was held on the casinos' application to intervene on July 19, 2023. Following this hearing and some additional briefing by the parties and the proposed intervenors, the Commonwealth Court denied the casinos' applications to intervene on August 14, 2023. The Commonwealth Court also entered a stay of proceedings in both of the cases involving POM pending resolution of related appellate issues in two...
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