Opinion
CIVIL ACTION NO. 03-CV-1706
December 19, 2003
MEMORANDUM AND ORDER
Presently before the Court is Motion for a Protective Order Filed by Plaintiff RCN Corporation. (Doc. No. 21.) For the following reasons, Plaintiff's Motion is granted.
Background
This case arises out of a promotion agreement entered into between RCN Corporation ("RCN") and Paramount Pavilion Group, LLC ("PPG"), dated as of August 1, 2001, as amended February 28, 2002 (the "Agreement"). RCN alleges that in the Agreement, PPG agreed to construct a facility named the "RCN Center" in exchange for seven installment payments made by RCN to PPG totaling $2,000,000. (Compl. ¶ 14.) After RCN had paid PPG approximately $300,000 pursuant to the Agreement, PPG contacted RCN and asked for a letter of credit in order to complete closing on a loan commitment letter needed in connection with the facility. ( Id. ¶ 23.) RCN informed PPG that RCN was not obligated by the Agreement to provide a letter of credit and that it did not intend to do so. ( Id. ¶ 24.) PPG was unable to obtain the loan commitment due to its failure to obtain the letter of credit. ( Id. ¶ 25.)
The Agreement required PPG to break ground on the construction of the facility prior to September 1, 2001. ( Id. ¶ 26.) RCN alleges that PPG failed to break ground by that date. ( Id. ¶ 27.) However, on February 28, 2002, RCN and PPG executed an amendment to the Agreement (the "Amendment") which, inter alia, (i) extended the ground breaking date by one year to September 1, 2002; (ii) required RCN to receive a copy of a fully executed loan commitment from PPG's lender; and (iii) clarified that the loan commitment letter could not place any obligations on RCN in addition to those contained in the Agreement. ( Id. ¶ 28.) The Amendment clarified the term "ground breaking" to mean "the occurrence of any substantial activity which indicates that the start of construction of the Facility is underway." The Amendment also set forth that activities such as "steps taken in anticipation of construction such as ground testing, soil sampling and similar activities, ceremonial ground breaking activities," and any activities which occurred prior to the date of the Amendment were activities that did not signify "ground breaking." ( Id. ¶ 29.)
RCN alleges that "ground breaking," as defined in the Agreement, did not occur prior to September 1, 2002. ( Id. ¶ 30.) On September 4, 2002, RCN notified PPG that PPG was in default of the Agreement by failing to break ground by September 1, 2002, and that RCN intended to terminate the Agreement. ( Id. ¶ 31.) Under the terms of the Agreement, upon default by PPG and termination of the Agreement by RCN, PPG is obligated to return all amounts paid by RCN to PPG within fifteen days of termination. RCN therefore demanded that PPG return the $300,000 RCN paid to PPG. ( Id. ¶ 32.) RCN agreed to extend to October 7, 2002, the deadline for PPG to reimburse RCN the $300,000. ( Id. ¶ 33.) However, PPG has failed to reimburse RCN. ( Id. ¶ 34.)
On March 21, 2003, RCN filed the instant action seeking return of the installment payments. On May 14, 2003, Defendants PPG, James W. Galley, and John C. Keefe answered the complaint and filed counterclaims, including a claim that RCN breached the Agreement. The parties have substantially completed discovery. On November 14, 2003, RCN completed depositions of two of PPG's principles. Over the next several weeks, PPG deposed four of the five witnesses it noticed. The one witness PPG failed to depose was Philip J. Passanante, an in-house counsel for RCN. PPG notified RCN that it wanted to depose Passanante on November 11, 2003. (Doc. No. 22, Ex. A.) On November 13, 2003, RCN notified PPG that it would not produce Passanante for a deposition because "his involvement was as legal counsel and the relevant conversations he had are privileged." ( Id., Ex. B.) Nevertheless, on November 25, 2003, PPG noticed Passanante's deposition for December 10, 2003. On December 9, 2003, RCN filed the instant motion to prevent Passanante's desposition.
In support of its motion, RCN attaches an affidavit from Passanante. In that affidavit, Passanante swears that he is an attorney employed by RCN, and that "[m]y personal involvement in the transactions and occurrences that give rise to the issues involved in this lawsuit was solely in my role as legal counsel to RCN." (Doc. No. 21, Affidavit of Philip J. Passanante, Esquire attached as exhibit, ¶¶ 1-2.) Specifically, Passanante swears that he (a) was consulted by RCN personnel for legal advice with respect to legal issues involved in the drafting and execution of agreements entered into between RCN and PPG ( id. ¶ 3); (b) communicated confidential information to RCN's outside counsel so that the outside counsel could provide legal advice to RCN ( id. ¶ 4); (c) never had any conversations related to the events giving rise to this litigation with any principals of PPG or attorneys for PPG ( id. ¶¶ 5-6); (d) never had any conversations related to the events giving rise to this litigation with anyone else outside of RCN ( id. ¶ 7); (e) that all of his knowledge related to the facts involved in this litigation stems from privileged conversations with RCN personnel or RCN's outside counsel ( id. ¶ 8); and (f) that it would be very difficult for him to testify regarding the facts related to this case without revealing privileged information ( id. ¶ 9).
PPG opposes RCN's motion. First, PPG contends that RCN's motion is not timely because PPG failed to move for a protective order until the day before Passanante's scheduled deposition. Second, PPG contends that a substantial portion of Passanante's testimony would not be protected by the attorney-client privilege. PPG seeks to depose Passanante to elicit any non-privileged information, and to ascertain information necessary to assess the applicability of the privilege asserted by RCN.
PPG concedes that some of the conversations involving Passanante are likely privileged, but it questions whether Passanante was acting in all instances as a legal advisor. In this regard, PPG notes that a very large volume of documents were withheld as privileged, and a substantial portion of those identified Passanante as a recipient, sender, or drafter. In addition, PPG argues that deposition testimony identifies Passanante as part of the "inside team" at RCN working on the transaction, and a "facilitator" with corporate financial personnel in connection with negotiations regarding the letter of credit. PPG also points to an e-mail to certain RCN personnel that stated, in part, "Phil Passanante has been part of the process from day one on both agreements." According to PPG, all of this evidence suggests that Passanante has non-privileged, discoverable information.
Analysis
"The purpose of the attorney-client privilege is to encourage full disclosure and open communication between attorneys and their clients." Teltron, Inc. v. Alexander, 132 F.R.D. 394, 395 (E.D. Pa. 1990) (citing Upjohn Co. v. United States, 449 U.S. 383 (1981)). Because the privilege obstructs the search for the truth, it must be narrowly construed. In re Grand Jury Investigation, 599 F.2d 1224, 1235 (3d Cir. 1979). "Notwithstanding this apparent limitation, it generally is acknowledged that the attorney-client privilege is `so compellingly important' that the courts must, within their limits, `guard it jealously.'" Scott Paper Co. v. United States, 943 F. Supp. 489, 499 (E.D. Pa. 1996) (citing Haines v. Liggett Group Inc., 975 F.2d 81, 90 (3d Cir. 1992)). "The burden of demonstrating the existence of the privilege is on the party asserting it." Teltron, 132 F.R.D. at 396 (citing Fed. Trade Comm'n v. Shaffner, 626 F.2d 32 (7th Cir. 1980)). Accordingly, "the proponent must provide the court with enough information to enable the court to determine privilege, and the proponent must show by affidavit that precise facts exist to support the claim of privilege." Caruso v. Coleman Co., No. 93-CV-6733, 1995 WL 384602, at *1 (E.D. Pa. June 22, 1995).
This is a diversity case. "Federal courts sitting in a diversity action are bound to apply state law regarding attorney/client privilege." Naglak v. Pa. State Univ., 133 F.R.D. 18, 22 (M.D. Pa. 1990) (citing FED. R. EVID. 501 and Cedrone v. Unity Sav. Ass'n, 103 F.R.D. 423, 426 (E.D. Pa. 1984)). Under Pennsylvania law, the privilege protects communications between a lawyer and his client made for the purpose of obtaining legal advice. In re Ford Motor Co., 110 F.3d 954, 965 (3d Cir. 1997). "A corporation may claim the privilege for communications between its counsel and its employees who have authority to act on its behalf." Id. (citing Maleski v. Corp. Life Ins. Co., 641 A.2d 1, 3 ( Pa. Commw. 1994)). See also Barr Marine Prods. Co. v. Borg-Warner Corp., 84 F.R.D. 631, 636 (E.D. Pa. 1979) ("The fact, by itself, that in-house counsel are involved in the communications at issue should not affect the protection afforded by the attorney-client privilege.").
After reviewing Passanante's affidavit, we conclude that RCN has met its burden of showing the existence of the attorney-client privilege. Passanante's affidavit demonstrates that he was corporate counsel for RCN and that the only knowledge he has relevant to this case stems from conversations with RCN personnel or RCN's outside counsel for the purpose of obtaining or providing legal advice. All of these conversations are protected by the attorney-client privilege. In our view, Passanante's affidavit is sufficient to demonstrate the applicability of the privilege. See, e.g., Georgine v. Amchem Prods., Inc., 160 F.R.D. 478, 485 n. 3 (E.D. Pa. 1995) (ordering attorneys claiming attorney-client privilege to "file a sworn affidavit establishing each element of that privilege").
We are not persuaded by PPG's reliance on Tehron, Inc. v. Alexander, 132 F.R.D. 395 (E.D. Pa. 1990). In that case, the CEO of the defendant submitted an affidavit stating his "information and belief that all of the information sought from the in-house counsel was privileged. The court rejected the affidavit as insufficient because it did not recite the personal knowledge of the in-house counsel and was therefore not admissible evidence. Tehron, 132 F.R.D. at 396. Here, Passanante submitted an affidavit stating his personal knowledge and belief that all of his conversations relevant to this case are privileged.
We reject PPG's contention that it has submitted evidence suggesting that Passanante acted as both a legal and business advisor with respect to the transaction at issue in this case. First of all, PPG's "evidence" consists of statements in its brief, not deposition transcripts or affidavits. See Meridian Mortg. Corp. v. Spivak, No. 91-3932, 1992 WL 205640, at *3 (E.D. Pa. Aug. 14, 1992) ("[S]atements in briefs are not a substitute for competent evidence."). Moreover, none of the statements PPG points to refute Passanante's contention that he acted solely as a legal advisor with respect to the transaction at issue in this case. Accordingly, after considering Passanante's affidavit, and the arguments of PPG, we find that RCN's motion for a protective order should be granted.
Finally, we reject PPG's assertion that RCN's motion should be denied because it was untimely. On November 11, 2003, PPG notified RCN that it wished to depose Passanante. Two days later, RCN responded that it would not produce Passanante because all of the relevant conversations he had were privileged. Though RCN did not move for a protective order until the day before Passanante's deposition, RCN notified PPG nearly a month before that it was asserting its attorney-client privilege and did not intend to produce Passanante for his deposition. Under the circumstances, we fail to see the prejudice to PPG.
An appropriate order follows.
ORDER
AND NOW, this ___ day of December, 2003, upon consideration of Motion for; Protective Order Filed by Plaintiff RCN Corporation (Doc. No. 21), and all papers filed in support thereof and opposition thereto, it is ORDERED that the Motion is GRANTED.
IT IS SO ORDERED.