Piltch, S. v. Lipsey, R. ( 2016 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
STUART PILTCH, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
ROBERT S. LIPSEY, ESQUIRE,
Appellee No. 3213 EDA 2014
Appeal from the Order Entered November 12, 2014
In the Court of Common Pleas of Montgomery County
Civil Division at No(s): 2014-00557
BEFORE: OLSON AND OTT, JJ. and STEVENS, P.J.E.*
MEMORANDUM BY OLSON, J.: FILED JULY 12, 2016
Appellant, Stuart Piltch, appeals from the order entered on November
12, 2014, which denied, among other things, his request for a protective
order. We vacate in part and remand.
On January 9, 2014, Appellant instituted the current action by filing a
complaint against Robert S. Lipsey, Esquire (“Attorney Lipsey”). Within
Appellant’s amended complaint, Appellant summarized the relevant factual
allegations:
[Arnold M. Katz (“Katz”)] has been associated with
[Appellant] for more than [20] years in a variety of
businesses. As part of their long-standing business
relationship, Katz would from time to time maintain and
distribute funds that belonged to [Appellant] from Katz’s
personal bank account for investment purposes. Katz would
do so on [Appellant’s] behalf and at [Appellant’s] direction. .
..
*Former Justice specially assigned to the Superior Court.
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[With respect to the case at bar, Katz] . . . delivered a
check in the amount of [$500,000.00] to [Attorney Lipsey] .
. . to be placed in [Attorney Lipsey’s] attorney escrow
account pursuant to an oral escrow agreement among
[Appellant], Delaware Valley Financial Group (“DVFG”) and
[Attorney Lipsey]. The [$500,000.00], which belonged to
[Appellant], was an advance on an investment that
[Appellant] agreed to make to finance premiums on life
insurance policies purportedly sold by DVFG, an insurance
broker and premium financing enterprise. At the time,
[Attorney Lipsey] served as DVFG’s General Counsel and
was also an officer of DVFG who was directly involved in the
company’s operations as well as in the transactions
concerning the financing of DVFG. Under the escrow
agreement, [Appellant] agreed to invest [$500,000.00] in
DVFG to finance premiums for insurance policy holders;
DVFG agreed to pay [Appellant] a return on his investment;
and [Attorney Lipsey] agreed to hold the [$500,000.00] in
his attorney escrow account until two conditions were met:
1) the insurance policies for which premiums were being
financed by [Appellant’s] investment were put in place; and
2) [Appellant], through Katz, authorized the release of his
funds from [Attorney Lipsey’s] escrow account. Despite his
commitment to the contrary, almost immediately after
depositing the check in his escrow account, [Attorney
Lipsey] wired [Appellant’s] money to an account held by
DVFG, prior to either of the conditions being met.
Appellant’s Amended Complaint, 7/9/14, at “Introduction” and ¶¶ 6-7 (some
internal paragraphing omitted).
Appellant averred that Attorney Lipsey refused to return his
$500,000.00. Id. at ¶ 26. As a result, Appellant claimed that Attorney
Lipsey was liable to him for breach of oral contract, promissory estoppel,
conversion, and breach of fiduciary duty. Id. at ¶¶ 28-48.
Attorney Lipsey answered Appellant’s amended complaint and averred
that he: “was not an officer or director of [DVFG];” “was not directly
involved in the operation of DVFG’s business and transactions concerning the
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financing of DVFG;” “was not a party to an escrow agreement involving
[Appellant] or [Katz];” and, “did not agree to hold money in an escrow
account or as an escrow agent.” Attorney Lipsey’s Answer, 1/12/15, at
“Response to [Appellant’s] Introduction” and ¶¶ 2, 10, 13, 15, 17, and 19-
27. Moreover, Attorney Lipsey averred:
[Appellant] did not have an escrow account. A check from
Katz drawn on Katz’s personal checking account was
deposited into [Attorney Lipsey’s] IOLTA. Katz instructed
[Attorney Lipsey] to release the funds to DVFG. There was
no condition on the release of funds from [Attorney
Lipsey’s] IOLTA communicated to [Attorney Lipsey].
[Attorney Lipsey] had no interaction with [Appellant] and
was unaware of [Appellant’s] alleged involvement.
[Attorney Lipsey] did not breach a contract, fiduciary duty
or a promise.
Id. at “Response to [Appellant’s] Introduction.”
In March 2014, Attorney Lipsey propounded a request for production
of documents upon Appellant. Within the request, Attorney Lipsey sought
the disclosure of the following documents:
24. [Appellant’s] income tax returns (IRS form 1040) from
January 1, 2000 through January 1, 2012.
25. A list of all entities [Appellant] holds an interest in.
26. All IRS form 1099’s filed by [Appellant] from January 1,
2000 through January 1, 2012.
27. All IRS form 1099’s indicating incoming revenue
[Appellant] received in any capacity from January 1, 2000
through January 1, 2012.
28. All IRS form 1099’s indicating incoming revenue from all
of the following entities:
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a. Stoney Hill Partners
b. Feldman Piltch Consulting
c. PYA
d. Cambridge Advisory Group, Inc.
e. Hinsdale, LLC
f. Health and Productivity Consulting, Inc.
29. All documentation of income for the above entities from
January 1, 2000 through January 1, 2012.
30. All documentation of income for [Appellant] from
January 1, 2000 through January 1, 2012.
...
34. Documentation of all revenues the following entities
received from January 1, 2000 through January 1, 2012 for
the following entities[:]
a. Stoney Hill Partners, LLC
b. Feldman Piltch Consulting, LLC
c. Cambridge Advisory Group, Inc.
d. Hinsdale, LLC
e. Health and Productivity Consulting, Inc.
f. PYA
Attorney Lipsey’s First Set of Requests for Production of Documents,
3/11/14, at ¶¶ 24-30 and 34 (hereinafter “Attorney Lipsey’s Requests for
Production of Documents”).
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Appellant objected to each of the above requests on the basis that
they were “overbroad, [sought] information that is not relevant to the
subject matter of this litigation, and/or the [r]equest[s are] not reasonably
calculated to lead to the discovery of admissible evidence.” See Appellant’s
Response to Attorney Lipsey’s Requests for Production of Documents,
5/19/14, at ¶¶ 24-30 and 34. In response, Attorney Lipsey filed a motion to
compel production of the requested documents. Attorney Lipsey’s Motion to
Compel, 9/8/14, at ¶¶ 93-97.
On October 23, 2014, the trial court granted Attorney Lipsey’s motion
to compel and ordered Appellant to produce the requested documents within
20 days. Trial Court Order, 10/23/14, at 1.
Appellant promptly filed a “Motion for Partial Reconsideration and
Protective Order.” Within the motion, Appellant again claimed that Attorney
Lipsey’s “requests for all personal tax returns and all income and revenue
[Appellant] received from any source for a 12-year period starting in 2000,
are absurdly irrelevant, overbroad, and not reasonably calculated to lead to
the discovery of admissible evidence.” Appellant’s Motion for Partial
Reconsideration and Protective Order, 11/7/14, at ¶¶ 36-45. Further,
Appellant’s motion sought entry of a protective order to prevent further
dissemination of documents produced during discovery. Id. at ¶¶ 53-54.
Appellant claimed that this protective order was necessary because
“information that is responsive to the requests subject to the [discovery]
order includes confidential and sensitive financial information of [Appellant]
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and his entities, including, without limitation, bank records and financial
statements.” Id. at ¶ 53. Appellant claimed that he “should not be required
to produce such information without an appropriate confidentiality
agreement in place that would govern the disclosure of the information.”
Id. at ¶ 54; see also Pa.R.C.P. 4012(a)(9).
On November 14, 2014, the trial court denied Appellant’s request for
partial reconsideration and for a protective order. Thereafter, on November
20, 2014, Appellant filed a notice of appeal from the trial court’s October 23,
2014 and November 14, 2014 orders. Appellant’s Notice of Appeal,
11/14/14, at 1. Appellant numbers three claims on appeal:
1. Whether the trial court erred when it granted [Attorney
Lipsey’s] motion to compel as to document request
[numbers] 24-30 [and] 34 and ordered the production of
Appellant’s confidential and sensitive financial information in
response to these requests because these requests –
seeking financial information and tax returns for Appellant
and the entities he controls for a 12-year period dating back
to 2000 – are overly broad, irrelevant to the underlying
dispute involving a single deposit into [Attorney Lipsey’s]
escrow account, not reasonably calculated to lead to the
discovery of admissible evidence, and therefore beyond the
scope of permissible discovery?
2. Whether the trial court erred when it denied Appellant’s
request for partial reconsideration of the October 21 order
to the extent it affirmed the portions of the order requiring
the production of information in response to document
request [numbers] 24-30 [and] 34?
3. Whether the trial court erred in denying Appellant’s
request for entry of a protective order pursuant to
Pennsylvania Rule of Civil Procedure 4012 to the extent
Appellant is required to produce his confidential and
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sensitive financial information in accordance with the
October 21, 2014 order?
Appellant’s Brief at 4 (some internal capitalization omitted).
As we have explained, this Court is obligated to “first ascertain
whether the [order appealed from] is properly appealable, because the
question of appealability implicates the jurisdiction of this [C]ourt.”
Commonwealth v. Borrero, 692 A.2d 158, 159 (Pa. Super. 1997). “The
general rule is that, unless otherwise permitted by statute, only appeals
from final orders are subject to appellate review.” Commonwealth v.
Sartin, 708 A.2d 121, 122 (Pa. Super. 1998). In relevant part,
Pennsylvania Rule of Appellate Procedure defines a “final order” as any order
that “disposes of all claims and of all parties.” Pa.R.A.P. 341(b)(1). 1
In this case, the trial court’s November 14, 2014 order is not final, as
it concerned a discovery matter. See also Jones v. Faust, 852 A.2d 1201,
1203 (Pa. Super. 2004) (“in general, discovery orders are not final, and are
therefore unappealable”). Thus, the challenged order constitutes a
non-final, interlocutory order.
Interlocutory orders are appealable in certain circumstances. Our
Supreme Court explained:
____________________________________________
1
Rule 341 also defines a “final order” as any order that “is expressly defined
as a final order by statute” or “is entered as a final order pursuant to
[Pa.R.A.P. 341(c)].” Pa.R.A.P. 341(b)(2) and (3). However, these two
categories are not applicable to the current appeal.
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in addition to an appeal from final orders of the Court of
Common Pleas, our rules provide the Superior Court with
jurisdiction in the following situations: interlocutory appeals
that may be taken as of right, Pa.R.A.P. 311; interlocutory
appeals that may be taken by permission, Pa.R.A.P. [312];
appeals that may be taken from a collateral order, Pa.R.A.P.
313; and appeals that may be taken from certain
distribution orders by the Orphans’ Court Division, Pa.R.A.P.
342.
Commonwealth v. Garcia, 43 A.3d 470, 478 n.7 (Pa. 2012) (internal
quotations omitted), quoting McCutcheon v. Phila. Elec. Co., 788 A.2d
345, 349 n.6 (Pa. 2002).
The discovery order at issue is not appealable as of right (per
Pa.R.A.P. 311) and Appellants did not ask for or receive permission to appeal
the order (per Pa.R.A.P. 312). Thus, the question before this Court is
whether the order in this case (or any aspect of the order) is appealable
under the collateral order doctrine. See Pa.R.A.P. 313.
Pennsylvania Rule of Appellate Procedure 313 defines a collateral order
as one that: “1) is separable from and collateral to the main cause of
action; 2) involves a right too important to be denied review; and 3)
presents a question that, if review is postponed until final judgment in the
case, the claim will be irreparably lost.” In re Bridgeport Fire Litigation,
51 A.3d 224, 230 n.8 (Pa. Super. 2012); Pa.R.A.P. 313(b). An order is
“separable from and collateral to the main cause of action” if the order “is
entirely distinct from the underlying issue in the case and if it can be
resolved without an analysis of the merits of the underlying dispute.” K.C.
v. L.A., 128 A.3d 774, 778 (Pa. 2015) (internal quotations omitted), citing
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Commonwealth v. Blystone, 119 A.3d 306, 312 (Pa. 2015). Further, with
respect to the “separability” prong of the test, our Supreme Court explained
that, “although [the Supreme Court will] tolerate a degree of
interrelatedness between merits issues and the question sought to be raised
in the interlocutory appeal, the claim must nevertheless be conceptually
distinct from the merits of plaintiff’s claim.” Id. (internal quotations and
citations omitted).
Our Supreme Court has also emphasized that:
the collateral order doctrine is a specialized, practical
[exception to] the general rule that only final orders are
appealable as of right. Thus, Rule 313 must be interpreted
narrowly, and the requirements for an appealable collateral
order remain stringent in order to prevent undue corrosion
of the final order rule. To that end, each prong of the
collateral order doctrine must be clearly present before an
order may be considered collateral.
Melvin v. Doe, 836 A.2d 42, 46-47 (Pa. 2003) (internal citations omitted).
In keeping with the narrow interpretation of the collateral order
doctrine, our Supreme Court has held that “the collateral order rule’s three-
pronged test must be applied independently to each distinct legal issue over
which an appellate court is asked to assert jurisdiction pursuant to Rule
313.” Rae v. Pa. Funeral Dir.’s Ass’n, 977 A.2d 1121, 1130 (Pa. 2009).
Therefore, even if the collateral order test “is satisfied with respect to one
[appellate] issue,” the assertion of jurisdiction does not necessarily mean
that we have “jurisdiction to consider every issue within the ambit of the
appealed order.” Id. at 1123.
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Appellant’s first two claims contend that the trial court erred when it
ordered the production of Appellant’s “confidential and sensitive financial
information in response to [Attorney Lipsey’s discovery] requests.”
Appellant’s Brief at 4. We conclude that we do not have jurisdiction to
consider this portion of the trial court’s order.
Appellant does not claim that the financial documents requested in
paragraphs 24-30 and 34 are privileged. See Rhodes v. USAA Cas. Ins.
Co., 21 A.3d 1253, 1258 (Pa. Super. 2011) (“[g]enerally, discovery orders
involving purportedly privileged material are appealable” under the collateral
order doctrine). Rather, Appellant claims that the financial records are
“confidential and sensitive” and that the “requests for all personal tax
returns and all income and revenue [Appellant] received from any source for
a 12-year period starting in 2000, are absurdly irrelevant, overbroad, and
not reasonably calculated to lead to the discovery of admissible evidence.”
Appellant’s Reply Brief at 13 and Appellant’s Motion for Partial
Reconsideration and Protective Order, 11/7/14, at ¶¶ 36-45.
It is true that the tax returns, return information, and financial records
of Appellant and the entities Appellant controls are private, confidential, and
sensitive. See 26 U.S.C. § 6103(a) (providing that, generally, federal tax
“[r]eturns and return information shall be confidential”); see also
Dougherty v. Heller, ___ A.3d ___, 2016 WL 3261814 at *17 n.10 (Pa.
2016) (“information contained in federal tax returns . . . is made confidential
per federal statute”). However, as the trial court ably explained,
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“[Appellant] placed his financial information at issue by filing suit to collect
monies for which there is no documentation.” Trial Court Opinion, 9/18/15,
at 15. To be sure, for Appellant to prevail on his underlying claims,
Appellant must prove that he owned the $500,000.00 that Katz transferred
to Attorney Lipsey and that Katz acted as Appellant’s agent when he made
the transfer. To prove (and to defend against) these claims requires the
production of income sources, tax returns, and financial records for
Appellant and Appellant’s entities. How far back in time these income
sources, tax returns, and financial records need to go undoubtedly depends
upon the relevance of the material to the underlying claims and defenses.
However, an assessment of the relevance of the material would require that
we analyze the merits of the underlying dispute. As such, that portion of the
trial court’s order that granted production of the requested financial
information is not “conceptually distinct from the merits of plaintiff’s claim”
and requires “an analysis of the merits of the underlying dispute.”
Blystone, 119 A.3d at 312. Thus, we do not have jurisdiction to consider
Appellant’s first two claims on appeal, as both claims concern a portion of
the trial court’s order that is not “separable from and collateral to the main
cause of action.” Pa.R.A.P. 313(b).
For Appellant’s third claim on appeal, Appellant contends that the trial
court erred when it denied his request for entry of a protective order to
protect against dissemination of documents produced during discovery. We
agree.
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At the outset, we conclude that we have jurisdiction to consider the
portion of the trial court’s November 12, 2014 order that denied Appellant’s
request for entry of a protective order. Indeed, this portion of the trial
court’s order satisfies all three prongs of the collateral order doctrine, as the
denial of the protective order: 1) is “separable from and collateral to the
main cause of action” (it is concerned only with the issue of whether the trial
court properly denied a protective order – and does not require any analysis
“of the merits of the underlying dispute”); 2) “involves a right too important
to be denied review” (Appellant sought entry of a protective order to protect
against the dissemination of the tax returns and financial documents that
were produced in discovery; the documents all contain private and sensitive
financial information and, with respect to the federal tax returns and return
information, are “made confidential per federal statute;” Dougherty, ___
A.3d at ___, 2016 WL 3261814 at *17;2 see 26 U.S.C. § 6103(a)); and, 3)
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2
In Dougherty, the Pennsylvania Supreme Court analyzed the
“importance” prong of the collateral order doctrine and held:
we find that the specific privacy concern in issue must be
evaluated and adjudged to satisfy the importance
requirement. In this regard, we make the distinction
among different orders of privacy interests, such as those of
a constitutional magnitude or recognized as such by statute,
as compared with lesser interests.
Dougherty, ___ A.3d at ___, 2016 WL 3261814 at *17. Further, with
respect to the privacy interests that are “recognized as such by statute,” the
Dougherty Court specifically cited to the “privacy interest in information
(Footnote Continued Next Page)
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“presents a question that, if review is postponed until final judgment in the
case, the claim will be irreparably lost” (as we held in Dibble v. Penn State
Geisinger Clinic, Inc., 806 A.2d 866, 870 (Pa. Super. 2002), “there is no
question that if the documents which have been disclosed to the [opposing
party] are in turn disseminated . . . appellate review of the issue will be
moot because such dissemination cannot be undone”). Therefore, we have
jurisdiction to consider the portion of the trial court’s November 12, 2014
order that denied Appellant’s request for entry of a protective order.
With respect to our standard of review over Appellant’s claim of error,
we have held:
It is the responsibility of the trial court to oversee discovery
between the parties and therefore it is within that court’s
discretion to determine the appropriate measure necessary
to insure adequate and prompt discovery of matters allowed
by the Rules of Civil Procedure. With regard to requests for
protective orders . . . [, t]here are no hard-and-fast rules as
to how a motion for a protective order is to be determined
by the court. Whether to grant or deny the motion, and
what kind or kinds of protective orders to issue are matters
that lie within the sound judicial discretion of the court, and
the court’s determination as to these matters will not be
disturbed unless that discretion has been abused.
Hutchison v. Luddy, 606 A.2d 905, 908 (Pa. Super. 1992) (internal
citations and quotations omitted). “An abuse of discretion occurs when a
trial court, in reaching its conclusions, overrides or misapplies the law, or
_______________________
(Footnote Continued)
contained in federal tax returns,” which, the Court noted, “is made
confidential per federal statute.” Id. at *17 n.10.
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exercises judgment which is manifestly unreasonable, or the result of
partiality, prejudice, bias, or ill will.” Commonwealth v. Brown, 839 A.2d
433, 435 (Pa. Super. 2003).
In this case, Appellant sought entry of a protective order under
Pennsylvania Rule of Civil Procedure 4012(a)(9), to protect against the
dissemination of any documents produced during discovery. Rule
4012(a)(9) states:
(a) Upon motion by a party or by the person from whom
discovery or deposition is sought, and for good cause
shown, the court may make any order which justice
requires to protect a party or person from unreasonable
annoyance, embarrassment, oppression, burden or
expense, including one or more of the following:
...
(9) that a trade secret or other confidential research,
development or commercial information shall not be
disclosed or be disclosed only in a designated way.
Pa.R.C.P. 4012(a)(9).
Within Appellant’s motion, Appellant claimed that a protective order
was necessary because the documents included “confidential and sensitive
financial information of [Appellant] and his entities, including, without
limitation, bank records[, tax returns,] and financial statements.”
Appellant’s Motion for Partial Reconsideration and Protective Order, 11/7/14,
at ¶ 53. According to Appellant, he “should not be required to produce such
information without an appropriate confidentiality agreement in place that
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would govern the disclosure of the information.” Id. at ¶ 54; see also
Pa.R.C.P. 4012(a)(9). The trial court denied Appellant’s request, explaining
that it denied the protective order because the documents were relevant to
the underlying case. See Trial Court Opinion, 9/18/15, at 15.
Respectfully, the trial court’s reasoning on this issue was mistaken.
True, the relevancy of the documents is pertinent to their discoverability.
However, with respect to Appellant’s request for a protective order,
Appellant was not seeking to prevent the discovery of the documents.
Rather, Appellant claimed that he “should not be required to produce such
information without an appropriate confidentiality agreement in place that
would govern the disclosure of the information.” Appellant’s Motion for
Partial Reconsideration and Protective Order, 11/7/14, at ¶ 54. Thus,
Appellant requested a protective order to avoid further dissemination of
documents subject to the court’s discovery order. See Appellant’s Reply
Brief at 24 (“[w]ithout a protective order in place, [Attorney Lipsey] will be
free to share and disclose [Appellant’s] and his entities’ confidential personal
and business information”). Simply stated, the relevance of the documents
is not germane to the issue of whether a protective order should issue, or
whether the circumstances justify such a measure to protect against
dissemination of confidential material.
Moreover, in this case, we conclude that the trial court abused its
discretion when it completely denied Appellant’s motion for a protective
order. To be sure, by definition, all of the documents at issue here contain
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private and sensitive financial information and most of the documents are
federal tax returns and information, which are “made confidential per federal
statute.” Dougherty, ___ A.3d at ___, 2016 WL 3261814 at *17 n.10; see
also 26 U.S.C. § 6103(a). As Appellant noted, he “should not be required to
produce such information without an appropriate confidentiality agreement
in place that would govern the disclosure of the information.” Appellant’s
Motion for Partial Reconsideration and Protective Order, 11/7/14, at ¶ 54.
As such, we conclude that Appellant demonstrated good cause as to why he
was entitled to a protective order. Therefore, we vacate this portion of the
trial court’s order and remand so that the trial court may exercise its
discretion and fashion an appropriate confidentiality order to guard against
disclosure of Appellant’s and his entities’ personal and business information,
including financial information.
Order vacated in part. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/12/2016
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