Giovinazzo, J. v. Susquehanna Bank

J. A33011/15
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
JOHN GIOVINAZZO AND : IN THE SUPERIOR COURT OF
TAMMY GIOVINAZZO : PENNSYLVANIA
:
v. :
:
SUSQUEHANNA BANK, KEVIN RIFE, :
RIFE & ASSOCIATES AND :
RIFE & ASSOCIATES MANAGEMENT :
CONSULTING LLC :
:
APPEAL OF: SUSQUEHANNA BANK, : No. 3147 EDA 2014
:
Appellant :
Appeal from the Order Entered September 28, 2014,
in the Court of Common Pleas of Philadelphia County
Civil Division at No. 00133 Feb. Term 2013
BEFORE: FORD ELLIOTT, P.J.E., STABILE AND STRASSBURGER,* JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: Filed: July 1, 2016
Susquehanna Bank (“the Bank”) appeals the order of the Court of
Common Pleas of Philadelphia County that denied the Bank’s claim of
privilege and ordered the Bank to produce without redaction all documents
listed on Exhibits D and E of Plaintiff’s Motion to Compel the Deposition of
Defendant Kevin Rife, the Corporate Designee of Rife Associates and the
Corporate Designee of Susquehanna Bank and Motion to Compel Production
of Documents Directed to Susquehanna Bank (“Motion”) filed by
John Giovinazzo (“Giovinazzo”) and Tammy Giovinazzo (collectively, “the
Giovinazzos”) within 15 days.
* Retired Senior Judge assigned to the Superior Court.
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On or about May 16, 2006, the Bank entered into a loan transaction
with Davis-Giovinazzo Construction Company (“D-G Construction”) and the
related companies of General Masonry Construction Company, Inc.,
Davis-Giovinazzo Masonry Company, Inc., and Tri-State Masonry
Systems, Inc. (collectively, “the DG Obligors”). The Bank agreed to lend the
DG Obligors the principal amount of $2,250,000. The DG Obligors executed
and delivered a promissory note to the Bank dated May 16, 2006. Also, on
May 16, 2006, the Bank entered into another loan transaction with the
DC Obligors and extended a line of credit to them in the maximum principal
amount of $6,000,000. The DG Obligors executed and delivered a
promissory note to the Bank for this loan on May 16, 2006. The two loans
were secured in part by a security agreement and UCC-1 financing
statements that covered the accounts receivable of D-G Construction.
Giovinazzo and other parties executed and delivered to the Bank a Guaranty
and Suretyship Agreement, dated May 16, 2006, under which the payments
of all sums due and owing from D-G Construction to the Bank were
guaranteed. The line of credit amount was increased to $6,450,000.
In July 2007, D-G Construction overdrew the line of credit. At the
request of the DG Obligors, the principal amount available under the line of
credit was increased to $9,500,000. D-G Construction defaulted on its
obligations to the Bank, so the Bank again increased the principal amount
available under the line of credit. D-G Construction defaulted on its
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obligations to the Bank when it failed to make required payments.
Giovinazzo defaulted on his obligations under the Guaranty and Suretyship
Agreement when he failed to cure D-G Construction’s default. On July 13,
2011, the Bank entered a confessed judgment against Giovinazzo in the
amount of $14,847,186.68 plus interest after May 19, 2011, in the amount
of $1,725.98 per day. The judgment has not been satisfied.
In the fall of 2007, the Bank assumed control of D-G Construction and
took over management of its operations. The Bank hired Kevin Rife (“Rife”),
Rife & Associates, and Rife & Associates Management Consulting, LLC
(collectively, “Rife Defendants”) to act as its consultants and help the Bank
recover uncollected debt of D-G Construction and to operate
D-G Construction. The Bank employed Giovinazzo to complete projects for
D-G Construction and to assist in the collection of outstanding accounts
receivable. As part of the consideration for this service, the Bank allegedly
was supposed to relieve Giovinazzo of all obligations to the Bank.
In February 2012, the Pennsylvania Attorney General’s Office filed
criminal charges against Giovinazzo personally because D-G Construction
failed to pay Pennsylvania taxes during the time the Bank and Rife were in
control of it. Giovinazzo was charged with four counts of theft by failure to
make required disposition of funds. The Attorney General’s Office dismissed
the charges against Giovinazzo on the basis that he was not responsible for
the payment of taxes by D-G Construction. During the investigation, Rife
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allegedly made false statements to the Pennsylvania Department of Revenue
and/or the Attorney General’s Office regarding the Bank’s operation of
D-G Construction and Giovinazzo’s role in it regarding the responsibility to
pay taxes.
The Giovinazzos commenced an action in the trial court against the
Bank and the Rife Defendants. Following preliminary objections by the Bank
and Rife, the Giovinazzos’ amended complaint contained a claim for
malicious prosecution as they alleged that Rife made false statements to
Pennsylvania Department of Revenue agents in order to place blame for
D-G Construction’s failure to pay taxes on Giovinazzo when, according to
Giovinazzo, it was the Bank’s responsibility to pay the taxes. Giovinazzo
further alleged that the Bank diverted money to itself that should have been
used to pay the outstanding tax liability. Mrs. Giovinazzo also alleged a loss
of consortium.
On March 26, 2014, the Giovinazzos filed a motion to compel the Bank
to answer interrogatories and to respond to the Giovinazzos’ request for
production of documents. Following a discovery hearing on April 7, 2014,
the trial court, on April 14, 2014, granted the motion and ordered the Bank
to provide full and complete responses to the interrogatories and full and
complete production of documents for inspection. Thereafter, the
Giovinazzos’ counsel inspected numerous records at the Bank’s counsel’s
office.
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On June 27, 2014, the Bank provided to the Giovinazzos a redaction
log and a privilege log. The redaction log contained 165 redacted emails
related to the documents that were responsive to the April 14, 2014 order.
The redaction log was included as Exhibit D of the Motion. The subjects of
the emails included correspondence concerning litigation, correspondence
concerning deposition, correspondence concerning legal strategy,
correspondence concerning pleading, correspondence concerning arbitration,
correspondence concerning status of operations, correspondence concerning
loan, correspondence concerning bank policies, correspondence concerning
collections, correspondence concerning financial matters, correspondence
concerning union matters, and correspondence concerning project
management. The log also listed the sender and the recipients of the
emails. Rife was the sender of 57 of the emails and the recipient of 47. The
emails were designated as privileged as either “attorney-client” or
“work product” or both.
The privilege log identified 364 pages of withheld documents that
contained 558 emails, letters, memoranda, spreadsheets, and other
communications that were responsive to the April 14, 2014, order. The
privilege log was included as Exhibit E of the Motion. Rife was the author of
116 of the documents and the recipient of approximately 101. The
documents were designated as privileged as either “attorney-client” or
“work product” or both.
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On July 17, 2014, the Giovinazzos filed the Motion after they received
the logs. The Giovinazzos alleged:
3. The log lists non-privileged documents. The
logs claim ‘work product and attorney-client
privilege’ with respect to documents by and
amongst Defendant Kevin Rife and Frank
Correll, Esquire, and/or Anthony Tabasso,
Esquire both of Klehr Harrison (who represents
[the] Bank in this litigation). However, no
such documents are privileged as Klehr
Harrison never represented Kevin Rife nor Rife
& Associates and indeed has never claimed to
do so in this litigation.
4. Further, the logs in other entries list persons
as being recipients of alleged privileged
documents who also are or may not be persons
to whom a privilege would apply, i.e.
Albert Ciardi, Esquire, who upon information
and belief, never represented any of the
defendants in this matter and Annie Foody (a
person whose identity is unknown to
[Giovinazzos’] counsel).
5. Based on the foregoing, [Giovinazzos] assert
that the late production of privilege logs and
the nature of those logs exhibit bad faith on
the part of [the] Bank.
Motion at 3-4 ¶¶3-5.
The Giovinazzos requested that the trial court order the Bank to
produce without redaction all documents listed in Exhibits D and E of the
Motion. Alternatively, the Giovinazzos requested that the trial court conduct
an in camera examination of the documents to determine if the Bank
asserted a valid privilege. At oral argument, the Giovinazzos’ counsel,
Neil Jokelson, Esq., stated, “I’m requesting all the documents that either
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were sent to or sent from Kevin Rife to Susquehanna Bank or Susquehanna
Bank’s counsel.” (Notes of testimony, 7/28/14 at 5.)
The trial court granted the motion and ordered the Bank to produce
without redaction all of the documents listed in Exhibits D and E or,
alternatively, the Bank had the option to submit the documents to the Court
for an in camera review to determine whether the asserted privilege for
each item was valid.
On August 12, 2014, the Bank delivered the documents to the trial
court. The Bank categorized the documents as: (i) communications
between the Bank or its counsel and the Rife Defendants which were
previously produced to the Giovinazzos as redacted subject to the
attorney-client and/or work-product privileges, as (ii) communications
between the Bank and its counsel and the Rife Defendants that were
previously withheld from production to the Giovinazzos because the
documents were subject to attorney-client and/or work-product privileges,
and as (iii) documents prepared by the Rife defendants for the use of the
Bank and its counsel that were previously withheld from the Giovinazzos
because they were subject to the work-product privilege.
On September 28, 2014, the trial court denied the claim of privilege
and ordered the Bank to produce all of the documents listed in Exhibits D
and E of the motion for production of documents. The trial court reasoned:
Kevin Rife, who either sent or received the emails in
question, was neither [the Bank’s] attorney nor the
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attorney’s subordinate. He was a third-party. A
party waives privilege when documents are shared
with non privileged persons. [The Bank] waived any
claim of attorney-client privilege when emails that it
sent to its Counsel were sent to Mr. Rife. These
emails were directly related to the management of
[D-G Construction]. After in camera review, the
Court concluded the emails are not attorney work
product because they do not contain the mental
impressions, conclusions, or opinions of the value or
merit of a claim, defense, strategy, or litigation
tactic. Accordingly, the Court properly ordered the
category (i) and (ii) documents to be produced to
[the Giovinazzos] without redactions.
[The Bank] produced redacted documents to
the Court for in camera review asserting
attorney-client privilege. These redacted documents
are alleged to fit within category (ii).
No claimant of a testimonial privilege can be
the final arbiter of his or her own claim. The trial
court must make specific findings and rulings as to
each claim of privilege. A benefit of in camera
review is that it “provides an essential check against
the possibility that a privilege may be abused.”
When the Court cannot determine what the
document is or says, it cannot sustain a claim of
privilege.
The purpose of in camera review is to
determine whether such documents are what the
objecting party claims and that the claimed privilege
exists. [The Bank] failed to meet its burden with
respect to claiming privilege on multiple documents
because they were blacked out entirely and could not
be reviewed. If the Court cannot perform the
“essential check” for abuse of privilege during
in camera review because documents have been
redacted completely, then [the Bank] cannot prevail
in the assertion of privilege of which it has the
burden to demonstrate. Accordingly, the Court
properly ordered the redacted documents to be
produced to [the Giovinazzos] without redactions.
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The category “iii” documents that were
withheld from [the Giovinazzos] are materials
relating to [D-G Construction’s] finances prepared by
the Rife Defendants for [the Bank]. [The Bank]
claims privilege for these documents on the basis of
attorney work product only, not attorney-client
communications. Kevin Rife is not an attorney. The
Rife Defendants deny that Kevin Rife was ever an
agent of [the Bank]. There is no basis for a claim of
attorney work product privilege when the creator of
the document is not an attorney, not a subordinate
of an attorney, and the substance of the documents
contain no mental impressions, conclusions, or
opinions of the value or merit of a claim, defense,
strategy, or tactic.
Trial court opinion, 3/25/15 at 5-6 (footnotes omitted).
The Bank has raised the following issues before this court:
A. Did the trial court abuse its discretion when it
compelled [the] Bank to produce to [the]
Giovinazzo[s] all documents that had been
withheld from production as privileged, without
regard for whether the production of those
documents had actually been requested?
B. Did the trial court err as a matter of law when
it overruled valid claims of privilege and
required [the] Bank to disclose attorney-client
privileged and attorney-work product protected
information?
The Bank’s brief at 4.
This court’s review of a discovery order is limited to a determination of
whether the trial court committed an abuse of discretion. Gormley v.
Edgar, 995 A.2d 1197 (Pa.Super. 2010). This court’s standard of review of
questions of law is de novo, and its scope of review is plenary. Whether the
attorney-client privilege or the work product doctrine precludes a document
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or communication from disclosure is a question of law. St. Luke’s Hospital
of Bethlehem v. Vivian, 99 A.3d 534 (Pa.Super. 2014).
In Custom Designs and Manufacturing Company v. Sherwin-
Williams Company, 39 A.3d 372, 376 (Pa.Super. 2012), this court
described the application of attorney-client privilege:
In Pennsylvania, the attorney-client privilege
operates in a two-way fashion to protect confidential
client-to-attorney or attorney-to-client
communications made for the purpose of obtaining
or providing professional legal advice. Gillard v.
AIG Ins. Co., 15 A.3d 44, 59 (Pa.2011); See
42 Pa.C.S. §5928. In describing the purpose of the
privilege, we have said: “The attorney-client
privilege exists to foster a confidence between
attorney and client that will lead to a trusting and
open dialogue.” Gocial v. Independence Blue
Cross, 827 A.2d 1216, 1222 (Pa.Super. 2003).
Pennsylvania law imposes a shifting burden of
proof in disputes over disclosure of communications
allegedly protected by attorney-client privilege. The
party invoking a privilege must initially “set forth
facts showing that the privilege has been properly
invoked; then the burden shifts to the party seeking
disclosure to set forth facts showing that disclosure
will not violate the attorney-client privilege, e.g.,
because the privilege has been waived or because
some exception applies.” Nationwide Mut. Ins.
Co. v. Fleming, 924 1259, 1266 (Pa.Super. 2007)
(citations omitted), aff’d, 605 Pa. 468, 992 A.2d 65
(2010). Accordingly, “[i]f the party asserting the
privilege does not produce sufficient facts to show
that the privilege was properly invoked, then the
burden never shifts to the other party, and the
communication is not protected under attorney-client
privilege.” Id. at 1267.
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Four elements must be satisfied in order to
invoke successfully the protections of attorney-client
privilege:
1) The asserted holder of the privilege is or
sought to become a client.
2) The person to whom the communication
was made is a member of the bar of a
court, or his subordinate.
3) The communication relates to a fact of
which the attorney was informed by his
client, without the presence of strangers,
for the purpose of securing either an
opinion of law, legal services or
assistance in a legal matter, and not for
the purpose of committing a crime or
tort.
4) The privilege has been claimed and is not
waived by the client.
Id. at 1264 (citations omitted).
The Bank asserts that the trial court abused its discretion when it
ordered the Bank to produce copies of all the documents listed on Exhibits D
and E, when the Giovinazzos did not expressly demand all the documents in
Exhibits D and E of the Motion or in oral argument before the trial court and
that some of these documents did not pertain to communications between
the Bank and the Rife Defendants or between the Bank’s attorneys and the
Rife Defendants.
First, a review of the record before this court reveals that the
Giovinazzos did request that the Bank produce all of the documents listed in
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Exhibits D and E in the Motion, although they did not make that same
request in oral argument.
Second, in its order that granted the motion, the trial court did not
distinguish between the documents that were communications between the
Bank and the Rife Defendants and any other documents listed on the
exhibits for which the Bank claimed privilege. The order stated in pertinent
part:
It is further ORDERED and DECREED that
Susquehanna Bank, within fifteen (15) days of the
date of this Order, is to produce, without redaction,
all documents listed in Exhibits D and E or
alternatively, Susquehanna Bank shall within that
time frame submit to this Court for examination
in camera of all documents listed on Exhibits D and E
to allow this Court to determine if a valid privilege
has been asserted. Failure to comply with this Order
may result in the imposition of sanctions upon
further application of the Court.
Trial court order, 7/28/14 at 1-2.
The Bank was ordered to either produce all of the documents listed on
Exhibits D and E or produce all of the documents for an in camera review
by the trial court. If the Bank believed that the scope of the discovery order
was too broad, it could have asked the trial court to reconsider the scope of
the order or to clarify the scope of the order. The Bank did not do so.
Instead, the Bank submitted the documents to the trial court for its review
with part or all of many of the documents redacted. Because the Bank
provided some of the documents in redacted form, the trial court denied the
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claim of privilege on the basis that it could not determine what the
documents said, such that the Bank failed to meet its burden to prove that it
was entitled to its claims of privilege. The trial court ordered the Bank to
provide unredacted copies of the documents at the oral argument. (Notes of
testimony, 7/28/14 at 9.) As the trial court stated in its opinion, the
redactions defeated the purpose of an in camera review. Somewhat
confusingly, the trial court does not identify a class of documents which did
not include communications between the Bank and/or its attorneys and the
Rife Defendants and in its opinion, referred only to the request for
documents between the Bank and/or its attorneys and the Rife Defendants.
The documents are not before this court. However, given the facts of this
case, this court determines that the trial court did not abuse its discretion
when it ordered the Bank to produce all of the documents listed in Exhibits D
and E.
The Bank next contends that the trial court erred as a matter of law
when it overruled the privileges claimed by the Bank for communications
between the Bank, the Bank’s attorneys, and the Rife Defendants, and
between the Bank’s attorneys and the Rife Defendants. Once again, it is the
Bank’s burden to prove that it is entitled to the privilege. In oral argument
before the trial court, Rife’s counsel denied that the Rife Defendants had an
agency relationship with the Bank or the Bank’s attorneys. (Notes of
testimony, 7/28/14 at 7.) Further, the Bank denied an agency relationship
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with the Rife Defendants in its answer to the amended complaint. (See
answer and new matter to plaintiffs’ amended complaint, 1/23/14 at 2 ¶7.)
The trial court determined that Rife was neither an attorney of the Bank nor
a subordinate of the Bank’s attorney as required in Nationwide. Based on
the record before this court, this court finds that the trial court did not abuse
its discretion when it found that the documents involving Rife and the
Rife Defendants were not privileged.
The Bank also contends that the trial court erred when it concluded
that the communications by and between the Bank, the Rife Defendants, and
the Bank’s attorneys should be produced in total because certain portions of
those documents not subject to the review of the trial court were redacted
when submitted on an in camera basis. Once again, the trial court ordered
the Bank to produce all of the documents in Exhibits D and E in an
unredacted form in order for the trial court to conduct its in camera review.
When it failed to do so, it could not prove that it was entitled to the claimed
privilege. Further, once these communications were shared with an outside
third party, Rife, they were no longer subject to the attorney-client privilege.
See Bagwell v. Pennsylvania Department of Education, 103 A.3d 409
(Pa.Cmwlth. 2014).
The Bank also contends that the trial court erred when it declared that
the emails submitted for in camera review did not qualify under the
work-product doctrine because they did not contain the mental impressions,
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conclusions, or opinions of the value or merit of a claim, defense, strategy,
or litigation tactic. The Bank argues that each of the communications
exchanged between the Bank, the Bank’s attorneys, and the Rife Defendants
that were listed in Exhibits D and E as “work product” are shielded from
production in discovery because these entities frequently analyzed claims
and defenses and shared strategy and tactics as a result of the “turnaround”
work being conducted.
The work-product doctrine is codified in Rule 4003.3 of the
Pennsylvania Rules of Civil Procedure. This rule states in pertinent part:
Subject to the provisions of Rules 4003.4 and
4003.5[1], a party may obtain discovery of any
matter discoverable under Rule 4003.1 even though
prepared in anticipation of litigation or trial by or for
another party or by or for that other party’s
representative, including his attorney . . . insurer or
agent. The discovery shall not include disclosure of
the mental impressions of a party’s attorney or his
conclusions, opinions, memoranda, notes or
summaries, legal research or legal theories. With
respect to the representative of a party other than
the party’s attorney, discovery shall not include
disclosure of his mental impressions, conclusions, or
opinions respecting the value or merit of a claim or
defense or respecting strategy or tactics.
Pa.R.C.P. 4003.3.
The purpose of protecting work product from discovery is to shield “the
mental processes of an attorney, providing a privileged area within which he
can analyze and prepare his client’s case.” Lepley v. Lycoming County
1
Rules 4003.4 and 4003.5 are inapplicable here.
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Court of Common Pleas, 393 A.2d 306, 310 (Pa. 1978), quoting United
States v. Nobles, 422 U.S. 225, 238, (1975).
The Bank presented no evidence to support its claim that these
documents were exempt from discovery as work product. The trial court
concluded that these emails related to the management of D-G Construction
and Giovinazzo’s employment with D-G Construction. The Bank’s argument
does not persuade this court that the trial court abused its discretion.
The Bank further contends that the trial court erred as a matter of law
when it categorically overruled privileges claimed for documents prepared by
the Rife Defendants for the Bank’s attorneys under the work-product
doctrine. While the attorney work-product privilege extends to the mental
impressions, conclusions, or opinions respecting the value or merit of a claim
or defense or respecting strategy or tactics including those of a party’s
representative who is not an attorney, Rife was neither an attorney nor was
he, according to the Bank, its agent. We find no abuse of discretion.2
Order affirmed.
2
Finally, the Bank contends that the trial court erred as a matter of law
when it implicitly overruled all other privileges claimed in Exhibits D and E.
The Bank asserts that these documents were never requested by the
Giovinazzos but that they were required to produce all clearly privileged
communications between the Bank and its attorneys with respect to the
request and provision of legal advice and between the Bank’s attorneys
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Judgment Entered.
JosephD.Seletyn,Esq.
Prothonotary
Date: 7/1/2016
concerning mental impressions and litigation strategies. This court has
already addressed this issue.
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