The Superior Court of Pennsylvania recently ruled that the attorney-client privilege and work product doctrine do not bar discovery in a Dragonetti action even while the underlying litigation is ongoing. The decision has significant implications for attorneys handling Dragonetti claims where advice of counsel is raised as a defense.
In a non-precedential opinion filed March 24, 2015, the Superior Court affirmed an order entered by Judge Mark I. Bernstein in the Court of Common Pleas of Philadelphia County granting plaintiff’s motion to compel defendants’ discovery responses over privilege objections. Brown v. Halpern, No. 14369 EDA 2014 (Pa. Super. Ct. March 24, 2015).
The underlying litigation began in 2009 when attorney Mark Halpern and Halpern & Levy, P.C., on behalf of their client, Lynne Boghossian, commenced a lawsuit against attorney John F. Brown and Hilda Kilijian Irrevocable Trust in the Court of Common Pleas of Montgomery County. In January 2013, all of Boghossian’s claims against Brown were dismissed, with prejudice, and Boghossian proceeded solely against the Trust. In October 2013, the court granted the Trust’s motion for summary judgment. Boghossian appealed the grant of summary judgment to the Superior Court, which appeal remains pending.
Meanwhile, six months after his dismissal from the case, Brown brought suit against Boghossian, Halpern, and Halpern & Levy, P.C., asserting claims for civil conspiracy and wrongful use of civil proceedings (Dragonetti claim), and contending that the underlying Montgomery County action was brought without probable cause. See 42 Pa. C.S. § 8351. In defending against these claims, Boghossian contended that Brown’s claims were barred because she relied, in good faith, upon the advice of her counsel, Halpern and his law firm. Similarly, Halpern and his law firm defended on the ground that they relied, in good faith, upon the facts they obtained from their client, Boghossian.
In discovery, Brown served discovery requests seeking information bearing on the defense raised by each defendant. In response, Boghossian and Halpern moved for a stay and for a protective order arguing that Brown’s requests improperly sought information protected by the attorney-client privilege and the work product doctrine. Brown then filed motions to compel responses to his discovery requests. The Court of Common Pleas denied the motion for stay and granted the motion to compel discovery.
Boghossian and Halpern took an interlocutory appeal from the order granting the motion to compel, arguing that their affirmative defenses should not operate to waive privilege or work product and because the Montgomery County action is still pending and, therefore, Brown’s Dragonetti claim is not ripe for review. Brown filed a motion to quash the appeal claiming that the appeal was interlocutory because it concerned a discovery order. Appellants contended, and the court agreed, that the discovery order was appealable as a collateral order pursuant to Pennsylvania Rule of Appellate Procedure 313 because it raised a colorable claim of attorney-client privilege. Accordingly, the court denied Brown’s motion to quash.
Judge Anne E. Lazarus, who wrote the majority opinion for the three-judge panel, considered appellants’ argument that the issue was premature due to the still pending Montgomery County action and concluded that the contention was “misplaced and outside the scope of this appeal.” The court reasoned that since the trial court had previously rejected appellants’ preliminary objection asserting that the Dragonetti action was premature, the issue was not properly before the court on interlocutory appeal and would only be subject to review and possible reversal after Brown’s suit is concluded.
Turning to the trial court’s grant of Brown’s motion to compel discovery responses, the court pointed to Pennsylvania Rule of Civil Procedure 4003.3, which excludes from discovery “the mental impressions of a party’s attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories.” The court noted that this protection is not without boundaries. The court cited the comments to Rule 4003.3, which provide, in pertinent part:
There are, however, situations under the Rule where the legal opinion of an attorney becomes a relevant issue in an action; for example, an action for malicious prosecution or abuse of process where the defense is based on a good faith reliance on a legal opinion of counsel. The opinion becomes a relevant piece of evidence for the defendant, upon which defendant will rely. The opinion, even though it may have been sought in anticipation of possible future litigation, is not protected against discovery. A defendant may not base his defense upon an opinion of counsel and at the same time claim that it is immune from pre-trial disclosure to plaintiff.
Appellants acknowledged this exception to the rule, but instead argued that, although Brown was dismissed from the Montgomery County action, “the factual record as it applies to the conduct of Brown is still active and probative in that litigation.” Therefore, appellants claimed, they would be prejudiced in the Montgomery County action if privileged information is disclosed in the Dragonetti action. The Superior Court rejected that argument, explaining that “[a]ppellants themselves placed into issue their attorney-client communications by asserting good faith reliance as a defense to Brown’s Dragonetti action. Having done so, they cannot now deny their adversary access to the information forming the basis of that defense.” The court further observed that it is not clear that appellant’s ability to prosecute the Montgomery County action would be “hampered” by this ruling.
The Brown v. Halpern decision begs the question of what, if anything, appellants could have done differently to avoid the forced disclosure of privileged communications and work product information during the pendency of the underlying litigation. Good faith reliance on the advice of counsel will constitute the requisite “probable cause” to defend against a Dragonetti action under 42 Pa. C.S. § 8352 and, therefore, the waiver of privilege may be warranted to establish the defense. However, waiver of privilege presents its own hazards, including inviting discovery directed to counsel in the underlying action. On the flip side, a Dragonetti defendant who disclaims having consulted with counsel before initiating the underlying action may be deemed to have acted per se without probable cause. See Winner Logistics, Inc. v. Labor & Logistics, Inc., 2011 Phila. Ct. Com. Pl. LEXIS 67, 23 Pa. D.&C.5th 463, 468 (Bernstein, J.) (summary judgment in favor of Dragonetti plaintiff warranted where defendant’s “sole claim to probable cause was based on his individual and uninformed reasonable belief that the claim may be valid.”).
The Brown v. Halpern opinion suggests that, if the defendants are successful in their appeal of the grant of summary judgment and obtain a remand in the underlying action, they can then seek a protective order or other relief to prevent the admission of privileged information disclosed for purposes of the Dragonetti action. Of course, any such relief could only be sought only after they disclose their claimed privileged and confidential communications to the opposing party.
An important question left unaddressed by the Brown v. Halpern decision is the scope of the privilege waiver when advice of counsel is raised as a defense. Does the waiver apply only to communications or information that directly establish the party’s defense based on a good faith reliance on a legal opinion of counsel? Or does the waiver extend to all communications between a client and counsel concerning the matter. In one opinion addressing the issue, the Eastern District of Pennsylvania explained that the privilege is waived “only with respect to the subject of the advice upon which the party intends to rely on as a defense.” Segal v. Strausser Enters., Inc., No. 07-4647, 2011 U.S. Dist. LEXIS 20528, *8 (E.D. Pa. March 1, 2011) (citing Applied Telematics, Inc. v. Sprint Corp., No. 94-4603, 1995 U.S. Dist. LEXIS 14061,*3 (E.D. Pa. Sept. 21, 1995)).
Either way, this decision makes clear that practitioners should carefully review with the client the implications of raising a defense based upon the advice of counsel, including the potential waiver of otherwise privileged communications.