I. INTRODUCTION

*1 Plaintiff, Vitamin Energy, LLC (“Vitamin Energy” or “VE”), initiated this action against Defendant, Evanston Insurance Company (“Evanston”). The Court previously granted Evanston's Motion for Judgment on the Pleadings. The Court of Appeals reversed, and this case proceeded to discovery.

Now before the Special Master is Evanston's Motion to Compel Compliance with the Subpoena for Production Directed to BRJ Holdings III, LLC (Doc. 198). Evanston's Motion seeks to compel production of communications between VE and its investor, BRJ Holdings III, LLC (“BRJ”), which BRJ withheld as privileged. After reviewing the withheld documents in camera, along with the relevant filings, the Special Master recommends that the Court grant Evanston's Motion to Compel (Doc. 198) for the reasons set forth below.

II. FACTS AND PROCEDURAL HISTORY

The Special Master has thoroughly summarized this case's history in previous reports and recommendations and will only address here the facts relevant to Evanston's Motion to Compel. (Docs. 191, 201, and 204). On August 16, 2022, Evanston served a subpoena for the production of documents and a deposition upon BRJ, an investor of VE. (Doc. 198 at 3). Evanston sought discovery of communications between BRJ and VE. Id. BRJ agreed to produce the documents in advance of the deposition of BRJ principal, Brett Jefferson.[1] Id. at 4. On October 12, 2022, BRJ produced approximately 650 pages of documents, but withheld several responsive documents on relevance and privilege grounds. Id. Specifically, BRJ argued that (1) any documents post-dating BRJ's initial, January 2022 investment in VE were irrelevant and (2) several documents were protected discovery by “the common interest and necessarily work product privilege and/or attorney client privilege to the extent attorneys were on those communications.” (Doc. 198, Ex. 3).

Throughout February, Evanston and BRJ attempted to resolve the dispute over BRJ's relevance and privilege objections. (Doc. 198). On February 23, 2023, Evanston moved to compel BRJ to comply with the subpoena for production, arguing that the post-January 2022 communications are relevant to VE's consequential damages claim. Id. At the instruction of the Special Master, BRJ filed a response on March 6, 2023 and produced a privilege log. (Doc. 208). BRJ agreed to produce the post-January, 2022 documents but continued to withhold documents on claims of attorney-client and “common interest” privilege.[2] (Doc. 208 at 5-6). Evanston filed a reply on March 8, 2023, arguing that any claims of attorney-client privilege were waived because the communications were between separate parties, and that the common interest doctrine exception to the waiver rule did not apply. (Doc. 209). BRJ filed a Surreply on March 9, 2023 maintaining that the withheld documents were privileged and submitted them to the Special Master for in camera review. (Doc. 210).

III. STANDARD OF REVIEW

A. Attorney-Client Privilege

*2 “[S]tate law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Federal Rule of Evidence 501. Accordingly, in “a diversity action that raises a state bad faith claim, [state] law governs the applicability of the attorney-client privilege.” Hydrojet Servs., Inc. v. Sentry Ins. Co., 2022 WL 2168438 (E.D. Pa. June 16, 2022) (Reid, M.J.).

In Pennsylvania, attorney-client privilege is governed by 42 Pa.C.S. § 5928, which states “[i]n a civil matter, counsel shall not be competent or permitted to testify to confidential communications made by him to his client, nor shall the client be compelled to disclose the same, unless in either case this privilege is waived upon the trial by the client.” The Pennsylvania Supreme Court has rejected narrow interpretations of the statute and held that the privilege affords derivative protection to “confidential client-to-attorney [and] 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). A corporation may claim the privilege for communications between its counsel and its employees who have authority to act on its behalf. See Maleski v. Corporate Life Ins. Co., 641 A.2d 1, 3 (Pa. Cmwlth. Ct. 1994).

“Pennsylvania law imposes a shifting burden of proof in disputes over disclosure of communications allegedly protected by attorney-client privilege.” Newsuan v. Republic Services Inc., 213 A.3d 279, 284 (Pa. Super. 2019). “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.” Id. (quoting Nationwide Mut. Ins. Co. v. Fleming, 924 A.2d 1259 (Pa. Super. 2007)), aff'd 992 A.2d 65 (Pa. 2010).

To successfully invoke the protections of attorney-client privilege, a litigant must show:

Ford-Bey v. Pro. Anesthesia Servs. of N. Am., LLC, 229 A.3d 984, 990-91 (Pa. 2020).

“[D]ocuments subject to the [attorney-client] privilege may be transmitted between non-attorneys so that the corporation may be properly informed of legal advice and act appropriately.” SmithKline Beecham Corp. v. Apotex Corp., 232 F.R.D. 467, 477 (E.D. Pa. 2005) (Surrick, J.); see also, Roberts Technology Group, Inc. v. Curwood, Inc., 2015 WL 4503547 at *2 (E.D. Pa. 2015) (Kearney, J.) (applying Pennsylvania law) (holding that communications are privileged when they evidence the advice of in-house counsel or “otherwise reflect counsel's involvement in decisions relating to legal matters, even if the communication is between two members of [the client corporation's] management.”).

B. Common Interest Doctrine

*3 Normally, “the [attorney-client] privilege is deemed waived once confidential attorney-client communications are disclosed to a third party.” BouSamra v. Excela Health, 210 A.3d 967, 982 (Pa. 2019). The common interest doctrine is an exception to this general rule. Cargill v. LGX, LLP, 2007 WL 2142355, at *2 (E.D. Pa. 2007) (Tucker, J.). The Restatement (Third) of the Law Governing Lawyers defines the doctrine:

Rest. 3d Law Governing Lawyers § 76.

While lower Pennsylvania Courts have adopted the common interest doctrine, “the Pennsylvania Supreme Court has not directly addressed the common interest doctrine nor defined if and when it is applicable.” Gelman v. W2 Ltd., 2016 WL 8716248, at *3 (E.D. Pa. 2016) (Hey, M.J.). However, the Court has favorably cited the Restatement (Third) of the Law Governing Lawyers's definition of the doctrine. Karoly v. Mancusco, 65 A.3d 301, 315 (Pa. 2013) (“even if [an attorney's client] heard the conversation between [the attorney and another client], it would not necessarily follow that the privilege was waived since, under the prevailing law of this Commonwealth, the joint-client or common interest privilege could potentially apply.... Rest. [Third] Law Governing Lawyers §§ 75-76.”). Several federal courts applying Pennsylvania law in diversity actions have applied the doctrine. See, e.g. Gelman, 2016 WL 8716248, at *3 (E.D. Pa. 2016) (predicting that the Pennsylvania Supreme Court would recommend the common interest doctrine); Sandoz Inc. v. Lannett Co., Inc., 570 F.Supp. 3d 258, 267 (E.D. Pa. 2021) (McHugh, J.) (applying common interest doctrine in diversity action).

For the common interest doctrine to apply, the parties must share a common legal interest. In re Condemnation by City of Philadelphia, 981 A.2d 391, 398 (Pa. Commw. Ct. 2009) (citing Katz v. AT&T Corp., 191 F.R.D. 433 (E.D. Pa. 2000) (Reed, J.)). The contours of this requirement are not well defined, however, “a shared common business interest or an interest that is solely commercial is insufficient to warrant application of the privilege.” Id.

Furthermore, to be protected under the common interest doctrine, “the communication must be shared with the attorney of the member of the community of interest.” In re Teleglobe Communications Corp., 493 F.3d 345, 364 (3rd Cir. 2007) (emphasis in original);[3] Sandoz, 570 F.Supp. 3d 267 (E.D. Pa. 2021) (holding that, because exceptions to waiver are to be construed narrowly under Pennsylvania law, the common interest doctrine protects only inter-party communications between counsel). “Sharing the communications directly with a member of the community may destroy the privilege.” Id. “Because the common-interest privilege is an exception to the disclosure rule, which exists to prevent abuse, the privilege should not be used as post hoc justification for a client's impermissible disclosures.” Id. at 365. “The attorney-sharing requirement helps prevent abuse by ensuring that the common-interest privilege only supplants the disclosure rule when attorneys, not clients, decide to share information in order to coordinate legal strategies.” Id.; see also, Gelman, 2016 WL 8716248, at *5 (E.D. Pa. 2016) (noting that, without the attorney-sharing requirement, “the common interest doctrine would permit individuals who claim the protection of the doctrine in one context to work in concert to advance separate and unrelated actions while shielding their communications or correspondence from discovery.”)

IV. THE SPECIAL MASTER'S ANALYSIS

*4 All of the withheld documents are communications between BRJ and VE. As such, BRJ must establish both that the communications would be subject to the attorney-client privilege, absent waiver, and that the common interest exception to the waiver rule applies.[4] The Special Master's analysis as to each of the privilege log (Doc. 209, Ex. 1) entries is detailed below.

*5 To summarize, most of the withheld documents only tangentially concern legal matters—if at all—and few reflect the advice of counsel. These communications would not be privileged even if they had not been between separate parties. To the extent a valid claim of privilege over any of the withheld documents does exist, it has been waived. None of the communications meet the common interest doctrine's attorney-to-attorney requirement enunciated in Teleglobe and applied repeatedly in diversity actions in this District. Accordingly, the Special Master recommends that the Court grant Evanston's Motion to Compel.[8]

V. RECOMMENDATION

For the reasons set forth above, the Special Master recommends that the Court grant Defendant's Motion to Compel (Doc. 198).

AND NOW, this _____ day of ________, 2023, based upon the March 13, 2023 Report and Recommendation of the Special Master, it is hereby ORDERED that Defendant's Motion to Compel Compliance with the Subpoena for Production Directed to BRJ Holdings III, LLC is GRANTED.