[J-26AB-2018] [MO: Baer, J.]
IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
PITTSBURGH HISTORY AND : No. 53 WAP 2017
LANDMARKS FOUNDATION, A :
PENNSYLVANIA NON-PROFIT : Appeal from the Order of the
CORPORATION; LANDMARKS : Commonwealth Court entered April
FINANCIAL CORPORATION, A : 21, 2017 at No. 113 CD 2016,
PENNSYLVANIA NON-PROFIT : vacating the Order of the Court of
CORPORATION; HENRY P. HOFFSTOT, : Common Pleas of Allegheny County,
JR.; DAVID E. BARENSFELD; PETER H. : Civil Division, entered September 21,
STEPHAICH; PATRICK R. WALLACE; : 2015 at No. GD 13-23355, and
ALEXANDER SPEYER; AND HENRY P. : remanding.
HOFFSTOT, III :
: ARGUED: April 11, 2018
:
v. :
:
:
ARTHUR P. ZIEGLER, JR.; MARK S. :
BIBRO; JACK R. NORRIS; PITTSBURGH :
HISTORY AND LANDMARKS :
FOUNDATION, A PENNSYLVANIA NON- :
PROFIT CORPORATION; AND :
LANDMARKS FINANCIAL :
CORPORATION, A PENNSYLVANIA :
NON-PROFIT CORPORATION :
:
:
APPEAL OF: ARTHUR P. ZIEGLER JR., :
MARK S. BIBRO, JACK R. NORRIS, :
PITTSBURGH HISTORY AND :
LANDMARKS FOUNDATION AND :
LANDMARKS FINANCIAL :
CORPORATION :
PITTSBURGH HISTORY AND : No. 54 WAP 2017
LANDMARKS FOUNDATION, A :
PENNSYLVANIA NON-PROFIT : Appeal from the Order of the
CORPORATION; LANDMARKS : Commonwealth Court entered April
FINANCIAL CORPORATION, A : 21, 2017 at No. 113 CD 2016,
PENNSYLVANIA NON-PROFIT : vacating the Order of the Court of
CORPORATION; HENRY P. HOFFSTOT, : Common Pleas of Allegheny County,
JR.; DAVID E. BARENSFELD; PETER H. : Civil Division, entered September 21,
STEPHAICH; PATRICK R. WALLACE; : 2015 at No. GD 13-23355, and
ALEXANDER SPEYER; AND HENRY P. : remanding.
HOFFSTOT, III :
: ARGUED: April 11, 2018
:
v. :
:
:
ARTHUR P. ZIEGLER, JR.; MARK S. :
BIBRO; JACK R. NORRIS; PITTSBURGH :
HISTORY AND LANDMARKS :
FOUNDATION, A PENNSYLVANIA NON- :
PROFIT CORPORATION; AND :
LANDMARKS FINANCIAL :
CORPORATION, A PENNSYLVANIA :
NON-PROFIT CORPORATION :
:
:
APPEAL OF: HENRY P. HOFFSTOT, JR.; :
DAVID E. BARENSFELD; PETER H. :
STEPHAICH; PATRICK R. WALLACE; :
ALEXANDER SPEYER; AND HENRY P. :
HOFFSTOT, III :
CONCURRING AND DISSENTING OPINION
JUSTICE TODD DECIDED: JANUARY 23, 2019
I join the thoughtful Concurring and Dissenting Opinion by Justice Mundy in full.1
In particular, I agree that this case is not the appropriate vehicle to decide whether this
Court should adopt the “good cause” exception set forth in Garner v. Wolfinbarger, 430
F.2d 1093 (5th Cir. 1970). I write to elaborate upon that point.
In contrast to the majority, I do not view the commentary to Section 7.13(e) of the
ALI Principles2 as potentially adopting Garner, or even, for that matter, implicating Garner
under the circumstances of this case. See Majority Opinion at 34 (“Comment (e) to
1 I thereby also join part V(D) of the Majority Opinion.
2 American Law Institute, Principles of Corporate Governance: Analysis and
Recommendations (1994) (“ALI Principles”).
[J-26AB-2018] [MO: Baer, J.] - 2
Section 7.13, however, does not necessarily adopt the Garner good cause analysis.”).
Rather, as the commentary makes clear, in my view, Garner is discussed by way of
contrast: there is deemed to be “no conflict” between Garner and Section 7.13(e)
because Garner addresses the attorney-client privilege in the context of discovery
directed to the merits of a derivative suit – that is, discovery seeking insight into events
giving rise to the litigation. By contrast, Section 7.13 addresses discovery and the limits
of the privilege with respect to a motion to dismiss. With regard to Garner, the
commentary to subsection (e) states:
The cases have recognized a potential exception to the
attorney-client privilege when an action is derivative, on the
ground that the plaintiff is seeking to represent the client and
the privilege may not be asserted by the attorney against the
client. See Garner v. Wolfinbarger, 430 F.2d 1093 (5th
Cir.1970), cert. denied, 401 U.S. 974, 91 S.Ct. 1191, 28
L.Ed.2d 323 (1971); Valente v. Pepsico, Inc., 68 F.R.D. 361
(D.Del.1975). This doctrine does not deem the privilege to be
unavailable; it simply permits the plaintiff to show “good
cause” why the privilege should not be applied against him or
her. Garner specified nine criteria that the court should
balance in making this good cause determination, and
virtually all subsequent cases have adopted these factors.
Two of these factors are: “whether the communication is of
advice concerning the litigation itself” and “whether the
communication related to past or prospective actions.” 430
F.2d at 1104. Those decisions that have found “good
cause” to pierce the veil of the attorney-client privilege
have involved communications that were roughly
contemporaneous with the events giving rise to the
litigation. Courts appear uniformly to have refused to
subject post-event attorney-client communications to
disclosure, particularly those communications advising
with respect to a pending litigation. See Reporter's Note 3.
In this light, there is no conflict between the position
taken in § 7.13(e) and the Garner line of cases. Section
7.13(e) provides that the special counsel's communications
with the board or committee with respect to a pending litigation
shall be privileged and not subject to plaintiff's inspection,
except as provided in § 7.13(a), which only requires
disclosure to the plaintiff of the report or other written
[J-26AB-2018] [MO: Baer, J.] - 3
submission to the court and any supporting documentation.
The position of counsel to a board or a litigation committee
considering a demand or a derivative action is substantially
different from that of a general counsel or other corporate
attorney who is giving advice with respect to a prospective
transaction. The special counsel has undertaken to serve only
a narrowly defined client—the disinterested members of the
board, or a litigation committee—and counsel's
communications uniquely relate to the appraisal of the
pending litigation. Moreover, the functioning of the
disinterested members of the board or the litigation committee
might be severely hampered if communication between them
and their counsel could not be conducted with reasonable
candor and confidence on both sides.
ALI Principles § 7.13(e) cmt. e (emphasis added).
Notably, Garner did not involve a motion to dismiss, nor any threshold inquiry into
the soundness of the derivative litigation. Indeed, the corporate entity in that case filed
its own suit cross-claiming against the non-corporate defendants, asserting, on its own
behalf, the claims of the derivative plaintiffs, and the sought-after privileged material
concerned the merits of the derivative action.3
Here, there is a pending motion to dismiss, and the trial court has yet to rule on
whether, under the business judgment rule developed in Cuker v. Mikalauskas, 692 A.2d
1042 (Pa. 1997), the suit may proceed. I agree with Justice Mundy that discovery into
the merits of the derivative litigation should be precluded at this stage, and, thus, that
Garner, as yet, plays no role. In my view, within the context of a motion to dismiss filed
pursuant to Section 7.13, including any discovery related thereto under subsection (c),
the scope of the attorney-client privilege, and the derivative plaintiff’s entitlement to
otherwise privileged materials, is fully answered by that section.
3Similarly, the other Pennsylvania case addressing Garner discussed by the majority,
Agster v. Barmada, 43 Pa. D. & C. 4th 353 (Allegheny Cty. 1999), was not a derivative
suit. Although brought by a shareholder, the claims therein involved breach of fiduciary
duties and breach of contract by the corporation and its majority shareholder.
[J-26AB-2018] [MO: Baer, J.] - 4