J-A16019-20
2020 PA Super 258
CABOT OIL AND GAS CORPORATION IN THE SUPERIOR COURT AND GASSEARCH DRILLING SERVICES OF PENNSYLVANIA CORPORATION
Appellees
v.
CHARLES F. SPEER, SPEER LAW FIRM, P.C., EDWARD CIARIMBOLI, CLANCY BOYLAN AND FELLERMAN & CIARIMBOLI
Appellants No. 1926 MDA 2019
Appeal from the Order Entered October 31, 2019 In the Court of Common Pleas of Susquehanna County Civil Division at No: 2017-00936
BEFORE: PANELLA, P.J., STABILE, J., and MUSMANNO, J.
OPINION BY STABILE, J.: FILED OCTOBER 26, 2020
In this action for wrongful use of civil proceedings (“Dragonetti Act”)1
and other claims, Appellants, Charles F. Speer, Speer Law Firm, P.C., Edward
Ciarimboli, Clancy Boylan, and Fellerman & Ciarimboli, appeal a discovery
order compelling them to produce their tax returns and other financial
documents to counsel for Appellees, Cabot Oil and Gas Corporation and
Gassearch Drilling Services Corporation. The order limited disclosure of the
documents to counsel for Appellees and prohibited disclosure to Appellees
themselves, a type of order known as “attorneys’ eyes only” (“AEO”).
Appellants contend that this order violates their privacy rights as well as
privacy rights of their spouses and law partners. We have jurisdiction to
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1 42 Pa.C.S.A. §§ 8351-8354. J-A16019-20
address this question under the collateral order doctrine embodied in Pa.R.A.P.
313. We affirm because the AEO order properly balances Appellants’ privacy
interests with Appellees’ right to obtain Appellants’ financial information for
the purpose of seeking punitive damages.
Appellees allege the following in their Dragonetti complaint. Prior to
2012, Appellant Speer, a Missouri lawyer, routinely filed suits against pig farm
operators based on alleged damages from odors and other purported
nuisances. Complaint, ¶ 22. After Missouri enacted legislation at the end of
2011 that put an end to Speer’s pig farm lawsuits, Speer set his sights on
Pennsylvania’s natural gas industry, thus “switch[ing] his focus from pigs to
rigs.” Id., ¶ 25. Speer and Speer Law teamed up with Appellants Edward
Ciarimboli, Clancy Boylan and the firm of Fellerman & Ciarimboli to commence
nuisance claim lawsuits against natural gas operators in Pennsylvania. Id.,
¶¶ 27-28. One of their Pennsylvania clients, Raymond Kemble, filed a federal
lawsuit against Appellees in 2009 and entered a settlement agreement with
Appellees in 2012. Id., ¶¶ 32-33, 49-53.
In 2017, despite knowing that Kemble had settled with Appellees in
2012, Appellants filed a second federal lawsuit against Appellees in 2017
alleging state law claims for negligence and nuisance. Id., ¶¶ 62-84. Counsel
for Appellees advised Speer that the complaint in the second federal lawsuit
was frivolous because its allegations were time-barred and released by the
2012 settlement, and it failed to satisfy federal requirements for diversity
jurisdiction. Id., ¶¶ 86-87. Appellees filed a motion to dismiss the complaint
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for lack of subject matter jurisdiction. Id., ¶ 90. Appellants filed a motion to
dismiss all defendants pursuant to Fed.R.C.P. 41(a)(2).2 Id., ¶ 91. On June
9, 2017, the federal court granted Appellants’ motion. Id., ¶ 94.
In August 2017, Appellees filed a complaint in the Court of Common
Pleas of Susquehanna County asserting the Dragonetti claim against
Appellants and Kemble and demanding a jury trial.3 Appellants filed an answer
to the complaint with new matter.
In June 2018, Appellees served document requests on Appellants
seeking their tax returns, bank records, and net worth information for years
2013 to the present. Appellants responded to these requests with claims of
privilege and objections that they were burdensome, vexatious and not likely
to lead to admissible evidence. Appellants did not assert that the document
requests violated their own privacy rights or privacy rights of third persons.
On August 6, 2019, Appellees filed a motion to compel production of
these documents. One day later, on August 7, 2019, the trial court granted
Appellees’ motion to compel and ordered Appellants to turn over the
documents on or before September 30, 2019.
2 Fed.R.C.P. 41(a)(2) provides that, except in circumstances not relevant here, “an action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper.”
3 Appellees also sued Appellants for tortious interference with contract and sued Kemble for breach of contract and permanent injunctive relief.
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On August 15, 2019, Appellants filed a motion for reconsideration
arguing that (1) the discovery order violated Pa.R.C.P. 4003.7, the rule
governing punitive damages discovery,4 (2) the court ignored its previous
order that Appellants need not answer Appellees’ document requests until the
court held a hearing on punitive damages discovery, and (3) the court failed
to provide Appellants an opportunity to file a written response to Appellees’
motion to compel. Appellants did not contend in their motion for
reconsideration that the discovery order violated their privacy rights.5
On September 9, 2019, the court scheduled a hearing for October 25,
2019 on Appellants’ motion for reconsideration. Ten days later, Appellants
filed a written response to Appellees’ motion to compel. This response raised,
for the first time, the issue that is the centerpiece of the present appeal: a
claim that the discovery order violated Appellants’ privacy rights. Appellants,
however, only argued that the discovery order violated their own privacy
rights, not privacy rights of their spouses or law partners. Similarly, during
the hearing on the motion, Appellants contended that the discovery order
infringed their privacy rights, but not those of their spouses or partners.
4 Pa.R.C.P. 4003.7 provides, “A party may obtain information concerning the wealth of a defendant in a claim for punitive damages only upon order of court setting forth appropriate restrictions as to the time of the discovery, the scope of the discovery, and the dissemination of the material discovered.”
5 Appellants merely argued that the evidence establishing a prima facie case for punitive damages discovery might vary from Appellant to Appellant. Motion For Reconsideration, ¶ 15.
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On October 31, 2019, the trial court denied Appellants’ motion for
reconsideration and ordered Appellants to produce the requested documents
within sixty days. The court found punitive damages discovery permissible
because Appellees “submitted evidence of intentional, willful and wanton
conduct by [Appellants] in filing a second federal litigation with full knowledge
of the prior settlement agreement between [Appellees] and [Kemble].” Order,
10/31/19, at n.1. The court declared this discovery “confidential” and ordered
counsel for Appellees not to “copy, disclose or utilize the contents of [this]
discovery for any purpose without leave of court” or “disclose [this] discovery
in any manner to any persons or entities, including Appellees, unless
[Appellees’] counsel obtains court approval for the disclosure.” Id., ¶¶ 3-5.
The court directed that following termination of the litigation, the order’s
confidentiality provisions would remain binding, and counsel for Appellees
must destroy this discovery and verify that they had done so. Id., ¶¶ 6-7.
On November 27, 2019, Appellants filed a notice of appeal under the
collateral order doctrine. Appellants filed a Pa.R.A.P. 1925 statement of
matters complained of on appeal claiming that the October 31, 2019 discovery
order violated their privacy rights and asserting, for the first time, that this
order violated the privacy rights of their spouses and law partners. Pa.R.A.P.
1925 Statement, ¶¶ 1-2. The trial court did not file a Pa.R.A.P. 1925 opinion.
Appellants raise three issues in this appeal:
A. Whether this appeal falls within the collateral order doctrine pursuant to Pa.R.A.P. 313.
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B. Whether the trial court’s failure to limit the scope of the punitive damages discovery was an error of law.
C. Whether this appeal was timely taken from the October 31, 2019 order, which was a new amended order with substantial modifications from the trial court’s August 7, 2019 order.
Appellants’ Brief at 9.
In essence, Appellants argue that the October 31, 2019 order violates
their privacy rights and the corresponding rights of their spouses and law
partners by requiring production of tax returns, bank records and net worth6
documents from 2013 onward. Appellees ask us to quash this appeal because
it does not satisfy the collateral order doctrine and is untimely. Alternatively,
Appellees argue that discovery of Appellants’ financial documents is proper in
view of their right to seek punitive damages under the Dragonetti Act, and the
trial court safeguarded Appellants’ privacy by restricting access to their
documents to Appellees’ counsel.
We first observe Appellants cannot appeal the October 31, 2019 order
on the ground that it infringes the privacy rights of their spouses and law
partners, because Appellants lack standing to assert the alleged deprivation
of another’s rights. Commonwealth v. Butler, 291 A.2d 89, 90 (Pa. 1972)
(“appellant lacks standing to assert the alleged deprivation of another’s
constitutional rights”). Under the Rules of Civil Procedure, Appellants’ spouses
6Net worth is “the amount by which assets exceed liabilities.” Sprague v. Walter, 656 A.2d 890, 920 (Pa. Super. 1995).
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or law partners could have moved to intervene in this case to assert and
protect their rights. Pa.R.C.P. 2327(4) (“At any time during the pendency of
an action, a person not a party thereto shall be permitted to intervene . . . if
the determination of such action may affect any legally enforceable interest
of such person whether or not such person may be bound by a judgment in
the action”). They have not yet taken this step, and Appellants cannot act as
their litigation proxies. Even if the law permitted Appellants to raise their
spouses’ and law partners’ claims, Appellants waived this argument by failing
to raise it during trial court proceedings. The first time that Appellants argued
that their spouses’ and law partners’ privacy rights were infringed was in their
Rule 1925 statement during this appeal. Appellants cannot raise issues for
the first time in a Rule 1925(b) statement. Commonwealth v. Coleman, 19
A.3d 1111, 1118 (Pa. Super. 2011) (issues raised for first time in Rule 1925(b)
statement are waived).7
Next, we address whether Appellants have the right to appeal the
privacy issue on their own behalf under the collateral order doctrine. The
collateral order doctrine is articulated in Pa.R.A.P. 313, which provides:
(a) General rule.--An appeal may be taken as of right from a collateral order of a trial court or other government unit.
(b) Definition.--A collateral order is an order separable from and collateral to the main cause of action where the right involved is ____________________________________________
7 Nonetheless, since we affirm the trial court’s order, as a practical matter, the privacy rights of covered spouses and partners subject to the order are protected to the same extent as those of Appellants.
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too important to be denied review and the question presented is such that if review is postponed until final judgment in the case, the claim will be irreparably lost.
Id. To satisfy the collateral order doctrine, the appellant must demonstrate
that the order “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.” Linde v. Linde, 222 A.3d 776, 783 (Pa. Super.
2019). The first prong, separability, occurs when we can address the issue
surrounding the disputed order without analyzing the ultimate issue in the
underlying case. Id. As for the second prong, importance, “it is not sufficient
that the issue be important to the particular parties.” Geniviva v. Frisk, 725
A.2d 1209, 1214 (Pa. 1999). Instead, the issue “must involve rights deeply
rooted in public policy going beyond the particular litigation at hand.” Id. We
must interpret the collateral order doctrine narrowly, and each of the above
prongs must be clearly present for us to deem an order collateral. Melvin v.
Doe, 836 A.2d 42, 47 (Pa. 2003).
“[T]he question of whether the collateral order doctrine has been met is
jurisdictional in nature.” Shearer v. Hafer, 177 A.3d 850, 855 (Pa. 2018).
“Where an order satisfies Rule 313’s three-pronged test, an appellate court
may exercise jurisdiction even though the order is not final.” Id. at 857. “If
the test is not met, [] and in the absence of another exception to the final
order rule, there is no jurisdiction to consider an appeal of such an order.” Id.
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Appellants satisfy all three prongs of the collateral order doctrine. They
satisfy the first prong, separability, because it is possible to address whether
Appellants’ financial records are discoverable without analyzing the merits of
Appellees’ actions against Appellants under the Dragonetti Act or for tortious
interference with contract. J.S. v. Whetzel, 860 A.2d 1112, 1117 (Pa. Super.
2004) (in personal injury action, defendant’s expert medical witness appealed
order requiring production of all 1099 tax forms from 1999 to 2002 from any
insurance company or attorney; held that admissibility of 1099 forms “may
be addressed without analyzing [defendant’s] alleged negligence in the
automobile accident”).
Appellants fulfill the second prong, importance, because they have a
significant privacy interest in their tax returns. Dougherty v. Heller, 138
A.3d 611, 629 n.10 (citing Cooper v. Schoffstall, 905 A.2d 482, 485 n.3 (Pa.
2006) (individuals have “privacy interest in information contained in federal
tax returns. . . . Such information is made confidential per federal statute”);
J.S., 860 A.2d at 1117 (defense witness’s privacy interest in information on
federal 1099 tax forms raised “sufficiently important public policy concern” for
purposes of collateral order doctrine). Further, Appellants have a privacy
interest in their bank records and net worth documents. Merithew v.
Valentukonis, 869 A.2d 1040, 1043 (Pa. Super. 2005), abrogated on other
grounds, Rae v. Pennsylvania Funeral Directors Association, 977 A.2d
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1121 (Pa. 2009)8 (discovery order compelling defendant to disclosure her
complete financial worth implicated her privacy interest in her financial
information and raised sufficiently important public policy concern to satisfy
second prong of collateral order doctrine).
Appellants meet the third prong, irreparable harm, because their privacy
rights in their financial documents will be irreparably lost if review of this
question “is postponed until final judgment in this case.” Linde, 222 A.3d at
783; Merithew, 869 A.2d at 1043 (in motor vehicle accident case,
defendant’s privacy interest in her financial worth would be irreparably lost if
she complied with discovery order to disclose financial information instead of
taking collateral order appeal).
Appellees argue that even if Appellants satisfy the collateral order
doctrine, we must quash Appellants’ appeal as untimely because (1)
Appellants failed to appeal within thirty days after entry of the August 7, 2019
order granting Appellees’ motion to compel, and (2) Appellants’ motion for
8 Merithew applied a “whole order approach” to the collateral order doctrine by ruling, in effect, that if one issue in an order satisfies the collateral order doctrine, the entire order was subject to review. Id., 869 A.2d at 1044 (determining whether information sought in discovery order was relevant, an issue that is not “separable from and collateral to the main cause of action”). In Rae, our Supreme Court held that this “whole order approach” was incorrect, and 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.” Id., 977 A.2d at 1130. Rae thus abrogated Merithew to the extent that Merithew applied the “whole order approach” to the collateral order doctrine.
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reconsideration of this order did not toll the time for appealing, since the trial
court did not grant the motion within thirty days after August 7, 2019. We
disagree.
In Estate of Petro, 694 A.2d 627 (Pa. Super. 1997), the administrator
of an estate filed a petition demanding that the decedent’s daughters return
certain assets to the estate. On September 9, 1994, the Orphans’ Court
denied the petition, and on July 10, 1995, the court denied the administrator’s
exceptions. The administrator filed a motion for new trial nunc pro tunc,
prompting the court to enter an order staying the entry of final judgment
pending receipt of evidence on the motion. On March 11, 1996, the court
denied the motion for new trial, and on March 29, 1996, the court entered
judgment. The administrator appealed. This Court held that the appeal was
timely even though the administrator appealed more than thirty days after
the July 10, 1995 order denying his exceptions. We emphasized that the
administrator’s petition seeking return of assets was “collateral to the main
cause of action here, the administration of the assets inventoried in the
estate.” Id., 694 A.2d at 630. All of the orders between September 1994
and March 1996, we continued, related to this collateral matter. Id. There is
no rule, however, that a collateral order must be appealed within thirty days
after its entry; Rule 313(a) only provides that an appeal “may” be taken from
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a collateral order.9 Id. at 631. Since there were multiple orders concerning
this collateral issue, “an appeal of this issue was properly taken when the
collateral matter (the inclusion of assets in [the] estate) was finally
determined,” i.e., following entry of judgment on March 29, 1996. Id. at 631-
32.
Several years after Petro, in Jones v. Faust, 852 A.2d 1201 (Pa.
Super. 2004), a motor vehicle accident case, the court entered (1) an order
on May 5, 2003 requiring the defendant’s expert witness to produce medical
records of other patients he treated (with their names redacted), (2) an order
on July 14, 2003 directing the expert’s company to pay a fine, and (3) an
order dated July 28, 2003 directing the expert and his company to pay fines
for failing to comply with prior orders. On August 1, 2003, the expert
appealed. Citing Petro, this Court held that the appeal from the May 5, 2003
order was timely.
[T]he timeliness of appeals from collateral orders depends not upon entry of the order itself, but upon resolution of the collateral matter. And, although collateral orders may be appealed within 30 days of their entry, the substance of the collateral order is not forever precluded when an appeal is not taken within this period. As the order involved here is a discovery matter, by definition preliminary and in addition concerned with resolution of collateral issues, clearly no finality is implicated; the appeal from the May 5th Order is therefore timely, as are the appeals from the July 14th and 28th Orders.
9Rule 313(a) remains the same today as it was when this Court decided Petro.
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Id., 852 A.2d at 1203 (citations omitted). We have interpreted Jones to
mean that “where [a] collateral matter is resolved through a series of
interlocutory orders, a timely notice of appeal from the last such order will
incorporate a prior order involving segments of same collateral matter.”
McGrogan v. First Commonwealth Bank, 74 A.3d 1063, 1076 n.16 (Pa.
Super. 2013) (citing Jones).
In the present case, as in Petro and Jones, the trial court entered a
series of interlocutory orders on a collateral matter: the August 7, 2019 order
granting Appellees’ motion to compel production of Appellants’ financial
documents, the September 9, 2019 order scheduling a hearing on Appellants’
motion for reconsideration, and the October 31, 2019 order denying
reconsideration. Appellants’ notice of appeal on November 27, 2019 was a
timely appeal from the October 31, 2019 order that incorporated the August
7, 2019 and September 9, 2019 orders involving the same collateral discovery
issue.
Having held that the October 31, 2019 discovery order herein is a
appealable collateral order, and that Appellants’ appeal from this order is
timely, we turn to the merits of the appeal.
“In reviewing the propriety of a discovery order, we determine whether
the trial court committed an abuse of discretion and, to the extent that we are
faced with questions of law, our scope of review is plenary.” Pasquini v.
Fairmount Behavioral Health System, 230 A.3d 1190, 1194 (Pa. Super.
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2020). The trial court entered an AEO order (1) declaring the discovery of
Appellant’s financial documents “confidential,” (2) directing Appellees’ counsel
not to copy or utilize this discovery or to disclose it anyone, including
Appellees, without court approval, even after termination of this litigation, and
(3) directing Appellees’ counsel to destroy this discovery after termination of
litigation. Courts have employed AEO orders in a variety of cases.
“[D]isclosure of confidential information on an ‘attorneys' eyes only’ basis is a
routine feature of civil litigation involving trade secrets. . . . The purpose of
this form of limited disclosure is to prevent a party from viewing the sensitive
information while nevertheless allowing the party’s lawyers to litigate on the
basis of that information.” In re City of New York, 607 F.3d 923, 935-36
(2d Cir. 2010) (emphasis in original). AEO orders are commonplace in trade
secret litigation, including trade secret cases in Pennsylvania. CLL Academy,
Inc. v. Academy House Council, 231 A.3d 884 (Pa. Super. 2020) (collecting
AEO orders in Allegheny County trade secret cases); see generally Wright
& Miller, 8A Fed. Prac. & Proc. Civ. § 2041 n.11 (3d ed.) (collecting dozens of
cases). In addition, courts have entered AEO orders to safeguard parties’
privacy interests. See Simpson v. Univ. of Colo., 220 F.R.D. 354, 361 (D.
Colo. 2004) (in sexual harassment case, some diary entries ordered disclosed,
but for attorneys’ eyes only); Sanchez v. Zabihi, 166 F.R.D. 500, 503
(D.N.M. 1996) (in sexual harassment case, interrogatory about prior romantic
or sexual advances narrowed to three years with response for attorneys’ eyes
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only); Rossini v. Ogilvy & Mather, Inc., 798 F.2d 590, 601 (2d Cir. 1986)
(in class action against employer for sexual discrimination, AEO order appears
to have been a proper attempt to balance plaintiffs’ desire for full disclosure
of relevant information against defendant’s desire to preserve privacy of its
employees). Further, we have found at least one court that has imposed an
AEO order when the plaintiff sought discovery relating to their claim for
punitive damages. Breault v Friedli, 610 S.W.2d 134, 140 (Tenn. App.
1980) (in action alleging fraud in sale of liquor store business, court properly
limited disclosure of defendants’ financial information to counsel only).
In this case, the trial court properly concluded that Appellees had the
right to punitive damages discovery under Rule 4003.7, based on evidence
that Appellants intentionally and wantonly filed a second federal lawsuit
despite full knowledge of the prior settlement agreement between Appellees
and Kemble. Appellants insist that disclosure of their financial documents will
rob them of their privacy interest in these documents, and that it is impossible
to undo this harm. The right to privacy, however, “is not an unqualified one;
it must be balanced against weighty competing private and state interests.”
Jones, 852 A.2d at 1207. Courts can and should craft discovery orders that
strike a proper balance between Appellants’ privacy interests and the rights of
other parties. Appellees have the right to seek punitive damages in their
Dragonetti action. See 42 Pa.C.S.A. § 8353(6) (plaintiff in Dragonetti action
may obtain punitive damages “according to law in appropriate cases”). The
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AEO order herein accommodates Appellants’ privacy rights by prohibiting
Appellees themselves from viewing Appellants’ financial information, limiting
access to these documents to Appellees’ attorneys, and requiring Appellees’
attorneys to destroy these documents at the conclusion of litigation. The AEO
order effectuates Appellees’ right to punitive damages discovery by providing
access to Appellants’ financial records while also “setting forth appropriate
restrictions as to . . . the dissemination of the material discovered.” Pa.R.C.P.
4003.7. The AEO order, in short, is a proper exercise of discretion because it
properly balances the parties’ competing interests.10
For the foregoing reasons, the October 31, 2019 order was appealable
under the collateral order doctrine, and Appellants’ appeal from this order was
timely. On the merits, we conclude that the trial court properly exercised its
discretion by ordering AEO production of Appellants’ financial documents.
10 We know of only one other Pennsylvania appellate decision concerning AEO orders—our ruling earlier this year in CLL Academy that an AEO order was an improper device for resolving the defendant’s attorney-client privilege and work product doctrine objections to the plaintiffs’ discovery requests. Privilege logs, CLL Academy said, are the primary method for determining whether privileges apply, and in camera review is available when privilege logs do not permit meaningful analysis. Id., 231 A.3d at 889. The AEO order was “wholly inconsistent with the in camera review sanctioned by our rules of civil procedure for evaluating claims of privilege.” Id. at 890. We observed that “disclosure [in trade secret cases] of confidential commercial information to attorneys who are not in a position to use it to achieve a competitive edge is quite different from the disclosure of an attorney’s mental impressions and strategies to opposing counsel in ongoing litigation.” Id.
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Order affirmed. Case remanded for further proceedings. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 10/26/2020
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