Giovinazzo, J. v. Susquehanna Bank

• Court: Superior Court of Pennsylvania
• Decided: July 1, 2016
• Docket: 3147 EDA 2014
• Status: Unpublished

Opinion

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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37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. J. A33011/15

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

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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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