Pace-O-Matic, Inc. v. Eckert, Seamans Cherin & Mellott, LLC

District Court, M.D. Pennsylvania·Decided May 9, 2024·No. 1:20-cv-00292·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA PACE-O-MATIC, INC., : Civil No. 1:20-CV-00292 : Plaintiff, : : v. : : ECKERT, SEAMANS CHERIN & : MELLOTT, LLC, et al., : : Defendants. : Judge Jennifer P. Wilson MEMORANDUM Before the court is a longstanding discovery dispute regarding 182 documents purportedly protected by attorney-client privilege. United States Magistrate Judge Joseph Saporito, Jr. previously found that Defendants and third party Greenwood Gaming & Entertainment, Inc. d/b/a Parx Casino (“Parx”) were judicially estopped from exercising attorney-client privilege with respect to these documents. (Doc. 167.) This court affirmed Judge Saporito’s decision. (Doc. 223.) The Third Circuit reversed and then issued a mandate vacating this court’s order and remanding the instant dispute. (Doc. 356.) After remand, the court conducted an in camera review of the documents. Based on that in camera review, the court finds that the vast majority of these documents are protected by attorney- client privilege.

1 FACTUAL BACKGROUND AND PROCEDURAL HISTORY1 There have been multiple opinions written on the immediate discovery issue

and there is not a dispute about the factual or procedural history. As such, the court will only restate the factual background and procedural history necessary for clarity in this opinion. Plaintiff, Pace-O-Matic, Inc. (“POM”), initiated this action in February 2020 against Defendants Eckert, Seamans Cherin & Mellott, LLC,

Mark S. Stewart, and Kevin M. Skjoldal (collectively, “Eckert”) for an alleged breach of Eckert’s fiduciary duties to POM. (Doc. 1.) POM alleges that this breach stems from Eckert’s representation of both POM and third-party

competitor, Parx, in matters in which POM and Parx had competing and adverse commercial interests in the Commonwealth Court of Pennsylvania relating to POM’s development, production, and licensure of electronic “skill games” sold in Pennsylvania. (Doc. 166, pp. 1−2.)2

Eckert’s representation of POM began in 2016 in Virginia and was limited to Virginia despite POM’s similar activity in Pennsylvania. That was because Eckert represented Parx in Pennsylvania. (Id. at 3−4.) In the summer of 2018,

POM filed two lawsuits in the Commonwealth Court of Pennsylvania through

1 Any additional factual recitation that is necessary for the discussion of each specific issue is included in the Discussion section of this memorandum.

2 For ease of reference, the court utilizes the page numbers from the CM/ECF header.

2 other counsel relating to the seizure and removal of some of its skill games in Pennsylvania.3 (Id. at 3.) During this litigation in the Commonwealth Court,

Parx, purportedly through its counsel, Hawke McKeon & Sniscak (“HMS”) and Ballard Spahr, LLP (“Ballard”), filed amicus briefs in opposition to POM’s position, and motions to intervene. (Id. at 4−5.) In January 2020, POM learned

that Eckert was allegedly involved in some capacity with Parx’s representation in the Commonwealth Court cases, assuming positions materially adverse to POM’s position despite Eckert’s ongoing representation of POM in Virginia. (Id. at 5.) After POM requested that Eckert withdraw from representing Parx in adverse

litigation in Pennsylvania, Eckert instead withdrew from representing POM in Virginia. (Id.) This discovery dispute has been extensively briefed and Judge Saporito allowed oral argument on these issues on October 20, 2020, during which the parties agreed to allow Judge Saporito to conduct an in camera review of the subject documents. ([Doc. 166, p.] 6−7.) Thereafter, the parties met and conferred to determine the documents to be submitted to Judge Saporito. (Id. at 7.) These documents were provided to Judge Saporito in December 2020, and Judge Saporito issued his memorandum and order on February 16, 2021. (Docs. 87, 88.) On March 2, 2021, Eckert, HMS, and Parx filed separate appeals of Judge Saporito’s decision, each only appealing section III. I. of Judge Saporito’s memorandum and paragraph 4 of Judge Saporito’s order pertaining to judicial estoppel. (Docs. 93, 95, 97.) The court granted this appeal, finding that Judge Saporito erred procedurally by raising the issue of judicial estoppel sua sponte without the benefit of briefing

3 These cases are located at docket numbers 418 MD 2018 and 503 MD 2018. (Doc. 166, p. 4.) 3 from counsel and remanded the matter for further consideration. (Docs. 113, 114.) On remand, Judge Saporito allowed the parties to brief the issue of judicial estoppel. (Doc. 166, p. 8.) Following further consideration, including a re-review of the allegedly privileged documents, Judge Saporito again concluded that the attorney-client privilege invoked by Eckert was inapplicable on judicial estoppel grounds and that the work product doctrine was likewise inapplicable. (Id. at 35−36.) (Doc. 222, pp. 3–4.) On November 30, 2021, Eckert, Parx, and HMS appealed Judge Saporito’s decision. (Docs. 168, 170, 172.) On July 5, 2022, this court issued an opinion and order affirming Judge Saporito’s decision. (Docs. 222, 223.) Eckert, Parx, and HMS moved for reconsideration. (Docs. 230, 232, 234.) While these motions were pending, the court granted a joint motion by Eckert, Parx, and HMS to stay production of the disputed documents until their motions for reconsideration were resolved. (Doc. 239.) On August 11, 2022, the court denied the motions for reconsideration but granted a request to certify the issue for interlocutory appeal. (Doc. 252.)

Eckert, Parx, and HMS petitioned for interlocutory review under § 1292(b). (Doc. 356, p. 9.) A motions panel of the Third Circuit granted the petition, and the Circuit consolidated the appeals. (Id.) The Circuit concluded that this court erred

and abused its discretion by applying judicial estoppel. (Id. at 9, 14–15.) On January 12, 2024, the court held an on-the-record status conference with the parties. (Doc. 363.) Per the parties’ request, the court issued a briefing 4 schedule for them to address whether Judge Saporito had determined whether, notwithstanding the application of judicial estoppel, the documents at issue were

protected by attorney-client privilege. The issue was briefed, and this discovery dispute is ripe for review. (Docs. 369, 372, 375.) DISCUSSION As a preliminary matter, the court finds that Judge Saporito never decided

whether, absent judicial estoppel, the documents at issue would be protected by attorney client privilege. During the on-the-record status conference, Eckert, HMS, and Parx asserted that Judge Saporito had found the documents would be

protected by attorney-client privilege. (Doc. 363.) But they were unable to point to any part of his memorandum or order stating that. Their briefs have the same shortcoming. (Docs. 369, 376.) In fact, neither Judge Saporito nor this court have ever determined whether attorney-client privilege applies to these 182 documents.

Therefore, the court will do so now. Because this is a diversity case, Pennsylvania law governs whether attorney- client privilege attaches to a particular document. (Doc. 353, p. 10 (citing Fed. R.

Evid. 501; United Coal Cos. v. Powell Constr. Co., 839 F.2d 958, 965 (3d Cir. 1988)). The Supreme Court of Pennsylvania has stated that, “[b]ecause it ‘has the effect of withholding relevant information from the factfinder,’ courts construe the privilege narrowly to ‘appl[y] only where necessary to achieve its purpose.’” In re

5 Estate of McAleer, 248 A.3d 416, 425–26 (Pa. 2021) (quoting Fisher v. United States, 425 U.S. 391, 403 (1976)).

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Pace-O-Matic, Inc. v. Eckert, Seamans Cherin & Mellott, LLC, (M.D. Pa. 2024).

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