author: GARDNER, J.,

text:
    Adhesive Specialists Inc. v. Concept Sciences Inc.

      C.P. of Lehigh County,
    nos. 2000-C-0183, 2000-C-1797 and 2000-C-2280.

      Seth Weber, Assistant United States Attorney on behalf of Potential Party United States of America.

      Frank A. Baker III and John A. Orlando, for defendants Concept Sciences, Heath and Ward.

      Marie H. Kramer, for defendants Alfa Laval.

      Thomas B. Schmitt III, for defendant ALEDco.

      Richard C. Biedrzycki, for additional defendant Ashland.
    November 13, 2002
   GARDNER, J.,

This matter is before the court on a motion and amended motion for a protective order brought by the United States of America through the United States Attorney’s Office for return of a memorandum alleged to be protected by the attorney-client and attorney work-product privileges. A Department of Labor attorney, Maureen A. Russo, Esquire, prepared the memorandum outlining a criminal case against defendant M Ward. For the reasons expressed below, we deny the motion and amended motion and direct that the memorandum be disseminated by the United States of America to counsel for all parties.

These consolidated cases arise from an explosion on February 19, 1999, at the facility of defendant Concept Sciences Inc. at 749 Roble Road, Allentown, Lehigh County, Pennsylvania. Numerous plaintiffs brought suit as a result of this explosion. Defendant Concept Sciences filed joinder complaints against numerous additional defendants whom they allege are responsible for the damages. In addition, a number of parties have filed cross-claims or counterclaims against each other. The complaining parties seek personal and property damages under theories of strict liability, negligence, breach of contract and breach of warranty.

Concept Sciences was in the business of manufacturing a solution know as hydroxylamine which is used to clean computer chips. At the time of the explosion at its plant, Concept Sciences was attempting to purify and manufacture hydroxylamine in a 50 percent aqueous solution. Concept Sciences purchased some of its equipment for its manufacturing facility through additional defendant ALEDco Inc. One of the many pieces of equipment purchased from ALEDco by Concept Sciences was an IP800 Peristalic Pump. Concept Sciences contends that the explosion on February 19, 1999, was caused by the malfunction of the pump.

Defendant Irl Ward was the president of Concept Sciences Inc. Defendants and additional defendants Alfa Laval Pumps Inc.; Alfa Laval Flow Inc.; Alfa Laval Pumps, a Division of Alfa Laval Flow Inc.; and Alfa Laval Flow GmbH (collectively Alfa Laval) allegedly manufactured and distributed the pump. More specifically, ALEDco ordered the pump from Alfa Laval Pumps Inc., in Kenosha, Wisconsin. Alfa Laval Pumps Inc. in turn ordered the pump from Alfa Laval Flow GmbH. Alfa Laval Flow GmbH shipped the pump to Alfa Laval Pumps Inc. in Kenosha, Wisconsin. Alfa Laval Pumps Inc. shipped the pump to ALEDco in Allentown, Pennsylvania, which then sold the pump to Concept Sciences Inc.

The United States of America’s motion for a protective order and for return of a privileged government attorney work-product document dated September 13, 1999, was filed May 17, 2001; and the United States of America’s amended motion was filed August 30, 2001.

Defendants’ brief in opposition to the motion for a protective order filed by the United States of America, a nonparty was filed June 5,2001, on behalf of defendants and additional defendants Concept Sciences Inc.; Irl E. Ward; Dawn L. Ward and Brian D. Heath (collectively, the Concept Sciences defendants). These parties filed a response to the government’s amended motion on September 5, 2001.

The response of additional defendant Ashland Inc. to the United States of America’s motion for a protective order and for return of a privileged work product document dated September 13,1999, was filed June 6,2001.

In its motion, the government seeks return of a 50-page memorandum dated February 13,1999, prepared by Attorney Russo addressed to Michael R. Stiles, United States Attorney for the Eastern District of Pennsylvania. The memorandum outlines the basis of a criminal indictment against Dr. M Ward.

We conducted a hearing on this matter on April 30, 2002. At the hearing, the government presented the testimony of Pennsylvania State Police Lieutenant Scott R. Snyder, Pennsylvania State Trooper Paul S. Romanic, Attorney Russo, and the stipulated testimony of Marie H. Kramer, Esquire (an attorney for Alfa Laval). The government introduced nine exhibits. Additional defendant Ashland introduced one exhibit.

Based upon the pleadings, record papers, stipulations, concessions of counsel, exhibits, and testimony of the witnesses at the hearing, the pertinent facts are as follows.

FINDINGS OF FACT

After the February 19,1999, explosion at the Concept Sciences’ facility, a number of agencies investigated the circumstances surrounding this fatal blast. The Pennsylvania State Police, Pennsylvania Fire Marshal, Lehigh County District Attorney, Occupational Safety and Health Administration, United States Department of Labor and the United States Attorney all participated in different aspects of the investigation of this incident.

To facilitate this investigation, there was a cooperation agreement between the agencies (OSHA, Department of Labor, Pennsylvania State Police and Pennsylvania Fire Marshal) and the prosecutors’ offices (Lehigh County District Attorney and the United States Attorney for the Eastern District of Pennsylvania).

As a part of the cooperation between the agencies, the district attorney and state police asked the Department of Labor to share its investigatory files with them. In response to those requests, by letters dated March 2 and March 10, 1999, the Department of Labor sent letters stating the terms of cooperation. Those terms included a requirement that the requesting agency set forth in writing the “specific information being requested, the purpose of requesting it and agreeing to maintain its confidentiality.” In addition, the letter stated: “In the event that a request is made by an outside party for information in the file, we ask that you contact OSHA before making any disclosure. Further, please return the file to OSHA when you have completed your work with it.”

By letter dated March 18, 1999, Pennsylvania State Police Lieutenant Scott R. Snyder sent a return letter to George J. Tomchick Jr., Allentown office area director of OSHA, indicating that the Pennsylvania State Police were interested in obtaining the cooperation of OSHA in the investigation and specifically, the “investigatory findings and reports including findings of expert examiners . ...” In addition, Lieutenant Snyder stated that any reports would be made a part of the Pennsylvania State Police investigatory file and would be classified as confidential.

Pennsylvania State Trooper Paul Romanic (the lead state police investigator in the Concept Sciences explosion investigation) assisted the federal government in the grand jury investigation. He was on a list prepared pursuant to Federal Rule of Criminal Procedure 6(e) which authorized him to receive certain grand jury documents. Trooper Romanic worked closely with the United States Attorney’s office during the investigation. He attended numerous meetings between the state police, district attorney and the United States Attorney to determine how the case should proceed.

At some point between September 13,1999 and January 8, 2001, during the period of cooperation between the various law enforcement agencies, the Pennsylvania State Police obtained the memorandum written by Attorney Russo.

On February 29, 2000, counsel for Alfa Laval sent a subpoena to produce documents or things for discovery pursuant to Pennsylvania Rule of Civil Procedure 4009.22 to Colonel Paul Evanko of the Bethlehem barracks of the Pennsylvania State Police. The subpoena requested:

“[The] entire file including but not limited to the fire department report, record, trip sheet and any and all supplemental reports, measurements, diagrams, photographs, photographic negatives, statements, memoranda, notes and anything else having to do with the explosion of February 19, 1999, at Concepts [sic] Sciences Inc. plant in the Lehigh Valley Industrial Park.”

On May 4, 2000, the petition of the Lehigh County District Attorney’s office for a protective order pursuant to Pennsylvania Rule of Civil Procedure 4012(a)(1) was filed seeking a protective order from the subpoena served by counsel for Alfa Laval. Alfa Laval Flow Inc.’s response to petition to quash subpoena and enter protective order was filed June 20, 2000.

Oral argument was scheduled for September 5, 2000. At the request of the district attorney, that date was continued until December 12,2000. The December 12,2000 argument was again continued at the request of the district attorney until January 30,2001. On January 30,2001, prior to commencing oral argument, the district attorney withdrew his motion for a protective order. By order dated January 30,2001, the undersigned granted the request to withdraw the motion for a protective order.

On January 8, 2001, counsel for Alfa Laval served a second subpoena on the Pennsylvania State Police in the other cases assigned to the undersigned. The subpoena demanded “any and all documents and things obtained or created by the Pennsylvania State Police in connection with its investigation of the February 19, 1999 explosion at Concept Sciences Inc., 450 Allenwood Drive, Allentown, Pennsylvania.”

At some time between January 17 and February 15, 2001, Trooper Romanic, at the direction of Lt. Scott Snyder (the criminal investigation section commander of the Bethlehem barracks of the state police), advised counsel for Alfa Laval that counsel could review the Pennsylvania State Police investigative file. There is no indication of any precautions taken to preserve the confidentiality of any documents in the possession of the state police prior to allowing counsel for Alfa Laval to review the documents.

There is no record evidence of any effort by the Pennsylvania State Police to advise, or contact, OSHA, the United States Department of Labor or the Office of the United States Attorney, about the subpoenas served by counsel for Alfa Laval. However, because of the close cooperation of all the agencies, and the efforts of the district attorney to quash the original subpoena, we conclude that some, or all, of these agencies knew about the efforts of the civil litigants to obtain the state police investigative file.

On February 15, 2001, several representatives of the firm of Daller, Greenberg and Dietrich (counsel for Alfa Laval) visited the state police barracks in Bethlehem, Pennsylvania. They reviewed the documents and tagged a number of them for copying. Trooper Romanic was not in the office that day.

On February 16, 2001, Trooper Romanic returned to his office and realized that there were two additional boxes which were not available for review by counsel for Alfa Laval. He contacted the firm of Daller, Green-berg and Dietrich and advised the attorneys that there were more documents to be reviewed.

On February 20, 2001, Attorney Marie H. Kramer of Daller, Greenberg and Dietrich went to the Bethlehem barracks to review documents, including the two additional boxes not previously made available. She took no notes concerning the documents, but telephoned Edward H. Greenberg, Esquire, of her firm who advised her to copy all of the documents responsive to the subpoena.

As part of her document review, Attorney Kramer saw the memorandum addressed to Attorney Stiles which had been prepared by Attorney Russo. This memorandum contained the heading “Privileged Attorney Work Product” on the front page. Attorney Kramer did not read the document but placed it with other documents for copying.

On February 26, 2001, a representative of Capitol Copying, a copy service hired by Daller, Greenberg and Dietrich, went to the Bethlehem State Police barracks and copied the documents selected by Alfa Laval’s attorneys.

After being copied, the documents were sent to Daller, Greenberg and Dietrich and further disseminated to the law firms of White and Williams LLP (counsel for the Concept Sciences defendants), Pepper Hamilton LLP (counsel for defendant and additional defendant ALEDco) and Pettit, Phelan and Biedrzycki (counsel for Ashland).

On April 23,2001, Paul R. Bartolacci, Esquire, of the law firm of Cozen O’Connor (plaintiffs’ counsel in the cases of Adams v. Concept Sciences Inc., case no. 2000-C-3070 and Adams v. Ward, case no. 2001-C-470), reviewed the discovery materials obtained from the state police at the offices of Daller, Greenberg and Dietrich.

Attorney Bartolacci spent an entire day reviewing documents and tabbed a number of documents which he wanted copied, including the memorandum prepared by Attorney Russo. None of the parties called Mr. Bartolacci as a witness at the hearing.

We conclude that Mr. Bartolacci reviewed the memorandum, at least to the extent that he concluded that he wanted a copy of it. One could infer that he read the entire document. Moreover, there is no indication whether he made any notes regarding his document review, whether he shared any of the information gleaned from his review of this document with any attorneys at his firm, or with his clients. However, all of these are reasonable possibilities.

On April 23, 2001, during the review of the Pennsylvania State Police documents, Richard H. Maurer, Esquire, of the firm of White and Williams LLP, came across the Russo memorandum. He did not read the memorandum. Rather, he brought it to the attention of his superior, John A. Orlando, Esquire.

At the direction of Attorney Orlando, Attorney Maurer drafted a letter to Assistant United States Attorney Seth Weber stating that his firm was in possession of the memorandum and that it contained an indication that it was attorney work-product. Mr. Maurer stated that if the government had any concerns about the apparent widespread distribution of this document, a motion should be filed before the undersigned to whom a number of the civil cases had been assigned. Mr. Maurer sent a copy of this letter to all the other litigants in the civil cases.

On April 24, 2001, Attorney Greenberg notified Attorney Bartolacci by letter that he would not be including the memorandum prepared by Attorney Russo in the documents to be produced because it contained material subject to the attorney-client privilege and the attorney work-product doctrine. Attorney Greenburg’s letter further stated that his firm was returning the document to the United States Attorney’s office.

By letter dated May 1,2001, Attorney Weber advised Attorney Maurer that the government wanted its document back and that if it did not get it back by May 4, 2001, it would file a motion in Lehigh County court to compel the return of the document.

By letter dated May 8,2001, Attorney Weber referred to a telephone conversation between himself and Richard C. Biedrzycki, Esquire. In that letter, Attorney Weber confirms that Attorney Biedrzycki would not return the memorandum unless the government agreed that if the Lehigh County court decided that the privilege had been waived, then the U.S. Attorney’s office would return the document. Attorney Weber would not agree to such a stipulation. Therefore, Attorney Biedrzycki refused to return the document to the government.

At oral argument, Attorney Biedrzycki conceded that he had reviewed the memorandum prepared by Attorney Russo. Moreover, he provided the court with a sealed marked-up copy (Ashland exhibit 1) which purports to designate sections of the memorandum which Attorney Biedrzycki does not believe constitute attorney work-product (because they are factual recitations and not the mental impressions of the drafter). In addition, Attorney Biedrzycki conceded that portions of the memorandum might fall within the attorney work-product privilege.

Moreover, Attorney Biedrzycki informed the court and the other parties that his firm had an agreement with the law firm of Montgomery McCracken to split the costs of copying the state police files. Montgomery McCracken represents defendant and additional defendant Puritan Products in some of these cases. Attorney Biedrzycki stated his belief that Montgomery McCracken has received a copy of the memorandum, but does not know what they have done with it.

Some time after creation of the memorandum, but before dissemination of the memorandum to the parties, Irl Ward was indicted by a federal grand jury. During pendency of this motion, the criminal charges against Dr. Ward were dismissed by Judge R. Barclay Surrick of the United States District Court for the Eastern District of Pennsylvania. There is no indication that a new indictment has been filed.

DISCUSSION

On May 17, 2001, the government filed the within motion for a protective order. In its motion, the government contends than the memorandum prepared by Attorney Russo is privileged under the attorney-client privilege or, in the alternative, under the attorney work-product doctrine. For the following reasons, we deny the government’s motion.

ATTORNEY-CLIENT PRIVILEGE

In Pennsylvania, the attorney-client privilege is codified at 42 Pa.C.S. §5928. It provides: “In a civil matter counsel shall not be competent or permitted to testify to confidential communications made to him by 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.”

This privilege is intended to foster candid communications between counsel and client so that counsel can provide legal advice based upon complete information obtained from the client. National Railroad Passenger Corporation v. Fowler, 788 A.2d 1053, 1064 (Pa. Commw. 2001). The attorney-client privilege protects only those disclosures which are necessary to obtain informed legal advice that might not be obtained otherwise and only applies where the client’s goal is to obtain legal advice. Joe v. Prison Health Services Inc., 782 A.2d 24 (Pa. Commw. 2001).

Because a federal government attorney prepared the memorandum, the Federal Rules of Evidence are pertinent. Federal Rule of Evidence 501 provides:

“Rule 501. General rule
“Except as otherwise required by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness, person, government, state, or political subdivision thereof shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which state law supplies the rule of decision, the privilege of a witness, person, government, state, or political subdivision thereof shall be determined in accordance with state law.” F.R.E. 501.

Accordingly, based upon the language of F.R.E. 501, whether the attorney-client privilege is applicable is to be determined by Pennsylvania law, rather than federal law. However, there are no “principles or rules of law unique to Pennsylvania that should control the resolution of our decision on these matters.” Rhone-Poulenc Rorer Inc. v. Home Indemnity Co., 32 F.3d 851 (3d Cir. 1994).

In Rhone-Poulenc the United States Court of Appeals for the Third Circuit enunciated the traditional elements of the attorney-client privilege as follows. Communications between attorney and client are protected if:

“(1) the asserted holder of the privilege is or sought to become a client;
“(2) the person to whom the communication was made
“(a) is a member of the bar of a court, or his or her subordinate, and
“(b) in connection with this communication is acting as a lawyer;
“(3) the communication relates to a fact of which the attorney was informed
“(a) by his client
“(b) without the presence of strangers
“(c) for the purpose of securing primarily either
“(i) an opinion of law or
“(ii) legal services or
“(in) assistance in some legal proceeding, and
“(d) not for the purpose of committing a crime or tort; and
“(4) the privilege has been
“(a) claimed and
“(b) not waived by the client.” 32 F.3d at 862. Documents may be protected from disclosure in discovery because they are privileged. However, the protection may be inapplicable to facts incorporated into the communication. Id.

The protection of the privilege extends only to communications and not to facts. A fact is one thing, and a communication concerning that fact is an entirely different thing. Upjohn Company v. United States, 449 U.S. 383, 395-96, 101 S.Ct. 677, 685-86, 66 L.Ed.2d 584 (1981); citing City of Philadelphia v. Westinghouse Electric Corporation, 205 F. Supp. 830, 831 (E.D. Pa. 1962).

Applying the Rhone-Poulenc test to the facts of this case, the United States government has failed to establish the existence of an attorney-client privilege. Although Attorney Russo, the author of the memorandum, testified that her client was OSHA, the memorandum itself does not refer to a client, nor indicate the existence of a client. The memorandum does not indicate any specific communication from that client to Attorney Russo, nor that any communications were confidential. The memorandum does not indicate that the client’s goal in making any disclosures was to obtain legal advice that might not be obtained otherwise.

The memorandum does not indicate that the client, as opposed to the United States Attorney, has claimed a privilege. Attorney Russo is employed by the United States Department of Labor, but there is no indication that the Labor Department is her “client” in this situation, nor that anyone at the Labor Department communicated anything to Attorney Russo.

The memorandum does indicate that it was prepared by Attorney Russo in anticipation of litigation. However, rather than representing a client, Attorney Russo’s role in this matter appears to be more akin to that of a co-prosecutor together with United States Attorney Stiles, or as a consultant to the prosecutor. However, because the potential criminal prosecution was based upon the alleged violation by Concept Sciences and Irl Ward of a number of OSHA regulations, one could reason that the client here is OSHA, as testified by Attorney Russo; but nothing in the memorandum indicates that.

In this case the United States government is not contending that the Pennsylvania State Police is its client. Rather, it attempts to assert that the state police were within the circle of privilege composed of lawyer, client and their respective agents, including the Lehigh County District Attorney and the Pennsylvania State Police. The government bases its argument that the document is still privileged upon the confidentiality agreements between the law enforcement agencies and OSHA and the protection of grand jury materials. For the following reasons, we disagree.

The Pennsylvania State Police were not the addressee of the memorandum. Rather, it was addressed to United States Attorney Michael Stiles. The state police presumably obtained a copy of the memorandum from either OSHA or the United States Attorney.

Under traditional waiver doctrine a voluntary disclosure to a third party waives the attorney-client privilege even if the third party agrees not to disclose the communications to anyone else. Westinghouse Electric Corporation v. Republic of Philippines, 951 F.2d 1414, 1427 (3d Cir. 1991).

Assuming, however, that OSHA, or someone else, is the client of Attorney Russo in this scenario, and that an attorney-client privilege exists, approximately 33 of the 50 pages of the Russo memorandum consist of facts (as opposed to communications) which are not subject to the protection of the attorney-client privilege.

Whoever Attorney Russo’s client might be in this case, if anyone, delivery of the memorandum to the Pennsylvania State Police constituted a voluntary disclosure to a third party. This, in turn, constituted a waiver of the attorney-client privilege, even if the state police agreed not to disclose the communication to anyone else. In addition, even if the Pennsylvania State Police come within the alleged circle of privilege, the attorney-client privilege was waived when the document was disseminated to some of the civil litigants in these cases, even though the dissemination may have been inadvertent.

ATTORNEY WORK-PRODUCT PRIVILEGE

The attorney work-product rule is closely related to the attorney-client privilege. However, its scope is broader because it protects any material, regardless of whether it is confidential, prepared by an attorney in anticipation of litigation. National Railroad, supra.

The doctrine was first enunciated by the United States Supreme Court in Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947). In Hickman, the Supreme Court held that the mental impressions, conclusions, notes, memoranda, theories and research of an attorney should be protected from discovery in actions governed by the Federal Rules of Civil Procedure.

Our review of the Russo memorandum reveals that portions of it do contain the mental impressions, conclusions, notes, memoranda, theories and research of Attorney Russo. Therefore, in the absence of waiver, those portions of the memorandum would be protected from discovery. However, for the reasons expressed below, we conclude that the government has waived the attorney work-product privilege.

The attorney work-product doctrine is defined in Pennsylvania in Pa.R.C.P. 4003.3. In the federal system it is defined in F.R.C.P. 26(b)(3). However, these two rules are materially different in two respects.

First, F.R.C.P. 26(b)(3) permits discovery only when there is a showing of substantial need for the materials, and the party is unable, without undue hardship, to obtain the materials elsewhere. Under Pa.R.C.P. 4003.3 there is no need for a showing of substantial need.

Second, Pa.R.C.P. 4003.3 differentiates between the privilege afforded a party’s attorney and other representatives of the party, whereas, F.R.C.P. 26(b)(3) places both a party’s attorney and other representatives on equal footing.

Because there is a difference in the two discovery rules, and based upon Federal Rule of Evidence 501, we conclude that we must follow the Pennsylvania rule of procedure and not the federal rule of procedure. Accordingly, the civil litigants here are not required to make a showing of substantial need to obtain discovery of this document. Rather, we will follow the test agreed upon by the parties to resolve this dispute.

The parties all cite U.S. v. Keystone Sanitation Company, 885 F. Supp. 672 (M.D. Pa. 1994) for the factors which must be considered in determining whether the government has waived the attorney work-product privilege. In Keystone Sanitation the United States District Court for the Middle District of Pennsylvania stated:

“Many courts use the following factors to determine whether a document has lost its privilege through inadvertent disclosure: (1) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production; (2) the number of inadvertent disclosures; (3) the extent of the disclosure; (4) any delay and measure taken to rectify the disclosure; and (5) whether the overriding interests of justice would or would not be served by relieving a party of its error.” 885 F. Supp. at 676.

We note that factor (5), above, requires us to perform a type of balancing test to determine whether the memorandum has lost its privileged status.

Concerning the first factor, we conclude that the reasonableness of the precautions taken by the Pennsylvania State Police, the Lehigh County District Attorney, OSHA, and the United States Attorney’s office fell short of what we would expect from law enforcement officials trying to protect the confidentiality of the criminal investigation of Irl Ward.

On January 30, 2001, Lehigh County District Attorney James B. Martin appeared before the undersigned and withdrew the Commonwealth’s motion for a protective order, which was previously filed on May 4, 2000. A motion for a protective order is the mechanism prescribed by Pennsylvania law to prevent the disclosure of this document. The withdrawal of this motion could have communicated to the Pennsylvania State Police that it was appropriate to give the civil litigants everything in the state police file.

In addition, we believe that the United States Attorney, OSHA, or both, were aware of the efforts of the civil litigants to obtain the files of the state police. They could have taken steps to ascertain what was going to be turned over to the litigants in these civil cases. If a document needed to be protected because of privilege, they could have either had their documents returned as set forth in the terms of the disclosure agreement, or filed their own motion for a protective order. However, neither the United States Attorney, nor OSHA, took either of these steps.

We conclude that the Pennsylvania State Police did what they should have done to protect the confidentiality of these documents (seek the help of attorneys, namely the district attorney of Lehigh County, to resist the subpoena). The documents were not disseminated to civil counsel by the state police until after this court’s January 30, 2001 order granting the oral motion of the district attorney to withdraw the motion for a protective order. While it may have been prudent for the state police to review each item in the case file prior to showing it to counsel for Alfa Laval, the subpoena was broad enough to encompass everything in that file.

In light of the zeal of the civil litigants to obtain as much information about this explosion as attainable, we conclude that the precautions taken by the law enforcement agencies to protect this memorandum fall short of the precautions which reasonably could have been taken. The volume of documents produced by the state police does not justify the inaction of the government concerning protection of a document which it considered privileged and important to protect.

Nothing in this opinion should be construed as criticism by this court concerning the actions of the state police, OSHA, district attorney or the United States Attorney. We believe that the dissemination of this document was inadvertent.

The second factor of the Keystone Sanitation test is the number of inadvertent disclosures. In this case, the number of disclosures is relatively small in comparison to the number of possible disclosures. Twenty-three lawsuits were filed in Lehigh County and at least four were filed in Northampton County as a result of this explosion. There are many parties and attorneys involved. Because their interests are similar, many of the parties have agreed to share discovery with one another. The document was sent to, or seen by, only six of the numerous law firms involved.

The third Keystone Sanitation factor is the extent of the disclosure. Richard C. Biedrzycki, Esquire, counsel for additional defendant Ashland, read the memorandum. In addition, Attorney Paul Bartolacci, counsel for the Adams plaintiffs, spent a day in the offices of Daller, Greenberg and Dietrich reviewing the documents which were produced by the state police in response to the subpoena. Attorney Bartolacci marked the Russo memorandum as one he wanted copied.

Because Attorney Bartolacci was not called as a witness, we are unaware of the extent of his review of this document. He may simply have done a cursory review of the document and marked it for copying. On the other hand, he may have thoroughly reviewed the memorandum, taken notes on it, and shared his findings with other members of his firm, his clients or other counsel.

In addition, Attorney Biedrzycki provided a copy of the memorandum to Montgomery McCracken, counsel for defendant and additional defendant Puritan Products because he had an agreement to split copying costs with Montgomery McCracken. It is unclear what Montgomery McCracken did with the memorandum. However, the extent of the disclosure may have been substantial.

The fourth Keystone Sanitation factor is the extent of any delay and measures taken to rectify the disclosure. Upon learning of the disclosure of the memorandum, the United States Attorney immediately contacted the firms of White and Williams and Daller, Greenberg and Dietrich. When Attorney Thomas B. Schmidt III of the Pepper Hamilton firm became aware that the government wanted its memorandum back, he returned it.

The United States Attorney did not contact Attorney Biedrzycki until May 8,2001, two weeks after being notified of the disclosure. There is no evidence that the United States Attorney ever contacted the law firms of Cozen O’ Connor or Montgomery McCracken to ascertain the level of disclosure by those firms. In addition, the within motion was not filed by the government until 23 days after it learned of the disclosure of the memorandum.

In our view, the 23-day wait to file a motion constitutes a delay by the government in protecting the privileged nature of its document, especially in light of the language contained in the April 23,2001 letter of Attorney Richard H. Maurer, counsel for defendant Concept Sciences.

Accordingly, we conclude that the government failed to act promptly to adequately protect its allegedly privileged document. Moreover, the government has failed to take corrective measures adequate to rectify the disclosure. Nor did the government sustain its burden of providing the court with a complete picture as to the nature and extent of the disclosure of the document.

Finally, we address the fifth Keystone Sanitation factor, which is whether or not the overriding interests of justice would be served by relieving the government of its error. For the following reasons, we conclude that justice will not be served by relieving the government of its error.

In this matter one plaintiffs’ counsel and one (possibly two) defense counsel have reviewed the document. Counsel for the Concept Sciences defendants argue that their clients will be severely prejudiced if they are not permitted to review the government memorandum. They argue that the memorandum likely contains information which could be used at trial by the parties who have seen it, against their clients, who have not seen it.

In addition, the Concept Sciences defendants argue that disseminating the document to all parties to this lawsuit will not prejudice the government because the government’s criminal prosecution against Irl Ward was dismissed by the federal court. For the following reasons, we agree.

In this determination, we are guided by the decision of the Third Circuit Court of Appeals in In re Ford Motor Company, 110 F.3d 954 (3d Cir. 1997). In Ford Motor Company, Judge (now Chief Judge) Becker stated:

“ ‘[Attorneys cannot unlearn what has been disclosed to them in discovery’; they are likely to use such material for evidentiary leads, strategy decisions, or the like. More colorfully, there is no way to unscramble the egg scrambled by disclosure; the baby has been thrown out with the bath water.” 110 F.3d at 963. (citations omitted)

The likelihood of unfair prejudice to the Concept Sciences defendants in this matter is great. Other parties in this litigation will have knowledge of the contents of this memorandum, and the Concept Sciences defendants will not. Without access to the memorandum, these defendants will have no way of knowing if certain information brought out at trial is the result of independent investigation or the product of information gleaned from the government memorandum.

We agree with defendants that the government will suffer no prejudice from dissemination of this document to all the civil litigants because its criminal prosecution of Irl Ward has been terminated by the federal court. Moreover, as stated by Judge Becker, the parties who have reviewed this memorandum cannot unlearn the information contained therein.

Accordingly, we conclude that the interests of justice would not be served by relieving the government of its mistake.

For all the above reasons, we conclude that the government has waived any attorney-client or attorney work-product privileges which it may have had in the memorandum prepared by Attorney Russo. A careful balancing of all the forgoing factors leads to the conclusion that the government did not adequately protect this document from disclosure, that while the actual number of the disclosures was relatively slight, the extent of those disclosures is unknown.

Moreover, we conclude that the government did not promptly file the within motion to adequately protect its privilege and failed to establish the full extent and nature of the disclosure. Other witnesses, including Paul Bartolacci, Esquire, and some from the firm of Montgomery McCracken, could have been called to shed light on the extent of the disclosure. By failing to call these witnesses, the government has failed to convince this court that the effect of this disclosure can be easily rectified by merely having everyone in possession of the document return it to the government.

Finally, we conclude that the Concept Sciences defendants will likely be prejudiced if they are not allowed to review this document. On the other hand, the government will suffer no prejudice by dissemination of the document to all the litigants.

IN CAMERA REVIEW

The Russo memorandum was admitted into evidence as government exhibit N. Assistant United States Attorney Seth Weber provided a sealed envelope containing the memorandum. Moreover, Attorney Richard C. Biedrzycki marked as Ashland exhibit 1 a copy of the memorandum which he marked with a designation of which parts of the memorandum consists of recitations of facts (as opposed to communications) which he contends are not protected by the attorney-client privilege. Ashland exhibit 1 was introduced into evidence in a sealed envelope.

At the April 30, 2002 hearing in this matter, government Attorney Weber requested the undersigned to inspect the document in camera to determine whether the document is privileged under the attorney work-product doctrine. Counsel for the only parties who formally responded to the government’s motion for a protective order (Frank A. Baker III, Esquire, for the Concept Sciences defendants and Richard C. Biedrzycki, Esquire, for Ashland) each stated they had no objection to the undersigned reviewing the document. Accordingly, the undersigned stated he would read the document.

Thomas B. Schmidt III, Esquire, counsel for ALEDco, objected to the undersigned reading the document. He argued that the court did not need to read the document because there was “uncontroverted testimony” that the document constituted attorney work-product. He stated that the only issue is whether that protection has been waived, and that the court does not need to look at the document in camera to make that decision. However, Attorney Schmidt did not have standing to object because his client did not formally answer the government motion for a protective order.

John A. Orlando, Esquire, former counsel for the Concept Sciences defendants, indicated that at a prior meeting with the court on September 11, 2001, all counsel agreed that the memorandum when written was in fact attorney work-product, and because the only issue now is whether that privilege was waived by the inadvertent disclosure of the document, there is no need for the undersigned to read it. However, Mr. Orlando did not have standing to object because he was no longer counsel of record for the Concept Sciences defendants at the April 30, 2002 hearing. Because of the tragic events of September 11, 2001 (see footnote 5, supra) counsel’s agreement was not placed on the record at that time.

Government Attorney Weber indicated that if counsel would stipulate now to the stipulation suggested by Attorney Orlando, that the government would withdraw its request that the undersigned read the memorandum. However, Attorneys Biedrzycki, Baker and Schmidt would not stipulate.

At the April 30, 2002 hearing the undersigned took under advisement the government request for an in camera review of the document. However, the court advised counsel that if the court reviews one of the sealed copies of the document (the government’s clean copy and Ashland’s marked-up copy) in camera, that it will review both copies.

In arriving at a decision in this matter, the undersigned first addressed the issue of whether or not any attorney-client or attorney work-product privilege had been waived, without reviewing the sealed documents. Our rationale was that if we concluded that the government had waived the privileges by its disclosure of the document, then the government would not be entitled to get the document back, even if it were privileged. However, in the process of deciding the waiver issue, we concluded that evaluation of the fifth factor of the Keystone Sanitation test would require a review of the document. This is, in part, because the fifth factor balancing test required us to determine whether the Concept Sciences defendants would be prejudiced, and to what degree, by not knowing the contents of the memorandum. Accordingly, we reviewed both sealed documents in camera at that time.

CONCLUSION

For all the foregoing reasons, we deny the United States of America’s motion for a protective order and for return of a privileged government attorney work-product document dated September 13,1999, filed May 17,2001, and we deny the United States of America’s amended motion filed August 30, 2001. We direct that the memorandum be disseminated to counsel for all parties by the United States of America on or after 40 days after the filing date of the within order and opinion.

ORDER

Now, November 13, 2002, upon consideration of the United States of America’s motion for a protective order and for return of a privileged government attorney work-product document dated September 13, 1999, which motion was filed May 17, 2001; upon consideration of the United States of America’s amended motion for a protective order and for return of a privileged government attorney work-product document dated September 13, 1999, which amended motion was filed August 30, 2001; upon consideration of defendants’ brief in opposition to the motion for a protective order filed by the United States of America, a nonparty, filed on behalf of defendants Concept Sciences Inc., Irl E. Ward Ph.D., Dawn L. Ward and Brian Heath on June 5, 2001; upon consideration of defendants’ response in opposition to the amended motion for a protective order filed by the United States of America, a nonparty, filed on behalf of defendants Concept Sciences Inc., Irl E. Ward, Dawn L. Ward and Brian Heath on September 5,2001; upon consideration of the response of additional defendant Ashland Inc. to the United States of America’s motion for a protective order and for return of a privileged work-product document dated September 13,1999, which response was filed June 6, 2001; after hearing and closing arguments held April 30, 2002; and for the reasons expressed in the accompanying opinion,

It is ordered that the motion and amended motion of the United States of America are each denied.

It is further ordered that the September 13,1999 memorandum prepared by Maureen A. Russo, Esquire, shall be disseminated by the United States of America to counsel for the parties in all of the cases pending in the Court of Common Pleas of Lehigh County, Pennsylvania, on or after 40 days after the filing date of the within order.

      . The United States of America originally filed a brief, and not a motion. The United States Attorney filed his amended motion on August 30, 2001, to correct this procedural oversight. The delay in filing the amended motion is attributed to a stay order of the Commonwealth Court of Pennsylvania involving the insolvency of liability carrier Reliance Insurance Company, and not because of any lack of diligence on the part of the government.

      . Dawn L. Ward is the wife of additional defendant Irl Ward. Although Mrs. Ward is not a party to any of the three cases involved in this motion, she is a defendant in the companion case of Adams v. Ward., case no. 2001-C-470.

      . Additional defendants Ashland Inc.; Ashland Chemical Inc., a subsidiary of Ashland Oil Inc.; Ashland Oil Inc.; and Ashland ACT are collectively referred to as Ashland.

      . The undersigned reviewed the memorandum which is the subject of the within motion for a protective order in camera. See the In Camera Review section of this opinion at pp. 272-75, below.

      . The hearing was originally scheduled for September 11, 2001. However, because of the tragic events of that day involving terrorists hijacking four airplanes and the subsequent crashing of those aircraft into the World Trade Center, the Pentagon, and a field in Western Pennsylvania, the hearing did not commence. After an off-the-record discussion between the undersigned and counsel, the hearing was postponed.

      . See government exhibits B and C.

      . Government exhibit B-l.

      . Government exhibit D.

      . See paragraph 3 of the petition of the Lehigh County District Attorney’s office for a protective order pursuant to Pennsylvania Rule of Civil Procedure 4012(a)(1) filed May 14, 2002.

      . At the time counsel for Alfa Laval sent the subpoena there were only two cases assigned to the undersigned: Volz v. Concept Sciences Inc., case no. 1999-C-1736 and Volz v. Ward, case no. 1999-C-2390. Later, a number of other cases were consolidated with these two original actions. The two original cases have subsequently settled.

        . Adhesive Specialists Inc. v. Concept Sciences Inc., case no. 2000-C-183, Trugreen Limited Partnership, d/b/a Trugreen-Chemlawn v. Concept Sciences Inc., case no. 2000-C-1797, and Bowers v. Alfa Laval Pumps Inc., case no. 2000-C-2280.

      . See paragraph 9 of government exhibit D, declaration of Trooper Paul Romanic.

      . Government exhibit D, paragraph 11.

      . Cozen O’Connor represents plaintiffs John H. Adams; James R. Redington; Jason Quick; Lehigh Realty Associates III; and Great Northern Insurance Company (collectively the Adams plaintiffs).

      . See letter from Richard H. Maurer, Esquire, to Assistant United States Attorney Seth Weber dated April 23, 2001. (United States of America’s motion for a protective order and for return of a privileged government attorney work-product document dated September 13, 1999, exhibit G).

      . Government exhibit L.

      . Notes of Testimony of the April 30,2002 hearing at pp. 78 and 119.

      . At the hearing, Richard C. Biedrzycki, Esquire, counsel for Ashland, who reviewed the memorandum, conceded that portions of the memorandum contained Attorney Russo’s work product. N.T. 63, 100, 166, 192-94.

      . Capitol Copying, the copy service hired by Daller, Greenberg and Dietrich, came in at the direction of Attorney Greenberg and copied 12,814 documents that had been selected by the attorneys from the firm. The disputed 50-page memorandum was among those 12,814 documents. N.T. 150.

      . Although some of them did not read it, and some of them returned it, the five law firms which received the Russo memorandum were Daller, Greenberg and Dietrich, counsel for Alfa Laval; White and Williams LLP, counsel for the Concept Sciences defendants; Pepper Hamilton LLP, counsel for defendant and additional defendant ALEDco Inc.; Pettit, Phelan and Biedrzycki, counsel for defendant and additional defendant Ashland; and Montgomery McCracken, counsel for Puritan Products, a defendant and additional defendant in the cases of Lumbermans Mutual Casualty Company v. Concept Sciences

        Inc., case no. 2001-C-474 and Bowers v. Ashland Chemical Inc., case no. 2001-C-188. Paul Bartolacci of Cozen O’Connor, counsel for the Adams plaintiffs, reviewed the Russo memorandum but did not receive a copy of it. N.T. 25, 26, 179, 180, 182-85, 188, 191. Apparently, Norman Greenspan, Esquire, of Blank Rome who represented Mr. Ward in the pending federal criminal prosecution did not have a copy of the memorandum. N.T 154-55, 187.

      . N.T. 183, 188.

      . N.T. 180.

      . See government exhibit M.

      . The April 23, 2001 letter from Attorney Maurer to Assistant United States Attorney Seth Weber provides in part:
      “In light of the apparent widespread distribution of this letter, I respectfully suggest that if your office has any concerns about this distribution, your office file a motion and direct it to the attention of the Honorable James Knoll Gardner, President Judge of Lehigh County to whom a substantial number of the above civil actions have been assigned.
      “If I do not receive a motion from your office by Monday, May 14, 2001,1 will assume that your office does not have concerns about the widespread distribution of the letter or any further distribution. Thank you.”

      . N.T. 81-82.

      . N.T. 83, 85.

      . N.T. 83.

      . N.T. 87, 92.

      . N.T. 88.

      . N.T. 97-99.

      . N.T. 98.

      . N.T. 101.

      . N.T. 102.

      . N.T. 103.

      . N.T. 107, 188-89.

      . N.T. 193.

      . In order to give plaintiffs and other parties the opportunity to appeal the within order before the memorandum is distributed to all parties, we are directing that the distribution by the United States of America to counsel for all parties not occur until at least 40 days after the date of filing of the within order and opinion. This will give all parties the opportunity to appeal this order within 30 days and to request a supersedeas before the document must be disseminated. We express no opinion on the merits of any potential request for supersedeas to stay dissemination of the memorandum until after any appeal is decided.

      . The following 12 actions are currently pending in the Court of Common Pleas of Lehigh County: Adhesive Specialists Inc. v. Concept Sciences Inc., case no. 2000-C-183; Trugreen Limited Partnership, d/b/a Trugreen-Chemlawn v. Concept Sciences Inc., case no. 2000-C-1791; Bowers v. Alfa Laval Pumps Inc., case no. 2000-C-2280; Adams v. Concept Sciences Inc., case no. 2000-C-3070; Bowers v. Ashland Chemical Inc., case no. 2001-C-188; Liberty Property Trust Inc. v. Concept Sciences Inc., case no. 2001-C-240; County of Lehigh v. Concept Sciences Inc., case no. 2001-C-284; Lehigh Realty Associates III v. Concept Sciences Inc., case no. 2001-C-295; Adams v. Ward, case no. 2001-C-470; Lumbermans Mutual Casualty Company v. Concept Sciences Inc., case no. 2001-C-474; Adhesive Specialists Inc. v. Ward, case no. 2001-C-498; and Team Imaging Inc. v. Concept Sciences Inc., case no. 2001-C-503.
      All of these cases have been assigned to our colleague Honorable Lawrence J. Brenner for all purposes including trial. Moreover, all of these actions except County of Lehigh v. Concept Sciences Inc. have been consolidated for discovery purposes.


source: Caselaw Access Project

author: SCHMEHL, J.L., J.,

license: Public Domain

text:
    Commonwealth v. Mehlman

      C.P. of Berks County,
    no. 4080/01.

      Ed Connor, assistant district attorney, for Commonwealth.

      Jesse Searfoss, for defendant.
    June 6, 2002
   SCHMEHL, J.L., J.,

The defendant was charged with two counts of driving under the influence of alcohol, 75 Pa.C.S. §3731(a)(l) and 75 Pa.C.S. §3731(a)(4)(i), driving on roadways laned for traffic (summary), 75 Pa.C.S. §3309(1), and careless driving (summary), 75 Pa.C.S. §3714. A preliminary hearing was held on August 8, 2001, before District Justice Ronald C. Mest and all of the charges were bound over to the court of common pleas. Following arraignment on September 4, 2001, the defendant filed an omnibus pretrial motion on September 27, 2001, requesting a motion to suppress, a motion for discovery, and a motion to quash information, and a motion for a writ of habeas corpus. A pretrial hearing was held before this court on November 20, 2001, where brief testimony was heard and the transcript from the preliminary hearing was admitted into evidence. On January 4, 2002, this court issued findings of fact and conclusions of law, granting defendant’s motion to suppress, but only as to blood test results and granting defendant’s motion for a writ of habeas corpus as to Count 2 of the information.

This appeal followed. Pursuant to Rule 1925(b) of the Pennsylvania Rules of Appellate Procedure, this court requested and received a concise statement of matters complained of on appeal. The Commonwealth alleges in its two claims for relief that the trial court erred in granting the defendant’s motion to suppress evidence because the arresting officer was authorized to obtain the blood alcohol test results without a warrant pursuant to 75 Pa.C.S. §§1547 and 3533. The Commonwealth also alleges that the trial court erred in granting the defendant’s habeas corpus relief, since the Commonwealth presented a prima facie case with respect to all charges of the information.

This opinion is written pursuant to Rule 1925(a) of the Pennsylvania Rules of Appellate Procedure and for the following reasons this court requests that this instant appeal be denied.

THE COURT DID NOT ERR IN GRANTING DEFENDANT’S PRETRIAL MOTION TO SUPPRESS EVIDENCE

The standard of review for a grant of a suppression motion is as follows:

“We begin by noting that where a motion to suppress has been filed, the burden is on the Commonwealth to establish by a preponderance of the evidence that the challenged evidence is admissible. Pa.R.Crim.P. 323(h). See Commonwealth v. Iannaccio, 505 Pa. 414, 480 A.2d 966 (1984), cert. denied, 474 U.S. 830, 106 S.Ct. 96, 88 L.Ed.2d 78 (1985). In reviewing the ruling of a suppression court, our task is to determine whether the factual findings are supported by the record. Commonwealth v. Monarch, 510 Pa. 138, 147, 507 A.2d 74, 78 (1986). If so, we are bound by those findings. Commonwealth v. James, 506 Pa. 526, 533, 486 A.2d 376, 379 (1985). Where, as here, it is the Commonwealth who is appealing the decision of the suppression court, we must consider only the evidence of the defendant’s witnesses and so much of the evidence for the prosecution as read in the context of the record as a whole remains uncontradicted. Commonwealth v. James, 506 Pa. at 532-33, 486 A.2d at 379; Commonwealth v. Hamlin, 503 Pa. 210, 216, 469 A.2d 137, 139 (1983). Commonwealth v. DeWitt, 530 Pa. 299, 301-302, 608 A.2d 1030, 1031 (1992) (footnote omitted).” Commonwealth. v. Pitts, 740 A.2d 726, 729 (Pa. Super. 1999).
“If there is sufficient evidence of record to support the suppression court’s ruling and that court has not misapplied the law, then we will not disturb the court’s decision, particularly with respect to credibility determinations.” Commonwealth v. Korenkiewicz, 743 A.2d 958, 962 (Pa. Super. 1999) (citing Commonwealth v. Queen, 536 Pa. 315, 639 A.2d 443 (1994)).

The factual findings as stated in the suppression court’s findings of fact are as follows:

“Shortly after midnight on April 17, 2001, Roy H. Rohrbach of 1163 State Street, Mertztown, Berks County, Pennsylvania, was awaken by the sound of a loud crash in his front yard. He looked out his window and discovered a one-car accident. Mr. Rohrbach immediately called 9-1-1. Daniel Lee Adam, an emergency medical technician of the Topton Ambulance Company, found the driver of the vehicle to be ‘semi-combative’ with lacerations on his head. He also saw ‘spider-webbed’ damage to the windshield and detected an odor of an alcoholic beverage on the defendant.
“After the defendant was extracted from the vehicle, he was transported in the ambulance a short distance before being taken by helicopter to the hospital. Trooper Nicholas Scianna of the Pennsylvania State Police was summoned to the scene. When he arrived, Trooper Scianna noted that the vehicle had experienced heavy front-end damage. It appeared to the trooper that the vehicle had crashed into Mr. Rohrbach’s lawn and mailbox before crashing into a big tree.
“Trooper Scianna determined that the vehicle was registered to the defendant, Glenn E. Mehlman. He also learned that the driver of the vehicle had already been transported to Lehigh Valley Hospital in Allentown. Trooper Scianna proceeded to the hospital and located the defendant. He asked the defendant what had happened and the defendant told him that he had no recollection of the accident. While speaking to the defendant, Trooper Scianna detected bloodshot, glassy eyes and an odor of an alcoholic beverage. He also noted that the defendant was drifting in and out of consciousness.
“At approximately 1:04 a.m., in an effort to determine the defendant’s blood-alcohol level, the trooper filled out a form provided by Lehigh Valley Hospital, entitled ‘Blood alcohol and toxicology request/chain-of-custody. ’ See Commonwealth exhibit 2. The trooper was unaware that hospital personnel had already drawn blood from the defendant for treatment purposes. This was the only blood sample that was drawn. Subsequently, Lehigh Valley Hospital mailed a report of the blood test results to Trooper Scianna. This report indicated a BAC of 0.24 percent.
“O’Connell warnings were never read to the defendant. No search warrant or court order was obtained to require the release of the medical records and no probable cause to justify the production of records was established before an independent judicial officer.”

Section 3755(a) of the Vehicle Code provides as follows:

“Section 3755. Reports by emergency room personnel
“(a) General rule. — -If, as a result of a motor vehicle accident, the person who drove, operated or was in actual physical control of the movement of any involved motor vehicle requires medical treatment in an emergency room of a hospital and if probable cause exists to believe a violation of section 3731 (relating to driving under influence of alcohol or controlled substance) was involved, the emergency room physician or his designee shall promptly take blood samples from those persons and transmit them within 24 hours for testing to the Department of Health or a clinical laboratory licensed and approved by the Department of Health and specifically designated for this purpose. This section shall be applicable to all injured occupants who were capable of motor vehicle operation if the operator or person in actual physical control of the movement of the motor vehicle cannot be determined. Test results shall be released upon request of the person tested, his attorney, his physician or governmental officials or agencies.” 75 Pa.C.S. §3755.

At the suppression hearing, the defendant referenced Commonwealth v. Shaw, 564 Pa. 617, 770 A.2d 295 (2001). In Shaw, the Supreme Court held that a violation of Article I, Section 8 of the Pennsylvania Constitution occurs when the results of a B AC test taken for independent medical purposes and not pursuant to section 3755(a) and without a warrant, are released to the police. Id. at 624, 770 A.2d at 299.

The Commonwealth argued that Shaw was factually distinguishable from the instant case because the officer in Shaw initially telephoned the hospital for the BAC results. Shaw at 620, 770 A.2d at 297. In this phone conversation, the officer learned the results were above 0.10 percent, so the officer subsequently obtained formal written results through a subpoena. Id. No subpoena was issued in the instant case nor did Trooper Scianna telephone the hospital to learn the results. Instead, Trooper Scianna merely filled out a hospital provided form, expecting the hospital to mail him the results of an analysis of the defendant’s blood. The Commonwealth also argued that the results should not be suppressed because Trooper Scianna did not know that the hospital had already drawn blood.

This court does not believe that it is relevant whether the state police knew, should have known, or should have asked hospital officials if the defendant’s blood had been previously drawn for independent medical purposes. These questions are not central to the holding in Shaw. Instead, the fundamental question is: (1) Did the state police follow the procedures set forth under section 3755? Next, (2) If the form was properly submitted to hospital personnel, was it necessary for the state police to apply for a search warrant?

We believe that Trooper Scianna acted pursuant to section 3755. He knew the defendant had been the driver of a vehicle involved in a one-car accident. While speaking to the defendant, he detected bloodshot, glassy eyes and an odor of an alcoholic beverage emanating from his person. Clearly, this information gave the trooper probable cause to believe that the defendant had been driving under the influence of alcohol to a degree that rendered him incapable of safe driving. See Commonwealth v. Simon, 440 Pa. Super. 428, 435, 655 A.2d 1024, 1027 (1995) (“The Superior Court ‘has repeatedly upheld probable cause to conduct a blood alcohol test under subsection (a)(1) of the implied consent statute where the defendant has looked and smelled like he has consumed alcohol and a serious one car or head-on accident has occurred.’ Commonwealth v. Smith, 382 Pa. Super. 288, 297, 555 A.2d 185, 189 (1989), allocatur denied, 524 Pa. 607, 569 A.2d 1366 (1989).”). Therefore, by filling out Lehigh Valley Hospital’s “Blood alcohol and toxicology request/chain-of-custody,” Trooper Scianna followed the procedures set forth under section 3755.

Next, we must consider whether case law mandates that the police obtain a search warrant after lawfully requesting that blood be drawn and tested. Quoting the concurrence in Commonwealth v. Riedel, 539 Pa. 172, 651 A.2d 135 (1994), the majority in Shaw stated:

“The implied consent provision of 75 Pa.C.S. § 1547(a)(1) does not eliminate the need to obtain a warrant to seize medical records, but only to request and conduct chemical tests. The reason for this is obvious. Due to the evanescent nature of the evidence of blood alcohol content, there is an immediate need to obtain samples of blood for testing. When blood samples have been drawn for medical purposes and the results of blood alcohol content tests are part of a patient’s medical record, the evidence will not have dissipated during the time that application for a search warrant is being made.” Shaw at 624, 770 A.2d at 299. (emphasis added)

By citing this passage and analogizing 75 Pa.C.S. § 1547(a)(1) to 75 Pa.C.S. §3755, the majority in Shaw believed that a warrant is required prior to the police obtaining the results of a BAC test where the suspect is unable to respond to the standard O’Connell warnings. Indeed, Justice Castille opens his dissenting opinion by stating that, “[t]he majority would hold that Article I, Section 8 of the Pennsylvania Constitution commands ... that the results of a medical purposes blood alcohol content test performed by a hospital on a Pennsylvania driver... cannot simply be requested by police unless or until they first secure a search warrant.” Shaw at 625, 770 A.2d at 301.

In the instant case, Trooper Scianna did not try to issue O’Connell warnings at the hospital. He did not attempt to obtain the results of the blood test through a search warrant or subpoena, nor did he even bother to ask hospital officials whether blood had already been drawn for treatment proposes. Instead, Trooper Scianna simply filled out a form at the hospital and went back to his barracks. This is simply not enough under Shaw.

The Commonwealth seems to be arguing that the implied consent provisions of the Vehicle Code gives the Commonwealth an unlimited right to receive blood test results. Unfortunately, this is not the state of the law in Pennsylvania. When seizing “medical records,” according to Shaw, a warrant is necessary. Accordingly, this court did not err in suppressing the blood test results and the instant appeal should be denied.

      . Section 3533 of the Vehicle Code does not exist. This court believes that the Commonwealth meant to reference section 3755.

      . See the court’s findings of fact and conclusions of law in disposition of the defendant’s omnibus pretrial motion.


author: FRIEDMAN, J.,

text:
    Advanced Telephone Systems Inc. v. Com-Net Professional Mobile Radio LLC

      C.P. of Allegheny County,
    no. GD 00-9001.

      Joseph Decker and Kenneth S. Kornacki, for plaintiff.

      William M. Wycojf, Alice B. Mittinger and Jeff D. Aronsohn Jr., for defendants.
    May 15, 2002
   FRIEDMAN, J.,

INTRODUCTION

This case arose from a contract between plaintiff, Advanced Telephone Systems Inc., t/d/b/a ATS Mobile Communications and defendant Com-Net Professional Mobile Radio LLC. In addition to recovering damages from Com-Net PMR LLC for an alleged breach of the contract, ATS also sought to recover damages from the other defendants by piercing the corporate veil.

At argument on motions in limine, it became evident that common facts gave rise to both an action at law (plaintiff vs. Com-Net PMR LLC) in assumpsit and an action in equity (plaintiff vs. all other defendants) for piercing the corporate veil. Therefore, only one evidentiary proceeding had to be conducted. This was followed by bifurcated decisions, a jury verdict for the action at law, and the instant adjudication for the action in equity. The trial was held before the undersigned commencing April 1,2002. At the conclusion of the evidence, the court directed a verdict on the issue of liability against defendant Com-Net PMR LLC, only, and the case was submitted to the jury on the issue of damages. On April 5, 2002, the jury returned a verdict in favor of ATS and against Com-Net PMR LLC in the amount of “$2.5 million plus attorney’s fees [in an uncontested amount of $102,000].’

The jury’s role in the case was thereby concluded and we then proceeded, in equity, to consideration of whether to pierce the corporate veil and impose liability on the other defendants. Extensive oral argument was heard by the undersigned on April 16,2002, after both parties had submitted proposed findings of fact and conclusions of law. For the reasons set forth below, we conclude that we cannot pierce the corporate veil and cannot impose liability for the breach by Com-Net PMR LLC on any of the remaining defendants.

ISSUES INVOLVED

ATS seeks to pierce the corporate veil of Com-Net PMR LLC so as to recover the jury award against it from the other defendants. ATS contends that the LLC form was misused by the other defendants so that the LLC became their alter ego, rendering defendants undeserving of LLC protection. ATS attempted to prove, inter alia, that Com-Net PMR LLC was never adequately capitalized, and that the individual defendants, especially Steven Savor Jr. and Stephen Frobouck, induced plaintiff to enter the contract with Com-Net PMR LLC by representing that it was backed by the financial strength of the W.E. Anderson Group Inc. and its various enterprises.

FINDINGS OF FACT

As an aid to deciding the non-jury portion of the captioned matter, the court permitted the parties to submit proposed findings of fact. The facts summarized below, which the court finds material and supported by the credible evidence, are largely undisputed. The omission of any proposed finding of fact or portions thereof should not necessarily be regarded as a rejection of the proposed finding or the portion omitted, but rather as an indication that the court regarded it as either repetitive or immaterial to its decision, or that the court, without a full transcript, was unsure of a particular detail contained in the proposed finding. Certain proposed findings of fact which are specifically rejected will be indicated later herein. For the convenience of the parties, the court has noted where the substance of each finding was proposed by placing either P-_or D-_at the end of each.

(1) At issue in this proceeding is an “800 MHz subscriber service agreement,” executed on March 24,1999, between ATS and Com-Net PMR LLC. The subject matter of the agreement was the use of 14 800 MHz radio frequency channels for which ATS held licenses from the Federal Communications Commission. (Plaintiff exhibit 1.) (D-2) (P-6)

(2) Prior to entering the service agreement, ATS leased the 14 channels to ERI on an undocumented, month-to-month basis. (Adamson and Beatty testimony.) (D-54) (P-10)

(3) Pursuant to the service agreement, Com-Net PMR LLC leased the 14 800 MHz FCC channels from ATS for $2,000 per channel per month. The term of the service agreement was to be 15 years. (Plaintiff exhibit 1.) (D-56) (P-6)

(4) During the negotiations of the service agreement, ATS was represented by counsel and Savor, an officer of both Corn-Net Development Group LLC, and the Anderson Group, was a practicing attorney. (Adamson and Savor testimony.) (D-57)

(5) ATS’s counsel was a Washington DC lawyer who specialized in communications law and who drafted the service agreement and implemented negotiated changes to it. (Adamson testimony.) (D-59)

(6) Initial drafts of the service agreement, prepared by plaintiff’s counsel, identify Corn-Net Development Group LLC as the signatory of the service agreement. (Adamson testimony; defense exhibits 82, 84 and 85.) (D-60) (P-15)

(7) Adamson, ATS’s treasurer and CEO, knew that the early drafts of the service agreement were with Corn-Net Development LLC and he knew that ATS would be entering into the service agreement with a limited liability company. (Adamson testimony.) (D-62)

(8) Prior to the time the parties entered the service agreement, Adamson knew what limited liability companies were. (Adamson testimony.) (D-66)

(9) Before the service agreement was executed, Adamson directed ATS’s counsel to change the signatory and the party to the service agreement from “Corn-Net Development LLC” to “Corn-Net Professional Mobile Radio LLC.” Adamson believes he was the person who made the name change from Corn-Net Development to Corn-Net Professional. (Transcribed Adamson testimony, attached to defendants’ proposed findings of fact and conclusions of law as appendix A, at 9.) (D-63)

(10) Adamson contacted Savor shortly before March 24, 1999 and indicated that ATS was prepared to sign the service agreement. (Savor testimony.) (D-65)

(11) Savor was willing to do this as he believed it gave the LLC leverage to persuade ERI to complete the deal sooner.

(12) ATS did not ask any representative of Corn-Net PMR LLC for financial statements or pro formas. It did not do any due diligence nor did it seek any form of guaranties of Corn-Net PMR LLC’s contractual obligation from any other entity or individual. (Adamson testimony.) (D-67)

(13) In 1998, representatives of Corn-Net Professional Mobile Radio Inc. had approached Equitable Resources Inc. with a proposed alternative to ERI’s current internal communications system. Instead of ERI operating its own system and leasing the 14 channels directly from ATS, on a month-to-month basis, the proposal envisioned an independent communications system, owned and maintained by an independent entity, of which ERI would be one customer. (Frobouck, Savor and Beatty testimony.) (D-18)

(14) ATS was aware of this larger deal that was being negotiated with ERI.

(15) At the time he signed the service agreement with Corn-Net PMR LLC, Adamson was aware that Corn-Net PMR LLC had not yet entered a contract with ERI and that negotiations with ERI were ongoing. (Adamson testimony.) (D-68)

(16) Because a necessary part of the proposed transaction with ERI would be the lease of the 14 channels from ATS, negotiations were also conducted with ATS to secure the radio frequencies for the term of the proposed agreement with ERI. (Frobouck, Savor and Fasulo testimony; defense exhibit 126A.) (B-50)

(17) As of March 24, 1999, ERI had told ATS that ERI’s “agreement with Corn-Net was on track and they were proceeding and yes, we should be negotiating and working with Corn-Net.” (Transcribed testimony of Adamson at 2-3, attached as exhibit A to defendants’ proposed findings of fact.) (D-69)

(18) Paragraph 10.1 of the service agreement is an integration clause which provides:

“10.1 This agreement (including any schedules hereto), and all other documents delivered pursuant to this agreement constitute the entire understanding between the parties relating to the subject matter of this agreement and supersedes all prior and contemporaneous agreements, negotiations, correspondence, undertakings, representations, warranties and communications of any kind of or between the parties, whether oral or written, respecting such subject matter.” (D-70) (P-25)

(19) Corn-Net PMR LLC’s obligation to perform under the service agreement was not contingent upon the sale of the ERI radio system closing. There is no contingency clause in the service agreement that releases Corn-Net PMR LLC from its contract if the ERI transaction did not close. (P-25)

(20) PNC Bank was to provide the initial funding for the purchase of ERI’s system with a bridge loan of $8.2 million. (Frobouck, Savor, Fasulo and Majeski testimony; defense exhibits 122 and 126A.) (D-22)

(21) With a signed lease from ERI as collateral, Corn-Net PMR LLC planned to issue notes bearing interest at 7.52 percent to secure its borrowing 10 to 15 million dollars from Provident Life and Accidental Insurance Co. (Frobouck, Savor and Fasulo testimony; defense exhibit 126A.) (D-23)

(22) PNC would have funded the bridge loan had ERI signed an agreement with Com-Net PMR LLC. (Majeski testimony.) (D-25)

(23) Com-Net Professional Mobile Radio Inc., as the member of Com-Net PMR LLC, was to guarantee the repayment of PNC Bank’s bridge financing. (Fasulo testimony; defense exhibit 124.) (D-26)

(24) Provident made a binding commitment to Com-Net PMR LLC to buy collateralized notes in an amount between 10 and 15 million dollars, contingent on ERI agreeing to sell its system. Com-Net Professional Mobile Radio Inc. provided a guaranty for Provident’s commitment to Com-Net PMR LLC. (Frobouck and Savor testimony; defense exhibit 29; plaintiff exhibit 28.) (D-28)

(25) A certificate of formation of Com-Net PMR LLC was filed with the Delaware secretary of state on December 28, 1998. (Defense exhibit 100.) (D-32)

(26) The purpose of Com-Net PMR LLC was to own, operate and maintain a communications system suitable for the use of utility customers, including ERI, and other customers. (Frobouck and Savor testimony.) (D-40)

(27) David J. Fasulo, as counsel for the member of Com-Net PMR LLC, filed an application for a federal employer identification number for the LLC. (Defense exhibit 110.) (D-33)

(28) Andrew Stidd of Global Securitization LLC was retained as an independent manager for Com-Net PMR LLC. Stidd’s duty to the bondholders would have been to ensure that all payments received from the system users were properly used to pay the bondholders and other accounts payable of Com-Net PMR LLC so that there could not be a default and so that the members or officers could not use any revenues for their own purposes. (Frobouck and Fasulo testimony; defense exhibit 45.) (D-34)

(29) Until the deal with ERI closed, Com-Net PMR LLC could not issue bonds or borrow significant sums of money.

(30) Because the ERI deal never went through, Stidd never did anything for the LLC other than sign the Certificate of Formation filed with the Delaware secretary of state. Stidd had no need to be involved with Com-Net PMR LLC, including its signing of the contract with ATS, until the ERI deal was concluded.

(31) Com-Net PMR LLC adhered to the appropriate formalities for a limited liability company, which are few. (Fasulo testimony; defense exhibit 100.) (D-42)

(32) Given the nature of limited liability companies generally and its start-up status, Com-Net PMR LLC shared office space, equipment and personnel with other Com-Net entities in the initial stages of its formation. (Frobouck and Savor testimony.) (D-43)

(33) Com-Net Professional Mobile Radio Inc. was a separate corporate entity and maintained its operations and corporate affairs separately from those of Com-Net PMR LLC. Com-Net Professional Mobile Radio Inc. did not derive any profit from Com-Net PMR LLC as the LLC never was able to close the deal crucial to its purpose and therefore itself made no profit and had no assets other than the 14 radio channels it was leasing from ATS. (Frobouck and Savor testimony.) (D-47)

(34) W.E. Anderson Group Inc. is a separate corporate entity and has maintained its operations and corporate affairs separately from those of Corn-Net PMR LLC. W.E. Anderson Group Inc. did not derive any profits from Corn-Net PMR LLC, because the LLC was never able to close the deal crucial to its purpose and therefore itself made no profit and had no assets other than the 14 radio channels it was leasing from ATS. (Frobouck and Savor testimony.) (D-48)

(35) The individual defendants worked together in the same group of companies and other ventures, always through established corporate entities. They also had success elsewhere in the United States with businesses involving other communications systems and communications towers. (Frobouck and Savor testimony.) (D-15)

(36) On November 4, 1997, the Anderson Group of companies and Daniel Eldridge (not a party to this action) had formed Corn-Net Development Group LLC to build, lease and sell communications towers for mobile radio and cellular communications. (Frobouck and Savor testimony; defense exhibit 94.) (D-17)

(37) Savor, Frobouck and Richard Serdynski met with Adamson and Freund, ATS’s general manager, on November 24,1998 at Quicksilver Golf Club to discuss leasing ATS radio frequencies. Savor, Frobouck and Serdynski gave ATS their business cards, which identified Corn-Net Development Group LLC as the Corn-Net entity they represented. (Plaintiff exhibits 26A, 26B, 26C.) Frobouck and Savor also gave Adamson and Freund business cards which identified them as executives in the “Anderson Group of companies.” Frobouck’s business card (plaintiff exhibit 26d) identified him as president, and Savor’s business card (plaintiff exhibit 26e) identified him as “Vice president of corporate and legal affairs.” Both Savor and Frobouck are attorneys. (P-9) (D-52)

(38) Savor and Frobouck told ATS’s Adamson and Freund at the meeting that they were negotiating with ERI for the sale and leaseback of ERI’s two-way radio system assets to Com-Net. ERI was ATS’s most important existing customer. ATS’s channels were an integral and critical part of the ERI radio system, and ERI was paying ATS $2,000 per month per channel for 12 channels on a month-to-month basis. Savor and Frobouck stated that ERI had told them to talk to ATS about leasing ATS’s radio frequencies on a long-term lease. Savor and Frobouck needed a long-term lease for ATS’s channels to develop the proposed radio system in Western Pennsylvania, which was to include ERI as a principal user. (P-10) (D-50) (D-52) (D-56)

(39) At the November 24, 1998 meeting, Savor and Frobouck told ATS that, in addition to contracting with ERI for the radio system, their business plan included putting other public and private entities, such as Allegheny County, Duquesne Light and People’s Natural Gas, on their two-way radio system. Frobouck wanted to combine the 37 specialized mobile radio entities in Western Pennsylvania that were operating such systems. (P-11)

(40) Adamson and Savor negotiated the contract directly. Two days before the service agreement was signed, Savor asked Adamson to substitute Com-Net PMR LLC as the entity which would sign the contract with ATS. Adamson agreed to make this change, and did so personally. (P-16) (D-16) (D-51) (D-58)

(41) Savor was the person “most knowledgeable” about Corn-Net PMR LLC’s affairs. Savor and Adamson signed the service agreement between ATS and Corn-Net PMR LLC even though Corn-Net PMR LLC never had any assets. (P-26)

(42) Corn-Net PMR LLC was formed to hold all the assets involved in the proposed transaction between Corn-Net PMR LLC and ERI. The LLC would have had assets, and $15 million of financing, once ERI signed the various agreements with Corn-Net PMR LLC. However, those agreements (defense exhibits 123, 84, 124, 82, 81) were never signed. (P-26)

(43) Corn-Net PMR LLC never had any financial statements, statements of assets, or bank accounts, and it never filed any tax returns, because Corn-Net PMR LLC “never got that far.” (P-27)

(44) Corn-Net PMR LLC never had any employees. It never had any office space separate from Anderson Group. (P-28)

(45) Corn-Net PMR LLC never reached the point where it needed to be capitalized. The crucial deal with ERI was never consummated, rendering the LLC’s purpose impossible to achieve.

(46) Savor knew that Corn-Net PMR LLC could not and would not pay ATS under the service agreement unless ERI signed the agreements with Corn-Net PMR LLC and Provident loaned money to Corn-Net PMR LLC. (P-24)

(47) Savor did not have to tell this elementary fact of LLC life to Adamson or Freund because, as sophisticated businessmen, they already knew this.

(48) The failure of ATS to get guarantors for the contract at issue was not induced in any way by any or all defendants.

(49) As of March 24,1999, Savor, Frobouck, Adamson and Freund all knew that no third parties such as Duquesne Light or Allegheny County, had yet made any firm commitments to use the proposed radio system.

(50) Com-Net PMR LLC itself never made any payments under the service agreement. The six payments made to ATS under the service agreement were made through the Anderson Group. The checks (plaintiff exhibit 50A-50F) were drawn on Anderson Group’s checking account, including the check given to ATS at the signing of the service agreement on March 24, 1999 in Anderson Group’s offices at 2501 CNG Tower in Pittsburgh. (P-30) (D-72)

(51) Com-Net PMR LLC never repaid Anderson or Anderson Group any of the money which Anderson Group had paid to cover the initial expenses of Com-Net PMR LLC. (P-31)

(52) The amounts of payment to ATS from W.E. Anderson Group Inc. were informal advances or “good Samaritan” loans to Com-Net PMR LLC, the repayment of which was reasonably expected by all parties, including ATS, to be done at the closing of the ERI deal. (Frobouck and Savor testimony.) (D-73)

(53) The draft Com-Net PMR LLC operating agreement (plaintiff exhibit 72, p. 2) provided that Com-Net PMR LLC was to file for authorization to do business in Pennsylvania. (P-36)

(54) That authorization was never requested because the ERI deal failed, and Com-Net PMR LLC did no business in Pennsylvania. (Agreeing to pay for the radio leases is not “doing business in Pennsylvania,” nor is making a few early payments on account of a 15-year contractual obligation.)

(55) As of December 10, 1998, the secretary of state of the Commonwealth of Pennsylvania certified that Corn-Net Professional Mobile Radio Inc. was a corporation in good standing. (Defense exhibit 106.) (D-9)

(56) A1 Beatty was the director of ERI’s communications department from the time that Corn-Net Professional Mobile Radio Inc. made its proposal to ERI, until December 31, 1998. (Beatty testimony.) (D-74)

(57) ERI experienced a change in upper management in January 1999. (Beatty testimony.) (D-75)

(58) ERI did not intend to continue its arrangement with ATS and instead planned to outsource its communications department sometime in 1999. (Beatty testimony.) (D-55)

(59) One of the possible “outsources” ERI was considering was Corn-Net PMR LLC.

(60) Beatty remained at ERI as a consultant with ERI and had personal knowledge of the progress of the proposed deal with ERI until April 16, 1999. (Beatty testimony). (D-76)

(61) Beatty testified that, up to the time of his departure on April 16, 1999, ERI’s new management had not yet made a decision to halt or terminate the deal with Corn-Net PMR LLC and that the deal was on-going and under consideration when he left. (Beatty testimony.) (D-77)

(62) As of March 24, 1999, the date on which ATS signed the service agreement at issue, negotiations between ERI and Com-Net PMR LLC were still going on. (Frobouck, Savor and Beatty testimony.) (D-78)

(63) After the signing of the service agreement and while negotiations between Com-Net PMR LLC and ERI were proceeding, ERI leased the 14 channels from Com-Net PMR LLC on a month-to-month basis. (Savor testimony; defense exhibit 41.) (D-83)

(64) By early August 1999, the new ERI management had opted to use another communications system and the proposed sale and leaseback of its systems to Com-Net PMR LLC was finally dead. (Frobouck and Savor testimony; defense exhibit 44.) (D-84)

(65) When no commitments from Duquesne Light or Allegheny County were forthcoming, Com-Net PMR LLC, in October 1999, informed ATS that it would be making no further payments under the service agreement. (Savor testimony.) (D-86)

(66) Com-Net PMR LLC returned the channels to ATS, which eventually sold them to Nextel, thereby mitigating the contract damages.

The court declines to accept plaintiff’s proposed findings nos. 56-63 regarding the Anderson Group as it does not find that the LLC form was misused in any way. As to plaintiff’s proposed findings nos. 40-55, regarding Com-Net Professional Mobile Radio Inc., the court declines to accept those for the same reason.

DISCUSSION

Basically, there is very little dispute over the material facts, although the spin that ATS gives to them is vastly different from the view taken by defendants or the court. The above findings of fact reveal the following scenario:

ATS had a month-to-month contract with ERI, whose ventures include a local gas company, for the lease of 14 of ATS’s radio channels to ERI for $2,000 per channel per month. Savor and Frobouck approached ATS about the possibility of acquiring the ERI channels from ATS on a long-term basis. They were hoping to form a countywide system of radio communication that would be used by various public and quasi-public entities that heretofore had each owned and maintained their own systems. The systems consisted of radio towers and ancillary equipment in addition to radio channels themselves. Critical to Savor and Frobouck’s plans was the acquisition of ERI’s entire system, which it would then lease back to ERI and would also lease to the other potential users (such as Allegheny County and Duquesne Light Company). They had been working on this for several months and approached ATS with the approval of ERI about leasing their 14 channels.

Savor and Frobouck, who also identified themselves at the time, correctly, as executives of the Anderson Group of companies, met with ATS executives Adamson and Freund at the Quicksilver Golf Club on November 24, 1998, to discuss leasing the channels ATS was then leasing to ERI on a month-to-month basis. As originally contemplated, the deal with ATS would close simultaneously with the purchase and lease-back of ERI’s system. The expected owner of the new countywide system was to be an LLC, originally designated as “Corn-Net Development Group LLC,” in the draft agreements that ATS had its Washington DC attorney prepare. In other words, the instant contract was originally expected to be signed at the same time as ERI sold its system to the same LLC whose purpose would be owning the new countywide radio communications system. It should be noted that this larger deal, countywide (or, possibly, region-wide) communications, was not pie-in-the-sky. It was an excellent idea, but it needed the extensive ERI-owned system just as much as, or even more than, it needed the 14 channels ATS controlled.

The only part of the larger deal that was easily negotiated was that represented by the instant contract between ATS and Com-Net PMR LLC. Another relatively easy part of the deal was the financing: PNC Capital Markets and Provident Life and Accident Insurance Company had tentatively agreed to provide bridge financing and permanent financing, respectively, again to be finalized if the ERI deal could be made. See defense exhibit 122, proposal letter dated December 17, 1998, which inter alia, bound “Com-Net Professional Mobile Radio Inc. and/or a special purpose entity to pay all fees and expenses of legal counsel incurred by PNC Capital Markets” for due diligence and so forth regarding the bridge loan the LLC would need to close any deal with ERI.

However, probably because it had just changed its top executives, ERI was unwilling to consummate the deal Savor and Frobouck had been negotiating with A1 Beatty, ERI’s director of communications. Beatty preferred to wait until new management had a chance to review and approve the purchase and lease-back of ERI’s communications system. As a result, this part of the larger deal was not agreed to by the end of 1998 as was originally hoped, but instead negotiations continued into 1999, finally terminating unsuccessfully by early August of 1999. The credible (and virtually undisputed) evidence does not support the contention of ATS that the deal was dead on March 24, 1999, the day the instant contract was signed, and that all the defendants knew this at the time.

Once the deal with ERI was clearly beyond resuscitation, Com-Net PMR LLC returned the channels to ATS, which eventually was able to sell them to Nextel. The evidence of the sale price to Nextel was relevant to ATS’s undisputed duty to mitigate and was available to the jury which decided the amount of contract damages Com-Net PMR LLC was liable for. It should go without saying that, aside from those radio channels, Com-Net PMR LLC had no other assets, as it was never able to close the deal with ERI and therefore was unable to pursue the countywide communications system that was to have been the LLC’s ultimate purpose and the source of income to pay off not only the anticipated loans from PNC and Provident but also the contract with ATS.

Regarding ATS’s reliance on Trustees of National Elevator Industry v. Lutyk, 140 F. Supp.2d 447 (E.D. Pa. 2001), the court finds it is misplaced. The facts of Lutyk span several years and show, inter alia, that the sole shareholder repaid to himself supposed loans at a time when the company was insolvent; that he used corporate funds to buy club memberships which were used for his personal entertainment and served no business purposes; that he attempted to deceive the court who clearly rejected his explanations for missing documents and so forth; that he admitted not having paid employee and employer contributions for several years to a trust fund (whose trustees were the plaintiffs) in admitted violation of federal law (specifically, ERISA). In short, the contrast between the facts of Lutyk and those of the instant case could not be more striking.

While the instant case was tried over several days and has a large amount of documentary evidence, the end result is rather simple. The facts are that ATS knew it was dealing with an LLC, knew an LLC’s liability is very limited, and admits it knew that the LLC “would have had assets, and $15 million of financing, once ERI signed the various agreements with [Corn-Net PMR LLC].” (See plaintiff’s proposed findings of fact no. 26.) Yet when the ERI deal fell through, and ATS, after having received contract payments for six months, was given back its consideration (the 14 radio channels), ATS tried to obtain more protection than it had bargained for. ATS had demanded no guaranties for the LLC’s obligations yet now it asks the court, in effect, to provide guaranties after-the-fact. ATS claims, at least implicitly, to have lost the ability to keep on leasing its channels to ERI after that larger deal fell through, yet all ATS had with ERI before March 1999 was a month-to-month arrangement that Mr. Beatty, in his uncontradicted testimony, said was not going to continue in any case.

In other words, neither the contract itself nor any of the other evidence supports the position of ATS that the corporate entities, or any of them, were misused or necessary formalities ignored.

ATS, run by sophisticated businessmen who themselves pushed for the premature closing of their part of the larger ERI deal with Corn-Net PMR LLC, now seeks special treatment from the court. ATS’s case, albeit well-tried by its current counsel, is absolutely without merit. Its complaint is with the legislators who permitted LLCs to come into being, not with defendants who followed the law in good faith, reasonably believing that ATS knew that law as well, and who had no duty in any event to protect ATS from its own mistakes.

CONCLUSION

There is no basis upon which any defendant other than Com-Net PMR LLC may be held liable to ATS. See decree nisi filed herewith.

DECREE NISI

And now, to-wit, May 15, 2002, it is ordered and decreed that plaintiff’s demand that liability for the breach of its contract with Com-Net Professional Mobile Radio LLC be imposed also on defendants W.E. Anderson Group Inc., Com-Net Critical Communications Inc., Steven Savor Jr., Stephen Frobouck, and William E. Anderson be and hereby is denied.

The prothonotary shall enter this decree nisi and give notice thereof to the parties or their counsel of record. If no post-verdict motions are filed within 10 days, in accordance with Pa.R.C.P. 227.1(c)(2), this decree nisi shall be entered by the prothonotary as the final decree, as of course.

      . Plaintiff has filed a motion to mold the jury verdict to include additional attorney’s fees and costs from March 1 through April 12, 2002, which remains pending, although it is believed to be unopposed.

      . The “good Samaritan” lease payments made by the Anderson Group while the ERI deal was pending are not a misuse of either Corn-Net PMR LLC nor the Anderson Group. Rather, they represent an attempt to keep the LLC from defaulting on the service agreement with ATS until the ERI deal could be closed.


author: HORAN, J.,

text:
    Rossi v. Fuchs
    C.P. of Butler County,
    no. A.D. 00-10659.

      Raymond J. Conlon, for plaintiff.

      John A. Robb Jr. and Tina A. Aracri, for defendant.

      March 7, 2002
   HORAN, J.,

Before this court for consideration is the defendant, Wayne Fuchs’ preliminary objections filed in response to the plaintiff’s amended complaint in the above-captioned case. For the following reasons, defendant Fuchs’ preliminary objections are denied.

BACKGROUND

The plaintiff filled her complaint in civil action on December 3,2001. She alleges that on January 22,2000, she and her husband were traveling southbound in separate vehicles along Route 19, towards their home in Cranberry Township. She further alleges that defendant Fuchs was traveling in the opposite direction and crossed the center line, thereby hitting her vehicle as well as her husband’s vehicle. The plaintiff’s husband, Marcus Rossi, was fatally injured in the accident. The plaintiff alleges that defendant Fuchs’ blood alcohol content at the time of testing was 0.159 percent, in excess of the legal limit of intoxication.

The plaintiff asserts 12 counts in her original complaint, including a claim for punitive damages against defendant Fuchs. The plaintiff’s amended complaint, which was filed on January 25, 2002, contains the same 12 counts as found in her original complaint, but also adds an additional count against all defendants, asserting that they are jointly and severally liable.

In his preliminary objections, defendant Fuchs argues that the facts in the plaintiff’s complaint do not warrant a claim for punitive damages. Oral arguments were heard by this court on February 28, 2002. The plaintiff argues that a punitive damage claim is proper in this case.

DISCUSSION

When considering preliminary objections, the court must accept all material facts set forth in the complaint, as well as all inferences reasonably deducible therefrom as admitted and true, and decide whether, based upon the facts averred, recovery is impossible as a matter of law. See Wiernik v. PHH U.S. Mortg. Corp., 736 A.2d 616 (Pa. Super. 1999). Preliminary objections should only be sustained in cases that are clear and free from doubt. See Pennsylvania AFL-CIO ex rel. George v. Commonwealth, 563 Pa. 108, 757 A.2d 917 (2000); Butler v. Illes, 747 A.2d 943 (Pa. Super. 2000); Martinez v. Baxter, 725 A.2d 775 (Pa. Super. 1999). It should be clear from all of the pleaded facts that the pleader will be unable to prove facts sufficient to legally establish a right to relief. Id. Any doubt should be resolved by refusing to sustain the objections. See Ellenbogen v. PNC Bank, N.A., 731 A.2d 175 (Pa. Super. 1999).

Punitive damages may be recovered when a party’s actions are shown to be of such an outrageous nature as to demonstrate intentional, willful, wanton or reckless conduct. See SHV Coal Inc. v. Continental Grain Co., 526 Pa. 489, 587 A.2d 702 (1991); Slappo v. J’s Development Associates Inc., 2002 WL 113945 (Pa. Super. 2002); Bannar v. Miller, 701 A.2d 232 (Pa. Super. 1997). The Superior Court has stated that “driving while under the influence of intoxicating liquor, with its very great potential for harm and serious injury, may under certain circumstances be deemed ‘outrageous conduct’ and ‘a reckless indifference to the interest of others’ sufficient to allow the imposition of punitive damages.” Focht v. Rabada, 217 Pa. Super. 35, 40, 268 A.2d 157, 160 (1970).

In Count VI of her amended complaint, the plaintiff asserts a claim for punitive damages against defendant Fuchs. She asserts that defendant Fuchs “acted in an egregious and outrageous manner, with intent, reckless disregard, willfulness and malice aforethought as to the rights and safety of the plaintiff and plaintiff’s decedent.” The plaintiff pleads facts, which support this assertion. At this stage in the proceedings, the plaintiff has pled facts, which sufficiently set forth a claim for punitive damages. As such, defendant Fuchs’ preliminary objections are denied.

Accordingly, we enter the following:

ORDER

And now, March 7, 2002, in consideration of defendant Wayne D. Fuchs’ preliminary objections and brief in support thereof, the plaintiff’s brief in opposition to defendant’s preliminary objections, counsel’s oral arguments, and in accordance with the foregoing memorandum opinion, it is hereby ordered that the defendant Wayne D. Fuchs’ preliminary objections are denied.

      . Defendant Fuchs filed his preliminary objections to the plaintiff’s original complaint on December 28, 2001. Thereafter, on January 25, 2002, the plaintiff filed an amended complaint. Counsel for both parties indicated to the court that defendant Fuchs’ original preliminary objections were not affected by the amended complaint, and that they wished to proceed on the preliminary objections as though such objections were filed to the plaintiff’s amended complaint.