Babcock Power Inc. et al v. Kapsalis
Filing
353
MEMORANDUM OPINION AND ORDER signed by Senior Judge Charles R. Simpson, III on 9/27/2016. For the reasons set forth, the 258 Objections of Defendant Stephen Kapsalis and non-party Carol Kapsalis to the 246 Memorandum Opinion and Order of the United States Magistrate Judge are OVERRULED.cc: Counsel (RLK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
BABCOCK POWER, INC., et al.
v.
PLAINTIFFS
3:13-CV-717-CRS
STEPHEN T. KAPSALIS, et al.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the court for consideration of the objections (DN 258) of defendant
Stephen T. Kapsalis and non-party Carol Kapsalis, to the April 28, 2016 Memorandum Opinion
and Order of the United States Magistrate Judge (DN 246) denying the Kapsalises’ motion for a
protective order. The motion sought to quash a deposition subpoena served on Carol Kapsalis.
The magistrate judge declined to quash the subpoena, finding that neither the adverse spousal
privilege nor the confidential marital communications privilege, recognized under federal law,
precluded the deposition of Carol Kapsalis in this case. He did, however, limit the matters of
inquiry to her knowledge concerning (1) Stephen Kapsalis’ involvement running CAM [Carol
Kapsalis’ business] while he was employed at Vogt Power; (2) the delivery by Vogt Power of
boxes to the Kapsalis home, including any observations concerning the content of those boxes;
and (3) entertainment with Stephen Kapsalis of Vogt Power customers for Express Group
Holdings, LLC (“Express”). The magistrate judge limited the duration of the deposition to three
hours.
The court need not restate the underlying facts. The background and arguments are fully
laid out in the magistrate judge’s opinion. In attempting to preclude Carol Kapsalis’ deposition,
the Kapsalises argued first that she did not possess any relevant information. They argued
alternatively that any information she might possess would only be relevant to state law causes
of action and therefore should be subject to the protection of Kentucky’s absolute spousal
testimonial privilege set forth in the Kentucky Rules of Evidence, KRE 504(a).
In a thorough and carefully considered decision, the magistrate judge considered whether
federal or state law should apply, ruling that “federal common law should apply to the spousal
privilege asserted in this matter.” DN 246, p. 5. In reaching this conclusion, the magistrate
judge relied upon a number of decisions in this Circuit applying Fed.R.Evid. 501 to claims of
privilege. Hancock v. Dodson, 958 F.2d 1367 (6th Cir. 1992); Sampson v. Sisters of Mercy of
Williard, Ohio, No. 3:12cv824, 2016 WL 362357 (N.D.Ohio, Jan. 29, 2016); Burkhead & Scott,
Inc. v. City of Hopkinsville, No. 5:12-CV-00198-TBR, 2014 WL 6751205 (W.D.Ky., Dec. 1,
2014).
Noting that federal question jurisdiction was asserted in this case and that pendent state
law claims were also plead, the magistrate judge referenced the Senate Report reproduced, in
part, in the Advisory Committee Notes to the 1974 Enactment of Fed.R.Evid. 501.1 For purposes
of context, we quote a bit more extensively from the report:
The formulation [of the rule on privilege] adopted by the House is pregnant with
litigious mischief. The committee has, therefore, adopted what we believe will be
a clearer and more practical guideline for determining when courts should respect
State rules of privilege. Basically, it provides that in criminal and Federal
question civil cases, federally evolved rules on privilege should apply since it is
Federal policy which is being enforced. [It is also intended that the Federal law of
privileges should be applied with respect to pendent State law claims when they
arise in a Federal question case.]
1
Rule 501 as ultimately enacted differs significantly from earlier proposed versions. Thus the comments in the
House and Senate Reports do not directly address Rule 501 as it was ultimately enacted by Congress.
2
S.Rep.No. 1277, 93d Cong., 2d Sess. 12, Fed.R.Evid. 501, Adv. Comm. Notes, 1974 Enact.
(brackets in original indicate text found at fn. 16). The magistrate judge concluded that despite
the fact that the parties had briefed the question with reference to Kentucky law, the rule in
Hancock applied requiring application of federal common law, as this is a federal question case
where pendent state law claims are asserted.
The Kapsalises contend that the magistrate judge’s ruling is in error because
…the state law of privilege should be applied to the state claims, and federal law
of privilege should only be applied to the federal claims.
(DN 258, p. 7)( referencing Gooden v. Ryan’s Res. Group, Inc., No. 5:04-CV-00179, 2006 WL
2946313 (W.D.Ky. Oct. 12, 2006), an unpublished decision from this district).2
The Gooden case does not mention Hancock, which constitutes binding precedent for this
court, or any other cases in support of the application of “Kentucky state privilege law with
regard to Kentucky claims and federal privilege common law with respect to federal claims.”
Gooden at *4. Rather, the result reached from the court’s “plain reading” of Fed.R.Evid. 501
directly conflicts with the holding in Hancock.
Two more recent unpublished decisions cited in the magistrate judge’s opinion,
Burkhead, a 2014 decision from the Western District of Kentucky, and Sampson, a 2016 decision
2
The Kapsalises begin their objections to the magistrate judge’s decision with the assertion that “when a party acquiesces to
application of a state law, the court need not engage in a sua sponte choice of law analysis,” citing GBJ Corp. v. Eastern
Ohio Paving Co., 139 F.3d 1080, 1085 (6th Cir. 1998)(quoting In re Korean Air Lines Disaster, 932 F.2d 1475, 1495
(D.C.Cir. 1991)). DN 258, p. 1. However, they stop short of arguing that it was clear error for the magistrate judge to
determine under Fed.R.Evid. 501 whether federal or state privilege law applies. Indeed, a stipulation of law is not binding
upon an appellate court. Brown v. United States, 868 F.2d 859, 864 (6th Cir. 1989), quoting Avila v. Immigration &
Naturalization Serv., 731 F.2d 616, 620 (9th Cir. 1984). The magistrate judge correctly addressed the choice of law as a
threshold matter in deciding the Kapsalises’ motion.
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from the Northern District of Ohio, follow Hancock in applying federal common law to claims of
privilege in federal question cases with pendent state law claims.
The holding in Hancock could not be clearer: “Since the instant case is a federal question
case by virtue of the appellant’s section 1983 claim, we hold that the existence of pendent state
law claims does not relieve us of our obligation to apply the federal law of privilege.” 938 F.2d
at 1373.
The holding in Hancock prevents the Kapsalises from cloaking Carol Kapsalis’ testimony
with the state law spousal privilege. Thus, to circumvent the effects of Hancock, the Kapsalises
urge that the cases cited in the magistrate judge’s opinion are distinguishable on their facts from
the present case and are therefore inapplicable. They summarize Hancock, Perrignon v. Bergen
Brunswig Corp., 77 F.R.D. 455 (N.D.Cal. 1978) upon which the holding in Hancock was based,
Sampson, and Burkhead, suggesting that in all of these cases, the federal privilege applied
because the potentially-privileged evidence related to both the federal claims and state claims in
the case. However, “if wishes were horses, beggars would ride.”3 None of these decisions turned
on such facts nor contained such analysis. Indeed, the only case from this group which even
mentions the claims to which the evidence in issue might apply is the Perrignon case, discussed
later in this opinion, which mentions these claims only generally. Instead, each case was viewed
from a macrocosmic perspective. That is, the court ascertained only whether the case was a
federal question case and determined whether pendent state law claims were raised. The court
did not delve deeper into the claims or evidence in issue.
In discussing Hancock, the Kapsalises state:
3
A line taken from a 16th century English nursery rhyme, aptly applied here, whose meaning is that if wishing could
make things happen, even those most destitute would have all they wanted. www.dictionary.com.
4
The testimony [of plaintiff’s treating physician] pertained to his treatment for
injuries allegedly caused by the officer’s actions in violation of both federal and
state law. Id. [referencing 958 F.2d at 1372].
DN 258, p. 5. There is no mention in the case of claims to which this evidence purports to relate
– federal claims, state claims, or both – at page 1372 or otherwise in the text. The court did not
analyze the nature of the claims, but rather followed Perrignon which held that “in federal
question cases where pendent state claims are raised the federal common law of privileges
should govern all claims of privilege raised in the litigation.” 77 F.R.D. at 459. The
determination whether to apply the Hancock rule was made without regard to the particular
evidence sought or its proposed use.
The Kapsalises similarly describe a claim-specific analysis in Sampson and Burkhead
which simply was not made by the court. With respect to Sampson, they state:
The testimony of the nun – concerning the plaintiff’s failure to mention she felt
discriminated against because of her age – was offered to refute both the federal
age discrimination claim under the ADEA and the State of Ohio age
discrimination statute. See Sampson at *3.
DN 258, p. 6. There is no discussion of the claims or the proposed testimony’s relation to those
claims anywhere in the cited text. In fact, at the outset of the discussion concerning the ClergyCommunicant Privilege, the court stated without further amplification,
While Sampson alleges some claims arising under Ohio law, this case primarily
involves a federal question – the Age Discrimination in Employment Act. (See
Doc. No. 22). Therefore, federal privilege law applies. Hancock, 958 F.2d at
1373.
Sampson, at *2.
The same is true with regard to the Burkhead case. The Kapsalises state:
5
The evidence at issue was email communications between the City and the waste
management authority pertaining to an ordinance, which the Burkhead court
found relevant to both the federal and state law claims. Burkhead at *1.
DN 258, p. 7. The court in Burkhead made no such finding of relevance. As in the other cases,
the court did not discuss the evidence or its relationship to the particular claims in making the
determination that Fed.R.Evid. 501 required the application of federal common law to the claim
of privilege. The Burkhead court cited to Hancock in concluding that “Where a federal question
is presented to a court with pendent state law claims, federal common law governs privilege
disputes.” Burkhead at *1.
The Kapsalises’ representations concerning the Perrignon case from which the decisions
in our Circuit flow also misses the mark. The Kapsalises invite the court to take “a close reading
of Perrignon…which specifically noted its holding was applicable to evidence relevant to both
federal and state law claims.” DN 258, p. 6. In discussing the Perrignon court’s decision, the
Kapsalises state:
At issue was evidence alleged to be protected by the attorney-client privilege. Id.
at 457-58. In determining whether to apply federal or state privilege law, the
Perrignon court held federal privilege would apply because “both federal and
state claims are raised, and the information sought from Nielsen apparently
goes to both federal and state claims.” Id. at 458.
DN 258, p. 5 (emphasis theirs). While the Kapsalises correctly quote from the case, the court did
not apply federal common law because the information sought apparently applied to both federal
and state claims. Rather, the court noted the problem with employment of a “plain reading” of
Rule 501, which arguably could require application of federal common law of privileges to
federal claims and state law of privileges to state claims. The court stated that
Such a dual application was not intended by Congress, however. The law of
privileges is not just a rule governing the admissibility of evidence. Its primary
6
purpose is to protect the confidentiality of certain communications under
circumstances where such confidentiality serves broad societal goals. If a
communication were privileged under state law but not under federal law, or if a
communication were privileged under federal law but not under state law, it
would be meaningless to hold the communication privileged for one set of claims
but not for the other. Once confidentiality is broken, the basic purpose of the
privilege is defeated.
77 F.R.D. at 458.
Notably, the court then determined that the approach most consistent with the
policy of Fed.R.Evid. 501 was a straightforward determination that
[W]here pendent state claims are raised[,] the federal common law of privileges
should govern all claims of privilege raised in the litigation. This was the
approach suggested by the Senate Judiciary Committee (see S.Rep.No. 1277, 93d
Cong., 2d Sess. 12 n. 16, reprinted in (1974) U.S. Code Cong. & Admin. News, p.
7059 n. 16), and it seems to be the approach most consistent with the policy of
Rule 501. That policy, simply stated, is that ‘(i)n nondiversity jurisdiction civil
cases, federal privilege law will generally apply.’ H.R.Rep.No. 1597, 93d Cong.,
2d Sess. 7, reprinted in (1974) U.S. Code Cong. & Admin. News, p. 7101. It
should not be cast aside simply because pendent state claims are raised in what is
primarily a federal question case.”
77 F.R.D. at 459.
The court finds infirm that the Kapsalises’ grounds for distinguishing the cases relied
upon by the magistrate judge. Despite their best attempt to prove otherwise, Hancock controls in
this matter. Further, the Kapsalises do not contest the presence of pendent state claims, and they
acknowledge, as they must, that this action was brought under our federal question jurisdiction.
28 U.S.C. § 1331. We conclude, therefore, that the magistrate judge correctly determined that
the federal common law of privileges applied to the evidence sought to be protected in this case,
and that Carol Kapsalis’ testimony was thus not shielded by a spousal privilege, as the
Kapsalises failed to establish that any relevant testimony involved confidential communications.
For the reasons stated hereinabove and the court being otherwise sufficiently advised, IT
IS HEREBY ORDERED AND ADJUDGED that the objections (DN 258) of defendant
7
Stephen Kapsalis and non-party Carol Kapsalis to the Memorandum Opinion and Order (DN
246) of the United States Magistrate Judge are OVERRULED.
IT IS SO ORDERED.
September 27, 2016
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