BRAND ENERGY & INFRASTRUCTURE SERVICES, INC. et al v. IREX CONTRACTING GROUP et al

Filing 245

MEMORANDUM AND/OR OPINION. SIGNED BY MAGISTRATE JUDGE ELIZABETH T. HEY ON 11/3/17. 11/6/17 ENTERED AND COPIES EMAILED TO COUNSEL.(jaa, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
BRAND ENERGY & INFRASTRUCTURE
SERVICES, INC., et al.
v.
IREX CORPORATION, et al.

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CIVIL ACTION

NO. 16-2499

MEMORANDUM AND ORDER
ELIZABETH T. HEY, U.S.M.J.

November 3, 2017

The court addresses another discovery dispute between Plaintiffs (“Brand”) and
Defendants (“Irex”). Brand moves to quash a subpoena issued by Irex to former
individual defendant Robert Russo.1 The subpoena seeks, among other things, the
disclosure and production of the settlement agreement entered into by Brand and Mr.
Russo in November 2016 in this matter. Brand argues that Irex has failed to make a
“particularized showing that the evidence related to settlement is relevant and calculated
to the discovery of admissible evidence.” Doc. 235 at 4 (citing Dent v. Westinghouse,
Civ. No. 08-83111, 2010 WL 56054, at *1 (E.D. Pa. Jan. 4, 2010)). Irex responded to the
motion to quash, and Mr. Russo’s counsel submitted a letter in support of Brand’s
motion. Docs. 240 & 243.

1

Robert Russo was the President of Harsco, and he remained at Brand briefly after
Harsco’s acquisition. Doc. 61 ¶¶ 68-69. At the time the Amended Complaint was filed,
Mr. Russo was the CFO of Acrow Bridge and from January 2014 to June 2014, allegedly
worked as a consultant to Irex. Id. ¶ 11. Plaintiffs originally named Mr. Russo as an
individual defendant in this case, but voluntarily dismissed him on November 16, 2016.
Doc. 88.

Federal Rule of Evidence 408 prohibits the use of settlement negotiations and
agreements to prove or disprove the validity or amount of a disputed claim, or to impeach
by a prior inconsistent statement. F.R.E. 408(a). However, the Rule does permit the use
of such evidence for other purposes including proving a witness’s bias or prejudice. Id.
408(b). The Rule “recognizes the strong public policy of promoting settlement.” Dent,
2010 WL 56054, at *1 (collecting cases). Rule 408 applies to both the finalized
agreement and the underlying negotiations. “Because it is ‘generally believed that
settlement negotiations will be inhibited if the parties are aware their statements may later
be used as admissions of liability,’ Rule 408 serves to protect the freedom of discussion
during negotiations and encourage settlement.” BTG Int’l Inc. v. Bioactive Lab., Civ.
No. 15-4885, 2016 WL 3519712, at *8 (E.D. Pa. June 28, 2016) (Pappert, J.) (quoting
Ciolli v. Iravani, 625 F. Supp.2d 276, 285 (E.D. Pa. 2009)).
In the subpoena, Irex sought
1.

All communications between [Mr. Russo] and Brand concerning Irex, the
Individual Defendants, or any of the allegations in the Amended Complaint.

2.

All communications between [Mr. Russo] and Brand concerning the
settlement, resolution or dismissal of claims against [Mr. Russo] that were
set forth in the Amended Complaint.

3.

All non-privileged documents concerning or reflecting any agreements to
settle, resolve, or dismiss the claims against [Mr. Russo] that were set forth
in the Amended Complaint.

4.

All non-privileged documents or things concerning or reflecting any notes
or recordings of communications between [Mr. Russo] and any third-party
concerning Irex, the Individual Defendants, or the allegations in the
Amended Complaint.

2

Doc. 235 at 2. According to the letter submitted by Mr. Russo’s counsel, discussions
with Irex narrowed the categories of responsive documents to three categories.
1.

The Settlement Agreement between Mr. Russo and [Brand].

2.

Communications between counsel for Mr. Russo and counsel for Brand
concerning negotiation of the Settlement Agreement including drafts of the
Settlement Agreement.

3.

Communications between Mr. Russo and any third parties concerning Irex,
the individual defendants in the . . . action or the allegations in the
Amended Complaint . . . .

Doc. 243 at 2. Mr. Russo has agreed to produce documents responsive to the third of
these categories. Therefore, the only documents at issue are the settlement agreement
and communications between counsel concerning negotiation of the agreement.
Irex argues that the settlement agreement is admissible for purposes of
determining Mr. Russo’s motivations, potential bias, and reasons for cooperating with
Brand. Specifically, Irex contends it “is entitled to know before trial the exact terms of
Mr. Russo’s relationship with Brand, including, for example, whether the parties
exchanged any money, what information Mr. Russo provided to Brand, any arrangement
concerning the content of Mr. Russo’s testimony, and the extent of any releases.” Doc.
240 at 3.
Both Brand and Mr. Russo rely on the settlement agreement’s confidentiality
provision to oppose disclosure. Docs. 235 at 4, 243 at 3. “[T]he mere fact that settling
parties have agreed to maintain the confidentiality of their agreement does not
automatically serve to shield that agreement from discovery.” Sippel Dev. Co., Inc. v.
Western Sur. Co., Civ. No. 05-46, 2007 WL 1115207, at *2 (W.D. Pa. Apr. 13, 2007)
3

(citing Directv, Inc. v. Puccinelli, 224 F.R.D. 677, 685 (D. Kansas 2004)). In
determining “whether a non-settling defendant should have access to a settlement
agreement that is confidential by agreement of the signatories,” the courts of this circuit
“require some heightened showing of relevance or need.” Doe v. Methacton Sch. Dist.,
164 F.R.D. 175, 176 (E.D. Pa. 1995) (Joyner, J.); see also Spear v. Fenkell, Civ. No. 132391, 2015 WL 3947559, at *1 (E.D. Pa. June 26, 2015) (Lloret, M.J.) (citing cases and
applying standard that party seeking discovery of a settlement agreement must show a
likelihood it will be admissible).
Brand argues that Irex has failed to meet this heightened burden. Doc. 235 at 4.
Irex contends that “[s]ince Brand dismissed its claims against Mr. Russo, it appears that
he has been actively cooperating with, and assisting with, Brand’s prosecution of its
claims,” including turning over documents and devices to Brand. While this is not
sufficient to compel disclosure of the entire agreement, I will require disclosure limited to
provisions that would show bias or prejudice. See Spear, 2015 WL 3947559, at *3
(requiring production of redacted settlement agreement).
Therefore, Mr. Russo shall provide a copy of the settlement agreement redacted to
show only the names and signatures of the parties, dates of agreement, and any provision
that includes any promise of pecuniary value made to Mr. Russo, including money, job
offer, or indemnification. Irex has not established a basis for the production of the
settlement negotiations.
An appropriate Order follows.

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