ENDEAVOR ENERGY RESOURCES, L.P. v. GATTO & REITZ, LLC
OPINION resolving 133 Gatto & Reitz's motion to compel production of documents withheld on the basis of privilege. Signed by Judge David S. Cercone on 3/31/17. (mwm)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ENDEAVOR ENERGY RESOURCES,
L.P., a Texas Limited Partnership,
GATTO & REITZ, LLC, a Pennsylvania )
Limited Liability Company,
Third Party Plaintiff,
RIDEC, INC., MARCELLUS
MINERAL GROUP, LLC and
JAMES C. ELLIS,
Third Party Defendants.
Plaintiff Endeavor Energy Resources ("Endeavor" or "plaintiff"), a Texas entity,
commenced this action against defendant Gatto & Reitz (“G&R”), a Pennsylvania law firm,
seeking redress for the alleged improper distribution of funds that G&R held in escrow.
Presently before the court is G&R's motion to compel production of various documents withheld
from discovery by Endeavor pursuant to the attorney-client and work-product privileges. The
motion also seeks to have more detailed information set forth in Endeavor's privilege log with
regard to additional withheld documents. In its response to the motion Endeavor volunteered to
produce the documents for in camera review and pursuant to that offer the court has received and
reviewed the documents. For the reasons set forth below, G&R's motion will be granted in part
and denied in part. Endeavor will be ordered to disclose certain documents forthwith and to
provide more detailed information in its privilege log with regard to the additional withheld
documents. The motion will be denied in all other aspects.
In its complaint Endeavor advances claims for breach of contract, breach of fiduciary
duty, conversion, fraud and civil conspiracy and seeks to recover $2,702,500.00 that was held in
escrow as well as related damages, fees and costs. G&R assertedly was not to distribute the
escrow funds until (1) RIDEC, Inc. (“RIDEC”), a Pennsylvania entity, entered into an oil and gas
lease on terms that were acceptable to Endeavor and (2) Endeavor authorized G&R to release the
funds in writing. The escrow funds were being held in trust from a prior attempted oil and gas
lease that was never consummated. Thereafter, an understanding was reached that the funds
would be used to (1) pay a lease-signing bonus to RIDEC upon consummation of the
contemplated RIDEC lease (the “RIDEC lease”) and (2) pay a fee to Marcellus Mineral Group,
LLC (“MMG”), a Pennsylvania entity controlled by Pennsylvania resident James C. Ellis
(“Ellis”), for brokering the lease between RIDEC and Endeavor. Plaintiff avers that it did not get
a lease that contained the terms which it had insisted on as acceptable and G&R failed to follow
Endeavor's instructions to not distribute the escrow funds and return them to Endeavor.
G&R filed an answer denying liability and a third-party complaint against RIDEC,
MMG, and Ellis (collectively the “third-party defendants”) seeking indemnification in the event
G&R is held liable for distributing the escrow funds. G&R advances claims for declaratory
relief and unjust enrichment. It seeks a declaration that a binding lease was entered between
Endeavor and RIDEC. In the event Endeavor and RIDEC did not agree to a lease, it seeks to
recoup the funds that the third-party defendants received from G&R's distribution of the escrow
account pursuant to an equitable theory of unjust enrichment.
RIDEC answered the third-party complaint and filed a counterclaim against G&R,
crossclaims against Ellis and MMG, and a claim against Endeavor. RIDEC advances claims for
breach of contract, negligence, promissory estoppel and unjust enrichment against Endeavor,
breach of contract, negligent misrepresentation and unjust enrichment against G&R, and breach
of contract, negligent misrepresentation and unjust enrichment against Ellis and MMG. RIDEC
asserts that for over a year none of the other parties informed it of Endeavor's contention that the
lease was invalid and the first notice it received of that contention was G&R’s third-party
complaint, notwithstanding Endeavor having informed the other parties at least a year earlier that
the lease did not contain the terms to which it had agreed. RIDEC maintains that disgorgement
of the signing bonus received from the G&R escrow account would be unjust because RIDEC
labored under the understanding that Endeavor obtained a valid lease for over one year of a two
year lease and RIDEC was unable to lease its land during what it thought was the lease’s
two-year term. RIDEC also complains that (1) it was never made aware that Ellis was affiliated
with MMG and (2) Ellis received a grossly disproportionate fee for facilitating the RIDEC lease.
It maintains that under these circumstances it would be a breach of its rights and inequitable for
it to have to return the money received from the escrow account as a bonus for signing the
Endeavor fired a return salvo of claims against G&R and the third party defendants.
These consist of breach of contract, aiding and abetting breach of fiduciary duty, conversion,
fraud, unjust enrichment and civil conspiracy against Ellis and MMG, civil conspiracy against
G&R and unjust enrichment and constructive trust against RIDEC. In the event that the RIDEC
lease is determined to be valid, Endeavor seeks to recover the bonuses and fees paid to the thirdparty defendants because, in that scenario, the third-party defendants (potentially with G&R’s
support) mislead Endeavor into believing that the RIDEC lease contained Endeavor’s demanded
terms when, in reality, it did not. And this in turn assertedly caused Endeavor to release the
escrow funds under misleading or false pretenses.
It is against this backdrop that the court turns to the pending discovery dispute involving
documents withheld on the basis of the attorney-client and work-product privileges. G&R
contends that the documents will evidence Endeavor’s treatment and/or belief that the RIDEC
lease was valid. From its perspective the documents are discoverable because either Endeavor
disclosed them to or they were produced by a third-party independent contractor, Don B. Estill
(“Estill”), who did not communicate directly with Endeavor’s general counsel Michael Short
(“Short”). It reasons that because Pennsylvania law does not equate independent contractors
with corporate employees or agents, the attorney-client privilege does not apply. Likewise,
Endeavor purportedly did not hire Estill in anticipation of litigation; and it also failed to meet its
burden to prove that the documents disclosed to or produced by Estill were made in anticipation
of litigation, thereby preventing application of the work-product doctrine. G&R thus concludes
that without the protection of the attorney-client privilege and work-product doctrine, the
documents are discoverable.
Endeavor responds that the attorney-client privilege and work-product doctrine shield the
documents from discovery. It posits that Pennsylvania law implicitly recognizes a
functional-equivalent doctrine that permits courts to treat independent contractors in the same
manner as corporate employees or agents for attorney-client privilege purposes under appropriate
circumstances. Applying this understanding of the attorney-client privilege, Estill assertedly is
functionally an Endeavor employee whose conversations regarding legal matters are not subject
to disclosure. The work-product doctrine also protects the documents G&R seeks because
Endeavor disclosed the documents to Estill or he produced them in order to prepare for litigation.
Thus, Endeavor maintains that all documents properly have been withheld as privileged.
G&R’s motion to compel production will be granted as to ENDEAVOR 735–36 and
ESTILL 169–171, 172–182, 185, 186–87, 198–99, 201 (starting with the Short email on the
bottom of ESTILL 201)–203. The motion to compel production will be denied and the court will
issue a protective order as to ENDEAVOR 578, 580–604, 607–21, 646–57, 711–14, 753–57 and
ESTILL 1–168, 183–184, 188–197, 200, 201 (not including Short’s email to Bradley Reitz on
the bottom of ESTILL 201), and 204–362.
DISCOVERY DISPUTE BACKGROUND
The origins of this particular discovery dispute arose when Estill, a "contract landman,"
appeared for a deposition on January 20, 2015. (Docket Nos. 133 at ¶ 7; 133-4 at 12:6-7).
There, a conflict quickly emerged over whether information Estill obtained from and exchanged
with Gilmour is protected. For instance, Endeavor’s counsel instructed Estill not to answer “any
follow-up questions to the degree that Mr. Gilmour discussed anything with you that Mr. Short
and he discussed.” (Docket No. 133-4 at 72:4-7). Estill’s counsel stated: “after February or
March of 2013, I think, that virtually everything . . . that Mr. Estill or his company did after, say,
January of 2013, . . . certainly March of ’13 was in connection with the litigation.” (Docket No.
133-4 at 115:24–116:4).1
G&R requests the court compel Endeavor to produce documents bates stamped ESTILL
1–362 and ENDEAVOR 578, 580–603, 604, 607–21, 646–57, 711–14, 735–36, and 753–57.
These documents were “disclosed to Estill.” (Docket No. 133 at ¶ 17). Endeavor thereafter
removed them from Estill’s possession. (Docket No. 133 at ¶ 6). And these documents do not
include direct communications between Short and Estill. (Docket No. 133 at ¶ 14). With regard
to these interactions, Estill admitted he could not recall “any conversations directly with [Short],
but [only knew] in [his] conversations with [Gilmour] that the information he was giving me had
been discussed with [Short].” (Docket No. 133-4 at 96:4-7). G&R thus contends that the
These statements by Estill’s counsel mirror Endeavor’s current position with regard to the
documents G&R seeks.
documents only contain communications between Gilmour and Estill that were derived from
Gilmour’s communications with Short and as a result they are discoverable. (Docket No. 133 at
The record does not indicate that Estill was Endeavor’s employee or agent. During his
deposition Estill defined the nature of his relationship with Endeavor:
Endeavor . . . refers to you as their agent. Are you aware of
I’m not their agent.
Okay . . . what’s your understanding of an agent?
I don’t know what the definition is, but I’m a contractor. I
don’t have any authority to act on their behalf, so I don’t
consider myself an agent. I consider myself a contractor.
(Docket No. 133-4 at 19:16-24). Endeavor pays Estill through invoices. (Docket No. 133-4 at
Estill described his work as providing “contract land services” including assisting
Endeavor’s “exploration and operations” anywhere Endeavor “want[s] me to go.” (Docket
No. 133-4 at 18:15-23). Specific tasks he performed included running title searches and
reviewing leases. (Docket No. 133-4 at 27:11-16). He ran a title search on “the RIDEC land” at
Short’s instruction. (Docket No. 133-4 at 27:19–28:10). He also described running a title search
occurring in “early—maybe March of 2013” at Gilmour’s instruction. (Docket No. 133-4 at
30:9–31:7). The purpose of this search was “to verify . . . that RIDEC owned the oil and gas
rights.” (Docket No. 133-4 at 33:15-23).2
Estill is not the only contract landman employed by Endeavor. Endeavor has “four or five . . .
employees that are landmen” and “several contract landmen that are in and out of the office
constantly.” (Docket No. 133-7 at 9:10-15).
Federal courts in diversity cases must look to state law when contemplating
attorney-client privilege issues. See Fed. R. Evid. 501; United Coal Co. v. Powell Constr. Co.,
839 F.2d 958, 965 (3d Cir. 1988). Pennsylvania’s attorney-client privilege rule has been codified
since 1887. Nationwide Mut. Ins. Co. v. Fleming, 992 A.2d 65, 68 (Pa. 2010) (Eakin, J.)
(affirming Superior Court by equally divided Pennsylvania Supreme Court); accord Upjohn v.
United States, 449 U.S. 383, 389 (1981) (the attorney-client privilege is “one of the oldest of the
privileges for confidential communications known to the common law.”). The current statute
states: “[i]n 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.” 42 Pa. C. S.
§ 5928. “[T]he attorney-client privilege operates in a two-way fashion to protect confidential
client-to-attorney or attorney-to-client communications made for the purpose of obtaining or
providing professional legal advice.” Gillard v. AIG Ins. Co., 15 A.3d 44, 59 (Pa. 2011).
The showing necessary to establish the privilege is settled:
[when] (1) legal advice of any kind is sought (2) from a
professional legal adviser in his capacity as such, (3) the
communications relating to that purpose, (4) made in confidence
(5) by the client, (6) are at his insistence permanently protected (7)
from disclosure by himself or by the legal adviser, (8) except the
protection be waived.
In re Grand Jury, 603 F.2d 469, 474 (3d Cir.1979) (citing J. Wigmore, EVIDENCE § 2292 at 554
(1961)); see also In re Impounded, 241 F.3d 308, 316 n.6 (3d Cir. 2001).
“The burden of proving that the (attorney-client) privilege applies is placed upon the
party asserting the privilege.” In re Grand Jury, 603 F.2d at 474 (citing among other cases
United States v. Landof, 591 F.2d 36, 38 (9th Cir.1978)). Once the privilege-invoking party
provides facts showing the privilege is applicable, “the burden shifts to the party seeking
disclosure to set forth facts showing that disclosure will not violate the attorney-client privilege.”
Red Vision Sys., Inc. v. Nat’l Real Estate Info. Servs. L.P., 108 A.3d 54, 62 (Pa. Super. Ct.
2015) (quoting Custom Designs & Mfg. Co. v. Sherwin-Williams Co., 39 A.3 372, 376 (Pa.
Super. Ct. 2012)). “[I]f the party asserting the privilege does not produce sufficient facts to show
that the privilege was properly invoked, then the burden never shifts to the other party, and the
communication is not protected under attorney-client privilege.” Id. (internal citations and
quotation marks omitted).
The attorney-client privilege serves laudable purposes and thus is “worthy of maximum
legal protection.” Haines v. Liggett Group Inc., 975 F.2d 81, 90 (3d Cir. 1992). Nevertheless,
the privilege obstructs the truth-finding process and is to be construed narrowly. Westinghouse
Elec. Corp. v. Republic of Phil., 951 F.2d 1414, 1423 (3d Cir. 1991). The privilege “‘protects
only those disclosures—necessary to obtain informed legal advice—which might not have been
made absent the privilege.’” Id. (quoting Fisher v. United States, 425 U.S. 391, 403 (1976)).
“In Pennsylvania, the attorney-client privilege is an absolute privilege; it is not a limited
privilege that is inapplicable whenever a court determines that the case cannot be fairly decided
if the privilege is invoked.” Mueller v. Nationwide Mut. Ins. Co., 31 Pa. D. & C. 4th 23, 1996
WL 910155, at *31 (Ct. of Com. Pleas of Allegheny County, May 22, 1996) (Wettick, J.).
Nevertheless, “[p]rotection under attorney-client privilege is subject to limits, exceptions, and
waiver.” Nationwide Mut. Ins. Co. v. Fleming, 924 A.2d 1259, 1265 (Pa. Super. 2007),
abrogated on other grounds by Gillard, 15 A.3d 33.
A client can waive the attorney-client privilege in a number of ways. One is by
disclosing a protected communication to a third party. Id. (citing Loutzenhiser v. Doddo, 260
A.2d 745, 748 (Pa. 1970); Joe v. Prison Health Services, Inc., 782 A.2d 24, 31 (Pa. Commw. Ct.
2001)). Such a disclosure “has long been considered inconsistent with an assertion of the
privilege.” Westinghouse Elec. Corp., 951 F.2d at 1424 (citing United States v. AT & T, 642
F.2d 1285, 1299 (D.C. Cir. 1980)).
The parties dispute whether the attorney-client privilege applies because Estill was not an
Endeavor employee or agent and Endeavor agrees that Estill was and is an independent
contractor. Notwithstanding this, Endeavor argues that Estill “acted as the functional equivalent
of an Endeavor employee and was involved in various communications so that Endeavor could
obtain legal advice from . . . Short . . . and its outside counsel.” (Docket No. 139 at p. 3).
The functional-equivalent test permits a court to treat independent contractors as
employees for the purposes of the attorney-client privilege if the particular contractor acted as
the “functional equivalent” of an employee. Smith v. Unilife Corp., No. 13-5101, 2015 WL
667432, at *2 (E.D. Pa. Feb. 13, 2015). But the court must look to Pennsylvania law on
attorney-client privilege because this is a diversity case. See Fed. R. Evid. 501; United Coal Co.,
839 F.2d at 965. And the Pennsylvania courts have not squarely decided whether a corporation’s
independent contractor can be considered the functional equivalent of an employee for
attorney-client privilege purposes.3 Pennsylvania statutes likewise do not address whether the
functional-equivalent doctrine applies here. Nor has any federal court predicted that the doctrine
is engrafted into Pennsylvania law.
Predicting Pennsylvania Law
The lack of prior precedent squarely addressing the issue does not mean that the
functional equivalent doctrine does not apply. In the absence of a controlling opinion from a
state’s highest court on an issue of state law, a federal court must predict how that court would
Endeavor acknowledges this. (Docket No. 139 at 3) (“It does not appear as though any
Pennsylvania state court has specifically addressed the functional equivalent test”) (internal
quotation marks omitted).
decide the issue. City of Phila. v. Lead Indus. Ass’n, Inc., 994 F.2d 112, 123 (3d Cir. 1993).
When predicting state law, a district court is to give due regard, but not conclusive effect, to the
decisional law of lower state courts. And in doing so the opinions of intermediate appellate state
courts are not to be disregarded unless the court is convinced by other persuasive data that the
highest court of the state would decide the matter differently. P. Emp’rs Ins. Co. v. Glob.
Reinsurance Corp. of Am., 693 F.3d 417, 433 (3d Cir. 2012) (internal quotations omitted); West
v. AT&T Co., 311 U.S. 223, 237 (1940).
Beyond the obvious distinction that an independent contractor is not on a corporation’s
payroll while a corporate employee is, on a micro level the difference between independent
contractors and employees as to the application of the attorney-client privilege is minimal at best.
For starters, “[t]he [attorney-client] privilege is available to corporate as well as individual
clients.” Red Vision Sys., Inc., 108 A.3 at 60 (citing Custom Designs & Mfg. Co., 39 A.3 at
376). The privilege also “‘extends to communications between its attorney and agents or
employees authorized to act on the corporation’s behalf.’” Pa. State Univ. v. W.C.A.B. (Sox), 83
A.3d 1081, 1092 (Pa. Commw. Ct. 2013) (quoting In re Condemnation by City of Phila. in
16.2626 Acre Area, 981 A.2d 391, 396 (Pa. Commw. 2009)). Discussing whether a practical
difference exists between applying the attorney-client privilege to employees versus independent
contractors, a respected secondary source states:
If the consultant was directed by the client to communicate with
the client’s attorney, and it was clear to the consultant that those
communications were for the purpose of obtaining legal advice,
and therefore, were confidential, the extension of the privilege’s
protection would place neither the client, the consultant, nor the
attorney in a position different than they would have been in had
the consultant been a “permanent” employee.
Paul R. Rice et al., 1 ATTORNEY-CLIENT PRIVILEGE IN THE UNITED STATES § 4:19 (2016).
Further, “[w]hen . . . third parties have an established working relationship with the corporate
client that is similar to that of regular employees, courts are increasingly treating them like
regular employees for purposes of the privilege.” Id.
One of our sister courts, the United States District Court for the Eastern District of
Pennsylvania (“Eastern District”), explained what the primary focus of the attorney-client
privilege inquiry in this context should be:
Focusing on whether the communication to the consultant was kept
confidential and made for the purpose of providing or obtaining
legal advice is more consistent with the principles articulated by
the United States Supreme Court in Upjohn. In that case, the
Supreme Court rejected the “control-center” test that had been
applied previously, and found that the realities of the manner in
which corporations function—through their employees—required
that communications with those employees be protected if kept
confidential and necessary for the purpose of legal advice.
Upjohn, 449 U.S. at 391–92.
It makes little sense to impose additional requirements for
extending the privilege to independent contractors merely because
they are not on the corporate payroll. In re Copper Mkt. Antitrust
Litig., 200 F.R.D. 213, 219 (S.D.N.Y. 2001). The difference is
only one of formality, and does not in itself diminish the need for
the attorney and non-lawyer to collaborate to ensure that the
corporation is complying with the law. Extending the privilege to
a consultant performing a role similar to that of an employee, to
the same extent as it applies to a corporate employee, simply
‘reflects the reality that “corporations increasingly conduct their
business not merely through regular employees but also through a
variety of independent contractors retained for specific purposes.”’
In re Flonase Antitrust Litig., 879 F. Supp. 2d 454, 460 (E.D. Pa.
2012) (quoting Edna Selan Epstein, THE ATTORNEY[-]CLIENT
PRIVILEGE AND THE WORK[-]PRODUCT DOCTRINE 269 (5th ed.
2007)). Where a consultant performs a similar role to an
employee, confidential communications made for the purpose of
obtaining or providing legal advice should be subject to the
attorney-client privilege regardless of whether the consultant was
hired for a litigation or business purpose. Id.
King Drug Co. of Florence, Inc. v. Cephalon, Inc., Nos. 2:06–cv–1797, 2:08–cv–2141, 2013 WL
4836752, at *6 (E.D. Pa. Sept. 11, 2013).
Established principles embedded in Pennsylvania court cases supplement the Eastern
District’s rationale. Research has uncovered two Pennsylvania cases that address whether
evidentiary privileges apply to independent contractors. Both the Superior Court of
Pennsylvania (“Superior Court”) and the Court of Common Pleas of Allegheny County
(“Allegheny County Court”) have rendered opinions that shed some guidance on the matter.
In Commonwealth v. Simmons, the Superior Court expounded on the scope of the
psychotherapist-client privilege, which is “modeled after the attorney-client privilege.” 719 A.2d
336, 340 (Pa. Super. Ct. 1998). The Superior Court reviewed whether a mental health patient’s
communications to an independent contractor working for an entity called Mentor Clinical Care
fell within the psychotherapist-client privilege. Id. at 337–38. Because the independent
contractor was a psychiatrist’s subordinate and the communications were undertaken in order to
facilitate review of the patient's treatment plan, the Superior Court ruled that the patient’s
communications to the independent contractor were privileged. Id. at 343–44. That the patient’s
communications were to an independent contractor did not stop the Superior Court from holding
that the psychotherapist-client privilege applied. Id. at 344.
The other Pennsylvania case providing insight is Irvin v. Mason, which was decided by
Allegheny County Court Judge R. Stanton Wettick Jr., a well-respected authority on
Pennsylvania's discovery law. 59 Pa. D. & C. 4th 129 (Ct. of Com. Pleas of Allegheny County
2002). He wrote:
[D]efendant apparently contends that the law will differentiate
between communications between the client/potential client and an
employee of the law firm and communications between a
client/potential client and an independent contractor hired by the
law firm. Defendant does not cite any case law supporting this
proposition and none of the case law which I reviewed makes such
a differentiation. Furthermore, there would be no reason to do so.
The controlling issue is whether the non-attorney to whom the
confidential communication is made is acting on behalf of a lawyer
in connection with legal services which the lawyer is providing or
Id. at 136–37. Commonwealth v. Simmons and Irvin v. Mason indicate that Pennsylvania
courts, when assessing whether the attorney-client privilege applies, are more interested in the
purpose of communications made to a non-attorney assistant than whether that assistant is an
employee, agent, or independent contractor.
Finally, a passage from the Pennsylvania Supreme Court does not directly suggest that
independent contractors can be considered the functional equivalent of corporate employees or
agents for purposes of the attorney-client privilege under appropriate circumstances, but its
rationale points in that direction. In Gillard, the Pennsylvania Supreme Court opined that “it
would be imprudent to establish a general rule to require the disclosure of communications
which likely would not exist . . . but for the participants’ understanding that the interchange was
to remain private.” 15 A.3d at 57. This reasoning suggests that the Pennsylvania Supreme
Court would extend the attorney-client privilege to independent contractors working on behalf of
and/or in conjunction with corporate in-house and outside counsel on a legal matter of
importance to the corporate entity.
In contrast, the Pennsylvania Supreme Court could choose to utilize a textual approach
and determine that the functional-equivalent doctrine is inapplicable under Pennsylvania law.
The corporate iteration of the attorney-client privilege “‘extends to communications between its
attorney and agents or employees authorized to act on the corporation’s behalf.’” W.C.A.B.
(Sox), 83 A.3d 1081, 1092 (Pa. Commw. Ct. 2013) (quoting In re Condemnation, 981 A.2d 391,
396 (Pa. Commw. Ct. 2009)). Under a textual method, the Pennsylvania Supreme Court could
hold that because independent contractors are not actual agents or employees, they are excluded
from the corporate attorney-client privilege’s protection.
Although the textual approach's simplicity and its fidelity to settled language has some
appeal, such a mechanical approach repeatedly has been rejected in Pennsylvania’s jurisprudence
applying the attorney-client privilege. Three annunciations of the attorney-client privilege or its
elements are instructive. As previously noted, the United States Court of Appeals for the Third
Circuit has held that the attorney-client privilege applies when:
(1) legal advice of any kind is sought (2) from a professional legal
adviser in his capacity as such, (3) the communications relating to
that purpose, (4) made in confidence (5) by the client, (6) are at his
insistence permanently protected (7) from disclosure by himself or
by the legal adviser, (8) except the protection be waived.
In re Grand Jury, 603 F.2d at 474. Reiteration number two, which is Pennsylvania’s codified
form of the attorney-client privilege, provides: “[i]n 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.” 42 Pa. C. S. § 5928. Version three requires the privilege-invoking party to
establish the following:
1) The asserted holder of the privilege is or sought to become a
2) The person to whom the communication was made is a member
of the bar of a court, or his subordinate.
3) The communication relates to a fact of which the attorney was
informed by his client, without the presence of strangers, for the
purpose of securing either an opinion of law, legal services or
assistance in a legal matter, and not for the purpose of committing
a crime or tort.
4) The privilege has been claimed and [has] not [been] waived by
Brown v. Greyhound Lines, Inc., 142 A.3d 1, 9 (Pa. Super. Ct. 2016) (quoting Red Vision Sys.,
Inc., 108 A.3d at 63–64) (internal citations omitted)).
None of these statements of Pennsylvania’s attorney-client privilege include explicit,
textual references to corporations or other business entities being potential holders of the
privilege. Nevertheless, “[t]he [attorney-client] privilege is available to corporate . . . clients.”
Red Vision Sys., Inc., 108 A.3 at 60.
Moreover, a corporation is a legal entity that can act “only through its officers, directors,
and other agents.” Daniel Adams Assocs., Inc. v. Rimbach Publ’g, Inc., 519 A.2d 997, 1000 (Pa.
Super. Ct. 1987). It is not possible for a corporation itself to seek an attorney’s advice or enter
into an attorney-client relationship. Thus, the proper boundaries of the relationship necessarily
have to extend to those individuals who the corporation vests with the requisite authority to
effectuate its legal interests and conduct its legal affairs. A rigid formula defining the individuals
who can fall within the proper exercise of this authority would verge on an unworkable exercise
in arbitrary line-drawing. We see no sound basis for engrafting such a requirement into
Pennsylvania's attorney-client privilege jurisprudence.
Use of a textual approach to determine the scope of Pennsylvania’s attorney-client
privilege as it relates to corporate entities' use of independent contractors is fraught with pitfalls
for misapplication. In this regard it would fail to provide a reliable framework for distinguishing
between legitimate undertakings to obtain legal advice and improper use of the privilege for
tactical advantage. In contrast, the functional-equivalent doctrine provides a fact-based inquiry
that (1) is in line with current business trends, (2) is consistent with the established precedent,
and (3) protects the purposes sought to be advanced by the privilege without unduly extending its
application. Consequently, we conclude that the Pennsylvania Supreme Court will adopt the
functional-equivalent doctrine when it is required to consider the issue.
Applying the functional-equivalent doctrine to the facts of this case, Estill easily qualifies
as the functional equivalent of an Endeavor employee. He routinely performed the same type of
work as Endeavor employees who worked in the land department. He provided “contract land
services” and assisted Endeavor’s “exploration and operations” anywhere Endeavor “want[ed]
[him] to go.” (Docket No. 133-4 at 18:15-23). He ran title searches and reviewed leases for
Endeavor. (Docket No. 133-4 at 27:11-16). In other words, he was one of several contractors
who performed the same and similar tasks to those performed by Endeavor's "landman"
employees. Thus, Endeavor is entitled to invoke the attorney-client privilege where it utilized
Estill in an effort to inform counsel about pressing legal matters or formulate legal strategy.
In camera review has revealed that Estill identified and researched records, transactions
and conveyances within this area of general services in order for Endeavor to gain informed legal
opinions and make decisions about specific legal matters. He also assisted by providing
information to devise or refine legal strategy involving the instant dispute. Considering that
Estill followed Endeavor’s instructions on where he should go and performed specific tasks in a
legal context such as running title searches, reviewing leases, and gathering information to make
informed decisions on legal matters and he understood that his conversations and undertakings
involved matters that were legal in nature, the fact that he was not an Endeavor employee per se
is not enough to retract the attorney-client-privilege umbrella over the communications in which
he participated or defeat the invocation of the work-product doctrine.
It follows that despite Estill not being on Endeavor’s payroll, if (1) he was
communicating about matters with Short, Gilmour (who must be considered Short’s
subordinate), or Endeavor’s outside counsel in Pennsylvania (Docket No. 139-1 at 17:15–18:9)
in an effort to gather information on a legal matter under review by Endeavor and/or to facilitate
the dispensing of legal advice to Endeavor, and (2) he and counsel overseeing the undertaking
had an understanding that the undertaking was occurring in such a context, then it is proper to
infer that those communications were made under the veil of confidentiality that accompanies
the attorney-client privilege.
Applying the Attorney-Client Privilege to Endeavor’s Privilege Log
With the potential applicability of the attorney-client privilege to communications
involving Estill having been established, the court will evaluate whether the documents G&R
seeks to have disclosed should be protected or produced. Based on the record pertinent to this
discovery dispute, some of Estill’s job duties did not include discussions with Short, Gilmour,
Endeavor's outside counsel in Pennsylvania or Dinsmore & Shohl attorneys. Nevertheless, he
ran a title search on “the RIDEC land” at Short’s instruction. (Docket No. 133-4 at 27:19–
28:10). He also described running a title search on the RIDEC lease occurring in “early—maybe
March of 2013” at Gilmour’s instruction. (Docket No. 133-4 at 30:9–31:7). The purpose of the
March 2013 search was “to verify . . . that RIDEC owned the oil and gas rights.” (Docket No.
133-4 at 33:15-23). It was clear by that time that Endeavor was contesting the legal effects of
the transaction that had recently transpired with G&R and the third-party defendants and by
context and understanding Estill, Gilmour and Short all understood that the undertakings were
designed to gain or formulate informed legal insight and assessments regarding the legal
situation. It is through this lens that the court will filter the documents Endeavor submitted for in
The Timelines of Events and Communications
The timelines consist of summaries of communications between individuals within
Endeavor’s corporate umbrella and events relating to attempted lease acquisitions and as such
are protected from disclosure by the attorney-client privilege. All of the communications
summarized in the timelines occurred confidentially, as they are between Endeavor officers and
employees, Estill, and/or Endeavor’s Pennsylvania counsel. The timelines are fairly construed as
being made to facilitate legal representation of Endeavor and provide one-stop,
chronologically-organized sources of information relating to Endeavor’s attempts to acquire
natural-gas leases. Some documents also include analyses of lease provisions and the changes
being considered from proposal to proposal. Thus, ESTILL 1–6 and 155–168 are protected from
disclosure via the attorney-client privilege.
Communications Regarding Draft Leases and Lease Provisions
The attorney-client privilege also applies to documents containing draft leases and
communications between Endeavor-affiliated individuals (including Estill) and outside counsel
as well as notes memorializing conversations about preferred and negotiable lease provisions.
All of the documents in this category are confidential and either sought, provided, or facilitated
legal advice. The attorney-client privilege shields ENDEAVOR 580–604, 607–21 and 646–57
and ESTILL 204–304 and 308–43 from disclosure.
Communications Occurring Under Endeavor’s Privilege Umbrella
Communications asking for and providing legal advice on Endeavor’s proposed lease
acquisitions, as well as emails exchanged between Endeavor-affiliated individuals regarding
Endeavor’s dealings, are protected from discovery by the attorney-client privilege. These
documents range from maintaining attorney-client relationships with Pennsylvania outside
counsel to discussions regarding legal issues that Endeavor was exploring in Southwest
Pennsylvania. All communications within these documents are confidential and pertinent to
legal representation. Therefore, ENDEAVOR 578 (the unredacted version), 711–14 and ESTILL
7, 63, 94, 100–02, 147–52, 183–84 and 200–01 (not including the Short email to Reitz on the
bottom of ESTILL 201) are sheltered from disclosure pursuant to the attorney-client privilege.
The Remaining Documents for Which Production is Sought
The court has reviewed the remaining documents withheld on attorney-client privilege
for which G&R seeks production through the instant motion and that have not been addressed
above. In camera review has revealed that the attorney-client privilege properly has been
invoked as to these documents in that the required showing has been satisfied. No further
explanation is deemed necessary by the court.
The work-product doctrine is codified in Federal Rule of Civil Procedure 26(b), which
provides that “a party may not discover documents and tangible things that are prepared in
anticipation of litigation or for trial by or for another party or its representative” unless otherwise
discoverable and the party shows substantial need for the material and the inability to obtain its
substantial equivalent without undue hardship. FED. R. CIV. P. 26(b)(3). In the seminal case of
Hickman v. Taylor, 329 U.S. 495 (1947), the Supreme Court first recognized the doctrine
pursuant to the principle that permitting attorneys to prepare their cases without fear that their
work product would be used against their clients advances the adversarial system. Id. at 510–11.
In United States v. Nobles, 422 U.S. 225, 238 (1975), the Supreme Court further opined
that the doctrine “shelters the mental processes of the attorney, providing a privileged area within
which he can analyze and prepare his client's case.” Included within this category are trial
preparation documents that reflect the fruits of the attorney’s endeavors, any compendium of
evidence prepared by the attorney and any of the attorney’s mental impressions, opinions or
theories. Id. at 236–39. Also protected are those materials prepared by an attorney’s agent. Id.
at 238–39. However, when “relevant and non-privileged facts remain hidden in an attorney's file
and where production of those facts is essential to the preparation of one's case, discovery may
properly be had.” Hickman, 329 U.S. at 511.
The work-product doctrine “is designed to protect material prepared by an attorney acting
for his client in anticipation of litigation.” United States v. Rockwell Intern., 897 F.2d 1255,
1265 (3d Cir. 1990). In contrast, the doctrine does not protect documents prepared “in the
ordinary course of business, or pursuant to public requirements unrelated to litigation, or for
other non-litigation purposes.” Martin v. Bally's Park Place Hotel & Casino, 983 F.2d 1252,
1260 (3d Cir. 1993).
A document is considered to be prepared “in anticipation of litigation [when] in light of
the nature of the document and the factual situation in the particular case, the document can be
fairly said to have been prepared or obtained because of the prospect of litigation.” In re Grand
Jury Proceedings, 604 F.2d 798, 803 (3d Cir. 1979). “The work-product immunity is not lost,
however, if the document was not prepared in anticipation of the present litigation so long as it
was prepared in anticipation of some litigation by a party to the present litigation.” Marvin
Lumber & Cedar Co. v. PPG Indus., Inc., 168 F.R.D. 641, 645 (D. Minn. 1996). Moreover, even
if documents were prepared for a different case, work-product protection may apply as long as
the cases “are closely related in parties or subject matter.” Louisiana Mun. Police Employees
Ret. Sys. v. Sealed Air Corp., 253 F.R.D. 300, 309 (D.N.J. 2008).
The party seeking the protection has the burden of proving the doctrine applies. Conoco,
Inc. v. U.S. Dep't of Justice, 687 F.2d 724, 730 (3d Cir. 1982). Once that burden has been met,
protected work prepared in anticipation of litigation must be produced only under very limited
circumstances and opinion work product is “afforded near absolute protection from discovery.”
In re Cendant Corp. Sec. Litig., 343 F.3d 658, 663 (3d Cir. 2003). The work-product doctrine
does not apply if the party seeking disclosure can demonstrate a substantial need for the material
and the inability without undue hardship to obtain the substantial equivalent of it by other means.
FED. R. CIV. P. 26(b)(3).
Endeavor is correct that disclosing work product to a third party—Estill—is not
dispositive as to whether the doctrine applies. (Docket No. 139 at 5); Serrano v. Chesapeake
Appalachia, LLC, 298 F.R.D. 271, 283 (W.D. Pa. 2014). “[A] party may continue to assert the
protections of the work[-]product doctrine only when the disclosure to a third party furthers the
doctrine’s underlying goal.” Serrano, 298 F.R.D. at 283.
Endeavor repeatedly has indicated that by at least by March of 2013 it believed that a
legal dispute existed concerning whether it obtained a lease containing the specific terms to
which it had agreed and that legal action was anticipated in order to pursue and preserve its legal
rights. Beyond mere assertion and conjecture there is nothing in the record that counters
Endeavor's position on this fact. It is through this lens that the court has reviewed the challenged
documents identified in Endeavor's privilege log to determine whether they were “prepared in
anticipation of litigation or for trial.” FED. R. CIV. P. 26(b)(3).
Draft Demand Letters
The work-product doctrine protects Endeavor’s draft demand letters from disclosure.
The control of the letters, as well as the comments and revisions made to them by
Endeavor-affiliated individuals, establish that they were made in anticipation of litigation. The
comments and revisions on the draft letters are classic forms of work-product, and much of the
commentary reflects the type of information that is given near absolute protection from
disclosure. As a result, ENDEAVOR 753–57, and ESTILL 188–97 must be withheld from
Maps of RIDEC Property
The two maps of the RIDEC property Estill created are shielded from discovery by the
work-product doctrine. Considering that Estill suggested edits to an Endeavor letter that was
made in anticipation of litigation on February 24, 2013, it is clear that the maps produced directly
thereafter at Endeavor's direction also were made in anticipation of litigation. ESTILL 153 and
154 cannot be ordered to be disclosed.
The Remaining Documents for Which Production is Sought
The court has reviewed the remaining documents withheld based on the work-product
privilege and for which G&R seeks production through the instant motion. To the extent these
documents are not addressed below, in camera review has revealed that the work-product
privilege properly has been invoked and no further explanation is deemed necessary by the court.
Furthermore, for all the specifically challenged work-product documents that are being withheld
after the court's in camera review, G&R has failed to show that it has a substantial need and the
inability without undue hardship to obtain the substantial equivalent of them by other means.
See Fed. R. Civ. P. 26(b)(3). Consequently, G&R's motion for production of these documents
will be denied.
Producible Discovery Documents
Not all of the documents in Endeavor’s privilege log are immune from G&R’s discovery
requests. After in camera review, certain documents listed in Endeavor’s privilege log must be
produced in response to G&R’s motion.
1. Documents From or Already Disclosed to Third Parties
ESTILL 169-71, 172-82, 185, 186–87, and 201 (on 201 only Short's email to G&R
starting on the bottom of ESTILL 201) –203 are discoverable. ESTILL 169-71 is an email from
a third party to Stephens and Gilmour proposing a potential future transaction. The email was
then forwarded by Gilmour to Estill without further comment. Estill 185 is an email from
Gilmour to G&R that Gilmour later forwarded to Estill without further comment. Estill 186-87
was initiated as an email from G&R to Stephens. Stephens then forwarded it to Gilmour without
further comment. As there is no communication or information emanating from Endeavor on
any of these email events and the elements needed to sustain either privilege cannot be inferred
from the mere forwarding of the emails, the original emails from the third parties as forwarded
do not become clothed with privilege.
Moreover, ESTILL 172-82 and 201 merely reflect communications from or to G&R that
Gilmour later forwarded to Estill without further comment. These are discoverable because they
came from or were sent to G&R and there is no further communications about or information
pertaining to the original disclosures by an Endeavor employee or affiliated individual. These
documents do not pertain to obtaining legal advice or formulating legal strategy, were already
disclosed to third parties, have no content or context from which to claim they were produced in
anticipation of litigation, and were not otherwise confidential.4 Therefore, these documents must
Confidential, yet Unprivileged Communications Lacking Work-Product Doctrine
Some of Endeavor’s communications might have been considered to be "confidential"
from a business perspective but still must be produced because they are not protected by the
attorney-client privilege or the work-product doctrine. These documents neither seek, contain or
were part of an undertaking to gain legal advice nor involve an undertaking to gather information
or formulate legal strategy in anticipation of litigation. ENDEAVOR 735–36 and ESTILL 198–
99 are subject to discovery and must be produced.
Further revision of Endeavor's Privilege Log
G&R's request to have Endeavor further identify the subject matter and date of certain
documents essentially identified in Endeavor's privilege log by the description "note made [by
Any argument that the email at ESTILL 186 from Stephens to Gilmour was confidential is
unavailing because the email simply forwarded a revised RIDEC draft lease to Gilmour without
Gilmour] in furtherance of document production" will be granted. When a party withholds
information from discovery on the basis of an asserted privilege, Federal Rule of Civil Procedure
26(b)(5)(A) requires that “[t]he party shall make the claim expressly and shall describe the nature
of the documents, communications, or tangible things not produced or disclosed – and do so in a
manner that, without revealing information itself privileged or protected, will enable other parties
to assess the applicability of the privilege or protection.” Fed. R. Civ. P. 26(b)(5)(A).
"A proper claim of privilege requires a specific designation and description of the
documents within its scope as well as precise and certain reasons for preserving their
confidentiality." Smithkline v. Beecham Corp. et al., 232 F.R.D. 467, 482 (E.D. Pa. 2005)
(quoting Foster v. Berwind Corp., Civ. A. No. 90–0857, 1990 WL 209288, *2, 1990 U.S. Dist.
LEXIS 17045, *5 (E.D. Pa. Dec. 10, 1990). Where, as here, a party intends to rely on a
privilege log, a certain level of information is required to meet the initial threshold for invoking
[T]ypically the logs will identify each document and the individuals who were parties to
the communications, providing sufficient detail to permit a judgment as to whether the
document is at least potentially protected from disclosure. Other required information,
such as the relationship between the individuals listed in the log and the litigating
parties, the maintenance of confidentiality and the reasons for any disclosures of the
document to individuals not normally within the privileged relationship, is then
typically supplied by affidavit or deposition testimony. Even under this approach,
however, if the party invoking the privilege does not provide sufficient detail to
demonstrate fulfillment of all the legal requirements for application of the privilege, his
claim will be rejected.
Id. (quoting Bowne of N.Y. City, Inc. v. AmBase Corp., 150 F.R.D. 465, 474 (S.D. N.Y.
1993) (other citations omitted)). "[M]ere conclusive or ipsa dixit assertions" fall short of the
information needed to present a proper privilege log. Id. (quoting Am. Health Sys., Inc. v.
Liberty Health Sys., Civ. A. No. 90–3112, 1991 WL 42310, *5, 1991 U.S. Dist. LEXIS 3675,
*13 (E.D. Pa. Mar. 26, 1991).
The information supplied by Endeavor in conjunction with the challenged entries is
little more than a mere conclusive statement. Because such statements fall exceedingly short
of the detail needed to present a sufficient privilege log, G&R's motion to compel a more
detailed description and information for the entries in question will be granted.5
After analyzing Endeavor’s attorney-client-privilege and work-product-doctrine
arguments, G&R’s motion to compel production will be granted as to ENDEAVOR 735–36 and
ESTILL 169–71, 172–82, 185, 186–87, 198–99, 201 (starting with the Short email on the bottom
of ESTILL 201)–203. The motion to compel production will be denied and the court will issue a
protective order as to ENDEAVOR 578, 580–604, 607–21, 646–57, 711–14, 753–57 and
ESTILL 1–168, 183–84, 188–97, 200, 201 (not including Short’s email to Bradley Reitz on the
bottom of ESTILL 201), and 204–362. G&R's motion to compel a more detailed description of
the subject matter and date of identified entries in Endeavor's privilege log will be granted and
Endeavor will be ordered to provide sufficient information as to comply with the requirements of
Rule 26(b)(5)(A) as to the documents identified as Bates labeled ENDEAVOR 575, 578, 605,
689–92, 693–97, 703–05, 707–08, 732–33, 734, 737 and 745. The revised information presented
in the privilege log shall at a minimum provide the dates (including those on the face of each
document and any further created or revised versions thereof), a sufficient description of the
subject matter and any other information necessary to present a proper invocation of the claimed
Of course, G&R is not foreclosed from challenging Endeavor's assertion of privilege as to these
documents after it has had an opportunity to review the revised privilege log and assess any
challenge it may have at that juncture.
privileges. An appropriate order will follow.
Date: March 31, 2017
s/David Stewart Cercone
David Stewart Cercone
United States District Judge
Denise D. Pentino, Esquire
William E. Robinson, Esquire
Randal M. Whitlach, Esquire
Nicholas J. Godfrey, Esquire
Dennis J. Roman, Esquire
Timothy R. Stienstraw, Esquire
Charlene S. Seibert, Esquire
Harry F. Kunselman, Esquire
Trent A. Echard, Esquire
Joseph M. George, Esquire
Christopher L. Blackwell, Esquire
(Via CM/ECF Electronic Mail)
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