The court has carefully reviewed its application of the factors pertinent to whether a privilege has been waived on the grounds of inadvertent disclosure. The decision was a difficult one, in the first place, but upon review, the court finds itself constrained to adhere to its prior ruling. The court reiterates that the Generator Defendants are entitled to discover only those portions of the narrative statements of attorney billing memoranda that relate to the disposition of the assets of the Keystone Sanitation Company and the Noels.
While this memorandum was in the drafting process this day, the court received a telephone call from the parties, who were in the process of deposing Anna Noel for the upcoming preliminary injunction hearing. Counsel for the Generator Defendants had posed a question to Anna Noel regarding communications between her and her accountant, which the court understands was to lead to questions concerning the disposition of the assets of Keystone and the Noels. Counsel for the Keystone Defendants raised the accountant/client privilege under Pennsylvania statutory law. The court ruled in the telephone conference that there is no federal accountant/client privilege, and that because this case is before the court on a federal question, the federal common law, and not Pennsylvania's statutory law of privilege applies. Counsel for the Keystone Defendants argued that the privilege in this case has been asserted only with respect to a state law claim (the fraudulent conveyance claim, which has yet to be filed, and which is the subject of the very recent motion to amend the complaint). The court does not believe, first, that the privilege is asserted only with respect to a state law claim. As the court has previously held, it is authorized to enjoin the disposition of assets in appropriate circumstances in a case brought under Section 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). Second, even if the privilege were asserted only with respect to a pendant state law claim, Pennsylvania's law of privilege would not preempt the federal law of privilege.
The court relies upon the following cases for its decision on this accountant/client privilege question: United States v. Arthur Young & Co., 465 U.S. 805, 817, 79 L. Ed. 2d 826, 104 S. Ct. 1495; Couch v. United States, 409 U.S. 322, 335, 34 L. Ed. 2d 548, 93 S. Ct. 611 (1973); Wm. T. Thompson v. General Nutrition Co., 671 F.2d 100, 103-04 (3d Cir. 1982). The court also reviewed several recent cases from the district courts of this Circuit. It is apparent from the case law that when a federal and state claim are tried together in federal court, if claim of privilege is raised only in reference to the state claim, the federal law of privilege applies.
In today's conference call, the parties also raised the issue of the questioning of Anna Noel regarding her communications with the Keystone Defendants' attorneys regarding disposition of assets. The court explained in the conference call that it had reached the decision to adhere to its prior ruling on the limited obligation to produce the billing memoranda containing this type of information. In light of that ruling, the court instructed the parties that the attorney/client privilege has also been waived, in the same limited fashion, with respect to the questioning of Anna Noel. In other words, information regarding her attorneys' assistance or advice to her regarding the disposition of Keystone Sanitation Company and personal assets after the onset of the CERCLA investigation that led to this action is now discoverable. Counsel for the Keystone Defendants advised the court of its intention to seek a Writ of Mandamus with respect to this ruling (and presumably, the order to produce the billing memoranda), and requested the court to stay the ruling. The court will do so.
Accordingly, IT IS HEREBY ORDERED THAT:
(1) The motion of the Keystone Defendants' for reconsideration of the court's October 19, 1994 ruling is DENIED;
(2) The Keystone Defendants may not refuse to answer questions regarding the disposition of Keystone assets and the assets of the Noels based upon attorney/client or accountant/client privilege; and
(3) The court will stay the order only with respect to the ruling on the attorney client privilege to afford the Keystone Defendants the opportunity to petition the Third Circuit Court of Appeals for a Writ of Mandamus on this issue.
SYLYIA H. RAMBO, Chief Judge
Middle District of Pennsylvania
Dated: January 13, 1995.
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