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Adelphia Recovery Trust v. Bank of America

November 24, 2009

ADELPHIA RECOVERY TRUST, PLAINTIFF,
v.
BANK OF AMERICA, N.A., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge McClure

MEMORANDUM

BACKGROUND

The present matter before this Court arises out of the bankruptcy proceedings of Adelphia Communications Corporation ("ACC"). After ACC filed for bankruptcy in 2002, a recovery trust called the Adelphia Recovery Trust ("ART") was created. ART, the plaintiff in the present matter, has since filed an action in the United States District Court for the Southern District of New York against more than forty financial institutions and their respective investment banking firms ("Bank Defendants"). In this action, ART claims that the Bank Defendants "knowingly aided and abetted a fraud by the ACC's majority shareholders and directors... " by providing loans to particular subsidiaries of ACC. (Rec. Doc. No. 13 at 2). ART alleges billions of dollars in damages. Id.

As part of the underlying litigation in the Southern District of New York, this Court issued two subpoenas to appear for depositions and produce documents to two non-party witnesses living in Coudersport, Pennsylvania. The two non-party witnesses are Colin Higgin, the former Deputy General Counsel of ACC, and Karen Chrosniak Larsen, the former Director of Investor Relations. (Rec. Doc. Nos. 11 and 13). Both Higgin and Larsen appeared for their depositions; however, both invoked their Fifth Amendment right against self-incrimination during their scheduled depositions. In fact, Higgin and Larsen answered virtually none of the questions asked of them at their respective depositions.

On October 30, 2009, the Bank Defendants filed motions to compel the deposition testimony of Higgin and Larsen. (Rec. Doc. Nos. 11 and 13). In their motions to compel, the Bank Defendants argue that Higgin and Larsen's attempted use of the privilege is overly broad and that the testimony of neither witness would raise a real or substantial risk of self-incrimination. Id. Also on October 30, 2009, the Bank Defendants filed a motion to expedite consideration of their motions to compel the testimony of both Higgin and Larsen. (Rec. Doc. Nos. 12 and 14). The Bank Defendants argued that, in light of a number of approaching deadlines in the action in the Southern District of New York, an expedited briefing schedule relating to the pending motions to compel was appropriate. Id. On November 2, 2009, we granted the Bank Defendants' motion for expedited consideration of their motions to compel deposition testimony from Higgin and Larsen. (Rec. Doc. Nos. 15 and 16).

Pursuant to this expedited briefing schedule, Higgin filed a response to the Bank Defendants' motion to compel on November 9, 2009.*fn1 (Rec. Doc. No. 18). Plaintiff ART filed a brief opposing the Bank Defendants' motions to compel the testimony of Higgin and Larsen on November 9, 2009. (Rec. Doc. No. 20). In its brief, ART argues that both Higgin and Larsen have a valid basis for invoking their Fifth Amendment privilege against self-incrimination.*fn2 Id. at 6-16. ART also requests that this Court consider transferring the motion to compel to the district court in the Southern District of New York, which is familiar with the underlying claim and discovery issues between the parties. Id. at 2.

On November 16, 2009, the Bank Defendants filed reply briefs in support of their motions to compel the deposition testimony of Larsen and Higgen. (Rec. Doc. No. 23 and 24). As to Larsen, the Bank Defendants argue that transfer to the district court in the Southern District of New York would be improper because that court lacks jurisdiction over Larsen. (Rec. Doc. No. 23 at 8-9). In addition, the Bank Defendants argue that appointment of counsel for Larsen would be improper and that Larsen should be compelled to testify. Id. at 2-8, 9. The Bank Defendants also note that there is no real risk of prosecution to Larsen if she were to testify, especially in light of the non-prosecution agreement between herself and the U.S. Attorney's Office for the Southern District of New York. Id. at 4-7. As to Higgin, the Bank Defendants argue that ART lacks standing to oppose the motion to compel and, even if ART did have standing, Higgin should still be compelled to testify. (Rec. Doc. No. 24 at 5-9). The Bank Defendants also argue that transfer to the Southern District of New York would be jurisdictionally improper. Id. at 10-11.

As the parties have filed the requisite motions, briefs, and reply briefs, the matter is ripe for disposition. Therefore, for the following reasons, we will deny the motion to compel.

DISCUSSION

The issue before this Court is whether Larsen and Higgin properly have invoked their Fifth Amendment privilege against self-incrimination in the context of a subpoena to testify at a deposition.

Rule 26(b)(1) of the Federal Rules of Civil Procedure sets the contours for discovery and provides that "[p]arties may obtain discovery of any matter, not privileged, that is relevant to any party's claim or defense." The rule further states that "[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." It is well-settled that Rule 26 establishes a liberal discovery policy. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978); Hickman v. Taylor, 329 U.S. 495, 507-08 (1947); Great West Life Assurance Co. v. Levithan, 152 F.R.D. 494, 497 (E.D. Pa. 1994). As a general rule, therefore, discovery is permitted of any items that are relevant or may lead to the discovery of relevant information. Hicks v. Big Bros./Big Sisters of Am., 168 F.R.D. 528, 529 (E.D. Pa. 1996); Transcontinental Fertilizer Co. v. Samsung Co., 108 F.R.D. 650, 652 (E.D. Pa. 1985).

1. This Court's Jurisdiction Over Higgin and Larsen

According to Fed. R. Civ. P. 45(a)(2)(B), a subpoena issued that requires an individual to attend a deposition must be issued "from the court for the district where the deposition is to be taken...." Similarly, Fed. R. Civ. P. 45(c)(3)(A)(ii) requires that a court that has issued a subpoena modify or quash such subpoena if the subpoena "requires a person who is neither a party nor a party's officer to travel more than 100 miles from where that person resides, is employed, or regularly transacts business in person...." According to Fed. R. Civ. P. 45(e), a court that has issued a subpoena "may hold in contempt a person who, having been served, fails without adequate excuse to obey the subpoena."

Under the Federal Rules of Civil Procedure, it is clear that this Court may exercise proper jurisdiction over the subpoenas for attendance at a deposition that are at issue here. As the depositions were to be taken in Coudersport, Pennsylvania, in the Middle District of Pennsylvania, this Court was the proper court to issue subpoenas to non-party witnesses Higgin and Larsen. In addition, the Bank Defendants correctly note that to require Higgin and Larsen to travel to the Southern District of New York for their depositions would run counter to the spirit of Fed. R. Civ. P. 45(c)(3)(A)(ii). As we have the power to compel the testimony of both witnesses and enforce the subpoena, this Court may exercise jurisdiction over the Bank Defendants' motions to compel.

2. The Right Against Self-Incrimination

The Fifth Amendment to the United States Constitution states, in part, that "[n]o person... shall be compelled in any criminal case to be a witness against himself...." A person may invoke the privilege against self-incrimination in a civil or criminal proceeding, at an administrative or judicial hearing, or in a setting that is adjudicatory or investigatory. Kastigar v. United States, 406 U.S. 441, 445 (1972) (citing Murphy v. Waterfront Comm'n, 378 U.S. 52, 94 (1964); McCarthy v. Arndstein, 266 U.S. 34, 40 (1924)). While the privilege protects an admission that on its own would support a criminal conviction, the privilege also protects admissions "which would furnish a link in the chain of evidence needed to prosecute the claimant for a federal crime." Hoffman v. United States, 341 U.S. 479, 487 (1951) (citing Blau v. United States, 340 U.S. 159 (1950)).

Importantly, it is not enough for the witness simply to claim a privilege against self-incrimination under the Fifth Amendment. A person claiming a privilege under the Fifth Amendment "must be 'confronted by substantial and real, and not merely trifling or imaginary, hazards of incrimination.'" United States v. Doe, 465 U.S. 605, 614 (1984) (citing Marchetti v. United States, 390 U.S. 53 (1968)) (internal quotations omitted). The privilege against self-incrimination "protects against real dangers, not remote and speculative possibilities." Zicarelli v. New Jersey State Comm'n of Investigation, 406 U.S. 472, 479 (1972). However, it is also well-established that "[t]he witness is not exonerated from answering merely because he declares that in so doing he would incriminate himself -- his say-so does not of itself establish the hazard of incrimination." Hoffman, 341 U.S. at 487.

Generally, a witness should be required "'to answer questions only if it is perfectly clear, from a careful consideration of all the circumstances in the case that the answer cannot possibly tend to incriminate the witness.'" Nelson v. Pilkington PLC (In re Flat Glass Antitrust Litig.), 385 F.3d 350, 371 (3d Cir. ...


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