The opinion of the court was delivered by: (judge Caputo)
Presently before the Court are four pending motions in this matter which is scheduled for trial on July 9, 2012.
The first three motions are in limine and pertain to documents which have only been very recently brought to the Plaintiffs' attention. In the first such motion addressed, the Plaintiffs have moved to impose sanctions against Defendant Douglas Bare for the non-production of these documents and the computer server they were discovered on. (Doc. 294.) This motion will be denied as I find that Defendant Bare was under no obligation to produce these documents to the Plaintiffs since he has signaled no intention of using them at trial. Yet, for that very same reason, these documents are not available for use as substantive evidence at trial and I will therefore grant the second motion addressed: Third-Party Defendant Stambaugh to exclude the documents at trial. (Doc. 289.) In the third motion in limine, the Plaintiffs have moved to file an additional complaint directly against Third-Party Defendant Stambaugh based on the new information apparently contained within these documents. Since I find that it would not be in the interest of justice to allow such amendment at this late date, this motion will be denied without prejudice.
Finally, the fourth motion is for reconsideration of an earlier order denying summary judgment as to an assignment of claims from a third-party plaintiff to a first-party plaintiff. Since the Plaintiffs have expressed that they do not oppose this motion, it will be granted as unopposed.
At issue in this lawsuit are client settlement funds unpaid by the former law firm Frankel & Associates P.C. ("the Firm"). It is undisputed that from September 2000 through October 2004, former-attorney Mark David Frankel perpetuated a fraud through the Firm's escrow account, whereby in excess of $1 million was converted from a number of clients to pay the Firm's tax obligations. Plaintiffs Brian Strayer, one of the Firm's former clients injured through this fraud, and the Pennsylvania Lawyers Fund for Client Security,*fn2 initiated this action on October 20, 2006 contending, in pertinent part, that "Defendants Cunningham and Bare were aware of and failed to take steps to prevent the Ponzi Scheme involving clients' funds." (Second Am. Compl. at ¶ 97, Doc. 60.) Claims were asserted against the Defendants for fraud, breach of fiduciary duty, bad faith, a violation of Pennsylvania's Unfair Trade Practice and Consumer Protection Law, 73 P.S. § 201-1, et seq., as well as a civil claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c)-(d). Wachovia bank, the operator of the Firm's client trust account, was also named as a party. Following Judge Munley's January 6, 2010 Memorandum and Order, Strayer v. Bare, No. 3:06cv2068, 2010 WL 95123 (M.D. Pa. Jan. 06, 2010), the only remaining claims and parties in the primary action were claims for conspiracy, conversion, and civil RICO as against Defendants Bare and Cunningham.
On August 11, 2008, Defendants Bare and Cunningham filed a Third-Party Complaint against Steven Stambaugh, the lawyer who represented Mr. Strayer in his original personal injury case, and Anita Livaditis, the Firm's bookkeeper ("the Third-Party Defendants"). (Third-Party Compl., Doc. 120.) In their Third-Party Complaint, Bare and Cunningham denied all liability as neither had actually represented Strayer or any of the Fund claimants, and sought contribution or indemnification from Stambaugh and Livaditis who, "at all relevant times, knew or should have known of the existence of the Ponzi scheme and failed to take steps to prevent the Ponzi scheme." (Id. at ¶¶ 10-11, 44-45.)
In August of 2011 the Plaintiffs settled with Defendant Darryl Cunningham rendering Defendant Douglas Bare as the sole Defendant in the primary suit. However, I ruled on April 4, 2012 that the Cunningham Release did not extinguish Cunningham's third-party claims and that Cunningham successfully assigned those claims to the Plaintiffs on December 22, 2011 in conformance with the Pennsylvania Uniform Written Obligations Act. This decision is subject to a pending motion for reconsideration. Later, in April of 2012, the Plaintiffs were made aware of the existence of documents derived from the Firm's computer server, which triggered the three instant motions in limine. On June 25, 2012, a hearing was conducted and oral argument was made in which all of these motions were at least partially addressed.
As such, these motions are now ripe for the Court's review.
I. Plaintiffs' Motion to Impose Sanctions against Defendant Bare (Doc. 294)
Defendant Bare admits to receiving a computer server from the Firm around December of 2008 and to downloading various documents from it without advising the Plaintiffs' Counsel. (Def.'s Resp. at ¶¶ 2-5, Doc. 299.) The Plaintiffs argue that this possession alone imposed a duty on Defendant Bare to share the information on that server with the Plaintiffs' Counsel. Defendant Bare retorts that any documents gleaned from the server were unresponsive to the Plaintiffs' document requests,*fn3 and that withholding them did not constitute a violation of Federal Rule of Civil Procedure 26 as "Bare did not and does not have any intention and/or expectation to use the documents at trial" and as the "the documents at issue have nothing to do with Bare." (Def.'s Resp. at ¶ 4, Doc. 299.)
Although the Plaintiffs have broadened the issue as to encompass "whether or not Defendant Bare had a duty to disclose that he was in possession of the computer server that obviously held documents relevant to this litigation" (Pls.' Br. at 4, Doc. 306.), the particular documents that triggered the instant motion include an apparent addendum to Third-Party Defendant Stambaugh's Will and an August 19, 2003 memorandum allegedly authored by Stambaugh. Plaintiffs represent that Stambaugh has acknowledged the existence of these documents, but has claimed that they were both altered. (Mot. At ¶ 14, Doc. 294.) Moreover, at the June 25 hearing, Stambaugh specifically denied that he was the author of the instant memorandum.
The Addendum to Stambaugh's Will states, in pertinent part: Frankel & Associates, P.C. owes me money. I question whether my estate will ever see it given recent revelations and my suspicions as to what the Frankels may have done with firm assets prior to Mark's disbarrment. In any event, I loaned the firm $40,000.00 to buy the firm's computers in addition to which I have not received any of my 40% bonus for cases settled in 2004. Darryl Cunningham can confirm the 40% bonus ...