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Rigas v. Deloitte & Touche, LLP

United States District Court, M.D. Pennsylvania

April 7, 2014

JAMES RIGAS, ZITO I, L.P., and ZITO MEDIA, L.P. Plaintiffs,
v.
DELOITTE & TOUCHE, LLP, Defendant.

MEMORANDUM

MATTHEW W. BRANN, District Judge.

Before the Court is James Rigas, Zito I, L.P., and Zito Media, L.P.'s (collectively, "Plaintiffs") Motion to Compel Deposition Testimony (ECF No. 1) of non-parties Karen Chrosniak Larsen, James R. Brown, and Doug Malone (collectively, the "Witnesses"). On February 24, 2014, the same day that they filed the instant motion, the Plaintiffs also filed a Motion for Expedited Consideration of this issue (ECF No. 3).[1] Following a telephonic conference held on February 25, 2014, United States District Judge Robert D. Mariani granted Plaintiffs' Motion for Expedited Consideration. Judge Mariani ordered that the Witnesses file their opposition to Plaintiffs' Motion to Compel by midnight on March 2, 2014, and that the Plaintiffs file any reply by midnight on March 3, 2014 (ECF No. 8).

Witnesses Larsen and Brown, by and through their attorneys, each submitted briefs in opposition to Plaintiffs' Motion to Compel on March 2, 2014 (ECF Nos. 12, 16). Plaintiffs filed a Reply Brief on March 4, 2014 (ECF No. 14). Unrepresented Witness Doug Malone has not filed a brief in the matter.

The Court held sealed, in camera hearings with each of the three Witness on April 2, 2014. The Court explored the Witnesses' concerns with answering questions on the topics proposed by the Plaintiffs and examined each witness to elicit facts that establish their concrete fears of potential criminal prosecution resulting from compelled testimony.

For the following reasons, the Plaintiffs' Motion to Compel Depositions (ECF No. 1) is denied. The Witnesses are entitled to assert their Fifth Amendment privilege in response to the Plaintiffs' proposed areas of questioning.

I. BACKGROUND

Plaintiff James Rigas ("Rigas") is a former officer and director of Adelphia Communications Corporation ("Adelphia"). Pls.'s Br. Supp. Mot. Compel 2, Feb. 24, 2014, ECF No. 2 [hereinafter Pls.'s Br.]. Prior to 2002, Rigas and his family were also the controlling shareholders of Adelphia and certain affiliated companies. Adelphia filed bankruptcy in 2002 as a result of securities fraud and additional criminal activity committed by numerous other executive officers. Plaintiffs Zito Media, L.P. and Zito I, L.P. are the successors in interests to certain affiliates that Rigas and his family owned. Id.

Plaintiffs are currently involved in litigation against Deloitte & Touche, LLP ("Deloitte") concerning Deloitte's alleged negligence and negligent misrepresentation in conjunction with Deloitte's accounting, auditing, and SEC disclosure services provided to Adelphia. This lawsuit is one of numerous cases transferred to the United States District Court for the Southern District of New York as part of the multi-district litigation concerning Adelphia.

The Witnesses are former employees of Adelphia who may have information relevant to this case. Karen Chrosniak Larsen ("Larsen") was formerly employed by Adelphia as its Director of Investor Relations. Larsen's Br. Opp'n Pls.'s Mot. Compel 2, Mar. 2, 2014, ECF No. 12 [hereinafter Larsen's Br. Opp'n]. James R. Brown ("Brown") and Doug Malone ("Malone") were also officers of Adelphia. Notably, both Brown and Larsen have provided substantial testimony on events surrounding Adelphia in other cases. Brown testified as a witness at the criminal trial of former Adelphia officers, and he also testified in civil proceedings on behalf of the United States Securities and Exchange Commission. Pls.'s Br., at 4. Larsen similarly testified at the criminal trial.[2] Id . Malone has not previously testified in a proceeding, but he has provided voluminous information concerning his involvement at Adelphia during interviews with the United States Attorney's Office for the Southern District of New York.

Attempting to elicit the Witnesses' knowledge in the present litigation, Plaintiffs issued subpoenas requiring the Witnesses to be deposed in Williamsport, Pennsylvania. In response to the subpoenas, each Witness expressed the intention to assert his or her right against self-incrimination afforded by the Fifth Amendment to the United States Constitution. Subsequently, Plaintiffs and the Witnesses executed agreements to forego attendance at the scheduled depositions and proceed to litigating in this Court whether the Witnesses' invocations of the Fifth Amendment are appropriate.

Specifically, the agreements provide that the Witnesses plan to invoke the Fifth Amendment in response to the following questions:

1. Your knowledge of any fraud during your tenure as an employee of Adelphia Communications Corp. ("Adelphia");
2. Your interaction with Deloitte while an employee of Adelphia;
3. Knowledge regarding information provided to Deloitte;
4. Deloitte & Touche's audit of Adelphia, including the status of its audit of Adelphia's 2001 financial statements as of March 27, 2002 and reasons for declining to issue an audit opinion ...

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