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Municipal Authority of Westmoreland County v. CNX Gas Co., LLC

United States District Court, W.D. Pennsylvania

December 20, 2017

MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY, on behalf of itself and all others similarly situated, Plaintiff
CNX GAS COMPANY, LLC, et al., Defendants


          Christopher C. Conner, Chief Judge.

         Before the court is a motion (Doc. 87) to quash or, in the alternative, for protective order filed by defendant CNX Gas Company, LLC (“CNX”) in response to the subpoenas (Docs. 87-5, 87-6, 87-7) issued by plaintiff Municipal Authority of Westmoreland County (“MAWC”) to third parties CONE Midstream Partners LP (“CONE Midstream”), CONE Gathering LLC (“CONE Gathering”), and Joseph Fink (“Fink”). For the reasons that follow, the court will grant in part and deny in part CNX's motion to quash.

         I. Factual Background & Procedural History

         MAWC commenced the instant class action on February 26, 2016 in Pennsylvania state court against defendants CNX and Noble Energy, Inc. (“Noble”) (collectively, “defendants”). (Doc. 1 ¶ 1; Doc. 1-1). Defendants removed the case on April 11, 2016. (Doc. 1). MAWC filed an amended complaint on November 7, 2016. (Doc. 50). Therein, MAWC, on behalf of itself and all others similarly situated, alleges breach of contract and conversion claims against defendants. (Id.)

         MAWC and defendants are parties to oil and gas leases under which MAWC receives royalty payments from CNX and Noble. (See id. at ¶¶ 12, 14, 17-20, 25-26; Doc. 88 at 4, Doc. 96 at 2). CONE Gathering provides “midstream gas gathering services” to CNX and Noble through CONE Midstream. (Doc. 50 ¶ 27). CONE Midstream is controlled by CNX, Noble, and CONE Gathering. (Id. at ¶ 28). CNX is owned by CNX Gas Corporation, which is a wholly owned subsidiary of CONSOL Energy, Inc. (“CONSOL”). (Doc. 88 at 1 n.1). MAWC contends that it is being underpaid because defendants are deducting post-production costs that are either prohibited under the leases altogether or are higher than allowed under the leases. (See Doc. 50 ¶ 57). MAWC also alleges that its royalty deductions are higher due to defendants' affiliation with CONE Gathering. (See Doc. 88 at 4).

         On July 27, 2017-three days prior to the close of fact discovery-MAWC deposed Fink as an individual fact witness and as corporate designee for CONE Midstream and CONE Gathering pursuant to Federal Rule of Civil Procedure 30(b)(6). (See Doc. 78 at 14; Doc. 84 at 4:3-13; Doc. 87-1, Joseph M. Fink Dep. 1, 10:3-15) (July 27, 2017) (“Fink Dep.”)). Fink is currently vice president of CONSOL's midstream operations as well as chief operating officer of CONE Midstream. (Fink Dep. 51:6-13). He has held those positions since 2012 and 2014, respectively. (Id. at 49:13-51:13). From 2011 to 2016, Fink also acted as president of CONE Gathering. (Id. at 51:14-52:19).

         Fink testified during his deposition that he and others, including Jason Mumford (“Mumford”), were parties to a “series of emails” about “appropriate deduction[s]” from “royalty payments.” (See id. at 308:24-309:16; 312:14-314:11). Fink could not recall when the communications occurred but stated that he “thought” it was sometime prior to an audit of MAWC in December 2014 into early 2015. (See id. at 317:15-22). MAWC asked Fink to speak to the content of the emails but counsel for CNX objected on privilege grounds because CONSOL attorney Bridget Furbee (“Furbee”) was a party to these communications. (See id. at 309:5-310:19, 314:19-315:23). MAWC requested that these emails be produced. (Id. 316:4-317:13).

         On August 1, 2017, MAWC filed a motion to compel against CNX seeking production of the emails and further depositions of Fink and Mumford for the limited purpose of questioning related to same. (Doc. 81). The next day, at an already scheduled hearing before the court, counsel for CNX testified that CNX did not have the emails in its possession because its “normal document retention policy would not have documents from 2012.” (See Doc. 84 at 2:3-6, 2:17-5:8). CNX admitted that the emails were “potentially. . . responsive” to a prior MAWC discovery request. (See id. at 3:14-21). The court denied the motion to compel based on CNX's representations and directed MAWC to file a third-party subpoena pursuant to Federal Rule of Civil Procedure 45. (See id. at 7:2-9:5). The court extended the deadline for fact discovery to afford MAWC an opportunity to review the emails and take related depositions, if necessary. (See id. at 9:6-14). CNX stated the emails may be privileged. (See id. at 8:9-23).

         On August 7, 2017, MAWC served identical subpoenas on CONE Midstream, CONE Gathering, and Fink. (See Doc. 87-8; see also Doc. 87-5, 87-6, 87-7). Less than two weeks later, counsel for the subpoena recipients sent the responsive emails to CNX and stated that they intended to produce the emails unless CNX wished to assert a privilege. (See Doc. 87-9). On August 28, 2017, CNX filed its instant motion to quash or, in the alternative, for protective order. (Doc. 87). MAWC responded in opposition on September 12, 2017. (Doc. 96). On October 11, 2017, the court directed CNX to produce the emails for in camera review. (Doc. 98). The court received the emails on October 20, 2017. The court has completed its review of the emails and the motion is fully briefed and ripe for disposition.

         II. Legal Standard

         Federal Rule of Civil Procedure 45 requires a court to quash or modify any subpoena that: (1) does not allow a reasonable compliance period; (2) seeks compliance beyond the geographic limits set forth elsewhere in the Rule; (3) requires a person to disclose privileged or protected matter in circumstances when waiver or other exceptions do not apply; or (4) subjects a person to an “undue burden.” Fed.R.Civ.P. 45(d)(3)(A). The moving party bears a “heavy burden” of demonstrating that an enumerated basis for quashing the subpoena exists. See Malibu Media, LLC v. John Does 1-15, No. 12-2077, 2012 WL 3089383, at *5 (E.D. Pa. July 30, 2012) (citation omitted).[1]

         III. Discussion

         CNX avers that the emails are privileged communications between CONSOL employees and CONSOL attorneys regarding issues that required legal advice.[2]MAWC responds that communications to which attorneys are recipients are not automatically privileged and the court should independently review the content of each.[3] The court's in camera review of the emails reveals, as discussed infra, that only some contain privileged attorney-client communications.

         The purpose of the attorney-client privilege “is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). While recognizing the value served by the privilege, courts must also be mindful that the privilege obstructs the truth-finding process; as such, it should be applied “only when necessary to achieve its purpose.” Wachtel v. ...

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