IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

___________________________________

:

REGIONAL EMPLOYERS’ ASSURANCE : CIVIL ACTION

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST, :

Plaintiff, : 

:

 v. : NO. 03-6903

:

GRETCHEN HUTTO CASTELLANO, :

Defendant. :

___________________________________:

:

GRETCHEN HUTTO CASTELLANO, :

 Counterclaim Plaintiff, :

:

v. :

:

REGIONAL EMPLOYERS’ ASSURANCE :

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST by :

Pennmont Benefit Services, Inc., :

Plan Administrator, et al., :

 Counterclaim Defendants. :

___________________________________:

MEMORANDUM AND ORDER

Presently before the Court is a discovery dispute

regarding privilege assertions made during a deposition. Counsel

for the Defendant/Counterclaim Plaintiff Gretchen Hutto

Castellano (“Mrs. Castellano”), has objected to a series of

questions put forth by Plaintiff’s counsel at Mrs. Castellano’s

deposition held on March 19, 2007, and the continuation of that

deposition on July 11, 2007. The sole basis for this objection

was that the questions violated Mrs. Castellano’s attorney-client

privilege. Mrs. Castellano has filed a counterclaim in which she

accuses the Counterclaim Defendants, including Plaintiff’s

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attorney, John J. Koresko, V, Esquire, and others, of breach of

contract, breach of fiduciary duty, conversion, RICO, and ERISA

violations. During the deposition, Plaintiff’s counsel asked

Mrs. Castellano questions regarding any investigation she may

have made regarding the facts set forth in her Counterclaim. 

Counsel for Mrs. Castellano, Ira B. Silverstein, Esquire,

directed her not to answer these questions. It appears from the

March 19, 2007 transcript that Mr. Silverstein’s directive to his

client was based upon his client’s right to assert her attorneyclient privilege.

The Plaintiff filed a Motion for Protective Order and

for Sanctions. On April 24, 2007, the Honorable Clifford Scott

Green heard argument regarding Mr. Silverstein’s directive to his

client. While Judge Green did not rule upon the objections at

the time of argument, he opined that “[w]ell, if the

communication that you give to her is then set forth as the basis

for a complaint, the filing of that complaint in a courtroom

would seem to me to waive any privilege as it relates to it.” 

Tr., 04/24/07, p. 22. Judge Green also stated that, “I’m almost

ready -- if you’re not going to have her tell us her basis for

her information which she based her lawsuit on then, you know, if

she were to -- . . . -- if she were to persist in that position I

would be inclined to strike your counterclaim.” Id., p. 25.

During the colloquy between Judge Green and counsel,

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Mr. Silverstein informed the Court that he would brief the issue

in support of his position. Subsequently, Judge Green referred

this discovery matter to Magistrate Judge Henry S. Perkin for the

purpose of monitoring Mrs. Castellano’s deposition. After a

conference call between the Court and counsel on June 14, 2007,

the deposition was scheduled for July 11, 2007, in Courtroom 4A

of the Edward N. Cahn U.S. Courthouse and Federal Building in

Allentown, Pennsylvania. At no time prior to the scheduled

deposition of July 11, 2007, did Mr. Silverstein file or submit a

brief in support of his position. Further, at the time of the

conference call with Judge Perkin, neither counsel informed the

Court that the issue of privilege had not been resolved by the

parties. At the commencement of the July 11 deposition,

Plaintiff’s counsel informed the Court that Mrs. Castellano’s

counsel was preventing Mrs. Castellano from answering his

questions regarding the source of facts or supporting

investigation leading to the averments in the Counterclaim. The

deposition was adjourned until July 13, 2007 and counsel were

directed to submit legal memoranda to the Court no later than

1:00 PM on July 12, 2007. Counsel for the parties have complied

and this issue is now ready for disposition.

This case is premised upon federal question

jurisdiction, therefore federal common law governs the

evidentiary privileges, rather than state law. Wm. T. Thompson

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Co. v. General Nutrition Corp., Inc., 671 F.2d 100, 103 (3d Cir.

1982). The United States Court of Appeals for the Third Circuit

has enumerated the traditional elements of the attorney-client

privilege:

The privilege applies only if: (1) the

asserted holder of the privilege is or sought

to become a client; (2) the person to whom

the communication was made (a) is a member of

the bar of a court, or his subordinate and

(b) in connection with this communication is

acting as a lawyer; (3) the communication

relates to a fact of which the attorney was

informed (a) by his client, (b) without the

presence of strangers, (c) for the purpose of

securing primarily either (i) an opinion on

law or (ii) legal services or (iii)

assistance in some legal proceeding, and not

(d) for the purpose of committing a crime or

tort; and (4) the privilege has been (a)

claimed and (b) not waived by the client.

In re Grand Jury Investigation, 599 F.2d 1224, 1233 (3d Cir.

1979)(citing U.S. v. United Shoe Machinery Corp., 89 F. Supp.

357, 358-59 (D. Mass. 1950)); see also Rhone-Poulenc Rorer, Inc.

v. Home Indemnity Co., 32 F.3d 851, 862 (3d Cir. 1994)(citing 8

Wigmore, Evidence, § 2292, at 554 (J. McNaughton rev. 1961)).

In Westinghouse v. Republic of the Philippines, 951

F.2d 1414 (3rd Cir. 1991), the United States Court of Appeals for

the Third Circuit noted that, “[b]ecause the attorney-client

privilege obstructs the truth-finding process, it is to be

construed narrowly.” Id. at 1423. (citations omitted). The

Court emphasized that the privilege extends only to

communications necessary for obtaining informed legal advice

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which might not otherwise have occurred. Only the communication

between the attorney and the client itself is privileged; the

underlying facts as well as the factual circumstances surrounding

the attorney-client relationship is not privileged. Upjohn Co.

v. United States, 449 U.S. 383, 389 (1981). A review of the

transcript from the March 13, 2007 deposition indicates to this

Court that the questions asked by Attorney Koresko were proper

and could have been answered by Mrs. Castellano without revealing

any privileged information. 

During the deposition, Attorney Silverstein stated,

when his client was asked to look at a document, “Gretchen, to

the extent you are asked questions about seeing the documents, to

the extent anything or knowledge comes through me or any of the

lawyers in my office or the lawyers working for you, you are not

required and I’m instructing you not to answer that.” 3/19/07

Dep., p. 38. This advice to Mrs. Castellano given during the

deposition resulted in a downward spiral of conduct between

counsel, and was erroneous according to the following: 

No misconception seems to be more common

among litigators asserting the attorneyclient privilege than the belief that if a

document or draft has been through the hands

of a lawyer, it is thereby automatically

privileged from disclosure. If a lawyer is

merely copied on documents prepared for

reasons other than obtaining legal advice,

the privilege is erroneously asserted and

will not attach. Insulation from discovery

cannot be so readily or fraudulently

obtained. 

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In re Asousa Partnership, 2005 WL 3299823, *2 -3 (Bkrtcy. E.D.

Pa. 2005)(quoting Edna Selan Epstein, The Attorney-Client

Privilege and the Work Product Doctrine 153-54 (3d ed. 1997)). 

Mr. Silverstein argues that the question “what

investigation of facts did you make” requires his client to

divulge communications with her counsel regarding any

investigation. He further argues that “[t]herefore, to the

extent that Ms. Castellano has asserted facts, not

communications, within her complaint, then she has not waived the

attorney-client privilege, even if her attorney was the source of

the factual information.” Silverstein Ltr., p. 7. It appears to

this Court that counsel is attempting to avoid an admission on

the record that the only source of factual information underlying

the Counterclaims in this case was counsel. By making certain

allegations in the Counterclaim, Mrs. Castellano and her counsel

have placed the conduct of the Counterclaim Defendants at issue

in this case, and the attorney-client privilege is therefore

waived with respect to all communications that could reveal what

impacted or should have impacted that decision. First Fidelity

Bancorporation v. National Union Fire Ins. Co. of Pittsburgh, PA,

CIV.A. No. 90-1866, 1992 WL 55742 (E.D. Pa. 1992). 

Despite Mr. Silverstein’s statements in his letter

brief that Mrs. Castellano did not waive the privilege by filing

a Counterclaim based on facts, some of which may have been

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communicated to her by her counsel, courts have examined this

issue and have held to the contrary. The attorney client

privilege is waived when a litigant “place[s] information

protected by it in issue through some affirmative act for his own

benefit, and to allow the privilege against disclosure of such

information would be manifestly unfair to the opposing party.” 

Sax v. Sax, 136 F.R.D. 542, 543-544 (D. Mass. 1991)(quoting Hearn

v. Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975)); see also Johnston

Development Group, Inc. v. Carpenters Local 1578, 130 F.R.D. 348,

354 (D.N.J. 1990). The averments contained in the Counterclaim

have been put in issue by Mrs. Castellano and her counsel, this

information is not privileged, and Mrs. Castellano must answer

any and all questions which seek the source of the facts

underlying the Counterclaims in this lawsuit. 

Despite this analysis, Attorney Koresko should

carefully craft his questions posed to Mrs. Castellano in a very

careful and concise fashion when the deposition resumes so as not

to violate any attorney-client privilege which Mrs. Castellano

may hold. Counsel shall also be mindful that the purpose of

discovery is to aid in the collection of relevant and admissible

information, and not for the pursuit of collateral, personal

agendas. 

An appropriate Order follows. 

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