IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Pittsburgh History and Landmarks :

Foundation, a Pennsylvania Non-Profit :

Corporation; Landmarks Financial :

Corporation, a Pennsylvania Non-Profit :

Corporation; Henry P. Hoffstot, Jr.; :

David E. Barensfeld; Peter H. Stephaich;:

Patrick R. Wallace; Alexander Speyer; :

and Henry P. Hoffstot, III :

: No. 113 C.D. 2016 

Arthur P. Ziegler, Jr.; Mark S. Bibro; : Argued: November 16, 2016

and Jack R. Norris :

:

Pittsburgh History and Landmarks :

Foundation, a Pennsylvania Non-Profit :

Corporation; Landmarks Financial :

Corporation, a Pennsylvania Non-Profit :

Corporation :

 :

Appeal of: Arthur P. Ziegler Jr., Mark S. :

Bibro, Jack R. Norris, Pittsburgh History:

and Landmarks and Foundation :

Landmarks Financial Corporation :

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge

HONORABLE RENÉE COHN JUBELIRER, Judge

HONORABLE ROBERT SIMPSON, Judge

HONORABLE P. KEVIN BROBSON, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE JOSEPH M. COSGROVE, Judge

OPINION

BY JUDGE SIMPSON FILED: April 21, 2017

I. Introduction

This appeal of a discovery order is treated as an appealable collateral 

order to the extent it may require disclosure of legal opinions and advice otherwise 

privileged under the attorney-client privilege and the attorney work product 
2

doctrine. Commonwealth v. Blystone, 119 A.3d 306 (Pa. 2015); Red Vision Sys., 

Inc. v. Nat’l Real Estate Info. Servs., L.P., 108 A.3d 54 (Pa. Super. 2015) (court 

treated order compelling discovery as to issues relating to attorney-client privilege 

as collateral, but refused to treat order as to other issues as collateral).

The underlying suit is a derivative action involving two related 

nonprofit corporations.

1

 The suit pits a group of potentially former members of the 

Boards of Trustees (whose removal is contested) against a group of current officers 

and members of the Boards of Trustees, amid allegations of corporate 

mismanagement and breach of fiduciary duty. The nonprofit corporations are 

named as plaintiffs and defendants. In order to evaluate whether proceeding 

further was in the best interests of the nonprofit corporations, they formed what 

they called a joint Independent Investigating Committee (Investigating 

Committee). After an investigation, the Investigating Committee recommended 

that the derivative action not continue. Accordingly, the defendants filed a motion 

to dismiss, which is currently pending before the Court of Common Pleas of 

Allegheny County (trial court). 2

Following the guidelines set forth in Sections 7.02 to 7.10, and 7.13 of 

the American Law Institute Principles of Corporate Governance: Analysis and 

Recommendations (1994) (ALI Principles), specifically adopted by our Supreme 

 

1 Our appellate jurisdiction is premised on the involvement of the nonprofit corporations. 

42 Pa. C.S. §762(a)(5)(ii). The nonprofit corporations are Pittsburgh History and Landmarks 

Foundation and Landmarks Financial Corporation.

2 A Motion for Leave to File the Report of the Investigating Committee Under Seal was 

filed at the same time. Reproduced Record (R.R.) at 411a-16a.
3

Court in Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997),3to be applied in 

derivative actions, the trial court entered the discovery order in question.

For the reasons discussed more fully below, we vacate the discovery 

order and remand the matter to the trial court for further proceedings.

II. Background

A. Derivative Action

Because we will not address the merits of the underlying lawsuit, we 

mention the details of the action in summary fashion. Plaintiffs/Appellees4 were

members of the Boards of Trustees of the Pittsburgh History and Landmarks 

Foundation, and the related Landmarks Financial Corporation, their current status 

being contested. Defendants/Appellants5are the long-time President and 

Chairpersons of the Boards of Trustees of the same nonprofit corporations. 

Questions arose regarding appropriate management and efforts to reconstitute the 

Boards of the nonprofit corporations between 2009 and early 2013. In October 

2013, Plaintiffs/Appellees formally demanded that the nonprofit corporations 

secure enforcement of their claims on behalf of the nonprofit corporations.

 

3

See also Lemenestrel v. Warden, 964 A.2d 902 (Pa. Super. 2008).

4

The individual Plaintiffs/Appellees were David E. Hoffstot, Jr., Peter H. Stephaich, 

Patrick R. Wallace, Alexander Speyer, and Henry P. Hoffstot, III. They brought suit in the name 

of Pittsburgh History and Landmarks Foundation and Landmarks Financial Corporation.

5

In addition to the nonprofit corporations named as Nominal Defendants, individual 

Defendants/Appellants are Arthur P. Ziegler, Jr., Mark S. Bibro, and Jack R. Norris. 
4

In response, each Board of Trustees adopted a resolution to appoint a 

joint Investigating Committee, comprised of sitting members of the Boards of 

Trustees, advised by independent counsel, with the charge of investigating the 

allegations made in Plaintiffs’/Appellees’ demand. 

During this process, in December 2013, Plaintiffs/Appellees brought 

suit in the name of the nonprofit corporations. Discovery ensued.

Meanwhile, the Investigating Committee completed its investigation 

and recommended against the prosecution of the derivative action. The Boards of 

each nonprofit corporation considered the Report of the Investigating Committee 

and adopted its recommendations. Accordingly, Defendants/Appellants filed the 

motion to dismiss based on the Report of the Investigating Committee. 

Reproduced Record (R.R.) at 376a-410a. The motion to dismiss is pending before 

the trial court.

B. Discovery Order

During the discovery phase of the lawsuit, disputes arose. In 

particular, Plaintiffs/Appellees sought disclosure of all information provided to the 

Investigating Committee as part of its investigation, including material which may 

be privileged. Defendants/Appellants resisted such disclosure. Plaintiffs/Appellees 

filed a motion to compel, which, together with the pending motion to dismiss,

prompted the trial court order under review.

In response to the motion to compel, the trial court entered the 

discovery order, which provided in pertinent part as follows:
5

a. Defendants[/Appellants] will provide 

Plaintiffs[/Appellees] with all materials provided 

to or generated by the [Investigating Committee], 

including all related legal opinions and 

communications. Privilege in such opinions and 

communications is retained by Nominal 

Defendants as to all persons and entities not a 

party to this action.

b. Decision on further release of purportedly 

privileged material is reserved, as such production 

is disproportionate to the nature and scope of this 

litigation at this time. See Pa. R.C.P. [No.] 4009.1 

(Explanatory Comment) (2012). After production 

and analysis of materials provided to the 

[Investigating Committee], further action on these 

materials may be requested by motion, upon 

showing that such production would be 

proportional to the issues at stake at that time.

c. Plaintiffs[/Appellees] may discuss with Anne 

Nelson the legal advice that she provided to the 

[Investigating Committee] and communications 

with the [Investigating Committee], as well as any 

non-privileged subjects.

Tr. Ct. Order, 9/21/15; R.R. at 683a-84a (emphasis added).

Defendants/Appellants appealed the discovery order to the extent it 

may require disclosure of legal opinions and advice otherwise protected by the 

attorney-client privilege or work product doctrine.

C. Trial Court Opinion

In response to Defendants’/Appellants’ concise statement of the errors 

complained of on appeal, the trial court filed an opinion. Initially, the trial court 

clarified “that the attorney-client and work product privileges do not apply to pre-
6

existing materials provided to the [Investigating Committee] for the purpose of 

producing the [Investigating Committee Report] or, obviously, to the report itself.” 

Tr. Ct., Slip Op., 2/8/16, at 9; R.R. at 730a. The trial court indicated that the 

privileges are applicable to communications between the Investigating Committee 

and its own counsel. Id.

Next, and most relevant to our analysis, the trial court addressed the 

application of the ALI Principles and the Supreme Court’s Cuker decision. In 

relevant part, the trial court stated the following:

ALI Principle of Corporate Governance § 7.13(e), 

which the Supreme Court of Pennsylvania adopted in 

[Cuker, 692 A.2d at 1049], states in relevant part, 

‘Plaintiff’s counsel should be furnished a copy of related 

opinions received by the board or committee if any 

opinion is tendered to the court under § 7.13(a).’

Comment e to § 7.13 explains the logic behind this 

rule:

‘The established law of the attorney-client 

privilege has long provided that invocation 

of the reliance-on-counsel defense waives 

the privilege... Thus, it would be unfair if 

the board or committee could rely on legal 

advice from its counsel that the actions was 

[sic] not meritorious as a ground for 

dismissing the action and then deny plaintiff 

access to the substance of that advice.’

* * * *

The applicable case law also illustrates the longheld principle that derivative litigation should not be 

dismissed based on privileged documents. In Cuker, the 

Supreme Court held that the factors that courts should 
7

take into account when determining the sufficiency of a 

special litigation committee’s investigation in a 

derivative suit include: ‘whether the board or its special 

litigation committee was disinterested, whether it was 

assisted by counsel, whether it prepared a written report, 

whether it was independent, whether it conducted an 

investigation, and whether it rationally believed its 

decision was in the best interests of the corporation.’ 

Cuker, 692 A.2d at 1048. See also Joy v. North, 692 

F.2d 880, 893 (2d Cir. 1982) (‘We simply do not 

understand the argument that derivative actions may be 

routinely dismissed on the basis of secret documents’).

It follows from these cases that in order to 

determine the independence and investigative adequacy 

of a special litigation committee such as the 

[Investigating Committee], [Plaintiffs’/Appellees’]

counsel must be allowed to access documents to which 

the committee itself had access.

Here, denying Plaintiffs’[/Appellees’] counsel 

access to pre-existing materials provided to the 

[Investigating Committee] for the purpose of producing 

the [Investigating Committee] report or to the report 

itself would create the exact problem that the Cuker and 

Joy courts sought to avoid: potentially dismissing a 

derivative action on the basis of secret documents.

Defendants[/Appellants] argue that § 7.13(e) only 

requires that Plaintiffs[/Appellees] receive the 

[Investigating Committee] materials submitted to the 

Court as well as related formal legal opinions given to 

the [Investigating Committee]. Defendants’ Brief in 

Opposition to Plaintiffs’ Motion to Compel at 14. 

Defendants[/Appellants] also assert that ‘the 

[Investigating Committee] process does not create an 

across-the-board waiver of the attorney-client or work 

product doctrines.’ Id. at 16.

Defendants[/Appellants] are correct that § 7.13(e)

does not create an across-the-board waiver of privilege. 

See Comment (e) (‘This understandable concern [that 

derivative actions may be dismissed on the basis of secret 
8

documents] does not, however, justify a complete waiver 

of the privilege.’).

But we find that Plaintiffs[/Appellees] have the 

stronger argument because there is no attorney-client or 

work product privilege recognized in § 7.13(e) regarding 

documents that existed before the creation of the 

[Investigating Committee] and were not generated by 

counsel to the [Investigating Committee]. Furthermore, 

attorney-client privilege, as discussed in § 7.13(e) relates 

to communications with the [Investigating Committee’s]

counsel, not with Defendants’[/Appellants’] counsel. See

Comment (e) (‘Section 7.13(e) provides that the special 

counsel’s communications with the board or committee 

with respect to a pending litigation shall be privileged 

and not subject to plaintiff’s inspection, except as 

provided in § 7.13(a), which only requires disclosure to 

the plaintiff of the report or other written submission to 

the court and any supporting documentation.’).

Thus, Plaintiffs[/Appellees] are correct that preexisting documents submitted to the [Investigating 

Committee] must be produced once the [Investigating 

Committee] report was submitted to the court.

Additionally, Defendants[/Appellants] would be 

unable to challenge the adequacy of the [Investigating 

Committee’s] investigation if they were denied access to 

the materials reviewed during the investigation.

Tr. Ct., Slip Op., at 9-12; R.R. at 730a-33a (emphasis added).

The trial court also discussed the fiduciary duty exception and the 

common interest exception to the attorney-client privilege and work product 

protection. The trial court concluded that these exceptions rendered the privileges 

inapplicable under these circumstances of this case.
9

Finally, the trial court authorized Plaintiffs/Appellees to speak with 

Anne Nelson, the former General Counsel of one of the nonprofit corporations, 

about her potential testimony, over the objections of Defendants/Appellants. The 

trial court reasoned that before she stopped working in 2012, the individual 

Plaintiffs/Appellees were sitting members of the Boards of Trustees; therefore, at 

the time they shared a common interest with Ms. Nelson. In those circumstances 

the common interest exception negated the privileges, and Ms. Nelson could 

discuss her legal advice to and communications with the Investigating Committee.

III. Issues

Defendants/Appellants state several issues for our consideration, 

which we reorganize for discussion purposes. First, they question whether the 

attorney-client or work product privileges may be asserted as to communications 

during the time period when the individual Plaintiffs/Appellees were still members 

of the Boards of the nonprofit corporations. Second, they question whether the 

privileges may be asserted as to communications between Defendants/Appellants 

and counsel for the Investigating Committee. Third, they question whether the 

common interest exception and the fiduciary duty exception apply to this case. 

Fourth, they question whether the privileges may be asserted in derivative 

litigation brought by former Board members. Fifth, they question whether 

Plaintiffs/Appellees have a right to interview Anne Nelson regarding her 

communications with the Investigating Committee.
10

IV. General Arguments

A. Defendants/Appellants

In addition to brief argument about the scope of an appeal from a 

collateral order, Defendants/Appellants emphasize the importance of the attorneyclient privilege and work product protection to assure that attorneys and their 

clients can freely communicate. They assert the trial court’s order has the effect of 

stripping the privilege from such communications based solely upon the status of 

the Plaintiffs/Appellees as derivative plaintiffs.

Defendants/Appellants assert the trial court’s discovery order failed to 

comply with long-established legal principles governing application of the 

attorney-client privilege. In particular, the privilege is a broad one. Also, it is held 

by the client, in this case the nonprofit corporations, not by its board members or 

other constituents. The status of Plaintiffs/Appellees as former board members 

does not give them standing to assert the common client and fiduciary exceptions 

to the privilege.

Further, Defendants/Appellants assail the trial court’s application of 

the common interest/common client exceptions to the attorney-client privilege. 

They highlight that the elements of those exceptions are not met. In some respects, 

they assert, the trial court’s application would effectively eliminate the attorneyclient privilege in derivative actions and would dramatically change the role of 

counsel to any corporation in Pennsylvania.

Defendants/Appellants also challenge the trial court’s application of 

the fiduciary exception to the attorney-client privilege. They underscore that the 
11

exception should be a narrow one, the trial court applied the exception in a novel 

way, no trust is involved, and the Plaintiffs/Appellees are not beneficiaries of a 

trust.

Finally, Defendants/Appellants complain that the effect of the trial 

court’s discovery order is to strip the privilege from any materials provided to or 

generated by the Investigating Committee. They argue that the ALI Principles 

cited by the trial court were misinterpreted by it. They claim that the ALI 

Principles are nothing more than an express recognition of the “reliance on 

counsel” exception to the attorney-client privilege, and the Principles merely 

clarify the common sense rule that the plaintiffs in a derivative lawsuit are entitled 

to receive copies of materials submitted to the court and copies “of legal opinions 

related to any opinion if such an opinion is provided to the court.” Appellants’ Br. 

at 52 (emphasis in original). Additionally, they assert that the ALI Principles and 

the Cuker decision adopting them did not intend to change Pennsylvania law with 

regard to attorney-client privilege. Defendants/Appellants emphasize the context 

of the ALI Principles and the Cuker decision is to afford a limited process by 

which the business judgment rule is applied to circumscribe a court’s review.

B. Plaintiffs/Appellees

After some argument related to the merits of the underlying action, 

Plaintiffs/Appellees contend that because the members of the Investigating 

Committee had an interest in perpetuating their continued service on the Boards of 

the nonprofit corporations, their recommendations should be challenged by a 

review of all the materials “that were supposedly considered by that [C]ommittee.” 

Appellees’ Br. at 15. 
12

Further, Plaintiffs/Appellees contend the fiduciary exception and joint 

interest/common interest exceptions to the privileges apply here.

In addition, they claim “good cause” warrants production of the 

ordered information, and the withholding of the information would frustrate the 

interests of justice, which is contrary to Pennsylvania law. Citing the ALI 

Principles, Plaintiffs/Appellees assert the privileges are waived as to “certain 

portions of the communications with the counsel of the [Investigating Committee] 

when a legal opinion or advice is relied upon and submitted to the court” as is the 

case here. Id. Further, the ALI Principles recognize that it would be unfair to urge 

the dismissal of an action on the basis of a special investigation committee report 

without providing materials considered by the committee to the plaintiff.

C. Defendants’/Appellants’ Reply

In their Reply Brief, Defendants/Appellants expend considerable 

effort to explain the facts underlying the litigation. They also explain the large 

amount of material potentially subject to discovery.

In addition, Defendants/Appellants point out fundamental flaws they 

perceive in Plaintiffs’/Appellees’ arguments: there is no legal distinction between 

the rights of a board member of a for-profit corporation and the rights of a board 

member of a nonprofit corporation; derivative lawsuit plaintiffs are not 

transformed into the corporation or its authorized representative simply because 

they assert a derivative claim; Plaintiffs/Appellees were not the clients of corporate 

counsel and therefore cannot demand to see communications between corporate 

counsel and the authorized representatives of the nonprofit corporations; and, the 
13

role of Plaintiffs/Appellees as former board members is not the basis for the 

fiduciary exception to the attorney-client privilege and work product protection.

Finally, Defendants/Appellants assert that the ALI Principles do not 

require either nonprofit corporation to surrender the protections in derivative 

litigation. Quoting portions of Section 7.13(e) and the comment to subsection e, 

they repeat that the ALI Principles do not change the law applicable to the 

attorney-client privilege, and they were not intended to work a blanket waiver of 

protected communications. They contend that a blanket waiver of protection is 

inconsistent with the entire process set forth in the ALI Principles, which provide 

for limited discovery to determine whether the business judgment rule should be 

applied. The only discovery of legal opinions which is contemplated by Section 

7.13(e) is “the disclosure of any formal opinion ... given by counsel to the ... 

committee with regard to the action if any legal opinion is tendered to the court.” 

AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND 

RECOMMENDATIONS §7.13 cmt. e (1994). Defendants/Appellants complain that the 

trial court’s order for disclosure of everything submitted to the Investigating 

Committee is too broad.

V. Discussion

A. Cuker and ALI Principles, Generally

Although generally discovery orders are reviewed under an abuse of 

discretion standard, application of the attorney-client privilege and work product 

doctrine raises questions of law, for which our standard of review is de novo and 

our scope of review is plenary. In re Thirty-Third Statewide Investigating Grand 
14

Jury, 86 A.3d 204 (Pa. 2014); Levy v. Senate of Pennsylvania, 65 A.3d 361 (Pa. 

2013) (Levy II).

The starting point for our review is our Supreme Court’s decision in 

Cuker, a derivative action. Sensing confusion over application of the business 

judgment rule in Pennsylvania, and a lack of clear authority about how the rule 

should be applied in derivative litigation, the Court added clarity. First, the Court 

explained that the business judgment rule applied in derivative litigation, and 

“should insulate officers and directors from judicial intervention in the absence of 

fraud or self-dealing, if challenged decisions were within the scope of the 

directors’ authority, if they exercised reasonable diligence, and if they honestly and 

rationally believed their decisions were in the best interests of the company.” 

Cuker, 692 A.2d at 1048 (emphasis added).

The Court authorized a trial court to act as a sort of gate-keeper, 

making a preliminary examination of the circumstances “to determine if the 

conditions warrant application of the business judgment rule.” Id. If 

circumstances support application of the rule, the trial court would not proceed to 

an examination of the merits of the challenged decisions. Id. “In order to make 

the business judgment rule meaningful, the preliminary examination should be 

limited and precise so as to minimize judicial involvement when application of the 

business judgment rule is warranted.” Id. Our Supreme Court further explained 

the limited, precise preliminary examination it anticipated:

To achieve these goals, a court might stay the 

derivative action while it determines the propriety of the 

board’s decision. The court might order limited 
15

discovery or an evidentiary hearing to resolve issues 

respecting the board’s decision. Factors bearing on the 

board’s decision will include whether the board or its 

special litigation committee was disinterested, whether it 

was assisted by counsel, whether it prepared a written 

report, whether it was independent, whether it conducted 

an adequate investigation, and whether it rationally 

believed its decision was in the best interests of the 

corporation (i.e., acted in good faith). If all of these 

criteria are satisfied, the business judgment rule applies 

and the court should dismiss the action. 

Id. (emphasis added).

This is the procedural posture of the current derivative litigation. 

Pending before the trial court is Defendants’/Appellants’ motion to dismiss based 

on the recommendation of the Investigating Committee. The trial court is 

preparing to perform its preliminary examination of the judgment of the 

Investigating Committee. As part of the preparation for the preliminary 

examination, the trial court entered the discovery order in question.

In Cuker, the Supreme Court went further to “provide a 

comprehensive mechanism to address shareholder derivative actions.” Id. at 1048-

49. Particularly relevant here, the Supreme Court specifically adopted several 

sections of the ALI Principles, including Section 7.13, titled “Judicial Procedures 

on Motion to Dismiss a Derivative Action Under §7.08 or §7.11.” That Section 

provides in pertinent part as follows:

(a) Filing of Report or Other Written Submission. Upon 

a motion to dismiss an action under § 7.08 (Dismissal of 

a Derivative Action Against Directors, Senior 

Executives, Controlling Persons, or Associates Based on 

a Motion Requesting Dismissal by the Board or a 
16

Committee) or § 7.11 (Dismissal of a Derivative Action 

Based Upon Action by the Shareholders), the corporation 

shall file with the court a report or other written 

submission setting forth the procedures and 

determinations of the board or committee, or the 

resolution of the shareholders. A copy of the report or 

other written submission, including any supporting 

documentation filed by the corporation, shall be given to 

the plaintiff’s counsel.

(b) Protective Order. The court may issue a protective 

order concerning such materials, where appropriate.

(c) Discovery. Subject to § 7.06 (Authority of Court to 

Stay a Derivative Action), if the plaintiff has 

demonstrated that a substantial issue exists whether the 

applicable standards of § 7.08, § 7.09, § 7.10, § 7.11, or § 

7.12 have been satisfied and if the plaintiff is unable 

without undue hardships to obtain the information by 

other means, the court may order such limited discovery 

or limited evidentiary hearing, as to issues specified by 

the court, as the court finds to be (i) necessary to enable it 

to render a decision on the motion under the applicable 

standards of § 7.08, § 7.09, § 7.10, § 7.11, or § 7.12, and 

(ii) consistent with an expedited resolution of the motion. 

In the absence of special circumstances, the court should 

limit on a similar basis any discovery that is sought by 

the plaintiff in response to a motion for summary 

judgment by the corporation or any defendant to those 

facts likely to be in dispute. The results of any such 

discovery may be made subject to a protective order on 

the same basis as under § 7.13(b).

* * * *

(e) Privilege. The plaintiff’s counsel should be 

furnished a copy of related legal opinions received by the 

board or committee if any opinion is tendered to the court 

under § 7.13(a). Subject to that requirement, 

communications, both oral and written, between the 

board or committee and its counsel with respect to the 

subject matter of the action do not forfeit their privileged 
17

character, and documents, memoranda, or other material 

qualifying as attorney’s work product do not become 

subject to discovery, on the grounds that the action is 

derivative or that the privilege was waived by the 

production to the plaintiff or the filing with the court of a 

report, other written submission, or supporting 

documents pursuant to § 7.13.

AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND 

RECOMMENDATIONS §7.13 (a)-(c), (e) (1994) (emphasis added).

In adopting the ALI Principles, the Court weighed many 

considerations. Among other things, the Court noted the need for specific 

guidance on how derivation actions should be managed. Cuker, 692 A.2d at 1049.

The Court declared that it often found ALI guidance helpful in the past, and the 

scholarship reflected in the work of the American Law Institute has been 

consistently reliable and useful, “most frequently when adopting or citing sections 

of various Restatements.” Id. Also, having undertaken a broad examination of the 

law in Pennsylvania and numerous other jurisdictions, the Court declared that “the 

principles set forth by the ALI are generally consistent with Pennsylvania 

precedent.” Id. (emphasis added). We will revisit these observations below.

B. ALI Principles: Attorney-Client Privilege and Work Product

Much like Restatements of the Law, the ALI Principles are reinforced 

with additional scholarship in the form of Comments and Reporter’s Notes. 

Comment e to Section 7.13 is titled “Disclosure and the attorney-client privilege.” 

Initially, comment e describes a potential exception to the attorney-client privilege 

when an action is derivative, founded primarily upon the leading decision in 

Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970), cert. denied, 401 U.S. 974 
18

(1971). This potential exception is based on the ground that the plaintiff in a 

derivative action is seeking to represent the client corporation, and the privilege 

may not be asserted by the attorney against the client. AM. LAW INST. PRINCIPLES 

OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS §7.13 cmt. e 

(1994). As to this potential exception to the attorney-client privilege, Comment e 

provides in pertinent part:

The cases have recognized a potential exception to the 

attorney-client privilege when an action is derivative, on 

the ground that the plaintiff is seeking to represent the 

client and the privilege may not be asserted by the 

attorney against the client. See [Garner]; Valente v. 

Pepsico, Inc., 68 F.R.D. 361 (D.Del. 1975). This 

doctrine does not deem the privilege to be unavailable; it 

simply permits the plaintiff to show ‘good cause’ why the 

privilege should not be applied against him or her. 

Garner specified nine criteria that the court should 

balance in making this good cause determination, and 

virtually all subsequent cases have adopted these factors. 

Two of these factors are: ‘whether the communication is 

of advice concerning the litigation itself’ and ‘whether 

the communication related to past or prospective 

actions.’ 430 F.2d at 1104. Those decisions that have 

found ‘good cause’ to pierce the veil of the attorneyclient privilege have involved communications that were 

roughly contemporaneous with the events giving rise to 

the litigation. Courts appear uniformly to have refused to 

subject post-event attorney-client communications to 

disclosure, particularly those communications advising 

with respect to a pending litigation. See Reporter’s Note 

3. In this light, there is no conflict between the position 

taken in § 7.13(e) and the Garner line of cases. Section 

7.13(e) provides that the special counsel’s 

communications with the board or committee with 

respect to a pending litigation shall be privileged and not 

subject to plaintiff’s inspection except as provided in 

§7.13(a), which only requires disclosure to the plaintiff 

of the report or other written submission to the court and 

any supporting documentation.
19

Id. (emphasis added).

In Garner, the Fifth Circuit determined that the attorney-client 

privilege must be placed in perspective. 430 F.2d at 1100. Citing Professor 

Wigmore’s treatise on Evidence, the Court stated the fundamental principle that 

the public has the right to every man’s evidence, and exceptions from the general 

duty to give testimony that one is capable of giving are distinctly exceptional. Id.

An exception is justified if--and only if--policy requires it be recognized when 

measured against the fundamental responsibility of every person to give testimony.

Id.

The Garner Court went on to explain conceptual problems inherent in 

shareholder derivative actions. In commenting on two English cases that treated 

the relationship between the shareholder and company as analogous to that 

between beneficiaries and trustees, the Court stated, “these English cases are 

persuasive recognition that there are obligations, however characterized, that run 

from corporation to shareholder and must be given recognition in determining the 

applicability of the privilege.” Id. at 1102. The Court also found instructive the 

common interest exception to the privilege. Id.

The Garner Court concluded that a corporation is not barred from 

asserting the privilege, “[b]ut where the corporation is in suit against its 

stockholders on charges of acting inimically to stockholder interests, protection of 

those interests as well as those of the corporation and of the public require that the 

availability of the privilege be subject to the right of the stockholders to show 
20

cause why it should not be invoked in the particular instance.” Id. at 1103-04. 

Finally, the Court set forth indicia of good cause that could be considered. Id. at 

1104.

Returning to the ALI Principles, Comment e to Section 7.13 

contemplates a potential exception to the attorney-client privilege. Consistent with

the Garner line of cases, a trial court may evaluate certain criteria to determine 

whether “good cause” exists to not apply the attorney-client privilege to a plaintiff 

in a derivative action. Even if “good cause” exists, however, disclosure is usually 

limited to communications that were roughly contemporaneous with the events 

giving rise to the litigation. Id. Post-event attorney-client communications, 

particularly those communications advising with respect to pending litigation, are 

not disclosed under this potential exception. Id.

In Comment e to Section 7.13, the potential Garner exception to the 

privilege is treated separately from the consequences of the submission of a special 

litigation committee report in support of a motion to dismiss. Comment e also 

contains a lengthy discussion of limited waiver of the attorney-client privilege 

based on the submission of a special litigation committee’s report to the court, as 

discussed in Section 7.13(e) of the ALI Principles quoted above.

The trial court here did not specifically discuss the potential exception 

to the privilege based on Garner; rather, only the limited waiver exception of 

Section 7.13(e) was expressly discussed by the trial court.
21

Relatedly, Reporter’s Note 3 to Section 7.13 is devoted to the status of 

the attorney-client privilege and work product in derivative litigation. This Note 

initially acknowledges that the status of the attorney-client privilege and work 

product protection in derivative litigation continues to be disputed. Nevertheless, 

the Note extensively discusses the Garner line of cases. The Note also restates a 

non-exclusive list of the considerations for a trial court before applying the Garner

potential exception to the privilege in a derivative action. Further, the Note states:

“Garner’s good faith exception to the privilege in a derivative action ‘has become 

accepted doctrine.’” Id. (citations omitted).

C. Restatement (Third) of the Law Governing Lawyers

In the past, this Court and our Supreme Court consulted the 

Restatement (Third) of the Law Governing Lawyers (2000) when dealing with the 

contours of the attorney-client privilege. See Gillard v. AIG Ins. Co., 15 A.3d 44 

(Pa. 2011); Levy v. Senate, 34 A.3d 243 (Pa. Cmwlth. 2011) (Levy I), aff’d in part, 

rev’d in part by Levy II (affirming application of attorney-client privilege, 

reversing per se waiver of alternate reasons for redaction).

Section 85 of the Restatement (Third), titled “Communications 

Involving a Fiduciary Within an Organization,” essentially adopts the Garner

potential exception to the attorney-client privilege in suits where there is a 

fiduciary relationship. Section 85 provides:

In a proceeding involving a dispute between an 

organizational client and shareholders, members, or other 

constituents of the organization toward whom the 

directors, officers, or similar persons managing the 

organization bear fiduciary responsibilities, the attorney-
22

client privilege of the organization may be withheld from 

a communication otherwise within § 68 if the tribunal 

finds that:

(a) those managing the organization are charged 

with breach of their obligations toward the 

shareholders, members, or other constituents or 

toward the organization itself;

(b) the communication occurred prior to the 

assertion of the charges and relates directly to 

those charges; and

(c) the need of the requesting party to discover or 

introduce the communication is sufficiently 

compelling and the threat to confidentiality 

sufficiently confined to justify setting the privilege 

aside.

RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §85 (2000) (emphasis 

added).

It is noteworthy that the withholding of the attorney-client privilege in 

these circumstances is limited to communications which occurred prior to the 

assertion of the charges and which related directly to those charges. See

RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §85(b) (2000). This is 

the same limitation described in ALI Principles, Section 7.13, comment e: “Those 

decisions which have found ‘good cause’ to pierce the veil of the attorney-client 

privilege have involved communications that were roughly contemporaneous with 

the events giving rise to the litigation.”6 AM. LAW INST. PRINCIPLES OF CORPORATE 

GOVERNANCE: ANALYSIS AND RECOMMENDATIONS §7.13 cmt. e (1994).

 

6

In this case, the Complaint identifies actions in the 2009 to early 2013 time period. See

R.R. at 1a-37a. Plaintiffs’/Appellees’ demand was made in October 2013.
23

Comment b to Section 85 of the Restatement, titled “Rationale,”

makes clear that Section 85 adopts the Garner line of cases: “Proceeding by 

analogy from the trustee exception of §84, the leading decision of [Garner] held 

that a court could, in appropriate circumstances, refuse to enforce a corporation’s 

otherwise valid attorney-client privilege when shareholders attempt to discover a 

communication between the corporation’s officers and its lawyers.” RESTATEMENT 

(THIRD) OF THE LAW GOVERNING LAWYERS §85 cmt. b (2000). Two policy 

considerations support this position. Directors and managers of an organization 

acting in that capacity in principle should not keep corporate information secret 

from their own principal constituents, the members of the organization. Id.

Second, in litigation against their constituents, the question of waiver of the 

attorney-client privilege may not be decided objectively. Id.

The Reporter’s Note to Comment b (“Rationale”), states in part, 

“Essential to the doctrine is the existence of a fiduciary relationship between the 

party seeking to set aside the attorney-client privilege and the managers of the 

organization that asserts the privilege.” RESTATEMENT (THIRD) OF THE LAW 

GOVERNING LAWYERS §85 Reporter’s Note, cmt. b (2000) (citation omitted).

Here, Defendants/Appellants do not assert that a fiduciary relationship is lacking. 

To the contrary, they apparently concede the existence of a fiduciary relationship. 

Appellants’ Reply Br. at 25 (“[T]he conclusion that the fiduciary exception does 

not apply does not mean that Appellees or the individual Defendants were not 

fiduciaries.”).
24

D. Cuker and ALI Principles, Summary

1. Garner-Based Potential Exception to Privilege

Based on our review, we conclude that both Section 7.13 of the ALI 

Principles and Section 85 of the Restatement (Third) of the Law Governing 

Lawyers adopt the reasoning and procedure of the Garner line of cases. We view 

these provisions for withholding the attorney-client privilege for a communication 

that occurred prior to the assertion of charges and relating directly to those charges,

based on certain predicate findings, as functionally equivalent. This is in addition 

to the limited waiver of the attorney-client privilege to legal opinions based on the 

submission to the trial court of an investigating committee’s report in support of a 

motion to dismiss. AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE:

ANALYSIS AND RECOMMENDATIONS §7.13(e) (1994).

We further hold that this is the law of Pennsylvania through the 

Supreme Court’s express adoption of the comprehensive mechanism for handling 

shareholder derivative actions embodied in the ALI Principles in general and 

Section 7.13 in particular. In making this holding, we reject several arguments 

raised by Defendants/Appellants. Primarily, we reject the argument that adoption 

of the ALI Principles, particularly Section 7.13, was not intended to expand the 

law of Pennsylvania, but merely to set forth the common sense principle that 

plaintiffs should be provided copies of what is submitted to the court. The Cuker

Court made clear that the lower courts needed broad, specific guidance from the 

Supreme Court on how derivative litigation should be managed, and the ALI 

Principles provided that guidance. Adoption of the ALI Principles was a deliberate 

effort by the Court to fill perceived gaps. Adoption was based on past experience 

with ALI work and respect for the scholarship involved, “most frequently in 
25

adopting or citing sections of various Restatements ....” Cuker, 692 A.2d at 1049. 

Our conclusion is reinforced by past experience with and respect for scholarship in 

the work of the Restatement (Third) of the Law Governing Lawyers, which in 

Section 85 reached a functionally identical conclusion with regard to the potential 

exception to the privilege.

Further, the Supreme Court found the ALI Principles “generally 

consistent” with Pennsylvania precedent. Cuker, 692 A.2d at 1049. In our view, 

the qualifier “generally” is significant. It communicates that there could be some 

inconsistency, but it would be tolerated. We further observe that there are no 

decisions of the Pennsylvania Supreme Court or other Pennsylvania appellate

courts which decline to adopt a potential Garner-based exception to the attorneyclient privilege. The Defendants/Appellants cite to Pennsylvania cases 

establishing general, uncontested propositions about the importance and breadth of 

the attorney-client privilege; however, they do not establish a clear inconsistency 

between Pennsylvania law and a Garner-based exception to the privilege, as 

recognized in both the ALI Principles and the Restatement (Third) of the Law 

Governing Lawyers for the discrete area of derivative litigation.

Moreover, the Garner Court’s approach to competing interests, those 

of the corporation in seeking legal advice, those of stockholders of the corporations 

to whom some “good management” duty is owed, and the public’s right to every 

man’s evidence, is generally consistent with our Supreme Court’s efforts to define 

the scope of the privilege. In its 2011 Gillard decision dealing with the privilege, 

the Court noted the “ongoing tension between the two strong, competing interests-
26

of-justice factors in play—namely—the encouragement of trust and candid 

conversations between lawyers and their clients, ... and the accessibility of 

material evidence to further the truth-determining process.” Gillard, 15 A.3d at 57.

We acknowledge that in two non-binding decisions trial courts located 

in Pennsylvania declined to adopt the reasoning in Garner. See R.J. Lefkowitz v. 

Duquesne Light Co., CIV. A. Nos. 86-1046, 86-2085, 1988 WL 169273 (W.D. Pa. 

June 14, 1988) (memorandum opinion) (disposing of discovery motion); Agster v. 

Barmada, 43 Pa. D.& C.4th 353 (C.P. Allegheny 1999), 1999 WL 1577979 

(disposing of discovery motion in suit involving closely-held corporation). Neither 

case, however, referenced our Supreme Court’s opinion in Cuker, the ALI 

Principles, or the Restatement (Third) of the Law Governing Lawyers. Indeed, the 

Lefkowitz decision pre-dated Cuker, the ALI Principles, and the Restatement

(Third). The Agster decision post-dated Cuker and the ALI Principles, but did not 

mention them. Nevertheless, the trial court in Agster conceded that a majority of 

courts that considered the issue have followed Garner. Agster, 43 Pa. D. & C.4th

at 362. Also, the decision in Agster pre-dated Section 85 of the Restatement

(Third) of the Law Governing Lawyers. Under all these circumstances, we discern 

little persuasive value in those trial court cases for current purposes.

Moreover, we specifically reject Defendants’/Appellants’ arguments 

that an exception to the privilege does not apply because Plaintiffs/Appellees are 

no longer members of the Boards of the nonprofit corporations. If 

Plaintiffs/Appellees are no longer members of the Boards (an as-yet undecided fact 

that goes to the underlying merits) it was not because of any voluntary action on 
27

their part. Further, as discussed below, some of the legal advice they wish to 

discover was allegedly given while they were unquestionably members of the 

Boards. See In re Int’l Sys. & Controls Corp. Sec. Litig., 693 F.2d 1235, 1239 n.3 

(5th Cir. 1982) (allowing former shareholders to seek application of potential 

Garner exception).

2. Process

We understand the judicial process to be as follows. Tasked with 

undertaking a preliminary examination to determine application of the business 

judgment rule, a trial court may order limited discovery. The discovery should be 

tailored to the preliminary inquiry faced by the trial court, as explained in Cuker. 

The trial court did so here. See Tr. Ct., Slip Op., at 11; R.R. at 732a (trial court 

defining its preliminary task as determining the independence and investigative 

adequacy of the special litigation committee). In addition, the trial court should 

make the discovery determinations set forth in Section 7.13(c) of the ALI 

Principles, quoted above.7

 

7

These include demonstrations that a substantial issue exists whether the applicable 

standards have been satisfied and that the plaintiff is unable without undue hardship to obtain 

information by other means, and trial court findings that discovery is necessary to enable it to 

render a decision on the motion to dismiss under the applicable standards and that discovery is 

consistent with an expedited resolution of the motion to dismiss. AM. LAW INST. PRINCIPLES OF 

CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS §7.13(c) (1994).

It is unclear the extent to which the trial court made all these determinations when it 

entered its discovery order. Nevertheless, our review under the collateral order appealed here is 

limited to issues involving application of the attorney-client privilege and work product 

protection only. Red Vision Sys., Inc. v. Nat’l Real Estate Info. Servs. L.P., 108 A.3d 54 (Pa. 

Super. 2015).
28

Next, when faced with a question involving assertion of the attorneyclient privilege and work product protection, a trial court should undertake a 

Garner “good cause” inquiry, which would include consideration of the nonexclusive factors discussed in Garner and cases following it. As discussed in 

Comment e to Section 7.13 of the ALI Principles, this inquiry will largely focus on 

communications that were roughly contemporaneous with the events giving rise to

the litigation. AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS 

AND RECOMMENDATIONS §7.13(e) cmt. e (1994). The trial court here did not 

undertake this inquiry. Therefore, we are constrained to vacate the trial court’s 

discovery order and remand to the trial court for it to do so.

Plaintiffs/Appellees explain the type of information that might be 

within the ambit of a potential Garner-based withholding of the attorney-client 

privilege: legal advice about efforts to pack the nonprofit corporation boards; legal 

advice about whether investments questioned by members of a Board were proper; 

and, legal advice about whether a Board could vote out all existing Trustees and 

elect successors based on a state statute, where a Board by-law only provided for 

termination of directors for cause. Appellees’ Br. at 56. Such legal advice 

rendered at about the time of those alleged events and before the current suit was 

pending could be reached by a discovery order, consistent with both Section 7.13 

of the ALI Principles and Section 85 of the Restatement (Third) of the Law 

Governing Lawyers, after consideration of pertinent factors.
29

3. Limitations

We caution that the breadth of legal advice and opinions potentially 

discoverable under a Garner approach may be more confined than that envisioned 

by the trial court. In particular, post-event attorney-client communications, 

particularly those communications advising with respect to pending litigation, are 

probably not discoverable. AM. LAW INST. PRINCIPLES OF CORPORATE 

GOVERNANCE: ANALYSIS AND RECOMMENDATIONS §7.13, cmt. e (1994). Here, 

most of the actions described in the Complaint occurred between 2009 and early 

2013. R.R. at 1a-37a. Plaintiffs’/Appellees’ demand was made in October 2013, 

and suit was filed in December 2013.

We also caution that the breadth of legal opinions discoverable as a 

result of the submission to the trial court of the Investigating Committee’s Report 

may be more restricted than that envisioned by the trial court. Communications to 

the Investigating Committee from its counsel may not be disclosed, unless the 

Committee’s Report is submitted to the trial court to support the motion to dismiss. 

AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND 

RECOMMENDATIONS §7.13(e) (1994). In such a circumstance, the Report and 

supporting documentation, including counsel’s written or oral opinion and “related 

legal opinions” must be disclosed to Plaintiffs/Appellees. Id.

The phrase “related legal opinions” is further explained in Comment e

to Section 7.13. The phrase does not mean any legal opinion from any time 

brought to the attention of a special litigation committee. Instead, the phrase 

applies to all other formal legal opinions given to a special litigation committee 

“and pertaining to the same general subject matter” as the committee’s counsel’s 
30

formal opinion. AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE:

ANALYSIS AND RECOMMENDATIONS §7.13 cmt. e (1994). Thus, the legal opinions 

disclosed as a result of the submission of the Committee’s Report to the trial court 

to support the motion to dismiss must be “related” to the opinion of the 

Committee’s counsel in the sense that they pertain to the same general subject 

matter. Presumably, the subject matter of the Committee’s counsel’s opinion is 

whether continuing the current litigation is in the best interests of the nonprofit 

corporations. “This rule is intended to discourage opinion shopping, without 

chilling the [special litigation committee’s] access to confidential legal advice.” Id.

Finally, we caution that the work product doctrine protects the work 

product of the Investigating Committee’s counsel, regardless of the attorney-client 

privilege and any Garner-based exception. AM. LAW INST. PRINCIPLES OF 

CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS §7.13 cmt. f 

(1994). “Thus, counsel’s notes, internal drafts, correspondence with witnesses, and 

similar materials should normally be protected from disclosure under the work 

product doctrine, regardless of the availability of the attorney-client privilege.” Id.

4. Anne Nelson, Former General Counsel

As discussed above, upon remand, the trial court will consider 

whether a Garner-based withholding of the attorney-client privilege is appropriate. 

If it is, Plaintiffs’/Appellees’ discussions with Ms. Nelson would most likely be 

limited to communications that were roughly contemporaneous with the events 

giving rise to the litigation. More particularly, under a Garner-based approach 

discussions would most likely be limited to communications during the 

approximate period from 2009 to Ms. Nelson’s departure as General Counsel in 
31

2012. See AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS 

AND RECOMMENDATIONS §7.13 cmt. e (1994); RESTATEMENT (THIRD) OF THE LAW 

GOVERNING LAWYERS §85 (2000).

As to communications occurring between Ms. Nelson and the 

Investigating Committee or its counsel after the Committee’s formation in 2013, a 

period when Ms. Nelson was no longer General Counsel and therefore not 

obviously involved in providing legal services to either corporation or the 

Investigating Committee, it is hard to see how any new attorney-client privilege 

arises. See Gillard (privilege operates in two-way fashion to protect confidential 

client-to-attorney or attorney-to-client communications made for the purpose of 

obtaining or providing professional legal advice). Just like any other witness, Ms. 

Nelson would be required to keep prior confidences, subject to a potential Garnerbased exception.

E. Fiduciary-Lawyer Communications

The trial court made reference to what it called the fiduciary duty 

exception to the attorney-client privilege. The trial court applied this exception 

despite acknowledging that this case does not involve a trust or beneficiaries. 

Instead, the trial court focused on a fiduciary duty.

Section 84 of the Restatement (Third) of the Law Governing Lawyers, 

titled “Fiduciary-Lawyer Communications,” provides:

In a proceeding in which a trustee of an express 

trust or similar fiduciary is charged with breach of 

fiduciary duties by a beneficiary, a communication 
32

otherwise within § 68 is nonetheless not privileged if the 

communication:

(a) is relevant to the claimed breach; and

(b) was between the trustee and a lawyer (or other 

privileged person within the meaning of § 70) who 

was retained to advise the trustee concerning the 

administration of the trust.

RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §84 (2000). Comment 

a to Section 84 (“Scope and cross-references”), provides that this exception is of 

long standing and was the starting point for recognizing the Garner-based 

exception discussed in Section 85. Restatement (Third) of the Law Governing 

Lawyers §84 cmt. a. (2000). Comment b to Section 84 (“Rationale”), states that 

this exception, unlike the Garner-based exception, does not require the beneficiary 

to show good cause. Restatement (Third) of the Law Governing Lawyers §84 cmt. 

b. (2000).

The Garner Court referenced the fiduciary duty exception to the 

privilege. It struggled, however, to characterize corporate management’s duties as 

being co-extensive with those of a common law trustee. Garner, 430 F.2d at 1101-

02. This was particularly true in describing the duty of corporate management to a 

very minor stockholder. Id. Because we share these concerns, we doubt that a 

broad fiduciary duty exception sufficiently captures the relationships in this 

derivative action, and we hold that a nuanced Garner-based exception is more 

appropriate here.
33

F. Common Interest Exception

The trial court also referenced what it called the common interest 

exception to the privilege, especially with regard to communications involving 

former General Counsel Anne Nelson. Defendants/Appellants argue that the trial 

court conflated the common interest exception, involving two or more persons with 

the same interests represented by different lawyers, with the co-client exception, 

where two or more persons with common interests are represented by the same 

lawyer. Appellants’ Br. at 29-30. Further, Defendants/Appellants assert that the 

elements of the exceptions are not established here. Id.

Section 75 of the Restatement (Third) of the Law Governing Lawyers, 

titled “The Privilege of Co-Clients,” provides:

(1) If two or more persons are jointly represented by the 

same lawyer in a matter, a communication of either coclient that otherwise qualifies as privileged under §§ 68-

72 and relates to matters of common interest is privileged 

as against third persons, and any co-client may invoke 

the privilege, unless it has been waived by the client who 

made the communication. 

(2) Unless the co-clients have agreed otherwise, a 

communication described in Subsection (1) is not 

privileged as between the co-clients in a subsequent 

adverse proceeding between them.

RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §75 (2000) (emphasis 

added).8 Thus, the attorney-client privilege for information shared between co-

 

8

“The Privilege in Common-Interest Arrangements” (also called the Community-ofInterest Privilege), is set forth in Section 76 of the Restatement (Third) of the Law Governing 

Lawyers. This form of the attorney-client privilege, and its corresponding exception, is 

distinguished from the co-client situation in that it involves representation “by separate lawyers.” 

(Footnote continued on next page...)
34

clients arises under subsection (1) in favor of jointly represented persons with a 

common interest, as against third persons. However, subsection (2), sometimes 

referred to as the adverse litigation exception to the privilege, provides that the 

privilege cannot be raised by one co-client against another in subsequent adverse 

proceedings between them. Id.; see In re Teleglobe Commc’ns Corp., 493 F.3d 

345 (3d Cir. 2007). Plaintiffs/Appellees here appear to rely on this exception to 

the privilege.

Although not discussed in the Comments to Section 75 of the 

Restatement (Third), this form of the privilege and its corresponding exception do 

not require that the co-client demonstrate “good cause.” Thus, the common 

interest (or adverse litigation) exception appears to be broader than the Garnerbased exception for derivative litigation. 

As stated in Teleglobe, a leading case on the privilege and the 

exception, when former co-clients sue one another, the default rule is that all 

communications made in the course of the joint representation are discoverable. 

Teleglobe, 493 F.3d at 366 (citing, in part, RESTATEMENT (THIRD) OF THE LAW 

GOVERNING LAWYERS §75(2) (2000)). The rule has two bases: (1) the presumed 

intent of the parties; and, (2) the lawyer’s fiduciary obligation of candor to both 

 

(continued...)

RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §76(1) (2000); see In re Teleglobe 

Commc’ns Corp., 493 F.3d 345 (3d Cir. 2007). Because “separate lawyers” have not been 

identified here, this form of the privilege and exception appears inapplicable. See Teleglobe.
35

parties. Id. (citing RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §75 

cmt. d (2000)).

Two problems arise in applying the privilege and the exception under 

the circumstances here. First, the concept of “common interest” could be

problematic under the facts. As discussed in Teleglobe, once begun, a co-client 

representation generally continues until a client discharges the lawyer or the lawyer 

withdraws. Id. at 362. In addition, numerous courts recognize that the relationship 

may terminate by implication. Id. In particular, a joint representation terminates 

when it becomes clear to all parties that the clients’ legal interests have diverged 

too much to justify using common attorneys. Id.

Addressing what happens when joint representation goes awry, the 

Teleglobe Court went further. The Court acknowledged the difficult problem 

when a joint attorney fails to end the joint representation and instead continues 

representing both clients when their interests become adverse. “In this situation, 

the black-letter law is that when an attorney (improperly) represents two clients 

whose interests are adverse, the communications are privileged against each other 

notwithstanding the lawyer’s misconduct.” Id. at 368 (citing, in part, Eureka Inv. 

Corp. v. Chicago Title Ins. Co., 743 F.2d 932 (D.C. Cir. 1984) (per curiam)). The 

Teleglobe Court explained that “‘[t]he policy behind [the co-client privilege]—to 

encourage openness and cooperation between joint clients—does not apply to 

matters known at the time of communication not to be in the common interest of 

the attorney’s two clients.’” Id. at 368-69 (quoting Eureka, 743 F.2d at 937). In 
36

those circumstances, counsel’s failure to avoid a conflict of interest should not 

deprive the client of the privilege. Id. at 369.

Given the averments in the Complaint, especially those in Paragraphs 

20 to 70, R.R. at 9a to 20a, it is very possible, perhaps likely, that sometime 

between 2009 and February 2013, any legal interests previously shared between 

the individual Plaintiffs/Appellees and the individual Defendants/Appellants had 

diverged too much to be viewed as “common.” Assuming for this point only that 

Plaintiffs/Appellees and Defendants/Appellants were co-clients, between 

themselves and with the corporations, a finding of de facto lack of common 

interest would obscure the legal basis for compelling disclosure of communications 

to and from a corporate attorney.

Second, the concept of “client” causes us to question the trial court’s 

application of the common interest exception here. The parties and the trial court 

agree that the nonprofit corporations are the “clients” entitled to assert any 

attorney-client privilege. The United States Supreme Court, recognizing that 

corporations must act through persons, held in Commodity Futures Trading 

Commission v. Weintraub, 471 U.S. 343 (1985), that control of the privilege 

passes with control of the corporation. See also Teleglobe; Maleski v. Corporate 

Life Ins. Co., 641 A.2d 1 (Pa. Cmwlth. 1994). It appears from averments in the 

Complaint that Defendants/Appellants have prima facie control of the nonprofit 

corporations. Therefore, it is difficult to identify the co-clients of the corporations, 

such as to support application of the common interest (or adverse litigation)

exception to the attorney-client privilege.
37

This is essentially the same approach taken by the Garner Court.

While drawing an analogy to common interest situations, the Court realized the 

conceptual problems and crafted a more targeted exception to the attorney-client 

privilege in cases of derivative litigation. Garner, 430 F.2d at 1103-04.

As a result of all these concerns, we do not believe the common 

interest (or adverse litigation) exception adequately describes the relationship 

between the parties here. Similar to our conclusion with the fiduciary duty 

exception, we hold that a Garner-based exception is more in harmony with the 

current litigation.

VI. Summary

Our collateral order review is limited to the extent the trial court’s 

discovery order may require disclosure of legal opinions and advice otherwise 

privileged under the attorney-client privilege and work product protection. We 

hold that neither the fiduciary duty exception nor the common interest exception 

apply to support the trial court’s broad discovery order. However, there is a 

potential Garner-based exception to the attorney-client privilege which could 

apply, but the trial court first needs to undertake a “good cause” evaluation. We

caution that the breadth of legal advice and opinions potentially discovered under a 

Garner approach may be more confined than that envisioned by the trial court. 

AM. LAW INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND 

RECOMMENDATIONS §7.13 cmt. e (1994); RESTATEMENT (THIRD) OF THE LAW 

GOVERNING LAWYERS §85 (2000). Similarly, we caution that the breadth of legal 

opinions discoverable as a result of the submission to the trial court of the 
38

Investigating Committee’s Report which includes a legal opinion may be more 

restricted than that envisioned by the trial court. AM. LAW INST. PRINCIPLES OF 

CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS §7.13 cmt. e 

(1994). Finally, we caution that the work product doctrine protects the work 

product of the Investigating Committee’s counsel regardless of the availability of 

the attorney-client privilege and a potential Garner-based exception. AM. LAW 

INST. PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND 

RECOMMENDATIONS §7.13 cmt. f.

For all these reasons, we vacate the trial court’s discovery order and 

remand for further proceedings.

 

ROBERT SIMPSON, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Pittsburgh History and Landmarks :

Foundation, a Pennsylvania Non-Profit :

Corporation; Landmarks Financial :

Corporation, a Pennsylvania Non-Profit :

Corporation; Henry P. Hoffstot, Jr.; :

David E. Barensfeld; Peter H. Stephaich;:

Patrick R. Wallace; Alexander Speyer; :

and Henry P. Hoffstot, III :

: No. 113 C.D. 2016 

Arthur P. Ziegler, Jr.; Mark S. Bibro; :

and Jack R. Norris :

:

Pittsburgh History and Landmarks :

Foundation, a Pennsylvania Non-Profit :

Corporation; Landmarks Financial :

Corporation, a Pennsylvania Non-Profit :

Corporation :

 :

Appeal of: Arthur P. Ziegler Jr., Mark S. :

Bibro, Jack R. Norris, Pittsburgh History:

and Landmarks and Foundation :

Landmarks Financial Corporation :

O R D E R

AND NOW, this 21st day of April, 2017, the Order dated September 

18, 2015 and entered on September 21, 2015, is VACATED, and the matter is 

REMANDED for further proceedings.

Jurisdiction is relinquished.

 

ROBERT SIMPSON, Judge