The Pennsylvania Superior Court Concludes Engineering Reports Prepared at the Direction of Corporate Counsel Were Not Protected Communications

The Pennsylvania Superior Court Concludes Engineering Reports Prepared at the Direction of Corporate Counsel Were Not Protected Communications

During the construction of the Revolution Pipeline (the pipeline), a landside occurred, causing the natural gas pipeline to explode, resulting in a fire that caused pollution and property damage to the surrounding area. Cardinal Midstream (Cardinal), a natural gas company, sued Energy Transfer (ETC), alleging that pursuant to a Membership Interest Purchase Agreement (MIPA), ETC breached its contractual obligation to properly construct and maintain the gas pipeline, resulting in Cardinal’s inability to use the pipeline to transfer natural gas, and damages in the amount of $55,000,000. It was also alleged that ETC was contractually bound to tender “earnout” payments to Cardinal if its subsidiaries were ready to use the pipeline and meet certain delivery thresholds.

Pursuant to state and federal laws, ETC was required to retain experts to investigate the cause of the pipeline accident and submit their experts’ findings to government agencies. During the lawsuit, Cardinal requested ETC to produce the experts’ reports. ETC objected to the production of the reports based on Pa.R.C.P. 4003.5(a)(3), which limits the discoverability of facts and opinions held by non-testifying experts retained by a party in anticipation of litigation. As to the Pennsylvania government entities, ETC also sought to have the material in the reports treated as confidential security information under 35 P.S. § 2141.1. As to the federal entity, the reports were designated by ETC as strictly confidential under the Trade Secrets Act, 18 U.S.C. § 1905.

Interestingly, the reports were at issue in two separate civil matters involving ECT and Cardinal’s affiliate, PennEnergy, wherein the Court of Common Pleas of Allegheny County ordered the production of the reports. ETC appealed the court’s decision but settled the case, rendering the appeal moot. PennEnergy was also engaged in an arbitration with ETC, wherein ETC produced the experts’ reports pursuant to the court’s order.

In the instant case, the trial court ruled that any privilege ETC may have had with respect to the reports was waived as to all of ETC’s potential adversaries once the reports were voluntarily disclosed to governmental agencies. See BouSamra v. Excela Health, 210 A.3d 967, 978 (Pa. 2019); Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1429 (3d Cir. 1991). ETC also sought a “claw back” of the subject reports in the other cases so that Cardinal could not use them against ETC in subsequent litigation.

On appeal, the Superior Court determined the discovery order was immediately reviewable pursuant to the collateral order doctrine. See Commonwealth v. Harris, 32 A.3d 243, 248 (Pa. 2011) (“orders overruling claims of privilege and requiring disclosures [are] immediately appealable.”). The Court also found that ETC was not collaterally estopped from asserting a work product privilege in this case despite its prior disclosure of the reports because there was no final adjudication on the merits in the prior PennEnergy cases. See City of Pittsburgh v. Zoning Bd. of Adjustment of City of Pittsburgh, 559 A.2d 896, 901 (Pa. 1989). Furthermore, the Court held that the issue was not moot because a determination could still have a practical effect on the existing controversy. Printed Image of York, Inc. v. Mifflin Press, Ltd., 133 A.3d 55, 59 (Pa. Super. 2016).

Regarding the merits, the Court concluded that ETC was required to prepare and disclose the experts’ reports to governmental agencies; therefore, ETC did not retain its experts or commission their reports “in anticipation of litigation or preparation for trial” under Rule 4003.5(a)(3). See e.g., Miller v. Brass Rail Tavern, 664 A.2d 525, 531–32 (Pa. 1995) (holding that, because county coroner formed opinions as to time of death and cause of death in the performance of his official duties, these opinions “were not acquired or developed with an eye toward litigation, [and so] Rule 4003.5 is inapplicable[.]”); see also Ziegler v. Easton Suburban Water Auth., 43 A.3d 553, 558 (Pa. Cmwlth. 2012) (same): Jahanshahi v. Centura Dev. Co., Inc., 816 A.2d 1179 (Pa. Super. 2003) (same).

Cardinal Midstream II, LLC, et al v. Energy Transfer LP, 2023 PA Super 84 (Pa.Super 2023)