Megan A. Bershefsky

Plaintiffs sued Duane Morris, alleging legal malpractice and breach of fiduciary duty relating to a disputed 2020 settlement agreement in an underlying matter, resulting in subsequent proceedings to enforce the settlement agreement. Plaintiffs are seeking approximately $2.3 million in attorneys’ fees and costs spent defending the subsequent proceedings. A discovery dispute in this matter concerning settlement communications as evidence of proximate cause is currently before the Superior Court—this is the trial court’s opinion holding that the evidence sought was discoverable.

Briefly, plaintiffs claim that they did not agree to the settlement in the underlying matter. Duane Morris, on the other hand, asserted that the plaintiffs failed to comply with the settlement agreement and thus, the defense expenses were self-inflicted. Accordingly, Duane Morris filed a motion to compel discovery related to contributory negligence and proximate causation, including communications between the plaintiffs and their subsequent counsel. After a hearing, the court granted the motion, and later denied the plaintiffs’ motion for reconsideration. Plaintiffs then filed an interlocutory appeal.

Plaintiffs asserted on appeal that the trial court erred in compelling plaintiffs to produce documents protected by the attorney-client privilege and/or the work product doctrine; by determining that there was an “at-issue” waiver of privilege without a showing that the plaintiffs affirmatively asserted their state of mind; and by requiring production despite the lack of statutory exception.

In its opinion, the trial court noted that, under Pennsylvania Rule of Evidence 408, evidence of settlement negotiations is inadmissible for certain purposes (such as to prove the validity or amount of a disputed claim), but could be admitted for another purpose, and does not prevent discovery of otherwise discoverable evidence. The court explained that the plaintiffs needed to establish proximate cause—that, but for the purportedly fraudulent settlement, plaintiffs would ultimately not have incurred the attorney fees associated with that the second action. The court determined that communications between the plaintiffs and their counsel regarding their objectives and their reasons for defending against the subsequent actions may be relevant and discoverable if, for example, they involved a strategic choice not to comply with the settlement agreement.

Likewise, the court determined that there was an “at-issue” waiver of attorney-client privilege because those communications were at issue—in order to allow Duane Morris to raise a defense as to proximate cause and damages, discovery on plaintiffs’ reasons for defending against the subsequent lawsuits and the reasonableness of the defense costs incurred by plaintiffs was permissible. The court was persuaded by Duane Morris’s citations to other jurisdictions to support the view that a malpractice plaintiff places communications about causation at issue by seeking to recover subsequent attorneys’ fees.

Finally, the plaintiffs/appellants also raised a public policy argument: that the court’s order would mean that clients seeking advice of counsel must be wary about the confidentiality because they may later be found to have unwittingly waived the privilege if they later bring a suit in which those communications are requested in discovery. The court rejected this argument because plaintiffs/appellants introduced the issue of the fees, and therefore should expect that the necessity and extent of the fees and costs would then be at issue.