Transcript ILLINOIS ATTORNEY * CLIENT PRIVILEGE

BY:
Donald Patrick Eckler
Paul J. Stroka
James J. Sipchen
Date: June 25, 2010



These issues effect all of our practices, corporate
entities in which we deal with, irrespective of
what side of the case we are on.
Any case involving corporate entities, current
employees, former employees, or multiple
defendants implicates these issues.
Opportunity to take advantage of opposing
counsel that is not aware of these issues and
better protect our client.

The general rule with respect to discovery in Illinois is
stated in the heading to Supreme Court Rule 201(b)(1): “Full
disclosure required.” In Illinois the assertion of privilege is
governed by Supreme Court Rule 201(b)(2), which in
relevant part states:
All matters that are privileged against disclosure on the
trial, including privileged communications between a
party or his agent and the attorney for the party, are
privileged against disclosure through any discovery
procedure. Material prepared by or for a party in
preparation for trial is subject to discovery only if it
does not contain or disclose the theories, mental
impressions, or litigation plans of the party’s attorney.


It is a well established principal under Illinois law that the
assertion of a privilege is the exception; not the rule. See
Golminas v. Fred Teitelbaum Const. Co., 112 Ill.App.2d 445,
448-449 (2nd Dist. 1969); [Waste Management, Inc. v. Int’l
Surplus Supply Lines Ins. Co., 144 Ill.2d 178, 190 (1991)].
(“[I]n Illinois we adhere to a strong policy of encouraging
disclosure, with an eye toward ascertaining the truth which is
essential to the proper disposition of a lawsuit.” )
Privileges are strongly disfavored under Illinois law. In re
Marriage of Daniels, 240 Ill.App.3d 314, 324-25 (1st Dist.
1992).
Footnote: That is not to say, however, that Illinois courts have not found privileges that exist and
which can be protected beyond those referred to in SCR 201(b)(2). See People v. Ryan,
30 Ill.2d 456 (1964). (Finding that an insurer-insured privilege exists); FMC Corp. v.
Liberty Mutual Ins. Corp., 236 Ill.App.3d 355 (1st Dist. 1992) (finding that an accountantclient privilege exists based on state statute).
 Accordingly,
Illinois
courts
narrowly
construe assertions of attorney-client
privilege and the work-product doctrine.
Archer Daniels Midland Co. v. Koppers Co.,
Inc., 138 Ill.App.3d 276, 278 (1st Dist. 1985).
 Finally,
the party who asserts the privilege
has the burden of showing the facts that give
rise to the privilege. Claxton v. Thackston,
201 Ill.App.3d 232, 234 (1st Dist. 1990).


The attorney-client privilege is designed to
protect from discovery documents which reflect
communications made in confidence between
lawyer and client. Shapo v. Tires N’ Tracks, Inc.,
336 Ill.App.3d 387, 393 (1st Dist. 2002).
To be entitled to the protection of the attorney-client
privilege, a claimant must show that the statement
originated in confidence that it would not be disclosed,
was made to an attorney acting in his legal capacity for
the purpose of securing legal advice or services, and
remained confidential. Rounds v. Jackson Park
Hosp., 319 Ill.App.3d 280, 285-86 (1st Dist. 2001).


Not every disclosure from client to attorney is entitled to
protection from discovery. The attorney-client privilege
protects only those disclosures necessary to obtain
informed legal advice which might not have been made
absent the privilege. Cangelosi v. Capasso, 366 Ill.App.3d
225, 228-29 (2nd Dist. 2006).
Furthermore, the attorney-client privilege does not protect
communications primarily regarding business advice. CNR
Inv., Inc. v. Jefferson Trust & Sav. Bank., 115 Ill.App.3d 1071,
1076 (3rd Dist. 1983). Thus, for the privilege to apply, the
confidential communications must be primarily legal in
nature.


The work product doctrine protects “material
prepared by or for a party in preparation for
trial” that contains “theories, mental impressions,
or litigation plans of the party’s attorney.” See Ill.
Sup. Ct. Rule 201(b)(2).
Materials are protected if they are prepared for
any litigation or trial as long as they were
prepared by or for a party to the subsequent
litigation. Fischel & Kahn, Ltd v. van Straaten
Gallery, Inc. 189 Ill.2d 579, 591 (2000).


What constitutes “work product” under Illinois Rules is
narrower than what is protected from discovery in the
federal system. Milynarski v. Rush-Presbyterian St. Lukes Med.
Ctr., 213 Ill.App.3d 427, 432 (1st Dist. 1991).
Illinois only protects “opinion work product,” i.e., matter
which discloses the theories, mental impressions or
litigation plans of a party’s attorney. Id. Examples of
documents prepared “in preparation for trial” include:
Memoranda made by counsel of his impression of a prospective witness,
as distinguished from verbatim statements of such witness, trial briefs,
documents revealing a particular marshaling of the evidentiary facts for
presentment at the trial, and similar documents which reveal the
attorney's ‘mental processes' in shaping his theory of his client's cause.
Monier v. Chamberlain, 35 Ill.2d 351, 359-60 (1966).
 Generally,
where there is a mixture of
unprivileged factual material and protected
opinion work product such as “attorneys’
notes and memoranda of oral conversations
with witnesses or employees” then these are
not routinely discoverable unless the party
seeking discovery can show that “it is
absolutely impossible to secure the factual
information from other sources.” Mlynarski,
213 Ill.App.3d at 433.

With respect to corporate entities, Illinois employs a version of the
control group test. Consolidation Coal Co. v. Bucyrus-Erie Co., 89
Ill.2d 103, 118-19 (1982). Under the Illinois formulation of the
control group test, the following analysis applies:
As a practical matter, the only communications that are
ordinarily held privileged under this test are those made by
top management who have the ability to make a final
decision rather than those made by employees those
positions are merely advisory. We believe that an
employee whose advisory role to top management in a
particular area is such that a decision would not normally
be made without his advice or opinion, and whose opinion in
fact forms the basis of any final decision by those with actual
authority, is properly within the control group. However, the
individuals upon whom he may rely for supplying
information are not members of the control group.



The control group test adopted by the Illinois courts
directly opposes the United States Supreme Court’s
ruling in Upjohn Co. v. United States, 449 U.S. 383
(1981).
In Upjohn, the United States Supreme Court rejected
the control group test holding that the test “frustrates
the very purpose of the privilege by discouraging
communication of relevant information.” Id. at 392.
Specifically, the Court concluded that the privilege
can extend to any employee who communicates with
counsel at the direction of her superiors, regarding
matters within the scope of her duties. Id. at 394.


The Illinois Supreme Court has refused to follow Upjohn and
continues to adhere to the more limited control group test
because it believes that the control group test “strike[s] a
reasonable balance by protecting consultations with counsel
by those who are the decision makers or those who
substantially influence corporate decisions and by
minimizing the amount of relevant factual material which is
immune from discovery.” Consolidation Coal, 89 Ill.2d at
118-119.
The Illinois Supreme Court’s emphasis on the disclosure of
relevant information was paramount to its decision, while the
United States Supreme Court’s ruling rested on its desire for
communication. This difference in approach is telling and
instructive for the following analysis.


The threshold consideration is to determine whether an
individual is a member of the control group.
Under Consolidation Coal, a person is deemed within
the control group if: (1) the agent served as an advisor
to top management of the corporate client; (2) this
advisory role was such that the corporate principal
would not normally have made a decision without the
agent's advice; and (3) the agent's opinion or advice in
fact formed the basis of the final decision made by
those with actual authority within the corporate
principal.
Archer Daniels Midland Company, 138
Ill.App.3d at 279-280.


In addition, merely because an employee supplies information or
facts to top management, that does not place that individual in the
control group. Id. The rule under Illinois law is such that with
respect to some issues an individual may be in the control group,
but with respect to others that same individual may not be in the
control group.
In order to determine who is and who is not in control group
Illinois courts have looked at the role that the individual played in
the organization and not that individual’s title. In Knief v. Sotos, 181
Ill.App.3d 959, 964 (2nd Dist. 1989), the court held that a head
waitress and a bar manager were not in the control group with
respect to litigation decisions, and therefore, those individuals’
communications with counsel representing the restaurant/bar
were not protected from disclosure.


In order meet the burden of establishing that an individual is
in the control group the proponent of the privilege must
supply facts to establish the basis for the assertion. In
Midwesco-Paschen Joint Venture for Viking Projects v. Imo
Industries, 265 Ill.App.3d 654 (1st Dist. 1994), the court
considered the claim that a field service manager in charge
of an allegedly defective product sold to plaintiff was in the
control group.
The court found that the manager was a member of the
control group based on testimony which established that the
manager had direct managerial responsibility over the
subject product, and that advice from that manager was
obtained with respect to liability for the subject product. Id.
at 663; see also Mlynarski, 213 Ill.App.3d at 431-432.


The courts of the State of Illinois have not
addressed the issue of whether communications
with a former employee of a corporation who was
previously in the control group are protected
under the attorney-client privilege.
However, a number of cases from other
jurisdictions have addressed this issue and have
come to varying conclusions. Not surprisingly,
many of these cases discuss the issue within the
framework of Upjohn since that decision represents
the majority view.
 Although
Illinois applies the control group
test, these cases remain instructive since the
type of relationship which is necessary to
create the privilege in the first instance
(whether arising under Upjohn or under the
control group test) is an independent and
separate question from whether (and/or to
what extent) that privilege continues to
apply to discussions with corporate counsel
post-employment.
 In
one line of cases, the courts have held
that corporate counsel’s discussions with
a former employee remained privileged
under Upjohn insofar as the subject matter
of those conversations concerned the
duties of the former employee during his
tenure with the corporation. Miramar
Construction Co. v. The Home Depot, Inc.,
167 F.Supp 2d 182, 185 (D. P.R. 2001).

In Miramar, a former employee was designated
as the corporate representative for the litigation.
The Court concluded that the attorney-client
privilege did indeed encompass him. It noted
that a number of cases have held that the
attorney-client
privilege
applies
to
communications
with
former
employees.
Miramar, 167 F.Supp.2d at 185, citing, In re
Coordinated Pretrial Proceedings in Petroleum
Products Antitrust Litigation, 658 F.2d 1355, 1361,
n. 7 (9th Cir. 1981); Command Transport, Inc. v. Y.S.
Line (USA) Corp., 116 F.R.D. 94, 96 (D. Mass. 1987).


Similarly, in Peralta v. Cendant Corp., 190 F.R.D. 38, 41 (D.Conn.
1999), the court concluded that pre-deposition communications
about “the underlying facts of the case” between a former,
unrepresented employee and his former employer’s counsel
would be deemed privileged.
However, any communications between the former employer’s
attorney and the former employee which went beyond the
deponent’s knowledge of the circumstances of plaintiff’s
employment and inquired into other activities, were not subject to
any privilege. For example, if the attorney for the employer
informed the deponent of facts developed during the litigation,
such as testimony of other witnesses of which the deponent did
not have prior or independent personal knowledge, those
communications would not be privileged.
 In
a second line of cases, courts have extended
the privilege to communications with former
employees, but not as far as cases such as
Miramar and Peralta.

In Infosystems, Inc. v. Ceridian Corp., 197 F.R.D. 303,
306 (E.D.Mich. 2000), the court extended the
privilege to former employees, but limited it to
communications which themselves were privileged
and which occurred during the employment
relationship.
 The
Infosystems court explained that the
willingness of former employees to
provide
information
is
generally
unrelated to directions from former
corporate superiors and, therefore,
“counsel’s communications with a former
employee of the client corporation
generally should be treated no
differently from communications with any
other third-party fact witness.”

In a third related line of cases, Judge Holderman found that
the attorney-client privilege does not extend to
communications with former employees. See Barrett Indus.
Trucks, Inc. v. Old Republic Ins. Co., 129 F.R.D. 515 (N.D.Ill.
1990); Clark Equip. Co. v. Lift Parts Mfg. Co., 1985 U.S. Dist.
LEXIS 15457 (N.D. Ill.). Clark held that:
Former employees are not the client. They share no
identity of interest in the outcome of the litigation. Their
willingness to provide information is unrelated to the
directions of their
former corporate superiors, and
they have no duty to their former
employer
to
provide such information. It is virtually impossible to
distinguish the position of a former employee from any
other party who might have pertinent information about
one or more corporate parties to a lawsuit.


The closest that the Illinois courts have come to addressing
the application of attorney-client privilege to former
employees is SPPS, Inc. v. Carnhan-Walsh, 267 Ill.App.3d 586,
592 (1st Dist, 1992).
SPPS, Inc. involved a motion by the plaintiff corporation
(SPPS) to disqualify counsel representing the defendants.
The defendants were former officers and board members of
the company who were participating in statutory appraisal
proceedings to determine the fair value of their shares.
SPSS claimed that its former corporate attorney had
disclosed confidential information to the defendants
relating to the matters at issue.



The Illinois Appellate Court relied upon Gottlieb v.
Wiles, 143 F.R.D. 241, 246-47 (D. Colo. 1992) in its ruling.
In Gottlieb, the court addressed a situation where a
former chief executive and chairman of the board of a
corporation to which he was now adverse refused the
former executive access to documents which would
have been available to the former executive at the time
he was in those positions with his former company.
The Gottlieb court found that the documents which the
former executive could have seen while he was in the
control group could not be restricted from disclosure.
 The
doctrine goes by many names: the
common interest doctrine, the joint defense
privilege, the joint defense doctrine.
 The
joint defense privilege, more properly
identified as the “common interest rule,” has
been described as “an extension of the
attorney client privilege.” U.S. v. Schwimmer,
892 F.2d 237, 243 (2nd Cir. 1989) citing Waller
v. Fin. Corp. of Am., 828 F.2d 579, 583 n. 7 (9th
Cir.1987).

The common interest rule serves to protect the
confidentiality of communications passing from
one party to the attorney for another party where
a joint defense effort or strategy has been
decided upon and undertaken by the parties and
their respective counsels. Id.
Only those
communications made in the course of an
ongoing common enterprise and intended to
further the enterprise are protected, even if the
other attorney represents a client with some
adverse interests. Eisenberg v. Gagnon, 766 F.2d
770, 787 (3d Cir. 1985).
 The
common interest must be more than
a mere business or similar interest, it
must be a legal and identical interest.
Dexia Credit Local v. Rogan, 231 F.R.D. 287
(N.D.Ill. 2005).
 Illinois
courts recognize the existence of
the “common interest doctrine” but have
only addressed the doctrine on a few
occasions. See Waste Mgmt., 144 Ill.2d at
178; Western State Ins. Co. v. O’Hara, 357
Ill.App.3d 509 (4th Dist. 2005); Allianz Ins.
Co. v. Guidant Corp., 373 Ill.App.3d 652
(2nd Dist. 2007).



It is important to note that no Illinois case has
addressed the “common interest doctrine”.
There was a presentation on this issue at the recent
IADTC conference advocating the use of the
doctrine. I am far more skeptical of its viability
given the tendency of Illinois courts to narrowly
construe privileges.
Fortunately, or unfortunately, much of the law on
this issue has been made in the Northern District of
Illinois.

The courts have not explicitly defined what is
sufficient to create a common legal interest as
opposed to a common business interest. However,
there is a strong suggestion in the case law that
when the parties are negotiating a merger
agreement they are adverse and have inconsistent
interests. See Oak Indus. v. Zenith Indus., 1988 WL
79614 (N.D. Ill. 1988); Baxter Travenol Laboratories v.
Abbott Laboratories, 1987 WL 12919 (N.D.Ill. 1987).
 The
law seems to suggest that after a merger
agreement is consummated an argument can
be made that the interests between the parties
become legal. In re JP Morgan Chase & Co.
Securities Litigation, 2007 WL 2363311 (N.D. Ill.
2007).
 The
most recent case from the Northern District
is In re JP Morgan Chase & Co. Securities
Litigation, 2007 WL 2363311 (N.D.Ill. 2007). In JP
Morgan, a plaintiff and putative class
representative brought an action for violation of
section 14(a) of the Securities and Exchange
Act. Specifically the plaintiff alleged that JP
Morgan breached its duty to its shareholders
during the course of its merger with Bank One.


The court held that the shared pre-merger documents were
not privileged and ordered that documents shared before
the signing of the merger agreement be disclosed. JP
Morgan 2007 WL 2363311, *5. However, the court ruled that
the communications after the signing of the merger were
protected from disclosure.
The court stated that the privilege did not attach to
documents shared prior to the merger because the entities’
interests were in conflict as “each company wanted to get
the best deal from the other company, and to the extent that
one succeeded in its goal, the other suffered.” Id. at *6, see
also Tenneco Packaging Specialty and Consumer Products,
Inc. v. S.C. Johnson & Son, Inc. 1999 WL 754748 (N.D. Ill 1999).


For further support of the existence of the common interest
doctrine in the Northern District of Illinois see Baxter Travenol
Laboratories v. Abbott Laboratories, 1987 WL 12919 (N.D.Ill. 1987)
(holding that an opinion letter relating to the validity of patents to
be developed by Baxter pursuant to a licensing agreement was
sufficiently encompassed by the common interest doctrine to
protect its disclosure to Abbott.) The court held that:
Although a community of legal interest usually arises between
parties engaged in or anticipating imminent litigation, litigation or
impending litigation is not a prerequisite for the existence of a
community of legal interests; corporations seek legal advice in
order to plan their conduct and avoid litigation as well as to deal
with present or imminent litigation, and a community of legal
interest may arise in the former situation as well as the latter. Id. at
*1.



This holding conflicts with that of Oak Indus. v. Zenith Indus., 1988
WL 79614 (N.D. Ill. 1988). The court in Oak Industries addressed
whether, in a patent infringement lawsuit, Zenith could effectively
assert a privilege for furnishing an opinion letter on the patent
with potential buyers during negotiations for the sale of its
consumer electronics business.
The Oak Industries court held that Zenith could not assert
privilege, finding that there was no common interest between the
potential buyers and Zenith and thus the disclosure constituted a
waiver.
The Oak Industries court, in finding that Zenith had waived the
privilege, recognized that its holding was contrary to a case with
very similar facts, Hewlett-Packard v. Bausch & Lomb, 115 F.R.D. 308
(N.D. Cal. 1987).


In Hewlett-Packard, [a patent infringement case] like Oak
Industries, defendant sought protection for the opinion letter of its
patent counsel which had been disclosed to a potential buyer.
Hewlett-Packard 115 F.R.D. at 309. The defendant asserted that it
disclosed the document to the potential buyer in anticipation of
litigation and citied Union Carbide v. Dow Chemical, 619 F.Supp.
1036 (Del.Ch. 1985) in support. Id. at 309-10.
The Hewlett-Packard court struggled with what was a “common
legal interest” and what was meant by to “anticipate joint
litigation” as defined by the Union Carbide court. Id. The court
found that even though the transaction which prompted the
disclosure was not consummated, that the disclosure was in
anticipation of joint litigation and protected by the common
interest doctrine. Id.


In Blanchard v. Edgemark Fin. Corp., 192 F.R.D. 233
(N.D.Ill. 2000). A securities fraud case, Edgemark
sought to protect from disclosure documents it had
forwarded Old Kent during the merger of the two
entities.
In addition to sending the documents to Old Kent,
Edgemark also sent the documents to its investment
banker at Donaldson, Lufkin, and Jenrette. Blanchard
192 F.R.D. at 236. As a result, the court found that the
privilege was vitiated because of the disclosure of
document to a third party not in a common interest with
the parties to the merger. Id. at 237


The Blanchard court reasoned that because the
interest in disclosing the documents to the
investment bank was merely financial, and not
legal, the privilege was waived as to the disclosed
documents.
Id; See also, Stenovich v. Wachtell,
Lipton, Rosen, Katz, 756 N.Y.S.2d 367 (2003).
It is important to note that the court decided the
issue without addressing whether the documents
themselves were privileged, because the purpose
for the disclosure of the documents to the
investment banker made constituted a waiver. Id.
at 236.


In American Legacy Foundation v. Lorillard Tobacco Co., 2004
WL 2521289 (Del.Ch. 2004), the court was faced with a
situation where in anticipation of litigation, American Legacy
entered into an agreement with its advertising agency,
Arnold. American Legacy was created by the 1999 Master
Settlement Agreement between 46 state attorneys general
and the five major tobacco companies. American Legacy,
2004 WL 2521589, *1 (Del.Ch. 2004).
In anticipation that one or all of the tobacco companies
would bring suit for the advertising seeking to discourage
youth smoking, American Legacy entered into a joint
defense agreement with Arnold. American Legacy, 2004 WL
2521589 at *3.
 See
also Rayman v. American Charter Fed. Sav. &
Loan Association, 148 F.R.D. 647 (D. Neb. 1993);
Cavallaro v. United States, 153 F. Supp.2d 52 (D.
Mass. 2001).
 In
its analysis of the documents over which the
privilege was asserted, the court reasoned that
because they were letters containing defense
counsel’s analysis of the case, present posture,
costs anticipated, and expenses incurred, they
were protected from disclosure. Id. at 655.

In order to assert the privilege over the documents
and conversations sought to be protected the
following actions should be considered:
1.
To the extent possible, communications
should be between counsel for the parties.
U.S. v. Schwimmer, 892 F.2d 237, 243 (2nd
Cir. 1989). To the extent necessary, any
communications between counsel of one
party and representatives of the other that
are not parties must be with individuals in
the other parties’ control group as
defined by Illinois law. Consolidation, 89
Ill. 2d at 118-19;
2. All communications should be related to legal
advice being sought for the common goal of
prevailing in the instant litigation, a legal objective
common to the parties and that also effectuates the
common business interests of the parties. People v.
Adam, 51 Ill. 2d 46 (1972);
3. No individuals beyond the counsel for the
parties and the members of the control group for
both parties should be the intended or actual
recipients of any materials for which the attorneyclient privilege or work product doctrine will be
asserted. Consolidation, 89 Ill. 2d at 115-16; Adam, 51
Ill. 2d at 48;
4. No verbatim statements of potential
witnesses should be made, rather, should only
make memoranda including the attorneys’
impressions of the witnesses testimony and
potential appearance as a witness. The Illinois
courts have created a very limited exception to
the work-product doctrine for “rare instances”
in which memoranda with attorneys’ notes may
be obtained even when those notes
intermingle statements of witnesses and
impressions of counsel. See Consolidation 89
Ill.2d at 111-10;
5. The joint defense agreement should
contain language affirming the special
relationship created in the merger agreement
and specifically identifying that preparation for
this litigation relates to the common legal
interests of the entities;
6. Any agreement should make clear that the
agreement is being entered into for the purposes of
this litigation and for protecting the communications
between the parties and their counsel. See American
Legacy, 2004 WL 2521589, at *4;
7. There must be substantial procedures in place
for any documents that are exchanged between the
parties to preclude their disclosure to individuals not
entitled to the confidential documents. See Tenneco
Packaging Specialty and Consumer Products, Inc. v.
S.C. Johnson & Son, Inc. 1999 WL 754748 (N.D. Ill 1999);
8. To the extent possible, communications in
preparation of witnesses of one party by counsel for
the other should be done without a written work
product of those discussions.
See Rayman v.
American Charter Fed. Sav. & Loan Association, 148
F.R.D. 647 (D.Neb. 1993);
9. Any documents exchanged should be vetted to
determine if their protection from disclosure
provides an unfair advantage to one of the parties in
the litigation. See Rayman v. American Charter Fed.
Sav. & Loan Association, 148 F.R.D. 647 (D.Neb. 1993);
Hewlett-Packard v. Bausch & Lomb, 115 F.R.D. 308
(N.D.Cal. 1987)
10. A confidentiality agreement should be
executed by each individual who is to be party
to the communications or to receive the
documents sought to be protected under the
“common interest.” See Tenneco Packaging
Specialty and Consumer Products, Inc. v. S.C.
Johnson & Son, Inc. 1999 WL 754748 (N.D. Ill
1999).


Despite the strictures of Illinois law regarding the
application of privileges to the precluding of the
disclosure of documents, an agreement can be crafted
and actions taken that can provide the factual and legal
basis to defeat the requests for certain documents and
communications with certain individuals.
The key to the assertion of the privilege will be the
joint defense agreement. Under Illinois law, the special
relationship is what may confer the application of the
“common interest doctrine” status to the relationship
between the parties, and it is the formalities in the
contacts between the parties’ lawyers that will reinforce
the efficacy of the agreement.