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FOR YOUR EASE ONLY, INC. v. CALGON CARBON CORPORATION

April 24, 2003

FOR YOUR EASE ONLY, INC., PLAINTIFF,
v.
CALGON CARBON CORPORATION AND PRODUCT CONCEPTS COMPANY AND MARK SCHNEIDER DEFENDANTS. CALGON CARBON CORPORATION COUNTERCLAIM PLAINTIFF, V. FOR YOUR EASE ONLY, INC. AND LORI GREINER COUNTERCLAIM DEFENDANTS.



The opinion of the court was delivered by: Nan R. Nolan, United States Magistrate Judge.

MEMORANDUM OPINION AND ORDER

Plaintiff For Your Ease Only, Inc. ("FYEO") seeks, among other things, a declaratory judgment that it is not infringing U.S. Patent No. 6,412,628 held by defendant Calgon Carbon Corporation ("Calgon"), or alternatively that the patent is invalid. FYEO also has claims for tortious interference and unfair competition based on statements allegedly made to FYEO's largest customer by Calgon and defendant Mark Schneider. FYEO now seeks to compel the production of documents withheld by Calgon on the grounds of privilege. FYEO's motion is granted in part, denied in part, and reserved in part.

DISCUSSION

A document is protected by the attorney-client privilege when: 1) legal advice of any kind is sought 2) from a professional legal adviser in his capacity as such, 3) the communications relating to that purpose, 4) made in confidence, 5) by the client, 6) are at his instance permanently protected 7) from disclosure by himself or the legal adviser, 8) except the protection may be waived. United States v. White, 950 F.2d 426, 430 (7th Cir. 1991). A document may be protected by the work-product privilege if it is created by an attorney "in anticipation of litigation." Fed.R.Civ.P. 26(b)(3); Logan v. Commercial Union Ins. Co., 96 F.3d 971, 976 (7th Cir. 1996). An assertion of work-product privilege may be overcome upon a showing of substantial need, but the courts are cautioned to give even greater protection to attorney opinions which include mental impressions, conclusions, or legal theories concerning the prospective litigation. Id. at 976, n. 4. A party that refuses to disclose information based on a claim of privilege bears the burden of establishing that the privilege applies. In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir. 2000) (attorney-client privilege); Holmes v. Pension Plan of Bethlehem Steel Corp., 213 F.3d 124, 138 (3d Cir. 2000) (work product doctrine).

FYEO raises three main arguments in support of its motion to compel: (1) factual information withheld by Calgon is not privileged; (2) documents disclosed to a third party outside of Calgon cannot be withheld under a claim of attorney-client privilege; and (3) a prima facie case of fraud exists which justifies — piercing the attorney-client privilege. The Court addresses each argument in turn.

I. Factual Information

FYEO first argues that Document Categories P and GG in Exhibit 1 of the declaration of Deakin T. Lauer which are being withheld by Calgon appear to reflect testing performed on FYEO's products. FYEO states that the parties previously agreed to exchange test results. The privilege log produced by Calgon indicates that the subject matter of the withheld documents is as follows: 1) "test results re: potential infringement of '628 patent by Silver Safekeeper Jewelry Box (QVC #H33954)" and 2) "Email re: testing on potential infringement of '628 patent by Silver Safekeeper Jewelry Boxes (QVC #H53761; QVC #H54187; QVC #H60943; QVC #H63704; QVC #54900; and QVC #33954)." Calgon claims that the attorney-client and work-product privileges protect these documents from disclosure. Calgon also states that it has produced all underlying factual information that is currently relevant to this case, including information related to the accused FYEO products that have been recently added to Calgon's counterclaim of infringement.

Based on the privilege log, it appears that the documents in question were authored by counsel and sent to Calgon employees or authored by Calgon employees and sent to counsel and/or other Calgon employees. However, the description of each document and its contents are not sufficiently detailed to allow the Court to determine whether the elements of attorney-client privilege or work product doctrine have been established. For example, the Court cannot determine whether the communications were confidential and made for the purpose of obtaining or providing legal advice. The Court is also unable to determine from the descriptions whether the documents were created by an attorney in anticipation of litigation. Accordingly, it is necessary for the Court to conduct an in camera review of the documents contained in Categories P and GG in Exhibit 1 of Lauer's declaration to determine whether the documents are protected from disclosure by the privileges asserted. Calgon is directed to submit these documents to the Court by April 30, 2003.

Moreover, Calgon does not contest FYEO's assertion that the parties agreed to exchange test results. Test results are not privileged. "The [attorney-client] privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney[.]" UpJohn Co. v. United States, 449 U.S. 383, 395 (1981). FYEO is entitled to discover the underlying test results which are the subject of the documents in question. Calgon is directed to produce any previously undisclosed test results which are the subject of these documents.

II. Disclosure of Documents to Mark Schneider

FYEO next seeks to compel withheld documents identified as Document Categories C, D, E, F, N, Q, S, T, U, V, and W which have been distributed to Calgon's co-defendant Mark Schneider ("Schneider"). Calgon asserts that the joint defense and/or community of interest privileges protect these documents from disclosure. FYEO maintains that the joint defense or common interest privilege does not apply and the disclosure of these documents to Schneider waives any claim of privilege that Calgon may have had with respect to these documents.

"The general rule is that material which is otherwise privileged is discoverable if it has been disclosed to a third party." Allendale Mut. Ins. Co. v. Bull Data Sys., 152 F.R.D. 132, 139 (N.E. Ill. 1993). An exception to this rule applies when a third party shares a common interest with the disclosing party which is adverse to that of the party seeking discovery. Id. at 140. This exception is known as the common interest or joint defense doctrine. The "common interest" or "joint defense" doctrine "generally allows a defendant to assert the attorney-client privilege to protect his statements made in confidence not only to his own lawyer, but to an attorney for a co-defendant for a common purpose related to the defense of both." United States v. Evans, 113 F.3d 1457, 1467 (7th Cir. 1997) (internal quotations and citations omitted). To maintain the privilege, the common interest must relate to a litigation interest, and not merely a common business interest. Medcom Holding Co. v. Baxter Travenol Labs., Inc., 689 F. Supp. 841, 845 (N.D. Ill. 1988). The burden of demonstrating the existence of a joint defense agreement falls on the person claiming it. Ocean Atlantic Development Corp. v. Willow Tree Farm, 2002 WL 649043, *5 (N.D. Ill. April 19, 2002).

Calgon has produced a joint defense agreement executed March 6, 2003. The agreement states an effective date of October 11, 2002, the date that the present action was initiated. The agreement also states that "the parties have previously agreed generally to proceed with a joint defense effort in connection with" this litigation.

FYEO contends that communications before October 11, 2002, the effective date of the agreement, are not shielded from disclosure by the joint defense privilege. In its Opposition, Calgon claims that this agreement memorializes a verbal understanding between Calgon, Product Concepts Company ("PCC"), and Schneider that existed since before this litigation began. The agreement states that it covers all privileged information exchanged or communicated between the parties or their attorneys in the past or future in connection with the joint defense efforts. Calgon also explains that its current litigation counsel represented PCC and Schneider regarding this dispute before the filing of the lawsuit.

Communications before October 11, 2002 are discoverable. The agreement explicitly states an effective date of October 11, 2002. Moreover, Calgon has not cited any authority indicating that its current counsel's previous representation of PCC and Schneider shields shared communications from disclosure without evidence of the existence of a joint defense agreement prior to October 11, 2002. Calgon bears the burden of demonstrating the existence of a joint defense agreement prior to October 11, 2002, and it has not meet that burden. Thus, communications before October 11, 2002 are not protected from disclosure and must be produced.

FYEO contends that Calgon has not provided any declarations that a joint defense privilege was created prior to March 6, 2003. The Court concludes that Calgon has met its burden of demonstrating that a joint defense privilege existed between October 11, 2002 and March 6, 2003. The agreement states an effective date of October 11, 2002. The agreement further states that the parties had agreed generally to proceed with a joint defense effort in connection with this litigation and were merely memorializing that prior agreement on March 6, 2003. The Court has no reason to doubt this statement. FYEO has not cited any authority indicating that affidavits and declarations by Calgon are necessary to meet its burden where a written agreement signed by both parties exists.

FYEO also argues that with respect to communications that were exchanged between October 11, 2002 and March 6, 2003, Calgon has not produced evidence that the parties took any steps to ensure that those communications between them would remain confidential. With respect to confidentiality, the terms of the agreement establish that the parties took steps to ensure the confidentiality of exchanged communications. For example, the agreement explicitly provides that all privileged information exchanged or communicated between the parties or their attorneys will be "held in strict confidence." Agreement ¶ 4. The agreement also states that each party agrees to take reasonable measures to "safeguard the confidentiality" of such information. Id. ¶ 5. The agreement provides that such information has been communicated by the parties to their attorneys "in confidence." Id. ¶ 6. Finally, the agreement makes clear that neither party may use the other party's confidential information for any purpose other than the defense of the litigation without the written consent of the other party or an order from a court declaring that such information is not subject to a valid claim of privilege. Id. ¶ 12.

FYEO also argues that Calgon and Schneider do not have the requisite identity of interest to support a joint defense privilege. To constitute a "common interest" the parties must have a strong identity of interest. McNally Tunneling Corp. v. City of Evanston, 2001 WL 1246630, *2 (N.D. Ill. Oct. 18, 2001). FYEO maintains that ...


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