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U.S. v. SEGAL

April 15, 2004.

UNITED STATES OF AMERICA
v.
MICHAEL SEGAL and NEAR NORTH Judge RUBEN CASTILLO INSURANCE BROKERAGE, INC.



The opinion of the court was delivered by: RUBEN CASTILLO, District Judge

MEMORANDUM OPINION AND ORDER

This opinion addresses the Government's motion in limine requesting a ruling on whether ninety-one communications are protected by the attorney-client privilege.*fn1 (R. 243-1.) In September 2003, Defendant Michael Segal gave the Government a log identifying approximately 13,000 seized electronic communications that he claims are privileged. The Government created a "taint team" of prosecutors who are screened off from the prosecution team. The taint team reviewed most of the 13,000 alleged privileged communications to determine the validity of Defendants' claims. The taint team identified ninety-one communications that it asserts are not attorney-client privileged and requested that the Court review these communications in camera. After reviewing these ninety-one communications, we partially grant and partially deny the Government's motion in limine. (R. 243-1.)

LEGAL STANDARDS

 I. Attorney-Client Privilege

  The attorney-client privilege prohibits the compelled disclosure of "confidential communications between a client and an attorney for the purpose of obtaining legal advice." Denius v. Dunlap, 209 F.3d 944, 952 (7th Cir. 2000). The privilege applies to statements made by a client to his lawyer and responsive statements made by the lawyer where the responses "rest on confidential information obtained from the client . . . or where those communications would reveal the substance of a confidential communication by the client." Rehling v. City of Chi., 207 F.3d 1009, 1019 (7th Cir. 2000) (internal citation omitted); see also Nedlog Co. v. ARA Servs., Inc., 131 F.R.D. 116, 117 (N.D. Ill. 1989) ("What is entitled to protection is really limited to the communication of confidences from client to lawyer, whether any such confidences (or sometimes the fact that confidences have been communicated) is disclosed in a client-authored document or a lawyer-authored response."). The privilege is strictly construed because it excludes relevant information. In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir. 2000). The attorney-client privilege only shields communications that were intended to be confidential, so communications made to an attorney in the presence of a third party or made with the intent that they will be disclosed to a third party are not privileged. United States v. Evans, 113 F.3d 1457, 1462 (7th Cir. 1997); United States v. White, 950 F.2d 426, 430 (7th Cir. 1991). The Court's privilege determinations are reviewed under the clearly erroneous standard. Rehling, 207 F.3d at 1019.

  Under the crime-fraud exception, communications that would otherwise be protected by the attorney-client privilege lose their protected status if they were "`made for the purpose of getting advice for the commission of a fraud' or crime." United States v. Zolin, 491 U.S. 554, 563 (1989) (declining, however, to determine the "quantum of proof necessary ultimately to establish the applicability of the crime-fraud exception"). Once the party arguing for the crime-fraud exception has provided prima facie evidence (evidence sufficient to require an explanation) that a party sought legal advice in order to commit a fraud or crime, the Seventh Circuit requires the party asserting the privilege to satisfactorily explain why it is entitled to the privilege. United States v. Davis, 1 F.3d 606, 609 (7th Cir. 1993); In re Feldberg, 862 F.2d 622, 626 (7th Cir. 1988); see also Clark v. United States, 289 U.S. 1, 15 (1933) (requiring the party challenging the assertion of privilege to provide evidence that gives "colour to the charge" and establish that its claim "has some foundation in fact"); In re Grand Jury Proceedings (Gregory P. Violette), 183 F.3d 71, 78 (1st Cir. 1999) (summarizing standards used by various circuit courts). The Court's crime-fraud determinations are reviewed under an abuse of discretion standard. Davis, 1 F.3d at 609.

  A party can only assert the attorney-client privilege if it sought legal advice on its own behalf. For example, a corporation cannot assert a claim of privilege when one of its officers sought personal legal advice, even if that officer sought it from the corporation's general counsel. See United States v. Walter, 913 F.3d 288, 392 (7th Cir. 1990). Similarly, a trustee cannot assert the attorney-client privilege against trust beneficiaries if he sought legal advice solely in his capacity as trustee for the benefit of the beneficiaries. See United States v. Mett, 178 F.3d 1058, 1064 (9th Cir. 1999). Under these circumstances, the trustee lacks standing to claim that a communication is protected by the attorney-client privilege. Id.

 II. Attorney Work Product Doctrine

  The attorney work product doctrine prohibits the compelled disclosure of documents created by an attorney in anticipation of litigation. United States v. Nobles, 422 U.S. 225, 238 (1975). This protection disappears, however, if at the time the document is created the prospect of future litigation was remote. Binks Mfg. Co. v. Nat `l Presto Indus., Inc., 709 F.2d 1109, 1118 (7th Cir. 1983). Instead, the work product doctrine applies only when there was an "identifiable prospect of litigation (i.e., specific claims that have already arisen) at the time the documents were prepared." Fox v. Cal Sierra Fin. Servs., 120 F.R.D. 520, 525 (N.D. Cal. 1988); see also Scruto v. Commonwealth Edison Co., No. 97 C 7508, 1999 WL 35311, at *2 (N.D. Ill. Jan 11, 1999) (finding that an investigation by a governmental agency presents more than a remote prospect of future litigation).

  ANALYSIS

  Whether a communication is attorney-client privileged can only be determined on a communication-by-communication basis. The Government challenges Defendants' claim of privilege with respect to ninety-one communications. The Government's challenges can be divided into four categories: (1) communications that are not attorney-client privileged;*fn2 (2) communications that are subject to the crime-fraud exception to the attorney-client privilege;*fn3 (3) communications to which Defendants lack standing to assert the attorney-client privilege;*fn4 and (4) communications to which a former Near North executive, Jeffrey Ludwig, waived any claim of privilege.*fn5 Defendants claim that eighty-eight of these communications are either attorney-client privileged or contain attorney work product.*fn6 Defendants provided a specific explanation for their privilege claims, but they only responded generally to the Government's crime-fraud exception and standing arguments. Defendants withdrew their privilege claim with respect to three communications: documents 26, 61, and 76 (A170, A176; A322-A323; A419). We have reviewed each communication individually and considered every challenge raised by the Government as well as Defendants' specific and general responses.

 I. The Attorney-Client Privilege

  The Government first alleges that many of the ninety-one communications do not qualify for protection under the attorney-client privilege. Recognizing that the attorney-client privilege should be strictly construed, we have striven to permit disclosure of all information that would not reveal confidential information that Defendants provided to their attorneys for the purpose of obtaining legal advice. We used a broad definition of confidential information and attempted to provide consistent, clear-cut explanations whenever we determined that a communication was not privileged in order to provide some certainty to this fact-intensive analysis. See Upjohn Co. v. United States, 449 U.S. 383, 393 (1981) ("An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.").

  One challenge to our privilege analysis is that the expanded role of the corporate general counsel has blurred the line between business and legal advice. A prudent corporation will seek legal advice with respect to most corporate decisions, but the inclusion of general counsel does not transform all business discussions into attorney-client privileged communications. Id. Additionally, the rise of e-mail as the primary mode of corporate communication permits the broad dissemination and near-complete documentation of corporate ...


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