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Equity Residential v. Kendall Risk Management

November 16, 2007

EQUITY RESIDENTIAL, EQUITY RESIDENTIAL PROPERTIES MANAGEMENT CORP., EQUITY RESIDENTIAL PROPERTIES MANAGEMENT CORP. II, AND ERP OPERATING LIMITED PARTNERSHIP, PLAINTIFFS,
v.
KENDALL RISK MANAGEMENT, INC., COBBS, ALLEN & HALL, INC., COBBS, ALLEN & HALL OF GEORGIA, INC., CHARLES K. ("KENDALL") MCEACHERN, VERLYN TANKSLEY, AND ROYAL SURPLUS LINES INSURANCE COMPANY, AS SUCCESSOR TO THE LIABILITIES OF CONNECTICUT SPECIALTY INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Morton Denlow

MEMORANDUM OPINION AND ORDER

Plaintiffs Equity Residential et al. (collectively "Equity") have moved to compel Defendant Connecticut Specialty Insurance Company ("Connecticut Specialty") to produce documents listed on Connecticut Specialty's privilege log. Connecticut Specialty has produced several documents listed on its log, but otherwise objects to the motion on the grounds that the remaining documents are privileged. Connecticut Specialty has moved to compel Equity to produce documents listed on its privilege log. Equity has produced two documents listed on its log, but otherwise objects to the motion on the grounds that the remaining documents are work product and that several of the documents are also privileged. For the reasons stated below, Equity's motion to compel is granted in part and denied in part, and Connecticut Specialty's motion to compel is denied.

I. BACKGROUND FACTS

This case involves a dispute over the terms of an insurance policy purchased by Equity, through its brokers Kendall Risk Management, Inc. and Cobbs, Allen & Hall, Inc., from Connecticut Specialty through its agents Special Risk Underwriters, Inc. Equity Residential is a Maryland real estate investment trust with its principal place of business in Chicago, Illinois. Connecticut Specialty is a Connecticut corporation, engaged in the insurance business. Equity alleges that it purchased three years of insurance coverage, from December 15, 1999 to December 15, 2002, from Connecticut Specialty. On September 5, 2000, Equity received a notice of non-renewal from Connecticut Specialty.Connecticut Specialty alleges that Equity purchased a one-year policy that was properly non-renewed.

By agreement of the parties, District Judge Gettleman bifurcated the issues in this case. The parties are presently litigating the issue of whether Connecticut Specialty was obligated to provide Equity with three years of insurance coverage.

During the course of discovery, both parties withheld certain documents from production due to their assertion that the documents were either work product, attorney-client privileged, or both. Both parties also provided the other with a privilege log listing the documents it was withholding from production. Near the close of discovery, Equity filed a motion to compel Connecticut Specialty to produce several documents included on Connecticut Specialty's log. Although Connecticut Specialty has produced over half of the requested documents since the motion to compel was filed, it still asserts a privilege to the remaining 130 documents listed on its log. Most of the documents listed on Connecticut Specialty's log are e-mails that originated in Connecticut, between Connecticut residents. Connecticut Specialty has also filed a motion to compel Equity to produce the documents listed on its privilege log. Although Equity has since produced two of those documents, it still asserts that the remaining 27 documents are work product, and that some of the documents are both work product and attorney-client privileged. Following briefing, the Court held oral argument on October 17, 2007.

II. LEGAL STANDARDS

A. Attorney-Client Privilege

1. Attorney-Client Privilege Under Illinois Law

Equity has brought breach of contract and reformation of contract claims against Connecticut Specialty, and seeks declaratory relief. This Court has federal jurisdiction over the state law claims based on supplemental jurisdiction.*fn1 In civil actions involving an element of a claim or defense to which state law applies, privilege is determined in accordance with state law. Caremark, Inc., v. Affiliated Computer Servs., Inc., 192 F.R.D. 263, 265 (N.D. Ill. 2000); FED.R.EVID. 501. Accordingly, the issue of attorney-client privilege is governed by Illinois law. Caremark, 192 F.R.D. at 265; FED.R.EVID. 501.

Under Illinois law, to be entitled to the protection of the attorney-client privilege, a party must show that "the statement orginated in a 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." Caremark, 192 F.R.D. at 265 (quoting Hyams v. Evanston Hospital, 587 N.E.2d 1127, 1130 (Ill. App. Ct. 1992)). Attorney-client privilege extends to both communication from client to attorney, as well as from attorney to client. Midwesco-Paschen Joint Venture for Viking Projects v. IMO Indus., Inc., 638 N.E.2d 322, 327 (Ill. App. Ct. 1994). Confidential communications made by a client to representatives of the attorney, such as paralegals or secretaries, are also privileged. Boettcher v. Fournie Farms, Inc., 612 N.E.2d 969, 973 (Ill. App. Ct. 1993).

The attorney-client privilege only protects those communications which relate to the giving or seeking of legal advice. See Hyams, 587 N.E.2d at 1130; accord Baxter Travenol Laboratories v. Abbott Laboratories, 1987 WL 12919 (1987). Simply funneling communications past an attorney will not make them privileged. People v. Harris, 570 N.E.2d 593, 597 (Ill. App. Ct. 1991).

2. Illinois' Control Group Analysis for Corporations

When a corporation is a client, Illinois applies a control group analysis and narrowly interprets the scope of the privilege in its application to employees of such a corporation. Consolidation Coal Co. v. Bucyrus-Erie Co., 432 N.E.2d 250, 257-58 (Ill. 1982). Under this analysis, only those communications made by employees in top management positions who have the ability to make a final decision are privileged. Rounds v. Jackson Park Hosp. & Med. Ctr., 745 N.E.2d 561, 568 (Ill. App. Ct. 2001); Consolidation, 432 N.E.2d at 258. In addition to top management, an employee's communications will be protected by the attorney-client privilege where "1) the employee is in an advisory role to top management, such that the top management would normally not make a decision in the employee's particular area of expertise without the employee's advice, and 2) that opinion does in fact form the basis of the final decision by those with actual authority." Rounds, 745 N.E.2d at 568; Consolidation, 432 N.E.2d at 258.

3. Waiver of the Privilege

The attorney-client privilege is based on a principle of confidentiality, and is subject to waiver if such communications are disclosed. Profit Mgmt. Dev., Inc. v. Jacobson, Brandvik & Anderson, 721 N.E.2d 826, 835 (Ill. App. Ct. 1999); accord Vardon Golf Co., Inc., v. Karsten Mfg. Corp., 213 F.R.D. 528, 532 (N.D. Ill. 2003).Generally, a party who voluntarily discloses privileged communications waives the privilege as to all other communications dealing with the same subject matter. In re Grand Jury January 246, 651 N.E.2d 696, 700 (Ill. App. Ct. 1995); accord Vardon, 213 F.R.D. at 532. A court should make its determination as to whether a disclosure constitutes subject matter waiver on a case by case basis, considering the principles of fundamental fairness. See Vardon, 213 F.R.D. at 532; Abbott Labs. v. Andrx Pharm., Inc., 2006 U.S. Dist. LEXIS 55647, at *18 (N.D. Ill 2006).

B. Choice of Law Questions for Privileged Communications

Generally, for federal claims based on diversity or for pendant state claims, federal district courts follow the choice-of-law rules of the state in which the district sits. Baltimore Orioles v. Major League Baseball Players Ass'n., 805 F.2d 663, 681 (7th Cir. 1986). Illinois courts apply Restatement (Second) of Conflict of Laws (Restatement) § 139 to choice-of-law questions for privileged communications.People v. Allen, 784 N.E.2d 393, 394 (Ill. App. Ct. 2003); Sterling Fin. Mgmt. v. UBS Painewebber, Inc., 782 N.E.2d 895, 904 (Ill. App. Ct. 2002).Restatement (Second) Conflict of Laws instructs:

(2) Evidence that is privileged under the local law of the state which has the most significant relationship with the communication but which is not privileged under the local law of the forum will be admitted unless there is some special reason why the forum policy favoring admission should not be given effect.

Restatement (Second) Conflict of Laws § 139 (2). Thus, so long as a court finds a special reason to do so, a court may decline to apply Illinois law to communications that would not be protected under Illinois law, but that would be protected under the law of the state with the most significant relationship to the communication. Under the Restatement, "the state which has the most significant relationship with a communication will usually be the state where the communication took place, which . . . is the state where an oral interchange between persons occurred, where a written statement was received, or where an inspection was made of a person or thing." Restatement (Second) Conflict of Laws § 139 (Comment e).

C. Work Product Doctrine

The attorney work-product doctrine protects "1) documents and tangible things otherwise discoverable; 2) prepared by or for another party or by or for that other party's representative; 3) in anticipation of litigation or for trial." Hickman v. Taylor, 329 U.S. 495 (1947); In re Application for an Order for Judicial Assistance in a Foreign Proceeding in the Labor Court of Brazil, 244 F.R.D. 434, 440 (N.D. Ill. 2007); Vardon, 213 F.R.D. at 534; FED.R.CIV.P 26(b)(3). "Opinion" work product which reveals the mental impressions or opinions of an attorney is not discoverable. In re Application, 244 F.R.D. at 440. Materials that are produced in the ordinary course of a party's business, and not to prepare for litigation, are outside the scope of the work product doctrine. Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 145 F.R.D. 84, 87 (N.D. Ill. 1992). To establish work product protection, a party must show that the primary motivating purpose behind the creation of a document was to aid in possible future litigation. Id. The party must also be able to prove the existence of objective facts establishing an identifiable resolve to litigate. Id.

The work-product doctrine is also subject to waiver by a party. Vardon, 213 F.R.D. at 534. Such a waiver occurs "when the protected communications are disclosed in a manner which substantially increases the opportunity for potential adversaries to obtain the information." Id. Thus, in determining if a party's actions constitute a waiver, the court should focus on whether the information is disclosed to an adversary, rather than whether the disclosure is voluntary. Id. Parties may be required to disclose certain documents to be used to refresh a witness's recollection for the purpose of testifying. Murlas Living Trust v. Mobil Oil Corp., 1995 WL 124186 (N.D. Ill. 1995). Such a disclosure, however, generally ...


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