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Baxter International, Inc. v. AXA Versicherung

United States District Court, N.D. Illinois, Eastern Division

December 13, 2016

BAXTER INTERNATIONAL, INC., Plaintiff,
v.
AXA VERSICHERUNG, Defendant.

          MEMORANDUM OPINION AND ORDER

          Jeffrey T. Gilbert United States Magistrate Judge

         Defendant AXA Versichemng ("AXA") has filed a motion to compel Plaintiff Baxter International, Inc. ("Baxter") to produce certain documents. Motion to Compel Baxter to Produce All Communications with Dechert ("AXA's Opening Brief), [ECF Nos. 344, 345]. Although AXA initially sought more than eighty documents, Baxter's subsequent production of the vast majority of the communications AXA was seeking narrowed substantially the scope of the parties' present discovery dispute. The only issue now before the Court is whether Baxter must produce the redacted portions of several memoranda written by one of its insurance coverage attorneys and a few emails to which the memoranda were attached when they were sent to Baxter and attorneys representing Baxter in underlying tort litigation. For the reasons stated below, AXA's motion [ECF Nos. 344, 345] is denied.

         I. BACKGROUND

         This lawsuit stems from the settlement of a multi-district litigation ("MDL") involving product liability lawsuits brought against Baxter and other drug companies seeking damages for allegedly contaminated blood products. See Baxter Int'l, Inc. v. AXA Versichemng, 2014 WL 3583929 (N.D. Ill. July 18, 2014) for a thorough discussion of the facts underlying both the MDL and this case. Throughout the MDL, which the parties refer to as "the Second Generation Litigation, " Dechert LLP ("Dechert") served as Baxter's defense counsel. At the same time, Baxter employed Shapiro & Dupont LLP (now Shapiro Rodarte & Forman LLP) (collectively, "the Shapiro firm") as its insurance coverage counsel. In this role, one of the Shapiro firm's attorneys, Carl Shapiro, wrote a memorandum titled "Settlement Options re 'Second Generation' Claims." During the drafting process, Mr. Shapiro produced several versions of the memorandum (collectively, "the Shapiro Memos" or "the Memos") that he emailed to Baxter and Dechert.

         During discovery in this case, AXA issued requests for production that encompass both the Shapiro Memos and what Baxter refers to as "the cover emails" to which the Memos were attached. Baxter initially withheld these documents in their entirety. Later, Baxter produced all of them but with redactions. According to Baxter, it only redacted portions of these documents that constitute its insurance coverage counsel's privileged coverage analysis. The Court now must decide whether Baxter must produce the redacted portions of the Shapiro Memos and the cover emails.

         II. LEGAL STANDARD

         Under Federal Rule of Civil Procedure 37(a), when a party does not respond properly to a discovery request, the party that issued the request may file a motion to compel a proper response. Fed.R.Civ.P. 37(a); Vukadinovich v. Hanover Cmty. Sch. Corp., 2014 WL 667830, at *4 (N.D. Ind. Feb. 20, 2014). The court then must independently determine the proper course of discovery. John Wiley & Sons, Ltd. v. McDonnell Boehnen Hulbert & Berghoff LLP, 2013 WL 505252, at *2 (N.D. III. Feb. 12, 2013). When doing so, the court has significant discretion. Gile v. United Airlines, Inc., 95 F.3d 492, 496 (7th Cir. 1996). Ultimately, the party objecting to discovery bears the burden to show that the requested discovery is improper. JAB Distributors, LLC v. London Luxury, LLC, 2010 WL 4008193, at *1 (N.D. Ill. Oct. 13, 2010).

         III. DISCUSSION

         Baxter argues that the attorney-client privilege and the work product doctrine protect the redacted portions of the Shapiro Memos and the cover emails, AXA contends that neither applies and that, in any event, Baxter has waived any protection that might have existed.

         A. The Illinois Attorney-Client Privilege

         The parties' dispute with respect to the Illinois attorney-client privilege is narrow. Baxter asserts that it redacted from the Shapiro Memos and emails only material that is protected by the Illinois attorney-client privilege. AXA responds by arguing that the attorney-client privilege does not cover Baxter's communications with Dechert, its defense counsel in the underlying Second Generation Litigation, under settled Illinois law, and the fact that Baxter's insurance coverage counsel was involved in those communications for the purpose of providing insurance coverage analysis related to the underlying claims in the lawsuit Dechert was defending does not change the analysis. AXA relies on the Illinois Supreme Court's decision in Waste Management, Incorporated v. International Surplus Lines Insurance Company, 579 N.E.2d 322 (Ill. 1991), in support of its argument that the Shapiro Memos and related emails must be produced without redaction. Baxter reads Waste Management more narrowly than AXA does in this context and argues that decision supports its production of the redacted Memos and emails.

         In Waste Management, the eponymous defendant and a related corporate entity ("the insureds") owned and operated five hazardous waste disposal sites. Id. at 324-25. The insureds were sued for personal injuries and property damage caused by their improper mitigation of toxic wastes at one facility. Id. The insureds defended against and then settled those claims. Id. at 325. After that, the insureds sought indemnification from their insurers, which already had denied coverage, leading to more litigation, Id. During the insurance coverage action, the insurers sought the insureds' litigation files from the underlying lawsuit. Id. The insureds refused to produce certain documents, claiming in part that the Illinois attorney-client privilege protected them from production. Id.

         The Illinois Supreme Court held that, in this situation, the attorney-client privilege had no application to the withheld portions of the underlying litigation file. Id. at 329. The Illinois Supreme Court's decision rested on two rationales, both of which were independently sufficient to justify the ruling. Id. at 327. The first was that the insureds' contractual duty to cooperate with their insurers, contained in their insurance policies, rendered any expectation of privilege unreasonable with respect to the communications. Id. at 327-28. The second was that the insureds and the insurers had a common interest in defeating or settling the underlying litigation and the communications were "of a kind reasonably calculated to protect or to further those common interests." Id. at 328-29.

         As this discussion illustrates, the holding and logic of Waste Management only extend to communications concerning matters with respect to which an insured has a duty to cooperate or a common interest with its insurer. In Waste Management, the court "recognize[d] [an] insured's need to have confidential communication with counsel regarding insurance coverage." LaSalle Nat. Trust, N.A. v. Schaffner, 1993 WL 105422, at *6 (N.D. Ill. Apr. 6, 1993). That is why the court distinguished "between nonprivileged communications regarding the underlying litigation, and privileged communications regarding the coverage issues that could arise in a subsequent declaratory judgment action." Illinois Emcasco Ins. Co. v. Nationwide Mut. Ins. Co., 913 N.E.2d 1102, 1108 (Ill.App.Ct. 2009). When interpreting Waste Management, courts consistently acknowledge this distinction and find that the attorney-client privilege protects communications about coverage issues with respect to which the insured and insurer have neither a duty to cooperate nor a common interest. See, e.g., Abbott Labs. v. Alpha Therapeutic Corp.,200 F.R.D. 401, 408 (N.D. Ill. 2001) (holding that the Illinois attorney-client privilege protects an indemnitee's communications with its attorneys "to the extent that such communications deal with issues of indemnification"); LaSalle, 1993 WL 105422, at *6 ("Communications made for the purpose of pursuing defense and indemnity against the Insurers is, however, subject to the attorney-client privilege."); Emcasco, 913 N.E.2d at 1108 ("In sum, we conclude that Waste Management preserves the attorney-client privilege for communications between Emcasco and its attorneys regarding the coverage issues ...


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