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Selby v. O'Dea

Court of Appeals of Illinois, First District, Fourth Division

December 7, 2017

FRANK SELBY, MARTIN YOUNG, ADRIANA LOPEZ, and KATHERINE SCHEIWE, n/k/a Katherine Polk, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants,
JAMES M. O'DEA, Individually and d/b/a James M. O'Dea & Associates, and STATE FARM MUTUAL AUTO INSURANCE COMPANY Defendants, (State Farm Mutual Auto Insurance Company, Defendant-Appellee).

         Appeal from the Circuit Court of Cook County No. 10 CH 43684 Honorable Sebastian T. Patti, Honorable Richard J. Billik, & Honorable Rodolfo Garcia Judges Presiding

          ELLIS JUSTICE delivered the judgment of the court, with opinion. Presiding Justice Burke and Justice McBride concurred in the judgment and opinion.



         ¶ 1 When parties on the same side of a lawsuit wish to strategize to defeat their common litigation opponent, they may meet together and share information that would otherwise be privileged under the attorney-client or work-product doctrines. A lawyer may share privileged information from his or her client with the other party's lawyer. One party may speak to the other party's lawyer. One client may speak to the other client, in the presence of the lawyers. When these communications occur, the parties risk waiving privileges because they are disclosing privileged information to third parties-the other client and the other client's lawyer.

         ¶ 2 This case requires us to decide whether two codefendants to a lawsuit waived these privileges when they met and shared information about that lawsuit as part of a "joint defense agreement" they executed.

         ¶ 3 Federal courts and many state courts have recognized an exception to the waiver rule in this context, protecting the confidentiality of these joint communications as to third parties. Other states have codified this exception to the waiver rule into statute. Surprisingly, no published decision in Illinois has ever decided whether parties with a common interest in defeating a litigation opponent may share and pool information without waiving their attorney-client and work-product privileges as to third parties.

         ¶ 4 After considering our supreme court's decisions on related issues and taking into account case law from other jurisdictions, we likewise recognize a common-interest exception to the waiver rule. As in virtually every other jurisdiction, we hold that coparties in a case who agree to share information pursuant to their common interest in defeating their litigation opponent do not waive either the attorney-client or work-product privilege when they do so.

         ¶ 5 While we agree with the trial court's recognition of this common-interest exception to the waiver rule, we remand this matter to the trial court to conduct an in camera, communication-by-communication review of the challenged conversations involving the codefendants and their attorneys. We vacate the trial court's dispositive rulings-the dismissal of one count, the grant of summary judgment on two others-pending the outcome of the in camera review, given the possibility that additional facts may become discoverable after that review.

         ¶ 6 I

         ¶ 7 Between 2006 and 2009, State Farm Mutual Auto Insurance Company (State Farm) filed a series of subrogation lawsuits through its counsel, James M. O'Dea, individually and doing business as James M. O'Dea & Associates, including suits against Frank Selby, Martin Young, Adriana Lopez, and Katherine Scheiwe, now known as Katherine Polk. In October 2010, these four individuals, as named plaintiffs, filed a purported class-action lawsuit in which they claim that their subrogation lawsuits were part of "a large scale scheme perpetrated by defendants in subrogation lawsuits" to obtain "fraudulent default judgments" against subrogation defendants "by circumventing the State of Illinois [r]ules governing service of process."

         ¶ 8 In sum, plaintiffs claimed that O'Dea, an attorney engaged by State Farm in its subrogation cases, was bypassing the office of the sheriff of Cook County for the purposes of service of summons, using unlicensed process servers, and obtaining default judgments without service of process, resulting in the suspension of their drivers' licenses based on these void judgments and requiring them to take steps to vacate their default judgments. The complaint further alleged an overall scheme involving State Farm and claimed that this scheme was financed by State Farm's payment of invoices from O'Dea for sheriff's fees-fees that were never incurred, permitting O'Dea to retain these funds for his own use.

         ¶ 9 Relevant to this appeal, plaintiffs sued State Farm for abuse of process, civil conspiracy, and malicious prosecution. The trial court dismissed the abuse-of-process claims for failure to state a claim. The court later entered summary judgment on the claims of civil conspiracy and malicious prosecution. The action is still pending in the trial court against O'Dea. This appeal only concerns the judgments as to State Farm.

         ¶ 10 Plaintiffs appeal from several of the circuit court's orders, including the court's application of the "joint legal defense privilege, " other discovery orders, the dismissal of plaintiffs' abuse-of-process action against State Farm for failure to state a claim, and grant of summary judgment on plaintiffs' claims of civil conspiracy and malicious prosecution.

         ¶ 11 Plaintiffs argue that "to understand the issues related to the dismissal of State Farm from the litigation, it is important to review the seminal problem related to discovery that overshadowed the trial court's subsequent rulings." Plaintiffs argue that the trial court's ruling on certain discovery matters prevented them from fully responding to the motion for summary judgment, one of many reasons, they claim, that the trial court erred in entering summary judgment on the civil-conspiracy and malicious-prosecution counts.

         ¶ 12 Within the discovery matters alone, there are sub-issues. One is the trial court's recognition of the "joint legal defense privilege." Another is the trial court's refusal to require a privilege log for information it deemed covered by that privilege. Third, plaintiffs complain of a protective order entered in this case to protect confidential and sensitive information disclosed in discovery. Finally, plaintiffs claim that the trial court erred in sequencing discovery such that they were permitted to issue discovery requests only regarding the four named plaintiffs and not concerning other members of the purported class of subrogation defendants sued by State Farm and O'Dea during the relevant time period. We will take up these issues in turn.

         ¶ 13 II

         ¶ 14 We begin with the trial court's recognition of the "joint legal defense privilege" in Illinois. Our review is de novo. See Center Partners, Ltd. v. Growth Head GP, LLC, 2012 IL 113107, ¶ 65 (existence of privilege, or exception thereto, is question of law subject to de novo review).

         ¶ 15 Several years into this lawsuit, plaintiffs submitted this interrogatory to State Farm:

"Did State Farm ever notify, or advise, from January 1, 2006 to the present, either in writing or orally, [O'Dea] that there were any irregularities discovered in the handling of the State Farm subrogation matters? If so, state the date upon which the notification occurred, whether it was orally or in writing, the person from State Farm that issued the notification and the individual to whom the notification was addressed." (Emphasis added.)

         ¶ 16 Because the scope of that interrogatory included conversations between codefendants State Farm and O'Dea and their lawyers that occurred after the filing of this purported class-action lawsuit in October 2010, State Farm asserted (besides attorney-client and work-product privileges) a "joint defense privilege, " arguing that anything that codefendants State Farm and O'Dea, as well as their respective lawyers, said to each other after the filing of the lawsuit, about the lawsuit, was privileged as part of communications concerning a common or joint defense. State Farm did acknowledge that postcomplaint conversations between State Farm and O'Dea responsive to this interrogatory had occurred: "Subject to these objections, and without waiving them, State Farm and O'Dea, with the involvement of counsel, have had privileged discussions relating to [p]laintiff s allegations during the pendency of this lawsuit."

         ¶ 17 The circuit court, after briefing and argument, recognized the "joint legal defense privilege" in Illinois. The court acknowledged that no Illinois reviewing court had recognized the privilege. But the court noted that the privilege had been recognized in federal court and other jurisdictions and reasoned that Illinois should recognize it, too, finding "nothing in Illinois case law that would preclude its application in an Illinois cause of action." The trial court thus ruled that, to the extent that plaintiffs sought postcomplaint communications between State Farm and O'Dea in their interrogatory, that information was privileged from discovery.

         ¶ 18 On appeal, State Farm tells us that the "joint defense" doctrine has already been recognized in Illinois as the common-interest doctrine, pursuant to our supreme court's opinion in Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill.2d 178, 193 (1991). Plaintiffs disagree; they argue that the Waste Management common-interest doctrine is different than the protection State Farm seeks. As we will explain below, plaintiffs are correct that the Waste Management common-interest doctrine is different than the remedy State Farm seeks. But State Farm is not altogether wrong, either, because the Waste Management common-interest doctrine is rooted in many of the same principles as the remedy State Farm seeks, whether we call it the "joint defense" doctrine or by another name.

         ¶ 19 We will begin by examining Waste Management common-interest doctrine as it currently exists in Illinois.

         ¶ 20 A

         ¶ 21 In Waste Management, our supreme court explained what it called the common-interest doctrine this way:

"[U]nder the common interest doctrine, when an attorney acts for two different parties who each have a common interest, communications by either party to the attorney are not necessarily privileged in a subsequent controversy between the two parties. [Citations.] This is especially so where an insured and his insurer initially have a common interest in defending an action against the [insured], and there is a possibility that those communications might play a role in a subsequent action between the insured and his insurer." Id. at 193.

         ¶ 22 At first blush, that seems simple enough. If one lawyer represents two parties who share a common interest in the outcome of a lawsuit (typically an insured and its insurer, who both want the insured to defeat a lawsuit brought by a plaintiff) and those parties are later embroiled in a controversy themselves (usually over whether the insurer has to cover the insured for the underlying judgment), either party may discover communications the other party made with that lawyer about that underlying lawsuit. Id.

         ¶ 23 That doctrine was expanded, however-by Waste Management itself-to include the situation where the insured retained counsel to defeat the underlying tort lawsuit but the lawyer did not represent the insurance company that was potentially liable to cover the insured's loss, nor did the insurance company even speak to the insured's lawyer. Despite the fact that the insurer did not retain or communicate with the insured's counsel, when the insured and insurer later became adverse in a declaratory-judgment action over coverage of the tort judgment, the insurance company was able to discover all communications between the insured and its counsel regarding the underlying tort lawsuit. Id. at 194.

         ¶ 24 The supreme court recognized that the common-interest doctrine was initially rooted in the so-called "dual-representation" doctrine, in which one lawyer represented two different parties simultaneously. See id. (noting that "[i]n the typical case *** the attorney has provided joint or simultaneous representation of the parties"); see also Brunton v. Kruger, 2015 IL 117663, ¶ 79 ("The common interest doctrine is rooted in the dual representation doctrine, which has a long history as an exception to the attorney-client privilege."). But in Waste Management, 144 Ill.2d at 194, the supreme court made clear that the common-interest doctrine "may properly be applied where the attorney, though neither retained by nor in direct communication with the insurer, acts for the mutual benefit of both the insured and insurer." In fact, the Waste Management common-interest doctrine has even been held to apply when each party with the common interest has its own lawyer and neither party communicates with the other party's lawyer. See Western States Insurance Co. v. O'Hara, 357 Ill.App.3d 509, 512 (2005).

         ¶ 25 So in the Waste Management common-interest doctrine, the focus is on the "commonality of interests" between the two parties, not whether they retained the same lawyer. Waste Management, 144 Ill.2d at 194. And while Illinois courts have never explicitly limited this doctrine to the insurer-insured relationship, that is the situation where it is most obviously applicable, as Waste Management itself noted. See id. at 193.

         ¶ 26 An insurer and an insured often have a complicated relationship; they have a common interest in defeating a lawsuit against the insured, but they might hold very different views on whether the insurer has to cover any resulting monetary judgment against the insured. Id. at 194. Thus, to the extent that an insurer and insured share a common interest in defeating the underlying lawsuit, either party may discover what the other communicated to its attorney about that underlying lawsuit, if the two parties later fight over insurance coverage. Id. But the parties may not discover what the other party discussed with its lawyers about insurance-coverage issues, because those are not interests they have in common; they are diametrically opposed on that issue. See id. at 200-01 (insurer may discover insured's attorney's work files relating to underlying tort litigation but may not discover any insured-attorney communications regarding insurance coverage); Illinois Emcasco Insurance Co. v. Nationwide Mutual Insurance Co., 393 Ill.App.3d 782, 790 (2009) (noting that Waste Management "preserves the attorney-client privilege for communications between [insurer] and its attorneys regarding the coverage issues arising in this declaratory judgment action [over insurance coverage]").

         ¶ 27 State Farm says that the Waste Management common-interest doctrine supports its claim of a "joint defense privilege" here with its codefendant, O'Dea. To be sure, there are some similarities between that doctrine and what State Farm seeks. State Farm is saying that, after this purported class-action lawsuit was filed against State Farm and O'Dea, the two codefendants have, on various occasions, discussed a mutual defense of this lawsuit in joint conferences with their respective lawyers. State Farm says that the joint defense of this lawsuit is a matter of "common interest" between the codefendants and the law should respect those conversations as privileged.

         ¶ 28 But plaintiffs are correct that the remedy State Farm seeks, though obviously related to the Waste Management common-interest doctrine, in fact occurs under different circumstances and produces very different results. The Waste Management common-interest doctrine defeats a claim of privilege, when asserted by one party to the common interest against the other party to the common interest, when the two parties later become adverse. See Brunton, 2015 IL 117663, ¶ 83 ("the common-interest doctrine is not intended to protect a claim of attorney-client privilege" but, rather, "to defeat a claim of privilege when both parties to a lawsuit share a common interest in the communications made in confidence by one of the parties to its attorney" (emphases in original)).

         ¶ 29 State Farm does not want to defeat a claim of privilege but to assert one. To put a finer point on the matter, State Farm is trying to avoid the waiver of attorney-client or work-product privilege that would ordinarily result if, during its joint conferences with O'Dea and his lawyer, State Farm shared information or work product with its codefendant and codefendant's counsel. See Center Partners, Ltd., 2012 IL 113107, ¶ 35 (client waives attorney-client privilege if it discloses privileged information to third party); Sherman v. Ryan, 392 Ill.App.3d 712, 736 (2009) (same for work-product privilege). Without the ability to assert some sort of exception, State Farm's privilege would be waived by disclosure of information to, or in the presence of, third parties-O'Dea and O'Dea's lawyer.

         ¶ 30 Viewed in this way, the remedy State Farm seeks-what it calls the "joint defense privilege"-is looking at the same situation as the common-interest doctrine but from a different viewpoint. The Waste Management common-interest doctrine looks at whether one party with the common interest may shield its communications from the other party with the common interest, in a later proceeding. The "joint defense privilege, " using State Farm's vernacular, looks at whether the two parties to the common interest may shield their joint communications about that common interest from third parties-including their opponent in litigation.

         ¶ 31 So as related as the two doctrines may be, State Farm cannot simply latch onto the Waste Management common-interest doctrine for its relief. That doctrine is not applicable here.

         ¶ 32 The trial court found it inapplicable, too. But the court decided that, after a review of the doctrine and careful consideration, Illinois should recognize the "joint legal defense" doctrine in this case. Because State Farm spent much of its original brief arguing that its claim was supported by the Waste Management common-interest doctrine in Illinois and plaintiffs spent most of their briefs arguing that it was not, we ordered additional briefing on whether this court should recognize a "joint defense" doctrine, by whatever name we may call it, as a matter of first impression. We take up that question next.

         ¶ 33 B

         ¶ 34 As we noted, generally, a client waives an attorney-client privilege if it discloses privileged information to a third party. Center Partners, Ltd., 2012 IL 113107, ¶ 35. The work-product privilege may be waived in much the same way. Sherman, 392 Ill.App.3d at 736 (but finding no waiver of work-product privilege in that context). So without some protection in the law, when parties on the same side of a lawsuit meet together, clients and lawyers alike, to strategize over the prosecution or defense of the case, they risk waiving their attorney-client privilege for anything that is said in that meeting and likewise the work-product privilege for any work product shared.

         ¶ 35 The Restatement of the Law Governing Lawyers provides that, in this context, lawyers and parties on the same side of a lawsuit (or potential lawsuit) may converse together and may share work product, without waiving any privilege as to third parties, including the opposing party in the lawsuit. Specifically, section 76, paragraph 1, of the Restatement (Third) of the Law Governing Lawyers, lays out this doctrine:

"(1) If two or more clients with a common interest in a litigated or nonlitigated matter are represented by separate lawyers and they agree to exchange information concerning the matter, a communication of any such client that otherwise qualifies as privileged under [the attorney-client privilege] that relates to the matter is privileged as against third persons. Any such client may invoke the privilege, unless it has been waived by the client who made the communication." Restatement (Third) of the Law Governing Lawyers § 76 (2000) (Restatement § 76(1)).

         ¶ 36 State Farm cites this Restatement section as the embodiment of what it seeks here. State Farm and O'Dea entered into a "joint defense agreement, " whereby they would confidentially share information concerning their joint defense of this class-action lawsuit. Because State Farm and O'Dea are "clients with a common interest in a litigated *** matter" and are "represented by separate attorneys, " and "they agree[d] to exchange information concerning the matter" with one another, State Farm argues that any communications between the codefendants are "privileged as against third persons, " including plaintiffs. See id.

         ¶ 37 The protection State Farm seeks was first recognized in 1871 by the Virginia Supreme Court, in the context of criminal litigation, and became known as the "common-defense" or "joint defense" rule. See Chahoon v. Commonwealth, 62 Va. 822, 841-42 (1871) ("They had a right, all the accused and their counsel, to consult together about the case and the defence, and it follows as a necessary consequence, that all the information, derived by any of the counsel from such consultation, is privileged ***.").

         ¶ 38 The doctrine was recognized through the first half of the 1900s by a few courts, in different contexts, including civil cases, and involving work product as well as attorney-client communications. See, e.g., Schmitt v. Emery, 2 N.W.2d 413, 417 (Minn. 1942), overruled on other grounds by Leer v. Chicago, Milwaukee, St. Paul & Pacific Ry. Co., 308 N.W.2d 305 (Minn. 1981) (civil case protecting shared work product); State v. Emmanuel, 259 P.2d 845, 854 (Wash. 1953) (en banc) (recognizing and applying doctrine where "[t]he persons present at this conference had a mutual interest in defending against the allegations of [the] complaint"); see also Note, Waiver of Attorney-Client Privilege on Inter-Attorney Exchange of Information, 63 Yale L.J. 1030, 1032 (1954) (as of 1954, "[t]he few cases ...

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