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Daily v. Greensfelder, Hemker & Gale, P.C.

Court of Appeals of Illinois, Fifth District

February 7, 2018


         Appeal from the Circuit Court of St. Clair County. No. 09-L-405, Honorable Vincent J. Lopinot, Judge, presiding.

          Attorneys for Appellants: Clyde L. Kuehn, Christopher J. Petri, Byron, Carlson, Petri & Kalb, LLC

          Attorneys for Appellees: Ted W. Dennis, Michael P. Murphy, Freeark, Harvey & Mendillo, P.C., Michael L. O'Donnell, Carolyn J. Fairless, Erin F. Frohardt, Wheeler, Trigg, O'Donnell, LLP, (attorneys for Greensfelder, Hemker & Gale, P.C.); Alphonse J. Pranaitis, David A. Schott, Rynearson, Suess, Schnurbusch & Champion, LLC, (attorneys for SSM Healthcare Corporation and SSM Healthcare St. Louis)

          JUSTICE MOORE delivered the judgment of the court, with opinion. Justice Welch concurred in the judgment and opinion. Justice Chapman dissented, with opinion.


          MOORE, JUSTICE

         ¶ 1 The plaintiffs, Bill Daily, M.D., and Cardiothoracic Surgery Associates, P.C., appeal the following orders of the circuit court of St. Clair County: (1) a July 13, 2015, order granting the motion of the defendant, Greensfelder, Hemker & Gale, P.C. (Greensfelder), to compel the production of certain documents the plaintiffs claim are protected by the attorney-client, work product, and accountant-client privileges; (2) an August 18, 2015, order denying the plaintiffs' motion to reconsider and finding the plaintiffs to be in contempt for failure to abide by the July 13, 2015, order granting the motion to compel; and (3) a September 10, 2015, order modifying the August 18, 2015, order to impose a $50 fine upon the plaintiffs to facilitate the appeal of these orders. On appeal, the plaintiffs argue that the circuit court erred in finding the "at issue" and "subject matter waiver" exceptions to the attorney-client, work product, and accountant-client privileges apply to allow for discovery of the documents at issue.

         ¶ 2 For the reasons that follow, we vacate the July 13, 2015, August 18, 2015, and September 10, 2015, orders and remand with directions that the plaintiffs produce all documents listed in its privilege logs that are discoverable in light of our opinion. Further, should the plaintiffs, in good faith, maintain privilege as to any of the documents in its privilege logs based on the principles set forth in this opinion, the plaintiffs shall submit a privilege log that conforms to the requirements of Illinois Supreme Court Rule 201(n) (eff. July 30, 2014). Finally, we direct that in the event the parties are not able to resolve all issues between them with regard to the documents at issue, and Greensfelder files a new motion to compel, the circuit court shall evaluate the plaintiffs' privilege log, conduct an in camera review of the disputed documents if needed, and issue an order adjudicating their discoverability in light of our opinion.

         ¶ 3 FACTS

         ¶ 4 Although the instant lawsuit commenced on July 30, 2009, the operative complaint at the time the circuit court entered the orders on appeal was the third amended complaint (complaint), filed by leave of the circuit court on May 4, 2015.[1] We set forth the allegations of the complaint in detail because we find them significant in analyzing the issues on appeal. According to the complaint, Greensfelder was the primary provider of legal services for the plaintiffs, a corporation providing cardiothoracic services to patients at various facilities, from its inception in 1996. Beginning in 1997, Greensfelder represented the plaintiffs in negotiating and drafting employment agreements with various doctors, all of which included noncompete agreements. In addition, Greensfelder represented the plaintiffs in negotiating, drafting, and executing shareholder agreements with the doctors that were employed by the plaintiffs.

          ¶ 5 According to the complaint, Greensfelder simultaneously served as general counsel for SSM Healthcare St. Louis (SSM), a not-for-profit healthcare organization that owns and operates several medical facilities in the St. Louis, Missouri, region. In 2003, the plaintiffs agreed to Greensfelder's representation of both the plaintiffs and SSM during negotiations between them for the purpose of achieving an agreement for the plaintiffs to become the exclusive provider of cardiovascular surgery services at two of SSM's facilities, DePaul and Kirkwood. The agreements, which were drafted by Greensfelder, contained nonsolicitation clauses providing that SSM would not employ the plaintiffs' employees or physicians without the plaintiffs' written consent.

         ¶ 6 The complaint further alleges that in 2006, the plaintiffs became the exclusive provider of cardiovascular surgery services at two more of SSM's facilities, despite the fact that at this time, the plaintiffs did not have contracts with SSM governing this relationship because negotiations remained ongoing.[2] Negotiations between the plaintiffs and SSM broke down in early 2007, when Greensfelder communicated, to counsel for the plaintiffs and counsel for the plaintiffs' employee doctors, a list of SSM's "non-negotiables" regarding a proposed network agreement. Following an exchange of letters between the attorney for the doctors and the plaintiffs' counsel, Laura J. Kipnis, a lawyer from the law firm of Stinson Morrison Hecker LLP (Stinson), the doctors filed suit in the circuit court of St. Louis County, Missouri (the Missouri litigation), seeking, inter alia, a declaratory judgment that the noncompete clauses in their respective employment contracts were unenforceable.

         ¶ 7 The allegations of the complaint further state that, on March 6, 2007, Greensfelder filed a motion, on behalf of SSM, to intervene in the Missouri litigation, seeking, inter alia, a declaratory judgment that the nonsolictation clauses in the 2003 service contracts for DePaul and Kirkwood, as well as the noncompete clauses in the employment contract between the plaintiffs and the doctors involved in the Missouri litigation, were unenforceable, despite Greensfelder having drafted those clauses. The plaintiffs filed a motion to disqualify Greensfelder from representing SSM in the Missouri litigation due to a conflict of interest, but that motion was never ruled upon due to a settlement of that litigation.

         ¶ 8 The complaint continues by alleging that, on May 16, 2007, settlement negotiations occurred among all of the parties to the Missouri litigation, concluding with a memorandum of understanding as to the settlement terms between the parties. This memorandum provided in part for mutual releases of all parties from claims which were or could have been asserted in the pending litigation, and Greensfelder drafted and inserted a provision that specifically included itself as a released party.

         ¶ 9 Count I of the complaint alleges a cause of action against Greensfelder for breach of fiduciary duty based upon the following actions on the part of Greensfelder: (1) representing a party adverse to the plaintiffs in a substantially similar matter without first obtaining written informed consent, (2) using information obtained during representation of the plaintiffs to their disadvantage, (3) subordinating the plaintiffs' interests to its own by, inter alia, including itself as a released party in the settlement documents, (4) coordinating strategy and otherwise advising attorneys with adverse interests to the plaintiffs, and (5) aiding and abetting SSM, as early as May 2006, in SSM's efforts to break up the plaintiffs' practice or place the plaintiffs under duress to influence them to breach their agreements with doctors that SSM wished to hire as its own. According to counts I and II, one or more of these breaches by Greensfelder of its fiduciary duty to the plaintiffs proximately caused "severe damage to [the] [p]laintiffs' financial well-being as well as [the] [p]laintiffs' professional reputation, including, but not limited to, lost compensation, lost income, past, present, and future, lost value, and lost past, present and future business opportunities." The remaining counts of the complaint allege causes of action against SSM and its parent corporation for conspiracy and vicarious liability respectively.

         ¶ 10 During discovery, the plaintiffs requested that Greensfelder produce "all work done on behalf of SSM" in the Missouri litigation. Greensfelder objected on the basis of the attorney-client privilege and produced a lengthy privilege log. The plaintiffs filed a motion to compel, seeking discovery of all the documents in the privilege log dated after October 4, 2006, the date on which the plaintiffs alleged Greensfelder began coordinating strategy with attorneys representing the physicians. The circuit court granted the motion to compel; Greensfelder requested a finding of "friendly contempt, " which the circuit court granted; and Greensfelder appealed to this court. This court affirmed the circuit court's ruling, holding that because the documents at issue related directly to "a matter on which Greensfelder attorneys provided simultaneous representation to [the plaintiffs] and SSM, " the documents fell within the common representation exception to the attorney-client privilege. Daily v. Greensfelder, Hemker & Gale, P.C., 2014 IL App (5th) 130273-U, ¶ 24.

         ¶ 11 On February 20, 2015, Greensfelder filed a motion to compel production of documents. In so doing, Greensfelder requested the circuit court find the plaintiffs had waived the attorney-client, work product, and accountant-client privileges "with respect to their representation by Sharon Daily; Stinson, Morrison, Hecker LLP (Stinson); and Padberg & Corrigan (Padberg) during the time period in which [the] [p]laintiffs claim Greensfelder committed malpractice, [3]and an order that the plaintiffs produce the documents identified on [the] [p]laintiffs' privilege logs." In its motion to compel, Greensfelder pointed out that the plaintiffs allege Greensfelder breached its fiduciary duty to them during its involvement in business deals, negotiations to modify those deals, the Missouri litigation, and the settlement of the Missouri litigation. Greensfelder further noted that the plaintiffs were represented by Daily, Stinson, and Padberg during the same time period. Accordingly, Greensfelder argued that the plaintiffs placed at issue the question of whether it was Greensfelder's alleged breach of fiduciary duty, or the conduct of the various attorneys who simultaneously represented the plaintiffs, that contributed to cause the plaintiffs' alleged damages.

         ¶ 12 Greensfelder attached the privilege logs concerning each attorney or law firm at issue to its motion to compel, although the documents themselves are not contained in the record on appeal, and it does not appear the circuit court ever conducted an in camera review of these documents. While this court has not counted the combined number of documents contained within the privilege logs at issue, it appears the plaintiffs' statement at oral argument for this appeal that "thousands of documents" are at issue is accurate. Each of the entries in the privilege logs designate the privilege that is being asserted for that entry by the acronym "WP" for work product, as well as "AC" for attorney-client privilege.[4] There does not appear to be a privilege log furnished by a certified public accountant (CPA). Rather, all of the documents contained within the logs seem to be sourced from the files of Daily, Stinson, and Padberg.

          ¶ 13 In addition to the privilege logs themselves, Greensfelder attached plaintiffs' answers to Greensfelder's interrogatories, dated May 18, 2011, to its motion to compel. In response to Greensfelder's interrogatory requesting the plaintiffs further itemize their claimed damages, the plaintiffs stated the following: "Plaintiff claims a host of legal fees, including but not limited to [a lawsuit involving the right to utilize office space], [the Missouri] litigation, negotiation of the medical records agreement which was never finalized by [Greensfelder], as well as additional settlement expenses related to the foregoing. Plaintiff additionally claims increased malpractice expenses as a result of the loss of their Missouri business, to go with the loss of business advantages (this includes loss of economies of scale, loss of ability to effectively manage staffing issues; and lost opportunities-such as with Medtronic, Guidant/Boston Scientific, expansion to other hospitals, and addition of new technologies and procedures). Plaintiff additionally overpaid its surgeons; had [the plaintiffs] known that [Greensfelder] would torpedo as unenforceable non-competition and non-solicitation provisions which they had drafted, plaintiff[s] would not have built [their] business model in reliance on those provisions, and further, would not have incurred costs to expand personnel. Additionally, plaintiff[s] w[ere] forced to settle the underlying litigation at far less-than-fair value."

         ¶ 14 Also, in the plaintiffs' answers to interrogatories, when asked about all legal representation the plaintiffs had "from 1998 to present, " the plaintiffs listed the following relevant attorneys and/or law firms: (1) Greensfelder-March 1995 to May 2006, (2) Stinson- April 2006 to present, and (3) Padberg-March 2007 to January 2009. Further, Greensfelder attached an excerpt from the deposition of Trevor Axford, M.D., to its motion to compel. In this deposition excerpt, Dr. Axford testified that attorney Sharon Daily was the only attorney present on behalf of the plaintiffs during negotiations that took place between the plaintiffs and its employee doctors prior to the institution of the Missouri litigation.

         ¶ 15 As previously discussed, prior to any hearing on Greensfelder's motion to compel, the plaintiffs filed the operative complaint, with leave of court, on May 4, 2015. Although Greensfelder's answer and affirmative defenses to the third amended complaint do not appear in the record, the plaintiffs acknowledged that Greensfelder filed this document in the plaintiffs' memorandum in support of its motion to strike affirmative defenses, which the plaintiffs filed on June 4, 2015.[5] From the plaintiffs' memorandum in support of its motion to strike Greensfelder's affirmative defenses, this court is able to glean that Greensfelder raised several affirmative defenses to the plaintiffs' third amended complaint. First, Greensfelder alleged the settlement agreement between the parties in the Missouri litigation released Greensfelder from liability, constituted waiver, was an accord and satisfaction of any liability on the part of Greensfelder, and estopped the plaintiffs from asserting claims against Greensfelder. Second, Greensfelder alleged the negligence of the plaintiffs' attorneys leading up to and throughout the Missouri litigation and its settlement caused or contributed to cause the plaintiffs' damages. Third, Greensfelder alleged the plaintiffs filed suit outside of a two-year statute of limitations, although according to the plaintiffs' motion to strike, Greensfelder did not specify which statute of limitations applied to the plaintiffs' causes of action.

         ¶ 16 On June 5, 2015, SSM filed a motion to dismiss the counts of the complaint that alleged causes of action against SSM, pursuant to section 2-619.1 of the Code of Civil Procedure (Code). 735 ILCS 5/2-619.1 (West 2014). In the motion to dismiss, SSM argued, inter alia, that the plaintiffs' claims against SSM were barred by the release in the Missouri litigation, dated June 29, 2007, as well as by the two-year statute of limitations and/or the six-year statute of repose for causes of action based on legal malpractice set forth in section 13-214.3 of the Code. 735 ILCS 5/13-214.3 (West 2014).[6]

         ¶ 17 On June 30, 2015, following a hearing on pending motions, the circuit court entered an order that, inter alia, denied the plaintiffs' motion to strike Greensfelder's affirmative defenses and took Greensfelder's motion to compel under advisement. On July 13, 2015, the circuit court entered an order granting Greensfelder's motion to compel, but made no findings of fact or conclusions of law. Reading this order in conjunction with Greensfelder's motion to compel, the effect of this order was to compel the plaintiffs to produce all items on Daily, Stinson, and Padberg's privilege logs. On August 3, 2015, the plaintiffs filed a motion to reconsider the circuit court's ruling on Greensfelder's motion to compel or, in the alternative, an objection to the production of privileged documents and request for an order of friendly contempt. On August 18, 2015, the circuit court entered an order denying the plaintiffs' motion to reconsider and finding the plaintiffs to be in contempt of court for failing to produce the documents at issue. On September 10, 2015, the circuit court entered an order modifying the August 18, 2015, order to reflect a $50 fine to be imposed upon the plaintiffs due to their contempt in failing to produce the documents at issue. On September 11, 2015, the plaintiffs filed a notice of appeal.

         ¶ 18 ANALYSIS

         ¶ 19 Because the issues on appeal concern the application of privilege rules in discovery, our standard of review is de novo. See Center Partners, Ltd. v. Growth Head GP, LLC, 2012 IL 113107, ¶ 27 (citing Norskog v. Pfiel, 197 Ill.2d 60, 71 (2001)). The plaintiffs assert that the issue on appeal is whether the circuit court properly ordered production of the documents at issue based on the plaintiffs' waiver of "the attorney-client, work product, and accountant-client privileges." However, in the remainder of their brief, the plaintiffs limit their analysis and citation to authority to the issue of whether the plaintiffs waived the attorney-client privilege as to those documents, making no argument and citing no authority specific to the work product and accountant-client privileges. Illinois Supreme Court Rule 341(h)(7) (eff. July 1, 2008) provides that the appellant's brief must contain contentions along with citations to the authorities and pages in the record relied upon. "A failure to cite relevant authority violates Rule 341 and can cause a party to forfeit consideration of the issue." Kic v. Bianucci, 2011 IL App (1st) 100622, ¶ 23. "However, a court may consider improperly raised issues in the interest of finding a just result because Rule 341 is not a limitation on the court's jurisdiction, but an admonishment to the parties." Id. In the interest of judicial economy as to the resolution of the discovery issues on appeal, we choose to address the applicability of the doctrine of waiver as it applies to all three privileges that have been asserted by the plaintiffs.

         ¶ 20 "Both attorney-client privilege and work product are provided for in our Rule 201(b)(2)." Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill.2d 178, 189 (1991) (citing Ill. S.Ct R. 201(b)(2) (eff. Aug. 1, 1989)). "However, they are separate and distinct protections and waiver of one does not serve as waiver of the other." Id. The accountant-client privilege was created by statute (225 ILCS 450/27 (West 2014)) and is, therefore, also a separate and distinct privilege. Accordingly, we will ...

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