THE ROBERT R. McCORMICK FOUNDATION and THE CANTIGNY FOUNDATION, Plaintiffs-Appellants,
ARTHUR J. GALLAGHER RISK MANAGEMENT SERVICES, INC., Defendant-Appellee.
from the Circuit Court of Du Page County. No. 13-L-481,
Honorable Kenneth L. Popejoy, Judge, Presiding.
HUTCHINSON JUSTICE delivered the judgment of the court, with
opinion. Justices Zenoff and Birkett concurred in the
judgment and opinion.
1 These consolidated interlocutory appeals are a sequel to an
appeal we decided over two years ago, Robert R. McCormick
Foundation v. Arthur J. Gallagher Risk Management Services,
Inc., 2016 IL App (2d) 150303 (Foundations I).
In these appeals, however, we consider the scope of
attorney-client privilege and whether the trial court should
have granted a renewed request for a stay.
2 Plaintiffs, the Robert R. McCormick Foundation and the
Cantigny Foundation (the Foundations) sued their former
insurance broker, Arthur J. Gallagher Risk Management
Services, Inc. (Gallagher). The Foundations were formerly the
second largest shareholder group in the Tribune Company
(Tribune), a large multimedia corporation. The Foundations
sold their preferred stock for some $2 billion during a
leveraged buyout (LBO) of the company in 2007. Less than one
year after the transaction, Tribune filed for bankruptcy
protection. The buyout itself, as we noted in Foundations
I, left many Tribune creditors "holding the
proverbial bag." Id. ¶ 3.
3 After the LBO, in 2009, the Foundations hired Gallagher to
procure for them directors' and officers' (D&O)
liability insurance. Gallagher obtained $25 million in
D&O coverage for the Foundations through (what was
essentially) a single policy with Chubb Insurance (Chubb).
The Foundations allege that in 2010 Gallagher advised that
they could obtain the same coverage-
"apples-to-apples"-at a reduced premium with (what
was essentially) a $25 million policy from Chartis Insurance
(Chartis). The Foundations purchased the Chartis policy and
let the Chubb policy lapse.
4 Soon after Tribune exited bankruptcy in 2011 (see In re
Tribune Co., 464 B.R. 126 (Bankr. D. Del. 2011)),
aggrieved shareholders filed a number of federal suits across
the country against more than 5000 defendants; the suits were
eventually consolidated in the Southern District of New York.
See In re Tribune Co. Fraudulent Conveyance
Litigation, 831 F.Supp.2d 1371 (J.P.M.L. 2011). The
Foundations were named as defendants in three of the suits
(which remain ongoing, as we discuss below). These suits
generally allege that the Foundations- through their
directors and officers, and acting in concert with other
"controlling shareholders"- orchestrated the LBO
through actual and constructive fraud. Accordingly, the suits
seek to unwind the LBO and to claw back creditors' funds.
5 Relevant here, when the Foundations tendered the suits (the
LBO litigation) to Chartis under their D&O policy,
Chartis denied coverage under a policy exclusion for claims
"in any way relating to any purchase or sale of
securities." The Foundations, asserting that Chubb would
have defended and indemnified them under their former policy,
sued Gallagher for breach of contract and professional
negligence resulting in a loss of coverage. On
Gallagher's motion for summary judgment, the trial court
determined that an exclusion in the Chubb policy, too, would
have barred coverage for the LBO litigation. In
Foundations I, we held that the Chubb exclusion in
question did not necessarily bar coverage, and we reversed
the court's judgment. On remand, Gallagher tendered
several affirmative defenses and the parties proceeded with
6 During discovery, Gallagher subpoenaed the Foundations and
their legal counsel for, among other things, the following:
"1. Any reports or opinion letters prepared for *** the
Foundations *** relating to the Tribune Co. or the LBO.
2. Any and all communications related to the Foundations'
Director[s'] and Officers['] insurance policy or
3. Any and all communications with the Foundations related to
the Tribune Bankruptcy.
4. Any and all communications with the Foundations related to
the LBO Litigation."
Foundations indicated that there were documents and
electronic communications responsive to Gallagher's
request (and filing a roughly 40-page privilege log (see Ill.
S.Ct. R. 201(n) (eff. July 1, 2014)) but refused to tender
them, citing attorney-client privilege. The Foundations then
asked the court to quash the subpoenas or, in the
alternative, "stay or phase" the case until the
completion of the LBO ...