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The Solutions Team, Inc. v. Oak Street Health, MSO, LLC.

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

January 2, 2020

THE SOLUTIONS TEAM, INC., Plaintiff,
v.
OAK STREET HEATH, MSO, LLC, FOCUS SOLUTIONS, LLC, and BRUCE SCHAUMBERG, Defendants.

          Robert M. Dow, Jr. Judge

          MEMORANDUM OPINION AND ORDER

          JEFFREY I. CUMMINGS, UNITED STATES MAGISTRATE JUDGE

         On September 25, 2019, plaintiff The Solutions Team, Inc. (“TST”) filed a motion to compel (Dkt. 60) seeking an order requiring defendant Oak Street Health, MSO, LLC (“Oak Street”) to answer certain interrogatories, respond to certain document requests, and produce documents and/or unredacted copies of documents that were withheld based on an assertion of attorney-client privilege. After Oak Street filed its response (Dkt. 75), this Court held a motion hearing on November 21, 2019, ordered Oak Street to produce certain additional documentation sought by TST (namely, all contracts between Oak Street and CenturyLink dated from 2016 through the present), and otherwise denied TST's requests for supplemental answers and responses to its interrogatories and production requests (Dkt. 86). This Court further ordered Oak Street to submit for an in camera review documents that it refused to produce to TST based on its assertion that the documents are protected by the attorney-client privilege (Dkt. 86).

         On December 19, 2019, the Court held a second hearing on TST's motion. The Court ruled that certain documents concerning communications with Oak Street's in-house counsel Lee Lowenthal and other documents involving communications between non-attorney employees of Oak Street that reflected either information communicated to attorney Lowenthal for the purpose of receiving legal advice or legal advice rendered by him were indeed protected by the attorney-client privilege and were properly withheld (Dkt. 93). The Court also ordered that three other documents should be produced to TST because they contained discussions of business practices and not legal advice (Dkt. 93).

         Finally, the Court took under advisement the question of whether Oak Street waived its attorney-client privilege over documents that were shared with defendant Bruce Schaumberg - who is not an employee of Oak Street. This issue is governed by Illinois law in this diversity case and Oak Street bears the burden of establishing that the documents are privileged. Huntington Chase Condo. Ass'n v. Mid-Century Ins. Co., No. 16 C 4877, 2017 WL 440730, at *2 (N.D.Ill. Feb. 1, 2017). Oak Street makes a two-pronged argument based on principles of agency and the common interest doctrine to support its position that it did not waive its attorney-client privilege by sharing the documents with Schaumberg.

         I. Schaumberg's Agency with Oak Street Avoided Waiver of Oak Street's Attorney-Client Privilege.

         Oak Street asserts that Schaumberg acted as its agent with respect to its relationship with TST. Under Illinois law, the attorney-client privilege protects communications between a non-employee agent and a corporation if the agent is a member of the corporate principal's control group. Caremark, Inc. v. Affiliated Computer Servs., Inc., 192 F.R.D. 263, 267 (N.D.Ill. 2000); Trustmark Ins. Co. v. Gen. & Cologne Life Re of Am., No. 00 C 1926, 2000 WL 1898518, at *5 (N.D.Ill.Dec. 20, 2000). To make this showing, a corporation must establish that:

(1) the non-employee agent served as an advisor to top management of the corporate client; (2) this advisory role was such that the corporate principal would not normally have made a decision without the agent's opinion or advice; and (3) the agent's opinion or advice in fact formed the basis of the final decision made by those with actual authority within the corporate principal.

Caremark, 192 F.R.D. at 267; Trustmark, 2000 WL 1898518, at *3. Furthermore, even if a non-employee is not a member of the corporation's control group, the corporation's privilege remains intact if the non-employee serves as a “communicating agent” between control group members and legal counsel. Certain Underwriters at Lloyds v. Fid. & Cas. Co. of New York, No. 89 C 876, 1997 WL 769467, at *2 (N.D.Ill.Dec. 9, 1997).

         In its response, Oak Street submitted the declarations of Jason Van Den Eeden (its Chief Technology Officer) and Schaumberg (Dkt. 75-1) to support its argument that Schaumberg was its “communicating agent” and that he was also a member of its control group under the above test. In its reply brief, TST strongly denies that Schaumberg was ever an agent of Oak Street because he “never took on the indicia of an . . . agent” and was “merely an independent contractor providing consulting services to Oak Street” (Dkt. 91 at 6). TST further asserts that Schaumberg was neither a “communicating agent” nor a member of Oak Street's control group.

         After considering the parties' written submissions and their arguments on December 19, the Court finds as follows:

         First, the factual record provided by Oak Street's declarations establishes that Schaumberg acted as Oak Street's agent with respect to its dealings with TST. Moreover, even if this evidence were not considered, TST would be barred from disputing the fact of Schaumberg's agency by its second amended complaint, where TST alleges that “Schaumberg was acting as an agent of Oak Street Health” during the course of a series of communications between September 2016 and mid-January 2017 (Dkt. 67, at ¶¶ 119, 118). This allegation regarding Schaumberg's agency is a judicial admission that is “binding” upon TST. Soo Lin R. Co. v. St. Louis Sw. Ry. Co., 125 F.3d 481, 483 (7th Cir. 1997), quoting Keller v. United States, 58 F.3d 1194, 1198 n.8 (7th Cir. 1995).[1]

         Second, the Court finds that Oak Street has failed to carry its burden of proof of establishing that Schaumberg was a “communicating agent” between control group members and legal counsel as the case law requires. See Certain Underwriters at Lloyds, 1997 WL 769467, at *2. In Lloyds, the case Oak Street relies upon, the court found that the attorney-client privilege was not waived where “the communicating agent served to ‘facilitate, control and maintain' privileged communications with Chicago counsel” and the “agent formed the only effective way for Chicago Counsel to communicate with all of plaintiffs entities.” Id. There is no evidence that Schaumberg played such a role here. Consequently, his communications with TST on Oak Street's behalf (Dkt. 75 at 13), are insufficient to invoke the “communicating agent” exception to the waiver of privilege.

         Finally, the Court finds that the factual record provided by Oak Street's declarations establishes that Schaumberg meets the corporate control group test for agency. In particular, Van Den Eeden avers that: (i) Schaumberg spent “extensive time” consulting with Oak Street executives including Chief Financial Officer James Chow, Chief Operating Officer Geoff Price, and Vice President of Information Technology Keith Forshaw “about whether to terminate the TST contract before it automatically renewed and instead engage a new vendor”; (ii) Van Den Eeden and Forshaw “were both directly involved in the decision to terminate Oak Street Health's contract with TST”; (iii) in making this decision, Van Den Eeden and Forshaw “heavily relied on Schaumberg's expertise and recommendations”; and (iv) Oak Street's executives would not have made a decision of this nature without consulting with Schaumberg, and they relied on his advice and insights in coming to their decision with respect ...


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