United States District Court, N.D. Illinois, Eastern Division
URBAN 8 FOX LAKE CORPORATION, URBAN 8 ZION CORPORATION, Plaintiffs,
NATIONWIDE AFFORDABLE HOUSING FUND 4, LLC, SCDC, LLC, WENTWOOD CAPITAL ADVISORS, LP, Defendants.
MEMORANDUM OPINION AND ORDER
Jeffrey Cole United States Magistrate Judge.
case proves, exaggerated and improper claims of
attorney-client privilege continue to impermissibly affect
discovery specifically and the adversarial process generally.
See the discussion in Motorola Sols., Inc. v. Hytera
Commc'ns Corp., 2018 WL 1804350, at *1 (N.D. Ill.
2018). Unfortunately, such claims are too often
indiscriminately applied to "documents that do not truly
qualify for protection." Towne Place Condo.
Ass'n v. Philadelphia Indem. Ins. Co., 284 F.Supp.3d
889 (N.D. Ill. 2018). See also Dietz & Watson, Inc.
v. Liberty Mut. Ins. Co., 2015 WL 2069280, at *6 (E.D.
Pa. 2015); Falin v. Condo. Ass'n of La Mer Estates,
Inc., 2012 WL 760831, at *1 (S.D. Fla. 2012);
Employer's Reinsurance Corp. v. Clarendon Nat. Ins.
Co., 213 F.R.D. 422, 430 (D. Kan. 2003). See
Motorola Solutions, Inc. v. Hytera Corp., 2018 WL
1281393 (N.D. Ill. 2018). [Dkt. #128]. Often, the excessive
and improper claims are later abandoned when a party is
challenged and is required to properly support the claims.
But that is too little too late, when viewed from the
deterrent purposes of sanctions.
defendants, after a couple of, to say the least, missteps,
Urban 8 Fox Lake Corp., supra, 2019 WL
6208107, have finally submitted a collection of fifty-eight
documents, along with the required privilege log, and asked
that the court conduct an in camera review of those
documents to determine whether defendants' claims that
they are protected from discovery by the work product
doctrine, the attorney-client privilege, or both, are valid.
Plaintiffs have lodged challenges to the defendant
withholding a number of documents on a handful of grounds.
[Dkt. # 129, at 6-8]. As those are the only ones at issue,
they will be the only ones reviewed and assessed.
See Exhibits Nos. 5, 6, 7, 8, 11, 12, 13, 14, 15,
16, 17, 18, 19, 21, 22, 23, 24, 25, 27, 28, 30, 31, 34, 35,
37, 38, 39, 42, 43, 44, 45, 48, 49, 50, 51, 52, 53, 54, 57,
60. After reconsideration of defendants' previous
submissions, and review of the present group of documents
along with the current version of the defendants'
privilege log, the defendants' motion is denied in full.
All of the foregoing challenged documents must be produced.
begin with the undisputed aphorism that the attorney-client
privilege is one of the oldest and most widely recognized
privileges of confidential communication. Swidler &
Berlin v. United States, 524 U.S. 399, 403 (1998). It is
intended to "encourage full and frank communication
between attorneys and their clients and thereby promote
broader public interests in the observance of law and
administration of justice." Upjohn Co. v. United
States, 449 U.S. 383, 389 (1981). Not all communications
between the attorney and the client are privileged; "the
privilege is in derogation of the search for the truth and,
therefore, must be strictly confined." In re Grand
Jury Proceedings, 220 F.3d 568, 571 (7th Cir.2000). The
privilege adheres "only if [the communications]
constitute legal advice, or tend directly or indirectly to
reveal the substance of a client confidence."
United States v. Defazio, 899 F.2d 626, 635
(7th Cir.1990). The attorney-client privilege only shields
communications that were intended to be confidential, so
communications made to an attorney in the presence of a third
party or made with the intent that they will be disclosed to
a third party are not privileged. United States v.
Evans, 113 F.3d 1457, 1462 (7th Cir.1997); United
States v. White, 950 F.2d 426, 430 (7th Cir.1991). The
Seventh Circuit has articulated the following test for
determining whether the attorney-client privilege attaches to
(1) Where legal advice of any kind is sought (2) from a
professional legal adviser in his capacity as such, (3) the
communications relating to that purpose, (4) made in
confidence (5) by the client, (6) are at his instance
permanently protected (7) from disclosure by himself or by
the legal adviser, (8) except the protection be waived.
Evans, 113 F.3d at 1461 (quoting 8 John Henry
Wigmore, Evidence in Trials at Common *217 Law § 2292
work product doctrine is broader than the attorney-client
privilege and protects from discovery "documents and
tangible things that are prepared in anticipation of
litigation." Fed.R.Civ.P. 26(b)(3)(A); United States
v. Nobles, 422 U.S. 225, 238 (1975). The work product
doctrine shields "material prepared by agents for the
attorney as well as those prepared by the attorney
himself." Nobles, 422 U.S. at 238-39. "The
mere fact that litigation does eventually ensue does not, by
itself, cloak materials . . . with the work product
privilege; the privilege is not that broad." Binks
Mfg. Co. v. National Presto Indus., Inc., 709 F.2d 1109,
1118 (7th Cir. 1983); Logan v. Commercial Union
Ins. Co., 96 F.3d 971, 976 (7th Cir. 1996). To identify
work product, courts are directed to determine "whether
in light of the factual context the document can fairly be
said to have been prepared or obtained because of the
prospect of litigation." Logan, 96 F.3d 971,
976-77 (quoting Binks, 709 F.2d at 1119) (internal
quotation marks omitted). Materials created in the ordinary
course of business which may have the incidental effect of
being helpful in litigation are not privileged under the work
product doctrine. Fed.R.Civ.P. 26(b)(3) (1970 Committee
Notes); RBS Citizens, N.A. v. Husain, 291
F.R.D. 209, 217-18 (N.D. Ill. 2013); Heriot v.
Byrne, 257 F.R.D. 645, 663 (N.D.Ill.2009).
next bit is important, especially given what we are dealing
with, and have been dealing with, in this case. See the
discussion in Urban 8 Fox Corporation, 2019 WL 6208107
(N.D.Ill. 2019). It cannot be stressed enough that there is
no presumption in favor of finding a document to be immune
from discovery under either the attorney-client privilege or
the work product doctrine. Both evidentiary privileges
operate in derogation of the search for the truth and run
counter to the public's right to every person's
evidence. Swidler & Berlin v. United States, 524
U.S. 399, 411 (1998); United States v. Nixon, 418
U.S. 683, 709 (1974); United States v. BDO Seidman,
LLP, 492 F.3d 806, 815 (7th Cir. 2007); In re Grand
Jury Proceedings (Thullen), 220 F.3d 568, 571 (7th Cir.
2000). Accordingly, courts have always construed the
privilege narrowly, Swidler & Berlin, 524 U.S,
at 411, "unless to do so will serve a public good
transcending the normally predominant principle of utilizing
all rational means for ascertaining truth."
Shaffer, 662 F.3d at 446. The party hoping to
withhold evidence from the proceedings - and, to degrees that
vary from case to case, thwart the fact-finders' efforts
at uncovering the truth - necessarily has the burden of
establishing the applicability of the privilege it asserts
on a document-by-document basis. Blanket claims of
privilege are impermissible in all contexts. Shaffer v.
Am. Med. Ass'n, 662 F.3d 439, 446 (7th Cir. 2011);
Logan, 96 F.3d at 977; Binks Mfg., 709 F.2d
at 1119. The defendants have certainly fallen short of that
first step in the resolution of any legal problem is
ascertaining the factual background and sifting through the
facts with an eye to the legally relevant."
Upjohn, 499 U.S. at 390-91. Unfortunately, neither
the defendants' "Resubmission of Defendants'
Privilege Log" [Dkt. # 127] nor their previous try, the
"chart" meant to accompany their "Motion for a
Protective Order" [Dkt. ## 76, 83], provide much in the
way of context for the five dozen or so documents now
deposited with the court after the defendants' initial
noncompliance. This is surprising, because in the Order of
November 13th allowing defendants a chance to
"fix" their previous inadequate - and late -
privilege log, defendants were directed to comply with
RBS Citizens, N.A. v. Husain, 291 F.R.D. 209 (N.D.
Ill. 2013). [Dkt. # 120, at 10]. There, the court
distilled a template for privilege logs from the cases in
Courts in this district have required that a privilege log
identify for each separate document the following
information: the date, the author and all recipients, along
with their capacities, the subject matter of the document,
the purpose for its production and a specific explanation of
why the document is privileged. This information must be
sufficiently detailed to allow the court to determine whether
the party asserting the privilege has discharged its burden
of establishing the applicability of the privilege.
291 F.R.D. at 218. Defendants have seemingly ignored that
part of the previous Order as well as the applicable case law
mentioned in that Order. Defendants' log provides no
dates, only sporadically identifies author and capacity, and
generally mentions only Mr. Brandstetter - defendants'
in-house counsel- as recipient despite most documents having
understandably argues that these deficiencies constitute a
waiver as to the claims of protection for all the documents.
Plaintiff has a point. Plaintiffs are supposed to be able to
"assess the claim" of privilege based on the
defendants" privilege log, Fed. R. Civ.P.
26(b)(5)(A)(ii), but without any dates for when documents
were created, that's virtually impossible. Especially
given that the defendants completely bollixed their first
attempt; if a blanket waiver of the privilege should ever be
found based on an inadequate or late privilege log, it ought
to be found in this case.
given the hoary nature of these evidentiary privileges,
courts have been hesitant to find such sweeping waivers,
however poorly a privilege log has been put together.
See, e.g., Sandra T.E. v. S. Berwyn Sch. Dist,
100, 600 F.3d 612, 623 (7th Cir. 2010); Belcastro v.
United Airlines, Inc., 2019 WL 1651709, at *5 (N.D. Ill.
Apr. 17, 2019)(collecting cases); Monco v. Zoltek
Corp., 317 F.Supp.3d 995, 1000 (N.D. Ill.
2018)(collecting cases). And, although one won't usually
see an effort as deficient as what we have here, especially
after two tries, the court won't go so far as to find a
global waiver here. After sifting through the hundreds of
pages of documents the court is able to, for the most part,
piece the necessary information together. But, of course, the
point is that doing so is the advocate's job, not the
court's, Dal Pozzo v. Basic Mach. Co., 463 F.3d
609, 613 (7th Cir. 2006). Moreover, all of it -
the lateness of the first privilege log, the inadequacies of
the first privilege log, the inadequacies of the second
privilege log, and the ridiculous claims of privilege the
first time around, see Appendix - all necessarily go
into the calculus of our in camera review.
so does defense counsel's disturbing concession that
there was no final review of the documents submitted for
in camera inspection the first time around.
Defendants' attorneys tell the court that they had an
outside vendor and staff put together the final submission,
and that their assurances were all counsel needed before
dumping the mess on the court. [Diet. #130, at
3-4]. Such a claim is unacceptable and contrary
to the minimal standards required of counsel advancing claims
of attorney-client privilege, such a claim is deeply
troubling and, if true, contrary to the minimal standards
required of counsel seeking to advance a claim of
attorney-client privilege. Thus, the defendants don't
fare well at all, and plaintiffs ought not be too
disappointed that the court doesn't accept their
invitation to find a global waiver as the defendants'
efforts, or lack thereof, get the plaintiffs to the same
place in the end.
main, the documents the defendants have submitted appear to
pertain to the parties' negotiations regarding the
exercise of the Purchase Options and the parties'
competing valuations of the properties. These documents
appeared to have been created from 2015 through 2017.
Obviously, the plaintiffs, seeking to exercise the options,
are arguing for lower evaluations than the defendants. While
all of the documents seemingly focus on property valuation, a
block of them are directed to what defendants felt were
overcharges by their property management companies. These
overcharges somehow entered into the valuations. None of this
is explained by the defendants or placed in the context of
the current litigation, [Dkt. # 76, at 8-10; # 124, at 2-3].
event, disputes about valuation and overcharges are common
and are part of the ordinary course of business. They
don't necessarily end up in court, The question becomes
whether the financial disagreement during negotiation means
that the documents, which were prepared as a part of and to
assist in those negotiations, were truly prepared in
anticipation of litigation. Or, whether gathering financial
information to go back and forth on a purchase price is work
in a legal or a business capacity. Importantly, the attorney
involved in these exchanges, often no more than peripherally,
is in-house counsel. As such, the defendants are
"treading in an area of privilege law that is generally
recognized to be 'especially difficult,' namely,
distinguishing in-house counsels' legal advice from their
business advice." Am. Nat. Bank & Tr. Co. of
Chicago v. Equitable Life Assur. Soc. of U.S., 406 F.3d
867, 879 (7th Cir. 2005); see also Smith v. Bd. of
Education of City of Chicago, 2019 WL 2525890, at *2
(N.D. Ill. June 19, 2019)(". . . courts presume that
where in-house counsel is involved, "the attorney's
input is more likely business rather than legal in
nature."); Parneros v. Barnes & Noble,
Inc., 2019 WL 4891213, at *4 (S.D.N.Y, Oct. 4,
2019)(". . . given that privilege obstructs the
truth-finding process and its scope is limited to that which
is necessary to achieve its purpose ...the need to apply it
cautiously and narrowly is heightened in the case of
corporate staff counsel, lest the mere participation of an
attorney be used to seal off disclosure."); In re
Cty. of Erie, 473 F.3d 413, 421 (2nd Cir.
2007)("... in-house attorneys are more likely to mix
legal and business functions."); Neuberger Berman
Real Estate Income Fund, Inc. v. Lola Brown Trust No.
1B, 230 F.R.D. 398, 411 n. 20 (D.Md.2005) ("While
courts state that they do not intend to weaken the privilege
[by imposing a "higher burden on in-house counsel to
'clearly demonstrate'" that counsel was giving
legal advice], they are mindful that corporate clients could
attempt to hide mountains of otherwise discoverable
information behind a veil of secrecy by using in-house legal
departments as conduits of otherwise unprivileged
the distinction is not easy to draw, generally speaking,
"legal advice, as contrasted with business advice,
'involves the interpretation and application of legal
principles to guide future conduct or to assess past
conduct'" and "[w]here business and legal
advice are intertwined, the legal advice must predominate for
the communication to be protected." BankDirect
Capital Fin., LLC v. Capital Premium Fin., Inc., 326
F.R.D. 176, 181 (N.D. Ill. 2018)(collecting cases). In the
main, it must be said that review of the documents at issue
here show that financial considerations - how to value
properties to get the best financial result in the purchase
options - tends toward financial advice and activity and away
from legal. That these documents, even those prepared
personally by in-house counsel Mr. Brandstetter, are business
documents and not legal ones is underscored by the fact that,
in many instances, Mr. Brandstetter, attorney for defendants,