Bankdirect Capital Fin., LLC v. Capital Premium Fin., Inc.

• Decision Date: 03 August 2018
• Docket Number: No. 15 C 10340,15 C 10340
• Parties: BANKDIRECT CAPITAL FINANCE, LLC Plaintiff, v. CAPITAL PREMIUM FINANCE, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

BANKDIRECT CAPITAL FINANCE, LLC Plaintiff, v. CAPITAL PREMIUM FINANCE, INC., Defendant.

No. 15 C 10340

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

August 3, 2018

Judge John Lee

Magistrate Judge Jeffrey Cole

MEMORANDUM OPINION

Although the case is now in its fourth year, the parties continue to have disputes about discovery. Little wonder that Judge Posner called "protracted discovery" the "bane of modern litigation." Rossetto v. Pabst Brewing Co., Inc., 217 F.3d 539, 542 (7th Cir.2000). See also A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1013 (4th Cir. 1986).

Fact discovery was originally set to close by the parties' choice - they demanded an "expedited discovery schedule" [Dkt. #24] - on July 31, 2017. [Dkt. #63]. The parties took until December 7, 2016 - nearly a year into the case - to agree on that deadline and their overall schedule. They asked that the schedule be modified a week and a half later. [Dkt. #64]. A month and a half after that, on January 30, 2017, Capital Premium Finance sought and was granted an extension of the schedule, with fact discovery set to close on August 29, 2017. [Dkt. # 68, 71]. That date came and went, and the parties requested and were allowed another extension to May 13, 2018. [Dkt. #142, 171]. BankDirect was given three additional weeks, to June 6th, to finish certain document production. [Dkt. #252]. But, the disputes continued, and near constant court intervention has been necessary. [Dkt. #207, 209, 212, 223, 224, 225, 227, 229, 231, 239, 241, 252, 254, 255, 256, 262, 263, 264].

But, the end- or at least the beginning of the end - is perhaps in sight. Pursuant to the parties' request and my Order of June 25, 2018 [Dkt. #255], Capital Premium Finance has submitted 143 documents for in camera review and evaluation of its claims of attorney-client privilege as to redacted portions of those documents.¹ It should be said that, in the grand scheme of federal litigation discovery disputes, the current attorney/client privilege dispute is restrained and quite reasonable. This fact tends to support the good faith of Capital Premium Finance's limited and restrained assertion of the privilege as to these materials because far more common is the sweeping, broad assertion of the privilege as to hundreds, if not thousands, of documents. Moreover, there are actually far fewer than 143 email chains at issue because each document reflects the then-current step in each chain. In other words, one single email exchange might give rise to 7 or 8 documents as individuals respond. While the amount of redactions are actually fewer than initial appearances might suggest, this manner of presenting the email chains hinders an accurate and consistent review of the redactions with duplicate redactions appearing anywhere among the 1500 or so total pages of materials.

Only the redacted portions of those documents are at issue, with the redactions in the versions provided to the court having been set out "transparently" and quite clearly in gray boxes. As we have said, the documents are email chains regarding the drafting of the suite of agreements - which the parties call the "Transaction Facility" - that gave rise to this litigation and attached drafts of the agreements from various stages of their negotiation. The emails were exchanged among five individuals: attorneys Rick Taggert and James Kruse from the firm of Kruse Landa Maycock &Ricks, LLC, whom Capital Premium Finance retained to assist with the drafting and negotiation of the Transaction Facility; Jeff Guylay, the Managing Director of investment bank, Colonnade Advisors, whom Capital Premium Finance retained to assist with the drafting and negotiation of the Transaction Facility; Scott Crowley, Capital Premium Finance's chief financial officer; and Chris Chidester, Capital Premium Finance's corporate controller. BankDirect argues that the documents cannot be privileged because they involve "a non-attorney third party," Mr. Guylay, and his input was not necessary for Capital Premium Finance's counsel to provide legal, as opposed to business, advice to Capital Premium Finance. [Dkt. #264, at 2, 5-6].

A.

The attorney-client privilege protects from discovery confidential communications between client and attorney that were made in order to obtain legal assistance. Fisher v. United States, 425 U.S. 391, 403 (1976); United States v. Bey, 772 F.3d 1099, 1101 (7th Cir. 2014); United States v. Leonard-Allen, 739 F.3d 948, 95253 (7th Cir. 2013). The burden of proof is on the party claiming privilege. Shaffer v. AMA, 662 F.3d 439, 446 (7th Cir. 2011); Comtide Holdings, LLC v. Booth Creek Mgmt. Corp., 2010 WL 5014483, at *3 (S.D. Ohio 2010). Whether the privilege exists is a fact-intensive inquiry, In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir. 2000), and cannot be solved by simply looking to the identity of the sender or recipient of a communication, In re: Subpoena Upon Nejame Law PA, 2016 WL 3125055 at *3 (N.D. Ill. 2016), for the lawyer-client relationship, itself, "does not create 'a cloak of protection which is draped around all occurrences and conversations which have any bearing, direct or indirect, upon the relationship of the attorney with his client.'" In re Walsh, 623 F.2d 489, 494 (7th Cir. 1980). See also Burden-Meeks v. Welch, 319 F.3d 897, 899 (7th Cir. 2003); Motorola Sols., Inc. v. Hytera Commc'ns Corp., 2018 WL1804350, at *4 (N.D. Ill. 2018).

The existence and scope of the privilege is defined by its purpose, which is "to encourage clients to make full disclosure to their attorneys." Leonard, 739 F.3d at 953; see also Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998). Thus, "[i]t goes without saying that documents do not become cloaked with the lawyer-client privilege merely by the fact of their being passed from client to lawyer." United States v. Robinson, 121 F.3d 971, 974 (5th Cir.1997). See also United States v. Williams, 698 F.3d 374, 380 (7^th Cir. 2012)("'An individual cannot purchase anonymity by hiring a lawyer to deliver his money or his messages.'"). Phrased differently, there is no prima facie presumption of privilege. United States v. Ruehle, 583 F.3d 600, 608 (9th Cir. 2009. See also Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146, 1162 (D.S.C. 1974). Determinations of privilege are generally made on a document by document basis. United States v. Sakhanskiy, 2018 WL 2146047, at *2 (9th Cir. 2018). But see Fed. Deposit Ins. Corp. for Valley Bank v. Crowe Horwath LLP, 2018 WL 3105987, at *6 (N.D. Ill. 2018)(categories may suffice); Towne Place Condo. Ass'n v. Philadelphia Indem. Ins. Co., 284 F. Supp. 3d 889, 894 (N.D. Ill. 2018)( listing cases recognizing that sampling may be an appropriate technique under certain circumstances).

Similarly, communications from the attorney to the client are privileged if they constitute legal advice or would reveal the substance of a client confidence—directly or indirectly. See Carmody v. Bd. of Trustees of Univ. of Illinois, 893 F.3d 397 (7th Cir. 2018); Rehling v. City of Chicago, 207 F.3d 1009, 1019 (7th Cir. 2000); United States v. Defazio, 899 F.2d 626, 635 (7th Cir.1990); Vill. of Rosemont v. Priceline.com Inc., 2010 WL 4876217, at *3 (N.D. Ill. 2010); Koken v. American Patriot Insurance Agency, Inc., 2007 WL 914251 at *2 (N.D.Ill.2007):Bell Microproducts, Inc. v. Relational Funding Corp., 2002 WL 31133195 (N.D.Ill.2002) (Shadur, J.).The question is always whether the "primary" or "predominant purpose" of the communication is to render or solicit legal advice. See E.E.O.C. v. BDO USA, L.L.P., 876 F.3d 690, 695 (5th Cir. Insert); Towne Place Condo. Ass'n v. Philadelphia Indem. Ins. Co., 284 F. Supp. 3d 889, 893 (N.D. Ill. 2018);Skyline Wesleyan Church v. California Dep't of Managed Health Care, 322 F.R.D. 571, 584-85 (S.D. Cal. 2017).

Because the privilege operates "in derogation of the search for truth," it is narrowly construed, Fisher v. United States, 425 U.S. 391, 403 (1976). It applies only where necessary to achieve its purpose. Id. See also United States v. BDO Seidman, LLP, 492 F.3d 806, 815 (7th Cir.2007); Shaffer v. AMA, 662 F.3d 439 (7^th Cir. 2011). "W]here this purpose ends, so too does the protection of the privilege," Wachtel v. Health Net, Inc., 482 F.3d 225, 231 (3d Cir.2007).

B.

In this case, the parties' dispute focuses on the distinction between "business" advice and "legal" advice. This critical distinction is often not an easy one to make - line drawing in any area seldom is, see, e.g., NIFLA v. Becerra, ___U.S.___, 138 S.Ct. 2361, 2373 (2018) - even allowing for the imprecision inherent in language. Indeed, it can be quite difficult. Am. Nat. Bank & Tr. Co. of Chicago v. Equitable Life Assur. Soc. of U.S., 406 F.3d 867, 879 (7th Cir. 2005). Accord In re Lindsey, 148 F.3d 1100, 1123 (D.C. Cir. 1998); United States v. Louisiana, 2015 WL 4619561, 4 (M.D.La. 2015)(quoting American Nat'l Bank & Trust); Brainware, Inc. v. Scan-Optics, Ltd., 2012 WL 2872812, n. 3 (E.D.Vir. 2012). But that difficulty is not, of course, an insuperable bar to decision. As always, the touchstone of the inquiry is whether the purpose of the communication is "generated for the purpose of obtaining or providing legal assistance." In re County of Erie, 473 F.3d 413, 419 (2d Cir. 2007). For example it has been said that legal advice, as contrasted with businessadvice, "involves the interpretation and application of legal principles to guide future conduct or to assess past conduct." Id. Courts have held that "[w]here business and legal advice are intertwined, the legal advice must predominate for the communication to be protected." Neuder v. Battelle Pac. Nw. Nat'l Lab., 194 F.R.D. 289, 292 (D.D.C. 2000); see also Equal Employment Opportunity Comm'n v. BDO USA, L.L.P., 856 F.3d 356, 364-65 (5th Cir. 2017); Great Plains Mut. Ins. Co. v. Mut. Reinsurance Bureau, 150 F.R.D. 193, 197 (D. Kan. 1993).

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