CSI Worldwide, LLC v. Trumpf, Inc.
| Docket Number | 18 CV 5900 |
| Decision Date | 08 September 2023 |
| Parties | CSI WORLDWIDE, LLC, Plaintiff, v. TRUMPF, INC., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Virginia M. Kendall Judge
Defendant TRUMPF, Inc. has filed a motion to compel, (Dckt. #84) seeking an order compelling plaintiff CSI Worldwide, LLC (“CSI”) to produce documents and present four witnesses for deposition, including two attorneys who served as CSI's counsel for bankruptcy proceedings involving non-party Lynch Exhibits, Inc. (“Lynch”). For the reasons set forth below, TRUMPF's motion is denied.
TRUMPF is a manufacturer of specialty machinery, which it showcases at tradeshows. CSI is in the business of providing labor for the installation and dismantling of tradeshow exhibits for companies like TRUMPF. In June 2017, according to CSI, representatives of TRUMPF and CSI met with representatives from Lynch to discuss TRUMPF's desire to participate in the 2017 Fabtech tradeshow in Chicago. Among other things, the parties discussed Lynch designing and engineering TRUMPF's exhibit for Fabtech, and CSI providing the onsite labor to build and dismantle the exhibit after the show.
Shortly after the initial meeting, Lynch informed CSI that TRUMPF and Lynch had entered into an agreement whereby Lynch would provide tradeshow services for Fabtech, among other tradeshows. Lynch further informed CSI that TRUMPF wanted CSI to provide the onsite labor for Fabtech. At that time, “because Lynch had a reputation of having poor credit, CSI informed Lynch that CSI would only provide the labor for TRUMPF for the Fabtech trade show as a ‘direct bill;' that is CSI would bill TRUMPF directly and TRUMPF would pay CSI directly.” (Dckt. #1 at 3). In response, a Lynch representative provided a CSI representative with “official notice” via email that CSI was the labor partner for TRUMPF and that CSI was to invoice TRUMPF directly for CSI's work at Fabtech. (Id). According to CSI's allegations, this contention was reiterated at meetings with TRUMPF and TRUMPF never took issue with the plan for direct billing. There is no dispute, however, that CSI was not a signatory to the tradeshow agreement between TRUMPF and Lynch. Ultimately, CSI performed the onsite labor services for TRUMPF's exhibit at the Fabtech show to the tune of $529,830.09.
When CSI submitted its invoices to TRUMPF to collect for its services provided at Fabtech, TRUMPF informed CSI that it had already paid Lynch for CSI's services and that CSI must collect from Lynch directly. When CSI's efforts to collect from Lynch failed, CSI - along with two other creditors - filed an involuntary bankruptcy petition against Lynch in February 2018 in the United States Bankruptcy Court for the Northern District of New Jersey. In it, CSI -through attorney Arthur Abramowitz - asserted a claim against Lynch for approximately $530,000 for “goods delivered and/or services rendered.” (Dckt. #84-3). In signing the petition, attorney Abramowitz attested with “a reasonable belief' that the information provided was “true and correct.” (Id.).
Subsequently, Lynch filed a petition for voluntary bankruptcy, in which CSI - this time through attorney John Rendemonti “under penalty of perjury” - filed a proof of claim in June 2015 for the same Fabtech services and amount of debt. (Dckt. #84-4). In later objecting to the liquidation plan in the voluntary bankruptcy proceeding, CSI stated that “it is believed that . . . Trumpf may have paid to [Lynch] the money to which CSI was entitled” and “ if Trumpf did in fact pay to [Lynch] the money to which CSI was owed by the assignment . . . then the money that was paid to [Lynch] by Trumpf is money that is held in trust by [Lynch] for CSI.” (Dckt. #24-6) (emphasis added).
In August 2018, CSI filed this case against TRUMPF seeking to recover the $529,830.09 still remaining due for CSI's services at Fabtech based on claims for promissory estoppel, payment over notice of assignment, unjust enrichment, and breach of contract. In response, TRUMPF filed a motion to dismiss, (Dckt. #13), arguing, inter alia, that based on CSI's prior sworn statements in the bankruptcy proceedings that Lynch owed CSI for its services at Fabtech, CSI should be judicially estopped from now taking the inconsistent position that TRUMPF owes CSI. District Court Judge Norgle agreed and dismissed this action on judicial estoppel grounds. (Dckt. #32). However, CSI appealed and, as discussed in more detail below, the Seventh Circuit reversed Judge Norgle's opinion, finding that CSI's claim against TRUMPF here was neither blocked by judicial estoppel nor contrary to CSI's prior claim against Lynch. CSI Worldwide, LLC v. TRUMPF Inc., 944 F.3d 661, 663 (7th Cir. 2019).
Upon remand, the parties proceeded with discovery, during which TRUMPF took the depositions of Thomas McLaughlin (CSI's Principal) and Dave Centrowitz (CSI's CEO). During those depositions, McLaughlin and Centrowitz both testified regarding their belief that CSI had a direct bill relationship with TRUMPF for the Fabtech show due to Lynch's “terrible” credit history. (See, e.g., Dckt. #84-1 (McLaughlin Dep. Tr.) at 4 (“[I]t's obviously a direct bill because we don't work with Lynch”); at 6 ( ); at 7 ( ); .
TRUMPF also served document production requests on CSI which demanded the production of all documents and communications related to Lynch's involuntary and voluntary bankruptcy proceedings. In response, CSI produced all non-privileged documents in its possession that are responsive to the requests in question, withheld other communications under the attorney-client and work product privileges, and provided a privilege log describing the privileged communications as required by Rule 26. (Dckt. #92-4 at 3; Dckt. #84-6).
Discovery closed in this matter on February 3, 2023. During a February 9, 2023 status hearing, the parties reported that they had finished discovery and TRUMPF's counsel indicated that he wanted to file a discovery motion related to the recent depositions of McLaughlin and Centrowitz “to address a question of attorney-client privilege and whether or not it applies or has been waived.” (Dckt. 87 at 3). The District Court granted TRUMPF leave to file the motion and set a briefing schedule. (Id.).[1]
In its motion to compel, TRUMPF cites to the deposition testimony of McLaughlin and Centrowitz that CSI would never directly bill Lynch and asserts that CSI made knowingly false and fraudulent statements in the Lynch bankruptcy proceedings when CSI's representatives “swore under penalty of perjury that it was Lynch - not TRUMPF - who owes CSI the $529,830.09 for the services CSI performed at the FABTECH show in November 2017.” (Dckt. #84 at 11). As such, TRUMPF argues that CSI's communications with its attorneys regarding the Lynch bankruptcy proceedings fall within the crime-fraud exception to the attorney-client privilege. TRUMPF further asserts that CSI has waived the attorney-client privilege by placing the communications at issue in this litigation. TRUMPF asks the Court to compel: (1) CSI to produce all previously withheld privileged communications related to the Lynch bankruptcy proceedings; (2) compel the continued depositions of McLaughlin and Centrowitz so that TRUMPF can question them about those privileged communications; and (3) compel the depositions of CSI's bankruptcy attorneys Arthur Abramowitz and John Rendemonti regarding their communications with CSI related to the Lynch bankruptcy proceedings.
CSI responds that neither the crime-fraud exception nor the waiver doctrine are applicable here, and that TRUMPF is simply attempting to re-hash a position already rejected by the Seventh Circuit. For the reasons set forth below, the Court agrees.
The purpose of the attorney-client privilege “is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice.” McCullough v. Fraternal Ord. of Police, Chicago Lodge 7, 304 F.R.D. 232, 236 (N.D.Ill. 2014). Because “the privilege is in derogation of the search for truth,” it is narrowly construed and applies “only where necessary to achieve its purpose.” United States v. BDO Seidman, LLP, 492 F.3d 806, 815 (7th Cir. 2007) (internal quotations and citations omitted); United States v. Lawless, 709 F.2d 485, 487 (7th Cir. 1983) (). The party asserting the attorney-client privilege has the burden of establishing all essential elements of the privilege and that it has not been waived. Lawless, 109 F.2d at 487; Square D Co. v. E.I. Elecs., Inc., 264 F.R.D. 385, 390 (N.D.Ill. 2009).
Here TRUMPF does not dispute that the communications it seeks related to the Lynch bankruptcy proceedings are covered by the privilege. Rather, TRUMPF contends that: (1) the crime-fraud exception to the privilege applies; and/or (2) that CSI has implicitly waived the protection of the privilege...
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