Dawson v. New York Life Ins. Co., 94 C 1423.
| Decision Date | 29 September 1995 |
| Docket Number | No. 94 C 1423.,94 C 1423. |
| Citation | 901 F. Supp. 1362 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | Ronald D. DAWSON, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY and Nylife Securities, Inc., Defendants. |
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Thomas P. Sullivan, Thomas Shane O'Neill, Jenner & Block, Sherwin H. Leff, Leff, Cohen & Rosenberg, Ltd., Chicago, IL, for Ronald D. Dawson.
James Andrew Klenk, Dale M. Cohen, Sally L. Davis, Sonnenschein, Nath & Rosenthal, Chicago, IL, Edwin G. Schallert, Frances L. Kellner, Debevoise 6 Plimpton, New York City, for New York Life Ins. Co. and NYLIFE Securities Inc.
This matter is before the Court on plaintiff Ronald D. Dawson's ("Dawson") motion to compel from defendants New York Life Insurance Company and NYLIFE Securities, Inc. (collectively "New York Life") answers to certain deposition questions and discovery of certain documents. For the reasons stated below, the motion is granted.
In this diversity action, Dawson sues New York Life alleging that it defamed him in speeches given by three employees of the company, in videotaped excerpts of the speeches disseminated to its general offices throughout the United States, and in an Amended Form U-5 document filed with the National Association of Securities Dealers ("NASD").1
The alleged defamatory statements were made in early March 1993, soon after New York Life suffered a $16 million dollar verdict in a case known as Hernandez v. New York Life. The Hernandez case arose from acts of fraud committed by former New York Life agent Oscar Herrera against policyholder Lamar Hernandez when Herrera was an agent in New York Life's Corpus Christi office. Dawson was the general manager of this office until September 1, 1989, during part of the time that the fraudulent acts were committed. Dawson claims that the New York Life speakers accused him of participating in and condoning this fraudulent conduct based on their understanding of the Hernandez trial evidence. Dawson also claims that the Amended Form U-5 prepared by Galler accuses him of condoning fraud against New York Life policyholders Richard and Veronica Cruz and of condoning other unidentified forgeries committed against New York Life policyholders by Agent Herrera.
In its answer to Dawson's complaint, New York Life asserted the affirmative defense of qualified privilege to justify each of the statements made about Dawson. Qualified privilege is an affirmative defense to a defamation claim. The elements of the privilege are: (1) good faith by the defendant; (2) an interest or duty to be upheld; (3) a statement limited in its scope to that purpose; (4) a proper occasion; and (5) publication in a proper manner and to proper parties only. Zeinfeld v. Hayes Freight Lines, Inc., 41 Ill.2d 345, 243 N.E.2d 217, 221 (1968). The existence of the privilege is a question of law for the Court to decide. Babb v. Minder, 806 F.2d 749, 753 (7th Cir. 1986). Once the Court decides that a qualified privilege exists, the plaintiff has the burden of showing that the defendant abused and lost the privilege by acting with actual or express malice. Id. The question of whether the defendant abused the privilege is a factual issue for the jury. Id.
New York Life also moved for summary judgment on the basis of qualified privilege. The resolution of the pending motion for summary judgment has been delayed because Dawson has asked New York Life to produce documents and answer deposition questions concerning the information about the Hernandez trial that was given to the speakers. Dawson has also asked New York Life to answer deposition questions concerning the information that was given to Robert Galler to aid in preparing the Amended Form U-5. Dawson specifically seeks to compel: (1) Communications to and from Alice Kane; (2) Communications to and from Alan Taxerman; (3) Communications from New York Life counsel to Lisa Frazier; (4) Communications to and from Michael McLaughlin; and (5) Communications from New York Life counsel to Lyle Paul and Lee Gammill.2 New York Life has refused to disclose these communications by claiming they are subject to the attorney-client privilege and work-product doctrine. Dawson argues that there has been an implied waiver of any discovery privileges with regard to these materials because of New York Life's assertion of qualified privilege defenses. Alternatively, Dawson argues that even if a waiver is not found, the communications do not fall within the requirements of the claimed privileges.
At the outset, the Court notes that Dawson's main argument is that New York Life has waived its asserted privileges through its affirmative defenses of qualified privilege. However, because the burden of showing facts that give rise to a privilege rests on the party who claims the privilege, we will first analyze whether New York Life has met this burden before turning to the waiver question. See Consolidation Coal Co. v. Bucyrus-Erie Co., 89 Ill.2d 103, 119, 59 Ill.Dec. 666, 673, 432 N.E.2d 250, 257 (1982) (); Chem-Central/Grand Rapids Corp. v. United States EPA, 1992 U.S.Dist. LEXIS 12539, No. 91 C 4380 at *15 (August 19, 1992) ("As with attorney-client privilege, the party asserting work product immunity has the burden of establishing eligibility for protection.").
New York Life has refused to produce the requested materials by asserting the attorney-client privilege. Although neither party has addressed the issue, the Court must first determine whether federal or state law applies. Under Federal Rule of Evidence 501, in civil actions in which state law provides the rule of decision, state law privileges apply. Because this is a diversity action in which Illinois law supplies the rule of decision, the Court finds that Illinois law on the attorney-client privilege governs.
The Illinois attorney-client privilege generally attaches upon a showing that the communication: (1) originated in a confidence that it would not be disclosed; (2) was made to an attorney acting in his legal capacity for the purpose of securing legal advice or services; and (3) remained confidential. Hartford Fire Ins. Co. v. PLC Enterprises, Inc., 1994 WL 148664 at *2, 1994 U.S.Dist. LEXIS 5228, No. 93 C 6905, at *5 (April 15, 1994).
At least one Illinois Appellate court has held that the attorney-client privilege only covers communications made by the client to the attorney and not by the attorney to the client. See Dalen v. Ozite Corp., 230 Ill.App.3d 18, 171 Ill.Dec. 845, 850, 594 N.E.2d 1365, 1370 (2d Dist.1992). However, we believe that this interpretation of the privilege is too narrow. Instead, we follow the decision in Hartford Fire Ins. Co. There, the court expressed its agreement with Robertson v. Yamaha Motor Corp., 143 F.R.D. 194 (S.D.Ill.1992) which stated "it is generally held that the privilege will protect at least those attorney to client communications which would have a tendency to reveal the confidences of the client." This broader interpretation of the privilege is consistent with Illinois Supreme Court Rule 201(b)(2), which defines privileged communications in terms of "communications between a party or his agent and the attorney for his party," not simply in terms of communications from a party or his agent to the attorney. So, the communications from New York Life attorneys requested by Dawson will be privileged if they reveal any confidential communications of New York Life employees.
New York Life cannot show that these communications contain confidential information from the employees, however. It is clear that what Dawson seeks is factual information that the attorneys communicated to the speakers concerning the Hernandez case and to Galler concerning Dawson's role in the fraud against the Cruz policyholders. In her deposition, Frazier explained that she relied upon a memo from the Office of the General Counsel to help her write Kane's speech. Frazier Dep. at 31-32. Gammill and Paul stated that they spoke to New York Life attorneys about the facts of the Hernandez case and about the testimony that related to Dawson. Gammill Dep. at 25-28; Paul Dep. at 95-97, 102. Kane stated that she received both memoranda and oral reports from other New York Life attorneys to help keep her informed of the Hernandez proceedings and about evidence introduced concerning Dawson. Kane Dep. at 21, 25, 30-32, 87-88. Galler stated that he spoke to Taxerman to obtain factual information to aid in completing the Amended Form U-5. Galler Dep. at 100-01. The common link is that these employees contacted New York Life attorneys to obtain factual information. This factual information was derived completely from outside sources and does not reflect the employees' communications with the attorneys in any way. Disclosing this information will betray no confidential communications from the employees. Therefore, the Court finds that the requested communications from the attorneys to the employees are not subject to the attorney-client privilege.
When the client is a corporation, an additional question is which employees of the corporation are entitled to the protection of the privilege. The Illinois Supreme Court has adopted the "control group" test to decide this question. In Consolidation Coal Co., v. Bucyrus-Erie Co., 89 Ill.2d 103, 119, 59 Ill.Dec. 666, 673, 432 N.E.2d 250, 257 (1982), the court stated that in a large corporation, an overly-broad attorney-client privilege has the potential "to insulate so much material from the truth-seeking process ... that the privilege ought to be limited for the...
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