Hayworth v. Schilli Leasing, Inc., 04S03-9505-CV-546

• Decision Date: 06 August 1996
• Docket Number: No. 04S03-9505-CV-546,04S03-9505-CV-546
• Citation: 669 N.E.2d 165
• Parties: Ruth HAYWORTH, Executrix of the Estate of Daniel Hayworth, Deceased, Appellant, v. SCHILLI LEASING, INC.; Schilli Transportation Service, Inc., Schilli Motor Lines, Inc., Fruehauf Corporation and Geupel Demars, Inc., Appellees.
• Court: Indiana Supreme Court

Page 165

669 N.E.2d 165

Ruth HAYWORTH, Executrix of the Estate of Daniel Hayworth, Deceased, Appellant, v. SCHILLI LEASING, INC.; Schilli Transportation Service,

Inc., Schilli Motor Lines, Inc., Fruehauf

Corporation and Geupel Demars, Inc., Appellees.

No. 04S03-9505-CV-546.

Supreme Court of Indiana.

Aug. 6, 1996.

Thomas F. Macke, Blachly, Tabor, Bozik & Hartman, Valparaiso, for Appellant Ruth Hayworth.

Edward E. Rundell, Gold, Weems, Bruser, Sues & Rundell, Alexandria, LA, for Appellee Fruehauf Corporation.

Ind. Defense Lawyers Ass'n by Lloyd H. Milliken, Jr., Todd J. Kaiser, and Kevin C. Schiferl, Indianapolis, Ind. Trial Lawyers Ass'n by Theodore F. Smith, Jr. Anderson, amici curiae.

ON PETITION TO TRANSFER

DICKSON, Judge.

This is an interlocutory appeal challenging a trial court's order enjoining a defendant's former employee from consulting with, or providing trial or deposition testimony on behalf of, the plaintiff in a wrongful death products liability case. The Court of Appeals affirmed. Hayworth v. Schilli Leasing, Inc., 644 N.E.2d 602 (Ind.Ct.App.1994).

Plaintiff-appellant Ruth Hayworth filed a wrongful death action against defendant Fruehauf Corporation, among others, ¹ after her husband was killed May 9, 1988, in a work-related accident involving a dump trailer manufactured by Fruehauf. During her pre-trial investigation and discovery, the plaintiff retained George Hagelthorn, a registered professional engineer, as an expert witness. Hagelthorn had been employed as an engineer by Fruehauf from 1965 until his retirement in 1982. Hagelthorn thereafter formed his own consulting corporation, provided technical advice and expert testimony to plaintiffs' attorneys in products liability litigation, and testified on behalf of Fruehauf in thirteen or fourteen lawsuits. Record at 334. On the day before Hagelthorn was to be deposed by one of the other defendants, Fruehauf asked the trial court to enjoin Hagelthorn from consulting with or testifying for any person or attorney participating in the litigation. The trial court ordered the Hagelthorn deposition stayed pending its resolution of Fruehauf's motion.

Thereafter, Fruehauf initiated an action against Hagelthorn in the Circuit Court for Wayne County, Michigan, seeking injunctive relief to prevent Hagelthorn from acting as an expert witness or consultant in any litigation brought by any plaintiff against Fruehauf. Following preliminary proceedings and a hearing, the Michigan court denied Fruehauf's motion for preliminary injunction and dismissed the petition for permanent injunction. The trial court was subsequently affirmed. Fruehauf Trailer Corp. v. Hagelthorn, 208 Mich.App. 447, 528 N.W.2d 778, appeal denied, 450 Mich. 229, 543 N.W.2d 314 (1995). Notwithstanding Michigan's rejection of Fruehauf's efforts to prohibit Hagelthorn's participation against Fruehauf in all litigation, the Indiana trial court granted Fruehauf's motion to enjoin Hagelthorn's participation in the present case. ² The plaintiff's motion to certify that order for an interlocutory appeal was granted, and the Court of Appeals accepted the appeal, see Ind.Appellate Rule 4(B)(6), but affirmed the trial court, finding the order to be justified by the attorney-client privilege and rejecting the plaintiff's claim of collateral estoppel. We granted the plaintiff's petition for transfer.

In this appeal, the plaintiff identifies three grounds for her contention that the trial court erred in precluding Hagelthorn's participation as an expert witness: (1) collateral estoppel; (2) work-product or attorney-client privilege; and (3) public policy. We decline to consider the public policy issue as an independent claim of error but will consider plaintiff's public policy arguments within our analysis of the remaining two issues.

The grant or denial of an injunction is within the trial court's sound discretion and will only be reversed upon a finding that the court has abused that discretion. Amoco Production Co. v. Laird, 622 N.E.2d 912, 915 (Ind.1993). An abuse of discretion will be found if the trial court's ruling is "clearly against the logic and effect of the facts and circumstances before the court, or if the trial court has misinterpreted the law." McCullough v. Archbold Ladder Co., 605 N.E.2d 175, 180 (Ind.1993).

Collateral Estoppel

In this appeal, the plaintiff first contends that the injunction is erroneous because collateral estoppel operates to bar Fruehauf from relitigating an issue previously determined against it in the Michigan proceeding. Collateral estoppel generally "operates to bar a subsequent relitigation of the same fact or issue where that fact or issue was necessarily adjudicated in a former suit and the same fact or issue is presented in the subsequent lawsuit." Sullivan v. American Casualty Co., 605 N.E.2d 134, 137 (Ind.1992). Recognition of the doctrine without the previously imposed prerequisites of identity of parties and mutuality of estoppel first occurred in Indiana in the context of the defensive ³ use of the doctrine. Id. The use of collateral estoppel without these prerequisites was extended to offensive application the following year. See Tofany v. NBS Imaging Systems, Inc., 616 N.E.2d 1034, 1038 (Ind.1993). A trial court must consider two factors in determining whether to apply collateral estoppel: whether the party against whom the judgment is pled had a full and fair opportunity to litigate the issue, and whether it would be otherwise unfair under the circumstances of the particular case to apply collateral estoppel. Tofany, 616 N.E.2d at 1037-38. See also Sullivan, 605 N.E.2d at 138. While the same two-part test applies to both defensive and offensive applications, we have recognized that the latter may pose particular risks of unfairness and that the former is more likely to promote judicial economy. ⁴ Tofany, 616 N.E.2d at 1038.

In order for collateral estoppel to apply here, the fact or issue necessarily adjudicated in the former Michigan proceeding must be the same fact or issue presented by this case. See Sullivan, 605 N.E.2d at 138. In the present case, the trial court granted Fruehauf's motion and enjoined Hagelthorn "from testifying in this action ... and from consulting or discussing with or disclosing to any party to this action, directly or indirectly, Fruehauf Corporation's trade secrets, confidential information, and matters of attorney-client privilege or work-product." Record at 462-63. In the Michigan case, Fruehauf sought to enjoin Hagelthorn from "discussing with anyone any information relating to [Fruehauf], and from consulting or testifying as an expert in any products liability case brought against [Fruehauf], asserting that [Hagelthorn's] consultation and expert services violated the attorney-client privilege." ⁵ Fruehauf Trailer Corp., 528 N.W.2d at 780. Denying the requested relief, the Michigan courts found that "Hagelthorn was not functioning as an attorney, nor was he an agent of an attorney, while employed by Fruehauf"; that "information relayed between [Hagelthorn] and [Fruehauf's] attorneys was not confidential ... consequently, the privilege was inapplicable"; and that "[Fruehauf] would not have prevailed on the merits owing to the inapplicability of the attorney-client privilege." Id. at 781.

In her memorandum in opposition to Fruehauf's motion to preclude and enjoin Hagelthorn from either testifying or communicating with any party regarding Fruehauf's trade secrets, confidential information, and matters of attorney-client privilege or work-product, the plaintiff argued to the trial court that Fruehauf should be collaterally estopped because "the issues involved in the Michigan case were identical in all relevance [sic] to the issues presented by Fruehauf's present motion." Record at 314. The plaintiff did not specifically assert that the Michigan court had adjudicated the individual issue of attorney-client privilege upon which Fruehauf was collaterally estopped. Rather, the plaintiff argued that the refusal of the Michigan court to enjoin Hagelthorn operated broadly as a complete bar to Fruehauf's motion. Unlike Fruehauf's motion in the present case, however, the Michigan ruling did not encompass issues of trade secrets, confidential information, or work product. See Record at 333, 344. Because Fruehauf's requested injunction in this case covered issues not litigated in the Michigan proceeding, collateral estoppel does not entirely foreclose Fruehauf's request for injunctive relief. ⁶

Work-Product Doctrine and Attorney-Client Privilege

The plaintiff next contends that the attorney-client privilege and the work-product doctrine should not broadly prevent Hagelthorn from all consulting and testimony in this case. The plaintiff further argues that no attorney-client privilege applies because Hagelthorn was neither an attorney nor an agent of Fruehauf's attorneys. She argues that work-product protection is inapplicable both because it shields only documents and tangible items, not general engineering knowledge, and because claims of work product must be asserted and considered on a particularized, document-by-document basis. The plaintiff further argues that Fruehauf has waived any work-product or attorney-client privilege claims by utilizing Hagelthorn as an independent expert witness on behalf of Fruehauf. Fruehauf responds by arguing that the trial court record shows that "Hagelthorn was an agent of Fruehauf lawyers and was privy to information protected by the attorney-client privilege and the attorney work product doctrine." ⁷ Brief of Fruehauf Corporation, Appellee at 22.

We first observe that courts disfavor blanket claims of privilege such as that asserted by Fruehauf. Petersen v. U.S. Reduction Co., 547 N.E.2d 860, 862 (Ind.Ct.App.1989). The party seeking to assert a privilege has the burden to allege and prove the applicability of the privilege "as to each question asked or document sought."...