Pampered Chef v. Alexanian

• Decision Date: 14 September 2010
• Docket Number: No. 10 C 1399,10 C 1399
• Citation: 737 F.Supp.2d 958
• Parties: The PAMPERED CHEF, Plaintiff, v. Sandy ALEXANIAN, Don Funt, Christine Laurich, Lori Mitchell, Valerie Newton, and Shannon Pell, Defendants.
• Court: U.S. District Court — Northern District of Illinois

737 F.Supp.2d 958

The PAMPERED CHEF, Plaintiff,

v.Sandy ALEXANIAN, Don Funt, Christine Laurich, Lori Mitchell, Valerie Newton, and Shannon Pell, Defendants.

No. 10 C 1399.

United States District Court,

N.D. Illinois,

Eastern Division.

Sept. 14, 2010.

Dean A. Dickie, James William McConkey, Katharine N. Dunn, Kathleen Elizabeth Koppenhoefer, Ryan Christopher Williams, Miller, Canfield, Paddock and Stone, PLC, Chicago, IL, for Plaintiff.

Henry M. Baskerville, Jonathan M. Cyrluk, Stelter & Duffy, Ltd., Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

JEFFREY COLE, United States Magistrate Judge.

INTRODUCTION

One of the defendants, Sandy Alexanian, used to work for the plaintiff as a sales representative. As part of her employment, she signed an agreement that precluded her from recruiting plaintiff's sales people to work for a competitor for two years after she left plaintiff. The agreement also contained a confidentiality provision regarding trade secrets. Ms. Alexanian left the plaintiff in February 2010, but had discussions with her new employer, Jewels by Park Lane, as early as October 2009. According to plaintiff, she began recruiting plaintiff's sales representatives for Park Lane before she resigned her position with plaintiff. Plaintiff also claims she misappropriated its trade secrets.

Thereafter, defendants Donald Funt, Christine Laurich, and Valerie Newton followed Ms. Alexanian to Park Lane. Plaintiff has sued them for breaching the non-solicitation and confidentiality provisions in their employment agreements. It has added Lori Mitchell and Shannon Pell,Park Lane employees, who, it claims, tortiously interfered with its contracts with its sales force.

The Pampered Chef seeks an order compelling Joyce Salela, a third-party witness, to answer certain deposition questions concerning conversations she had in the presence of her counsel, Dan Feeney, and the defendants' counsel, Jonathan Cyrluk, at the time she was preparing for her deposition in this case. The central thesis of the motion to compel is that the discussions between Ms. Salela, Mr. Feeney, and Mr. Cyrluk are discoverable because the confidential protections afforded by the attorney-client privilege are waived when an otherwise-privileged conversation takes place in the presence of a third-party. It is Ms. Salela's contention that the privilege was not waived because she and the defendants had a "common legal interest" agreement, and thus, the protections of the attorney-client privilege extended to her pre-deposition discussions with Mr. Feeney and Mr. Cyrluk. The plaintiff's ancillary argument is that Ms. Salela's testimony regarding some "chit chat" she had with Mr. Cyrluk waived whatever privilege might have existed as to all other conversations. Although not formulated this way, the argument in essence is that testimony about information that is not privileged waives the privilege as to all that is. To borrow one of Justice Frankfurter's bon mots, "[t]his is a horse soon curried." Olberding v. Illinois Cent. R. Co., 346 U.S. 338, 340, 74 S.Ct. 83, 98 L.Ed. 39 (1953).

FACTUAL BACKGROUND

A.

The Pampered Chef is a direct seller of essential kitchen tools whose products are sold primarily through in-home cooking demonstrations known as "Cooking Shows." (Complaint ¶ 12). At each of the shows, products are demonstrated and sold by a member of The Pampered Chef's sales team, which is comprised of more than 60,000 independent consultants working mainly on a commission and incentives basis. ( Id.). Consultants and attendees prepare and serve dishes showcasing The Pampered Chef's products, as well as its proprietary recipes. This kind of sales strategy is alleged to be highly effective, often inspiring customers and hosts to become Pampered Chef consultants. The system's success is said to depend on repeat business, grassroots marketing, and the strength of the consultants' relationships with the company's customer base. Consequently, the company values as protectable assets and trade secrets the identities and contact information of its customers, as well as its sales field members. ( Id. at ¶ 13-15).

The Pampered Chef initially brought this suit only against Sandy Alexanian, a former Pampered Chef sales director, who left the company in 2010 to join Jewels by Park Lane, a direct seller of jewelry retailer, whose products are sold primarily through in-home jewelry shows. (Salela Response to Motion to Compel at 2). In its complaint, The Pampered Chef alleged that Ms. Alexanian violated the express terms of her written Independent Sales Director Agreement, in which she had agreed she would not (1) disclose any of The Pampered Chef's confidential, proprietary information and trade secrets for two years; and (2) solicit or recruit any members of The Pampered Chef's sales force to sell products or services for any other company for two years. (Complaint ¶ 1). The complaint accused Ms. Alexanian of misappropriating Pampered Chef trade secrets and breaching her Director Agreement by accessing the contact information of Pampered Chef sales force members, and "attempt[ing] to ... solicit and recruit Pampered Chef consultants to join Park Lane as sales representatives." ( Id. at ¶ 5, 42).

After filing the complaint, The Pampered Chef's lawyers deposed three other members of Park Lane's sales team—including now-defendants Don Funt and Christine Laurich—who had previously been directors at The Pampered Chef. (Salela Response 2). During those depositions, counsel for the plaintiff asked the witnesses questions regarding the Director Agreements they had signed with Pampered Chef and their own compliance with those agreements. ( Id.; Salela Response, Ex. C). At one point during Mr. Funt's deposition, his attorney expressed concern that plaintiff's counsel seemed to be framing his questions in an attempt to "somehow build a case against [Mr. Funt]." (Salela Ex. C at 40). Plaintiff's counsel responded that his questioning was "legitimate" and "may well lead to additional relevant evidence not only against Sandy Alexanian but others." ( Id. at 41). Shortly after their depositions were taken, The Pampered Chef amended its complaint to add Mr. Funt and Ms. Laurich as defendants, accusing them of the same contractual and fiduciary breaches it had asserted against Ms. Alexanian. (Amended Complaint ¶ 70, 89).¹

B.

On August 4, 2010, plaintiff's counsel deposed Ms. Salela, who is not a party. (Motion to Compel 1)("Motion"). Like Ms. Alexanian, Mr. Funt, and Ms. Laurich, Ms. Salela had previously been a Pampered Chef director, signed the same Director Agreement, and is currently affiliated with Park Lane. (Salela Response 3). During the questioning, plaintiff's counsel came to learn that Ms. Salela had met with her retained counsel, Mr. Feeney, in preparation for her deposition, and that the defendants' attorney, Mr. Cyrluk, was also present for a portion of that meeting. (Motion 1; Plaintiff's Ex. A at 19-20). ² When Ms. Salela was asked specifically about what had been discussed in that meeting, Mr. Feeney objected on the basis that the question "call[ed] for privileged communications." (Plaintiff's Ex. A at 20).

Plaintiff's counsel expressed his belief that "the privilege was broken by virtue of Mr. Cyrluk being present for the meeting," to which Mr. Feeney responded that Ms. Salela and the defendants had reached a written "joint interest agreement," which protected the communication despite Mr. Cyrluk's presence. Plaintiff's counsel then requested to see the agreement, but Mr. Feeney stated that he did not have a copy with him, and instructed Ms. Salela not to answer the question. ( Id. at 21-23).

The attorneys continued to debate the privilege issue, and following a short recess, Ms. Salela was again asked questions regarding the conversation she had while in the presence of Mr. Feeney and Mr. Cyrluk. ( Id. at 25-29). Ms. Salela answered the questions, but she did so in general terms, and without disclosing the specific contents of any communication she had with her attorney or Mr. Cyrluk during the course of her deposition preparation. Her complete description of the conversation with Mr. Cyrluk was as follows: "We were talking about lunch. It was just sort of general not to worry have I been deposed before. I mentioned, you know, my background and different businesses that I was in. It was just kind of more of a general chitchat. I can't think of anythingreal specific." (Salela Response, Ex. F at 30). She stated that, "[i]t was a very short period of time, twenty minutes, had a sandwich, hi, how are you." ( Id. at 31). Ms. Salela's sur-reply explains that she and Mr. Feeney met for purposes of deposition preparation, and the preparation session recessed for lunch when Mr. Cyrluk arrived. (Sur-Reply at 3). During the lunch break, she and Mr. Cyrluk engaged in small-talk over sandwiches, which she described as non-substantive "chitchat." ( Id.). The conversation ended when the deposition preparation recommenced, and Mr. Cyrluk observed for several minutes before departing. ( Id.).

The day after Ms. Salela's deposition, Mr. Feeney turned over a copy of the common interest agreement to plaintiff's counsel. The parties to the agreement are Jewels by Park Lane, Inc., Sandy Alexanian, Don Funt, Christine Laurich, Lori Mitchell, Valerie Newton, Shannon Pell, Grace Calderon, Joyce Salela, and Sybil Goade. (See Plaintiff's Ex. B). The agreement states in pertinent part:

[T]he Parties have mutually concluded that their respective interests will be best served by a common and join investigation and defense of their common interests in connection with the Claims, thereby protecting the privileges and other protections that otherwise might arguably be waived in the absence of this Agreement.

( Id. at 2).

The parties intended for the agreement to cover "[a]ny oral communications" between or among any counsel and/or any of the parties to the agreement. ( Id. at 4). And although...