Sullivan v. Alcatel-Lucent USA, Inc., Case No. 12 C 7528

CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
Writing for the CourtAMY J. ST. EVE
PartiesJOHN P. SULLIVAN and STEPHEN D. HELM, a/k/a Steven Helm and Steve Helm, Plaintiffs, v. ALCATEL-LUCENT USA, INC., a Delaware corporation, Defendant.
Decision Date12 June 2013
Docket NumberCase No. 12 C 7528

JOHN P. SULLIVAN and STEPHEN D. HELM, a/k/a Steven Helm and Steve Helm, Plaintiffs,
ALCATEL-LUCENT USA, INC., a Delaware corporation, Defendant.

Case No. 12 C 7528


Date: June 12, 2013


AMY J. ST. EVE, District Court Judge:

Before the Court is Plaintiffs' Motion to Compel documents withheld on the basis of privilege and for sanctions. (R. 41, Pls.' Mot. to Compel.) For the following reasons, the Court grants in part and denies in part the Motion.


This case involves a breach of contract dispute over attorneys' fees between Alcatel-Lucent USA, Inc. ("Lucent" or "Defendant") and two of its former attorneys, Plaintiffs John P. Sullivan and Stephen D. Helm. In their Second Amended Complaint, Plaintiffs allege that they entered into a contingency fee agreement with Lucent to represent the company in the contest of a real estate assessment of certain of Lucent's real property in Naperville, Lisle Township, DuPage County, Illinois. (R. 40, Second Am. Compl. ¶ 4 ("SAC").) According to Plaintiffs, the agreement provided "for Lucent to pay a contingent fee of 25 per cent of any real estate tax savings accruing to Lucent if the matter was settled or resolved prior to trial." (Id. ¶ 4.)

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Plaintiffs seek to recover the contingency fees allegedly due in connection with a settlement reached with the Lisle Township Assessor and the DuPage County Board of Review, in which Lucent purportedly agreed to withdraw its 2010 tax appeal in exchange for agreed tax savings in 2011, 2012, and 2013. (SAC ¶ 13; Pls.' Supp. Mem. 1.)

On April 5, 2013, Plaintiffs moved to compel the production of documents withheld by Defendant on the basis of the attorney-client privilege. The Court then entered and continued the Motion and ordered Defendant to produce the documents to the Court for an in camera review along with a Second Revised Privilege Log asserting the grounds for each claim of privilege. At the Court's directive, Defendant also submitted additional affidavits in support of its contentions that certain employees fell within Defendant's "control group" for purposes of its privilege claims.

Defendant asserts that the attorney-client and work product privileges protect numerous documents as communications between and among in-house counsel and members of the control group relating to the settlement regarding the 2010 tax appeal. (Def.'s Mem. 4.) Plaintiffs dispute Lucent's control group contentions, whether certain documents were privileged, and whether Defendant has waived the privilege by asserting an estoppel defense in its Answer based on Plaintiffs' alleged violation of their "professional and ethical obligations to communicate with Alcatel-Lucent . . . regarding the fees that they expected to earn as a result of the settlement of the 2010 property tax appeal." (R. 46, Ans. ¶ 5.)


I. Motion to Compel

The federal discovery rules liberally assist in preparation for trial and settlement of

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disputes. See Bond v. Uteras, 585 F.3d 1061, 1075 (7th Cir. 2009). Federal Rule of Civil Procedure 26(b)(1) provides that "[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense . . . Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Fed. R. Civ. P. 26(b)(1). "If the party from whom the documents are requested objects to their production, that party has the burden to show why a discovery request is improper." John Wiley & Sons, Ltd. v. McDonnell Boehnen Hulbert & Berghoff LLP, No. 12 C 1446, 2013 WL 505252, at *3 (N.D. Ill. Feb. 12, 2013). With respect to a motion to compel, the Seventh Circuit instructs that "a district court may grant or deny the motion in whole or in part, and similar to ruling on a request for a protective order under Rule 26(c), the district court may fashion a ruling appropriate for the circumstances of the case." Gile v. United Air Lines, Inc., 95 F.3d 492, 496 (7th Cir. 1996). As with all discovery matters, courts have broad discretion in deciding motions to compel. See James v. Hyatt Regency Chi., 707 F.3d 775, 784 (7th Cir. 2013).

II. Illinois Attorney-Client Privilege

Because diversity of citizenship is the basis for jurisdiction in this case, Illinois law also governs questions of attorney-client privilege. See Wychocki v. Franciscan Sisters of Chi., No. 10 C 2954, 2011 WL 2446425, at *3 (N.D. Ill. June 15, 2011) (citing Fed. R. Evid. 501); Favala v. Cumberland Eng'g Co., 17 F.3d 987, 989 (7th Cir. 1994). In defining the attorney-client privilege, the Illinois Supreme Court has stated that "where legal advice of any kind is sought from a professional legal adviser in his capacity as such, the communications relating to that purpose, made in confidence by the client, are protected from disclosure by himself or the legal

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adviser, except the protection be waived." Fischel & Kahn v. van Straaten Gallery, 189 Ill.2d 579, 584, 244 Ill. Dec. 941, 944, 727 N.E.2d 240, 243 (Ill. 2000). "The purpose of the attorney-client privilege is to encourage and promote full and frank consultation between a client and legal advisor by removing the fear of compelled disclosure of information." Id. Nonetheless, Illinois recognizes a "strong policy of encouraging disclosure, with an eye toward ascertaining that truth which is essential to the proper disposition of a lawsuit." Waste Mgmt. Inc. v. Int'l Surplus Lines Ins. Co., 144 Ill. 2d 178, 190, 161 Ill. Dec. 774, 779, 579 N.E.2d 322, 327 (Ill. 1991). Thus, courts should "construe the privilege 'within its narrowest possible limits.'" Ill. Emasco Ins. Co. v. Nationwide Mut. Ins. Co., 393 Ill. App. 3d 782, 786, 332 Ill. Dec. 812, 913 N.E.2d 1102, 1105 (Ill. App. Ct. 2009) (quoting Waste Mgmt., 144 Ill. 2d at 190). The party claiming the privilege "carries the burden of presenting facts that give rise to the privilege." Janousek v. Slotky, 2012 IL App (1st) 113432, 980 N.E.2d 641, 650 (Ill. App. Ct. Nov. 26, 2012). This burden includes showing certain "threshold requirements," including: "(1) that the communication originated in a confidence that it would not be disclosed"; "[that] it was made to an attorney acting in his legal capacity for the purpose of securing legal advice or services,"; and (3) "that [it] remained confidential." Consolidation Coal Co. v. Bucyrus-Erie Co., 89 Ill. 2d 103, 119, 432 N.E.2d 250, 257 (Ill. 1982). Although "documents prepared for business purposes or for the purpose of obtaining advice on 'political, strategic, or policy issues'" do not receive protection, "legal advice relating to business matters clearly [does]." Glenwood Halsted LLC v. Vill. of Glenwood, No. 11-CV-6772, 2013 WL 140794, at *2 (N.D. Ill. Jan. 11, 2013); CNR Invs., Inc. v. Jefferson Trust & Sav. Bank of Peoria, 115 Ill. App. 3d 1071, 1076, 451 N.E.2d 580, 583 (Ill. App. Ct. 1983).

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As relevant here, payment of fees and information regarding fees are generally not privileged. See People ex rel. Ulrich v. Stukel, 294 Ill. App. 3d 193, 203-04 (Ill. App. Ct. 1997) ("It is well-recognized that information regarding a client's fees generally is not a "confidential communication" between an attorney and client, and thus is not protected by the attorney client privilege.") (citing Matter of Grand Jury Proceeding, Cherney, 898 F.2d 565, 567 (7th Cir. 1990)); Stopka v. Am. Family Mut. Ins. Co., Inc., 816 F. Supp. 2d 516, 532 (N.D. Ill. 2011) ("In the absence of any evidence of legal advice, documents relating to the payment of fees are only incidental to the attorney-client relationship.") Nonetheless, confidential communications relating to legal advice arising in connection with billing matters may be subject to protection. Hill v. Metro. Prop. & Cas. Co., No. 1-10-1588, 2011 WL 10069435, at *3 (Ill. App. Ct. May 12, 2011) ("[C]onfidential communications relating to legal advice will naturally arise from a retainer agreement or perhaps during negotiations in the creation of the agreement"); see also Matter of Witnesses Before the Special 1980 Grand Jury, 729 F.2d 489, 494 (7th Cir. 1984) (noting in the context of fee arrangements that the privilege turns "not upon incrimination per se but upon whether disclosure would in effect reveal information which has been confidentially communicated").

Illinois law follows the "control group" test for privilege claims. Id.; see also Dell v. Bd. of Educ., Twp. High Sch. Dist. 113, 32 F.3d 1053, 1065 (7th Cir. 1994). As such, "not every communication made to a corporation's attorney by an employee of the corporation is privileged but, rather, the corporation attorney-client privilege applies only to those employees within the control group." Sterling Fin. Mgmt., L.P. v. UBS PaineWebber, Inc., 336 Ill. App. 3d 442, 448, 782 N.E.2d 895, 900 (Ill. App. Ct. 2002). In Consolidation Coal Co., the Illinois Supreme Court

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defined the control group as consisting of (1) "top management persons who have the responsibility of making final decisions" and (2) "employee[s] whose advisory role to top management in a particular area is such that a decision would not normally be made without [their] advice or opinion,...

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