Waste Management, Inc. v. International Surplus Lines Ins. Co.

• Citation: 161 Ill.Dec. 774,579 N.E.2d 322,144 Ill.2d 178
• Decision Date: 20 May 1991
• Docket Number: No. 70958,70958
• Court: Supreme Court of Illinois
• Parties: , 161 Ill.Dec. 774 WASTE MANAGEMENT, INC., et al., Appellants, v. INTERNATIONAL SURPLUS LINES INSURANCE COMPANY et al., Appellees (Matthew W. Cockrell, Contemnor-Appellant).

Page 322

579 N.E.2d 322

144 Ill.2d 178, 161 Ill.Dec. 774

WASTE MANAGEMENT, INC., et al., Appellants, v. INTERNATIONAL SURPLUS LINES INSURANCE COMPANY et al.,

Appellees (Matthew W. Cockrell, Contemnor-Appellant).

No. 70958.

Supreme Court of Illinois.

May 20, 1991.

As Modified on Denial of Rehearing

Sept. 30, 1991.

Victoria Walkowicz, Rivkin, Radler, Bayh, Hart & Kremer, [144 Ill.2d 185] Joseph V. Giffin, Frank K. Heap, Bell, Boyd & Lloyd, Chicago, Ill., for Waste Management, Inc., and Chemical Waste Management, Inc

Irene C. Warshauer, Anderson, Kill, Olick & Oshinski, New York City, for Keene Corp., and Mid-America Legal Foundation.

Robert Marc Chemers, Robert J. Franco, Michael A. Clarke, Scott O. Reed, Andrew G. Wilik and Michael E. Prangle, Pretzel & Stouffer, Chartered, Chicago, Ill., for International Surplus Lines, and Am Special Risk Ins. Co.

Justice FREEMAN delivered the opinion of the court:

Plaintiffs, Waste Management, Inc., and Chemical Waste Management, Inc. (insureds), and Matthew Cockrell (Cockrell), legal counsel for insureds, appeal from certain discovery orders and a finding of contempt for noncompliance with those orders.

BACKGROUND

International Surplus Lines Insurance Company and American Risk Insurance Company (insurers) issued certain policies of insurance (EIL policies) to insureds. The policies provide indemnity to insureds for defense costs for any claim arising out Insureds owned and operated five hazardous waste disposal sites which were the subject of several lawsuits. The current case involves only the litigation with respect to the site located in Furley, Kansas (the Miller litigation). In the Miller litigation, which was commenced in January 1982 in the United States District Court for the District of Kansas, the plaintiffs alleged that insureds were responsible for personal injury and property damage arising from the migration of toxic wastes.

[161 Ill.Dec. 777] of an environmental impairment brought against insureds by third parties. Insurers' duty to indemnify is subject to certain exclusions and conditions, including insureds' duty to cooperate. Additionally,[144 Ill.2d 186] the policies provide insurers the right, but not the duty, to defend such a claim.

During the pendency of the Miller litigation, on October 1, 1982, prior owners of the Furley, Kansas, site filed suit against insureds (the Nunn litigation). Insureds counterclaimed, alleging negligent design, construction and operation of the site. Insureds obtained a judgment against the prior owners in the amount of $10,675,342.17 and subsequently settled with certain of the prior owners for $1,500,000.

Insureds retained counsel, defended and settled the Miller lawsuit. Pursuant to the EIL policies, insureds subsequently sought indemnification from insurers for $2,150,000 in settlement costs and $850,000 in defense costs. Insurers denied coverage.

FACTS

Both insureds and insurers filed declaratory judgment actions seeking a determination of their respective rights and liabilities under the policies. The actions were consolidated. In their complaint, insureds alleged that they had performed all of their obligations and conditions precedent under the terms of the EIL policies. Further, insureds alleged that the settlement and defense costs incurred in the Miller litigation were reasonable and that the settlement was necessary. Additionally, insureds alleged that insurers had received advance notification of the settlement and agreed not to contest its reasonableness.

In their answer, insurers denied coverage, and further denied that insureds had met all of their contractual obligations and conditions precedent. Insurers admitted sending a letter to insureds agreeing not to contest the Miller settlement, but asserted that the letter was "based on information then known to it." In their complaint, insurers alleged that one reason for their denial of coverage for the Miller litigation was insureds' failure to advise them of the Nunn litigation. This, insurers maintain, constituted a breach of the cooperation clause and other conditions of the policy.

During discovery, insurers requested production of defense counsel's files in the underlying Miller and Nunn litigations. (134 Ill.2d R. 214.) Insureds produced some of the requested documents from the Miller litigation, but withheld certain others, claiming attorney-client and work-product privileges. None of the Nunn litigation files were produced. Insureds provided the court with a detailed log of the withheld documents.

The court ordered production of the Miller litigation files, but denied insurers' request for production of the Nunn files. Cockrell, in order to perfect an appeal to the appellate court, refused production of the additional files from the Miller litigation. He was held in contempt and fined $100. (134 Ill.2d R. 219(c).) Both parties appealed to the appellate court, first district.

The appellate court, in a unanimous decision, affirmed in part and reversed in part the circuit court's order to produce the Miller litigation files; reversed the order denying production of the Nunn litigation files; and ordered an in camera inspection of all requested documents. (203 Ill.App.3d 172, 148 Ill.Dec. 496, 560 N.E.2d 1093.) We granted insureds' petition for leave to appeal (107 Ill.2d R. 315). We affirm in part and reverse in part.

Two issues are presented for our review: (1) whether jurisdiction is proper and (2) whether attorney-client privilege or the work-product doctrine may bar discovery of the attorney's files in the underlying lawsuits..

                [161 Ill.Dec. 778]   The parties have agreed that resolution of the privilege issues regarding the documents generated in connection with the Miller litigation will govern the parameters of production for defense documents from all sites involved in the coverage litigation
                

JURISDICTION

Insurers first contend that this court is without subject matter jurisdiction to hear Cockrell's appeal. They point out that the contempt order was levied against Cockrell, not insureds, yet the notice of appeal was filed on behalf of insureds, not Cockrell. Therefore, insurers argue, the contempt order is not properly before us and further, since discovery orders are not final and appealable, this court lacks jurisdiction.

Our Rule 303(c) provides for the form and content of the notice of appeal. (134 Ill.2d R. 303(c).) Notice of appeal serves the dual purpose of vesting the reviewing court with jurisdiction (Dunaway v. Ashland Oil, Inc. (1989), 189 Ill.App.3d 106, 110, 136 Ill.Dec. 538, 544 N.E.2d 1313; Thorsen v. City of Chicago (1979), 74 Ill.App.3d 98, 104, 30 Ill.Dec. 61, 392 N.E.2d 716), and informing the prevailing party that the unsuccessful litigant seeks review by a higher court (Burtell v. First Charter Service Corp. (1979), 76 Ill.2d 427, 433, 31 Ill.Dec. 178, 394 N.E.2d 380). Thus, notice must necessarily specify the judgment or part thereof from which the appeal is taken (134 Ill.2d R. 303(c)(2)), and accordingly, a reviewing court has jurisdiction solely over those issues properly raised in the notice (Smock v. Hale (1990), 197 Ill.App.3d 732, 737, 144 Ill.Dec. 177, 555 N.E.2d 74; Lewanski v. Lewanski (1978), 59 Ill.App.3d 805, 815, 16 Ill.Dec. 854, 375 N.E.2d 961). It is our preference that cases presented for our review be resolved on the merits, and to that end, notice requirements are given a liberal construction (March v. Miller-Jesser, Inc. (1990), 202 Ill.App.3d 148, 157, 147 Ill.Dec. 504, 559 N.E.2d 844). Mere technical defects in form, as opposed to substance, are deemed not fatal. Burtell, 76 Ill.2d at 434, 31 Ill.Dec. 178, 394 N.E.2d 380.

We have reviewed the notice of appeal in this case. The notice states, inter alia, that the insureds appeal from the September 11, 1989, order which found Cockrell, counsel for plaintiffs, in contempt of court for his refusal to comply with the court's August 25, 1989, order to produce certain documents. Although Cockrell is not formally named in the caption portion of the notice, insurers were adequately apprised that Cockrell and insureds were seeking review of the contempt finding as well as the underlying discovery order. Further, review of the contempt finding necessarily requires review of the order upon which it is based. (See People ex rel. Scott v. Silverstein (1981), 87 Ill.2d 167, 174, 57 Ill.Dec. 585, 429 N.E.2d 483.) Insurers claim no prejudice as a result of insureds' apparent inadvertent omission of Cockrell's name in the notice and we perceive none. The defect is merely technical. Jurisdiction is proper.

ATTORNEY-CLIENT PRIVILEGE

Both attorney-client privilege and work product are provided for in our Rule 201(b)(2) (134 Ill.2d R. 201(b)(2)). However, they are separate and distinct protections and waiver of one does not serve as waiver of the other. Therefore, we will address each separately.

Insureds first contend that discovery of the Miller and Nunn litigation files is barred by the attorney-client privilege. Contrarily, insurers argue that the privilege is inapplicable. Prior to addressing the arguments of the parties, we set out the applicable rule. Rule 201(b)(2) provides, in pertinent part:

"(2) Privilege * * *. All matters that are privileged against disclosure on the trial, including privileged communications between a party or his agent and the attorney for the party, are privileged against disclosure through any discovery procedure." 134 Ill.2d R. 201(b)(2).

"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 Initially, insurers urge that the attorney-client privilege does not apply here because the files are "at issue" in the declaratory judgment action. Insureds urge that should this court adopt a mere relevancy standard, the privilege will be meaningless. The appellate court agreed with insurers and...