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First District Enlarges Attorney-Client Privilege by Creating the “Common Interest Exception” in IL

02/15/2018

By: Barry Noeltner, bnoeltner@heylroyster.com

On December 7, 2017, the Illinois Appellate Court, First District, released its opinion in Selby v. O’Dea, 2017 IL App (1st) 151572. The lengthy opinion is a must-read for all litigators and claims professionals, particularly those involved in multiple party claims and in cases where it is often a sound defense strategy to communicate with other defending parties. Many will be surprised at the history of the “joint defense privilege” and “common interest exception,” and the opinion points out the differences between the two, and that the “common interest exception” did not exist in Illinois prior to its adoption in the Selby case. While the opinion does not settle all issues surrounding the “common interest exception,” we now know that in certain clearly defined circumstances, the attorney-client privilege will be extended by the new common interest exception. Counsel and parties have been given a road map, of sorts, by the Selby opinion, for permitted communications and how to preserve them in discovery. There are still many unresolved issues which will likely find their way into our appellate courts. In the meantime, litigants are left with a degree of uncertainty as to whether some situations and communications, particularly written communications, will be protected by the common interest exception.

In this case, Selby and three other plaintiffs filed a purported class action lawsuit in the Circuit Court of Cook County against State Farm Mutual Auto Insurance Company and attorney James O’Dea, alleging that State Farm’s subrogation lawsuits were part of a scheme to obtain “fraudulent default judgments” by circumventing rules on service of process. The suit alleged causes of action based on abuse of process, civil conspiracy, and malicious prosecution. The trial court dismissed the abuse of process cause of action for failure to state a claim, and granted summary judgment to State Farm on the civil conspiracy and malicious prosecution claims.

Appealing the trial court’s rulings on State Farm’s claims, plaintiffs argued that they could not fully respond to State Farm’s motions because, among other things, they had been prevented from discovering whether “State Farm ever notif[ied], or advise[d],” O’Dea after the lawsuit was filed, “that there were any irregularities discovered in the handling of the State Farm subrogation matters.” Selby, 2017 IL App (1st) 151572, ¶ 15. State Farm acknowledged that conversations had occurred between the defendants, after the lawsuit, but objected to disclosing those conversations based upon the attorney-client, work-product, and joint defense privileges.

The panel first discussed the “common-interest” doctrine recognized by the Supreme Court in Waste Management, Inc. v. International Surplus Lines Ins. Co., 144 Ill. 2d 178, 193 (1991). State Farm argued that the “joint defense” privilege it asserted was the same as the “common interest” doctrine in Waste Management. Plaintiffs disagreed and argued that the “common interest” doctrine is different. Although the trial court and panel agreed with the plaintiffs and found that the “common interest” doctrine was inapplicable, neither court found that this determination ended the analysis. The court traced the history of the “common interest” doctrine and noted that it is rooted in cases where an attorney has undertaken a joint representation, and one of the represented parties seeks to defeat, rather than create a claim of privilege. Such was the issue in Waste Management and subsequent “common interest” cases. In the case at bar, State Farm was seeking to create a privilege, the exact opposite of the issue in Waste Management. The panel noted that even though the “common interest” doctrine was inapplicable, the “joint defense” privilege asserted by State Farm was simply the same argument for the common interest doctrine, but from a different perspective, and should be recognized in Illinois.

State Farm pointed out that the Restatement (Third) of the Law Governing Lawyers provides for such a privilege. The opinion acknowledged this, tracing such a privilege back to 1871 in the Virginia case of Chahoon v. Commonwealth, 62 Va. 822, 841-42 (1871), and cites to numerous cases from state and federal courts around the country acknowledging the privilege, albeit under different names and titles. The panel found it noteworthy that it had not uncovered any cases where the common interest exception had not been recognized. The panel also reviewed Illinois state and federal cases and sourcebooks which have recognized a joint defense privilege, even though the panel disagreed that such a privilege ever existed. The panel opted to denominate the rule it was recognizing not as a privilege, but as “the common-interest exception.” Therefore, the court had reframed the issue before it, and recognized the “common interest exception” permitting parties to communicate with each other without fear of waiver of the attorney-client privilege.

But that is the theoretical portion of the opinion. The question remained whether the “common interest exception” had been properly applied by the trial court. The question could not be answered without first identifying the parameters of the exception. The panel declined to apply the exception beyond the facts in the case, namely, limiting its application to actual litigation, and to communications after the execution of a written confidentiality agreement. Any extension of the exception, such as whether it applies pre-suit, requires a written agreement, or whether it applies to common interests beyond the litigation, was specifically left to the Supreme Court.

The first question the court addressed regarding the parameters of the exception was whether the parties have to be “perfectly aligned in all respects” or whether they must “share some common interest in defeating a litigation opponent.” Selby, 2017 IL App (1st) 151572, ¶ 77. The panel chose the latter, declining to accept that the hypothetical possibility that the parties might at some later date be adverse eliminates the exception, nor requiring the parties to have a complete alignment of interests. The “common interest” may be on a single issue even though the parties may be otherwise adverse. The ability to prevent disclosure of communications lies with the requirement that the “communications between the parties sharing the common interest be in furtherance of that common interest – that they be germane to that common interest.” Id, ¶ 83.

The second question addressed was which communications are covered by the exception? The panel provided four situations in which the exception applies. It clearly covers lawyer-to-lawyer communications. Somewhat reluctantly, the panel also held that communications between a party and another party’s lawyer are covered by the exception. The panel also extended the exception to communications between a party and the party’s attorney, which take place in the presence of another party’s attorney. Finally, it extended the exception to communications from one party to another, with counsel for both parties present. The panel, very notably, declined to consider whether the exception should apply to party-to-party communications when counsel is not present, nor did it provide any parameters regarding written communications, as State Farm’s discovery objections were directed toward oral communications and had represented to the courts that no written communications existed. The panel also said that it was not yet determining whether an in-house lawyer should be classified as a lawyer or client. The case was remanded for the trial court to conduct an in-camera analysis of each communication for which the exception was claimed.

Recognition of the common interest exception brings Illinois into line with a long history of precedent in other state and federal jurisdictions. While this is a significant development and a potential tool for Illinois litigants in complex multi-party litigation, it is clear from Selby that not every communication among defendants will be entitled to an automatic privilege. Use and application of this rule will require careful analysis and assistance from legal counsel. As with all privileges, great care must be taken to ensure that the privilege is protected and not inadvertently waived. Should you have any question regarding the Selby case, its holding or application, please feel free to contact counsel at Heyl Royster for further evaluation and guidance.