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Univ. of South Carolina School of Law

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Wednesday, June 24, 2009

Duty To Defend: Diversity Case Reveals Interesting Aspect Of Illinois' Attorney-Client Privilege

Similar to most states' attorney-client privileges, Illinois' attorney-client privilege allows a client to prevent his attorney from disclosing a statement he made to his attorney in court if

(1) the statement originated in confidence that it would not be disclosed; (2) it was made to an attorney acting in his legal capacity for the purpose of securing legal advice or services; and (3) it remained confidential. 

As the recent opinion of the United States District Court for the Northern District of Illinois in Cars R Us Sales and Rentals, Inc. v. Ford Motor Co., 2009 WL 1703123 (N.D. Ill. 2009), makes clear, however, Illinois has an additional component to its attorney-client privilege, albeit one that was not relevant to the court's opinion.

In Cars R Us,  

[o]n February 24, 2005, a fire allegedly occurred in the dashboard of a 1997 Ford Escort owned by Linda Farther....At the time of the fire, the car was parked inside a building owned by [Cars R Us Sales and Rentals]....[Cars R Us] allege[d] that the fire occurred because [Ford] negligently designed, manufactured, and sold the car....Plaintiffs brought [a] diversity action against [Ford] on December 12, 2008, alleging that the fire caused damage to [its]' real, personal, and business property.

General Casualty provided a policy of insurance covering Cars R Us' property at the time of the fire, and, during discovery, Cars R Us produced two documents, each titled a document titled, "Litigation Agreement." The Litigation Agreement was

“between [General Casualty], [Cars R Us], and Smith Amundsen LLC ('Attorneys')."...Paragraph one of the Litigation Agreement simply authorize[d] Smith Amundsen to represent General Casualty and [Cars R Us]....Paragraph three require[d] [Cars R Us] to cooperate with the Attorneys and to assist them in preparation of the trial....Paragraph five relate[d] to the payment of attorneys' fees and costs in this litigation....The remainder of the document regards the relationship between General Casualty and [Cars R Us] in settlement, and the priorities in the potential distribution of settlement funds.

Cars R Us claimed that this Litigation Agreement was covered by attorney-client privilege, and Ford disagreed. The Northern District of Illinois found that the issue was governed by Illinois privilege law pursuant to Federal Rule of Evidence 501, which provides that 

Except as otherwise required by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness, person, government, State, or political subdivision thereof shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or political subdivision thereof shall be determined in accordance with State law.

And the court noted that, in addition to the the typical attorney-client privilege that applies when the aforementioned three elements are satisfied, "[i]n Illinois, the privilege also extends to communications between an insurer and an insured, 'where the insurer is under an obligation to defend the insured.'" Of course, in Cars R UsCars R Us was the plaintiff meaning that there was no obligation to defend and thus no insurer-insured privilege.

But, here's the part of the opinion with which I don't agree. According to the court,

Although the Litigation Agreement was executed with assistance from attorneys and purports to represent an agreement entered into by the parties and the parties' attorneys, [Cars R Us] admit[s] that nothing in this document constitutes an 'explicit attorney-client communication of advice or opinion.'...More accurately, the document memorializes the rights and responsibilities agreed to between General Casualty and [Cars R Us] in this litigation. Because the document does not reflect or represent communications made to an attorney acting in his legal capacity for the purpose of securing legal advice or services, it is not protected by the attorney-client privilege.

Huh? This seems to to be exactly the type of communication that is covered by the attorney-client privilege. This ruling ended up being irrelavant because the court found that the Litigation was work product, but it seems to me that the court was wrong on the privilege issue.

-CM 

http://lawprofessors.typepad.com/evidenceprof/2009/06/il-atty-clientcars-r-us-sales-and-rentalsinc-vford-motor-coslip-copy-2009-wl-1703123ndill2009.html

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