Case Title: Harold C. Lane, Jr. v. Sharp Packaging Systems, Inc.

Citation: 2002 WI 28

Docket Number: 2000AP001797

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2002-03-20T00:00:00Z

Document:
2002 WI 28 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
00-1797 
COMPLETE TITLE: 
 
 
Harold C. Lane, Jr.,  
 
Plaintiff-Respondent, 
 
v. 
Sharp Packaging Systems, Inc., Paul W. Scarberry 
and Virginia Scarberry,  
 
Defendants-Appellants, 
John H. Niebler and Niebler, Pyzyk, Klaver & 
Wagner, LLP,  
 
Intervening-Appellants. 
 
 
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
OPINION FILED: 
March 20, 2002   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 5, 2001   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Waukesha   
 
JUDGE: 
Kathryn W. Foster   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
ABRAHAMSON, C.J., dissents (opinion filed). 
BABLITCH and BRADLEY, J.J., join dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendants-appellants there were briefs by Larry J. 
Britton, William J. Richards and Vlasak & Britton, S.C., 
Milwaukee, and James Reiher, Terrance E. Nilles and von Briesen, 
Purtell & Roper, Milwaukee, and oral argument by Larry J. 
Britton and James C. Reiher. 
 
For the intervening appellants there were briefs by Terry 
E. Johnson, Maria D. Sanders and Peterson, Johnson & Murray, 
S.C., Milwaukee, and oral argument by Terry E. Johnson. 
 
For the plaintiff-respondent there was a brief by James O. 
Huber, Maureen A. McGinnity, David W. Simon and Foley & Lardner, 
Milwaukee, and oral argument by Maureen A. McGinnity. 
 
 
2002 WI 28 
NOTICE 
This opinion is subject to further 
editing and modification.  The 
final version will appear in the 
bound 
volume 
of 
the 
official 
reports.   
No.  00-1797  
(L.C. No. 
99-CV-2476) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Harold C. Lane, Jr.,  
 
          Plaintiff-Respondent, 
 
     v. 
 
Sharp Packaging Systems, Inc., Paul W.  
Scarberry and Virginia Scarberry,  
 
          Defendants-Appellants, 
 
John H. Niebler and Niebler, Pyzyk,  
Klaver & Wagner, LLP,  
 
          Intervening-Appellants. 
 
FILED 
 
MAR 20, 2002 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
APPEAL from an order of the Circuit Court for Waukesha 
County, Honorable Kathryn W. Foster, Circuit Court Judge.    
Reversed and cause remanded.   
 
¶1 
N. PATRICK CROOKS, J.   This case is before the court 
on certification by the Court of Appeals, District II, pursuant 
to Wis. Stat. § 809.61 (1999-2000).1  While this case arises from 
                                                 
1 All references to the Wisconsin Statutes are to the 1999-
2000 version unless otherwise noted. 
No. 
00-1797   
 
2 
 
the termination of Harold C. Lane (hereinafter Lane) by his 
employer, Sharp Packaging Systems, Inc. (hereinafter Sharp), the 
issues before this court relate to the parties' discovery 
dispute.  During discovery, Lane filed a subpoena duces tecum, 
requesting documents from Attorney John Niebler (hereinafter 
Niebler) and his law firm, Niebler, Pyzyk, Klaver & Wagner, LLP, 
(hereinafter 
the 
Niebler 
law 
firm) 
regarding 
their 
representation of Sharp.  Lane also filed a subpoena duces tecum 
requesting production of documents from third parties, including 
M&I 
Mortgage 
Co. 
 
Sharp 
and 
the 
Scarberrys, 
the 
sole 
shareholders, filed motions to quash both subpoenas.  The 
circuit court denied both motions and we now address the 
discovery issues in dispute.  Specifically, we address:  (1) 
whether a corporation can invoke the lawyer-client privilege 
against a former member of the corporation's board of directors; 
(2) whether an attorney's billing records are protected by the 
lawyer-client privilege; (3) whether the circuit court erred in 
ordering production of documents reflecting communications with 
third parties; (4) whether the circuit court should conduct an 
in camera review of records when otherwise privileged records 
are sought under the crime-fraud exception to the attorney 
client privilege; and (5) whether documents created prior to an 
employee's termination are protected as work product.  We also 
review the circuit court's award of attorneys' fees. 
¶2 
Recognizing that the discovery issues in this case are 
matters of first impression and that the issues "go to the very 
core of the lawyer-client relationship and the reach of the 
No. 
00-1797   
 
3 
 
lawyer-client privilege" the court of appeals certified the case 
to this court.  We review the Waukesha County Circuit Court's 
decision, the Honorable Kathryn W. Foster, presiding, regarding 
the lawyer-client privilege, the work product doctrine, and the 
award of attorneys' fees. 
¶3 
We first address whether the circuit court erroneously 
exercised discretion in concluding that the documents requested 
from Niebler and his law firm are not protected by the lawyer-
client privilege.  We first conclude that Sharp can effectively 
assert the lawyer-client privilege against Lane.  Lane's status 
as a former director does not allow him to waive the lawyer-
client privilege as a representative of Sharp, nor does Lane's 
status preclude the current board of directors from asserting 
the lawyer-client privilege against him regarding documents 
prepared during his tenure.  Second, we conclude that attorney 
billing records are protected by the lawyer-client privilege.  
The circuit court erroneously exercised its discretion by 
failing to examine the nature of the billing records in this 
case, specifically, that the billing records reveal the nature 
of legal services provided and the substance of lawyer-client 
communications.  Third, we conclude that the circuit court did 
not erroneously exercise its discretion in ordering production 
of non-privileged documents reflecting communications with third 
parties.  The circuit court carefully examined the relevant 
facts, applied the proper standard of law, and reached a 
reasonable conclusion on that issue.  Finally, we conclude that 
the circuit court did not erroneously exercise its discretion in 
No. 
00-1797   
 
4 
 
concluding that Lane established a prima facie case that the 
crime-fraud exception to the lawyer-client privilege applies.  
We further conclude, however, that the circuit court did err in 
failing to conduct an in camera review.  Rather than considering 
the appropriate factors, the circuit court simply allowed Lane 
to overcome the lawyer-client privilege by establishing a prima 
facie case.  Upon remand, we instruct the circuit court to 
conduct an in camera review to determine if the crime-fraud 
exception applies. 
¶4 
In addition to the lawyer-client privilege issues, we 
review the circuit court's decision that prior to May 31, 1999, 
litigation was not imminent and documents prepared during that 
time are not protected by the work product doctrine.  We 
conclude that the circuit court erroneously exercised its 
discretion because it failed to apply the proper standard of law 
and did not conduct an in camera review to determine if the 
documents 
were 
prepared 
or 
obtained 
in 
anticipation 
of 
litigation. 
¶5 
Finally, we review the circuit court's award of 
attorneys' fees to Lane.  Based on the record, we conclude that 
the circuit court's award of half the attorneys' fees and 
expenses pertaining to two motions was reasonable and not an 
erroneous exercise of discretion. 
I. FACTS 
A.  Lane's Employment with Sharp 
¶6 
Sharp Packaging Systems, Inc. (Sharp) is a Wisconsin 
corporation of which Paul and Virginia Scarberry (hereinafter 
No. 
00-1797   
 
5 
 
the Scarberrys) are, and at all relevant times have been, the 
sole shareholders.  In 1992, Harold C. "Bud" Lane joined Sharp 
as Executive Vice President of Marketing and Sales.  During his 
employment, Lane and Sharp 
maintained 
several 
agreements, 
including an employment agreement, a stock option agreement, a 
stock 
transfer 
restriction 
agreement, 
and 
a 
non-compete 
agreement. 
¶7 
In March 1995, Sharp, the Scarberrys, and Lane entered 
into an employment agreement defining the terms and conditions 
of Lane's continued employment with Sharp.  The employment 
agreement allowed Sharp to terminate Lane's employment for any 
reason with ninety days written notice.  The agreement also 
provided that Lane maintained his position as Executive Vice 
President of Sharp, received the same compensation as Paul 
Scarberry, and was elected a director of Sharp's board of 
directors.2  Lane was also given an equal voice in selecting 
Sharp's professional service providers and Lane, as well as Paul 
Scarberry, had veto power to discharge any professional failing 
to 
provide 
satisfactory 
performance. 
 
Furthermore, 
in 
recognition of Lane's service to Sharp, the employment agreement 
referenced a Stock Option Agreement and a Stock Transfer 
Restriction Agreement.     
¶8 
The Stock Option Agreement gave Lane the option to 
purchase a 25% stock ownership in Sharp.  Until Lane exercised 
                                                 
2 Lane actually replaced John Niebler, then legal counsel to 
Sharp, as a member of Sharp's board of directors. 
No. 
00-1797   
 
6 
 
the option, the agreement provided that he shall have no rights 
as a shareholder of the company, but shall be given at least 
forty-eight hours notice of, and shall be entitled to be present 
at, any meeting at which action is to be taken by shareholders.  
If Lane chose not to exercise his stock option, and his 
employment was terminated before the agreement expired, the 
agreement provided that Lane would be paid a sum of money 
according to an appraisal formula in the agreement, based on the 
present stock value.3 
¶9 
During the time of Lane's employment, Sharp prospered. 
From October 1992, to October 1998, Sharp's gross sales more 
than doubled and shareholders' equity more than quadrupled.  The 
company's value increased from approximately $1.8 million in 
1992 to approximately $11 million by October 1995. 
¶10 On March 2, 1999, Sharp terminated Lane's employment, 
effective May 31, 1999.  Lane had not exercised his stock option 
at the time of his termination.  Accordingly, on May 26, 1999, 
pursuant to the Stock Option Agreement, Lane elected to 
surrender his stock options and receive his lump sum stock 
appreciation rights payments.  Pursuant to the appraisal formula 
and procedure laid out in the Stock Transfer Restriction 
Agreement, Sharp and the Scarberrys retained Theodore F. Gunkel 
                                                 
3 Paragragh 6(a) of the Stock Option Agreement references 
the appraisal formula as the "Formula Price" determined under 
paragraph 9 of the Stock Transfer Restriction Agreement.  
Because the method of calculating the appraisal is not at issue 
here, we do not lay out the method used for valuation of the 
company's stock. 
No. 
00-1797   
 
7 
 
of Madison Valuation Associates to appraise the fair market 
value of Lane's stock appreciation rights.  Lane received the 
appraisal in October 1999, which revealed that prior to Lane's 
termination, 
there 
was 
a 
distribution 
of 
profit 
to 
the 
shareholders.  The appraiser concluded that the value of Lane's 
25% interest in Sharp was $91,000.  Lane disagreed with Gunkel's 
appraisal and retained Bryan Browning of Valuation Research 
Corp. to conduct an additional appraisal, as permitted under the 
parties' agreements. 
B. Niebler's Relationship with Sharp and the Scarberrys 
¶11 Since approximately 1985, Attorney John Niebler and 
his law firm, Niebler, Pyzyk, Klaver & Wagner, LLP (hereinafter 
"Niebler law firm"), have represented both Sharp and the 
Scarberrys in various legal matters.  Since 1992, Niebler has 
advised Sharp and the Scarberrys about Sharp's employment 
agreements and relationship with Lane.  At various times since 
1994, Niebler and his law firm have also provided legal advice 
to Sharp and the Scarberrys about a proposed termination of 
Lane's employment with Sharp.  Niebler and his law firm also did 
considerable legal work for Sharp regarding other matters.  From 
at least 1995 through 1999, Niebler's firm sent monthly bills to 
Sharp, requesting payment and revealing the nature of legal 
services performed. 
¶12 From 1993 to 1995, as Sharp's lawyer, Niebler served 
on Sharp's Board of Directors.  Pursuant to Lane's 1995 
employment contract with Sharp, Lane replaced Niebler on Sharp's 
board.  In 1995, Sharp designated new corporate counsel, the law 
No. 
00-1797   
 
8 
 
firm of Meissner & Tierney, replacing the Niebler law firm.  
However, Niebler continued to represent the Scarberrys as their 
personal attorney. 
¶13 In 1998, Niebler advised the Scarberrys about taking a 
corporate 
distribution 
from 
Sharp's 
accumulated 
profits.  
Niebler subsequently consulted with M&I Bank about a possible 
loan to Sharp to finance the distribution.  In February 1999, 
the Scarberrys received a corporate distribution from Sharp in 
the amount of approximately $3,800,418.00, financed by a loan to 
Sharp from M&I Mortgage Corp.  The distribution was made without 
any meeting of the Board of Directors and without Lane's 
knowledge.  As stated previously, Lane had not exercised his 
stock options prior to the distribution.  Furthermore, Lane was 
not aware of the distribution until he received Gunkel's 
appraisal in October of 1999. 
C. Trial Court Proceedings 
¶14 On December 13, 1999, Lane filed suit against Sharp 
and the Scarberrys in Waukesha County Circuit Court, alleging 
fraudulent transfer, breach of his employment agreement, breach 
of the stock option agreement, civil conspiracy, request for an 
accounting, and request for declaratory and injunctive relief 
seeking to undo the actions taken by Sharp and the Scarberrys.  
Represented by Niebler and two other attorneys,4 Sharp and the 
Scarberrys filed an answer to Lane's complaint.  Sharp and the 
                                                 
4 Robert Horowitz and 
Barbara 
A. 
Neider 
of Stafford 
Rosenbaum LLP, also represented Sharp and the Scarberrys. 
No. 
00-1797   
 
9 
 
Scarberrys contended that Lane never exercised his stock option 
rights and that the distribution was valid. 
¶15 During 
discovery, 
Lane 
subpoenaed 
documents 
from 
Niebler and his firm.  Specifically, the subpoena duces tecum 
requested: 
 
1. 
All bills submitted by Niebler, Pyzyk, Klaver & 
Wagner, LLP (hereinafter "Niebler") to Sharp 
Packaging Systems, Inc. (hereinafter "Sharp") for 
the period May 3, 1995 to May 31, 1999. 
 
2. 
All charge records, day book records or other 
Documents* showing the date and/or time and/or 
work done by Niebler or any attorney associated 
with the firm of Niebler, Pyzyk, Klaver & Wagner 
with respect to services rendered for Sharp 
Packaging Systems, Inc. for the period May 3, 
1995 to May 31, 1999. 
 
3. 
All Documents representing communications by or 
between 
Sharp 
and/or 
the 
Scarberrys 
and/or 
Niebler 
regarding 
Harold 
C. 
Lane, 
Jr. 
(hereinafter "Lane") and/or any agreements with 
Lane for the period January 1, 1998 to the 
present. 
 
4. 
All Documents relating to any loan or loan 
request for purposes of funding a shareholder 
distribution 
for 
Sharp 
shareholders 
for 
the 
period January 1, 1998 to May 31, 1999. 
 
5. 
All Documents comprising or relating to any 
negotiations and/or proposals and/or letters of 
intent 
and/or 
offers 
for 
the 
sale 
or 
recapitalization of all or a portion of Sharp, or 
its stock, for the period January 1, 1998 to the 
present. 
 
6. 
All 
Documents 
relating 
to 
the 
decision 
to 
distribute, or the distribution of, approximately 
$3,800,418 
to the 
stockholders of 
Sharp in 
February 
or March, 
1999, 
including 
but not 
No. 
00-1797   
 
10 
 
limited to all loan documents and communications 
relating to the source of any such funds. 
 
*The word "Documents" is defined on the enclosed 
attachment to Exhibit A. 
¶16 Sharp and the Scarberrys responded to Lane's subpoena 
of Niebler's documents with a motion for a protective order and 
to quash the subpoena duces tecum.  Sharp and the Scarberrys 
argued that the documents requested are protected by the lawyer-
client privilege and the work product doctrine.  Lane argued 
that the subpoena fell within the crime-fraud exception to the 
lawyer-client 
privilege 
because 
his 
complaint 
sufficiently 
alleged fraudulent transfer.  In a bench decision, the Honorable 
Kathryn W. Foster, denied the motion to quash and ordered the 
defendants to produce all documents previously withheld on both 
lawyer-client privilege and work product grounds.  In her 
written decision, the circuit court ordered that the Niebler law 
firm provide: 
 
(a) bills from the Niebler firm to Sharp and 
documents 
reflecting 
confidential 
communications between the Niebler firm and 
defendants shall be produced for the period 
through May 31, 1999; and 
 
(b) non-privileged 
documents, 
including 
documents 
reflecting 
the 
Niebler 
firm's 
communications with third parties, shall be 
produced for the time periods requested by 
plaintiff. 
When issuing the decision, the circuit court judge stated, 
"[t]here's a foul odor that comes from this file."  With regard 
to the connection with the Niebler firm, the circuit court judge 
stated, "there were billings that were submitted to the 
No. 
00-1797   
 
11 
 
corporation and under Mr. Lane's obligations were reviewed by 
him but not retrievable by him upon his termination, I think 
he's entitled to examine them again with the benefit of 
counsel."  In finding the crime-fraud exception to the lawyer-
client privilege applicable, 
the 
circuit court 
attributed 
"sinister motives" to the defendants' acts, stating: 
 
I'm satisfied that there is based on the Court's 
previous review of the Complaint, as well as the other 
limited information presented here, that there is a 
prima 
facie 
case. . . . the 
combination 
of 
the 
relationship 
that 
existed 
between 
the 
immediate 
parties already named in this case and that prima 
facie showing and the circumstances, the allegation of 
breach and of that agreement going on, not just 
immediately prior to the termination but perhaps for a 
time pre-dating that, a time in which the Niebler law 
firm 
was 
supposedly 
only 
providing 
limited . . . services 
[to 
Sharp] . . . that 
the 
totality of all those matters I believe allow the 
attorney-client privilege to be dissipated under the 
parameters that the Court has outlined here. 
¶17 In addition to the subpoena duces tecum requesting 
documents from Niebler, Lane also served a subpoena duces tecum 
on third parties, including M&I Bank.5  In response to the 
subpoena, Sharp and the Scarberrys again filed a motion for a 
protective order and to quash on the grounds that the documents 
were private and irrelevant.  The circuit court denied the 
motion and also awarded Lane attorneys' fees on the motion.  
There was no breakdown on the fees between the two motions to 
quash, so the circuit court based the awarded fees on half of 
                                                 
5 We do not lay out the language of the subpoena because the 
substance of the subpoena duces tecum is not at issue. 
No. 
00-1797   
 
12 
 
what was expended on the two motions.  Specifically, the circuit 
court judge stated: 
 
The last matter I still want to get to is the 
plaintiff's request for costs pertaining to this 
motion.  The Court will request a submission of what 
those costs are.  But as far as the issue of the 
production of financial records, I am going to grant 
that request.  As far as the matter of attorney-client 
privilege which I think present more difficult legal 
issues, I'll deny that.  My inclination simply is to 
cut it strictly in half and not require that you say 
how much I did on this part of the motion or that on 
the other, but I would award 50 percent of costs 
pertaining to all of the matters brought before the 
Court here today. 
(Emphasis added.)6 
D. Appellate Court Proceedings 
¶18 Sharp and the Scarberrys sought leave to file an 
interlocutory appeal on the circuit court's denial of the 
motions to quash Lane's subpoenas.  The Court of Appeals granted 
review on an expedited schedule and also allowed John H. Niebler 
and Niebler, Pyzyk, Klaver & Wagner, LLP to intervene as 
additional appellants.  Recognizing this case involves several 
issues of first impression, the Court of Appeals certified a 
                                                 
6 Lane subsequently amended his complaint, adding Niebler 
and the Niebler law firm as party defendants.  Niebler and his 
law firm filed a motion to dismiss.  On March 1, 2001, the 
circuit court issued a written order dismissing all claims 
asserted against Niebler and his law firm.  Issues involving 
that claim are not presently before this court. 
No. 
00-1797   
 
13 
 
portion7 of the appeal to this court.  We granted certification 
of all issues raised on appeal. 
II.  DISCUSSION 
¶19 We review the circuit court's discovery order for an 
erroneous exercise of discretion.  See Borgwardt v. Redlin, 196 
Wis. 2d 342, 350, 538 N.W.2d 581 (Ct. App. 1995); Swan Sales 
Corp. v. Jos. Schlitz Brewing Co., 126 Wis. 2d 16, 28, 374 
N.W.2d 640 (Ct. App. 1985).  "The burden is on [the appellant] 
to show that the trial court misused its discretion and we will 
not reverse unless such misuse is clearly shown."  Konle v. 
Page, 205 Wis. 2d 389, 393, 556 N.W.2d 380 (Ct. App. 1996).  We 
will sustain a discretionary act if we find the trial court 
examined the relevant facts, applied a proper standard of law, 
and using a demonstrative rational process, reached a conclusion 
that a reasonable judge could reach.  Paige K.B. v. Steven G.B., 
226 Wis. 2d 210, 233, 594 N.W.2d 370 (1999).  Whether the 
circuit court utilized the proper legal standard, however, is a 
question of law we review independently of the circuit court, 
benefiting from its analysis.  See Three & One Co. v. Geilfuss, 
178 Wis. 2d 400, 410, 504 N.W.2d 393 (Ct. App. 1993). 
¶20 Sharp and the Scarberrys argue that the circuit court 
erroneously exercised its discretion by denying their motion to 
                                                 
7 The Court of Appeals' certification directly asked this 
court to address four issues.  In a footnote, however, the Court 
of Appeals noted five other issues raised in the appeal.  We 
granted certification of all issues raised in the Court of 
Appeals, not just the four issues directly addressed in the 
certification. 
No. 
00-1797   
 
14 
 
quash the subpoena of Niebler's documents.  They maintain that 
the documents requested are protected either by the lawyer-
client privilege or the work product doctrine.  Lane argues the 
documents requested from Niebler either do not fall within the 
protection of the lawyer-client privilege or the work product 
doctrine, or the documents are exempt from privilege on several 
theories.  We address each argument in turn. 
A.  Lawyer-Client Privilege 
¶21 We first address whether the documents requested from 
Niebler are protected by the lawyer-client privilege.  Wisconsin 
Stat. § 905.03 
protects 
confidential 
communications 
between 
clients and their attorneys.  Section 905.03(1)(d) defines a 
"confidential communication" as a communication "not intended to 
be disclosed to 3rd persons other than those to whom disclosure 
is in furtherance of the rendition of professional legal 
services to the client or those reasonably necessary for the 
transmission of the communication."  Wisconsin Stat. § 905.03(2) 
details the scope of the lawyer-client privilege: 
 
A client has a privilege to refuse to disclose and to 
prevent any other person from disclosing confidential 
communications made for the purpose of facilitating 
the rendition of professional legal services to the 
client: 
 
between 
the 
client 
or 
the 
client's 
representative and the client's lawyer or the lawyer's 
representative; or between the client's lawyer and the 
lawyer's representative; or by the client or the 
client's lawyer to a lawyer representing another in a 
matter of common interest; or between representatives 
of 
the 
client 
or 
between 
the 
client 
and 
a 
representative of the client; or between lawyers 
representing the client. 
No. 
00-1797   
 
15 
 
In State ex rel. Dudek v. Circuit Court, 34 Wis. 2d 559, 580, 
150 N.W.2d 387 (1967), we addressed the scope of privilege and 
held that "once the professional relationship is established, 
all communications, oral and written, between attorney and 
client are privileged from production excluding those exceptions 
outlined in the statute."  The privilege belongs to the client 
and can only be claimed by the client or the lawyer at the time 
of 
the 
communication, 
on 
behalf 
of 
the 
client.  
Wis. Stat. § 905.03(3).  The policy underlying this privilege is 
to ensure full disclosure by clients who feel safe confiding in 
their attorney.  See Jax v. Jax, 73 Wis. 2d 572, 579, 243 
N.W.2d 831 (1976) (citing Jacobi v. Podevels, 23 Wis. 2d 152, 
156-157, 127 N.W.2d 73 (1964)); Koeber v. Somers, 108 Wis. 497, 
504, 84 N.W. 991 (1901); Dyson v. Hempe, 140 Wis. 2d 792, 813, 
413 N.W.2d 379 (Ct. App. 1987).  Furthermore, because the 
lawyer-client privilege is "'an obstacle to the investigation of 
the truth' it should be 'strictly confined within the narrowest 
possible limits consistent with the logic of the principle.'" 
Jax, 73 Wis. 2d at 579 (quoting Jacobi, 23 Wis. 2d at 157). 
¶22 Sharp and the Scarberrys contend the circuit court 
erred because the documents requested by Lane fall directly 
within the protection of the lawyer-client privilege.  On the 
other hand, Lane argues the documents fall outside the scope of 
the privilege for several reasons:  (1) Lane, as a former 
officer of Sharp, was allowed to waive the privilege; (2) 
billing records are similar to fees and not subject to the 
lawyer-client privilege; (3) communications with third parties 
No. 
00-1797   
 
16 
 
are not protected; and (4) the crime-fraud exception applies.8  
We address each issue separately. 
1.  Lane's status as former director of Sharp 
¶23 First, we examine whether Lane, as a former officer 
and director of Sharp, is entitled to documents from Sharp 
either because he can waive the lawyer-client privilege, or 
because as a corporate representative, he was entitled to the 
privileged communications at the time they were made, and the 
privilege survives his termination of employment.   
¶24 Sharp, the Scarberrys, Niebler, and the Niebler law 
firm (hereinafter appellants) argue that the circuit court erred 
in ordering the discovery of documents from Niebler because 
according to the entity rule (the organization, not individual 
members, is the client), only Sharp can waive the lawyer-client 
privilege.  Appellants urge this court to apply the entity rule 
here and find that Lane's status as a former director does not 
                                                 
8 Lane also argues that the documents are not privileged 
because the advice Niebler gave to Sharp was business advice 
rather than legal advice.  Sharp and the Scarberrys urge this 
court to create guidelines and strengthen the presumption in 
Wisconsin that lawyers are hired for legal advice.  We decline 
to address this issue because the circuit court's decision was 
not based on whether Niebler provided business or legal advice.  
In fact, the circuit court did not even address this argument.  
Because we are reviewing the reasons stated by the circuit court 
for its decision, we decline appellants' invitation to address 
this issue simply to strengthen the presumption that lawyers are 
hired for legal advice.  See United States v. Chen, 99 F.3d 
1495, 1501 (9th Cir. 1996) (presumption that a lawyer is hired 
to give legal advice is rebutted only "when the facts show that 
the lawyer was 'employed without reference to his knowledge and 
discretion in the law'"). 
No. 
00-1797   
 
17 
 
allow him to waive the lawyer-client privilege, and that the 
current corporate representatives may effectively assert the 
lawyer-client privilege against Lane.   
¶25 Appellants first rely on SCR 20:1.13(a), which states:  
"A lawyer employed or retained by an organization represents the 
organization acting through its duly authorized constituents."  
In Jesse v. Danforth, 169 Wis. 2d 229, 485 N.W.2d 63 (1992), 
this court discussed the entity rule expressed by SCR 20:1.13, 
holding that the organization, not the constituent, is the 
lawyer's client.  We then applied the entity rule to privileged 
communication under SCR 20:1.6,9 and held that the corporate 
                                                 
9 SCR 
20:1.6 
states 
in 
full: 
 
Confidentiality 
of 
information.  (a)  A lawyer shall not reveal information 
relating to representation of a client unless the client 
consents after consultation, except for disclosures that are 
impliedly authorized in order to carry out the representation, 
and except as stated in paragraphs (b), (c) and (d). 
(b) A lawyer shall reveal such information to the extent 
the lawyer reasonably believes necessary to prevent the client 
from committing a criminal or fraudulent act that the lawyer 
reasonably believes is likely to result in death or substantial 
bodily harm or in substantial injury to the financial interest 
or property of another. 
(c) A lawyer may reveal such information to the extent the 
lawyer reasonably believes necessary: 
(1) to rectify the consequences of a client's criminal or 
fraudulent act in the furtherance of which the lawyer's services 
had been used; 
(2) to establish a claim or defense on behalf of the 
lawyer in a controversy between the lawyer and the client, to 
establish a defense to a criminal charge or civil claim against 
the lawyer based upon conduct in which the client was involved, 
or to respond to allegations in any proceeding concerning the 
lawyer's representation of the client. 
No. 
00-1797   
 
18 
 
entity, not the constituent, holds the privilege.  Appellants 
contend that under the entity rule, only Sharp, not Lane, can 
waive the lawyer-client privilege. 
¶26 In addition to relying on the entity rule and Jesse, 
appellants rely on Commodity Futures Trading Commission v. 
Weintraub, 471 U.S. 343 (1985), for their position that even as 
a former director of Sharp, Lane may not waive the lawyer-client 
privilege and the present directors of Sharp may effectively 
assert the privilege against him.  In Weintraub, the United 
States Supreme Court addressed "whether the trustee of a 
corporation in bankruptcy has the power to waive the debtor 
corporation's 
attorney-client 
privilege 
with 
respect 
to 
communications that took place before the filing of the petition 
in bankruptcy."  471 U.S. at 345.  As part of an investigation 
of the Chicago Discount Commodity Brokers (CDCB) the Commodity 
Futures Trading Commission (hereafter the Commission) served a 
subpoena duces tecum upon CDCB's former counsel, Gary Weintraub.  
At his deposition, Weintraub refused to answer questions, 
asserting the lawyer-client privilege.  The CDCB maintained that 
former officers, directors and employees no longer had authority 
to assert the privilege.  Recognizing that corporations must act 
through 
agents, 
the 
Court 
discussed 
how 
control 
of 
the 
                                                                                                                                                             
(d) This rule does not prohibit a lawyer from revealing 
the name or identity of a client to comply with ss. 19.43 and 
19.44, Stats. 1985-86, the code of ethics for public officials 
and employees. 
No. 
00-1797   
 
19 
 
corporation is exercised through management and the effect of 
new management. 
 
New managers installed as a result of a takeover, 
merger, loss of confidence by shareholders, or simply 
normal 
succession, 
may 
waive 
the 
attorney-client 
privilege with respect to communications made by 
former officers and directors.  Displaced managers may 
not assert the privilege over the wishes of current 
managers, even as to statements that the former might 
have made to counsel concerning matters within the 
scope of their corporate duties. 
Weintraub, 471 U.S. at 349.  The Court noted that for solvent 
corporations, the corporation's management retains the power to 
waive the corporate lawyer-client privilege.  Id. at 348.  
Therefore, because "the trustee plays the role most closely 
analogous to that of a solvent corporation's management" the 
Court held that the trustee retains control of the lawyer-client 
privilege.  Id. at 353.  Appellants urge this court to follow 
Weintraub and hold that because Lane is "now neither an officer 
nor 
a 
director . . . [he] 
retains 
no 
control 
over 
the 
corporation's privilege."  Id. at 349 n.5. 
¶27 Finally, 
appellants 
argue 
that 
the 
standard 
to 
determine if the lawyer-client privilege applies should be based 
on why the information is requested, not when the documents are 
prepared.  Relying on Milroy v. Hanson, 875 F. Supp. 646 (D. 
Neb. 1995), appellants argue that whether the lawyer-client 
privilege can be invoked depends on whether the requesting 
officer or director attempting to acquire the privileged 
documents, is acting in his own capacity or as a representative 
of the corporation.   
No. 
00-1797   
 
20 
 
¶28 In Milroy, the United States District Court for the 
District of Nebraska, examined whether a director and minority 
stockholder of a corporation has the right to documents 
otherwise protected under the lawyer-client privilege.  875 F. 
Supp. at 646.  The director brought suit against the corporation 
and remaining stockholders and directors seeking money damages 
and liquidation of the corporation.  Id.  The court focused on 
whether the corporation could assert the lawyer-client privilege 
and prevent production of documents held by the corporation's 
accountants and lawyers.  Id. at 647.  The court examined case 
law from other jurisdictions, particularly Kirby v. Kirby, No. 
Civ. A. 8604, 1987 WL 14862 (Del. Ch. July 29, 1987), and cases 
relying on Kirby.10  In Kirby, the Delaware Chancery Court 
reasoned that all directors are responsible for the proper 
management of the corporation and concluded that the lawyer-
client privilege could not be asserted against a former 
director.  1987 WL 14862, at *6.  The Milroy court disagreed 
with the Kirby reasoning: 
 
With all due respect, cases like Kirby, Harris, and 
Gottlieb make a fundamental error by assuming that for 
a corporation there exists a "collective corporate 
'client'" which may take a position adverse to 
"management" 
for 
purposes 
of 
the 
attorney-client 
privilege.  There is but one client, and that client 
is the corporation.  This is true despite the fact 
that 
a 
corporation 
can 
only 
act 
through 
human 
beings. . . . A dissident director is by definition 
                                                 
10 Harris v. Wells, Nos. B-89-391 (WWE), B-89-482 (WWE), 
1990 U.S. Dist. LEXIS 13215, 1990 WL 150445 (D. Conn. Sept. 5, 
1990); Gottlieb v. Wiles, 143 F.R.D. 241 (D. Colo. 1992). 
No. 
00-1797   
 
21 
 
not "management" and, accordingly, has no authority to 
pierce or otherwise frustrate the attorney-client 
privilege when such action conflicts with the will of 
"management." 
875 F. Supp. 646, 649-650 (citations omitted).  The court held 
that under Nebraska law, the dissident director "has no right to 
waive or otherwise pierce [the corporation's] attorney-client 
privilege because he is not the 'management' of the corporation 
and 'management' of the corporation, as it has a right to do, 
asserts the privilege against him."  Id. at 651.  In this case, 
appellants contend that because Lane is a dissident former 
director seeking privileged documents for personal gain, the 
lawyer-client privilege applies, it cannot be waived by Lane, 
and Sharp may effectively assert the privilege against him. 
¶29 Lane argues that the documents requested from Niebler 
are not privileged because Sharp has not established the 
communications were for the purpose of obtaining legal advice.  
Even if the documents are privileged, however, Lane contends 
that Sharp cannot withhold privileged documents because he was 
an officer and director of Sharp during the time the requested 
communications were made.  According to Lane, applying the 
entity rule does not solve this issue because he does not 
dispute that Sharp is the client.  Rather, Lane argues that his 
right to the documents is based on his former status as director 
and a representative of the entity.  Lane contends that Milroy 
and Weintraub are not on point because Milroy was principally a 
shareholder derivative suit and unlike here, the plaintiff did 
not contend he was entitled to corporate documents.  According 
No. 
00-1797   
 
22 
 
to Lane, Weintraub is inapplicable because the case focuses on 
who has the authority to assert or waive a corporation's lawyer-
client privilege, and not whether a former director is entitled 
to discover documents to which he was entitled during his 
employment. 
¶30 Instead of Milroy and Weintraub, Lane urges this court 
to follow Moore Business Forms, Inc. v. Cordant Holdings Corp., 
1996 WL 307444 (Del. Ch. June 4, 1996),11 because the facts are 
similar.  In Moore, the Court of Chancery of Delaware was faced 
with a situation where an attorney furnished legal advice about 
a purchase agreement and discussed strategies with all but one 
director.  1996 WL 307444, at *2.  When the attorney was 
subsequently deposed, the corporation asserted the lawyer-client 
privilege.  Id.  Relying largely on Delaware case law, the court 
held 
that 
a 
corporation 
cannot 
assert 
the 
lawyer-client 
                                                 
11 We recognize that Lane also cites other cases for his 
argument that a corporation may not invoke the lawyer-client 
privilege 
against 
a 
former 
officer 
or 
director 
of 
the 
corporation.  See Carnegie Hill Fin., Inc. v. Krieger, No. 99-
CV-2592, 2000 WL 10446 (E.D. Pa. Jan. 5, 2000); Glidden Co. v. 
Jandernoa, 173 F.R.D. 459 (W.D. Mich. 1997); In re Hutchins, 211 
B.R. 330 (Bankr. E.D. Ark. 1997); Resolution Trust Corp. v. 
Adams, No. 93-389-CIV-ORL-18, 1994 WL 315646 (M.D. Fla. Apr. 14, 
1994); Gottleib v. Wiles, 143 F.R.D. 241 (D. Colo. 1992); AOC 
Ltd. P'ship v. Horsham Corp., Civ. A. No. 12480, 1992 WL 97220 
(Del. Ch. May 5, 1992); Kirby v. Kirby, No. Civ. A. 8604, 1987 
WL 14862 (Del. Ch. July 29, 1987).  We note, however, that these 
cases are largely unpublished decisions and are only from 
Delaware and a few federal district courts.  Rather than 
distinguishing all of these cases, we follow Lane's approach in 
his brief and address in detail only Moore Business Forms, Inc. 
v. Cordant Holdings Corp., Nos. 13911 and 14595, 1996 WL 307444 
(Del. Ch. June 4, 1996). 
No. 
00-1797   
 
23 
 
privilege to deny a director access to legal advice furnished to 
the board during the director's tenure.  1996 WL 307444, at *4.  
"Because the attorney-client privilege belongs to the client, it 
would be perverse to allow the privilege to be asserted against 
the client."  Id. at *6 (emphasis in original).  The court also 
noted that under Delaware law, the corporation had alternative 
means to enable its directors to receive confidential attorney 
advice not discoverable by the other director.12  Based on Moore, 
Lane contends that the circuit court did not erroneously 
exercise its discretion and properly held that the information 
in Niebler's files was not protected by the lawyer-client 
privilege.  Lane urges this court to hold that because he was 
entitled 
to 
the 
communications 
regarding 
the 
shareholder 
distribution when he was a director, he is entitled to the same 
communications in this litigation. 
¶31 In reviewing the circuit court's decision, we note 
first that the circuit court did not directly rule on this 
specific issue.  The court did not specifically address the 
legal issues the parties raise before this court regarding 
whether Lane's former status as a director allows him access to 
                                                 
12 Specifically, the court found that the corporation could 
have bargained for the protection of confidential attorney 
advice in the Stockholders Agreement or could have acted 
pursuant to 8 Del.C. § 141(c).  Moore, 1996 WL 307444, at *6.  
Under 8 Del.C. § 141(c), the corporation could appoint a special 
committee empowered to address the confidential issues.  Id.  
Under either option, the special committee could have retained 
separate legal counsel and the communications would be properly 
protected from disclosure under the lawyer-client privilege.  
Id.  
No. 
00-1797   
 
24 
 
otherwise privileged communications.  The circuit court judge's 
only 
comment 
on 
this 
issue 
was 
related 
specifically 
to 
billings,13 but the court's ruling seemed to rely largely on 
Lane's former status as a director.   
 
There were (sic) a linking by contract of these 
parties during a significant period of time in which 
the Niebler law firm provided services to the Sharp 
Corporation.  And if, in fact, there were billings 
that were submitted to the corporation and under Mr. 
Lane's obligations were reviewed by him but not 
retrievable by him upon his termination, I think he's 
entitled to examine them again with the benefit of 
counsel. 
¶32 We conclude that the circuit court's ruling was an 
erroneous exercise of discretion.  The circuit court did not 
directly address whether a former director is allowed to waive 
the lawyer-client privilege of the corporation, or whether the 
corporation is able to assert the lawyer-client privilege 
against a former director for documents prepared during the 
director's tenure.  However, we recognize the circuit court had 
little guidance because this is an issue of first impression in 
Wisconsin. 
¶33 Lane's status as a former director does not entitle 
him to access Niebler's files regarding communications with 
                                                 
13 Whether attorney billings are protected by the lawyer-
client privilege is a somewhat different issue and is discussed 
below in Section 2. 
No. 
00-1797   
 
25 
 
Sharp.  Wisconsin follows the entity rule,14 and accordingly, the 
lawyer-client privilege belongs to Sharp——Niebler's client——and 
only 
Sharp 
can 
waive 
the 
lawyer-client 
privilege. 
 
See 
Wis. Stat. § 905.03(3); see also Dudek, 34 Wis. 2d at 605 (only 
the client can waive the lawyer-client privilege); Borgwardt, 
196 Wis. 2d at 355; Swan Sales Corp., 126 Wis. 2d at 31-32.  
While a corporate client can only act through its officers, 
directors, employees, shareholders and other constituents, see 
Comment to SCR 20:1.13,15 we logically conclude that a former 
director cannot act on behalf of the client corporation and 
waive the lawyer-client privilege. 
                                                 
14 Even though Jesse v. Danforth, 169 Wis. 2d 229, 242, 485 
N.W.2d 63 (1992), originally adopted and applied the entity rule 
in a conflict of interest case, we find it appropriate to rely 
on the entity rule here as well.  As we recognized in Jesse, 
"the clear purpose of the entity rule was to enhance the 
corporate lawyer's ability to represent the best interests of 
the corporation without automatically having the additional and 
potentially conflicting burden of representing the corporation's 
constituents."  Id. at 240 (emphasis added).  Applying the 
entity rule here furthers this purpose, because it allows the 
corporate lawyer to focus on representing only the best interest 
of the client corporation.  The corporation's lawyer does not 
need to worry about representing the interests of every member 
(or former member) of the corporation's board of directors.  
Accordingly, only the client corporation or the corporation's 
lawyer, acting on the corporation's behalf, can waive the 
lawyer-client privilege.  We disagree with the dissent's 
interpretation that  applying the entity rule makes the lawyer 
"become the corporation's guardian ad litem."  Dissent at ¶85.  
Rather, we are merely applying the purpose of the entity rule as 
stated in Danforth. 
15 The Comment to SCR 20:1.13 states in part:  "An 
organizational client is a legal entity, but it cannot act 
except through its officers, directors, employees, shareholders 
and other constituents." 
No. 
00-1797   
 
26 
 
¶34 We further conclude that even though the documents 
were created during Lane's tenure as a director, Lane is not 
entitled to the documents in Niebler's files.  As the United 
States Supreme Court stated in Weintraub, "the power to waive 
the 
corporate 
attorney-client 
privilege 
rests 
with 
the 
corporation's management and is normally exercised by its 
officers and directors."  471 U.S. at 348.  The Scarberrys 
currently comprise Sharp's board of directors, or management, 
and retain control over Sharp's lawyer-client privilege.  Lane 
is a former director, and a "dissident." We agree with the 
court's reasoning in Milroy:  "A dissident director is by 
definition not 'management' and, accordingly, has no authority 
to pierce or otherwise frustrate the attorney-client privilege 
when such action conflicts with the will of 'management.'"16  875 
F. Supp. 646, at **13.  Accordingly, we conclude that even 
though Lane is a former officer and director, and the documents 
                                                 
16 While 
we 
decline 
appellants' 
request 
to 
ground 
application 
of 
the 
lawyer-client 
privilege 
on 
why 
the 
information is being requested, we find it significant that Lane 
is acting in his individual capacity and requests the documents 
for personal gain in his lawsuit against the corporation.  
Lane's status as former director does not entitle him to pierce 
the lawyer-client privilege in order to further his personal 
gain against the corporation. 
No. 
00-1797   
 
27 
 
at issue were prepared during his tenure, Sharp can effectively 
assert the lawyer-client privilege against him.17 
                                                 
17 The dissenting opinion ignores the present facts, and 
instead bases its decision on the fact that Lane, when he was a 
member of the Sharp board of directors, could have acted on 
behalf of Sharp and waived the attorney-client privilege.  
Dissent at ¶80.  Specifically, the dissent ignores that Lane, a 
"dissident," can no longer act on behalf of Sharp; only the 
current Sharp board of directors can waive the attorney-client 
privilege.  Accordingly, and directly on point, the current 
board of directors, can, and has chosen to, not waive the 
attorney-client privilege in respect to the documents requested 
by Lane.  To state this another way, the current board of 
directors has chosen to effectively assert the attorney-client 
privilege against Lane.  Moreover, as discussed previously, it 
makes no difference to the attorney-client privilege that the 
documents Lane requested were prepared during his tenure with 
Sharp. 
No. 
00-1797   
 
28 
 
¶35 Finally, before addressing other issues involving the 
lawyer-client privilege, we note that our holding here is based 
strictly on the facts as presented.  We rely largely on the fact 
that Lane is a former director.  We specifically do not address, 
or speculate, on the outcome of any similar situations involving 
a current member of a board of directors.18 
2. Attorney billing records. 
                                                                                                                                                             
It also makes no difference if we note, as the dissent 
suggests, that Sharp is a closely held corporation.  See dissent 
at ¶89.  The dissent erroneously characterizes this situation as 
one where the Scarberrys and Lane retained a single attorney and 
later developed adverse interests.  Dissent at ¶94.  The dissent 
therefore concludes, "When the persons who joined together later 
develop adverse interests, they may not assert the attorney-
client 
privilege 
against 
one 
another 
as 
the 
basis 
for 
withholding legal information developed during their joint 
undertaking."  Id. (footnote omitted).  In drawing this 
conclusion, the dissent ignores, however, several relevant 
facts.  First, at all relevant times the Scarberrys have been 
the sole shareholders of Sharp.  Second, the Scarberrys and 
Sharp first retained Attorney Niebler in 1985, but Lane did not 
join Sharp as executive vice president until 1992.  Based on 
these facts, Niebler was involved with the Scarberrys and Sharp 
nearly seven years before Lane could claim that they "shared a 
common interest in the success of Sharp Packaging."  Dissent at 
¶92.  We therefore find it wrong to characterize this situation 
as one where the Scarberrys and Lane, together, retained Niebler 
in order to pursue a common interest.  Accordingly, we conclude 
that it makes no difference to our decision that Sharp is a 
closely held corporation.  We reiterate that, as the current 
representatives of Sharp, the Scarberrys have chosen to assert 
the attorney-client privilege against Lane.  Throughout the time 
period at issue, Lane was an officer and employee of Sharp, 
never a shareholder. 
18 Contrary to the dissent's suggestion that limiting the 
scope of our opinion to the facts presented "mean[s]" something, 
dissent at ¶74 n.2, we note that the decision is limited to the 
facts of this case because we conclude it would be inappropriate 
to speculate on issues not before this court. 
No. 
00-1797   
 
29 
 
¶36 We next turn to appellants' argument that the circuit 
court erred in ordering production of the Niebler firm's billing 
records because attorney billing records are protected by the 
lawyer-client privilege.  Appellants contend that production of 
attorney billing records would reveal the specific nature of 
legal services provided to Sharp and the Scarberrys, which is 
confidential 
information 
protected 
by 
the 
lawyer-client 
privilege. 
¶37 Appellants rely on the distinction drawn in In re 
Grand Jury Subpoena Issued to Horn, 976 F.2d 1314, 1316-1317 
(9th Cir. 1992), and Real v. Continental Group, Inc., 116 F.R.D. 
211, 213-214 (N.D. Cal. 1986), where the court distinguished 
billing records from fee arrangements, which are normally not 
protected.  In both cases, the court found billing records 
protected by the lawyer-client privilege because production of 
these records would reveal the nature of legal services 
provided.  In re Grand Jury Subpoena, 976 F.2d at 1318; Real, 
116 F.R.D. at 214.  Appellants argue that this case is similar 
because Niebler contends that the billing records at issue are 
more than just a bill for "services rendered" as they contain 
narrative descriptions of the legal services provided.  Based on 
this reasoning, appellants contend the circuit court erroneously 
exercised its discretion by ordering production of the attorney 
billing records. 
¶38 Lane argues he is entitled to the Niebler law firm 
billing records because when he was employed by Sharp, he was 
entitled to review attorney billing records.  In other words, 
No. 
00-1797   
 
30 
 
Lane contends that since he was entitled to review the billing 
records when they were originally sent to Sharp, he is entitled 
to see them as part of this litigation. 
¶39 In ordering production of the Niebler firm's billing 
records, the circuit court stated:  "And if, in fact, there were 
billings that were submitted to the corporation and under Mr. 
Lane's obligations were reviewed by him but not retrievable by 
him upon his termination, I think he's entitled to examine them 
again with the benefit of counsel."  We conclude that the 
circuit court erroneously exercised its discretion in ordering 
production of the attorney billing records.  The circuit court 
failed 
to 
examine 
the 
nature 
of 
the 
communications; 
specifically, it failed to note that the billing records reveal 
the nature of legal services provided and the substance of 
lawyer-client communications.  We recognize that this is an 
issue of first impression for this court, and we conclude that 
the circuit court's ruling was not based on a proper application 
of the legal principles involved. 
¶40 While the lawyer-client privilege readily protects 
statements from the client to the lawyer, the privilege only 
protects communications from the lawyer to the client if 
"disclosure 
of 
the 
lawyer-to-client 
communications 
would 
directly or indirectly reveal the substance of the client's 
confidential communications to the lawyer."  Journal/Sentinel v. 
Sch. Dist. of Shorewood, 186 Wis. 2d 443, 460, 521 N.W.2d 165 
(Ct. App. 1994).  Billing records are communications from the 
attorney to the client, and producing these communications 
No. 
00-1797   
 
31 
 
violates the lawyer-client privilege if production of the 
documents reveals the substance of lawyer-client communications.  
See Dyson, 140 Wis. 2d at 815 (answer may not be compelled to 
inquiries that threaten to reveal the substance of lawyer-client 
communications). 
¶41 According 
to 
Niebler's 
affidavit, 
which 
is 
uncontested,19 the attorney billing records disputed here contain 
detailed descriptions of the nature of the legal services 
rendered to Sharp.  Producing the attorney billing records 
would, 
therefore, 
reveal 
the 
substance 
of 
lawyer-client 
                                                 
19 We find it significant that Lane does not contest 
Niebler's affidavit regarding the contents of the billing 
records sent from Niebler's law firm to Sharp.  In his brief at 
pages 41-42, Lane states: 
[It] is undisputed that [Lane] was entitled to review 
Niebler's legal bills while plaintiff was employed by 
Sharp.  Sharp argued below that plaintiff "must have 
known" about Niebler's services because plaintiff was 
in charge 
of 
Sharp's 
accounting 
operations, and 
Niebler's monthly bills were sent to and reviewed by 
Sharp's 
corporate 
controller, 
who 
reported 
to 
[Lane]. . . . Especially 
since 
Sharp 
affirmatively 
contends [Lane] either did review or could have 
reviewed Niebler's bills while plaintiff was employed 
by Sharp, the trial court properly ruled that Sharp 
may not assert privilege against plaintiff to deny him 
discovery of billing records in this litigation.  
(emphasis added). 
Faced with the opportunity, Lane does not dispute, but 
actually relies on Sharp's argument that Lane either did review, 
or could have reviewed, Niebler's bills sent to Sharp.  The 
record, therefore, reflects that Lane could have contested, with 
his own affidavit, Niebler's representation that the attorney 
billing records contain detailed descriptions of the nature of 
legal services, and, therefore, production would violate the 
lawyer-client privilege. 
No. 
00-1797   
 
32 
 
communications between Sharp and Niebler.  Accordingly, we 
conclude that the attorney billing records are protected by the 
lawyer-client privilege.  Again, we note that our holding is 
limited by the particular facts presented before this court.  We 
decline to establish a broad rule that all attorney billing 
records are protected by the lawyer-client privilege.  Rather, 
we focus only on the billing records in this case.  We do not 
determine that all other attorney billing records or invoices 
are privileged, nor do we address whether the circuit court 
should conduct an in camera review in cases where the parties 
dispute whether billing records reveal the substance of lawyer-
client communications. 
3. Communications with Third Parties 
¶42 Sharp and the Scarberrys next argue that the circuit 
court erred in ordering production of documents from Niebler 
involving communications with third parties.  Sharp and the 
Scarberrys contend that the circuit court's ruling sacrifices 
confidentiality for efficiency, and that Lane has made no 
showing that he was unable to obtain these documents from third 
parties. 
¶43 Lane argues that the circuit court's decision was 
within the court's discretion, because Niebler's correspondence 
with third parties is relevant and not within the scope of the 
lawyer-client privilege.  Lane argues that Sharp, the party 
alleging privilege, bears the burden of showing good cause as to 
why 
the 
requested 
documents 
should 
not 
be 
produced.  
Furthermore, Lane contends it is imperative that he obtains 
No. 
00-1797   
 
33 
 
discovery from all involved parties, in order to compare notes 
and piece together circumstantial evidence of fraud. 
¶44 During the oral decision denying Sharp's and the 
Scarberry's motion to quash, the circuit court judge stated,  
 
There is an offer here that this kind of information 
may be available from third parties, but there's also 
documentation by way of the excerpts from depositions 
here that that was denied the plaintiff in the normal 
course of those depositions.  And that being the case, 
it may be that there are other sources of this same 
information, but it occurs to this Court that the most 
efficient way of obtaining them is through the Niebler 
law firm file. 
Furthermore, in the written order, the circuit court required 
production of all "non-privileged documents, including documents 
reflecting the Niebler firm's communications with third parties" 
for the time period Lane requested.   
¶45 We conclude that the circuit court did not erroneously 
exercise its discretion on this issue.  The circuit court judge 
carefully examined the situation and, significantly, found that 
there was evidence that plaintiff was denied the requested 
information 
in 
the 
normal 
course 
of 
depositions. 
 
More 
importantly, however, is the fact that the circuit court ordered 
production 
of 
only 
non-privileged 
documents. 
Accordingly, 
documents protected by the lawyer-client privilege, or the work 
product doctrine, were not part of the circuit court's order 
regarding this issue.  We, therefore, conclude that the circuit 
court's decision does not reflect an erroneous exercise of 
discretion, because the court examined the relevant facts, 
applied the proper standard of law, and reached a reasonable 
No. 
00-1797   
 
34 
 
conclusion based on a demonstrative rational process.  See Paige 
K.B., 226 Wis. 2d at 233. 
4. Crime-Fraud Exception 
¶46 Appellants' final argument regarding the lawyer-client 
privilege is that the circuit court erred by concluding that the 
crime-fraud exception in Wis. Stat. § 905.03(4)(a)20 applies, 
because Lane failed to make out a prima facie case of fraud, and 
the circuit court failed to conduct an in camera review prior to 
reaching 
the 
conclusion 
as 
to 
the 
applicability 
of 
the 
exception.  We first address whether Lane made out a prima facie 
case, and then turn to whether the circuit court erred by 
failing to conduct an in camera review. 
¶47 Relying on Dyson v. Hempe, 140 Wis. 2d 792, 413 
N.W.2d 379 
(1987), 
appellants 
first 
argue 
that 
Lane's 
allegations of fraud in the complaint are insufficient to 
establish a prima facie case.  "The mere charge of fraud or 
illegality will not, however, 'set the confidences free.'"  
Dyson, 140 Wis. 2d at 804 (quoting Clark v. United States, 289 
U.S. 1, 15 (1933)).  The test for invoking the crime-fraud 
exception is whether there is "reasonable cause to believe that 
the attorney's services were utilized in furtherance of the 
ongoing unlawful scheme."  United States v. Chen, 99 F.3d 1495, 
1503 (9th Cir. 1996) (citations omitted).  According to 
                                                 
20 Wisconsin Stat. § 905.03(4)(a) provides that there is no 
privilege "If the services of the lawyer were sought or obtained 
to enable or aid anyone to commit or plan to commit what the 
client knew or reasonably should have known to be a crime or 
fraud." 
No. 
00-1797   
 
35 
 
appellants, Lane has failed to meet this threshold requirement, 
because 
he 
has 
failed 
to 
provide 
any 
evidentiary 
facts 
supporting his position that services of the Niebler law firm 
were utilized in furtherance of fraud.21  Finally, appellants 
contend that Lane has alleged only a breach of contract case, 
not actionable fraud.   
¶48 Lane 
contends 
that 
the 
circuit 
court 
did 
not 
erroneously exercise its discretion in determining that a prima 
facie case of fraud was made.  According to Lane, the complaint 
sufficiently alleges fraudulent transfer, the circuit court 
properly considered substantial evidence of fraud, and the 
record also establishes prima facie evidence that the intent of 
the distribution was to hinder Lane's rights as an equity 
holder.  Among other things, Lane bases his argument on the fact 
that the $3.8 million distribution was not legal, because 
neither Sharp's by-laws nor the Wisconsin Statutes grant the 
                                                 
21 Niebler and the Niebler law firm additionally contend 
that 
this 
case 
addresses 
an 
"inherent 
conflict" 
between 
Wis. Stat. § 905.03(2) and (4) and SCR 20:1.2 and SCR 20:1.6.  
They argue that these statutes and Supreme Court Rules create a 
conflict between an attorney's obligation to comply with court 
orders, and the Supreme Court rules requiring attorneys to 
"abide by a client's decisions concerning the objectives of 
representation."  SCR 20:1.2(a).  According to Niebler, because 
Sharp, the Scarberrys and Niebler deny participation in any 
fraudulent activity, Niebler faces an inherent conflict and must 
choose between violating his obligation to his client, and being 
found in contempt for refusing to comply with the circuit 
court's discovery order.  We decline to address Niebler's 
"inherent conflict" argument, because we do not uphold the 
circuit court's application of the crime-fraud exception to the 
lawyer-client privilege. 
No. 
00-1797   
 
36 
 
right to receive shareholder dividends without a declaration by 
the board of directors.  Based on the Stock Transfer Restriction 
Agreement, the only alteration to the requirement of a board of 
directors' declaration is that which allows for distribution of 
dividends to pay income taxes, but nothing more.  Lane contends 
that the board meeting requirement was an express requirement 
intended to protect his 25% interest in Sharp.  Lane further 
argues that this is not merely a breach of contract case, and 
that he has established a claim for fraudulent conveyance under 
Wis. Stat. § 242.01(4).  Furthermore, the fact that Lane's 
status as a creditor derives from a contract, is immaterial.  
See, e.g., Marshall & Ilsley Bank v. Stepke, 228 Wis. 39, 279 
N.W.2d 625 (1938) (recognizing mortgagee as creditor under 
fraudulent conveyance statute).  Finally, Lane argues that the 
record contains ample evidence of Niebler's involvement in 
furthering the fraudulent scheme to distribute the profits only 
to the Scarberrys.  According to Lane, Niebler encouraged the 
distribution to occur before Lane exercised his stock options, 
and, acting on behalf of Sharp, Niebler applied for and 
negotiated 
the 
M&I 
Mortgage 
Co. 
loan 
to 
finance 
the 
distribution.  Examined together, Lane argues that the complaint 
and the record provide more than adequate evidence to satisfy 
his burden of making a prima facie case of fraud. 
¶49 In finding that Lane had established a prima facie 
case of fraud, the circuit court relied on the allegations in 
the complaint and the limited evidence in the record.  The 
circuit court judge stated: 
No. 
00-1797   
 
37 
 
 
I'm satisfied that there is based on the Court's 
previous review of the Complaint, as well as the other 
limited information presented here, that there is a 
prima 
facie 
case. . . . [T]he 
combination 
of 
the 
relationship 
that 
existed 
between 
the 
immediate 
parties already named in this case and that prima 
facie showing and the circumstances, the allegation of 
breach and of that agreement going on, not just 
immediately prior to the termination but perhaps for a 
time pre-dating that, a time in which the Niebler law 
firm 
was 
supposedly 
only 
providing . . . limited 
services pertaining to the industrial bond issue, that 
the totality of all those matters I believe allow the 
attorney-client privilege to be dissipated under the 
parameters that the Court has outlined here. 
¶50 We conclude that the circuit court did not erroneously 
exercise its discretion in finding that Lane established a prima 
facie case of fraud.  While we recognize that the mere 
allegation of fraud is insufficient, we note that the burden is 
low in that "[t]o drive the privilege away, there must be 
'something 
to 
give 
colour 
to 
the 
charge.'" 
Dyson, 
140 
Wis. 2d 792, 804 (quoting Clark v. United States, 289 U.S. 1, 15 
(1933)); see also, United States v. Zolin, 491 U.S. 554, 571 
(1989) ("[A] lesser evidentiary showing is needed to trigger in 
camera review than is required ultimately to overcome the 
privilege.")  In order to establish a prima facie case, Lane 
must only show "reasonable cause to believe [Niebler's] services 
were utilized in furtherance of the ongoing unlawful scheme."  
Chen, 99 F.3d at 1503.  "Reasonable cause is more than suspicion 
but less than a preponderance of evidence."  Id. 
¶51 Under this standard, Lane needs only submit evidence 
that, if believed, would establish an "ongoing unlawful scheme."  
No. 
00-1797   
 
38 
 
Id.  We conclude that the complaint, combined with evidence in 
the record (deposition testimony and affidavits)——demonstrating, 
among other things, Niebler's involvement with the distribution, 
and the lack of approval by the board of directors——are 
sufficient to establish a prima facie case of fraud.  The 
circuit court's conclusion, therefore, will be upheld, because 
it is consistent with the facts in the record and established 
legal principles. 
¶52 We next address appellants' argument that the circuit 
court erred in failing to conduct an in camera review to 
determine whether the crime-fraud exception applies.  Sharp and 
the Scarberrys argue that even if the circuit court correctly 
concluded that Lane established a prima facie case of fraud, the 
court erred by failing to conduct an in camera review of the 
disputed documents.  According to Sharp and the Scarberrys, an 
in camera review is the proper procedure to determine whether 
the crime-fraud exception applies because it is a smaller 
intrusion 
on 
lawyer-client 
confidentiality 
than 
public 
disclosure, and ensures that the circuit court's decision 
regarding the crime-fraud exception is an informed one. 
¶53 Lane contends an in camera review is unnecessary, 
because the purpose of an in camera review is to resolve 
privilege disputes.  Lane again asks this court to adopt a rule 
that Sharp cannot assert the lawyer-client privilege against a 
former director, making Lane entitled to discover all documents 
requested.  Accordingly, an in camera review to determine 
No. 
00-1797   
 
39 
 
whether specific documents are privileged would be unnecessary, 
because Lane would be entitled to discover all such documents. 
¶54 Lane also contends that Sharp and the Scarberrys have 
waived their right to an in camera review by simply asserting a 
blanket claim of privilege (both attorney-client privilege and 
work product).  Lane relies on Holifield v. United States, 909 
F.2d 201, 204 (7th Cir. 1990), where the Seventh Circuit Court 
of Appeals refused to address the merits of the alleged lawyer-
client privilege because Holifield failed to properly raise the 
issue.  The court held that "brief conclusory summations" as to 
why documents are protected were insufficient to support a claim 
of the lawyer-client privilege.  Id.  We conclude that the 
holding in Holifield is inapplicable here for two reasons.  
First, Sharp and the Scarberrys have submitted more than "brief 
conclusory summations" as to why the lawyer-client privilege and 
the work product doctrine apply.  While we might have preferred 
that they submit a privilege log, asserting the privilege on a 
document-by-document basis, we do not find that failure to do so 
in this case warrants denying Sharp and the Scarberrys an in 
camera review.  By asserting that the circuit court erred in 
this case, Sharp and the Scarberrys are basically disputing all 
of the documents that would fall within the discovery order.  
Based on this conclusion, we do not find unreasonable Sharp and 
the Scarberry's choice to appeal the circuit court's entire 
decision.  Second, contrary to Lane's assertion that Sharp and 
the Scarberrys have made no good-faith effort to produce 
documents, after reviewing the record, we conclude that Sharp 
No. 
00-1797   
 
40 
 
and the Scarberrys have produced numerous documents in this 
case.  Accordingly, we conclude that this is not a situation 
where Sharp and the Scarberrys are shirking their responsibility 
to 
provide 
discovery 
by 
making 
"blanket 
allegations" 
of 
privilege.  We, therefore, reject Lane's argument that Sharp and 
the Scarberrys have waived their right to an in camera review. 
¶55 Regarding the merits of the circuit court's decision 
not to conduct an in camera review, we conclude that the circuit 
court erroneously exercised its discretion.  The circuit court 
simply determined that a prima facie case of the crime-fraud 
exception had been established, and did not examine any 
documents to determine if the crime-fraud exception actually 
applied.  "It must do so."  Borgwardt, 196 Wis. 2d at 357 
(remanding for in camera review).  As discussed previously, the 
burden to establish a prima facie case is low.  Once the circuit 
court determines the prima facie case has been established, an 
in camera review is the proper procedure to determine if the 
crime-fraud exception to the lawyer-client privilege applies.  
See George v. Record Custodian, 169 Wis. 2d 573, 582, 485 
N.W.2d 460 (Ct. App. 1992) (instructing trial court to conduct 
in camera inspection to determine if lawyer-client privilege 
applies).  An in camera review is appropriate, because it is a 
"smaller intrusion upon the confidentiality of the attorney-
client relationship than is public disclosure."  Zolin, 491 U.S. 
at 572. 
¶56 While the decision to conduct an in camera review is a 
discretionary decision, we conclude that, in this case, the 
No. 
00-1797   
 
41 
 
circuit court erroneously exercised its discretion.  In United 
States v. Zolin, 491 U.S. 554, 572 (1989), the United States 
Supreme Court discussed factors a trial court should consider in 
deciding whether to conduct an in camera review. 
 
The court should make that decision in light of the 
facts 
and 
circumstances 
of the 
particular 
case, 
including, among other things, the volume of materials 
the district court has been asked to review, the 
relative importance to the case of the alleged 
privileged information, and the likelihood that the 
evidence produced through in camera review, together 
with other available evidence then before the court, 
will establish that the crime-fraud exception does 
apply. 
Here, the circuit court did not consider any of these factors in 
deciding it would not conduct an in camera review.  Rather, the 
circuit court simply used the prima facie case to "allow the 
attorney-client privilege to be dissipated."  An in camera 
review is appropriate in this case.  Only by reviewing the 
documents at issue is the circuit court able to determine 
whether Niebler's legal services were rendered in furtherance of 
fraud.  Upon remand, therefore, we instruct the circuit court to 
conduct an in camera review of the disputed documents to 
determine the applicability of the crime-fraud exception to the 
lawyer-client privilege.22 
B. 
Work Product Doctrine 
                                                 
22 In 
determining 
that 
the 
crime-fraud 
exception 
is 
applicable, it is not intended that the circuit court invade the 
province of the jury to determine the claim of fraudulent 
transfer.  Rather, the circuit court is only to make an 
evidentiary ruling that documents cannot be withheld from 
production based on the lawyer-client privilege. 
No. 
00-1797   
 
42 
 
¶57 In addition to the lawyer-client privilege, Sharp and 
the Scarberrys contend that documents Lane requested from 
Niebler are protected by the work product doctrine.  Appellants 
argue 
that 
the 
circuit 
court 
erroneously 
exercised 
its 
discretion by concluding that, prior to May 31, 1999, litigation 
was not imminent, and documents prepared during that time are 
not protected by the work product doctrine.  Appellants contend 
that Lane had standing to sue Sharp since the date he was 
informed of his termination, March 2, 1999, and that litigation 
was anticipated as early as 1998.  Based on these circumstances, 
appellants argue that documents prepared or obtained as early as 
1998 are protected by the work product doctrine. 
¶58 Niebler and his law firm further contend that Lane has 
not satisfied the burden to overcome the protection of the work 
product doctrine.  Specifically, Niebler argues that under 
Wis. Stat. § 804.01(2)(c),23 State ex rel. Dudek v. Circuit 
                                                 
23 Wisconsin Stat. § 804.01(2)(c) provides: 
(2) Scope of Discovery.  Unless otherwise limited by 
order of the court in accordance with the provisions 
of this chapter, the scope of discovery is as follows: 
 . . .  
No. 
00-1797   
 
43 
 
Court, 34 Wis. 2d 559, 585, 150 N.W.2d 387 (1967), and Hickman 
v. Taylor, 329 U.S. 495, 511-512 (1947), Lane has failed to meet 
his burden of showing that production of the documents is 
necessary to the preparation of his case, or that nonproduction 
would cause prejudice or hardship. 
¶59 Lane argues that the circuit court's decision was not 
an erroneous exercise of discretion, because litigation was not 
imminent until Lane's employment was officially terminated on 
May 31, 1999.  Lane further argues that appellants bear the 
burden of proving the documents were made in anticipation of 
litigation, and Niebler's conclusory affidavit is insufficient 
to meet that burden. 
¶60 We again review the circuit court's discovery order 
under the erroneous exercise of discretion standard.  See 
Borgwardt, 196 Wis. 2d at 350.  In deciding that documents 
prepared prior to May 31, 1999, are not protected by the work 
product doctrine, the circuit court judge stated: 
                                                                                                                                                             
(c) Trial preparation:  materials.  1.  Subject to par. (d) 
a party may obtain discovery of documents and tangible things 
otherwise 
discoverable 
under 
par. 
(a) 
and 
prepared 
in 
anticipation of litigation or for trial by or for another party 
or by or for that other party's representative (including an 
attorney, consultant, surety, indemnitor, insurer, or agent) 
only upon a showing that the party seeking discovery has 
substantial need of the materials in the preparation of the case 
and that the party seeking discovery is unable without undue 
hardship to obtain the substantial equivalent of the materials 
by other means.  In ordering discovery of such materials when 
the required showing has been made, the court shall protect 
against disclosure of the mental impressions, conclusions, 
opinions, 
or 
legal 
theories 
of 
an 
attorney 
or 
other 
representative of a party concerning the litigation. 
No. 
00-1797   
 
44 
 
 
 . . . I certainly can accept at face value, Mr. 
Niebler's representation and by way of affidavit that 
whenever work is done, certainly the potential for 
litigation exists.  Where [sic] in a litigious society 
in dealing with corporate entities certainly the 
possibility of litigation is always there, but the key 
is, the fact that when it is imminent, and I think 
under the circumstances here that test is not met 
until after the actual termination of Mr. Lane 
occurred and went into full force and effect.  And he 
in effect had standing to bring a lawsuit such as we 
have here before the Court today. 
¶61 The work product doctrine was adopted in Wisconsin in 
Dudek, and codified by Wis. Stat. § 804.01(2)(c).24  Unlike the 
lawyer-client 
privilege, 
the 
work 
product 
doctrine 
is 
a 
"qualified 
privilege."  
Borgwardt, 
196 
Wis. 2d at 353-354 
(quoting United States v. Nobles, 422 U.S. 225, 237-238 (1975)).  
The work product doctrine only "gives way 'upon a showing that 
the party seeking discovery has substantial need of the 
materials in the preparation of the case and that the party 
seeking discovery is unable without undue hardship to obtain the 
substantial equivalent of the materials by other means.'"  Id. 
at 354 (quoting Wis. Stat. § 804.01(2)(c)1.); see also Dudek, 34 
Wis. 2d at 591 ("[T]he work product of the lawyer usually is 
privileged and not subject to discovery except where the 
objectives of pretrial discovery are unnecessarily frustrated 
                                                 
24 The work product doctrine announced in State ex rel. 
Dudek v. Circuit Court, 34 Wis. 2d 559, 150 N.W.2d 387 (1967), 
is unaffected, however, by the enactment of Wis. Stat. § 804.01.  
Meunier v. Ogurek, 140 Wis. 2d 782, 789, 412 N.W.2d 155 (Ct. 
App. 1987) (citing Judicial Council Committee's Note, 1974, 67 
Wis. 2d at 659).  
 
No. 
00-1797   
 
45 
 
and where good cause is shown to make exception to the rule.").  
Furthermore, in order to be covered by the work product 
doctrine, litigation has to be anticipated, but not already 
commenced.  Borgwardt, 196 Wis. 2d at 354.  "[T]he test should 
be whether, in light of the nature of the document and the 
factual situation in the particular case, the document can 
fairly be said to have been prepared or obtained because of the 
prospect of litigation."  Id. (quoting 8 C.A. Wright, A.R. 
Miller, & R.L. Marcus, Federal Practice and Procedure:  Civil 2d 
§ 2024 at 343 (1994) (interpreting Fed. R. Civ. P. 26(b)(3), the 
federal 
analogue 
to 
Wis. Stat. § 804.01(2)(c))); 
see 
also 
Meunier v. Ogurek, 140 Wis. 2d 782, 788, 412 N.W.2d 155 (Ct. 
App. 1987) (interpreting Wis. Stat. § 804.01(2)(c)1 by using 
federal 
decisions 
construing 
the 
procedural 
counterpart).  
Finally, in Dudek, this court laid out what is necessary to 
overcome the protection of the work product doctrine. 
 
[O]nce a matter is classified as work product the 
court will require the party moving for discovery to 
make 
an 
adequate 
showing 
that 
the 
information 
contained in the work product is unavailable from 
other sources and that a denial of discovery would 
prejudice the movant's preparation for trial.  What 
showing of unavailability or prejudice the court will 
require depends upon the particular facts and issues 
of the case, as well as what is deemed to be [the] 
basis for classifying the particular item as work 
product. 
Dudek, 34 Wis. 2d at 591. 
¶62 We 
conclude 
that 
the 
circuit 
court 
erroneously 
exercised its discretion by simply concluding that all documents 
prepared or obtained prior to May 31, 1999, are not covered by 
No. 
00-1797   
 
46 
 
the work product doctrine.  It is not apparent that the circuit 
court applied the test from Dudek and Borgwardt.  We recognize 
that application of the work product doctrine is "a question of 
fairness tempered by the basic concepts of our adversary system 
and the desirable aspects of pretrial discovery."  Dudek, 34 
Wis. 2d at 592.  However, the circuit court's decision does not 
reflect a finding that Lane made a showing of substantial need 
for the documents, there is no determination that the documents 
were 
prepared 
or 
obtained 
because 
of 
the 
"prospect 
of 
litigation," and although the circuit court's decision includes 
discussion about other sources of the information, the circuit 
court concluded, "the most efficient way of obtaining them is 
through the Niebler law firm."  Because the circuit court failed 
to apply the correct legal standard, and did not examine the 
documents to determine whether the work product doctrine 
applies, we conclude that the circuit court's decision was an 
erroneous exercise of discretion.  On remand, we direct the 
circuit court to apply the Dudek and Borgwardt standard and 
conduct an in camera review of the disputed documents.  As 
discussed previously with regard to applicability of crime-fraud 
exception to the lawyer-client privilege, an in camera review is 
the proper procedure for determining whether the claimed 
privilege applies.  See Borgwardt, 196 Wis. 2d at 357-358 
(citing United States v. Zolin, 491 U.S. at 568-569). 
C. 
Attorneys' Fees and Costs  
¶63 We now turn to Sharp's and Scarberry's final argument 
that the circuit court's award of costs, including attorneys' 
No. 
00-1797   
 
47 
 
fees was an erroneous exercise of discretion and violated 
Wis. Stat. § 804.12.25  On June 5, 2000, the court heard 
defendant's motion for a protective order and to quash the 
subpoena concerning the Niebler firm's files, and defendant's 
motion for a protective order and to quash the subpoena 
regarding the scope of Lane's discovery of Scarberry's personal 
financial records from M&I Bank.  The circuit court denied both 
motions.  Pursuant to § 804.12, Lane filed a motion for an award 
of costs, including attorneys' fees in connection with both 
motions.  The circuit court denied Lane's attorneys' fees motion 
regarding the Niebler firm's files, but granted Lane's motion 
for attorneys' fees regarding the personal financial records.  
In an oral ruling (as noted earlier), the circuit court judge 
stated: 
 
The last matter I still want to get to is the 
plaintiff's request for costs pertaining to this 
motion.  The court will request a submission of what 
those costs are.  But as far as the issue of the 
production of financial records, I am going to grant 
that request.  As far as the matter of attorney-client 
privilege which I think presents a more difficult 
legal issue, I'll deny that.  My inclination simply is 
to cut it strictly in half and not require that you 
say how much I did on this part of the motion or that 
on the other, but I would award 50 percent of costs 
pertaining to all of the matters brought before the 
Court here today. 
                                                 
25 Wisconsin Statute § 804.12(1)(c)3. provides:  "If the 
motion is granted in part and denied in part, the court may 
apportion the reasonable expenses incurred in relation to the 
motion among the parties and persons in a just manner." 
No. 
00-1797   
 
48 
 
¶64 Sharp and the Scarberrys argue that the circuit court 
erred by simply cutting the attorneys' fees in half.  They 
contend that the circuit court's decision was arbitrary and 
unreasonable in violation of Wis. Stat. § 804.12. 
¶65 Lane contends the circuit court's decision was well 
within its discretion.  The two motions were briefed and argued 
simultaneously, and it would have been difficult to segregate 
the time spent on each individual motion.  Lane, therefore, 
argues that it was logical for the court to simply split the 
attorneys' fees in half because it was a method of avoiding 
prolonged allocation arguments. 
¶66 We review the circuit court's award of attorneys' fees 
under the erroneous exercise of discretion standard.  Hughes v. 
Chrysler Motors Corp., 197 Wis. 2d 973, 987, 542 N.W.2d 148 
(1996).  We conclude that the circuit court did not erroneously 
exercise its discretion by awarding half of the costs, including 
attorneys' fees, pertaining to both motions.  The circuit court 
reviewed the circumstances and determined the proper solution 
was to avoid any prolonged argument regarding costs and fees, 
and divide the costs and fees in half.  Based on the record, we 
conclude that the circuit court's award of costs, including 
attorneys' fees, was reasonable and not an erroneous exercise of 
discretion. 
III. CONCLUSION 
¶67 In summary, we have reviewed the circuit court's 
discovery orders under the erroneous exercise of discretion 
standard.  We first examined the circuit court's conclusion that 
No. 
00-1797   
 
49 
 
documents requested from Niebler and his law firm are not 
protected under the lawyer-client privilege.  First, based on 
the entity rule and the reasoning in Milroy, we concluded that 
Lane's status as a former director does not allow him to waive 
the lawyer-client privilege, nor does it preclude Sharp's 
current board of directors from asserting the lawyer-client 
privilege against him.  Second, we concluded that because 
Niebler firm's billing records reveal the nature of legal 
services provided, the billing records are protected by the 
lawyer-client privilege.  Third, we concluded that the circuit 
court did not erroneously exercise its discretion in ordering 
production of non-privileged documents reflecting communications 
with third parties.  Finally, we addressed the circuit court's 
application of the crime-fraud exception to the lawyer-client 
privilege.  We concluded that while the circuit court did not 
err in finding that Lane established a prima facie case, the 
circuit court's failure to conduct an in camera review was an 
erroneous exercise of discretion.  Accordingly, on remand, we 
instruct the circuit court to conduct an in camera review of the 
disputed 
documents 
and 
determine 
whether 
the 
crime-fraud 
exception is applicable. 
¶68 In addition to lawyer-client privilege issues, we 
examined the circuit court's order regarding the application of 
the work product doctrine.  We concluded that the circuit 
court's decision was an erroneous exercise of discretion.  The 
circuit court failed to apply the correct test from Dudek and 
Borgwardt 
to 
determine 
whether 
Lane 
made 
a 
showing 
of 
No. 
00-1797   
 
50 
 
substantial need for the documents, and that he is unable, 
without undue hardship, to obtain the materials by other means.  
Furthermore, the circuit court did not conduct an in camera 
review and determine whether the documents were prepared or 
obtained because of the prospect of litigation.  Accordingly, on 
remand, we instruct the circuit court to apply the Dudek and 
Borgwardt standard and conduct an in camera review of the 
disputed documents. 
¶69 Finally, we reviewed the circuit court's award of 
costs, including attorneys' fees.  We concluded that the circuit 
court's award of half the costs was reasonable and not an 
erroneous exercise of discretion. 
By the Court.—The order of the circuit court is reversed 
and the cause is remanded. 
 
 
No. 00-1797.ssa 
1 
 
 
¶70 SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE   (dissenting).  
This case involves the questions of who is the client and who 
speaks for the client when a corporation claims an attorney-
client privilege.  More specifically, the question presented in 
this case is whether Lane, a former director in a closely held 
corporation, may have access to documents created during his 
tenure as a director of the corporation when the corporation's 
current board of directors asserts the corporation's attorney-
client privilege to those documents.  The majority opinion 
concludes that the current directors decide whether to waive the 
attorney-client privilege.  I conclude that the corporation does 
not have an attorney-client privilege in the present case. 
¶71 Sharp Packaging is a closely held corporation composed 
of two shareholders, Mr. and Mrs. Scarberry.  Pursuant to an 
employment agreement, Lane was given extensive powers and 
interests in the corporation.  Although not a shareholder of the 
corporation, Lane was entitled to notice of shareholder meetings 
and to be present at those meetings.  He was given stock options 
and stock appreciation rights.  He had the power to veto or 
discharge any professional who was not performing to his 
satisfaction.  He exercised that power to terminate Attorney 
Niebler's employment as Sharp Packaging's corporate counsel.  
Nevertheless, at the Scarberrys' request, Attorney Niebler 
apparently continued to provide Sharp Packaging with legal 
advice.  Attorney Niebler also continued to bill Sharp Packaging 
for his services.  At least some of Attorney Niebler's advice to 
No. 00-1797.ssa 
2 
 
the corporation was kept secret from Lane while Lane was a 
director of the corporation.   
¶72 The guiding principle in this case, which the majority 
opinion explicitly recognizes at ¶21, is that the attorney-
client privilege can be an obstacle to the investigation of the 
truth and should be strictly confined within the narrowest 
possible limits consistent with the logic of the principle.  
Unfortunately, the majority opinion fails to adhere to this 
principle.  Instead, the majority opinion permits the current 
board of directors to use the attorney-client privilege to block 
a former director from inspecting documents to which the former 
director had access during his tenure and that might contain 
evidence of wrongdoing. 
¶73 I agree with much of the majority opinion.  But 
unfortunately the bulk of the opinion does not support the 
ultimate conclusion the majority reaches.   
¶74 For example, I agree with the majority opinion that if 
a corporation's attorney-client privilege is to be waived, only 
the current corporate directors, not past corporate directors, 
have the power to waive that privilege.26  I also agree with the 
majority opinion that under the entity rule, the attorney-client 
privilege belongs to the corporation, and only the corporation 
can waive the privilege.27  The corporate entity must, of course, 
                                                 
26 Majority op. at ¶¶33-34; Commodities Futures Trading 
Comm'n v. Weintraub, 471 U.S. 343, 349 (1985). 
27 Majority op. at ¶33; Jesse v. Danforth, 169 Wis. 2d 229, 
239-41, 485 N.W.2d 63 (1992). 
Jesse is not on point and the majority's reliance on it is 
misplaced.   
No. 00-1797.ssa 
3 
 
act through a person or persons to carry out its many functions, 
including waiving or asserting the attorney-client privilege.   
¶75 But 
these 
conclusions, embodied in 
the majority 
opinion, are not helpful in resolving the present case.  Lane 
does not seek to waive the corporation's attorney-client 
privilege.  The issue presented is not who can waive the 
privilege, but whether the current directors, the Scarberrys, 
can claim an attorney-client privilege against Lane, a former 
director.   
¶76 Does a corporation have an attorney-client privilege 
that it may assert against a former director as to corporate 
records developed during the former director's tenure?  The 
majority opinion does not answer this question.  It merely 
states that the current directors determine whether an attorney-
client privilege can be waived.28   
¶77 Wisconsin corporate law makes clear that directors are 
entitled 
to receive communications 
from the 
corporation's 
                                                                                                                                                             
The majority opinion expressly declines to address the 
question of whether a current member of a board of directors in 
a situation similar to the one presented here can acquire legal 
advice secretly provided to the corporation.  Majority op. at 
¶35.  What does this mean when the majority opinion explicitly 
states, without qualification, that a dissident director has no 
authority to frustrate the attorney-client privilege, majority 
op. at ¶34, citing Milroy v. Hanson, 875 F. Supp. 646, 649 (D. 
Neb. 1995), in which a current director was denied access to 
legal documents?  
28 I agree with Gottlieb v. Wiles, 143 F.R.D. 241, 247 (D. 
Colo. 1992):  "The fact that former officers and directors lack 
the power to waive the corporate privilege does not resolve the 
question of whether they themselves are precluded by the 
attorney-client 
privilege 
or 
work 
product 
doctrine 
from 
inspecting documents generated during their tenure.  There is a 
surprising dearth of authority on this subject."  
No. 00-1797.ssa 
4 
 
lawyer.  Wisconsin law requires corporations to have a board of 
directors.  Wis. Stat. § 180.0801(1) (1999-2000).  All corporate 
powers shall be exercised by or under the authority of, and the 
business and affairs of the corporation managed under the 
direction of, the board of directors, § 180.0801(2).  Directors' 
meetings must be held and all directors must be given an 
opportunity to participate in the meetings, § 180.0820-0824.  A 
board of directors may authorize committees, which in turn may 
exercise the authority of the board, including the employment of 
counsel, § 180.0825(1).  The creation of a committee does not 
relieve the board of directors or any of its members of any 
responsibilities 
imposed 
on 
the 
members 
or 
the 
board, § 180.0825(7).  The board of directors is entitled to 
rely on information prepared by legal counsel, § 180.0826(2).  
Thus, Wisconsin corporate law recognizes that the board of 
directors is entitled to legal information.   
¶78 Most important for the present case, the board of 
directors has the authority to determine whether and in what 
amount to declare shareholder dividends, § 180.0640(1).  Yet the 
distribution to the shareholders in the present case was made 
without a prior meeting of the board of directors, without 
notice to director Lane, without Lane's knowledge, and with the 
advice of counsel paid with corporate funds.  And therein lies a 
basis for this lawsuit. 
¶79 I conclude that under Wisconsin corporate law, Lane 
was entitled to have access to legal advice that Attorney 
Niebler rendered to the corporation during Lane's tenure as 
director, especially with respect to the $3.8 million dividend 
No. 00-1797.ssa 
5 
 
that is at issue in the present case.  Indeed, the very reason 
Lane was a member of the board of directors was to protect his 
interest in the corporation by assuring that no shareholder 
distributions would be made without his knowledge and consent. 
¶80 When I apply the entity theory to this case, I reach a 
different result from the majority.  Applying the entity theory 
and Chapter 180 of the Wisconsin Statutes governing business 
corporations to the present case means that the client is the 
corporate entity; the corporate entity can act only through 
people; the directors are the collective body that has the 
responsibility to manage the corporation; and consistent with 
their joint obligations, the directors are the joint clients 
when legal advice is given to the corporation through one of its 
officers or directors.29  Lane was part of the collective body 
and was, therefore, entitled to have access to the legal advice 
Sharp Packaging received during Lane's tenure on the board.  
This legal information cannot be privileged against Lane.  An 
attorney may not withhold legal advice from his or her own 
client.  The majority opinion's position holds otherwise and 
allows the corporate entity of Sharp Packaging to assert the 
client's privilege against Lane, who was a member of the board 
and who was therefore also the client——a result that one court 
labeled "perverse."30  
                                                 
29 Kirby v. Kirby, No. Civ. A. 8604, 1987 WL 14862, at *7 
(Del. Ch. July 29, 1987). 
30 Glidden Co. v. Jandernoa, 173 F.R.D. 459, 474 (W.D. Mich. 
1997); Moore Bus. Forms, Inc. v. Cordant Holdings Corp., Nos. 
13911 and 14595, 1996 WL 307444, at *6 (Del. Ch. June 4, 1996). 
No. 00-1797.ssa 
6 
 
¶81 Wisconsin courts often look to Delaware law for 
guidance on matters of corporate law.31  I reach the same result 
on the issue presented as that reached by the Delaware chancery 
courts. 
¶82 For example, in Moore Bus. Forms, Inc. v. Cordant 
Holdings Corp., Nos. 13911 and 14595, 1996 WL 307444, at *4 
(Del. Ch. June 4, 1996), a Delaware case, the court addressed 
the precise issue presented in this case.  Moore involved a 
former 
director 
of 
a 
corporation 
who 
sought 
information 
regarding confidential communications between the corporation 
and its attorney during the former director's tenure on the 
board.  The other directors had received legal advice regarding 
a repurchase of the former director's stock; the former director 
had been excluded from secret meetings held by the other 
directors.  Moore reasoned that the former director would have 
been entitled to examine the documents while he was a member of 
the board.  Thus, Moore held that a corporation cannot assert 
attorney-client privilege in order to deny a director access to 
legal advice furnished to the board during the director's tenure 
                                                 
31 See, e.g., HMO-W Inc. v. SSM Health Care Sys., 2000 WI 
46, ¶¶29-31, 38, 234 Wis. 2d 707, 611 N.W.2d 250 (following 
Delaware law in rejecting application of minority discount in 
determining "fair value" in dissenters' rights proceeding); 
Jacobson v. American Tool Companies, 222 Wis. 2d 384, 397, 588 
N.W.2d 67 (Ct. App. 1998) (looking to Delaware law to define 
fiduciary duties); Advance Concrete Form, Inc. v. Accuform, 
Inc., 158 Wis. 2d 334, 344, 462 N.W.2d 271 (Ct. App. 1990) 
(citing Delaware cases to determine whether request to inspect 
corporate documents was for a "proper purpose"); Schweiner v. 
Hartford Accident & Indem. Co., 120 Wis. 2d 344, 351, 354 
N.W.2d 767 (Ct. App. 1984) (citing Delaware law for effect of 
statutory merger on liabilities of merger corporation). 
No. 00-1797.ssa 
7 
 
without alerting the former director that certain communications 
would be concealed from that director during the director's 
tenure.   
¶83 The Moore court is joined by numerous courts that have 
considered this issue.32   
¶84 Moore is persuasive because, unlike the authorities 
relied upon by the majority opinion, Moore directly addresses 
the question in the present case:  Can Lane have access to 
documents created during Lane's former tenure as a corporate 
director and that are now claimed by the remaining directors 
(the Scarberrys) to be subject to the corporation's attorney-
client privilege?  Like Moore, Lane was excluded from privileged 
information that was provided secretly to the corporation's 
other directors against Lane's interest during Lane's tenure as 
a corporate director.  Lane had no reason to expect he would be 
denied full access during his tenure as a director to legal 
advice provided to the corporation. 
                                                 
32 See, e.g., Carnegie Hill Fin., Inc. v. Krieger, No. 99-
CV-2592, 2000 WL 10446, at *2 (E.D. Pa. Jan. 5, 2000) (former 
directors entitled to discover corporation's attorney-client 
privileged documents that they could have seen prior to their 
resignations); Glidden Co. v. Jandernoa, 173 F.R.D. 459, 473 
(W.D. Mich. 1997) (directors have a right to access attorney 
communications of the company relating to the time that they 
served as directors); Resolution Trust Corp. v. Adams, No. 93-
389-CIV-ORL-18, 1994 WL 315646, at *1 (M.D. Fla. Apr. 14, 1994) 
(rejecting any privilege asserted to any privileged documents 
that former corporate director previously had a right to possess 
or control); Gottlieb v. Wiles, 143 F.R.D. 241, 247 (D. Colo. 
1992) (corporation may not assert attorney-client privilege 
against former director); Kirby v. Kirby, No. Civ. A. 8604, 1987 
WL 14862, at *7 (Del. Ch. July 29, 1987) (attorney-client 
privilege may not be invoked against those persons who were 
directors at the time the requested documents were prepared). 
No. 00-1797.ssa 
8 
 
¶85 The entity theory, according to the majority opinion, 
allows "the corporate lawyer to focus on representing only the 
best interest of the client corporation."  Majority op. at ¶33 
n.14.  This language makes it sound as if corporate counsel has 
become the corporation's guardian ad litem and that the 
corporation's lawyer must speak for the corporation's best 
interest, perhaps regardless of the wishes of the board of 
directors or shareholders.  The Wisconsin Rules of Professional 
Conduct for Attorneys adopt an entity view.  See SCR 20:1.13(a) 
and (b).   
¶86 The comments to the Rules of Professional Conduct for 
Attorneys nevertheless recognize that the entity is made up of 
individuals and that an attorney has obligations to the 
individuals.  The comments caution that when an organization's 
interest might presently be or might later become adverse to the 
interest of one or more constituents of the organization, 
whether the organization be a partnership or a corporation, a 
lawyer must advise the constituent that the lawyer has a 
potential conflict of interest, that the lawyer cannot represent 
that person, and that the person may wish to obtain independent 
representation.  (A constituent of a corporation is, for 
example, a shareholder or director.)  The Rules of Professional 
Conduct for Attorneys also recognize, however, that a lawyer 
representing an organization may, under certain circumstances, 
also represent any of its partners, directors, or shareholders 
No. 00-1797.ssa 
9 
 
individually, subject to the general conflict of interest rule 
set forth in SCR 20:1.7.33  
¶87 Just what is the best interest of the corporate 
entity, Sharp Packaging, in the present case?  Why is permitting 
the Scarberrys or Sharp Packaging to assert the corporation's 
alleged attorney-client privilege against Lane in the best 
interest of the corporation?  Is it in the corporation's best 
interest to incur debt and deplete corporate assets by a $3.8 
million distribution to the shareholders?  The majority opinion 
implies that Lane is not acting in the best interest of the 
corporation.  The majority opinion "finds it significant that 
Lane is acting in his individual capacity and requests the 
documents for personal gain against the corporation."  Majority 
op. at ¶34 n.16.  However, the majority opinion does not 
consider whether the Scarberrys might also be acting in their 
individual capacity for their personal gain in denying Lane 
access to the corporation's legal documents. 
                                                 
33 For a discussion of the entity approach and issues of 
professional ethics faced by lawyers who represent partnerships 
and small business corporations, see, for example, Susanna M. 
Kim, 
Dual 
Identities 
and 
Dueling 
Obligations: 
Preserving 
Independence in Corporate Representation, 68 Tenn. L. Rev. 179 
(2001); Paul J. Sigwarth, It's My Privilege and I'll Assert It 
If I Want To: The Attorney-Client Privilege in Closely-Held 
Corporations, 23 J. Corp. L. 345 (1998); Bryan J. Pechersky, 
Representing General Partnerships and Close Corporations: A 
Situational Analysis of Professional Responsibility, 73 Tex. L. 
Rev. 919 (1995); Nancy J. Moore, Expanding Duties of Attorneys 
to 
"Non-Clients": 
Reconceptualizing 
the 
Attorney-Client 
Relationship in Entity Representation and Other Inherently 
Ambiguous Situations, 45 S.C. L. Rev. 659 (1994); Lawrence E. 
Mitchell, Professional Responsibility and the Close Corporation: 
Toward a Realistic Ethic, 74 Cornell L. Rev. 466 (1989). 
No. 00-1797.ssa 
10 
 
¶88 Raising these issues reminds us that the entity theory 
is a legal fiction and that this legal fiction may not be a 
valuable analytical tool in cases involving a closely held 
corporation.  As one commentator stated, "although the entity 
fiction makes sense in the context of a large, publicly held 
corporation, 
the 
distinction 
between 
the 
entity 
and 
its 
constituents begins to blur in the context of a small general 
partnership or close corporation."34 
¶89 I have thus far responded to the majority opinion 
using its entity theory.  I now present another way of looking 
at this case: the closely held corporation approach.  In a 
closely held corporation, the line between the entity and the 
individuals who own or control the entity often becomes 
blurred.35  The most significant or perhaps sole relevant 
interests in a closely held corporation might be those of the 
constituents, that is, the shareholders and the directors.  A 
closely held corporation may be a separate legal entity for 
purposes of its relation with outsiders, but with respect to its 
constituents (that is, intra-entity relations), the fictional 
"entity" may have little, if any, import.  The court should look 
at the practical realities of the closely held corporation in 
                                                 
34 Bryan J. Pechersky, Representing General Partnerships and 
Close Corporations: A Situational Analysis of Professional 
Responsibility, 73 Tex. L. Rev. 919, 930 (1995). 
35 Susanna M. Kim, Dual Identities and Dueling Obligations: 
Preserving Independence in Corporate Representation, 68 Tenn. L. 
Rev. 179, 192 (2001). 
No. 00-1797.ssa 
11 
 
determining 
attorney-client 
questions 
in 
the 
particular 
situation before the court.36 
¶90 The Scarberrys (sole shareholders), Sharp Packaging (a 
closely held corporation), and Lane embarked on a joint 
undertaking to manage and operate Sharp Packaging and to give 
Lane an ownership interest in Sharp Packaging.  As early as 
1991-1992, the Scarberrys and Sharp Packaging used Lane as a 
consultant.  That relationship grew and Lane became executive 
vice president for sales and marketing for Sharp Packaging.   
¶91 In the fall of 1994, the Scarberrys, Sharp Packaging, 
and Lane jointly retained Attorney Paul Meissner to prepare 
agreements to formalize the terms of Lane's employment with and 
equity 
interest 
in 
Sharp 
Packaging. 
 
The 
Scarberrys 
individually, Sharp Packaging, and Lane each signed a March 1995 
agreement, 
making 
the 
Scarberrys 
and 
Lane 
collectively 
responsible for the proper management of Sharp Packaging and 
enabling Lane to acquire an ownership interest in Sharp 
Packaging.  
¶92 By their agreement, the Scarberrys (the shareholders), 
Sharp Packaging (the corporation), and Lane (a director) shared 
a common interest in the success of Sharp Packaging.  Also by 
their agreement, Lane was given powers as a director of Sharp 
Packaging to protect his ownership and management interests in 
the joint undertaking with the Scarberrys and Sharp Packaging 
                                                 
36 "No application of the attorney-client privilege can be 
made without concrete reference to the specific issues and the 
particular set of facts of the case in which the privilege is 
sought to be invoked."  State ex rel. Dudek v. Circuit Court, 34 
Wis. 2d 559, 582, 150 N.W.2d 387 (1967). 
No. 00-1797.ssa 
12 
 
and to protect against acts by the Scarberrys or Sharp Packaging 
that would be adverse to his interests in the joint undertaking.  
The Scarberrys and Lane clearly shared a common interest in and 
with Sharp Packaging.   
¶93 Attorney Niebler and members of his law firm handled a 
wide variety of legal matters for Sharp Packaging and also for 
the Scarberrys individually during this joint undertaking.37  
Because of these dealings and relationships, a fact-finder could 
conclude that the Scarberrys, Sharp Packaging, and Lane could 
each assume that when Attorney Niebler represented and billed 
Sharp Packaging, he was or should have been undertaking an 
attorney-client relationship with each of them.38  During their 
joint undertaking, the Scarberrys and Lane developed adverse 
interests.  And thus, this lawsuit. 
                                                 
37 Attorney Niebler's affidavit states his relationship with 
the Scarberrys, Sharp Packaging, and Lane as follows: 
Attorney Niebler has represented both the Scarberrys 
and Sharp Packaging since 1984.   
Attorney Niebler represented the Scarberrys and Sharp 
Packaging in their 1991 dealings with Lane. 
Sometime in 1992 Attorney Niebler became cognizant 
that litigation might develop between the Scarberrys, 
Sharp Packaging, and Lane. 
Since 1992 Attorney Niebler and his law firm have 
continued to handle a wide variety of legal matters 
for the Scarberrys individually and Sharp Packaging. 
38 The existence of an attorney-client relationship depends 
on the facts and circumstances of each case.  See Note, An 
Expectations Approach to Client Identity, 106 Harv. L. Rev. 687 
(1993) 
(advocating 
the 
"reasonable 
constituent 
expectation 
approach"). 
No. 00-1797.ssa 
13 
 
¶94 The situation in the present case is, as a Colorado 
federal district court stated, analogous to a situation in which 
persons with a common interest retain a single attorney.  Here, 
the Scarberrys, Sharp Packaging, and Lane had a common interest.  
They were in a joint undertaking involving the management and 
ownership of Sharp Packaging.  Sharp Packaging was one with and 
the same as the persons in the joint undertaking.  When Attorney 
Niebler represented Sharp Packaging, he was representing the 
joint undertaking and each member thereof.  When the persons who 
joined together later develop adverse interests, they may not 
assert the attorney-client privilege against one another as the 
basis for withholding legal information developed during their 
joint undertaking.39 
¶95 In summary, using either the entity theory or the 
closely held corporation approach, I would uphold the circuit 
court's 
discretionary 
rulings 
allowing 
discovery. 
 
Sharp 
Packaging's attorney-client privilege for legal advice that was 
developed for Sharp Packaging while Lane was a member of the 
board of directors and also while Lane was a member of the joint 
undertaking with Sharp Packaging and the Scarberrys cannot be 
asserted against either Lane or the Scarberrys. 
¶96 For the reasons set forth, I dissent.   
                                                 
39 Gottlieb v. Wiles, 143 F.R.D. 241, 247 (D. Colo. 1992).  
Cf. McCormick on Evidence § 91 at 365-66 (5th ed. 1999) (when 
parties with a common interest retain a single attorney to 
represent them, but later become adverse parties, thereafter 
neither party is permitted to assert the attorney-client 
privilege as to the communications that occurred during the 
period of common interest). 
No. 00-1797.ssa 
14 
 
¶97 I am authorized to state that Justices WILLIAM A. 
BABLITCH and ANN WALSH BRADLEY join this opinion. 
 
 
No. 00-1797.ssa 
 
 
1