contained confidential legal advice between Defendant and its attorney regarding Plaintiff's
claims, the attorney-client privilege attaches to the letter.

2. The Attorney-Client Privilege Was Waived

The attorney-client privilege is based on a principle of confidentiality in order to
enable attorneys to properly advise their clients. The purpose of the privilege is “to
encourage clients to make full disclosure to their attorneys.” Upjohn v. United States, 449
U.S. 383, 389 (1981). The attorney-client privilege reinforces the concept of trust necessary
between a lawyer and client.

The general rule is “[a]ny voluntary disclosure by the holder of the attorney-client
privilege is inconsistent with the attorney-client confidential relationship and thus waives the
privilege.” Powers v. CTA, 890 F.2d 1355, 1359 (7th Cir. 1989); Blanchard v. EdgeMark
Financial Corp., 192 F.R.D. 233, 236 (N.D.II. 2000). The client is the holder of the
attorney-client privilege and once a client discloses confidences to a third party, the privilege
is deemed waived. Nye v. Sage Products Inc., 98 F.R.D. 452, 453 (N.D.Ill. 1982) (holding
the clients waived the attorney-client privilege when they produced documents and answered
interrogatories, but opinion work product was protected from disclosure). See also, Urban
Outfitters v. DPIC Companies, Inc., 203 F.R.D. 376, 380 (N.D.III. 2001) (holding the client
waived the attorney-client privilege when she faxed the documents to opposing counsel).

In this case, Cahill waived the attorney-client privilege during the meeting in April

2001, because he voluntarily disclosed the letter to Nielsen, Plaintiff’s President. In re


422 US. at 239-40. The protected materials were waived with respect to matters covered in
his testimony. Jd. “What constitutes a waiver with respect to work-product materials
depends, of course, upon the circumstances.” Jd. at 240, n.14.

In Salomon Brothers Treasury Litigation v. Steinhardt Partners, L.P.,9 F.3d230 (2nd
Cir. 1993), the court found the work product doctrine had been waived with respect to a
document which defendant had voluntarily produced to the SEC in the hope of preventing
a formal enforcement proceeding. The document was sought by plaintiffs who had filed a
civil class action relating to the subject matter of the SEC investigation. The Second Circuit
agreed with the district court’s conclusion that voluntary disclosure of the document to an
adversary waived the protection in a subsequent civil suit, explaining, “once a party allows
an adversary to share the otherwise privileged thought processes of counsel, the need for the
privilege disappears.” Jd. at 235.

Courts have found the voluntary disclosure of work product in settlement negotiations
waives the work product protection. See e.g., In re Chrysler Motors Corporation Overnight
Evaluation Program Litigation, 860 F.2d 844, 846-47 (8th Cir. 1988) (holding Chrysler
waived work product protection by voluntarily disclosing the computer tape to the class
action plaintiffs during the due diligence phase of settlement negotiations); Grumman
Aerospace Corporation v. Titanium Metals Corporation of America, 91 F.R.D. 84, 90 (E.D.
N.Y. 1984) (finding “disclosure to an adversary waives the work product protection as to

items actually disclosed, even where disclosure occurs in settlement.”)


The work product doctrine exists because “it is essential that a lawyer work with a
certain degree of privacy, free from unnecessary intrusion by opposing parties and their
counsel.” Hickman, 329 U.S. at 510. See also, Upjohn v. United States, 449 U.S. 383, 400
(1981) (commenting on the danger of disclosing an attorney’s mental processes). As
announced in Hickman, if work product was discoverable upon mere demand, “much of what
is now put down in writing would remain unwritten.” 329 U.S. at 511. Further, disclosure
of an attorney’s efforts during pretrial discovery “could disrupt the orderly development and
presentation of his case.” United States v. Nobles, 422 U.S. 225, 239 (1975). A trial attorney
should be able to “prepare his legal theories and plan his strategy without undue and needless
interference.” Hickman, 329 U.S. at511. Ifsuch work product was discoverable upon mere
demand, “inefficiency, unfairness, and sharp practices would inevitably develop,” thereby
having a “demoralizing” effect on the legal profession. Jd. Therefore, opinion work product
as noted by the Supreme Court in Upjohn, deserves “special protection.” 449 U.S. at 400.

Federal Rule of Civil Procedure 26(b)(3) divides work product into two categories:
“opinion” work product and “fact” work product. Caremark, 195 F.R.D. at 616. If the
document is fact work product, then the party seeking discovery must demonstrate a
substantial need for the material and an inability to obtain the substantial equivalent of the
information without undue hardship. Jd. This burden is difficult to meet and is satisfied only
in “rare situations, such as those involving witness unavailability.” Trustmark Insurance Co.

v. General & Cologne Life Re of America, 2000 WL 1898518 * 3 (N.D.III. 2000).


Subpoena Duces Tecum, 738 F.2d 1367, 1370 (D.C. Cir. 1984) (client willingly sacrificed

its attorney-client confidentiality by voluntarily disclosing material in an effort to convince

SEC not to bring a formal investigation). See also, cases collected at Edna Selan Epstein,

The Attorney-Client Privilege and the Work-Product Doctrine 292-96 (American Bar

Association 4th ed. 2001) [hereinafter Epstein].

B.

Work Product Doctrine
1. Policies Underlying the Work Product Doctrine

The work product doctrine, announced in Hickman v. Taylor, 329 U.S. 495 (1947),

protects otherwise discoverable documents and tangibles, and was subsequently codified as

Rule 26(b)(3) of the Federal Rules of Civil Procedure. Caremark, Inc. v. Affiliated Computer

Services, Inc., 195 F.R.D. 610, 612 (N.D. Ill. 2000). Rule 26(b)(3) provides:

{A] party may obtain discovery of documents and tangible things otherwise
discoverable under subdivision (b)(1) of the rule and prepared in anticipation of
litigation or for trial by or for another party or by or for that other party’s
representative (including the other party’s 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 party’s case and that the party 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 ofa party
concerning the litigation.

Factual information may not be withheld under the work product doctrine, but must be

produced through interrogatories, depositions or other discovery. Allen v. Chicago Transit

Authority, 198 F.R.D. 495, 500 (N.D.IIl. 2001).


3. Defendant Waived the Work Product Protection
Plaintiff claims Defendant waived the work product doctrine because disclosure of
the letter was inconsistent with the maintenance of secrecy from a disclosing party’s
adversary. Defendant asserts that although an arguable waiver of the attorney-client privilege
occurred, it did not constitute a waiver of the attomey work product doctrine.

The waiver of the attorney-client privilege does not automatically waive work product
protection for the same document, as the two are independent and grounded on different
policies. Epstein at 608. Waiver of attorney-client privilege and waiver of work product
require separate analysis because they reflect different policies. Jd. The attorney-client
privilege is designed to protect the client and the client can waive the privilege. On the other
hand, the work-product doctrine protects the attorney’s work and mental impressions from
adversaries and third parties. Jd, “While the attorney-client privilege is often treated as
waived by any voluntary disclosure, only disclosures that are ‘inconsistent with the adversary
system’ are deemed to waive work-product protection.” Id. at 610.

The voluntary disclosure of attorney work product to an adversary waives work
product protection. See Id. at 610-12 (cases collected). “Because the protection is designed
to protect an attorney’s trial preparation and mental processes from discovery at the behest
ofan adversary, clearly voluntary disclosure to an adversary would almost invariably be seen
as a total waiver.” Jd. at 613. For example, in United States v. Nobles, the Supreme Court

held a party waived work product protection by presenting an investigator as a trial witness.


‘Minute Order Form (06/97)

United States District Court, Northern District of Illinois

si er
NamestAeientnie | Charles P. Kocoras | Sting eine Morton Denlow
CASE NUMBER 01 C 4032 DATE 4/18/2002
CASE Eagle Compressors, Inc. vs. HEC Liquidating Corp., et al.
TITLE

{In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)

MOTION:

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above.]

(2) im} Brief in support of motion due

(3) Oo Answer brief to motion due____. Reply to answer briefdue____.

(4) Q Ruling/Hearingon__—_ssetfor___—_at

(5) im Status hearing{held/continued to] [set for/re-set for} on setfor_ at

(6) im} Pretrial conference[held/continued to] [set for/re-set for]on__——ssetfor_- ss at_—

(7) oO Trial[set for/re-set for]on__at

(8) Oo [Bench/Jury trial] [Hearing] held/continued to_—_at

(9) ag This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) OGeneral Rule21 OFRCP41(a)(1) OO FRCP41(a)(2).

(10) 4 [Other docket entry] _ Enter Memorandum Opinion and Order. Plaintiff's motion to compel

Defendant’s production of its attorney’s letter [11-1] is granted.

(il) @f [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.
lo notices req umber of notices

APR 19 2002

W | Notices mailed by judge’s staff.

Notified counsel by telephone.

Docketing to mail notices,

Mail AO 450 form.

docketing depuly initials

oY | Copy to judge/magistrate judge.
4772002

date maited notice

courtroom GD: Ud QELLY
DK deputy's

oe DK
initials

Date(time received in. i; <] ; -
central Clerk’s Office inating depatyintals



The client cannot be permitted to pick and choose among his

opponents, waiving the privilege for some and resurrecting the

claim of confidentiality to obstruct others, or to invoke the

privilege as to communications whose confidentiality he has

already compromised for his own benefit ... The attorney-client

privilege is not designed for such tactical employment.
The same can be said for the work product doctrine. Having chosen to voluntarily disclose
his attorney’s work product, Defendant must live with the consequences.

Ill. CONCLUSION
Plaintiff's Motion to Compel Defendant’s production of its attorney’s letter is

granted because the protection afforded to the letter under the attorney-client privilege and

work product doctrine was waived by Defendant’s voluntary disclosure to Plaintiff.

SO ORDERED THIS 18" DAY OF APRIL, 2002.

Mites Cenbou

MORTON DENLOW
United States Magistrate Judge

Copies mailed or delivered in open court to:

Gerald Haberkorn Donald G. Mulack

Mark Smith Micah E. Marcus

Linda E. Lu McBride Baker & Coles
Lowis & Gellen 500 West Madison Street
200 West Adams Street 40" Floor

Chicago, Illinois 60606 Chicago, Illinois 60661
Attorneys for Plaintiff Attorneys for Defendant

i


While this result may seem harsh, it is consistent with the policies underlying the work
product doctrine.’ The doctrine enables a lawyer to analyze a case for his client’s benefit.
However, where as here, the client chooses to reveal the information as part of its settlement
strategy, Defendant sought to have Plaintiff comprehend the rationale put forward by the
attorney. Although the settlement negotiations failed, Defendant intended to impart its
attorney’s mental impressions and conclusions for the purpose of advancing its settlement
posture. It is now too late to put the genie back into the bottle.

Defendant’s decision to disclose its attorney’s work product was obviously motivated
by self-interest, not inadvertence. The document was clearly marked “CONFIDENTIAL,
ATTORNEY-CLIENT PRIVILEGE.” Defendant expected to reap the benefits of the
disclosure to Plaintiff’s President in the form of a favorable settlement.

Defendant did not have any expectation of confidentiality after making the disclosure.
Although the document was retrieved, Defendant used the letter to convince Plaintiff of the
weakness of its claim in the hope of driving down the settlement demand. If Defendant had
been successful, we would not be here now. Having been unsuccessful, Defendant cannot
cry foul. As the court stated in Permian Corp. v. United States, 665 F.2d 1214, 1221 (D.C.

Cir. 1981):

*The disclosure of the letter to Gardner Denver as part of its acquisition of Defendant did
not constitute a waiver because Gardner Denver was not an adversary in the prospective
litigation. United States v. Gulf Oil Corp., 760 F.2d 292, 296 (Temp. Emer. Ct. App. 1985)
(work product protection not waived where documents disclosed in the course of merger
discussions).

10


With respect to opinion work product, “the court shall protect against disclosure of
the mental impressions, conclusions, opinions, or legal theories of an attorney.” Fed. R.
Civ.P. 26(b)(3). In 7rustmark, the court explained opinion work product is protected even
when undue hardship exists and therefore, is for “all intents and purposes absolute.” 2000
WL 1898518 at 3. See also, Vardon Golf Company, Inc., v. BBMG Golf LTD., 156 F.R.D.
641, 646-47 (N.D.IIl. 1994) (denying motion to compel because documents constituted
opinion work product and were absolutely privileged from discovery).

2. The Letter is Opinion Work Product

The letter is classic opinion work product because it contains an attorney’s mental
impressions, conclusions, opinions and legal theories pertaining to Plaintiff’s claims against
Defendant. The underlying facts contained in the letter are discoverable pursuant to ordinary
discovery process such as interrogatories, document requests and depositions. Plaintiff has
not shown or argued that it has a substantial need for the facts contained in the letter, nor that
the facts are not discoverable by other means. If Plaintiff were allowed to discover the letter,
defense attorney’s mental processes would be exposed to Plaintiff, thereby allowing Plaintiff
to enjoy a tactical advantage over Defendant. Therefore, because the letter contains an
attorney’s mental impressions regarding the case, it is opinion work product and would

ordinarily be protected from discovery.


In addition, the letter was provided to Gardner Denver, Inc. in early 2001 as part of
Gardner Denver’s purchase of Defendant. Gardner Denver now owns Defendant. (Cahill
Decl. 4 7). No other person outside of Hamworthy’s corporate affiliates was shown the
letter. Id.

Plaintiff now seeks to compel the production of the letter claiming the two disclosures
constituted a waiver of both the attorney-client privilege and the work product doctrine.
Defendant claims the protection was not waived by disclosure in a settlement meeting or as
part of an acquisition. Oral argument was held on March 27, 2002. The Court will examine
whether the letter is protected under either the attorney-client privilege or the work product
doctrine.

Il, DEFENDANT WAIVED ITS PROTECTION
UNDER THE ATTORNEY-CLIENT PRIVILEGE
AND WORK PRODUCT DOCTRINE
A.  Attorney-Client Privilege

1. The Letter is an Attorney-Client Privilege Communication

The Seventh Circuit applies the general principles of attorney-client privilege as
outlined by Wigmore:

(1) Where legal advice of any kind is sought (2) from a professional legal advisor in

his capacity as such, (3) the communications relating to that purpose, (4) made in

confidence (5) by the client, (6) are at his instance permanently protected (7) from
disclosure by himself or by the legal adviser, (8) except the protection be waived.

United States v. White, 950 F.2d 426, 430 (7th Cir. 1991). The party seeking to invoke the

privilege bears the burden to establish all of the essential elements. Jd. Since the letter

3


Compressors, Inc. (“Plaintiff”). (Cahill Decl. J 1-2).

On October 30, 2000, Plaintiff’s counsel sent Defendant’s attorney a letter asserting
claims for the defective products and encouraged Defendant to proceed with good faith
settlement negotiations. (Cahill Decl. 73 and Ex. A). In April 2001, Defendant’s Managing
Director, John Cahill (“Cahill”), met with Plaintiff’s President, Peter Nielsen (“Nielsen”) in
Bristol, England for a two hour meeting. The purpose of the meeting was to discuss a retro
fit program to modify and strengthen the design specifications which were sold to Plaintiff
as part of the asset sale. (Cahill Decl. 4). During the meeting, the parties discussed the
recall/retro fit program and approximately 30 to 45 minutes was spent discussing the
possibility of settling the claim for defective products. (Jd. at {{] 4-5). During the settlement
discussion, Cahill showed Nielsen a thirteen page, single spaced, confidential legal opinion
letter (“the letter”) prepared by Defendant’s attorney. (Jd.). Cahill allowed Nielsen to read
the letter for approximately 5 to 10 minutes and took the letter back. (/d.). Defendant’s
attorney had prepared the letter on February 6, 2001, in which he analyzed Plaintiff's claims,
various documents relating to the anticipation of litigation and gave an opinion on the merits
of the claims. The letter was marked “CONFIDENTIAL, ATTORNEY-CLIENT

PRIVILEGE.”!

‘A copy of the letter has been provided to the Court for its in camera review.

2


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

EAGLE COMPRESSORS, INC.,
an Illinois Corporation f/k/a
EMERGENCY PRODUCTS, INC.,

Plaintiff,
No. 01 C 4032

v. Magistrate Judge Morton Denlow
HEC LIQUIDATING CORP.,

a Delaware Corporation, f/k/a
EAGLE COMPRESSORS, INC.,
HAMWORTHY BELLISS &

MORCOM LTD., a United Kingdom
Corporation,

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

Defendants. )

MEMORANDUM OPINION AND ORDER

This case presents the issue of whether defense attorney’s confidential letter to his

client analyzing Plaintiff's claims and threatened litigation is protected from discovery after

it has been shown by Defendant to Plaintiff during a client settlement meeting. For the

reasons stated herein, Defendant has waived both the attorney-client privilege and work
product doctrine and the Court grants Plaintiffs motion to compel.

I. BACKGROUND FACTS
On January 29, 1999, Hamworthy Belliss and Morcom Ltd., (“Hamworthy” or

“Defendant”), located in Gloucester England, sold the assets of its compressors division,

Eagle Compressors Inc., to Emergency Products, Inc., which later changed its name to Eagle

De