represented Ocean Atlantic Woodland, and both Mr. Petka and Mr.
Campbell represented Mrs. Arnhold in the prior suit. During the
prior suit, Mr. Petka and Mr. Campbell collaborated in their
defense of Mrs. Arnhold. The only true newcomer to this
litigation is Mr. Shobat, who was understandably concerned about
digesting the acrimonious history of this case prior to his
client’s deposition.

The Court finds that it is entirely credible that Mr. Shobat
and Mr. Campbell would agree to collaborate in the present suit.
Mr. Petka and Willow Tree both have a substantial interest in
defeating Ocean Atlantic’s lawsuit. In addition, Mr. Petka and
Mr. Campbell have a long history of defending against Ocean
Atlantic’s lawsuits.

Given this history, the Court further finds that, under the
unique facts of this case, it was appropriate for Mr. Campbell to
act on behalf of his client. According to Mr. Campbell’s
affidavit, Willow Tree had authorized Mr. Campbell to take any
and all reasonable steps on Willow Tree’s behalf, including
making tactical and strategic decisions. The decision to enter
into a joint defense agreement with Mr. Petka certainly falls
into this category.

In addition, the concerns regarding the waiver of
confidentiality highlighted by Ocean Atlantic are simply not as

significant in this particular case. As Willow Tree is well

19


privilege bears the burden of demonstrating its existence.
United States v. Evans, 113 F.3d 1457, 1461 (7% Cir. 1997).

The joint defense privilege is an extension of the attorney-
client privilege . See Id. at 1466 (noting that the joint
defense privilege is more aptly referred to as the common
interest privilege); Securities Investor Protection Corp. v.
Stratton Oakmont, Inc, 213 B.R. 433, 435 n.1 (S.D.N.Y.

1997) (noting the distinction between the joint client doctrine
and the common interest doctrine). “The joint defense privilege
protects communications between an individual and an attorney for
another when the communications are ‘part of an ongoing and joint
effort to set up a common defense strategy.” In re Grand Jury
Subpoena, 274 F.3d 563, 572 (1% Cir. 2001) (quoting United
States v. Bay State Ambul., 874 F.2d 20, 28 (1% Cir. 1989)).
“Because the privilege sometimes may apply outside the context of
actual litigation, what the parties call a ‘joint defense
privilege is more aptly termed the ‘common interest’ rule.” In re
Grand Jury Subpoena, 274 F.3d at 572.

The burden of demonstrating the existence of a joint defense
agreement falls on the person claiming it. United States v.
Weissman, 195 F.3d 96 (2d Cir. 1999). A party seeking to assert
the joint defense privilege must demonstrate that: 1) the
communications were made in the course of a joint defense effort;

2) the statements were made in furtherance of that effort; and 3)

13


contract would be terminated if the First Closing did not occur
by November 30, 1999, pursuant to the Second Amendment. Judge
Holderman ultimately denied Plaintiffs’ summary judgment motion,
and in the Fall of 2000, the parties settled the lawsuit by
entering into the October 26, 2000 Settlement Agreement.
Throughout her contract negotiations and during these
proceedings, Mrs. Arnhold was represented primarily by Mr. Petka.

B. Mrs. Arnhold’s “Drop Dead” Settlement Agreement.

The parties’ negotiations, which culminated in a Settlement
Agreement, revealed that the following were material aspects of
the Settlement Agreement: (1) there would be one closing for the
full purchase price of the Property (as opposed to three, as the
initial contract had contemplated); (2) January 25, 2001 would be
the final, “drop-dead” date for closing; and (3) the issue of the
sewer moratorium would be waived.

Nonetheless, closing did not occur on January 24, 2001 - the
date selected for closing by Ocean Atlantic Woodland - nor on
January 25, 2001, the absolute, final “drop-dead” date in the
Settlement Agreement. A glitch in Ocean Atlantic Woodland’s
paperwork prevented the company from securing the funds necessary
to effectuate closing until January 26, 2001. When Ocean
Atlantic Woodland attempted to persuade Mrs. Arnhold to close on
that day, she told Ocean Atlantic Woodland, essentially, to “drop

dead.”


aware, Mr. Petka is already intimately familiar with the facts
giving rise to Willow Tree’s decision to grant Cambridge Homes
the easement. Ocean Atlantic has even suggested that Mr. Petka
and the Defendants are conspiring to deprive it of its rights
under the Easement Grant.

Given Willow Tree’s limited liability (due to the indemnity
agreement), Mr. Campbell’s authority to act on its behalf, and
Willow Tree’s relationship with Mr. Petka, the Court finds that
Willow Tree’s failure to consent to the joint defense agreement
prior to Mr. Petka’s deposition does not render it void.
Although Mr. Campbell’s decision to enter into the agreement
without first consulting his client was hardly the model of good
judgment, the privilege nevertheless stands.

II. The Submission of In Camera Affidavits Was Inappropriate

During the March 8, 2002 hearing, this Court directed
Messrs. Shobat and Campbell to submit affidavits in support of
their claim that a joint defense agreement existed. In response,
Messrs. Shobat and Campbell submitted three affidavits to the
Court for in camera inspection. Ocean Atlantic received only
heavily redacted copies of these affidavits.

The Court finds that there is no basis for redacting these
affidavits; they contained neither confidential nor highly
sensitive information that warrants such treatment. See

generally, Jessup v. Luther, 277 F.3d 926, 928 (7% Cir. 2002)

20


that there is enough evidence to establish that the
communications were protected under the joint defense privilege.
However, the Court further finds that the affidavits submitted in
an effort to demonstrate the existence of this privilege should
not have been redacted. Because the submissions constitute
impermissible ex parte communications with the Court, the Court
directs Messrs. Shobat, Petka, and Campbell to produce to Ocean
Atlantic unredacted copies of these affidavits. In addition, the
Court agrees that, to the extent that these affidavits contain
impermissible legal argument, they are stricken. Accordingly,

IT IS HEREBY ORDERED that Plaintiff’s Motion To Compel the
Production of Documents and Testimony be, and the same hereby is,

DENIED. Plaintiff’s Motion to Strike is GRANTED in part, and

DENIED in part.

Dated: April 18, 2002 ENTER:

Ss

ARLANDER KEYS e
United States Magistrate Judge

22


without at least consulting their clients first.® In this case,
there is no evidence that Willow Tree has consented to enter into
a joint defense agreement with Mr. Petka. Although Mr. Petka
does not specifically reference a joint defense agreement in his
affidavit, it is clear that he gave Mr. Shobat permission to
collaborate with Mr. Campbell about privileged matters on the
condition that the information remain confidential.

In addition, the Court agrees that Messrs. Shobat and
Campbell’s rather lackadaisical response to Ocean Atlantic’s
demand to produce the joint defense agreement does not instill
confidence that this agreement had been well-defined prior to Mr.
Petka’s deposition.

Nevertheless, the Court cannot analyze the existence of a
joint defense agreement in a vacuum. Given the history between
these parties, Mr. Petka, and these attorneys, the Court finds
that the joint defense privilege protects Mr. Petka’s
conversations with Mr. Shobat and Mr. Campbell, even though
Willow Tree did not consent to a joint defense agreement prior to
Mr. Petka’s deposition.

The genesis of the present suit, as well as Ocean Atlantic

Woodland’s suit against Mrs. Arnhold, can be traced to Ocean

® Ocean Atlantic argues that, because lawyers must “preserve
the confidences and secrets of a client,” Canon 4 of the Code of
Professional Responsibility, lawyers must first obtain the
client’s knowing waiver of that confidentiality before sharing
those confidences with a third party.

17


Tree and had previously represented Mrs. Arnhold. Mr. Campbell
recommended that Mr. Petka retain attorney Steven Shobat for
representation, which he did on January 28, 2002. Mr. Shobat, a
newcomer to this controversy, negotiated to postpone Mr. Petka’s
deposition until February 13, 2002.

On February 2, 2002, Mr. Petka and Mr. Shobat discussed the
propriety of asking Mr. Campbell to provide Mr. Shobat with
information about the proceedings, in an effort to bring Mr.
Shobat “up to speed” prior to Mr. Petka’s deposition. Mr. Petka
acknowledged that confidential information would likely be
discussed at such a meeting, and Mr. Shobat assured Mr. Petka
that this information would remain confidential despite the
disclosures.

Mr. Shobat contacted Mr. Campbell later that day, and the
two attorneys agreed that any information shared in the briefing
would be privileged pursuant to a joint defense agreement. Mr.
Campbell thoroughly explained the history between Ocean Atlantic
and Mrs. Arnhold, Willow Tree, and Mr. Petka, and he fleshed out
the details of the current suit. In doing so, Mr. Campbell
revealed to Mr. Shobat information about litigation strategies
and impressions, and other confidential information.

On the morning of February 13, 2002, Mr. Petka met with both
Mr. Shobat and Mr. Campbell to prepare for his deposition. Mr.

Shobat again explained to Mr. Petka that Mr. Campbell was


Cc. Ocean Atlantic v. Willow Tree

The impact of the Court’s decision on Ocean Atlantic was
substantial. Not only did Ocean Atlantic lose its battle to
purchase the Property for the previously agreed upon price, but
it also forfeited the improvements it had made to the Property in
preparation for Ocean Atlantic’s planned residential development.
Apparently, the Court’s ruling also upset Ocean Atlantic’s
business relationship with the owners of the farm adjacent to
Mrs. Arnhold’s Property, Willow Tree Farm.

In preparation for the residential development it had
planned for Mrs. Arnhold’s farm, Ocean Atlantic had negotiated an
easement agreement (“Easement Grant”) with the owners of Willow
Tree Farm.‘ On December 31, 1998, Ocean Atlantic and Willow Tree
recorded an easement granting Ocean Atlantic the right to
construct a storm drainage water pipeline (“pipeline”) across
Willow Tree to service the proposed residential development. The
Easement Grant called for construction of the pipeline to be
completed by June 30, 2001.

Following this Court’s February 28, 2001 ruling, however,
Willow Tree took the position that Ocean Atlantic had no further

easement right against Willow Tree Farm. Since Ocean Atlantic

* Although it was Ocean Atlantic Woodland Corporation that
entered into the contract to purchase Mrs. Arnhold’s farm, Ocean
Atlantic Development Corp. (“Ocean Atlantic”) negotiated the
Easement Grant with Willow Tree.


On February 7, 2001, Ocean Atlantic Woodland filed a Motion
to Enforce the Settlement Agreement. On February 14 and 15,
2001, this Court held an evidentiary hearing, and heard from Mr.
Farraguto, Ocean Atlantic’s President, Mr. Argoudelis, and Mr.
Petka. During the hearing, Mr. Petka testified as a witness, and
he did not appear as Mrs. Arnhold’s attorney. Instead, Mrs.
Arnhold was represented by Messrs. Theodore Poulos and William
Campbell of Cotsirilos, Stephenson, Tighe & Streicker.

The Court, after fully considering the briefs and the
hearing testimony, concluded that Ocean Atlantic Woodland’s
failure to close on the Property on or before January 25, 2001
was a material breach of the parties’ agreement. Arnhold v.
Ocean Atlantic Woodland Corp., 132 F. Supp.2d 662 (N.D. Ill.
2001) aff’d,--F.3d--, 2002 WL 435513 (7 Cir. Mar. 21, 2002).
Because Ocean Atlantic Woodland breached a material term of the
Settlement Agreement, it forfeited all rights to the Property.
Id.

The Court’s decision cleared the way for Mrs. Arnhold to
sell the Property to another buyer, which she did shortly
thereafter. In July of 2001, Mrs. Arnhold sold the Property to
DRH Cambridge Homes, Inc. (“Cambridge Homes”), which agreed to
indemnify Mrs. Arnhold in the event that she was sued by Ocean
Atlantic. Once again, Mr. Petka represented Mrs. Arnhold during

these contract negotiations.


Atlantic’s frustrated desire to develop a residential community
on Mrs. Arnhold’s farm. The two suits are interrelated; the
outcome of Ocean Atlantic Woodland’s suit against Mrs. Arnhold
proved to be determinative of who would develop Mrs. Arnhold’s
farm, and the Willow Tree easement is critical to the
construction of that development®. It is, therefore, not
surprising that the present dispute impacts many of the same
people involved in the prior dispute, and that Mr. Petka’s and
the Defendants’ interests are aligned.

After Ocean Atlantic lost its first suit against Mrs.
Arnhold, Mrs. Arnold sold her property to Cambridge Farms.
Shortly thereafter, she and Mr. Petka helped convince Willow Tree
to grant Cambridge an easement similar to Ocean Atlantic’s
Easement Grant. Willow Tree agreed, somewhat reluctantly, to
sell an easement to Cambridge Homes on the condition that both
Cambridge Homes and Mr. Petka’s client, Mrs. Arnhold, agree to
indemnify Willow Tree in the event it was sued by Ocean Atlantic.
Upon Mr. Petka’s advice, Mrs. Arnhold is, at least financially,
standing in Willow Tree’s shoes in this litigation.

Similarly, the attorneys on both sides of this dispute were

involved in the prior litigation; Messrs. Farrell and Hughes

° One struggles to understand the purpose to be served by
permitting Ocean Atlantic to construct the pipeline drain on
Willow Tree Farm, other than to frustrate Cambridge Homes’ own
development plans.

18


Ocean Atlantic filed the instant suit against Willow Tree on June
29, 2001. The case was assigned to Judge Lefkow. In its
Complaint, Ocean Atlantic alleges that Willow Tree breached its
contract by failing to provide written approval of specifications
and by denying Ocean Atlantic access to its property to begin
construction. Ocean Atlantic seeks specific performance and
breach of contract damages.

In defense of this suit, Willow Tree retained attorney
William Campbell -- the same attorney that had represented Mrs.
Arnhold in the post-settlement hearing before this Court on
February 14 and 15, 2001. It soon became clear that many of the
persons who had figured prominently in Ocean Atlantic Woodland’s
suit against Mrs. Arnhold would play critical roles in the
present litigation as well.

D. Mr. Petka’s Deposition

On January 31, 2002, Judge Lefkow referred several discovery
matters to this Court. One of those discovery matters involved
Ocean Atlantic’s desire to depose Mr. Petka about his and Mrs.
Arnhold’s role in helping to secure Cambridge Homes’ easement on
Willow Tree Farm. On January 4, 2002, Ocean Atlantic issued a
subpoena to Mr. Petka, directing the production of certain
documents and his deposition on January 31, 2002.

After Mr. Petka received Ocean Atlantic’s subpoena, he

contacted Mr. Campbell, who was currently representing Willow


”

>
‘Minute Order Form (06/97)

United States District Court, Northern District of [linois

Name of Assigned Judge Sitting Judge if Other A
or Magistrate Judge Joan Humphrey Lefkow than Assigned Judge Arlander Keys
CASE NUMBER 01C 5014 DATE 4/18/2002
CASE Ocean Atlantic Development vs. Willow Tree Farm et al.
TITLE
[in the following box (a) indicate the party fling the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]

DOCKET ENTRY:

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

(2) o Brief in support of motion due

(3) oO Answer brief to motion due . Reply to answer brief due.

(4) Oo Ruling/Hearing on set for at

(5) oOo Status hearing[held/continued to] [set for/re-set for] on set for at

(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at :

(ea) Oo Trial{set for/re-set for] on at

(8) im [Bench/Jury trial] [Hearing] held/continued to at

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) CGeneralRule21 CIFRCP41(a\(1) OO FRCP41(a)(2).

(10) Mi [Otherdocket entry] Memorandum Opinion and Order entered. Plaintiff's Motion to Compel [#29]
is denied; Plaintiff's motion to Strike Affidavits [#41] is granted in part and denied in part. Status hearing
set for 5/15/02 at 9:00 a.m. in Courtroom 2230. Ae

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

No notices required, advised in open court.
2
No notices required. vunberofotces
v | Notices mailed by judge’s staff.
Net APR 19 2002
lotified counsel by telephone. date dvckened
Docketing to mail notices.
Mail AO 450 form,
V | Copy to judge/magisteate judge.
courtroom 62 2 Ud Gy Me date mailed notice
FT, deputy’s ‘r
initials ————++
(Date/tinie received in!
central Clerk’s Office ailing deputy initials



E. Ocean Atlantic’s Motion to Compel

On February 14, 2002, Ocean Atlantic sent Mr. Shobat a
letter, requesting that he immediately produce the joint defense
agreement. Ocean Atlantic contended that the agreement was not
protected by the attorney-client privilege, and was responsive to
Ocean Atlantic’s earlier subpoena seeking any agreements between
Mrs. Arnhold, her attorneys, and Willow Tree. Mr. Shobat
responded only that he did not believe that a joint defense
agreement was covered by Ocean Atlantic’s subpoena.

On February 21, 2002, Ocean Atlantic sent Mr. Shobat another
letter, seeking the production of the joint defense agreement.
Although Mr. Shobat purportedly responded on February 23, 2002
that the joint defense agreement was oral and that there was no
document to produce, Ocean Atlantic did not receive this letter
until February 26, 2002 - one day after Ocean Atlantic had filed
its Motion to Compel Production of the Joint Defense Agreement
and Mr. Petka’s testimony.

Ocean Atlantic initially took the position that courts did
not recognize oral joint defense agreements, and that
nondefendants, such as Mr. Petka, could not be party to such
agreements. Contrary caselaw refined its position, and Ocean
Atlantic properly noted that, while a joint defense agreement
could exist between Mr. Petka and Willow Tree, they had failed to

present any evidence demonstrating that it did, in fact, exist.

11


participating in the deposition preparation to help answer
questions and concerns, and that his presence would not waive the
attorney-client privilege. Mr. Campbell was not present during
the entire meeting, but rather, walked in and out of the room
while Mr. Shobat was preparing Mr. Petka for his deposition.
During the deposition, counsel for Ocean Atlantic discovered
that Mr. Campbell had been present during meetings between Mr.
Shobat and Mr. Petka. Ocean Atlantic insisted that Mr.
Campbell’s presence destroyed the attorney-client privilege with
respect to these conversations. Mr. Shobat retorted that the
conversations were nevertheless protected, because he and Mr.
Campbell had entered into a joint defense agreement on behalf of
their respective clients. Mr. Shobat instructed Mr. Petka not to
answer any questions tending to reveal the substance of the

conversations among and between the three men, and any questions

concerning the existence of the joint defense agreement.

5 Notably, two days after Mr. Petka’s deposition, Ocean
Atlantic filed an Amended Complaint, adding a tortious
interference with contract claim against Cambridge Homes, Inc.,
Byzantio L.L.C., and Mrs. Arnold. Ocean Atlantic alleges that
Mrs. Arnhold and Cambridge Homes induced Willow Tree to breach
its easement agreement with Ocean Atlantic by offering to
purchase the same easement and by promising to indemnify Willow
Tree against a lawsuit by Ocean Atlantic to enforce the Easement
Agreement. Despite his admitted involvement in negotiating on
Cambridge Homes’ behalf, Mr. Petka has not yet been named a
defendant in this lawsuit.

10


Woodland could no longer construct its residential development,
Willow Tree reasoned, Ocean Atlantic’s plans to construct the
pipeline were similarly futile. In the meantime, Willow Tree
allegedly entertained another offer to purchase the easement from
Mrs. Arnhold.

During the summer of 2001, Mrs. Arnhold and her attorney,
Mr. Petka, purportedly contacted the owners of Willow Tree Farm
in an effort to secure an easement for Cambridge Homes.
Apparently, Cambridge Homes came to the same realization that
Ocean Atlantic had years earlier: a successful residential
development on the Property could only be achieved by
constructing a pipeline across Willow Tree Farm. After an
allegedly stormy relationship with Ocean Atlantic, the owners of
Willow Tree Farm were purportedly apprehensive about negotiating
a second easement agreement with yet another large development
company. Cambridge Homes correctly guessed that Willow Tree’s
owners would be more receptive to an offer coming from their
neighbors; Mrs. Arnhold, Mr. Byzantio, and Mr. Petka. By July 1,
2001, Mrs. Arnhold and Mr. Petka had purportedly helped to secure
the easement agreement on behalf of Cambridge Homes. Cambridge
Homes and Mrs. Arnhold agreed to indemnify Willow Tree in the
event that it was sued by Ocean Atlantic.

Even before Cambridge Homes could record this easement

agreement, Ocean Atlantic had seen the handwriting on the wall.


(discussing documents filed under seal.) “The facts necessary to
establish the attorney-client privilege are not themselves
privileged.” B.F.G. of Illinois v. Ameritech Corp., No. 99C
4604, 2001 WL 1414468, at *4 (N.D. Ill. Nov. 13, 2001). The
Court agrees with Judge Norgle; accepting these affidavits in
camera would constitute an impermissible ex parte communication
with the Court. Id. Therefore, the Court orders Messrs. Shobat
and Campbell to produce unredacted copies of the submitted
affidavits to Ocean Atlantic.

Ocean Atlantic also asserts that the submitted affidavits
contain impermissible legal argument, in direct violation of this
Court’s express directive barring the parties from making further
legal argument on the issue. The Court agrees that the
affidavits, which reference numerous citations, contain
impermissible legal conclusions and arguments. See Zilker v.
Klein, 540 F. Supp. 1196, 1997 n. 1 (N.D. Ill. 1982) (the purpose
of an affidavit is to set forth evidentiary facts, not to advance
legal arguments). To the extent the affidavits contain
impermissible legal conclusions or arguments, they are
disregarded. However, the Court declines Ocean Atlantic’s
invitation to strike the affidavits in their entirety.

Conclusion
Ocean Atlantic seeks to compel Mr. Petka to disclose his

conversations with Messrs. Shobat and Campbell. The Court finds

21


But the First Closing did not occur on August 6, 1998. Each
party placed the blame for the delay squarely on the other, and
their business relationship began on a long, downward spiral that
continues to this day. Nevertheless, the parties agreed to a
series of date extensions, which were embodied in the First
Amendment, executed on November 10, 1997°, and then a Second
Amendment, executed on or about April 14, 1999. The Second
Amendment extended the First Closing date to no later than
November 30, 1999, but, once again, the First Closing did not
occur by this date.

Believing that Ocean Atlantic Woodland was concocting yet
another delay tactic, on November 22, 1999, Mrs. Arnhold filed a

lawsuit in federal court for a declaratory judgment that the

3after the First Amendment, Ocean Atlantic Woodland filed a
federal lawsuit, in November 1998, requesting specific
performance for Plaintiffs to sign the petition and annexation
agreement, a necessary step for closing pursuant to the contract
and First Amendment. According to Plaintiffs, they signed the
petition and annexation agreement on December 1, 1998, but were,
nonetheless, still served with the lawsuit in January 1999. In
April 1999, Ocean Atlantic Woodland voluntarily dismissed the
lawsuit (and the Second Amendment was executed). The only
relevance of this dispute to the present controversy is that it
underscores the tension between the parties, and further
illustrates, as will be discussed in more depth infra, that a
specific closing date was always important to Plaintiffs. For
instance, paragraph 13 of Ocean Atlantic Woodland’s Complaint for
Specific Performance, in case No. 98 C 7140, states that
Plaintiffs refused to execute the necessary petition and
annexation agreement unless Ocean Atlantic Woodland committed to
a first closing date no later than December 31, 1998. Therefore,
as early as November 1998, Ocean Atlantic Woodland knew that
Plaintiffs were insistent on specific dates for closing.

3


the privilege has not been waived. In re Bevill, Bresler &
Schulman Asset Management Corp., 805 F.2d 120, 126 (3d Cir.
1986)°.

Although “[p]rivileges should be narrowly construed and
expansions cautiously extended,” Weissman, 195 F.3d at 100,
courts have found that an oral joint defense agreement may be
valid. See, e.g., In re Grand Jury Subpoena, 274 F.3d at 569-70.
In addition, a person need not be a litigant to be a party toa
joint defense agreement. Russell v. General Elect. Co., 149
F.R.D. 578, 580 (N.D. Ill. 1993) (the joint defense privilege
apples to parties or potential parties sharing a common interest
in the outcome of a particular claim.)

In this case, the affidavits submitted evidence the fact
that Mr. Shobat and Mr. Campbell entered into a joint defense
agreement on behalf of their clients prior to Mr. Petka’s
deposition. This does not resolve the issue of whether the joint
defense privilege applies, however, because: 1) Mr. Petka and
Willow Tree must demonstrate that they have a common interest in
the outcome of this litigation; and 2) Ocean Atlantic contends
that attorneys cannot enter into joint defense agreements on

behalf of their clients.

6 Ocean Atlantic does not contend that the underlying
conversations between Mr. Shobat and Mr. Petka were not
privileged; rather, it contends that Mr. Campbell’s presence
destroyed the privilege. Nor does it contest Mr. Petka’s ability
to satisfy the remaining elements of the joint defense privilege.

14


Tree Farm’s owners and attorney. Mr. Petka was willing and able
to provide such assistance. As such, it may only be a matter of
time before Ocean Atlantic adds Mr. Petka’s name to the list of
Defendants that allegedly tortiously interfered with its
contractual rights.

As such, the Court concludes that Mr. Petka’s interest in
this case stems from his desire to limit both his and his
client’s legal exposure. See generally, Blanchard v. Edgemark
Financial Corp., 192 F.R.D. 233, 237 (N.D. Ill. 2000) (noting
that the common interest must be a legal interest, not merely a
financial or commercial interest). The indemnity agreements,
combined with the fact that Mrs. Arnhold has already been named
as a Defendant in this lawsuit, further solidify Mr. Petka’s
legal interest in the outcome of this case. Given Mr. Petka’s
substantial involvement in the matters underlying this
litigation, the Court finds that he has a common interest with
Willow Tree and the other Defendants in the outcome of this case.

B. Mr. Shobat and Mr. Campbell Entered into the Joint
Defense Agreement on Behalf of Their Clients.

The second question presents something of a challenge. The
Court finds reasonable Ocean Atlantic’s argument that, given the
contemplated exchange of confidential information, two attorneys

should not be permitted to enter into a joint defense agreement

16


witness in this case, Steven Shobat, Mr. Petka’s attorney, and
William Campbell, attorney for Defendant Willow Tree Farm, L.L.C.
(“Willow Tree”)?. Mr. Petka refused to disclose these
conversations, on the ground that they were privileged. Full
appreciation of Mr. Petka’s claim of privilege requires
familiarity with not only the underlying litigation, but also
with a previous lawsuit between Mr. Petka’s former client, Mrs.
Elda Arnhold, and the Ocean Atlantic Woodland Corporation (“Ocean
Atlantic Woodland”), which is affiliated with the Plaintiff in
this case.

A. Elda Arnhold v. Ocean Atlantic Woodland.

Elda Arnhold and her neighbor? (hereinafter referred to
collectively as “Mrs. Arnhold”) owned large family farms adjacent
to one another, outside of Plainfield, Illinois. On August 6
1997, Mrs. Arnhold entered into a contract to sell her farm land
(i.e. the Property) to Ocean Atlantic Woodland. The original
contract contemplated an initial closing by November, 1997, and
required that the initial closing, or specified conditions for
closing, occur no later than August 6, 1998, or either party

would have the right to terminate the contract.

' Initially, Ocean Atlantic also sought to discover the
Joint Defense Agreement itself. Mr. Petka has responded that no
such document exists. Ocean Atlantic does not contest this
assertion.

2 mrs. Arnhold’s neighbors were, primarily, Mr. Byzantio and
his son, Mr. Argoudelis.


UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS Ge, .
EASTERN DIVISION EP) lies
lO
<9, °O
ZF
OCEAN ATLANTIC DEVELOPMENT 7p

CORPORATION, No. 01 C 5014

Plaintiff,
Judge Joan H. Lefkow

)
)
)
)
)
)
)
) Magistrate Judge
) Arlander Keys
)
WILLOW TREE FARM, L.L.C., )
DRH CAMBRIDGE HOMES, INC., )
ELDA ARNHOLD, and BYZANTIO, )
L.L.c. )
)
)

Defendants.

MEMORANDUM OPINION AND ORDER

Currently before the Court is Plaintiff Ocean Atlantic
Development Corporation’s (“Ocean Atlantic”) Motion to Compel
testimony and the production of allegedly privileged documents.
In addition, Ocean Atlantic contends that the submission of
redacted affidavits in response to its Motion constitutes an
impermissible ex parte communication with the Court, and that the
affidavits should be stricken. For the reasons set forth below,
Ocean Atlantic’s Motion to Compel is denied; and its Motion to
Strike is granted in part, and denied in part.

Background Facts
In its Motion to Compel, Ocean Atlantic asserts that it is

entitled to discover conversations between Edward Petka, a


At a hearing on March 8, 2002, this Court agreed and directed
Messrs. Shobat and Campbell to submit affidavits demonstrating
the existence of the joint defense agreement.

On March 15, 2002, Messrs. Petka, Shobat, and Campbell each
submitted, in camera, affidavits to this Court describing the
creation of the joint defense agreement. Ocean Atlantic received
heavily redacted copies of these affidavits. Ocean Atlantic
subsequently filed a Motion to Strike the affidavits, complaining
that they constitute impermissible ex parte communications with
the Court, and contain improper legal arguments and conclusions.

Discussion

Ocean Atlantic’s Motions raise, primarily, two issues that
must be addressed by the Court: 1) whether Mr. Petka and Willow
Tree have demonstrated the existence of a recognizable joint
defense agreement; and 2) whether the submission of in camera
affidavits constitutes improper ex parte contact with the Court.
The Court will address each contention in turn.

I. Joint Defense Agreements.

The attorney-client privilege is an exception to the spirit
of broad disclosures envisioned by the Federal Rules of Civil
Procedure. Courts permit parties to keep such communications
confidential to encourage “full and frank communication between
attorneys and their clients.” Upjohn Co. v. United States, 449

U.S. 383, 389 (1981). However, the party asserting such a

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A. Mr. Petka and Willow Tree Have a Common Interest In the
Outcome of this Litigation.

The first question is relatively straightforward. As
detailed in his deposition, Mr. Petka played a substantial role
in helping to secure the easement from Willow Tree on behalf of
Cambridge. Following Mr. Petka’s deposition, Ocean Atlantic
amended its Complaint to add a claim of tortious interference
against Mrs. Arnhold, Byzantio, and Cambridge Homes for conduct
that Mr. Petka advised and/or facilitated. In addition, Mr.
Petka advised Mrs. Arnhold to agree to indemnify Willow Tree for
any litigation by Ocean Atlantic arising out of the easement,
with full knowledge of Ocean Atlantic’s prior lawsuit against
her.

Although Ocean Atlantic lacks standing to file a negligence
claim against Mr. Petka,’ this does not mean that Ocean Atlantic
cannot raise any claim against him. In this case, it is not
entirely clear that Mr. Petka did not cross the line from legal
advisor to active participant in the easement negotiations.
Cambridge Homes was convinced that its best chance for securing
an easement from Willow Tree ~which was allegedly apprehensive
about dealing with another development company - was to rely upon

Mrs. Arnold and Mr. Petka’s friendly relationship with Willow

7 And while Mrs. Arnhold does have standing to pursue such
a claim against Mr. Petka, the advisability of such action is
likely dependant upon the outcome of this lawsuit.

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