Illinois Decision a Win for In-House Attorney-Client Privilege

Sue Reisinger

Corporate Counsel

12-10-2012

In-house counsel won a major victory in Illinois, where the State Supreme Court ruled November 29 [PDF] that the sharing of legal advice during business negotiations doesn’t create a waiver of attorney-client privilege over the entire transaction.

Amar Sarwal, chief legal officer for the Association of Corporate Counsel in Washington D.C., cheered the ruling in an interview with CorpCounsel.com on Friday. “For our members who engage in business negotiations constantly and counsel their clients on contracts, the idea that every piece of legal advice about a contract could be made public would deeply disrupt the negotiations,” Sarwal said.

The case arose in Cook County over a business transaction between companies that own and operate shopping malls across the country. During negotiations, three co-defendants shared among themselves certain legal advice each of them received from their attorneys regarding the purchase.

The plaintiffs argued that each defendant waived attorney-client privilege by discussing the legal advice with each other. They filed a motion to compel production of over 1,500 documents on the defendants’ privilege logs, claiming the documents fell under the “subject matter waiver” of attorney-client privilege.

The trial court agreed with the plaintiffs, and ordered the documents to be produced. The defendants declined and were found in contempt. A state appeals court upheld the ruling.

In what is believed to be the first state supreme court to decide the issue, the Illinois high court overturned the ruling.

“We hold that subject matter waiver does not apply to the extrajudicial disclosure of attorney-client communications not thereafter used by the client to gain an adversarial advantage in litigation,” the opinion said.

ACC had filed an amicus brief in January, along with the Illinois State Bar Association and the Cook County Chapter of ACC, asking the Supreme Court to overturn the lower courts.

The brief argued that the lower court ruling would “undermine the public policy interests of the legal profession in Illinois, create an impossible environment for business negotiations in Illinois, and unfairly place lawyers into a mine-field of ethical conflicts and potential malpractice claims.”

Sarwal called the Illinois Supreme Court opinion a very well thought-out ruling. “This decision reaffirms the importance of the privilege,” he said. “This court really understood that if the clients don’t feel conversations are confidential, they will be less than candid with their attorneys.”

Sarwal added, “If the Supreme Court decision had gone otherwise, companies doing business in Illinois or even dealing with Illinois companies could have a real problem.”

It is likely that the lower court ruling, if left standing, could have been expanded to include not just businesses, but any individual who retained a lawyer for any purpose, Sarwal said.

He also stressed that lawyers in private practice—not just in-house lawyers—were concerned about the case, as evidenced by the Illinois Bar Association joining the amicus.

Charles Northrup, general counsel of the state bar association, and Alexandra Darrow, a senior counsel at ADP Inc. and advocacy chair of ACC’s Chicago chapter, joined Sarwal in the amicus.

The final ruling, Sarwal concluded, provided practical advice to the legal profession on how privileged communications with their clients can be protected.

“Any court confronting an assault on the privilege would do well to review this opinion,” he said.