MUELLER INDUSTRIES, INC., еt al., Plaintiffs and Counterdefendants-Appellees, v. PETER D. BERKMAN et al., Defendants and Counterplaintiffs-Appellants (William O‘Hagan et al., Counterdefendants-Appellees; Homewerks Worldwide LLC, Counterplaintiff).
No. 2-09-0134
Second District
March 23, 2010
399 Ill. App. 3d 456
An inmate must be provided with ” ‘nutritionally adequate food that is prepared and served under conditions which do not present an immediate danger to the health and well being of the inmates who consume it.’ ” French v. Owens, 777 F.2d 1250, 1255 (7th Cir. 1985), quoting Ramos v. Lamm, 639 F.2d 559, 570-71 (10th Cir. 1980). Presumably, plaintiff‘s eighth amendment claim is that he was served food on cracked and broken trays that presented an immediate danger to his health and well-being. However, to adequately state that claim, he must allege that he suffered “serious or significant physical or mental injury.” White, 1 F.3d at 269. Plaintiff has not alleged any injury at all. Accordingly, the complaint was properly dismissed for failure to state a cause of action.
CONCLUSION
Based on the foregoing, we affirm the dismissal with prejudice of plaintiff‘s amended complaint.
Affirmed.
BURKE and SCHOSTOK, JJ., concur.
Jeffrey L. Willian, Donna M. Welch, and Travis J. Quick, all of Kirkland & Ellis LLP, of Chicago, and James H. Knippen, of Walsh, Knippen, Knight & Pollock, Chtrd., of Wheaton, for appellants.
Anthony J. Ashley and Frederic T. Knape, both of Vedder, Price, Kaufman & Kammholz, P.C., of Chicago, and Francis J. Menton, Jr., James C. Dugan, Paul W. Horan, and Jesenia M. Ruiz De La Torre, all of Willkie Farr & Gallagher LLP, of New York, New York, for appellees.
Peter Berkman, the former president of B&K Industries, Inc., was sued by B&K and its parent company, Mueller Industries, Inc. (collectively, Mueller), for breach of contract and breach of fiduciary duty relating to the formation of a competing company and to bribes and kickbacks that Berkman allegedly received from one of Mueller‘s primary suppliers. In response to Mueller‘s discovery requests for the production of documents, Berkman refused to produce various documents, asserting a privilege based on the fifth amendment and the attorney-client privilege. The trial court rejected Berkman‘s assertions of privilege and granted Mueller‘s motion to compel production. In order to perfect an appeal, Berkman again refused to produce the documents and drew a finding of contempt. He now appeals the finding of contempt and the grant of the motion to compel. We affirm in part, reverse in part, vacate in part, and remand.
BACKGROUND
Berkman was one of the owners of B&K, a company that imported plumbing products from suppliers and sold the products to customers in the United States. Beginning in 1997, Berkman‘s attorney was David Shevitz, a partner at Katten, Muchin & Rosenman LLP (Katten). In 1998, B&K was bought by Mueller, a publicly owned manufacturer of plumbing fixtures and products. After the acquisition, Berkman continued to work for Mueller as the president of B&K. Katten, through Shevitz, continued to represent Berkman.
One of B&K‘s primary suppliers was Xiamen Lota International Co., Ltd. (Lota), a plumbing manufacturer specializing in valves and faucets. Lota‘s annual sales to B&K regularly exceeded $10 million. In April 2003, Lota USA, a limited liability company, was formed to serve as Lota‘s sales and marketing representative in the North American market. About the same time, Berkman formed Woodland Investment Partnership (Woodland), which acquired a 10% ownership interest in Lota USA. Berkman was the managing member of Woodland. Katten, through Shevitz, assisted Berkman in forming Woodland and Lota USA and advised Berkman regarding how to structure his ownership
Berkman did not inform Mueller about his interest in Lota USA. Copies of e-mails between the principals of Lota USA and Katten, relating to agreements entered into by Lota USA, suggest efforts to avoid identifying Berkman‘s interest. For instance, although a March 2003 memorandum initially identified Berkman as the owner of 10% of Lota USA, a later memorandum from May 2003 identified the owner of that interest as Woodland. Similarly, Berkman‘s name and position as agent for Woodland were removed from a May 2005 agreement between Lota USA and Woodland.
In late 2005, Mueller‘s previous written employment contract (which contained a noncоmpete agreement) with Berkman expired, and the parties entered into an open-ended employment agreement. Berkman continued to serve as the president of B&K. In March 2006, Berkman asked Shevitz to review Mueller‘s code of conduct that he had just received, which contained among other things provisions restricting (1) outside financial interests that might affect an employee‘s decisions, (2) the handling of business opportunities, and (3) competition with Mueller. About the same time, Berkman asked Shevitz to form a new limited liability company, eventually named Homewerks, to compete with Mueller. One month later, in April 2006, Berkman, ostensibly acting for Mueller, advised Katten that Mueller would be retaining a different firm for its intellectual property legal work. Katten continued to work with Berkman in setting up Homewerks and soliciting investors. In July or August 2006, Berkman resigned his position with Mueller and began working full time at Homewerks.
In July 2007, Mueller sued Berkman, alleging that he had breached his employment contracts and also breached his common-law fiduciary duty to Mueller. Mueller alleged that Berkman, through his ownership interest in Lota USA, profited personally and at the expense of Mueller by acquiescing in Lota‘s efforts to overcharge Mueller for supplies. Mueller also alleged that Berkman received payments from Lota for his assistance in this scheme. Katten appeared on behalf of Berkman and filed an answer and counterclaim against Mueller and the individual members of its board of directors, alleging that the counter-
The parties commenced discovery. A subpoena was issued to Northern Trust, seeking documents relating to bank accounts held by Berkman and Woodland. Berkman moved to quash the subpoena. The motion was denied, and Berkman did not seek further review of that denial. Mueller also requested that Berkman produce various documents dating from August 1998 (Mueller‘s acquisition of B&K) through the present. Berkman initially produced about 350 pages of documents, but objected to producing any others on the ground that they were irrelevant or were protected by the attorney-client privilege. Mueller moved to compel. The documents at issue include the following: documents relating to Berkman‘s communications with Lota and Lota USA; documents concerning the relationship and financial arrangements between Berkman and Lota and Lota USA; documents relating to the legal advice Berkman received from Katten about his relationship with Lota USA and the creation of Homewerks, during the time that Berkman was president of B&K; documents relating to the formation and organization of Lota USA and Homewerks; and documents relating to any other “side” businesses of Bеrkman‘s.
On May 7, 2008, Berkman testified in connection with an arbitration proceeding involving Lota USA and Nick Moss, a former Lota employee who began working for Mueller. Although Berkman and his attorney had spoken about the proceeding, the attorney was not present. Berkman testified, among other things: that his attorney advised him that it was okay to own 10% of Lota USA and that such ownership would not conflict with his obligations under his employment contract with Mueller; that he believed that he could be fired if Mueller found out about Woodland‘s ownership interest in Lota USA; and that he had told Moss what his attorney had told him. Berkman also testified regarding a January 2005 wire transfer from Lota to Woodland of over $313,000, which he later explained was for recruiting and business consulting services he performed for Lota.
As noted, Berkman produced some documents, but objected to producing others on the ground that they were irrelevant or protected by the attorney-client privilege. In June 2008, shortly after Mueller moved to compel production of the requested documents, Katten ceased representing Berkman in the litigation and new counsel filed a substitute appearance. Berkman then responded to the motion to compel by asserting that he was entitled to decline to respond to the document production requests under the fifth amendment to the United States Constitution, although he had not objeсted to production on this ground in his initial discovery responses. Berkman did not
On October 3, 2008, the trial court issued a memorandum opinion and order granting the motion to compel. As to the attorney-client privilege, the trial court held that Katten‘s dual representation of Berkman and Mueller destroyed any claim of privilege:
“It is undisputed that Peter Berkman was a corporate officer with B&K Industries during the time that the law firm of Katten, Muchin represented both Berkman and Mueller/B&K from 2003 to 2006. Mr. Berkman cannot conceal from Plaintiffs communications between their own officer and their own attorneys. No attorney-client privilege exists under circumstances where the law firm represents both a corporate entity and a corporate officer at the same time, and the representation is arguably adverse. Common sense dictates that the corporate officer, knowing the existence of the law firm‘s representation, cаn have no expectation of confidentiality with counsel on matters germane to the corporation.”
The trial court therefore held that the attorney-client privilege did not shield the documents requested.
Regarding Berkman‘s fifth amendment claim of privilege, the trial court noted that under the “act of production” doctrine, documents may be withheld only if the act of producing those documents would itself be testimonial and incriminating. The trial court noted that Berkman‘s contentions in support of his argument that the fifth amendment applied were very general, and he had failed to produce any type of privilege log or make any particularized identification of how the production of each document would be testimonial or incriminating. It therefore held that Berkman had failed to make the required threshold showing that the fifth amendment privilege applied. The trial court ordered the production of the above categories of documents.
Berkman moved for reconsideration, making essentially the same arguments as before, but also responding to the trial court‘s complaint that Berkman did not produce a privilege log of the documents he sought to shield under the fifth amendment privilege. Berkman argued that requiring him to produce a privilege log to Mueller would eviscerate the privilege, because part of what he was entitled to рrotect was the very existence of responsive documents. Nevertheless, Berkman
In order to appeal the trial court‘s ruling, Berkman notified the trial court that it would not obey the court‘s order to produce the requested documents and asked to be held in contempt. On January 7, 2009, the trial court found Berkman in civil contempt of court and imposed a penalty of $1,000. Berkman filed a timely notice of appeal.
ANALYSIS
Berkman‘s appeal of the contempt order requires us to review the underlying discovery order. Cangelosi v. Capasso, 366 Ill. App. 3d 225, 227 (2006). On appeal, Berkman challenges the trial court‘s determination that neither the attorney-client privilege nor the fifth amendment privilege shielded the requested documents from discovery. Although discovery orders are generally reviewed for abuse of discretion, we review the triаl court‘s determination of whether a privilege applies de novo. Cangelosi, 366 Ill. App. 3d at 227.
On appeal, Berkman has not identified which privilege he believes applies to each of the five outstanding document requests. It is possible that the two privileges apply to entirely separate groups of responsive documents, or there may be some overlap. We therefore analyze the applicability of each privilege separately.
A. Attorney-Client Privilege
Only one of the five document production requests at issue contains an obvious request for communications between Berkman and his attorneys (the request for all documents relating to the legal advice Berkman received from Katten about his relationship with Lota USA and the creation of Homewerks, during the time that Berkman was president of B&K). However, it is possible that documents responsive to the other production requests at issue may also involve communications between Berkman and Katten. The following analysis applies to all responsive documents as to which Berkman has claimed the attorney-client privilege.
Under certain circumstances, the attorney-client privilege shields communications between a lawyer and an existing or potential client
” ‘The purpose of the attorney-client privilege is to encourage and promote full and frank consultation between a client and legal advisor by removing the fear of compelled disclosure of information.’ [Citation.] However, the privilege is not without conditions, and we are mindful that it is the privilege, and not the duty to disclose, that is the exception. [Citation.] Therefore, the privilege ought to be strictly confined within its narrowest possible limits. Further, the attorney-client privilege is limited solely to those communications which the claimant either expressly made confidential or which he could reasonably believe under the circumstances would be understood by the attorney as such. [Citations.] Finally, we note that in Illinois, we adhere to a strong policy of encouraging disclosure, with an eye toward ascertaining that truth which is essential to the proper disposition of a lawsuit.” Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill. 2d 178, 190 (1991), quoting and citing Consolidation Coal Co. v. Bucyrus-Erie Co., 89 Ill. 2d 103, 117-18 (1982).
Berkman contends that the attorney-client privilege protects many of the documents sought by Mueller. Mueller responds that the attorney-client privilege does not apply for a variety of reasons, including Katten‘s dual representation of both Berkman and Mueller, the fiduciary-duty exception to the privilege, and the crime-fraud exception. We discuss each exception in turn.
1. Doctrine of Dual Representation
The trial cоurt held that Katten‘s dual representation of both Berkman and Mueller during a time when Berkman was an officer of Mueller meant that, once the parties were adverse, neither party could have a reasonable expectation of confidentiality in its communications with Katten about any matter germane to Mueller‘s business. Under both Illinois law and foreign law cited by the parties, the trial court‘s reasoning is sound.
As noted, Illinois law limits the scope of the attorney-client privilege to “communications which the claimant either expressly made confidential or which he could reasonably believe under the circumstances would be understood by the attorney as such.” Waste Management, 144 Ill. 2d at 190; see E. Cleary, McCormick on Evidence § 91 (3d ed. 1984). As applied to this case, the issue becomes whether, in seeking the legal advice, Berkman could reasonably believe under the circumstances that his communications with Katten would be confidential.
Our holding is limited to communications related to the business—plumbing supply—in which Mueller was engaged. We note that the only documents sought by Mueller are those related to Katten‘s advice to Berkman in this area. Mueller has not sought discovery of any communications between Berkman and Katten on other, purely personal legal matters.
In affirming, the appellate court adopted a five-part test for determining whether a corporate officer may assert an individual attorney-client privilege as to communications with an attorney who also represented the corporation: (1) the officer must have approached the corporate counsel for the purpose of seeking legal advice; (2) the officer must have made it clear from the start that the officer sought advice in his or her individual capacity; (3) corporate counsel chose to advise the officer, despite knowing that a potential conflict could arise; (4) the officer‘s communications with counsel were confidential; and (5) the substance of the communications did not concern “matters within the company or the general affairs of the company.” Bevill, 805 F.2d at 123.
Here, both parties seek to apply the Bevill test to this case and focus their arguments on how it should be applied. Althоugh the parties do not seriously contest that the first four elements of this test are met, they dispute whether the fifth prong is met. Berkman contends that it is met, arguing that his communications with Katten concerned only his own personal liability for his actions. In support, Berkman cites to In re Grand Jury Proceedings, 156 F.3d 1038, 1041 (10th Cir. 1998). That case involved the chief executive officer of a hospital that was the subject of a grand jury investigation. The officer sought to quash a subpoena served on the hospital on the grounds that some of the documents were privileged because they contained attorney-client communications between himself and the attorney for
If we were to apply Bevill here, we would likely find that Berkman has not met the fifth prong of the test, because the substance of his communications with Katten was not “outside the scope of the corporation‘s concerns and affairs.” There is no suggestion in the record that the communications requested here solely concerned Berkman‘s individual liability, or any other matter outside the scope of Mueller‘s corporate concerns and affairs. To the contrary, Mueller‘s document request seeks documents relating to the legal advice Berkman received from Katten about his relationship with Lota USA (a supplier to Mueller) and the creation of Homewerks (a competitor to Mueller), during the time that Berkman was a corporate officer of Mueller. On its face, this request focuses solely on communications that were about matters properly within the scope of Mueller‘s legitimate business concerns and not matters of individual liability. We also note that the courts applying Bevill have made it clear that the fifth prong is met only where the substance of the communications does not concern the corporation‘s affairs at all; when the communications involve both individual and corporate concerns, the officer‘s claim of an individual privilege cannot be sustained. See, e.g., In re Grand Jury Subpoena, 274 F.3d 563, 573 (1st Cir. 2001) (under fifth prong of Bevill, former corporate officers “may only assert an individual privilege to the extent that communications regarding individual acts and liabilities are segregable from discussions about the corporation” or its business concerns).
Although the Bevill test is particularized and relates more directly to the situation presented here, in which a former corporate officer seeks to assert an individual attorney-client privilege over communications with an attorney for the corporation, the Illinois Supreme Court has not yet adopted the Bevill test, and we see no need to do so in the first instance. In a case such as this, both the Bevill test and the
2. The Fiduciary-Duty Exception
Mueller also asks us to affirm the trial court‘s order on the basis of the fiduciary-duty exception to the attorney-client privilege. We find that, given the limited historical application of this exception, it is not clear that it applies here.
The fiduciary-duty exception arose in the context of trust law and was historically based on the principle that the true owner of a trust is the trust‘s beneficiary, who possesses all of the legal rights associated with the trust and toward whom the trustee has a fiduciary duty. Accordingly, English common law held that “when a trustee obtained legal advice relating to his administration of the trust, and not in anticipation of adversarial legal proceedings against him, the beneficiaries of the trust had the right to the production of that advice.” Wachtel v. Health Net, Inc., 482 F.3d 225, 231 (3d Cir. 2007). “The theory of the rule was that the trustee obtained the advice using both the authority and the funds of the trust, and that the benefit of [the] advice regarding the administration of the trust ran to the beneficiaries.” Wachtel, 482 F.3d at 231. In essence, the beneficiary, not the trustee, was the true “client” of the attorney, and so was the real possessor of the attorney-client privilege. The beneficiary could therefore discover the communications between the attorney and the trustee without being subject to assertiоn of the attorney-client privilege.
In recent years, American courts have applied the fiduciary-duty exception in two situations outside of its original trust context: actions against ERISA fiduciaries and derivative shareholder suits. In the first situation, federal courts have held that beneficiaries of an employee-benefits plan have a right to discover the communications between plan fiduciaries and attorneys regarding the administration of the plan. See, e.g., Bland v. Fiatallis North America, Inc., 401 F.3d 779, 787-88 (7th Cir. 2005);
The fiduciary-duty exception is limited by the requirement that the subject of the communications with the attorney was the ordinary affairs of the trust or corporation: if the communications concern the personal liability of the fiduciary or were made in contemplation of adversarial litigation, the exception does not apply. Mett, 178 F.3d at 1063-64; see Wachtel, 482 F.3d at 233. Given this limitation on the exception, it is doubtful whether the exception is applicable here, where Berkman‘s communications with Katten appear to have concerned actions that Berkman wished to take that could be adverse to Mueller‘s interests. We also note that, as with the Bevill test, Illinois has not yet adopted the fiduciary-duty exception. Under these circumstances, we decline to apply the fiduciary-duty exception. Instead, we turn to the remaining exception to the attorney-client privilege, which, in contrast to the foregoing exceptions, is well established in Illinois law.
3. Crime-Fraud Exception
The crime-fraud exception is a “major exception to the attorney-client privilege” and appliеs when a client seeks the services of a lawyer “in furtherance of criminal or fraudulent activity.” In re Marriage of Decker, 153 Ill. 2d 298, 313 (1992). The rationale for this
Good-faith consultation with an attorney regarding the legality of a possible course of action does not fall within the scope of the crime-fraud exception. Thus, the primary issue in determining whether the exception applies is the intent of the client in seeking the attorney‘s services. Radiac Abrasives, 177 Ill. App. 3d at 635. In order to show that the crime-fraud exception applies, a party must demonstrate that, at the time of consulting the attorney, the client knew or should have known that the intended conduct was illegal. Decker, 153 Ill. 2d at 314. The party seeking the discovery may not rest merely on the allegations of the complаint, but neither must it establish a full-blown case of crime or fraud. Instead, the party seeking discovery must make out a prima facie case, that is, ” ‘a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud, and that the communications were in furtherance thereof.’ ” Decker, 153 Ill. 2d at 322, quoting In re Grand Jury Subpoena Duces Tecum Dated September 15, 1983, 731 F.2d 1032, 1039 (2d Cir. 1984). Once the party seeking discovery has met this burden, the trial court may conduct an in camera inspection of the relevant documents to determine whether the communications were indeed in furtherance of a crime or fraud. If so, production of the documents may be compelled. Decker, 153 Ill. 2d at 321.
Here, Mueller has met its preliminary burden to establish a “reasonable basis to suspect” that Berkman was engaged in the perpetration or attempted perpetration of a fraudulent scheme when he sought Katten‘s services. Although direct evidence of fraudulent intent is rare, circumstantial evidence may give rise to an inference of such intent. Cincinnati Insurance Co. v. Guccione, 308 Ill. App. 3d 220, 226 (1999). The evidence assembled thus far suggests that, while serving as an officer of Mueller, Berkman (through Woodland) held an interest in one of Mueller‘s largest suppliers without disclosing that interest to Mueller. Berkman received at least one payment of over $300,000 from that supplier, again without disclosing the payment. At
In so holding, we recognize that Mueller did not plead fraud per se against Berkman. Rather, it alleged breaches of fiduciary duty and contract. In concluding that an intentional breach of fiduciary duty may serve as the fraud necessary to establish the crime-fraud exception, we take note of Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). In that case, similar to this one, a corporation sued its former officer (among others) for breach of fiduciary duties in connection with the formation of a competing business. The evidence established that the officer had spent the final 11 months of his employment with the plaintiff quietly setting up the new company, soliciting investors, and wooing the plaintiff‘s customers. The Kentucky Supreme Court held that the breach of fiduciary duty was “on an equal par with fraud and deceit.” Steelvest, 807 S.W.2d at 487. Several other courts have reached a similar conclusion. See Lane v. Sharp Packaging Systems, Inc., 2002 WI 28, 251 Wis. 2d 68, 640 N.W.2d 788; Euclid Retirement Village, Ltd. Partnership v. Giffin, No. 79840 (Ohio App. June 6, 2002) (unpublished decision); Fassihi v. Sommers, Schwartz, Silver, Schwartz & Tyler, P.C., 107 Mich. App. 509, 519, 309 N.W.2d 645, 650 (1981).
We agree with this reasoning. There are parallels between fraud and the intentional breach of fiduciary duties. In this case, Berkman‘s silence regarding his own “side” business activities suggests an intent to deceive Mueller about his participation in those activities, in possible contravention of his fiduciary duty to share corporate opportunities with Mueller. A breach of fiduciary duties can be seen as a form of fraud in other contexts as well. For instance, when a fiduciary relationship exists, there is a presumption that any transaction between the parties in which the agent profits is fraudulent. Prodromos v. Everen Securities, Inc., 341 Ill. App. 3d 718, 724 (2003). Here, it is undisputed that Berkman owed Mueller a fiduciary duty, and Mueller has made out a prima facie case that Berkman nonetheless profited from a separate relationship with one of Mueller‘s suppliers, without Mueller‘s knowledge. Under these circumstances, we find that the intentional breaches of fiduciary duty alleged here were on a par with the level of fraud necessary to establish the crime-fraud exception.
In closing our analysis of the attorney-client privilege and its exceptions, we note that the various arguments advanced by Mueller—the doctrine of dual representation, the fiduciary-duty exception to the attorney-client privilege, and the crime-fraud exception—overlap to a great degree in cases such as this, in which a corporation (or its shareholders) sues a former corporate officer for breach of fiduciary duties.2 We ultimately conclude that Mueller has made out at
B. Fifth Amendment Privilege
Although we have held that Berkman is not entitled to assert the attorney-client privilege over all the documents requested, that holding does not dispose of Berkman‘s separate claim that the fifth amendment privilege also protects from disclosure some or all of the documents sought by Mueller. We now turn our attention to that claim.
The fifth amendment to the United States Constitution provides that “[n]o person *** shall be compelled in any criminal case to be a witness against himself.”
We begin by noting the general rule that the fifth amendment does not apply to documents. Fisher, 425 U.S. at 410.
“[T]he Fifth Amendment would not be violated by the fact alone that the papers on their face might incriminate the taxpayer, for the privilege protects a person only against being incriminated by his own compelled testimonial communications. *** [Where] the preparation of all of the papers sought in these cases was wholly voluntary, *** they cannot be said to contain compelled testimonial evidence, either of the taxpayers or of anyone else. The taxpayer cannot avoid compliance with the subpoena merely by asserting that the item of evidence which he is required to produce contains incriminating writing, whether his own or that of someone else.” Fisher, 425 U.S. at 409-10.
Just as in Fisher, in this case the business records and other documents sought by Mueller were prepared voluntarily by Berkman and others without compulsion. Thus, the mere fact that the contents of the requested documents might tend to incriminate Berkman does not permit him to shield them from production on the basis of the fifth amendment privilege.
Under some circumstances, however, the production of documents itself constitutes a “statement” that may be privileged under the fifth amendment. The Supreme Court first enunciated this “act of production doctrine” in Fisher, stating, “The act of producing evidence in response to a subpoena nevertheless has communicative aspects of its own, wholly aside from the contents of the papers produced.” Fisher, 425 U.S. at 410. For instance, the act of producing documents requested in discovery may implicitly concede the existence of the documents, possession or control of the documents, and in some situations the authenticity of the documents. See Fisher, 425 U.S. at 410. As with any other statement, the “statement” made by producing requested documents is privileged under the fifth amendment only if it meets the three requirements for such protection: that is, the act of production itself is compelled, testimonial, and incriminating. Fisher, 425 U.S. at 410;
In almost every case in which this issue arises, the first requirement is met, as the production of the documents is being compelled by a discovery request, a court order, or a subpoena. In this case, the trial court entered an order compelling Berkman to produce the requested documents.
The evaluation of the remaining requirements for the privilege—is the act of production testimonial and incriminating?—is often more difficult, and depends on the facts of each case. Fisher, 425 U.S. at 410; see also In re Grand Jury Subpoena, Dated April 18, 2003, 383 F.3d 905, 909 (9th Cir. 2004) (In re 2003 Grand Jury Subpoena) (“Whether the act of production has a testimonial aspect sufficient to attract Fifth Amendment protection is a fact-intensive inquiry“).
In some cases, where the items or documents requested are contraband or otherwise directly embody a violation of the law, it may be obvious that thе act of production would be both testimonial and incriminating. For example, in Hubbell, 530 U.S. at 30, the mere existence (and Hubbell‘s possession) of the documents requested by the government was incriminating because Hubbell had previously promised, as part of a plea agreement in an earlier criminal proceeding, to provide the government with “full, complete, accurate, and truthful information,” regarding certain subjects. The very existence and possession of the documents requested, which were documents that Hubbell had not given the government earlier, could subject Hubbell to criminal liability. Hubbell was therefore entitled to claim a fifth amendment privilege in response to the subpoena of the documents. Hubbell, 530 U.S. at 37. An Illinois case, Roney, is similarly illustrative. In that case, a wife sought to require her husband to turn over tape recordings he had made of telephone calls to her. The trial court ordered the husband to produce the tapes. The appellate court reversed and held that the husband was entitled to assert a fifth amendment privilege over the tapes, because the very existence of the tapes was incriminating, as they were created in violation of the Illinois criminal law prohibiting eavesdropping (
The documents requested in this case do not fall into this category. Nothing about the mere existence or possession of the documents sought here is direct evidence of an illegal act. As various courts (including the trial court in this case) have pointed out, “it is not a crime to make a wire transfer, use the phone, or possess corporate records.” Bear Stearns & Co. v. Wyler, 182 F. Supp. 2d 679, 684 (N.D. Ill. 2002); see also Fisher, 425 U.S. at 412 (the production of taxpayer‘s accountant‘s papers was not incriminating, because “it is not illegal to seek accounting help in connection with one‘s tax returns or for the accountant to prepare workpapers and deliver them to the taxpayer“). However, the Supreme Court has held that the fifth amendment may also protect against the compelled production of documents that are indirectly testimonial and incriminating.
In Fisher, the Supreme Court established that documents may be privileged from discovery by the fifth amendment if their production would give the requesting party knowledge that it did not previously have regarding: (1) the existence of the documents; (2) the producing person‘s possessiоn or control of the documents; and (3), in some situations, the authenticity of the documents. See Fisher, 425 U.S. at 410. Here, Berkman argues that responding to the document requests would force him to concede the existence, possession, and authenticity of the documents, and that these admissions would be both testimonial and incriminating. We begin the analysis with the last argument, regarding authentication.
1. Authentication of the Documents
Berkman argues that requiring him to produce the requested documents would be testimonial and incriminating in that it would amount to authentication of the documents produced. Under Illinois law, however, the production of documents in response to discovery requests does not, in and of itself, authenticate those documents so as to permit the use of the documents at trial. Complete Conference Coordinators, Inc. v. Kumon North America, Inc., 394 Ill. App. 3d 105, 107 (2009); see also CCP Ltd. Partnership v. First Source Financial, Inc., 368 Ill. App. 3d 476, 484 (2006). Although
2. Existence and Possession of the Documents
A more difficult issue is posed by Berkman‘s claim that responding to the document requests would force him to concede that certain documents exist and are in his possession, and that this concession would be both testimonial and incriminating. The admission that responsive documents exist and are in the possession or control of the responder may or may not be “testimonial.” The Supreme Court has held that if the existence of the requested documents is a “foregone conclusion” and the production of the documents therefore “adds little or nothing” to the knowledge of the other party, the fifth amendment is not implicated, because “[t]he question is not of testimony but of surrender.” Fisher, 425 U.S. at 411. The requesting party is not required to have “actual knowledge of the existence and location of *** every responsive document.” In re 2003 Grand Jury Subpoena, 383 F.3d at 910. However, if the requesting party needs “the respondent‘s assistance both to identify potential sources of information and to produce those sources” (Hubbell, 530 U.S. at 41), the response is testimonial. When the requesting party does not know whether the requested documents exist, it may not “compensate for its lack of knowledge by requiring the [responding party] to become, in effect, the primary informant against himself.” In re Grand Jury Empanelled March 19, 1980, 680 F.2d 327, 335 (3d Cir. 1982), aff‘d in part & rev‘d in part, 465 U.S. 605 (1984) (Doe).
The case law sheds a limited amount of light on the practical application of this “foregone conclusion” doctrine. At the one extreme are cases in which the party requesting the documents (typically, the government) clearly knows about the documents’ existence in advance because the responding party has previously admitted the documents’ existence and their whereabouts. See, e.g., United States v. Teeple, 286 F.3d 1047 (8th Cir. 2002); In re Grand Jury Subpoena Duces Tecum Dated October 29, 1992, 1 F.3d 87 (2d Cir. 1993) (In re 1992 Grand Jury Subpoena); United States v. Rue, 819 F.2d 1488 (8th Cir. 1987). Other means short of a confession by the producing party may also
Here, the parties dispute whether Mueller already knows, from other sources, that the requested documents exist. Berkman points to statements made by Mueller‘s attorney in oral argument, in which the attorney repeatеdly indicated that because of the breadth of Berkman‘s assertion of the privilege, Mueller did not know whether individual documents that might be responsive to its document requests, such as a list of Lota‘s payments to Berkman, existed. However, Fisher and Hubbell do not require that a document request describe in detail “every scrap of paper” it seeks to obtain. Ponds, 454 F.3d at 325. What troubles us more than the failure to name each
Nevertheless, the record indicates that Mueller already has access to documents that may enable it to prove that it already knows about the existence of the various documents that it has requested. For instance, Mueller has already obtained, through other sources, bank records of Berkman and Woodland showing transactions related to Lota and Lota USA, and a record of a wire transfer from Lota to Woodland for over $313,000. Mueller also has e-mails relating to the formation and management of Woodland and Lota USA, and statemеnts made by Berkman relating to the formation of Lota USA and Homewerks and Berkman‘s participation in decisionmaking related to the prices charged by Lota for products sold to Mueller. Thus, it is by no means clear that Mueller cannot establish its prior knowledge of the documents “with reasonable particularity.” See In re 1992 Grand Jury Subpoena, 1 F.3d at 93 (setting out the rule that a person may not refuse to produce documents if the requesting party ” ‘can demonstrate with reasonable particularity that it knows of the existence and location of [the requested] documents’ “), quoting In re Grand Jury Subpoena Duces Tecum Dated November 13, 1984, 616 F. Supp. 1159, 1161 (E.D.N.Y. 1985); 3 W. LaFave, Criminal Procedure § 8.13(a), at 339-40 (3d ed. 2007) (noting that although the Supreme Court has not explicitly adopted the “reasonable particularity” standard, its use is widespread in lower courts).
This dispute is not one that we can resolve on the current record. In this regard, we disagree with the trial court‘s refusal to engage in an in camera review of the disputed documents. Our supreme court has stated that in camera reviews represent “a sensible solution’ to the problem of how to evaluate a claim of privilege without revealing the privileged material to the party seeking it, thereby rendering the privilege worthless. Decker, 153 Ill. 2d at 324. In this case, we are sympathetic to the trial court‘s view that in camera review was unjustified because Berkman put forward too little too late to support his claims of a fifth amendment рrivilege. Berkman‘s initial claims of the privilege were sweeping and did not provide the information necessary for the trial court to evaluate his claims. Nevertheless, “[t]he right against self-incrimination is one of the most fundamental rights
We therefore remand with instructions to conduct an in camera review of the documents in order to determine which of them, if any, are protected by the fifth amendment privilege because their production would be testimonial—that is, it would concede the еxistence of a document that was previously unknown. In order to engage in such a review, the trial court will not only need Berkman to produce, in camera, the documents as to which he asserts this privilege (or, if they are voluminous, a privilege log containing a highly detailed description of each document); the trial court will also need a submission from Mueller, in which it describes with reasonable particularity the documents that it seeks and the basis for its knowledge that those documents exist. The trial court may also seek or accept any other material that it believes will aid its determination. The trial court can then compare Mueller‘s present knowledge of the requested documents with those documents themselves. Any documents that Mueller establishes it already knew about with reasonable particularity must be produced, as their production would not be “testimonial” and therefore would not be protected under the fifth amendment.
As for those documents that the trial court determines were previously unknown and whose production would therefore be testimonial, the trial court must proceed to the third prong of the inquiry: determining whether the act of producing these documents would also be incriminating. We admit plainly that the proper scope of a trial court‘s analysis in this regard is somewhat ambiguous under the current state of the case law. On the one hand, Fisher advocated an ap-
We agree that each of these approaches may be useful in various circumstances. Thus, a trial court faced with the determination about whether production would be incriminating may consider either approach. If either approach indicates that production would be incriminating—some aspect of the production itself would be incriminating, or the production would provide the requesting party with incriminating documents whose existence was unknown—then the fifth amendment protects against such compelled production. In any individual case, however, the touchstone remains whether, in that
Regardless of how the trial court ultimately rules on remand, we urge it to provide a reasonably detailed explanation of that ruling. Indeed, in light of the likelihood of additional appeals from this litigation, it is essential that the trial court make a detailed record of its findings with respect to each document or group of documents. In addition, should Mueller gain additional independent information relating to documents that were initially withheld on the grounds that they were unknown and therefore privileged, it may seek anew the production of those documents through the same methods outlined here. Finally, should the threat of criminal prosecution diminish, for instance through the expiration of the applicable statute of limitations, Berkman‘s assertion of the privilege will likewise be called into question. At this point, however, we cannot say that Berkman‘s assertion of the fifth amendment privilege is untenable.
CONCLUSION
In sum, the requested documents were not protected by the attorney-client privilege insofar as they fell within the period of Katten‘s dual representation of Berkman and Mueller or contain communications between Berkman and Katten that fall within the crime-fraud exception. Accordingly, the trial court did not err in granting Mueller‘s motion to compel as to documents withheld solely under that privilege that were created within (or contain communications that occurred within) the period of dual representation. The crime-fraud exception may also permit the discovery of other attorney-client communications that occurred outside of that period, but the trial court must make that determination in the first instance. As to the documents withheld pursuant to Berkman‘s claim of the fifth amendment privilege, we remand the case to the trial court with instructions to conduct an in camera review as set forth above.
We also vacate the trial court‘s contempt order against Berkman. “Where a party‘s refusal to comply with a trial court‘s order constitutes a good-faith effort to secure an interpretation of the *** privileges in question, it is appropriate to vacate a contempt citation on appeal.” Cangelosi, 366 Ill. App. 3d at 230. It is undisputed that Berkman‘s refusal to comply with the trial court‘s order was a good-faith effort to obtain review of the discovery order. We therefore vacate
Affirmed in part, reversed in part, and vacated in part; cause remanded.
JORGENSEN, J., concurs.
JUSTICE O‘MALLEY, specially concurring:
The majority holds that Katten‘s dual representation of Berkman and Mueller meant that Berkman could not have a reasonable expectation of confidentiality in its communicatiоns with Katten. I disagree. As the majority makes clear in other parts of its opinion, “Berkman‘s communications with Katten appear to have concerned actions that Berkman wished to take that could be adverse to Mueller‘s interests” (399 Ill. App. 3d at 469) and, “[a]t Berkman‘s request, Katten assisted Berkman in setting up his interest in Lota USA and in concealing the fact that Berkman held such an interest” (399 Ill. App. 3d at 470-71). Under those facts as the majority states them, there should be no question but that Berkman engaged Katten on these matters with the expectation that they would not be disclosed to Mueller. It therefore puzzles me to see the majority‘s conclusion, preceded by a recitation of the parties’ positions but no analysis as to which is the stronger position, that “Berkman could not reasonably have believed that his communications with Katten would be confidential.” 399 Ill. App. 3d at 465.
The majority takes this contradiction one step further when it discusses the Bevill test created to determine whether corporate officers got their legal advice “in their role as corporate officials,” so that they should not expect their communications to be kept confidential from the corporation, or for “matters not related to their role as officers of the corporation,” so that they should expect confidentiality. Bevill, 805 F.2d at 125. The majority states that “[t]here is no suggestion in the record that the communications requested here solely concerned Berkman‘s individual liability, or any other matter outside the scope of Mueller‘s corporate concerns and affairs” and that, “[t]o the contrary, Mueller‘s document request seeks documents relating to the legal advice Berkman received from Katten about his relationship with Lota USA (a supplier to Mueller) and the creation of Homewerks (a competitor to Mueller).” 399 Ill. App. 3d at 467. (Incidentally, by the vague phrase “his relationship with Lota USA (a supplier to Mueller),” the majority describes a relationship allegedly created to allow
If the majority means to imply that the fifth prong of the Bevill test—whether the communications concerned “matters within the compаny or the general affairs of the company” (Bevill, 805 F.2d at 123)—should be read to encompass any communications that have any effect whatsoever on the company, including even communications on matters intentionally withheld from the company, then the majority has read the prong so broadly that it has untethered the Bevill test from its purpose. As I have said, the Bevill test seeks to determine whether the corporate officer who obtained the advice was acting in his role as a corporate officer. A corporate officer organizing a competitor, and concealing a scheme of kickbacks and bribes, is acting decidedly outside his official role. Further, his scheme would quite obviously depend on his corporation‘s not being apprised of his activities. He would therefore receive advice on those matters with the expectation that the advice would be kept confidential from the corporation. Accordingly, under either the Illinois test or the Bevill test, the fact that Katten represented both Berkman and Mueller does not mean that Berkman should not have expected Katten‘s advice to him personally to be kept confidential.
Although the majority deviates from this understanding of Berkman‘s actions in its discussion of the dual-representation issue, it characterizes his actions correctly (albeit inconsistently) in its discussion of the fiduciary-duty and crime-fraud exceptions to thе attorney-client privilege. I therefore agree with the majority that, although the fiduciary-duty exception does not apply, this matter must be remanded for an in camera inspection to determine the applicability of the crime-fraud exception as well as the fifth amendment privilege.