DeGeer

Filing 122

MEMORANDUM Opinion and Order Signed by the Honorable Nan R. Nolan on 9/17/2010.Mailed notice(lxs, )

DeGeer vs. Gillis

Doc. 122

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS E A S T E R N DIVISION R A N D A L L S. DEGEER P la in tiff, v. M . SCOTT GILLIS; J O S E P H R. SHALLECK; and L E R O Y J. MERGY, D e fe n d a n ts . ) ) ) ) ) ) ) ) ) ) )

C a s e No. 09 C 6974 M a g is tra te Judge Nan R. Nolan

M E M O R A N D U M OPINION AND ORDER T h is breach of contract action arises from the alleged failure of Defendants M. Scott Gills, J o s e p h R. Shalleck, and Leroy J. Mergy (hereinafter collectively referred to as "Defendants") to a b id e by the terms of a partnership agreement to pay a bonus or incentive compensation for Plaintiff R a n d a ll S. DeGeer's ("DeGeer") services in 2008 and 2009 as a Managing Director of the Galt d iv is io n of Huron Consulting Services LLC ("Huron"). Before the Court are several discovery d is p u te s between the parties. For the following reasons, the Court denies Plaintiff's Motion to C o m p e l the Depositions of Defendants in Chicago, Illinois [#84], grants Defendants' Motion to C o m p e l Plaintiff's Production of Documents [#86] to the extent described below, and overrules in p a rt and sustains in part Defendants' Objections to Plaintiff's Designation of Certain Materials As P riv ile g e d [#88]. Background D e G e e r and Defendants are in the management consulting business. DeGeer was

e m p lo ye d as a Managing Director in the Galt division of Huron from July 2006 to October 28, 2009. Defendants were the practice leaders of the Galt division at Huron from March 2006 through D e c e m b e r 2009. DeGeer claims entitlement to a bonus calculated on the basis of a formula applied to annual Earn-Out payments made by Huron to Defendants' liability corporation as part of the

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purchase price for Huron's acquisition of certain assets of MSGalt & Company LLC ("Galt"), of which D e f e n d a n ts were the sole members and owners. DeGeer brought what eventually became a fivec o u n t complaint. Count I alleges Breach of Contract; Count II alleges Breach of Partnership A g re e m e n t; Count III alleges Promissory Estoppel; Count IV alleges Quantum Meruit; and Count V alleges Breach of Fiduciary Duty. Defendants filed counterclaims for breach of fiduciary duty, to rtio u s interference with business expectancy, and breach of contract. D is c u s s io n P u rs u a n t to Federal Rule of Civil Procedure 26(b)(1), "[p]arties may obtain discovery re g a rd in g any nonprivileged matter that is relevant to any party's claim or defense." Upon a showing o f good cause, a court may order "discovery of any matter relevant to the subject matter involved in the action." Magistrate judges are granted broad discretion in addressing and resolving discovery d is p u te s . W e e k s v. Samsung Heavey Indus., Co., Ltd., 126 F.3d 926, 943 (7 th Cir. 1997). I. L o c a tio n of Depositions of Defendants T h e parties cannot agree on the location for the individual Defendants' depositions. DeGeer h a s noticed the depositions of Defendants in Chicago, Illinois. Defendants object to their

d e p o s itio n s taking place in Chicago since they are citizens of other states. Gillis is a citizen of South C a ro lin a , and Shalleck and Mergy of Connecticut. Defendants work out of their places of residence in South Carolina and Connecticut or on-site at client locations. T h e Federal Rules of Civil Procedure do not state where depositions may be taken. "Thus th e examining party may set the place for the deposition of another party wherever he or she wishes s u b je c t to the power of the court to grant a protective order under Rule 26(c)(1)(B) designating a d if f e re n t place." 8A W rig h t, Miller & Marcus, Federal Practice and Procedure § 2112 (2010). Under R u le 26(c)(1)(B), a court "may, for good cause, issue an order to protect a party or person from a n n o ya n c e , embarrassment, oppression, or undue burden or expense, including one or more of the

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following: . . . specifying terms, including time and place, for the disclosure or discovery . . . ." Fed. R . Civ. P. 26(c)(1)(B). This Court has previously recognized, however, that "[a]s a general matter, th e re is a presumption that a defendant . . . shall be deposed in the district where the deponent re s id e s ." Healthsouth Corp. v. Sussman, 2003 W L 685576, at *2 (N.D. Ill. Feb. 26, 2003). A court h a s "wide discretion in selecting the place of examination." 8A W rig h t, Miller & Marcus, Federal P ra c tic e and Procedure § 2112 (2010). In this case, good cause has been shown for a protective order designating the districts in w h ic h the Defendants reside as the sites for their depositions. Defendants have submitted

u n c o n tr o v e r te d evidence establishing that having to travel to Chicago for their depositions will im p o s e a substantial hardship on them. On December 31, 2009, Defendants repurchased assets o f the Galt business. Since January 1, 2010, Defendants have been engaged more than full-time re b u ild in g , operating and managing Galt as a independent firm, without the benefit of support s e rv ic e s previously provided under Huron's ownership. (Defendants' Declarations at ¶ 4).

Defendants state that in addition to having to attend to new administrative and organizational re s p o n s ib ilitie s , this requires extensive time and effort from each of them in servicing existing clients, s o lic itin g new clients, and in recruiting and training new employees and independent contractors. Id. Traveling to Chicago for a deposition will disrupt Defendants' already overcrowded and busy b u s in e s s schedule. D e G e e r's expense analysis does not compel a different result. DeGeer's assertion that it w o u ld be more cost efficient to proceed with the depositions in Chicago is based on the fact that "D e fe n d a n ts have offices in Chicago, and so do their attorneys." (Doc. 84, at 3). In response, D e f e n d a n ts explain that the assets they acquired in the repurchase from Huron included a mailing a d d re s s in Chicago but none of the Defendants actually conducts any business out of that Chicago a d d re s s . Moreover, Defendants will be represented at their depositions by their lead counsel, w h o s e office is in New York. Finally, DeGeer has not argued that Defendants' counterclaim is

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permissive. So, the fact that Defendants filed a counterclaim is not sufficient to require them to tra v e l to Chicago for their depositions. Sears v. American Entertainment Group, Inc., 1995 W L 6 6 4 1 1 , at * 2 (N.D. Ill. Feb. 13, 1995) (stating that if the counterclaim is compulsory, the defendant "re m a in s entitled to protection from deposition anywhere but for his or her residence or business lo c a tio n ." ) . R is te v s k i v. S&P Carrier, LTD, 2010 W L 1687878 (N.D. Ill. Apr. 26, 2010), the only case c ite d by DeGeer, is distinguishable. In Ristevski, the magistrate judge concluded that a retired truck d riv e r would not suffer undue physical hardship to his injured right shoulder nor financial hardship if required to be deposed outside his district of residence. The court distinguished two other cases in v o lv in g working truck drivers who would suffer financial hardship by being pulled away from one o f their runs to make a trip to another state for a deposition. Here, Defendants have demonstrated th e disruption to Galt that travel to a deposition in Chicago would cause. Defendants are the sole o w n e rs of Galt and are currently engaged more than full-time in operating and managing Galt as a n independent firm. Depositions in Chicago will interfere with Defendants' busy business

s c h e d u le s . Under the circumstances of this case, the general presumption in favor of Defendants b e in g deposed in their home districts controls. II. D e fe n d a n ts ' Document Request Nos. 50 and 51 D e f e n d a n ts seek an order compelling DeGeer to comply with Request Nos. 50 and 51 of D e f e n d a n ts ' First Request for Production of Document, which state: R e q u e s t No. 50: All documents reflecting, referring or relating to Plaintiff's solicitation o f Clients, as defined in Section 6.4 of the SMA, during the period from September 2 0 0 8 to date. R e q u e s t No. 51: All documents reflecting, referring or relating to Plaintiff's solicitation o f , or marketing activities directed to, actual or potential clients (including, without lim ita tio n , Anglo American, Cynthia Carroll, Dow Chemical, Rohm and Haas, Alcoa, B e ld e n , and Synventive) during the period from September 2008 to date. D e G e e r objected to these requests on relevancy grounds, among others.

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DeGeer has produced documents responsive to these requests from the pre-October 28, 2 0 0 9 time frame. Defendants argue that responsive documents post-dating DeGeer's resignation f ro m the Galt division on October 28, 2009 may reflect a continuation of marketing and solicitation e f f o rts beginning before that date which would be relevant to Defendants' counterclaim of breach o f fiduciary duty in diverting Galt division business and business opportunities. Defendants also c o n te n d that such documents may reveal DeGeer's use of proprietary Galt information (including its methods, approaches and frameworks for providing consulting services to clients), which would b e directly relevant to Defendants' counterclaim for DeGeer's breach of his Galt non-disclosure a g re e m e n t. DeGeer responds that his post-October 28, 2009 marketing activities have no

re le v a n c e to any claim or defense in this case. DeGeer believes that Defendants' efforts to obtain d o c u m e n ts relating to his marketing efforts after he left Huron are designed to harass DeGeer and h is current employer, Charles River Associates, Inc. ("CRA"). T h e requested post-October 28, 2009 documents are relevant to Defendants' counterclaims. Defendants' First Counterclaim (Breach of Fiduciary Duty) alleges that: "As a further result of D e G e e r's breaches of fiduciary duty, DeGeer usurped and diverted to his own benefit business and b u s in e s s opportunities belonging to Gillis, Shalleck and Mergy and the Galt Division." Doc. 82, at ¶ 40. Defendants' Second Counterclaim (Tortious Interference with Business Expectancy) alleges th a t: "As a result of DeGeer's interference with Gillis, Shalleck and Mergy's business expectancy to continue their relationships with clients and employees of the Galt division, Gillis, Shalleck and M e rg y were precluded to continuing relationships and deriving income from clients that they o th e rw is e would have realized. Id. at ¶ 50. Defendants' Third Counterclaim (Breach of Contract) a lle g e s that: "DeGeer breached his [Non-Disclosure Agreement] by misusing confidential and p ro p rie ta ry information for his own benefit and to the detriment of Gillis, Shalleck and Mergy" and b y "disclosing such information to others without the consent of Gillis, Shalleck, or Mergy." Id. at ¶¶ 5 5 , 56.

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Under Rule 26(b)(1), Defendants are entitled to discover any non-privileged matter that is re le v a n t to their counterclaims. Documents reflecting DeGeer's client solicitation and marketing e f f o r ts following his departure from the Galt division on October 28, 2009 are relevant to D e f e n d a n ts ' breach of fiduciary duty claim. Documents post-dating DeGeer's departure may reveal m a rk e tin g and solicitation efforts beginning before his departure. Moreover, to the extent such d o c u m e n ts reveal DeGeer's use of proprietary Galt information they would be relevant to D e f e n d a n ts ' counterclaim for breach of the Galt non-disclosure agreement. DeGeer complains that D e f e n d a n ts cite no factual support for the allegation in their Counterclaim that DeGeer solicited c lie n ts of the Galt division for his own benefit. At this stage of the proceedings, Defendants do not n e e d to come forward with evidence to support their counterclaim. There is no requirement in the F e d e ra l Rules of Civil Procedure that Defendants support their counterclaims with factual proof b e f o re being permitted to engage in discovery. W ith regard to Request No. 50, DeGeer argues that under the terms of his Senior M a n a g e m e n t Agreement with Huron ("SMA"), he was only prohibited from providing future services f o r a period of one year to one client, Anglo-American. DeGeer has submitted an affidavit stating th a t he has not solicited business from or provided services to Anglo-American since he resigned f ro m Huron on October 28, 2009. Defendants counter that DeGeer has "flatly misrepresented" that th e re are no persons or firms that fit the definition of Client except Anglo American but do not state w h a t other persons or firms meet the definition. The Court cannot determine, based on the record b e f o re it, whether any others persons or firms meet the definition of Client. For purposes of d is c o v e ry, it does not matter because Defendants' claims are not limited by the SMA. Defendants s h a ll provide DeGeer with the names of the persons or firms they believe meet the definition of C lie n t in Section 6.4 of DeGeer's SMA. Defendants shall limit their list relating to actual clients to th o s e serviced directly or indirectly by the Galt Division, as opposed to all divisions of Huron, during th e two-year period. W ith o u t admitting that those person or firms meet the definition of Client,

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DeGeer shall respond to Request No. 50 with regard to the list provided by Defendants. DeGeer further contends that his marketing activities between October 28, 2009 and D e c e m b e r 31, 2009 are irrelevant because Defendants are precluded from pursuing any claims with re g a rd to DeGeer's conduct with clients prior to December 31, 2009. In support of his contention, D e G e e r says that Defendants surrendered all such rights in their December 31, 2009 Asset P u rc h a s e Agreement ("APA") with Huron. The Court has reviewed Section 2.2(h) of Defendants' A P A with Huron, and that section does not preclude Defendants from pursuing their claims re g a rd in g DeGeer's conduct with clients prior to December 31, 2009. As Defendants explain, that s e c tio n of the APA merely states that Huron reserved the right to enforce the non-solicitation of c lie n ts provision in Section 6.4 of DeGeer's SMA in regard to conduct prior to December 31, 2009. Defendants have not asserted any counterclaims under the SMA, but rather have alleged breach o f fiduciary duty, tortious interference with business expectancy, and breach of DeGeer's NonD is c lo s u re Agreement with Galt. D e G e e r also points out that Huron conducted an investigation of DeGeer after he advised D e f e n d a n ts that he was dissolving their partnership on May 18, 2009. Huron reviewed an image o f DeGeer's computers and found no evidence that he had violated his restrictive covenants or d is p a ra g e d anyone. Although DeGeer describes Huron's investigation as "lengthy," Defendants n e e d not accept Huron's finding at face value. Defendants are entitled to test the accuracy of H u ro n 's findings through discovery. F in a lly, DeGeer argues that he is prohibited from producing documents responsive to these re q u e s ts for the post-October 2009 time frame by his October 2009 confidentiality agreement with C R A . DeGeer says that the documents belong to CRA and contends that Defendants must s u b p o e n a CRA and allow CRA to state objections. Contrary to DeGeer's contention, Defendants n e e d not subpoena CRA documents in DeGeer's possession from CRA, but properly requested th e m through normal channels of obtaining party discovery. The CRA agreement provides that

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DeGeer may disclose confidential information pursuant to a court order provided that he "give p ro m p t notice of such request to CRA's General Counsel prior to such disclosure so that CRA can ta k e any appropriate action it deems necessary to limit or implement such disclosure." (Doc. 89, E x h . 10 to Exh. A). DeGeer apparently gave such notice. In his Response, DeGeer states that his c o u n s e l "has spoken with counsel for CRA, Jonathan Yellin, who . . . agrees with DeGeer's position o n this matter as it pertains to DeGeer's confidentiality obligations to CRA and CRA clients." (Doc. 8 9 , at 9). Because disclosure of post-October 28, 2009 documents will be pursuant to court order, D e G e e r will not be in breach of this contact. DeGeer's confidentiality concerns also do not prevent d is c l o s u re here. The district judge has entered a Stipulated Protective Order in this case, and D e G e e r has not stated that the Protective Order is an insufficient safeguard of CRA's interests. Moreover, defense counsel states that Defendants have no objection to the redaction of nonre s p o n s iv e proprietary information, including the substance of any business proposals made. III. P la in tiffs ' Designation of Certain Materials as Privileged D e f e n d a n ts object to DeGeer's designation of nine email communications and various a tta c h m e n ts as privileged and attorney work-product. In August 2009, DeGeer was required to d e liv e r all Huron-related electronic data in his possession to Huron and its then counsel (Mayer B ro w n ) in connection with an internal investigation. DeGeer Aff. at ¶ 2. DeGeer complied with the re q u e s t. Id. DeGeer turned over to Huron his Huron-issued laptop computer from which it created a n image of the hard drive, data DVDs containing copies of Huron-related data from his personal la p to p computer, and data DVDs containing Huron-related data from an external hard drive in D e G e e r's possession. Id. at ¶ 3. In advance of providing these materials to Huron, DeGeer was s p e c if ic a lly instructed in writing by Huron's Legal and Information Technology Departments not to m o v e or delete any data from his Huron-issued laptop, and he complied with that request. Id. at ¶ 4 . DeGeer withheld from the data DVDs his communications with his counsel, and provided a log

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indicating that he was withholding these materials. Id. at ¶ 5. In August 2009, DeGeer was aware of three privileged communications on his Huron-issued la p to p : (1) an April 30, 2009 email from DeGeer to Mr. King; (2) a May 7, 2009 email from Mr. King t o DeGeer (with an attachment); and (3) a May 8, 2009 email from Mr. King to DeGeer (with an a t t a c h m e n t ). Id. at ¶ 6. These three emails were sent on DeGeer's work email address. Id. DeGeer maintained his privilege in these communications with Huron's new counsel (Barnes & T h o rn b u rg ) in April 2010. (Doc. 90, Ex. D). Mr. King specifically alerted Larry Blust at Barnes & T h o rn b u rg as to the existence of the three privileged communications and requested that Mr. Blust re m o v e them from any electronic data production. Id. W ith regard to those three communications, M r. Blust complied with Mr. King's request. In June 2010, Huron produced an external hard drive in response to Defendants' subpoena. DeGeer Aff. at ¶ 7. This external hard drive contained the image of the hard drive from DeGeer's H u ro n -is s u e d laptop computer, the data DVDs DeGeer provided to Huron, and copies of emails that re s id e d on the Huron server. Id. At that time, DeGeer and his counsel became aware that six a d d itio n a l privileged materials were contained on this external hard drive which Huron turned over to Defendants' counsel. Id. Unlike the three previously discovered communications, these six c o m m u n ic a tio n s were sent via DeGeer's personal email address while apparently utilizing the Huron s e rv e r. Id. at ¶ 8. DeGeer and his counsel were previously unaware that communications sent on D e G e e r's personal email account would be maintained on Huron's server. Id. DeGeer seeks a finding sustaining his assertion of privilege and work-product with respect to all documents identified in his July 6, 2010 log. DeGeer contends that the communications are p ro te c te d from disclosure under the attorney-client privilege and the attachments to six of the c o m m u n ic a tio n s consist of work product prepared for purposes of litigation. Defendants argue that D e G e e r waived any privilege or work-product protection with respect to those materials. DeGeer d e n ie s waiver. DeGeer says that he was diligent in asserting and maintaining his privilege in

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advance of litigation and throughout the discovery process in this case. D e f e n d a n ts contend that DeGeer has not met his burden of demonstrating that the emails a re privileged or that the attachments are protected as trial-preparation material. Illinois law of p riv ile g e applies here. Under Illinois law, "[t]he purpose of the attorney-client privilege is to

e n c o u ra g e and promote full and frank consultation between the client and legal advisor by removing th e fear of compelled disclosure of information." Consolidation Coal Co. v. Bucyrus-Erie Co., 432 N .E .2 d 250, 256 (Ill. S.Ct. 1982). In defining the attorney-client privilege, the Illinois Supreme Court "h a s stated that where legal advice of any kind is sought from a professional legal advisor in his c a p a c ity as such, the communications relating to that purpose, made in confidence by the client, are p ro te c te d from disclosure by himself or the legal adviser, except the protection be waived." Fischel & Kahn, Ltd v. van Straaten Gallery, Inc., 727 N.E.2d 240, 243 (Ill. S.Ct. 2000). Federal law governs the scope and application of the work product doctrine. The doctrine "is designed to serve dual purposes: (1) to protect an attorney's thought processes and mental im p re s s io n s against disclosure; and (2) to limit the circumstances in which attorneys may piggyback o n the fact-finding investigation of their more diligent counterparts." Sandra T.E. v. South Berwyn S c h o o l Dist. 100, 600 F.3d 612, 622 (7 th Cir. 2010). As codified, the work product doctrine states th a t "[o]rdinarily, a party may not discover documents and tangible things that are prepared in a n tic ip a tio n of litigation or for trial by or for another party or its representative (including the other p a rty's attorney, consultant, surety, indemnitor, insurer, or agent)." Fed. R. Civ. P. 26(b)(3)(A). An a s s e rtio n of work-product privilege may be overcome upon a showing of "substantial need" and "u n d u e hardship." Fed. R. Civ. P. 26(b)(3)(A)(i)-(ii). "If the court orders discovery of those materials, it must protect against disclosure of the mental impressions, conclusions, opinions, or legal theories o f a party's attorney or other representative concerning the litigation." Fed. R. Civ. P. 26(b)(3)(B). D e f e n d a n ts argue that DeGeer has failed to provide sufficient factual information for the C o u rt to determine whether the nine communications are privileged or attorney work-product. Rule

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26(b)(5)(A) requires that the withholding party make a claim of privilege or protection as trialp re p a ra tio n material expressly and "describe the nature of the documents, communications, or ta n g ib le things not produced or disclosed­and do so in a manner that, without revealing information i t s e l f privileged or protected, will enable other parties to assess the claim." Fed. R. Civ. P.

2 6 (b )(5 )(A ). DeGeer's description of the documents provides sufficient information for the Court to a s s e s s the applicability of the attorney-client privilege. For each document, DeGeer provided the d a te of the document, all authors and recipients of the document, including their capacities, and a d e s c rip tio n of the subject matter of the document. DeGeer's Opposition describes the disputed d o c u m e n ts as "confidential communications between DeGeer and his counsel, Mr. Jones and Mr. K in g , where legal advice was sought. The only party cc'd on any of the communications (two to be e x a c t) is Tara DeGeer. Communications containing Ms. DeGeer as a copied recipient remain p riv ile g e d pursuant to the attorney-client privilege doctrine since Ms. DeGeer is a client in this case, a n d also pursuant to the marital privilege doctrine since she is DeGeer's wife." (Doc. 90, at 4-5). DeGeer has sufficiently shown that the attorney-client privilege applies to the nine communications in question. In addition, DeGeer did not waive the attorney-client privilege by copying his wife on tw o of the email communications. DeGeer and his wife share a common legal interest in pursuing c l a i m s against the Defendants regarding the 2008 and 2009 bonus payments, the dispute u n d e rlyin g the instant lawsuit. Grochnocinski v. Mayer Brown Rowe & Maw LLP, 251 F.R.D. 316, 3 2 6 -2 7 (N.D. Ill. 2008). T h e Court agrees that DeGeer has not provided enough information to support his assertion o f work product protection as to the attachments, and DeGeer has otherwise conceded that the a tta c h m e n ts are not protected by the work product doctrine. In their Objections, Defendants argue th a t the three attached engagements letters are not protected from disclosure by the work-product d o c trin e . (Doc. 88 at 9-10). Defendants further argue that the remaining three attachments are not p ro te c te d by the work-product doctrine because they were not prepared by DeGeer's attorneys. Id.

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at 10. DeGeer fails to acknowledge or respond to these arguments and therefore concedes D e f e n d a n ts ' position that the attachments are not attorney work-product. a tta c h m e n ts must be disclosed. T u rn in g to Huron's production of the six emails sent via DeGeer's personal email address, D e f e n d a n ts say that DeGeer's explanation of the production of these six emails "defies common s e n s e ." Doc. 107, at 2 n.1. Defendants believe that it is much more likely that Huron produced the p e rs o n a l emails because they were on DeGeer's hard drive, but the evidence in the record does not s u p p o rt that contention. DeGeer's counsel, Kasey Folk, has provided an affidavit supporting D e G e e r's version of events. Ms. Folk's affidavit states that on June 21, 2010, she had a telephone c o n v e rs a tio n with counsel for Huron, Larry Blust. Folk Aff. at ¶ 2. Mr. Blust informed Ms. Folk that p rio r to Huron's production of the external hard drive he had instructed a Barnes & Thornburg IT e m p lo ye e to perform a search for privileged materials using the names of DeGeer and his attorneys. Id. Mr. Blust informed Ms. Folk that he was investigating why the additional six communications b e tw e e n DeGeer and his attorneys Peter King and Bill Jones containing dates of May 11, 2009, May 1 2 , 2009, and May 19, 2009 had not appeared in the results list. Id. On or about July 21, 2010, Mr. B lu s t informed Ms. Folk that subsequent to August 2009 Huron copied additional materials from the H u ro n server and added them to the data it had obtained from DeGeer, including communications s e n t and received utilizing the Huron server. Id. at ¶ 3. Mr. Blust informed Ms. Folk that it is likely th a t the six newly discovered communications were contained on the external hard drive as a result o f that addition of new materials. Id. The Court has no reason to doubt DeGeer's and his counsel's r e p r e s e n ta tio n s . Therefore, on the current record, the Court finds that the six additional Accordingly, the

c o m m u n ic a tio n s sent via DeGeer's personal email address were likely pulled from Huron's server a n d added to the external hard drive after DeGeer provided Huron with his electronic data. Having found that the disputed communications (without attachments) are privileged, the d e te rm in a tio n of whether the privilege has been waived is governed in part by Federal Rule of

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Evidence 502. Huron produced the six emails sent via DeGeer's personal email address in re s p o n s e to a subpoena from Defendants in this federal proceeding. Rule 502 addresses the effect o f disclosure of protected information in federal court proceedings or to a federal public office or a g e n c y. Specifically, Rule 502(d) concerns agreements between the parties providing for mutual p ro te c tio n against waiver in that proceeding. Rule 502(d) states that "[a]n agreement on the effect o f disclosure in a Federal proceeding is binding only on the parties to the agreement, unless it was in c o rp o ra te d into a court order." Here, the Stipulated Protective Order entered by the district court ju d g e (doc. 34) has a provision which expressly addresses inadvertent production of privileged d o c u m e n ts . Paragraph 24 of the Stipulated Protective Order states that the "inadvertent production o f any confidential, privileged, or work product documents shall be without prejudice to any claims th a t the document is confidential or privileged, and shall constitute neither a waiver of any claim of p riv ile g e that may otherwise attach thereto nor a general waiver of such claim or privilege." (Doc. 3 4 , at ¶ 24). The affidavits of DeGeer and Ms. Folk satisfy the Court that Huron's production to D e f e n d a n ts of the six privileged communications sent via DeGeer's personal email address while a p p a re n tly utilizing the Huron server was inadvertent. Because the production as to these six emails w a s inadvertent, paragraph 24 of the Stipulated Protective Order controls and DeGeer has not w a iv e d his privileged as to these communications. W ith regard to the three privileged email communications which DeGeer instructed Huron to remove from the hard drive Huron produced to Defendants, the typical inadvertent disclosure a n a lys is does not apply because these emails were not inadvertently or mistakenly produced. In A u g u s t 2009, DeGeer was employed by Huron, and the laptop was Huron property. DeGeer's s u rre n d e r of the laptop with the three email communications was at the direction of Huron's legal c o u n s e l (Mayer Brown). Mayer Brown advised DeGeer's counsel that DeGeer had "an obligation to preserve documents and other potential evidence relating to the investigation and other recent e v e n ts at Huron." (Doc. 90-2 at 2). Mayer Brown instructed DeGeer's counsel to "direct your client

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not to delete any files and to bring or send in his laptop to Huron as soon as possible." Id. DeGeer c o m p lie d but took affirmative steps to maintain the confidentiality of the three attorney-client c o m m u n ic a tio n s sent on his work email address which were contained on his Huron-issued laptop b y advising Huron's counsel (Mayer Brown and Barnes & Thornburg) of the existence of the three e m a ils and asserting a privilege over those emails. (Doc. 90-2 at 5). T h e relevant question appears to be whether DeGeer waived the attorney-client privilege b y communicating with his counsel over his work email address and on his Huron supplied laptop. Courts have developed a four and sometimes five factor test to determine whether information s to re d on an employer's computer waives a confidential communication for purposes of the a tto rn e y-c lie n t privilege: (1) does the employer maintain a policy banning personal use of e-mails; (2 ) does the employer monitor the use of its computer or e-mail; (3) does the employer have access to the computer or e-mails; (4) did the employer notify the employee about these policies; and (5) h o w did the employer interpret its computer usage policy? See United States v. Hatfield, 2009 W L 3 8 0 6 3 0 0 , at *8-10 (E.D. N.Y. Nov. 13, 2009). Neither party specifically discussed these factors in their briefs or cited any cases that a d d re s s this precise issue. Applying these factors to the limited record, the Court concludes that D e G e e r did not waive the privilege. Because the record does not contain Huron's computer usage p o lic y, the Court cannot determine whether Huron prohibited employees from using their company c o m p u te rs to conduct personal legal matters. Other than Huron and its counsel's review of

e le c tro n ic documents in connection with its internal investigation relating to earn-out payments by H u ro n to MS Galt or compensation paid to DeGeer, the record does not indicate whether Huron m o n ito re d employee's computers or e-mail messages. The record seems to clearly indicate that H u ro n had the right to access DeGeer's Huron-issued laptop. There is no evidence with respect to whether DeGeer personally knew about a Huron computer usage policy. The final factor is c o n tro llin g here. The record unambiguously demonstrates that Huron believed that employees did

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not waive the attorney-client privilege by communicating with counsel over their work email a d d re s s e s and on Huron computers. Huron's counsel (Barnes & Thornburg) conducted a privilege re v ie w on DeGeer's behalf before producing documents responsive to Defendants' subpoena. Folk A f f . at ¶ 2; see Hatfield, 2009 W L 3806300, at *10 (holding employee did not forfeit applicable p riv ile g e s by maintaining personal legal documents on company computers where employer's c o u n s e l conducted privilege review which included screening out material protected by "individuals' p riv ile g e s " from any document production it made). If Huron interpreted its computer usage policy a s meaning that employees waive the attorney-client privilege by using their work email addresses a n d Huron computers to communicate with counsel, such a review would have been unnecessary a n d violated Huron's obligation to produce all non-privileged responsive documents responsive to D e f e n d a n t's subpoena. Id. Accordingly, the Court finds that DeGeer did not waive the attorneyc lie n t privilege with respect to the three email communications Huron withheld from its production o f DeGeer's hard drive. C O N C L U S IO N F o r these reasons, Plaintiff's Motion to Compel the Depositions of Defendants in Chicago, Illin o is [#84] is denied, Defendants' Motion to Compel Plaintiff's Production of Documents [#86] is g ra n te d to the extent described herein, and Defendants' Objections to Plaintiff's Designation of C e rta in Materials As Privileged [#88] is overruled in part and sustained in part. E N T E R:

Nan R. Nolan U n ite d States Magistrate Judge D a te d : September 17, 2010

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