Federal Deposit Insurance Corporation, as Receiver for First Chicago Bank & Trust v. Lowis & Gellen LLP et al

Filing 102

MEMORANDUM Opinion and Order Signed by the Honorable Young B. Kim on 2/20/2014. (ma,)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for
FIRST CHICAGO BANK & TRUST, an
Illinois chartered bank,
Plaintiff,
v.
LOWIS & GELLEN LLP, an Illinois
limited liability partnership, and
ROBERT D. LEAVITT,
Defendants/
Third-Party Plaintiffs,
v.
KATTEN MUCHIN ROSENMAN LLP,
an Illinois limited liability
partnership, WILLIAM J. DORSEY
and JOHN J. SIEGER,
Third-Party Defendants.

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No. 11 CV 5902

Magistrate Judge Young B. Kim

February 20, 2014

MEMORANDUM OPINION and ORDER
In this legal malpractice and breach of contract action, the Federal Deposit
Insurance Corporation (“FDIC”) as receiver for First Chicago Bank & Trust (“First
Chicago”) seeks to recover damages it incurred from a loan transaction gone wrong.
FDIC alleges that First Chicago’s former counsel, Lowis & Gellen LLP and Robert
D. Leavitt (together, “L&G”), provided faulty advice and documentation in
connection with a loan from First Chicago to IFC Credit Corporation (“IFC”). L&G
is in turn suing Katten Muchin Rosenman LLP, William J. Dorsey and John J.

Sieger (collectively, “Katten”) in a third-party action claiming that Katten, as
counsel hired by First Chicago to replace L&G, committed intervening and
superseding negligence which ultimately caused or contributed to FDIC’s damages.
Before the court is L&G’s Motion for Reconsideration in Part of this court’s
December 19, 2013 order denying L&G’s October 28, 2013 motion to compel. The
motion is denied for the following reasons:
Background
A.

First Chicago’s Complaint
First Chicago originally filed suit against L&G on May 10, 2011, in the

Circuit Court of Cook County, Illinois.

(R. 1-1.)

After First Chicago filed for

bankruptcy and FDIC was appointed as receiver, FDIC substituted itself as
Plaintiff on August 25, 2011, and removed the case to this court. (R. 12 ¶¶ 3-5.)
According to FDIC’s amended complaint, in December 2007, First Chicago agreed to
loan IFC up to $5 million (later increased to $10 million) to purchase or finance
equipment that would be leased to third-parties. (R. 68, Am. Compl. ¶¶ 13, 23.)
FDIC alleges that First Chicago hired L&G to prepare the necessary documents
granting First Chicago a perfected first priority security interest in the loan
collateral, but that L&G failed to deliver the secured interest it sought. (Id. ¶ 16,
20.)

FDIC further alleges that in correspondence exchanged between L&G and

First Chicago after the transaction closed, L&G failed to correct First Chicago’s
misperception that a UCC filing was not necessary to perfect its security interest in
the loan collateral. (Id. ¶¶ 33-34.) First Chicago later hired Katten to replace L&G

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in 2009, and upon discovering that UCC financing statements had not been filed
against IFC, Katten made the filing on First Chicago’s behalf. (Id. ¶¶ 61-62.) After
IFC defaulted on the loan in June 2009 and refused to turn over the loan collateral,
First Chicago filed a complaint and an emergency motion for the appointment of a
receiver and temporary restraining order against IFC on July 7, 2009 (the “TRO
Action”). (Id. ¶¶ 63, 65.) IFC filed for bankruptcy a few weeks later on July 27,
2009, and the trustee of IFC’s bankruptcy estate initiated an adversary proceeding
against First Chicago seeking to: (1) avoid First Chicago’s security interest and lien
on the loan collateral; (2) avoid and recover certain payments made to First Chicago
under the loan; and (3) bar First Chicago’s claims against IFC. (Id. ¶¶ 68, 72.)
First Chicago ultimately settled with the trustee on December 1, 2010, and agreed
to return $200,000 and to assign all of its interest in the loan collateral to the
trustee. (Id. ¶¶ 73-74.) FDIC now seeks damages to recoup the losses First Chicago
sustained from the failed loan transaction, along with legal fees and costs incurred
in the proceedings surrounding IFC’s bankruptcy and in bringing this action. (Id.
¶¶ 84, 91.)
B.

L&G’s Third Party Complaint
L&G answered the complaint1 on January 9, 2012, denying all allegations of

wrongdoing and raising several affirmative defenses including First Chicago’s
contributory negligence and Katten’s intervening and superseding negligence as
successor counsel. (R. 16.) L&G also filed a third party complaint for contribution
FDIC filed an amended complaint on July 31, 2013, (R. 68), and L&G answered
the same on August 30, 2013, (R. 69).

1

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against Katten on January 23, 2012. (R. 19.) L&G alleges that Katten’s failure to
file the UCC financing statements perfecting First Chicago’s security interest
sooner and premature initiation of the TRO Action were intervening and
superseding negligent acts or omissions barring FDIC’s claims. (Id. ¶ 22.) L&G
contends that the TRO Action caused IFC to file for bankruptcy within 90 days of
Katten perfecting First Chicago’s security interest, thereby allowing the bankruptcy
trustee to avoid First Chicago’s security interest.

(Id. ¶ 21-22, 29.)

Katten

unsuccessfully sought dismissal of L&G’s third party complaint, (R. 51), and filed its
answer on March 15, 2013, denying all allegations of negligence, (R. 54).
C.

L&G’s Motion to Compel and Motion for Reconsideration
On October 28, 2013, L&G brought a motion to compel seeking, among other

things,

First

Chicago’s

privileged

communications

with

Katten

regarding

transactions with IFC. (See R. 74 at 11-14.) L&G argued that “at-issue” waiver
applied to otherwise privileged documents because without them, L&G cannot
effectively defend against FDIC’s claims and prosecute its third-party action against
Katten. (Id. at 12.) FDIC opposed L&G’s motion, contending that at-issue waiver
does not apply in this case and that the privileged communications L&G seeks are
not vital to its defense.

(R. 84 at 13-14.)

FDIC also argued that unlike other

malpractice cases in which at-issue waiver was found, this case does not concern
multiple firms involved in the same underlying litigation. (Id. at 14-15.) According
to FDIC, L&G’s malpractice in failing to properly secure the loan transaction was
complete before First Chicago filed the TRO Action against IFC. (Id. at 15.)

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On December 19, 2013, this court granted L&G’s motion in part, but denied
the motion as to certain discovery requests because, among other reasons, the court
was not convinced that First Chicago had waived its attorney-client privilege by
putting its communications with Katten at issue. (R. 87.) Pursuant to a briefing
schedule set by this court, (id.), L&G filed the current motion on January 23, 2014,
seeking reconsideration of this court’s December 19, 2013 order, (R. 91, L&G’s Mot.
¶ 2).

Specifically, L&G’s motion focuses on Interrogatory Nos. 19 and 24 and

Document Request Nos. 1, 7, 9, 10, 11, 16, and 17, directed to FDIC, and
Interrogatory Nos. 2, 5, and 6, and Document Request Nos. 1, 2, 3, and 4, directed to
Katten. (Id. ¶ 1.) L&G argues that: (1) this court misapplied the law by conflating
“at-issue” waiver with “subject matter” waiver; and (2) at-issue waiver occurred
when FDIC injected an issue into the case which requires the examination of
privileged communications to resolve. (R. 93, L&G’s Mem. at 2-3.) In support of the
second argument, L&G asserts that Katten’s actions could have proximately caused
FDIC’s damages, and are therefore at issue.

(Id. at 3-4.)

Alternatively, L&G

contends that FDIC at least waived privilege with respect to Katten’s redacted
invoices, which were submitted to L&G in support of FDIC’s claimed damages. (Id.
at 1, 12-15.) FDIC filed its response on February 7, 2014, which was adopted and
joined by Katten, (R. 97), refuting L&G’s argument that this court improperly
conflated at-issue and subject matter waivers and arguing that L&G’s reliance on
federal decisions is inappropriate in this case not only because state law governs,
but also because those decisions are distinguishable, (R. 98, FDIC’s Resp. at 2-8).

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Relying primarily on the Illinois Supreme Court’s decision in Fischel & Kahn, Ltd.
v. van Straaten Gallery, Inc., 189 Ill. 2d 579 (Ill. 2000), FDIC argues that the
information L&G seeks should remain privileged. (R. 98, FDIC’s Resp. at 5-8.)
Finally, FDIC denies L&G’s contention that by producing Katten’s redacted
invoices, FDIC waived its privilege as to those invoices. (Id. at 8-10.)
Analysis
A motion for reconsideration is narrowly designed “to correct manifest errors
of law or fact or to present newly discovered evidence.” Hicks v. Midwest Transit,
Inc., 531 F.3d 467, 474 (7th Cir. 2008). A motion for reconsideration will be granted
when: (1) the court has patently misunderstood a party; (2) the court has made a
decision outside the adversarial issues presented to the court by the parties; (3) the
court has made an error not of reasoning but of apprehension; (4) there has been a
controlling or significant change in the law since the submission of the issue to the
court; or (5) there has been a controlling or significant change in the facts since the
submission of the issue to the court. Bank of Waunakee v. Rochester Cheese Sales,
Inc., 906 F.2d 1185, 1191 (7th Cir. 2009) (citation omitted). “Reconsideration is not
an appropriate forum for rehashing previously rejected arguments or arguing
matters that could have been heard during the pendency of the previous motion.”
Caisse Nationale de Credit Agricole v. CBI Indus., 90 F.3d 1264, 1270 (7th Cir.
1996) (citations omitted). Therefore, a court will grant a motion to reconsider when
there is a “compelling reason,” including a change in the law that shows that an

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earlier ruling was erroneous, but not to address arguments that a party should have
previously raised. Solis v. Current Dev. Corp., 557 F.3d 772, 780 (7th Cir. 2009).
A.

At-Issue Waiver
L&G has failed to identify legitimate grounds for this court to reconsider its

December 19, 2013 order.

In its motion, L&G first argues that this court

misapplied the law by referring to the “sword and the shield” analogy to describe
the reasoning behind at-issue waiver. (R. 93, L&G’s Mem. at 2.) Citing to Lama v.
Preskill, 353 Ill. App. 3d 300, 301-02 (App. Ct. 2004), and Center Partners, Ltd. v.
Growth Head GP, LLC, 2012 IL 113107 (Ill. 2012), L&G contends that the analogy
only applies to subject matter waiver, and that using the metaphor to describe atissue waiver improperly conflates the two.

(R. 93, L&G’s Mem. at 2.)

This

argument falls flat. L&G makes much of the fact that Center Partners, a case
involving subject matter waiver, references “the ‘sword’ and the ‘shield’ approach” to
explain that a party should not be allowed to disclose portions of privileged
communications to gain an advantage while also claiming privilege over undisclosed
communications relating to the same subject matter.

Center Partners, 2012 IL

113107 at P39. But the court in Lyon Financial Services, Inc. v. Vogler Law Firm,
P.C., 2011 WL 3880948, at *3 (S.D. Ill. Sept. 2, 2011) used the very same analogy to
describe at-issue waiver in words L&G found compelling enough to quote in support
of its earlier motion to compel, (R. 74 at 12). Although at-issue waiver and subject
matter waiver are distinct exceptions to privilege, the sword and shield metaphor is

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applicable to both. L&G’s attempt to portray this “conflation” as an error of law is
misguided.
L&G then resorts to rehashing arguments already considered and rejected by
this court, including that because Katten’s actions could have proximately caused
FDIC’s

damages,

at-issue

communications with Katten.

waiver

applies

to

First

Chicago’s

privileged

Although this court addressed these arguments

during the December 19, 2013 hearing, it is worthwhile to address the substance of
L&G’s arguments in more depth here.
Illinois law governs the determination of attorney-client privilege waiver in
this case.

See Fed. R. Evid. 501 (“In a civil case, state law governs privilege

regarding a claim or defense for which state law supplies the rule of decision.”).
Unlike attorney-client privilege, federal law governs the work-product doctrine. See
Lyon, 2011 WL 3880948 at *4. The work-product doctrine is codified in Federal
Rule of Civil Procedure 26(b)(3), which explains that “[o]rdinarily, a party may not
discover documents and tangible things that are prepared in anticipation of
litigation or for trial by or for another party or its representative.”

Both the

attorney-client and work-product privileges are subject to waiver.

Beneficial

Franchise Co., Inc. v. Bank One, N.A., 205 F.R.D. 212, 215 (N.D. Ill. 2001). Courts
generally apply the same at-issue test used in attorney-client privilege scenarios to
determine whether to waive the work-product protection.
3880948 at *4.

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See Lyon, 2011 WL

In applying Illinois law, this court must decide what the Illinois Supreme
Court would do if it were presented with the issue.

Allen v. Transamerica

Insurance Co., 128 F.3d 462, 466 (7th Cir. 1997). This court is not bound by district
court decisions. Anderson v. Romero, 72 F.3d 518, 525 (7th Cir. 1995). In the
absence of authoritative Illinois Supreme Court rulings, decisions of Illinois
Appellate Courts control unless there are persuasive indications that the Illinois
Supreme Court would decide the issue differently. Id. Illinois courts have stated
that the attorney-client privilege serves to encourage full and frank communication
between a client and an attorney by removing the fear of compelled disclosure of
information. See, e.g., Consol. Coal Co. v. Bucyrus-Erie Co., 89 Ill. 2d 103, 117-18
(Ill. 1982). Moreover, Illinois law recognizes “‘that sound legal advice or advocacy
serves public ends and that such advice or advocacy depends upon the lawyer being
fully informed by the client.’” Fischel & Kahn, 189 Ill. 2d at 585 (quoting Upjohn
Co. v. United States, 449 U.S. 383, 389 (1981)).

At the same time, however,

attorney-client privilege rather than the duty to disclose is considered the exception,
and privilege is strictly confined within its narrowest limits.

See Waste

Management, Inc. v. Int'l Surplus Lines Ins. Co., 144 Ill. 2d 178, 200-201 (Ill. 1991).
Illinois Supreme Court case Fischel & Kahn involved facts similar to the case
at hand. A law firm, Fischel & Kahn, advised an art gallery that it could limit its
liability to consignment artists in case of damage to the artists’ work. Fischel &
Kahn, 189 Ill. 2d at 581. A fire subsequently destroyed the art gallery’s inventory,
and several consignment artists sued the gallery for damages. Id. The gallery

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retained another law firm, Pope & John, to represent it in that litigation.

Id.

Fischel & Kahn later sued the art gallery to recover unpaid legal fees related to the
exposure analysis, and the gallery filed a counterclaim for malpractice, alleging that
the firm provided erroneous advice regarding the gallery’s exposure to liability. Id.
at 582.

When Fischel & Kahn requested Pope & John’s files relating to the

underlying litigation, the art gallery withheld certain documents on the basis of
attorney-client privilege and the work-product doctrine. Id. at 582-83. Fischel &
Kahn argued that the gallery waived its privilege by filing its counterclaim because
facts surrounding the underlying litigation were “central” to determining whether
and to what extent the gallery’s loss resulted from Fischel & Kahn’s alleged
malpractice. Id. at 585.
In holding that the art gallery did not waive its privilege, the court reasoned
that “[t]o allow Fischel & Kahn to invade the attorney-client privilege with respect
to subsequently retained counsel in this case simply by filing the affirmative
defenses it did would render the privilege illusory[.]” Id. at 586. The court stated
that “the allegations raised in Fischel & Kahn’s affirmative defenses were
insufficient to put the cause of [the gallery’s] damages at issue, resulting in waiver
of the attorney-client privilege in this case.” Id. at 586-87. In contrast to the facts
in a case cited by Fischel & Kahn, Pappas v. Holloway, 114 Wash.2d 198, 205-06
(1990), the firm’s malpractice was “already complete” by the time the gallery hired
Pope & John, and there was no need to determine “who, among a number of
different lawyers handling the same matter simultaneously, might have committed

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the alleged malpractice.” Id. at 589. Furthermore, the court in Fischel & Kahn
pointed out that the requested files were not “vital” to Fischel & Kahn’s defense. Id.
Again distinguishing Pappas, the court reasoned that non-privileged evidence
regarding the gallery’s damages would be readily available to either party, making
intrusion upon privilege unnecessary. Id.
In Lama v. Preskill, 353 Ill. App. 3d 300, 301-02 (App. Ct. 2004), a plaintiff
sued her former physician for negligently performing a procedure which caused the
plaintiff to require additional emergency surgery for stabilization.

Anticipating

that the two-year statute of limitations would be an issue, the plaintiff alleged in
her complaint that she did not discover her injury until a few months after her
surgery, making her claim timely.

Id. at 304.

But the defendant obtained an

affidavit from a malpractice attorney, Terrence Carden, who stated that the
plaintiff’s husband met with him just four days after the surgery. Id. at 302. The
defendant then subpoenaed Carden’s files arguing that by invoking the discovery
rule to toll the two-year limitations period, the plaintiff placed at issue as to when
she discovered her injury. Id. at 303. Affirming the trial court’s order compelling
production of Carden’s files, the court in Lama rejected the plaintiff’s arguments
that the defendant was the one who raised the discovery rule as an affirmative
defense and that she did not rely on the privileged documents to prove her
allegations. Id. at 303, 306. The Lama court reasoned that at-issue waiver occurs
when “a party voluntarily injects either a factual or legal issue into the case, the
truthful resolution of which requires an examination of the confidential

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communications.”

Lama, 353 Ill. App. 3d at 305 (internal quotations omitted).

Because her complaint alleged that she only learned of her injury months after the
surgery, the plaintiff “voluntarily injected” the timeliness issue into the case and
thus waived privilege regarding communications with Carden. Id. at 306.
In this case, L&G argues that if “Katten’s actions are potentially a proximate
cause of the damages sought, then [FDIC] has waived protections with respect to
Katten because Katten’s conduct is ‘at issue’ in this matter.” (R. 93, L&G’s Mem. at
4.)

In support of this argument, L&G reiterates allegations in its third-party

complaint regarding Katten’s failure to wait 90 days after filing the UCC financing
statements when it initiated the TRO Action. (Id. at 5.) L&G further alleges that
Katten “quietly rewrote the terms of the credit agreement” on First Chicago’s behalf
in order to permit additional borrowing. (Id. at 5-6.) Relying on Fischel & Kahn
and cases citing to Lama, L&G contends that because FDIC “put Katten’s conduct
at issue,” FDIC waived its privilege and work product protections over Katten’s
work for First Chicago related to IFC. Id. at 8-12.
Although L&G seeks to differentiate itself from Fischel & Kahn, the
similarities between their positions are considerable. Fischel & Kahn argued that
“it would be impossible to determine whether and to what extent [the gallery’s] loss
resulted from” its malpractice without privileged documents relating to the
underlying litigation. Fischel & Kahn, 189 Ill. 2d at 585. L&G argues that it would
be unfair “to prevent inquiry into the very cause of the damages” for which FDIC
seeks recovery. (R. 93, L&G’s Mem. at 11-12.) For the same reasons the Illinois

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Supreme Court disagreed with Fischel & Kahn’s arguments, this court disagrees
with L&G.

To allow the invasion of privilege simply because a party filed

affirmative defenses “would render the privilege illusory[.]” Fischel & Kahn, 189
Ill.2d at 586. Also, the mere fact that an issue may be “subject to dispute” does not
mean that the parties have waived privilege with respect to any attorney-client
communications “that might touch on that question.” See id. at 587. Such a lax
construction of waiver undermines the important policy considerations behind “full
and frank communication” between a client and an attorney. See, e.g., Consol. Coal
Co. v. Bucyrus-Erie Co., 89 Ill.2d 103, 117-18 (Ill. 1982).
L&G also relies on the court’s statement in Fischel & Kahn that “the
allegations raised in Fischel & Kahn’s affirmative defenses were insufficient to put
the cause of [the art gallery’s] damages at issue[.]” Fischel & Kahn, 189 Ill.2d at
586-87. While this language does suggest that allegations could theoretically be
sufficient to put causation at issue thereby triggering at-issue waiver, the
information sought must also be vital to L&G’s defense.

Id. at 589.

Even if

Katten’s conduct could have contributed to FDIC’s damages─a theory L&G is free to
explore─L&G has failed to explain how Katten’s privileged communications with
First Chicago are necessary to determine why the UCC statements and the TRO
Action were filed when they were. As this court noted during the December 19,
2013 hearing, if L&G is interested in investigating the rationale behind the filing of
the TRO Action, L&G could have posed this question directly in written discovery
and obtained a non-privileged answer, (R. 93-1, L&G’s Mem., Ex. 1 at 51:20-52:15),

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and may still seek the rationale during oral discovery. L&G stated at the hearing
that beyond simply finding out what Katten knew and when, L&G needs to
understand what Katten “should have known based upon the surrounding facts and
circumstances” regarding their work for First Chicago. (Id. at 54:13-22.) But this
assertion alone is not enough to persuade this court to permit L&G to invade
privilege.

Also, as argued by FDIC and Katten, L&G can use non-privileged

information—such as communications between Katten and IFC, Katten’s redacted
invoices showing their involvement with IFC, and transaction documents prepared
by Katten—to investigate what Katten should have known. (Id. at 53:2-4, 64:1624.)
The Fischel & Kahn court’s reliance on Jakobleff v. Cerrato, Sweeney & Cohn,
97 A.D.2d 834 (N.Y. App. Div. 2d Dep’t 1983), is particularly instructive on the issue
of necessity. In Jakobleff, the plaintiff sued her former divorce attorneys alleging
that the judgment of divorce failed to include a provision that required her husband
to pay premiums for her health insurance. Id. at 834. The defendant law firm
brought a third-party complaint against the plaintiff’s subsequent attorney,
Norman Essner, contending that he negligently failed to seek a resettlement of the
judgment of divorce. Id. at 835. The law firm then sought to depose Essner to
determine whether: (1) he had advised the plaintiff of possible remedial actions
which could have been taken; (2) he advised her not to proceed with any such
actions; or (3) the plaintiff, having been advised to proceed with remedial actions,
refused to do so. Id. The defendant law firm’s objectives in seeking privileged

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information bear a strong resemblance to L&G’s. L&G wants to ascertain whether
Katten advised First Chicago to file the TRO Action within 90 days of filing the
UCC statements, or whether Katten advised against filing the TRO Action, but
First Chicago did so anyway. (R. 93, L&G’s Mem. at 11.) This court agrees with the
Jakobleff court’s position that “it simply cannot be said . . . that discovery of
such communications is required to enable defendants to assert a defense or to
prosecute their third-party claim.”

Jakobleff, 97 A.D.2d at 835.

“To conclude

otherwise would render the privilege illusory in all legal malpractice actions: the
former attorney could, merely by virtue of asserting a third-party claim for
contribution against the present attorney, effectively invade the privilege in every
case.” Id.
L&G also attempts to draw comparisons between this case and Pappas, 114
Wash.2d at 206, cited and distinguished in Fischel & Kahn, 189 Ill. 2d at 590, in
which the Washington Supreme Court found that clients had waived their privilege
as to their present attorneys because those attorneys also participated in the
underlying litigation giving rise to the clients’ malpractice claim against former
counsel. Again, the comparison breaks down because the Pappas court concluded
that the information sought by former counsel was vital to his defense of the
malpractice action. Pappas, 114 Wash.2d at 209; see Fischel & Kahn, 189 Ill.2d at
589. That is not the case here. L&G has not demonstrated the link between the
privileged communications it seeks and its ability to pursue its claims and defenses.

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For these reasons, this court finds that FDIC has not waived its attorney-client
privilege as to communications with Katten.
B.

Katten’s Invoices
L&G argues that if FDIC did not waive privilege over First Chicago’s

communications with Katten, it at least waived privilege with respect to Katten’s
redacted invoices, which were submitted to L&G in support of FDIC’s claimed
damages.

(R. 93, L&G’s Mem. at 1, 12-15.)

Citing again to Lama and Center

Partners, Ltd., L&G contends that FDIC committed either at-issue waiver by
“voluntarily inject[ing] the factual issue of Katten’s invoices[,]” or subject matter
waiver by “using partial disclosure of a communication as a sword[.]” (R. 93, L&G’s
Mem. at 14, 15.) At the December 19, 2013 hearing, this court withheld decision on
whether FDIC’s production of Katten’s redacted invoices effectuated at-issue
waiver, in part to allow L&G the opportunity to review FDIC’s production. (Id.,
Ex. 1 at 71:17-72:14, 73:12-22.)

Having now considered the points presented in

L&G’s current motion, this court finds L&G’s arguments unpersuasive. First, for
the same reasons discussed above, seeking attorneys’ fees in a malpractice action is,
in itself, insufficient to put damages at issue for waiver purposes. See Fischel &
Kahn, 189 Ill. 2d at 587. “If raising the issue of damages in a legal malpractice
action automatically resulted in the waiver of the attorney-client privilege with
respect to subsequently retained counsel, then the privilege would be unjustifiably
curtailed.” Id. Second, L&G recognizes in its own brief that the reasoning behind
subject matter waiver is that “a litigant should not be able to disclose portions of

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privileged communications with his attorney to gain a tactical advantage in
litigation[,]” and then claim privilege over undisclosed portions of the privileged
communications relating to the same subject matter.

(R. 93, L&G’s Mem. at 2

(quoting Center Partners, 2012 IL 113107 at P39 (emphasis added)).) As FDIC
correctly points out, L&G has not identified any privileged information disclosed in
Katten’s invoices which FDIC is using to gain a tactical advantage. (R. 98, FDIC’s
Resp. at 8.) In fact, L&G complains about the fact that privileged information has
been redacted from the invoices. (R. 93, L&G’s Mem. at 13.) Katten is entitled to
produce redacted invoices to support a claim for attorneys’ fees while also
preserving attorney-client privilege and work-product protection. See Greviskes v.
Univs. Research Ass’n, Inc., 417 F.3d 752, 757 (7th Cir. 2005) (upholding award of
attorneys’ fees based on invoices and bills redacted to protect privileged
information); Reynolds v. Beneficial National Bank, 288 F.3d 277, 286 (7th Cir.
2002) (confidential information in attorneys’ fees applications “can be whited out”);
see also Balcor Real Estate Holdings v. Walentas-Phoenix Corp., 1995 WL 275594, at
*5 (N.D. Ill. May 8, 1995) (records indicating the general subject matter of the work
performed, by whom the work was performed, the time expended, and the hourly
rate charged are sufficient to support an award of attorneys’ fees).
A party seeking to recover attorneys’ fees ultimately bears the burden of
presenting sufficient evidence from which the trial court can render a decision as to
their reasonableness. Harris Trust & Sav. Bank v. American Nat'l Bank & Trust
Co., 230 Ill. App. 3d 591, 595 (App. Ct. 1992).

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Because FDIC has decided to

preserve privilege and work-product protection over Katten’s invoices by using
redactions, it has also assumed the risk that the court will decline to award the full
requested amount of fees on the basis of FDIC’s failure to meet its burden. See PNC
Bank, NA v. OHCMC-Oswego, LLC, 2012 WL 2062889, at *3 (N.D. Ill. June 4, 2012)
(concluding plaintiff’s submissions were sufficient to support requested attorneys’
fees despite the use of redacted invoices); Bretford Mfg. v. Smith Sys. Mfg. Co., 421
F. Supp. 2d 1117, 1129 (N.D. Ill. 2006) (awarding only 60 percent of requested fees
in view of inadequate documentation and invoice descriptions). As the privilegeholder and the party seeking attorneys’ fees, FDIC is entitled to make that choice.
Conclusion
For the foregoing reasons, L&G’s Motion for Reconsideration in Part of this
court’s December 19, 2013 order denying L&G’s motion to compel is denied.
ENTER:

____________________________________
Young B. Kim
United States Magistrate Judge

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