Cori et al v. Phyllis Schlafly's American Eagles et al

Filing 117

ORDER re 101 MOTION for Discovery Memorandum In Support of the Common Interest Doctrine filed by Phyllis Schlafly's American Eagles, Eagle Forum. The Court OVERRULES Defendant PSAE and ETF's assertion of privilege under the common interest doctrine. Action due by 2/16/2018. See attached Order. Signed by Magistrate Judge Reona J. Daly on 2/1/2018. (nmf)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
EAGLE FORUM, an Illinois Not for Profit
Corporation,

)
)
)
and
)
)
ANNE SCHLAFLY CORI, on behalf of
)
EAGLE FORUM, et al.,
)
)
Plaintiffs,
)
v.
)
)
PHYLLIS SCHLAFLY’S AMERICAN EAGLES, )
a Virginia Not for Profit Corporation,
)
)
Defendant.
)

Case No.: 3:16-cv-946-DRH-RJD

ORDER
DALY, Magistrate Judge:
This is a trademark infringement action in which Plaintiffs seek injunctive relief and
damages arising from violations of federal and state law. On October 19, 2017, the undersigned
held a discovery dispute conference concerning issues with the privilege log produced by
Defendant Phyllis Schlafly’s American Eagles (hereinafter referred to as “PSAE” or “Defendant”)
and Eagle Trust Fund. Following the conference, Defendant was directed to file a memorandum
in support of its argument that the documents referenced in the log are privileged under the
common interest doctrine. Defendant filed its memorandum1 (Doc. 101) on October 30, 2017,
and Plaintiffs filed their responses thereto on November 6, 2017 (Docs. 102-103). The Court held
an additional discovery dispute conference concerning the privilege issue on November 15, 2017,
and its ruling is set forth below.
1

The memorandum is brought before the Court by both Defendant PSAE and Eagle Trust Fund. The Court notes
that Eagle Trust Fund is not a defendant to this action, but rather, is an interested party as a respondent in discovery.

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BACKGROUND
Although the parties provide somewhat differing accounts concerning the genesis of this
litigation, it is apparent that it was preceded by a fracture among the Eagle Forum Board Members
transpiring on or about April 11, 2016. At the April 11, 2016 Eagle Forum board meeting, Ed
Martin was terminated as President of Eagle Forum. According to Plaintiffs, prior to that
meeting, Ed Martin and Phyllis Schlafly had engaged Steve Clark and the Runnymede Law Group
(“Runnymede”), to provide certain services for Eagle Forum, including “representation and
counsel with respect to governance matters, Board disputes and litigation as necessary (see Doc.
102-1). Plaintiffs further contend that late in the evening on April 11, 2016, Andy Schlafly (a
director of Eagle Forum), sent an email to Ed Martin, John Schlafly, and Bruce Schlafly proposing
to “start a new c4 using mother’s name” that would “do better and be more effective in politics
than ‘Eagle Forum’.” (See Doc. 102-2). This email was purportedly forwarded by Ed Martin to
Runnymede later that evening (See id.). Plaintiffs, therefore, contend that an “unholy alliance”
was created amongst Eagle Forum’s attorneys (Runnymede), Eagle Forum’s acting President (Ed
Martin), and two Eagle Forum directors (John and Andy Schlafly) to replace the organization they
were “duty-bound to protect.”
Subsequent to the April 11, 2016 board meeting, the Individual Plaintiffs in this action
(Anne Schlafly Cori, Eunie Smith, Cathie Adams, Carolyn McLarty, Rosina Kovar, and Shirley
Curry) filed an action in the Circuit Court of Madison County, Illinois on April 22, 2016, against
John Schlafly and Ed Martin (and naming Eagle Forum as a nominal defendant) (hereinafter
referred to as the “Madison County Action”) (See Doc. 101-1). In the Madison County Action,
Plaintiffs sought an accounting of Eagle Forum property, assets, and resources, as well as
declaratory relief to uphold and enforce the firing of Ed Martin. Plaintiffs also brought claims of
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breach of fiduciary duty against John Schlafly and Ed Martin. Plaintiffs filed an amended
complaint in the Madison County Action on March 23, 2017, naming as additional defendants
Andrew Schlafly, Kathleen Sullivan, the Estate of Phyllis M. Schlafly, Eagle Trust Fund, and
Eagle Forum Education and Legal Defense Fund (See Doc. 101-3).
The filing of the instant action followed the Madison County Action, initially as a
derivative suit. Defendant asserts that prior to October 20, 20162, Smith Amundsen (retained by
Ed Martin and John Schlafly to represent Eagle Forum on October 7, 20173), only took actions at
the direction of Martin and Schlafly; however, after the entry of a temporary restraining order in
the Madison County Action, Smith Amundsen ceased communications with Martin and Schlafly
and, upon information and belief, began taking instruction from the Individual Plaintiffs in this
case. Defendant also asserts that at the time this suit was filed the Board of Directors for PSAE
included the now late Phyllis Schlafly, Kathleen Sullivan, Ed Martin, John Schlafly, and Andrew
Schlafly.
On October 16, 2016, after the filing of the instant action, the Phyllis Schlafly Revocable
Trust (“PSRT”) and the Eagle Trust Fund (“ETF”) filed suit in the Eastern District of Missouri
against the Individual Plaintiffs, as well as Jane and John Does (“the EDMO Lawsuit”) (See Doc.
101-4). The EDMO Lawsuit involved ETF’s and PSRT’s assertion of exclusive control and
ownership of intellectual property allegedly owned by Phyllis Schlafly, setting forth claims that
the defendants had misappropriated and infringed on the intellectual property of Phyllis Schlafly.
The complaint was amended on April 17, 2017, and Eagle Forum Education and Legal Defense

2

Defendant makes reference to both October 20, 2016 and October 20, 2017 in its brief. It appears that any
reference to October 20, 2017 is in error as the Madison County Order at issue was entered on October 20, 2016.
3
Defendant’s reference to October 6, 2017 appears to be in error as attorney’s for Smith Amundsen entered their
notice of appearance on behalf of Eagle Forum in this matter on October 17, 2016 (see Docs. 27 and 28).

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Fund (“EFELDF”) was named as a plaintiff and Eagle Forum was named as a defendant.
In January 2017, Andrew Schlafly brought an action against Eagle Forum and the
Individual Plaintiffs in the Circuit Court of St. Louis County, Missouri. This action was later
removed to the United States District Court for the Eastern District of Missouri, Schlafly v. Eagle
Forum, et al., Cause No. 4:17-cv-283-JAR. Also, Plaintiff Anne Cori brought an action in the
Circuit Court of St. Louis County, Missouri, alleging that the defendants, John Schlafly, Bruce
Schlafly, Andrew Schlafly, and Liza Forshaw asserted undue influence over the late Phyllis
Schlafly as to her trusts and will.
Defendant PSAE contends that, based upon the litigation filed to date, the Individual
Plaintiffs in this lawsuit (Anne Cori, Eunie Smith, Cathie Adams, Carolyn McLarty, Rosina
Kovar, and Shirley Curry) are adverse to the following individuals and entities: John Schlafly,
Andrew Schlafly, Bruce Schlafly, Ed Martin, Eagle Trust Fund, Eagle Forum Education and Legal
Defense Fund, The Phyllis Schlafly Revocable Trust, Phyllis Schlafly’s American Eagles,
Kathleen Sullivan, Ned Pfeifer, and Liza Forshaw. Defendant asserts that because the emails and
documents identified on its privilege log are between parties and counsel representing one or more
of the adverse entities (with the exception of Roger Schlafly), they are subject to the
attorney-client privilege under the common interest doctrine.
Plaintiffs disagree, arguing that Defendants have oversimplified the common interest
doctrine. Plaintiffs assert that the entities and individuals do not have identical common legal
interests and it is inappropriate to blindly apply the common law doctrine to any party adverse to
Plaintiffs in any litigation.

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ATTORNEY-CLIENT PRIVILEGE AND THE COMMON INTEREST DOCTRINE4
The attorney-client privilege is the oldest and one of the most carefully guarded privileges
known to the common law. Jaffee v. Redmond, 518 U.S. 1, 11 (1996); Upjohn Co. v. United
States, 449 U.S. 383, 389 (1981); see also Swidler & Berlin v. United States, 524 U.S. 399, 403
(1998). “Its purpose is to encourage full and frank communications between attorneys and their
clients and thereby promote broader public interests in the observance of law and administration of
justice.” Upjohn, 449 U.S. at 389.
The protection of the privilege extends to confidential communications made by a client to
his lawyer “[w]here legal advice of any kind is sought … from a professional legal advisor in his
capacity as such.” Rehling v. City of Chicago, 207 F.3d 1009, 1019 (7th Cir. 2000). In order for
the attorney-client privilege to attach, the communication in question must be made: (1) in
confidence; (2) in connection with the provision of legal services; (3) to an attorney; and (4) in the
context of an attorney-client relationship. United States v. BDO Seidman, LLP, 492 F.3d 806,
815 (7th Cir. 2007). The party seeking to invoke the privilege bears the burden of proving all of
its essential elements. United States v. Evans, 113 F.3d 1457, 1461 (7th Cir. 1997).
The attorney-client privilege does not extend to statements made by a client to his or her
attorney in the presence of a third-party who is not an agent of either the client or attorney. Id. at
1462. In other words, knowing disclosure to a third-party almost invariably surrenders the
privilege. United States v. Brock, 724 F.3d 817, 821 (7th Cir. 2013). The common interest
doctrine is considered an “exception to th[is] rule ….” BDO Seidman, 492 F.3d at 816.
As explained by the Seventh Circuit Court of Appeals:

4

The Court finds, and the parties agree, that the federal common law is applicable, and will be applied, in this case.
FED.R.EVID. 501.

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In effect, the common interest doctrine extends the attorney-client
privilege to otherwise non-confidential communications in limited
circumstances. For that reason, the common interest doctrine only
will apply where the parties undertake a joint effort with respect to a
common legal interest, and the doctrine is limited strictly to those
communications made to further an ongoing enterprise.
Id. It is well settled that communications need not be made in anticipation of litigation to fall
within the common interest doctrine. Id. However, for the doctrine to apply, the person with
whom the privileged information is shared must have an identical — not merely similar — legal
interest in the subject matter of the communication, which must be made in the course of
furthering the ongoing, common enterprise. McCullough v. Fraternal Order of Police, Chicago
Lodge 7, 304 F.R.D. 232, 239 (N.D. Ill. 2014) (citing BDO Seidman, 492 F.3d at 816; Pampered
Chef v. Alexanian, 737 F.Supp.2d 958, 963 (N.D. Ill. 2010)). “A shared rooting interest in the
successful outcome of a case … is not a common legal interest.” Miller UK Ltd. v. Caterpillar,
Inc., 17 F.Supp.3d 711, 732 (N.D. Ill. 2014) (internal citations and emphasis omitted). Finally,
the Seventh Circuit directs that the application of the common interest doctrine “must be strictly
confined,” as it acts “in derogation of the search for truth.” BDO Seidman, 492 F.3d at 816
(internal citations omitted).
DISCUSSION
Defendant asserts that the documents at issue are covered by the common interest doctrine
as PSAE, Eagle Trust Fund, John Schlafly, Andrew Schlafly, Bruce Schlafly, Ed Martin,
EFELDF, the Estate of Phyllis Schlafly5, the Phyllis Schlafly Revocable Trust, Kathleen Sullivan,
Liza Forshaw, and Ned Pfeifer (referred to by Defendant as “Group 2”) all share a common legal
interest against the Individual Plaintiffs and Eagle Forum.
5

Defendant contends that these

Although not included in Defendant’s “Group 2” list, the Estate of Phyllis Schlafly is referenced by Defendant in its
explanation of Group 2 (see Doc. 101 at 5).

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individuals and entities are either named defendants, plaintiffs, or counterclaimants in litigation
against the Individual Plaintiffs or Eagle Forum and are working toward the same legal goal —
“the protection of the Phyllis Schlafly Family of Marks and the ousting of the Cori Plaintiff [sic] as
directors of Eagle Forum.”
In support of its argument, Defendant asserts that “[a] reading of the pleadings in all of the
various cases clearly establishes that the parties in Group 2 are litigating many similar claims with
a common goal … [and] they quite literally have a common interest in defeating the Cori Plaintiffs
as the opponent in those litigations, and are allowed to communicate with each other to develop a
joint strategy.” Defendant’s conclusory argument misses the mark. First, Defendant has failed
to articulate the precise legal interest that binds the parties in “Group 2” (aside from “defeating”
the Cori Plaintiffs). Indeed, what Defendant describes appears to be a mere “rooting interest”
among these individuals and entities against the Individual Plaintiffs. While it is apparent that
there are disputes concerning the Phyllis Schlafly Family of Marks and the corporate governance
of Eagle Forum, the Court is not convinced that the interests of PSAE are clearly aligned with
ETF, EFELDF, or PSRT, or any trustee or member of the Board of the same. If they are,
Defendant has failed to meet its burden on this point. In particular, with regard to the ownership
of the Family of Marks, it appears these entities have taken differing positions. Similarly, there
has been no showing of a common legal interest between PSAE or members of its Board of
Directors (Kathleen Sullivan, Ed Martin, John Schlafly, Andrew Schlafly, and Phyllis Schlafly at
the time this lawsuit was filed) and the other individuals identified by Defendant in “Group 2”
(Bruce Schlafly, Liza Forshaw, or Ned Pfeifer). While communications between Kathleen
Sullivan, Ed Martin, John Schlafly, Andrew Schlafly, and counsel for PSAE concerning legal
advice and strategy for this case are certainly protected, see Wilstein v. San Tropai Condominium
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Mater Ass’n, 189 F.R.D. 371, 379 (N.D. Ill. 1999), the Court finds no basis to extend this privilege
to communications with individuals not within the PSAE “control group.” In other words, those
communications identified on the privilege log that were not solely confined to controlling
members of PSAE and PSAE’s counsel are not protected by the common interest doctrine.
Insofar as there are communications solely between controlling members of PSAE, the Court
would need to address claims of privilege on a case-by-case basis.
With regard to Roger Schlafly in particular, the Court finds no basis to apply the common
interest doctrine to communications in which he was a part. Defendant indicates that although
Roger Schlafly is not a party to any of the ongoing litigation, he was very much involved in
advising his mother, including setting up and maintaining databases, web sites, mailing lists,
accounting programs, and other computer programs. Defendant also explains that he “advised
lawyers concerning these matters during the course of litigation.”
While the Court recognizes that the common interest doctrine can cover communications
between non-lawyers of multiple parties with a common interest, Defendant’s reliance on this
point with regard to Roger Schlafly is misplaced. The common interest exception to a waiver
only comes in to play once a party has first established that a privilege applies. Dexia Credit
Local v. Rogan, 231 F.R.D. 268, 273-74 (N.D. Ill. 2004) (“Thus, if a document is not already
shielded from production by a privilege, then the common interest doctrine does not apply.”).
Defendant has not addressed why Roger Schlafly’s familiarity with the litigation and knowledge
of the databases, web sites, and other intellectual property at issue in this case and others entitles
him to receive otherwise privileged communications in this litigation. Moreover, Defendant has
failed to show how Roger Schlafly shares a common legal interest with Defendant. That Roger
Schlafly made inquiries related to and concerning the litigation against the Individual Plaintiffs is
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certainly not sufficient to except his communications from the general waiver rule.
Defendant further asserts that communications with Runnymede Law Group and Smith
Amundsen prior to October 20, 20166 are privileged and need not be disclosed. In setting forth
this argument, Defendant asks the Court to treat the asserted privilege here like a derivative suit
where the company is divided between the shareholders and directors. In so doing, Defendant
asks the Court to rely on Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970), wherein the court
held that the directors of a corporation, when being sued by the stockholders and the company
itself, were still entitled to their privileged documents and communications. Defendant contends
that this “fiduciary duty exception” is applicable in the instant suit, wherein directors are being
sued by other directors. Defendant seeks to shield emails with Runnymede Law Group and Smith
Amundsen from the Individual Plaintiffs on this basis. Defendant’s argument is unconvincing
and misplaced.
As mentioned by Plaintiffs, Garner holds that shareholders can only obtain otherwise
privileged documents from a corporation in a derivative suit upon a showing of good cause. 430
F.3d at 1103. The Garner holding indicates that the privilege lies with the corporation. See id.
(“The attorney-client privilege still has viability for the corporate client. The corporation is not
barred from asserting it merely because those demanding information enjoy the status of
stockholders.”). Accordingly, its application in this instance is dubious, as PSAE and ETF are
seeking to enforce the privilege, not Eagle Forum. That there is ongoing litigation between
directors of Eagle Forum in other venues does not allow one group of those directors to invoke
privilege on behalf of the corporation in this litigation. Further, the Court does not find that PSAE

6

Defendant makes reference to both October 20, 2016 and October 20, 2017. It appears that any reference to
October 20, 2017 is in error as the Madison County Order at issue was entered on October 20, 2016.

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and Eagle Forum shared a common legal interest before October 20, 20167.
CONCLUSION
Based on the foregoing, the Court OVERRULES Defendant PSAE and ETF’s assertions
of privilege pursuant to the common interest doctrine as set forth in this Order. Defendant PSAE
is ORDERED to produce all communications addressed herein and outlined in its privilege log,
with the exception of those communications that were limited to the members of PSAE’s Board of
Directors (Kathleen Sullivan, Ed Martin, John Schlafly, Andrew Schlafly, and Phyllis Schlafly)
and counsel for PSAE. Insofar as there are communications solely between these controlling
members of PSAE and no counsel, it shall seek to enforce the privilege on a
document-by-document basis. PSAE shall produce said documents by February 16, 2018.
At this time, it is not clear to the Court whether any privileged communications between
PSAE members and its counsel were reviewed by outside counsel (e.g., Graves Garret). If there
is an issue concerning any such communication, the parties shall bring it to the Court’s attention.
Further, insofar as issues remain concerning Defendant’s invocation of work product privilege, the
parties should bring said disputes to the Court’s attention as necessary.
IT IS SO ORDERED.
DATED: February 1, 2018
s/ Reona J. Daly
Hon. Reona J. Daly
United States Magistrate Judge

7

Although this action was originally filed as a derivative suit with Eagle Forum named as a nominal defendant, the
Court granted Eagle Forum’s motion for realignment in which it indicated that it agreed with the Individual Plaintiffs
that PSAE is illegally using the intellectual property of Eagle Forum (Docs. 32 and 36). Eagle Forum further indicated
that no actual controversy existed between it and the Individual Plaintiffs (Doc. 32).

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