Cori et al v. Phyllis Schlafly's American Eagles et al
Filing
169
ORDER DENYING 158 Motion. Signed by Judge Nancy J. Rosenstengel on 3/6/2019. (jmp2)
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,
vs.
PHYLLIS SCHLAFLY’S AMERICAN
EAGLES, a Virginia Not for Profit
Corporation,
Defendant.
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Case No. 3:16-CV-946-NJR-RJD
MEMORANDUM AND ORDER
ROSENSTENGEL, District Judge:
According to the First Amended Complaint, Plaintiff Eagle Forum is a not-forprofit corporation formed by Phyllis Schlafly 1 in 1975 to advance conservatism activism
(Doc. 40, p. 1). Plaintiffs Anne Schlafly Cori, Eunie Smith, Cathie Adams, Carolyn
McLarty, Rosina Kovar, and Shirley Curry (collectively “Individual Plaintiffs”) are
members and directors of Eagle Forum (Id. at p. 102). Defendant Phyllis Schlafly’s
American Eagles (“PSAE”) is a not-for-profit corporation formed on April 16, 2015 (Id. at
1
Phyllis Schlafly died during the pendency of this lawsuit (Doc. 68, p. 4).
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p. 8). Four of PSAE’s directors were also directors of Eagle Forum: Phyllis Schlafly, Andy
Schlafly, John Schlafly, and Kathleen Schlafly (Id. at p. 11).
Plaintiffs allege that in April 11, 2016, the Eagle Forum Board of Directors held a
board meeting and terminated Ed Martin as President of Eagle Forum (Doc. 102, p. 4).
Later that evening, Ed Martin, Eagle Forum’s attorneys from Runnymede Law Group,
and two of Eagle Forum’s directors, John Schlafly and Andy Schlafly, formed an alliance
to replace Eagle Forum (Id.).
On April 22, 2016, Plaintiffs filed a complaint in Madison County, Illinois, against
John Schlafly, Ed Martin, and Eagle Forum to enforce the firing of Ed Martin, obtain an
accounting of Eagle Forum’s property, and bring claims of breach of fiduciary duty
against John Schlafly and Ed Martin (Madison County Circuit Court Case No. 2016 MR
000111). Plaintiffs amended their complaint to add Andrew Schlafly, Kathleen Sullivan,
the Estate of Phyllis Schlafly, ETF, and Eagle Forum Education and Legal Defense Fund
(“EFELDF”) as defendants.
On August 24, 2016, Plaintiffs filed this action, alleging PSAE appropriated and
utilized Eagle Forum’s assets and resources, including its money, intellectual property,2
mailing lists, real and personal property, and P.O. Box (Doc. 40, p. 9). Plaintiffs bring
claims for conversion; federal and state claims for trademark and service mark
infringement, unfair competition, and dilution; and claims for cyberpiracy under the
Federal Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) (Doc. 40).
2
Some of the intellectual property at issue here is referred to as the “Family of Marks” (Doc. 68, p. 4).
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On October 16, 2016, the Phyllis Schlafly Revocable Trust (“PSRT”) and ETF filed
suit in the United States District Court for the Eastern District of Missouri, to assert their
control and ownership of intellectual property allegedly owned by Phyllis Schlafly in her
individual capacity (EDMO Case No. 16-cv-01631-JAR). The first amended complaint in
that action added EFELDF as a plaintiff and Eagle Forum as a defendant (Id. at Doc. 57).
On January 19, 2017, Andrew Schlafly filed an action against Eagle Forum, Eunie
Smith, Cathie Adams, Rosina Kovar, and Carolyn McLarty in the Circuit Court of St.
Louis County, Missouri, which was removed to the United States District Court for the
Eastern District of Missouri (EDMO Case No. 17-cv-283-JAR). The first amended
complaint alleges the defendants breached their fiduciary duties to Eagle Forum by
changing its bylaws without notice and disenfranchising its members (Id. at Doc. 72).
Finally, Anne Cori filed an action in the Circuit Court of St. Louis County,
Missouri, alleging John Schlafly, Bruce Schlafly, Andrew Schlafly, and Liza Forshaw
asserted undue influence over Phyllis Schlafly regarding her trusts and will, and Phyllis
Schlafly lacked the capacity to execute certain documents related to her estate (Doc. 101,
p. 4).
Despite nine hearings and conferences (Docs. 25, 44, 53, 63, 67, 73, 97, 109, & 139)
and a multitude of briefing and orders over the course of nearly two years, the parties in
this action are still embroiled in discovery disputes. On October 19, 2017, Magistrate
Judge Reona J. Daly held a hearing to resolve issues related to a privilege log produced
by PSAE and Respondent Eagle Trust Fund (“ETF”) (Doc. 97). PSAE and ETF sought to
withhold certain communications based on privilege, under the common interest
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doctrine. At the hearing, Judge Daly ordered PSAE and ETF to provide Plaintiffs with an
amended privilege log that specifies which documents are allegedly privileged under the
common interest doctrine and indicate whether the documents were reviewed by counsel
for PSAE or counsel for ETF (Id.). Judge Daly also ordered PSAE and ETF to file a
memorandum in support of their assertions of privilege (Id.).
On October 30, 2017, PSAE and ETF filed their Memorandum in Support of
Privilege, arguing PSAE, ETF, John Schlafly, Andrew Schlafly, Bruce Schlafly, Ed Martin,
EFELDF, the Estate of Phyllis Schlafly, PSRT, Kathleen Sullivan, Liza Forshaw, and Ned
Pfeifer all share a common legal interest against Plaintiffs (Doc. 101, p. 11). Thus, under
the common interest doctrine, communications amongst these individuals, as well as
communications shared amongst their legal counsel, are privileged (Id.). Plaintiffs timely
opposed the memorandum, arguing the supposed “common interest group” does not
share a common legal interest for purposes of privilege (Doc. 102). Plaintiffs pointed out
that, although there is a similarity of parties across the various litigation, the litigation
“diverges widely in subject matter, from the breaches of fiduciary duty . . . to general
corporate governance, from life insurance proceeds to mail and P.O. Boxes (Id. at p. 3).
Plaintiffs also noted that the “common interest group” holds “widely diverging interests”
in the intellectual property at issue (Id.).
Judge Daly held a discovery dispute conference on the matter on November 15,
2017 (Doc. 25) and issued a ruling on February 1, 2018, rejecting the assertion of privilege
under the common interest doctrine (Doc. 117). She noted that, “for the doctrine to apply,
the person with whom the privileged information is shared must have an identical—not
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merely similar—legal interest in the subject matter of the communication, which must be
made in the course of furthering the ongoing, common enterprise” (Id. at p. 6) (quoting
McCullough v. Fraternal Order of Police, Chicago Lodge 7, 304 F.R.D. 232, 239 (N.D. Ill. 2014)).
Judge Daly additionally noted, “A shared rooting interest in the successful outcome of a
case . . . is not a common legal interest” (Id.) (quoting Miller UK Ltd. v. Caterpillar, Inc., 17
F. Supp. 3d 711, 732 (N.D. Ill. 2014)). She reasoned,
Defendant asserts that ‘[a] reading of the pleadings in all of the various
cases clearly establishes that the parties in [the ‘common interest group’]
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 [the ‘common interest group’] (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 . . . and the other individuals
identified by Defendant in [the ‘common interest group’] . . .. While
communications between Kathleen Sullivan, Ed Martin, John Schlafly,
Andrew Schlafly, and counsel for PSAE concerning legal advice and
strategy for this care are certainly protected . . . 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
(Id. at pp. 7-8).
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On February 15, 2018, PSAE and ETF appealed the order to United States District
Judge David R. Herndon (Doc. 120), 3 who denied the appeal (Doc. 124). PSAE and ETF
then sought a writ of mandamus from the Seventh Circuit Court of Appeals, which was
denied on April 26, 2018 (Doc. 130). On May 9, 2018, PSAE and ETF requested clarification
of Judge Daly’s February 2018 Order (Doc. 136). They stated the Estate of Phyllis Schlafly,
John Schlafly, Andrew Schlafly, Bruce Schlafly, Ed Martin, Kathleen Sullivan, EFELDF,
PSRT, PSAE, and ETF (“the Entities”) are represented by many of the same law firms (Id.
at p. 4). PSAE and ETF asserted,
[W]hile the February Order protects communications between PSAE’s
controlling members and its legal counsel, it does not account for any of the
other Entities [sic] communications with their legal representatives . . .. This
is despite that [sic] fact that due to the manner in which these
communications were harvested, many of the documents listed in the
privilege log constitute communications solely between a non-PSAE entity
and that entity’s legal counsel
(Id. at pp. 6-7).
PSAE and ETF argued the Court should not force the disclosure of documents
“solely between an Entity and that Entity’s legal counsel, in which the Entity is seeking
or has received legal advice,” because “production of these documents would effectively
waive [attorney-client] privilege . . .” (Id. at p. 8).
On May 29, 2018, Judge Daly held a hearing on the motion and granted PSAE leave
to supplement its request for clarification (Doc. 139). On June 5, 2018, PSAE filed its
supplement, and set forth a variety of exhibits, including a chart identifying the Entities
On December 21, 2018, the case was transferred to the undersigned District Judge because of
Judge Herndon’s upcoming retirement. (Doc. 159).
3
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listed in the privilege log and their legal representation (Doc. 141, Ex. 1), and an affidavit
from John Schlafly (Doc. 141, Ex. 3). According to the affidavit, at the times relevant to
this action, John Schlafly held positions on the boards of PSAE, ETF, and EFELDF, and
was a sole and/or co-trustee of PSRT, and personal representative of Phyllis Schlafly
and/or the Estate of Phyllis Schlafly (Doc. 141, Ex. 2). He attested he used the same email
address for all his communications (Id.).
PSAE asserted that emails between the Entities and their legal counsel are
privileged, because the documents were produced solely because of their existence on
the source of electronic data. Additionally, PSAE contended it did not waive privilege of
documents it disclosed to ETF, because both are represented by Riezman Berger, P.C. and
engaged in a joint defense. PSAE argued, “the mere existence of emails between
individual clients other than ETF and PSAE and their counsel on [the privilege log] does
not waive the privilege as to those entities” (Id. at p. 7).
On November 29, 2018, Judge Daly issued an order, recognizing that certain emails
to or from John Schlafly were obtained based on his email address, including
communications not in his capacity as a board member of PSAE or ETF (Doc. 152, p. 7).
Judge Daly found, “[T]he collection of these communications, while possibly haphazard,
does not constitute an intentional waiver of the attorney-client privilege” (Id. at p. 8). But
Judge Daly also held,
If there are other instances wherein communications of the other Entities
and their counsel are included on the privilege log (to which John Schlafly
was not a part), the Court has no evidence as to how they were procured
and, as such, no privilege attaches as it is PSAE’s burden to demonstrate
privilege. Communications that were solely between Board Members (with
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no counsel on the communication) for the other Entities at issue may be
addressed by the Court on a document-by-document basis. The Court also
notes that insofar as there are ETF documents that were produced by PSAE,
the Court’s discussion above applies and the documents are not privileged
under the joint defense privilege
(Id.).
Judge Daly rejected PSAE and ETF’s joint defense argument because they were
“merely attempting to relitigate the common interest doctrine that was squarely
addressed in the Court’s February 1, 2018 order” (Doc. 152, p. 6). Judge Daly explained,
PSAE asserts that although the common interest doctrine and joint defense
privilege are similar, they are distinct insofar as the common interest
doctrine applies to communications between different parties and those
parties’ different lawyers, while the joint defense privilege applies to
communications between one lawyer who represents co-parties in a suit.
While acknowledging this subtle difference, many courts have used the
common interest doctrine and joint defense privilege interchangeably. See,
e.g., United States v. Evans, 113 F.3d 1457, 1467 (7th Cir. 1997) (‘The joint
defense privilege, more properly identified as the ‘common interest rule,’
has been described as ‘an extension of the attorney client privilege’.’
(citation omitted). PSAE and ETF have failed to establish that they were
endeavoring in a ‘joint defense’ (as ETF is not a party to this lawsuit) and
they have wholly failed to meet their burden in proving the same. Indeed,
PSAE and ETF merely assert that ‘[a]s long as the firm represents all entities
on the email, it may communicate to all clients and the other firms that
represent them without waiving the privilege.’ PSAE and ETF provide no
authority for this broad reading of the ‘joint defense privilege’ and fail to
establish how it is relevant or applicable in this instance
(Id.).
On December 13, 2018, PSAE and ETF filed an objection to Judge Daly’s November
2018 Order (Doc. 152), pursuant to Federal Rule of Civil Procedure (“Rule”) 72(a)
(Doc. 158). Plaintiffs filed a timely response, opposing the objection (Doc. 160).
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DISCUSSION
Under Rule 72(a), the Court may modify or reverse a magistrate judge’s order on
a non-dispositive issue, upon a showing that the magistrate judge’s decision is “clearly
erroneous or contrary to the law.” A finding is clearly erroneous when “the reviewing
court on the entire evidence is left with the definite and firm conviction that a mistake
has been committed.” Anderson v. City of Bessemer, 470 U.S. 564, 573 (1985) (internal
quotations and citations omitted).
PSAE and ETF object to Judge Daly’s ruling that PSAE documents that were
disclosed to ETF are not entitled to joint defense privilege or covered under the common
interest doctrine. PSAE and ETF are clearly rehashing arguments initially rejected by this
Court over a year ago (Doc. 117), and twice since (Docs. 120 & 152). Rule 72’s “clearly
erroneous” and “contrary to the law” standard is not met when a litigant reargues its
position to the District Court. Ford v. Sessoms, 2017 WL 2222753, at *1 (N.D. Ind. May 22,
2017); Pain Center of SE Indiana, LLC v. Origin Healthcare Solutions LLC, 2015 WL 13215524,
at *1 (S.D. Ind. Nov. 13, 2015).
Moreover, PSAE and ETF contend Judge Daly erroneously held joint defense
privilege only applies to co-parties. But this misstates Judge Daly’s ruling. PSAE and ETF
attempted to extend the reach of the joint defense privilege without any supporting
authority. They argued to Judge Daly, “[A] firm that represents multiple entities, such as
Riezman Berger, may communicate to all of the entities it represents without waiving the
privilege. As long as the firm represents all entities on the email, it may communicate to
all clients and other firms that represent them without waiving privilege” (Doc. 141, p. 7).
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Judge Daly refused to adopt this interpretation of the joint defense privilege, finding
PSAE and ETF made unsupported and conclusory arguments. Judge Daly also
recognized that many courts, including the Seventh Circuit, use joint defense privilege
and the common interest doctrine interchangeably; and this Court has, on many
occasions, rejected PSAE and ETF’s argument under the common interest doctrine.
To the extent PSAE and ETF attempt to present new arguments or offer new
support for their position, they cannot do so for the first time in a Rule 72 motion. “Rule
72(a) limits a district court’s consideration of a [magistrate judge’s] ruling to whether the
decision was clearly erroneous based on the evidence and information before her. . .”
North Jersey Media Group Inc. v. Fox News Network, LLC, 2015 WL 7444822, at *2 n.2 (S.D.
N.Y. Nov. 23, 2015) (internal quotations and citations omitted); see Giganti v. Gen-X
Strategies, Inc., 222 F.R.D. 299, 307-08 (E.D. Va. July 12, 2004) (denying an objection
“because it was not argued before the magistrate judge and cannot be raised for the first
time as part of plaintiffs’ Rule 72 motion”); Griffin v. Southtec, LLC, 2013 WL 3455742, at
*3 (M.D. Tenn. July 9, 2013) (“Asserting a new argument in an objection that could have
been made in the original motion does not provide grounds for the Court to find that the
previous order is clearly erroneous or contrary to law under Rule 72(a)”); Ebo v. New York
Methodist Hospital, 2015 WL 4078550, at *5 (E.D. N.Y. July 6, 2015) (and cases cited therein)
(recognizing a district court need not address arguments raised for the first time in a Rule
72 motion).
For the third time, this Court refuses to extend the common interest doctrine, or
joint defense privilege, to PSAE and ETF. “Parties must take before the magistrate [judge],
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not only their best shot but all of their shots.” Borden v. Sec’y of Health & Human Services,
836 F.2d 4, 6 (1st Cir. 1987).
CONCLUSION
For the reasons set forth above, Magistrate Judge Daly’s November 29, 2018 Order
(Doc. 152) is AFFIRMED, and the Motion and Objection to Magistrate Order (Doc. 158)
filed by Defendant Phyllis Schlafly’s American Eagles and third party Eagle Trust Fund
is OVERRULED.
IT IS SO ORDERED.
DATED: March 6, 2019
____________________________
NANCY J. ROSENSTENGEL
United States District Judge
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