Design Basics LLC v. Campbellsport Building Supply Inc et al

Filing 114

ORDER signed by Judge Rudolph T. Randa on 9/2/2015. 82 Defendants' Motion to Compel DENIED. By 9/14/2015 Design Basics must file redacted versions of 106 112 original and supplemental memorandums regarding the motion to compel or a factual statement indicating why they can't be redacted. (cc: all counsel)(cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
DESIGN BASICS LLC,
Plaintiff,
-vs-

Case No. 13-C-560

CAMPBELLSPORT BUILDING SUPPLY INC.,
BERLIN BUILDING SUPPLY INC.,
KIEL BUILDING SUPPLY INC.,
DREXEL INC.,
DREXEL BUILDING SUPPLY INC.,
JOEL M. FLEISCHMAN
also known as
JOEL C. FLEISCHMAN, and
ALBERT J. FLEISCHMAN,
Defendants and Counterclaim-Defendants,
and
WILSON MUTUAL INSURANCE COMPANY,
Intervenor Defendant and Counterclaimant.

DECISION AND ORDER
As directed by the Court’s May 13, 2015, Decision and Order,
Plaintiff Design Basics LLC (“Design Basics”) filed a supplemental brief
(ECF No. 112) providing a specific fact-based explanation regarding its
claims that the 79 remaining documents sought by the Defendants’ motion
to compel (ECF No. 82) are protected by the work-product doctrine; that a

subset of the 79 are also protected by attorney-client privilege; and why it
contends that it did not waive those protections by disclosing investigative
reports and by naming investigators as potential lay witnesses. Attached
to the supplemental memorandum are the 79 exhibits,1 each comprised of
the original document and a redacted version.
Responding to the Court’s questions in the May Decision and Order,
Design Basics indicates that it provided exhibits DB-Campbellsport 0274-A
through 0274-C to the Defendants on April 30, 2015, (Supp. Br. 6), and
that DB-Campbellsport 0623-A will be produced to the Defendants (Supp.
Br. 55).

Furthermore, Design Basics states that it does not claim any

protection for the last two sentences of exhibit DB-Campbellsport 0432, a
February 22, 2013, email from Chuck Martell (“Martell”) to investigator
John C. White (“White”), and that information was included in the
documents provided to the Defendants. (Supp. Br. 39-40.) These responses
are adequate.
However, Design Basics apparently overlooked the June 5 filing
deadline

for

redacted

versions

of

its

original

and

supplemental

memorandums (ECF Nos. 106, 112). The Court will extend the time for

1 The exhibits are not 79 completely different documents; a number of them are
email strings that incorporate the original email message and are assigned a new
exhibit number as each subsequent message is added.

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Design Basics to file redacted versions of them or to file a factual statement
indicating why they cannot be redacted.
The in camera review is complete, and for the following reasons the
remaining portions of the Defendants’ motion to compel are denied. Design
Basics has established that all 79 of the documents are protected by the
work product privilege and that it has not waived that privilege.
Of the subset for which Design Basics also asserts attorney-client
privilege, it has not met its burden of establishing that the privilege
protects five of the documents and a portion of a sixth. However, because
those documents are otherwise protected, they are not subject to
production. Furthermore, as to the balance of the subset that is protected
by the attorney-client privilege, Design Basics has not waived that
privilege.
Work Product
Based on its review of the 79 documents, the Court concludes that
the work product doctrine applies to each.

Although the work product

privilege was developed to protect the work of an attorney prepared in
anticipation of litigation, Binks Mfg. Co. v. Nat’l Presto Indus., Inc., 709
F.2d 1109, 1118 (7th Cir. 1983), its protection has been extended to the
work of both lawyers and nonlawyers. See Fed. R. Civ. P. 26(b)(3)’s 1970
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advisory committee's note (“[T]he weight of authority affords protection of
the preparatory work of both lawyers and nonlawyers . . . .”). See also,
Logan v. Commercial Union Ins. Co., 96 F.3d 971, 977 (7th Cir. 1996).
Design Basics has established that each of the documents was
prepared

in

anticipation

of

litigation

for

“another

party

or

its

representative (including the other party’s attorney . . . or agent).” See
Fed. R. Civ. P. 26(b)(3)(A).

“[I]n light of the factual context ‘[each]

document can fairly be said to have been prepared or obtained because of
the prospect of litigation.’”

Logan, 96 F.3d at 976-77 (citation omitted)

(upholding work product protection of investigation report created by
insurance company in anticipation of litigation). Therefore, each of the 79
documents is subject to work product protection.
Attorney-Client Privilege
Despite the foregoing, the Court addresses Design Basics’ assertion
that the attorney-client privilege shields from production documents
designated as exhibits 2, 3, 6, 8-11, 17, 22, 25, 27, 38, 39, 41, 42, 44, 46-55,
and 60-63. The attorney-client privilege protects communications made in
confidence by a client and a client’s employees to an attorney, acting as an
attorney, for the purpose of obtaining legal advice.

Sandra T.E. v. S.

Berwyn Sch. Dist. 100, 600 F.3d 612, 618 (7th Cir. 2010). The analysis is
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“(1) whether ‘legal advice of any kind [was] sought . . . from a professional
legal adviser in his capacity as such’; and (2) whether the communication
was ‘relat[ed] to that purpose’ and ‘made in confidence . . . by the client.’”
Id. (citation omitted). “[T]he attorney-client privilege protects not only the
attorney-client relationship in imminent or ongoing litigation but also the
broader attorney-client relationship outside the litigation context.” Id. at
621.
The party asserting the privilege has the burden of demonstrating
that it applies. Valero Energy Corp. v. United States, 569 F.3d 626, 630 (7th
Cir. 2009). The attorney-client privilege “is in derogation of the search for
the truth and, therefore, must be strictly confined.”

In re Grand Jury

Proceedings, 220 F.3d 568, 571 (7th Cir. 2000). The analysis is “highly fact
specific,” requiring a “document-by-document” review and a consideration
of the “‘totality of the circumstances.’“ Id. at 571 (citation omitted).
“Confidential communications by non-lawyers . . . for the purpose of
assisting the lawyers to provide legal advice are also protected by the
attorney-client privilege.” Schlicksup v. Caterpillar, Inc., No. 09-CV-1208,
2011 WL 4007670, at *2 (C.D. Ill. Sept. 9, 2011) (regarding an accounting
firm, citing United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961)
(accountant's assistance was protected by the attorney-client privilege
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where it enabled “effective consultation between the client and the
lawyer”)). See also United States v. McPartlin, 595 F.2d 1321, 1337 (7th
Cir. 1979) (regarding investigators: “It has never been questioned that the
privilege protects communications to the attorney’s . . . agents . . . for
rendering his services.” (quoting 8 Wigmore, Evidence § 2301, 583
(McNaughton rev. 1961).)).
“[W]hat is vital to the privilege is that the communication be made
in confidence for the purpose of obtaining legal advice from the lawyer. If
what is sought is not legal advice but only accounting service . . . or if the
advice sought is the accountant's rather than the lawyer’s, no privilege
exists.” In re Grand Jury Proceedings, 220 F.3d at 571 (citations omitted).
Thus,

the

attorney-client

privilege

applies

if

a

consultant's

communications were “necessary, or at least highly useful, for the effective
consultation between the client and the lawyer.” Schlicksup, 2011 WL
4007670, at *2 (citations omitted).
Exhibits 17, 42, and 63 involve communications from Design Basics’
attorney, who provided legal advice for Design Basics and oversaw the
investigators acting at his direction on behalf of Design Basics. Exhibits
2, 3, 6, 8-11, 22, 25, 27, 38, and page one of exhibit 63 involve
communications between Martell and the attorney. Exhibits 41, 44, and
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46 are communications between the attorney and Martell and one or more
of the subcontracted investigators.

Exhibits 39 and 47-55 contain

communications between Martell and one or more of the subcontracted
investigators. Design Basics has established that the foregoing exhibits
fall within with scope of the attorney-client privilege.
Design Basics’ description of exhibits 60-62 and page three of exhibit
63 does not mention that a portion of the material claimed to be covered by
the attorney-client privilege includes a response by investigator White to
Kiel store leader Steve Theilman’s (“Thielman”) suspicion that White was a
secret shopper. This exchange was part of White’s investigation on behalf
of Design Basics; however, it was not confidential because it was sent to
Thielman – an employee or agent of the Defendants. Therefore, Design
Basics has not met its burden of establishing that exhibits 60-62 and page
three of exhibit 63 are protected by the attorney-client privilege.
Also not mentioned or explained by Design Basics is the fact that
[e-mail] was copied on the emails in exhibits 3 and 10, and Linda
Schreckenbach was copied on the email included in exhibits 6 and 10. An
internet search for hmcclaw.com indicates that it is the website of Hopkins
McCarthy, an intellectual property and litigation law firm. Schreckenbach
worked as a paralegal at the LeJune law firm (counsel for Design Basics in
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this action) from July 2004 until August 2014.2 It is reasonable to infer
that Schreckenbach was part of the legal team representing Design Basics.
However, absent an explanation regarding the link of Hopkins McCarthy
to this litigation, Design Basics has not established that exhibits 3 and 10
are protected by the attorney-client privilege in addition to being protected
by the work-product doctrine.
Waiver
In the brief (ECF No. 83) supporting their motion to compel, the
Defendants rely on Fed. R. Evid. 502 in asserting that Design Basics’
waiver of the attorney-client privilege or the work product doctrine as to
certain materials or information extends to other, undisclosed materials or
information. (Br. Defs’ Mot. Compel, 9-14.) Design Basics counters that it
produced the investigators’ reports to disclose all factual information
known to them and to advance settlement negotiations, and it did not give
any indication that this action would act as a waiver of privilege. (Resp.
Mot. Compel 12.) (ECF No. 87.)

Design Basics also states that upon

request from the Defendants, they will be provided with any factual
information regarding what the investigators heard and said. (Id. at 11.)

2 See www.intelius.com/Find-Phone-Address/Houston-TX/Linda-Schreckenbach.html and
www.linkedin.com/pub/linda-schreckenbach/9/46a/599 (both last visited July 14, 2014.)

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Rule 502 governs such situations where a party unfairly discloses
only a portion of privileged material. Appleton Papers, Inc. v. E.P.A., 702
F.3d 1018, 1026 (7th Cir. 2012).

This Rule “abolishe[d] the dreaded

subject-matter waiver, i.e., that any disclosure of privileged matter worked
a forfeiture of any other privileged information that pertained to the same
subject matter.”

Id. (citation omitted).

Instead, waiver occurs only (1)

when disclosure is intentional, (2) the disclosed and undisclosed material
concern the same subject matter, and (3) fairness requires considering the
material together.

Fed. R. Evid. 502(a).

Determining whether the

undisclosed material ought to be considered with the disclosed material
requires a case-specific analysis of the subject matter and adversaries. Id.
(citing Fed. R. Evid. 502 Advisory Comm. Notes.)
Design Basics disclosed the investigator reports by relying on them
to support its arguments on a discovery motion; however, they were factual
reports and were not considered privileged.

Design Basics has not

intentionally disclosed any communications or documents containing the
attorneys’ thoughts, investigations, or materials prepared in anticipation of
litigation or trial.

Design Basics has not waived its work product

immunity. See id. at 1024-25. Furthermore, the investigators have only
been named as witnesses who may testify at trial. Based on the foregoing,
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the Defendants’ motion to compel is denied.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
The remaining portions of the Defendants’ motion to compel (ECF
No. 82) are DENIED;
On or before September 14, 2015, Design Basics must file
redacted versions of its original and supplemental memorandums
regarding the motion to compel (ECF Nos. 106, 112) or a factual statement
indicating why they cannot be redacted.
Dated at Milwaukee, Wisconsin, this 2nd day of September, 2015.
BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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