(holding that a corporation owned and therefore could waive or assert privilege protection for communications between it and its lawyer that occurred before the majority of the corporation's board asserted their power to take control of the corporation; rejecting the lawyer's argument that he could withhold those communications because he was representing a client adverse to the corporation; finding Tekni-Plex inapplicable in determining the privilege's ownership; "Rohlf concedes that ordinarily a change of control of a corporation generally passes control of the privilege on to new management. . . . However, he contends that the 'ordinary' rule should not apply here. Rohlf [Lawyer for the Runnymede Law Group, who was retained by a company, but was later ousted when his allies on the corporate board were overruled by the board majority] asks the Court to find that the control of Eagle Forum's privilege did not, and could not, pass to the individual Plaintiffs from the control group (Ed Martin and Phyllis Schlafy) who retained Runnymede for the purpose of preventing the individual Plaintiffs from taking control of the organization. The Court disagrees."; "Rohlf contends that allowing the privilege to transfer here would defy the purpose of privilege and breach the reasonable expectation of privacy that Eagle Forum had when it hired Runnymede. Rohlf's argument is based on the proposition that Runnymede was retained as counsel by Phyllis Schlafy and Ed Martin, on behalf of Eagle forum, to defeat the takeover of Eagle Forum by the individual Plaintiffs in this lawsuit. In proffering this argument, Rohlf urges the Court to apply case law developed in New York courts in the context of corporation mergers and acquisitions. In particular, New York courts have carved out an exception for confidential communication related to acquisitions, finding that 'to grant [the newly merged company] control over the attorney-client privilege as to communications concerning the merger transaction would thwart, rather than promote, the purposes underlying the privilege.' Tekni-Plex, Inc. v. Meyner and Landis, 89 N.Y. 2d 123, 138, 674 N.E. 2d 663, 651 N.Y.S. 2d 954 (1996). Indeed, the court in Tekni-Plex remarked that allowing access to such confidences would 'be the equivalent of turning over to the buyer all of the privileged communications of the seller concerning the very transaction at issue.' Id."; "Although mindful of the parallels Rohlf is attempting to make, the Court declines to follow the approach adopted by New York courts in the context of mergers and acquisitions because the factual scenario here is not sufficiently analogous. The individual Plaintiffs contend, and Rohlf does not dispute, that at all relevant times hereto they constituted the majority of Eagle Forum's Board of Directors . . . . Because a corporation is generally controlled by its board of directors . . . the individual Plaintiffs, in their capacity as majority directors, have had control over Eagle Forum, and ultimately its privilege, at all times relevant. Despite the clear fissure in Eagle Forum's Board and management, there never was an occurrence akin to an acquisition. That Eagle Forum is named as a nominal defendant in the Madison County action and is actively litigating the same does not affect the Court's reasoning as such status does not create the adversity professed by Rohlf. Further, Rohlf correctly points out that the TRO in the Madison County action indicated that its purpose was to 'maintain the status quo . . . and allow defendants Martin and Schlafy to maintain custody, possession and control of the Eagle Forum property and assets while working cooperatively with Plaintiffs'. . . . The court's statement, however, does not support the finding proposed by Rohlf – that Ed Martin and Phyllis Schlafy controlled Eagle Forum prior to the April 11, 2016 meeting. Rather, it supports the general proposition that officers and directors work together to manage a corporation."; "Based on the foregoing, the undersigned finds no reason to deviate from the well-established principle that the right to waive a corporation's attorney-client privilege is an incident of control of the corporation. The individual Plaintiffs, acting as Eagle Forum's majority directors, have control of Eagle Forum and, as such, have the power to waive attorney-client privilege on its behalf. Plaintiffs' position is further strengthened insofar as Eagle Forum has, at all times relevant, ultimately been in their control (albeit only in their capacity as majority directors). Because the ability to waive privilege lies with Eagle Forum, not Ed Martin and John Schlafy, the Court declines to quash the subpoena directed to Joel Rohlf or enter a protective order concerning the same on the basis of privilege. However, of course, Eagle Forum shall decide whether or not to waive privilege.")
| Case Date |
Jurisdiction |
State |
Cite Checked |
| 2018-03-29 |
Federal |
IL |
|