ContiTech USA, Inc. v. McLaughlin Freight Servs., Inc.
ContiTech USA, Inc. v. McLaughlin Freight Servs., Inc.
2021 WL 6618846 (S.D. Iowa 2021)
November 24, 2021
Jackson Jr., Stephen B., United States Magistrate Judge
Summary
McLaughlin Freight Services, Inc. filed a motion to compel ContiTech USA, Inc. to produce documents that were being withheld based on the common interest doctrine. The Court found that ContiTech had failed to meet its burden of establishing the application of the common interest doctrine to the withheld documents and granted the motion to compel. The Court emphasized the need for evidentiary support when asserting attorney-client privilege to bar discovery and the need to establish a joint agreement between parties to exchange privileged information in order to obtain the protection of the common interest doctrine.
CONTITECH USA, INC., Plaintiff,
v.
MCLAUGHLIN FREIGHT SERVICES, INC. and DAN MCLAUGHLIN, Defendants.
MCLAUGHLIN FREIGHT SERVICES, INC. Counter-Claimant,
v.
CONTITECH USA, INC. Counter-Defendant
v.
MCLAUGHLIN FREIGHT SERVICES, INC. and DAN MCLAUGHLIN, Defendants.
MCLAUGHLIN FREIGHT SERVICES, INC. Counter-Claimant,
v.
CONTITECH USA, INC. Counter-Defendant
CIVIL NO. 3:20-cv-00075-SMR-SBJ
United States District Court, S.D. Iowa, Eastern Division
Filed November 24, 2021
Counsel
Cassandra Makenzie Alesch, Michael A. Dee, Brown Winick Graves Gross and Baskerville P.L.C., Des Moines, IA, for Plaintiff.Joseph Porter, Abram V. Carls, Simmons Perrine Moyer Bergman PLC, Cedar Rapids, IA, for Defendants.
Jackson Jr., Stephen B., United States Magistrate Judge
ORDER
I. INTRODUCTION
*1 This case involves a dispute over payment of services provided by McLaughlin Freight Services, Inc. (“McLaughlin Freight”) to transport products manufactured by ContiTech USA, Inc. (“ContiTech”). ContiTech asserts claims of fraud and unjust enrichment against McLaughlin Freight and its president Dan McLaughlin. Dkt. 46. ContiTech alleges falsified documents were submitted for payment of unperformed services. Id. ContiTech ceased working with and paying McLaughlin Freight until the veracity of invoices could be determined. Id. McLaughlin Freight asserts counterclaims against ContiTech for breach of contract, unjust enrichment and fraud. Dkt. 26. McLaughlin Freight alleges ContiTech breached its contractual obligations by failing to pay for freight hauling and other services. Id.
Now before the Court is a Motion to Compel (Dkt. 39) filed by McLaughlin Freight under Federal Rule of Civil Procedure 37 and Local Rule 37. McLaughlin Freight seeks an order compelling ContiTech to fully respond to certain requests for production of documents. ContiTech objected to the requests based on attorney-client privilege and the common interest doctrine and provided a privilege log identifying documents being withheld. McLaughlin Freight urges the Court to overrule the objections and compel the production of the documents. ContiTech resists the motion and maintains the withheld documents contain privileged communications which fall within the protection of the common interest doctrine. Dkt. 41.
The Court finds oral arguments to be unnecessary and considers the motion to be fully submitted See L.R. 7(c). Because ContiTech has failed to sufficiently meet its burden of establishing attorney-client privilege and application of the common interest doctrine to the withheld documents, the motion to compel by McLaughlin Freight will be granted.
II. COMMON INTEREST DOCTRINE
As explained by the Court of Appeals for the Eighth Circuit, the common interest doctrine expands the protection of the attorney-client privilege under certain circumstances:
If two or more clients with a common interest in a litigated or non-litigated matter are represented by separate lawyers and they agree to exchange information concerning the matter, a communication of any such client that otherwise qualifies as privileged ... that relates to the matter is privileged as against third persons. Any such client may invoke the privilege, unless it has been waived by the client who made the communication.
In re Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 922 (8th Cir. 1997) (quoting Restatement (Third) of the Law Governing Lawyers § 126(1) (Proposed Final Draft No. 1, 1996)). In the words of the Eighth Circuit, the “doctrine softens the ordinary requirement that lawyer-client communications must be made in confidence in order to be protected by the privilege.” Id. (citing John Morrell & Co. v. Local Union 304A, United Food & Commercial Workers, 913 F.2d 544, 555-56 (8th Cir.1990) (applying the doctrine), cert. denied, 500 U.S. 905, 111 S.Ct. 1683, 114 L.Ed.2d 78 (1991)). Under the circumstances of In re Grand Jury Subpoena Duces Tecum, the Eighth Circuit concluded the doctrine was inapplicable because, first, whether the communications at issue did not “otherwise qualif[y] as privileged” was questionable and, second, “the requisite common interest between the clients” was lacking. Id. The Eighth Circuit noted “[t]he common interest may be ‘either legal, factual, or strategic in character,’ ” but “even this loose standard” was not met. Id. (quoting Restatement § 126(1) cmt. e).
*2 The Restatement provision quoted by the Eighth Circuit for the common interest doctrine is now found at section 76, with the following comments:
b. Rationale. The rule in this Section permits persons who have common interests to coordinate their positions without destroying the privileged status of their communications with their lawyers. For example, where conflict of interest disqualifies a lawyer from representing two co-defendants in a criminal case (see § 129), the separate lawyers representing them may exchange confidential communications to prepare their defense without loss of the privilege. Clients thus can elect separate representation while maintaining the privilege in cooperating on common elements of interest.
c. Confidentiality and common-interest rules. The common-interest privilege somewhat relaxes the requirement of confidentiality (see § 71) by defining a widened circle of persons to whom clients may disclose privileged communications. As a corollary, the rule also limits what would otherwise be instances of waiver by disclosing a communication (compare § 79). Communications of several commonly interested clients remain confidential against the rest of the world, no matter how many clients are involved. However, the known presence of a stranger negates the privilege for communications made in the stranger's presence.
Exchanging communications may be predicated on an express agreement, but formality is not required. It may pertain to litigation or to other matters. Separately represented clients do not, by the mere fact of cooperation under this Section, impliedly undertake to exchange all information concerning the matter of common interest.
d. The permissible extent of common-interest disclosures. Under the privilege, any member of a client set—a client, the client's agent for communication, the client's lawyer, and the lawyer's agent (see § 70)—can exchange communications with members of a similar client set. However, a communication directly among the clients is not privileged unless made for the purpose of communicating with a privileged person as defined in § 70. A person who is not represented by a lawyer and who is not himself or herself a lawyer cannot participate in a common-interest arrangement within this Section.
e. Extent of common interests. The communication must relate to the common interest, which may be either legal, factual, or strategic in character. The interests of the separately represented clients need not be entirely congruent.
Unlike the relationship between co-clients, the common-interest relationship does not imply an undertaking to disclose all relevant information (compare § 75, Comment d). Confidential communications disclosed to only some members of the arrangement remain privileged against other members as well as against the rest of the world.
f. Subsequent adverse proceedings. Disclosing privileged communications to members of a common-interest arrangement waives the privilege as against other members in subsequent adverse proceedings between them, unless they have agreed otherwise. In that respect, the common-interest exception operates in the same way as the exception for subsequent adverse proceedings as between co-clients (see § 75, Comment d). Disclosing information does not waive the privilege with respect to other communications that might also be germane to the matter of common interest but that were not in fact disclosed.
*3 There is no waiver between the members exchanging a communication if they have agreed that it will remain privileged as against each other in subsequent adverse proceedings.
g. Standing to assert the privilege; waiver. Any member of a common-interest arrangement may invoke the privilege against third persons, even if the communication in question was not originally made by or addressed to the objecting member.
In the absence of an agreement to the contrary, any member may waive the privilege with respect to that person's own communications. Correlatively, a member is not authorized to waive the privilege for another member's communication. If a document or other recording embodies communications from two or more members, a waiver is effective only if concurred in by all members whose communications are involved, unless an objecting member's communication can be redacted.
Restatement (Third) of the Law Governing Lawyers § 76 cmts. b-g. (2000).
III. DISCOVERY IN DISPUTE
ContiTech has withheld the production of documents responsive to McLaughlin Freight's requests for production numbers 37, 38, 43 and 44 based on the attorney-client privilege and common interest doctrine. The requests and responses at issue are as follows:
37. Emails sent to or received from Walter Zelichowski (DSV) from July 1, 2019 forward.
RESPONSE: Plaintiff objects to this request to the extent it seeks documents or communications protected by attorney-client privilege or common interest privilege. Without waiving said objection, see Privilege Log produced herewith.
38. Emails sent to or received from Dennis Heil (DSV) from July 1, 2019 forward.
RESPONSE: Plaintiff objects to this request to the extent it seeks documents or communications protected by attorney-client privilege or common interest privilege. Subject to said objection, and without waiving the same, see Privilege Log produced herewith. Also see CONTI008063-CONTI008107.
* * *
43. Your prior productions reference a “document with the suggested game plan” developed by ContiTech and/or DSV with respect to your claims against Defendants and/or outstanding invoices. See CONTI002491. Produce every version of that “game plan” document, and every proposal, report, or agreement shared between ContiTech and DSV.
RESPONSE: Plaintiff objects to this request to the extent it seeks documents or communications protected by attorney-client privilege or common interest privilege. Subject to said objection, and without waiving the same, see Privilege Log produced herewith.
44. Every email that provided or mentioned a document produced under Request 43.
RESPONSE: Plaintiff objects to this request to the extent it seeks documents or communications protected by attorney-client privilege or common interest privilege. Subject to said objection, and without waiving the same, see Privilege Log produced herewith.
Dkt. 39-2 pp. 39-40.
According to McLaughlin Freight, the privilege log identifies 48 documents, primarily emails, that ContiTech is withholding from discovery. See Dkt. 39-2 pp. 48-51. Except for three specified documents, McLaughlin Freight requests that the Court overrule ContiTech's objections and compel the production of all other logged documents. McLaughlin Freight contends the documents are neither attorney-client communications nor subject to the common interest doctrine. Dkt. 39-1 p. 1.
*4 ContiTech on the other hand insists the withheld documents contain attorney-client privileged communications which fall within the protection of the common interest doctrine. In its brief, ContiTech proffers the following contextual background:
ContiTech has a contract with DSV Road Inc. (“DSV”) for DSV to serve as its third-party logistics provider for ContiTech facilities, which includes coordinating, obtaining, and paying for shipping services from trucking companies hauling freight to and from such facilities. McLaughlin Freight is one of the trucking companies that contracted with DSV to provide trucking services for ContiTech and other DSV customers.
ContiTech and DSV discovered in late 2019 that Dan McLaughlin, owner of McLaughlin Freight, engaged in fraudulent acts in order to receive scheduled loads and be paid round-trip rates to which he was not entitled. Dan McLaughlin forged emails purportedly sent from ContiTech employee Dan Cook approving a round-trip and submitted them to DSV to receive payment of a round-trip rate. DSV paid McLaughlin Freight these round-trip rates and sought reimbursement from ContiTech.
Dkt. 41 pp. 1-2. ContiTech explains the withheld documents contain two categories of privileged communications:
First, communications that were solely between in-house counsel for ContiTech (Christopher Proesel) and in-house counsel for DSV (Dennis Heil) listed in the privilege log .... The second type are communications between ContiTech in-house counsel and/or DSV in-house counsel, with an employee of ContiTech and/or DSV.
Id. p. 2.
ContiTech contends it has a shared legal interest with DSV and the communications were made in furtherance of that interest, stating: “ContiTech and DSV share the common interest to resolve the fraud that has been perpetrated against both ContiTech and DSV. The two parties have the common goal of recovering funds that were obtained fraudulently by Defendants.” Id. pp. 6-7 (internal case citation omitted). ContiTech therefore asserts the communications between in-house counsel for ContiTech and in-house counsel for DSV are privileged pursuant to the common interest doctrine. Id. pp. 4-5. ContiTech cites Comment d of Restatement Section 76 which states: “Under the privilege, any member of a client set—a client, the client's agent for communication, the client's lawyer, and the lawyer's agent (see § 70)—can exchange communications with members of a similar client set.” Id. p. 4. ContiTech further asserts that withheld documents containing communications between DSV's in-house counsel and a DSV employee which were then forwarded to ContiTech are also protected by the common interest doctrine. Id. p. 6.[1]
*5 In reply, McLaughlin Freight maintains ContiTech “provides no basis for the Court to find that the great bulk of withheld documents contain attorney-client communications.” Dkt. 42 p. 1. McLaughlin Freight emphasizes the common interest doctrine is an expansion of the attorney-client privilege which, necessarily, first requires establishment of the privilege. Id. pp. 1-2. McLaughlin Freight also points out ContiTech provides no evidence of an agreement or understanding between ContiTech and DSV to exchange privilege information as required under the common interest doctrine. Id. p. 2. McLaughlin Freight further notes ContiTech provides no evidence to support the assertion that ContiTech and DSV share a common legal interest. Id. From the perspective of McLaughlin Freight, “the evidence in the record is that ContiTech and DSV are legally adverse.” Id.
IV. COURT'S DECISION
Under the Federal Rules of Civil Procedure, and unless otherwise limited by court order, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1). A party may serve a request for production of documents or electronically stored information within the scope of Rule 26(b). Fed. R. Civ. P. 34(a)(1). Pursuant to Rule 37, a party is permitted to move for an order compelling discovery if the opposing party fails to produce documents. See Fed. R. Civ. P. 37(a)(3)(B)(iv).
After consideration of the parties' submissions on the motion to compel, the Court finds ContiTech has failed to meet its burden of establishing the application of the common interest doctrine to the withheld documents. As emphasized by McLaughlin Freight, ContiTech provided this Court with insufficient evidentiary support to establish, first, the withheld documents contain attorney-client privileged communications and, second, the common interest doctrine expands the protection of such privilege to the exchange of the information between ContiTech and DSV. ContiTech submitted no affidavits or other documentary evidence with its Resistance (Dkt. 41) to the motion to compel.
It is well-established that the party asserting the attorney-client privilege to bar discovery has the burden of establishing a factual basis for the applicability of such protection. See, e.g., United States v. Ivers, 967 F.3d 709, 715 (8th Cir. 2020); Rabushka ex rel. U.S. v. Crane Co., 122 F.3d 559, 565 (8th Cir. 1997); Hollins v. Powell, 773 F.2d 191, 196 (8th Cir. 1985) (citing Diversified Industries, Inc. v. Meredith, 572 F2d 596, 609 (8th Cir. 1978) (en banc); Bouschor v. United States, 316 F.2d 451, 456 (8th Cir. 1963)); Iowa Protection & Advocacy Servs., Inc. v. Rasmussen, 521 F.Supp.2d 895, 906-07 (S.D. Iowa 2002) (quoting St. Paul Reinsurance Co., Ltd. v. Commercial Fin. Corp., 197 F.R.D. 620, 627 (N.D. Iowa 2000)). The party may meet this burden by producing “a detailed privilege log stating the basis of the claimed privilege for each document in question, together with an accompanying explanatory affidavit of its ... counsel.” Rabushka, 122 F.3d at 565; see also Fed. R. Civ. P. 26(b)(5)(A) (“When a party withholds information otherwise discoverable by claiming that the information is privileged ... the party must ... describe the nature of the documents, [and] communications, ... and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.”). Communications are not entitled to blanket protection merely because attorneys are involved without any regard to underlying facts and circumstances. See, e.g., Diversified Industries, 572 F2d at 602 (“A communication is not privileged simply because it is made by or to a person who happens to be a lawyer.”); Ivers, 967 F.3d at 715 (Party seeking to assert attorney-client privilege “must show that the statements at issue were ‘made for the purpose of facilitating the rendering of legal services to the client.’ ”) (emphasis added) (quoted citation omitted).
*6 Here, the privilege log (submitted to the Court by McLaughlin Freight) contains some necessary information but is inadequate for this Court to fully assess ContiTech's assertions of attorney-client privilege for the withheld documents. ContiTech's discovery responses (again as submitted to the Court by McLaughlin Freight) fail to provide any factual explanation for assertion of the privilege. No explanatory affidavit from counsel has been proffered to the Court by ContiTech. And the explanatory statements within ContiTech's brief are limited and fall short of providing sufficient factual information to properly determine attorney-client privilege. As previously emphasized in the Southern District of Iowa, “ ‘[i]t is not the court's burden to establish the applicability of the privilege to the documents by engaging in a factual and legal analysis on the discovery opponent's behalf.’ ” Iowa Protection & Advocacy Servs., 521 F.Supp.2d at 908 (quoted citation omitted).
ContiTech has also failed to sufficiently establish the common interest doctrine expands the protection of the asserted attorney-client privilege to the exchange of the information between ContiTech and DSV. Caselaw relied upon ContiTech highlights its lack of evidentiary support. For example, in a decision from this District cited by ContiTech, Iowa Network Servs., Inc. v. Sprint Commc'ns Co., L.P., 2011 WL 13151672 (S.D. Iowa 2011), the Magistrate Judge noted “[t]he party asserting an attorney-client privilege has the burden to establish its applicability.” Id. at *2. Turning to address the common interest doctrine, it was further noted: “Essential to a privileged common interest communication is some kind of agreement or understanding between the clients ... that they would exchange information concerning the matter.” Id. *8. The Magistrate Judge then determined the common interest doctrine did not apply because “there was no evident agreement among” the parties to exchange information. Id.
In another decision cited by ContiTech, Progressive Cas. Ins. Co. v. F.D.I.C., 49 F.Supp.3d 545 (N.D. Iowa 2014), the Magistrate Judge granted defendant's motion to compel production of purported attorney-client privileged documents because the privilege was waived when the communications were voluntarily disclosed by plaintiff to third parties. Id. at 554. It was further determined plaintiff failed to establish the application of the common interest doctrine. Id. at 554-55. The District Judge found no error and noted the following principles:
Obtaining the protections of the common interest doctrine requires a two-part showing. First, the parties exchanging otherwise privileged information must establish a common legal, rather than commercial, interest. The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial. For courts to find such a common legal interest, the parties must have come to an agreement, though not necessarily in writing, embodying a cooperative and common enterprise towards an identical legal strategy.
* * *
Second, the parties must establish that any exchange of privileged information was made in the course of formulating a common legal strategy[,] and that the parties understood that the communication would be in furtherance of the shared legal interest.
Id. 557 (quoting Fireman's Fund Ins. Co. v. Great Am. Ins. Co. of New York, 284 F.R.D. 132, 139-40 (S.D.N.Y. 2012) (internal quotation marks and citations omitted)). The District Judge agreed plaintiff had failed to show that an agreement between it and the third parties “established a cooperative and common enterprise towards an identical legal strategy.” Id. at 558 (internal quotation marks and citation omitted). It was noted: “There is no evidence establishing a joint legal strategy or legal enterprise, which is central to the common interest doctrine[.]” Id. (emphasis added).
Likewise, here, while ContiTech cites to the principles set forth in Progressive Cas. Ins., it has failed to sufficiently establish, with evidentiary support, the existence of a joint agreement as to the exchange of privileged information with DSV as required to obtain the protection of the common interest doctrine. Nor has ContiTech sufficiently established, with evidentiary support, that the exchange of privileged information with DSV “ ‘was made in the course of formulating a common legal strategy, and that the parties understood that the communication would be in furtherance of the shared legal interest.’ ” Dkt. 41 p. 3 (quoting Progressive Cas. Ins., 49 F.Supp.3d at 557). ContiTech acknowledges “[t]here must be an agreement between the parties to share information” but proffers no proof of such an agreement with DSV for consideration by the Court. Id. (emphasis added). Merely citing principles and making conclusory factual assertions without evidentiary support is insufficient to meet the burden of establishing the application of the common interest doctrine.
*7 For those reasons, the Motion to Compel (Dkt. 39) is hereby granted. Plaintiff ContiTech USA, Inc. shall produce the documents being withheld based on the common interest doctrine by December 9, 2021, except for the three documents specified by McLaughlin Freight Services, Inc. An award of expenses under Federal Rule of Civil Procedure 37 is not warranted.
IT IS SO ORDERED.
Footnotes
ContiTech brought this case under the jurisdiction of this Federal Court based upon diversity of citizenship of the parties pursuant to 28 U.S.C. § 1332. Dkt. 1 ¶ 4. Pursuant to Federal Rule of Evidence 501, “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Fed. R. Evid. 501; see also Union Cty., Iowa v. Piper Jaffray & Co., 525 F.3d 643, 646 (8th Cir. 2008) (“Because this is a diversity case, the determination of whether attorney-client privilege applies is governed by state law.”) (citing Fed. R. Evid. 501). ContiTech does not cite to applicable state law to support its reliance on the common interest doctrine but, instead, relies primarily upon Federal common law as set forth by the Eighth Circuit in In re Grand Jury Subpoena Duces Tecum.