*1 Pending and ripe before the Court in both cases are Plaintiffs' Motion to Compel Production of Discovery Involving Third-Party Environmental Consultants Withheld or Redacted on Attorney-Client and Work Product Privilege Grounds [DE 204][1] filed on December 13, 2016, and Defendant Johnson Controls, Inc.’s (“JCI's”) Cross-Motion for Protective Order [DE 212] filed on January 13, 2017. On February 24, 2017, these motions were referred to Special Master Duffin for all necessary proceedings and preparation of a Report pursuant to Fed. R. Civ. P. 53(c). [DE 225 at 6–7]. On May 12, 2017, Special Master Duffin held a hearing to discuss several pending discovery motions referred to him, including the two instant motions. [See DE 280-2 at 15–27]. On July 7, 2017, Special Master Duffin delivered his Report to the Court. [DE 267-1].

Consistent with this Court's order of referral, JCI timely filed its Memorandum of Law Objecting to the Special Master's Order on July 21, 2017. [DE 274]. On the same day, Plaintiffs timely filed their Motion to Adopt the Special Master's order. [DE 275]. With the motions related to the Special Master's Order ripe, the Court issues the following order resolving the parties' dispute over JCI's production of discovery involving third-party environmental consultants.

I. Relevant Background

These cases resulted following environmental contamination over many years from JCI's plant in Goshen, Indiana that led JCI to enter into a Voluntary Remediation Agreement with the Indiana Department of Environmental Management. JCI has contracted with several environmental consultants over the years for advice on their remediation efforts. The consultants also communicated with JCI's counsel while a previous lawsuit—the Pinnyei litigation—was proceeding.

As part of these two instant cases related to the contamination in Goshen, Plaintiffs have requested the production of documents related to JCI's remediation at the Goshen site from JCI and several of its retained environmental consultants. JCI refused to produce approximately 1,000 of these documents and communications claiming attorney-client and work product privilege protection. Plaintiffs, however, argue that the privileges were waived as to those documents because the environmental consultants are not JCI's agents. This dispute over the agency of the consultants formed the basis for Plaintiffs' instant motion to compel and JCI's instant motion for protective order.

Before Special Master Duffin held his evidentiary hearing on the parties' pending discovery motions, JCI produced some additional relevant documents and communications leaving only 358 at issue. At the hearing, the parties agreed to deliver a small sample of representative documents to Special Master Duffin for in camera review with the understanding that the Court could “make the call” on the documents presented for review or alternatively ask for submission of further documents. [DE 280-2 at 25–26]. Accordingly, Special Master Duffin reviewed ten samples of redacted or withheld materials from each party, including the unredacted versions before issues his Report to the Court.

*2 In his Report, the Special Master began with the premise, to which the parties agree, that if the environmental consultants were JCI's agents, the materials would be protected. The Special Master also noted that the contracts between JCI and the environmental consultants clearly provide that they were not agents of JCI, but that the contract language does not in and of itself resolve the question of whether the consultants are agents of JCI. Citing Phelps Dodge, 852 F. Supp. at 158–62 and Valley Forge Insurance Co. v. Hartford Iron & Metal, Inc., No. 1:14-cv-00006-RLM-SLC, 2017 WL 1361408 (N.D. Ind. Apr. 14, 2017), the Special Master noted that JCI retained the environmental consultants for remediation purposes, not for provision of legal advice, and concluded that the consultants were not agents of JCI. [DE 267-1 at 2].

The Special Master then discussed some of the categories of the materials submitted for in camera review. The Special Master deemed “[a]ll notes between counsel and JCI exclusively ... privileged,” but also found “attorney notes either addressed to the consultants or to which the consultants have been made privy, are not privileged.” [Id.]. The Special Master rejected JCI's claim of work product for the same documents because the consultants were not agents of JCI.

The Special Master also deemed 21 documents withheld by JCI to be privileged because they “reflect the handwritten notes of JCI's counsel on e-mails or documents submitted to the attorney including “draft letters, draft reports and memoranda from environmental consultants reflecting the attorneys [sic] legal advice and/or thought processes.” [Id.]. After noting these categories of privileged materials, the Special Master concluded by ordering JCI to “produce all documents disclosed to or from their environmental consultants ... as specified on Plaintiffs' summary spreadsheet, except the exceptions listed above.” [Id.].

JCI objects to the Special Master's finding that the environmental consultants were not JCI's agents while Plaintiffs agree that they are not agents leaving a dispute over the remaining documents. Awaiting this Court's review of the Special Master's report, JCI has withheld four categories of documents that it claims are indeed privileged: “(1) communication between JCI and its counsel seeking or providing legal advice that copy consultants; (2) communications between JCI's counsel and JCI's consultant requesting or providing information for the purpose of counsel rendering legal advice; (3) the 21 documents with handwritten notes that the Special Master found “are privileged and not to be released”; and (4) work product related to the Pinnyei litigation or this litigation.” [DE 274 at 3].

The threshold issue before this Court remains the question of whether JCI's environmental consultants were agents of JCI. The Court has also reviewed the same sample materials reviewed by Special Master Duffin, which can be addressed after the agency decision is resolved.

II. ANALYSIS

A. Standard of Review

“The court must decide de novo all objections to findings of fact made or recommended by a master, unless the parties, with the court's approval, stipulate that the findings will be reviewed for clear error; or the findings of a master appointed under Rule 53(a)(1)(A) or (C) will be final.” Fed. R. Civ. P. 53(f)(3). “The court must [also] decide de novo all objections to conclusions of law made or recommended by a master.” Fed. R. Civ. P. 53(f)(4).

Here, the parties did not stipulate to a standard of clear error or that the findings of the Special Master would be final. Moreover, this Court permitted the parties to file an objection to the Order within 14 days. [DE 225 at 7; DE 267]. Thus, the findings of fact and law of the Special Master must be reviewed de novo.

B. Privilege Due to an Agency Relationship

*3 The attorney-client privilege protects “confidential communications between a client and an attorney for the purpose of obtaining legal advice.” Denius v. Dunlap, 209 F.3d 944, 952 (7th Cir. 2000). The communications can be made by the client or the client's agent. Stafford Trading, Inc. v. Lovely, No. 05-C-4868, 2007 WL 611252, at *2 (N.D. Ill. Feb. 22, 2007) (citing United States v. White, 950 F.2d 426, 430 (7th Cir. 1991)). Disclosure of the communication to a third party will ordinarily waive the privilege. See United States v. Evans, 113 F.3d 1457, 1462 (7th Cir. 1997). However, disclosure of the communication to an agent of either the client or attorney will not. Id.; see also Indianapolis Airport Authority v. Travelers Property Casualty Co. of Am., No. 1:13-CV-01316-JMS, 2015 WL 4715202, at *2 (S.D. Ind. Aug. 7, 2015) (rejecting waiver argument that “[defendant's] attorneys destroyed its privilege when it communicated with its consultants ... about [plaintiff's] claim.”).

Here, the key question is whether JCI's third-party environmental consultants are agents of JCI for purposes of privilege.

United States v. Aldridge, 642 F.3d 537, 541 (7th Cir. 2011). Therefore, the key elements in determining the existence of an agency relationship are (1) whether the agent acted on the principal's behalf, (2) whether the agent is subject to the principal's control, and (3) whether the agent assents to the control or otherwise consents so to act. “The question whether a principal-agent relationship exists is typically a question of fact.” Fed. Trade Comm'n v. Lifewatch Inc., 176 F. Supp. 3d 757, 773 (N.D. Ill. 2016) (citing Clarendon Nat'l Ins. Co. v. Medina, 645 F.3d 928, 935 (7th Cir. 2011)). The party asserting an agency relationship generally has the burden to establish its existence. Restatement (Third) of Agency § 1.02 cmt. d.

The contracts between JCI and the environmental consultants explicitly disclaimed agency. (See DE 280 at 6). The contracts therefore show that neither JCI nor any of its environmental consultants assented to or agreed to the creation of an agency relationship. Nevertheless, the parties agree that the express contractual disclaimer of agency of agency between themselves “is not decisive of their relations so far as third parties dealing with them upon the basis of their being agents are concerned.” Bd. of Trade of City of Chicago v. Hammond Elevator Co., 198 U.S. 424, 437 (1905) (internal citation omitted). As such, parties' conduct can imply the consent required for agency despite disclaiming contract language like that included in the contracts defining JCI's relationships with its environmental consultants.

To act as an agent “on behalf of” a principal means that the agent acts “with power to affect the legal rights and duties of the other person.” Restatement (Third) of Agency § 1.01 cmt. c. A realtor acts on behalf of a principal when the realtor makes offers to purchase properties for an investor. See, e.g., Bunger v. Demming, 40 N.E.3d 887, 894–95 (Ind. Ct. App.), transfer denied sub nom. Underwood v. Demming, 40 N.E.3d 858 (Ind. 2015). In a different setting, contracted telemarketers act on behalf of a company when they sell services exclusively for the company and often hold themselves out as working directly for the company. See, e.g., Lifewatch, 176 F. Supp. 3d at 774–76. In these examples, the agents were clearly affecting the principal's legal rights by binding them to offers for property purchases and product sales. The Lifewatch telemarketers also put themselves in the position of affecting the principal's legal rights and obligations by holding themselves out as the principal's employees.

*4 The facts in the record here about JCI's relationship with its environmental consultants do not demonstrate that the consultants were empowered to bind JCI legally in any way. Admittedly, JCI's contracts with its environmental consultants included statements that the consultants were working “on behalf of JCI.” However, recitation of those words alone does not demonstrate that the consultants were actually affecting JCI's legal rights as they complied with the terms of their professional services contract with JCI. A closer look at the consultants' conduct shows that they provided services to JCI including drafting reports that were ultimately submitted to IDEM after being approved by JCI; communicating with individuals residing near the contamination site about JCI's remediation efforts; and conducting environmental investigations and testing to advice JCI on how to proceed with its remediation efforts. Yet none of these activities reflect independent action by the environmental consultants to bind JCI legally. Accordingly, JCI has not established that its environmental consultants were working on its behalf with the power to affect its legal rights and duties. Even if JCI had, it has not met its burden to show that its consultants were subject to its control.

Complete control is not necessary to establish an agency relationship. Bunger v. Demming, 40 N.E.3d at 894. However, a principal must dictate more than just the desired result of an agency to demonstrate sufficient control over an agent's conduct. See id. For example, agency exists where a principal also dictates the strategy by which the agent accomplishes the principal's desired result of the agency. Id. Sufficient control also exists in situations where a principal company directly oversees the professional services delivered as the result of a contract. See Lifewatch, 176 F. Supp. 3d at 773–77. In Lifewatch, control was found where the principal corporation revised the contracted telemarketers' script, specified what telemarketers were allowed to say, and ultimately approved the final script used by telemarketers. Id. at 776. However, not all relationships arising from professional services contracts subject alleged agents to sufficient control from the principal to satisfy the definition of agency. Restatement (Third) of Agency § 1.01 cmt. c.

In support of its contention that JCI maintained control over the environmental consultants in this case, JCI notes that the consultants used their professional expertise to make recommendations to JCI regarding remediation. However, JCI did not dictate the strategy the consultants had to use to make those recommendations. Similarly unpersuasive is the letter that JCI cites from consultant GZA to JCI's own David Troup proposing terms and conditions whereby JCI could employ GZA to perform the proposed remediation work. [DE 211-16]. The proposal letter required JCI's approval to implement the remediation strategy proposed by GZA, which is to be expected in a contract for services. For instance, the letter states that

However, the letter includes no indication that JCI would retain authority in its relationship with GZA to dictate, or even supervise, how it would go about gathering the data or drafting the reports for JCI's consideration. This is different than the principal's micromanagement of the telemarketers' operations in Lifewatch or the exacting control of the realtor's conduct in Bunger. Even though the evidence shows that the consultants met and spoke directly to IDEM outside of JCI's presence and consulted with JCI before submitting reports to IDEM, evidence of operational control over the consultants is lacking, demonstrating nothing more than an arms-length professional services relationship rather than a relationship defined by JCI's control over the consultants' conduct.

With evidence that JCI and the environmental consultants did not mutually agree to an agency relationship, that the consultants performed work for JCI rather than acting on behalf of JCI, and that the consultants were not subjected to operational control of its work for JCI, this Court finds—just as the Special Master did—that the environmental consultants were not agents of JCI.

C. Privilege Review

*5 Regardless of whether the environmental consultants were agents of JCI, the particular documents and communications for which JCI claims privilege must be analyzed to determine whether the privilege applies. See Evans, 113 F.3d at 1457, 1463. When evaluating the applicability of privilege to particular materials, “[c]ourts should consider the totality of the circumstances.” Heriot v. Byrne, 257 F.R.D. 645, 667 (N.D. Ill. 2009).[2] Among the circumstances to be considered are the practical realities of providing legal advice to companies. See Stafford Trading, 2007 WL 611252, at *2. For instance, legal advice related to business matters may be privileged such as in the case where a company's attorney requires the input of the company's third-party consultant to advise the client. Id. at *2–*3. Accordingly, disclosure to third-party consultants does not automatically waive the privilege. Instead, confidential communications between an attorney and the client's third-party consultant remain privileged when conducted “for the purpose of obtaining or providing legal advice.” Id. at *7. Therefore, the court must consider the unique nature of each communication on a document-by-document basis to determine whether the privilege applies. Id.; see also In re JP Morgan Chase & Co. Sec. Litig., No. 06 C 4674, 2007 WL 2363311, at *7 (N.D. Ill. Aug. 13, 2007). Said another way, the court should not rely upon the general role of a third party when analyzing privilege; rather, the court should consider the third party's specific involvement in the communication. See Evans, 113 F.3d at 1457.

The court's analysis in Stafford Trading is an example as it evaluated each communication to determine whether it had been for the purpose of obtaining or providing legal advice and found the privilege to apply where that was the case. See Stafford Trading, 2007 WL 611252, at *7–*12; see also Ford Motor Co. v. Mich. Consolidated Gas Co., No. 08-CV 13505, 2013 WL 5435184, at *4 (E.D. Mich. Sept. 27, 2013) (“the [attorney-client] privilege can ... apply to communications between an environmental consultant and an attorney when the communication is made to assist the attorney in giving legal advice to the client.”). Here, JCI seeks to protect only this type of communications—those with its environmental consultants to assist its attorneys in giving it legal advice—from disclosure to Plaintiffs. Thus, the question is whether the withheld or redacted materials constitute “legal advice” such that the materials should remain protected. Without reviewing all of the documents at issue, the Court provides the following guidance based upon in camera review of the sample materials received from the parties.

First, as the Special Master found, (1) all handwritten notes between counsel and JCI exclusively remain privileged and must not be disclosed to Plaintiffs; and (2) the 21 documents withheld by JCI that include the handwritten notes of JCI's counsel on e-mails or documents reflect counsel's legal advice or thought processes on draft letters, draft reports, and memoranda remain privileged and must not be disclosed. See, e.g., JCI's In Camera Document #3.

Second, communications between JCI's attorneys that were copied to consultants seeking direction on interactions with IDEM reflect efforts to keep the consultants informed of legal advice being given to JCI on relevant environmental concerns. As such, these communications involve legal advice protected by privilege. See, e.g., JCI's In Camera Document #1.

Third, communications from consultants to JCI's counsel describing relevant environmental administrative requirements and making recommendations for ensuring JCI's compliance amount to translations of the environmental regulations to help counsel provide legal advice to JCI. Similarly, consultants' responses to counsel's requests for information on remediation issues provide information necessary for counsel to advise JCI on legal issues. As such, their content does constitute legal advice worthy of protection by privilege. See, e.g., JCI's In Camera Documents #2 and 8.

*6 Fourth, any reports, such as an environmental compliance audit, prepared by consultants at the request of JCI's counsel constitute legal advice protected by privilege. See, e.g., JCI's In Camera Document #4.

Fifth, communications from JCI's counsel to consultants providing legal summaries on issues relevant to JCI's interests, seeking information to benefit JCI, and seeking an opinion on the effects of particular laws constitute legal advice protected by privilege. See, e.g., JCI's In Camera Documents #5, 6, 7, and 9.

Lastly, communications between JCI and its counsel that were copied to consultants seeking advice on the effects of law on the remediation efforts involve legal advice that is protected. See, e.g., JCI's In Camera Document #10.

III. CONCLUSION

Based on the record before the Court, including (1) the parties' briefing of Plaintiffs' motion to compel and JCI's cross motion for protective order, (2) the Special Master's report, and (3) the parties' briefing of JCI's Objection to the report and Plaintiffs' motion to adopt the report, the Court ADOPTS the Special Master's IN PART to the extent it finds that the environmental consultants were not agents of JCI and finds that counsel's handwritten notes are privileged. [Schmucker, DE 249; Hostetler, DE 275]. The Court also SUSTAINS JCI's Objection to the Special Master's report to the extent that the content of the materials at issue constitute legal advice as outlined above. [Schmucker, DE 248; Hostetler, DE 274]. Accordingly, the Court DENIES IN PART Plaintiffs' motion to compel production of discovery involving third-party environmental consultants withheld or redacted on attorney-client and work product grounds. [Schmucker, DE 210; Hostetler, DE 204]. In addition, the Court GRANTS IN PART JCI's cross motion for protective order. [Schmucker, DE 219; Hostetler, DE 212].

The Court ORDERS JCI to produce any relevant discovery and respond to any relevant request or interrogatory, which are NOT included within the categories of privileged and protected information described above by September 25, 2017.

SO ORDERED.