Page 49 - Sharp-Hundley 2012

Sharp Thinking

No. 80 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. December 2012

No “Subject Matter Waiver” of Privilege

From Disclosure in Business Transaction

By John T. Hundley, jhundley@lotsharp.com, 618-242-0246

The doctrine of “subject matter” waiver of privilege does not apply to the extra-judicial disclosure of
attorney-client communications not thereafter used by the client to gain an adversarial advantage in
litigation, the Illinois Supreme Court held late last month.

Under the doctrine of subject matter waiver, the waiver of privilege as to a given
communication, or part thereof, operates as a waiver as to all communications on the
same subject matter. As regards disclosures made outside of judicial proceedings,
the case was one of first impression in the Supreme Court and one of only a handful
of appellate decisions nationwide. Center Partners, Ltd. v. Growth Head GP, LLC,
2012 IL 113107.

The decision reversed the judgment and much of the reasoning of the Appellate
Court decision reported at 2011 IL App (1st) 110381. See Sharp Thinking No. 52
(Sept. 2011). It involved the sharing of privileged information among buyers and
sellers in a business transaction, but the court said it did “not limit our holding only to
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advice given in business transactions”. Hundley

Background Complex: In Center Partners, buyers and sellers had shared privileged information
as part of the negotiation and structuring of the sale of numerous shopping center properties. As part of
the transaction, buyers acquired a majority interest in one of the limited partnerships formerly operated by
the sellers. After the transaction, limited partners of that partnership sued both the buyers and the sellers
claiming breaches of fiduciary and contractual duties to them.

The privilege issues arose in the trial court in three waves. First, plaintiffs sought documents that had
been shared among the parties. The trial court ordered those documents’ production, but appeared to
hold that waiver as to their entire subject matter had not occurred. Next, plaintiffs sought to require
defendants' witnesses to testify on the same subject matter in depositions. The trial court refused the
request. Finally, plaintiffs sought 1,500 documents not shared during the negotiations but on the same
subject matter as those shared. The trial court then ruled that because “[d]efendants had shared
privileged communications it follows that the subject of those communications is susceptible to discovery.”
The Appellate Court affirmed (see Sharp Thinking No. 52), but the Supreme Court reversed.

Usual Rule Distinguished: The high court noted the “well-settled rule . . . that when a client
discloses to a third-party a privileged communication, that particular communication is no longer privileged

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For an early discussion of the issues that arise in these sorts of business cases, see Hundley, White Knights, Pre-Nuptial
Confidences, and the Morning After: The Effect of Transaction-Related Disclosures on the Attorney-Client and Related Privileges, 5
DEPAUL BUS. L.J. 59 (1992-93).

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Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
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constitute educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal
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