Page 23 - John Hundley 2011

Sharp Thinking

No. 52 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. September 2011

Sharing Information in Business Transactions

May Result in Waiver of Attorney-Client Privilege

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

Persons who share privileged information with others as part of a business transaction may find that
they have waived the privilege as to all communications on the subject matter of the shared information, a
panel of the Illinois Appellate Court ruled late last month.

Moreover, Center Partners, Ltd. v. Growth Head GP, LLC, 2011 IL App (1st) 110381 (Aug. 30, 2011),
holds that business transaction lawyers have no “work product” privilege which may be asserted
to cover any such shared information.

Assuming the decision is not subsequently reversed and that its logic is accepted by other appellate
panels, the ruling is likely to have severe chilling effects on information-sharing during transactions and on
business lawyers generally.

Plaintiffs and defendants in Center Partners were in the business of
owning and operating shopping malls. In 2001-02, three groups of the
defendants negotiated to jointly purchase the assets of a Dutch company.
Among the assets to be purchased was an entity known as Head Acquisition,
L.P. (“Head”), which was the general partner of a limited partnership known as
Urban Shopping Centers, L.P. (“Urban”). As part of the transaction, the
three groups of defendants acquiring the Dutch company’s assets
shared information and strategy concerning the acquisition and how the
target’s assets would be split up as part of the acquisition. Plaintiffs were
minority limited partners in Urban who claimed that the acquisition of Head
constituted breaches of contract and of fiduciary duties owed to them. They
filed suit on those theories and as part of the discovery process sought the
privileged information which had been shared between the three groups of
defendants during the transaction. Hundley

Defendants resisted the discovery requests on the grounds of the attorney-client privilege, and their
attorneys resisted it on the further ground of the work-product exemption. However, the Appellate Court
rebuffed both of those objections.

With respect to the attorney-client privilege, the court held that the privilege was waived when the
defendants shared their privileged information with each other. Although a credible argument apparently
could be made that the acquiring companies were commonly-aligned allies, the appellate panel instead
treated the information recipients as “third parties” to the privilege and ruled that the disclosures not
only waived the privilege as to the specific communications shared, but as to all information on
the same subject.

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●
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
Thinking shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein
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
advice on your particular situation, contact a Sharp lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.