No Common Interest Exception Without Prior Agreement

The Illinois Appellate Court for the First District, applying Illinois law, in an opinion written by Justice Mikva, reversed the circuit court and found there was no good faith settlement that operated to require dismissal of the third-party defendant.  The appellate court also held that the common interest exception to the waiver of attorney client privilege did not apply where there was no prior agreement between the parties.

Antwon Ross alleged that he was injured while employed as a freight conductor by Illinois Central Railroad Company (“Illinois Central”).  After falling while attempting to board a train, he was taken to a hospital where he was diagnosed with a compression fracture of the T12 vertebra, treated for a head contusion and scalp laceration, and discharged.  Later that week, he began to see Dr. Sarmed Elias, an orthopedic surgeon.  Mr. Ross was treated by Dr. Elias over the next several years.  Mr. Ross did not return to work and collects disability.  Dr. Andrew Zelby, a neurosurgeon, was hired by Illinois Central shortly after the accident to render an opinion as to the reasonableness and necessity of the medical treatment.  Dr. Zelby reviewed Mr. Ross’s medical records and informed Illinois Central and Mr. Ross that he did not believe that Mr. Ross required any treatment and that none of the procedures performed by Dr. Elias, except perhaps the first vertebroplasty, were reasonable or necessary.  Nevertheless, Mr. Ross opted to continue treatment for three more years. 

Mr. Ross sued Illinois Central under the Federal Employers’ Liability Act (“FELA”) claiming his injuries were the result of Illinois Central’s negligence.  Illinois Central asserted that his injuries were the result of his own negligence and that Mr. Ross failed to mitigate his damages, by “fail[ing] to follow the advice and recommendations of independent physicians in an effort to alleviate symptoms, promote recovery, and protect [him] from inadequate medical care.” Illinois Central filed a third-party complaint against Dr. Elias, seeking contribution for the share of damages that were attributable to his negligent treatment.  

Mr. Ross and Dr. Elias entered into a settlement under which Dr. Elias would pay Mr. Ross $25,000 “in full settlement of any claim for contribution by [Dr. Elias] regarding any injuries suffered by [Mr.] Ross.”  The agreement did not discharge or mention the liens Dr. Elias’ companies held against Mr. Ross for unpaid medical bills.  Dr. Elias then moved for a finding that the settlement was entered into in good faith, and, pursuant to the Joint Tortfeasor Contribution Act, moved for a dismissal of Illinois Central’s contribution claim. 

Prior to the settlement, Illinois Central served discovery on Mr. Ross and Dr. Elias, seeking “all documents or communications, including but not limited to joint defense agreements,” between Dr. Elias or his counsel and Mr. Ross or his counsel.  Dr. Elias stated that there were no such agreements and objected to the requests on the grounds that the communications sought were protected by attorney-client privilege and that the sharing of those communications between Dr. Elias, Mr. Ross, and their respective counsel did not waive the privilege.  The circuit court agreed and held that the common-interest exception applied to prevent waiver of the attorney-client privilege. The circuit court also held that the settlement was entered into in good faith and dismissed with prejudice Illinois Central’s third-party complaint for contribution against Dr. Elias.

On appeal, Illinois Central challenged the good faith nature of the settlement.  The Joint Tortfeasor Contribution Act provides that tortfeasor who settles “in good faith” with an injured party is no longer liable for contribution; any remaining tortfeasor is entitled to only a setoff in the amount of settlement.  Under Illinois law, to determine whether a settlement was entered into in good faith, courts must consider the totality of the circumstances in light of the encouragement of legitimate settlements and the equitable apportionment of damages among tortfeasors.  If the good faith nature of the settlement is challenged, courts are to consider (1) the reasonableness of the amount paid compared to the settlor’s fair share of liability, (2) the relationship of the settling parties, (3) whether the plaintiff sued the settlor, and (4) whether efforts were made to conceal the circumstances surrounding the settlement.  The appellate court agreed with Illinois Central and ruled that the settlement was not made in good faith: “In our view, the strongest evidence of a lack of good faith is the amount that Dr. Ellis [sic] paid when compared to what could have been his fair share of liability.”

With regard to the discovery dispute, the appellate court reversed the circuit court’s ruling that the common-interest exception to waiver of attorney-client privilege applied to the case at hand. The appellate court found the exception did not apply because Mr. Ross and Dr. Elias had not entered into a joint defense agreement or any other agreements relating to the defense of the case. Under the common interest exception, “parties with a common interest in defeating a litigation opponent” can share information relating to that interest with each other without destroying the privilege. The appellate court stated: “It is clear to us from [Selby v. O’Dea, 2017 IL App (1st) 151572], and the authorities relied on therein, that some form of agreement between the parties must exist for the exception to be invoked.” Further, “[e]ven when a common interest exists between parties, it is clear to us that the client must, at the time of the disclosure, have an agreement with the receiving party that the party will treat the information as privileged.” Justices Pierce and Griffin joined the opinion. Ross v. Illinois Central Railroad Co., 2019 IL App (1st) 181579 (May 6, 2019).