Security - Check Permissions

MFDF - Mutual Fund Directors Forum - Illinois Court Rejects Motion for Exception to Attorney-Client Privilege in 36(b) Case

Member Login

Request an account

Sample Banner 2

Illinois Court Rejects Motion for Exception to Attorney-Client Privilege in 36(b) Case

An alert by law firm Ropes & Gray details the latest ruling in Section 36(b) litigation after an Illinois court’s rejection of a motion by plaintiffs to compel an adviser and its trustees to produce documents protected by the attorney-client privilege. The plaintiffs in the case (Chill v. Calamos Advisors, No. 1:17-cv-01658 (N.D. Ill. Apr. 25, 2017)) argued that the withheld information was probative and that the defendants had not identified any burden or expense in producing the information. However, U.S. Magistrate Judge Mary Rowland wrote that the issue in the plaintiffs’ request was not simply the probative nature of the information requested “but whether plaintiffs have demonstrated good cause for piercing the attorney-client privilege.” The plaintiffs, who claimed they were entitled to the documents under the fiduciary exception to attorney-client privilege, cited to Kenny v. Pac. Inv. Mgmt. Co. LLC, No. 14 C 1987, 2016 WL 6836886 (W.D. Wash. Nov. 21, 2016), in which a court ordered the production of documents based on the principle that attorney-client communications are not privileged from those to whom the client owes a fiduciary duty. The Illinois court noted, however, that the court in Kenny v. PIMCO merely found “that a fiduciary relationship existed between the mutual fund trustees and the fund’s shareholders” but did not apply the good cause standard in ruling that the attorney-client privilege should be pierced. “In order to establish that the exception applies, the party seeking the discovery must establish both ‘a fiduciary relation and good cause for overcoming the privilege’,” Judge Rowland wrote, citing to another Seventh Circuit case, and added that the plaintiffs in Chill v. Calamos failed to meet this particularized showing when they failed to demonstrate the necessity of the information and its unavailability from other sources.