Beck Sys., Inc. v. ManageSoft Corp., No. 05 C 2036, 2006 WL 2037356 (N.D. Ill. July 14, 2006) (Schenkier, Mag. J.).

In considering the scope of attorney-client privilege and work product waivers stemming from defendant ManageSoft’s reliance on an opinion of counsel, Magistrate Judge Schenkier undertook a detailed analysis of the Federal Circuit’s recent In re Echostar Communications, 448 F.3d 1294 (Fed. Cir. 2006), decision and how it changes the Northern District of Illinois’ previous ruling on the issue in Beneficial Franchise Co., Inc. v. Bank One N.A., 205 F.R.D. 212 (N.D. Ill. 2001).

In Echostar, the Federal Circuit held that reliance on an opinion waives attorney-client privilege with respect to all communications relating to the subject matter. This means that even if you use in-house counsel to provide the opinion, which Echostar did, privilege is waived for all communications with any counsel, including trial counsel, on the subject.  The Court considered the following three categories of work product, holding that the first and third categories are waived when relying on an opinion, but that the second is not waived: 1) documents embodying a communication between the attorney and client regarding the subject matter; 2) documents analyzing law, facts or strategy and reflecting the attorney’s impressions which were not given to the client; and 3) documents discussing an attorney-client communication concerning the subject matter which were not themselves sent to or from the client. The Federal Circuit also held that the waivers continue for communications after the litigation was filed. For a more detailed analysis of the Federal Circuit’s Echostar decision, visit Patently-O.

Magistrate Judge Schenkier noted that the Beneficial decision is largely in line with Echostar because Beneficial held that waiver continues after litigation is initiated and that waiver extends beyond opinion counsel to all communications with any counsel regarding the waived subject matter. But the Court found that Echostar modified the Beneficial analysis in one area – the scope of work product waiver. The two opinions agree that category one documents are waived, but differ slightly on the other two categories. Beneficial required protection of category two documents if they contradicted the disclosed opinions of counsel. But Echostar does not require waiver and production with respect to any category two document, narrowing the waiver as contemplated by Beneficial. Similarly, Beneficial only waived work product protection for category three documents if they contradicted the disclosed opinions of counsel. But Echostar holds that waiver applies to all category three documents, broadening the Beneficial waiver.

A final procedural point may be very important to litigators currently dealing with this issue, but which will shortly become moot. The Court, of course, ordered ManageSoft to review its documents and privilege log and to produce any documents in waived categories. The Court also, however, required that plaintiff return to ManageSoft any category two documents which ManageSoft might have originally produced under the Beneficial ruling, holding that such documents were inadvertently produced and did not constitute waiver.