Court Finds In-House Counsel’s Litigation Database Privileged; Disclosure to Auditor did not Effect Waiver

Lawrence E. Jaffee Pension Plan v. Household Int’l, Inc., 2006 WL 1898151 (N.D. Ill. July 6, 2006)

In this securities fraud class action, plaintiffs sought to compel production of documents relating to Household’s litigation database. During the class period, Household’s Office of the General Counsel collected and maintained information regarding all litigation that was being prosecuted, defended, or supervised by attorneys in that department. The purpose of the database was to assist Household’s counsel in understanding, managing and providing legal advice to management about each lawsuit. According to Household, attorneys or staff under their direction added comments to the database reflecting the attorneys’ mental impressions, conclusions, opinions, and strategies. Household further claimed that it implemented strict controls to protect the confidentiality of these records, and that the database has never been disclosed to Household’s outside auditors or any other third party.

Plaintiffs insisted that the database was a mere “management tool” prepared in the ordinary course of business, and not something “for use” in any particular litigation. Plaintiffs noted that Household had “standard procedures” for maintaining the database, and claimed that it “was used by Household for the business purpose of drafting the audit letters to the auditors and providing evidential support to the auditors.”

The court found that the database was “created primarily to assist Household’s counsel in understanding, managing, and providing legal advice about pending and threatened litigation, and not merely to assist with business audits.” Thus, the ruled that the litigation database was protected from discovery by the attorney client privilege and work product doctrine. The court further rejected plaintiffs’ argument that Household had waived any privilege by allegedly sharing the database with Anderson: “The mere fact that Andersen was aware of the database and some of the litigation it discussed, however, does not establish that Andersen actually viewed the database itself.” It further concluded: “In any event, disclosing documents to an auditor does not substantially increase the opportunity for potential adversaries to obtain the information and, thus, the court declines to find that Household has waived the privilege.”