Federal courts handling diversity cases must decide which attorney-client privilege law applies – using their host state’s conflict of laws principles. The stakes can be enormous if the governing law might come from Illinois or one of the other handful of states that continue to follow the control group test – because that might strip away the privilege from communications made in some other state whose law clearly protected the communications when they were made.
In Rawat v. Navistar International Corp., Case No. 08 C 4305, 2010 U.S. Dist. LEXIS 34868 (N.D. Ill. Apr. 7, 2010), the court engaged in such a choice of laws analysis – deciding whether to apply the Illinois “control group” test or Delaware law (which follows the Upjohn standard, and thus protects communications with lower level employees). The court pointed to the somewhat surprising principle articulated in the Restatement (Second) of Conflict of Laws, which indicates that even if some other state (such as Delaware in this case) has the most significant relationship with the communication, the court handling a case should follow its own privilege law “‘unless there is some special reason why [the host state’s] policy favoring admission should not be given effect.'” Id. at *9 (quoting Restatement §139). The court ultimately applied the Illinois control group standard, and ordered discovery of communications that would have been privileged under Delaware law.
This is one of the most troubling aspects of privilege law – because Illinois courts can apply the Illinois “control group” test in denying privilege protection for communications that took place in other states in which those communications deserve full protection. Unfortunately, if a company can be sued in Illinois, there is nothing that can be done about this illogical result.