Foe Can’t See Suit-Funding ‘Deal Documents’ But Related Materials May Be Discoverable

The ABA/BNA Lawyers’ Manual on Professional Conduct™ is a trusted resource that helps attorneys understand cases and decisions that directly impacts their work, practice ethically, and...

By Samson Habte  

Jan. 7 --Construction equipment giant Caterpillar Inc. is not entitled to discover the “deal documents” that a third-party funder executed when it agreed to finance a smaller construction firm's trade secrets lawsuit against Caterpillar, the U.S. District Court for the Northern District of Illinois ruled Jan. 6 (Miller UK Ltd. v. Caterpillar, Inc., N.D. Ill., No. 10 C 3770, 1/6/14).

The order, which settles one of several discovery disputes that have arisen in the case, was largely resolved in favor of the plaintiff, Miller UK Ltd.

Magistrate Judge Jeffrey Cole held that Miller is not obligated to produce the “deal documents” that it executed with Juris Capital LLC, a third-party litigation financing company that agreed to finance Miller's suit.

Those documents are not relevant to the litigation, Cole said. He rejected Caterpillar's “largely unexplained assertion that Miller's funding agreement offends the Illinois statute prohibiting champerty and maintenance and its utterly unsupported and unexplained conclusion that a violation of the statute by Miller is a defense to Miller's claims.”

The court was more sympathetic to Caterpillar's claims regarding the discoverability of materials Miller provided to other prospective funders from which it sought assistance.

The court rejected Miller's claims that certain withheld documents were protected by the attorney-client privilege and work product doctrine. Those protections, Cole said, were in many instances waived when Miller revealed privileged information to the prospective funders without extracting at least an oral promise that the recipient would keep the data secret.

Based on an in camera review, Cole concluded that “Miller must produce all damage summaries, damage estimates and spread sheets” that it provided to prospective funders who did not make confidentiality agreements. However, “Miller need not turn over any document that in whole or in part deals with budgets for the case, expected funding requirements, legal fees, expected or actual, or any other document that discusses funding efforts or actual or prospective funders,” Cole declared.

'David and Goliath.'

According to the opinion, Caterpillar and Miller had a decades-long, mutually beneficial relationship during which Miller shared trade secrets with Caterpillar. However, the court said, “Caterpillar suddenly severed that relationship [in 2008] and began manufacturing a product that previously had utilized and allegedly depended on the confidential information supplied by Miller.”

Miller sued Caterpillar for trade secret misappropriation and other contract and tort claims. Miller described its suit against Caterpillar--a Fortune 50 company and the world's largest construction equipment firm--as a “David and Goliath scenario,” and it reached out to third-party litigation funders for support.

The case “has been bitterly contested at every turn,” the court said, and the “overwhelming majority of the disputes have been over discovery.” In a court filing, Miller said Caterpillar understood “that the best way to destroy Miller was to make it so that Miller could barely afford to survive.” The request to discover materials Miller shared with Juris Capital and prospective funders was part of that “scorched earth” strategy, Miller asserted.

'Deal Documents' Not Relevant

The court said the terms of Miller's funding arrangement with Juris Capital had “no apparent relevance to the claims or defenses in this case, as required by [Fed. R. Civ. P.] 26 as a precondition to discovery.”

The court rejected Caterpillar's claim “that litigation funding agreements are unlawful in Illinois and support a new Caterpillar defense” based on Illinois's statute against champerty and maintenance. Caterpillar's argument, Cole said, “overlooks the fact that neither would be a viable defense by Caterpillar to Miller's claims, which have nothing to do with the conduct forbidden by the Illinois maintenance statute.”

Caterpillar also contended that the litigation financing deal was relevant to another purportedly disputed issue: whether the third-party funder was actually a real party in interest in the case. “Attempting to liken third party litigation funding to subrogation in an insurance context,” the court explained, “Caterpillar argues that the funding agreement (and related transactional documents) are therefore relevant to the issue of who the real party in interest is--Miller or the funder.”

But Cole, who reviewed the deal documents in camera, found “nothing in those agreements that remotely supports Caterpillar's attempt to equate Miller's funding agreement to the relationship between an insured and its insurer.”

Cole cited several reasons to reject the analogy. “Unlike an insurer,” he noted, “the funder in this case has not paid nor will ever pay Miller for any losses caused by Caterpillar's claimed misappropriation of trade secrets and breach of contract; it will never be a plaintiff seeking indemnification from Caterpillar.”

Some Nondeal Documents Are Fair Game

Miller also sought to shield a second category of documents that contain information it shared when making pitches to Juris Capital and other litigation funding entities.

Cole concluded that the attorney-client privilege does not extend to “documents that are prepared 'primarily for a business transaction, rather than for securing legal advice.'” He explained that “by Miller's own classification, the contemplated funding transaction was merely commercial or financial, and … documents conveyed to funders [were] not protected” by the privilege.

“A shared rooting interest in the 'successful outcome of a case' … is not a common legal interest.”


Magistrate Judge Jeffrey Cole

Even if the privilege did attach, Cole continued, it would have been waived by Miller's disclosure of those documents to a third party.

Moreover, the “common interest” doctrine does not counteract a waiver because that doctrine “will only apply 'where the parties undertake a joint effort with respect to a common legal interest,'” Cole said. “A shared rooting interest in the 'successful outcome of a case'--and that is what Miller explicitly alleges here--is not a common legal interest,” he added.

Work Product Protection, if…

Miller also contended that the documents it shared with prospective funders “were created 'because of' this litigation and thus are protected as core work product,” the opinion state. The court agreed--to an extent.

“[A] review of the documents reveals quite clearly that a number of them were prepared to aid Miller's counsel in the preparation of the case,” Cole said. “Materials that contain counsel's theories and mental impressions created to analyze Miller's case do not necessarily cease to be protected because they may also have been prepared or used to help Miller obtain financing,” he said.

Moreover, work product protection is not subject to the same waiver risks as attorney-client privilege, the court observed. “This disparity in treatment flows from the very different goals the privileges are designed to effectuate,” Cole said.

“Because the work-product doctrine serves to protect an attorney's work product from falling into the hands of an adversary, a disclosure to a third party does not automatically waive work-product protection,” the court noted. Rather, it explained, waiver is found only “when the protected communications are disclosed in a manner that 'substantially increase[s] the opportunity for potential adversaries to obtain the information.'”

Applying that test, the court said Miller had disclosed some materials in a manner that substantially increased the risk that they would wind up in the hands of potential adversaries.

Specifically, the court said work product protection was waived as to documents Miller provided to prospective sponsors who did not agree at least verbally to keep the materials confidential.

In Camera Scrutiny

After reviewing the voluminous documents in chambers, Cole said most of them “contain no admissions or statements that undercut any claim or support or undercut any defense or counterclaim in the case. They could not reasonably lead to the discovery of admissible evidence.”

He concluded that only some of the requested documents were relevant and either unprivileged or unprotected through waiver. Those included materials relating to damage summaries and estimates, but not to budgets, fees or numerical estimates regarding the chance of success.

Miller was represented by Reed S. Oslan, Justin A. Barker, William E. Arnault and Inbal Hasbani of Kirkland & Ellis LLP, Chicago. Caterpillar was represented by Gregory L. Baker and Robert G. Abrams of Baker & Hostetler LLP, Washington D.C., and by John M. Touhy and Edward H. Williams of the firm's Chicago office.

To contact the reporter on this story: Samson Habte in Washington at

To contact the editor responsible for this story: Kirk Swanson at

Full text at

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.

Copyright 2014, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.