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THIRD DIVISION

December 2, 1998

No. 1-96-2251

PRESIDING JUSTICE LEAVITT delivered the modified opinion of the court on denial ofrehearing:

Appellants van Straaten Gallery, Inc., the New van Straaten Gallery, Inc., Seaberg PictureFraming, Inc., Frameway Studios, Inc., and William van Straaten appeal from the trial court'sorder finding them in contempt for refusing to disclose certain documents to appellees Fischel&Kahn, Ltd., and Joel Fenchel (Fischel & Kahn). On appeal, appellants claim the challengeddocuments are privileged and deny either the attorney-client or work product privileges werewaived in this case.

The van Straaten Gallery and the New van Straaten Gallery are Illinois corporations engagedinthe art gallery business in Chicago. Frameway Studios and Seaberg Picture Framing are Illinoiscorporations engaged in the business of framing art sold by the galleries. William van Straaten isthe president and sole shareholder of these corporations, and, for this reason, we will refer to allof the appellants simply as "van Straaten."

In 1986, van Straaten solicited legal advice from attorney Joel Fenchel and his firm, Fischel&Kahn, regarding the recently enacted Illinois Consignment of Art Act (Act) (see 815 ILCS 320(West 1996)) and its effect on his inventory and sale of consigned art. Specifically, the substanceof the legal advice at issue concerned van Straaten's potential liability to the consignment artistsin the event of the destruction of the consigned art. The parties disagree as to the advice givenand the degree to which the advice was followed by van Straaten.

These issues took on significance when a fire wiped out the gallery and the consignment artwithin it in 1989. In 1990, van Straaten brought a negligence suit against the owner of buildingin which the gallery had been located and the company renovating the building at the time of thefire. Several of the consignment artists intervened and brought claims against van Straaten fordamages resulting from the destruction of their artwork (the parties refer to this litigation as theMesirow litigation, which we will adopt for purposes of this appeal). Van Straatenhired the firmof Pope & John to represent his companies in the Mesirow litigation. According to the parties,that litigation has settled, although the date of the settlement is somewhat unclear from therecord.

Fischel & Kahn brought the instant action against van Straaten for payment of legalfees. VanStraaten counterclaimed for legal malpractice. In response to van Straaten's counterclaim,Fischel & Kahn filed a document request seeking all of the contents of Pope & John'sfilesrelating to the Mesirow litigation and the consignment artists' claims. Van Straatenobjected toproduction of 38 of the documents (out of 170,000 pages of documents produced, according tovan Straaten) on the basis of the attorney-client and work product privileges. The trial courtreviewed the documents in camera and ruled that 16 were protectedby the attorney-clientprivilege. Van Straaten was ordered to disclose the remaining 22 documents but refused to doso. As a result, on June 3, 1996, the trial court cited van Straaten for contempt and imposed amonetary sanction for its failure to produce those documents.

The documents, which have been filed under seal, can be classified into three groups. Onegroupof documents consists of correspondence between van Straaten and Pope & John. A secondgroup consists of correspondence between Pope & John and the firm originally retained byvanStraaten to pursue his malpractice claim against Fischel & Kahn. The third group appears tobeinternal documents from Pope & John's file on van Straaten.

On appeal, the parties do not dispute that either the attorney-client or work product privilegewould normally shield the sought-after documents from disclosure. Rather, they disagree as towhether van Straaten, by counterclaiming against Fischel & Kahn for malpractice, has putthecontents of the documents "at issue" and thereby waived both privileges.

In Illinois, both the attorney-client privilege and the work product privilege (see 134 Ill. 2dR.201(b)(2)) may be waived as to a communication put "at issue" by a party who is a holder of theprivilege. See Waste Management, Inc. v. International Surplus Lines Ins. Co., 144Ill. 2d 178,199-200, 579 N.E.2d 322 (1991); M. Graham, Cleary & Graham's Handbook of IllinoisEvidence