                                   2014 IL App (1st) 131824

                                                                        FIRST DIVISION
                                                                        DECEMBER 8, 2014

No. 1-13-1824

BORGWARNER, INC., and KUHLMAN CORPORATION,                        )       Appeal from the
                                                                  )       Circuit Court of
            Plaintiffs and Counterdefendants-Appellees,           )       Cook County.
                                                                  )
            v.                                                    )       No. 10 L 8893
                                                                  )
KUHLMAN ELECTRIC CORPORATION and KEC                              )
ACQUISITION CORPORATION,                                          )       Honorable
                                                                  )       Sanjay T. Tailor,
            Defendants and Counterplaintiffs-Appellants.          )       Judge Presiding.

       JUSTICE CUNNINGHAM delivered the judgment of the court with opinion.
       Presiding Justice Delort and Justice Harris concurred in the judgment and opinion.

                                          OPINION

¶1     This appeal arises from the February 21, 2013 order entered by the circuit court of Cook

County, which denied a motion for protective order filed by defendants Kuhlman Electric

Corporation (KEC) and KEC Acquisition Corporation (KAC) to protect from disclosure certain

allegedly privileged documents requested by plaintiffs BorgWarner, Inc. (BorgWarner), and

Kuhlman Corporation (Kuhlman) and granted BorgWarner and Kuhlman's motion to compel

KEC and KAC to produce these documents, in a dispute arising out of an indemnification

agreement for toxic tort liability. This appeal also arises from the circuit court's May 2, 2013

order finding KEC and KAC in direct civil contempt for refusing to comply with the court's

February 21, 2013 order to produce the documents. On appeal, KEC and KAC argue that the

circuit court erred in denying their motion for a protective order and requiring them to provide



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BorgWarner and Kuhlman with the privileged documents. For the following reasons, we affirm

in part and vacate in part the judgment of the circuit court of Cook County.

¶2                                       BACKGROUND

¶3     This case involves a complex procedural background and only the most pertinent facts

are set forth in this opinion.       For the past 50 years, KEC has owned and operated a

manufacturing site in Crystal Springs, Mississippi (the Crystal Springs site). In March 1999,

BorgWarner purchased Kuhlman and all of its subsidiaries, including KEC, which represented to

BorgWarner at that time that there was no contamination on its property.

¶4     Shortly thereafter, pursuant to an August 30, 1999 "Agreement and Plan of Merger" (the

merger agreement), KAC purchased KEC from BorgWarner and the sale transaction closed on

October 5, 1999. In the merger agreement, KEC represented that it was in compliance with

environmental laws and that it had no "material liability" at the Crystal Springs site. Pursuant to

the merger agreement, BorgWarner and Kuhlman agreed to indemnify KEC and KAC for certain

preclosing environmental liabilities and to pay reasonable fees and costs in connection with those

matters. KEC and KAC in turn agreed to indemnify BorgWarner and Kuhlman for any damages,

penalties, fines and liabilities as a result of "any breach of or other default under any covenant of

[KEC] contained in this agreement." The merger agreement provided that the parties' obligations

would be governed by Illinois law.

¶5     On April 19, 2000, KEC and KAC sent a letter to BorgWarner and Kuhlman stating that

KEC had "become aware of facts that may give rise to claims for indemnification" based on the

discovery of polychlorinated biphenyl (PCB) contamination in the soil at the Crystal Springs site.

The April 19, 2000 letter was the first time that either KEC or KAC had given BorgWarner or

Kuhlman any indication of potential contamination at the Crystal Springs site. KEC and KAC
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represented to BorgWarner and Kuhlman that they had no prior knowledge of any environmental

contamination at the Crystal Spring site.       Beginning in 2001, as a result of the PCB

contamination, thousands of toxic tort lawsuits were filed against KEC, BorgWarner and

Kuhlman, seeking compensation for personal injury and property damage that were allegedly

caused by the PCB contamination at the Crystal Springs site (the underlying tort actions).

Pursuant to their duty to indemnify under the 1999 merger agreement, BorgWarner and Kuhlman

retained the law firm of Seyfarth Shaw to jointly defend them and KEC in the underlying

Mississippi tort actions. Based on KEC and KAC's representations that they had no prior

knowledge of the contaminants at the Crystal Springs site, and subject to a reservation of rights,

BorgWarner and Kuhlman spent millions of dollars defending against the underlying tort actions,

as well as conducting clean-up and remediation activities at contaminated properties in

Mississippi. During defense of the underlying tort actions, KEC and KAC continued to assert

the position that they had no prior knowledge of the contamination.

¶6     In February 2004, in response to a subpoena issued in the underlying tort cases, KEC's

environmental counsel, Dickinson Wright PLLC (Dickinson Wright), revealed that it possessed

an environmental report which, as a result of environmental testing performed in 1988,

documented the presence of contamination at the Crystal Springs site (the Stalwart Report). As a

result of the conflict of interest created by the Stalwart Report, Seyfarth Shaw ultimately

withdrew as lead joint counsel for BorgWarner, Kuhlman, and KEC in the underlying

Mississippi tort actions, and the parties retained separate counsel while continuing to jointly

defend in the underlying tort actions. In July 2004, BorgWarner and Kuhlman entered into a

"Joint Defense and Confidentiality Agreement" (JDCA) with KEC and KAC, in order to outline

the parties' common interest relating to the underlying Mississippi tort actions and to reduce to
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writing the basis for the necessary exchange of privileged information in furtherance of their

common interest in the underlying tort actions. The 2004 JDCA stated that the parties agreed to

be bound by the JDCA as it related to all litigation brought by third parties against them alleging

personal injury and property damage associated with contamination at the Crystal Springs site, as

well as any claims by BorgWarner, Kuhlman, KEC or KAC against insurers relating to the

underlying tort actions.

¶7     In 2006, BorgWarner filed a separate lawsuit in the circuit court of Cook County against

KEC's former attorney, Dickinson Wright, alleging fraud and legal malpractice (the Dickinson

Wright lawsuit). See BorgWarner, Inc. v. Dickinson Wright PLLC, No. 06 L 4663 (Cir. Ct.

Cook Co.). In the Dickinson Wright lawsuit, BorgWarner claimed that Dickinson Wright, with

whom it had an attorney-client relationship, knew of the PCB contamination at the Crystal

Springs site as early as 1988 but concealed the information from BorgWarner. In May 2008,

Dickinson Wright filed a third-party complaint against KEC, and KEC sought defense and

indemnification for the Dickinson Wright lawsuit from BorgWarner and Kuhlman. During the

course of discovery in the Dickinson Wright litigation, BorgWarner sought to compel disclosure

of certain KEC documents over which KEC asserted attorney-client privilege. The Dickinson

Wright court ruled that certain information sought by BorgWarner was protected from disclosure

by KEC's privilege.        In 2009, the Dickinson Wright lawsuit was dismissed pursuant to a

settlement agreement.

¶8     On August 3, 2010, BorgWarner and Kuhlman filed a five-count complaint against KEC

and KAC in the instant case. Each count related to an indemnification dispute under the 1999

merger agreement and concerned the environmental contamination at the Crystal Springs site. In

count I, BorgWarner and Kuhlman sought damages for KEC and KAC's alleged breach of the
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merger agreement and for a declaration that they have no obligation to defend or indemnify KEC

and KAC under the merger agreement for or against any expenses and liabilities incurred by

KEC in the underlying tort cases. BorgWarner and Kuhlman further sought damages for KEC

and KAC's breach of their duties to provide full access to all environmental information and to

fully cooperate with BorgWarner and Kuhlman under the merger agreement. In counts II to IV,

BorgWarner and Kuhlman sought declaratory relief regarding the scope of the indemnification

provisions in the merger agreement. BorgWarner and Kuhlman alleged that they had no duty to

defend or indemnify KEC and KAC against claims in the underlying tort actions relating to KEC

and KAC's intentional misconduct, willful and wanton acts or omissions, or gross negligence,

nor had a duty to defend or indemnify claims brought against KEC and KAC for punitive

damages and asbestos exposure. BorgWarner and Kuhlman also alleged that they had no duty to

defend or indemnify KEC for claims brought against KEC in the Dickinson Wright litigation. In

count V, BorgWarner and Kuhlman sought a declaration that they were not required to defend or

indemnify KEC and KAC for expenses or liabilities incurred relating to additional groundwater

plume contamination caused by solvents leaked off-site from the Crystal Springs site. They

claimed that such indemnity and defense exceeded the "quantum and geographical boundaries"

of the contamination that existed on the October 1999 closing date of the sale transaction by

which KAC purchased KEC from BorgWarner.

¶9     In response, KEC and KAC asserted multiple affirmative defenses and counterclaims

against BorgWarner and Kuhlman. In the affirmative defenses, KEC argued that it worked with

BorgWarner for years to jointly defend against several thousands of underlying Mississippi tort

actions and to lessen the liability exposure of both BorgWarner and KEC to those claims. KEC

and KAC claimed that they allowed BorgWarner access to KEC's facility, records, employees,
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and counsel for the investigation and defense of those claims. They further argued that under a

separate cooperation agreement signed by the parties in 2005, BorgWarner released any claim

for recoupment of amounts already spent in the underlying tort actions. KEC also asserted that it

complied with all of the court's discovery orders in the Dickinson Wright litigation and that the

circuit court which presided over the Dickinson Wright litigation had exclusive jurisdiction to

resolve disputes relating to those matters. In their counterclaims, KEC and KAC alleged that

BorgWarner breached the 1999 merger agreement by refusing to indemnify them for the Crystal

Springs contamination claims. They also contended that BorgWarner breached the 2004 JDCA.

Further, the counterclaims alleged that BorgWarner and Kuhlman, at the time they still owned

KEC, falsely represented to KAC that there was no environmental contamination at the Crystal

Springs site and that they would fully protect and indemnify KEC and KAC if contamination

was present. KEC and KAC also alleged that BorgWarner and Kuhlman acted in bad faith to

increase KEC and KAC's liability exposure, and asserted claims for fraud, conversion, and

disclosure of confidential or privileged information. KEC and KAC also sought a declaration

that the 1999 merger agreement required BorgWarner and Kuhlman to indemnify them for all

present and future claims regarding pre-closing environmental conditions; that BorgWarner and

Kuhlman had waived any and all claims to recoup costs; that BorgWarner and Kuhlman must

indemnify them for any settlement payments made; and that BorgWarner and Kuhlman must

indemnify them in the underlying tort actions.

¶ 10   During discovery in the instant case, BorgWarner and Kuhlman requested production of

all documents regarding the environmental contamination and the underlying tort actions. In

response, KEC and KAC refused to produce certain categories of relevant documents that they


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claimed were protected by the attorney-client privilege and the work-product doctrine. As a

result, BorgWarner and Kuhlman moved to compel KEC and KAC to produce the documents.

¶ 11    On June 18, 2012, KEC and KAC filed a motion for a protective order to prevent

BorgWarner and Kuhlman from obtaining documents relating to the underlying tort actions on

the    grounds   of   attorney-client   privilege   and   the   work-product   doctrine—including

communications that KEC and KAC had with their legal representatives at the law firms of

Dickinson Wright, Seyfarth Shaw and Jenner & Block LLP (Jenner & Block) relating to the

underlying Mississippi tort actions or the Crystal Springs site; the mental impressions,

conclusions, opinions and/or legal theories of KEC and KAC with their counsel at law firm

Latham & Watkins regarding the underlying tort actions; communications between KEC, KAC,

BorgWarner, Kuhlman, Seyfarth Shaw, and Dickinson Wright; documents relating to the

settlement of any claims in the underlying Mississippi tort actions; and materials withheld by

Dickinson Wright. KEC and KAC also sought to be relieved of the obligation to produce a

"privilege log" on the bases of prejudice and undue burden.

¶ 12    On August 27, 2012, the circuit court ordered KEC and KAC to produce all non-

privileged documents identified in BorgWarner and Kuhlman's requests for documents, and

ordered KEC and KAC to prepare a "privilege log identifying the categories of documents they

are withholding from production to [BorgWarner and Kuhlman]."

¶ 13    On September 25, 2012, KEC and KAC produced a privilege log, which identified 28

categories of approximately 40,000 documents relating to the underlying tort actions and

environmental matters.

¶ 14    On February 21, 2013, the circuit court entered an order denying in part KEC and KAC's

motion for a protective order by finding that documents relating to the underlying environmental
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matters in 22 out of the 28 categories listed on the privilege log must be produced to BorgWarner

and Kuhlman. In making its ruling, the circuit court set forth three independent bases to require

production of the 22 categories of privileged documents: (1) KEC and KAC's duty to cooperate

under the merger agreement; (2) the parties' common interest in the underlying matters; and (3)

KEC and KAC's waiver of privilege by putting the privileged materials at issue in their

affirmative defenses and counterclaims against BorgWarner and Kuhlman. The circuit court

determined that any privileged communications between KEC and KAC with their counsel

"generated in preparation for the defense and prosecution of the indemnity claims, including the

present indemnity dispute," were the only materials protected from disclosure.

¶ 15   On March 21, 2013, KEC and KAC filed a partial motion for reconsideration, which the

circuit court denied on April 11, 2013.

¶ 16   On April 16, 2013, after KEC and KAC refused to produce the documents as required by

the court's February 21, 2013 order, BorgWarner and Kuhlman filed a petition for adjudication

of direct civil contempt (petition for direct civil contempt) against them.

¶ 17   On May 2, 2013, the circuit court found KEC and KAC in direct civil contempt of court

for their noncompliance of the court's February 21, 2013 order to produce the documents, found

that they were "acting in good faith for purposes of seeking an appeal under Supreme Court Rule

304(b)," and imposed a monetary penalty of $100. See In re Marriage of Levinson, 2013 IL App

(1st) 121696, ¶ 56 ("exposing oneself" to a finding of contempt is an appropriate method of

testing the validity of a court order by making the order appealable) (internal quotation marks

omitted.). On May 31, 2013, KEC and KAC filed a timely notice of appeal.




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¶ 18                                      ANALYSIS

¶ 19   This court has jurisdiction over this appeal pursuant to Supreme Court Rule 304(b)(5),

which makes appealable, without the necessity of a special finding by the court, orders "finding a

person or entity in contempt of court which imposes a monetary or other penalty." Ill. S. Ct. R.

304(b)(5) (eff. Feb. 26, 2010).

¶ 20   We determine on appeal whether the circuit court erred in denying KEC and KAC's

motion for a protective order and in requiring them to provide BorgWarner and Kuhlman with

documents in 22 of the 28 categories in KEC and KAC's privilege log. We review this issue de

novo. See Janousek v. Slotky, 2012 IL App (1st) 113432, ¶ 13 (although discovery orders are

generally reviewed for an abuse of discretion, a trial court's determination as to whether a

privilege exists is reviewed de novo).

¶ 21   In its February 21, 2013 order, the circuit court set forth three independent bases to

require KEC and KAC to produce documents from 22 out of 28 categories of the privilege log:

(1) KEC and KAC's duty to cooperate under the merger agreement; (2) the parties' common

interest in the underlying matters; and (3) KEC and KAC's waiver of privilege by putting the

privileged materials at issue in their affirmative defenses and counterclaims against BorgWarner

and Kuhlman. We may affirm the circuit court's ruling on any one of the three grounds, or on

any other basis in the record, regardless of whether the circuit court relied upon that basis or

whether the circuit court's reasoning was correct. See Alpha School Bus Co. v. Wagner, 391 Ill.

App. 3d 722, 734 (2009).

¶ 22   KEC and KAC argue that the information sought by BorgWarner and Kuhlman was

protected from disclosure by the attorney-client privilege and the work-product doctrine. KEC

and KAC contend that the parties' contractual agreements did not grant BorgWarner and
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Kuhlman access to their privileged information; that the circuit court in the Dickinson Wright

litigation and in an underlying Mississippi action denied BorgWarner and Kuhlman access to the

same privileged information; and that the public policy concerns regarding the prevention of

collusion between the plaintiffs in the underlying actions, and KEC and KAC, were not present

to compel disclosure.

¶ 23   BorgWarner and Kuhlman counter that the circuit court properly ordered disclosure of

the documents in 22 of the 28 categories in KEC and KAC's privilege log. They argue that

language in the parties' 1999 merger agreement required KEC and KAC to produce these

documents; that our supreme court's decision in Waste Management, Inc. v. International

Surplus Lines Insurance Co., 144 Ill. 2d 178 (1991), required disclosure of the documents; that

interlocutory rulings by the circuit court in the Dickinson Wright lawsuit and in an underlying

Mississippi action did not control the outcome in the instant case; and that no public policy

concerns destroyed KEC and KAC's duty to cooperate under the merger agreement.

¶ 24   Illinois Supreme Court Rule 201(b)(2) govern both the attorney-client privilege and

work-product doctrine: "[a]ll matters that are privileged against disclosure on the trial, including

privileged communications between a party or his agent and the attorney for the party, are

privileged against disclosure through any discovery procedure. Material prepared by or for a

party in preparation for trial is subject to discovery only if it does not contain or disclose the

theories, mental impressions, or litigation plans of the party's attorney." Ill. S. Ct. R. 201(b)(2)

(eff. Jan. 1, 2013). Our supreme court has defined the attorney-client privilege as "where legal

advice of any kind is sought from a professional legal advisor in his capacity as such, the

communications relating to that purpose, made in confidence by the client, are protected from

disclosure by himself or the legal advisor, except the protection be waived." Fischel & Kahn,
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Ltd. v. Van Straaten Gallery, Inc., 189 Ill. 2d 579, 584 (2000). The purpose of the attorney-

client privilege is to encourage clients to engage in full and frank discussion with their attorneys

without fear of being compelled to disclose that information. Id. at 584-85. The attorney-client

privilege recognizes that sound legal advice or advocacy serves public ends and that such advice

or advocacy depends upon the lawyer being fully informed by the client. Id. at 585. The work-

product doctrine "provides a broader protection than the attorney-client privilege and is designed

to protect the right of an attorney to throughly [sic] prepare his case and to preclude a less

diligent adversary attorney from taking undue advantage of the former's efforts." Id. at 591.

¶ 25   Our supreme court's decision in Waste Management, Inc. governs our analysis in the case

at bar. In Waste Management, Inc., the insureds, which owned and operated hazardous waste

materials disposal sites, purchased insurance from two insurance companies.                  Waste

Management Inc., 144 Ill. 2d at 185. The insurance policies provided indemnity to insureds for

defense costs arising out of any environmental claims filed against them by third parties, subject

to certain exclusions and conditions, including the insureds' "duty to cooperate." Id. The "duty

to cooperate" was memorialized in a "cooperation clause," which imposed upon the insureds "the

duty to assist insurers in the conduct of suits and in enforcing any right to contribution or

indemnity against persons potentially liable to insureds." Id. at 192. Further, the policies

provided that the insurers were entitled "to conduct any claim, in the name of insureds, for

indemnity or damages." Id. The insureds defended and settled a lawsuit alleging migration of

toxic waste from the insureds' waste disposal sites. Id. at 186. The insureds later sought

indemnification from the insurers for settlement and defense costs in the amount of $3 million.

Id. The insurers denied coverage, claiming that the insureds had breached the cooperation clause

by failing to disclose that the insureds had previously filed and settled a negligent design and
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construction claim against the prior owner of the property for $1.5 million. Id. Both the insureds

and the insurers then filed declaratory judgment actions seeking a determination of their rights

and liabilities under the policies. Id. During discovery, the insurers requested production of the

insureds' counsel's files in the underlying environmental litigation. Id. at 187. The insureds

withheld some of the requested information, asserting attorney-client and work-product

privileges. Id. The trial court ordered production of the files relating to the underlying toxic tort

case, but denied production of the files relating to the negligent design case against the prior

owner of the property. Id. The insureds refused to comply with the order, and the trial court

held one of the insureds' attorneys in contempt of court and fined him $100. Id. The appellate

court held that the insurers were entitled to all of the requested documents. Id. On appeal, our

supreme court held that the attorney-client privilege and the work-product doctrine were not

applicable to bar disclosure of the files. Id. at 201. The Waste Management, Inc. court offered

two reasons in finding that the attorney-client privilege did not apply. Id. at 191. First, the court

concluded that the plain language of the insurance policies' "cooperation clause" created

"contractual obligations" requiring the insureds to disclose to the insurers "any communications

they had with defense counsel representing them on a claim for which insurers had the ultimate

duty to satisfy."   Id. at 192.    The court stated that the clause imposed a "broad duty of

cooperation and is without limitation or qualification." Id. Accordingly, our supreme court

concluded that a "fair reading" of the insurance policies rendered any expectation of attorney-

client privilege unreasonable. Id. at 192-93. Second, our supreme court found the attorney-

client privilege inapplicable in light of the "common interest" doctrine, which provides that

"when an attorney acts for two different parties who each have a common interest,

communications by either party to the attorney are not necessarily privileged in a subsequent
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controversy between the two parties." Id. at 193. The court noted that typically, the "common

interest" doctrine applies where an attorney has provided joint or simultaneous representation of

the parties. Id. at 194. However, the court also found the doctrine applicable where the attorney,

although neither retained by nor was in direct communication with the insurer, acts for the

mutual benefit of both the insured and the insurer. Id. The court concluded that "[i]n a limited

sense," the insureds' attorney represented the insurers in the underlying environmental litigation

because the insurers were ultimately liable if the plaintiffs in the underlying action received a

favorable verdict or settlement. Id. at 194-95. Because both the insurers and insureds had a

"common interest" in either defeating or settling the underlying environmental litigation, the

attorney-client privilege was inapplicable. Id. Likewise, the Waste Management, Inc. court

concluded that the case did not "fit within the parameters" of the work-product doctrine. Id. at

197. The court noted that in the typical case, the sought-after material is generated in preparation

of trial against an adversary who may seek disclosure of his opponent's work product. Id. at 196.

However, the materials requested in Waste Management, Inc. were prepared for the mutual

benefit of the insureds and the insurers against a third-party adversary. Id. at 198-99. In other

words, because the requested materials were not prepared in anticipation of the declaratory

judgment action in which the discovery was sought, the work-product doctrine was inapplicable.

Id. The court rejected the insureds' claim that the information requested by the insurers "may be

gleaned from objective facts, contained outside the contents of defense counsel's files." Id. at

199.   The court pointed out that "what [the] insurers seek to discover is *** the mental

impressions and case assessment of defense counsel" and that there is "no source, outside the

files, where this information might be obtained." Id. The court added that, even if the work-

product doctrine applied, the sought-after materials would still be subject to disclosure pursuant
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to the "at issue" exception to the doctrine, which permits discovery of work product where the

sought-after material is either the basis of the lawsuit or the defense thereof. Id. at 199-200. The

court held that where, in the underlying environmental litigation, an attorney represents the

common interests of two or more clients whose relationship later becomes adverse, and, in a

subsequent action, the work product of the attorney is at issue, the work-product doctrine is not

available to bar discovery by one of the original parties. Id. at 200. In rejecting the application

of the attorney-client and work-product privileges, the Waste Management, Inc. court further

noted that Illinois has a strong public policy favoring complete disclosure in litigation, such that

courts should be mindful that the privilege is not without conditions and "it is the privilege, not

the duty to disclose, that is the exception." Id. at 190. Therefore, the court noted, the privilege

"ought to be strictly confined within its narrowest possible limits." Id.

¶ 26   Applying the principles of Waste Management, Inc. to the case at bar, we find that neither

the attorney-client privilege nor the work-product doctrine barred discovery of the requested

documents. Like the insureds in Waste Management, Inc., KEC in the instant case owned and

operated a manufacturing site on the Crystal Springs site.          Pursuant to the 1999 merger

agreement, similar to the insurance policies in Waste Management, Inc., BorgWarner and

Kuhlman agreed to indemnify KEC and KAC for liabilities arising out of environmental claims

filed by third-parties concerning the Crystal Springs site—subject to certain limitations to the

right to indemnification, including KEC and KAC's duty to cooperate with BorgWarner and

Kuhlman in connection with these matters. Specifically, section 11.5(e) of the 1999 merger

agreement provides in pertinent part the following: "[KAC] will (i) notify [Kuhlman] and

[BorgWarner] promptly after becoming aware of facts which may give rise to a claim by [KAC]

in connection with any liability for [p]re-closing [e]nvironmental [m]atters relating to the
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[f]acilities of [KEC] located in *** Crystal Springs, Mississippi *** and (ii) cooperate with

[Kuhlman] and [BorgWarner] in connection with such matters." Like the insureds in Waste

Management, Inc., KEC and KAC sought indemnification from BorgWarner and Kuhlman for

millions of dollars in defense and settlement costs that incurred in the underlying tort actions.

Like Waste Management, Inc., BorgWarner and Kuhlman filed the instant lawsuit against KEC

and KAC seeking a determination of their rights and liabilities under the merger agreement.

During discovery, BorgWarner and Kuhlman requested documents and information from KEC

and KAC that were relevant to the defense of the underlying tort actions for which KEC and

KAC demanded indemnification. However, KEC and KAC refused to provide the documents.

We find that, based on the holding of Waste Management, Inc., the plain language of the 1999

merger agreement's "cooperation clause" created obligations requiring KEC and KAC to disclose

to BorgWarner and Kuhlman relevant information and documents relating to the defense and

settlement of the underlying tort actions, which BorgWarner and Kuhlman had the ultimate duty

to satisfy. Similar to the "cooperation clause" in the Waste Management, Inc. insurance policies,

KEC and KAC's duty to cooperate, as outlined in section 11.5(e) of the merger agreement, is

broad and without limitation or qualification. Thus, we find that any expectation of attorney-

client privilege was unreasonable. Likewise, because the requested materials were not prepared

in anticipation of the instant lawsuit in which the discovery was sought, but rather in defense of

the underlying tort actions against third-party adversaries, we find that the work-product doctrine

was inapplicable.

¶ 27   Nonetheless, KEC and KAC argue against disclosure of the requested documents by

claiming that the 1999 merger agreement did not grant BorgWarner and Kuhlman access to their

privileged information. They contend that nothing in the provisions of section 11 of the merger
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agreement gave BorgWarner and Kuhlman a "clear, express contractual right to pierce the

privilege and obtain KEC's attorney-client and work-product information." Pointing to section

11.4 of the merger agreement specifically, which is entitled "Third-Party Claims," KEC and

KAC note that it did not impose on KEC and KAC any obligations—not even the duty to

cooperate—but only conferred on KEC and KAC "the unfettered ability to defend against and

settle [t]hird-[p]arty [c]laims if [BorgWarner and Kuhlman] fail to timely provide a satisfactory

indemnity agreement [in writing], while still preserving KEC and KAC's right to receive

indemnity from BorgWarner and Kuhlman." We reject this argument. To construe section 11.4

of the merger agreement as KEC and KAC suggest ignores the provisions under section 11.5

setting forth limitations to KEC and KAC's right to indemnification—limitations such as KEC

and KAC's duty to cooperate. See Paluch v. United Parcel Service, Inc., 2014 IL App (1st)

130621, ¶ 13 (when interpreting a contract, the court must read the entire contract in context and

construe it as a whole, viewing each provision in light of the other ones instead of focusing on

one clause or provision in isolation). As discussed, section 11.5(e), which is broad and without

limitation or qualification, imposed upon KEC and KAC an obligation to cooperate—that is, to

disclose to BorgWarner and Kuhlman relevant information relating to the defense and settlement

of the underlying tort actions for which KEC and KAC demand indemnification. KEC and KAC

neither challenged in the circuit court nor argue before this court that section 11.5(e) does not

address their duty of cooperation on the underlying claims for which they seek indemnity.

¶ 28   KEC and KAC further dispute that section 11.5(e) of the merger agreement imposed a

broad duty to cooperate by arguing that other provisions in the merger agreement, such as section

7.4(b), use the words "fully cooperate" in another context involving the submission of documents

to taxing and governmental authorities. Thus, KEC and KAC surmise, because the parties chose
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the more limited phrase "cooperate" rather than "fully cooperate" in section 11.5(e), this showed

that the parties did not intend for privileged information to be disclosed.        We reject this

contention. As the circuit court correctly noted, "there is no perceptible difference between a

duty to 'cooperate' and a duty to 'fully cooperate' or provide 'full cooperation,' nor do [KEC and

KAC] cite any case [law] to support the distinction they draw." We agree with the circuit court's

assessment and reiterate that, similar to the cooperation clause in Waste Management, Inc., the

cooperation clause in the merger agreement here is without limitation or qualification. KEC and

KAC further argue that, even if the cooperation clause under section 11.5(e) required disclosure

of privileged information under certain circumstances, no disclosure was required in the present

dispute because the clause did not require them to cooperate with BorgWarner and Kuhlman in

connection with the Dickinson Wright litigation. We do not see how this in any way advances

KEC and KAC's arguments against disclosure. The subject of the requested materials in the

instant indemnification dispute pertained to the defense of the underlying tort actions and not the

Dickinson Wright litigation.

¶ 29   KEC and KAC also argue that the 2004 JDCA, which was executed five years after the

1999 merger agreement, expressly barred disclosure of the privileged information that

BorgWarner and Kuhlman now seek. In support of their argument, KEC and KAC specifically

reference paragraphs 3 and 4 of the 2004 JDCA, which they assert show that they were not and

could not be required to disclose the privileged information. KEC and KAC argue that, because

BorgWarner and Kuhlman agreed, under the 2004 JDCA, that they could not require KEC or

KAC to disclose "the very privileged information [BorgWarner and Kuhlman] now wrongly seek

here," BorgWarner and Kuhlman's attempt to renege on their own "contractual promises" should

be rejected. We disagree with KEC and KAC's misguided interpretation of the 2004 JDCA.
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¶ 30   We find that the 2004 JDCA did not abrogate KEC and KAC's duty to cooperate under

section 11.5(e) of the merger agreement.        The 2004 JDCA was executed by BorgWarner,

Kuhlman, KEC, and KAC in order to outline the parties' common interest relating to the

underlying Mississippi tort actions and to reduce to writing the basis for the necessary exchange

of privileged information in furtherance of their common interest in the underlying tort actions.

The preamble of the 2004 JDCA states that the parties agreed to be bound by the JDCA as it

related to all litigation brought by third parties against them alleging personal injury and property

damage associated with contamination at the Crystal Springs site, as well as any claims by

BorgWarner, Kuhlman, KEC or KAC against insurers relating to the underlying tort actions.

Paragraph 3 of the 2004 JDCA provides in relevant part that "all [p]rivileged [i]formation or

business or technical information disclosed by the parties shall be deemed confidential"; that any

privileged information "exchanged or communicated between [BorgWarner and Kuhlman] or

their counsel and KEC [and KAC] or their counsel in connection with the [underlying tort

actions] shall be deemed subject to this [a]greement"; and that "nothing in this [a]greement shall

require the [p]arties or their counsel to share any such [p]rivilege[d] [i]nformation." (Emphases

added.) Paragraph 4 of the 2004 JDCA provides in relevant part that "[i]n order to protect the

privileged and/or protected status of the [p]rivilged [i]nformation that will be exchanged pursuant

to this [a]greement, the [p]arties and their respective counsel agree that they will not share, make

available, disclose or communicate in any way any such [p]rivileged [i]nformation to any person

or entity not a [p]arty without the consent of the disclosing [p]arty"; that [p]rivileged

[i]nformation shall be used solely for the purpose of this [underlying tort litigation]"; and that

disclosure of any privileged information "in violation of this [a]greement will cause the [p]arties

to suffer irreparable harm for which there is not adequate legal remedy." (Emphases added.) We
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find that nothing in the 2004 JDCA modified or conflicted with KEC and KAC's duty to

cooperate under section 11.5(e) of the merger agreement. Rather, it is clear that by using the

terms "nothing in this [a]greement," the parties were addressing their obligations under the 2004

JDCA only. (Emphasis added.) Based on our examination of the plain language of these

provisions in the 2004 JDCA, we find that the parties agreed that all privileged information that

had already been disclosed or exchanged, or would be exchanged, between the parties shall be

confidential, and that such information is prohibited from disclosure to a third party without the

consent of the disclosing party. Because the terms of the 2004 JDCA did not abrogate KEC and

KAC's preexisting duty to cooperate under section 11.5(e) of the merger agreement, and

concerns regarding disclosure of privileged materials to third parties were not present here, we

find that KEC and KAC were not entitled to relief on this basis. Further, we reject KEC and

KAC's argument that the circuit court "incorrectly found the JDCA to be ambiguous." The

circuit court made no such finding. Rather, it simply stated in the hypothetical that even if the

JDCA was ambiguous, the evidence did not warrant a different conclusion.

¶ 31   Nor do we find persuasive KEC and KAC's assertion that BorgWarner and Kuhlman

were prohibited from gaining access to the privileged information under a separate agreement

executed by the parties in 2005—the 2005 cooperation agreement.             The 2005 cooperation

agreement was entered into by the parties "in the interest of efficiency, coordination and joint

defense, *** for BorgWarner [and Kuhlman] to attempt to negotiate settlements (on an

individual and/or global basis) that resolve the [p]arties' total liability in connection with claims

brought and which may in the future be brought for damages allegedly arising from alleged PCB

(and/or other) contamination at or originating from KEC's Crystal Springs *** facility." KEC

and KAC point to various provisions in the 2005 cooperation in arguing that it did not require
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them to disclose privileged information to BorgWarner and Kuhlman and that it was governed by

the terms of the 2004 JDCA. This argument does not advance KEC and KAC's position in any

way. Paragraph 5 of the 2005 cooperation agreement specifies that "[t]his [a]greement shall not

serve to modify, limit or enlarge any of the [p]arties' rights or obligations as set forth in the

[m]erger [a]greement." We have already determined that, pursuant to the holding in Waste

Management, Inc., section 11.5(e) in the 1999 merger agreement required KEC and KAC to

disclose the requested documents and that the 2004 JDCA did not modify KEC and KAC's duty

to cooperate under the merger agreement. Thus, the 2005 cooperation agreement, which did not

modify, limit, or enlarge the parties' rights or obligations in the 1999 merger agreement or in the

2004 JDCA, did not extinguish KEC and KAC's duty to cooperate with BorgWarner and

Kuhlman.

¶ 32   KEC and KAC further challenge the circuit court's order compelling disclosure of the

requested information by arguing that two other courts—the circuit court in the Dickinson

Wright litigation and in an underlying Mississippi action—had denied BorgWarner and Kuhlman

access to the same privileged information. We find this argument to be forfeited, where KEC

and KAC, in violation of Illinois Supreme Court Rule 341(h)(7) (eff. July 1, 2008), cite no legal

authority to support their argument that this court is bound by the discovery rulings of circuit

courts in other lawsuits and jurisdictions. See Sekerez v. Rush University Medical Center, 2011

IL App (1st) 090889, ¶¶ 80-82 (failure to cite legal authority in violation of Rule 341(h)(7)

results in forfeiture of the issue). Thus, we need not address this argument any further.

¶ 33   KEC and KAC also argue against disclosure of the requested materials, by noting that the

policy concerns underlying our supreme court's Waste Management, Inc. decision—such as the

prevention of collusion between the insured and the injured party—were not present in the case
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at bar. They contend that "extending" Waste Management, Inc.'s holding to include "standard

indemnity clauses" such as the ones at issue here would be "problematic and dangerous," and

they cite Hartz Construction Co. v. Village of Western Springs, 2012 IL App (1st) 103108, for

support. To the extent that KEC and KAC suggest that the holding of Waste Management, Inc.

only applies to cases involving insurance companies, rather than other types of indemnitors such

as BorgWarner and Kuhlman, we reject this contention. This court in Hartz Construction Co.

has already rejected such a limitation. Hartz Construction Co., 2012 IL App (1st) 103108, ¶ 30

(parties do not have to match the classic profile of an insurer and insured for the concepts in

Waste Management, Inc. to apply). Further, we find Hartz Construction Co. to be inapposite,

where, there, the indemnity contract did not contain any express language mandating a duty of

cooperation. By contrast, the 1999 merger agreement here contains an express duty to cooperate,

similar to the cooperation clause in Waste Management, Inc. As discussed, we find the holding

in Waste Management, Inc. to be dispositive. Thus, we find that KEC and KAC are not entitled

to relief on this basis.

¶ 34    In light of our determination that the attorney-client privilege and the work-product

doctrine were inapplicable to bar production of the requested materials, we need not address the

circuit court's other independent bases (the "common interest" doctrine and the "at issue" waiver)

for compelling disclosure. Also, it bears noting that, as the circuit court correctly found in its

February 21, 2013 order, any privileged communications and materials "generated in preparation

for the defense and prosecution of the indemnity claims, including the present indemnity

dispute," are protected from disclosure. (Emphasis added.) See Waste Management, Inc., 144

Ill. 2d at 200-01 (holding that the protections under the attorney-client privilege and work-


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product doctrine are nonetheless "available to bar disclosure of any communications or materials

generated in preparation for the present declaratory judgment action").

¶ 35   Accordingly, we hold that the circuit court properly ordered disclosure of the documents

relating to the underlying environmental matters in 22 out of the 28 categories identified in KEC

and KAC's privilege log (categories 1 through 3, 5 through 8, 11 through 21, 24, and 26 through

28). KEC and KAC posit that regardless of the outcome of this appeal, we should vacate the

circuit court's May 2, 2013 order of contempt and the accompanying fine against them because

they acted in good faith in seeking review of the February 21, 2013 order concerning the

privileges in question. We agree with the circuit court's assessment that KEC and KAC were

"acting in good faith for purposes of seeking an appeal under Supreme Court Rule 304(b)."

Thus, although we affirm the circuit court's February 21, 2013 ruling, we find it appropriate to

vacate the finding of contempt and the $100 fine. See Allianz Insurance Co. v. Guidant Corp.,

373 Ill. App. 3d 652, 677 (2007) ("[w]here a party's refusal to comply with a trial court's order

constitutes a good-faith effort to secure an interpretation of the privileges in question, it is

appropriate to vacate a contempt citation on appeal").

¶ 36   For the foregoing reasons, we affirm the circuit court's February 21, 2013 order

compelling KEC and KAC to disclose the requested materials to BorgWarner and Kuhlman, but

vacate the circuit court's May 2, 2013 order of contempt and imposition of fine against KEC and

KAC.

¶ 37   Affirmed in part; vacated in part.




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