November 2000 • Volume 88 • Number 11 • Page 648
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Protecting Evidence of Self-Critical Analysis From Discovery in Illinois
The self-critical analysis privilege protects documents generated from an organization's critical self-examinations. This article discusses the privilege under federal and Illinois law.
Businesses in Illinois perform internal reviews and audits to ensure compliance with applicable laws and to improve employee and consumer safety. Sometimes these reviews reveal problems that could lead to legal liability if not corrected. Some of the problems may already be the subject of current or threatened litigation. If so, the documents created during these reviews and audits could be the subject of discovery. The issue arises, then, whether these documents can be shielded from discovery, or whether they must be produced.
This article discusses one privilege that may protect these types of documents; the common-law privilege of self-critical analysis. The article begins by discussing the origin and rationale behind the privilege. Next, the article looks at the requirements of the privilege and identifies which courts have accepted it and how being in a state court might affect its application. Finally, we discuss two Illinois statutes that have codified versions of the self-critical analysis privilege.
II. Self-Critical Analysis Privilege: The Background
A. Origin of the Common-Law Privilege
The self-critical analysis privilege was first recognized almost 30 years ago in a federal case, Bredice v Doctors Hospital, Inc.1 In Bredice, the court held that the minutes and reports created by a hospital's peer-review committee were not discoverable in a medical malpractice case.2 The court reasoned that the purpose of the hospital's peer-review committee was solely to improve the available care and treatment of patients.3
In addition, the court noted that reviews of the effectiveness of treatments were valuable in improving the quality of health care available to the public.4 The court also noted that physicians would be unwilling to candidly critique the actions of their colleagues if the critiques were subject to discovery and used as evidence in a subsequent malpractice action.5 As a result, the court concluded, the public interest in maintaining the confidentiality of hospital peer-review committees outweighed the plaintiff's need for the documents.6
B. Rationale Underlying the Common-Law Privilege
In addition to medical peer-reviews, the common-law self-critical analysis privilege protects any critical self-examination from discovery,7 based on the same rationale that applies to medical peer-reviews that disclosure of documents reflecting candid self-examinations will deter self-critical analysis.8
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In other words, the privilege allows a business to candidly assess its compliance with regulatory and legal requirements without creating evidence that may be used against it by opponents in litigation.9
Moreover, the self-critical analysis privilege is based on the same public policy considerations that underlie Rule 407 of the Federal Rules of Evidence, which excludes evidence of subsequent remedial measures.10 One district court has even held that claims of a self-critical analysis privilege should be evaluated under Rule 407.11
C. Requirements of the Common-Law Privilege
In general, litigants must meet a three-part test to invoke the self-critical analysis privilege: (1) the information sought "must result from a critical self-analysis undertaken by the party seeking protection; (2) the public must have a strong interest in preserving the free flow of ... information sought;" and (3) "the information must be of the type whose [creation] would be curtailed if discovery were allowed."12
Under the third criterion, "courts must balance the public interest in protecting the confidentiality of the [information] against the need of the party seeking discovery to prove its case."13 In other words, "the court must determine whether the type of internal review conducted by the party invoking the privilege is one that benefits the public interest and would be curtailed in the future if it were subject to disclosure during civil discovery."14 In Dowling v American Hawaii Cruises, Inc.,15 the court added a fourth requirement: that the document was created "with the expectation that it would be confidential, and has in fact been kept confidential."16
Under the privilege, the party resisting discovery must make a "detailed and convincing showing of the harm to be anticipated from the disclosure at issue in the particular case."17 The privilege does not apply to underlying facts but only to documents created during the evaluative process.18 Stated in another way, only subjective impressions and opinions, not objective facts, are privileged.19 Furthermore, because the privilege is qualified, discovery can be had by a showing of extraordinary circumstances or special need.20
Finally, the privilege is applied at the trial judge's discretion.21 Thus, the trial court must balance the interests of the resisting party in keeping the information confidential with those of the party seeking discovery.22
D. Acceptance of the Common-Law Privilege in Federal Courts
Some federal district courts have adopted the self-critical analysis privilege and applied it outside of medical peer reviews.23 Recently, the United States District Court for the Northern District of Ohio adopted the privilege, reasoning that, although the Sixth Circuit had not addressed the existence of the self-critical analysis privilege, it would do so if confronted with the issue.24
Other federal district courts have chosen not to recognize the self-critical analysis privilege, including a magistrate judge for the United States District Court for the Northern District of Iowa, who reasoned that the Eighth Circuit would not do so.25 The privilege has even been denied by some district courts in the medical peer-review context,26 and other courts have done so in affirmative action cases.27 A few courts and commentators have questioned whether the privilege is really needed to protect the free flow of critical information.28
In University of Pennsylvania v E.E.O.C., the Supreme Court of the United States declined to recognize a qualified common-law privilege against disclosure of confidential peer-review materials in a Title VII discrimination case.29 The Court stated that it was disinclined to exercise "expansively" its authority to develop rules of privilege pursuant to Federal Rule of Evidence 501,30 reasoning that "[t]estimonial exclusionary rules and privileges contravene the fundamental principle that the 'public...has a right to every man's evidence.'"31 The majority further stated that a trial court should only recognize a privilege when it "promotes sufficiently important interests to outweigh the need for probative evidence."32
Note, though, that the Supreme Court and the circuit courts have not expressly denied the existence of the self-critical analysis privilege, nor have they accepted it and defined its scope.33 Rather, when confronted with the privilege, they have refused on "narrow grounds" to apply it to the facts of the cases.34
Many commentators, however, have argued in favor of adopting the self-critical analysis privilege.35 Furthermore, Rule 501 of the Federal Rules of Evidence states as follows: "[I]n civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or political subdivision thereof shall be determined in accordance with State law." Thus, under the plain language of Rule 501, state law regarding privileges applies in diversity cases.
E. The Common-Law Privilege in State Courts
The development of the self-critical analysis privilege has primarily been at the federal level. Although some state courts recognize the self-critical analysis privilege, others do not. For example, the New Jersey Supreme Court has held that the self-critical analysis privilege does not exist in the common law.36 The Supreme Court of Kentucky has also refused to judicially adopt the self-critical analysis privilege.37 Moreover, lower courts in Indiana,38 Florida,39 Colorado,40 California,41 Delaware,42 Massachusetts,43 Connecticut,44 and New York45 have all rejected the common-law self-critical analysis privilege.
There have been no reported decisions to date from the Illinois courts recognizing or rejecting the self-critical analysis privilege. Thus, the issue becomes whether it exists in Illinois. With that in mind, we discuss two Illinois statutes that have codified the self-critical analysis privilege in some circumstances for insurance companies and hospitals.
III. Illinois Medical Studies Act
The self-critical analysis privilege for medical peer-review committees, as recognized in Bredice, has now been adopted by statute in most states.48 In Illinois, that statute is the Medical Studies Act.49 Section 2101 of the Act states as follows:
All information, interviews, reports, statements, memoranda, recommendations, letters of reference or other third party confidential assessments of a health care practitioner's professional competence, or other data of the Illinois Department of Public Health, local health departments, the Department of Human Services (as successor to the Department of Mental Health and Developmental Disabilities), the Mental Health and Developmental Disabilities Medical Review Board, Illinois State Medical Society, allied medical societies, health maintenance organizations, medical organizations under contract with health maintenance organizations or with insurance or other health care delivery entities or facilities, tissue banks, organ procurement agencies, physician-owned inter-insurance exchanges and their agents, committees of ambulatory surgical treatment centers or post-surgical recovery centers or their medical staffs, or committees of licensed or accredited hospitals or their medical staffs, including Patient Care Audit Committees, Medical Care Evaluation Committees, Utilization Review Committees, Credential Committees and Executive Committees, or their designees (but not the medical records pertaining to the patient), used in the course of internal quality control or of medical study for the purpose of reducing morbidity or mortality, or for improving patient care or increasing organ and tissue donation, shall be privileged, strictly confidential and shall be used only for medical research, increasing organ and tissue donation, the evaluation and improvement of quality care, or granting, limiting or revoking staff privileges or agreements for services, except that in any health maintenance organization proceeding to decide upon a physician's services or any hospital or ambulatory surgical treatment center proceeding to decide upon a physician's staff privileges, or in any judicial review of either, the claim of confidentiality shall not be invoked to deny such physician access to or use of data upon which such a decision was based.
Furthermore, section 2102 of the Act states as follows:
Such information, records, reports, statements, notes, memoranda, or other data, shall not be admissible as evidence, nor discoverable in any action of any kind in any court or before any tribunal, board, agency or person. The disclosure of any such infor information or data, whether proper, or improper, shall not waive or have any effect upon its confidentiality, nondiscoverability, or nonadmissability.
One purpose of the Act is to "encourage candid and voluntary studies and programs used to improve hospital conditions and patient care or to reduce the rates of death and disease."50 Another is to "ensur[e] that members of the medical profession effectively engage in a peer-review process."51 The Act is based on the premise that without a statutory peer-review privilege, physicians would be reluctant to engage in candid evaluations of their colleagues and to sit on peer-review committees.52
The seminal Illinois Supreme Court decision on the Act is Roach v Springfield Clinic.53 In Roach, the court held that not all information and documents in the possession of a hospital's staff are privileged,54 even if they are considered by a peer-review committee.55 Instead, the court stated, the Act only protects information generated during the course of the peer-review process.56 If the information was generated before the process began or if it otherwise exists in a nonprivileged form, merely giving it to a peer-review committee will not make it privileged:57
If the simple act of furnishing a committee with earlier-acquired information were sufficient to cloak that information with the statutory privilege, a hospital could effectively insulate from disclosure virtually all adverse facts known to its medical staff, with the exception of those matters actually contained in a patient's records. As a result, it would be substantially more difficult for patients to hold hospitals responsible for their wrongdoing through medical malpractice litigation. So protected, those institutions would have scant incentive for advancing the goal of improving patient care. The purpose of the act would be completely subverted.58
Note that the Act applies not only to peer-review committees.59 Indeed, the court in Roach observed that the "statute may be applicable to certain other types of committees."60 The Act also protects "medical studies."61 The issue of whether specific materials are part of a medical study is a factual question within the legal determination of whether the privilege applies.62 The burden of establishing the applicability of the Medical Studies Act rests with the party seeking to invoke the privilege.63
Federal courts may not apply the privilege where jurisdiction is based on a federal question or claim and the records or information sought are relevant to that federal claim.64 For example, the seventh circuit has held that where the "principal claim" in a case is federal, "state law does not supply the rule of decision," and therefore the court has discretion whether to apply the state law privilege.65
IV. Illinois Insurance Compliance Self-Evaluative Privilege
In August of 1997, Illinois Public Act 90-0499 was signed into law, creating the insurance compliance self-evaluative privilege.66 The purpose of the statute is to encourage insurance companies to conduct voluntary internal audits of their compliance programs and management systems and to assess and improve compliance with various state and federal laws.67 The statute makes "insurance compliance self-evaluative audits document[s]" and testimony about any "insurance compliance audit[s]" privileged and not admissible in any civil, criminal or administrative proceeding.68 Note, though, that when the privilege is claimed, the documents are subject to in camera review by the court.69 The statute defines an "insurance compliance audit" as "a voluntary, internal evaluation, review, assessment, or audit not otherwise expressly required by law of a company or an activity regulated under [the Insurance] Code, or other State or federal law applicable to a company, or of management systems related to the company or activity, that is designed to identify and prevent noncompliance and to improve compliance with those statutes, rules, or orders."70
The statute states that an insurance compliance audit may be conducted by the insurance company, its employees, or by independent contractors.71
The statute defines an "insurance compliance self-evaluative audit document" as one "prepared as a result of or in connection with and not prior to an insurance compliance audit."72 The scope of what constitutes such a document is found in section (g)(2) of the statute and includes "field notes and records of observations, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, computer-generated or electronically recorded information, phone records, maps, charts, graphs, and surveys." A privileged document can also be an audit report, including exhibits and appendices, memoranda or documents analyzing the report; an implementation plan that addresses improving compliance and correcting and preventing noncompliance; and analytical data generated in the course of the audit.73
There are limits to the statutory privilege. For example, section (b)(1) excludes "[d]ocuments, communications, data, reports, or other information created as a result of a claim involving personal injury or workers' compensation made against an insurance policy." Also excluded are documents and reports required to be made and maintained by law, information obtained from "observation or monitoring by any regulatory agency," or documents and information obtained independently from an insurance compliance audit.74
Moreover, the privilege may be lost if it is "asserted for a fraudulent purpose" or if the document in question shows noncompliance with a law and the company failed to implement "reasonable corrective action" or to "eliminate the noncompliance within a reasonable time."75 In a criminal proceeding, the privilege can be lost if the government can show a compelling need and the information is otherwise unavailable except by incurring "unreasonable cost and delay."76 The privilege will also be lost if it is waived by the company.77 Note, though, that an insurance company can submit a privileged document to the director of the Department of Insurance as a confidential document and not waive the privilege.78
If, after an in camera review, a court compels discovery for one of the reasons set out above, it may only compel discovery of the relevant portions of the documents.79 Compelled disclosure does not waive the privilege on the same documents in any other civil, criminal, or administrative proceeding,80 and if a court compels disclosure, the insurer can request that the court enter an order protecting the document from further disclosure.81
Finally, a company asserting the privilege has the burden of demonstrating its applicability.82 Once applicability is established, the burden shifts to the requesting party to show that the privilege is asserted for a fraudulent purpose or that the company failed to undertake reasonable corrective action to comply within a reasonable time.83
Illinois state courts of review have neither adopted nor rejected the common-law self-critical analysis privilege, and the record is mixed in federal court. Health care professionals and insurance companies, however, have been given a measure of statutory protection to conduct self-review, and defense counsel should be familiar with the scope of these privileges and prepared to assert them wherever applicable.
The Self-Critical Analysis Privilege in a Nutshell
The common-law self-critical analysis privilege is based on the same public policy considerations that underlie Rule 407 of the Federal Rules of Evidence, which excludes evidence of subsequent remedial measures because disclosure could discourage self-examinations. The privilege allows a business to candidly assess its compliance with regulatory and legal requirements without creating evidence that could be used against it in court.
Parties seeking to assert the privilege must meet a three-part test: (1) the information results from a critical self-analysis undertaken by the party seeking protection; (2) the public has a strong interest in preserving the information's free flow; and (3) creation of the information would be discouraged if discovery were allowed. Some courts add a fourth requirement: the information was created with the expectation that it would be confidential and it has in fact been kept confidential.
The privilege does not apply to underlying facts but only protects documents created during the evaluative process. The privilege is qualified and applied at trial court discretion, and the information can be discovered by a showing of extraordinary circumstances or special need.
Although no Illinois court decisions have recognized the common-law self-critical analysis privilege, two statutes codify it. The Illinois Medical Studies Act makes privileged information and documents generated during medical peer-reviews and medical studies. The Act is based on the premise that physicians would otherwise be reluctant to candidly evaluate their colleagues and sit on peer-review committees.
The Illinois Insurance Compliance Self-Evaluative Privilege statute makes privileged self-evaluative insurance compliance documents and testimony about insurance compliance audits. This Act was designed to encourage insurance companies to conduct voluntary internal audits of their compliance programs and management systems to improve compliance with various state and federal laws.
16. Id at 426; compare, Roberts v Carrier Corp., 107 FRD 678, 684 (ND Ind 1985) (setting forth a different four-part test for self-critical analysis: (1) "the materials must have been prepared for mandatory government reports"; (2) "[a]ny privilege extends only to subjective, evaluative materials"; (3) the privilege "does not extend to objective data in the same reports"; (4) "[d]iscovery has been denied only where the policy favoring exclusion has clearly outweighed plaintiff's need").
18. See Abel v Merrill Lynch & Co., Inc., 1993 WL 33348 at *2 (SD NY) (no issue of privilege because reports contain only "non-evaluative facts, statistics or other data"); Sheppard v Consolidated Edison Co. of NY, 893 F Supp 6 (ED NY 1995).
23. See, e.g., New York Stock Exch. v Sloan, 22 Fed R Serv 2d (Callaghan) 500 (SD NY 1980) (accounting records); In re Crazy Eddie Sec. Litig., 792 F Supp 197 (ED NY 1992) (to securities law); Keyes v Lenoir Rhyne College, 552 F2d 579 (NC 4th Cir), cert denied, 434 US 904 (1977) (academic peer reviews); Granger, 116 FRD 507 (railroad accident investigations); Lloyd v Cessna Aircraft Co., 74 FRD 518 (ED Tenn 1977) (product safety assessments); Bradley v Melroe Co., 141 FRD 1 (D DC 1992) (products liability); Banks v Lockheed-Georgia Corp., 53 FRD 283 (ND Ga 1971); O'Connor v Chrysler Corp., 86 FRD 211 (D Mass 1980); Webb, 81 FRD 431 (assessment of equal employment opportunity/discrimination practices); Hoffman v United Telecommunications, 117 FRD 440 (D Kan 1987) (self-critical portions of EEO-1 reports which the employer by law filed with the government); but see Zapata v IBP, Inc., 1994 WL 649322 at *5 (D Kan) ("no clear consensus that such a privilege should apply in Title VII cases").
28. See, e.g., Williams v Vulcan-Hart Corp., 136 FRD 457 (WD Ky 1991); Note, Criticizing the Self-Criticism Privilege, 1987 U Ill L Rev 675 (1987); J. Flanagan Rejecting a General Privilege for Self-Critical Analyses, 51 Geo Wash L Rev 551 (1983).
33. Dowling, 971 F 2d at 425 n 1 (voluntary routine pre-accident safety reviews are not protected by a privilege of self-critical analysis); see also, First E. Corp. v Mainwaring, 21 F3d 465 (DC Cir 1994); but see ASARCO, Inc., Tenn. Mines Div. v NLRB, 805 F2d 194 (6th Cir 1986) (reversing ALJ order requiring ASARCO to disclose internal self-critical report); Coates v Johnson & Johnson, 756 F2d 524, 551 (7th Cir (Ill) 1985) ("The prevailing view is that self-critical portions of affirmative action plans are privileged and not subject to discovery by plaintiffs."); Martin v Potomac Elec. Power Co., 1990 WL 158787 (D DC) (collecting cases considering privilege).
35. See D. Beck, Business Litigation, 60 Def Couns J 357 (1993); R. Bush, Stimulating Corporate Self-Regulation — The Corporate Self-Evaluative Privilege: Paradigmatic Preferentialism or Pragmatic Panacea, 87 NW U L Rev 597, 599 (1993); J. Pelso, The Privilege for Self-Critical Analysis, 18 Sec Reg L J 699, 722-25 (1990); J. Murphy and R. Oyer, The Self-Evaluative Privilege and Beyond, 7 No 3 Insights 11 (1993); J. Murphy, The Self-Evaluative Privilege, 7 J Corp L, 489, 491 (1982); D. Leonard, Codifying a Privilege for Self-Critical Analysis, 25 Harv J on Legis 113 (1988); R. Allen and C. Hazelwood, Preserving the Confidentiality of Internal Corporate Investigations, 12 J Corp L 355 (1987).
36. See Payton v New Jersey Turnpike Auth., 691 A2d 321 (NJ 1997) (holding that a court may consider the interest of protecting self-critical analysis in balancing the need for discovery against the prejudice to the party resisting it).
40. See Combined Communications Corp., Inc. v Public Service Co. of Colo, 865 P2d 893 (Colo App 1993) (stating that self-critical analysis privilege does not exist in Colorado, although applied self-critical analysis to facts of case and held that it did not apply).
Michelle R. Mosby-Scott is a partner in Allison and Mosby-Scott in Bloomington, where she concentrates in plaintiff's personal injury, medical malpractice, and family law. She is a member of the Illinois Bar Journal Editorial Board. She received her B.A. from Eastern Illinois University and her J.D. from Southern Illinois University School of Law.
Michael Todd Scott <email@example.com>, CPA, CPCU, CLU, is an assistant counsel for State Farm Insurance Companies in Bloomington. He is a member of the ISBA Insurance Law Section Council and vice-chair of the Corporate Law Departments Section Council. He also serves as editor of The Corporate Lawyer, the newsletter of the Corporate Law Departments Section Council. He earned his B.S. in accountancy from University of Illinois and his J.D. (cum laude) from Southern Illinois University School of law.