A state appeals panel has ruled James McDonald, ousted pastor of Harvest Bible Chapel, cannot use a “crime-fraud exception” to circumvent attorney-client privilege as part of the defamation lawsuit he filed in the wake of a falling out with the suburban megachurch stemming from allegations of financial mismanagement and other misconduct.
MacDonald founded HBC, but the church terminated him in February 2019 for conduct that allegedly included “insulting, belittling, and verbally bullying others,” “improperly exercising positional and spiritual authority” and “extravagant spending utilizing church resources resulting in personal benefit.”
When MacDonald initiated arbitration with the Institute of Christian Conciliation, Harvest retained Hoogendoorn & Talbot for representation. Harvest also retained Sally Wagenmaker, of Wagenmaker and Oberly, to investigate its finances and corporate structure. That firm signed a forensic auditing contract with Schechter, Dokken, Kanter, Andrews, & Selcer.
MacDonald ultimately sued Wagenmaker, her firm and the accountants, alleging statements they provided to Harvest leadership were provably false and defamatory, and weakened MacDonald's arbitration position.
During discovery, the law firms moved to quash MacDonald’s subpoenas. The accountants produced the requested documents. MacDonald them moved to compel disclosure, arguing his allegations superseded the concept of privileged communication between lawyers and clients.
Cook County Judge Jerry Esrig sided with MacDonald and found, based only on MacDonald’s pleadings, he’d sufficiently argued for a right to inspect certain documents. Esrig also granted the law firms’ request for a so-called “friendly” order of contempt, allowing them to appeal the decision.
The Illinois First District Appellate Court then consolidated those filings.
Justice Michael Hyman wrote the panel’s opinion, issued March 1; Justices Sharon Oden Johnson and Sanjay Tailor concurred.
“Absent an exception, there is no dispute that MacDonald seeks protected communications,” Hyman wrote, adding the crime-fraud “exception’s rationale recognizes a lawyer’s professional services should not assist in committing a crime or fraud; advice given for those purposes would amount to participating in a conspiracy.”
To prove the exception applies, Hyman continued, MacDonald would have to show Harvest “knew or should have known” the conduct bolstering his allegations was illegal — that he made the allegations alone would be insufficient. The law firms argued Judge Esrig erred by ruling in MacDonald’s favor based only on his motion to compel the firms’ responses, the panel agreed.
“Significantly,” Hyman wrote, Esrig “did not say that ‘evidence’ showed HBC sought the advice with the intent to defame MacDonald (assuming the fraud exception reaches defamation) or that the lawyers’ representation was anything other than in good faith or that HBC knew or should have known the statements it published were defamatory.”
The firms also argued Esrig was wrong to find the crime-fraud exception applies at all. The panel said he incorrectly relied on cases to apply “the exception to intentional torts, including deliberate misrepresentations that constitute defamation.”
While the firms agreed “some courts in Illinois and other jurisdictions have applied the crime-fraud exception to conduct not explicitly criminal or fraudulent,” Hyman said they also noted those rulings involved situations “where the conduct rose to the level of fraud or was akin to fraud or the conduct in the litigation was fundamentally inconsistent with the basic premise of the adversary system.”
The panel said MacDonald didn’t allege the statements he claimed were defamatory were intended to induce him to act, nor did he claim he relied on those statements, elements needed to sustain a fraud claim. Further, he “presented no evidence showing HBC sought advice from its attorneys with the intent to defame him,” Hyman wrote. “Extending the crime-fraud exception to claims like MacDonald’s would risk deterring clients from seeking legal advice, chilling lawyers from giving advice and eroding the attorney-client privilege’s protection of legitimate communications.”
In addition to Hoogendoorn & Talbot, the firms are represented by Tibler Orpett & Meyer, of Chicago.
Wagenmaker did not respond to a request for comment.
MacDonald is represented by Roetzel & Andress, of Chicago.