The August 14th disclosure that there were two entities named Everfresh was stunning in its implications.  See §IX-B, above, discussing the fraud that induced the contract settling the 89c1114 case. 

Confronting the defense over this fraud would have been cathartic, but it wouldn’t have brought the case any closer to the resolution that my 76-year old client wanted.  So, the day after I learned about the fraud, I tendered a counterproposal to McDermott Will & Emery’s October 1989 settlement offer; Grove Fresh had promised to make such a tender when it executed the 89c1114 settlement contract.[1]  I also recommended to Mr. Troy that if 89c1113 didn’t settle, filing a new, particularized complaint alleging a RICO conspiracy would be the best way to overcome the discovery problems that were the legacy of Hines’s conflicts of interest and the defense’s fraudulent conduct. 

McDermott Will & Emery did not respond to the counterproposal, so on August 23rd I sent a follow-up letter, giving notice that Grove Fresh was preparing a new lawsuit that would name Labatt and both Everfresh entities as defendants, among others.  McDermott Will & Emery responded with an emergency motion seeking to require me to file the new complaint under seal. 

I agreed to file under seal so long as the court held a prompt, post-filing hearing on whether there were legitimate grounds for a seal.  Judge Zagel never held any such hearing, however; he offered no explanation for the seal until he issued the Contempt Order five years later. 

A. Grove Fresh’s August 15th counterproposal on settlement. 

On August 15, 1990, I sent McDermott Will & Emery a three-page letter making a “settlement demand that might serve as a framework for settlement discussions.”  With the caveat that Grove Fresh still “need[ed] substantially more information about sales and costs than it has obtained to date in discovery,” the letter made the following claims, concessions and demands:

  • Continuous tort claim:  Citing the continuous tort doctrine and information it had obtained from the Florida Department of Citrus, Grove Fresh claimed that it was “entitled to Everfresh’s unlawful profits for the period from at least 1975 to the date of the complaint.” 
  • Concession as to time period:  For the sake of settlement negotiations only, the time periods for Grove Fresh’s demands would begin on “the date John Labatt Limited acquired the facilities in Chicago [1986], Detroit [1986], and Windsor [1983], rather than the dates on which Messrs. Kotwicki and Allen first started manufacturing and selling adulterated juice.” 
  • Concession as to products:  Powell had testified at his deposition that Everfresh and its predecessors had adulterated grapefruit juice and apple juice.  Nevertheless, Grove Fresh’s demand was limited to orange juice sales only.
  • Settlement demands: Grove Fresh made the following demands to settle and compromise all pending and potential claims against Labatt and both of the Everfresh entities:
    • 20% of orange juice sales by Holiday Juice, Boden Products, and Ever Fresh from the respective dates that Labatt acquired the entities through February 1989.
    • $2,000,000 for lost profits.
    • An amount for Grove Fresh’s attorney’s fees and costs.
    • An amount for punitive damages.

I asked the McDermott lawyers to let me know by August 17 whether they were interested in pursuing settlement discussions at that stage of the litigation, but they never responded.  Instead, on August 20, Powell (Everfresh’s president) called Mr. Troy to request a meeting of principals.  Mr. Troy rejected that request.

B. The six discovery motions filed on August 20, 1990, including the motion to enforce discovery regarding sales data.

On August 20, 1990, Grove Fresh, in accordance with the recently entered Discovery Plan and Order, filed six motions in 89c1113 regarding disputes over document requests.  One of the motions sought to compel discovery regarding defendants’ unlawful profits.

On August 31, Judge Zagel entered and continued generally the motion seeking discovery regarding defendants’ unlawful profits.  He never ruled on that motion.

C. Grove Fresh’s August 23rd notice of its intent to file a new complaint. 

On August 23, 1990, having received no response to my August 15th letter, I notified Everfresh that Grove Fresh was preparing to file a new lawsuit alleging a RICO conspiracy to adulterate orange juice from 1975 onward, and that Everfresh would be one of the defendants in that case.  The notice was in a letter to McDermott Will & Emery that began as follows:

I am writing to advise you that on Monday, August 27, 1990, Grove Fresh will be filing a new lawsuit (not an amended complaint) against your clients and others, including American Citrus Products Corp. The defendants will include several Labatt entities and several former officers and shareholders of entities acquired by Labatt over the last seven years. The complaint is about 40 pages and includes more than three dozen exhibits.

* * * *

The complaint fixes December 1986 as the latest date by which Labatt learned about the adulteration practices because that is when it acquired Ever Fresh Juice Co…. 

On the date of acquisition, Ever Fresh was a defendant in a law suit that had been filed in March 1986 by Purity Products, Inc., No. JFM 86-963 (D. Maryland). The Purity Products complaint alleged that Ever Fresh had been selling orange juice adulterated with sugar since at least 1984. The Purity Products complaint supported these allegations with the results of six tests performed by an independent food testing laboratory. Labatt settled this suit in August 1987.

The complaint by Grove Fresh will allege that R. Bruce Frasier, a Labatt vice-president, learned about the 1986 Purity Products complaint (and an earlier complaint making similar allegations that had been filed in 1982) in the course of conducting a "due diligence" investigation prior to Labatt's acquisition of Ever Fresh. The Grove Fresh complaint will also allege that in 1986 or 1987 another Labatt officer, Dave Murray, received the results of independent tests of products made by Labatt's fruit juice division, and that the results of these tests indicated that Labatt's juice products were adulterated. The complaint will allege that neither Frasier nor Murray took any steps to terminate the adulteration practices, and thereby gave their tacit approval to such practices.

The complaint will allege that after acquiescing in and profiting from the adulteration practices at its juice division for several years, Labatt, in the spring of 1989, devised a scheme for evading possible criminal liability for those practices. Specifically, the complaint will allege that after Grove Fresh filed its complaint in February 1989 and as rumors circulated in the industry about the forthcoming indictment against Edward Boden, et al., Labatt fabricated an explanation of events that made Kotwicki the scapegoat for the Labatt organization. In May and June 1989, in furtherance of this scheme, Labatt executives met with representatives of the Food and Drug Administration and told certain untruths, namely, that Kotwicki had been carrying out his adulteration practices without the knowledge or approval of the parent organization.

We will consider postponing the filing of the new complaint, but only if we receive a good-faith settlement offer, in writing, by noon on Saturday, August 25, 1990.

D. The 89c1113 defendants’ emergency motion to require Grove Fresh to file any new complaint under seal. 

On August 24, 1990, Weitzman served me with an emergency motion to require that Grove Fresh file the 90c5009 complaint under seal.  His motion argued that the proposed new lawsuit was an improper attempt to amend 89c1113 and to escape the discovery plan and order entered earlier that month. The motion did not allege that I was attempting to litigate Grove Fresh’s claims “on the courthouse steps,” which is the reason Judge Zagel would give five years later for why he had sealed 90c5009.[2] 

I received the notice less than two hours before the scheduled hearing.  I reviewed what was then Local Rule 10, which described the “[p]rocedures for handling restricted documents”, but said nothing about the showing required to obtain a seal.  I attempted to research the applicable law, but found nothing in the limited time available before the hearing. 

At the hearing, wary of arguing the issues without a clear grasp of the applicable law, I offered to file the complaint under seal “so long as we can have a status on Tuesday [August 28] and then discuss how we would dispose of the seal.”  Judge Zagel agreed:

THE COURT:                        Right.  File it under seal, designate it as a related case and it will come to me, and then we can sort out whether it should be under seal in the first place, whether it is a related case, all of that stuff. 

(Id.) [emphasis added]. 

On my way out of the courtroom Donald Walker, the deputy clerk assigned to Zagel’s courtroom, told me that filing a complaint under seal required a minute order from the Emergency Judge, and that Zagel was currently designated as the Emergency Judge.  Walker told me that my paralegal should see him before presenting the new complaint to the intake desk on the 20th floor of the Dirksen Building, and that he (Walker) would provide my paralegal with a minute order authorizing the sealing of the complaint. 

E. The minute order sealing 90c5009, which was never served on Grove Fresh. 

On Tuesday, August 28, my paralegal met with Walker to complete the paperwork for sealing the complaint.  Walker had my paralegal fill out the upper portion of a minute order form with the caption of the new case.  Walker then typed in the following two sentences:

Plaintiff’s motion to file case under seal is granted.  The complaint and all subsequent pleadings shall be filed under seal until further order of courtNo notice.  (emphasis added)

These two sentences misrepresented my August 24 stipulation in three respects:

  • They identified Grove Fresh as the party seeking the seal; in fact, the defendants were the ones who had sought the seal.
  • They omitted to recite the condition on which I had offered the stipulation—that we have a hearing to “discuss how we would dispose of the seal.”
  • They expanded the scope of the seal to include not just the complaint, but “all subsequent pleadings.”

I did not have a timely opportunity to correct these misrepresentations because, as the “no notice” notation indicates, the minute order was not served on Grove Fresh. 

I finally received a copy of the sealing order in May 1991, but only after making a special request for it. 

F. The inapt application of the qui tam secrecy procedures, which precluded the clerk of court from making an official record of the 90c5009 case. 

The minute order that Walker prepared triggered the secret operating procedures that apply to the early stages of qui tam (i.e., whistleblower) cases filed under the False Claims Act.  See §§XIII, below.

Judge Zagel never disclosed his intent to apply the qui tam operating procedures to the 90c5009 case.  The Northern District of Illinois has never published those procedures, so I did not know that they even existed,[3] much less did I anticipate that they would be applied to the 90c5009 case. 

The qui tam operating procedures include a suspension of the clerk’s duty under FRCP 79(a) to enter on the docket all papers filed by the litigants and all “orders, judgments, and verdicts” rendered by the court.  See §§XIII-B, C, below.  Because docket entries define the scope of the official record in the trial court,[4] applying the qui tam operating procedures to the 90c5009 case meant that there would be no official record of the case. 

There was no plausible ground for applying the qui tam secrecy procedures to the 90c5009 case.  See §XIII-D, below.

G. The unexplained denial of the motion to vacate the seal. 

Judge Zagel did not hold any hearing on the seal after I filed the 90c5009 complaint.  On August 31, 1990, I presented a motion to vacate the seal.  Judge Zagel denied that motion without stating any legal or factual reasons for the seal.

H. The 89c1113 and 89c1117 defendants’ concession that the 90c5009 complaint was based on information in the public domain. 

Everfresh, Home Juice, and Henry Lang eventually moved to dismiss the 90c5009 complaint on the exact same ground alleged in the emergency motion for a seal—that the new complaint was nothing more than an amendment to the February 1989 complaints “disguised by a different caption and docket number,” and that “[t]he new complaint entirely subsumes the original complaints ..."[5]  They argued that Grove Fresh did not meet the standards for amending the February 1989 complaints because the only new allegations in the 90c5009 complaint came from information that was publicly available to Grove Fresh as of February 1989, and that too much time had lapsed to permit Grove Fresh to use this public information in the August 1990 90c5009 complaint.

Home Juice and Lang made the following statements about the public sources for the 90c5009complaint:

[M]uch of the information that is contained in the “new” complaint was drawn from public sources of information.  Many of [the] test results, for example, upon which the plaintiff relies came from the Florida Department of Citrus.  These were obtained voluntarily and not through service of process.  Others were obtained from public court files.[6] 

In a similar vein Everfresh stated:

The information that Grove Fresh claims it relied upon to "amend" was obtained from public agencies, which was, therefore, available prior to February 1989.  Grove Fresh should not be allowed to file [the February 1989 complaints] without any investigation [of these public sources], forego the extended time this Court gave it to amend,...and claim it was permissible for it to wait to investigate its claims and amend its claims on the eve of the close of discovery.[7] 

In March 1991 Judge Zagel denied the motions to dismiss the 90c5009 complaint, but he accepted the defendants' characterization of the 90c5009 allegations as having come from public sources.  See §XV-G, below. 

I. The First Amendment anomalies.

The seal on the 90c5009 case created two anomalies.  First, as the defendants themselves acknowledged when seeking dismissal of the complaint, the 90c5009 complaint was based on information in the public domain, yet the public was not allowed to read the complaint or any other papers filed in that case. 

Second, the subject matter of 90c5009 overlapped with the subjects at issue in 89c1113, 89c1114, and 89c1117, yet none of those cases was under seal.  Grove Fresh could file a motion in 89c1113 discussing Everfresh’s history of illegal practices, and the public would have unrestricted access to that discussion.  The identical discussion in a motion filed in 90c5009 would be under seal and unavailable to the public.  

J. The 90c5009 seal was not the equivalent of a gag order according to the standards set by Chase v. Robson 

Over time, the defendants would treat the 90c5009 sealing order as the equivalent of a gag order, claiming that it required Grove Fresh to file under seal in 89c1113, 89c1114, and 89c1117 any papers that referred to any historical facts that might be at issue in 90c5009.  Judge Zagel had any number of opportunities to clarify whether the seal order was or was not a gag order, but he didn’t; he waited five years before finally addressing that issue in the Contempt Order. 

In the absence of guidance from Judge Zagel, I turned to case law for advice and found Chase v. Robson, 435 F.2d 1059 (7th Cir. 1970), a 20 year-old precedent binding on Judge Zagel that established procedural and substantive standards for gag orders.  

In Chase, a criminal case, the trial judge sua sponte issued a gag order barring the prosecutors, the defendants, and defense counsel from making any out-of-court “written or oral, either at a public meeting or occasion, or for public reporting or dissemination in any fashion, regarding…the merits of the case, the evidence, actual or anticipated, the witnesses, or the rulings of the court.”  The defendants petitioned the Seventh Circuit for a writ of mandamus directing the trial judge to vacate the gag order on the ground that it was an unconstitutional prior restraint.

The Seventh Circuit granted the writ and gave the following reasons: 

We hold that before a trial court can limit defendants' and their attorneys' exercise of first amendment rights of freedom of speech, the record must contain sufficient specific findings by the trial court establishing that defendants' and their attorneys' conduct is 'a serious and imminent threat to the administration of justice.' Craig v. Harney, 331 U.S. 367, 373, 67 S. Ct. 1249, 1253, 91 L. Ed. 1546 (1947). Applying either the standard that the speech must create a 'clear and present danger,' Wood v. Georgia, 370 U.S. 375, 82 S.Ct. 1364, 8 L.Ed.2d 569 (1962), of a serious and imminent threat to the administration of justice, or the lesser standard that there must be a 'reasonable likelihood,' United States v. Tijerina, 412 F.2d 661 (10th Cir. 1969), of a serious and imminent threat to the administration of justice, we hold that the trial court's order is constitutionally impermissible.

The 90c5009 sealing order did not even purport to address the Chase standards for gag orders, much less to meet them.  I concluded that Chase precluded the seal order from being construed as a gag order.

K. Relinquishing a billion-dollar client: Schiff Hardin & Waite’s appearance for Labatt. 

From February 1989 through August 1990, the McDermott lawyers had held themselves out as representing both Labatt and Labatt’s orange juice business.  Nevertheless, after the 90c5009 complaint named Labatt, JLI, and the Everfresh entities as defendants, McDermott Will & Emery appeared for only one of those four entities—the Michigan Everfresh Inc.  A new set of lawyers from Schiff Hardin & Waite appeared for Labatt, JLI, and the Canadian Everfresh Inc. 

Labatt held more than $2 billion in assets. Law firms do not refer multi-billion-dollar clients to other law firms unless the originating firm has an incurable conflict of interest.  Appler and his partners never formally acknowledged that they had such a conflict, but the appearance of new lawyers for three of the four Labatt Entities was an unmistakable sign that the firm did, indeed, have one. 

We do not know how, in 90c5009, Appler and his partners rationalized representing one of the Labatt Entities even as they disqualified themselves from representing the other three.  If they were ever compelled to explain their reasoning, however, the explanation would be tethered to decisions they had made in March 1989, when they agreed to represent Flavor Fresh and its principals in 89c1114.  See discussion above in §II.

[1] See §§IX-A-2, 4, above.

[2] Grove Fresh Distributors, Inc. v. John Labatt Ltd., 888 F. Supp. 1427, 1431 (N.D. Ill. 1995).

[3] I had no experience in qui tam litigation, which is a highly specialized area of the law.  I first learned about the special operating procedures for qui tam cases in 2000, when they were described to me by a deputy clerk.  See text at footnote 155, below.

[4] A pleading, motion, or brief that is not docketed is not part of the official record and cannot be considered by a court of appeals.  International Business Machines Corp. v. Edelstein, 526 F.2d 37, 45 (2d Cir. 1975).  An order, judgment or verdict that is not docketed cannot be appealed.  Stelpflug v. Federal Land Bank of St. Paul, 790 F.2d 47, 49 (7th Cir. 1986).

[5] 10/2/90 Memorandum of American Citrus Products Corp. In Support of its Motion to Strike the Complaint as an Unauthorized and Prejudicial Amendment, p. 2.

[6] Id., p. 10.

[7] 1/16/91 Everfresh Inc.'s Reply Memorandum in Support of its Motion to Dismiss the Complaint, p. 10.