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In re Chinese Manufactured Drywall Products Liability Litigation

United States District Court, E.D. Louisiana

December 12, 2014

IN RE CHINESE MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION, Section L. THIS DOCUMENT RELATES TO ALL CASES

ORDER AND REASONS

ELDON FALLON, District Judge.

Before the Court is an in camera review of the privilege log of counsel of record for Taishan Gypsum Co. Ltd. ("TG") and Tai'an Taishan Plasterboard Co. Ltd. ("TTP"), (collectively the "Taishan Entities" or "Taishan"). The in camera review stems from a discovery dispute between the Plaintiffs' Steering Committee ("PSC") and counsel for Taishan. Having considered the parties' memoranda and the applicable law, the Court issues this order and reasons.

I. BACKGROUND

From 2005 to 2008, a housing boom coincided with the destruction caused by Hurricanes Katrina and Rita to sharply increase the demand for construction materials in the Gulf South and East Coast. In response, Chinese companies manufactured, and sold to homeowners throughout the United States, considerable quantities of gypsum wallboard which came to be known as "Chinese drywall." Homeowners experienced problems with the drywall. Specifically, the drywall emits various sulfide gases, damages structural mechanical and plumbing systems of the home, and damages other appliances in the home. The affected parties sued the entities involved in the manufacturing, importing, and installing the Chinese drywall. The cases multiplied and the Judicial Panel on Multidistrict Litigation ("MDL"), declared the matter an MDL and transferred the cases to this Court. After a period of discovery, it became clear that there were two principal manufacturers, (1) the Knauf Entities, and (2) the Taishan Entities.

Taishan initially refused to participate in this litigation, and default judgments were entered in four cases: Germano, Mitchell, Gross, and Wiltz. The day before the expiration of the window for appeal, Taishan appeared and appealed to the Fifth Circuit Court of Appeals, arguing - for the first time - that this Court lacked personal jurisdiction. The matters were remanded to this Court for further discovery on the jurisdictional issue. After a period of discovery, this issue was briefed and argued. In due course, this Court rendered an opinion finding it had jurisdiction over the Defendant Taishan. The Defendant appealed the Court's judgment. Ultimately, two separate Fifth Circuit panels affirmed this Court's exercise of jurisdiction over Taishan. The time for seeking writs to the Supreme Court has passed, so such judgment became final and enforceable. In order to execute the judgment, Plaintiffs moved for a Judgment Debtor Examination. The Court ordered Taishan to appear in open court on the morning of July 17, 2014 for a Judgment Debtor Examination (Rec. Doc. 17774). Taishan failed to appear for the July 17, 2014 Judgment Debtor Examination and the Court held Taishan in contempt of court, both criminally and civilly. (Rec. Doc. 17869).

Just prior to the Judgment Debtor Examination, counsel for Taishan filed motions to withdraw as counsel of record, reporting that Taishan had decided to no longer participate in proceedings before this Court and had terminated counsel. (Rec Docs. 17846, 17858). Thereafter, the PSC issued a request for document production from Taishan's counsel regarding its communications with Taishan. The PSC seeks, for example, "all communication regarding retention as counsel for any of the Taishan affiliated companies..." and "all documents and information regarding the decision to discharge the Taishan Defendants' counsel, " among other requests. Counsel for Taishan responded, objecting to document production on the basis of attorney-client and work product privilege.

II. PRESENT MOTION

The PSC now moves to compel document production, as further supported by a supplemental memorandum. (Rec. Doc. 18060, 18193). The PSC argues that the attorney-client privilege does not apply to the communications between Taishan and its affiliates' communications with counsel, as it appears that criminal contempt was always contemplated by Taishan. The PSC notes that Taishan has been held in criminal contempt for deliberately disregarding the Court's order to appear for a judgment debtor examination. This criminal contempt, the PSC argues, invokes the crime-fraud exception to the attorney-client privilege. Moreover, the PSC argues that Taishan waived its privilege when the China National Building Material Company ("CNBM, " an upstream affiliate of Taishan) discovered the views of counsel by its August 20, 2014 "Voluntary Announcement."

Counsel for Taishan respond in opposition, as further supported by a supplemental responsive memorandum. (Rec. Doc. 18069, 18193). First, counsel argue that the document requests are irrelevant, overbroad, and overly burdensome. Second, counsel argue that there is no basis to believe that Taishan communicated with counsel for the purpose of perpetrating or concealing any fraud or crime. Third, counsel argue that the statement by the upstream affiliate CNBM is not sufficient to waive privilege for TG.

III. DISCUSSION

A. Attorney-Client Privilege

The attorney-client privilege is an exception to the general rule that the law is entitled to every man's evidence. The privilege generally protects communications from the client to the attorney, and responsive communications from the attorney to the client. A widely quoted definition of the attorney-client privilege appears in United States v. United Shoe Machinery Corp., 89 F.Supp. 357, 358-59 (D. Mass. 1950):

The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 89 F.Supp. at 358-59.

This definition was adopted by the Fifth Circuit Court of Appeals in 1975 in In re Grand Jury Proceedings, 517 F.2d 666, 670 (5th Cir. 1975), and has been generally applied elsewhere. See generally PAUL R. RICE, 1 ATTORNEY-CLIENT PRIVILEGE IN THE UNITED STATES, § 5:2 (Thomson West 2d ed. 1999). It is key, then, that for privilege to attach to a client's communication, the client must be soliciting legal advice from the attorney, as opposed to non-legal services such as business advice. See RICE, § 7:1. As explained by the court in Hercules Inc. v. Exxon Corp., 434 F.Supp. 136, 147 (D. Del. 1977), "[o]nly if the attorney is acting as a lawyer' - giving advice with respect to the legal implications of a proposed course of conduct - may the privilege be ...


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