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Zloop Inc. v. Phelps Dunbar LLP

United States District Court, W.D. Louisiana, Lafayette Division

March 21, 2019

ZLOOP, INC.
v.
PHELPS DUNBAR LLP, ET AL.

          JUNEAU JUDGE

          MEMORANDUM RULING

          PATRICK J. HANNA UNITED STATES MAGISTRATE JUDGE

         Before the court is the motion to compel the production of documents (Rec. Doc. 111), which was filed by the plaintiff, Zloop, Inc. The motion is opposed. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the motion is GRANTED IN PART and DENIED IN PART.

         Background[1]

         In 2014, Kendall Mosing filed suit against Robert Boston, Robert LaBarge, and Zloop, Inc.[2] Mr. Mosing had invested in Zloop, an electronic waste recycling company, which was owned by Mr. Boston and Mr. LaBarge, and he asserted various claims for securities fraud, unfair trade practices, fraud, conversion, breach of contract, negligent misrepresentation, and detrimental reliance. In 2016, Mr. Mosing initiated a second lawsuit against Mr. Boston and Mr. LaBarge, [3] in which he alleged that he had been defamed. Protracted litigation in various civil actions in scattered venues ensued. Zloop, LLC and two related entities sought bankruptcy protection, and the bankruptcy court in Delaware confirmed a Chapter 11 Liquidation Plan in which Mr. Mosing was awarded an unsecured claim and control over the prosecution of Zloop, Inc.'s claims against third parties including Mr. Boston and Mr. LaBarge, effectively making Zloop, Inc. a plaintiff in Mr. Mosing's original lawsuit. Mr. Boston and Mr. LaBarge were also criminally prosecuted in North Carolina.

         In September 2014, Phelps Dunbar LLP was retained to represent Mr. Boston, Mr. LaBarge, and Zloop with regard to the first lawsuit filed by Mr. Mosing. According to the retainer letter, attorneys Michael D. Hunt and Heather Duplantis would be doing most of the work on the file.

         On November 29, 2016, the Plan Administrator for Zloop's bankruptcy proceeding retained the Allen & Gooch law firm to represent Zloop, Inc. in the ongoing litigation in place of Phelps Dunbar.[4] Two days later, on December 1, 2016, Charles M. “Chuck” Kreamer of Allen & Gooch advised Ms. Duplantis that Allen & Gooch would be filing a motion to substitute counsel.[5] In the instant consolidated lawsuits, initiated in April 2017, Zloop, Inc. sued Phelps Dunbar and its individual attorneys Heather Duplantis, Michael D. Hunt, Kelly Romer Boudreaux, and Marc G. Matthews, for legal malpractice and other torts. Zloop's primary complaint is that there was a conflict of interest between Zloop on the one hand and Mr. Boston and Mr. LaBarge on the other, allegedly resulting in Zloop being damaged by the joint representation.

         The Motion to Compel

          In the pending motion to compel, Zloop, Inc., through its counsel James H. Gibson and Charles M. “Chuck” Kreamer of the Allen & Gooch law firm, seeks the production of seventeen e-mails that were sent by Phelps Dunbar lawyers to other lawyers in the same firm regarding ethical or professionalism issues involving the firm's joint representation of Zloop, Mr. Boston, and Mr. LaBarge. The seventeen e-mails were exchanged on dates between December 5 and December 16, 2016 among defendant Heather Duplantis, defendant Michael D. Hunt, Phelps Dunbar attorney Christopher Ralston, and others at the Phelps Dunbar law firm with regard to Allen & Gooch's request that Phelps Dunbar turn over its entire file and Allen & Gooch's request that Phelps Dunbar reimburse Zloop the sum of approximately $72, 000 in attorneys' fees. The defendants claim that the documents are protected by the attorney-client privilege. Redacted versions of the documents were produced by Phelps Dunbar to Allen & Gooch (Rec. Doc. 120-1), and copies of the unredacted documents were submitted to this Court under seal for in camera review.

         Law and Analysis

         The plaintiff alleged that the court has subject-matter jurisdiction over this action under 28 U.S.C. §§ 1331, 1332, and 1334. The facts set forth in the plaintiff's original compliant are insufficient to establish diversity jurisdiction. If this were a diversity case, Louisiana law would govern the issue of whether the attorney-client privilege precludes disclosure of the seventeen e-mails.[6] Since diversity jurisdiction has not been established, however, the common law as interpreted by federal courts governs this dispute.[7] What law governs the dispute is not critically important in this case, however, because federal common law and Louisiana statutory law are materially similar concerning the attorney-client privilege.[8]

         “The attorney-client privilege protects two related, but different, communications: (1) confidential communications made by a client to his lawyer for the purpose of obtaining legal advice; and (2) any communication from an attorney to his client when made in the course of giving legal advice, whether or not that advice is based on privileged communications from the client.”[9] The purpose of the privilege:

is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client.[10]

         “Because the privilege protects only confidential communications, the presence of a third person while such communications are made or the disclosure of an otherwise privileged communication to a third person eliminates the intent for confidentiality on which the privilege rests.”[11] For a communication to be protected under the privilege, the proponent “must prove: (1) that he made a confidential communication; (2) to a lawyer or his subordinate; (3) for the primary purpose of securing either a legal opinion or legal services, or assistance in some legal proceeding.”[12] Communications by the lawyer to the client are also protected “if they would tend to disclose the client's confidential communications.”[13]

         The burden of demonstrating that the privilege applies rests on the party invoking the privilege.[14] After the privilege has been established, the burden shifts to the adverse party to prove any applicable exception.[15] Any ambiguity concerning whether the elements of a privilege claim have been met is construed against the proponent of the privilege.[16]

         There is no presumption that a company's communications with counsel are privileged.[17] Instead, a fact-specific inquiry must be made.[18] The attorney-client privilege does not apply to materials that contain purely factual data.[19] Similarly, a document that simply transmits another document to other individuals without more is not protected by the attorney-client privilege.[20] Therefore, documents that were “carbon copied” to counsel for informational purposes rather than for legal advice are not privileged.[21] Furthermore, with particular applicability to this case, the general rule is that information regarding attorneys' fees is generally not privileged.[22]

         In this case, the defendants contend that they sought legal advice from a lawyer in their firm, Christopher Ralston, who was not working on this case but was a member of the firm's Ethics Committee and charged with addressing questions raised by any attorney at the firm regarding “the applicability, interpretation[, ] or meaning of any of the rules of professional conduct.”[23]

         This Court finds that a law firm, like any other business, is entitled to in-house counsel. In this case, Phelps Dunbar established that it has policies in place regarding the consultation by its attorneys with particular lawyers in the firm designated as coverage counsel and also with particular lawyers in the firm designated as an Ethics Committee, to whom such issues may be addressed. This Court finds that it is immaterial that Mr. Ralston was a member of the Ethics Committee rather than the firm's officially designated coverage counsel. This Court finds that the defendants could have been in the position of a client seeking legal advice from Mr. Ralston, their attorney, when they approached him about Allen & Gooch's request for the file and the reimbursement of legal fees. Whether the seventeen e-mails ...


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