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Leblanc v. Texas Brine Company, LLC

United States District Court, E.D. Louisiana

October 17, 2019


         SECTION: “A” (5)



         Before the Court is the “Motion to Quash Subpoenas Duces Tecum” filed by Defendant, Texas Brine Company, LLC (“TBC”). (Rec. doc. 2124). Third-Party Defendant, Legacy Vulcan, LLC (“Vulcan”) filed an opposition memorandum (rec. doc. 2156) and the Court granted leave for TBC to file a reply memorandum. (Rec. doc. 2169). The Court heard oral argument on the motion on September 25, 2019, at which time it ordered supplemental briefing by the parties. (Rec. doc. 2167). That briefing is complete. (Rec. docs. 2172 and 2176). Having thoroughly considered the facts, the law, and the parties' arguments, the Court denies the motion for the following reasons.


         This consolidated litigation arises out of a significant sinkhole event near Bayou Corne in Assumption Parish, Louisiana in August of 2012. Following the appearance of the sinkhole, the Louisiana Department of Natural Resources issued multiple directives obligating TBC to undertake environmental remediation of the land where the sinkhole formed. These directives required TBC to, among other things, assist in the evacuation of residents and monitor water quality and pressures. TBC claims that, in complying with these directives, it incurred more than $106 million in remediation expenses. (Rec. doc. 2169).

         In the years following the sinkhole's appearance, TBC sought reimbursement of these expenses (including its attorneys' fees) from two of its insurers, Zurich American Insurance Company (“Zurich”) and Allied World Assurance Company (U.S.) Inc. (“AWAC”). Zurich is one of TBC's liability insurers and AWAC is a pollution liability insurer. (Rec. doc. 2124-1). To help assess the reasonableness of TBC's reimbursement submissions, Zurich retained the Vertex Companies, Inc. of Delaware (“Vertex”) and AWAC retained Hydro-Environmental Technologies, Inc. (“HETI”). (Id.). Vertex's and HETI's respective analyses as to the reasonableness of TBC's submissions were reflected in what the parties have termed “Cost Review Reports.” (Rec. doc. 2156 at p. 5).

         Upon their completion, the Cost Review Reports were sent by Vertex and HETI to their respective clients, Zurich and AWAC, who then forwarded them to Bruce Martin (“Martin”), the Director of Operations of TBC. (Rec. doc. 2170 (transcript) at pp. 13-15). Martin, who is not an attorney, “eventually” sent them to TBC's litigation counsel. (Id. at p. 15).

         In 2013, TBC filed a third-party demand against Vulcan, seeking, among other things, to recover its costs incurred “to reduce or mitigate damage to all third-party property owners” impacted by the sinkhole. (Rec. doc. 2156 at p. 2). It is undisputed that some or all of the costs that are subject of the Vertex and HETI reports submitted to Zurich and AWAC for reimbursement by Texas Brine are also being sought by TBC in its third-party claim against Vulcan. (Rec. doc. 2170 at pp. 2-3).

         According to Vulcan, beginning in 2015 and continuing into 2018, TBC routinely produced copies of the Vertex and HETI reports to Vulcan as part of the “damages” discovery in this litigation. (Id. at pp. 23-24). In an affidavit of counsel attached to its supplemental brief, TBC states that it produced 426 such reports to Vulcan (rec. doc. 2172-1 at p. 4), which Vulcan explains were the subject of 23 separate productions. (Rec. doc. 2176 at p. 1).

         The subpoenas at issue here were served upon Vertex and HETI, each seeking “"[a]ll final [adjustment] reports (including any exhibits, appendices, or attached materials) regarding expenses incurred by Texas Brine Company, LLC related to the sinkhole near Bayou Corne in Assumption Parish, Louisiana, which emerged on or about August 3, 2012.” (Rec. doc. 2156). Vulcan explained in its opposition memorandum that it issued the subpoenas when TBC would not confirm its counsel's oral requests for confirmation that all of the Cost Review Reports had been produced. (Rec. doc. 2170 at p. 21). TBC filed the present motion to quash the subpoenas and thereafter clawed back the 426 reports it had voluntarily produced to Vulcan since 2015. (Rec. doc. 2169).[1]


         Texas Brine's primary argument is that:

[b]ecause Texas Brine, Zurich, and AWAC share a common interest in minimizing Texas Brine's liability and the magnitude of claimants' alleged damages against it, documents exchanged between Zurich's representative and Vertex and documents exchanged between AWAC's representative and HETI are subject to the “common interest” privilege codified in article 506(B)(3) of the Louisiana Code of Evidence, and thus, are immune from disclosure.

(Rec. doc. 2124-1 at p. 3).

         Texas Brine argues that “by its terms, ” Article 506(B)(3) “protects communications among Texas Brine, AWAC, Zurich, and their consultants, as all parties share a ‘common interest' in reducing Texas Brine's liability in the various sinkhole-related lawsuits.” (Id. at p. 5). Admittedly, TBC is unable to point to a single case that so construes Article 506(B)(3) in these factual circumstances, so it relies on a handful of decisions of other states' courts.

         Alternatively, TBC argues that courts “from around the country” hold that communications between insureds and their insurers are subject to both the common-interest and work-product privileges.

         In response, Vulcan argues initially that the subject reports are not subject to any privilege. As to the claim of work-product protection, it submits that TBC failed to establish that anticipation of litigation was the “primary motivating purpose” behind creation of the reports, as required by United States Fifth Circuit Court of Appeals precedent. Similarly as to the claim of attorney-client privilege, Vulcan argues that TBC has failed to establish that the subject reports were created for the purpose of giving or obtaining legal advice, that they were confidential, or that they were exchanged only between persons necessary for the rendition of legal services. Finally, as to the common-interest privilege, Vulcan argues that Article 506(B)(3) does not create an independent basis for such a privilege, i.e., the common-interest privilege is derivative of the attorney-client privilege. And because there is no attorney-client privilege, Vulcan claims, there can be no common-interest privilege. Vulcan also complains that the common interest TBC claims is far too vague to support its claims.

         Finally, Vulcan argues that the disclosure of all or of a subset of the reports (the 426 voluntarily produced throughout the litigation by TBC) waives any privilege that might have attached to the remainder of the reports.[2] At the hearing on the matter, the Court ordered TBC to address this waiver argument in a supplemental brief, which it did. (Rec. doc. 2172). In that brief, TBC urges the Court to undertake the five-factor analysis set forth in Alldread v. City of Grenada[3]to determine “whether there has been an ‘inadvertent disclosure'” in this case. (Id.).


         A. Whether the “Common-Interest” Privilege Applies to These Documents

         As noted above, TBC's primary argument is that the Cost Review Reports are protected from disclosure by operation of the “common-interest” privilege, which is codified in Article 506(B)(3) of the Louisiana Code of Evidence.[4] The relevant language of Article 506(B)(3) is:

A client has a privilege to refuse to disclose, and to prevent another person from disclosing, a confidential communication, whether oral, written, or otherwise, made for the purpose of facilitating the rendition of professional legal services to the client . . . when the communication is: . . .
(3) By the client or his lawyer, or a representative of either, to a lawyer, or representative of a lawyer, who represents another party concerning a matter of common interest.

La. Code Evid. Art 506(B)(3) (emphasis added).

         TBC claims that “[b]y its terms, Article 506(B)(3) protects communications among Texas Brine, AWAC, Zurich, and their consultants, as all parties share a ‘common interest' in reducing Texas Brine's liability in the various sinkhole-related lawsuits.” (Rec. doc. 2124-1 at p. 5). Importantly, TBC takes the position that this Article creates a stand-alone privilege, separate and independent of the attorney-client or work-product privileges.

         The Court does not read the Article that way. At the initial hearing, the Court pressed TBC's counsel to explain how the text of Article 506(B)(3) could be ...

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