United States District Court, E.D. Louisiana
LISA T. LEBLANC, ET AL.
TEXAS BRINE COMPANY, LLC, ET AL.
ORDER AND REASONS
MICHAEL B. NORTH UNITED STATES MAGISTRATE JUDGE.
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.
THE RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
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).
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).
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).
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).
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).
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).
THE PARTIES' RESPECTIVE POSITIONS
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
(Rec. doc. 2124-1 at p. 3).
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.
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
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.
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. 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
Grenadato determine “whether there has
been an ‘inadvertent disclosure'” in this
LAW AND ANALYSIS
Whether the “Common-Interest” Privilege Applies
to These Documents
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. The relevant language of Article
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
La. Code Evid. Art 506(B)(3) (emphasis added).
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
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 ...