Case: 13-30830 Document: 00512619738 Page: 1 Date Filed: 05/06/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 13-30830 FILED
May 6, 2014
Lyle W. Cayce
Clerk
EXXON MOBIL CORPORATION,
Plaintiff–Appellant
versus
CLARENCE HILL; TIMOTHY J. FALCON; JEREMIAH A. SPRAGUE;
FRANK M. BUCK, JR.,
Defendants–Appellees.
Appeals from the United States District Court
for the Eastern District of Louisiana
Before SMITH, ELROD, and SOUTHWICK, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Exxon Mobil Corporation (“Exxon Mobil”) appeals a judgment that dis-
missed its intervention based on the district court’s ruling that a memorandum
prepared by Exxon Mobil’s in-house counsel was ineligible for the protections
of the attorney-client privilege. Concluding that the memorandum is privil-
eged, we vacate and remand.
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No. 13-30830
I.
In the late 1980s, Exxon Mobil was negotiating with another company
(“ITCO”) over a proposed contract under which ITCO would clean and store
oilfield production tubulars for Exxon Mobil. The parties knew that some of
the tubulars had accumulated scale, some of which was contaminated with
“naturally occurring radioactive material” or “NORM.” ITCO had created a
new device designed to contain any dust generated by cleaning NORM-
contaminated scale from the tubulars. As part of its due diligence, Exxon Mobil
sent an industrial hygienist, Lindsey Booher, to conduct tests designed to
reveal whether the device would work as intended. Booher wrote a confidential
report to Exxon Mobil employee John Guidry containing the results of his test,
including four tables, numbered I through IV, showing the air-sampling data.
During their negotiations, ITCO asked Guidry for Booher’s test results.
Guidry, in turn, sought advice from Rosemary Stein, an in-house lawyer for
Exxon Mobil, on how to respond. Stein suggested that Guidry disclose only
Table IV, because it contained the only data that ITCO specifically had
requested, and that Guidry remove the caption “Table IV” so as not to flag the
existence of other tables. According to the defendants, the “withheld data con-
firms much higher levels of radiation” than what Table IV suggested. Stein
also drafted a suggested response to accompany the table, including a dis-
claimer of any warranty as to the data’s accuracy and a statement that the
data was created solely for Exxon Mobil’s internal use.
Stein’s advice was recorded in a memorandum dated July 22, 1988. Now
referred to by the parties as the “Stein Memo,” it is the epicenter of the fight
on appeal.
Various persons, in the ensuing years, have sued Exxon Mobil, ITCO, or
both, alleging exposure to NORM at ITCO’s pipe yard. In 2008, in the course
of discovery, Exxon Mobil accidentally produced a number of allegedly
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privileged documents, including the Stein Memo. Months later, Exxon Mobil
discovered the inadvertent production. Pursuant to Louisiana Code of Civil
Procedure article 1424(D) (a claw-back provision), its counsel sent a letter to
plaintiffs’ attorney Timothy Falcon informing him of the error and demanding
a return of the production. Although he returned the CDs and made no
objection to Exxon Mobil’s assertion of privilege, Falcon kept a copy of the Stein
Memo and distributed it to other plaintiffs’ attorneys, who in turn attempted
to use it in other cases.
Exxon Mobil had a mixed record asserting its privilege over the Stein
Memo in various state suits. Attempting to prevent its use in state litigation
once and for all, it sued in federal court (Exxon Mobil Corp. v. Falcon,
No. 12-454 (E.D. La.)) (“Falcon”) seeking an injunction preventing the plain-
tiffs’ attorneys from using the Stein Memo in state court. Judge Fallon was
assigned to the case, and he made no ruling on the merits of Exxon Mobil’s
claim; instead, he stayed the case indefinitely out of federalism concerns.
Separate from the Falcon suit, plaintiff Clarence Hill, among others,
sued Exxon Mobil and several other defendants in state court, alleging dam-
ages caused by exposure to NORM. With the other defendants’ consent, Exxon
Mobil removed to federal court, then docketed as Hill v. Exxon Mobil Corp.,
No. 11-2786 (E.D. La.) (“Hill”). Eventually, Hill voluntarily dismissed Exxon
Mobil with prejudice, and the Hill case continued against other defendants.
Hill’s counsel then filed the Stein Memo into the record as part of a fight
over expert testimony. Exxon Mobil moved for and was granted leave to inter-
vene in Hill to assert its privilege over the Stein Memo. The district court
severed Exxon Mobil’s intervention from the main Hill action and transferred
the intervention to Judge Fallon, with whom the Falcon case was still
(nominally) pending. The intervention was given a new caption (Exxon Mobil
Corp. v. Hill) and docket number (No. 13-236). That is the case on appeal.
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After the transfer, Exxon Mobil moved to enforce its attorney-client priv-
ilege over the Stein Memo, to have the memorandum stricken from the record,
and to compel Hill’s attorneys to destroy or return all copies to Exxon Mobil.
The district court denied the motion and entered final judgment dismissing
Exxon Mobil’s intervention. The basis for its holding was that the advice in
the Stein Memo was primarily business advice rather than legal advice.
II.
In this diversity case, Louisiana provides the applicable law of privilege.
See FED. R. EVID. 501. The Louisiana attorney-client privilege, codified in Arti-
cle 506 of the Louisiana Code of Evidence, provides that “[a] client has a priv-
ilege 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.”
LA. CODE EVID. ANN. art. 506(B) (emphasis added). The Code then provides a
number of exceptions and definitions, but the parties agree that the beginning
and end of this case is the “made for the purpose of facilitating the rendition of
professional legal services” language in article 506.
The parties disagree, however, on the standard of review. Citing United
States v. Seale, 600 F.3d 473, 492 (5th Cir. 2010), Hill claims that the appli-
cation of the attorney-client privilege is a question of fact, which we review
only for clear error. Exxon Mobil does not dispute the general proposition but,
citing United States v. McFerrin, 570 F.3d 672, 675 (5th Cir. 2009), maintains
that, in this particular case, we owe no deference to the district court’s privilege
determination because it was based on legal error. We decline to decide which
side has the better of this argument because, even assuming that we are
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reviewing for clear error, we would still reverse. 1
The Stein Memo reflects the advice by in-house counsel concerning dis-
closure of certain data during contract negotiations. Context here is key: The
document was prepared during contract negotiations in which both sides were
assisted by legal counsel. The negotiations, according to the record, involved a
number of legal issues, including indemnity for downstream tort claims, stor-
age and handling of nuclear residue, licensure, trade secrets, and other issues.
Disclosure of material facts is a universal concern in contract law. When
ITCO requested internal data prepared by and on behalf of Exxon Mobil, it is
no surprise that Exxon Mobil would seek advice from its attorney as to how to
respond. All of this is to say that the context in which the Stein Memo was
produced—even before we say anything of the memorandum itself—strongly
suggests that Exxon Mobil was approaching its in-house counsel for just the
sort of lawyerly thing one would expect of an in-house lawyer: advice on trans-
actional matters. Though we recognize that in-house counsel can often play a
variety of roles within an organization, this record is devoid of any indication
that Stein was providing business advice divorced from its legal implications. 2
Especially when viewed in context, the Stein Memo cannot be mistaken
for anything other than legal advice. Stein drafted a proposed response to
ITCO in which she included elaborate language disclaiming liability for any
reliance ITCO may have on the data, stating that the data was prepared for
Exxon Mobil’s own internal use and disclaiming any warranty as to the
1 We also find it unnecessary to address Exxon Mobil’s nuanced contention that the
district court applied an erroneously higher standard for the application of the attorney-client
privilege for in-house counsel vis-à-vis outside counsel.
2 Cf. State v. Montgomery, 499 So. 2d 709, 713 (La. App. 3d Cir. 1986), (holding defense
attorney communications from defense attorney not to be privileged because record estab-
lished that the advice was sought as that of a friend, not a client), writ denied, 502 So. 2d 106
(La. 1987).
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accuracy of the test results. The manifest purpose of the draft was to deal with
what would be the obvious reason Exxon Mobil would seek its lawyer’s advice
in the first place, namely to deal with any legal liability that may stem from
under-disclosure of data, hedged against any liability that may occur from any
implied warranties during complex negotiations. 3
For these reasons, even assuming arguendo that we are reviewing only
for clear error, we are left with a “definite and firm conviction that a mistake
has been committed.” United States v. U.S. Gypsum Co., 333 U.S. 364, 395
(1948). The judgment of dismissal is VACATED and REMANDED for what-
ever appropriate actions the district court may elect to take in light of our
determination that the Stein Memo is protected by the attorney-client
privilege.
3 See LGS Natural Gas Co. v. McFarland Energy, Inc., Civ. Ac. No. 96-3163, 1997 WL
96376 (E.D. La. Mar. 5, 1997) (opinion of magistrate judge) (holding, as privileged, various
drafts of handwritten notes and editions made to drafts of a written contract, assuming
―without having direct evidence other than the nature of the notes themselves―that they
were made by in-house counsel); cf. Se. Pa. Transp. Auth. v. Caremark PCS Health, L.P., 254
F.R.D. 253 (E.D. Pa. 2008); R.J. Reynolds Tobacco Co. v. Premium Tobacco Stores, Inc., 2001
WL 1286727 (N.D. Ill. Oct. 24, 2001) (both applying the attorney-client privilege for advice
over the implications of proposed contract terms). See also Brookshire Bros. Holding, Inc. v.
Total Containment, Inc., 2:04-CV-1150, 2006 WL 845731 (W.D. La. Mar. 30, 2006) (holding
that an email to a person who was both in-house counsel and a “Chief Administrative Officer”
was not protected where there was no indication in the email that the person was approached
as a lawyer for legal advice).
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