### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 13

- 30830

EXXON MOBIL CORPORATION,

Plaintiff

–

Appellant

v ersus CLARENCE HILL; TIMOTHY J. FALCON; JEREMIAH A. SPRAGUE; FRANK M. BUCK, JR.,

Defendants

– Appellees

.

Appeal s 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 memo ran dum prepared by Exxon Mobil ’s in

- house counsel was ineligible for the protec t ions of the attorney

- client privilege. C oncluding that the memo randum is privil

ege d , we vacate and remand

. United States Court of Appeals Fifth Circuit 

### FILED May 6, 2014 Lyle W. Cayce Clerk Case: 13-30830 Document: 00512619738 Page: 1 Date Filed: 05/06/2014No. 13

- 30830
I. In the late 1980s, Exxon Mobil was negotiating with another company (“ITCO”) over a propo sed contract under which ITCO would clean and store oilfield production tubulars for Exxon Mobil . The parties knew that some of the tubu lars 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 whethe r 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, n umbered I through IV, showing the air

- sampling data. During their negotiations, ITCO as ked 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 s uggested 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 yar d. In 2008, in the course of discovery, Exxon Mobil accidentally produced a num ber of allegedly 2 Case: 13-30830 Document: 00512619738 Page: 2 Date Filed: 05/06/2014No. 13

- 30830 privi leged documents, including the Stein M emo. Months later , Exxon Mobil dis covered the inadvertent production. Pursuant to Louisiana Code of Civil Pro ce dure article 1 424(D) (a claw

- back provision) , its counsel sent a letter to plain tiffs’ attorney Timothy Falcon informing him of the error and demanding a return of the pro duction. Although he returned the CDs and made no objection to Exxon Mobil ’s asser tion of priv ilege, Falcon kept a copy of the Stein Memo and distributed it to other plain tiffs’ 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 cour t. 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 indefinit ely out of federalism concerns. Separate from the Falcon suit, p laintiff Clarence Hill , among others, sued Exxon Mob il 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 cont inued 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 grant ed leave to inter

vene in Hill to assert its privilege over the Stein Memo. The district court

sev ered 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). Th at is the case on appeal. 3 Case: 13-30830 Document: 00512619738 Page: 3 Date Filed: 05/06/2014No. 13

- 30830 After the transfer, Exxon Mobil moved to enforce its attorney

- client priv

i lege over the Stein Memo, to have the m emo randum stricken from the record, and to compel Hill’s attorneys to destroy or return all copies to Exxon Mobil

. The dis trict court denied th e motion and entered final judgment dismissing
Exxon Mobil ’s intervention. The basis for its holding was tha t 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 F ED

. R. E VID

. 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

con fi dential communication, whether oral, written, or otherwise, made for the

pur pose of facilitating the rendition of professional legal services to the client .”
L A

. C ODE E VID

. A NN

. art. 506( B ) (emphasis added). The Code then provides a number of exceptions and definitions, but the parties agree that the begin ning and end of this case is the “ made for the purpose of facilitating the ren di tion 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), main tains that, in this pa rticular 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

4 Case: 13-30830 Document: 00512619738 Page: 4 Date Filed: 05/06/2014No. 13

- 30830
review ing for clear error, we woul d still reverse. 1 The Stein Memo reflects the advice by in

- house counsel concerning dis

clos ure of certain data during contract negotiations. Context here is key: The doc ument 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 u niversal 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 M emo was produced

— even before we say anything of the memo randum 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

a ctional matters. Though we recognize that in

- house counsel can often play a variety of roles within an organization, th is record is devoid of any indi cation that Stein was providing business advice divorced from its legal impli ca tions. 2
E specially when viewed in context, the Stein Memo cannot be mistaken for anything other than legal advice. Stein draft ed a proposed response to ITCO in which she included elaborate language disclaiming liability for any reliance ITCO may have on the data, stating that th e 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 dis trict court applied an erroneously higher standard for the application of the attorney

- client privi lege for in

- house counsel vis

- à

- vis outside counsel.

2 Cf. State v. M ontgomery , 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 1 06 (La. 1987). 5 Case: 13-30830 Document: 00512619738 Page: 5 Date Filed: 05/06/2014No. 13

- 30830 accuracy of the test results. The manifest purpose of th e draft was to deal with what would be the obvious reason Exxon Mobil would seek its lawyer’s advice in t he 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 com mit ted.” United States v. U.S. Gypsum Co. , 333 U.S. 364, 395 (1948). The judgment of dismissal is VACATED and REMANDED for what

ever appropr iate actions the district court may elect to take in light of our deter mination that the Stein M emo is protected by the attorney

- client privilege.

3 See LGS Natural Gas C o. v. McFarland Energy, Inc. , C iv. 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 writ ten 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). 6 Case: 13-30830 Document: 00512619738 Page: 6 Date Filed: 05/06/2014