InPwr Inc v. Olson Restoration L L C

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF LOUISIANA

LAKE CHARLES DIVISION

INPWR INC. : CASE NO. 2:21-CV-00821

VERSUS : JUDGE TERRY A. DOUGHTY

OLSON RESTORATION LLC ET AL. : MAGISTRATE JUDGE KAY

MEMORANDUM RULING

Before the court is a motion filed by Southwest Louisiana Hospital Association d/b/a Lake

Charles Memorial Hospital (“LCMH”).1 Doc. 32. The motion concerns the discoverability of an

email and attachments that InPwr, Inc. (“InPwr” or “IP”) produced in the course of discovery,

apparently inadvertently. LCMH requests that the court determine that the documents are not

privileged and therefore discoverable. Doc. 32, p. 7. InPwr opposes. Doc. 46. The parties have

briefed this matter extensively [docs. 32, 46, 58, 68], and the matter is now ripe for determination.

The motion has been referred to the undersigned for review, report, and recommendation in

accordance with the provisions of 28 U.S.C. § 636 and the local rules of court.

For the reasons stated herein, plaintiff’s motion is DENIED.

I.

BACKGROUND

In February or March of 2021, Plaintiff InPwr, Inc. (“InPwr”) made a large production of

documents to LCMH. Doc. 32, p. 2. Included in the production was an email from InPwr

1 The motion is styled, LCMH’s Motion to Address Extent to Which Documents That Were Possibly Inadvertently

Disclosed by InPwr Are Discoverable, Under Exceptions to the Attorney-Client Privilege and/or the Work Product

Doctrine. Doc. 32.

executive Staci Inskeep to other InPwr personnel and InPwr counsel Lowell Woods, Jr., dated

January 27, 2021 (the “Inskeep Email”) Doc. 32, p. 1. The Inskeep Email had as its subject line,

“FW: Private and Confidential RE: Requested ESP invoice to InPwr.” Doc. 32, att. 1, p. 4.2 There

were no third parties copied on the communication. Id.

Counsel for LCMH discovered and reviewed the Inskeep Email on or about June 16, 2021.

Doc. 32, p. 1-2. By letter dated June 18, 2021, LCMH counsel contacted InPwr counsel in

accordance with Fed. R. Evid. 502, which governs inadvertent disclosures of potentially privileged

information. Doc. 32, p. 2. In a June 24 phone call that followed, the parties were unable to agree

about the extent to which the Inskeep Email may be privileged, prompting the instant motion. Doc.

32, p. 2-4.

In the unredacted portions of the Inskeep Email string, Staci Inskeep of InPwr has a

conversation with Chris Williamson of defendant Expediated Service Partners LLC (“ESP”)

concerning sharing “all versions of ESP invoices” with LCMH in an effort to be “100% transparent

with the hospital” and “clear up some misconceptions on the rates we initially charge [sic] LCMH

[. . . ].” Doc. 32, att. 1, p. 6-7.

InPwr describes redacted portion of the Inskeep Email (i.e., the portion submitted for in

camera review) as follows, reserving any privilege:

the email discusses an existing allegation by LCMH that the invoices

submitted constitute “price-gouging.” The InPwr representative addresses

to counsel its position and defense to that allegation, and the InPwr

representative conveys a proposed communication potentially to be sent to

a third-party (not LCMH) regarding that issue. In the email, the InPwr

representative seeks advice regarding the proposed communication to a

third-party.

Doc. 46, att. 7.

2 LCMH attached a redacted version of the Inskeep Email to the motion. Doc. 32, att. 1.

Counsel for LCMH submitted the Inskeep Email for in camera review when it filed the

instant motion. Doc. 32, p. 4. InPwr argues that it was “‘entirely inappropriate’ for LCMH to

unilaterally submit the email in question to the Court for an in camera inspection.” Doc. 46, p.

10. In light of InPwr’s arguments, the court has not reviewed the in camera submission. 3

In its original motion and memorandum, LCMH argues that, even if some or all of the

Inskeep Email is privileged, the crime-fraud exception under La. Code Evid. art. 506(C)(1) applies

to the contents of the memorandum, making it discoverable despite any privilege asserted by

InPwr. The heart of LCMH’s argument is that LCMH was the victim of “price gouging” or unfair

pricing that resulted from deceptive communications directed at LCMH, and that the Inskeep

Email is evidence of the fact that an InPwr employee suspected those allegedly deceptive practices

in January 2021 and did not disclose them to LCMH because InPwr was concerned about its own

bottom line. Doc. 32, att. 2, p. 7; doc. 58, p. 8. LCMH also argues that InPwr waived any privilege

by producing the Inskeep Email in the document production and neglecting to take proper steps to

remedy that disclosure. Doc. 58.

InPwr argues in its opposition that the crime-fraud exception is inapplicable here because

LCMH has not borne its burden of making a prima facie showing that a crime or fraud has been

committed, without considering the allegedly privileged communication. Doc. 58. InPwr argues

that the Inskeep Email was plainly inadvertently disclosed, that InPwr took reasonable steps to

prevent its disclosure, and that InPwr took reasonable steps to rectify its error by asserting privilege

in the June 24 phone call and thereafter. Doc. 68, p. 3. Thus, InPwr argues, there is no applicable

exception to the attorney-client privilege or work product doctrine that would allow discovery of

3 As discussed below, the court must apply the crime-fraud exception without considering the content of the allegedly

privileged communications; therefore the court reserved review of the Inskeep Email until after conducting that

analysis. See State v. Taylor, 502 So. 2d 537, 542 (La. 1987). Having now found that the Inskeep Email is privileged,

the court sees no reason to conduct an in camera review of it.

the Inskeep email. InPwr also argues in its sur-reply that LCMH waived arguments not raised

until the reply. Doc. 68.

II.

LAW & ANALYSIS

A. Applicable Law

In this diversity case, state law applies to InPwr’s claims of attorney-client privilege, and

federal law governs whether the items are immune from discovery under the work product

doctrine. See Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869, 875 (5th Cir. 1991) (applying

state law to claims of attorney-client privilege and federal law to claims of work-product immunity

in diversity matter); Davis v. United States, No. 2:05-CV-767, 2006 WL 2883042, at *1, n. 1 (W.D.

La. Oct. 4, 2006); Conoco Inc. v. Boh Brothers Constr. Co., 191 F.R.D. 107, 118, n. 6 (W.D. La.

July 10, 1998). Although the communication is potentially protected from discovery under both

work-product doctrine an attorney-client privilege, the parties focus their arguments on the latter,

and the court will focus its analysis there.

Louisiana law creates a general attorney-client privilege for among other things, a

“confidential communication” made “for the purpose of facilitating the rendition of professional

legal services to the client [ . . . ], when the communication is [ . . . ] [b]etween the client or a

representative of the client and the client's lawyer or a representative of the lawyer.” La. Code

Evid. art. 506(B). The attorney-client privilege allows the client to “refuse to disclose, and to

prevent another person from disclosing” such a communication. Id.

1. Crime-fraud exception to attorney-client privilege

Article 506 creates several exceptions to the attorney-client privilege, among them the so-

called “crime-fraud” exception, under which there is no privilege as to a communication:

(a) If the services of the lawyer were sought or obtained to enable or aid

anyone to commit or plan to commit what the client or his representative

knew or reasonably should have known to be a crime or fraud.

(b) Made in furtherance of a crime or fraud.

La. Code Evid. art. 506(C)(1). Under Louisiana law, “[i]n order to vitiate the attorney-client

privilege, the trial court must make a finding that the attorney-client relationship was intended to

further continuing or future criminal or fraudulent activity.” Bridlington Co., L.L.C. v. S. Disposal

Servs., L.L.C., 51,138, 216 So. 3d 219, 223 (La. App. 2 Cir. 2/15/17). This involves a two-step

showing: “The party challenging the privilege must (1) make an independent prima facie case that

a crime [or fraud] has been committed, and (2) then demonstrate that the privileged information

bears a relationship to the alleged crime or fraud.” Id. (alteration added); Ward v. Succession of

Freeman, 854 F.2d 780, 789-90 (5th Cir. 1988). “Included as part of the prima facie case of fraud

is evidence of an intent to deceive.” S. Scrap Material Co. v. Fleming, No. CIV.A. 01-2554, 2003

WL 21474479, at *2 (E.D. La. June 18, 2003). Courts should evaluate whether the proponent has

borne its burden of showing criminal or fraudulent activity “without considering the allegedly

privileged communications.” State v. Taylor, 502 So. 2d 537, 542 (La. 1987) (on second rehearing,

discussing procedure for proving crime-fraud exception in criminal context). “Mere allegations

of fraud are not, however, sufficient to break the privilege.” Ward, 854 F.2d at 790. “In

determining whether the crime-fraud exception applies, we focus on the client’s purpose in seeking

legal advice.” U. S. v. Edwards, 303 F.3d 606, 618 (5th Cir. 2002).

2. Waiver of privilege through disclosure

The attorney-client privilege may be waived if the holder of the privilege “voluntarily

discloses or consents to disclosure of any significant part of the privileged matter.” La. Code Evid.

502(A). Under Louisiana law, inadvertent disclosure does not constitute a waiver of the attorney-

client privilege. Hebert v. Anderson, 681 So. 2d 29, 31-32 (La. App. 4 Cir. 1996), writ denied, 684

So. 2d 936 (citing Succession of Smith v. Kavanaugh, Pierson & Talley, 513 So. 2d 1138 (La.

1987)). When such a letter comes into the hands of opposing counsel through inadvertent

disclosure, it may be appropriate to order all copies destroyed. Id. at 32.

After LCMH discovered the “possibly inadvertently disclosed” material, counsel

proceeded according to Fed. R. Evid. 502, which governs the treatment of such inadvertent

disclosures. The rule states, in pertinent part:

Inadvertent Disclosure. When made in a federal proceeding or to a federal

office or agency, the disclosure does not operate as a waiver in a federal or

state proceeding if:

(1) the disclosure is inadvertent;

(2) the holder of the privilege or protection took reasonable steps to

prevent disclosure; and

(3) the holder promptly took reasonable steps to rectify the error,

including (if applicable) following Federal Rule of Civil Procedure

26(b)(5)(B).

Fed. R. Evid. 502(b). This “rule makes no attempt to alter federal or state law on whether a

communication or information is protected under the attorney-client privilege or work-product

immunity as an initial matter.” Fed. R. Evid. 502 advisory committee’s note to 2007 amendments.

B. Application of provisions governing inadvertent disclosure of attorney-client

privileged information

As a threshold matter, the Inskeep Email meets the general definition of an attorney-client

privileged communication under Louisiana Law. The general rule of attorney client privilege

covers confidential communications between a client representative and the client’s attorney,

“made for the purpose of facilitating the rendition of professional legal services to the client.” La.

Code Evid. art. 506(B). Here, there is no dispute that Inskeep, an InPwr representative, contacted

InPwr counsel, Lowell Woods, for legal advice. In the June 18 letter from LCMH counsel advising

InPwr counsel that the letter had been included in document production, LCMH acknowledges

that the Inskeep Email is “seeking advice as to a proposed communication with Chris Williamson

of ESP.” Doc. 32, att. 1, p. 1. There were no third parties copied on the communication, suggesting

that it is a confidential communication for the purposes of La. Code Evid. art. 506(A)(5). Doc.

32, att. 1, p. 4.4 On its face, therefore, the Inskeep Email is protected from discovery by attorney-

client privilege unless the privilege was waived or an exception applies.

1. Application of the crime-fraud exception to attorney-client privilege

LCMH argues that the crime fraud exception applies here because “LCMH is making an

adequate prima face showing of deceptive and misleading conduct that is tantamount to fraud in

its Counterclaims and Crossclaims and the exhibits referenced in same.” Doc. 32, att. 2, p. 5.

LCMH’s assertion that it has made a prima facie showing of fraud or fraudulent activity is wholly

conclusory and effectively invites the court to review its Counterclaims and Crossclaims and

determine for itself that LCMH has stated a prima facie case of crime or fraud against InPwr and

its co-defendants. The court declines to do so because LCMH “has the burden of establishing a

prima facie case that the attorney-client relationship was intended to further criminal or fraudulent

activity,” including “evidence of an intent to deceive.” United States v. Edwards, 303 F.3d 606,

618 (5th Cir. 2002); S. Scrap Material Co. v. Fleming, No. CIV.A. 01-2554, 2003 WL 21474479,

at *2 (E.D. La. June 18, 2003). As a first step this means presenting the court with a showing of

crime or fraud “(s)uch as will suffice until contradicted and overcome by other evidence .... (a)

case which has proceeded upon sufficient proof to that stage where it will support finding if

4There seems to be no question here that the communication was intended to be confidential, (5) A communication is

“confidential” if it is not intended to be disclosed to persons other than:

(a) Those to whom disclosure is made in furtherance of obtaining or rendering professional legal services for

the client.

(b) Those reasonably necessary for the transmission of the communication.

(c) When special circumstances warrant, those who are present at the behest of the client and are reasonably

necessary to facilitate the communication.

evidence to contrary is disregarded.” In re Grand Jury Proc. in Matter of Fine, 641 F.2d 199, 203

(5th Cir. 1981)(alteration original, adopting district court’s quotation of Black’s Law Dictionary

(4th ed. 1968)). LCMH has not attempted to bear this burden except by reference to its

counterclaims and crossclaims, and the court finds this showing inadequate.

Assuming for the sake of argument that LCMH’s pleadings do set out such a prima facie

case of fraudulent activity, LCMH does not “then demonstrate that the privileged information

bears a relationship to the alleged crime or fraud.” Bridlington, 216 So. 3d at 223. LCMH suggests

that the email shows that Inskeep developed a suspicion that ESP was being underhanded, and

that InPwr erred in failing to timely disclose that suspicion to LCMH. But LCMH does not

otherwise explain how this particular email was “[m]ade in furtherance of a crime or fraud” or

sought legal advice to enable someone to “commit or plan to commit [ . . . ] a crime or fraud.”

La. Code Evid. 506(C)(1)(alteration added).

To the contrary, LCMH suggests that, in the privileged communication, Inskeep “declared

that her company was the victim of deceptive conduct by ESP.” Doc. 32, att. 2, p. 5. LCMH also

explains that Inskeep sought the advice of counsel in attempt to “shed light on ESP[’s] deceptive

conduct” but was apparently prevented from doing so. Doc. 58, p. 8 (alteration added). This

reasoning all but admits that Inskeep’s email sought counsel’s advice about the prospect of

countering potentially deceptive conduct, not furthering it. LCMH declares that “delayed

disclosure of the details and origin of ESP’s fraudulent conduct, as spelled out in the subject email,

could also be said to have perpetuated the fraud, by delaying its discovery for several months.”

Doc. 32, att. 2, p. 5. But LCMH does not suggest that Inskeep contacted counsel for the purpose

of delaying disclosure and furthering fraudulent conduct.

In short, LCMH clearly believes that the Inskeep Email is evidence of the fraudulent

activity it seeks to expose,5 but LCMH does not show that the Inskeep Email was made in

furtherance of that fraudulent activity. “The test is whether the client's purpose is the furtherance

of a future fraud or crime; it is not enough that a communication merely provides evidence of

fraud.” S. Scrap Material Co. v. Fleming, No. CIV.A. 01-2554, 2003 WL 21474479, at *2 (E.D.

La. June 18, 2003). The court therefore concludes that the crime-fraud exception does not apply

here.

2. Application of law governing waiver of privilege

In its reply brief, LCMH raises the argument that the Inskeep email does not qualify for

protection under laws governing inadvertent disclosures because, in effect, InPwr did not follow

proper procedures to protect the document from disclosure in the first place or remedy its

inadvertent disclosure.6 LCMH also suggests that the disclosure might not have been inadvertent

at all. Doc. 58, p. 1.

As to the argument that the disclosure was not inadvertent, InPwr states that the “email was

inadvertently disclosed when InPwr produced a large volume of documents [ . . . ].” Doc. 46, p.

7. The court sees no reason to find otherwise, notwithstanding LCMH’s arguments. LCMH argues

that “the disclosure happened not once, but twice” in two stages of document production. Doc.

58, p. 2. LCMH also argues that the Inskeep Email was part of information “voluntarily

exchanged” as a part of a dispute-resolution process intended to avoid litigation. Doc. 58, p. 1.

InPwr argues, and the court agrees, that this is insufficient to show voluntary waiver of a privileged

5 LCMH points out this this is “the only available evidence that InPwr learned and admitted in January of 2021 that

the ESP rates” were unfair. Doc. 32, att. 2, p. 7.

6 LCMH also argues that Fed. R. Evid. 502 does not apply because “the disclosure was not made in a court proceeding,

federal or state.” LCMH does not explain—and the court fails to perceive—how this fact would somehow vitiate the

attorney client privilege that arose by operation of Louisiana law, per La. Code Evid. art. 506.

communication under La. Code Evid. art. 502 where, as here, InPwr asserted such privilege when

the disclosure was brought to its attention. See United States v. Edwards, 39 F. Supp. 2d 716, 738

(M.D. La. 1999).

In its reply brief, LCMH also argues that, even if the disclosure was inadvertent, Fed. R.

Evid. 502 “does not apply” because “IP did not take reasonable steps to prevent the disclosure;”

and “IP did not take reasonable steps to rectify any alleged error in making the disclosure.” Doc.

58, p. 1. LCMH does not cite any jurisprudence in support of these arguments. Under the heading

“IP did not take reasonable steps to prevent the disclosure” LCMH does not describe alternate

steps InPwr might have taken to prevent the disclosure, and instead argues that InPwr is talking

out of both sides of its mouth by arguing that the content of the Inskeep Email is privileged. Doc.

58, p. 2-3. In support of the argument that InPwr took inadequate steps to remedy the disclosure,

LCMH points solely to the fact that several months passed between the inadvertent disclosure and

LCMH’s discovery of the same among the large document production. Doc. 58, p. 4. Neither of

these arguments is supported by jurisprudence, and the court is therefore unpersuaded.

The court notes InPwr’s argument that LCMH has waived these arguments (concerning the

applicability of Fed. R. Evid. 502) by waiting until its reply brief to raise them. Doc. 68, p. 2.

InPwr urges the court to act in accordance with “the practice of [the Fifth Circuit] and the district

courts to refuse to consider arguments raised for the first time in reply briefs[,]” and consider the

new arguments raised in LCMH’s reply waived. Gillaspy v. Dallas Indep. Sch. Dist., 278 F. App'x

307, 315 (5th Cir. 2008)(alteration added). Finding the arguments unsupported, the court need not

consider whether they were also waived.

C. LCMH’s requested alternative relief

In the alternative to seeking full discoverability of the Inskeep Email, LCMH requests that

InPwr be required to “stipulate to the facts stated by Mrs. Inkseep in the subject document.”

Having found that the subject document is protected from discovery by attorney-client privilege,

the court is unaware of any authority that would allow the court to require InPwr to stipulate to its

contents.

II.

CONCLUSION

For the foregoing reasons, it is ORDERED that LCMH’s Motion to Address Extent to

Which Documents That Were Possibly Inadvertently Disclosed by InPwr Are Discoverable, Under

Exceptions to The Attorney-Client Privilege and/or the Work Product Doctrine [doc. 32] is

DENIED.

THUS DONE AND SIGNED in Chambers this 23 day of June, 2022.

UNITED STATES MAGISTRATE JUDGE

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