Exxon v. Hill: Attorney-Client Privilege Communication

Exxon Mobil Corporation v. Clarence Hill

This decision of May 6, 2014 from the U.S. Fifth Circuit Court of Appeals
addresses an issue rarlely reaching the appellate level. The facts are a
bit unusual. But, ostensibly, in certain NORM Discovery attorneys from
Exxon inadvertently produced documents which were claimed to be privileged
and under the La. Code of Civil Procedure Art. 1424 (D) requested return of
the documents including the one at issue identified as the Stein Memo.
Counsel fo the plaintiff returned the documents but retained a copy of the
Stein Memo and also distributed it to other counsel to use in other
litigation.

As Exxon had an inconsistent record asserting privilege to this Memo it
filed suit in federal court seeking an injunction. This suit was stayed
until another plaintiff filed suit in state court; this was removed to
federal court. Though Exxon was eventually dismissed, when counsel
attempted to use the disputed memo Exxon intervened to assert its objection
based on its claim of attorney-client privilege.

Judge Fallon ruled that the document was not privileged but rather that the
advice sought and reflected in the memo was business advice not legal
advice. The intervention was then dismissed.

On appeal, the U.S. Court of the Appeals for the Fifth Circuit reversed.
"The Stein Memo reflects the advice by in-house counsel concerning
disclosure 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."

"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.

"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." One question remains: Would any sanctions
be imposed on the attorney who kept the memo and circulated it?