TMJ GROUP, LLC v. IMCMV HOLDINGS, ET AL CIVIL ACTION NO. 17-4677 United States District Court, E.D. Louisiana Filed April 25, 2018 Counsel Omer Frederick Kuebel, III, Peyton C. Lambert, Robert William Mouton, Locke Lord, New Orleans, LA, Kelly Rothermel Vickers, Pro Hac Vice, Matthew B. Buongiorno, Pro Hac Vice, Locke Lord, Dallas, TX, for TMJ Group, LLC. James C. Gulotta, Jr., Abigayle Clary McDowell Farris, Andrew D. Mendez, Walter Frederick Metzinger, III, Stone, Pigman, Walther, Wittmann, LLC, New Orleans, LA, for IMCMV Holdings, et al. van Meerveld, Janis, United States Magistrate Judge ORDER AND REASONS *1 Before the Court are the Motion to Compel filed by defendants IMCMV Holdings, Inc. and IMCMV management, LLC (together “IMC”) (Rec. Doc. 49) and IMC's Amended Motion to Compel and Motion for Leave to Take Depositions Past Discovery Deadline (Rec. Doc. 84), which were taken under submission in part with regard to the redacted documents. (Rec. Docs. 132, 134). For the following reasons, as to the redacted documents, the Motions to Compel (Rec. Docs. 49, 84) are DENIED. All issues raised by the Motions to Compel have now been resolved. Background Plaintiff TMJ Group, LLC, (“TMJ Group”) filed this lawsuit on May 3, 2017, alleging that it had been fraudulently induced to invest in two Margaritaville restaurants by defendants IMCMV Holdings, Inc. (“IMC Holdings”), IMCMV Management, LLC (“IMC Management,” and with IMC Holdings, “IMC”). One of the restaurants is located in the Mall of America (“MOA”) and the other in New Orleans (“NOLA”). On March 7, 2018, TMJ was granted leave to amend its complaint to add facts regarding the purported fraudulent misrepresentations, to assert new causes of action arising from the same facts, to demand a jury, and to add TMJ Developer, LLC (“TMJ Developer” and with TMJ Group, “TMJ”) as a plaintiff. Of interest to the present discovery motions is TMJ's allegation that it sought and obtained financing for the investment at issue in this lawsuit from First NBC Bank (“FNBC”) and that IMC altered financial figures in the pro forma financial statements it provided to TMJ and FNBC so that FNBC would approve the financing after initially rejecting it. The remaining issue raised by IMC's Motions to Compel concerns one document (TMJ002653-TMJ002655),[1] which TMJ produced to IMC in redacted form. The document is an email between Aaron Motwani (of TMJ) to Steven Hannan (of the law firm of Hannan, Guisti & Hannan L.L.P.) with a carbon copy to Logan Trogger (of TMJ), as well as Hannan's response to Motwani, and Motwani's subsequent response to Hannan. The body of each email is redacted. The email is listed on the privileged log as “Email between attorney and client seeking legal opinion on dispute. At this point in time, attorney Steven Hannan was conducting legal analysis solely for TMJ.” Following oral argument on the Motions to Compel on April 4, 2018, TMJ submitted the document for in camera review. The Court ordered the parties to submit supplemental briefing in light of IMC's contention that Hannan cannot be TMJ's attorney because he works for the same law firm as FNBC's attorney. Law and Analysis 1. Scope of Discovery The Federal Rules of Civil Procedure provide that “parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” Fed. R. Civ. Proc. 26(b)(1). Of note, with the 2015 amendment to Rule 26, it is now clear that “[i]nformation within this scope of discovery need not be admissible in evidence to be discoverable.” Id. In assessing proportionality of discovery, the following should be considered: “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Id. The advisory committee comments to the 2015 amendment to Rule 26 make clear that the parties and the court have a collective responsibility to ensure that discovery is proportional. The party claiming it would suffer an undue burden or expense is typically in the best position to explain why, while the party claiming the information sought is important to resolve the issues in the case should be able “to explain the ways in which the underlying information bears on the issues as that party understands them.” Id. advisory committee comments to 2015 amendment. “The court's responsibility, using all the information provided by the parties, is to consider these and all the other factors in reaching a case-specific determination of the appropriate scope of discovery.” Id. 2. IMC's Motion to Compel Unredacted FNBC Communications and Depositions *2 “[T]he attorney-client privilege protects communications made in confidence by a client to his lawyer for the purpose of obtaining legal advice.” Hodges, Grant & Kaufmann v. U.S. Gov't, Dep't of the Treasury, I.R.S., 768 F.2d 719, 720 (5th Cir. 1985). The purpose of the privilege: is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). For a communication to be protected under the privilege, the proponent “must prove: (1) that he made a confidential communication; (2) to a lawyer or his subordinate; (3) for the primary purpose of securing either a legal opinion or legal services, or assistance in some legal proceeding.” United States v. Robinson, 121 F.3d 971, 974 (5th Cir. 1997) (emphasis in original). Communications by the lawyer to the client are protected “if they would tend to disclose the client's confidential communications.” Hodges, 768 F.2d at 720. “The burden of demonstrating the applicability of the privilege rests on the party who invokes it.” Id. “An attorney-client privilege attaches to communications between a client and his attorney where at least an implied relationship exists between them.” United States v. Hart, No. CRIM. A. 92-219, 1992 WL 348425, at *1 (E.D. La. Nov. 16, 1992). Whether an attorney-client relationship exists “hinges upon the client's belief that he is consulting a lawyer in that capacity and his manifested intention to seek professional legal advice.” Id. (quoting Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1319 (7th Cir. 1978)). Importantly, though, the client's “subjective belief must be a reasonable one.” United States v. Edwards, 39 F. Supp. 2d 716, 722 (M.D. La. 1999); see Under Seal v. U.S.; In re Grand Jury Subpoena: Under Seal; Under Seal, 415 F.3d 333, 339 (4th Cir. 2005) (“[T]he putative client must show that his subjective belief that an attorney-client relationship existed was reasonable under the circumstances.”). “An attorney-client relationship and privilege may exist even though the attorney's fees are paid by a third person.” Edwards, 39 F. Supp. 2d at 722. 3. TMJ002653-TMJ002655 The only real element required to establish the attorney-client privilege here is whether an attorney-client relationship existed between TMJ and Hannan so as to implicate the attorney-client privilege. In support of its position that the communication is privileged, TMJ submits the declaration of Motwani, who asserts that Steven Hannan has “represented members of my family and affiliated business” and “has performed legal work for TMJ Group.” (Rec. Doc. 150-1, ¶ 4). He acknowledges that Marcus Giusti, of the same firm as Hannan, represented FNBC in connection with the loan transaction for the Margaritaville restaurants at issue in this litigation. Id. ¶2. He asserts that Giusti has also represented members of Motwani's family. Id. ¶ 3. He certifies that it was his understanding that “only Mr. Giusti was involved in working on FNBC Bank's loan transaction for the MOA Business.” Id. ¶ 5. He adds that he does “not believe that Mr. Hannan was involved in working on First NBC's loan transaction for the MOA Business.” Id. He also certifies that he “reached out to Mr. Hannan in October 2016, to seek his legal advice in connection with the MOA Business.” *3 IMC points out that TMJ has failed to provide any objective evidence of the existence of an attorney-client relationship. There is no engagement letter and no representation that TMJ and Hannan orally agreed to a scope of engagement. There is no evidence of any billings, any retainer, or any fee arrangement. It remains unclear whether Hannan billed his time to FNBC, Motwani, or to no one. IMC notes that TMJ was already represented by Brad Axelrod on the transaction. Although the lack of any evidence of a formal attorney-client relationship raises a serious question of whether an attorney-client relationship exists, in this case, having reviewed the document in question, the Court concludes that the communication at issue is protected by the attorney client-privilege. The previous relationship of Motwani and his family and their businesses, including TMJ, with the Hannan, Giusti & Hannan law firm provides at least some basis for why Motwani might reach out to an attorney at that law firm without formally engaging him or her first. And critically to this Court's conclusion, it is clear from the unredacted communication reviewed by the Court in camera that Motwani is requesting legal advice on behalf of TMJ regarding the operating agreement and management agreement for the MOA deal. It is also clear from Hannan's return email that he understood Motwani's email in this manner because he provides legal advice in direct response to the request. There is no reference to FNBC by either Motwani or Hannan to suggest that TMJ was, for example, seeking input from FNBC through its counsel regarding the operating agreement. The legal advice does not concern the FNBC loan such that it might be reasonable to expect a lay person to understand that FNBC's law firm would have a conflict if it provided legal advice to the borrower. While there may be a conflict of interest at play in the communication at issue here, any failure by Hannan to notify Motwani and TMJ of such a possibility and obtain a knowing waiver cannot inure to the benefit of IMC, or more importantly, to TMJ or Motwani's detriment. The Court finds that, under the circumstances of this case, TMJ's belief that Hannan was its attorney for the purpose of the legal advice requested and obtained in the document at issue here was reasonable. Accordingly, it is protected by the attorney-client privilege. Conclusion For the foregoing reasons, as to the remaining issue in IMC's Motion to Compel (Rec. Doc. 49) and IMC's Amended Motion to Compel and Motion for Leave to Take Depositions Past Discovery Deadline (Rec. Doc. 84), the Motions are DENIED. TMJ shall not be compelled to produce in unredacted form the document bates labeled TMJ002653-TMJ002655. New Orleans, Louisiana, this 25th day of April, 2018. Footnotes [1] The Motions to Compel and Memorandum in Opposition seemed to implicate other redacted documents in which FNBC representatives were involved in the communications. In the course of producing the redacted and unredacted document to the Court, the parties were able to resolve their issues with regard to all documents except the one discussed here.