Le Bleu Corp. v. Fed. Mfg. LLC, Case No. 17-CV-0549
| Decision Date | 02 April 2018 |
| Docket Number | Case No. 17-CV-0549 |
| Parties | LE BLEU CORPORATION, Plaintiff, v. FEDERAL MFG. LLC and PRO MACH, INC., Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Plaintiff Le Bleu Corporation produces bottled beverages, such as bottled water and juice. Defendant Federal Mfg., LLC, a Wisconsin limited liability company, manufactures bottle-filling machines. In December 2014, Le Bleu entered into a contract to purchase a filling machine, known as a "filler," from Federal. In this action for breach of contract, Le Bleu alleges that the filler did not perform as promised. Le Bleu also alleges that Federal's parent company, Pro Mach, Inc., is liable for Federal's breach under a veil-piercing theory. Before me now are two motions to compel discovery filed by Le Bleu. The first motion seeks production of seven email messages that the defendants claim are protected by the attorney-client and work-product privileges. The second motion seeks production of certain documents relating to Le Bleu's veil-piercing theory.
In response to Le Bleu's requests for the production of documents, the defendants objected to producing seven responsive emails on the ground that they are protected by the attorney-client privilege and the work-product doctrine. The emails in question were either authored by or sent to Patrick Mohan, who is employed by defendant Pro Mach and holds the title "Chief Administrative Officer." Mohan has a law degree and is a member in good standing of the Ohio bar. The defendants state that one of Mohan's job duties is to oversee the legal needs of Pro Mach and its subsidiaries. (Mohan Decl. ¶ 2.) The defendants further state that the emails to and from Mohan were communications about Le Bleu's legal claims and were made for the purpose of obtaining legal advice from Mohan about those claims. (Id. ¶ 6.) Thus, argue the defendants, the communications are protected by both the attorney-client privilege and the work-product doctrine.
Le Bleu contends that, although Mohan is an attorney, he was not rendering legal advice to the defendants when he sent and received the disputed emails. However, Mohan has submitted a declaration in which he states that one of his duties at Pro Mach is to oversee the legal needs of Pro Mach and its subsidiaries (which includes Federal). He further states that the disputed emails "all relate to [Le Bleu's] second demand letter," and that "the purpose of those communications was for relevant employees to provide information requested as necessary to evaluate [Le Bleu's] demand letter and to engage outside counsel." (Id.) Mohan's declaration establishes that the communications were made to him in his capacity as Pro Mach's and Federal's in-house counsel for the purpose of obtaining legal advice—namely, so Mohan could advise the defendants about Le Bleu's claim and to assist them in retaining outside counsel. Le Bleu has submitted no evidence that contradicts Mohan's declaration.Therefore, I find that the emails are protected by the attorney-client privilege and that the defendants are not required to produce them. (Because the emails are protected by the attorney-client privilege, I will not separately consider whether they are also protected as work product.)
Le Bleu also contends that if Mohan was providing advice to the defendants, then he was engaged in the unauthorized practice of law. Le Bleu points out that Mohan, who is licensed to practice law in Ohio, is not also licensed in Kentucky, which is where Pro Mach was located at the time of Mohan's advice. Le Bleu contends that Mohan's providing legal advice to a corporation located in Kentucky without being admitted to practice in Kentucky would violate the state's rules of professional responsibility. Le Bleu then argues that, because Mohan rendered advice in violation of Kentucky's rules of professional responsibility, the defendants' communications to him, as well as his advice to them, could not have been privileged.
In support of this argument, Le Bleu cites a case decided in 1954 by the District of Delaware. See Zenith Radio Corp. v. Radio Corp. of Am., 121 F. Supp. 792 (D. Del. 1954). But this case does not hold that the attorney-client privilege does not attach when a licensed attorney renders advice to a client in a manner that could be construed as the unauthorized practice of law. Instead, the case states that the privilege applies only if the person "is a member of the bar of a court." Id. at 794 (emphasis added). The case does note that "[b]ar membership should properly be of the court for the area wherein the services are rendered," but then it immediately adds that "this is not a sine qua non." Id. In any event, I am not bound by this district-court case, and I note that other courts have recognized that so long an attorney is licensed to practice law insome jurisdiction, then the client's communications to him will be privileged even if the attorney's advice might technically constitute the unauthorized practice of law in another jurisdiction. See Scranton Prods., Inc. v. Bobrick Washroom Equip., Inc., 190 F.Supp.3d 419, 428-29 (M.D. Pa. 2016); Heckler & Koch, Inc. v. German Sport Guns GmbH, No. 1:11-cv-1108-SEB-TAB, 2013 WL 2406262, at *9 (S.D. Ind. 2013). I find these cases persuasive. I also note that the attorney-client privilege belongs to the client rather than the lawyer, see, e.g., Lane v. Sharp Packaging Sys., Inc., 251 Wis. 2d 68, 99 (2002), and that it would unfairly punish the client to find that a communication is not privileged simply because the attorney was not in technical compliance with the rules of professional responsibility. Thus, even if Mohan may have violated the Kentucky rules of professional responsibility (a subject on which I express no view), the defendants' communications to him for the purpose of obtaining legal advice would still be privileged.
For these reasons, Le Bleu's motion to compel the production of the seven emails will be denied.
Le Bleu next seeks to compel production of certain information that it contends is relevant to its claim that Federal's "corporate" veil should be pierced so that Le Bleu can hold Pro Mach liable for Federal's breach of contract.1 Specifically, Le Bleu seeks the production of certain tax returns, profit-and-loss statements, and information concerning the net worth of Federal and Pro Mach. The defendants object to producing this information because, among other reasons, they contend it is not relevant to Le Bleu'sclaim that Federal's corporate veil should be pierced. See Fed. R. Ci v. P. 26(b)(1). Le Bleu contends that the requested information is relevant to two factors that some courts consider when deciding whether to pierce the corporate veil: undercapitalization and failure to observe corporate formalities.
It is true that undercapitalization is a factor that courts sometimes consider in the veil-piercing context. But this factor usually matters only in tort cases involving an involuntary creditor, rather than a contract case involving a voluntary creditor, such as the present case. See Secon Serv. Sys., Inc. v. St. Joseph Bank & Trust Co., 855 F.2d...
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