Schilling v. Mid-America Apartment Communities, Inc. et al
ORDER GRANTING 61 Motion to Compel Discovery. Signed by Judge Andrew W. Austin. (ml)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
JAMIE C. SCHILLING and
KATELYN ELIZABETH BROOKS
for themselves and all others
COMMUNITIES, INC. & MID-AMERICA §
Before the Court is: Plaintiff’s Opposed Motion to Compel Discovery (Dkt. No. 61);
Defendants’ Response to Motion to Compel Discovery (Dkt. No. 65); and Plaintiffs’ Reply (Dkt. No.
66). The Court held a hearing on all referred motions and responses on Tuesday, May 17, 2016. At
the hearing, the Court orally granted the parties’ motions for certain emails to be reviewed in camera
by the Court. Having reviewed the documents in camera, the Court enters the following Order as to
disclosure of the documents.
Plaintiffs Jamie C. Schilling and Katelyn Elizabeth Brooks, who describe themselves as
“boyfriend and girlfriend living together,” sue their landlord, Mid-America Apartment Communities,
Inc. and Mid-America Apartments, L.P. (collectively “MAA”), alleging that MAA improperly
charged water connection fees in violation of the Texas Water Code. Dkt. Nos. 15, 24 at 3 n.2.
Plaintiffs sue on behalf of a proposed class of current and former residential tenants of over 19,000
dwelling units in approximately 62 apartment communities in Texas where Defendants are the owner
or landlord. The present dispute relates to emails between MAA and American Utility Management,
Inc., a third-party company MAA contracted with to coordinate utility billing to MAA’s tenants.
The issue before the Court is narrow. MAA contends that 11 emails that passed between
employees of MAA and employees of AUM, sent a year before the case was filed, are attorney-client
communications and therefore exempt from discovery. Plaintiffs contest this, and argue that the
communications are between non-lawyer employees of the two companies, sent in the ordinary
course of business, about the subject matter of the parties’ contractual relationship.
MAA argues that the emails are subject to the attorney-client privilege because under the
written agreement between AUM and MAA, AUM agreed to provide “full legal support,” and to
ensure that “all terms under this contract are executed in accordance with all pertinent governing
jurisdictions’ laws and regulations.” MAA asserts that in carrying out its responsibilities under their
contract, AUM provided MAA with legal advice concerning tenant billing and utility allocation.
MAA also points out that on its website, AUM states it provides its landlord customers “legal and
regulatory expertise in industry laws and regulations.” MAA asserts that it regularly sought advice
from AUM about what it was, or was not, permitted to bill to tenants, including advice about
compliance with various states’ billing and utility regulations. The communications were sent to
AUM representatives (such as Vice President - Client Manager Jacki Caputo), and by the AUM
employees to AUM’s general counsel, Jeffrey Peterson. MAA contends that Peterson’s legal advice
was funneled back to MAA through AUM employees.
The parties agree that Texas law governs the attorney-client privilege analysis in this diversity
action. See FED. R. EVID. 501. When a party is claiming that a document is subject to the attorneyclient privilege, it bears the burden of proving each of the elements of the privilege. Hodges, Grant
& Kaufmann v. U.S. Gov't, Dep't of the Treasury, 768 F.2d 719, 721 n.7 (5th Cir. 1985). “A clear
showing must be made which sets forth the items or categories objected to and the reasons for that
objection.” Navigant Consulting, Inc. v. Wilkinson, 220 F.R.D. 467, 473 (N.D. Tex. 2004). Thus,
if a party fails to produce evidence in support of any one of the elements of the privilege, the
document is not entitled to protection. In a corporate setting, the privilege extends to any employee
of the corporation who, on instructions from a superior, communicates with inside or outside counsel
on behalf of the corporation. Upjohn v. United States, 449 U.S. 383, 394–95 (1981). But the
privilege only attaches to communications made for the purpose of giving or obtaining legal advice
or services; it does not apply to business or technical advice or management decisions. Id.;
Navigant, 220 F.R.D. at 473.
For a communication to be subject to the attorney-client privilege is must be: (1) a
confidential communication; (2) made for the purpose of facilitating the rendition of professional
legal services; (3) between or amongst the client, lawyer, and their representatives; and (4) the
privilege has not been waived. TEX.R. EVID. 503(b); Huie v. DeShazo, 922 S.W.2d 920, 923 (Tex.
“Between or Amongst the Client, Lawyer, and their Representatives”
Because it is fundamental to the issue before it, the Court first addresses MAA’s novel
argument that, through its vendor relationship with AUM, it became the “client” of AUM’s in-house
attorney. MAA has been unable to provide the Court with any case in which a court has made such
a finding on similar facts. This is likely because the argument is so odd that no court has ever been
presented with it. The Court has struggled with this order, not because it presents a particularly
challenging decision, but rather because MAA’s claim is so unorthodox, so far-fetched, that it is
difficult to address in the context of existing case law.
Generally, the attorney-client privilege covers communications made by a corporate
employee when they concern matters pertinent to the employee’s job and the information is sought
by the corporation’s attorney in order to formulate and render legal advice to the corporation. See
Upjohn Co., 449 U.S. at 394-95. About the only factual aspect of the present dispute that is clear
is the identity of the attorney in the alleged attorney-client relationship, because there is only one
attorney who had any relationship to the communications at issue—Jeffrey Peterson, the general
counsel of AUM. Though MAA had its own in-house general counsel at this time, Dkt. No. 66-2
at 100-101, none of the communications at issue here took place between MAA’s employees and
MAA’s in-house attorney. Instead, all of the communication were between MAA employees, and
AUM employees, who MAA contends were simply passing on the legal advice of AUM’s in-house
MAA’s evidence demonstrating the existence of an attorney-client relationship with AUM’s
general counsel is thin. Conspicuously absent from the record is any declaration from AUM or
AUM’s in-house attorney addressing whether either that corporation or its attorney believed that it
had established an attorney-client relationship with MAA, or that it was providing legal advice to
MAA in these emails. Instead, the only evidence MAA has given the Court on this point is the
declaration of MAA Vice President James Maclin, who states that he believed that he was seeking
legal advice from AUM in the emails, and that the advice would be provided by an attorney. Dkt.
No. 65-1 at ¶ 6. Even this evidence is doubtful, though, as Maclin’s deposition testimony on this
point was different:
Under the contracts that we identified in Exhibits 28 through 31, did you understand
those contracts to include the providing of legal services by AUM to MAA?
My—my interpretation would be that AUM was to provide some regulatory
—based upon the services that they provided Colonial Properties.
Okay. But you agree with me that you don’t have to be a lawyer to understand
Dkt. No. 66-2 at 120-21. Further, Mr. Peterson, AUM’s general counsel, was neither the sender, nor
the recipient, of any of the emails. Rather, he is copied on only one email, and is not a party, in any
capacity, to the other 10 emails.
As mentioned, there are few, if any, helpful opinions addressing a privilege claim like that
made by MAA. Some fact scenarios come close. For example, courts have held that, in some
circumstances, communications between a corporation’s in-house attorney and an independent
contractor or other non-employee working for the corporation can be privileged. See LG Electronics
U.S.A., Inc. v. Whirlpool Corp.,661 F.Supp.2d 958, 961-963 (N.D. Ill. 2009). But that is not what
is before the Court in this instance. MAA was not acting as AUM’s agent in any respect. Instead,
MAA was AUM’s customer. The proper description of the facts here is not that MAA was acting
as an agent of AUM, and AUM was passing on legal advice to MAA in the context of a principalagent relationship; rather, MAA was AUM’s customer, and AUM employees sought legal advice
from their legal counsel on questions related to the services AUM was providing to MAA, and then
shared those opinions in their communications with MAA.
A factually closer situation was addressed in In re Vioxx Products Liability Litigation, 501
F. Supp. 2d 789 (E.D. La. 2007). In that case, Merck retained outside advertising agencies on an
ongoing basis and vetted every advertisement and communication those agencies created with the
Merck in-house legal department to ensure compliance with strict FDA advertising regulations.
Merck asserted that the advertising agencies were acting as Merck agent-employees, and thus
communications between Merck and the ad agencies were subject to the attorney-client privilege.
To assist in the resolution of the complex attorney-client privilege claims made by Merck, the district
judge assigned Prof. Paul Rice as a special discovery master. Prof. Rice is the author of a wellrespected treatise on the attorney-client privilege, and he quotes from his report in the Vioxx
litigation in one chapter of the treatise:
Merck is now claiming that consultants should permissibly be brought within the
circle of confidentiality because they, the consultants, could be assisted by directly
receiving advice from the corporation’s lawyers. We are not willing to take this step
in the expansion of the privilege because it makes a mockery of the privilege’s
limited purpose and rationale, and further renders the concept of confidentiality
meaningless. With the advent of electronic communications and the vastly expanded,
albeit inappropriate, assertion of privilege claims by corporations, privilege
resolution process in litigation has become one of the most costly endeavors. Here,
for example, the court has not only had to address the issue of confidentiality within
the Merck corporate structure, but also within each organizational structure of each
consulting firm. Every expansion adds complexities, that in turn add cost and
confusion to the process. This added expansion would particularly have that effect.
Paul Rice, ATTORNEY-CLIENT PRIVILEGE § 4:19 (Thomson West 2d ed. Supp. 2009). The court
thus declined to extend the privilege to the communications between Merck employees and the ad
agency employees. Once again, the facts of this case are less favorable to the assertion of the
privilege than in the Vioxx litigation. There, the ad agencies were Merck’s agents, hired by Merck
to work at Merck’s direction. Here, MAA was not working on behalf of AUM, but instead AUM
was working for MAA.
As noted at the outset, MAA bears the burden of establishing that it had formed an attorneyclient relationship with AUM’s general counsel, and that the emails sent by AUM employees to
MAA were merely conveying Mr. Peterson’s legal advice to MAA. Other than the conclusory
statements in Maclin’s declaration, which are inconsistent with his deposition testimony, there is no
evidence to support this claim. Further, the Court can find no legal basis to conclude that such a
relationship has ever been recognized in this setting. The evidence, including the Court’s review of
the subject emails, demonstrates that any legal or business advice given by AUM’s in-house counsel
was given to AUM’s employees, for the benefit of AUM. AUM’s employees’ decision to share that
information with their customer did not extend any privilege that might exist to that customer. MAA
has wholly failed to carry its evidentiary burden of establishing that an attorney-client relationship
existed between MAA and AUM’s general counsel, Jeffrey Peterson, and its assertion of a privilege
as to the emails fails for this reason.
Although the Court has found that MAA failed to demonstrate the existence of a lawyer-
client relationship, there are other, independent reasons that its privilege claim fails. They are
discussed in the following sections.
In the corporate context, demonstrating the confidentiality element of the privilege is
important, particularly in the age of email and the ease with which communications can be shared.
As relevant here, Rule 503 of the Texas Rules of Evidence provides that the privilege applies to
communications “between the client or the client’s representatives and the client’s lawyer or the
lawyer’s representative.” TEX. R. EVID. 503(b)(1)(A). A communication is “confidential” if it is not
intended to be disclosed to third persons other than those “to whom disclosure is made to further the
rendition of professional legal services to the client” or “reasonably necessary for the transmission
of the communication.” TEX. R. EVID. 503(a)(5)(A) & (B). One aspect of confidentiality requires
that the party invoking the attorney-client privilege show that each person privy to the
communication: (1) had the authority to obtain professional legal services on behalf of the client; (2)
had authority to act on legal advice rendered to the client; or (3) made or received the confidential
communication while acting within the scope of his employment for the purpose of effectuating legal
representation to the client. Navigant, 220 F.R.D. at 480 (citing Seibu Corp. v. KPMG LLP, 2002
WL 87461 at *2 (N.D. Tex. Jan. 18, 2002)); TEX. R. EVID. 503(a)(2)(A)-(B)).
The emails at issue were distributed to many recipients, several of whom are not identified
in any of the evidence before the Court. The most detail given regarding the roles of these recipients
is contained in James Maclin’s declaration, where he states that he “requested legal advice from
AUM in connection with certain of my job responsibilities, and I directed certain employees
(including Rebecca Wade) to obtain such advice from AUM pursuant to the Agreement.” Dkt. No.
65-1 at ¶ 7. The “certain employees” mentioned in the declaration are not identified. But there are
various individuals copied on the emails other than Maclin or Wade.1 Further, the emails are not
marked “privileged” or “confidential,” nor do they contain any disclaimer that they contain legal
advice. By not giving the Court any evidence of who these individuals are, and whether they qualify
as either persons to whom disclosure was made “to further the rendition of professional legal
Specifically, one or more of the emails were distributed to Pat Flanigan, Amy Pearson,
Carolyn Diehl, Chad Edwards, Audwin Washington, and Michael Schaeffer. There is no evidence
as to who these people are, what their roles at either AUM or MAA is, and whether they had been
empowered by AUM or MAA to participate in the giving or seeking of legal advice.
services to the client,” or persons “reasonably necessary for the transmission of the communication,”
TEX. R. EVID. 503(a)(5)(A) & (B), MAA has again failed to carry its evidentiary burden.
This is not a novel legal principle, as numerous courts have rejected privilege claims by
corporations for this very reason. For example, a court in the Northern District of Illinois stated in
Whether in the form of supporting affidavits or additional detail in the privilege log
[the privilege proponent is] required to provide additional facts as to the identity and
function of those individuals included in the communication to establish that the
‘employee ma[de] the communication at the direction of his superiors in the
corporation’ or that ‘the subject matter upon which the attorney’s advice [was]
sought by the corporation and dealt with in the communications [was] the
performance by the employee of the duties of his employment.’ A name and
ambiguous or undefined job title do little to substantiate that the confidentiality of the
communications was not compromised by disclosure to individuals outside the
Muro v. Target Corp., 243 F.R.D. 301, 308 (N.D. Ill. 2007) (internal citations omitted). That is
exactly the case here. Thus, the Court finds that MAA has failed to establish that the emails—even
if they are considered communications between a lawyer and a client—were “confidential.”
“Made to facilitate the rendition of professional legal services”
Plaintiffs also contend that MAA has failed to show that the emails were sent for the purpose
of facilitating the rendition of professional legal services; rather Plaintiffs argue that the emails in
question relate to “day-to-day operations” and “routine business affairs.” The distinction between
an in-house attorney giving legal advice and the attorney giving business advice has become an
important part of this analysis as the role of in-house attorneys has grown. But the basic legal
principle that, to be privileged, a communication involving in-house attorneys must have been made
to facilitate the rendition of legal services was established long ago. For example, a New York
district court stated in 1974 that “[i]f the document was prepared for purposes of simultaneous
review by legal and nonlegal personnel, it cannot be said that the primary purpose of the document
is to secure legal advice.’’ United States v. International Business Machines Corp., 66 F.R.D. 206,
213 (S.D. N.Y. 1974). See also United States v. Chevron Corp., 1996 WL 444597 (N.D. Cal. 1996)
(‘‘When a document is prepared for simultaneous review by non-legal as well as legal personnel, it
is not considered to have been prepared primarily to seek legal advice and the attorney-client
privilege does not apply.’’).
The only evidence MAA points to on this point is its contract with AUM, and statements on
AUM’s website. Specifically, MAA relies on the portion of The Utility Billing and Energy
Management Agreement that identifies the “BILLING SERVICE PROVIDED BY AMERICAN
UTILITY MANAGEMENT, INC.” One of the services listed under that heading is “[f]ull legal
support as needed by [MAA].” Dkt. No. 61-8 at ¶ 3. MAA notes as well that the agreement states
that AUM is to ensure that “all terms under this contract are executed in accordance with all
pertinent governing jurisdictions’ laws and regulations.” Id. at ¶ 11. MAA also relies on the
language on AUM’s website which states that AUM provides, among many other things, “legal and
regulatory expertise in industry laws and regulations” to its clients. Dkt. No. 66-1 at 8.
What is lacking from MAA’s argument is any analysis of the emails themselves, and whether
they can fairly be read to be solely addressed to legal matters, or if instead are properly construed as
also concerning business issues. On this point, MAA’s evidence is again insufficient. First, none
of the emails were directed to AUM’s general counsel, Jeffrey Peterson. They were directed to rank
and file AUM employees who, it would appear on their own initiative, solicited advice from Mr.
Peterson before responding to the MAA employees’ questions. Further, Peterson never addressed
his responses containing the alleged legal advice, to an MAA employee. Instead, he responded to
AUM employees. In addition, the emails seek advice regarding the very services that AUM provides
to its clients—the billing of tenants. This is akin to the situation in Baptist Health v. BancorpSouth
Ins. Servs., Inc., 270 F.R.D. 268, 276 (N.D. Miss. 2010), where the court noted that “the critical
inquiry is whether any particular communication facilitated the rendition of predominantly legal
advice or services to the client.” MAA employees were writing to AUM employees asking for
guidance on what they were permitted to bill for, and AUM answered those questions directly, after
seeking input from its own counsel. The emails were primarily business conversations between
AUM and its customer.
The path that the communications followed further supports this conclusion. As has been
noted, none of MAA’s messages were sent to Peterson, and not a single response to MAA was sent
from Peterson. Instead, all of the conversations were between non-lawyer employees, who appear
to have dealt with each other regularly on business matters. The agreement between MAA and
AUM is not a legal services agreement, but rather is entitled “Utility Billing and Energy
Management Agreement.” The first paragraph of the Agreement describes the ”Services Provided”
as “monthly billing services for the approximately 50,000 apartment units owned by Colonial.” Dkt.
61-8 ¶ 1. While the Agreement does make provision for “full legal support,” this term is not defined
in the contract, and there is no evidence that MAA expected AUM to advise it on anything other than
the application of laws and regulations to billing practices, which is AUM’s business. And the
evidence shows that on various occasions AUM’s non-lawyer employees gave advice about
regulations to MAA, without first talking to AUM’s in-house counsel.
To put this point in one final way, in the words of TEX. R. EVID. 503, for the privilege to
apply to these communications, the AUM employees who conveyed the alleged legal advice to MAA
would have to be considered a “lawyer’s representative.”
Rule 503 provides that for a
communication to be privileged it must be “between the client or the client’s representative and the
client’s lawyer or the lawyer’s representative.” TEX. R. EVID. 503(b)(1)(A). Under MAA’s
argument, the “client” must be MAA, its employees are “the client’s representative” and the client’s
lawyer is Peterson. Because the communications were between MAA employees and AUM
employees (other than Peterson), to fit under the rule, the AUM employees would have to be
considered “the lawyer’s representative.” But that term is defined in Rule 503 as someone
“employed by the lawyer to assist in the rendition of legal services” or “an accountant reasonably
necessary for the lawyer’s rendition” of legal services. TEX. R. EVID. 503(a)(4). There is no
evidence in the record that would allow the Court to conclude that any of the AUM employees were
“employed by [Peterson] to assist in the rendition of legal services,” or were accountants necessary
Having reviewed the emails, the Court finds that the emails were not sent to facilitate the
rendition of professional legal services, but instead involved general questions relating to the billing
services provided by AUM to MAA. As such they are not protected by the attorney-client privilege.
In camera review
As mentioned, in reaching its conclusions, the Court considered the emails themselves, which
were submitted to the Court for review in camera. Given the conclusions set forth above there is
no need to go through the documents one-by-one, or to otherwise apply the Court’s findings to the
documents on an individualized basis. The Court does make the following, observations, however.
The sole document on which the attorney is copied is PRIV0000002. Notably, Peterson is copied
by an AUM employee, along with others, and the email contains no legal opinions. Documents
numbered P-MAA-SCHI0000001-6, AUM0001858, PRIV0000008, and PRIV0000010 (several of
which duplicate a single email chain) each contain italicized text which is described in the email as
having been received by an AUM employee from AUM’s in-house counsel, and then duplicated and
pasted into the email. But because MAA was not the in-house counsel’s client (as discussed in detail
above), the transmission of the in-house attorney’s words was in effect a waiver of the privilege
between the AUM employee and her in-house attorney. Finally, all of the documents contain
discussion of ordinary business matters, and all of them were circulated to one or more of the people
listed in footnote 1 (who are not identified in MAA’s evidence).
III. Summary and Order
IT IS THEREFORE ORDERED that Plaintiff’s Opposed Motion to Compel Discovery (Dkt.
No. 61) is GRANTED and, unless an appeal is taken from this order in the time period set by FED.
R. CIV. P. 72(a) and Rule 4(c) of Appx. C of the Local Rules of this Court, MAA shall produce to
Plaintiffs all of the records it submitted to the Court for in camera review.
SIGNED this 9th day of June, 2016.
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE
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