In re Blue Sky Golden FPS Ltd. 2012 WL 1454532 (Tex. App.

2011)
PER CURIAM.
Relator, Blue Sky Golden FPS, Ltd., filed a petition for writ of mandamus challenging the
trial court's July 7, 2011 order denying relator's motion to overrule respondents' privilege
assertions and to compel Michelle Neal's deposition testimony and production of documents;
challenging the trial court's August 17, 2011 order sustaining the real parties' in interest
objections to production of certain documents; requesting that we direct the trial court to compel
the deposition of Michelle Neal; and requesting that we direct the trial court to order production
of all documents listed on the Fulcrum Defendants' privilege log.
[Appellants petition for mandamus to Supreme Court was also denied; the material below
represents the Respondents successful argument]
This case arises out of a commercial relationship between Blue Sky (and its parent and affiliated
companies), Fulcrum Energy, LLC (Fulcrum), and Fulcrum Power Services, L.P. (FPS).
Blue Sky has asserted various claims against Fulcrum, its founders, Jesson A. Bradshaw, Gerardo
P. Manalac, and Kimberly J. Casey (collectively, the Founders), and Double G Holdings, L.P.
(Double G, collectively with Fulcrum, FPS, and the Founders, the Fulcrum Parties). The
Fulcrum Parties have filed counterclaims against Blue Sky, as well as claims against Blue Sky's
parent and affiliated companies and a former Blue Sky officer.
Fulcrum and FPS, both headquartered in Houston, provide energy management services and
retail electricity to commercial and retail consumers of electricity. Fulcrum is the general partner
of FPS, and the decision-making body for both companies is Fulcrum's Executive Committee
(Exco). In 2007, an Indonesian conglomerate, the Sinarmas Group, entered into a business
relationship with Fulcrum, which resulted in the creation of Blue Sky, an affiliate of the Sinarmas
Group. Once formed, Blue Sky became a limited partner of FPS with its rights being governed
by the Fourth Amended and Restated Agreement of Limited Partnership (Partnership
Agreement). Blue Sky also became a member of Fulcrum, with its rights being governed *2 by
the Third Amended and Restated Company Agreement of Fulcrum Energy LLC (Company
Agreement).
As a limited liability company, Fulcrum is comprised of members and managers. Only those
members serving on the Exco are managers. Under Fulcrum's Company Agreement, Blue Sky
was granted the right to designate an individual to serve on the Exco. Blue Sky chose Peter Ong
as its designee. While Mr. Ong was a manager of Fulcrum under the Company Agreement, Blue
Sky was (and is) only a member. Mr. Ong served on the Exco until April 2010. At that point Blue
Sky designated Djoko Tata Ibrahim to serve as its designated member of the Exco. The Founders
were also granted the right under the Company Agreement to designate two individuals to serve
on the Exco. They chose Mr. Manalac and Mr. Bradshaw.. Thus, Mr. Manalac and Mr. Bradshaw
are both members and managers of Fulcrum. Ms. Casey is a member of Fulcrum.
Under the Company Agreement, managers and members have different powers and duties.
Members do not have the authority or right to assume or create any obligation ... on behalf of,
or in the name of [Fulcrum] or [FPS] nor can they bind [Fulcrum] or [FPS] in any respect,

without the specific prior written approval of the [Exco]. As a group, the managers on the Exco
were given the full power and authority to manage the business and affairs of [Fulcrum],
including exercising its power and authority as general partner of [FPS].... No individual
manager, however, can act on behalf of Fulcrum or FPS without the specific prior written
approval of the [Exco]. Additionally, managers owe fiduciary duties to Fulcrum, including the
duty to act in Fulcrum's best interest, while members only owe a duty to deal in good faith with
[Fulcrum] and to act with the care of an ordinary prudent person in a like position and under
similar circumstances. The Company Agreement does not state that Blue Sky is a manager of
Fulcrum or that Blue Sky has the same powers and duties as a manager.
The pleadings which frame the issues in this case allege that in 2008, Fulcrum began having
difficulties collecting from one of its largest customers, Tara Energy, L.L.C. (Tara). Eventually
the Exco made the decision to acquire Tara. In approximately mid-2009, Blue Sky informed
Fulcrum that it would consent to the proposed Tara transaction only if Fulcrum would buy out
Blue Sky's partnership interest. Blue Sky later modified its position and conditioned its approval
of the Tara transaction upon Mr. Bradshaw, Double G, and Ms. Casey signing a letter agreement
(the Letter Agreement) to give their personal distributions up in order to buy back Blue Sky's
investment in Fulcrum. The terms of the Letter Agreement were finalized at the same time the
Tara transaction was set to close, which culminated on September 1, 2009. Fulcrum was not a
party to the Letter Agreement. Immediately following the closing, Blue Sky repudiated the
consent it had given for the Tara transaction.
Michelle Neal was Fulcrum's in-house general counsel from mid-2008 to January 2010, when
she left the company. As general counsel, Ms. Neal's duties were to provide legal advice to
Fulcrum and on occasion FPS. She also represented Mr. Manalac (on behalf of Double G), Mr.
Bradshaw, and Ms. Casey with respect to the negotiations and execution of the Letter
Agreement. Ms. Neal revised drafts of the Letter Agreement and provided the Founders with
legal advice with respect to that transaction. Blue Sky was represented by its own attorneys who
attended Exco meetings for Blue Sky.
After filing its lawsuit against the Fulcrum Parties, Blue Sky requested a deposition of Ms. Neal.
Ms. Neal was the first witness Blue Sky sought to depose. During Ms. Neal's deposition, Blue
Sky sought testimony from Ms. Neal on 64 broad topics that were covered by Fulcrum's
attorney-client privilege. Blue Sky has also requested the production of certain privileged
communications of Ms. Neal's. The Fulcrum Parties objected on grounds of attorney-client and
work-product privilege. Blue Sky moved to overrule the Fulcrum Parties' privilege assertions and
to compel Ms. Neal's deposition and production of documents. The trial court denied Blue Sky's
motion.
[Argument]
II. THE TRIAL COURT DID NOT CLEARLY ABUSE ITS DISCRETION IN REFUSING TO
COMPEL THE DEPOSITION OF FULCRUM'S FORMER IN-HOUSE COUNSEL.
Blue Sky is seeking access to Ms. Neal's privileged communications with Fulcrum. Blue Sky
argues that it is entitled to discover these communications because, as a member of Fulcrum,

Blue Sky is part of Ms. Neal's client and, thus, is not a third party to Ms. Neal's communications.
This argument is without merit.
A business organization, such as an LLC, is a legal entity separate and apart from the individuals
who compose it. It is black letter law that an attorney for such an organization represents the
entity, rather than the entity's constituents. It is also well established that the attorney-client
privilege belongs to the client alone. Only the holder of the attorney-client privilege may waive
it. Thus, Fulcrum holds the power to assert or waive the attorney-client privilege with respect to
the communications of its in-house counsel. Where, as here, an LLC is operated by a committee
of managers (i.e., the Exco), it is the Exco, as a whole, that has the right and power to assert the
attorney-client privilege on Fulcrum's behalf.
Blue Sky's position as a member of Fulcrum does not automatically entitle it to access Fulcrum's
privileged communications. Blue Sky claims that it is a client representative of Fulcrum under
Rule 503 of the Texas Rules of Evidence because it has broad management authority in Fulcrum
Energy as an owner with one designee manager on the ExCo. However, Fulcrum's Company
Agreement clearly states that Blue Sky is a member of Fulcrum, not a manager. Blue Sky
appears to argue that because it has the right to designate a manager on the Exco, its status is
equivalent to that of the other managers of Fulcrum. This is completely inaccurate.
A client representative is a person having authority to obtain professional legal services, or to
act on advice thereby rendered, on behalf of the client... Blue Sky, as a member of Fulcrum,
does not have this authority. Rather, it is the Exco as a whole that has such authority. Thus, the
Exco is the client representative. Blue Sky is not on the Exco. And even Blue Sky's designee
on the Exco does not qualify as a client representative because the Company Agreement
clearly states that no individual manager has any authority or right to assume or create any
obligation ... on behalf of, or in the name of [Fulcrum] or [FPS], nor bind [Fulcrum] or [FPS] in
any respect, without the specific prior written approval of the [Exco]. Thus, only the Exco, as a
whole, has the authority to seek or obtain legal advice on behalf of Fulcrum.
Here, at the time of the communications, it was perfectly clear to everyone that the interests of
Blue Sky (and its designee) were adverse to the interests of Fulcrum. Neither Blue Sky nor its
designee, Mr. Ong, had a reasonable expectation that Ms. Neal was representing their interests at
that time.