Metropolitan News-Enterprise


Tuesday, December 1, 2009


Page 3


S.C. Rules Factual Summary in Opinion Letter Was Privileged


By SHERRI M. OKAMOTO, Staff Writer


An opinion letter sent by outside counsel to a corporate client is protected by the attorney-client privilege, irrespective of the letter’s content, the California Supreme Court clarified yesterday.

The unanimous panel ruled that Los Angeles Superior Court Judge Emilie H. Elias erred by directing a referee to conduct an in camera review of a 22-page letter by Los Angeles attorney Kelly Hensley allowing the referee to redact the letter to conceal the portions the referee believed to be privileged, and ordering the client to disclose the remainder to the opposing party.

Costco Wholesale Corporation retained Hensley’s firm—Sheppard, Mullin, Richter & Hampton—in 2000 to provide legal advice regarding whether certain Costco warehouse managers in California were exempt from California’s wage and overtime laws.

Several years later, various Costco employees filed a class action against their employer, claiming Costco had misclassified some of its managers as “exempt” employees and therefore had failed to pay them required overtime wages.

In the course of the litigation, the employees sought to compel discovery of Hensley’s opinion letter.

Costco objected on the grounds the letter was subject to the attorney-client privilege and the attorney work product doctrine, but the employees contended that the letter contained unprivileged material and that Costco had placed the contents of the letter in issue, thereby waiving any privilege.

In Camera Review

Over Costco’s objection, Elias ordered a discovery referee to conduct an in camera review of Hensley’s opinion letter to determine the merits of Costco’s claims of privilege.

The referee found that much of the letter’s content was protected material, but that those portions of text involving factual information about various employees’ job responsibilities were not shielded by the attorney-client privilege nor the work product doctrine.

Elias adopted the referee’s findings, and without ruling on the employees’ assertion that Costco had waived the privilege by placing the contents of the letter in issue, ordered Costco to produce a copy of the letter, as redacted by the referee.

Costco sought a writ of mandate, but this district’s Court of Appeal denied Costco’s petition.

Div. Three did not address the merits of the trial court’s discovery order or its decision to refer the opinion letter to the referee for in camera review, but rather concluded Costco had not demonstrated that disclosure of the unredacted portions of the letter would cause it irreparable harm in the action since the unredacted text referred to factual matters that would be easily discoverable by other means.

In a decision by Justice Kathryn M. Werdegar, the high court disagreed with both the trial court’s and the appellate court’s rulings.

Werdegar emphasized that the attorney-client privilege “protects the transmission of information” and so the entirety of a privileged communication “including its recitation or summary of factual material” is shielded from disclosure.

“[I]f, as plaintiffs contend, the factual material referred to or summarized in Hensley’s opinion letter is itself unprivileged it may be discoverable by some other means, but plaintiffs may not obtain it by compelling disclosure of the letter,” Werdegar said.

The justice added that Evidence Code Sec. 915—which prohibits the disclosure of information claimed to be privileged in order to rule upon a claim of privilege—provided a second reason for overturning the trial court’s discovery order.

Concluding that trial court’s order was invalid, Werdegar then turned to the issue of whether the Court of Appeal erred in declining to grant extraordinary relief on the ground that disclosure of the letter in redacted form did not harm Costco.

She suggested that the appellate court’s ruling “implies that the harm in an order compelling disclosure of privileged information is the risk the party seeking disclosure will obtain information to which it is not entitled,” which is not the case.

“[T]he fundamental purpose of the attorney-client privilege is the preservation of the confidential relationship between attorney and client…and the primary harm in the discovery of privileged material is the disruption of that relationship, not the risk that parties seeking discovery may obtain information to which they are not entitled,” Werdegar said.

As the trial court’s order “threatened the confidential relationship between Costco and its attorney,” the justice reasoned that Costco was not required to demonstrate prejudice and was entitled to the relief it sought.

‘Course’ of Relationship

Chief Justice Ronald M. George wrote separately to emphasize that a communication must occur “in the course of” an attorney-client relationship in order to be privileged.

The Legislature intended to extend the protection of the privilege to those communications between the lawyer and the client that are made for the purpose of seeking or delivering the lawyer’s legal advice or representation, George insisted, acknowledging that the purpose of an attorney-client communication “rarely will be in dispute,” but may occasionally be “a critical consideration.”

David D. Kadue of Seyfarth Shaw argued the case before the Supreme Court on behalf of Costco, with Victor Schachter of Fenwick & West for the California Employment Law Council as amicus.

Lee M. Gordon of Hagens Berman Sobol Shapiro represented the Costco employees.

The case is Costco Wholesale Corporation v. Superior Court (Randall), S163335.


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