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Costco Wholesale Corp. v. Superior Court of Los Angeles County

November 30, 2009


Ct.App. 2/3 B197692 Los Angeles County Super. Ct. No. BC29636, Judge: Emilie H. Elias.

The opinion of the court was delivered by: Werdegar, J.

In this case we consider whether the trial court erred by directing a referee to conduct an in camera review of an opinion letter sent by outside counsel to a corporate client, allowing the referee to redact the letter to conceal that portion the referee believed to be privileged, and ordering the client to disclose the remainder to the opposing party. We conclude the court's directions and order violated the attorney-client privilege, and violated as well the statutory prohibition against requiring disclosure of information claimed to be subject to the attorney-client privilege in order to rule on a claim of privilege. (Evid. Code, § 915, subd. (a).)


In June 2000, Costco Wholesale Corporation (Costco), which operates warehouse-style retail establishments throughout California, retained the law firm of Sheppard, Mullin, Richter & Hampton to provide legal advice regarding whether certain Costco warehouse managers in California were exempt from California's wage and overtime laws.*fn1 Attorney Kelly Hensley, an expert in wage and hour law, undertook the assignment, ultimately producing for Costco the 22-page opinion letter at issue here. The letter followed conversations held by Hensley with two warehouse managers Costco had made available to her. Costco, the managers, and Hensley understood the communications between the managers and Hensley were, and would remain, confidential. Similarly, Costco and Hensley understood that Hensley's opinion letter was, and would remain, confidential.

Several years later, real parties in interest, Costco employees (hereafter collectively referred to as plaintiffs), filed this class action against Costco, claiming that from 1999 through 2001 Costco had misclassified some of its managers as "exempt" employees and therefore had failed to pay them the overtime wages they were due as nonexempt employees. In the course of the litigation, plaintiffs 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. Plaintiffs disagreed, arguing both that the letter contained unprivileged matter and that Costco had placed the contents of the letter in issue, thereby waiving the privilege.

The trial court, over Costco's objection, ordered a discovery referee to conduct an in camera review of Hensley's opinion letter to determine the merits of Costco's claims of attorney-client privilege and work product doctrine. The referee produced a heavily redacted version of the letter, stating her conclusion that although much of it "constitutes attorney client communications and/or the type of attorney observations, impressions and opinions plainly protected as work product," those portions of text involving "factual information about various employees' job responsibilities" are protected by neither the privilege nor the doctrine. The referee explained that statements obtained in attorney interviews of corporate employee witnesses generally are not protected by the corporation's attorney-client privilege and do not become cloaked with the privilege by reason of having been incorporated into a later communication between the attorney and the client. She also found that while interviewing the two Costco managers, Hensley had acted not as an attorney but as a fact finder. The trial court, without ruling on plaintiffs' assertion that Costco had waived the privilege by placing the contents of the letter in issue, adopted the findings and conclusions of the referee and ordered Costco to produce a version of the letter in the same form as recommended and redacted by the referee.

Costco petitioned the Court of Appeal for a writ of mandate, arguing the trial court had erred by ordering the in camera review of Hensley's opinion letter and by ordering disclosure of a redacted version of the letter. The Court of Appeal denied the petition. Without ruling on the merits of the trial court's discovery order or its decision to refer the opinion letter to the referee for in camera review, the court concluded Costco had not demonstrated that disclosure of the unredacted portions of the letter would cause it irreparable harm in the action, explaining the unredacted text simply referred to factual matters that would be easily discoverable by other means.

We hold the attorney-client privilege attaches to Hensley's opinion letter in its entirety, irrespective of the letter's content. Further, Evidence Code section 915 prohibits disclosure of the information claimed to be privileged as a confidential communication between attorney and client "in order to rule on the claim of privilege." (Id., subd. (a).) Finally, contrary to the Court of Appeal's holding, a party seeking extraordinary relief from a discovery order that wrongfully invades the attorney-client relationship need not also establish that its case will be harmed by disclosure of the evidence.

As we find the attorney-client privilege precludes discovery of the opinion letter, we do not consider whether the work product doctrine would also apply to prevent its discovery. And, as the trial court's ruling extended only to the opinion letter, neither do we consider the separate but related question of whether, independent of the letter, the conversations between Hensley and Costco's warehouse managers might be subject to either the attorney-client privilege or the work product doctrine.*fn2



The attorney-client privilege, set forth at Evidence Code section 954, confers a privilege on the client "to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and lawyer...." The privilege "has been a hallmark of Anglo- American jurisprudence for almost 400 years." (Mitchell v. Superior Court (1984) 37 Cal.3d 591, 599.) Its fundamental purpose "is to safeguard the confidential relationship between clients and their attorneys so as to promote full and open discussion of the facts and tactics surrounding individual legal matters. [Citation.]... [¶] Although exercise of the privilege may occasionally result in the suppression of relevant evidence, the Legislature of this state has determined that these concerns are outweighed by the importance of preserving confidentiality in the attorney-client relationship. As this court has stated: `The privilege is given on grounds of public policy in the belief that the benefits derived therefrom justify the risk that unjust decisions may sometimes result from the suppression of relevant evidence.' [Citations.]" (Id. at pp. 599-600.) "[T]he privilege is absolute and disclosure may not be ordered, without regard to relevance, necessity or any particular circumstances peculiar to the case." (Gordon v. Superior Court (1997) 55 Cal.App.4th 1546, 1557.)

A trial court's determination of a motion to compel discovery is reviewed for abuse of discretion. (2,022 Ranch v. Superior Court (2003) 113 Cal.App.4th 1377, 1387.) An abuse of discretion is shown when the trial court applies the wrong legal standard. (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, 1493.) However, when the facts asserted in support of and in opposition to the motion are in conflict, the trial court's factual findings will be upheld if they are supported by substantial evidence. (HLC Properties, Ltd. v. Superior Court (2005) 35 Cal.4th 54, 60; D. I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 729.) The party claiming the privilege has the burden of establishing the preliminary facts necessary to support its exercise, i.e., a communication made in the course of an attorney-client relationship. (D. I. Chadbourne, Inc., at p. 729; Wellpoint Health Networks, Inc. v. Superior Court (1997) 59 Cal.App.4th 110, 123.) Once that party establishes facts necessary to support a prima facie claim of privilege, the communication is presumed to have been made in confidence and the opponent of the claim of privilege has the burden of proof to establish the communication was not confidential or that the privilege does not for other reasons apply. (Evid. Code, § 917, subd. (a); Wellpoint Health Networks, Inc., at pp. 123-124.)

That Costco engaged Hensley to provide it with legal advice and that the opinion letter was a communication between Costco's attorney (Hensley) and Costco are undisputed. The letter was "confidential," defined as "information transmitted between a client and his or her lawyer in the course of [the attorney-client] relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted...." (Evid. Code, ยง 952.) Indeed, the referee heavily redacted the letter because she believed it was a confidential communication between attorney and client. That Hensley's opinion letter may not have been prepared in anticipation of litigation is of no consequence; the privilege attaches to any legal advice given in the course of an attorney-client relationship. (Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 371; Zurich American Ins. Co. v. Superior Court, supra, 155 ...

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