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Seahaus La Jolla Owners Association v. Superior Court (La Jolla View Ltd., LLC)

California Court of Appeals, Fourth District, First Division

March 12, 2014

THE SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent LA JOLLA VIEW LTD., LLC et al., Real Parties in Interest.

Petition for writ of mandate after superior court (Hon. John S. Meyer) granted motion to compel discovery responses over Petitioner's assertion of attorney-client privilege. San Diego County Super. Ct. No. 37-2009-00095253-CU- CD-CTL; No. 37-2010-00092634-CU-IC-CTL.

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Epsten Grinnell & Howell, Anne L. Rauch; Rockwood & Noziska, Brant Noziska, Neal Rockwood; Law Offices of William A. Bramley and William A. Bramley for Petitioner.

Simpson Delmore & Greene, Paul J. Delmore, Elizabeth A. Donovan and Brook T. Barnes for Real Parties in Interest CLB Partners Ltd. and La Jolla View Ltd., LLC.

Gordon & Rees, Sandy M. Kaplan, R. Scott Sokol and Matthew G. Kleiner for Real Parties in Interest Webcor Development, Inc., Webcor Builders, Inc. and Webcor Construction, L.P.

Bryan Cave, Robert E. Boone III, Edward M. Rosenfeld, Tony Tootell and David Harford for Real Parties in Interest Bank of America Corporation, Bank of America, N.A. and Countrywide Home Loans, Inc.



Petitioner Seahaus La Jolla Homeowners Association (Association) is the plaintiff in a construction defect action alleging water and other damage to the common areas of a common interest development. The Association sued the developers and builders of the complex, La Jolla View Ltd., LLC et al. and Webcor Construction L.P. (Defendants), who, among others, are the real parties in interest in this mandamus proceeding. The Association contends the trial court erred and abused its discretion in overruling the Association's claim of attorney-client privilege in this discovery dispute over Defendants' efforts to depose individual homeowners regarding disclosures made at informational meetings about the litigation.

The record shows that counsel for the Association's board of directors (the Board) gave notice to the individual homeowners in June 2009 that the Board was pursuing mediation but was also contemplating filing construction defect

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litigation. (Former Civ. Code, former § 1368.5, now §6150.)[1] Such litigation was filed in July of 2009, and the Board and its counsel subsequently conducted meetings with many individual homeowners of the 140 units, to apprise them of the status and goals of the litigation. Pursuant to the provisions of the governing documents, at one such litigation update meeting, the Board sought and obtained majority approval by the homeowners for pursuing the action. (Civ. Code, § 6150, subd. (b); Association's Declaration of Covenants, Conditions and Restrictions (CCRs), § 4.4.11, "Members' Approval of Certain Actions.")

By the time of the later litigation update meetings, a subgroup of individual homeowners had filed its own companion action in which they seek damages for construction defects in their private individual units, and their action was coordinated for discovery purposes with the Association's action. (Sarnecky v. La Jolla View Ltd., LLC (Super. Ct. San Diego County, 2010, No. 37-2010-00092634-CU-IC-CTL)) (Sarnecky action).)[2]

Defendants' contested discovery requests were made during depositions of many individual homeowners, and seek to inquire into the content and disclosures made at those informational litigation update meetings, which were conducted by the Association's counsel. The Association objected, invoking the attorney-client privilege under Evidence Code[3] section 952 and the "common interest" doctrine. (See OXY Resources California LLC v. Superior Court (2004) 115 Cal.App.4th 874, 887-888 [9 Cal.Rptr.3d 621] (OXY Resources) [parties who possess common legal interests may share privileged information without losing the protection afforded by the privilege].) However, several rulings by the trial court have declined to allow such a privilege to be asserted by the Association, or have concluded any privilege was waived, regarding the communications received at the meetings by

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individual homeowners who are not the actual clients of the Association's retained counsel. This petition ensued.

"Confidential communications" between client and lawyer are defined in section 952 as meaning "information transmitted between a client and his or her lawyer in the course of that 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, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship." (Italics & underscoring added.)

We evaluate this discovery dispute in the context of the usual first principles, that parties may obtain discovery regarding any unprivileged matter that is relevant to the subject of the pending action, or motions, but subject to the rule that "the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence." (Code Civ. Proc., § 2017.010, italics added.) Defendants' claim to entitlement to information about the litigation update meetings is apparently based upon the claim of some of the individual plaintiffs to stigma damages for their units (apparently in the Sarnecky action). Defendants argue that in the Association's common area action, they should be able to inquire into the beliefs of the individual homeowner plaintiffs about damages and the source of their beliefs (such as any perceptions gained from information given to them by the Association's attorneys at the Board's litigation update meetings).

To the extent this record reveals anything about the purpose of the requested discovery, it shows that counsel for Defendants is seeking to develop information about the litigation strategy of the Association's counsel, including the legal opinions formed and the advice given by the lawyers in the course of that relationship, and such disclosures would not likely lead to the discovery of admissible evidence. (§ 952; Code Civ. Proc., § 2017.010; Mitchell v. Superior Court (1984) 37 Cal.3d 591, 609-610 [208 Cal.Rptr. 886, 691 P.2d 642] (Mitchell) [public policy concerns outlined against unwarranted invasions of privilege].)

In the Act governing common interest developments, the Legislature placed certain obligations on homeowners' association governing boards to communicate with individual owners about proposed construction defect litigation by the Association regarding the common areas. (Civ. Code, § 6150, subd. (a).) The Association may sue developers over common area defects, and

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also over alleged damage to the separate interests that the Association must maintain or repair, or damage to the separate interests that is integrally related to damage to the common areas. (Ibid.; Civ. Code, § 5980.) By the same token, individual owners have economic interests in the value of not only their own individual units, but also in the state of the development as a whole. (Ostayan v. Nordhoff Townhomes Homeowners Assn., Inc. (2003) 110 Cal.App.4th 120, 126-127 [1 Cal.Rptr.3d 528] (Ostayan).)

As we will show, the challenged orders in the Association's action represent an overly technical definition of the attorney-client privilege, and do not account for the protection of client confidentiality as it operates through the common interest doctrine, in this factual and legal context surrounding common interest developments. We grant relief on the petition to allow the attorney-client privilege to be asserted under these circumstances.


A. Nature of Meetings Held by Board for Individual Homeowners; Legal Representation

The Association's Board hired the Epsten Grinnell & Howell law firm to represent it in pursuing mediation with the developer and general contractor of the development. On June 23, 2009, the Association's counsel sent a letter to all homeowners notifying them that mediation was pending, no lawsuit had been filed, and a preliminary list of defects was enclosed, reflecting that the Association was currently investigating the nature, extent and severity of the defects at the site. The letter stated that if an owner was selling or refinancing a unit, "you may be required to provide this document to escrow, buyer, or a lending institution."

The next letter from the Association's attorneys was dated August 17, 2009, and provided homeowners with an update regarding the status of the construction defect claims involving the common areas of the development. This letter notified homeowners that (1) the Association had just filed its lawsuit on July 31, 2009, due to limitations concerns and bankruptcy of one defendant, and (2) the homeowners might be required to disclose that filing in connection with any pending sale or refinance of a unit. Mediation was continuing, but the legal action filing had been deemed to be essential to preserve the claims. Counsel stated that members of the firm would be present at the Association's annual meeting on September 16, 2009, to answer questions and discuss the Association's legal options and the status of the investigation and mediation efforts.

On January 13, 2010, the Board and its mediation and litigation committee sent out a notice of an informational meeting to all homeowners, at which

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counsel for the Association would be present to provide owners with information about the status of the claims against the developers and builders of the complex. The meeting was scheduled for January 26, 2010 for presentations by the attorneys and some of the ...

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