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The Attorney-Client The Attorney-Client Privilege After Privilege After

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The Attorney-Client The Attorney-Client Privilege After Privilege After

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A Hallmark of Anglo-American Jurisprudence

“The privilege ‘has been a hallmark of Anglo-American jurisprudence for almost 400 years.’ 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.’”

Costco Wholesale Corp. v. Superior Court, 47 Cal. 4th 725, 732 (2009) citing Mitchell v. Superior Court, 37 Cal. 3d

591, 599 (1984).

The Attorney-Client Privilege

• Cal. Evid. Code § 954– The client, whether or not a party, has a privilege to refuse to

disclose, and to prevent another from disclosing, a confidential communication between client and lawyer

• Fundamental Purpose: – It safeguards the confidential relationship between clients

and attorneys to promote full and open discussion of the facts and tactics surrounding legal matters

• Mitchell, 37 Cal. 3d at 597.

“Confidential Communications”

• Cal. Evid. Code § 952– Information transmitted between a client and lawyer in the

course of that relationship and in confidence by a means which discloses the information to no third parties is confidential

• Corporate Employees– Confidential communications between corporate employees

regarding legal advice and strategy are privileged, as long as the employees involved are persons to whom disclosure is reasonably necessary to further the purpose of the legal representation

– Includes internal litigation plans and strategy reflecting legal advice from counsel even when not directly communicated by counsel to the employee

• Zurich American Ins. Co. v. Superior Court, 155 Cal. App. 4th 1485, 1495 (Ct. App. 2007).

More on “Confidential Communications” and Corporate Employees

• Not all corporate employee communications with in-house attorneys are privileged

• Attorney’s Client is the Corporation– The in-house attorney’s client is the corporation– For the communication to be privileged, it must be within

the scope of the employee’s responsibility• D.I. Chadbourne Inc. v. Superior Court, 60 Cal. 2d 723, 736

(1968).

• Examples Where Privilege May Be Waived– Meetings where legal advice is provided and employees

non-essential to a particular matter are present

Dominant Purpose Tests• Dominant Purpose of the Communication (pre-

Costco)– A communication is privileged only if the dominant

purpose of the communication is to further the objectives of the attorney-client relationship

• 2,202 Ranch LLC v. Superior Court, 113 Cal. App. 4th 1377, 1390 (2003).

• Dominant Purpose (when more than one purpose)– When the corporate employer has more than one purpose

in directing an employee to make a report or statement, the dominant purpose will control, unless the secondary use is such that confidentiality has been waived

• D.I. Chadbourne, Inc. v. Superior Court, 60 Cal. 2d 723, 737 (1964).

Costco v. Superior Court

• Background Facts– Costco retained outside counsel to provide legal

advice regarding a wage and hour law issue concerning certain Costco warehouse managers

– Outside counsel (Kelly Hensley) produced a 22-page opinion letter to Costco

– Several years later, Costco employees filed a class action against Costco claiming Costco misclassified certain managers as exempt and sought to compel discovery of the Hensley opinion letter

– Costco objected on the grounds of attorney-client and work product privileges. Plaintiffs argued that the letter contained unprivileged matter and that Costco had waived the privilege

Costco v. Superior Court

• Trial Court’s Ruling– Trial court ordered a discovery referee to

conduct an in camera review of the opinion letter. Discovery referee determined that although much of the letter constituted attorney-client communications, the portions involving factual information were not protected by the privilege

– Trial court adopted the findings of the referee and ordered Costco to produce the redacted version of the letter

Costco v. Superior Court

Principal Holding:

“The attorney-client privilege attaches to a confidential communication between the attorney and the client and bars discovery of the communication irrespective of whether it includes unprivileged material.”

Costco, 47 Cal. 4th at 734.

Cal. Supreme Ct.: What part of “absolutely privileged” don’t you understand?

Cal. Supreme Court found error in three respects:

1. court’s attempt to draw a distinction between privileged legal advice and non-privileged factual material;

2. ordering in camera review of the documents to determine privilege;

3. finding that the letter’s partial disclosure would not irreparably harm Costco.

Costco Dissected: Dominant Purpose of the Relationship vs. Dominant Purpose of the Communication

• The Key is the Dominant Purpose of the Relationship, Not the Dominant Purpose of the Communication– The attorney-client privilege protects the

entire communication between outside counsel and in-house counsel

– The fact that the information is transmitted from attorney to client in the course of the attorney-client relationship triggers the protection

Costco Dissected: Factual Material

• The privilege exists even if the communication only contains information that is readily available to the public– “[W]hen the communication is a confidential

one between attorney and client, the entire communication, including its recitation or summary of factual material, is privileged.” Costco, 47 Cal. 4th at 736.

Costco Dissected: In Camera Review

• A trial court may not order in camera review of an attorney-client communication to determine whether the privilege exists

• The court may compel disclosure of some information to support the privilege, but it should be limited to information to determine whether the attorney-client privilege existed in the first place (not to determine whether the communication itself is privileged)

Developments After Costco

• Umpqua Bank v. First Am. Ins. Co., 2011 U.S. Dist. LEXIS 34088 (E.D. Cal. 2011)– Addresses a complex factual situation

where a lawyer’s role providing a legal opinion is highly intermingled with the claims adjustment advice he also provides

– Here, the court applies Costco and further clarifies the relevance of the distinction between business and legal dealings

Developments After Costco

• Umpqua Bank cont’d– Surmising from Costco, the court says, “. . .

this intermingling of roles does not relieve the requirement that [the court] make a determination as to which function predominated, even where the facts present a close call on the question.”

• 2011 U.S. Dist. LEXIS 34088 at *10

Developments After Costco

• Umpqua Bank cont’d– To determine which function predominates,

the court had to identify the dominant purpose of the relationship

– In this very muddled factual situation, the court found the dominant purpose to be an attorney-client relationship, and determined that the communications in question between the company and lawyer were privileged

Developments After Costco

• Umpqua Bank cont’d– Implications

• The court’s decision and analysis show that while Costco made the particular factual v. legal distinction irrelevant to any one particular communication, the difference is still relevant, and determining the line sometimes difficult, when evaluating the relationship of the parties

• In finding an attorney-client relationship and allowing the privilege in a very difficult factual situation, the decision may indicate an inclination by courts to find attorney-client relationships where possible

Costco: A New Interpretation of the Privilege?

• Is the Court saying that everything in-house attorneys say is necessarily an attorney-client communication, even though they often give business advice?

Considerations as a Result of Costco

• Should companies withhold more?

• Are we moving toward a world in which non-legal communications can be shielded by running them through lawyers?

Costco Applied

• Pre-Costco Review Strategy:– determine if the communication was made by an

attorney to an employee– analyze substance of document to determine if

dominant purpose of communication between attorney and employee was to provide legal advice

– if dominant purpose was legal advice, then privileged

– redact statements not reflecting legal advice– if dominant purpose was other than legal advice

(business advice), then not privileged

Costco Applied cont.

• Post-Costco Review Strategy:– Substance of relationship:

• Is the communication between an attorney and an employee?

• Is an attorney included on the email or cc’d on the email?• If yes, to either privileged

– Does the communication contain legal advice?

• If yes privileged– Is a third party included on the communication between the

attorney and employee, or on a communication that contains legal advice?

• If yes was the third party necessary to the communication?

• If yes privileged

Examples: How to Determine Privilege

Clearly Privileged• Email: from attorney to

employee for the purpose of communicating legal advice

• Email: from employee to attorney seeking legal advice

• Email: from employee to employee communicating legal advice received from attorney

Privileged After Costco• Email: from employee to

employee with attorney cc’d communicating business matters?

• Email: from employee to employee with attorney cc’d communicating legal advice

Protecting the Privilege

• Policies re Communications with In-house attorneys– Limited to matters within employee’s role as

directed or set out by the company– Limited to matters seeking legal advice or

business advice within attorney’s capacity

E-Discovery and Attorney-Client Privilege

• Challenges:– Reviewing large amounts of ESI

• Assessing privilege

– Creation of privilege log(s)• Dealing with amount of privileged documents• Addressing “Parent and Child” emails and documents• Integrating basis of privilege into privilege log

– Addressing challenges to privilege log(s)• Accessibility and ease of finding related documents in

data

– Inadvertent Production• Addressing clawback of inadvertently produced privileged

documents• Dealing with re-review of documents for privilege

E-Discovery and Attorney-Client Privilege

• Solutions– Privilege Log Software

• Create privilege logs from data management database by integrating reviewers’ designation of privileged documents and reasoning

• Data exported, then sent to vendor; vendor pulled out all email strings into parent and child; privileged documents and emails in privilege log with all relevant information

– Clawback Rule• Under Cal. Civ. Proc. Code § 2031.285, inadvertent

disclosure does not constitute waiver• Clawback agreements, entered before discovery, in

which the parties agree to return inadvertently produced material without waiver can minimize costs and delays of privilege review

The In-House Perspective

• Issues for global companies

• Issues for regulated companies

• Different approaches for different forums

• Policies to maximize protection of the privilege

Thank You!

Meryl Macklin, Partner

meryl.macklin@hro.com

(415) 268-1981

Steve Perfrement, Partner

steven.perfrement@hro.com

(303) 866-0370

Michael Johnson, General Attorney

AT&T Services, Inc.

mj8161@att.com – (925) 543-1546