Costco Wholesale Corp. v. Superior Court, S163335 (Cal. Nov. 30, 2009)
In 2000, Costco hired outside counsel to provide legal advice regarding the applicability of certain wage and overtime laws to its warehouse managers. In furtherance of providing such advice, counsel spoke with two managers Costco had made available to her. Thereafter, she provided Costco with a 22-page opinion letter addressing the question at issue. Several years later, plaintiffs in a class action against Costco sought to compel production of the relevant opinion letter arguing that the letter contained unprivileged information and that Costco had placed the contents in issue thereby waiving the privilege.
To resolve the question, the court ordered the letter be reviewed by a discovery referee who subsequently recommended production of the letter with heavy redactions. The referee reasoned that the factual information therein was not privileged and that while interviewing the two managers, the attorney had acted not as an attorney but as a fact finder. The trial court adopted the recommendation and ordered the letter produced. On appeal (and without ruling on the merits of the trial court’s order or its decision to refer the letter to a discovery referee for review), the court affirmed the order reasoning that Costco had failed to establish that the production would cause irreparable harm. The issue was appealed to the Supreme Court of California.
The supreme court held that the attorney-client privilege attached to the opinion letter “in its entirety, irrespective of the letter’s content” and that Evidence Code section 915 prohibited the disclosure of information claimed to be privileged “in order to rule on a the claim of privilege.” The court also held that “contrary to the Court of Appeal’s holding, a party seeking 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.”
Specifically regarding the protection of the entirety of the letter, the court relied on a prior decision in which it explained that “[T]he privilege covers the transmission of documents which are available to the public, and not merely information in the sole possession of the attorney or client. In this regard it is the actual fact of the transmission which merits the protection, since discovery of the transmission of specific public documents might very well reveal the transmitter’s intended strategy.” The court later stated, “because the privilege protects the transmission of information, if the communication is privileged, it does not become unprivileged simply because it contains material that could be discovered by some other means.” In its analysis the court rejected plaintiffs’ attempts to conflate the issue of whether the information contained within the letter was privileged (as opposed to merely factual) with the issue of whether the letter itself was a protected communication with counsel. The court also noted plaintiffs’ failure to dispute the fact that Costco retained counsel to provide legal advice.
Having settled the question of the attorney-client privilege (and having declined to address the applicability of the work product doctrine), the court turned to its second reason for overturning the order: the prohibition against requiring disclosure of information claimed to be privileged in order to rule on privilege. Pursuant to Evidence Code section 915, “the presiding officer may not require disclosure of information claimed to be privileged… in order to rule on the claim of privilege.” Accordingly, the court found that the trial court’s requirement that the letter be disclosed to the referee for review was in error. In so holding, the court engaged in a lengthy discussion of the nuances of this prohibition, including a discussion of the court’s ability to review information related to the communication in lieu of the communication itself in order to make a determination of privilege and a litigant’s option to request an in camera review of its own documents by the court in order to aid the court’s determination of privilege, among other things.
Finally, the court turned to the ruling of the appellate court and its determination that absent a showing of irreparable harm from the production, the trial court would not be reversed. Per the court, such reasoning implied that the harm in an order compelling the disclosure of privileged information was the risk of a party obtaining information to which it is not entitled. Rather, the court reasoned, the “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 the parties seeking discovery may obtain information to which they are not entitled.” [Citations omitted.] Accordingly, the court concluded that “Costco is entitled to relief because the trial court’s order threatened the confidential relationship between Costco and its attorney.” The judgment of the appellate court was therefore reversed, and the case was remanded to the trial court for further proceedings.
A copy of the full opinion is available here.