On November 30, 2009, the Supreme Court of California reaffirmed strong, categorical protections for the secrecy of attorney-client communications. The Court not only clarified the broad scope and purpose of the attorney-client privilege, but also strictly interpreted statutory limits on a court’s ability to require disclosure of a communication claimed to be privileged in the course of determining the applicability of the privilege. See Costco Wholesale Corp. v. Superior Court, No. S163335. 

Costco Wholesale Corporation had sought legal advice from a law firm regarding the applicability of California’s wage and overtime laws to certain warehouse managers. One of the firm’s attorneys spoke with two warehouse managers and subsequently provided Costco with a 22-page opinion letter. Several years later, Costco employees filed a class action lawsuit against Costco, claiming that Costco failed to pay overtime wages due under California law, and sought to compel discovery of the opinion letter. The trial court directed a discovery referee to conduct in camera review of the letter to determine whether the letter was protected by the attorney-client privilege or work product doctrine. 

Although the referee determined that much of the letter was protected, she concluded that statements obtained during the attorney’s interviews with warehouse managers were not privileged. As a result, the referee produced “a heavily redacted version of the letter,” disclosing “those portions of text involving ‘factual information about various employees’ job responsibilities,’” which the trial court ordered Costco to produce to the plaintiffs. The Court of Appeal subsequently denied interlocutory relief on the ground that “the unredacted text simply referred to factual matters that would be easily discoverable by other means.” A unanimous Supreme Court of California reversed, holding that the trial court erred in ordering Costco to produce a redacted version of the letter, that the trial court erred in directing in camera review of the letter, and that the Court of Appeal erred in declining to grant relief.

First, the Supreme Court observed that the undisputed facts made out a prima facie claim of privilege—the opinion letter was “a communication made in the course of an attorney-client relationship.” The Court then held that plaintiffs had not satisfied their burden “to establish the communication was not confidential or that the privilege does not for other reasons apply.” The Court dismissed as irrelevant plaintiffs’ argument that the warehouse managers’ statements were not themselves privileged: because the attorney-client privilege protects the fact of transmission of information between attorney and client, “the entire communication, including its recitation or summary of factual material, is privileged.” The Court noted that if the factual material in the 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.” The Court also rejected plaintiffs’ characterization of the attorney’s interviews with warehouse managers as “simple fact gathering,” observing that the attorney “was presented with a question requiring legal analysis and was asked to investigate the facts she needed to render a legal opinion.” 

Second, the Supreme Court observed that the plain language of California Evidence Code section 915 allows, under limited circumstances, a court to order in camera review of information claimed to be protected by the work product doctrine, but does not allow a court to order in camera review of information claimed to be protected by the attorney-client privilege. Moreover, the Court noted that “the attorney-client privilege is a legislative creation, which courts have no power to limit by recognizing implied exceptions.” Therefore, the trial court’s order directing the referee to conduct in camera review was improper. The Court noted, however, that a party claiming the privilege is “free to request an in camera review” and “after the court has determined the privilege is waived or an exception applies generally, the court to protect the claimant’s privacy may conduct or order an in camera review of the communication at issue to determine if some protection is warranted notwithstanding the waiver or exception.” 

Finally, the Supreme Court found ample basis for immediate relief. The Court observed that “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.” As a result, Costco was not “required to demonstrate that its ability to present its case would be prejudiced by the discovery of the opinion letter.” Instead, Costco was entitled to relief “because the trial court’s order threatened the confidential relationship between Costco and its attorney.”

The Costco decision should provide substantial comfort to businesses operating in California that their consultations with attorneys will remain confidential. The unanimous decision of the state’s highest court has made clear that trial courts will not be permitted to nibble around the edges of the attorney-client privilege, and that appellate courts must remedy failures to protect the privilege even if the underlying litigation is not materially affected.

For more information about the topics raised in this Client Alert, please contact Donald Falk or
Rita Lomio.

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