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Costco Wholesale Corp. v. Superior Court

Supreme Court of California

November 30, 2009, Filed

S163335

Opinion

 [**739]  [***761]   WERDEGAR,  [****2] J.—In this case we consider whether the trial court erred by directing a referee to conduct an in  [**740]  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  [***762]  to the attorney-client privilege in order to rule on a claim of privilege. (Evid. Code, § 915, subd. (a).)

BACKGROUND

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. 3 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  [****3] 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,  [*731]  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  [****4] 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  [****5] 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.

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47 Cal. 4th 725 *; 219 P.3d 736 **; 101 Cal. Rptr. 3d 758 ***; 2009 Cal. LEXIS 12375 ****

COSTCO WHOLESALE CORPORATION, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; GREG RANDALL et al., Real Parties in Interest.

Subsequent History: Reported at Costco Wholesale Corporation v. S.C. (Randall), 2009 Cal. LEXIS 12393 (Cal., Nov. 30, 2009)

Prior History:  [****1] Superior Court of Los Angeles County, No. BC29636, Emilie H. Elias, Judge. Court of Appeal, Second Appellate District, Division Three, No. B197692.

Costco Wholesale Corp. v. Superior Court, 161 Cal. App. 4th 488, 74 Cal. Rptr. 3d 345, 2008 Cal. App. LEXIS 421 (Cal. App. 2d Dist., 2008)

CORE TERMS

attorney-client, privileged, communications, discovery, in camera, disclosure, opinion letter, trial court, confidential, legal advice, confidential communication, claim of privilege, dominant purpose, redacted, disclose information, warehouse, disclosure requirements, privileged information, transmission, unprivileged, documents, patient, advice, cases, information transmitted, information claimed, trial court's order, attaches, disclose, ordering

Evidence, Privileges, Attorney-Client Privilege, General Overview, Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Discovery, Misconduct During Discovery, Motions to Compel, Substantial Evidence, Sufficiency of Evidence, Burdens of Proof, Burden Shifting, Scope, Privileged Communications, Attorney-Client Privilege, Writs, Common Law Writs, Mandamus