City of Petaluma v. Super. Ct.

Filed 6/8/16; pub. order 6/30/16 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CITY OF PETALUMA,
Petitioner,
v.
THE SUPERIOR COURT OF SONOMA A145437
COUNTY,
(Sonoma County
Respondent; Super. Ct. No. SCV 256309)
ANDREA WATERS,
Real Party in Interest.
This writ proceeding requires us to resolve two questions related to whether an
employer’s prelitigation investigation of an employee’s harassment and discrimination
claims is protected from disclosure in discovery. As an initial matter, we consider
whether the employer’s prelitigation factual investigation is protected by the attorney-
client privilege or work product doctrine when the investigation is undertaken by outside
counsel who is specifically directed not to provide legal advice as to which course of
action to take. If we conclude the investigation is privileged, we must next consider
whether the employer’s assertion of an “avoidable consequences” defense waives any
applicable claim of privilege when the investigation was initiated after the employee had
already left his or her job with the employer.
The trial court ruled in favor of the former employee on the privilege issue,
concluding that outside counsel was acting as a fact finder and not an attorney who was
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providing legal advice. The court also concluded the employer waived any privilege that
might be claimed by asserting an avoidable consequences defense and thereby placing the
investigation at issue.
We conclude the trial court erred. The dominant purpose of outside counsel’s
factual investigation was to provide legal services to the employer in anticipation of
litigation. Outside counsel was not required to give legal advice as to what course of
action to pursue in order for the attorney-client privilege to apply. Further, the privilege
was not waived by the employer’s assertion of an avoidable consequences defense under
the circumstances presented here.
FACTUAL AND PROCEDURAL HISTORY
Andrea Waters began working as a firefighter and paramedic for the City of
Petaluma (City) in 2008. She was the first and only woman to hold that position. She
claims she was immediately subjected to harassment and discrimination based upon her
sex. According to Waters, she was subjected to retaliation when she complained. For its
part, the City maintains that its records show that Waters never complained to her
supervisors, to City supervisors, or to anyone in the City’s human resources department
about harassment or discrimination.
In February 2014, Waters went on leave from her job with the City. In May of
that same year, the City received a notice of charge of discrimination from the U.S. Equal
Employment Opportunity Commission (EEOC) indicating that Waters had filed a charge
with the EEOC alleging sexual harassment and retaliation pertaining to the terms and
conditions of her employment and training. According to the City, the EEOC notice was
the first indication it had that Waters felt she had been the subject of discrimination and
harassment at work. Just days after the City received the EEOC notice, and while Waters
was still on leave from her job, she voluntarily resigned her position as a City firefighter
and paramedic.
The City has a policy and practice of investigating every claim of harassment or
retaliation in the workplace. Depending upon the nature of the claims, the investigation
may be conducted by City staff or an outside investigator.
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As a consequence of the fact that Waters had resigned shortly after filing her
EEOC charge, City Attorney Eric Danly (City Attorney) concluded that Waters was not
seeking corrective action but was instead exhausting her administrative remedies before
filing suit against the City. On June 11, 2014, the City Attorney retained outside counsel,
the law offices of Amy Oppenheimer (Oppenheimer), to investigate Waters’s EEOC
charge and to assist him in preparing to defend the City in the anticipated lawsuit. The
City Attorney’s office could have conducted the investigation itself but chose to retain
Oppenheimer to benefit from her legal expertise and experience of over 30 years in
employment law. The City Attorney wanted to ensure that the investigative report as
well as related notes and analysis would be subject to the attorney-client privilege and
work product doctrine just as if the investigation had been conducted by the City
Attorney’s office.
The retention agreement between the City and Oppenheimer specified that
Oppenheimer was retained to do an impartial investigation of an EEOC complaint filed
by Waters. As set forth in the agreement, Oppenheimer was required to “interview
witnesses, collect and review pertinent information, and report to you on that
information.” Oppenheimer agreed to “tell [the City] what we believe happened, and the
basis for that conclusion.” Oppenheimer promised to arrive at “findings based on an
impartial and professional evaluation of the evidence.” The agreement stated that it
created “an attorney/client relationship” between the City and Oppenheimer and further
provided as follows: “As attorneys, we will use our employment law and investigation
expertise to assist you in determining the issues to be investigated and conduct impartial
fact-finding.” The agreement further specified that the investigation would be subject to
the attorney-client privilege until the City waived the privilege or a court determined that
some or all of the investigation was not subject to the privilege.
Although the retention agreement anticipated that Oppenheimer would offer a
professional evaluation of the evidence based upon her experience in employment law,
the agreement stopped short of asking Oppenheimer to advise the City on what to do in
response to Waters’s EEOC complaint. Specifically, the agreement provided: “It is
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understood that in this engagement we will not render legal advice as to what action to
take as a result of the findings of the investigation.” As set forth in the agreement, the
City Attorney was “solely responsible for providing the City legal advice relating to this
matter,” including “the legal implications and actions the City should take based on the
results of the investigations . . . .”
Oppenheimer provided a written report to the City as required by the terms of her
retention. She provided the report to the City only and not to the City’s fire department
or any member of its staff. Every page of her report contains an indication that it is
confidential and attorney-client privileged. Oppenheimer claims she was zealous in
preserving the report’s confidential status and in transmitting the report to the City in
confidence. According to the City Attorney, all communications with Oppenheimer and
work product submitted by her have been maintained in confidence and not disclosed to
anyone outside the attorney-client relationship.
Waters filed suit against the City in November 2014. She alleged causes of action
under the Fair Employment and Housing Act (Gov. Code, § 12900 et seq.) (FEHA) for
hostile environment harassment, discrimination based upon sex, retaliation in violation of
FEHA, and failure to prevent harassment, discrimination, and retaliation from occurring.
In its answer to the complaint, the City generally denied the allegations of the
complaint and asserted various affirmative defenses, including alleging in its eighteenth
affirmative defense that it exercised reasonable care to prevent or correct instances of
unlawful harassment or discrimination but that Waters had “unreasonably failed to take
advantage of any preventative or corrective opportunities or to otherwise avoid harm.”
The City further alleged in its twenty-first affirmative defense that any claims or damages
were barred in whole or in part by Waters’s “failure to take reasonable and necessary
steps to avoid the harms and/or consequences [she] allegedly suffered.” Taken together,
these two affirmative defenses make up the “avoidable consequences doctrine.”
In discovery requests served on the City, Waters sought documents and testimony
relating to the City’s investigation of her complaint, including the investigative report
prepared by Oppenheimer. The City objected to every request seeking production of
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Oppenheimer’s report and other materials bearing on the investigation on the ground they
were protected by the attorney-client privilege or work product doctrine.
Waters moved to compel production of documents and testimony relating to the
investigation of her EEOC complaint. She claimed the investigation was not privileged
and, that even if it was privileged, the City had waived any applicable privileges by
placing the investigation at issue.
The trial court granted the motion to compel. The court concluded that the
documents and information sought by Waters are not subject to either the attorney-client
privilege or work product protection. It reasoned that Oppenheimer’s investigation and
report cannot be construed to constitute attorney-client communications because the
terms of Oppenheimer’s engagement specified that she would not render legal advice.
The court observed that, even if Oppenheimer had offered legal advice, the privilege
would extend only to communications containing legal advice and not to the factual
investigation. The court also concluded that any applicable privilege had been waived
because the City put the investigation at issue by asserting an avoidable consequences
defense. It did not suggest Waters had failed to take advantage of preventative or
corrective opportunities that resulted from the investigation, which was initiated only
after Waters left her job. Instead, the court explained that the investigation was the “best
evidence” of what the City “would have done earlier” if Waters had pursued her
complaints while still employed.
The City filed a petition for writ of mandate in this court challenging the trial
court’s order. After we denied the petition, the Supreme Court granted a writ of review
and transferred the matter back to this court with directions to issue an order to show
cause why the relief requested by the City should not be granted. We issued an order to
show cause at the Supreme Court’s direction.
DISCUSSION
1. Scope and propriety of writ review
Interlocutory writ review of discovery rulings is ordinarily limited to situations
involving (1) an issue of first impression that is of general importance to the legal
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profession, (2) an order denying discovery that effectively precludes a litigant from
having a fair opportunity to litigate his or her case, or (3) a ruling compelling discovery
that violates a privilege. (OXY Resources California LLC v. Superior Court (2004)
115 Cal. App. 4th 874, 886 (OXY Resources).) Writ review is appropriate here because
the trial court’s order compelling production of documents and testimony violates a
privilege allegedly held by the City. An appeal following a final judgment does not offer
an adequate remedy because there is no way to undo the harm resulting from the
disclosure of privileged materials. (Ibid.)
We apply the abuse of discretion standard in reviewing discovery rulings. (OXY
Resources, supra, 115 Cal.App.4th at p. 887.) A court abuses its discretion when it
applies the wrong legal standard. (Costco Wholesale Corp. v. Superior Court (2009)
47 Cal. 4th 725, 733 (Costco).) “[W]hen the facts asserted in support of and in opposition
to the motion are in conflict, the trial court’s factual findings will be upheld if they are
supported by substantial evidence.” (Ibid.) However, we apply independent review to
the trial court’s conclusions as to the legal significance of the facts. (Cf. Dorel
Industries, Inc. v. Superior Court (2005) 134 Cal. App. 4th 1267, 1273.)
2. Principles governing attorney-client privilege and work product doctrine
The attorney-client privilege, which is set forth in Evidence Code section 954,
confers a privilege on the client “to refuse to disclose, and to prevent another from
disclosing, a confidential communication between client and lawyer . . . .” The
fundamental purpose of the privilege “ ‘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 legal matters.’ ” (Costco, supra, 47 Cal.4th at p. 732.) The
privilege is absolute and precludes disclosure of confidential communications even
though they may be highly relevant to a dispute. (Ibid.)
A party that seeks to protect communications from disclosure based upon the
attorney-client privilege must establish the preliminary facts necessary to support its
exercise—i.e., a communication made in the course of an attorney-client relationship.
(Costco, supra, 47 Cal.4th at p. 733.) “Once that party establishes facts necessary to
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support a prima facie claim of privilege, the communication is presumed to have been
made in confidence and the opponent of the privilege has the burden of proof to establish
the communication was not confidential or that the privilege does not for other reasons
apply.” (Ibid.)
An attorney-client relationship exists when the parties satisfy the definitions of
“lawyer” and “client” as specified in Evidence Code sections 950 and 951, respectively.
For purposes of the attorney-client privilege, “client” is defined in relevant part as “a
person who, directly or through an authorized representative, consults a lawyer for the
purpose of retaining the lawyer or securing legal service or advice from him in his
professional capacity . . . .” (Evid. Code, § 951, italics added.) A “confidential
communication” means “information transmitted between a client and his or her lawyer
in the course of that relationship and in confidence” by confidential means. (Evid. Code,
§ 952.) A confidential communication may include “a legal opinion formed and the
advice given by the lawyer in the course of that relationship.” (Ibid.)
In assessing whether a communication is privileged, the initial focus of the inquiry
is on the “dominant purpose of the relationship” between attorney and client and not on
the purpose served by the individual communication. (Costco, supra, 47 Cal.4th at
pp. 739–740.) If a court determines that communications were made during the course of
an attorney-client relationship, the communications, including any reports of factual
material, would be privileged, even though the factual material might be discoverable by
other means.” (Id. at p. 740.)
The attorney work product doctrine is codified in section 2018.010 et seq. of the
Code of Civil Procedure. The meaning of “client” for purposes of the work product
doctrine is the same as that used for the attorney-client privilege. (Code Civ. Proc.,
§ 2018.010.) The attorney work product doctrine serves the policy goals of “preserv[ing]
the rights of attorneys to . . . investigate not only the favorable but [also] the unfavorable
aspects” of cases and to “[p]revent attorneys from taking undue advantage of their
adversary’s industry and efforts.” (Code Civ. Proc., § 2018.020, subds. (a) & (b).)
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“ ‘The work product rule in California creates for the attorney a qualified privilege
against discovery of general work product and an absolute privilege against disclosure of
writings containing the attorney’s impressions, conclusions, opinions or legal theories.’ ”
(Wellpoint Health Networks, Inc. v. Superior Court (1997) 59 Cal. App. 4th 110, 120
(Wellpoint); Code Civ. Proc., § 2018.030.) An attorney’s work product that is subject to
a qualified privilege is not discoverable unless a court determines that denial of discovery
would unfairly prejudice the party seeking discovery or result in an injustice. (Code Civ.
Proc., § 2018.030, subd. (b).)
The protections of the attorney-client privilege and the work product doctrine may
be waived by disclosure of privileged communications or work product to a party outside
the attorney-client relationship if the disclosure is inconsistent with goals of maintaining
confidentiality or safeguarding the attorney’s work product. (See OXY Resources, supra,
115 Cal.App.4th at pp. 890–891.) Although the attorney-client privilege and work
product doctrine are both subject to waiver, there are important distinctions between the
two. Among other things, the attorney-client privilege applies only to communications
(Evid. Code, § 954) whereas work product protection applies irrespective of whether any
material claimed to be privileged is communicated to the client.
With these principles in mind, we turn to the issues raised by the City’s petition.
3. Treating prelitigation factual investigation as privileged
The City contends the factual investigation is protected by the attorney-client
privilege and the work product doctrine because it retained outside counsel to provide
legal services. In rejecting the City’s claim of privilege, the trial court focused on the fact
that the terms of outside counsel’s retention did not extend to providing legal advice to
the City. Waters takes the position that outside counsel’s services were limited to a role
as a fact finder without any evidence to suggest counsel was retained to provide a legal
service. For the reasons that follow, we agree with the City that it had an attorney-client
relationship with outside counsel even though counsel’s role was limited to a factual
investigation and did not extend to providing legal advice as to which course of action to
take based upon the results of the investigation.
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As an initial matter, Waters claims we are obligated to defer to the lower court’s
factual findings—including its conclusion that there was no attorney-client relationship
between the City and Oppenheimer—unless the factual findings are not supported by
substantial evidence. We do not agree that deference is owed to the trial court’s
conclusions under the circumstances presented here, where the relevant facts are
undisputed. Waters does not dispute the terms of Oppenheimer’s retention or the
circumstances that led the City to retain outside counsel. Instead, she disputes the legal
significance of the facts. Specifically, the legal question of whether an attorney-client
relationship was created turns on one undisputed fact—while Oppenheimer was asked to
investigate the facts underlying Waters’s EEOC complaint, she was not retained to
provide legal advice based upon her findings. This purely legal issue is subject to our
independent review.
We begin by noting that the statute defining a “client” for purposes of the
attorney-client privilege and the work product doctrine refers to a person who retains a
lawyer for securing “legal service or advice” in the attorney’s professional capacity.
(Evid. Code, § 951, italics added; see Montebello Rose Co. v Agricultural Labor
Relations Bd. (1981) 119 Cal. App. 3d 1, 32 [dominant purpose must be to “secure or
render legal service or advice”].) The plain terms of the statute support the conclusion
that an attorney-client relationship may exist when an attorney provides a legal service
without also providing advice. The rendering of legal advice is not required for the
privilege to apply.
As the United States Supreme Court has recognized, “[t]he first step in the
resolution of any legal problem is ascertaining the factual background and sifting through
the facts with an eye to the legally relevant.” (Upjohn Co. v. United States (1981)
449 U.S. 383, 390–391.) It is for this reason that “fact-finding which pertains to legal
advice counts as ‘professional legal services.’ ” (United States v. Rowe (9th Cir. 1996)
96 F.3d 1294, 1297.)
Here, Oppenheimer was retained to provide a legal service because she was hired
to act as an attorney in bringing her legal skills to bear to assist the City in developing a
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response to Waters’s EEOC complaint and the anticipated lawsuit. The retention
agreement not only expressly specified that it created an attorney-client relationship, but
is also provided that Oppenheimer would use her expertise in employment law to arrive
at findings based upon her “professional evaluation of the evidence.” She was not merely
a fact finder whose sole task was to gather information and transmit it to the City, as
Waters suggests. Instead, she was expected to use her legal expertise to identify the
pertinent facts, synthesize the evidence, and come to a conclusion as to what actually
happened. The dominant purpose of Oppenheimer’s representation was to provide
professional legal services to the City Attorney so that he, in turn, could advise the City
on the appropriate course of action.
Our conclusion is consistent with the approach taken by the court in Wellpoint,
supra, 59 Cal. App. 4th 110, a case upon which the trial court relied. In Wellpoint, the
court considered a claim that outside counsel was acting in a nonattorney capacity when
he undertook an investigation of an employee’s discrimination complaints. (Id. at
pp. 121–123.) The court reviewed a number of cases in which courts had determined that
the attorney-client privilege did not apply because the dominant purpose of the attorney’s
relationship with the client was not to provide legal services. (Id. at pp. 121–122.) In
one such case, the attorney acted as a labor negotiator. In another, the attorney acted as
the client’s business agent. (Ibid.) The Wellpoint court concluded these cases did not
support a “blanket rule excluding attorney investigations of employer discrimination from
attorney-client and work product protection . . . .” (Id. at p. 122.)
The court in Wellpoint went on to conclude that the employer had established
“facts necessary to support a prima facie claim of privilege, i.e., communications in the
course of the lawyer-client relationship” by virtue of the fact that it was undisputed the
attorney was hired by the employer “to conduct an investigation of the charges of
discrimination.” (Wellpoint, supra, 59 Cal.App.4th at p. 123.) According to the court,
the employee had failed to meet his burden to oppose the claim of privilege “by simply
asserting . . . that [the attorney] was engaged in a fact-finding mission.” (Id. at p. 124.)
The court noted that it might have been urged that the attorney was engaged in “routine
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fact-finding on behalf of the company’s personnel department rather than legal work,”
but that no such evidence had been presented on this point. (Ibid.)
Here, just as in Wellpoint, the City established a prima facie claim of privilege by
presenting undisputed evidence that Oppenheimer was retained to use her legal expertise
to conduct a factual investigation that would, in turn, be the basis for the City Attorney to
provide legal advice to the city. Waters did not present any relevant evidence to
contradict the claim of privilege.
Our conclusion that Oppenheimer’s investigation constituted the provision of legal
services to a client supports not only the application of the attorney-client privilege, but
also supports the application of the work product doctrine to her investigative efforts.
(Cf. Code Civ. Proc., § 2018.010 [“client” means the same thing for both attorney-client
privilege and work product doctrine].)
4. Waiver by virtue of asserting avoidable consequences defense
The trial court ruled the City had waived any claim of privilege that might
otherwise protect outside counsel’s factual investigation by asserting an avoidable
consequences defense. As explained below, we conclude that an employer does not
waive any applicable privileges associated with an investigation conducted after the
employee leaves his or her employment when the employer asserts an avoidable
consequences defense.
Our Supreme Court has described the avoidable consequences doctrine as follows:
“[I]n a FEHA action against an employer for hostile environment sexual harassment by a
supervisor, an employer may plead and prove a defense based on the avoidable
consequences doctrine. In this particular context, the defense has three elements: (1) the
employer took reasonable steps to prevent and correct workplace sexual harassment;
(2) the employee unreasonably failed to use the preventive and corrective measures that
the employer provided; and (3) reasonable use of the employer’s procedures would have
prevented at least some of the harm that the employee suffered.” (State Dept. of Health
Services v. Superior Court (2003) 31 Cal. 4th 1026, 1044.) The defense allows an
employer to escape liability for those damages “the employee more likely than not could
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have prevented with reasonable effort and without undue risk, expense, or humiliation, by
taking advantage of the employer’s internal complaint procedures appropriately designed
to prevent and eliminate sexual harassment.” (Ibid.)
In Wellpoint, supra, 59 Cal.App.4th at page 125, the court considered whether an
employer waived any attorney-client or work product protections associated with a
prelitigation investigation by raising the investigation as a defense to harassment claims.
The court agreed with the proposition that “the employer’s injection into the lawsuit of an
issue concerning the adequacy of the investigation where the investigation was
undertaken by an attorney or law firm must result in waiver of the attorney-client
privilege and work product doctrine.” (Id. at p. 128.) “If a defendant employer hopes to
prevail by showing that it investigated an employee’s complaint and took action
appropriate to the findings of the investigation, then it will have put the adequacy of the
investigation directly at issue, and cannot stand on the attorney-client privilege or work
product doctrine to preclude a thorough examination of its adequacy.” (Ibid.)
The avoidable consequence defense focuses upon what the employer and
employee did or did not do while the employee was employed. The assertion of the
avoidable consequences defense may put the adequacy of an investigation into issue if
the person was still employed and able to take advantage of any corrective measures the
employer undertook as a result of the investigation. The investigation may also be relied
upon to show that the employer took reasonable steps to prevent and correct workplace
sexual harassment while the employee was employed. But the assertion of an avoidable
consequences defense does not put a post-employment investigation directly at issue in
the litigation. The employee necessarily could not have taken advantage of any
corrective measures adopted in response to a post-employment investigation. Further, a
post-employment investigation would not itself demonstrate that the employer took
reasonable steps to prevent and correct workplace harassment while the employee was
still employed.
Here, the City does not seek to rely on the post-employment investigation itself as
a defense, nor could it. Accordingly, the City’s assertion of the avoidable consequences
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doctrine does not constitute a waiver of any attorney-client or work product protection
afforded to the post-employment investigation conducted by Oppenheimer.
5. Issues upon remand
Waters urges that, even if we conclude the Oppenheimer report is privileged and
that assertion of the avoidable consequences defense does not waive any applicable
privileges, we should still remand the matter to the trial court to allow it to consider
which of the various materials it ordered released by the City are subject to attorney-
client or work product protection. We agree with Waters that remand is appropriate for
this purpose.
The record provided to this court does not include a privilege log or other
itemization of documents or materials withheld as privileged. Accordingly, we are in no
position to rule upon any particular items relating to the investigation that were withheld
as privileged with the exception of the investigative report itself, which is protected by
the attorney-client privilege and work product doctrine. Waters speculates that there may
be taped interviews and interview notes, among other items related to the investigation.
We leave it to the trial court in the first instance to consider whether any such items must
be produced by the City because they are not protected from disclosure by an applicable
privilege.
DISPOSITION
A peremptory writ of mandate shall issue directing respondent superior court to
vacate its order of May 19, 2015, granting Waters’s motion to compel. The matter is
remanded for further proceedings consistent with this opinion. The City shall recover the
costs incurred in this writ proceeding.
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_________________________
McGuiness, P.J.
We concur:
_________________________
Pollak, J.
_________________________
Jenkins, J.
A145437
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Filed 6/30/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CITY OF PETALUMA, A145437
Petitioner,
(Sonoma County
v. Super. Ct. No. SCV 256309)
THE SUPERIOR COURT OF SONOMA ORDER CERTIFYING OPINION
COUNTY, FOR PUBLICATION
Respondent;
ANDREA WATERS,
Real Party in Interest.
THE COURT:
The opinion in the above-entitled matter filed on June 8, 2016, was not certified
for publication in the Official Reports. For good cause it now appears that the opinion
should be published in the Official Reports and it is so ordered.
Dated: _______________ ___________________________________
McGuiness, P.J.
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City of Petaluma v. The Superior Court of Sonoma County
(A145437)
Trial Court: Sonoma County
Trial Judge: Hon. Elliot Lee Daum
Attorneys: City of Petaluma, Eric W. Danly, City Attorney; Burke, Williams, &
Sorenson, Samantha W. Zutler; Greines, Martin, Stein & Richland,
Timothy T. Coates, Alison M. Turner for Defendant and Petitioner.
Renne Sloan Holtzman Sakai; Nikki Hall, Ivan Delventhal for The
League of California Cities, California State Association of
Counties, California Association of Joint Powers Authorities, and
California Special Districts Association as Amici Curiae on behalf of
Defendant and Petitioner.
Cooper, White & Cooper; Mark L. Tuft, Sarah J. Banola for
Association of Workplace Investigators, Inc. as Amicus Curiae on
behalf of Defendant and Petitioner.
Kerley Schaffer, J. Edward Kerley, Dylan Schaffer; Kochan &
Stephenson, Deborah Kochan, Mathew Stephenson for Plaintiff and
Real Party in Interest.
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