Reed Smith Client Alerts

In a fresh vote of respect for the attorney-client privilege, the California Supreme Court recently affirmed the importance of the attorney-client relationship and the sanctity of attorney-client communications. "[T]he primary harm in the discovery of privileged material is the disruption of that relationship, not the risk that parties seeking discovery may obtain information to which they are not entitled." Costco Wholesale Corp. v. The Superior Court of Los Angeles County, No. S163335, slip op. at 17 (Cal. Sup. Ct. filed November 30, 2009) (internal citations omitted). The decision is good news for corporate counsel who routinely rely on the confidentiality of communications with outside counsel.

In Costco Wholesale Corp., Costco hired an outside attorney and wage-and-hour law expert to advise Costco whether certain managers were exempt from California's wage and overtime laws. The attorney interviewed two Costco managers and performed her own factual investigation before sending Costco a 22-page opinion letter regarding its legal obligations. While not prepared in anticipation of any litigation, the communication provided legal advice that was intended to be confidential. When Costco managers later brought suit against Costco, plaintiffs sought discovery of the letter. The discovery referee reviewed the letter in camera and redacted certain parts of it, but left factual information about various employees' job responsibilities, and concluded that the redacted document should be produced to the plaintiff. The district court agreed.

The California Supreme Court held first that the attorney-client privilege attached to the opinion letter in its entirety, irrespective of its content. The communication itself, and the fact of its confidential transmission, was privileged regardless of whether the content itself was otherwise discoverable. Relying on California Evidence Code section 915, the court rejected the trial court's requirement that the letter be produced in camera to determine its privileged nature. Section 915 expressly prohibits mandatory disclosure of attorney-client communications in order to rule on a claim of privilege. The court also concluded that a party appealing a discovery order on the grounds of attorney-client privilege need not prove that its case would be harmed by the disclosure of the evidence. Although the parties had settled this matter before this opinion was issued, the court exercised its discretion to publish this opinion since it raises issues of continuing public importance.

Costco confirms the importance of the attorney-client relationship and the privileged nature of attorney-client communications. It is the transmission of confidential legal advice between attorney and client that renders the communication protected, even if the underlying information itself is discoverable by other means. With this opinion, clients can be confident that, absent waiver, their communications with counsel will remain confidential even if the underlying information is discoverable through other means. And, while a party can be required to prove that the relationship at issue in the disputed communication was an attorney-client relationship, it cannot be compelled to make an in camera disclosure as a prerequisite to a successful claim of privilege.