by Carole J. Buckner A lawyer faced with a court order requiring disclosure of attorney-client communications faces a difficult ethical dilemma. The year’s end brought two important new decisions addressing the attorney-client privilege, both arising from employment-related litigation. Ironically, although Justice Sotomayor observes that most district court rulings on matters involving attorney-client privilege “involve the routine application of settled legal principles,” both decisions disapprove or abrogate prior authority. The California Supreme Court’s decision in Costco Wholesale Corp. v. Sup. Ct., 47 Cal.4th 725 (2009) held that a lawyer’s letter to her client was entirely covered by the attorney-client privilege, and that the Court could not require an in camera disclosure in order to rule on the privilege claim, disapproving two prior cases. The Costco Court also held that the employer was entitled to extraordinary writ relief to avoid disruption to the confidential attorney-client relationship. In contrast, in a decision limiting judicial review of attorney-client privilege disclosure orders, the United States Supreme Court’s decision in Mohawk Indus., Inc. v. Carpenter, __ U.S.__, 130 S.Ct. 599, 175 L.Ed.2d 458 (2009) held that disclosure orders would not qualify for immediate review under the judicially created collateral order doctrine, resolving a Circuit split and abrogating several decisions, including a Ninth Circuit case. The U.S. Supreme Court held that appellate review of a final judgment, combined with other avenues of interlocutory review, adequately protected privileged communications. Entire Communication Privileged In the Costco decision, a lawyer’s letter to her employer client Costco regarding wage and hour issues was requested by plaintiffs in discovery in a subsequent wage and hour class action. The trial court directed a referee to review the letter, redact privileged information, and produce any unprivileged information in the letter. The referee redacted the “privileged” portions of the letter, leaving facts unredacted, and directed that it be produced in discovery. The referee found that portions of the letter concerning factual information regarding various employee’s job descriptions, did not fall within the protection of the attorney-client privilege, because attorney interviews of corporate employee witnesses generally were not protected by the corporation’s attorney-client privilege. The referee further found that, in interviewing Costco managers, the company’s lawyer acted as a “fact finder,” rather than as a lawyer. The trial court concurred, and ordered Costco to produce the redacted letter.
The Court of Appeal denied the writ of mandate, finding that Costco could not show that disclosure of the unredacted parts of the letter would result in irreparable harm, since the unredacted matter referenced only factual information otherwise discoverable.
The California Supreme Court disagreed entirely, holding the whole letter was privileged. Noting that the privilege covers confidential communications between client and lawyer, the Court said: “the privilege attaches to any legal advice given in the course of the attorney-client relationship.” Id. at 733. The privilege attaches to the entire communication, a unanimous court said, “irrespective of whether it includes unprivileged material.” Id. There was no basis, therefore, for the referee’s distinction between the factual and legal information contained in the letter; rather, the Court held, the privilege cloaked the entire letter. Justice George concurred, emphasizing that communications are only privileged if they occur in the course of the attorney-client relationship, and noting that, for example, if a lawyer acted as a client’s agent in a business transaction, communications would not be protected.
Notably the Costco ruling acknowledges the purpose of the attorney-client privilege is to promote a full and frank exchange between lawyer and client, including “discussion of facts and tactics.” Id. at 732. In the California Supreme Court’s estimation in Costco, the possible suppression of relevant evidence is outweighed by the sanctity of the attorney-client relationship, even at the risk of an unjust decision. No Court Ordered in Camera Review Next the Costco Court addressed whether the trial court should have submitted the letter for in camera review. While such in camera review is available to rule on claims involving work product (Cal.Evid.Code §915), the Court observed that “no comparable provision permits in camera disclosure of information alleged to be protected by the attorney-client privilege.” Id. at 736. The Court disapproved two cases the plaintiffs’ cited for the proposition that a court could order in camera review in order to rule on a claim of privilege, while at the same time noting that, although the Court could not order in camera review, a party could request in camera review to assist the Court in making a determination of privacy issues.
Finally, the Costco decision held that the Appellate Court should have granted the prerogative writ in order to avoid “disruption of a confidential relationship,” and that the employer need not show that it would suffer prejudice resulting from the disclosure in order to obtain writ review. Id. at 741. While the Costco decision may increase the likelihood of review of a decision requiring disclosure of arguably privileged information in the state courts, the federal courts will undoubtedly not prove so welcoming after Justice Sotomayor’s opinion in the Mohawk case. Federal Review of Disclosure Orders Narrowed In Mohawk, plaintiffs in a class action suit sought discovery of information concerning a meeting between a corporate employee and corporate counsel, after the employee sent an email to human resources asserting the company was employing undocumented immigrants. Following the email, the employee was interviewed by the employer’s retained counsel, then later terminated. The employee contended the retained company counsel pressured him in the meeting to recant his allegation. The District Court determined that the privilege applied, but that the company had implicitly waived it when, in response to the request for an evidentiary hearing, the company had characterized the employee’s accusation as “fantasy” and asserted the employee’s termination followed his blatant misconduct in attempting to have the company hire an undocumented worker. The District Court stayed the ruling to allow the company to explore avenues of appeal. The Court refused to certify the decision for an interlocutory appeal, so the company petitioned for a writ, and pursued an appeal under the collateral order doctrine.
The Eleventh Circuit denied the writ, and also found no appellate review available under the collateral order doctrine, and the U.S. Supreme Court agreed. Generally, under the final judgment rule, only a final valid judgment on the merits is appealable. The collateral order doctrine is a judicially created exception to the final judgment rule and a so-called “gloss” on 28 U.S.C. §1291, allowing an interim appeal if an order: 1) conclusively determines a disputed question; 2) resolves an important issue separate from the merits of the action; and 3) is effectively unreviewable on appeal from a final judgment. Mohawk, 175 L.Ed.2d at 465. The collateral order doctrine is a judicially-created exception to the final judgment rule, intended, the Court has indicated, to cover a “small class” of collateral orders that are “too important to be denied review.” Id. at 472. Among those orders considered “important” enough to merit this extraordinary review are orders involving immunity from suit and certain constitutional rights.
Three Circuits, including the Ninth Circuit, in the Napster litigation in 2007, had permitted appellate review of an order requiring disclosure of attorney-client privileged information under the collateral order doctrine. In Mohawk, the Supreme Court abrogated those decisions, holding that the third prong of the collateral order doctrine is not satisfied in this context, in that “postjudgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege.” Id. at 468. At oral argument, the Court questioned whether the attorney-client privilege is important enough to join this small class of matters significant enough to merit review under the collateral order doctrine. Proponents of permitting review of disclosure issues under the collateral order doctrine, including the American Bar Association, writing as amicus in the Mohawk case, argued that the attorney-client privilege is central to the administration of justice, and that the legal and practical value of the privilege is destroyed if the privilege is not vindicated prior to trial. Brief of Amici Curiae American Bar Ass’n, at 4, Mohawk (No. 08-678). The Court, however, questioned why the attorney-client privilege was any more important than the trade secret doctrine or other privileges, particularly given the exceptions to the attorney-client privilege and the possibility of waiver.
Like the Costco decision, the Mohawk decision acknowledges the importance of the attorney-client privilege. But, the Mohawk Court concludes that, while significant, protection of lawyer-client communication does not justify the delay in resolution and burden on appellate courts that would result from permitting the interim appellate review of disclosure decisions under the collateral order doctrine. Id. at 478. While the “swamp the courts” concern is bandied about as a rationale for limiting review, inconclusive evidence on the point exists. Carpenter asserted that about 10 to 30 orders in Westlaw per month address the attorney-client privilege, with about one-half ordering disclosure. Transcript of Oral Argument, Mohawk, 2009 U.S. Trans. LEXIS 41, 26 (Oct. 5, 2009) (the “Oral Argument Trans.”). Justice Alito indicated that in his eight years on the Third Circuit under the regime allowing appellate review of disclosure orders under the collateral order doctrine: “it didn’t seem to me the sky was falling.” Id. The opinion suggests this may be because “the practice . . . is relatively new and not yet widely known,” however, the decisions abrogated date back 12 years to the Third Circuit’s 1997 decision in In re Ford Motor Co. According to the brief from the Chamber of Commerce of the United States of America, in 12 years since the Third Circuit permitted review of orders requiring disclosure of attorney-client privilege materials, the Third Circuit issued only six decisions on the topic.
The Court observes in Mohawk that, most of the time, district courts correctly apply the well-settled law in this area, so that most lower court rulings would be affirmed, and the justices found no evidence of district courts “under-enforcing the privilege.” Id. at 468, n.2. Justice Sotomayor further observed that remote appellate considerations would not chill attorney-client communications, and that other avenues remain for review of erroneous district court rulings, including the writ of mandamus, certification for review of an interlocutory appeal, and the appeal of court imposed sanctions including contempt, after a party defies a disclosure order, in a final judgment. These appellate mechanisms would permit some appellate review, while filtering out from review more routine cases. In relying on this distinction, the Court is implicitly finding that only some disclosure orders are significant enough to merit review prior to final judgment.
The observation that lower courts most often correctly apply the attorney-client privilege would provide little comfort to an employer in the position of Costco, faced with an aberrant determination by a referee, affirmed by the trial court. Nor would the writ of mandamus provide assurance of justice, given the likelihood of the denial of the writ, although the Costco decision may remedy that somewhat in California state courts. Nor would most corporate litigators advise clients to defy the order, risk criminal contempt and other sanctions, including the possibility of the lawyer going to jail, in order to position themselves for an appellate review of a disclosure order. Justice Roberts observed at oral argument that a lawyer choosing between imprisonment for contempt and disclosure of a privileged communication is in a very difficult ethical position. Oral Argument Trans., at 33-34. However, Mohawk finds: “these established mechanisms for appellate review . . . provide assurances to clients and counsel about the security of their confidential communications.” Id. at 470.
Although the Mohawk Court rejected the position articulated by the ABA emphasizing the importance of the attorney-client privilege, all is not lost. The Mohawk decision indicates the more appropriate avenue to address the issue is the rule-making process, where empirical data can be examined, and the experience of the bench and bar is brought to bear. Justice Thomas, writing in a concurring opinion, favored the rule-making avenue, and would have concluded the opinion there. Congress authorized the Supreme Court through its rule-making capacity to provide that certain interlocutory orders be treated as final, and the Court has done so, for example, in the class action arena, by amending Federal Rule of Civil Procedure 26 to permit the appeal of an order granting or denying class certification. While the Court was not receptive to expanding the collateral order doctrine to address orders requiring disclosure of attorney-client privilege, it may prove more receptive to a proposed rule revision, depending on the evidence developed through the rule-making process. The statistics referenced by Carpenter’s counsel in oral argument suggest the issue merits further study. Briefing from the Chamber of Commerce in support of Mohawk’s position, as well as Justice Alito’s observation from the bench concerning the Third Circuit’s experience in 12 years of permitting such appeals suggest appellate review would not necessarily swamp the appellate court system. Perhaps the most hopeful conclusion to be drawn from the Third Circuit’s experience is that most orders of disclosure of privileged information probably do accurately apply the law, as Justice Sotomayor suggests, otherwise there would have been a higher number of appeals. That most orders are correct will provide little solace to a company in the position of Costco. Until the data are further studied, and the rules amended, litigators in both state and federal systems faced with an order compelling disclosure of attorney-client privileged information probably will rely on the writ process to obtain review. While Costco may increase the likelihood of writ review in the state system, lawyers undoubtedly will find federal appellate review of attorney-client privilege disclosure orders more limited. ______________________________ The author is a Special Assistant United States Attorney, and Adjunct Professor at Western State University College of Law. She is the Chair of the California State Bar’s Committee on Professionalism and Conduct, and a member of the OCBA’s Professionalism and Ethics Committee. The views expressed do not necessarily reflect those of the Orange County Bar Association, the Orange County Lawyer magazine, or any or all of its writers and contributors. They reflect the views of the author.