Southern Bell Tel. & Tel. Co. v. Deason, s. 81487

• Citation: 632 So.2d 1377
• Decision Date: 10 March 1994
• Docket Number: 81716,Nos. 81487,81926 and 82196,s. 81487
• Parties: 19 Fla. L. Weekly S119, 27 A.L.R.5th 829 SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Petitioner, v. J. Terry DEASON, et al., Respondents.
• Court: United States State Supreme Court of Florida

Page 1377

632 So.2d 1377

19 Fla. L. Weekly S119, 27 A.L.R.5th 829

SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Petitioner, v. J. Terry DEASON, et al., Respondents.

Nos. 81487, 81716, 81926 and 82196.

Supreme Court of Florida.

March 10, 1994.

Marshall M. Criser, Robert J. Winicki, David M. Wells and William W. Deem, Jacksonville, and Harris R. Anthony and J. Phillip Carver, Mahoney, Adams & Criser, P.A., Tallahassee, Robert G. Beatty, Southern Bell Tel. & Tel. Co., Miami, and J. Robert Fitzgerald and Roger M. Flynt, Jr., Vice President and Gen. Counsel, Southern Bell Tel. & Tel. Co., Atlanta, GA, for petitioner.

Robert Vandiver, Gen. Counsel, and Richard D. Bellak, Associate Gen. Counsel, FL Public Service Com'n, Robert A. Butterworth, Atty. Gen., Jason Vail and Michael Twomey, Asst. Attys. Gen., Jack Shreve, Public Counsel, Charles J. Beck, Deputy Public Counsel and Janis Sue Richardson, Associate Public Counsel, Office of Public Counsel, Tallahassee, on behalf of Citizens of State of FL, for respondents.

McDONALD, Justice.

We review the non-final administrative orders of the Public Service Commission (PSC), ¹ which direct Southern Bell Telephone and Telegraph Company (Southern Bell) to disclose certain documents to the PSC. We have jurisdiction pursuant to article V, section 3(b)(2) of the Florida Constitution.

Case History

In February 1991, the Office of Public Counsel petitioned the PSC to investigate allegations that Southern Bell falsified information regarding its compliance with Rules 25-4.070(2) and 25-4.110(2), Fla.Admin.Code, requiring rebates for the untimely repair of telephone service. The PSC, which had already begun to informally investigate similar allegations against Southern Bell, formally initiated an investigation of Southern Bell in May 1991. In January 1993, the PSC consolidated the investigation docket with Southern Bell's pending rate case. ² The basis for the PSC's decision to consolidate was the "belief that to attempt to separate and isolate the issues between rate case and investigation matters would not be efficient and perhaps, not possible." Order No. PSC-93-0390-FOF-TC (March 15, 1993).

In the series of consolidated cases now before us, Public Counsel filed various motions to compel the production of documents from Southern Bell. Each case in these proceedings involves the discovery of a different category of information. Case number 81,487 involves investigative audits and panel recommendations. Case number 81,716 involves the statements of Southern Bell employees regarding their experiences in the customer repair service operation, a statistical analysis performed by a Southern Bell employee on the company's repair and rebate systems, the work notes of Human Resources personnel concerning craft/management disciplinary issues, and deposition testimony by the company's chief auditor regarding the allegedly privileged audits. Case number 82,196 involves the deposition testimony of several upper-level employees of Southern Bell and their information about employee discipline matters. Finally, case number 81,926 involves the National Association of Regulatory Utility Commissioners' request for complete audit access to Southern Bell's affiliated companies. In each case, the PSC ordered Southern Bell to produce the documents. ³ Southern Bell requests this Court to quash the PSC orders compelling production and argues that the documents are protected under the attorney-client privilege and/or the work product doctrine.

The Attorney-Client Privilege

The attorney-client privilege applies to confidential communications made in the rendition of legal services to the client. Sec. 90.502, Fla.Stat. (1991). Section 90.502(1)(b) defines "client" as "any person, public officer, corporation, association, or other organization or entity, either public or private, who consults a lawyer with the purpose of obtaining legal services or who is rendered legal services by a lawyer." (Emphasis added). Clearly, Florida law applies the attorney-client privilege to corporations such as Southern Bell. Sec. 90.502(1)(b); see also, United States v. Louisville & N. R.R., 236 U.S. 318, 35 S.Ct. 363, 59 L.Ed. 598 (1915). What are not so clear, however, are the legal standards which should be used to determine whether the elements of the attorney-client privilege in the corporate context have been satisfied.

In City of Philadelphia v. Westinghouse Elec. Corp., 210 F.Supp. 483 (E.D.Pa.1962), the court adopted the following "control group test" to determine who may communicate as the "client" for purposes of the attorney-client privilege:

[I]f the employee making the communication, of whatever rank he may be, is in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney, or if he is an authorized member of a body or group which has that authority, then, in effect, he is (or personifies) the corporation when he makes his disclosure to the lawyer and the privilege would apply.

Id. at 485. ⁴ Although some courts and commentators have found the control-group test to be easily applicable, ⁵ the test fails to recognize the crucial role middle and lower-level employees play in the corporation's activities. Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). Although upper-echelon management may be responsible for making decisions on behalf of the corporation, the noncontrol-group employees are frequently the ones responsible for implementing those decisions. Thus, an attorney representing the corporation is charged with gathering the facts from employees with information relevant to the corporation's legal problem, regardless of their rank.

In Upjohn, independent accountants informed Upjohn's general counsel that one of the company's foreign subsidiaries bribed foreign officials in order to secure government business. In response to this information, Upjohn's general counsel conducted an internal investigation of the questionable payments and sent questionnaires to the foreign managers requesting information regarding the payments. Upjohn voluntarily submitted a preliminary report to both the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS). The IRS issued a summons demanding production of the questionnaires, memoranda, and notes of the interviews conducted with Upjohn employees. Rejecting the control-group test, the Supreme Court held that the attorney-client privilege protected the employees' communications from disclosure.

In the PSC orders compelling Southern Bell to disclose the documents at issue, the PSC acknowledged Upjohn but did not consider it dispositive. ⁶ The PSC reasoned that Upjohn is factually distinguishable from the instant case because Upjohn's operations were not regulated by rule and statute as Southern Bell is. Thus, the PSC relied on Consolidated Gas Supply Corp., 17 Fed.Energy Reg.Comm'n Rep. (CCH) p 63,048 (Dec. 2, 1981) and In re Notification to Columbia Broadcasting System Concerning Investigation by CBS of Incidents of "Staging" by its Employees of Television News Programs, 45 F.C.C.2d 119 (1973). In Consolidated Gas, the motions judge adopted the "narrow" view of the attorney-client privilege, noting that the regulating agency had a "duty to protect the public interest" and a "continuing obligation" to ensure that the company satisfied the requirements of the Natural Gas Act. ⁷ Similarly, in CBS, the Federal Communications Commission ruled that a licensee's assertion of the attorney-client privilege is not "compatible with a licensee's duty to be forthcoming with information relevant to its operation under the statutory public interest standard." CBS, 45 F.C.C.2d at 123. In the instant case, the PSC depended on Consolidated Gas and CBS to support its premise that the PSC's investigatory and regulatory powers permit it to inspect Southern Bell's documents. The PSC further argues that as a regulated entity, Southern Bell has a continuing obligation to comply with PSC regulations and a concomitant need to seek legal advice to ensure its compliance. The PSC is specifically empowered with broad authority to regulate telecommunications companies such as Southern Bell. ⁸ Even though the PSC has a statutory duty to ensure Southern Bell's compliance with the law, the PSC cannot exercise its regulatory power at the expense of destroying the corporate attorney-client privilege. Southern California Gas Co. v. Public Utilities Comm'n, 50 Cal.3d 31, 265 Cal.Rptr. 801, 784 P.2d 1373 (1990).

In another case involving a regulated company, United States v. Louisville & Nashville Railroad Co., 236 U.S. 318, 35 S.Ct. 363, 59 L.Ed. 598 (1915), the Interstate Commerce Commission (ICC) attempted to examine confidential communications between a railroad and its attorneys. The ICC argued that its power to examine records and correspondence under the Interstate Commerce Act authorized such an inspection, but the Court concluded that disclosure of the company's communications "would be a practical prohibition upon professional advice and assistance." Id. at 336, 35 S.Ct. at 369. To a certain extent, all companies operating in the United States are regulated by some governmental agency and have an obligation to abide by general laws and/or specific administrative rules. ⁹ Southern Bell's status as a regulated company does not entitle the regulating body to unfettered access to Southern Bell's confidential communications.

The question of what constitutes a confidential communication in the corporate context, and under what circumstances such a communication should be protected, presents a quandary unresolved by this court or the United States Supreme Court. Upjohn applied the attorney-client privilege to corporations, but the Court deliberately refrained from defining the parameters for applying the privilege to corporations. The variety of...