American Mut. Liab. Ins. Co. v. Superior Court

• Decision Date: 12 April 1974
• Citation: 113 Cal.Rptr. 561,38 Cal.App.3d 579
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, Petitioner, v. SUPERIOR COURT of the State of California FOR the COUNTY OF SACRAMENTO, Respondent; John G. NORK et al., Real Parties in Interest. Civ. 14125.

Page 561

113 Cal.Rptr. 561

38 Cal.App.3d 579

AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, Petitioner, v. SUPERIOR COURT of the State of California FOR the COUNTY OF SACRAMENTO, Respondent;

John G. NORK et al., Real Parties in Interest.

Civ. 14125.

Court of Appeal, Third District, California.

April 12, 1974.

As Modified on Denial of Petition for Rehearing May 10, 1974.

Hearing Denied June 26, 1974.

McDonough, Holland, Schwartz & Allen, Sacramento, for petitioner.

John F. Harper, San Francisco, and John Quincy Brown, Jr., Sacramento, for John G. Nork.

Edward Freidberg, Sacramento, for Albert Gonzales.

David C. Rust, Sacramento, for Mercy Hospital.

RICHARDSON, Presiding Justice.

Petitioner, American Mutual Liability Insurance Company, hereinafter 'American,' at all relevant times was malpractice insurance carrier for Sacramento County Medical Society, hereinafter 'Society,' one of whose members was John G. Nork, M. D. Nork, and Mercy General Hospital of Sacramento, Hereinafter 'Mercy,' were sued for malpractice by Albert Gonzales. Nork, Mercy, and Gonzales comprise the real parties in interest. The proceedings giving rise to the issues before us occurred during the trial of that action.

Petitioner American, seeks herein alternatively a writ of prohibition, or mandamus, or certiorari directed to respondent Court and to the real parties in interest. The first two extraordinary writs are sought to prevent respondent court from taking further action relative to the disclosure of the contents of files worked up by attorney Gray, engaged by American to represent Nork in the defense of previous malpractice actions against him. Additionally, a writ of certiorari is sought directing respondent court to transmit a record of the proceedings of the trial court concerning the production of the files.

The documents in question form nine separate files developed and maintained by Gray. Though the exact nature and content of the files have never been fully and clearly stated, Gray testified that they included, as to each file, his correspondence with Nork and others, research references, interrogatories, and investigative and expert reports. Responsive to our request, American, which also has not seen the subject files, describes them more fully, so far as known to it, as consisting of several kinds of documents including written reports from attorneys discussing the status of the actions, comments by counsel on depositions and trial testimony, discussion of the possibilities of Nork's exposure to an adverse judgment and the probable range thereof, settlement negotiations, discussions with defense witnesses and consultants and other comments and opinions, all comprising so-called 'status reports' sent by Nork's attorneys to American, the insurer, but not to Nork, the insured; a second class of information includes investigative reports furnished by investigators for American including interviews with Nork and others, which reports were forwarded to the attorneys with a copy to American; a third type of report is that of consultants, largely physicians, contacted by the attorney concerning medical issues; a fourth class of communication consists of letters from American commenting on and discussing the first three classes of documents; finally, there are reports of the Medical Review and Advisory Committee of the Society concerning a medical evaluation and review of Nork's surgeries. Apparently the contents of the files are arranged chronologically and are segregated neither by source nor particular subject matter.

We will review the contentions of the parties, trace the history of the litigation, consider the element of mootness, examine the nature of the extraordinary writs sought to be invoked, discuss the relationships of the parties and the various privileges asserted, including the lawyer-client privilege described in Evidence Code § 952; the work product rule defined in Code of Civil Procedure § 2016(b), the statutory proscriptions against disclosure of proceedings and records of medical review committees of the Society expressed in Evidence Code § 1157, and the nature and scope of the waivers thereof. We will conclude by issuing a peremptory writ of mandate directing the trial court to vacate and set aside its order of disclosure of the files in question.

The respective contentions of the parties may be summarized. American claims that the files and records, containing as they do confidential communications and evaluations given and received by the attorney in question, are either conditionally or absolutely privileged under both the lawyer-client and work product privileges, and that as to portions of the files, the immunity from disclosure arises from Evidence Code § 1157. Gonzales and Mercy, in concert, take the position that the trial court found as a fact that American was not a client of Gray. Alternatively, they argue that if it was such a client, the lawyer-client privilege has been expressly or impliedly waived, and additionally has been rendered inapplicable because, it is charged, the services of counsel were sought or obtained 'to commit . . . a crime or fraud,' and thus the privileges were dissipated by Evidence Code § 956. Gonzales also asserts loss of the lawyer-client privilege because of the breach of duty by the attorney. (Evid.Code § 958.)

The foregoing contentions frame the essential issues which may be generally stated: Does American have a privilege in some form to prevent the disclosure of the contents of the files and, if so, has the interrelationship or subsequent conduct of the parties destroyed the privilege?

A review of the history of the litigation in question underscores the complexity and unusual character of the procedural context from which the issues arise.

Nork, an orthopedic surgeon with a substantial medical practice in the Sacramento area, was named defendant in a series of malpractice actions. American, in the discharge of its duties as malpractice carrier for Nork and for the purpose of defending him, engaged the services of two firms of attorneys, one, Hassard, Bonnington, Rogers and Huber of San Francisco, and the other, Wilke, Fleury, Sapunor and Hoffelt of Sacramento of which Gray was and is a member.

The attorneys, together with the investigators and claims personnel of American, prepared for the trials of the various malpractice cases and extensive discovery was effected. Trial of the first two cases, namely, Hendrick and de la Torre, resulted in substantial malpractice verdicts against Nork for both compensatory and punitive damages. Thereafter, and while other actions were pending against him, Nork, through attorney Harper, filed with respondent court an action for declaratory relief hereinafter described as the 'Nork action,' against his carrier American, and his judgment creditor Hendrick, in which Nork asserted that American declined to pay the punitive damage portion of the Hendrick and de la Torre judgments. He further alleged that American refused to accept Hendrick's or de la Torre's pre-trial offers to settle their claims against him within American's policy limits notwithstanding Nork's demands that they do so, charging American thereby with acting in bad faith. Other causes of action in the Nork case sounded in misrepresentation and negligent and willful breach of the fiduciary obligation owing by American to Nork in its refusal to review and properly evaluate Nork's records and to consider his impaired health as a factor affecting his defense. A final cause of action asserted that American pressured Nork into adopting certain 'positions' in the discovery proceedings and in his testimony in the trial of the Hendrick's action, which 'positions' were untrue and known by American and its counsel to be untrue, and provably so, thus objecting Nork to impeachment; further, that American's defense of the punitive damage claim in the Hendrick's trial was, by design, passive, only, the purpose and effect of which was to reduce the compensatory award which American agreed that it was obligated to pay, and to inflate the punitive damage claim, responsibility for which American disclaimed.

American's defense of the Nork action against it proceeded concurrently with the trial of the action against Nork and co-defendant Mercy by a third malpractice claimant, Gonzales. Upon the filing of the Nork action against American, Gray's firm withdrew as counsel of record in all cases then pending against Nork. In February and March, 1973, proceedings were instituted in the Nork action by American's co-defendant Hendrick seeking injunctive relief to prevent destruction of American's investigative records in order to preserve and bad faith claims asserted by Hendrick and Nork against American. A series of discovery moves was made in the Nork action by Hendrick and Nork directed at American and its representatives seeking to establish the validity of Nork's causes of action against American as above described. These proceedings triggered responsive moves by American for protective orders as to noticed depositions and for orders to quash subpoenas duces tecum. Temporary stays of some of these discovery moves in the Nork action were issued by the Presiding Judge of the Sacramento County Superior Court. Extensive depositions of attorneys, investigators and claims personnel, however, were taken and partially completed. The Nork action remains pending in respondent superior court.

Thereafter, in the course of the Gonzales trial, Gray was served by Gonzales' attorney, who also represented judgment creditors Hendrick, de la Torre, and other malpractice claimants against Nork, with a subpoena duces tecum directing him to appear as a witness and to produce 'The files--documents, papers, records--memorandums and other writings contained in said files' used by Gray in the defense of Nork in nine specific Sacramento County malpractice cases, including Hendrick and de la...