Bp Alaska Exploration, Inc. v. Superior Court

• Decision Date: 29 March 1988
• Docket Number: No. F008887,F008887
• Citation: 245 Cal.Rptr. 682,199 Cal.App.3d 1240
• Court: California Court of Appeals Court of Appeals
• Parties: , 56 USLW 2630 BP ALASKA EXPLORATION, INC., Petitioner, v. The SUPERIOR COURT of Kern County, Respondent; NAHAMA & WEAGANT ENERGY COMPANY 1984 EXPLORATORY DRILLING LIMITED PARTNERSHIP et al., Real Parties in Interest.

Page 682

245 Cal.Rptr. 682

199 Cal.App.3d 1240, 56 USLW 2630

BP ALASKA EXPLORATION, INC., Petitioner, v. The SUPERIOR COURT of Kern County, Respondent NAHAMA & WEAGANT ENERGY COMPANY 1984 EXPLORATORY DRILLING LIMITED PARTNERSHIP et al., Real Parties in Interest.

No. F008887.

Court of Appeal, Fifth District, California.

March 29, 1988.

Bright and Brown, James S. Bright, Gregory C. Brown, Los Angeles, Joseph A. Drazek, Clifford, Jenkins & Brown, J. Craig Jenkins, Bakersfield, for petitioner.

[199 Cal.App.3d 1246] Klein, Wegis & Duggan, Anthony J. Klein, J.L. Rosenlieb, Bakersfield, Gibson, Dunn & Crutcher, Robert W. Loewen, Craig H. Millet, John R. Crews, Newport Beach, for real parties in interest.

No appearance for respondent.

OPINION

FRANSON, Presiding Justice.

INTRODUCTION

Two basic issues are involved in this appeal: (1) whether the crime-fraud exception to the lawyer-client privilege provided in Evidence Code section 956 applies to writings protected by the attorney work product rule and (2) the proper standard for determining whether the party seeking discovery of an otherwise privileged attorney-client communication has made the prima facie showing of crime or fraud required to negate the privilege.

THE CASE

Petitioner, BP Alaska Exploration, Inc. (BPAE), seeks a writ of prohibition directing the respondent Kern County Superior Court to vacate its order requiring production of several documents and compelling BPAE's president to answer deposition questions. BPAE claims the communications are protected by the attorney-client privilege (Evid.Code, § 954) and the attorney work product rule (formerly Code Civ.Proc., § 2016, subd. (b), now § 2018). Real parties in interest, Nahama & Weagant Energy Company 1984 Exploratory Drilling Limited Partnership and Nahama & Weagant Company (collectively referred to as NWEC), argues the privileges were vitiated by Evidence Code section 956 because BPAE sought counsel's services to commit a fraud. This court issued an order to show cause to determine whether the communications are protected from disclosure.

We conclude that the crime-fraud exception provided in Evidence Code section 956 does not apply to writings protected by the absolute work product rule; hence, the trial court erred in ordering the discovery of the contents of writings protected by the rule. However, we also conclude that NWEC made the necessary evidentiary showing to invoke the fraud exception to the attorney-client privilege. We define the necessary evidentiary showing as a prima facie proof that BPAE sought or obtained the services of its attorneys with the intent to enable it to commit or to plan to commit a fraud. We will remand the matter to the trial court with directions to reconsider the discovery motion in the light of our rulings.

THE FACTS

NWEC claims it had unique, confidential geological ideas based on many years of research and analysis to develop underground oil and gas reserves in an area known in the industry as the Bakersfield Arch in Kern County. On March 4, 1985, NWEC proposed to BPAE that they join in a large-scale exploration venture in the Arch area controlled by Tenneco Oil Company. To persuade BPAE to participate, NWEC disclosed confidential information about five prospects on Tenneco land and other prospects on adjoining property. NWEC delivered maps, montages and other proprietary data to BPAE for its use in evaluating the proposal.

On March 11, 1985, NWEC introduced Steve Rogers and Martyn Eames of BPAE to Tenneco. At that time, Tenneco presented a proposal to Rogers that it had made to other industry members of a 33,000 acre exploration venture. NWEC was aware of that venture. It was narrower in scope but similar in concept to the Tenneco proposal which NWEC had recommended to BPAE at the March 4 meeting.

On March 21, 1985, Richard Hubbard, chief geologist for BPAE, called NWEC. He reported that BPAE's affiliate in London was not interested in the 33,000 acre Tenneco proposal but that he still hoped to convince them of the merits of the larger NWEC proposal.

NWEC learned of a BPAE/Tenneco exploration agreement when it was announced in trade publications in September 1985. On October 22, 1985, Rod Nahama of NWEC wrote Mike Brownhill, BPAE's vice president in charge of exploration, asking for an explanation of BPAE's decision to exclude NWEC from the exploration agreement. Nahama believed, based on the discussions of the parties and the industry custom that there was an implied agreement that NWEC would participate in the BPAE/Tenneco venture.

Brownhill discussed NWEC's claims with Christopher Gibson-Smith, BPAE's president. Neither Brownhill nor Gibson-Smith had been with BPAE when NWEC made its proposal in March 1985. Because of the threat of litigation, Gibson-Smith asked Frederick Dorey, BPAE's general counsel, and Bright and Brown, BPAE's outside counsel, to assist Brownhill in investigating NWEC's claims.

Sometime during the investigation, Bright and Brown sent a letter to BPAE regarding the investigation.

On November 11, 1985, Rod Nahama and Graham Dryden of NWEC met with Brownhill and Richard Hubbard of BPAE to discuss each side's position. After the meeting, at general counsel Dorey's direction, Brownhill prepared a memorandum summarizing the meeting and sent copies to Dorey and other BPAE personnel for their evaluation.

At the conclusion of the investigation and with the approval of Gibson-Smith and Dorey, Brownhill wrote Nahama on December 23, 1985, denying that NWEC had any right to participate in the Tenneco agreement and stating various reasons for his conclusion. NWEC contends the letter contains six misrepresentations of fact which were aimed at convincing NWEC that the confidential information NWEC provided to BPAE did not contribute to BPAE's decision to proceed with the Tenneco exploration agreement.

NWEC filed suit in August 1986. The second amended complaint alleges multiple causes of action--that BPAE breached an implied-in-fact agreement that BPAE would not use NWEC's confidential information without granting NWEC an interest in the Tenneco play, that BPAE acted in bad faith and without probable cause in denying the existence of the contractual obligation to NWEC; that BPAE breached a confidential relationship with NWEC, misappropriated trade secrets, engaged in unfair competition and received unjust enrichment all as a result of its conduct in not including NWEC in the Tenneco project.

NWEC sought discovery from BPAE about its investigation of NWEC's claim. BPAE refused to divulge four communications related to the investigation on the ground they were protected by the attorney-client privilege and the work product rule. The communications are as follows:

(1) The written report prepared by Bright and Brown, outside counsel, retained by BPAE to assist in evaluating NWEC's claims.

(2) The written report of Dorey, BPAE's general counsel, allegedly prepared for BPAE during the investigation. ¹

(3) The memo of Brownhill, BPAE's vice president in charge of exploration, prepared at the direction of general counsel Dorey, and describing the November 27, 1985, meeting with Nahama and Dryden.

(4) The testimony of Gibson-Smith, BPAE's president, in response to deposition questions concerning the investigation. BPAE maintains that the information sought by the questions is protected by the attorney-client privilege because it was channeled through Attorney Dorey or in Dorey's presence.

NWEC moved respondent court for an order compelling BPAE to produce the documents and testimony. NWEC contended the communications had lost their privileged status because they were obtained in furtherance of a fraud, citing Evidence Code section 956. NWEC's theory of fraud is that the alleged misrepresentations in the December 23, 1985, letter from BPAE to NWEC were made for the purpose of dissuading NWEC from pursuing its claim against BPAE.

Respondent court granted the motion finding NWEC had made a prima facie showing of fraud so the attorney-client privilege and the work product rule did not apply.

DISCUSSION

The "old" discovery act governs this motion.

The new discovery act, which became operative July 1, 1987, provides that any particular use of a discovery method initiated before July 1, 1987, is governed by preexisting provisions. (Stats.1987, ch. 86, § 20.) NWEC's motion to compel involved discovery methods initiated before the operative date of the new discovery act. Thus, the "old" act controls the parties' claims in this case.

Writ review is appropriate.

The appellate court may entertain a petition for extraordinary relief when compulsion to answer a discovery order would violate a privilege. (Roberts v. Superior Court (1973) 9 Cal.3d 330, 336, 107 Cal.Rptr. 309, 508 P.2d 309.) The discovery order may be prohibited where it is wholly invalid and where, under the circumstances, it constitutes an abuse of the lower court's discretion. (Dickerson v. Superior Court (1982) 135 Cal.App.3d 93, 98, 185 Cal.Rptr. 97.) Writ review is appropriate in this case.

I. The Evidence Code section 956 crime-fraud exception does not apply to documents protected by the work product rule.

Evidence Code section 956 codifies the common law rule that the privilege protecting confidential attorney-client communications is lost if the client seeks legal assistance to plan or perpetrate a crime or fraud. (Glade v. Superior Court 1978) 76 Cal.App.3d 738, 745, 143 Cal.Rptr. 119.) The crime-fraud exception expressly applies to communications ordinarily shielded by the attorney-client privilege. (Evid.Code, § 954.)

The work product rule encompasses a companion but separate document protection.

"The work product of an attorney shall not be discoverable unless the court determines that denial of discovery will unfairly prejudice the party seeking discovery in preparing his claim or defense or will result in an injustice, and any writing that reflects an...