HLC Properties, Ltd. v. Superior Court, S120332.

• Citation: 24 Cal.Rptr.3d 199,105 P.3d 560,35 Cal.4th 54
• Decision Date: 14 February 2005
• Docket Number: No. S120332.,S120332.
• Court: United States State Supreme Court (California)
• Parties: HLC PROPERTIES, LIMITED, et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; MCA Records, Inc., et al., Real Parties in Interest.

24 Cal.Rptr.3d 199

35 Cal.4th 54

105 P.3d 560

HLC PROPERTIES, LIMITED, et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent;

MCA Records, Inc., et al., Real Parties in Interest.

No. S120332.

Supreme Court of California.

February 14, 2005.

Rehearing Denied April 13, 2005.

Law Offices of Mark A. Brodka, Mark A. Brodka, Los Angeles; Girardi and Keese, Thomas V. Girardi, Howard B. Miller and Shahram S. Shayesteh, Los Angeles, for Petitioner.

No appearance for Respondent.

Irell & Manella, Gregory R. Smith, Steven A. Marenberg, Steve Kang, Elizabeth L. Rosenblatt and Philip M. Kelly, Los Angeles, for Real Parties in Interest.

BAXTER, J.

At issue in this matter are 59 written communications pertaining to three recording contracts executed by the late Harry Lillis Crosby, the talented entertainer known to all as Bing Crosby. In the proceedings below, the trial court rejected plaintiffs' claim of attorney-client privilege with respect to the 59 documents, many of which were either authored or received by persons Crosby had hired to help manage his business interests. We conclude that the trial court ruled correctly and that the Court of Appeal erred in granting plaintiffs' petition for writ of mandate.

Factual and Procedural Background

Bing Crosby was one of the most successful entertainers of his time. When he died in 1977, he left an extensive portfolio of interests in records, radio and television productions, motion pictures, and musical and literary works, as well as the contract and publicity rights related to those interests. He also left business interests he had accumulated in mining, oil, real estate, and other financial ventures. Crosby owned these interests during his lifetime, but he managed them with the assistance of others he employed. One such employee was Basil Grillo (Grillo), an accountant who became Crosby's business manager and worked for him for over 30 years. Crosby and his employees referred to Crosby's various business operations collectively as "Bing Crosby Enterprises" (Enterprises).¹

After Crosby's death, the executor of his estate (Richard C. Bergen of the law firm of O'Melveny & Meyers) continued to maintain "Mr. Crosby's business office," where Enterprises operated. In 1980, the executor entered into a limited partnership agreement with Hillsborough Productions, Inc., and Kathryn G. Crosby (Crosby's second and surviving spouse) to form HLC Properties, Limited (HLC Properties), an entity that would manage the interests Crosby left. Ultimately, the executor transferred the estate's 78.685 percent interest in certain properties to HLC Properties. Kathryn G. Crosby also transferred her 21.315 percent interest in these same properties to HLC Properties. The properties transferred to HLC Properties include the three recording contracts that are the subject of this litigation. In January 1981, the superior court filed the "Order Settling First and Final Account and Report of Executor, etc.," which approved the formation of HLC Properties, approved the estate's agreement to transfer estate properties and assets to HLC Properties, and approved the estate's transfer of its limited partnership interest in HLC Properties to various family member trusts. Upon final distribution of the estate, the executor was discharged.

In July 2000, HLC Properties and the trustee for the Wilma Wyatt Crosby Trust² (collectively HLC) initiated this action against defendants MCA Records, Inc., GRP Records, Inc., UMG Recordings, Inc., MCA, Inc., and Universal Studios, Inc. (collectively MCA), for allegedly underpaying royalties due on three recording contracts between Crosby and MCA's predecessors in interest, dated March 29, 1943, January 3, 1949, and May 10, 1956, respectively.

In the course of pretrial discovery, MCA propounded to HLC a demand for production of documents. In response, HLC produced some documents but withheld others that it listed in a privilege log as containing protected attorney-client communications. MCA later issued a third party deposition subpoena to Crosby's former law firm, O'Melveny & Meyers, for production of documents. O'Melveny & Meyers produced some documents through HLC's attorney, who also submitted a "supplemental privilege log" that added three documents to HLC's original privilege log.

Thereafter, MCA issued a subpoena duces tecum to HLC for the production at trial of 59 of the documents HLC listed in its privilege logs. Many of the 59 documents reflected written communications between attorneys and persons Crosby had hired, and of those, approximately 48 had been sent when Crosby apparently was conducting an audit of his recording artist royalties in 1959 and 1960. In its motion and trial court briefing on the matter, MCA contended the 59 documents might provide critical support to its interpretation of the royalty provisions in dispute and its position that the contracting parties had previously resolved the accounting matters at issue.

On the first day of trial, the court considered the enforceability of MCA's subpoena duces tecum in view of HLC's attorney-client privilege objections. After hearing counsel's arguments, the court agreed with MCA that Crosby was the client and the holder of the privilege and that the privilege terminated after his death. The court did not recognize Enterprises or HLC as a privilege holder.

The Court of Appeal granted HLC's petition for a writ of mandate in a published opinion. In brief, it found that Enterprises constituted an organization during Crosby's lifetime, and therefore that HLC, as Enterprises' successor, currently holds the privilege. The Court of Appeal remanded the matter to the trial court with instructions to vacate its order compelling compliance with MCA's subpoena duces tecum and to consider each document listed in HLC's privilege logs to determine whether, in accordance with the appellate court's opinion, the attorney-client privilege applied.

We granted MCA's petition for review.

Discussion

As proposed by the California Law Revision Commission (the Commission) and subsequently enacted by the Legislature in 1965, the Evidence Code³ declares authoritatively that evidentiary privileges such as the attorney-client privilege are governed by statute. (§ 911; Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1129, 69 Cal.Rptr.2d 317, 947 P.2d 279.) The party claiming a privilege shoulders the burden of showing that the evidence it seeks to suppress falls within the terms of an applicable statute. (D.I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 729, 36 Cal.Rptr. 468, 388 P.2d 700 (Chadbourne); see also People v. Gionis (1995) 9 Cal.4th 1196, 1208, 40 Cal.Rptr.2d 456, 892 P.2d 1199 (Gionis).)

"`When the facts, or reasonable inferences from the facts, shown in support of or in opposition to the claim of privilege are in conflict, the determination of whether the evidence supports one conclusion or the other is for the trial court, and a reviewing court may not disturb such finding if there is any substantial evidence to support it [citations].'" (Gionis, supra, 9 Cal.4th at p. 1208, 40 Cal. Rptr.2d 456, 892 P.2d 1199, quoting Chadbourne, supra, 60 Cal.2d at p. 729, 36 Cal.Rptr. 468, 388 P.2d 700.) Accordingly, unless a claimed privilege appears as a matter of law from the undisputed facts, an appellate court may not overturn the trial court's decision to reject that claim. (See ibid.)

In the matter before us, HLC relies on section 953, subdivision (d), which defines a holder of the attorney-client privilege to include "[a] successor ... of a[n] ... association [or] organization ... that is no longer in existence." HLC's primary argument, which the Court of Appeal also largely espoused, is that Enterprises was an unincorporated organization; that during Crosby's lifetime, Enterprises was the client and holder of the attorney-client privilege with respect to the 59 withheld documents; and that HLC currently holds the privilege as Enterprises' successor.⁴

Conversely, MCA relies on section 953, subdivision (c), which provides that, "if the client is dead," the holder of the attorney-client privilege is the client's "personal representative." It is MCA's position that Bing Crosby, the natural person, not Enterprises, was the client and holder of the attorney-client privilege with respect to the 59 documents; that the executor of Crosby's estate held the privilege upon Crosby's death; and that the privilege ceased to exist after the estate was finally distributed and the executor discharged.

Resolution of the instant dispute hinges on two questions. First, who may hold the attorney-client privilege initially? Second, who may succeed to the privilege? We address these questions in order.

A. Who May Hold the Attorney-Client Privilege Initially?

With certain exceptions not relevant here, the Evidence Code provides that a "client" has "a privilege to refuse to disclose, and to prevent another from disclosing, a confidential communication" the client has had with an attorney "if the privilege is claimed by" someone statutorily authorized to do so. (§ 954.) A "client" means "a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity." (§ 951.) For purposes of the Evidence Code, a "person" includes "a natural person, firm, association, organization, partnership, business trust, corporation, limited liability company, or public entity." (§ 175.)

As for who may claim the attorney-client privilege, the Evidence Code designates a "holder of the privilege" (§ 954, subd. (a)); a person the privilege holder authorizes to claim the privilege (id., subd. (b)); or the attorney at the time of the confidential communication if the privilege holder is in existence and has not authorized the communication's disclosure (id., subd.(c)). Section 953, in turn,...