The REGENTS of The Univ. of Cal. v. The SUPERIOR COURT of San Diego County

• Decision Date: 30 July 2008
• Docket Number: No. D051364.,D051364.
• Citation: 165 Cal.App.4th 672,81 Cal.Rptr.3d 186
• Court: California Court of Appeals Court of Appeals
• Parties: The REGENTS OF the UNIVERSITY OF CALIFORNIA et al., Petitioners, v. The SUPERIOR COURT of San Diego County, Respondent; Aquila Merchant Services, Inc., et al., Real Parties in Interest.

165 Cal.App.4th 672

81 Cal.Rptr.3d 186

The REGENTS OF the UNIVERSITY OF CALIFORNIA et al., Petitioners,

v. The SUPERIOR COURT of San Diego County, Respondent;Aquila Merchant Services, Inc., et al., Real Parties in Interest.

No. D051364.

Court of Appeal, Fourth District, Division 1, California.

July 30, 2008.

Cotchett, Pitre & McCarthy, Joseph W. Cotchett, Nancy L. Fineman, Steven N. Williams and Nanci E. Nishimura, Burlingame, for Petitioners.

No appearance for Respondent.

Quinn Emanuel Urquhart Oliver & Hedges, A. William Urquhart, Kathleen M. Sullivan, Kristen Bird and Roxanna A. Manuel, Los Angeles; Fulbright & Jaworski, Peter H. Mason and Joshua D. Lichtman, Los Angeles, for Real Party in Interest Coral Energy Resources.

Pillsbury, Winthrop, Shaw, Pittman, Douglas T. Tribble and Michael J. Kass, San Francisco, for Real Parties in Interest

Dynegy Inc., West Coast Power and Dynegy Marketing and Trade.

Hall, Estill, Hardwick, Gable, Golden & Nelson, Graydon Dean Luthey, Jr., and Sarah Jane Gillett; English & Gloven and Donald A. English, San Diego, for Real Parties in Interest The Williams Companies, Inc. and Williams Gas Marketing, Inc., formerly known as Williams Energy Marketing and Trading Co.

Hogan & Hartson and David R. Singer, Los Angeles, for AEP Energy Services, Inc., as Amicus Curiae on behalf of Real Parties in Interest Coral Energy Resources, Duke Energy Corporation, Duke Energy Trading and Marketing, Dynegy Power Companies, Inc., The Williams Companies, Inc., and Williams Energy Marketing and Trading Co.

BENKE, J.

Evidence Code section 912, subdivision (a), provides that the attorney-client privilege is waived when “without coercion” a holder of the privilege has either disclosed or consented to the disclosure of a significant part of an otherwise privileged communication. In this writ proceeding we consider whether disclosure of privileged communications is free of coercion when, as a matter of policy, the federal government advised corporations under criminal and regulatory investigation that they might avoid indictment or regulatory sanctions if they fully cooperated in the government's investigation and among other matters waived the attorney-client and attorney work product privileges.

Although no California cases have considered this issue directly, the cases which have discussed waiver of the privileges have found that the holder of a privilege need only take “reasonable steps” to protect privileged communications. No case has required that the holder of a privilege take extraordinary or heroic measures to preserve the confidentiality of such communications. Here, the threat of regulatory action and indictment posed the risk of significant costs and consequences to the corporations such that they could cooperate with the Department of Justice's investigation without waiving the privilege.

Accordingly, we find no abuse of discretion in the trial court's order denying plaintiff's motion to compel disclosure of privileged documents which the defendants produced during the course of the federal government's regulatory and criminal investigations.

FACTUAL AND PROCEDURAL BACKGROUND

The plaintiffs ¹ in this coordinated antitrust case allege the defendants, ² a group of energy suppliers, unlawfully inflated the retail price of natural gas in California between 1999 and 2002. In the course of discovery, the plaintiffs asked the defendants to produce attorney-client communications and attorney work product which the defendants had previously disclosed to participants in a federal corporate fraud task force. The task force, which had been investigating the defendants' conduct, was composed of the United States Department of Justice (DOJ), the Federal Energy Regulatory Commission (FERC), the Commodity Futures Trading Commission (CFTC) and the Securities & Exchange (SEC). In particular, the defendants produced to the federal agencies the results of investigations their respective outside counsel had conducted with respect to the defendants' compliance with federal regulations and antitrust law.

At the time the federal agencies obtained the privileged communications from the defendants, the DOJ had adopted a policy under which, in determining whether it would indict a corporation, the department would consider the corporation's cooperation with the government. Under the department's policy, one important indicia of a corporation's cooperation was the corporation's willingness to waive the attorney-client and attorney work product privileges when responding to the government's subpoenas and requests for documents.

All of the defendants received subpoenas or requests for documents from one or more of the federal agencies. After consulting counsel, each of the defendants waived the attorney-client and work product privileges. With one exception, each of the defendants obtained an agreement from the government under which the government agreed that disclosure of information to the government was not a waiver of the attorney-client and work product privileges. None of the defendants was indicted. However, the government reached plea agreements with employees of the defendants, and the factual basis for the employees' pleas was established in part based on facts disclosed in privileged documents, including in particular compliance reviews conducted by the defendants' counsel.

The plaintiffs in this action moved to compel production of the privileged documents. The plaintiffs argued that the defendants made a business decision to produce the documents to the respective federal agencies and therefore waived the privilege. The plaintiffs argued that having decided to waive the privilege with respect to one party's demand, the defendants could no longer assert the privileges in response to lawful demands from other parties. (See McKesson HBOC, Inc. v. Superior Court (2004) 115 Cal.App.4th 1229, 1240-1241, 9 Cal.Rptr.3d 812 ( McKesson ).)

In response to the plaintiffs' motion, the defendants argued their cooperation with the federal agencies was coerced within the meaning of Evidence Code ³ section 912, subdivision (a), and that in providing the department with privileged documents they did not waive the privileges.

The trial court denied the plaintiffs' motion. It found that the defendants' cooperation with the federal agencies did not waive the privileges.

The plaintiffs have challenged the trial court's order denying their motion to compel by way of a petition for a writ of mandate. Because the precise issue the plaintiffs have raised has not been previously considered by a court of record in this state, is of some public importance, and, in the absence of our consideration of the petition on the merits, is likely to escape review, we issued an order to show cause. (See O'Grady v. Superior Court (2006) 139 Cal.App.4th 1423, 1439, 44 Cal.Rptr.3d 72; Roden v. AmerisourceBergen Corp. (2005) 130 Cal.App.4th 211, 218, 29 Cal.Rptr.3d 810.)

As we explain more fully below, we deny the petition.

I

As defendants note, on the basis of uncontradicted declarations ⁴ the defendants submitted in opposition to the motion to compel, the trial court found each defendant produced privileged documents to the government because each defendant believed there would be severe regulatory or criminal consequences if it was labeled as uncooperative by the government. We review that finding of fact for substantial evidence. (See CenterPoint Energy, Inc. v. Superior Court (2007) 157 Cal.App.4th 1101, 1119, 69 Cal.Rptr.3d 202.) We review the legal conclusions to be drawn from that finding de novo. ( Ibid.; see also McKesson, supra, 115 Cal.App.4th at pp. 1235-1236, 9 Cal.Rptr.3d 812.)

II

Section 912, subdivision (a), states in pertinent part: “(a) Except as otherwise provided in this section, the right of any person to claim a privilege provided by Section 954 (lawyer-client privilege) ... is waived with respect to a communication protected by the privilege if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone. Consent to disclosure is manifested by any statement or other conduct of the holder of the privilege indicating consent to the disclosure, including failure to claim the privilege in any proceeding in which the holder has the legal standing and opportunity to claim the privilege.” (Italics added.)

The term “coercion” is not defined in section 912. However, a related provision, section 919, provides: “(a) Evidence of a statement or other disclosure of privileged information is inadmissible against a holder of the privilege if:

“(1) A person authorized to claim the privilege claimed it but nevertheless disclosure erroneously was required to be made; or

“(2) The presiding officer did not exclude the privileged information as required by Section 916.

“(b) If a person authorized to claim the privilege claimed it, whether in the same or a prior proceeding, but nevertheless disclosure erroneously was required by the presiding officer to be made, neither the failure to refuse to disclose nor the failure to seek review of the order of the presiding officer requiring disclosure indicates consent to the disclosure or constitutes a waiver and, under these circumstances, the disclosure is one made under coercion.”

Although its function is different than the attorney-client privilege, in this context the attorney work product privilege is subject to the same waiver principles applied to the attorney-client product privilege. “Waiver of work product protection, though not expressly defined by statute, is generally found under the same set of circumstances as waiver of the attorney-client privilege-by failing to assert the protection, by tendering certain issues, and by conduct inconsistent with claiming the protection. [Citations.] Waiver also occurs by an attorney's ‘voluntary disclosure or consent to disclosure of the writing...