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Paul Zimmerman

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CA Appellate Court Rules That Outside Counsel’s Fact Investigation is Privileged

On June 8, 2016, the First Appellate District of the California Court of Appeal, reversed a Sonoma County Superior Court, holding that an outside counsel’s investigative report was protected from discovery by the attorney-client privilege and the work product doctrine despite outside counsel’s agreement not to provide “legal advice” based on her findings.  City of Petaluma v. Superior Court (Cal. App. 1st Dist. June 8, 2016, ordered published June 30, Case No. A145437). The Court also held that the assertion of an avoidable consequences defense did not waive the attorney-client privilege or work product protection because the investigation was initiated after the plaintiff resigned from her position.

Plaintiff Andrea Waters, a female firefighter, sued her former employer, the City of Petaluma for hostile work environment, discrimination, retaliation and failure to prevent sexual harassment. Waters worked for the Fire Department from 2008-2014 and immediately resigned after filing an EEOC complaint.  Before Waters filed an action, the City Attorney retained outside counsel to investigate and evaluate Waters’ anticipated claims and to assist him in preparing to defend the City.

Outside counsel’s engagement agreement described her duties to “interview witnesses, collect and review pertinent information, and report to [the City] on that information.” The agreement specifically stated that it created an attorney-client relationship between the City and outside counsel, and highlighted the significance of using legal expertise to evaluate the investigation. However, the agreement also stated that outside counsel was not to “render legal advice as to what action to take as a result of the findings of the investigation.”  

In the ensuing superior court action, plaintiff Waters filed a motion to compel production of outside counsel’s investigative report.  Based on the language of the engagement agreement stating outside counsel was not to render “legal advice,” the trial court granted the motion to compel, finding no attorney-client relationship existed, and instead held outside counsel was merely retained to complete a fact-finding task. The trial court found that because the engagement agreement prohibited legal advice, no attorney-client relationship existed sufficient to invoke the attorney-client privilege or work produce doctrine. 

 The Court of Appeal reversed, holding that in the context of the attorney-client privilege and work product doctrine, a “client” is a person who consults a lawyer for the purpose of securing legal service or advice.  The Court held that providing legal advice is not required for the privilege or doctrine to apply, and that providing “legal services” was sufficient for both. The Court reasoned that outside counsel was “not merely a fact finder whose sole task was to gather information and transmit it to the City;” rather outside counsel was “expected to use her legal expertise to identify the pertinent facts, synthesize the evidence, and come to a conclusion as to what actually happened.”  The Court found an attorney-client relationship existed because outside counsel was providing legal services when conducting the investigation. Thus, the report was protected by both the attorney-client privilege and the work product doctrine.

The Court also reversed the trial court’s holding that asserting the avoidable consequence defense put the investigative report at issue, thereby waiving any attorney-client or work product claim.  In the FEHA context, the avoidable consequence defense has three elements: (1) the employer took reasonable steps to prevent and correct workplace sexual harassment; (2) the employee unreasonably failed to use the preventive and corrective measures provided by the employer; and (3) reasonable use of the employer’s procedures would have prevented at least some of the harm that the employee suffered. The Court held that while the “avoidable consequences defense may put the adequacy of an investigation into issue if the person was still employed and able to take advantage of any corrective measures the employer undertook as a result of the investigation,” since Waters was no longer employed by the City, she could not have taken advantage of any such corrective measures. As a result, outside counsel’s post-employment investigation was not at issue and neither the privilege not the doctrine were waived. The Court suggested that the result may have been different if the investigation occurred when the employee was still employed.

The takeaway from the case is that the attorney’s investigative report was found privileged even though (1) the engagement agreement specifically excluded providing legal advice based on her findings, and (2) the employer raised the “avoidable consequences defense” after conducting a post-employment investigation. The opinion is significant because it makes clear that rendering “legal advice” is not necessary to maintain an attorney-client relationship for purposes of asserting the attorney-client or work product protection. Rather, the provision of “legal services” is sufficient to maintain attorney-client and work product protection. The opinion also affirms an employer’s ability to retain legal experts to analyze potential claims without concern that an investigative report will be discoverable. However, employers and their lawyers should take note that there is a significant waiver risk if the avoidable consequence defense is asserted and the investigation takes place while the subject employee is still employed.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.