Hoiles v. Superior Court

In Hoiles v. Superior Court (1984) 157 Cal. App. 3d 1192, the Court of Appeal considered whether a closely-held corporation's attorney-client privilege covers communications between the corporation's attorney and some of the corporation's owners. The plaintiff was a minority shareholder and director of a corporation. The plaintiff's brothers and sister were the other shareholders. A dispute arose among the shareholders concerning who would succeed one of the plaintiff's brothers as chief executive officer of the corporation. The plaintiff wanted to take the office, but his siblings would not agree. Hoiles, supra, 157 Cal. App. 3d at page 1195. The plaintiff threatened to dissolve the corporation or sell his stock to a buyer outside the family without allowing the corporation a right of first refusal. Two of the plaintiff's siblings held meetings to decide what to do about the plaintiff's demands. The corporation's counsel attended the meetings and later testified he was there to represent not only the corporation but also the controlling shareholders. The plaintiff was not one of the "controlling shareholders." The parties did not resolve their dispute and the plaintiff filed an action to dissolve the corporation and for breach of fiduciary duty. Hoiles, supra, 157 Cal. App. 3d at pages 1196-1197. The plaintiff deposed corporate counsel, who asserted the attorney-client privilege and refused to answer questions concerning the meetings and documents related to the dispute. The plaintiff apparently brought a motion to compel answers to deposition questions, which the trial court denied. The plaintiff filed a writ petition on several grounds including (1) "a closely held corporation has no attorney-client privilege concerning the communications of some of its owners as against other owners" and (2) the corporation's "privilege does not shield corporate counsel's communications with some officers, directors, and shareholders at 'family meetings.'" Hoiles, supra, 157 Cal. App. 3d at page 1197. The appellate court found "the majority shareholders' interests and those of the corporation appear to have been treated interchangeably, since counsel purported to represent both in the apparent belief their interests were not in conflict." The court also found the trial "court's implied finding the meetings were for corporate purposes was supported by substantial evidence." Therefore, the court held the corporation's privilege shielded the communications between counsel and the plaintiff's siblings because the communications occurred in the context of meetings concerning the corporation's response to the plaintiff's demands.