Zurich American Ins. Co. v. Superior Court

In Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, a bad faith insurance case, the discovery referee and the trial court found that everything in a claims file was discoverable except actual copies of letters or e-mails from outside counsel, documents created by counsel or received by counsel, or that contained direct communications from counsel. In other words, it limited application of the attorney-client privilege to communications by counsel to the client, and by the client to counsel. (Id. at p. 1493.) The insurance company filed a petition for writ of mandate seeking to vacate the trial court's production order, and this court granted the requested relief, finding the referee's and trial court's standard of applicability of the attorney-client privilege too narrow. The question before the court in Zurich was "whether the corporate attorney-client privilege extends to confidential communications between agents of the client regarding legal advice and strategy, in which the corporation's attorneys are not directly involved or which do not include excerpts of direct communications from the attorneys." (Id. at p. 1494.) The court cited Upjohn Co. v. United States (1981) 449 U.S. 383 for its observation that the privilege rests on the need for the advocate and counselor to know all that relates to the client's reasons for seeking representation if the professional mission is to be carried out. In the corporate setting, the attorney-client privilege may extend to communications involving middle- and lower-level employees. In that setting, it will frequently be employees beyond the control group who will possess the information needed by the corporation's lawyers. Middle-level and lower-level employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he or she is adequately to advise the client with respect to such actual or potential difficulties. (Id. at pp. 389-392.) The Zurich court thus concluded: "It follows that in order to implement the advice of lawyers, the advice must be communicated to others within the corporation. It is neither practical nor efficient to require that every corporate employee charged with implementing legal advice given by counsel for the corporation must directly meet with counsel or see verbatim excerpts of the legal advice given." (Zurich, supra, at p. 1498.) The privilege applies even where disclosure is made to persons not present at the attorney-client consultation; the third persons need not necessarily participate in the legal consultation. (Id. at p. 1503.) Based on these conclusions, the Zurich court remanded the matter to the trial court to conduct a new review of the disputed documents to determine (1) whether each document contained a discussion of legal advice or strategy of counsel and, if so, (2) whether the privilege had been waived by involving unnecessary third persons or whether disclosure had been made only to those third persons to whom disclosure was reasonably necessary to further the purpose of the legal consultation. (Ibid.)