Opinion
NOT TO BE PUBLISHED
Original proceedings; petition for a writ of mandate to challenge an order of the Superior Court of Orange County, No. 30-2007-00100173, William M. Monroe, Judge.
Hinkle Elkouri Law Firm, Kenneth R. Lang, Geron J. Bird, Matthew K. Holcomb; Haight Brown & Bonesteel, William O. Martin, R. Bryan Martin, Jules S. Zeman and Stephanie M. Alexander for Petitioners.
No appearance for Respondent.
Bisnar & Chase, Brian D. Chase and John V. Bell for Real Parties in Interest.
OPINION
MOORE, J.
A child was severely injured when a propane heater, used indoors, resulted in a fire. Real parties in interest, the plaintiffs in the subsequent product liability action, claimed that petitioners, defendants in this action, knew prior to the fire that the subject heater could not legally have been sold for home use. They filed a motion to compel documents withheld as privileged, arguing that defendants sought legal advice concerning the continued sales of the heater. After a reference to a discovery referee, which included an in camera review of the documents at issue, the trial court adopted the referee’s finding that certain communications between defendants and its attorneys were discoverable. We agree with defendants, however, that the trial court lacked sufficient evidence to overcome the attorney-client privilege, and accordingly, we grant the petition.
I
FACTS AND PROCEDURAL HISTORY
According to the operative complaint, on December 30, 2005, plaintiff Trevor Dennis, age eight, was sleeping in a trailer when a propane heater caught fire and ignited, resulting in a serious fire which destroyed the trailer. Trevor suffered catastrophic burn injuries, and his experts opine that his net damages range from $20-$30 million. Plaintiffs alleged that the fire was caused by the heater, (the heater) which was manufactured by The Coleman Company, Inc (Coleman). Plaintiffs filed suit against Coleman, The Grant Boys (the heater’s retailer) and the trailer’s manufacturer, Carson Trailer, Inc. (Coleman and The Grant Boys are the petitioners herein, collectively referred to as defendants.)
Trevor filed suit through his grandmother, Gwinlyn Reed, acting as his guardian ad litem. Plaintiff Alysha Reed is Trevor’s mother and plaintiff James K. Dennis is Trevor’s father.
The heater was a Propane Catalytic or “ProCat” model 5053.
In their July 2008 third amended complaint (the complaint), plaintiffs added to their other causes of action claims for false advertising, unfair and fraudulent business practices, and violation of the Consumer Legal Remedies Act (CLRA). Plaintiffs claimed that Coleman sold the heater in violation of California law, specifically, Health and Safety Code section 19881, subdivision (a) (section 19881). That section states: “No person shall sell, or offer for sale, any new or used unvented heater that is designed to be used inside any dwelling house or unit, with the exception of an electric heater, or decorative gas logs for use in a vented fireplace.” Plaintiffs alleged that defendants advertised and marked the heater for home use in violation of section 19881, and further claimed that Coleman was aware of this before the fire that injured Trevor. Plaintiffs further alleged that the heater had a history of causing indoor fires, documenting several specific cases throughout the United States.
Plaintiffs’ previous complaint had alleged product liability, negligence, breach of warranty, and negligent infliction of emotional distress.
Discovery revealed that on November 9, 2005, Sacramento County Deputy District Attorney Douglas Whaley had written to the president of Home Depot regarding the sale of portable heaters in violation of section 19881, and that Coleman became aware of this letter in early December. After Coleman learned of the issue from Home Depot (which discontinued sales of the heaters in response to Whaley’s letter), Coleman continued to sell propane heaters to other retailers in California and elsewhere. Plaintiffs assert that after learning of the Home Depot letter, Coleman changed the packaging on the heater, which had previously pictured a mother and child using the heater in an indoor environment.
In September 2008, plaintiffs filed a motion to compel documents that Coleman had withheld from discovery based on the attorney-client and work product privileges. Plaintiffs based their motion on Evidence Code section 956, the crime-fraud exception to the attorney-client privilege. In sum, plaintiffs argued that Coleman sought legal advice regarding the continued sale of the heater in California while making changes to the product’s packaging. They argued there was sufficient prima facie evidence that Coleman’s actions triggered the crime-fraud exception to the attorney-client privilege. Defendants opposed the motion, arguing that no prima facie case existed.
The hearing on the motion was continued to late October. At that time, the court issued a tentative ruling, stating: “Defendants generally fail to submit evidence as to who are the authors and the recipients of the listed documents. Defendants do identify some of the authors/recipients as attorneys, but fail to submit evidence to establish these facts. Sometimes defendants claim the attorney-client privilege when the attorney disclosed is an attorney for a 3rd party or customer. It is unclear how defendants can claim the privilege in those circumstances. Other times the authors or recipients are only identified by name. [¶] Defendants need evidence to establish in what capacity the author or recipient is acting in order to make any prima facie showing that attorney-client or work product privileges apply.”
The court then continued the motion to November 18 to allow defendant to submit additional evidence supporting the claimed privileges. In response, Coleman submitted a more detailed privilege log. At the continued hearing on November 25, the court’s tentative ruling granted plaintiffs’ motion, noting: “My [previous] minute order clearly refers to defendants’ need for ‘evidence’ to meet defendants’ initial burden of establishing preliminary facts supporting the claimed attorney-client and work product privileges.... [¶] Defendant only submits a more detailed privilege log, without any supporting evidence. [¶] The motion to compel is granted (except as to those documents Plaintiff no longer seeks in the privilege log) as defendant has failed to meet its initial burden of submitting evidence of the preliminary facts necessary to establish application of attorney-client and work product privileges to the subject documents.”
A hearing followed, during which defendants’ counsel suggested that an in camera review should be conducted to establish the foundation for the privileges. Plaintiffs’ counsel argued that an in camera review would not solve the foundational problems presented by the privilege log. The court took the matter under submission, advising the parties that if they did not resolve matters among themselves, the court would make a final ruling, which might include referring the matter to a discovery referee.
On December 2, the court issued an admittedly testy minute order. “COUNSEL ENOUGH! I gave you an opportunity to resolve and agree on the issues and it is apparent that you have not done so. Plaintiff’s objection is overruled. The court or its surrogate[] will conduct an in camera review of all unredacted documents and determine which are privileged and which are not and if so to what extent. Then, if applicable, the court or its surrogate will determine if the crime fraud exception would require defendant to divulge, if so, what to divulge. The court will entertain a short brief on the applicability or non-applicability regarding the crime fraud exception. Said briefs are due not later than close of business 12/12/08. No Replies! [¶] The court is not unmindful of [plaintiffs’ counsel]’s concern re: the inability to independently verify. Short of injecting sodium penathol the court will rely on [defense counsel]’s representation that as to each document, what it is, who it went to, who was copied (blind or otherwise) and describing the contents which the court, or its surrogate, will match with the document. NO APPEARANCES!”
On December 5, the court appointed retired Judge Dennis Choate as discovery referee for the purpose of handling the motion to compel and in camera review. Payment of the cost of the reference was to be determined by Judge Choate.
After the discovery matter was referred to Judge Choate, the parties each filed another brief addressing the crime-fraud exception. On January 5, 2009, Judge Choate sent a letter to the court reporting on his findings (the first report). In sum, Judge Choate found that Coleman had made a sufficient foundational showing as to the existence of privilege, but also found that plaintiffs had made a prima facie showing that the crime-fraud exception applied. Noting that the crime-fraud exception applied only to documents protected by attorney-client but not work product privilege, Judge Choate recommended the production or nonproduction of each document based on these conclusions.
Shortly thereafter, the court granted defendants’ motion to designate additional expert witnesses on the subject of section 19881.
On January 21, defendants filed objections to Judge Choate’s report, including a number of new issues not previously raised. Defendants offered nine separate objections and requested that the court reject the first report. After plaintiffs replied, the court referred the matter back to Judge Choate to address the issues raised in defendants’ objections and plaintiffs’ response. The following day, defendants, without a request or leave to do so, furnished more evidence to Judge Choate.
Judge Choate, in his second report, rejected defendants’ arguments, recommended the court deny defendants’ objections and adopt the recommendations of the first report. On February 4, the day after Judge Choate filed his second report, defendants filed notice that they intended to object. On February 5, however, the court issued a minute order without appearances. The court adopted the recommendations of Judge Choate’s first report, and took a previously scheduled hearing regarding the applicability of section 19881 off calendar. The court also rejected defendants’ attempt to file further objections.
On February 10, defendants filed an ex parte application to vacate the February 5 minute order, arguing they were entitled to file more objections first. With the application, defendants filed 28 pages of written objections to the second report. At the ex parte hearing on February 11, the court overruled defendants’ objections. The instant petition followed.
II
DISCUSSION
Plaintiffs’ Prima Facie Case re Applicability of Evidence Code section 956
“The attorney-client privilege has been a hallmark of Anglo-American jurisprudence for almost 400 years. [Citations.] The privilege authorizes a client to refuse to disclose, and to prevent others from disclosing, confidential communications between attorney and client. (Evid. Code, § 950 et seq.) Clearly, the fundamental purpose behind the privilege is to safeguard the confidential relationship between clients and their attorneys so as to promote full and open discussion of the facts and tactics surrounding individual legal matters. [Citation.] In other words, the public policy fostered by the privilege seeks to insure ‘the right of every person to freely and fully confer and confide in one having knowledge of the law, and skilled in its practice, in order that the former may have adequate advice and a proper defense.’ [Citation.]” (Mitchell v. Superior Court (1984) 37 Cal.3d 591, 599, fn. omitted (Mitchell).)
“Although exercise of the privilege may occasionally result in the suppression of relevant evidence, the Legislature of this state has determined that these concerns are outweighed by the importance of preserving confidentiality in the attorney-client relationship. As this court has stated: ‘The privilege is given on grounds of public policy in the belief that the benefits derived therefrom justify the risk that unjust decisions may sometimes result from the suppression of relevant evidence.’ [Citations.]” (Mitchell, supra, 37 Cal.3d at pp. 599-600.)
“While it is perhaps somewhat of a hyperbole to refer to the attorney-client privilege as ‘sacred,’ it is clearly one which our judicial system has carefully safeguarded with only a few specific exceptions. (Mitchell, supra, 37 Cal.3d at p. 600, fn. omitted.) One of those exceptions is known as the “crime-fraud” exception. It is codified in Evidence Code section 956, which states: “There is no privilege under this article if the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit a crime or a fraud.”
The crime-fraud exception is “very limited.” (Geilim v. Superior Court (1991) 234 Cal.App.3d 166, 174.) “This exception is invoked only when a client seeks or obtains legal assistance ‘to enable or aid’ one to commit a crime or fraud. The quoted language clearly requires an intention on the part of the client to abuse the attorney-client relationship....” (Glade v. Superior Court (1978) 76 Cal.App.3d 738, 746.)
The standard of review upon a finding to support the crime-fraud exception is stated in BP Alaska Exploration, Inc. v. Superior Court (1988) 199 Cal.App.3d 1240, 1261-1262 (BP Alaska): “A trial court’s determination of a motion to compel discovery cannot be overturned in the absence of an abuse of discretion. [Citation.] If the privilege does not appear as a matter of law, the appellate court may not disturb the lower court’s findings if there is any substantial evidence to support them. [Citation.] The appellate court may not weigh the evidence, resolve conflicts in the evidence, or resolve conflicts in the inferences that can be drawn from the evidence. If there is substantial evidence in favor of the finding, no matter how slight it may appear in comparison with the contradictory evidence, the finding must be affirmed. [Citation.]”
With these principles in mind, we focus upon whether there is sufficient evidence to support the finding of a prima facie case to apply the crime-fraud exception: whether the services of attorneys were used to enable defendants to commit a crime or a fraud; and whether there exists “‘a reasonable relationship between the [crime or] fraud and the attorney-client communication. [Citation.]’” (People v. Superior Court (Bauman & Rose) (1995) 37 Cal.App.4th 1757, 1769.) In that connection, it is the intent of the client upon which attention must be focused and not that of the lawyers. (Glade v. Superior Court, supra, 76 Cal.App.3d at p. 746.)
One of the few relatively few examples of the application of the exception can be found in BP Alaska. Nahama & Weagant Company (NWEC) proposed a joint oil exploration venture to BP Alaska Exploration, Inc. (BPAE) on land controlled by Tenneco Oil Company. NWEC, as part of its offer, delivered what it characterized as confidential information about the project. BPAE eventually declined to join with NWEC but did form an agreement with Tenneco directly. NWEC then wrote to BPAE seeking an explanation for its exclusion from the agreement. BPAE, as a result of the threat of litigation, asked both in-house and outside counsel to assist in an investigation and respond to NWEC’s letter. Counsel provided reports to BPAE which became part of the basis of its response to NWEC. NWEC later filed suit against BPAE and sought discovery about BPAE’s investigation of NWEC’s claim, including the reports and communications between BPAE its attorneys. It was argued that these communications were utilized in framing the letter ultimately sent to NWEC, which NWEC alleged, contained misrepresentations. (BP Alaska, supra, 199 Cal.App.3d at pp. 1247-1249.) The court concluded “that NWEC made a prima facie showing that BPAE sought its attorney’s services to assist in the commission or planning of a fraud by making misrepresentations of fact aimed at discouraging NWEC from pursuing its claims.”
(Id. at p. 1269.)
The facts here are different. We have carefully reviewed the documents in question, submitted in camera by the defendants at our request. At the end of the day, we find nothing other than a client seeking legal advice about a potential legal issue. They do not establish that the advice of counsel was “sought or obtained” to enable or to aid defendants to commit or plan to commit a crime or fraud. While the Whaley letter was certainly the opinion of one official about the applicability of section 19881 to the heater, it can hardly be considered a final determination. Coleman was entitled to seek legal advice about the issue, and simply doing so does not create a prima facie case of a crime or fraud. Plaintiffs argue that what they have offered here is sufficient, but if that is true, then nearly any evidence that a client contacted a lawyer after a legal issue arose will be sufficient to negate the privilege, and clearly, that is not the law.
Therefore, we do not find substantial evidence to support the trial court’s conclusions. In the absence of substantial evidence, the court has abused its discretion, and thus, we grant defendants’ petition.
Defendants’ Procedural Objections
Defendants also raise numerous procedural issues concerning the scope of the reference, the adoption of the referee’s recommendations, and other matters. Given that we have determined that a prima facie case sufficient to support the order does not exist, however, these issues are rendered moot.
III
DISPOSITION
The petition is granted. Let a peremptory writ of mandate issue directing the superior court to vacate its February 5, 2009 order and issue new and different orders consistent with this opinion. In the interests of justice, each party shall bear its own costs.
WE CONCUR: SILLS, P. J., FYBEL, J.