Opinion
F051509
12-6-2006
GENESIS FAMILY CENTER, INC., Petitioner, v. THE SUPERIOR COURT OF FRESNO COUNTY, Respondent; THE PEOPLE, Real Party In Interest.
Linda R. Kollar, for Petitioner. No. appearance by Respondent. Bill Lockyer, Attorney General, Mary Jo Graves, Chief Assistant Attorney General, Michael P. Farrell, Senior Assistant Attorney General, and Janis Shank McLean and Daniel B. Bernstein, Deputy Attorneys General, for Real Parties in Interest.
OPINION
THE COURT
Before Ardaiz, P.J., Cornell, J., and Gomes, J.
We conclude that the reasons given in the order filed on October 18, 2006, are incomplete and deficient. Thus, we cannot adequately review petitioners claims of privilege in light of the issues presented by the parties below. Relief is appropriate to allow all of the issues to be reconsidered and decided in an order that cures those deficiencies. We are expressing no opinion on the claims of privilege or the other issues presented.
This court adopts the procedural background set forth in the "Opposition to Petition for Writ of Mandate ..." as follows:
"Petitioner Genesis Family Center, Inc., is a non-profit corporation in Fresno that runs group homes for foster children. According to an indictment issued in June 2005, Genesis was the victim of an alleged embezzlement scheme by three of its current or former employees: Elaine Bernard, the chief executive officer; her former husband, Rene Bernard; and her sister, Carol Dela Torre. The indictment charges that the three defendants stole in excess of $250,000 from Genesis between January 1, 1996, and January 31, 2002, and committed income tax fraud for four calendar years during that period. Prosecutors have alleged that much of the embezzlement occurred when the defendants used a corporate American Express credit card to purchase a variety of personal items, including clothing from upscale retail stores in several major cities.
"In February 2003, each of the defendants entered into signed agreements with Genesis, agreeing to repay amounts totaling $ 237,632 for personal expenses incurred on the corporate credit card. . . . Each of the agreements states that the corporations board understands that the defendant `did not intend to steal or embezzle any corporate funds, but at all times intended to reimburse the Corporation for personal expenses incurred by use of the American Express Card. The Board also found that the use of the American Express Card was not unauthorized. . . . The letters were authored and signed by Genesiss attorney, Linda Kollar. . . .
"A. Court Proceedings
"Beginning in December 2004, the Fresno County District Attorneys Office has attempted to obtain various corporate records from Genesis, including internal financial documents regarding the expenditures on the American Express card. Genesis has consistently refused to provide that information, claiming attorney-client and work-product privileges.
"On January 6, 2005, a hearing was held on Genesiss motion to suppress a search warrant served by the district attorneys office. . . . The superior court ruled that only the repayment agreements (also known as `letter agreements) had to be disclosed. . . . The court concluded that all other financial records sought by the prosecution were protected either by the attorney-client privilege or the work-product privilege `at least on the state of the records before me. . . .
"On March 14, 2006, a hearing was held on Genesiss motion to quash a subpoena duces tecum issued to the corporation by the district attorneys office. . . . The superior court granted the motion to quash without prejudice to renewal of the subpoena before the trial judge for consideration in light of the evidence that the defendants intend to present at trial. . . .
"On August 16, 2006, the superior court held a hearing on Genesiss motion to quash a subpoena duces tecum served on the corporation on behalf of defendant Dela Torre. . . . The subpoena sought correspondence between the corporation and third parties, as well as board minutes and resolutions, relating to the repayment demands, rather than the more extensive financial records sought by the district attorney. . . . The court quashed the subpoena without prejudice to Dela Torre serving a similar subpoena on the corporations law firm. . . .
"On October 2, 2006, the trial court began hearing in limine motions, including Genesiss motion to quash the district attorneys renewed subpoena served on the corporation on September 25, 2006. . . . The court stated that it did not intend to allow the repayment letters to be introduced into evidence because the statement regarding the defendants lack of criminal intent was hearsay. . . . The court added that it `would be unjust to allow the letters to be admitted without allowing the prosecution to impeach the statements in the letters with the financial documents that served as a basis for those conclusions. . . .
"On October 3, 2006, the trial court conducted an in camera review of the documents sought by the district attorney. . . . Afterward, the court tentatively ruled that no documents regarding Genesiss internal investigation into the American Express charges had to be turned over to the prosecution. The ruling was based on the assumption that the defendants would be precluded from introducing statements in the letter agreements or by witnesses regarding the defendants criminal intent. . . . The following day, the court stated that it would allow testimony regarding the defendants repayments referred to in the letter agreements. . . .
"On October 6, 2006, the trial court stated that when it initially reviewed the financial documents in camera, it did not realize that they were the basis for the repayment figures included in the letter agreements. . . . The Court also stated that it did not realize that the corporation provided each of the defendants with a document in September 2002 containing a list of specific credit card charges, which served as the basis for the repayment amounts cited in the letter agreements. . . .
"On October 10, the court expressed concern over the prospect that defendants might be able to introduce evidence of immediate repayment to show a lack of criminal intent, while the prosecution might be prevented from determining whether the repayment amount represented the full amount of personal purchases. . . . The court called this a `troubling scenario . . . from the position of whats fair in a search for the truth. . . . It added that granting attorney-client and work-product privileges in connection with the financial records underlying the repayment letters `could wind up being used to perpetuate an injustice. . . . Accordingly, the court tentatively ruled that it would not allow the letter agreements to be admitted into evidence, and that none of the underlying financial records had to be turned over to the prosecution because they were attorney work-product materials. . . .
"On October 12, the trial court reversed its tentative ruling, stating that the law requires the defendants to be allowed to present evidence of the repayments to show a lack of criminal intent. . . . To avoid a one-sided presentation of evidence in that regard, the trial court had suggested striking language in the letter agreements stating that the defendants did not have criminal intent. . . . However, each of the defendants objected, arguing that this language was a condition of the repayment, and omitting it would lead the jury to believe that they had consciousness of guilt. . . . The proposal was then dropped.
"The court explained that its prior rulings to prevent disclosure of the underlying financial records behind the repayment letters was based on the `mistaken impression that it could prevent the terms of the settlement from coming before the jury. . . . The prosecutor complained of unfairness to her case if the defendants were allowed to rely on the letter agreement as evidence of their innocence, while she was unable to test those self-serving claims with the underlying records. . . .
"On October 17, the court stated, `I dont see how the corporation can put its findings and conclusions in letter form thats meant to be an agreement, and then use attorney-client privilege or work product privilege as a reason to hide the investigation that purportedly led to those findings. . . . The court then conducted another in camera review of the financial records prior to announcing its final decision the next day. . . .
"B. The October 18, 2006, Ruling
"On October 18, the trial court issued a written decision, ruling that 2,344 pages of financial records, plus three corporate memos, are not shielded by the attorney-client or work-product privileges. . . . The court provided some additional details of its reasoning from the bench the same day. . . .
"The courts ruling applies to documents with Bates stamp numbers 3204-5548, 5687, and 5816-5818. The court described document numbers 3204-5548 as `the working papers of the corporation reflecting the investigation and analysis conducted by Genesis, in cooperation with its attorney and retained experts, into the alleged personal use of the corporations American Express cards by defendants herein. . . . It stated, `Although these documents were generated with the assistance and cooperation of the attorney and retained experts, and they were shared by counsel and members of the board in the process of the boards investigation, they are not attorney-client communications. . . .
"Alternatively, the court found that, even if the documents are confidential communications, Genesis had waived any attorney-client privilege in those documents by `reciting in the letter agreements, which it must necessarily have expected would be made public, details about the extent of the investigation and the findings of the board pursuant to that investigation. . . . The court explained that, at the time the letter agreements were drafted, the corporation must have known that they `would be offered in some public setting — either to persuade prosecutors not to file charges, or to persuade a jury that they were not guilty. . . .
"The court found that, although those documents are work product materials, they are not subject to discovery under Civil Procedure Code section 2018 because they do not reflect the legal thinking of counsel and because denial of discovery would unfairly prejudice a party or result in an injustice. . . .
"The trial court also found that three other documents were subject to disclosure: a memorandum with Bates stamp number 5687, and two other memos containing Bates stamp numbers 5816-5818. . . . The court stated that the first memo was `not subject to any work product or attorney-client privilege because it `is not between the corporation and its counsel or between counsel and retained experts. . . . It stated that the two other memos were attorney work-product materials because they were authored by the corporations lawyer, but found that denial of discovery would unfairly prejudice the prosecution or result in injustice. . . ." (Fns. omitted.)
DISCUSSION
Petitioner "invokes this courts power to order extraordinary relief to correct the trial courts ... error of October 18, 2006 when it ordered Petitioner to disclose ... privileged documents." (Files.)
As summarized above, the Order of October 18, 2006 (Order) was itself the result of a series of re-evaluations of the same issues by the trial court. Initially, the trial court denied the People access to the Files but came to a different conclusion in the Order. As the People admitted above, the Order granting discovery to the People resulted from the trial courts ruling that the Agreements would be admissible (Ruling) — the admissibility and relevance of the statements in the Agreements affected the need for the People to have access to the Files. However, the Order neither contains the Ruling nor explains it. If the statements in the Agreements were to be admitted for the truth of the matters asserted therein, the Order should have explained what exception to the hearsay rule rendered them admissible. If those statements were to be admitted other than for their truth, the Order should have explained their relevance.
Nothing in this opinion reflects the views of this court regarding whether such an evidentiary ruling is appropriate prior to trial under the circumstances of this case.
Moreover, despite the trial courts verbal statements at the hearing on October 17, 2006, that the Files were to be made available to the People, those statements were not included in the Order. In drafting the Order, the court necessarily had an opportunity to review its conclusions at the hearing. The omission in the Order of any mention of a transfer impliedly superseded any prior verbal statements to the contrary. The Order did not contain any express direction that a transfer was to occur nor was a date and time set for that transfer. Neither at the hearing nor in its Order did the trial court expressly deny petitioners motion to quash the subpoena duces tecum. (Motion) Instead, the Order concluded as follows:
"Each of the above described documents has been personally sealed by the undersigned, with appropriate sealing orders attached thereto, and will be retained in a secure place until November 1, 2006, when counsel for Genesis will advised whether she intends to seek extraordinary relief, by way of a writ to the Court of Appeals, from this Courts decision. In the event of review of this Courts findings and conclusions regarding the above documents by the Court of Appeals, the specific documents described herein will be delivered to the Court of Appeals under seal."
A decision on the Motion was a condition precedent before any Files could be made available to the People. Since no such decision was rendered, the result was that the trial court merely made factual findings and legal conclusions on the issues of privilege and waiver and invited this court to review them prior to any decision on the Motion and transfer.
"It is well settled that the duty of this court, as of every other judicial tribunal, is to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it." (Nat. Assn. of Wine Bottlers v. Paul (1969) 268 Cal.App.2d 741, 746.)
For this court to undertake a review of the Files in light of the trial courts findings and conclusions at this point would amount to an advisory opinion and a piecemeal adjudication of the issues. (People v. Ybarra (1988) 206 Cal.App.3d 546, 549.)
Furthermore, the response of the People makes the following admissions regarding the insufficiency of the trial courts findings and conclusions:
"In ruling that the financial documents examined in camera were not confidential communications, the trial court appeared to rely entirely on the content of the records. Whether corporate records and reports constitute attorney-client communications is a fact-intensive inquiry with many permutations. (See D.I. Chadbourne v. Superior Court [1964] 60 Cal.2d [723, 732-739] [discussing various issues that arise in such a context].) Based on the trial courts limited findings, however, the People cannot dispute that the trial court erred in concluding that the financial records at issue are not protected communications simply because they do not contain `any record of any communication between corporate counsel, her retained experts and members of the board.
"Because the trial court found that the financial documents were generated with the assistance and cooperation of counsel, and were shared with counsel, the information contained in them would appear to be a confidential communication for purposes of Evidence Code section 952."
The trial court concluded that as to Files G03204 through G05818, "Alternatively, if these documents are attorney-client communications, Genesis waived any attorney-client privilege in these documents by reciting in the letter agreements, which it must necessarily have expected would be made public, details about the extent of the investigation and findings of the board pursuant to that investigation." However, under Evidence Code section 912 a waiver occurs if "... the holder of the privilege ... has disclosed a significant part of the communication ..." The Order does not identify any portion of the Agreements which constitute a "significant part of the" Files. The People alternatively argue that a waiver occurred because the Agreements "placed in issue a communication which goes to the heart of the claim in controversy" — the People focus on the statements in the Agreements regarding the defendants lack of criminal intent. However, the Order didnt expressly apply such a theory. Nor do the People explain how petitioner, who is a non-party and at this point merely a source of information and documents, can tender for litigation an issue which had already been submitted by the People. If the trial court had relied on this new theory, the Order should have so stated and explained how it applied to the Agreements.
This court concludes that the findings and conclusions in the Order are incomplete and facially inadequate.
"[A]n order based upon improper criteria or incorrect assumptions calls for reversal `"even though there may be substantial evidence to support the courts order."" (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 436.) Linder thus makes it unnecessary to review and evaluate the Files at this time.
Because the trial court expressly invited this courts review and to conserve the resources of the parties and the courts, this court further concludes that relief should issue allowing the trial court to reconsider its findings and conclusions. If any statements in this opinion are inaccurate, the new decision should note them and explain.
Petitioner is entitled to appropriate relief. (Code Civ. Proc., § 1085; see Whitneys at the Beach v. Superior Court (1970) 3 Cal.App.3d 258, 266.) A peremptory writ of mandate is proper and should issue. (Code Civ. Proc., § 1088; Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 178; Goodenough v. Superior Court (1971) 18 Cal.App.3d 692, 697.)
Let a peremptory writ of mandate issue directing the Fresno County Superior Court to vacate its Order filed on October 18, 2006, in action No. F05904742-4.
The stay order filed on October 31, 2006, shall remain in effect only until the trial court has complied with the above stated directions, the Supreme Court grants a hearing herein or this opinion is final in all courts in this state; thereafter said order is vacated and the stay dissolved.
Pursuant to California Rules of court, rule 24(b)(3), this opinion is ordered to become final only as to this court upon the date it is filed. (Ng v. Superior Court (1992) 4 Cal.4th 29, 34.)