Opinion
NOT TO BE PUBLISHED
ORIGINAL PROCEEDINGS; applications for a writ of mandate. Orders to show cause issued. Jane L. Johnson, Judge. Community Bank’s petition for writ of mandate is denied; Mimi Shanahan’s petition for a writ of mandate is granted., Super. Ct. No. BC413879
Keker & Van Nest, Jon B. Streeter, Ajay S. Krishnan and Benjamin W. Berkowitz for Petitioner Mimi Shanahan.
No appearance for Respondent.
Manatt, Phelps & Phillips, Sandra R. King, Benjamin G. Shatz, Noel S. Cohen and Joanna M. Hooper for Petitioners Community Bank, et al.
WOODS, J.
As the executor of the estate of Francis P. Shanahan (Fran) and individually, Mimi Shanahan (Mimi), Fran’s widow, sued Community Bank (Bank) and Bank directors Alan P. Johnson, Charles E. Cook, Daniel J. McCluer and Craig H. Stewart for breach of contract and related causes of action arising out of an oral agreement between Fran and the Bank for executive compensation for Fran, who served as the president and CEO of the Bank from April 2006 to September 2008.
After Mimi’s motion to compel the return of documents the Bank found when it searched Fran’s computer, the court ruled certain documents were privileged and ordered their return to Mimi. The court also ruled the privilege had been waived as to another document and it need not be returned. The Bank’s writ petition challenges the order finding the other documents (Exhibits 14-18) were privileged. Mimi’s writ petition challenges the order finding the privilege had been waived as to Exhibit 15. We deny the Bank’s petition and grant Mimi’s petition.
FACTUAL AND PROCEDURAL SYNOPSIS
I. The Agreement
In April 2006, Fran, who had been on the Bank’s board of directors since 1994, began working as the Bank’s president and CEO. The terms of Fran’s employment were not formally finalized at that time. On April 17, 2006, Fran entered into a “handshake deal, ” i.e., an oral agreement, with Bank director Alan Johnson. Their understanding was Fran would receive an annual salary of $350,000 for a two-year period. Fran and the Bank agreed that the terms of Fran’s employment would include a potential equity component, i.e., if Fran met certain performance benchmarks over a defined period of time, he would be entitled to some sort of equity interest in the Bank.
The Bank agreed to Fran’s request that he take the responsibility to have the “handshake deal” committed to a written contract. Contemporaneous Bank documents, such as the term sheet discussed at the meeting, evidence portions of the agreement. The Bank agreed that Fran could hire an attorney to represent him with regard to documenting the agreement and that it would pay the fees of that attorney.
Two years passed before serious efforts were made to draft the agreement. In the Spring of 2008, when Fran began working in earnest to document the deal, the Bank was represented by outside counsel Manatt, Phelps & Phillips (Manatt). Manatt attorney William Quicksilver referred Fran to Jonathan Joseph, a transactional attorney in San Francisco with experience in the financial services industry. Joseph first met with Fran in April 2008 and began representing Fran as his personal counsel at that time.
The process of drafting the agreement was informal and cordial. Manatt attorneys David Herbst and Craig Miller informally discussed with Joseph the legal issues related to the drafting of the agreement. At times, Joseph asked the Manatt attorneys to supply the legal research and analysis. When Miller was not sure whether his assignment was to draft the entire employment agreement or just the equity portion, rather than ask his client, Miller asked opposing counsel Joseph what his understanding was.
Fran was never told to work on drafting the agreement on his own time or outside of the Bank’s premises.
Efforts to document the agreement in 2008 included Joseph’s transmission of a draft agreement to Manatt on July 1, 2008, that rejected earlier material terms and proposed entirely new terms, and Manatt’s forwarding of several portions of a draft agreement to Malone on July 3, 2008. Despite these efforts, no final agreement was ever drafted. Fran died of cancer in early September 2008.
In November 2008, the Bank paid Mimi approximately $240,000 representing a pro rata portion of Fran’s 2008 annual bonus. The operative complaint, the first amended complaint (FAC), alleged the Bank refused to award certain equity compensation to Fran’s estate as agreed.
Within days after Fran’s death, Johnson had Wendy Welch-Keller, Fran’s secretary/assistant, searched Fran’s computer for documents.
II. Motion to Compel
On September 21, 2009, Mimi moved to compel the return of a number of the documents collected by the Bank on the basis they were protected by the attorney-client privilege and the work-product doctrine. Those documents included: (1) Exhibit 11, a document dated April 18, 2006, and entitled “Community Bank [¶] Terms of Employment-Francis P. Shanahan”; (2) Exhibit 12, e-mails between Fran and Joseph with attachments printed out from Fran’s Bank e-mail account; (3) Exhibit 13, an e-mail from Joseph to Fran’s Bank and personal e-mail accounts, which was apparently printed from Fran’s personal e-mail account; (4) Exhibit 14, a confidential memorandum (Confidential Memo) titled “Francis P. Shanhan–2008 Option Agreement” that Fran gave to Joseph on or about April 16, 2008, along with attachments to the memorandum; (5) Exhibit 16, a document titled “Francis P. Shanahan– Employment Issues” that appears to be Fran’s notes of a conversation between himself and Joseph; (6) Exhibit 17, spreadsheets of calculations that were likely created by Fran in July 2008 reflecting his communications with Joseph about the value and vesting of the equity ownership agreement; and(7) Exhibit 18, a document titled “FPS Contract Summary 7 8 08” that appears to be Fran’s notes of his and Johnson’s negotiation positions on the drafting of the agreement.
The motion to compel also asked for the return of Exhibit 15, two rough drafts of the Confidential Memo (Exhibit 14) that Fran gave to Joseph on April 16, 2008. Fran sent one of the two drafts to Welch-Keller by e-mail. As far as Welch-Keller understood, Fran sent her the document for her to print it.
During Fran’s life, he maintained those communications in a confidential manner. Although Welch-Keller might have had access to some of the documents on Fran’s computer, including certain e-mails, she maintained Fran’s e-mails in confidence. Welch-Keller did not believe she was allowed to share Fran’s e-mails with anyone other than him. Fran commonly sent e-mails and other documents to Welch-Keller to print or proofread.
The Bank provided Fran with an office and a computer. Fran’s use of the computer was governed by the Bank’s employee handbook and code of conduct. The code of conduct applied to all Bank employees, including directors and officers.
The code of conduct provides:
[Bank] reserves the absolute right periodically to search, check, review, monitor, record, audit, access, store and disclose any electronic communications, and any other rights necessary to protect its electronic communications system(s).
Employees are to use the electronic communications system(s) only for [Bank] business and legitimate business purposes and not for personal correspondence or communications. Incidental and personal use of electronic communications is permitted, but such electronic communications will be treated no differently from any other communications. [Bank] strictly forbids the use of any electronic equipment to disseminate, engage in or further any illegal activity such as....
The Bank’s employee handbook had a section on “Electronic Communications & Inspections, ” which states in part:
The Bank reserves the absolute right periodically to search, check, review, monitor, record, audit, access, store, and disclose any electronic communications information without notice or permission and investigate unauthorized and/or improper access or use of its systems. By accessing these systems, employees consent that the Bank and/or its agents may exercise the aforementioned rights.
....
Under no circumstances will a Bank employee have any privacy expectations or rights with regards to electronic communications sent, received or stored by the Bank.
There was no evidence that the policy was applied to Fran or that the Bank searched Fran’s e-mails during his life. There was no evidence anyone at the Bank had authority to search the CEO’s e-mails without his prior knowledge or permission.
The court heard oral argument on Mimi’s motion on October 14, 2009. The court stated the Bank’s policy did not waive the (attorney-client) privilege because it did not include an express reference to privilege. The court entered an order granting the motion for return of all the privileged documents except for Exhibit 11, which was Fran’s notes of his conversation with Johnson (who was not an attorney) prior to retaining Joseph as his lawyer. The court found as factual matters that the Bank conceded Exhibits 12 and 13 were attorney-client communications, the Confidential Memo (Exhibit 14) and the two drafts of the Confidential Memo (Exhibit 15) were “clearly protected by the attorney client privilege, ” and though Exhibits 17 and 18 were never delivered to counsel, their primary purpose was for transmission to counsel.
III. Motion for Clarification
On October 23, 2009, having been ordered to return the privileged documents, the Bank requested the court clarify its prior order with respect to Exhibit 15. The Bank argued that because Fran had e-mailed one of the two drafts of the Confidential Memo to his secretary, he had waived the attorney-client privilege with respect to that document. Exhibit 15 consists of two documents. The first is marked “Confidential” and contains the notation “Discussion with John Joseph, April 16, 2008.” The second document (Draft Memo) is a preliminary draft of that document. It is the Draft Memo that the Bank contended was not privileged because Fran asked his secretary to print it for him.
In its ruling, the court noted it had previously “found that Exhibit 15 was protected by the attorney client privilege because it was marked Confidential and reflected that it was prepared as a result of Francis Shanahan’s... discussion with Jon Joseph, his lawyer, on April 16, 2008.” The court found Fran had waived the privilege with respect to the Draft Memo when he asked his secretary to print it for him. The court entered an order granting the Bank’s motion for clarification and denying Mimi’s motion to compel return of the Draft Memo.
The Bank timely petitioned this court for a writ to relieve it of its obligation to return the privileged documents the court ordered it to return.
Mimi timely petitioned this court for a writ of mandate ordering the superior court to reverse its order granting the Bank’s motion for clarification.
This court ordered the two petitions be considered together.
INTRODUCTION
Both petitions challenge discovery orders of the superior court. “‘“We review discovery orders under the abuse of discretion standard, and where the petitioner seeks relief from a discovery order that may undermine a privilege, we review the trial court’s order by way of extraordinary writ.”’ ‘“A trial court abuses its discretion when it applies the wrong legal standards applicable to the issue at hand.”’” (Citations omitted.) (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, 1493.)
“‘On appeal, the scope of judicial review is limited. “When the facts, or reasonable inferences from the facts, shown in support of or in opposition to the claim of privilege are in conflict, the determination of whether the evidence supports one conclusion or the other is for the trial court, and a reviewing court may not disturb such finding if there is any substantial evidence to support it.’” (People v. Gutierrez (2009) 45 Cal.4th 789, 818.) However, “Where the facts are undisputed, the privilege claim is one of law which is reviewed de novo.” (Tien v. Superior Court (2006) 139 Cal.App.4th 528, 535.)
THE BANK’S PETITION
Evidence Code section 952 defines a confidential communication as:
All statutory references are to the Evidence Code.
As used in this article, ‘confidential communication between client and lawyer’ means information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.
“The party claiming the privilege has the burden of establishing the preliminary facts necessary to support its exercise, i.e., a communication made in the course of an attorney-client relationship. Once that party establishes facts necessary to support a prima facie claim of privilege, the communication is presumed to have been made in confidence and the opponent of the claim of privilege has the burden of proof to establish the communication was not confidential or that the privilege does not for other reasons apply.” (Citations omitted.) (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 733; see also OXY Resources California LLC v. Superior Court (2004) 115 Cal.App.4th 874, 894 [“‘“The party opposing the privilege must bear the burden of showing that the claimed privilege does not apply or that an exception exists or that there has been an express or implied waiver.”’”].) Thus, it was the Bank’s burden to prove that Fran had waived the attorney-client privilege.
The Bank contends the attorney-client privilege does not protect documents created and stored on an employer’s computer. According to the Bank, the following documents are at issue in its writ petition.
Exhibit 14: A document (with attachments) titled “Confidential” that Fran personally gave to his lawyer on April 16, 2008, when they met at Fran’s office.
Exhibit 15: Two rough draft memos, one of which Fran e-mailed to his secretary Welch-Keller.
Exhibit 16: A single page document titled “Francis P. Shanahan-Employment Issues” containing Fran’s notes regarding different aspects of his employment relationship with the Bank.
Exhibit 17: Spreadsheets of calculations apparently created by Fran in July 2008.
Exhibit 18: A single page document titled “FPS Contract Summary 7 8 08” that appears to be Fran’s notes of his and the Bank’s negotiating positions regarding different terms of the employment agreement.
The Bank argues Fran could have no reasonable expectation the documents stored on its computer were confidential because of its policy of allowing it to have free access to its computers, i.e., Fran waived any expectation of privacy by using its computer. In Shadow Traffic Network v. Superior Court (1994) 24 Cal.App.4th 1067, 1082, in the context of considering whether an expert’s earlier discussions with an adverse party were confidential, the court reasoned, “the dispositive question is whether there was a reasonable expectation that information would remain confidential.”
Mimi asserts the Bank failed to meet its burden of submitting evidence the subject documents were obtained from Fran’s work computer. Although the Bank’s initial authentication of the exhibits does not verify they were obtained from Fran’s computer and Mimi has moved to strike the Bank’s subsequent verification to that effect, we will assume arguendo that the subject documents were stored on the Bank’s computer. Consequently, we deny Mimi’s motion to strike as unnecessary.
“‘A “reasonable” expectation of privacy is an objective entitlement founded on broadly based and widely accepted community norms, ’ and ‘the presence or absence of opportunities to consent voluntarily to activities impacting privacy interests obviously affects the expectations of the participant.’” (TBG Ins. Services Corp. v. Superior Court (2002) 96 Cal.App.4th 443, 449.)
The Bank argues that no exception to the general rule of waiver applies here because Fran knew about its policy and because Fran did not take any specific precautions, such as using a personal, password protected e-mail account. The Bank cites authority from other state and federal courts, legal treatises and law review articles to support its position that employees have no reasonable expectation of privacy for documents stored on an employer’s computer, particularly if the employer has a policy providing computer use may be monitored.
Citing TBG Ins. Services Corp., the Bank posits California law accords with that view. The court there concluded, “the use of computers in the employment context carries with it social norms that effectively diminish the employee’s reasonable expectation of privacy with regard to his use of his employer’s computers.” (TBG Ins. Services Corp. v. Superior Court, supra, 96 Cal.App.4th at p. 452.) The court did not address the attorney-client privilege per se, but while it entered an order directing the return of the employer’s computer that the employee was using at home for an allegedly improper purpose, it suggested the employer was not entitled to discovery where there was “a legitimate privilege issue or claim of attorney work product.” (Id., at pp. 445, 447-448, 454.)
However, we need not resolve the general issue of what an employee’s expectation of privacy is with regard to his or her use of his or her employer’s computer because, as explained below, we conclude that under the unusual circumstances here, Fran did have a reasonable expectation his documents would remain confidential.
In its tentative decision, the court found:
[U]nder the circumstances, [Fran] reasonably believed that he was being permitted to communicate with his attorney via his computer, and that he had a reasonable expectation that the attorney-client privilege would attach to those communications. This is so because the company provided the computer to [Fran], and also provided him with the attorney he used to negotiate the deal; the company paid for [Fran’s] attorney, and the company often engaged in negotiations with [Fran] via [Fran’s] e-mail system during work hours. It would be unreasonable for the company to have expected [Fran] to use only a private e-mail when communicating with his attorney, and there is no reason to think that the attorney-client privilege should not apply merely because the communications were only company e-mail. This is especially true in light of Evidence Code Section 917(b), which appears to be the most on-point authority available on the issue.
Section 917, subdivision (b) provides: “A communication between persons in a relationship listed in subdivision (a) [which includes lawyer-client] does not lose its privileged character for the sole reason that it is communicated by electronic means or because the persons involved in the delivery, facilitation, or storage of electronic communication may have access to the content of the communication.” The Bank asserts this section is irrelevant to this case, but admits that the statute ensures e-mail communications can be privileged even if they are not automatically privileged.
We find the court’s reasoning persuasive and agree that under the circumstances of this case, Fran had a reasonable expectation the documents would be confidential, i.e., that, if applicable, the attorney-client privilege would attach to them.
Generally, “The waiver of an important right must be a voluntary and knowing act done with sufficient awareness of the relevant circumstances and likely consequences.” (Roberts v. Superior Court (1973) 9 Cal.3d 330, 343.) Moreover, a form consent waiving a privilege “is to be strictly construed against” the one “supplying the form so that the waiver encompasses only that which clearly appears on its face.” (Ibid.; see also Maas v. Municipal Court (1985) 175 Cal.App.3d 601, 607 [“consent to disclosure must be unambiguously manifest.”].) Hence, the Bank’s policy of access, as expressed in the employee handbook and code of conduct, does not negate that expectation of confidentiality as it does not contain any express reference to waiving the attorney-client privilege. In other words, the facts in the instant case trump the Bank’s policy. Accordingly, we deny the Bank’s petition for a writ of mandate.
MIMI’S PETITION
Mimi contends the issue presented by her petition is whether an employee waives the attorney-client privilege when he asks his secretary, who regularly maintains the confidentiality of his files, to print out an otherwise privileged document. The Bank counters that the attorney-client privilege does not protect a document the client knowingly shared with an agent of the adverse party in the matter for which the client sought legal counsel.
Waiver is governed by section 912. Subdivision (a) provides in part that waiver occurs “if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone.” Subdivision (d) contains an exception to waiver: “A disclosure in confidence of a communication that is protected by a privilege provided by Section 954 (lawyer-client privilege)... when disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer... was consulted, is not a waiver of the privilege.”
The superior court found that even though the Draft Memo (part of Exhibit 15) was “protected by the attorney client privilege, ” Fran had waived the privilege when he e-mailed the document to his secretary. The court reasoned that because Fran’s secretary (Welch-Keller) was a Bank employee, she “could not be considered [Fran’s] agent for communication with [Fran’s] lawyer” and Mimi had “not presented any evidence that [Fran] was unable to communicate the second document to his lawyer such that Ms. Welch-Keller would have been required for transmission to his lawyer.”
Preparatory notes or writings created for the purpose of communicating them to one’s attorney are protected even if they are not ultimately conveyed to the attorney. (Cf. People v. Gardner (1980) 106 Cal.App.3d 882, 887.)
The Bank contends those fact findings govern the outcome and support the court’s order. (See People v. Gutierrez, supra, 45 Cal.4th at pp. 817-818.) The Bank notes that Fran treated this document differently than other relevant documents, which he labeled confidential and did not share with Welch-Keller, and that Fran did not ask his secretary to transmit the document to his counsel. (See Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, 396.) The Bank asserts Welch-Keller was an unnecessary third person and her involvement destroyed the privilege. (Insurance Co. of North America v. Superior Court (1980) 108 Cal.App.3d 758, 765.) The Bank also asserts that Welch-Keller could not be considered Fran’s agent for purposes adverse to the Bank as she was a Bank employee not Fran’s personal secretary and could not be Fran’s agent for purposes of his personal business as her duty would be to side with the Bank if a conflict arose.
Even though Welch-Keller was an employee of the Bank, under the circumstances of the case at bar, that fact does not negate Fran’s expectation his documents would remain confidential or waive the attorney-client privilege. As is often the case, although a secretary is an employee of the company or agency, he or she is assigned as a particular person’s secretary. Welch-Keller indicated in her deposition that she was acting as Fran’s secretary; Fran sent her documents to print or proof read, and Welch-Keller maintained Fran’s e-mails in confidence and knew not to share his e-mails with anyone else. In contrast, had Fran shared the e-mails with a pool secretary or the secretary of another officer, he would have waived the attorney-client privilege.
In addition to assigning Welch-Keller as Fran’s secretary, the Bank acceded to Fran’s request that he work on committing the terms of his employment agreement to a written contract. Not only did the Bank assign Fran a secretary and an office and provide him with a computer, but also it agreed Fran could hire an attorney to represent him with respect to documenting the agreement, recommended attorney Joseph to Fran and agreed to pay Joseph’s fees. It is reasonable to infer the Bank was aware of the ongoing informal communications between Joseph and the Bank’s outside counsel regarding legal issues related to drafting the agreement, including doing some legal research. The Bank never told Fran to work on drafting the agreement on his own time or outside the Bank’s premises. Accordingly, the Bank should have been aware Fran would use Welch-Keller to assist him. Thus, Welch-Keller was acting more as Fran’s secretary than as a Bank employee when Fran e-mailed the Draft Memo to her.
“‘(T)he client’s freedom of communication requires a liberty of employing other means than his own personal action. The privilege of confidence would be a vain one unless its exercise could be thus delegated. A communication, then, by any form of agency employed or set in motion by client is within the privilege.” (Italics deleted.) (City & County of San Francisco v. Superior Court (1951) 37 Cal.2d 227, 236-237; see also Greyhound Corp. v. Superior Court, supra, 56 Cal.2d at p. 396 [“It has been held that it is still the client’s communication to the attorney even when it is given to an agent for transmission to the attorney, and it is immaterial whether the transmitter is the agent of the client, the attorney, or both.”]; Skopp v. Weaver (1976) 16 Cal.3d 432, 439, fn. 7 [“In a dual agency, ‘[t]he agent... is under no duty to disclose, and has a duty not to disclose to one principal, confidential information given to him by the other.’”].)
As an exception to waiver by disclosure, it was Mimi’s burden to demonstrate that the disclosure to Welch-Keller was reasonably necessary. (See Roush v. Seagate Technologies, LLC (2007) 150 Cal.App.4th 210, 225; see also OXY Resources California LLC v. Superior Court, supra, 115 Cal.App.4th at p. 891 [“If a disclosing party does not have a reasonable expectation that a third party will preserve the confidentiality of the information, then any applicable privileges are waived. An expectation of confidentiality, however, is not enough to avoid waiver. In addition, disclosure of the information must be reasonably necessary for the accomplishment of the purpose for which the lawyer was consulted.”].)
As noted in Insurance Co. of North America, “To sum up, we construe section 952 to mean that attorney-client communications in the presence of, or disclosed to, clerks, secretaries, interpreters, physicians, spouses, parents, business associates, or joint clients, when made to further the interest of the client or when reasonably necessary for transmission or accomplishment of the purpose of the consultation, remain privileged.” (Insurance Co. of North America v. Superior Court, supra, 108 Cal.App.3d at p. 771; see also Brody v. Montalbano (1978) 87 Cal.App.3d 725, 734 [“The California Legislature has recognized that disclosure of confidential communications to secretarial help is reasonably necessary to accomplish the transmission of the information, hence such disclosure will not destroy the privilege.”].)
The record does not expressly reveal why Fran sent the Draft Memo portion of Exhibit 15 to his secretary. We note that Fran is deceased and cannot explain why he sent it. The Bank posits the only clear evidence is that Fran e-mailed the document to Welch-Keller and she read it. However, Welch-Keller stated she kept Fran’s documents confidential and “it was not uncommon for him [Fran] to send documents to me to print them.” The Bank questions why if Welch-Keller had an understanding with Fran that she was simply to print the document, she read it. Welch-Keller stated that it was a normal practice for Fran to draft a document, send it to her to proofread, print out and bring to him for signature and that Fran would type things in draft or dictate them. Under such a practice, Fran might not have labeled the Draft Memo as confidential as it was a preliminary draft. The fact the subsequent drafts were labeled confidential indicates Fran considered it so.
It is reasonable to infer Fran sent this document to Welch-Keller for her to print it or perform some other clerical function, such as proofreading it for him. Thus, helping to accomplish the purpose for which the attorney was retained. The Bank offers no other suggestion as to why he did so nor did it raise below the question of why Fran e-mailed the document to Welch-Keller. The court only considered whether Welch-Keller had transmitted the document not whether she had performed some function reasonably necessary to accomplish the purpose of Fran’s consultation with attorney Joseph. As discussed above, under the totality of the circumstances, Fran had a reasonable expectation the document would remain confidential and did not waive the attorney-client privilege when he sent the document to Welch-Keller.
Accordingly, we grant Mimi’s petition for a writ of mandate.
DISPOSITION
The Bank’s petition for a writ of mandate is denied. Mimi’s petition for a writ of mandate is granted with directions to the superior court to set aside its December 3, 2009, order on the Bank’s motion for clarification and to enter a new and different order requiring the Bank to return to Mimi the Draft Memo document in Exhibit 15 (Bates number CB 1899-1902). Mimi is awarded her costs relating to these petitions.
We concur: PERLUSS, P. J., JACKSON, J.