Fact Investigation Conducted by Outside Counsel Privileged Despite No Legal Advice Provided

Employers should carefully consider how they handle investigations by outside counsel and non-attorneys in light of a California appellate court decision in City of Petaluma v. the Superior Court of Sonoma County. In this case, a female firefighter/paramedic working for the City of Petaluma filed an EEOC charge claiming sexual harassment and retaliation, and thereafter, resigned. The employee’s EEOC Charge was the first time the City had become aware of her allegations. In response to the employee’s charge, the City retained outside counsel to investigate her claims. The retainer agreement between the City and outside counsel specified that the investigation would be subject to the attorney-client privilege and that counsel would not “render legal advice as to what action to take.”

During the trial court proceeding, the employee sought outside counsel’s investigation files. The City refused to produce the files, claiming that they were privileged. While the trial court ordered the files to be produced, the appellate court disagreed and found that the files were protected by the attorney-client privilege and work product doctrine since the “dominant purpose” of engaging outside counsel was to determine the facts, and to assist with the defense in the anticipated litigation. This ruling underscores the importance of carefully consulting with counsel about how to maintain privilege and work product protections regarding the investigation of claims and any resulting report, especially if employers are conducting the investigation on their own using internal resources (e.g., human resources) or engaging an outside professional to conduct an investigation.