In City of Petaluma v. Superior Court of Sonoma County (Cal. App. 1st Dist. June 8, 2016, No. A145437), a public employer hired outside counsel to conduct an investigation in anticipation of a lawsuit for discrimination and retaliation. The investigator was directed not to provide legal advice. In the subsequent lawsuit, the California Court of Appeal held that attorney-client privilege and the attorney work product doctrine protected the investigator’s report from discovery. Though the investigator did not give the employer legal advice, the legal service she provided was, by itself, sufficient to support a protected attorney-client relationship.

Background
Andrea Waters, a firefighter and paramedic with the City of Petaluma (City), filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging sexual harassment and retaliation. Days later, she resigned from her position. The City Attorney, anticipating a lawsuit, retained attorney Amy Oppenheimer to investigate Waters’ EEOC complaint.

Waters sued the City for discrimination, hostile work environment, and retaliation, among other claims. The City claimed Oppenheimer’s investigation report was protected from discovery by attorney-client privilege and the work product doctrine. Waters asked the California Superior Court to compel the production of the report. The court granted Waters’ motion. The City sought relief from the California Court of Appeal.

The Appellate Court’s Decision

1. Investigation Report Protected By Attorney-Client Privilege and Work Product Doctrine

The California Court of Appeal ruled that the Superior Court erred. The appellate court held that the investigation report was protected by attorney-client privilege and the work product doctrine because it was prepared under an attorney-client relationship.

The court first turned to the relevant statute. It noted that for purposes of the attorney-client privilege and the work product doctrine, California Evidence Code § 951 defines "client" as a person who retains a lawyer for securing "legal service or advice" in a professional capacity. Therefore, "an attorney-client relationship may exist when an attorney provides a legal service without also providing advice. The rendering of legal advice is not required for the privilege to apply."

The court determined that Oppenheimer was hired to provide a legal service. The retention agreement between the City and Oppenheimer specified that it created an attorney-client relationship and that Oppenheimer would use her expertise in employment law to arrive at findings based upon her professional evaluation of the evidence. The court found that Oppenheimer was not merely a fact finder whose sole task was to gather information and transmit it to the City. Rather, the "dominant purpose" of her relationship with the City was for Oppenheimer to provide professional legal services so that the City Attorney could advise the City on the appropriate course of action. As a result, the investigation report Oppenheimer prepared was protected by attorney-client privilege and the work product doctrine.

2. Attorney-Client Privilege and Work Product Doctrine Not Waived By Assertion of Avoidable Consequences Defense

The Court also found that the City did not waive its attorney-client privilege or the work product doctrine when it asserted the avoidable consequence defense, because the investigation was conducted after the employee left her job.

Under the avoidable consequences defense, employees may not collect damages if they ignore procedures their employers designed to prevent sexual harassment. If an employer claims it investigated an employee’s complaint and responded with appropriate measures that the employee did not take advantage of, the employer waives attorney-client privilege and work product doctrine protections for its investigation. However, the appellate court held that an employer’s assertion of the avoidable consequences defense does not affect a post-employment investigation. Obviously, employees cannot take advantage of corrective measures initiated after they have left their jobs. The court found that the City did not seek to rely on the post-employment investigation as a defense, nor could it. As a result, the City’s assertion of the avoidable consequences defense did not waive attorney-client privilege and the work product doctrine.

Significance

Employers that engage outside counsel for workplace investigations can use the City of Petaluma decision to help them protect investigation reports from disclosure in discovery proceedings. The California Court of Appeal noted the following factors in its finding that the investigation report was protected by attorney-client privilege and the work product doctrine:

  1. The retainer agreement stated that it created "an attorney/client relationship" between the investigator and the client.
  2. In the retainer agreement, the investigator agreed to the following: "As attorneys, we will use our employment law and investigation expertise to assist you in determining the issues to be investigated and conduct impartial fact-finding."
  3. The retainer agreement specified that the investigation would be subject to attorney-client privilege until the client waived the privilege or a court determined that some or all of the investigation was not subject to the privilege.
  4. Every page of the investigation report indicated that the report was confidential and attorney-client privileged.
  5. All communications between the investigator and the client were maintained in confidence and not disclosed to anyone outside the attorney-client relationship.
  6. All of the investigator’s work product, including her report, was maintained in confidence and not disclosed to anyone outside the attorney-client relationship.

Employers seeking to protect investigation reports from discovery should consider incorporating these factors into their engagement agreements and their relationships with investigators.