Newman v. Highland School District No. 203

381 P.3d 1188, 186 Wash. 2d 769

• Court: Washington Supreme Court
• Decided: October 20, 2016
• Docket: No. 90194-5
• Status: Published

Opinions

Stephens, J.

¶1 Highland High School quarterback Matthew Newman suffered a permanent brain injury at a football game in 2009, one day after he allegedly sustained a head injury at football practice. Three years later, Newman and his parents (collectively Newman) sued Highland School District No. 203 (Highland) for negligence. Before trial, Highland’s counsel interviewed several former coaches and appeared on their behalf at their depositions. Newman moved to disqualify Highland’s counsel, asserting a conflict of interest. The superior court denied the motion but ruled that Highland’s counsel “may not represent non-employee witness [es] in the future.” Clerk’s Papers (CP) at 636. Newman then sought discovery concerning communications between Highland and the former coaches during time periods when the former coaches were unrepresented by Highland’s counsel. Highland responded with a motion for a protective order, arguing its attorney-client privilege shielded counsel’s communications with the former coaches. The trial court denied the motion, and Highland appealed.

¶2 At issue is whether postemployment communications between former employees and corporate counsel should be treated the same as communications with current employees for purposes of applying the corporate attorney-client privilege. Although we follow a flexible approach to application of the attorney-client privilege in the corporate context, we hold that the privilege does not broadly shield counsel’s postemployment communications with former employees. The superior court properly denied Highland’s motion for a protective order. We affirm the lower court and lift the temporary stay of discovery.

FACTS AND PROCEDURAL HISTORY

¶3 Matthew Newman suffered a permanent brain injury during a football game on September 18, 2009. Newman sued Highland for negligence in violation of the Lystedt law, RCW 28A.600.190, which requires the removal of a student athlete from competition or practice if he or she is suspected of having a concussion. Newman alleges that Matthew suffered a head injury at football practice the day before the September 18 game, and that Highland coaches permitted him to play in the game even though he exhibited symptoms of a concussion.

¶4 In preparing for trial, Newman’s counsel deposed the entire football coaching staff employed at the time of Newman’s injury, including coaches who were no longer employed by Highland. At the depositions, Highland’s counsel indicated that he had interviewed the former coaches before their individual depositions, and was appearing on their behalf for purposes of their depositions.

¶5 Newman moved to disqualify Highland’s counsel from representing the former coaches, claiming a conflict of interest under Rule of Professional Conduct (RPC) 1.7. The superior court denied the motion but ruled that Highland’s counsel “may not represent non-employee witness [es] in the future.” CP at 636.

¶6 Newman then sought discovery concerning communications between Highland’s counsel and its former coaches. Highland moved for a protective order to shield those communications, asserting attorney-client privilege. The superior court denied the protective order and directed Highland to respond to Newman’s discovery requests. The superior court ordered Highland’s counsel to disclose “exactly when defense counsel represented each former em-ployeeand barred defense counsel from asserting the attorney-client privilege with respect to communications outside the deposition representation. CP at 70.¹

¶7 Highland sought discretionary review of the superior court’s discovery order, which the Court of Appeals denied. This court subsequently granted discretionary review and entered a temporary stay of discovery. Newman v. Highland Sch. Dist. No. 203, 180 Wn.2d 1031, 332 P.3d 985 (2014).

ANALYSIS

1. The Corporate Attorney-Client Privilege Does Not Shield Communications between Corporate Counsel and Former Employees

¶8 Whether the attorney-client privilege extends to postemployment communications between corporate counsel and former employees is an issue of first impression in Washington. The leading United States Supreme Court case addressing corporate attorney-client privilege, Upjohn Co. v. United States, expressly did not answer this question. 449 U.S. 383, 394 n.3, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981). Highland argues the flexible approach to protecting privileged communications recognized in Upjohn supports extending the privilege to postemployment communications with former employees. Am. Pet’r’s Br. at 23. We disagree. Because we conclude Upjohn does not justify applying the attorney-client privilege outside the employer-employee relationship, the trial court properly denied Highland a protective order to shield from discovery communications with former coaches who are otherwise fact witnesses in this litigation. We affirm the trial court’s decision to deny Highland’s motion for protective order, and lift the temporary stay of discovery.

¶9 We begin by recognizing that in our open civil justice system, parties may obtain discovery regarding any unprivileged matter that is relevant to the subject matter of the pending action. CR 26(b)(1). “‘[T]he privilege remains an exception to the general duty to disclose.’ ” Peralta v. Cendant Corp., 190 F.R.D. 38, 41 (D. Conn. 1999) (alteration in original) (quoting 8 John Henry Wigmore, Evidence in Trials at Common Law 554 (McNaughton rev. ed. 1961)). A party claiming that otherwise discoverable information is exempt from discovery on grounds of the attorney-client privilege carries the burden of establishing entitlement to the privilege. See Dietz v. John Doe, 131 Wn.2d 835, 844, 935 P.2d 611 (1997).

¶10 Washington’s attorney-client privilege provides that “[a]n attorney or counselor shall not, without the consent of his or her client, be examined as to any communication made by the client to him or her, or his or her advice given thereon in the course of professional employment.” RCW 5.60.060(2)(a). But the attorney-client privilege does not automatically shield any conversation with any attorney. See, e.g., Morgan v. City of Federal Way, 166 Wn.2d 747, 755-56, 213 P.3d 596 (2009). To qualify for the privilege, communications must have been made in confidence and in the context of an attorney-client relationship. See id. at 755-57. It is “a narrow privilege and protects only ‘communications and advice between attorney and client.’ ” Hangartner v. City of Seattle, 151 Wn.2d 439, 452, 90 P.3d 26 (2004) (quoting Kammerer v. W. Gear Corp., 96 Wn.2d 416, 421, 635 P.2d 708 (1981)). The privilege extends to corporate clients and may encompass some communications with lower level employees, as both the United States Supreme Court and this court have recognized. Upjohn, 449 U.S. at 396; Wright v. Grp. Health Hosp., 103 Wn.2d 192, 195-96, 691 P.2d 564 (1984); Youngs v. PeaceHealth, 179 Wn.2d 645, 650-51, 316 P.3d 1035 (2014).

¶11 The attorney-client privilege does not shield facts from discovery, even if transmitted in communications between attorney and client. Youngs, 179 Wn.2d at 653 (“Facts are proper subjects of investigation and discovery, even if they are also the subject of privileged communications.”)- Rather, only privileged communications themselves are protected in order “to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Upjohn, 449 U.S. at 389. The attorney-client privilege “recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer’s being fully informed by the client.” Id. However, because “the privilege sometimes results in the exclusion of evidence which is otherwise relevant and material, contrary to the philosophy that justice can be achieved only with the fullest disclosure of the facts, the privilege cannot be treated as absolute; rather, it must be strictly limited to the purpose for which it exists.” Pappas v. Holloway, 114 Wn.2d 198, 203-04, 787 P.2d 30 (1990) (citing Dike v. Dike, 75 Wn.2d 1, 11, 448 P.2d 490 (1968)).

¶12 In enunciating a flexible test for determining the scope of the attorney-client privilege in the corporate setting, Upjohn expanded the definition of “client” to sometimes include nonmanagerial employees. 449 U.S. at 394-95; see also Youngs, 179 Wn.2d at 661. The Upjohn Court considered several factors, including whether the communications at issue (1) were made at the direction of corporate superiors, (2) were made by corporate employees, (3) were made to corporate counsel acting as such, (4) concerned matters within the scope of the employee’s duties, (5) revealed factual information “ ‘not available from upper-echelon management,’ ” (6) revealed factual information necessary “ ‘to supply a basis for legal advice,’ ” and whether the communicating employee was sufficiently aware that (7) he was being interviewed for legal purposes, and (8) the information would be kept confidential. Youngs, 179 Wn.2d at 664 n.7 (quoting Upjohn, 449 U.S. at 394).

¶13 In denying Highland’s motion for a protective order, the superior court incorrectly stated that this court has never adopted Upjohn. In both Wright and Youngs, this court embraced Upjohn’s flexible approach to applying the attorney-client privilege in the corporate client context. Wright, 103 Wn.2d at 195-96; Youngs, 179 Wn.2d at 645. However, until today we have never considered whether Upjohn supports expanding the scope of the privilege to include counsel’s communications with former nonmanage-rial employees. In Youngs, this court relied on Upjohn to recognize that corporate litigants have the right to engage in confidential fact-finding and to communicate directions to employees whose conduct may embroil the corporation in disputes. Youngs, 179 Wn.2d at 651-52. The court in Youngs relied on the values underlying the attorney-client privilege to create an exception to the general prohibition on defense counsel’s ex-parte contact with the plaintiff’s treating physician, applicable when the physician is employed by the defendant. Id. at 662 (creating exception based on attorney-client privilege to rule established in Loudon v. Mhyre, 110 Wn.2d 675, 756 P.2d 138 (1988)). But Youngs did not answer whether the attorney-client privilege should extend beyond termination of the employment relationship.

¶14 Today, we reject Highland’s argument that Upjohn and Youngs support a further extension of the corporate attorney-client privilege to postemployment communications with former employees. The flexible approach articulated in Upjohn presupposed attorney-client communications taking place within the corporate employment relationship. Upjohn, 449 U.S. at 389 (the purpose of the attorney-client privilege is “to encourage full and frank communication between attorneys and their clients”); see also Youngs, 179 Wn.2d at 661 (noting corporate employees may sometimes be corporate clients). We decline to expand the privilege to communications outside the employer-employee relationship because former employees categorically differ from current employees with respect to the concerns identified in Upjohn and Youngs.

¶15 A school district, like any organization, can act only through its constituents and agents. See RPC 1.13 cmt. 1. Corporate attorney-client privilege may arise when “the constituents of an organizational client communicate [ ] with the organization’s lawyer in that person’s organizational capacity.” Id. at cmt. 2; see also Restatement (Third) of the Law Governing Lawyers § 73(2) (Am. Law Inst. 2000). An organizational client, including a governmental agency, can require its own employees to disclose facts material to their duties (with some limits not relevant here) to its counsel for investigatory or litigation purposes. See Restatement (Third) of Agency § 8.11 (Am. Law Inst. 2006).

¶16 But everything changes when employment ends. When the employer-employee relationship terminates, this generally terminates the agency relationship.² As a result, the former employee can no longer bind the corporation and no longer owes duties of loyalty, obedience, and confidentiality to the corporation. See id. & cmt. d. Without an ongoing obligation between the former employee and employer that gives rise to a principal-agent relationship, a former employee is no different from other third-party fact witnesses to a lawsuit, who may be freely interviewed by either party. See Infosystems, Inc. v. Ceridian Corp., 197 F.R.D. 303, 305 (E.D. Mich. 2000) (“ ‘It is virtually impossible to distinguish the position of a former employee from any other third party who might have pertinent information about one or more corporate parties to a lawsuit.’ ” (quoting Clark Equip. Co. v. Lift Parts Mfg. Co., 1985 WL 2917, at *5, 1985 U.S. Dist. LEXIS 15457, at *14 (N.D. Ill. Oct. 1, 1985) (court order))).

¶17 Highland’s argument for extending the attorney-client privilege to its communications with the former coaches emphasizes that these former employees may possess vital information about matters in litigation, and that their conduct while employed may expose the corporation to vicarious liability. These concerns are not unimportant, but they do not justify expanding the attorney-client privilege beyond its purpose. The underlying purpose of the corporate attorney-client privilege is to foster full and frank communications between counsel and the client (i.e., the corporation), not its former employees. State v. Chervenell, 99 Wn.2d 309, 316, 662 P.2d 836 (1983). This purpose is preserved by limiting the scope of the privilege to the duration of the employer-employee relationship. See Restatement (Third) of the Law Governing Lawyers § 73(2).³ Upon termination of the employment relationship, the interests of employer and former employee may diverge. But the attorney-client privilege belongs solely to the corporation, and it may be waived or asserted solely by the corporation, even to the detriment of the employee.

¶18 Refusing to extend the corporate attorney-client privilege articulated in Upjohn beyond the employer-employee relationship preserves a predictable legal framework. Upjohn recognized the value of predictability when determining the applicability of the attorney-client privilege:

[I]f the purpose of the attorney-client privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected. An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.

449 U.S. at 393. We find this consideration particularly relevant here, where the question before us is at what point in the employer-employee relationship the attorney-client privilege ceases to attach. All agree that it cannot extend forever and that it cannot encompass every communication between corporate counsel and former employees. But it is difficult to find any principled line of demarcation that extends beyond the end of the employment relationship. We conclude that the interests served by the privilege are sufficiently protected by recognizing that communications between corporate counsel and employees during the period of employment continue to be privileged after the agency relationship ends. See supra note 1.

¶19 We recognized that some courts have extended the corporate attorney-client privilege to former employees because of the corporation’s perceived need to know what its former employees know. See In re Allen, 106 F.3d 582, 605-06 (4th Cir. 1997) (collecting cases). We find this justification unpersuasive. A defendant might easily perceive itself as needing to know many things known by potential witnesses, and might strongly prefer not to share its conversations with those witnesses with the other side. So might a plaintiff. So might a government. That alone should not be enough to justify frustrating “the truth-seeking mission of the legal process” by extending the old privilege. United States v. Tedder, 801 F.2d 1437, 1441 (4th Cir. 1986) (citing United States v. (Under Seal), 748 F.2d 871, 875 (4th Cir. 1984)).

¶20 The superior court properly rejected Highland’s argument that former employees should be treated the same as current employees. The court appropriately allowed Highland to assert its attorney-client privilege over communications with the former coaches only during the time Highland’s counsel purportedly represented them at their depositions. We therefore affirm the superior court’s decision to deny Highland’s motion for a protective order and lift the temporary stay of discovery issued by our commissioner.

2. Attorney Fees on Appeal

¶21 We deny Newman’s request for attorney fees on appeal. Newman requests fees under CR 26(c) and CR 37(a)(4) for successfully challenging Highland’s claim of attorney-client privilege. Br. of Resp’ts at 33. We deny Newman’s request because Highland’s opposition to discovery was reasonable given that the question of whether the corporate attorney-client privilege extends to former employees was a novel legal question of first impression in Washington. CR 37(a)(4) (mandatory award of expenses and attorney fees for successfully challenging a motion becomes discretionary if “the court finds that the opposition to the motion was substantially justified or that other circumstances make an award of expenses unjust”). For these same reasons, we also exercise our discretion to deny Newman’s request for fees pursuant to chapter 7.21 RCW.⁴

CONCLUSION

¶22 We affirm and lift the temporary stay of discovery. The superior court properly denied Highland’s motion for a protective order shielding from discovery its postemployment communications with former employees.

Johnson, Fairhurst, González, and Yu, JJ., concur.

1 Newman did not appeal the trial court’s order denying disqualification of Highland’s counsel from representing the former coaches at their depositions, and does not challenge the assertion of attorney-client privilege during this period. Nor do the parties dispute that communications with counsel during the coaches’ employment are protected by the attorney-client privilege. This notion of a “durable privilege’’ is well recognized and does not appear to be at issue here because the relevant communications occurred after the coaches left Highland’s employment. See In re Coordinated Pretrial Proceedings in Petrol. Prods. Antitrust Litig., 658 F.2d 1355, 1361 n.7 (9th Cir. 1981) (recognizing that attorney-client privileged conversations “remain privileged after the employee leaves’’); see also Peralta v. Cendant Corp., 190 F.R.D. 38, 41 (D. Conn. 1999) (concluding any privileged information obtained during employment remains privileged upon termination of employment).

2 Some courts have recognized that the attorney-client privilege could extend to former employees in those situations in which a continuing agency duty exists. See Peralta, 190 F.R.D. at 41 n. 1 (stating “[a]ccording to the Restatement (Third) of the Law Governing Lawyers [§ 73 cmt. e], the attorney-client privilege would not normally attach to communications between former employees and counsel for the former employer” in the absence of “a continuing duty to the corporation” based on agency principles); Infosystems, Inc. v. Ceridian Corp., 197 F.R.D. 303, 306 (E.D. Mich. 2000) (recognizing “there may be situations where the former employee retains a present connection or agency relationship with the client corporation” that would justify application of the privilege).

3 The Restatement recognizes that in general privileged communications are temporally limited to the duration of a principal-agent relationship:

[A] person making a privileged communication to a lawyer for an organization must then be acting as agent of the principal-organization. The objective of the organizational privilege is to encourage the organization to have its agents communicate with its lawyer .... Generally, that premise implies that persons be agents of the organization at the time of communicating.

Restatement (Third) of the Law Governing Lawyers § 73 cmt. e. The Restatement comment acknowledges the privilege may extend to postemployment communications in limited circumstances, based on the agency principles discussed supra in note 2 of this opinion. Id.

4 This discretionary review does not include any issue concerning the trial court’s order imposing contempt sanctions against Highland, or limit the trial court’s ability to revisit that order in light of our decision. See Washburn v. Beatt Equip. Co., 120 Wn.2d 246, 300, 840 P.2d 860 (1992) (“Absent a proper certification, an order which adjudicates fewer than all claims or the rights and liabilities of fewer than all parties is subject to revision at any time before entry of final judgment as to all claims and the rights and liabilities of all parties.’’).