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Tuesday, July 16, 2024 | Back issues
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Costco Legal Advice Is Privileged, Court Rules

(CN) - A letter between retail giant Costco and legal counsel is protected by attorney-client privilege, the California Supreme Court ruled. The justices overturned a court order compelling discovery of the letter, which contained information on wage and overtime benefits for Costco managers.

The California high court ruled that the trial court's appointment of a referee to review the letter violated attorney-client privilege.

Costco had hired an attorney specializing in wage and hour law to advise it on whether certain managers were eligible for overtime pay under California law.

When some Costco employees filed a class action against the company, claiming they were misclassified as exempt, the trial court complied with their discovery request to look into the attorney's 22-page opinion letter.

The trial court erred in ordering Costco to produce the letter, the state high court ruled.

The plaintiffs had argued that the letter contained interviews with managers that aren't protected under attorney-client privilege, because a non-attorney could have conducted them.

But the justices pointed out that, regardless of the content, the letter was still sealed.

"[T]he privilege protects the transmission of information," the court wrote.

"[T]here should be no need to examine the content in order to rule on a claim of privilege," Justice Werdegar wrote.

"We hold the attorney-client privilege attaches to (the) opinion letter in its entirety, irrespective of the letter's content," Werdegar added.

The state Supreme Court also ruled that because Costco was already seeking relief from the discovery order, it doesn't also have to prove that it will be harmed if the information is revealed.

The court noted that the purpose of the attorney-client privilege is to preserve the confidential relationship between an attorney and his client, so the primary harm is disrupting that relationship, not risking the disclosure of sensitive information.

"Accordingly, Costco is entitled to relief because the trial court's order threatened the confidential relationship between Costco and its attorney," Werdegar concluded.

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