Sometimes the standard of review is better than you might first think

Clients (and their lawyers) can be disheartened when they conclude that the ruling they want to challenge on appeal is subject to review for abuse of discretion — a standard of review that is indeed daunting. But keep in mind that rulings ordinarily subject to review for abuse of discretion may be subject to the much more appellant-friendly de novo (or independent) standard of review, in which the court of appeal decides the issue without any deference to the trial court.

The defendant-appellant in Children’s Hospital Central California v. Blue Cross of California, case no. F065603 (5th Dist. June 9, 2010) was able to take advantage of this situation. Blue Cross had a contract with the state to provide a managed care plan for Medi-Cal recipients. Plaintiff hospital and Blue Cross had a written rate agreement that lapsed, and did not enter into a new agreement for about ten months. In the interim, the hospital kept providing services and Blue Cross paid the hospital more than $4 million based on government Medi-Cal rates, but the hospital contended that the reasonable value of the services provided was nearly $11 million, and sued to recover the difference.

Blue Cross contended that the trial court improperly limited the evidence of the reasonable value of the services by denying Blue Cross’s discovery motion to compel the production of the hospital’s written agreements with other insurers and granting the hospital’s motion in limine to preclude any evidence of the rates accepted by or paid to Hospital by other payors, the Medi-Cal and Medicare fee for service rates paid by the government, and Hospital’s service specific costs. The hospital contended that reasonable reimbursement rates were governed solely by the six factors set forth in a regulation.

Normally discovery rulings and evidentiary ruling are subject to review for abuse of discretion. Here, however, Blue Cross benefited from a de novo standard, because the basis for the trial court’s rulings — its conclusion that the evidence was irrelevant — is an “analysis of the substantive law governing the case,” making it a legal issue subject to independent review.

The abuse of discretion standard is full of nuance. Don’t let it automatically discourage you from pursuing an appeal. Instead, consider the actual error to be asserted to see if it comes within independent review.

SCOTUS holds discovery ruling requiring disclosure of privileged information is not appealable

Richard Westfall at Rocky Mountain Appellate Blog wrote up the first SCOTUS opinion authored by Justice Sotomayor, Mohawk Industries, Inc. v. Carpenter, in which the unanimous court (with a separate concurrence from Justice Thomas) holds that a discovery order is not immediately appealable under the “collateral order doctrine.” Westfall summarized the case:

In Mohawk, the district court ordered Mohawk to turn over documents Mohawk asserted were protected by the attorney-client privilege. The collateral-order doctrine allows for immediate appeals if: (1) the particular ruling conclusively determines the disputed question; (2) resolves an important issue separate from the merits of the action; and (3) is effectively unreviewable on appeal from a final judgment. Some circuits allow for immediate appeals under the collateral-order doctrine to review whether an order violates the attorney-client privilege. The Supreme Court held in Mohawk that orders requiring disclosure of arguably privileged material will have to wait for a final judgment because they are reviewable after judgment, however imperfectly. Justice Sotomayor noted that parties in such situations can defy disclosure orders and suffer sanctions, which will then be reviewable, or subject themselves to contempt of court, thereby also obtaining review.

Westfall urges the Colorado state courts not to adopt the rule, to which I say . . . be glad you don’t practice in California, Steve! In California state courts, discovery rulings are generally not appealable, even where the disclosure of privileged information would result. In such a situation, the party seeking review must do so by petitioning for a discretionary writ, and hope that the issue presented and the gravity of the disclosure are enough for the court of appeal to exercise its discretion to hear the petition on the merits.

Mohawk Industries resolves a circuit split in which the Ninth Circuit was in the minority camp that allowed appeal from such rulings. (In re Napster, Inc. Litigation (9th Cir. 2007) 479 F.3d 1978.) I’ll have more on the federal angle in an update.

An Important Discovery Ruling Overcomes a Deferential Standard of Review

For a prospective appellant (or, as in the case profiled here, the prospective writ petitioner), the “abuse of discretion” standard of review can be daunting, and may even convince the party that the pursuit of an appeal or writ is not worthwhile. Not only does it set a high bar for reversal, but it can be very difficult to define within the circumstances of a case. (I’ve written before about the somewhat hazy nature of the “abuse of discretion” standard of review.)

Against this backdrop, Alch v. Superior Court, case no. B203726 (2d Dist. Aug 14, 2008) presents a very interesting discussion of the standard as it introduces its decision reversing the trial court’s refusal to allow discovery (which is not, by the way, immediately appealable, and thus is found in this writ decision).

First, the backdrop of the case:

Television writers filed class action lawsuits against studios, networks, production companies and talent agencies, asserting an industry-wide pattern and practice of age discrimination. The writers served subpoenas on third parties, including the Writers Guild of America, seeking data on Writers Guild members from which they could prepare a statistical analysis to support their claims of age discrimination. A privacy notice was sent to 47,000 Writers Guild members, advising them of their right to object to disclosure of personal information on privacy grounds. Some 7,700 individuals filed objections. The writers moved to overrule the objections. The trial court sustained the objections in their entirety. The writers sought a writ directing the trial court to vacate its order and allow access to certain of the requested information, arguing the information was critical to proving their claims and privacy concerns were minimal. We grant the writ petition.

Before even reaching its analysis, the court of appeal explains why it is able to reverse despite the formidable obstacle usually presented by the abuse of discretion standard applicable to review of orders denying discovery:

We are well aware that a reviewing court may not substitute its opinion for that of the trial court if there is a basis, supported by the evidence, for the trial court’s ruling, and that we may set aside an order denying discovery only if there was no legal justification for the order. (Tien v. Superior Court (2006) 139 Cal.App.4th 528, 535.) We also recognize that the trial court was faced, to some extent, with a moving target: the information initially subpoenaed was more comprehensive – and considerably more sensitive on the privacy scale – than the information the writers requested in their motion to overrule the objections, and the latter, too, was more inclusive than the information ultimately sought when the writers asked for reconsideration. These differences, however, highlight the error in the trial court’s analysis. It used a broad brush to deny the writers access to all data about the objectors out of hand, and wholly failed to consider whether a more nuanced approach to the different categories of data would satisfy the balance that must be struck between privacy interests and a litigant’s need for discovery. (See Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 658 (Valley Bank) [considerations which will affect the exercise of the trial court’s discretion in evaluating privacy claims include the “‘ability of the court to make an alternative order which may grant partial disclosure’”; where possible, “‘courts should impose partial limitations rather than outright denial of discovery’”].)

In short, while the trial court purported to weigh the objectors’ privacy rights against the public interest in pursuing the litigation, it failed to follow the dictates of Valley Bank in doing so. In addition to failing to analyze the different categories of data requested, the court gave short shrift to “the public interest in pursuing [the] litigation.” Indeed, it erroneously stated that the writers, in their brief, had indicated “that they may still be able to put together a meaningful statistical study based upon information from non-objectors.” On the contrary, the writers submitted evidence that no meaningful statistical study could take place if data from the objectors were omitted from it. Under these circumstances, we can reach no other conclusion than that the trial court’s orders denying access to any and all data from the objectors were without legal justification.

(Footnotes omitted.)

I suspect, however, that few litigants will be able to take advantage of Alch in the Court of Appeal because the only immediate route for review of discovery orders is via writ petition. The odds are greater than 9 in 10 that your writ petition will be denied summarily without reaching the merits.

The real value of Alch will be to trial attorneys trying to convince the trial court in the first instance that denial of discovery would be an abuse of discretion. Because such orders are not immediately appealable, there has always been a dearth of appellate discovery rulings for trial lawyers to cite when arguing a motion to compel or a motion for protective order. Alch’s application of Valley Bank may lead to greater uniformity in trial court decisions, or at least greater attention being paid to the “nuance” of the scope of information sought.

i-Cyber-Meta-Digital Law

This post highlights a post I included in Blawg Review #155 and a related post I ran across since then. Both concern how to stay out of trouble regarding electronic data.

The first, featured in my previous post, is The Multipass Erasures Myth from EDD Update, a blog about electronic data discovery. Just how much “scrubbing” of your hard drive does it take for that data on your hard drive to be unrecoverable? I think you’re going to be surprised at the answer.

The second is a post on the ethics of mining metadata in documents received from adverse parties. What is metadata? Well, the Wikipedia article on metadata is a tad geeky, so let’s go for now with what I consider a safe layman’s definition of metadata, especially for purposes of the post I am talking about: “any information about the document stored electronically in the document file and not visible in the viewed document.” In a document saved in multiple versions in a single file, this might include the previous versions, the identities of everyone who worked on the document, creation and modification dates, comments by reviewers, etc. When it comes to documents received electronically from adverse parties, there’s obvious potential for mischief, as Robert Ambrogi points out in Metadata: Read at Your Own Risk, referencing a report from a bar organization in New York that he found at Legalethics.com.

(Hat tip: Legal Blog Watch, via EDD Update.)

A Pair of Interesting Posts on Discovery

Cal Biz Lit has a pair of interesting posts regarding civil discovery in California.  The first links to a white paper on the subject written with the non-California lawyer in mind.  The second answers whether a party, in light of the fact that form interrogatories have already been approved by the Judicial Council, may nonetheless object to a form interrogatory.

Judicial Performance Commission Records Not Discoverable

In Commission on Judicial Performance v. Superior Court, case no. B201251 (2d Dist. Oct. 29, 2007), the court of appeal holds that records of the Commission on Judicial Performance are not discoverable.  Its holding appears absolute, regardless of circumstances.

Felony defendant Davidson had his suppression motion denied by Judge Schwartz. Davidson filed a complaint against Judge Schwartz with the Commission, then was convicted after his case was transferred to another judge. In connection with his motion for a new trial, he filed a Pitchess motion (Pitchess v. Superior Court (1974) 11 Cal.3d 531) for records from the Commission concerning Judge Schwartz. The trial court ordered the records produced for in camera review.

The court of appeal grants the writ petition, issuing a writ compelling the trial court to vacate its order and to enter a new order denying Davidson’s Pitchess motion and granting the Commission’s motion to quash the subpoena. The Commission clearly qualifies for the official records privilege (Evid. Code § 1040); the court is unaware of any previous decision under Pitchess allowing such discovery; allowing discovery would “encourage mischief without a concomitant benefit to a criminal defendant”; the discovery would allow Davidson to indirectly question Judge Schwartz regarding the denial of his suppression motion, something he cannot do directly, and; other states with similar commissions have denied similar discovery.

All well and good, but the court also held that the trial court’s order for in camera review is invalid because the non-discoverability of the records would make such review a “wasted effort” and, “more to the point,” the judge has “no more right to see the Commission’s records than does any other member of the public.” It’s hard to square either rationale with Evidence Code section 915, subdivision (b):

When a court is ruling on a claim of privilege under Article 9 (commencing with Section 1040) of Chapter 4 (official information and identity of informer) . . . and is unable to do so without requiring disclosure of the information claimed to be privileged, the court may require the person from whom disclosure is sought or the person authorized to claim the privilege, or both, to disclose the information in chambers out of the presence and hearing of all persons except the person authorized to claim the privilege and any other persons as the person authorized to claim the privilege is willing to have present. If the judge determines that the information is privileged, neither the judge nor any other person may ever disclose, without the consent of a person authorized to permit disclosure, what was disclosed in the course of the proceedings in chambers.

The only way to read the decision in light of Evidence Code section 915 is that it forecloses any discovery of Commission records ever.

Privilege within the Company

Lawyer advises the CEO of his client on some litigation strategy. Privileged communication, obviously. CEO then meets with his VPs and shares the information with them. Privileged?

I always thought it should be, and now I have the decision in Zurich American Ins. Co. v. Superior Court (Watts Industries, Inc.), case no. B194793 (2d Dist. Oct. 11, 2007) to back me up.

The court holds that the trial court construed the attorney-client privilege too narrowly by exempting from discovery only those documents that “contain actual copies of letters or e-mail communications from outside counsel, or documents that have been created by counsel, or received by counsel, or that contain direct communications from counsel.” Evidence Code section 952 defines confidential communications between lawyer and client much more broadly. Under section 952:

[C]onfidential communications include information transmitted to persons “to whom disclosure is reasonably necessary for the transmission of the information,” and those to whom disclosure is reasonably necessary for “the accomplishment of the purpose for which the lawyer is consulted.” Section 952 expressly includes legal opinions and advice given by a lawyer within the definition of confidential communication.

Since corporations are unquestionably “persons” who can invoke the privilege, and can only communicate through living individuals:

It follows that in order to implement the advice of lawyers, the advice must be communicated to others within the corporation. It is neither practical nor efficient to require that every corporate employee charged with implementing legal advice given by counsel for the corporation must directly meet with counsel or see verbatim excerpts of the legal advice given. But that is what the approach adopted by the referee and trial court would require in light of the narrow construction of section 952 they adopted.

But before your company gets too crazy telling everybody everything, realize there are limits: “The privilege only protects disclosure of communications, it does not protect disclosure of the underlying facts by those who communicated with the attorney.”

Documents are privileged if they (1) contain legal advice or a discussion of legal advice or strategy and (2) were not disclosed within the corporation to anyone but those identified in section 952, i.e.,

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.

C.C.P. Section 1985.3 is Toothless

Just one decision out of the Court of Appeal on yesterday, but it’s a doozy.  In Foothill Federal Credit Union v. Superior Court, case no. B198664 (2d Dist. Sept. 24, 2007), the court holds that consumers’ claims against a credit union for disclosing consumer records in response to a subpoena are barred by the litigation privilege of Civil Code section 47.  At least, that’s the way the court describes its holding, but there is more at work in the decision.

The impact of this decision is hard to understate in light of Code of Civil Procedure section 1985.3, which requires a party seeking certain forms of consumer records in discovery to notify the consumers so they have an opportunity to object to the disclosure.  The court’s finding that the credit union in this case was shielded from any liability by Civil Code section 47 renders Code of Civil Procedure section 1985.3 pretty much toothless.

Interestingly, the real parties did not contend that section 47 was inapplicable.  Instead, they claimed that the policies underlying expanding the privilege beyond defamation were not served by applying it to a custodian of records who provides records in violation of section 1985.3, that applying the privilege in such circumstances would virtually abrogate section 1985.3 because it would remove any incentive for a records custodian to comply with it, and  that applying the privilege in this case leads to an absurd result because the very litigation that gives rise to the discovery would also confer immunity for providing discovery in violation of the statute.

The actual reasoning of the court strays from application of the privilege to whether any remedy exists for violation of section 1983.5.  The court holds that the only purpose of section 1985.3 is to provide a process for consumers to object to disclosure.  It provides them no right of action against a noncomplying records custodian.

Given this determination, the discussion of whether the section 47 litigation privilerge applies seems academic to me.  If no right of action exists, then there’s no liability, privilege or no privilege.

Regardless of the court’s actual reasoning, there is no denying that its decision leaves consumers at the mercy of records custodians and leaves them with no recourse for violations of section 1985.3.  The tone of California Appellate Report‘s post on the case does not appear to be overstated.

Even the majority opinion appears to acknowledge this (though certainly in less dire terms than California Appellate Report), and the concurring opinion makes an explicit appeal to the legislature to step in.

Writ Review Appropriate where Discovery Ruling Threatens Privilege

You’ve seen me complain before about the court of appeal reviewing writ petitions on the merits without saying why.  After all, there has to be something special in every instance of review, as more than 90% of writ petitions are summarily dismissed.

Ombudsman Services of Northern California v. Superior Court, case no. C054737 (3d Dist. Sept. 5, 2007), the court is very explicit about why it reviewed the writ petition on the merits (citations omitted):

“Although writ review of discovery rulings is generally disfavored, interlocutory review by writ is the only adequate remedy when, as here, a court compels the disclosure of documents or information that may be subject to a privilege, because ‘once privileged matter has been disclosed there is no way to undo the harm which consists in the very disclosure.’ [Citation.]”  Writ review is particularly appropriate here to protect the confidential records of third persons who are not parties to the underlying litigation below, who have had no notice of the ordered disclosure, and who, as a result, have had no opportunity to object. OSNC properly asserted the privacy rights of those third persons affected by the discovery order of the trial court.

It figures that the court of appeal would be very explicit in a case where the reason for review would probably have been rather obvious without the explanation.  But I won’t look a gift horse in the mouth.  Instead, I shall just politely ask: “More of this, please.”

Grand Jury Secrecy vs. Civil Rights Plaintiff’s Right to Discovery

If your civil rights lawsuit alleged you were imprisoned for 24 years for a murder you didn’t commit and your conviction was based on the perjured testimony of a jailhouse informant, you might want to take a peek at the records of a grand jury investigation into the misuse of such informants during the time you were convicted.  But there’s that pesky issue of grand jury secrecy, so the trial court rules that you have no right to access those records.

This is what happened to Thomas Lee Goldstein, but he has a second chance after Goldstein v. Superior Court, case no. B199147 (2d Dist. August 23, 2007), in which the Court of Appeal reverses and remands to the trial court to consider Goldstein’s motion under the appropriate test.  The test announced in Douglas Oil Co. v. Petrol Stops Northewest (1979) 441 U.S. 211, 222 governs because Goldsteing is not seeking public disclosure and is willing to abide by a protective order.

Under that test, parties seeking grand jury material in federal court must make a particularized showing that (1) the material they seek is needed to avoid a possible injustice in another judicial proceeding, (2) the need for disclosure is greater than the need for continued secrecy, and (3) the request is structured to cover only material so needed.

This case also illustrates a principle of writ review.  As the court notes at footnote 1 of its opinion, Goldstein filed a contemporaneous appeal from the order denying his motion for access to the grand jury records.  The court decided the issue on review of the writ petition because “it appears the issue “is one of importance that should be resolved promptly.”

How Does a Court Write a Trade Secrets Opinion When It Can’t Disclose the Trade Secrets?

That was the difficult question facing the court in Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826.  An excerpt from the opening paragraph of the opinion gives you an idea of the substantive issues facing the court (emphasis added):

We hold that Code of Civil Procedure section 2019.210 (formerly Code of Civil Procedure section 2019, subdivision (d)), which provides that discovery relating to a trade secret may not commence until the trade secret is identified with “reasonable particularity,” is not limited in its application to a cause of action under the Uniform Trade Secrets Act (UTSA) (Civ. Code, §§ 3426-3426.11), for misappropriation of the trade secret, but extends to any cause of action which relates to the trade secret. We also hold that where the plaintiff makes a showing that is reasonable, i.e. fair, proper, just, rational, the trade secret has been described with “reasonable particularity,” and is sufficient to permit discovery to commence.

The italicized holding is about as specific as the court can get, because the trade secret designation was under seal.  In footnote 2 of the opinion, the court states:

To avoid disclosure of the parties’ confidential information we are, in this publicly available opinion, purposefully vague in our descriptions of the claimed trade secrets, the trade secret designations, the expert witness declarations and other related documents.

The court comes up with a pretty good articulation of the standard for “reasonable particularity,” considering it is foreclosed from demonstrating specifically how the standard applies to the trade secrets before it.

An Appealable Discovery Order

Most parties faced with an adverse discovery ruling have to grin and bear it.  Discovery orders are not generally appealable, and a writ petition is such a longshot that unless the ruling threatens a trade secret or similarly sensitive confidential information, the writ petition hardly seems worthwhile.  In H.B. Fuller Co. v Doe, case no. H030099 (May 31, 2007), California’s Sixth District Court of Appeal reminds us of a rare occasion when a discovery order is appealable. 

Doe sought to quash a subpoena directed to an internet company.  The subpoena sought information that would identify the person (Doe) who posted Fuller’s confidential company information on internet message boards.  No lawsuit was pending in California, and Doe’s identity was apparently necessary before Fuller could commence suit in its home state of Minnesota.

In a decision limited to Doe’s motion to unseal the record and briefs on appeal, the court first addressed the issue of appealability.  It found this discovery order was appealable because “the order is ancillary to litigation in another jurisdiction and operates as the last word by a California trial court on the matters at issue.”  Thus, even though the court could readily have chosen to construe the appeal as a writ petition, it found it unnecessary to do so.

This is a great case to remember.  Dire circumstances justifying writ review won’t always be present when a client gets hit with an unfavorable discovery order arising from litigation in another jurisdiction.  Being able to appeal greatly expands the cases in which review may be invoked.