UNION OIL CO OF CALIFORNIA v DIST
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No. 12345 I N THE SUPREPIE COURT OF THE STATE O M N A A F OTN STATE e x r e l . UNION OIL CO. OF CALIFORNIA, Relator, THE DISTRICT COURT O THE EIGHTH JUDICIAL F DISTRICT O THE STATE OF MONTANA, I N AND F FOR THE COUNTY OF CASCADE, and t h e HONORABLE PAUL G. HATFIELD, DISTRICT JUDGE, Respondents. ORIGINAL PROCEEDING : Counsel o f Record:. For Relator: J a r d i n e , Stephenson, B l e w e t t & Weaver, G r e a t F a l l s , Montana. John Stephenson, Jr. a r g u e d , G r e a t F a l l s , Montana. F o r Respondents: Smith, Emmons and B a i l l i e , G r e a t F , ~ l l s , Montana. Robert Emmons a r g u e d , G r e a t F a l l s , Montana. Submitted: August 24, 1972 Filed: ~ f 8 p6 1972 d Mr. C h i e f J u s t i c e James T. Harrison delivered t h e Opinion of the Court. This application by r e l a t o r f o r a writ of supervisory control o r other appropriate writ a r i s e s from the order of the Cascade County D i s t r i c t Court, dated August 10, 1972, denying r e l a t o r ' s motions t o s t r i k e and f o r protective order. Relator seeks t o have the d i s t r i c t c o u r t ' s order vacated and t o have the r e l i e f which was sought i n the d i s t r i c t court granted by this Court. The record indicates t h a t t h i s application i s the r e s u l t of extensive procedural controversy i n the d i s t r i c t court between Union Oil Company of California (Union O i l ) , defendant below and r e l a t o r herein, and Eugene R . F l u i t t and Leonard L. Godak and others, p l a i n t i f f s below. That controversy focuses on the production and disclosure of c e r t a i n legal opinions drafted by r e l a t o r ' s attorneys. This Court e a r l i e r heard the application of r e l a t o r in Cause No. 12197 f o r an order preventing discovery by p l a i n t i f f s of those legal opinions, and by per: curiam order of January 17, 1972, we denied t h e previous application by Union Oil. Because w denied r e l a t o r ' s application and dismissed the show cause e order i n Cause No. 12197, t h e order of t h e d i s t r i c t court dated November 18, 1971 , granting p l a i n t i f f s ' motion f o r production of documents, remained i n t a c t . Union Oil then f i l e d a motion f o r protective order in the d i s t r i c t court s t a t i n g additional reasons why i t would be v i o l a t i v e of the attorneyc l i e n t privilege and highly prejudicial t o Union Oil i f r e l a t o r were compelled t o produce f o r discovery purposes legal opinions rendered i n confidence by r e l a t o r ' s "house counsel " i n Cal i f o r n i a . Following hearing on this motion the Cascade County d i s t r i c t court in i t s order of February 22, 1972, required Union Oil t o turn over these legal opinions t o the court f o r an "in camera" inspection. The court s t a t e d i t would then r u l e on which portions of the opinions, i f any, would be turned over t o p l a i n t i f f s ' counsel f o r inspection. One of the s p e c i f i c r e s t r i c t i o n s of the d i s t r i c t c o u r t ' s order is contained i n paragraph 4 thereof: "4. Said opinions shall be treated as confidential material and shall not be made a part of the Court record or otherwise disclosed to other persons, subject to such further rulings as the Court may make herein " . Subsequent to the district court's "in camera" review, it entered orders dated May 23, June 1, and June 12, 1972, particularly describing those portions of the legal opinions which plaintiffs ' counsel would be permitted to copy. In its May 23, 1972 order the district court expressed the opinion that this Court's January 17, 1972 per curiam rul ing rendered the issue of attorney-client privi 1 ege "res judicata" . In none of these orders, however, did the district court remove the mandate contained in paragraph 4 of its February 22, 1972 order. The court's order of June 12, 1972 added the further condition "that the use of said opinions by plaintiffst counsel or by anyone else shall be restricted to this action only and shall not be considered in any other litigation invol ving Union Oi 1 Company for either evidentiary or discovery purposes. " Union Oil relied upon the protective provisions set forth in the orders of the district court and did not seek review of those orders in this Court. Then on June 30, 1972, plaintiffs served the document giving rise to this application, their "First Amended Complaint". The amended complaint is a purported class action on behalf of plaintiffs and all other holders of relator's credit cards in the State of Montana who have paid revolving charge account finance charges. The amended complaint alleges that Union Oil has violated the .usury laws of the State of Montana in assessing finance charges upon certain revolving charge account balances at a periodic rate of 1% per month. The crux of the procedural history 1 ies herein: this amended complaint contains approximately 13 pages of quotations and pirported quotations from the legal opinions turned over to plaintiffs' attorneys in accordance with the aforementioned orders of the d i s t r i c t court. Certain omissions have been made and emphasis given t o p a r t s of the original legal opinions without appropriate notation t o so indicate. Relator then f i l e d i t s motion t o s t r i k e the quotation of legal opinions from the amended complaint and t o seek a protective order pursuant t o Rule 30(b), M.R.Civ.P. Specifically, r e l a t o r sought a protective order: " * * * requiring p l a i n t i f f s ' counsel t o r e f r a i n from publicizing the contents of the legal opinions prepared by the s t a f f of Union Oil Company previously turned over t o him, except where the publication of the same i s shown t o be necessary f o r good cause upon written application t o t h i s Court pursuant t o notice given t o counsel. ** *It Counsel f o r Union Oil a l s o obtained an order of the d i s t r i c t court requiring the F i r s t Amended Complaint t o be f i l e d in a sealed envelope w i t h the judge and be kept " i n camera" until the defendant Union Oil Is motions could be determined. On August 10, 1972, following the submission of b r i e f s and oral argument upon Union O i l ' s motions, the d i s t r i c t court entered i t s order denying the motions and y e t providing t h a t t h e First Amended Complaint would remain sealed u n t i l a determination had been given by t h i s Court upon application by r e l a t o r . If r e l a t o r had not so applied here, the d i s t r i c t c o u r t ' s order provided f o r making the amended complaint a matter of pub1 i c record w i t h i n ten days following August 10. Relator's application was f i l e d w i t h t h i s Court on August 18, 1972. The issue presented by the application is whether the d i s t r i c t court conunitted e r r o r i n i t s order of August 10, 1972, denying Union O i l ' s motions t o s t r i k e and f o r protective order. Because we find upon examination of a l l the f a c t s now before t h e Court t h a t the disclosure and indeed original production of the legal opinions here in issue constitutes a violation of t h e attorney-client privilege, we need not consider herein the argument of r e l a t o r addressed t o whether plaint i f f s ' amended complaint oversteps the provisions af Rule 8 ( a ) and ( e ) , M.R.Civ.P., regarding the pleading of a "short and plain statement" which shall be "simple, concise and direct." For the reasons set out below, the attorney-client privilege as enunciated in this state and in other jurisdictions compels us to order the objectionable material stricken from the amended complaint and the protective relief granted. We further note that in the giving of this opinion, recognition of the attorney-client privilege. requires that we not allow disclosure of the content of the legal opinions in question. Before considering the matter of attorney-client privilege, however, we wish to clarify the significance of our January 17, 1972, per curiam ruling in this action. We find that both plaintiffs and the court below have attached undue importance and an almost "stare decisis" interpretation to our denial of relator's earlier application for writ of supervisory control. Such deference is not warranted. Specifically, the district court stated in its May 23, 1972 order that the issue of "lawyer-client privilege is now res judicata as to the legal opinions". Respondents' reply brief herein states " * ** that argu- ment has been finally and conclusively disposed of by the Supreme Court in its Order dated 17 January 1972". In the first instance, we are not here dealing with a matter of res judicata, which gives conclusive finality to a final, valid judgment; the order of January 17, 1972, raises a question of whether the doctrine "law of the case" is applicable. Law of the case is concerned with establishing rules of law in the case at hand and with getting that particular case to judgment. 1B Moore's Federal Practice, Par. 0.401. The law of the case doctrine, though, does not apply to our January 17 ruling. This Court discussed the doctrine in O'Brien v. Great Northern R. Co., 148 Mont. 429, 421 P.2d 710, cert. den. 87 S.Ct. 2034, 387 U.S. 920, 1 L.Ed.2d 974, wherein we stated: 8 "The application of the doctrine of 'the law of the case' is 1 imited to those issues which were actually decided and were necessary to the decision. The doctrine does not extend so far as to include matter which was connot sequential, incidental , or -decided by the court. * * *" (Emphasis added. ) Our ruling i n Cause No. 12197 was simply a denial of t h e application and dismissal of the show cause order. N discussion of our grounds and o r a t i o n a l e was given nor was one necessary i n t h a t this Court may in i t s d i s c r e t i o n deny application f o r the writ i n a manner analogous t o t h a t of the United S t a t e s Supreme Court denying c e r t i o r a r i , and, similar t o the e f f e c t of a United S t a t e s Supreme Court denial of c e r t i o r a r i , our denial of the application f o r a supervisory writ imports no expression of opinion on the merits of the case, nor does such denial by t h i s Court imply anything regarding our view of t h e merit of the arguments presented. Thus, whether the production of t h e documents in question was a breach of the attorney-client privilege i n l i g h t of t h e f a c t s as we now know them was not decided by t h i s Court and the 1aw of the case doctrine does not operate in respect t o our January 17, 1972 order. Research Products v . Gross, 120 F.2d 301 (CCA 9th, 1941). See Electrical While the immed- i a t e e f f e c t of the denial of application f o r the w r i t was to allow the action of the lower court t o stand, in this case t o allow t h e c o u r t ' s order of November 18, 1971, compelling production t o remain unchanged, t h e denial does not endorse the reasoning behind the lower c o u r t ' s order as the law of the case. A t the time of the January 17 order, we saw no harm o r prejudice befalling defendant i n l e t t i n g the lower c o u r t ' s order stand so we chose not t o intervene a t t h a t time. The f a c t s have changed considerably since e January 17. W now have before us the a f f i d a v i t s of Messrs. Myron E. Smith, Robert W. Putnam, Samuel 0. Pruitt, J r . , and other attorneys r e l a t i n g t h e circumstances under which the legal counsel t o Union Oil rendered the legal opinions. W have ourselves seen these legal opinions. e W note the use e which p l a i n t i f f s now seek t o make of the opinions. What we have t o say a s respects the attorney-client privilege hereafter i s not concerned with communications i n furtherance of prospective criminal o r fraudulent acts, nor conspiracies entered into to accomplish such purposes. Different principles prevail in those instances. See Vol 3 Jones on Evidence, 5th Ed., Sec. 833, p. 1564. This brings us to an examination of the attorney-client privilege in Montana. The privilege is well-established in this state. Section 93701-4(2), R.C.M. 1947, states: "An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the-course of professional employment. " (Emphasis added. ) This Court has applied this section to exclude from evidence legal advice given by an attorney. See Davis v. Morgan, 19 Mont. 141, 47 P. 793 and August v. Burns, 79 Mont. 198, 255 P. 737. It is also well-established in other jurisdictions that the attorneyclient privilege applies to legal opinions prepared for use of a corporation by its house counsel. In United States v. United Shoe Machinery Corporation, 89 F.Supp. 357 (D. Mass., 1950), the United States sought production of various correspondence and memoranda in the possession of defendant. Some of the matter was legal opinions rendered by independent law firms to defendant and other communications were by defendant's own house counsel. As to the first group, the court recognized applicability of the attorney-client privilege: I * * * And the privilege of nondisclosure is not lost ' merely because relevant nonlegal considerations are expressly stated in a communication which also includes legal advice. It follows that in so far as these letters to or from independent 1 awyers were prepared to sol i cit or give an opinion on law or legal services, such parts of them are privileged as contain, or have opinions based on, inf6rmation furnished by an officer or employee of the defendant in confidence and without the presence of third persons. " The court also gave attorney-client privilege protection to communications prepared by house counsel : "On the record as it now stands, the apparent factual differences between these house counsel and outside counsel are that the former are paid annual salaries, occupy o f f i c e s in the corporation's buildings, and are employees r a t h e r than independent contractors. These a r e not s u f f i c i e n t differences t o distinguish the two types of counsel f o r purposes of the attorney-client privilege. And t h i s i s apparent when a t t e n t i o n i s paid t o the r e a l i t i e s of modern corporate law practice. The type of service performed by house counsel is substant i a l l y 1i ke t h a t performed by many members of the 1arge urban law firms. The d i s t i n c t i o n i s c h i e f l y t h a t the house counsel gives advice t o one regular c l i e n t , the outside counsel t o several regular cl i e n t s " . The court upheld the privilege as t o those exhibits which met the following test: " ( a ) the exhibit i t s e l f was prepared by o r f o r e i t h e r (1 ) independent counsel o r (2) defendant's general counsel or one of his immediate subordinates; and " ( b ) as appears upon the face of the e x h i b i t , t h e principal purpose f o r which the exhibit was prepared was t o s o l i c i t or give an opinion on law or legal services o r assistance in a legal proceeding; and "(c) t h e part of the exhibit sought t o be protected consists ot e i t h e r (1) information which was secured from an o f f i c e r o r employee of defendant and which was not disclosed i n a public document o r before a t h i r d person, or (2) an opinion based upon such information and not intended f o r disclosure t o t h i r d persons." See a l s o Georgia-Pacific Plywood Co. v. United S t a t e s Ply. Corp., 18 F.R.D. (S .D.N.Y., 463 1956) and Malco Manufacturing Company v . El co Corporation, 45 F .R. D. 24 ( D . Minn., 1968). Turning t o the application a t hand, we note t h a t the legal opinions involved herein are three legal memoranda prepared by t h e s t a f f of Union Oil dated March 20, 1959, Apri 1 16, 1968, and January 22, 1971 . These were a1 1 prepared by attorneys acting s o l e l y i n t h e i r capacity as such, were addressed only t o members of defendant's management, and were intended t o be confidential. The opinions contain i n some s i t u a t i o n s quoted excerpts from and attachments of legal opinions rendered t o Union Oil by independent law firms in some of the s t a t e s where r e l a t o r does business. The legal opinions were requested by r e l a t o r and were rendered by counsel upon the assumption t h a t said opinions were rendered in confidence and would be imune from discovery by reason of the attorney-client privilege. Both the excerpts quoted from opinions of private counsel and t h e opinions drafted by r e l a t o r ' s s t a f f counsel a r e privileged by reason of the attorney-cl i e n t privilege. Respondents suggest t h a t due t o c e r t a i n statements by Union Oil ' s c r e d i t manager, Richard L. Noland, made during his deposition of October 15, 1971, the privilege is waived. Noland t e s t i f i e d t o the existence of c e r t a i n documents containing the 1egal opinions . Certainly , voluntary disclosure of the f a c t s i n question, here the content of the legal opinions, may c o n s t i t u t e a waiver of the privilege. Civil Sect. 2016. Wright & Miller, Federal Practice and Procedure: Yet Noland's references were only i n regard t o t h e exis- tence of t h e various memoranda, i n response t o questions seeking a foundation f o r an attempt t o require production. data. H did not s e t f o r t h t h e confidential e W conclude t h a t r e l a t o r ' s privilege was not waived. e This Court has f u l l powers pursuant t o Rule 30(b), M.R.Civ.P., to issue i t s order protecting a party from annoyance, embarrassment o r oppression. Rule 34, under which production was had, i s expressly made subject t o t h e provisions of Rule 30(b). Disclosure of the quotations and purported quotations of legal opinions contained i n t h e amended complaint would obviously be highly prejudicial and oppressive t o r e l a t o r herein. Therefore,we conclude t h a t : 1 . The order of the d i s t r i c t court dated August 10, 1972, i s hereby annulled, vacated, and s e t aside; 2. All of the quotations and purported quotations contained i n plain- t i f f s ' First Amended Complaint derived from the legal opinions furnished t o p l a i n t i f f s ' counsel pursuant t o order of t h e d i s t r i c t court shall be e n t i r e l y stricken from said F i r s t Amended Complaint before said F i r s t Amended Complaint may be placed upon the court records; and 3. P l a i n t i f f s and p l a i n t i f f s ' counsel are hereby ordered t o r e f r a i n from publ icizing or i n any other manner spreading upon the publ i c records the contents of said legal opinions, without f i r s t being required t o show good cause therefor t o the d i s t r i c t court upon notice given t o counsel. Let the writ of supervisory control issue in accordance with the foregoing . Chief Justice f N e ,concur:
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