Uber's Not So Good (and Nonprivileged) Investigation Report

As Uber and Waymo start trial over Uber's alleged theft of Waymo's self-driving technology, Uber will have to deal with an exhibit it never wanted Waymo to see—a third party report investigating various wrongdoing by the very employees Waymo accuses of various wrongdoing. Uber contended the report could be withheld from discovery. The Court decided otherwise and ordered its production. 

Waymo—once a Google project and now an Alphabet subsidiary—sued Uber and its former employee Anthony Levandowski. Waymo alleged that Levandowski downloaded thousands of Waymo documents, formed a competing driverless company (Ottomotto), and then sold Ottomotto to Uber. Before the Uber/Ottomotto transaction closed, Ottomotto and Uber jointly retained Stroz Friedman, an outside forensic expert, to investigate Levandowski.

The investigation included interviewing Levandowski, reviewing his digital devices and cloud storage, and preparing a report with their findings—the Stroz Report. The findings were not good, and Uber fought the report's disclosure.  

Among the arguments Uber made to fight producing the Stroz Report was that it was privileged. Uber, Ottomotto, and Levandowski all entered into a "Joint Defense, Common Interest, and Confidentiality Agreement." Thus, the Uber argument went, the Stroz Report could (1) be freely shared among the parties to the agreement, but (2) remain privileged to prevent Waymo from seeing it. The joint defense / common interest doctrine is a common source of confusion for practitioners, and it is the focus of this article. 

The Joint Defense Privilege: Is There Such A Thing?  

Lawyers will commonly have their clients enter into "joint defense agreements" and, signed contract in hand, presume they can freely share documents and information that will be shielded from disclosure under their contractually-agreed-to "joint defense privilege."  

As an initial matter, there is no stand-alone joint defense privilege. Courts instead look at the common interest / joint defense doctrine as a potential exception to the attorney-client privilege being waived. Specifically in California, there is no independent statutory joint defense or common interest privilege, and California courts are not authorized to establish one. OXY Res. California LLC v. Superior Court, 115 Cal. App. 4th 874, 888 (2004), citing United States v. Henke, 222 F. 3d 633, 637 (9th Cir. 2000). In federal courts, the "Federal Rules of Evidence provide that principles of common law govern rules of privilege," and the Ninth Circuit "has recognized a 'joint defense privilege' as an 'extension of the attorney-client privilege.'" Id. (italics added). 

Accordingly, the proper first question when considering joint defense / common interest issues is whether the shared communication would otherwise be protected by the attorney-client privilege (or attorney work product doctrine):

[A] party seeking to rely on the common interest doctrine does not satisfy its burden to justify a claim or privilege simply by demonstrating that a confidential communication took place between parties who purportedly share a common interest. Rather, the party seeking to invoke the doctrine must first establish that the communicated information would otherwise be protected from disclosure by a claim of privilege. 

 OXY Resources, 115 Cal. App. 4th at 890. 

 The Attorney-Client Privilege In Federal and California Courts: A Review 

 To answer the first question—whether the shared communication would itself be privileged—let us briefly examine the rules surrounding the attorney-client privilege. 

 In federal courts, "[i]ssues concerning application of the attorney-client privilege in the adjudication of federal law are governed by federal common law." United States v. Ruehle, 583 F. 3d 600, 608 (9th Cir. 2009). "[B]ecause [the attorney-client privilege] impedes full and free discovery of the truth, the attorney-client privilege is strictly construed." Id. "[A] party asserting the attorney-client privilege has the burden of establishing the relationship and the privileged nature of the communication." Id. at 607. An eight-part test determines whether information is covered by the attorney-client privilege: 

(1) Where legal advice of any kind is sought;

(2) From a professional legal adviser in his capacity as such; 

(3) The communications relating to that purpose; 

(4) Made in confidence; 

(5) By the client; 

(6) Are at his instance permanently protected; 

(7) From disclosure by himself or by the legal adviser; 

(8) Unless the protection be waived. 

In re Grand Jury Investigation, 974 F. 2d 1068, 1071 n.2 (9th Cir. 1992).  

In California, a client—whether a party in litigation or not—has a privilege to refuse to disclose, and to prevent another from disclosing, a "confidential communication" with his or her lawyer. Cal. Evid. Code § 954.

Section 952 defines "confidential communication" as information (1) shared between a client and lawyer, (2) in the course of that relationship, (3) made in confidence, and (4) so far as the client is aware, not disclosed to any third persons except (a) those who are present to further the interest of the client in the consultation, or (b) those to whom disclosure is reasonably necessary for the transmission of the information of the accomplishment of the purpose for which the lawyer is consulted. The attorney-client privilege is absolute, and disclosure may not be ordered, without regard to relevance, necessity, or any particular circumstances peculiar to the case. Gordon v. Superior Court, 55 Cal. App. 4th 1546, 1557 (1997).

The party claiming the privilege has the burden of establishing the preliminary facts necessary to support its exercise, i.e., a communication made in the course of an attorney-client relationship. D.I. Chadbourne, Inc. v. Superior Court, 60 Cal. 2d 723, 729 (1964); see also Ruehle, 583 F. 2d at 607. Once that party establishes the facts necessary to support a prima facie claim of privilege, the communication is presumed to have been made in confidence. The opponent of the claimed privilege then has the burden to establish that the communication was not confidential (or that the privilege does not, for other reasons, apply). Cal. Evid. Code § 917(a); Wellpoint Health Networks, Inc. v. Superior Court, 59 Cal. App. 4th 110, 123-24 (1997). 

The Attorney-Client Privilege And The Corporate Client

While the attorney-client privilege rules are simple enough in isolation, there can be complexity in their application. For example, in D.I. Chadbourne, Inc. v. Superior Court, 60 Cal. 2d 723, 729 (1964), the Court examined the attorney-client privilege in the corporate context. Id. at 732. A corporation can only communicate through people: through officers, employees, or some other natural person. Thus, corporations should not be denied the privilege because of their entity status. On the other hand, the privilege should not attach to every report or statement furnished to a corporate attorney. Id. 

The Chadbourne court concluded that the reasoning that applies to a natural person should apply to a corporation (with certain adaptations to fit the corporate concept). Id. at 736. With this threshold rule in mind, the Court articulated certain principles to apply when considering the privilege with a corporate entity:

1. When the employee making the statement is a co-defendant with the employer: That individual defendant's statement to a representative of the employer and delivered to an attorney who represents [or will represent] either or both of them regarding the facts with which he or his employer may be charged is privileged. The statement is entitled to the attorney-client privilege in the same way it would apply if there was no employee employer relationship. Id.at 736.   

2. When the employee making the statement is not a co-defendant: The employee's statement is not privileged unless—under all of the circumstances of the case—he is the natural person to be speaking for the corporation. Put another way, the privilege does not attach unless the communication constitutes information which emanates from the corporation (as distinct from the non-litigant employee), and the communicating employee is such a person who would ordinarily be utilized for communication to the corporation's attorney. Id.at 736-37. 

3. When the employee is a witness and the employer requires the employee to communicate with the corporation's attorney: So long as the employee has no connection with the matter other than as a witness, the fact that the employer requires him to make a statement for transmittal to the latter's attorney does not alter his status or make his statement subject to the attorney-client privilege. Id.at 737.   

4. Where the employee is a witness, but he is required in the ordinary course of business to report or make a statement: Where the employee's connection with the matter grows out of his employment to the extent he is required to report the matter, his report or statement is that of the employer. Whether the report is privileged will then be determined by the employer's purpose in requiring it (e.g., if the employer directs the making of the report for confidential transmission to its attorney, the communication may be privileged). If the employer has more than one purpose for the report, the dominant purpose for requiring the report will determine whether it is privileged. Id. 

5. When an otherwise privileged statement or report is obtained by an agent of the employer: A communication does not lose its privilege merely because it was obtained by an agent of the employer acting under such agency. For example, an insurance company (and its agents) can be agents of the employer. However, the extent to which this doctrine may be carried, and the number of hands through which the communication may travel without losing confidentiality will depend on the facts and reasons of the particular case. Id. 

6. When statements come from employees who were not directed to be made by their employer: In all employer-employee situations, it is the intent of the person from whom the information emanates that originally governs its confidentiality. Where the employee makes a statement and does not know that his statement is being sought on a confidential basis (or he does not intend the statement to be confidential), the intent of the party receiving and transmitting the information does not control the question of privilege. Id.at 737-38.  

7. When statements come from employees that were directed to be made by their employer: Where a corporate employer directs an employee to make a statement, at the request of an insurance company for example, the intent of the employer controls. Unless the insurance carrier (or its agent) advised the employer that the statement would be used by and/or transmitted to the employer's lawyer, it cannot be said that the corporation intended the statement to be made as a confidential communication from client to attorney. Id. at 738.  

Finally, the Court explained that, "no greater liberality should be applied to the facts which determine privilege in the case of a corporation than would be applied in the case of a natural person (or association of persons), except as may be necessary to allow the corporation to speak." Id.     

The Common Interest / Joint Defense Doctrine: The Rule 

To understand the common interest / joint defense doctrine, it is important to understand the doctrine of waiver as it applies to the attorney-client privilege. In California, to determine whether a privilege has been waived, Section 912 provides that, "[a] disclosure in confidence of a communication that is protected by a privilege provided by Section 954 (lawyer-client privilege) ..., when disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer... was consulted, is not a waiver of the privilege." See OXY Resources, 115 Cal. App. 4th at 891. 

Similarly, federal courts hold that the attorney-client privilege may extend to communications with third parties who have been engaged to assist the attorney in providing legal advice. See United States v. Richey, 632 F. 3d 559, 566 (9th Cir. 2011). "'What is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer.'" Id., at 566, n.3, citing United States v. Gurtner, 474 F. 2d 297, 299 (9th Cir. 1973) (italics in original).    

In OXY Resources, the court examined these waiver principles in the context of communications and identified the elements of the common interest doctrine: 

(1) The participants in the exchange must have a reasonable expectation that the information disclosed will remain confidential. If a disclosing party does not have a reasonable expectation that a third party will preserve the confidentiality of the information, then any applicable privileges are waived.

AND

(2) Disclosure of the information must be reasonably necessary for the accomplishment of the purpose for which the lawyer was consulted. Thus, most courts insist that the two parties have in common an interest in securing legal advice related to the same matter—and that the communications be made to advance their shared interest in securing legal advice on that common matter. 

See OXY Resources, 115 Cal. App. 4th at 891. 

The Common Interest Doctrine And The Timing Of Communications 

When considering whether a common interest exists, the timing of party communications can be important. For example, in Citizens for Ceres v. Superior Court, 217 Cal. App. 4th 889 (2013), the Court examined whether communications between a city and a developer—before the project was approved—were protected by the common-interest privilege.

The case involved allegations that a city failed to properly consider (and mitigate) the environmental impact of a 300,000-square-foot shopping center it approved. The challenger, Citizens for Ceres, requested that various documents be produced, including communications between the city and developer before the project was approved. The city and developer claimed the communications were protected by the common interest doctrine. The court upheld the claimed privilege and the challenger appealed. Id. at 905. 

To determine whether a common interest existed, the Court first looked at the city's interest (and obligation) when reviewing project proposals. The role of a city is to play a neutral role, evaluate the potential environmental impacts, and ultimately accept or reject the proposal. Id. This is different from a developer's interest. A developer wants to produce a legally defensible environmental impact report (EIR) that supports the proposal. Id. at 918. 

As the Court explained, there are often disputes about whether the impact of a proposed project can be mitigated versus the impact being so severe that mitigation is not feasible. And while these are among the most important decisions a city is required to make, their obligation (i.e., to present the conclusion best supported by the facts) is at odds with the interest of the developer (i.e., to present a conclusion most favorable to its proposal). Because the city and developer did not share a common interest, the Court concluded that they waived the attorney-client privilege with respect to all communications they disclosed to each other before the city approved the project. Id. at 922. 

The Common Interest Doctrine And Finger Pointing Co-Defendants 

In Raytheon Company v. Superior Court, 208 Cal. App. 3d 683 (1989), the Court examined whether documents circulated among co-defendants, whose interests were potentially adverse, could still be protected by the attorney-client privilege. Raytheon and other defendants (including Intel Corporation and Fairchild Semiconductor Corporation) were sued for contract and tort claims related to the toxic condition of sites located in Mountain View. Id. at 685. 

After the plaintiffs filed their lawsuit, the Environmental Protection Agency (EPA) began an investigation of the contaminated site. As part of the EPA's investigation, Raytheon and the other defendants circulated documents among themselves—documents that were prepared by counsel at the direction of counsel (the "circulated documents"). The plaintiff sought production of the circulated documents, and Raytheon refused. Raytheon argued that during the EPA investigation, the parties were not adversaries but were cooperating jointly with the investigating agencies so as to expedite remedial measures most efficiently. Id. at 686. The trial court ordered their production and Raytheon sought a writ of mandate. Id. 

The trial court based its ordered production on Williamson v. Superior Court, 21 Cal. 3d 829 (1978), which involved the production of an expert report that was shared among two defendants. The first defendant shared the report with the second defendant—the report was highly critical of the second defendant. The co-defendants then agreed that the report would be suppressed in exchange for the second defendant indemnifying the first. Williams thus stands for the narrow rule that a bargain to suppress evidence is disfavored—for obvious reasons. Raytheon, 208 Cal. App. 3d at 686. 

There was no bargained agreement to withhold the circulated documents in Raytheon. Instead, the issue was whether the circulation of the various documents among the co-defendants constituted a waiver of the attorney-client privilege. Normally, disclosure of privileged documents to a litigation adversary constitutes a waiver because it is inconsistent with the policy stated in Evidence Code section 912. The plaintiff argued that the various co-defendants were adversaries because they had an individual interest in shifting as much blame to other parties. Id. at 687. Moreover, the defendants' answers included affirmative defenses wherein they individually disclaimed responsibility and pointed fingers at the other defendants. Id. 

Raytheon responded that there was a commonality of interest based on joint cooperation during the EPA investigation. The Court remanded the case to the trial court to make a determination of whether circulating the documents among the co-defendants was "reasonably necessary," within the meaning of Section 912. Because the trial court improperly relied on Williamson as the guiding authority, remand was necessary to consider the issue under a Section 912 analysis. In doing so, the Court suggested that the attorney-client privilege "is not waived except by a disclosure wholly inconsistent with the purpose of the privilege, which is to safeguard the attorney's work product and trial preparation." Id. at 689, citing Fellows v. Superior Court, 108 Cal. App. 3d 55, 65-66 (1980) (italics added). 

Conclusion

The trial court in Waymo ordered the production of the Stroz Report because Stroz was not an agent for Levandowski. Stroz was hired by Ottomotto and Uber to investigate Levandowski. Accordingly, Levandowski's communications were not protected by the attorney-client privilege. The fact that Levandowski may have had a common legal interest that the Ottomotto / Uber transaction did not create an independent privilege. The court explained that to find the Stroz Report privileged under these circumstances would be "unprecedented." The ruling is a cautionary reminder that signing a joint defense or common interest does not create an automatic shield to discovery.  

David Sugden is a shareholder at Call & Jensen. He can be reached at [email protected].