Gravel2Gavel Construction & Real Estate Law Blog
Protecting communications disclosed to third-parties under the common interest doctrine can be an uphill battle. Was the communication reasonably necessary for the purposes for which the attorney was consulted? Was there a reasonable expectation the communication would remain confidential? Was the content of the communication of the type that should be afforded protection? In the context of construction defect litigation, homeowners associations are often placed in a “common interest” predicament:
Association bylaws and the California Civil Code require the association to keep individual homeowners abreast of details regarding construction defect litigation. The individual homeowners are not the clients of the association’s lawyer – the association is. Does complying with pertinent statutory and association-specific requirements result in a waiver of privileged information?
This issue was dealt with by the California Court of Appeal in Seahaus La Jolla Owners Ass’n v. Superior Court, 224 Cal. App. 4th 754 (2014).
In Seahaus, petitioner and plaintiff, a homeowner’s association (the, “Association”) brought a construction defect action alleging various damages to the common areas of a common interest development. The Association sued the developers and builders of the complex (“Defendants”). The Court of Appeal conducted a mandamus proceeding to address the Association’s contention that the trial court erred in overruling its claim of attorney-client privilege in a discovery dispute over Defendant’s efforts to depose individual homeowners regarding disclosures made at an informational meeting regarding the litigation.
After the Association filed its litigation against the Defendants, in July of 2009, it held litigation update meetings pursuant to the Association’s governing documents. By this time, a subgroup of individual homeowners had filed its own companion action seeking damages for defects in their private, individual units.
Defendants sought to inquire into the content and disclosures made at the litigation update meetings during the depositions of certain individual homeowners. The Association objected, invoking the attorney-client privilege and the “common interest” doctrine under Evidence Code section 952.
The Association argued section 952 applied because the individual homeowners were “third persons. . . to whom disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer is consulted.” Evid. Code § 952. Several rulings by the trial court declined to allow for such a privilege to be asserted regarding the communications received at the meetings by individual homeowners who are not the actual clients of the counsel retained by the Association.
The Court of Appeal held that, under the circumstances specific to this dispute, the communications were protected by attorney-client privilege and the common-interest doctrine. In making that determination, the court outlined relevant attorney-client privilege and common interest doctrine authority.
With regard to attorney-client privilege, the court relied on Evidence Code sections 912 and 952, which, together, “permit sharing of privileged information when it furthers the attorney-client relationship; not simply when two or more parties might have overlapping interest.” McKesson HBOC, Inc. v. Superior Court, 115 Cal. App. 4th 1229, 1237 (2004). Evidence Code section 912 provides further guidance for when disclosures operate to waive privilege; in pertinent part, this section provides:
“A disclosure in confidence of a communication that is protected by a privilege provided by [attorney-client privilege, § 954], when disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer … was consulted, is not a waiver of the privilege.”
With regard to the common interest doctrine, the court reiterated that unlike attorney-client privilege, the protection afforded by the common interest doctrine is qualified, because it depends on the content of the communication. The court found important the multiple communications between the Association’s counsel and the individual homeowners in evaluating the “content” of the subject communications. The Association’s counsel sent the 5 separate letters containing litigation update information and information concerning further defects and their investigations regarding those defects. These letters were sent in accordance with the Association’s governing and Civil Code requirements (which places certain obligations on an association to communicate with individual owners about any proposed construction defect litigation). See Civil Code § 6150.
Lastly, the court analyzed the Association’s statutory obligations to its individual homeowners. Notably, Civil Code section 5980 grants a common interest development’s homeowners association standing to sue in its own name, on matters concerning damage to the common area, or damage to separate interest that are affected by damage to the common areas. Civ. Code § 5980. The subgroup’s separate action did not affect the Associations ability to seek regress for damage to separate interests affected by damage to the common areas.
The court concluded that, in accordance with its governing documents and the Civil Code, the Association’s duties and powers included communicating with individual homeowners who have closely aligned common interests. The circumstances of these disputes indicated, on balance, that the there was a “reasonable expectation” that the information disclosed regarding the status of the litigation was confidential in nature. Further, the court held that the relationship between the Associations action and the subgroup of homeowner’s action was “close enough” so that the subgroup had common interests in the legal status of the Association’s action.
This decision only informs a homeowners association’s ability to comply with internal and statutory requirements regarding construction defect litigation without waiving attorney-client privilege. It is worth noting the limited nature of this court’s holding (the court turned only to the “specific questions presented about the application of the common interest doctrine in this situation.”) As such, this decision does not carve into stone a bright line rule easily applied by all common interest developments in all factual scenarios. Instead, it stands as an example of the fact intensive analysis that accompanies common interest doctrine disputes. This territory is murky; here, the clarity provided is as informative as it is limited.