California Appeals Court: Employer Waived Privilege For Investigative Materials

Providing an important reminder for employment attorneys, a California appellate court held that an employer waived attorney-client privilege and attorney work product protection when it used an investigation report as a defense in a lawsuit brought by a former employee.

While an employee of Intuitive Surgical, Michelle Paknad made formal complaints of sexual harassment, gender discrimination and unlawful retaliation. Intuitive retained Andrea Kelly Smethurst, an outside attorney, to investigate the complaints.

Smethurst conducted interviews, reviewed documents and produced two reports summarizing her findings and conclusions. While a summary of the findings was conveyed to Paknad, Intuitive did not share the materials, which consisted of 437 pages comprised of Smethurst’s two reports, documents (primarily emails) that Smethurst reviewed in her investigations and Smethurst’s interview notes.

Paknad was subsequently fired, and she sued Intuitive and her former supervisors. In asserting avoidable consequences as an affirmative defense to Paknad’s complaint, Intuitive cited the Smethurst investigations and touted their thoroughness and independence.

In response, Paknad filed a motion to compel production of the reports and investigative materials. The trial court denied the motion. On Paknad’s first appeal, the appellate court reversed in part, concluding that once an employer puts the adequacy of an investigation directly at issue in response to an employee’s lawsuit, that employer “cannot stand on the attorney-client privilege or work product doctrine to preclude a thorough examination of [the investigation’s] adequacy.”

The appellate court remanded with instructions for in-camera review to determine if protection was warranted for “core work product” in the materials. On remand, the trial court ordered disclosure of the reports, subject to Intuitive’s redactions. Because Intuitive redacted all of the investigator’s factual findings, Paknad appealed again.

The appeals court weighed in for a second time.

“We clarify that Intuitive, by its voluntary conduct, has waived attorney-client privilege and attorney work product protection as to (1) all Smethurst’s factual findings about Paknad’s allegations of discrimination, harassment, or retaliation, and (2) information – whether in Smethurst’s reports or the underlying investigative materials – relevant to the scope or adequacy of Smethurst’s investigation of Paknad’s allegations,” the court explained.

The court focused on the scope of the waiver: what Intuitive voluntarily put at issue through its assertion of the avoidable consequences defense.

Smethurst’s factual findings represent her “interpretation and weighing of the available evidence, her assessment of the credibility of the witnesses, and her determination of whether Paknad’s factual allegations were substantiated,” the court wrote. “The relevance of these factual findings to the scope and adequacy of the investigations is undisputed. They are squarely within the scope of Intuitive’s waiver.”

Intuitive told the court that because even bare credibility determinations were informed by Smethurst’s legal judgment and experience, they were not subject to disclosure.

But the court disagreed because Intuitive engaged Smethurst both to investigate Paknad’s complaints and to make recommendations to its management about how to respond to them, so the substance of Smethurst’s factual findings had direct bearing on the adequacy of both the investigation and Intuitive’s response.

“If Intuitive chose to disregard the findings of the investigations it commissioned, those findings would be relevant to the claimed adequacy of its response; likewise, if it chose to accept and act on the findings made, the adequacy of its response is enmeshed with the adequacy of those investigations,” the court said.

Smethurst’s factual findings were also relevant to the disputed issue of her independence, the court added. Intuitive put Smethurst’s independence and objectivity at issue in its responses to interrogatories, which meant Paknad must be given access to Smethurst’s factual findings so that she had equal opportunity to assess how Smethurst reached those findings, and if warranted, to root out possible bias.

Intuitive also sought proposed limited redactions to other portions of the reports and to the underlying investigative materials.

The court directed the trial court to conduct further in-camera review of the remaining redactions but was clear that the review was not to determine whether any information contained core work product.

Instead, the question for the trial court was “whether the redacted materials are within the scope of Intuitive’s waiver of protection for core attorney work product,” the court said.

To read the decision in Paknad v. Superior Court, click .

Why it matters: By relying on the investigation materials as part of an affirmative defense, the employer waived both the attorney-client privilege as well as work product protection, as “even core work product is subject to waiver when the beneficiary of that protection puts it at issue,” the appellate panel made clear. The decision is a reminder to employers that even if you engage a lawyer to conduct an investigation, the lawyer’s materials produced in connection with the investigation may need to be turned over to the other side in litigation, if the employer seeks to rely on the adequacy of the investigation in a lawsuit.