Are Your Legal Bills Privileged?
A recent decision from the California Supreme Court touches deep into the heart of every lawyer’s practice.
A recent decision of the California Supreme Court leaves attorneys and their clients thinking twice about what they put in client invoices and bills. In Los Angeles County Board of Supervisors v. Superior Court, 2 Cal.5th 282 (2016) (also available at 2016 WL 7602131), the state’s highest court held that information in attorney invoices sent to clients is privileged if part of “active and ongoing litigation,” but may not be privileged if related to matters “concluded long ago.”
The case was decided by a razor-thin 4-3 vote. And while LA County is instructive and certainly decisive on its particular facts, it is equally true that there remain several key questions as the legal community attempts to apply the work product doctrine and attorney-client privilege to legal bills.
As part of an excessive force investigation into the Los Angeles County jail system, the ACLU submitted a Public Records Act request to the Board of Supervisors seeking invoices submitted by outside counsel to the county related to excessive force claims. The county claimed attorney-client privilege, refused to produce the requested items, and the ACLU filed a petition for a writ of mandate with the superior court to compel the county to produce the invoices. The trial court granted the writ.
The county followed with its own petition for a writ of mandate to the court of appeal. The appellate panel granted the county’s petition and vacated the superior court’s order. The state supreme court then granted review.
The California Supreme Court reversed the judgment of the court of appeal, holding that invoices pertaining to “active and ongoing” litigation are privileged, while invoices related to “concluded” matters may not be privileged. Conceding that not all communications between attorney and client are privileged, the court reasoned that billing statements to clients could indirectly lead to “clues” about legal strategy. For example, the court stated that evidence of a sudden upswing in billing could indicate an upcoming motion filing. The court also drew a distinction between invoices related to ongoing litigation and invoices related to “concluded” litigation, reasoning that “with no ongoing litigation to shed light on the context from which such records are arising—may communicate little or nothing about the substance of legal consultation.” However, the court stopped short of stating that invoices from “concluded” litigation were categorically not privileged. See generally, 2016 WL 7602131 at 6-7.
This decision means that the inquiry over whether a client can be compelled to produce attorney invoices turns on the status of the litigation to which the invoices relate. Of course, just because a matter is “concluded” does not necessarily mean that some related litigation may not arise in the future. Because of the possibility—however distant—of compelled disclosure, attorneys may now need to more carefully consider the content of their invoices, particularly if there is a likelihood of related litigation after the current matter is concluded.
Federal Court ImplicationsIt also remains to be seen how this decision affects similar situations in federal cases. The court notes that “disclosure of billing invoices is the norm in the federal courts in California, where ‘[f]ee information is generally not privileged.’” Id. at *8 (quoting Fed. Sav. & Loan Ins. Corp. v. Ferm, 909 F.2d 372, 374 (9th Cir. 1990). However, as pointed out by Justice Werdegar in her dissenting opinion, the federal cases permitting disclosure of billing invoices “rely on Federal Rule of Evidence 501, which simply incorporates federal common law.” See 2016 WL 7602131 at *12 (Werdegar, J., dissenting). In a footnote, Justice Werdegar further expounds that although Federal Rule of Evidence 501 incorporates federal common law, it also states that “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Id. at *12 n.7 .
In doing so, Justice Werdegar hints at the tension that now exists between California federal courts, which largely allow disclosure of billing invoices, and California state courts, which now prohibit disclosure of billing invoices in ongoing litigation. Because of this tension, there is now the hypothetical situation in federal court where the cause of action determines the privilege status of billing invoices, due to the text of Federal Rule of Evidence 501. For example, a section 17200 unfair business practice claim in a California federal court would be subject to the new LA County rule, with billing related to ongoing litigation being privileged, because “state law supplies the rule of decision.” See Fed. R. Evid. 501. On the other hand, a Lanham Act unfair competition claim would leave attorney billing open to disclosure under Federal Rule of Evidence 501 and California federal authority. See, e.g., Fed. Sav. & Loan, supra, 909 F.2d at 374.
Implications for Transactional Representation
The LA County opinion does not explain how the new rule would affect the privilege status of billing invoices for transactional matters. For example, if a law firm sends a series of invoices to a client for assisting in drafting and negotiating a contract, and that contract, long after execution and closing, becomes the subject of litigation, are those invoices privileged?
If a court were to analogize the LA County rule, it would seem that because the transactional matter is “concluded”—i.e. the contract reached its closing date—then the related billing may not be privileged. However, now that it is subject to litigation, it would seem counterintuitive to open up those records to disclosure when they could contain critical information about the drafting process. However, the careful wording of the opinion suggests that even if a matter is “concluded,” invoices from that matter may still be privileged if they “reveal the substance of legal consultation.” 2016 WL 7602131 at *7. Lower courts are left to interpret LA County in the wake of its silence as to non-litigation invoices.
Key Issue, Close Call
These privilege issues are vital not only to lawyers, but their clients as well. While we all yearn for simple rules that are easy to apply, the LA County decision complicates the privilege status of attorney invoices in California, in both state and federal court. Future cases, decided in varying factual contexts will no doubt flesh out the parameters of this crucial issue.
Joshua M . Heinlein is a partner and Jacob A. Ayres an associate at the San Diego office of Dinsmore & Shohl LLP. They focus on a wide variety of civil litigation.