California Mediation and Arbitration

References and Privilege: Second District Division 7 Rules Special Reference Can’t Examine Documents Claimed To Be Privileged To Determine If They Are Privileged

Allegedly Confidential Documents Can Only Be “Generally Described” To Determine If They Are Truly Privileged

     Plaintiff Parness sued attorney Weiss and his law firm (acting as film production counsel) for alleged fraud arising out of the financing of the film Gospel Hill.  Plaintiff claimed production counsel made fraudulent representations the production company had good chain of title to the film screenplay, and that this proved to be false, along with the representation that Samuel L. Jackson would star in the movie.  Over plaintiff’s objection, the trial judge appointed a referee to evaluate production counsel’s contention it could not defend without disclosing protected lawyer-client communications relevant to counsel’s scienter.  Accepting the referee’s report that production counsel could not defend without violating the attorney-client privilege, and that attorney-client communications were relevant to the lawyer’s scienter, the trial judge dismissed claims against production counsel.  Plaintiff appealed the dismissal of production counsel.  Parness v. Abrams Garfinkel Margolis Bergson, LLP, Case No. B234762 (2nd Dist. Div. 7 August 14, 2012) (Perluss, J., author) (unpublished).

     Finding that the reference was improper, the Court of Appeal reversed.  There were two flaws in the reference procedure.

     First, in camera review of documents allegedly protected by the lawyer-client privilege to determine if they are privileged is prohibited.  Evid. Code section 915(b).   “So long as Weiss established a prima facie claim of privilege, his motion to dismiss must be decided without examination of the contents of the assertedly privileged documents notwithstanding the ‘assumptions’ and ‘uncertainty’ about the nature of the privileged communication that troubled the trial court.”  The trial court’s error here was in ordering a reference to inspect the documents.

     Second, the referee made recommendations on the ultimate legal question presented by the motion that the trial judge did not independently review – and the findings of a special referee under Cal. Code of Civ. Proc. section 639 are not to be rubber-stamped, but rather require independent review by the trial judge.  If the trial judge had treated the referee’s report as “advisory”, and independently reviewed it, the second problem could have been avoided. 

     On remand, the trial court “must decide the motion [to dismiss production counsel] by weighing the materiality of information, which can only be generally described, on the elements of scienter and intent – elements by their very nature that can be difficult to prove – and drawing conclusions about its significance from other evidence the court is permitted to review.” 

References: Ninth Circuit Addresses Issue of First Impression Concerning Appealability of Order Granting Reference

 

Order Compelling A Reference And Staying Proceedings Does Not Put Plaintiffs "Out Of Court", And Therefore Is Not Final And Appealable

     The Ninth Circuit tells us the issue considered in this case is one "of first impression." That issue is "whether an order compelling enforcement of a contractual agreement to submit a dispute to a referee, and staying proceedings in the interim, is immediately appealable." Bagdasarian Productions, LLC v. Twentieth Century Fox Film Corporation, No. 10-56430 (9th Cir. March 26, 2012) (for publication) (Hawkins, Senior Circuit Judge).

     The underlying dispute involved plaintiffs, who created or controlled properties connected with Alvin and the Chipmunks, and defendant Fox, owner of rights in the properties entitling it to develop, produce, distribute, exhibit, exploit, advertise, promote and publicize "throughout the universe." The agreement between the parties provided that "any dispute arising out of the Agreement would be submitted to a general non-jury reference pursuant to California Code of Civil Procedure section 638."

     Plaintiffs sued Fox. Fox moved to refer the disputes to a referee, and to stay the action. The trial court granted Fox's motion. Was the order granting the reference a final and appealable order?

     It helps to know two things: first, that an order granting a motion to compel arbitration is not appealable; second, that both arbitration and a reference are a form of ADR – and therefore, the court is likely to view them similarly:

     “Although there are some differences between arbitration and Section 638 reference, both are forms of alternative dispute resolution designed to move disputes out of court and lower the cost of trial proceedings. Plaintiffs offer no convincing reason why stays pending Section 638 reference proceedings should be treated differently from stays pending arbitration, since errors with either may be corrected later on appeal.”

     In other words,

“the district court’s order is not final, the Plaintiffs have not been put ‘out of court’ by the order . . . the decision to refer can be reviewed and, if incorrect, later remedied by this court. As such, the appeal is premature and we lack jurisdiction over it under Section 1291.”