Client Alert: Court of Appeal Applies Common Interest Privilege Doctrine to HOA Litigation Meetings

In Seahaus La Jolla Owners Assoc. v. Superior Court (No. D064567, March 12, 2014), the California Court of Appeal held a homeowners association’s (“HOA”) litigation meetings related to the HOA’s construction defect lawsuit were subject to protection under the attorney-client privilege. Specifically, the court concluded the common interest doctrine applied to the subject litigation meetings, thereby barring the defendants in the HOA’s lawsuit from seeking discovery related to the content and disclosures made during those meetings.

The plaintiff HOA initiated a construction defect lawsuit against a residential developer and builder, seeking damages for construction defects related to common areas. The defendants took the depositions of individual homeowners and inquired regarding the communications and disclosures made at informational litigation update meetings. The meetings were conducted by the HOA’s counsel with groups of homeowners, some of whom had filed their own, separate lawsuits against the same defendants. Motions to compel were filed after attorney-client privilege objections were asserted by counsel for the HOA. After the court-appointed discovery referee opined that the common interest doctrine applied and that the communications presented at the meetings were subject to the attorney-client privilege, the trial court rejected this recommendation and overruled the HOA’s privilege objections. The HOA filed a petition for a writ of mandate.

The defendants argued the privilege had been waived based on the presence of persons who were not the clients of the HOA’s attorney, that the subject communications were not “confidential communications” and that the individual homeowners and the HOA did not share common interests at the time. After setting forth a comprehensive discussion of the statutory principles underlying the attorney-client privilege and the bases for waiver, as provided in California Evidence Code §§ 912 and 952, and summarizing applicable decisional law, the court specifically analyzed the question of whether the common interest doctrine applied in the context of the disputed HOA litigation meetings. The common interest doctrine protects confidential communications made by counsel to third parties if the third parties are present to further the interest of the client or are those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer was consulted.

Applying these principles in the context of the HOA’s litigation meetings, the court concluded that, under the specific circumstances presented, the common interest doctrine applied. The court emphasized that the scope of the doctrine’s protection depends on the content of the communications and the circumstances under which they are made and found sufficient grounds to apply the privilege. The court relied upon the association’s duties and powers, as defined by statute and the common interest developments governing CC&R’s, which required communication concerning the HOA’s litigation to the individual homeowners. The court also found that the homeowners did, in fact, have interests which were closely aligned with the HOA. As such, the court held these communications concerning the litigation were privileged under the common interest doctrine and that the defendants could not compel disclosure.

While the court in Seahaus emphasized that its decision does not expand California law governing the scope of the attorney-client privilege, this case reflects a novel application of the common interest doctrine in the context of a third party seeking discovery of communications by counsel for an HOA. Seahaus is unfortunate for defendants in construction defect actions because it removes a common discovery tool (i.e., the scope of questions in homeowner depositions) used by defense counsel. The question going forward will be whether the underlying rationale of Seahaus, that the third parties in that case were really seeking to discover the HOA’s litigation strategy, will be applied outside the context of common interest developments. If so, it could significantly impact how corporations and other businesses strategically approach safeguarding privileged information when they are required to have their counsel make disclosure of otherwise privileged information to non-clients. A careful analysis of the specific requirements for the assertion of the common interest doctrine to render such communications privileged will clearly be in order. The Seahaus decision provides a thorough discussion of all such factors.

This document is intended to provide you with information about professional liability and construction law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

March 14, 2014