Munguia-Brown v. Equity Residential

Background

The plaintiffs sued Equity Residential and other defendants under two California statutes. They alleged that the defendants charged tenants the greater of $50 or 5% of the outstanding balance for late rent and that this charge was an unlawful penalty and violated California’s unfair-competition law.

The discovery dispute arose from the defendants’ opposition to the plaintiffs’ summary-judgment motion. The defendants relied on evidence describing their evaluation of the late fee, including statements that outside counsel and in-house counsel had reviewed the fee and that the company determined the 5% charge was reasonable and legally permissible. The defendants continued to withhold other attorney-client communications on the ground that they were privileged.

Court’s analysis

The court rejected the defendants’ argument that the plaintiffs’ motion to compel was untimely. It also held that Federal Rule of Evidence 502, rather than state privilege law, governed the alleged waiver because Rule 502 applies to disclosures of attorney-client communications even when state law supplies the rule of decision. The court further clarified that only attorney-client privilege, not attorney work-product protection, was at issue.

Under Rule 502(a), a waiver extends to undisclosed communications only when the disclosure was intentional, the disclosed and undisclosed communications concern the same subject, and fairness requires that they be considered together. The court found all three requirements satisfied. It concluded that the defendants intentionally disclosed the substance of legal advice by stating that outside counsel had confirmed the fee was reasonable and by describing legal reviews that led the company to conclude that the fee passed legal muster. The court found that the withheld communications concerned the same subject: legal advice about whether the late fee was lawful.

The court also found that fairness required disclosure. The defendants’ evidence presented legal advice as support for their claim that they had acted diligently and reasonably. Without access to the underlying communications, the plaintiffs could not meaningfully test whether the defendants accurately characterized that advice or whether different lawyers gave different advice.

Ruling

The court ordered the defendants to produce all attorney-client communications withheld on the subject of legal advice concerning the legality of the late fee. The court also ordered the defendants to make the two identified witnesses available for depositions concerning that subject. The waiver was limited to that subject and did not require production of documents withheld for other reasons, including any agreements about custodians or date ranges. Judge Thomas S. Hixson issued the discovery order.