Hecht v. Superior Court
1987 Cal. App. LEXIS 1815, 192 Cal.App.3d 560, 237 Cal. Rptr. 528 (1987)
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Rule of Law:
When two or more individuals consult an attorney on a matter of common interest, a joint attorney-client relationship can be established based on the parties' conduct, even if one party later denies the relationship existed. In a subsequent dispute between the parties, the attorney-client privilege cannot be invoked by one client to prevent the other from discovering communications related to that common interest.
Facts:
- Renate Hecht and David Ferguson lived together and operated a business, Ferguson Tool Co., in a partnership-like arrangement where Hecht managed the business side and shared in the profits.
- In late 1981, they decided to form a new corporation, Amalgamated Software of North America, Inc. (ASNA), to market new software and secure outside investment.
- Hecht contacted Attorney Abram Zukor to handle the legal work for the new corporation.
- Hecht and Ferguson jointly met with Zukor in his office and participated in several three-way telephone conversations regarding the formation of ASNA.
- During one conversation, Ferguson allegedly told Zukor that he and Hecht were to be equal shareholders and that Hecht would be the corporate secretary.
- The initial organizational documents for ASNA, including the Notice of Issuance of Shares, listed both Hecht and Ferguson as officers, directors, and proposed shareholders.
- After Hecht and Ferguson's personal relationship ended in 1982, Ferguson married someone else.
- In March 1983, Attorney Zukor redrafted ASNA’s corporate documents, removing Hecht's name and substituting Ferguson's new wife as an officer and director, and issued shares only to Ferguson and his nephew.
Procedural Posture:
- Renate Hecht sued David Ferguson and others in California Superior Court, alleging she was deprived of her interest in ASNA, Inc.
- During discovery, Hecht deposed Attorney Abram Zukor, who had handled the incorporation of ASNA.
- Ferguson's counsel invoked the attorney-client privilege to prevent Zukor from answering questions about communications concerning the drafting of corporate documents.
- Hecht filed a motion in the superior court to compel Zukor's testimony, arguing that the 'joint client' exception to the privilege applied.
- The superior court partially denied the motion, ruling that the privilege was waived only for conversations where Hecht was present, finding insufficient evidence of a broader attorney-client relationship between Hecht and Zukor.
- Hecht petitioned the California Court of Appeal for a writ of mandate to compel the superior court to grant her motion to compel in its entirety.
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Issue:
Does the joint client exception to the attorney-client privilege apply to allow one co-founder of a business to compel the testimony of the formation attorney against the other co-founder, when the parties' conduct objectively demonstrates a shared purpose and consultation, despite one party's denial of a joint relationship?
Opinions:
Majority - Ashby, J.
Yes, the joint client exception applies. An attorney-client relationship is determined by the intent and conduct of the parties, and Hecht's conduct demonstrated she was a client of Zukor alongside Ferguson for the purposes of forming ASNA. The court reasoned that while the parties' intent was disputed, their objective conduct was dispositive. Hecht's prior partnership-like role in their previous business, her active participation in meetings and calls with the attorney, and her inclusion as a principal in the initial corporate documents established a reasonable expectation that Zukor was representing their common venture. Drawing an analogy to partnership law, as in Wortham & Van Liew v. Superior Court, the court concluded that an attorney for a joint venture represents all principals, and one cannot later use the attorney-client privilege as a shield against the other in a dispute arising from that venture.
Analysis:
This decision is significant because it affirms that an attorney-client relationship can be implied from conduct, without a formal retainer agreement or the payment of legal fees by the party asserting the relationship. It sets a precedent that in the context of business formations involving multiple principals, courts will look beyond subjective claims and examine objective evidence of joint consultation and common interest. The ruling limits the ability of one business partner to retroactively characterize an attorney as their sole counsel to disadvantage a co-founder, thereby preventing the attorney-client privilege from being used to conceal a potential breach of fiduciary duty during the formation of a closely held corporation.
