Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-01026/USCOURTS-cand-5_04-cv-01026-4/pdf.json

Nature of Suit Code: 720
Nature of Suit: Labor Management Relations Act
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ROBERT SCHMIDT and THOMAS WALSH,

Plaintiffs,

 v.

LEVI STRAUSS & CO., LAURA LIANG and

DOES 1-50,

Defendants. /

RELATED COUNTER-ACTION

 /

No. C04-01026 RMW (HRL)

ORDER GRANTING IN PART AND

DENYING IN PART PLAINTIFFS’

MOTION TO COMPEL PRODUCTION

OF DOCUMENTS

[Re: Docket No. 90]

This is an action brought under the Sarbanes-Oxley Act, 18 U.S.C. § 1541A. Plaintiffs

Robert Schmidt and Thomas Walsh are former employees of defendant Levi Strauss & Co.

(“LS&Co.”) who worked under the supervision of defendant Laura Liang. They claim that they

were wrongfully terminated in retaliation for filing complaints about defendants’ alleged tax

fraud and other accounting irregularities. They also allege that defendants defamed them. 

Defendants contend that plaintiffs were fired for insubordination and work performance issues.

Before filing the instant action, plaintiffs filed a similar wrongful termination lawsuit in

San Francisco Superior Court, alleging violations of state common law and statutes. The parties

exchanged some discovery there. Later, they stipulated to stay the state court case while they

litigate the defamation and Sarbanes-Oxley claims here.

*E-FILED ON 02/13/2007*

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United States District Court

For the Northern District of California

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On January 30, 2007, this court heard the “Motion to Compel Production of Documents

and Further Production of Documents” filed by plaintiffs. LS&Co. opposed the motion; and, at

this court’s direction, LS&Co. subsequently submitted certain documents for an in camera

review. Upon consideration of the papers filed by the parties, as well as the arguments of

counsel, this court grants the motion in part and denies the motion in part.

1. Moot Issues

The parties reached agreement as to (a) draft written improvement notices and

termination notices and (b) business plan and presentation documents. Accordingly, plaintiffs’

motion to compel these documents is DENIED as MOOT.

2. Defendant Laura Liang’s Personnel File

LS&Co. has produced documents from defendant Laura Liang’s personnel file. 

However, plaintiffs assert that the production is “spotty” and that several categories of

documents are missing from the production, including: Liang’s self-assessments; documents

concerning her 2001 promotion from Director to Vice President; documents concerning her

work, duties and awards for 1999; the second page of a two-page performance evaluation in

2003 by LS&Co.’s former Chief Financial Officer, Bill Chiasson; and other records which

LS&Co.’s documents indicate are created in the normal course of employment with the

company. Plaintiffs assert that LS&Co. should have Liang’s complete personnel file because it

is legally required to maintain it. Further, they express concern that LS&Co.’s search for

Liang’s personnel documents was haphazard and less than thorough because the document

production was made in piecemeal fashion over four different points in time.

LS&Co.’s counsel avers that LS&Co. has produced all of Liang’s personnel documents

that LS&Co. has been able to locate after a diligent search. (See Schwing Decl., ¶ 3). At oral

argument, defense counsel stated that LS&Co.’s legal department conducted the document

search in consultation with the human resources department and, possibly, Liang herself. As for

the performance review by Chiasson, defense counsel asserted that Chiasson’s deposition

testimony indicates that there was no second page because he did not prepare the document in a

normal review situation (i.e., the review in question reportedly was provided by Chiasson two

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weeks after his employment at LS&Co. was terminated). Further, defense counsel confirmed

that defendants are not “hiding” documents.

Based on defense counsel’s representations to the court, it appears that there are no

further documents to compel. Nonetheless, this court will grant plaintiffs’ motion to the

following extent: No later than February 23, 2007, defendants shall serve declaration(s) from

appropriate person(s) within LS&Co. (i.e., not defense counsel) which (a) detail the search

(what, where and who) that was conducted for Liang’s personnel file; (b) confirm that

defendants have searched for Liang’s personnel documents in all locations where they might

reasonably be found; and (c) confirm that all responsive documents which were located have

been produced and that no documents have been withheld.

3. Minutes of Tax Leadership Team Meetings

During their employment at LS&Co., plaintiffs were members of the tax leadership

team, which met on a monthly basis. Plaintiffs assert that although LS&Co. produced the

“rough” minutes from those meetings, it refuses to produce the “final” version of those minutes. 

The parties vigorously dispute whether the “final” version of the minutes fall within (a) their

prior stipulation as to the use of discovery from their state court action; or (b) their agreement to

conduct limited additional written discovery through February 15, 2007 (notwithstanding that

discovery closed in this case on September 15, 2006). In any event, LS&Co. maintains that

plaintiffs have drawn an inappropriate distinction between “rough” and “final” minutes. At the

motion hearing, defense counsel asserted that minutes were kept sporadically and that there may

be one or two instances where changes may have been made to an initial version. However,

LS&Co. says that it has not withheld any version(s) of minutes which have been produced in

this action.

There is no dispute that, in their state court lawsuit, plaintiffs served a formal request

calling for the tax leadership meeting minutes. (See Ainley Decl., Ex. D (Request No. 494: “All

LS&Co. Tax Department Leadership Team Meeting Minutes for all meetings during and after

fiscal year 1999 to the present.”)). However, plaintiffs have not pointed to any discovery

request propounded in the instant action which calls for the production of the tax leadership

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meeting minutes themselves; and, LS&Co. says that the minutes which have been produced

here were produced because they are responsive to plaintiffs’ requests for other categories of

documents.

Plaintiffs nevertheless argue that the parties agreed that all discovery propounded in the

state court action could be used in the instant lawsuit. LS&Co. contends that the parties agreed

only that those documents which had been produced and depositions which had been taken in

the state court lawsuit could be used here. Further, it says that (1) there was no agreement that

defendants would be obliged to respond here to all of plaintiffs’ requests served in the state

court action; and (2) plaintiffs’ counsel indicated that he did not want defendants to respond to

the discovery requests which had been propounded in the state court lawsuit. The record

presented indeed appears to corroborate LS&Co.’s version of events (see Ainley Decl., Ex. E;

see also Schwing Decl., ¶¶ 2,8, 9, Exs. C and D).

Nor is this court persuaded that the “final” minutes which are now being sought fall

within the parties’ agreement to conduct limited post-cutoff discovery through February 15,

2007. Although there appears to be some dispute over the specific terms of the parties’

agreement, they have essentially agreed that no further written discovery will be taken except as

follows:

To the extent a deponent in a deposition identifies a particular

document or readily identifiable and limited category of

documents that have not been produced in the case and were

not previously known to a requesting party, the requesting party

may request those documents or category of documents. The

requests shall not be broad, open-ended document requests

(e.g., “all documents relating to X subject”), but rather shall be

tailored to the particular document or readily identifiable and

limited category of documents referenced or identified during

the deposition. These requests will be considered on a case by

case basis.

(Scheduling Order, Docket No. 89 at 2:26-3:5). (Defendants’ version of the parties’ agreement

is the same, except that they contend that the exception applies only to those documents

identified in a deposition conducted after August 16, 2006). (Id.). Here, plaintiffs and their

counsel certainly have been aware of the existence of the minutes (generally) for quite some

time.

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At the same time, however, plaintiffs say that they were not previously aware that

“final” versions of minutes exist which might differ from the original minutes until the October

26, 2006 deposition of Denise Cahalan. Moreover, the record before this court indicates that

Cahalan was unable to answer certain questions because she did not know whether she had the

“final” versions of minutes before her. (See Ainley Reply Decl., Ex. C (Calahan Depo. at pp.

254-55)).

Accordingly, this court will grant plaintiffs’ motion, but only to the following extent: 

No later than February 23, 2007, LS&Co. shall produce all versions and iterations of the

minutes which have been produced to plaintiffs in this action. If all such documents have

already been produced (or if multiple versions of them do not exist), then LS&Co. shall serve,

no later than February 23, 2007, declaration(s) from appropriate person(s) within the

company so attesting. Plaintiffs’ motion is otherwise denied.

4. Unredacted Version of Nancy Handa’s Notes

Nancy Handa is a human resources manager at LS&Co. During her deposition, LS&Co.

voluntarily produced certain notes authored by Handa that had been used to prepare her for

deposition. However, LS&Co. redacted Handa’s notes of her June 19, 2002 and September 13,

2002 conversations with LS&Co.’s in-house counsel, Tracey Preston. LS&Co. says that those

notes were not used to prepare Handa for deposition and are protected by the attorney-client

privilege. Plaintiffs now move for an order compelling LS&Co. to produce them.

Preliminarily, LS&Co. argues that the motion should be denied because plaintiffs never

served a document request for the notes in the instant action. However, this court finds that

plaintiffs are entitled to test the asserted privilege over the redacted material. Having

voluntarily produced the notes (in redacted form), LS&Co., in effect, opened the door to

plaintiffs’ inquiry as to what was redacted and why.

LS&Co. nevertheless maintains that the notes are exempt from disclosure under the

attorney-client privilege. The attorney-client privilege applies “(1) [w]hen legal advice of any

kind is sought (2) from a professional legal adviser in his or her capacity as such, (3) the

communications relating to that purpose, (4) made in confidence (5) by the client, (6) are, at the

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client’s instance, permanently protected (7) from disclosure by the client or by the legal adviser

(8) unless the protection be waived.” United States v. Martin, 278 F.3d 988, 999-1000 (9th Cir.

2002). The party asserting the privilege has the burden of establishing that the privilege

applies. “Because the attorney-client privilege has the effect of withholding relevant

information from the factfinder, it is applied only when necessary to achieve its limited purpose

of encouraging full and frank disclosure by the client to his or her attorney.” Clarke v.

American Commerce Nat’l Bank, 974 F.2d 127, 129 (9th Cir. 1992). Here, LS&Co. contends

that the notes in question are privileged because they memorialize confidential communications

between Handa and Preston in which Handa sought legal advice from Preston on issues

concerning plaintiffs’ employment.

Plaintiffs argue that there can be no privilege over the notes because Preston assisted in

the preparation of a written warning which was issued to plaintiff Walsh on July 8, 2002. Here,

their motion is based upon the apparent theory that the redacted notes pertain to that written

notice. As such, plaintiffs contend that (a) Preston was acting primarily as a business (not legal)

advisor on a human resources action; and (b) even if the privilege applies, it has been waived

because the written warning eventually was disclosed to Walsh after an investigation.

However, based upon its in camera review, this court finds that the redacted notes do

not appear to discuss or even mention the written warning notice. Indeed, as LS&Co. points

out, the September 13, 2002 conversation took place several months after the notice had been

issued. Morever, unlike Neuder v. Battelle Pacific Northwest Nat’l Lab., 194 F.R.D. 289

(D.D.C. 2000), cited by plaintiffs, the factual record before this court does not indicate that

Preston was acting as a business advisor when she met with Handa. Here, there is nothing in

the redacted notes indicating that business (as opposed to legal) advice was being requested or

provided. Further, Preston attests that she has never served as a business advisor during her

employment at LS&Co. (see Preston Decl., ¶ 2).

Plaintiffs nevertheless maintain that insofar as the written warning was issued to Walsh

after an investigation, they are entitled to access the entire record of that investigation,

including Handa’s notes. Here, they rely upon several cases in which a party was found to have

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waived the privilege when it placed the advice of its counsel or the adequacy of its internal

investigations at issue in the litigation. See Sharper Image Corp. v. Honeywell Int’l, Inc., 222

F.R.D. 621 (N.D. Cal. 2004) (concluding in a patent infringement action that defendant waived

the privilege as to pre-litigation communications concerning patent infringement where

defendant relied upon the advice of its counsel on infringement issues); Peterson v. Wallace

Computer Servs., Inc., 984 F. Supp. 821 (D. Vt. 1997) (concluding in an employment

discrimination case that the defendant-employer waived the privilege by raising the defense that

it conducted an adequate investigation into plaintiff’s claims of harassment). These cases are

distinguishable, however. Here, LS&Co. says that it does not intend to rely upon the advice of

its counsel – and, specifically, not upon Preston’s conversations with Handa – to defend itself in

the instant lawsuit.

Nonetheless, plaintiffs argue that Handa’s notes fall within LS&Co.’s express waiver of

the attorney-client privilege on certain tax issues. LS&Co. has indeed affirmatively waived the

attorney-client privilege and work product protection as to certain tax-related issues, namely:

LSLA, Finserv, foreign tax credits, deferred tax assets,

check-the-box elections, bad debt and worthless stock

transactions, and Internal Revenue Code 956.

(See Schwing Decl., Ex. K). However, LS&Co. qualified its waiver as follows:

• the waiver as to deferred tax assets is limited to foreign tax credits;

• with respect to LSLA, the privilege is waived “only as to the legitimacy of the

historical tax treatment of LSLA through 2002”;

• with respect to Internal Revenue Code Section 956, the waiver is limited to

“information relating to Finserv”; and

• for check-the-box elections, bad debt and worthless stock transactions, the

waiver is limited to the following entities: Finserv, LS India, LS Mauritius, LS

Asia, LS Taiwan, LS APD, LS Indonesia and LS France.

(Id.). Further, LS&Co. stated that it was not waiving the privilege or work product protection

as to:

privileged communications to or from or work product created

by its lawyers or their agents in defending against the allegations

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raised by Schmidt and Walsh in any complaint filed with a court of

law or agency or testimony before the United States government,

regardless of whether the communications or work product related

to LSLA, Finserv, foreign tax credits, deferred tax assets,

check-the-box elections, bad debt and worthless stock transactions,

Internal Revenue Code Section 956, and/or any other issue.

(Id.). In essence, plaintiffs assert that LS&Co.’s waiver necessarily extends to any discussions

concerning their employment insofar as LS&Co. claims to have fired them for their work on

these same tax issues. LS&Co. contends that its waiver is limited solely to substantive tax

issues in the case and does not encompass any employment issues.

Based on the record before it, the court finds that LS&Co. has legitimately asserted the

attorney-client privilege over the notes in question. The redacted notes appear to corroborate

LS&Co.’s claim that they comprise confidential communications between Handa and Preston

made to secure legal advice about issues concerning plaintiffs’ employment. (See Preston

Decl., ¶¶ 3-4). The notes do not discuss the substantive tax issues which are the subject of

LS&Co.’s waiver, and this court finds that they do not fall within the scope of that waiver.

Accordingly, plaintiffs’ motion to compel the production of Handa’s redacted notes is

DENIED.

IT IS SO ORDERED.

Dated:

 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

February 13, 2007

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5:04-cv-1026 Notice will be electronically mailed to: 

Joseph Heathcliff Ainley JAinley@popelka.com, gsimmons@popelka.com 

Franklin Edward Bondonno fbondonno@popelka.com, dlee@popelka.com 

Philip Edward Kay phil@nosexualharassment.com 

Rebecca Justice Lazarus rjustice@gibsondunn.com, rmcbain@gibsondunn.com 

Jeffry W. Lochner jlochner@popelka.com, kanderson@popelka.com; jlochner@verizon.net 

Sheila Marie Pierce sheila.pierce@bingham.com 

Erin E. Schneider eschneider@gibsondunn.com 

Austin Van Schwing aschwing@gibsondunn.com

Counsel are responsible for distributing copies of this document to co-counsel who have

not registered for e-filing under the court’s CM/ECF program.

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