No. 12345 

IN THE SUPREPIE COURT OF THE STATE OF MONTANA 

STATE ex rel. UNION OIL CO. 

OF CALIFORNIA, 

Relator, 

THE DISTRICT COURT OF THE EIGHTH JUDICIAL 

DISTRICT OF THE STATE OF MONTANA, IN AND 

FOR THE COUNTY OF CASCADE, and the HONORABLE 

PAUL G. HATFIELD, DISTRICT JUDGE, 

Respondents. 

ORIGINAL PROCEEDING : 

Counsel of Record:. 

For Relator: 

Jardine, Stephenson, Blewett & Weaver, Great Falls, 

Montana. 

John Stephenson, Jr. argued, Great Falls, Montana. 

For Respondents: 

Smith, Emmons and Baillie, Great F,~lls, Montana. 

Robert Emmons argued, Great Falls, Montana. 

Submitted: August 24, 1972 

Filed: ~fp d 8 6 1972 
Mr. Chief Justice James T. Harrison delivered the Opinion of the Court. 

This application by relator for a writ of supervisory control or 

other appropriate writ arises from the order of the Cascade County District 

Court, dated August 10, 1972, denying relator's motions to strike and for 

protective order. Relator seeks to have the district court's order vacated 

and to have the relief which was sought in the district court granted by this 

Court. 

The record indicates that this application is the result of extensive procedural controversy in the district court between Union Oil Company 

of California (Union Oil), defendant below and relator herein, and Eugene R. 

Fluitt and Leonard L. Godak and others, plaintiffs below. That controversy 

focuses on the production and disclosure of certain legal opinions drafted 

by relator's attorneys. This Court earlier heard the application of relator 

in Cause No. 12197 for an order preventing discovery by plaintiffs of those 

legal opinions, and by per: curiam order of January 17, 1972, we denied the 

previous application by Union Oil. 

Because we denied relator's application and dismissed the show cause 

order in Cause No. 12197, the order of the district court dated November 18, 

1971 , granting plaintiffs ' motion for production of documents, remained intact. 

Union Oil then filed a motion for protective order in the district 

court stating additional reasons why it would be violative of the attorneyclient privilege and highly prejudicial to Union Oil if relator were compelled 

to produce for discovery purposes legal opinions rendered in confidence by 

relator's "house counsel " in Cal ifornia. Following hearing on this motion 

the Cascade County district court in its order of February 22, 1972, required 

Union Oil to turn over these legal opinions to the court for an "in camera" 

inspection. The court stated it would then rule on which portions of the 

opinions, if any, would be turned over to plaintiffs' counsel for inspection. 

One of the specific restrictions of the district court's order is contained in 
paragraph 4 thereof: 

"4. Said opinions shall be treated as confidential 

material and shall not be made a part of the Court 

record or otherwise disclosed to other persons, subject to such further rulings as the Court may make 

herein . " 

Subsequent to the district court's "in camera" review, it entered 

orders dated May 23, June 1, and June 12, 1972, particularly describing 

those portions of the legal opinions which plaintiffs ' counsel would be 

permitted to copy. In its May 23, 1972 order the district court expressed 

the opinion that this Court's January 17, 1972 per curiam rul ing rendered 

the issue of attorney-cl ient privi 1 ege "res judicata" . 

In none of these orders, however, did the district court remove 

the mandate contained in paragraph 4 of its February 22, 1972 order. The 

court's order of June 12, 1972 added the further condition "that the use of 

said opinions by plaintiffst counsel or by anyone else shall be restricted 

to this action only and shall not be considered in any other litigation invol ving Union Oi 1 Company for either evidentiary or discovery purposes. " 

Union Oil relied upon the protective provisions set forth in the 

orders of the district court and did not seek review of those orders in this 

Court. 

Then on June 30, 1972, plaintiffs served the document giving rise 

to this application, their "First Amended Complaint". The amended complaint 

is a purported class action on behalf of plaintiffs and all other holders 

of relator's credit cards in the State of Montana who have paid revolving 

charge account finance charges. The amended complaint alleges that Union 

Oil has violated the .usury laws of the State of Montana in assessing finance 

charges upon certain revolving charge account balances at a periodic rate 

of 1% per month. The crux of the procedural history 1 ies herein: this 

amended complaint contains approximately 13 pages of quotations and pirported 

quotations from the legal opinions turned over to plaintiffs' attorneys in 
accordance with the aforementioned orders of the district court. Certain 

omissions have been made and emphasis given to parts of the original legal 

opinions without appropriate notation to so indicate. 

Relator then filed its motion to strike the quotation of legal opinions from the amended complaint and to seek a protective order pursuant to 

Rule 30(b), M.R.Civ.P. Specifically, relator sought a protective order: 

" * * * requiring plaintiffs' counsel to refrain from 

publicizing the contents of the legal opinions prepared 

by the staff of Union Oil Company previously turned over 

to him, except where the publication of the same is 

shown to be necessary for good cause upon written application to this Court pursuant to notice given to counsel. * * *It 

Counsel for Union Oil also obtained an order of the district court 

requiring the First Amended Complaint to be filed in a sealed envelope with 

the judge and be kept "in camera" until the defendant Union Oil Is motions 

could be determined. On August 10, 1972, following the submission of briefs 

and oral argument upon Union Oil's motions, the district court entered its 

order denying the motions and yet providing that the First Amended Complaint 

would remain sealed until a determination had been given by this Court upon 

application by relator. If relator had not so applied here, the district 

court's order provided for making the amended complaint a matter of pub1 ic 

record within ten days following August 10. 

Relator's application was filed with this Court on August 18, 1972. 

The issue presented by the application is whether the district court 

conunitted error in its order of August 10, 1972, denying Union Oil's motions 

to strike and for protective order. 

Because we find upon examination of all the facts now before the 

Court that the disclosure and indeed original production of the legal opinions 

here in issue constitutes a violation of the attorney-client privilege, we 

need not consider herein the argument of relator addressed to whether plaintiffs ' amended complaint oversteps the provisions af Rule 8(a) and (e) , 
M.R.Civ.P., regarding the pleading of a "short and plain statement" which 

shall be "simple, concise and direct." For the reasons set out below, the 

attorney-client privilege as enunciated in this state and in other jurisdictions compels us to order the objectionable material stricken from the 

amended complaint and the protective relief granted. We further note that 

in the giving of this opinion, recognition of the attorney-client privilege. 

requires that we not allow disclosure of the content of the legal opinions 

in question. 

Before considering the matter of attorney-client privilege, however, 

we wish to clarify the significance of our January 17, 1972, per curiam ruling in this action. We find that both plaintiffs and the court below have 

attached undue importance and an almost "stare decisis" interpretation to 

our denial of relator's earlier application for writ of supervisory control. 

Such deference is not warranted. 

Specifically, the district court stated in its May 23, 1972 order 

that the issue of "lawyer-client privilege is now res judicata as to the 

legal opinions". Respondents' reply brief herein states " * * * that argument has been finally and conclusively disposed of by the Supreme Court in 

its Order dated 17 January 1972". In the first instance, we are not here 

dealing with a matter of res judicata, which gives conclusive finality to a 

final, valid judgment; the order of January 17, 1972, raises a question of 

whether the doctrine "law of the case" is applicable. Law of the case is 

concerned with establishing rules of law in the case at hand and with getting 

that particular case to judgment. 1B Moore's Federal Practice, Par. 0.401. 

The law of the case doctrine, though, does not apply to our January 

17 ruling. This Court discussed the doctrine in O'Brien v. Great Northern R. 

Co., 148 Mont. 429, 421 P.2d 710, cert. den. 87 S.Ct. 2034, 387 U.S. 920, 

18 L.Ed.2d 974, wherein we stated: 

"The application of the doctrine of 'the law of the case' 

is 1 imited to those issues which were actually decided 

and were necessary to the decision. The doctrine does 

not extend so far as to include matter which was consequential, incidental , or - not decided by the court. * * *" 

(Emphasi s added. ) 
Our ruling in Cause No. 12197 was simply a denial of the application and 

dismissal of the show cause order. No discussion of our grounds and 

rationale was given nor was one necessary in that this Court may in its 

discretion deny application for the writ in a manner analogous to that of 

the United States Supreme Court denying certiorari, and, similar to the 

effect of a United States Supreme Court denial of certiorari, our denial of 

the application for a supervisory writ imports no expression of opinion on 

the merits of the case, nor does such denial by this Court imply anything 

regarding our view of the merit of the arguments presented. 

Thus, whether the production of the documents in question was a 

breach of the attorney-client privilege in light of the facts as we now 

know them was not decided by this Court and the 1 aw of the case doctrine 

does not operate in respect to our January 17, 1972 order. See Electrical 

Research Products v. Gross, 120 F.2d 301 (CCA 9th, 1941). While the immediate effect of the denial of application for the writ was to allow the action 

of the lower court to stand, in this case to allow the court's order of November 18, 1971, compelling production to remain unchanged, the denial does 

not endorse the reasoning behind the lower court's order as the law of the 

case. 

At the time of the January 17 order, we saw no harm or prejudice 

befalling defendant in letting the lower court's order stand so we chose not 

to intervene at that time. The facts have changed considerably since 

January 17. We now have before us the affidavits of Messrs. Myron E. Smith, 

Robert W. Putnam, Samuel 0. Pruitt, Jr., and other attorneys relating the 

circumstances under which the legal counsel to Union Oil rendered the legal 

opinions. We have ourselves seen these legal opinions. We note the use 

which plaintiffs now seek to make of the opinions. 

What we have to say as respects the attorney-client privilege hereafter 

is not concerned with communications in furtherance of prospective criminal or 
fraudulent acts, nor conspiracies entered into to accomplish such purposes. 

Different principles prevail in those instances. See Vol 3 Jones on Evidence, 

5th Ed., Sec. 833, p. 1564. 

This brings us to an examination of the attorney-client privilege 

in Montana. The privilege is well-established in this state. Section 93- 

701-4(2), R.C.M. 1947, states: 

"An attorney cannot, without the consent of his client, 

be examined as to any communication made by the client 

to him, or his advice given thereon in the-course of 

professional employment. " (Emphasis added. ) 

This Court has applied this section to exclude from evidence legal advice 

given by an attorney. See Davis v. Morgan, 19 Mont. 141, 47 P. 793 and 

August v. Burns, 79 Mont. 198, 255 P. 737. 

It is also well-established in other jurisdictions that the attorneyclient privilege applies to legal opinions prepared for use of a corporation 

by its house counsel. In United States v. United Shoe Machinery Corporation, 

89 F.Supp. 357 (D. Mass., 1950), the United States sought production of various 

correspondence and memoranda in the possession of defendant. Some of the 

matter was legal opinions rendered by independent law firms to defendant and 

other communications were by defendant's own house counsel. As to the first 

group, the court recognized applicability of the attorney-client privilege: 

I' * * * And the privilege of nondisclosure is not lost 

merely because relevant nonlegal considerations are 

expressly stated in a communication which also includes 

legal advice. It follows that in so far as these letters 

to or from independent 1 awyers were prepared to sol i ci t 

or give an opinion on law or legal services, such parts 

of them are privileged as contain, or have opinions based 

on, inf6rmation furnished by an officer or employee of 

the defendant in confidence and without the presence of 

third persons. " 

The court also gave attorney-client privilege protection to communications 

prepared by house counsel : 

"On the record as it now stands, the apparent factual 

differences between these house counsel and outside 

counsel are that the former are paid annual salaries, 
occupy offices in the corporation's buildings, and are 

employees rather than independent contractors. These 

are not sufficient differences to distinguish the two 

types of counsel for purposes of the attorney-client 

privilege. And this is apparent when attention is paid 

to the realities of modern corporate law practice. The 

type of service performed by house counsel is substantial ly 1 i ke that performed by many members of the 1 arge 

urban law firms. The distinction is chiefly that the 

house counsel gives advice to one regular client, the 

outside counsel to several regular cl ients . " 

The court upheld the privilege as to those exhibits which met the following 

test: 

"(a) the exhibit itself was prepared by or for either 

(1 ) independent counsel or (2) defendant's general 

counsel or one of his immediate subordinates; and 

"(b) as appears upon the face of the exhibit, the principal purpose for which the exhibit was prepared was to 

solicit or give an opinion on law or legal services or 

assistance in a legal proceeding; and 

"(c) the part of the exhibit sought to be protected 

consists ot either (1) information which was secured 

from an officer or employee of defendant and which was 

not disclosed in a public document or before a third 

person, or (2) an opinion based upon such information 

and not intended for disclosure to third persons." 

See also Georgia-Pacific Plywood Co. v. United States Ply. Corp., 18 F.R.D. 463 

(S .D.N.Y., 1956) and Malco Manufacturing Company v. El co Corporation, 45 F .R. D. 

24 (D. Minn., 1968). 

Turning to the application at hand, we note that the legal opinions 

involved herein are three legal memoranda prepared by the staff of Union Oil 

dated March 20, 1959, Apri 1 16, 1968, and January 22, 1971 . These were a1 1 

prepared by attorneys acting solely in their capacity as such, were addressed 

only to members of defendant's management, and were intended to be confidential. 

The opinions contain in some situations quoted excerpts from and attachments 

of legal opinions rendered to Union Oil by independent law firms in some of 

the states where relator does business. The legal opinions were requested by 

relator and were rendered by counsel upon the assumption that said opinions 

were rendered in confidence and would be imune from discovery by reason of 

the attorney-client privilege. Both the excerpts quoted from opinions of 
private counsel and the opinions drafted by relator's staff counsel are 

privileged by reason of the attorney-cl ient privilege. 

Respondents suggest that due to certain statements by Union Oil 's 

credit manager, Richard L. Noland, made during his deposition of October 15, 

1971, the privilege is waived. Noland testified to the existence of certain 

documents containing the 1 egal opinions . Certainly , voluntary disclosure of 

the facts in question, here the content of the legal opinions, may constitute 

a waiver of the privilege. Wright & Miller, Federal Practice and Procedure: 

Civil Sect. 2016. Yet Noland's references were only in regard to the existence of the various memoranda, in response to questions seeking a foundation 

for an attempt to require production. He did not set forth the confidential 

data. We conclude that relator's privilege was not waived. 

This Court has full powers pursuant to Rule 30(b), M.R.Civ.P., to 

issue its order protecting a party from annoyance, embarrassment or oppression. 

Rule 34, under which production was had, is expressly made subject to the 

provisions of Rule 30(b). Disclosure of the quotations and purported quotations 

of legal opinions contained in the amended complaint would obviously be highly 

prejudicial and oppressive to relator herein. 

Therefore,we conclude that: 

1. The order of the district court dated August 10, 1972, is 

hereby annulled, vacated, and set aside; 

2. All of the quotations and purported quotations contained in plaintiffs' First Amended Complaint derived from the legal opinions furnished to 

plaintiffs' counsel pursuant to order of the district court shall be entirely 

stricken from said First Amended Complaint before said First Amended Complaint 

may be placed upon the court records; and 

3. Plaintiffs and plaintiffs' counsel are hereby ordered to refrain 

from publ icizing or in any other manner spreading upon the publ ic records the 

contents of said legal opinions, without first being required to show good 
cause therefor to the district court upon notice given to counsel. 

Let the writ of supervisory control issue in accordance with the 

foregoing . 

fNe ,concur: 

Chief Justice