No. 12345 INTHE 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, INAND 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:

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d 

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### 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 strikeand for protective order. Relator seeks tohave the districtcourt's order vacated and to have the relief which was sought inthe district court granted by 

### this Court. The record indicates that this application isthe result of extensive procedural controversy inthe districtcourt 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 earlierheard 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 inCause 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 itwould be violative of the attorneyclient privilege and highly prejudicial to Union Oil ifrelator were compelled to produce fordiscovery purposes legal opinions rendered inconfidence by relator's "house counsel

### " inCalifornia. Following hearing on thismotion the Cascade County district court in itsorder of February 22, 1972, required Union Oil to 

### turn over these legal opinions to the court for an "in camera" inspection. The court stated itwould then rule on which portions of the opinions, if any, would be turned over to plaintiffs' counsel for inspection. One of the specificrestrictions of the districtcourt's order is contained in

### paragraph 

### 4thereof: "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 Courtmay 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 opinionswhich plaintiffs

### ' counsel would be permitted to copy. In its May 23, 1972 order the district court expressed the opinion that this Court'sJanuary 

### 17, 1972per curiam ruling rendered the issue of attorney-cl ient privi

### 1ege "res judicata"

# . In none of these orders,however,did the district court remove the mandate contained 

### in paragraph 4of its February 22, 1972 order. The court'sorder of June 12, 1972added the further condition "that the use of said opinions by plaintiffstcounsel or by anyone else shall be restricted to this action only and shall not be considered in any other litigation 

### involving Union Oi

### 1 Company for either evidentiaryor discovery purposes.

### " Union Oil relied upon the protective provisions set forth in the orders of the district courtand 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 "FirstAmended 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 ofMontana who have paid revolving charge account finance charges. The amended complaint alleges that Union Oil has violated the .usurylaws of the State ofMontana in assessing finance charges upon certain revolving charge accountbalances at

### a periodic rate of 

### 1% per month. The crux of the procedural history 

### 1ies herein: this amended complaint contains approximately 13pages of quotations and pirported quotations from the legal opinions turned over to plaintiffs' attorneys inaccordance with the aforementioned orders of the districtcourt. Certain omissions have been made and emphasis given to parts of the original legal opinions without appropriate notation to so indicate. Relator then filed itsmotion to strikethe 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 tobe 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 districtcourt requiring the FirstAmended Complaint to be filed in a sealed envelope with thejudge and be kept "in camera" until the defendant Union OilIs motions could be determined. On August 10, 1972, following the submission of briefs and oral argument upon Union Oil'smotions, the districtcourt 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 formaking the amended complaint a matter of pub1ic 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 districtcourt conunitted error initsorder of August 10, 1972, denying Union Oil'smotions to strikeand for protective order. Because we find upon examination of all the factsnow 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 towhether plaintiffs

### ' amended complaint oversteps theprovisionsaf Rule 8(a)and (e)

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### 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-clientprivilege as enunciated in this state and in other jurisdictions compels us to order the objectionablematerial 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 allowdisclosure of the content of the legal opinions 

### in question. Before considering the matter of attorney-client privilege,however,

we wish to clarify the significanceof 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

ourdenial 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-clientprivilege is now res judicata as to the legal opinions". Respondents' reply brief herein states 

### " 

## * 

## * * that argument has been finally and conclusivelydisposed of by the Supreme Court in its Order dated 17 January 1972". In the first instance,we are not here dealing with amatter 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. 1BMoore'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. GreatNorthern R. Co., 148

### Mont. 429,421 P.2d 710,cert. den. 87S.Ct. 2034, 387U.S. 920, 18 

### L.Ed.2d 974,wherein we stated: "The application of the doctrine of 'thelaw of the case' is 

### 1imited to those issueswhich were actuallydecided and were necessary to the decision. The doctrinedoes not extend so far as to includematter which was consequential, incidental

### ,or 

## - not decided by the court. 

## * *

## *" (Emphasis added.)Our ruling inCause 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 inthat this Court may in its discretion deny application for the writ ina 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 fora supervisorywrit imports no expression of opinion on the merits of the case, nor does such denial by this Court imply anything regarding our view of themerit 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 immediateeffect of the denial of application for the writ was to allow the action of the lower court to stand, in this case toallow 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. Atthe time of the January 17order, we saw no harm or prejudice befalling defendant inletting the lower court's order stand so we chose not to intervene atthat 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 tomake of the opinions. What we have to say as respects the attorney-client privilege hereafter isnot concerned with communications infurtherance of prospective criminal or

### fraudulentacts,nor conspiracies entered into to accomplish such purposes. Different principles prevail in those instances. SeeVol 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 consentof his client, be examined as to any communicationmade 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, 19Mont. 141,47 

### P. 793 and August

### v. Burns, 79Mont. 198, 255 

### P. 737. It is also well-established 

### in other jurisdictions that the attorneyclient privilege applies to legal opinions prepared foruse 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 soughtproduction ofvarious correspondence and memoranda 

### in the possession of defendant. Some of the matter was legal opinions rendered by independent law firms to defendant and other communicationswere by defendant's own house counsel. As to the first group, the court recognized applicabilityof the attorney-clientprivilege: I'

## *

## * * And the privilege of nondisclosure is not lost merely because relevant nonlegal considerations are expressly stated in a communicationwhich also includes legal advice. It follows that in so far as these letters to or from independent 

### 1awyerswere prepared to sol

### icit 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-clientprivilege 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 isapparent when attention ispaid to the realities of modern corporate law practice. The type of service performed by house counsel is substantially 1 ike that performed by many members of the 1 arge urban law firms. The distinction ischiefly that the house counsel gives advice to one regular client, the outside counsel to several regular clients

# ." 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 forwhich 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 tobe protected consists ot either (1) information which was secured from an officer or employee of defendant and which was not disclosed ina public document orbefore 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., 18F.R.D. 463 (S

### .D.N.Y., 1956) and Malco Manufacturing Company 

### v. Elco Corporation, 45 F.R. D. 24 (D. Minn., 1968). Turning to the application athand, we note that the legal opinions involved herein are three legal memoranda prepared by the staff of Union Oil dated March 20, 1959, Apri1 16, 1968, and January 22, 1971

# . These were a11 prepared by attorneys acting solely intheir capacity as such, were addressed only tomembers of defendant'smanagement, and were intended tobe confidential. The opinions contain insome 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 ofprivate counsel and the opinions drafted by relator's staff counsel are privileged by reason of the attorney-client privilege. Respondents suggest that due to certain statements by Union Oil's creditmanager, 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 inquestion, 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 inregard to the existence of the various memoranda, inresponse 

### toquestions seeking a foundation for an attempt to require production. He did not setforth 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 oroppression. Rule 34, under which production was had, isexpresslymade subject tothe provisions of Rule 30(b). Disclosure of the quotations and purported quotations of legal opinions contained inthe amended complaint would obviously be highly prejudicial and oppressive 

### torelator herein. Therefore,we conclude that: 1. The order of the districtcourt dated August 10, 1972, is hereby annulled, vacated, and setaside; 2. All of the quotations and purported quotations contained inplaintiffs' 

### 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 FirstAmended Complaint before said FirstAmended Complaint may be placed upon the court records; and 3. Plaintiffs and plaintiffs' counsel are hereby ordered torefrain from publicizing or inany othermanner spreading upon the publicrecords the contents of said legal opinions, without firstbeing required to show goodcause therefor 

### to the district court upon notice given 

### tocounsel. Let the writ of supervisory control issue in accordance with the foregoing

# .

fNe,concur: Chief Justice