In Costco Wholesale Corporation v. Superior Court (Greg Randall et al.) (March 27, 2008) ___ Cal.Rptr.3d ___ [2008 WL 803143, 08 Cal. Daily Op. Serv. 3627], the Court of Appeal (Second Appellate District, Division Three) denied a Petition for a Writ of Mandate after the Trial Court (Hon. Emilie H. Elias) granted a Motion to Compel the production of documents that included a partially redacted letter from outside counsel to Costco, commenting upon the appropriateness of classifying certain managerial employees as exempt from California’s overtime pay laws and regulations.  (Hereinafter, point page citations are to the Slip Opinion, available from the Opinions page of the California Courts website.)

The procedural history of the Writ Petition is interesting and merits a quick read if appellate procedure floats your boat.  In short, the following occurred: a Petition was filed, an OSC issued, the OSC was dismissed without an opinion, the Supreme Court directed the Court of Appeal to issue an OSC, the matter was heard, and, finally, the Petition was denied.  (Slip op., at p. 10.) But while I am interested in such things, it doesn’t concern the point I want to make (and will get to) in this post. The result of the case is also of substantial interest to wage & hour practitioners (an area in which I happen to practice). But again, that discussion is for another time, or possibly another blog. ( See, e.g., The California Wage And Hour Law Weblog, discussing all thing wage & hour.)

What I find most interesting from this opinion is the dramatic effect created by what was likely a short line of questioning at a Person Most Qualified deposition. Plaintiff deposed the person most knowledgeable (Mr. Matthews) about Costco’s exemption defense. (Slip op., at p. 5.) For those of you who don’t practice wage & hour law in California, the claim that an employee is “exempt” from overtime pay laws and regulations is an affirmative defense in California. The employee establishes a prima facie case by simply alleging that work was performed in excess of 8 hours per day or 40 hours per week, but overtime (premium rate) wages were not paid for that time. The employer then asserts an affirmative defense of “exemption” under the any of the recognized exemption categories.

In any event, plaintiffs’ counsel questioned Mr. Matthews about Costco’s expectations of its managers:

Matthews testified about Costco’s reasonable expectations regarding the duties of managers historically classified as exempt. He testified that in making the classification decision, Costco gathered information during interviews with managers. Matthews also testified that Costco relied, in part, on input from counsel in classifying its employees as exempt or nonexempt. During the deposition, Costco’s counsel explicitly stated that Costco was not relying upon the advice of counsel defense. Costco’s counsel instructed Matthews not to relay any information as to what was discussed during interviews with Costco’s attorneys.

(Slip op., at p. 6.) That question and answer exchange set in motion a series of events that ultimately led to the production of a letter from outside counsel to Costco’s corporate counsel. By way of background, “In June 2000, Costco’s then corporate counsel (attorney Donna M. Brandon) engaged ‘the law firm[ ] of Sheppard Mullin . . . to undertake [a] comprehensive factual investigation and legal analysis regarding the classification of managers within Costco Warehouses.’” (Slip op., at p. 3.) After a thorough review of decisional authority supporting the Trial Court’s ability to review a document in camera to ascertain whether the communications in the letter were privileged under attorney-client or work product doctrines (slip op., at pp. 11-17), the Court concluded that Costco had not met is burden to establish that extraordinary relief was warranted (slip op., at p. 20).

The ultimate significance of the Costco ruling to the parties in that matter seems relatively insignificant:

We have examined the redacted letter, which is presented to us under seal. As redacted, it demonstrates that Costco was successful in precluding discovery of a majority of the August 4, 2000, letter. Thirteen of the 22 pages (pages 2-9 and 17-21) were redacted in their entirety. Large portions of the remaining pages were eliminated by the referee. The only parts remaining visible are inconsequential and do not infringe on the attorney-client relationship. They came from non-privileged written job descriptions and interviews with the two managers.

(Slip op., at p. 18.) Rather, the significance, in my opinion, is that the plaintiffs obtained any portion of that letter. It bears repeating: the plaintiffs obtained part of a letter written by Sheppard Mullin to Costco's general counsel. They did so by asking a PMQ to explain everything that Costco relied upon when classifying its managers. His answer opened, at least in part, Pandora’s box.

The lesson I take away from this is that PMQ depositions provide a rich discovery opportunity that is often squandered when careful thought and preparation are absent.  I once overlooked PMQ depositions as a discovery tool.  I no longer do, and you shouldn't either.