Lawyers often engage private investigators for sensitive assignments, such as conducting surveillance, obtaining admissions, and finding assets. Many lawyers do not know how investigators perform their work; other lawyers do not want to know. However, ignorance may not be bliss for California lawyers and investigators. In fact, it can be dangerous. An investigation that involves deception--even if the investigator has avoided perpetrating an outright lie--may jeopardize an investigator's license. Further, if the investigation invades someone's privacy or is otherwise tortious, both the investigator and the person hiring the investigator may face civil liability. Finally, criminal penalties exist for unlicensed investigators and persons who knowingly hire them.

California's Private Investigator Act (PIA)1 prohibits private investigators from committing "any act constituting dishonesty or fraud."2 The court of appeal in Wayne v. Bureau of Private Investigators and Adjusters3 broadly applied this prohibition. In Wayne, an investigator retained by the defendants' insurance companies visited accident victims at home and misled them about who had retained him. The investigator never lied but did not identify his principals. The court of appeal upheld suspension of the investigator's license:

Wayne does not define the PIA's prohibition narrowly or technically. Rather, "dishonesty may very well be something less than criminality," and "fraud embraces multifarious means whereby one person gains advantage over another.... " Thus, "the conduct complained of constituted dishonesty or fraud...."5

Wayne's interpretation of the PIA's "dishonesty or fraud" language has been repeatedly cited by California courts.6 While investigators may argue that "in pursuing their business [they] must necessarily resort to tricks and ruses" and that investigators "will get nowhere by the direct approach," such arguments have not been accepted.7 Likewise, the argument that the "dishonesty or fraud" prohibition applies only to investigators' conduct toward their clients and does not apply to their "dealings with opponent's clients" has been rejected.8

The California Supreme Court approved and extended Wayne in Redner v. Workmen's Compensation Appeals Board.9 A workers' compensation insurance carrier retained an investigator who hired someone to pose as a friend of an injured worker. The purported friend plied the worker with alcohol and then induced the worker to go horseback riding, which the investigator captured on film. The carrier proceeded to offer the film as evidence. The supreme court held that "the [workers' compensation] referee should have refused to rely upon [the film] because the carrier obtained it by fraudulent inducement...." Moreover, according to the court:

Further, the Redner court held that victims of investigators may seek damages:

In Noble v. Sears, Roebuck and Company,12 the court of appeal extended Redner by holding that lawyers retaining an investigator may be liable for at least some of the investigator's torts. In Noble, an investigator was retained by Sears's lawyers who had been defending Sears in an underlying personal injury suit. According to the pleadings, the investigator had "gained admittance to a hospital room where plaintiff was confined" and, "by deception," obtained a witness's address. The plaintiff sued Sears, its lawyers, and the investigator, but the trial court sustained a demurrer to the complaint. Ruling on the plaintiff's appeal of the demurrer, the Noble court held that, under the pleaded facts, "an unreasonably intrusive investigation may violate a plaintiff's right to privacy."13 Further, Sears and the lawyers may have vicarious liability:

Also, under the pleaded facts, Sears and Sears's lawyers may have primary liability for their own "negligent supervision" or "negligent entrustment" of the investigator.15

Undercover Investigations

In sum, California case law indicates that:

1) The PIA prohibits investigators from misrepresenting themselves or their principals--whether the misrepresentation occurs affirmatively or by silence and whether or not an investigator actually lies.
2) Evidence obtained as a result of misrepresentation might be excluded in civil proceedings.
3) Victims of torts related to misrepresentations may seek damages against investigators.
4) Victims of intentional torts may seek damages against attorneys or others hiring the investigators.
5) Victims of negligently supervised or entrusted investigators may seek damages from attorneys or others hiring the investigators.

Indeed, this case law might possibly be read as precluding all undercover investigations--that is, those investigations in which the investigators fail to disclose their true status, pose as someone they are not, and thereby seek to obtain admissions or other evidence. If so, then investigators who conduct undercover investigations--with the possible exception of investigations into certain insurance claims16--might be engaging in "dishonesty or fraud" under the PIA.

The breadth of this possibility is significant. The use of investigators in today's business climate may be exemplified by two scenarios. In the first, a business owner experiencing a loss of inventory and suspecting theft by workers retains a private investigator to pose as a worker in order to observe and learn whether employees are indeed involved in theft. The investigator usually avoids telling lies but engages in casual conversations that serve to encourage his or her acceptance by the other workers and elicit approaches by would-be thieves. (For example, the investigator might say, "I could use some extra money," or "How secure is this warehouse?")

In the second, a business suspects that a competitor is misrepresenting itself and hires an investigator to pose as a prospect for the competing business. The investigator, without disclosing his or her true role, asks questions as a means of gathering information about how the competitor is describing its status and activities. For example, an accredited vocational school may want to discover whether an unaccredited vocational school is misleading prospective students by claiming to be accredited. The investigator might say, "I am thinking about your school, but I want to know if it is accredited." By asking this question, the investigator is avoiding a direct lie but is being misleading. The investigator clearly wants to know about the school's accreditation, but he or she wants to be perceived as a real potential student.

In both types of scenarios, investigators do not disclose that they are investigators and do not reveal who has hired them. Moreover, investigators deliberately mislead others into believing that they are something they are not. Indeed, they are not fellow workers or business prospects. Investigators use the misconceptions about their identity to obtain evidence that most likely would not have been forthcoming if they had disclosed that they were investigators.

If these scenarios portray prohibited conduct, then many investigators and their principals will have difficulty in ferreting out wrongdoing and wrongdoers. On the other hand, if the scenarios portray permitted conduct, then courts may have difficulty in articulating objective standards that allow private investigators to pose as colleagues or prospective customers but not as allies (as in Wayne) or friends (as in Redner). Of course, Wayne also included in-home visits, Redner involved intoxication, and Noble featured a hospital room visit, but the case law did not indicate that, absent these particular facts, the subject investigations would have been permissible.

In addition to the general prohibition of dishonesty or fraud, the PIA provides for denial, suspension, and revocation of an investigator's license for specific types of misconduct. These include: impersonating a law enforcement officer; using a badge; using a uniform, insignia, or identification card "to give an impression" of connection with the government; committing assault, battery, or kidnaping, or using "force or violence without proper justification"; committing any violation of the California Privacy Act,17 which outlaws secret wiretapping, eavesdropping, and recording; "using illegal means" in debt collection; or accepting employment "adverse to a client or former client" relating to a matter about which the investigator obtained "confidential information."18

Protections and Risks

While the PIA does not expressly confer privileges or immunities on private investigators, the Civil Code accords every person a qualified privilege against some tort liability if his or her conduct consisted of a communication "to a person interested therein..." who "requested...the information"19 and an absolute privilege if the conduct was in a "judicial...or...other proceeding authorized by law."20 However, no reported case has held that investigators have any greater claim to these privileges than other persons.

Accordingly, investigators may be liable for torts such as fraud, trespass, invasion of privacy, battery, and false imprisonment. Likewise, investigators may be liable for violating statutes such as the Uniform Trade Secrets Act.21 Other persons may be vicariously liable for any of this wrongdoing by retaining an investigator, especially if the investigator had advertised his or her capabilities for working undercover. The advertising may impute notice to the hirers of the investigator of potential Wayne-type problems.

Also, no per se private investigator-client privilege or private investigator work product doctrine has been held to exist. The PIA does provide that, in the absence of a client's consent, an investigator "shall not divulge..., except as he or she may be required by law..., any information acquired..." (though "criminal offense" information "may" be divulged to law enforcement officers).22 Thus, investigators have a duty of confidentiality, but the case law expressly leaves open the question of whether this duty creates any corresponding privilege against discovery.23 Nevertheless, investigators must allow relevant discovery of the identity of their clients.24

Without the certainty of a privilege, private investigators face the possibility that their work product and communications with clients might be discoverable. Investigators are not entirely vulnerable in this area, however. There are two grounds for objection to discovery that investigators may be able to utilize. First, an investigator (or the investigator's client) may assert a privacy objection.25

Second, while investigators might not have their own protections, investigators retained by lawyers might avail themselves of the lawyers' protections. Investigators retained by lawyers in litigation may assert the attorney work product doctrine to prevent disclosure of the lawyer's or the investigator's "impressions, conclusions, opinions, or...theories."26 Similarly, communications between a lawyer's client and an investigator who is the lawyer's agent may be protected by the lawyer-client privilege.27

Lawyers retaining investigators face their own set of prohibitions and risks. For example, a lawyer may not compensate an investigator by "directly or indirectly" sharing fees from the lawyer's client.28 Also, lawyers must be careful not to violate Rule 2-100 of the California Rules of Professional Conduct, which prohibits a lawyer from "directly or indirectly" communicating "about the subject of the representation" with a party represented by another lawyer. A violation of Rule 2-100 can occur if a lawyer engages an investigator to communicate with a party that the lawyer knows to be represented by another lawyer.

In Jorgensen v. Taco Bell Corporation,29 the court of appeal found no violation of Rule 2-100 when a prospective plaintiff's lawyer retained an investigator to interview a corporation's employees seven months before the plaintiff sued the corporation. The court expressly rejected the corporation's argument that the lawyer "should have known" that the corporation "would be represented" or had "house counsel."30 However, the Jorgensen court implied that a closer question would be presented if the investigator had conducted the interviews "on the eve of the filing of the lawsuit" and that a lawyer would violate Rule 2-100 if the lawyer hired an investigator to communicate with a represented adversary or represented witness after filing suit.31

Lawyers who violate Rule 2-100 face sanctions by the trial court, including disqualification from any role in the lawsuit at issue.32 These sanctions are in addition to any disciplinary actions that the State Bar of California may take.33 However, a Rule 2-100 violation does not give rise to a civil action for damages.34

Given these proscriptions, investigators and their principals may wonder if any private investigation is lawful. In California, at least five investigatory activities generally are permissible:

1) Overt investigations, in which investigators identify their roles and principals and do not otherwise mislead or deceive anyone.
2) Public records searches.35
3) Physical observations, measurements, and the like.
4) Protection of a person, if it is "incidental" to an investigation and if the investigator complies with the PIA's firearms and insurance requirements.36
5) Surveillance, even if covert, provided that investigators do not trespass or invade privacy.

The privacy issue bears careful study, because California has common law,37 constitutional,38 and statutory protections against the invasion of privacy. The privacy statutes are numerous and scattered, ranging from an antipaparazzi law (banning certain photography of "personal or familial activity")39 and an antistalking law40 to a recently enacted ban on the use of a "telescope, binoculars, camera,...or camcorder" to view the interior of a "bedroom, bathroom,...or the interior of any other area in which the occupant has a reasonable expectation of privacy."41 To complicate matters further, federal privacy statutes also exist.42

Licensing Issues and Exempt Persons

Under the PIA, a private investigator is any person:

Unlicensed persons (not including those considered exempt under the PIA) who represent themselves as licensed or act as private investigators are committing a misdemeanor and may be jailed for up to one year and fined $5,000.46 In addition, anyone--presumably including a lawyer--who "knowingly" engages an unlicensed investigator or who conspires to have an unlicensed person operate as an investigator also commits a misdemeanor with the same penalties.47 Public prosecutors may seek civil remedies against unlicensed investigators, their coconspirators, and anyone who knowingly engages such investigators. The civil remedies include an injunction (for which prosecutors need not "show lack of adequate remedy at law or irreparable injury"), a civil fine of up to $10,000, and reimbursement of BSIS investigation expenses.48

The PIA does not contain a private right of action for licensing violations. However, private parties might have at least three indirect remedies. First, a licensing violation would be an "unlawful...business act or practice" under the Unfair Competition Law, which generally affords private parties equitable relief, including an injunction and, if appropriate, restitution.49 Second, an aggrieved litigant might move to exclude evidence gathered by an unlicensed investigator.50 Third, a person who contracts with an unlicensed investigator might seek to avoid paying the investigator's fees on the ground that the contract is illegal.51

May a licensed investigator employ or contract with unlicensed persons to perform investigative tasks? The answer appears to be a qualified yes. Under the PIA, a licensee may be an individual, partnership, corporation, or other business.52 If the licensee is a partnership, corporation, or other business, it must designate a licensed "manager," under whose "direction, control, charge, or management the business...is operated."53 The individual or manager licensee is "legally responsible for the good conduct...of his or her employees or agents...,"54 and only the licensee, manager, or other person authorized by them may submit a "written report...to a client."55 Also, employees of licensed investigators may provide "incidental" personal protection.56

The PIA exempts several classes of persons from its purview, including its licensing requirement. Among those for whom the PIA does not apply are:

• Employees "employed exclusively and regularly" by an employer "in connection with the affairs of such employer." While this exemption requires the unlicensed, in-house investigator to be a W-2 employee, no court has interpreted the "affairs of such employer" language. Is the unlicensed employee limited, say, to investigations on the employer's premises or relating to the employer's suppliers, customers, or other employees? Or may the unlicensed employee also visit the employer's competitors and investigate their businesses? May the unlicensed employee investigate prospective employees or potential competitors? No reported case law has addressed these questions.

Beyond the statutory exemptions, some case law holds that at least some experts, consultants, and others performing investigative work also need not be licensed. However, these decisions are neither recent nor fully developed.

In Kennard v. Rosenberg,58 two licensed chemical engineers and a retired city fire inspector sued Nate Rosenberg to collect their professional fees. Rosenberg had been indicted for arson of his nightclub. His lawyer retained the fire inspector after the inspector had stated that he was not licensed and "acted only in the capacity of consultant or an expert." The lawyer also retained the engineers who conducted tests, examined photographs, prepared court exhibits, and--along with the inspector--attended the preliminary hearing and consulted with the lawyer. Rosenberg's defense for not paying the three was that the PIA required them to be licensed as private investigators. The trial court rejected this defense, and the court of appeal affirmed. The appellate court, announcing that "none of the [three experts/consultants] were engaged in the private detective business," reasoned that the engineers were licensed engineers and thus "were authorized to make investigations in connection with that profession...." Moreover, the court continued:

Thus, experts--particularly in recognized, forensic disciplines--may be retained to investigate matters in litigation without being licensed as investigators.

In Mason v. Peaslee,60 Russell Mason, an unlicensed sound engineer, sued his client Margaret Peaslee after she refused to pay his fees. For eighteen years, Mason had taped "meetings..., speeches,...and personal conversations" for corporations, attorneys, individuals, and law enforcement agencies--"in many instances" without the subjects' knowledge. Peaslee requested Mason to install recording devices in her husband's office to determine if the husband was "dishonest and secreting money" or "a sex pervert." Mason did so. The trial court granted a nonsuit on the ground that the contract was illegal, because Mason lacked an investigator's license. The court of appeal reversed, on two grounds. First, the PIA's requirement of a license for persons who "engage" in the investigation business connotes "frequency of action," and the trial court "could not draw the inference that [Mason's] work in recording conversations for others was done in such a manner as to constitute doing business as a private investigator...."61 Second, the court noted that Mason did not personally "conduct any investigation...." Indeed, according to the court, "Mason...merely furnished to [Peaslee] the devices with which she could carry out her own investigation and...in operating the devices he acted not as an investigator but as one employed by [Peaslee] to render technical aid to her in operating the devices which she had rented from him."62

The Mason court seemed to hold that 1) an investigator need not be licensed to conduct a one-time investigation, and 2) merely furnishing and operating surveillance equipment is not an investigation. Mason's holdings, though, appear unsound. For example, if the word "engage" connotes "frequency," then, using the same logic, an unlicensed person could perform dental surgery on one occasion, because dentists' licenses are required only for persons who "engage in the practice of dentistry...."63 Unsurprisingly, no court has ever cited Mason's interpretation of the PIA, and it would be risky for unlicensed investigators or anyone contemplating retention of an unlicensed investigator to rely on it.

Persons exempt from the PIA (such as in-house investigators) enjoy not only freedom from licensing, but, ironically, perhaps greater latitude than licensed investigators in undercover investigations. To be sure, exempt persons still must avoid torts and statutory violations, but Wayne holds licensed investigators to higher standards. For example, Wayne suggests that the PIA's "dishonesty or fraud" language could--at least in part--encompass silence, does not expressly require that the victims' reliance be reasonable, and does not mention damages. By contrast, actionable fraud excludes misrepresentations by silence except in limited circumstances,64 requires that the reliance be reasonable,65 and requires actual damages.66 Thus, in Wayne, as well as in the typical types of scenarios in which businesses use undercover investigations, exempt persons might have been able to conduct the investigations, even if licensed investigators could not. Indeed, exempt persons might be able to investigate in ways that avoid tort or statutory liability, but licensed investigators must also reckon with Wayne.67

In the celebrated 1939 novel and 1946 movie The Big Sleep, Los Angeles private detective Philip Marlowe was retained by General Guy Sternwood to investigate Arthur Geiger, after Geiger had requested payment of some suspect promissory notes. Marlowe's investigation included two visits to Geiger's book shop on Hollywood Boulevard. On the first visit, Marlowe pretended to be interested in buying books; on the second, he pretended to have a book to sell. In neither visit did Marlowe disclose that he was an investigator or that General Sternwood had retained him. Under Wayne and its progeny, Marlowe might well have violated the PIA and risked BSIS discipline and civil liability. The fictional Philip Marlowe could ignore such risks. Nonfictional investigators and lawyers cannot.