Legal Ethics Corner

Ethics Corner is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.

This is the third in a four part series on the duty of confidentiality.

Attorney-Client Confidentiality:  Damage Control Following Inadvertent Disclosure of Confidential Material.

Regardless of how careful you are, it very likely will happen at some point.  An attorney-client confidential email, letter, or memorandum will inadvertently be sent to someone other than the client, e.g., to opposing counsel.  You might leave your work product notes in opposing counsel’s conference room.  You and your client might jointly leave a voice-message for opposing counsel thinking you have hung up the speakerphone.  You hire an expert only to find out that the opposing side designates the same person.  The development of case law over the last decade provides guidance on the post-disclosure damage control steps one can take to minimize any prejudicial effect as well as the steps one is to take if one inadvertently receives such information.  

In State Comp. Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644, a case of first impression, producing counsel inadvertently turned over obviously privileged claim forms which were intended only for the client to consider the legal issues in the case.  At the request of the producing attorney, the trial court entered an order compelling the return of the documents. (The trial court’s grant of sanctions was reversed because of the then lack of case law on the receiving attorney’s ethical obligations in this circumstance.)  The Court of Appeal set forth the following rule:  upon receipt of material apparently produced through inadvertence and that obviously appears to be attorney-client privileged or otherwise clearly confidential, the receiving attorney must refrain from examining the materials any more than is essential to ascertain the privileged/confidential nature, and must immediately notify the sender.  If the parties cannot themselves resolve the situation, they may seek judicial guidance which can include, inter alia, the issuance of protective orders.  Thus, the producing attorney should first seek the voluntary return of the documents, and if this is not enough, s/he should seek a court order for the return and possibly for sanctions.

In Collins v. State of California (2004) 121 Cal.App.4th 1112, plaintiff’s counsel designated the same expert who—unbeknownst to plaintiff’s counsel—was working for defense counsel in the same case.  The Court of Appeal reversed the trial court’s grant of a motion to disqualify plaintiff’s counsel.  Among other reasons justifying the reversal, the expert had not even informed plaintiff’s counsel he had been retained by the defense until after formal designation (the expert “had completely forgotten about it”), and plaintiff’s counsel’s conduct adhered to the standard imposed by State Comp. Ins. Fund, supra; upon learning of the expert’s conflict, counsel cut off all communication with the expert until the court addressed the issue.  Also, it was uncontroverted that the expert did not share any confidential information with plaintiff’s counsel.  Although not so much a standard case of inadvertent disclosure as one of inadvertent potential access to the opposing side’s confidential information, plaintiff’s counsel’s conduct serves as a good example of what to do so as to avoid disqualification.

In Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th 807, not only did the receiving counsel have access to the opposing counsel’s work product (notes of impressions regarding experts’ theories inadvertently left behind in a conference room), he made copies of the notes, disseminated them, and used the notes to cross-examine the expert witnesses.  The California Supreme Court upheld the trial court’s disqualification of the receiving attorney.  It agreed that without disqualification of plaintiffs' counsel and their experts, the damage caused by the receiving attorney’s use and dissemination of the notes was irreversible.  

Although uncitable because review was ultimately dismissed, the analysis in Jasmine Networks v. Marvell Semiconductor, Inc. (2004) 117 Cal.App.4th 794 (review dismissed on April 23, 2008) provides further insight regarding inadvertent disclosure and waiver issues.  Counsel and the officers of his client-corporation left a voice-mail message for the opposing in-house counsel setting forth a proposal for the sharing of proprietary information.  They thought they had hung up the speakerphone and held a conversation to the effect that the proposal they had just made was a fraudulent scheme to access the other company’s proprietary information so that they could misuse it.  It turns out that the conversation was inadvertently left on the opposing counsel’s voice-mail system, and she later sought to use a transcript of the conversation in litigation between the two companies.  The Court of Appeal held that the transcript could be used because a) although inadvertent disclosure by counsel does not constitute a waiver of the attorney-client privilege, the inadvertent disclosure by the client itself, i.e., the corporate officers who were part of the voice-message and the subsequent conversation, was sufficient to constitute a waiver, and b) in light of the fraudulent nature of the conversation, it fell within the crime-fraud exception to the attorney-client privilege. (Evid. Code § 956.) 

Finally, as a recent example of how to violate the rule set forth in State Comp. Ins. Fund, supra, in Bak v. MCL Financial Group, Inc. (2009) 170 Cal.App.4th 1118, counsel in an arbitration proceeding received inadvertently disclosed attorney-client privileged documents.  At the request of the producing counsel, receiving counsel returned the same but first made a cursory review of them, made copies, placed copies in a sealed envelope and sent them to the arbitration panel, and also made a spreadsheet outlining key information culled from the limited review of the documents.  The arbitration panel issued $7500 in sanctions for this conduct, and the Court of Appeal allowed the sanctions to stand.  In addition to having successfully sought the sanctions, the producing attorney had filed a successful emergency motion prohibiting the defendants from using the documents and compelling destruction of the same.  The panel granted these requests and also ordered the receiving counsel to sign “an affidavit that neither he nor anyone in his office retained copies of the privileged material, that they did not give copies to anyone else, and that no other copies of the documents exist.”  Counsel signed such an affidavit.

In sum, an attorney who inadvertently discloses privileged and/or work product protected information has available to him/her remedies ranging from the voluntarily return of the information, to sanctions for lack of cooperation from the receiving attorney, to disqualification, all depending on the particular circumstances of the case.  On the other side of the coin, counsel who has come into possession of potentially inadvertently disclosed confidential information should follow the State Comp. Ins. Fund rule to the letter.  Both not seeking to mitigate the prejudicial effect from the inadvertent disclosure and over zealously seeking to make the most of such disclosure have their respective downsides (malpractice, sanctions, disqualification).  Fortunately, State Comp. Ins. Fund and it legacy provide significant guidance on how to ethically make the best of a bad situation.

--Luis E. Ventura

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis.  Any views expressed are those of the author only, and not of the SDCBA or its Legal Ethics Committee.**