Courts typically do not treat an inadvertent disclosure of documents protected by the attorney-client privilege as a waiver. But when a lawyer receives documents from the opposition that appear privileged, the issues quickly become complex. Questions arise as to the appropriate response. And unlike challenging a claim of privilege asserted in a privilege log, when the full substance of the communication is revealed through an inadvertent production, there is often a powerful incentive to challenge the applicability or scope of the privilege.
Simultaneously at work are several competing principles, policies and rules. On one hand, privileged information is often highly relevant. Arguably, fairness requires that a factfinder consider all relevant evidence, especially if our legal system aims to uncover truth. And lawyers may legitimately view their duty of zealous advocacy as requiring that they argue waiver or challenge the existence or scope of the privilege.
On the other hand, our legal system depends upon litigants being able to communicate freely with their chosen counsel. Attorneys must be free to investigate favorable as well as unfavorable aspects of their cases. And as a matter of policy, the rule is that attorney client communications are protected from compelled disclosure. Since a lawyer’s initial response to receipt of an opposing party’s privileged communications potentially can result in disqualification, it is imperative that business trial lawyers understand the issues involved when there is an inadvertent disclosure of privileged information and follow how the courts are shaping the rules that balance these competing principles and policies. Currently under review by the California Supreme Court is Rico v. Mitsubishi Motors, a case that squarely addresses these issues and should provide guidance to the bar.
A lawyer’s receipt of materials that appear privileged initially triggers several questions. What duties arise for a lawyer who obtains information or documents protected by the attorney-client privilege? How should the lawyer receiving the information respond? May the receiving lawyer assume the privilege was waived? Or should the lawyer receiving the privileged information notify opposing counsel of receipt? How extensively should the lawyer analyze the information before notifying opposing counsel? Does the content of the privileged information matter? May the lawyer receiving the potentially privileged information provide it to his client or expert to analyze?
In 1999, the Second District Court of Appeal addressed these issues in State Comp. Ins. Fund v. WPS, Inc. 70 Cal.App.4th 644 (1999) (hereafter "State Fund"). In State Fund, WPS’ lawyer received copies of State Fund’s privileged attorney-client communications when State Fund's outside lawyers inadvertently sent them along with other documents produced for use at trial. WPS’ lawyer gave some of the privileged documents to his expert witness. The expert in turn gave the documents to another lawyer who was pursuing a different claim against State Fund. When State Fund's counsel discovered the error and requested return of the documents, WPS’ lawyer refused. The trial court found the conduct of WPS’ lawyer to be in bad faith and contrary to ethical standards generally governing the legal profession and imposed monetary sanctions against appellants WPS, Inc., and its lawyers, under C.C.P. section 128.5.
The Court of Appeal, however, noting an absence of a controlling decision, statute or ethical rule in California covering the duties of a lawyer who receives inadvertently produced privileged documents or information, disagreed with the trial court’s reliance on an American Bar Association (ABA) Formal Ethics Opinion No. 92-368 (Nov. 10, 1992) and the ABA Model Rules of Professional Conduct as a basis for imposing sanctions. But the Second District also purported to establish the following standard for lawyers and courts to follow in future cases: "When a lawyer who receives materials that obviously appear to be subject to an attorney-client privilege or otherwise clearly appear to be confidential and privileged and where it is reasonably apparent that the materials were provided or made available through inadvertence, the lawyer receiving such materials should refrain from examining the materials any more than is essential to ascertain if the materials are privileged, and shall immediately notify the sender that he or she possesses material that appears to be privileged. The parties may then proceed to resolve the situation by agreement or may resort to the court for guidance with the benefit of protective orders and other judicial intervention as may be justified."
While the State Fund opinion provided some guidance to practitioners, it left unanswered questions as to the method and procedure for challenging the existence or scope of the privilege when the substance of the communication has been revealed. For instance, if counsel receiving potentially privileged information seeks to challenge the applicability or scope of the privilege, must certain procedures be followed, since filing motions publicly risks further exposure of the allegedly privileged information? If measures are taken to preserve confidentiality, such as seeking an order sealing the record, may the parties then argue the substance of the allegedly privileged communication, or must they confine the arguments solely to whether the privilege applies? Does the content of the allegedly privileged document ever matter?
In 2004, the Fourth District Court of Appeal (Division Two) answered some of these questions when it applied the State Fund standards in Rico v. Mitsubishi Motors 116 Cal.App.4th 51 (2004) (rev. granted Jun. 9, 2004) (hereafter "Rico"). Rico involved serious injuries and death resulting from an SUV rollover. Before trial, plaintiffs’ counsel obtained a document summarizing a dialogue in which defense attorneys and defense experts discussed the strengths and weaknesses of the defendants' technical evidence. Plaintiffs' counsel did not notify defense counsel that he had obtained the document. Rather, plaintiffs’ counsel examined, disseminated, and used the notes to impeach the testimony of defense experts during their depositions. The trial court had found that the summary constituted work product and ordered the disqualification of plaintiffs’ counsel, relying upon legal and ethical standards established in State Comp. Ins. Fund v. WPS, Inc.
The Fourth District Court of Appeal affirmed the trial court's disqualification order. The court reviewed and rejected Rico’s analogy to Aerojet-General Corp. v. Transport Indemnity Insurance 18 Cal.App.4th 996 (1993). There the court held that inadvertent disclosure and subsequent use by the opposition did not warrant disqualification or sanctions because it was not so obvious that the documents obtained were privileged and only the name of a witness was disclosed (which was discoverable anyway) thereby resulting in no prejudice. The Rico court’s analysis of Aerojet was interesting because it necessarily involved analyzing the substance of the privileged communication to determine whether there was prejudice. Yet later in the opinion, the Rico court stated that whether the privilege applies does not involve an inquiry into the substance of the privileged material: "Once an unintended reader ascertains that the writing contains an attorney's impressions, conclusions, opinions, legal research or theories, the reading stops and the contents of the document for all practical purposes are off limits." The Rico opinion gave practitioners only limited guidance concerning how to approach challenging
the applicability of the privilege, and specifically, whether reference can be made to the substance of the privileged material.
On June 9, 2004, the California Supreme Court granted review of Rico v. Mitsubishi Motors in Supreme Court Case No. S123808. Although the Supreme Court’s opinion has yet to be published, review of the docket entries shows the record sealing procedures set forth in California Rules of Court 243.2 and 12.5 were followed. Business trial lawyers can track the progress of the Rico case through the email notification feature of the court website (see: http://appellatecases.courtinfo.ca.gov/email). Sometime in 2005, the California Supreme Court is expected to publish an opinion balancing the competing principles and policies and setting forth the rules to follow when there is an inadvertent disclosure of privileged documents.
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