Knowing Use of Privileged Materials Leads to Disqualification of Counsel

“Counsel’s knowing use of the opposing side’s privileged documents, however obtained, is a ground for disqualification, a California appeals court ruled Tuesday in a dispute among cannabis company co-owners.”  Joyce E. Cutler, Counsel’s Disqualification Upheld Over Use of Privileged Emails (bloomberglaw.com)(2023), describing Militello v. VFarm 1509, __ Cal.Rptr.3d __, 2023 WL 2579204 (Mar. 21, 2023)(spousal privilege).

The decision provides an interesting contrast to Hur v. Lloyd & Williams, LLC, 523 P.3d 861 (Wash. App. Div. 3 2023), where an attorney’s failure to notify the opponent of receipt of privileged materials that were not intentionally obtained did not lead to disqualification.  See Redaction Errors Re-Visited, Again and Again (Mar. 13, 2023).

In Hur:

The court opined that some of the recipient’s explanations “were suspicious” but believed that counsel did not knowingly search through privileged material.  It held that disqualification was too severe and ordered receiving counsel “to destroy the files, promised to banish the e-mail excerpts from the court’s decision-making, and instructed the parties to not mention the excerpts again.”

In Hur, the court found no ethical violation by a word search of redacted documents that had been produced in discovery and added: “The rules do not prohibit a lawyer from reading inadvertently disclosed information that is subject to a claim of privilege. The only proscription is of the failure to take corrective action.”  The corrective action required is notification under the analog to ABA Model Rule of Professional Conduct 4.4(b).

In Militello, like Hur, there was an allegation of the recipient’s failure to give notice.  2023 WL 2579204, at *2.  That, however, was combined with knowing use of the documents.  Id.[1]

The Militello court drew a distinction between oral discussion, on the one hand, and use of documents, on the other: “[W]hile we acknowledge disqualification may not be an appropriate remedy when a client simply discusses with his or her lawyer improperly acquired privileged information, counsel’s knowing use of the opposing side’s privileged documents, however obtained, is a ground for disqualification.”  2023 WL 2579204, at *1.

The penultimate analysis was:

Courts cannot effectively police what a client, after reading or hearing another party’s confidential communications, chooses to tell his or her lawyer. As the cases indicate, attempting to restrict oral disclosures of that sort risks undue interference with candid discussions between the client and counsel; and disqualification would, in any event, be an ineffective remedy because the client might provide the same information to new counsel. But it is an entirely different matter if the client improperly obtained (or maintained) possession of written or digital copies of an adverse party’s confidential information and provided them to counsel for use in litigation. Insisting that counsel not read purloined documents any more closely than is necessary to determine if they are privileged, … and prohibiting their use if they are, will not inhibit legitimate attorney-client conversations; and a client whose counsel is disqualified for defying such a rule is not likely to repeat the violation. On the other hand, as the trial court ruled here, to allow continued representation of a client after counsel has been provided with, and then used, improperly obtained confidential information would undermine the public’s trust in the fair administration of justice and the integrity of the bar.

The appellate court added: “Militello’s final argument—disqualification is not appropriate when the lawyers receive the adverse party’s privileged communications from their own client—finds some support in the case law, but does not justify reversal of the decision to disqualify [counsel] under the circumstances here.”  Id. at *9.

For a discussion of District of Maryland and Maryland State cases, see “Civil Vigilantism” – Sanctions for Surreptitious “Self-Help” Investigation.  In the District of Maryland, an attorney and client were subjected to a monetary sanction for obtaining information about the opposing litigant outside of the discovery process, regardless of privilege.  In the Maryland state action, the Court did not find the facts – involving late-night entry into others’ offices – egregious enough for dismissal; however, it held that prelitigation “self help” can support other sanctions.  As pointed out in that blog, in an Oklahoma case, use of similar materials resulted in Stored Communication Act and Computer Fraud and Abuse Act claims.

In Maryland, the duty to notify an opponent is clear.  Maryland Attorney’s Rule of Professional Conduct  19-304.4 (based on ABA Model Rule 4.4(b)) states:

An attorney who receives a document, electronically stored information, or other property relating to the representation of the attorney’s client and knows or reasonably should know that the document, electronically stored information, or other property was inadvertently sent shall promptly notify the sender.

However, the Comment to the Rule states:

Whether the attorney is required to take additional steps, such as returning the document, electronically stored information, or other property, is a matter of law beyond the scope of these Rules, as is the question of whether the privileged status of a document, electronically stored information, or other property has been waived. Similarly, this Rule does not address the legal duties of an attorney who receives a document, electronically stored information, or other property that the attorney knows or reasonably should know may have been inappropriately obtained by the sending person….

Some attorneys may choose to return a document or delete electronically stored information unread, for example, when the attorney learns before receiving it that it was inadvertently sent. Where an attorney is not required by applicable law to do so, the decision to voluntarily return such a document or delete electronically stored information is a matter of professional judgment ordinarily reserved to the attorney.

Maryland State Bar Association Ethics Opinion 2000-04 addresses the duties of an attorney who receives inadvertently produced privileged documents from opposing counsel in discovery:

An inadvertent transmission of privileged material may be clear from the identification on the box, envelope, or fax. Alternately, the attorney who went [sic – sent] the material may realize the error and contact the receiving attorney before the material has even been received. In either case, if the sending attorney indicates that transmission was inadvertent and asks the return of the documents, they should be returned unopened and unreviewed immediately…. Reading inadvertently produced material you know is privileged after learning of the error is similar to copying papers from an opposing lawyer’s file folders during a break in a deposition. Such conduct has been found to be dishonest….

In other situations, … the privileged nature of documents sent to you may be evident only after your review of them.… If either the content of the document or the circumstances of its production lead you to believe that the disclosure of the privileged material was inadvertent, you must inform opposing counsel of the inadvertent disclosure.

Once you have reviewed the material, you also have an obligation under Maryland Rule of Professional Conduct 1.4, Communication, to inform your client promptly that you have reviewed privileged documents received from another party, and that you have certain obligations under the Rules of Professional Conduct.

The Committee listed two alternatives:

• “[Y]ou may be required to return the documents without further reviewing them, using them or disclosing the information, when asked to do so by opposing counsel….”; or,
• “[I]f you have already reviewed the documents, your second alternative would be to consult the Courts regarding the permissible use of the inadvertently disclosed privileged material before using or further disclosing the information to anyone. For example, once you realize the information you’re reviewing might be privileged, you might seal the documents in an envelope without further reviewing them, any apply to the Court, in a sealed motion, for a ruling as to whether or how the disclosed material might be used.”

Maryland State Bar Association Ethics Opinion 2007-09 addresses the ethics of viewing or using metadata in ESI received from another:

Subject to any legal standards or requirements (case law, statutes, rules of procedure, administrative rules, etc.), this Committee believes that there is no ethical violation if the recipient attorney (or those working under the attorney’s direction) reviews or makes use of the metadata without first ascertaining whether the sender intended to include such metadata.

Part of that opinion was superseded by Rule19-304.4.

In civil litigation, both the Maryland and Federal Rules have clawback and privilege non-waiver rules. For a comparison, see Maryland v. Federal Clawback and Privilege Non-Waiver Rules . Upon notice, “both rules prohibit further use or disclosure; however, the Federal Rule provides substantial additional protection, i.e., requiring the recipient to return, sequester, or destroy the clawed back information.”  In civil litigation, it is difficult to hypothesize any situation where parties would not ask for the full protection of the Rules.

____

[1] In footnote 12, the Militello court held that it need not decide whether failure to give notice, alone, was sufficient to support disqualification.