The Inadvertent Receipt of Confidential Information and the Consequent Risk of Disqualification

By Griffin S. Dunham

Every lawyer who knows what the inside of a courthouse looks like also knows the importance of the discovery process. It can make or break a case, influence settlement, and be used to posture a client's position. Unfortunately, it can often be used to annoy, harass, and waste money. The dreaded "document dump," characterized as the intermittent scattering of relevant documents amidst disorganized boxes of irrelevant documents, can suck the energy out of even the most ambitious young associate. But what happens when that associate sifts through the documents and stumbles across an e-mail from opposing counsel to the client laying out in detail their case theme and theory? Or notes of a meeting between opposing counsel and your adversary that discuss trial strategy or settlement thresholds? All of the sudden, the pitfalls of a voluminous document production become a teaching point for the propounding counsel. If not careful, it can also become a teaching point for the receiving counsel. The recipient of inadvertently produced information has handling obligations and some serious tactical decisions to make. Failure to think through both of these steps could result in not only missing a chance to capitalize on the adversary's mistake, but could land you on the wrong end of a motion to disqualify you as counsel.

I. First Order of Business - Recognize Your Ethical Duties

Finding documents you had no business finding may seem like a potential watershed moment in the case. After all, opposing counsel is the one who made the mistake, right? A thorough review of the Tennessee Rules of Professional Conduct appears to support your supposition - there is no rule or canon directly on point. But, it would be premature to stop the search for guidance. The Board of Professional Responsibility of the Supreme Court of Tennessee has indeed weighed in. Following guidance from two American Bar Association Formal Ethics Opinions (Nos. 92-368, 94-382), the Board opines that a receiving attorney should (i) stop reviewing materials that appear to be subject to the attorney-client privilege or otherwise not intended for production, (ii) notify opposing counsel of the inadvertent disclosure and (iii) either follow disposition instructions from opposing counsel or do not do anything with the documents until a court with jurisdiction issues a definitive ruling. See Formal Ethics Opinion 2004-F-150.

The Board supported its position by reciting the principles that govern the ethical practice of law: safeguarding the attorney-client relationship; protecting confidential information; and eliminating advantages from ill-gotten gains. The Board also looked to case law developed in other states. See Abamar Housing v. Lisa Daly Lady Décor, 698 So.2d 276, 279-80 (Fla. App. 3 Dist. 1997) ("An attorney who receives confidential documents of an adversary as a result of an inadvertent release is ethically obligated to promptly notify the sender of the attorney's receipt of the documents."); see also State Compensation Ins. Fund v. WPS, Inc., 82 Cal.Rptr. 2d 799, 807-08 (Cal. App. 2 Dist. 1999) ( "[A]n attorney has an obligation not only to protect his client's interest but also to respect the legitimate interests of fellow members of the bar, the judiciary, and the administration of justice.").

II. Beware the Risk of Attorney Disqualification

The Rules of Professional Responsibility should be enough to convince counsel to do the right thing (i.e., stop reviewing and notify opposing counsel) after discovering an inadvertent production of documents. But in addition to the ethical mandates governing your professional obligations, there exists a practical consideration that your client would find most interesting: attorney disqualification. Not surprisingly, a court can impose evidentiary sanctions upon a willful failure to inform opposing counsel of an inadvertent production. See Aerojet-Gen. Corp. v. Transp. Indem. Ins., 22 Cal.Rptr.2d 862 (Ct. App. 1993). However, fairly recently, at least one court has disqualified a firm for refusing to cooperate when asked who saw the inadvertently produced documents and whether the documents were the subject of conversations. See Atlas Air Inc., v. Greenberg Traurig, P.A., 997 So. 2d 1117, 1119 (Fla. 3d DCA 2008); see Abamar Housing v. Lisa Daly Lady Décor, 698 So.2d 276, 279-80 (Fla. App. 3 Dist. 1997). In Atlas Air, both the firm and individual attorney were disqualified because it was impossible to know the extent to which the receiving counsel benefited from the production and what kind of impact the disclosure would have on the case. Id.; see also General Acceptance Insurance Co. v. Borg-Warner Acceptance Corp., 483 So. 2d 505 (Fla. 4th DCA 1986) (disqualifying attorney and noting that the inability to measure a tactical advantage, or even the appearance of an advantage, must be a consideration).

The American Bar Association Opinion 94-382 seems to support disqualification under certain circumstances. The ABA Opinion indicates that complying with the rules and acting as a responsible recipient might still result in disqualification "to preserve inviolate the attorney-client privilege and...to avoid the appearance of impropriety." While recognizing the right for clients to retain counsel of their choosing, several courts have subordinated this interest to the interest of protecting the legal process from the unfair advantage of acting upon "tainted knowledge." See MMR/Wallace Power & Indus., Inc. v. Thames Assocs., 764 F.Supp. 712, 728 (D. Conn. 1991) (granting disqualification because the right to counsel is outweighed by "the risk that confidential information has been used against it and in the public's interest in the integrity of the judicial process itself"). In fact, multiple states have addressed whether disqualification is appropriate. See Resolution Trust Corp. v. First of America Bank, 868 F.Supp. 217 (W.D. Mich. 1994); In re Meador, 968 S.W.2d 346 (Tex. 1998); In re Polypropylene Carpet Antitrust Litigation, 181 F.R.D. 680 (N.D. Ga. 1998); Ackerman v. National Property Analysts, Inc., 1993 WL 258679 (S.D.N.Y. July 2, 1993).

Although there is no test used in Tennessee to address the disqualification of counsel who receive attorney-client privileged material, it is only a matter of time until a case is presented. When so presented, the cleaner the hands the better for the challenged attorney. Counsel should consider having in place a mechanism so that inadvertently receiving documents is handled in a way to minimize the risk of disqualification. For example, consider requesting sending counsel to retrieve the entire production and check for confidential material, prohibiting any communications about any confidential material reviewed, or quarantining the "tainted" attorney. The bottom line is that the less your knowledge of and involvement with the documents, the more likely your client will keep its counsel.

III. Making the Most Out of the Adversary's Mistake

Even if the most confidential, case-hinging documents are accidentally reviewed and you have complied with the Rules of Professional Responsibility to the greatest extent possible, there is another way to avoid disqualification: use opposing counsel's sloppy over-indulgence against them by getting court approval to do so. Depending upon the facts surrounding the disclosure, you may petition the court to keep the documents based on the doctrine of waiver of the attorney-client privilege. See Edwards v. Whitaker, 868 F.Supp. 226 (M.D. Tenn. 1994). In Edwards, the plaintiff turned over seven letters from the client that contained precise details about the claims and the issues presented in the lawsuit against the defendant. Id. at 228. To determine whether the plaintiff (as the party claiming inadvertent disclosure) carried its burden of proving that the attorney-client privilege had not been waived, the court looked to the following factors:

(1) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production;
(2) the number of inadvertent disclosures;
(3) the extent of the disclosures;
(4) the promptness of measures taken to rectify the disclosure; and
(5) whether the overriding interests of justice would or would not be served by relieving the party of its error.

Id. at 229. The court in Edwards considered that the document production was 2,000 pages, took the plaintiff seven months to complete, and the unfairness of rewarding the plaintiff's carelessness. Id. (finding a waiver of privilege and also recognizing that such waiver opened the door for all privileged communications "on the same topics as those addressed in the letters").

Only by looking at the individual facts of your case will you be able to determine if trying to keep the documents is worthwhile. As a practice pointer in light of factor #4 above, the receiving party should get ahead of the issue and not afford the sending party with a chance to move the court for the return of the inadvertently produced documents and your disqualification. Instead, notification to opposing counsel of the received documents should be accompanied with a motion for a preliminary ruling on the issue of waiver. This approach would not give the sending party a chance to get in the first word on disqualification and otherwise "rectify the disclosure" without shifting the burden of proof.

IV. Conclusion

Any danger identified in this article can simply be avoided by carefully scrubbing outgoing discovery. But in the event that a mistake happens, the first focus should be on minimizing the damage. The ethics rules make this very easy by requiring the receiving counsel to stop reviewing any suspect materials, or better yet returning the un-reviewed portion for a more thorough analysis by sending counsel. Once this happens and you have done absolutely everything you can to prevent acquiring "tainted knowledge," move on to determining whether you can further avoid disqualification and simultaneously capitalize on the adversary's mistake by arguing waiver of the attorney-client privilege. Although the disclosure of confidential information can require the time and energy of both parties, it presents an opportunity to make a good impression before the judge and obtain judicial approval to review documents you should never have received.