On Legal Ethics

A critical issue that frequently comes up in connection with inadvertent disclosure is whether the attorney can make use of the information they inadvertently received.

If a lawyer reads confidential information inadvertently produced by the other side that changes his or her strategy or approach to the case, may they change gears based on what they have read? In California, we now have some guidance on this issue.

Inadvertent disclosure involves the competing interests of the duty of loyalty and diligent representation of a client against the duty of fairness and duty to maintain an even playing field. The long-awaited decision from the California Supreme Court in Rico v. Mitsubishi Motors has finally arrived. The next two columns will focus exclusively on this decision and its practical implications.

Rico v. Mitsubishi Motors

In Rico v. Mitsubishi Motors, (2007) 42 Cal.4th 807, the California Supreme Court considered what actions are ethically required of a lawyer who inadvertently receives privileged documents. The Court adopted the rule expressed in State Compensation Insurance Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644 (hereafter State Fund), that the attorney may only read as much as is necessary in order to determine the documents are privileged. Once that is determined, the attorney must notify the sender immediately and make an effort to resolve the situation.

The facts

In Rico, lawyers for Mitsubishi held a litigation strategy session at which one of the participants took notes about what was discussed at the meeting. Rico, supra, 42 Cal.4th at 810. One of Mitsubishi's lawyers, James Yukevich, printed out only one copy of the notes, which he kept to himself in order to help him defend the case. The notes were not labeled as either "work product" or "confidential." Id. at 811.

Several weeks later, when Yukevich arrived early to depose a plaintiffs' witness at the office of plaintiffs' counsel, Raymond Johnson, he left his notes in the conference room to go to the restroom and returned to find plaintiffs' counsel and representatives in the conference room by themselves; he was permitted to get back into the room to retrieve his belongings after a short delay. Id. Somehow, Johnson came into possession of Yukevich's notes from the strategy session. He claimed that the court reporter gave them to him; the court reporter denied any memory of this issue whatsoever. Id. at 812. It was subsequently ruled that Johnson had acquired the notes through "inadvertence," because defense counsel had failed to establish that plaintiffs' counsel had taken the notes from the case file. Id.

Nonetheless, Johnson made valuable use of the document. Recognizing it as a "powerful impeachment document" which he admitted he knew Yukevich had not intended to produce, he copied it for his experts and co-counsel and used the information a week later in the deposition of a defense expert. Id. Once the document came to light, defendants moved to disqualify plaintiffs' lawyers on grounds that they unethically utilized Yukevich's work product resulting in irreversible prejudice to the defendants. Id. at 813. The trial court held the notes were privileged work product and that Johnson had acted unethically in his use of the notes. Id. Consequently, the court disqualified plaintiffs' attorneys and experts. Id. The Court of Appeal affirmed the trial court's order on work product grounds alone.

Distinguishing precedent

The plaintiffs relied on Aerojet-General Corp. v. Transport Indemnity Insurance, (1993) 18 Cal.App.4th 996, to argue that because the document was received through inadvertence, Johnson had a duty to use the nonprivileged portions of the document to the benefit of his client. Rico, supra, 42 Cal.4th at 816.

The Court rejected this argument, finding there were no portions of the document at issue that were "unprivileged." Id. Having distinguished Aerojet on the privilege issue, the Court turned to State Fund, where the inadvertently produced documents at issue were clearly identified as subject to the attorney client privilege. Id. While Yukevich's document was not marked as privileged, as the material at issue was in State Fund -- the documents in State Fund were marked "Confidential," "Attorney-Client Communication/ Attorney Work Product," Id. (citing State Fund, supra, 70 Cal.App.4th at 648) -- the Court noted the lack of such prominent markings makes them no less privileged. Id. at 818 (citing the Court of Appeal's opinion). Note also that Johnson admitted he understood Yukevich did not intend to reveal the notes. Id. at 819.

Accordingly, the Rico Court adopted the State Fund standard: "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." Id. at 817 (citing State Fund, supra, 70 Cal.App.4th at 656-57). Please tune in next month for a continuing discussion of this important case.