Privilege Isn't Lost by Seeking to Disqualify Counsel for Using Mistakenly Produced Docs

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By Joan Rogers

June 12 — A party doesn’t waive the attorney-client privilege merely by seeking disqualification of opposing counsel on grounds that they improperly reviewed and used the party’s inadvertently produced privileged documents, the Arizona Court of Appeals, Division One, decided June 4.

In an opinion by Judge Kenton D. Jones, the court outlined three steps for the trial court to follow in deciding whether to grant disqualification in this type of situation.

No Implied Waiver

The court found no authority supporting a privilege waiver simply because a party whose privileged information was allegedly used by opposing counsel files a motion to disqualify.

“Reliance upon privileged information in support of a motion to disqualify does not place that information ‘at issue relevant to the case,' as the phrase is contemplated under Arizona law, and does not impliedly waive privilege as to the opposing party,” the court stated.

A motion to disqualify, unlike a party's efforts to advance a substantive claim premised upon privileged documents, neither establishes a cause of action nor defeats a claim of liability, and does not have any apparent direct impact upon the merits of the underlying litigation, the court said.

“Petitioners cite no authority to the contrary, and we have found none which suggests the mere filing of a motion to disqualify, premised upon the improper review and use of inadvertently disclosed information, constitutes an implied waiver of the attorney-client privilege,” Jones wrote.

The court cited cases from California, Kansas, Louisiana and New Jersey that it said have approved procedures to protect the confidentiality of privileged information in the course of ruling on motions to disqualify.

Three-Step DQ Process

The court said that when faced with a motion to disqualify based on the opponent's alleged abuse of inadvertently disclosed privileged information, the trial court must:

• determine whether the documents at issue are in fact privileged;

• determine whether the receiving party exercised an unfair advantage over the documents, such as reviewing, copying or distributing them in violation of Rule 26.1(f)(2) of the Arizona Rules of Civil Procedure and Rule 4.4(b) of the Arizona Rules of Professional Conduct; and

• review the privileged information objectively, in light of the context of the case, to determine whether the receiving party possibly gained an unfair tactical advantage over the moving party. 

In announcing this framework, the court embraced the approach set out in Moriber v. Dreiling, 2012 BL 214285, 95 So. 3d 449, 28 Law. Man. Prof. Conduct 529 (Fla. Dist. Ct. App. 2012). The Florida approach strikes a proper balance between the parties' interests, and it emphasizes the receiving attorney's obligations to “down tools” upon becoming aware that privileged materials have been inadvertently disclosed, the court said.

If an attorney follows the procedures in Rule 26.1(f)(2) and Rule 4.4(b) when he knows or has reason to know he had received privileged materials inadvertently, he cannot be disqualified for their mere receipt, the court said.

Firm's Ejection Upheld

The court affirmed the trial court's decision to disqualify Burch & Cracchiolo P.A. for reviewing and using privileged material that the opposing side mistakenly turned over to it.

There was no dispute, the court said, that a lawyer with that firm, Bryan Murphy, violated Rule 26.1(f)(2) when he reviewed and used privileged material in a litigation opponent's file that had inadvertently been provided to him.

After reviewing the privileged documents in camera, Jones said, the trial court determined that Murphy gained an obvious and significant advantage in reviewing the client file, and that no other alternative such as suppressing the inadvertently disclosed documents would provide an adequate remedy.

Disney Heirs' Dispute

The decision is the latest step in long-running litigation among Disney heirs. Certain relatives of Bradford Lund, Walt Disney's grandson, are seeking to establish a guardianship for him.

After Lund's attorney in a previous guardianship proceeding mistakenly produced his entire file to Murphy, Lund moved to disqualify Burch & Cracchiolo, claiming it had gained an unfair and improper advantage in the litigation by reviewing and using the privileged material in the client file.

While the disqualification motion was pending, the Arizona Supreme Court held that ethics and procedural rules allow an attorney who receives inadvertently sent documents that may be privileged to submit them under seal to the trial court for a privilege ruling. See Lund v. Myer, 2013 BL 188233, 286 P.3d 789, 29 Law. Man. Prof. Conduct 469 (Ariz. 2013).

Judge John C. Gemmill and Judge Samuel A. Thumma joined Jones's opinion.

Osborn Maledon P.A., Phoenix, represented Burch & Cracchiolo. Jeff A. Shumway, Scottsdale, Ariz., represented Lund.

Full text at http://www.bloomberglaw.com/public/document/Burch__Cracchiolo_PA_v_Myers_No_1_CASA_150013_2015_BL_176103_Ariz.

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