Putting sensitive materials on an unprotected file-sharing site waived a plaintiff’s attorney-client privilege and work product protection for those materials, a federal magistrate judge in Virginia held Feb. 9 ( Harleysville Ins. Co. v. Holding Funeral Home, Inc. , 2017 BL 39590, W.D. Va., No. 1:15cv00057, 2/9/17 ).
However, the magistrate judge also ruled that defense counsel acted improperly by accessing the materials and using them without notifying the plaintiff’s counsel and asking for a court ruling. Disqualification isn’t warranted, but defense counsel must pay the parties’ costs in connection with the disqualification motion as a sanction, Magistrate Judge Pamela Meade Sargent decided.
The court’s waiver ruling should make lawyers think twice before putting confidential documents in a file-sharing site without password protection. The case is also a reminder that lawyers generally aren’t free to secretly exploit inadvertently disclosed materials even if they believe the disclosure waived any privilege claim.
The dispute arose in litigation between an insurer and its insureds over a fire loss. An insurance company employee put the entire case file on a file-sharing service operated by Box Inc., and e-mailed a link to the company’s investigator.
The investigator produced a copy of the e-mail in response to a subpoena from defense counsel. Defense counsel accessed the case file using the link in the email. Later defense counsel produced the insurer’s case file back to the company, leading to a privilege fight and motion to disqualify defense counsel.
The magistrate judge said the insurance company inadvertently disclosed the confidential material when an employee intentionally uploaded the case file to the Box site. The disclosure waived the attorney-client privilege under the multifactor waiver test set out in Virginia case law, the magistrate found.
The employee should have known that the information uploaded to the site wasn’t protected in any way and that anyone who clicked on the hyperlink could access the case file, the magistrate said.
The insurer’s actions “were the the cyber world equivalent of leaving its claims file on a bench in the public square and telling its counsel where they could find it,” the magistrate said.
For similar reasons, the magistrate found that the insurer also waived work product protection under federal law for material in the claims file. Fed. R. Evid. 502(b) prevents waiver from disclosure in some circumstances but not here, the magistrate ruled.
The magistrate judge found that defense counsel’s conduct was improper in light of Virginia ethics opinions, as well as federal and Virginia rules that specify procedures for situations where a party asserts privilege over materials produced in discovery.
The magistrate said defense counsel should have realized that the Box site might contain privileged or protected information when defense counsel used the hyperlink shown in the e-mail, which bore a confidentiality notice, and discovered that the site contained the claims file.
Defense counsel should have contacted the insurer’s counsel and revealed that they had access to the claims file, the magistrate judge said. If defense counsel believed that the circumstances waived any privilege claim, they should have asked the court to decide the issue before making any use of the information or disseminating it, the magistrate said.
Not doing so requires some sanction, the magistrate said. She found disqualification unwarranted, considering that substitute counsel would have access to the privileged materials anyway in light of the waiver ruling.
A more reasonable sanction is to make defense counsel bear the parties’ costs in obtaining the court’s ruling, the magistrate said.
Midkiff Muncie & Ross P.C. and CooleySublett PLC represented Harleysville Insurance Co. Silver & Brown represented Holding Funeral Home Inc. and the other defendants.
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