Rules on Client Files Don’t Permit Attorney to Retain Opponents’ Protected Documents

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Cruz v. Dollar Tree Stores Inc., N.D. Cal., No. 07-04012-SC, 5/16/12

Key Holding: A California ethics rule that requires lawyers to keep records of client property for five years after litigation ends does not permit a lawyer to retain copies of confidential materials produced by the opposing party under a protective order.

Potential Impact: Indicates limits of what kinds of client “properties” an attorney is ethically required to keep, and thwarts effort to expand it to include opponent's protected documents.

By Samson Habte  

California ethics rules dealing with preservation of client files and property at the conclusion of a case do not allow, much less require, an attorney to retain confidential documents produced in discovery by an opposing party, the U.S. District Court for the Northern District of California declared May 16 (Cruz v. Dollar Tree Stores Inc., N.D. Cal., No. 07-04012-SC, 5/16/12).

The court's interpretation came in the context of a motion to enforce a protective order filed by a defendant which complained that plaintiffs' counsel refused to return confidential discovery documents that the court ordered him to return after the lawsuit was dismissed.

The attorney for the plaintiffs--a group of Dollar Tree Stores managers who brought a wage-and-hour class action against their employer--argued that he was ethically obligated to keep electronic copies of the defendant's confidential documents, despite the court's order that he return them.

He maintained that California Rule of Professional Conduct 4-100(B)(3), which is similar to ABA Model Rule 1.15(a), required him to retain an archival electronic copy of the files for at least five years.

Judge Samuel Conti was unconvinced. He ordered the materials returned and stated that plaintiffs' counsel's reading of Rule 4-100(B)(3) “strains credulity.”

Unpersuasive Reading of Rule.

Rule 4-100(B)(3) requires California lawyers to maintain and preserve “complete records of all funds, securities, and other properties of a client” for at least “five years after final appropriate distribution of such funds or properties.”

Plaintiffs' counsel argued that the term “other properties of a client” includes “all client files as well as confidential documents produced by an opposing party through discovery.”


“[I]t strains credulity to suggest that another party's confidential materials become the property of a client when they are produced in discovery pursuant to a protective order.”
Judge Samuel Conti

That reading of the ethics rules is far too broad, the court ruled. Conti found no support for it in case law, and said counsel's interpretation conflicted with the plain language of Rule 4-100 as well as the structure, scheme, and organization of the California rules. Such a reading also would discourage the private resolution of discovery disputes, the court said.

“[I]t strains credulity to suggest that another party's confidential materials become the property of a client when they are produced in discovery pursuant to a protective order,” Conti wrote.

Plaintiffs' counsel's reading of Rule 4-100(B)(3) was based on two court decisions that Conti said could arguably be read as standing for the proposition that “the client file, particularly attorney work product, may be considered the property of the client.”

Although those cases “may have expanded” the “scope of a client's property under Rule 4-100(B)(3) … to include attorney work product,” Conti said, there appeared to be no authority that “further broadened the rule so as to encompass the confidential information disclosed by an opposing party through discovery.”

Conflicting Structure.

Nor did a close reading of Rule 4-100(B)(3) support plaintiffs' counsel's broad interpretation, the court continued. The provision is found in a chapter of the California professional conduct rules that pertains to “financial relationships with clients,” the court noted. This structure, Conti said, indicates that Rule 4-100(B)(3) “deals primarily with preserving the identity of funds and other property held in trust for a client.”

Moreover, Conti observed that accepting plaintiffs' counsel's interpretation of Rule 4-100 would create a direct contradiction with California Rule 3-700(D). That provision, somewhat analogous to ABA Model Rule 1.16(d), states that upon termination of employment an attorney shall, “[s]ubject to any protective order or non-disclosure agreement, promptly release to the client … all client papers and property.”

In other words, Conti said, because Rule 3-700(D) provides that an attorney is not required to provide a client with confidential material that is subject to a protective order, it would make little sense to find that an attorney is obligated to retain materials that a client is not even entitled to receive.

Discouraging Cooperation in Discovery.

Counsel's expansive gloss on Rule 4-100 also would have negative policy implications, the court said. “[R]eading Rule 4-100 so broadly would hamper the private resolution of discovery disputes,” Conti wrote. “Parties might be unwilling to … disclose confidential documents if they know that those documents could be retained by opposing counsel indefinitely,” he stated.

Although the court rejected plaintiffs' counsel's arguments, it declined a request that he be ordered to pay the defendant's attorneys' fees for bringing the motion to enforce the protective order.

“Plaintiffs' counsel retained an electronic archive of Dollar Tree's confidential information because [he] believed [he] had an ethical obligation to do so,” Conti said. “While this position was overly cautious and ultimately incorrect, there is no indication that it was taken in bad faith.”

Scott E. Cole of Scott Cole & Associates, Oakland, Cal., represented the plaintiffs.

Lead counsel for Dollar Tree were Alexander Hernaez of Fox Rothschild, San Francisco; Matthew P. Vandall of Littler Mendelson, San Francisco; Robert D. Links of Slote & Links, San Francisco; and Rossana S. Eltanal of Littler Mendelson in Phoenix.


Full text at http://op.bna.com/mopc.nsf/r?Open=kswn-8ucrhd.