The Court of Appeal, Fourth District, Division Three (Santa Ana), issued a recent opinion analyzing the scope of the State Fund ethical rule for inadvertently disclosed, privileged information. (See State Comp. Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644, 656-657 ("State Fund").) In McDermott Will & Emery LLP v. Superior Court of Orange County (Apr. 18, 2017, G053623) __ Cal.App.5th __, the court held that an attorney had an ethical obligation to notify opposing counsel and discontinue using a privileged email that had been inadvertently disclosed to third parties and later given to him by his own client. The court held that "State Fund duties are not limited to inadvertently disclosed, privileged documents the attorney receives from opposing counsel, but also may apply to documents the attorney receives from the attorney's client." (Slip opn., pp. 2-3.)
This case involves a messy dispute over control of family wealth including probate and malpractice actions. (Slip opn., pp. 7, 9.) During the course of this dispute, the plaintiff, Dick Hausman ("Hausman"), received an email from his attorney that contained legal advice. (Id. at p. 5.) Using his smartphone, Hausman inadvertently forwarded this email to a family member and the email eventually ended up in the hands of one of the defendants. (Id. at p. 6.) Hausman's attorney claimed that the email was a privileged communication that had been inadvertently disclosed, and demanded that the defendants return or destroy all copies. (Id. at pp. 9-10.) The defendants' attorney refused, arguing that Hausman waived confidentiality by disclosing the email to third parties. (Id. at p. 10.) Hausman filed a motion for judicial determination that the email was privileged and a motion to disqualify the defendants' attorney's law firm, Gibson, Dunn & Crutcher ("Gibson Dunn"). (Id. at pp. 11-12.) The trial court granted both motions. (Ibid.) The defendants filed a petition for writ of mandate requesting the Court of Appeal to vacate these orders. (Id. at p. 12.)
The Court of Appeal denied the writ petition. (Slip opn., p. 3, 49.) The court held that there was substantial evidence to support the trial court's ruling that Hausman's disclosure of the email was inadvertent, thus privilege had not been waived. (Id. at pp. 13, 18, 21.) "[A] waiver of the attorney-client privilege occurs only when there is an 'intention to voluntarily relinquish a known right.'" (Id. at p. 15, quoting State Fund, supra, 70 Cal.App.4th at p. 653.) "When determining whether an inadvertent disclosure waived the attorney-client privilege, a trial court must examine both the subjective intent of the privilege holder and any manifestation of the holder's intent to disclose the information." (Slip opn., p. 15.) Hausman testified that he did not intend to forward the e-mail and he did not know how it happened. Thus, there was no basis to find intentional waiver. (Id. at p. 17.)
Further, substantial evidence supported the finding that Gibson Dunn violated its State Fund duties to notify opposing counsel of, and discontinue using, materials that reasonably appear to have been inadvertently disclosed and obviously or reasonably appear privileged. (Slip opn., p. 27.) The court held that "State Fund duties are not limited to inadvertently disclosed, privileged documents the attorney receives from opposing counsel, but also may apply to documents the attorney receives from the attorney's client." (Ibid.) Moreover, "[t]he receiving attorney's reasonable belief the privilege holder waived the privilege or an exception to the privilege applies does not vitiate the attorney's State Fund duties." (Id. at p. 3.) Thus, Gibson Dunn had an ethical obligation to return the privileged material and refrain from using it. Accordingly, substantial evidence supported the trial court's decision to disqualify Gibson Dunn. (Id. at pp. 42-43.)
Judge Thompson dissented, arguing that the majority's opinion was an "unwarranted extension" of the State Fund rule. (Diss. opn., p. 1.)
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