Disqualification: A Painful Reminder of the Pitfalls of Using Inadvertently Disclosed Attorney-Client Privileged Information

Neil Bardack 
Neil Bardack
August 21, 2017

In California, State Compensation Insurance Fund v. WPS, Inc. 70 Cal.App.4th 644 (1999), has served as the rule book for attorneys who obtain inadvertently disclosed and obvious attorney-client information on how to avoid certain disqualification from representation.  Under State Fund, regardless of how the attorney came into possession of the information, once it is concluded that the document appears to be attorney-client privileged, the attorney must notify the holder of the privilege and refrain from using it until the parties or court has sorted out the disclosure or finds a waiver of the privilege.  The receiving attorney’s reasonable belief that there has been a waiver is not a defense to disqualification that may result if the attorney uses the document in advance of resolving the waiver issue.

A recent example of how courts apply the rule in State Fund is found in McDermott Will & Emery v. Superior Court, 10 Cal.App.4th 1083 (2017).  The document involved was clearly attorney-client privileged on its face as it contained an opinion of counsel, but the manner in which came into possession of counsel raised a strong argument of waiver.

There, McDermott had been sued for malpractice by a former client who alleged the firm had represented him and other family members, creating a conflict of interest.  McDermott was represented by Gibson Dunn.  The document in question had been drafted by the client’s attorney and clearly contained legal advice pertinent to the malpractice claim.  However, the client had sent the document to other non-lawyer family members and it ended up with McDermott pre-suit because the firm had been counsel to family members and a family-owned company.  This relationship had given rise to the conflict of interest claim being made.

Over objections, the client’s attorney Gibson Dunn had used the document in the litigation arguing that not only had it come from its client’s files and not by inadvertent disclosure in discovery, but it also had passed through the hands of several non-lawyers and any privilege had been waived.  Gibson Dunn made the wrong call, and that caused its disqualification from representing McDermott by the trial court.

On appeal, a divided Court of Appeal upheld the disqualification by finding there was no evidence of any intention to waive the privilege by the holder even in the face of several intermediate disclosures that had been made before McDermott had obtained the document from a family member who did not hold the privilege. Disqualification was proper because Gibson Dunn did not follow the guidelines set in State Fund but instead used the document, knowing it was presumptively privileged and that the document should have been either returned or that Gibson Dunn should have sought a court order obtained permitting its use.  Disqualification was necessary to prevent future harm and to protect the integrity of the judicial system.

The circumstances causing disqualification in McDermott show how important it is that an attorney refrain from using a document that at least could be argued as attorney-client privileged, no matter how strong the arguments may be that the privilege was waived. Only the holder of the privilege or a court can make that determination. It is a no-win situation and no matter how tempting the document may be, its use outside of State Fund’s ethical pathway will almost certainly result in an expensive and embarrassing disqualification of a client’s choice of counsel.