Key issues in the inadvertent release and receipt of confidential information: how to protect yourself and your client from embarrassing exposure.

• Author: Richmond, Douglas R.

They are every lawyer's nightmare--the letter to the client detailing litigation strategy inadvertently delivered to the adversary among other documents produced in discovery, the letter faxed to another party in the case instead of being faxed to the client, documents protected by a joint defense agreement that are delivered to the plaintiff rather than to a codefendant, the e-mail message accidentally copied to recipients for whom it was never intended. The inadvertent disclosure of confidential information can be disastrous. Of course, the lawyers on the receiving end of materials inadvertently disclosed are not without their own problems. That is, what are they to do with the privileged or immune materials that have come into their hands? Should they retain them and use them to their advantage, or should they return them to the sender unread? Depending upon the facts and the jurisdiction, the wrong decision may mean disqualification, sanctions, or professional discipline.

1. Inadvertent Release and Receipt

   Inadvertent disclosures of privileged documents are disturbingly common, even in cases handled by careful lawyers. (1) The pressure to produce large numbers of documents within tight deadlines, the daily burdens of a busy law practice, the delegation of key tasks to young lawyers or to lawyers who are not intimately familiar with a case, the increasing volume of documents created and stored electronically, and the transmission of documents electronically, all create problems when it comes to protecting confidential information. Unfortunately, there is no consensus among jurisdictions as to whether the inadvertent disclosure of privileged materials waives any protection that would otherwise attach. (2) Courts confronted with inadvertent disclosures typically take one of three approaches to determine whether the disclosure waives the attorney-client privilege or work product immunity. (3)

   Under the "lenient approach," the privilege must be knowingly waived, and the determination of inadvertence ends the analysis. (4) The lenient approach may be criticized because it provides little incentive for lawyers to maintain tight control over privileged material, and it ignores the importance of confidentiality in the privilege calculus.

   Under the "strict approach," any document produced, whether inadvertently or otherwise, loses its privileged status upon production. (5) This approach is faulted for sacrificing the value of protecting client confidences for the sake of certain results and for chilling attorney-client communications. (6)

   Finally, there is the "middle" or "moderate" approach, also referred to as the "modern" approach, which requires courts to make waiver determinations on a case-by-case basis. (7) Courts applying this approach consider (1) the reasonableness of the precautions taken to avoid inadvertent disclosure; (2) the time taken to rectify the error; (3) the scope of the discovery; (4) the extent of the disclosure; and (5) whether the overriding interests of fairness and justice are served by absolving the party of its error. (8) This approach reflects the majority rule. (9)

   Courts taking the moderate approach generally focus on the reasonableness of the precautions taken to avoid inadvertent disclosure. Reasonable precautions are not foolproof, of course, and the mere production of privileged documents does not necessarily evidence a party's carelessness. (10) Furthermore, the reasonableness of the precautions "must be viewed principally from the standpoint of customary practice in the legal profession at the time and in the location of the production, not with the 20-20 vision of hindsight." (11)

   Courts' inquiries into the reasonableness of the precautions taken by the producing party against disclosure often overlap with the scope of the discovery and the extent of the disclosure. In other words, where the number of privileged communications is small in comparison to the number of documents produced, courts are not inclined to find that the precautions taken by the disclosing party were so inadequate as to support a finding of waiver. (12) Conversely, where the number of privileged documents is large in comparison to the total number of documents produced, courts tend to find that the revealing party's precautions against disclosure were inadequate, and that the disclosures therefore are not inadvertent. For example, in Amgen Inc. v. Hoechst Marion Roussel, Inc., the court held that the disclosure of 200 documents comprising 3,821 privileged pages out of more than 70,000 pages produced counseled against a determination that the law firm's precautions were adequate. (13)

   If a party inadvertently reveals confidential information, it must move promptly to rectify its error. In F.C. Cycles International, Inc. v. Fila Sport, S.p.A., (14) for example, the court easily concluded that the defendant's waiver was not inadvertent where the plaintiff used a privileged document as a deposition exhibit without objection in two instances, without any attempts by the defendant to retrieve the document in the interim. In Bowles v. National Ass'n of Home Builders, (15) the court held that the defendant's waiver could not be deemed inadvertent where the defendant waited fifteen months to try to recover privileged documents. A much shorter period of inaction weighed against inadvertence in Murray v. Gemplus International, Inc., (16) where the court found that the waiver was not inadvertent because the defendant waited eleven weeks to try to recover the documents at issue.

   Fairness, the fifth factor, defies easy description or mechanical application. Generally, the party to which documents are inadvertently produced "has no inherent 'fairness' interest in keeping them, unless the producing party waited so long to address the problem having been informed of it that the receiving party reasonably changes its position in reliance upon their continued availability." (17) It is unreasonable for a receiving party to rely on documents that are labeled as privileged or confidential. "Fairness" also may come into play where privileged documents are widely disseminated, in which case a finding of waiver is supported. (18)

   1. Recent Cases and Controversies

      Increasingly, inadvertent disclosure problems arise outside the document production context, as Jasmine Networks, Inc. v. Marvell Semiconductor, Inc., (19) illustrates. In that case, Marvell was negotiating with Jasmine to purchase a portion of Jasmine's semiconductor business and to employ a group of Jasmine's engineers. Three Marvell executives, including its general counsel and an in-house patent attorney, used a speakerphone to call a Jasmine executive. They got her voicemail. After leaving a message, they continued to talk among themselves, not realizing that they failed to hang up their speakerphone. Their conversation revealed that Marvell's real intention was to steal Jasmine's technology and pirate away Jasmine personnel using purloined information about their compensation and stock options. The Jasmine executive checked her voicemail and heard the entire conversation. Jasmine ultimately sued Marvell for trade secret misappropriation.

      Marvell sought to enjoin Jasmine from using the recorded voicemail conversation, arguing that because the conversation involved its attorneys, its contents were protected by the attorney-client privilege. Jasmine argued that Marvell had waived its privilege and that the conversation fell within the crime-fraud exception to the privilege. The trial court sided with Marvell, concluding that the conversation was privileged, and that Marvell had not waived the privilege because it did not intend to disclose the contents of the conversation. (20)

      The appellate court reversed. Under California law, an "intent to disclose is not required in order for the holder to waive the privilege through uncoerced disclosure." (21) Although it is true in California that "an attorney's inadvertent disclosure does not waive the privilege absent the privilege holder's intent to waive," (22) here a non-lawyer executive participated in the call, and Marvell's general counsel had business responsibilities unrelated to his legal function. Accordingly, California inadvertent waiver rules did not apply, and the crime-fraud exception stripped the conversation of its privilege in any event. The California Supreme Court has granted review in Jasmine, depriving the case of precedential value. Jasmine nonetheless teaches that there is ample opportunity for error in electronic communication and an abundant need for caution.

      Another recent case, Harold Sampson Children's Trust v. Linda Gale Sampson 1979 Trust, (23) decided by the Wisconsin Supreme Court, is notable for its controversial result. In Harold Sampson, one of the...