© 2011 Bloomberg Finance L.P. All rights reserved. Originally published on April 11, 2011, by Bloomberg Finance L.P. in the Vol. 5, No. 15 edition of the Bloomberg Law Reports—Labor & Employment. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.
The sun is shining, and the traffic is light on the ride to the office. You are thinking that this is going to be a good day. When you arrive at the office, you find a big surprise – an unmarked envelope containing copies of e-mails and other documents from an anonymous source that are very damaging to your opponent in a major case. The day is really looking up. You rack your brain, but have no idea who could have delivered the envelope. Or, instead of a mysterious envelope, your client appears at your office with a stack of confidential documents that she took without permission from her employer before she was fired. Is this still a good day?
If faced with either of these hypothetical (but not uncommon) situations, especially in employment discrimination cases, may a lawyer simply make use of documents received outside the normal discovery process? Are there potential repercussions? May sanctions be imposed upon the client or the lawyer when utilizing this type of evidence? The attendant consequences often depend on the kind of information received, from whom and by what means.
Analysis of the Issue
Burt Hill, Inc. v. Hassan1 is the most recent case to critically analyze a situation created by the receipt of documents outside the discovery process.2 In Burt Hill, defendants’ counsel received two envelopes of plaintiff’s documents from an allegedly anonymous source. The first delivery was in an unlabeled manila envelope, left outside defendants’ rented office space in Dubai, and contained internal e-mails which would have been very helpful to the defendants. The second package was delivered a month later in another envelope left at the personal residence of one of the defendants in Amman, Jordan.
Defense counsel retained an attorney with expertise on professional responsibility issues to advise them on their legal and ethical responsibilities and their ability to use the documents in their case. Even though some of the documents clearly were protected by plaintiff’s attorney-client privilege, the expert opined that no provision of the Rules of Professional Conduct prevented use of the documents.
When the existence of these documents became known to Burt Hill, it filed a motion to prohibit the use of the “anonymous source” documents and to disqualify defense counsel. The Burt Hill court denied the motion to disqualify, concluding that the record would not support a finding of bad faith. The court noted that counsel operated “under a cloak of ethical propriety,” based on the ethics opinion it had secured. In addition, given the extremely contentious nature of the litigation, a substitution of counsel would have prejudiced defendants substantially.
The court then looked for a lesser sanction and agreed that an order precluding defendants from using the “anonymous source” documents was warranted. The court rejected the opinion of the plaintiff’s ethics “expert” and held that “in reviewing Plaintiff’s privileged and confidential documents [d]efense counsel proceeded at their and their clients’ peril.” While acknowledging that Pennsylvania Rule of Professional Conduct 4.4(b) on inadvertent disclosure requires only that the recipient promptly notify the sender, the court found that the “justifications underlying the protections afforded to inadvertent productions apply with greater, and stricter, force in connection with advertent but unauthorized disclosures.”3 The court then surveyed the case law, including the Maldonado decision discussed below, and ruled that the cases addressing unauthorized disclosure were “decidedly unfavorable” to the party which had secured the documents outside the discovery process. Even aside from the case law, the court found that receipt of the purported “anonymous source” documents should have raised “red flags” for any reasonable attorney.
With the objective of maintaining the integrity of the judicial process and discouraging similar conduct in the future, the court prohibited defendants and their lawyers from benefiting in any way from their retention and review of plaintiff’s privileged and confidential materials. The twelve-paragraph order required, inter alia, that defense counsel: (1) return all copies of the plaintiff’s documents; (2) provide written certification of the return and destruction of all copies; (3) refrain from using these documents in any way during the course of the litigation; and (4) forward any “anonymous source” documents received in the future to an escrow agent with the responsibility of notifying the court immediately.
The Burt Hill court relied extensively on the leading case of Maldonado v. State of New Jersey.4 Mysteriously appearing in Maldonado’s workplace mailbox was a twelve-page letter written by the defendants to their former attorney. The letter addressed the credibility of witnesses interviewed by the state commission in the underlying administrative investigation of Maldonado’s discrimination claim. When the state attorney became aware that plaintiff’s counsel possessed the letter, she advised opposing counsel that the letter was protected by the attorney-client privilege and demanded its return. Maldonado’s counsel refused and insisted on an in camera review by the court. Defense counsel then filed various motions with the following results.
First, the court refused to dismiss the complaint. Even though the circumstances were “suspicious,” there was no direct evidence that Maldonado took the letter. He also did not hide the letter or fail to disclose it; he simply gave it to his counsel for purposes of his case. This conduct did not rise to willful or deliberate bad faith necessary to justify dismissal of the action. Second, the court ruled that the letter was protected by the attorney-client privilege and/or the work-product privilege, and that the privileges had not been waived. The court granted the defendants’ motion for a protective order.
Finally, the Maldonado court imposed the harsh sanction of disqualification. The factors the court relied upon in reaching this conclusion included: the clearly privileged nature of the letter; that Maldonado’s counsel did not notify the defense counsel that he possessed the letter and made no attempt either to return the letter or to cease review; plaintiff’s references to the letter in the initial and amended complaints in the case (showing its significance and that counsel had fully digested its contents); and the court’s findings that “[the letter’s] significance cannot be overstated” and its disclosure resulted in “substantial prejudice” to the defendants because the letter was a blueprint to the merits of Maldonado’s case, as well as defendants’ defenses. The court concluded, “when chosen counsel strains the limits of ethical conduct, that choice has to yield to the preservation of a fair and just litigation process.”5
Apparently critical to the conclusion was counsel’s failure to adhere to the “cease, notify, and return” mandate of the New Jersey Rules of Professional Conduct, Rule 4.4(b),6 in these circumstances. That rule requires attorneys in New Jersey matters to cease reviewing a privileged document which was inadvertently produced, notify the privilege holder and return the document. At the time of the Maldonado decision, the American Bar Association’s position was consistent with the mandate in New Jersey for the treatment of confidential or privileged documents from a party offered to the attorney for the opponent by a person not authorized to make that offer.7
Especially given the Burt Hill decision, the Maldonado case may continue to have a broader impact outside of New Jersey, even though Model Rule of Professional Conduct 4.4(b) now requires only notice to opposing counsel.8
Nesselrotte v. Allegheny Energy, Inc.9 reached a far different result on sanctions in circumstances perhaps more compelling than those presented by Burt Hill. There, an in-house attorney copied and removed hundreds of documents in her last weeks at work after being notified of her upcoming termination. Some of the documents that she gave to her counsel were privileged. Upon receipt of the documents, the plaintiff’s attorney conducted legal research relating to the propriety of his client’s actions and his decision to retain the documents. He also retained an ethics expert.
Three years later, when asked about the documents by defendants’ counsel during discovery, the plaintiff and her counsel were forthcoming and admitted how she had obtained the documents. Defendant then moved for sanctions and to disqualify plaintiff’s counsel. The court denied the motion to disqualify, finding no bad faith by counsel.
Further, the court refused to impose harsh sanctions. The court concluded, with some twisted logic, that any prejudice was de minimis because the majority of the improperly obtained documents were privileged and, therefore, would not come into play in the case. To bolster its finding, the court ordered the return of all privileged documents and ruled that any taint appropriately was purged. Furthermore, even though the court recognized that plaintiff’s conduct – in removing documents that she should have requested through the discovery process – subverted the Federal Rules of Civil Procedure, it found that she did not do so “secretly.” The court also noted that plaintiff and her counsel did not lie to the court and did not disclose any privileged or confidential information in any publicly-filed document.
The court concluded by recognizing that “Plaintiff’s conduct was improper in that she sought to circumvent the well-settled principles of the discovery process” but left the prosecution of defendants’ counterclaims as “the proper avenue of recourse.” Given this conclusion, and in light of Burt Hill, decided more recently in the same jurisdiction, attorneys should not take much comfort in Nesselrotte.
In Jackson v. Microsoft Corp.,10 the court was presented with shocking and bad faith conduct by the plaintiff employee. There, the court responded by granting the defendant’s motion to dismiss the case. Before leaving Microsoft, Jackson allegedly stole or purchased two compact discs (CDs) containing about 10,000 Microsoft e-mail messages. The e-mails contained both privileged and other sensitive information, such as information about the Department of Defense, trade secrets, confidential personnel records containing employees’ performance evaluations and salaries, and attorney-client communications between Microsoft management and counsel. Jackson did not disclose that he possessed these CDs until his deposition, 10 months after he received them. If that were not bad enough, he also produced documents which were partially destroyed. He admittedly altered the documents to hide the identity of the person(s) who provided them to him. In addition, Jackson had personnel records in hard copy, many of which were not on the CDs, for numerous Microsoft employees.
Jackson gave “highly inconsistent” answers to questions about the manner in which he acquired these documents and CDs. He admitted to reading documents from the CDs that contained attorney-client communications and personnel information. He also distributed some of the contents to other third parties, not just his attorney. He initially denied altering the documents, and then admitted doing so. When he finally disclosed that a former co-worker supplied the CDs, he never mentioned until much later that he paid the employee $1,000 “in gratitude” for the CDs. He later recanted his statement that the co-worker supplied the CDs, claiming that he only had “suspicions” about who provided the CDs to him.
Not surprisingly, the Jackson court dismissed the case, finding that Jackson’s actions were “willful and exemplified the bad faith” with which he had pursued the litigation. The court found incredible Jackson’s statements about who supplied the documents and determined that Jackson had engaged in a pattern of deceptive acts and fraudulent testimony. In so doing, he had undermined the truth-finding function of the court beyond repair. Further, Microsoft had been prejudiced in its ability to fairly defend itself in the litigation. After considering less drastic actions, the court rejected those alternatives holding that there were “no [other] sanctions which would cure [Jackson’s] extensive access to defendant’s privileged and confidential materials and which would assure [his] honesty in the proceedings to come.”
Other cases with similar facts have reached similar results. For example, Rhodes v. LaSalle Bank, N.A.11 appeared to be a typical employment discrimination case until the plaintiff’s deposition. At her deposition, Rhodes admitted that she had destroyed contemporaneous notes after preparing an activity log of discriminatory incidents. She also testified that there might have been some other notes at her home which she had not produced. As it turned out, Rhodes had over 3,000 documents which should have been produced in discovery, including stolen proprietary and confidential documents belonging to LaSalle, many of which contained performance reviews and salary information for Rhodes and other employees. LaSalle moved for dismissal under Federal Rule of Civil Procedure 37 (Failure to Make Disclosures or to Cooperate in Discovery: Sanctions) and the court’s “inherent powers” to punish discovery abuse. The court supported its finding of willfulness, bad faith or fault based on the perjurious answers Rhodes gave at her deposition, her destruction of, or failure to produce, documents she knew were relevant to the case and her theft of proprietary information. The Rhodes court concluded that any sanction other than dismissal would have been an “open invitation to abuse the judicial process because litigants would infer they have everything to gain and nothing to lose by trying to lie, cheat, and abuse the orderly rules of discovery.”
Attorneys receiving documents from sources outside the discovery process should proceed with caution. As the Burt Hill court advised, “if something appears to be too good to be true, it probably is.” A review of cases imposing harsher sanctions reveals that they are better reasoned than those applying more lenient penalties and more effective in deterring and remedying conduct prejudicial to the administration of justice. In addition, using documents received outside the normal process may be viewed as violating the applicable Rules of Professional Conduct.12 This circumstance poses additional substantial risks to attorneys. A lawyer should consider taking the following steps when presented with information of this kind:
- talk to the client about the source of the information and examine it carefully
- if the information appears to have been obtained improperly, stop reading any document which may contain confidential or privileged materials
- review the Rules of Professional Conduct and relevant ethics opinions for guidance as to whether the opposing party or owner of the improperly obtained documents should be notified
- research the substantive law, especially where any privileges are at issue
- onsider obtaining advice from an attorney who concentrates on professional responsibility issues.
Discuss the plan of action with your client and make sure the documents are secure. In this way, you can proceed in a manner that is in the best interest of your client while reducing the risk of sanctions. With these principles to guide you, receipt of a mysterious envelope might signal the start of a very good day.