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Evidence from Third Party Creates Legal and Ethical Issues

Christa Theodora Pitzen

Summary

  • Section leaders urge caution when presented with evidence from a nonparty.
  • The lawyer must determine whether the former employee is lawfully in possession of the data.
  • The lawyer must also consider whether the data includes information he “knows or reasonably should know [is] privileged or subject to a claim of work product.”
Evidence from Third Party Creates Legal and Ethical Issues
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Imagine you represent the plaintiff company in a civil lawsuit for theft of trade secrets. A corporate officer of your client tells you he has been approached by a former employee of the defendant company who claims the company is withholding important documents from discovery. This former employee further claims to have a copy of data that shows the defendant’s possession and use of your client’s trade secrets. Your client asks you to meet with this former employee and take possession of the data. At first glance, your situation may seem enviable. But the Los Angeles County Bar Association (LACBA) cautions that the lawyer in this position “is faced with competing public policy considerations and difficult ethical and legal issues.”

Lawyer Must Consider Potential Criminal Issues and Privilege Concerns

The LACBA Professional Responsi-bility and Ethics Committee considered the scenario described above, and the resulting Opinion No. 531 advises attorneys to answer two key questions in this situation. First, the lawyer must determine whether the former employee is lawfully in possession of the data. If the answer is no, and the lawyer nevertheless takes possession of the data or encourages his client to do so, the lawyer may be either engaging in unlawful conduct or advising his client to do so—both of which violate applicable ethics rules.

Second, the lawyer must consider whether the data includes information he “knows or reasonably should know [is] privileged or subject to a claim of work product.” If it does, even though it was “transmitted by a person other than the holder of a privilege,” the lawyer should comply with the ethics rule requiring that he refrain from further examining the data and promptly notify the privilege holder (Rule 4.4 in California).

Opinion Tracks Ethics Rules, but Leads to Tough Calls

“The LACBA opinion is consistent with what the ethical rules require when you receive evidence from a third party and what you are allowed to do with it,” says Michael S. LeBoff, Newport Beach, CA, cochair of the ABA Section of Litigation’s Professional Liability Litigation Committee. Because the ethical rules regarding receipt of information “tend to be pretty uniform, I would think most jurisdictions would be similar, if not identical,” he adds.

But that does not make the lawyer’s job easy or the determinations clear-cut. A legal analysis of the relevant privilege rules should be the first step. “An attorney should not jump the gun to review the documents before understanding the privilege implications,” cautions John M. Barkett, Miami, FL, cochair of the Section of Litigation’s Ethics & Professionalism Committee. If necessary, counsel should get guidance from ethics counsel or from the court, Barkett adds.

The next step is to figure out exactly what the documents are, but do so cautiously. “You really have to review documents to understand what they are,” LeBoff explains. “But by reviewing the documents, you are now running the risk of violating the ethics rules laid out in the opinion. The attorney should start with a very preliminary review to determine what you have received,” LeBoff advises, “and that determination will then dictate what it is you need to do.”

If you determine that you cannot use the documents or information, the particular facts of the situation will dictate whether—and what—you must disclose to opposing counsel. If you did not accept the documents from the third party, you may not have to disclose that you were approached, says LeBoff. On the other hand, if you have the documents in your possession, in most situations the better practice is to disclose that fact to opposing counsel. However, you must “be careful to preserve your client’s confidences,” LeBoff cautions. “If your client obtained the documents, you must counsel your client—by disclosing the documents, you don’t want to also disclose client confidences,” he explains.

Finally, while it is one of the later-mentioned rules in the opinion, the Rule 1.4 obligation to discuss the matter with the client is important. “The client may want to take advantage of the offer from the defendant’s former employee and may even invoke the lawyer’s duty of diligence under Rule 1.3,” Barkett warns. In that situation, “the lawyer has to explain why great care needs to be taken in how to respond—not just because of the criminal law aspects discussed in the LACBA opinion, but also because of Rule 4.4’s prescriptions regarding potentially privileged information,” Barkett advises. Because ethical rules do not read the same in every state, lawyers confronting a similar factual setting in another jurisdiction should be mindful of that and consult their governing ethics rules, he adds.

Opinion Creates Risk for the Receiving Attorney

Despite overall consistency with the ethical rules, there are some unexpected aspects of the LACBA opinion. “The absence of consequences for the party withholding the documents” was surprising, LeBoff says. “It is striking that whether the documents were properly or improperly withheld did not change the recipient’s obligations, analysis, or burdens,” he adds.

Ironically, the party that has withheld information from production may not bear the greatest risk of an ethical misstep. “The opinion really puts the onus on the attorney who receives the information to determine how it was obtained and whether it is privileged, and there are consequences flowing to the receiving attorney if that attorney gets it wrong,” LeBoff explains.

“Concealment did not seem to impact the opinion and what the receiving attorney’s duties were,” observes LeBoff. Rather, those duties appear to be the same whether the information was withheld from production, not requested in discovery, or obtained before filing suit. “The non-producing party’s misconduct doesn’t alter the duties, burden, and risk of the receiving attorney to verify how the documents were received and their privileged nature,” he notes.

Practitioners Should Proceed with Caution

The best advice to practitioners is to tread carefully and be particularly careful before you accept the documents, Barkett says. “As an attorney, you have to make a risk assessment every time you get documents from a third party,” LeBoff observes. “Generally, the better practice is to notify the other side if you come across documents potentially unlawfully obtained or privileged,” he advises.

Many of the issues involved in these situations are unclear, particularly when a party intends to claim that the disclosed documents are confidential. For example, “whether something is a trade secret at all may not be determined until after significant litigation,” LeBoff explains. “This uncertainty is one reason the best practice is to disclose it, because you put the opposing counsel in the position of having to explain it,” he adds.

Notifying opposing counsel may often be the best first step and court involvement may ultimately be appropriate or necessary, Barkett advises. If the defendant company indeed withheld “material information that goes to the essence of the claim of theft of trade secrets,” and if defense counsel knew about the failure to produce the “hot documents,” he or she will face both legal and ethical consequences, Barkett cautions. Thus, approaching that lawyer may be appropriate, “depending upon the lawyers’ relationships and defense counsel’s past conduct in the litigation,” he suggests. “But approaching the court for guidance may be a preferable practical first step, again depending upon the circumstances,” he adds.

Unfortunately, notifying opposing counsel or seeking court guidance may not always be practical. For example, an attorney may be in a difficult spot if he or she receives such documents on the morning of a hearing or deposition. “If you can get the documents at issue to the other side a day or two in advance, it will help,” LeBoff advises. If you cannot, as in the case of a deposition, be prepared for the other side to object to the use of every questionable document, he notes. “If that happens, and the attorney cannot get immediate access to the court or discovery referee, the attorney should not use the document but reserve the right to recall the witness once the privilege issues have been resolved,” LeBoff suggests.

Resources

  • McDermott Will & Emery LLP v. Superior Court, 217 Cal. Rptr. 3d 47 (Ct. App. 2017).
  • Stengart v. Loving Care Agency, Inc., 990 A.2d 650 (N.J. 2010).
  • ABA Formal Ethics Op. 11-460 (Aug. 4, 2011).

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