Hello everyone and welcome to this JACPA Ethics Alert which will discuss the recent California U.S. District Court order/opinion disqualifying a party’s lawyers for failing to notify opposing counsel of receipt of an inadvertently sent strategy e-mail. The case is Terraphase Engineering Inc., William Carson , Jeff Raines , Peter Zawislanski and Andrew Romolo v. Arcadis, U.S., Inc., Case Number: 3:2010cv04647 (U.S. District Court, Calif. Northern District).
The underlying facts were as follows: a group of employees left their former employer to form a competing company. The former employer alleged that the former employees stole trade secrets before they left and the former employees alleged that former employer was threatening potential new clients with litigation if they did business with the new company. The former employees sued on the alleged threats and the former company counterclaimed on the alleged trade secrets violation.
Before the lawsuit was filed, plaintiffs’ attorney sent an e-mail to his client(s) discussing potential strategy. The e-mail was sent to the former employee at that person’s old e-mail address at the company. The former employee’s company e-mail was being monitored and in-house counsel read it and forwarded it to outside counsel who also read it. Neither lawyer notified or attempted to notify opposing counsel of receipt of the e-mail.
Since the counterclaim filed by the former employer had information that could only have been obtained from the e-mail, the company’s lawyers were confronted and admitted that they received and read the e-mail. Plaintiffs filed a motion to prohibit any use of the privileged information from the e-mail since the lawyers failed to immediately notify them after receiving the strategy e-mail, which is required under the California Bar Rules.
In its response to the motion, the former employer did not deny that it received the e-mail and argued that there was only a cursory review of the e-mail and it was not confidential or privileged since it was sent “unsolicited” to the former employee’s work e-mail address, where there was no reasonable expectation of privacy. The response also argued that plaintiffs would not suffer irreparable harm since the information was not privileged and it would have been required to be disclosed during discovery. Finally, the response argued that the California Bar Rules did not apply because there was no active litigation at the time the e-mail was sent.
The court’s opinion order rejected all of the arguments and disqualified both the former employer’s outside counsel and the in-house counsel who reviewed the e-mails. The order also required that the former employer’s general counsel be “removed from all aspects of the day-to-day management of the case”, including “making any substantive or strategic decisions with regard to the case.” The former employer was also required to dismiss the counterclaim without prejudice and re-file it with new counsel (if it chose to re-file) without any reference to the privileged information and plaintiffs were awarded costs and fees.
Bottom line: This case serves as a reminder that failure to follow the (fairly minimal) requirements of the Bar Rules and notify the sender when privileged information and/or documents are received after being sent inadvertently may result in disqualification…or worse.
Florida Bar Rule 4-4.4(b) (which is attached) states that “(a) lawyer who receives a document relating to the representation of the lawyer’s client and knows or reasonably should know that the document was inadvertently sent shall promptly notify the sender.”
…be careful out there!
As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding these or any other ethics, risk management, or other issues, please do not hesitate to contact me.
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