Appellate Judges

DC Ethics Opinion 256 and 318: An Inadvertent Disclosure of Confidential Documents Constitute a Waiver of the Attorney-Client Privilege

DC Ethics Opinion 256: We see no ethical violation if the receiving lawyer retains the documents and uses the disclosed information.

LIT COMMENTARY

When Opposing Counsel/Parties send you ‘privileged’ material via email, where do you stand?

Privilege is waived, that’s the short answer. Hence, as in the Burkes case, opposing parties/counsel’s arguments fail in law.

Yet the Fifth Circuit disagreed and has created a circuit split, based on the DC Ethics Opinion(s) and case law below (and indeed other courts and circuits nationwide).

Here’s the latest snippet from opposing counsel, filed on Friday 31st July, 2020. It should be noted the Burkes amended brief is in compliance with the Fifth Circuits’ order and the amended brief was approved by the court early Friday morning. This motion was submitted after the courts approval of the amended brief.

6. Once again, the Burkes, and in violation of this Court’s order, seek to take advantage of the inadvertent production of attorney-client privileged material, received by the Burkes due to an error by Appellee Shelley Hopkins in accidently including Mrs. Burke’s email address in privileged correspondence sent by Appellee Shelley Hopkins.

This privileged information, along with the rest of the documents linked to Appellants’ Brief are not material – or even arguably relevant – to Appellants claims. In fact, the billing records accidently emailed to Mrs. Burke involve Appellee Hopkins’ legal work for unrelated mortgage companies in connection with the defense of those companies in unrelated foreclosure litigation.

It appears that the Burkes included the billing records of the Hopkins’ law firm in an attempt to bolster the Burke’s false claims of “wrongdoing” by the Hopkins / Appellees.

7. The Burkes’ links to the billing records (now improperly possessed and stored by the Burkes in an online database) simply are not part of the appellate record.

The Burkes’ ongoing possession over the documents, as well as the attachment and production of those documents is not permissible to have been done in the Burkes’ brief to the Court…

Ethics Opinion 256
Inadvertent Disclosure of Privileged Material to Opposing Counsel

Where a lawyer has inadvertently included documents containing client secrets or confidences in material delivered to an adversary lawyer, and the receiving lawyer in good faith reviews the documents before the inadvertence of the disclosure is brought to that lawyer’s attention, the receiving lawyer engages in no ethical violation by retaining and using those documents. Where, on the other hand, the receiving lawyer knows of the inadvertence of the disclosure before the documents are examined, Rule 1.15(a) requires the receiving lawyer to return the documents to the sending lawyer; the receiving lawyer also violates Rule 8.4(c) if the lawyer reads and/or uses the material.

Depending on the facts, the lawyer making the inadvertent disclosure may, by so doing, violate Rule 1.1, requiring a lawyer to use diligence and care in a representation.

Applicable Rules

Rule 1.1 (Competence)
Rule 1.6 (Confidentiality of Information)
Rule 1.15 (Safekeeping Property)
Rule 8.4(c) (Misconduct: Dishonesty, Fraud, Deceit, or Misrepresentation)

Inquiry

The inquirers are opposing lawyers in a securities arbitration. During the course of discovery in the arbitration proceeding, the lawyer for the respondent was given unrestricted access by claimant’s lawyer to a substantial volume of documents. After their review, respondent’s lawyer identified documents for copying; the copying was accomplished by claimant’s lawyer and the copies were delivered to respondent’s lawyer.

After copying and delivery of the documents, claimant’s lawyer informed respondent’s lawyer that one or more documents, consisting of handwritten notes, contained privileged attorney-client communications. The documents themselves, on their face, did not contain any indication of their privileged status.

Lawyers for both the claimant and the respondent have inquired whether the disclosure of the privileged material, under the circumstances described above, constitutes a waiver of the attorney-client privilege and whether respondent’s lawyer may, without violating ethical rules, use the assertedly privileged material which he now has in his possession.

Discussion

The inquiry raises for the first time in this jurisdiction the ethical issues raised by the no longer infrequent occurrence of inadvertent disclosure of confidential documents to opposing counsel.1 The situation can occur, as here, in the context of a document discovery, through a secretarial error in mailing or, as an unfortunate (but not uncommon) consequence of an increasingly electronic world, as when a facsimile or electronic mail transmission is mistakenly made to an unintended recipient.

While the question of waiver of an evidentiary privilege is beyond our authority,2 the inquiry does present two important questions of legal ethics:

(1) What are the ethical obligations of a lawyer who receives confidential material inadvertently disclosed by opposing counsel; and

(2) Whether an inadvertent disclosure of information which a lawyer is ethically obliged to protect itself constitutes an ethical violation.

Ethical Obligations of a Lawyer Who Receives Inadvertently Disclosed Confidential Material

There are several different scenarios under which a lawyer might inadvertently be sent another party’s confidential information. In the inquiry presented to us, the information was included with other documents intended to be provided the lawyer.

The confidential information was not marked as such, and contained no indication that it was not freely provided to the receiving lawyer; and the receiving lawyer did not learn of the assertedly confidential nature of the documents until after he had read them.

In other situations, confidential information might be received by a lawyer who knows that it was not intended for him. This could occur, for example, when the sending lawyer specifically communicates to the receiving lawyer, before that lawyer reads a document that bore no indication of confidentiality, that the document was misdirected and should be returned unexamined.

Between these two poles—of complete lack of awareness of the inadvertence of the disclosure and actual knowledge of it—lies a continuum of fact situations in which there may be differing levels of indication of the possibility of an inadvertent disclosure.

1. Inadvertently Disclosed Documents—Where There Is No Indication of Confidentiality

No Rule of Professional Conduct directly addresses the conduct in issue in this inquiry. However, if we dissect the individual components of the activity we are examining, substantial guidance emerges.

First, where the confidential document is received by opposing counsel with no indication that the disclosure was inadvertent, and is read by opposing counsel before being otherwise informed of these circumstances (as through a communication from the sending lawyer), we see no ethical violation if the receiving lawyer retains the documents and uses the disclosed information.

Such a situation would arise under the facts of this inquiry, where privileged documents (containing no indication of such status) were included in a large document production and were reviewed in the ordinary course by receiving counsel before being notified of the inadvertent disclosure.

We begin our analysis with the belief that a lawyer (no different than any other person) should be able to presume that materials delivered to him or her in the ordinary course were intended to be so delivered.

Such a presumption accords with both common sense and experience; moreover, the absence of such a presumption would place the unreasonable burden on a lawyer of examining the circumstances of the delivery of all mail, faxes and other material before reading them.

And so, in the situation described above, the documents were freely provided by the sending lawyer, the receiving lawyer could reasonably presume the documents were intended for that lawyer, the documents themselves did not inform the receiving lawyer that their disclosure was inadvertent, and the documents were examined by opposing counsel in good faith before being informed of the claim of privilege.

Under these circumstances, we see nothing improper or unethical about counsel’s use of the disclosed document.

Rule 1.6 (Confidentiality of Information) is obviously inapplicable to the conduct of the receiving lawyer, as it only governs a lawyer’s disclosure and use of confidences and secrets of the lawyer’s client.

We see no other Rule applicable to this situation which would prohibit use of the document.

Indeed, we do not see how the receiving lawyer could be prohibited from using the information acquired during the document review.

First, and most importantly, under case law likely applicable in this jurisdiction, the facts we have assumed—an inadvertent disclosure of confidential documents—constitute a waiver of the attorney-client privilege.

Such a waiver occurs when the privileged communication is disclosed to a third-party, and the law in this jurisdiction appears to be that even an inadvertent disclosure to a third-party operates as a waiver.

See, e.g., Wichita Land & Cattle Co. v. Amer. Fed. Bank, 148 F.R.D. 456 (D.D.C. 1992); In re Sealed Case, 877 F.2d 976 (D.C. Cir. 1989).3 In Wichita Land & Cattle, the facts were similar to those presented in the inquiry described above: allegedly privileged materials were inadvertently included in a document production and were reviewed by opposing counsel before their privileged status was ascertained and asserted.

The court found a waiver, holding that any uncompelled disclosure of otherwise privileged information is inconsistent with the evidentiary privilege, and therefore results in its loss.

In In re Sealed Case, the document in issue was a memorandum of a corporate vice-president to the company’s chief accountant containing the advice of the company’s lawyer.

During a routine audit of the company’s defense contracting business, the memorandum was given to a government auditor. When, many months later, the company resisted a subpoena for this document on the ground of attorney-client privilege, the government argued that the prior disclosure constituted a waiver of the privilege.

The court agreed, holding that the possessor of privileged information must guard it carefully—“like jewels”—and that any uncompelled disclosure will waive the privilege. Id. at 980.

Thus, where (as in this jurisdiction) the underlying law holds that inadvertently disclosed information is no longer protected, there would appear to be no justification for requiring the receiving lawyer to accord it special treatment.4

Second, once read, the inadvertently disclosed information becomes part of the body of knowledge residing in the mind of the receiving lawyer, who may wish to use it to further the interests of that lawyer’s client.

For example, under the facts of this inquiry, if the assertedly privileged information revealed that the securities arbitration claimants (whose lawyers produced the documents) possessed actual knowledge of the truth of matters alleged to have been misrepresented to them, and if this were relevant to the defense of their claims, respondent’s counsel (the receiving lawyers) would not likely be able to accord confidential status to the information and still properly represent their client.5

Should those lawyers take action, such as directing discovery to the claimant, seeking to develop evidence of that party’s prior knowledge of allegedly fraudulent representations, the lawyers would be courting an ethical violation unless they could establish that their litigation strategy derived from some source other than the inadvertently disclosed information.

An interpretation of the ethical rules that required the receiving lawyer to protect the confidentiality of these materials would, we believe, place too much of a burden on the exercise of a lawyer’s obligation to represent his client zealously and diligently (Rule 1.3).

As the ethics committee of another jurisdiction observed in concluding that a lawyer may use inadvertently disclosed confidential information:

Once confidential material has been examined even if briefly, the information cannot be purged from the mind of the attorney who inadvertently received it.6

Indeed, if the receiving lawyer were under some ethical inhibition from using that information, the lawyer could have a prohibited conflict of interest under Rule 1.7(b)(4), which could require withdrawal under Rule 1.16(a). Rule 1.7(b)(4) prohibits a lawyer from representing a client in a matter if “the lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by . . . the lawyer’s own financial, business, property or personal interests.”

If the receiving lawyer were under some ethical inhibition from using the inadvertently disclosed information to the fullest in a particular case, his professional judgment “reasonably may be adversely affected” in that case.

In the example just noted, if the receiving lawyer in the securities arbitration learned from the disclosed document of a possible defense of “actual knowledge” to a misrepresentation claim, and was ethically inhibited from using that information in defense of his client, it is probable that his professional judgment “reasonably may be adversely affected” by a concern that his pursuit of this avenue of defense could result in a breach of professional ethics.7

Precedent from other jurisdictions is in accord with our conclusion that no ethical violation arises from a lawyer’s use of inadvertently disclosed material, where the receiving lawyer had no knowledge that the materials were inadvertently disclosed before they were read.

Aerojet-General Corp. v. Transport Indemnity Ins., 22 Cal. Rptr. 862 (Ct. App. 1993), involved a situation where a lawyer for one party to litigation received a memorandum prepared by opposing counsel describing a witness interview.

The document had been sent by the preparing lawyer to his client’s insurer, which had mistakenly sent it to another insured, who happened to be the receiving lawyer’s client. The memorandum bore no indication that it was privileged.

The court allowed the document to be used by the receiving lawyer, finding no ethical violation in his reading or use of it. According to the court:

Once [the receiving lawyer] had acquired the information in a manner that was not due to his own fault or wrongdoing, he cannot purge it from his mind.

Indeed, his professional obligation demands the he utilize the knowledge about the case on his client’s behalf. Id. at 867-68.

A similar conclusion was reached in Granada Corp. v. First Court of Appeals, 844 S.W.2d 223 (Tex. 1992), where privileged materials were included in a document production.

Eleven months after the disclosure, and after the documents had been reviewed by the receiving lawyer, the disclosing lawyer sought their return and an order prohibiting their use.

The court declined to do so, holding that the privilege had been waived and that the receiving lawyer engaged in no misconduct in reading and using the documents.

See also Ohio Supreme Court Bd. of Comm’rs on Grievances and Discipline Op. 93-11 (Dec. 3, 1993) (decided under the Code of Professional Responsibility); extract;

“The Tenth Circuit recently ruled that a lawyer who was inadvertently faxed an internal federal-agency memorandum need not return the memo to the agency as there was waiver of the work-product privilege once the memo was transmitted. NLRB v Monfort Inc., Nos. 90-9518, etc., (10th Cir. Sept. 10, 1993). In Monfort, the magistrate stated “[y]ou cannot seal the bag from which the cat has already escaped.””

2. Inadvertently Disclosed Documents—Where the Receiving Lawyer Knows of the Inadvertence
On the other hand, where the receiving lawyer has not examined the misdirected material before gaining knowledge of the inadvertence of the disclosure, it is our opinion that the lawyer should, at a minimum, seek guidance from the sending lawyer and, if that lawyer confirms the inadvertence of the disclosure and requests return of the material, unread, the receiving lawyer should do so.

In our view, a failure to do so would be a dishonest act, in violation of Rule 8.4(c).8 A document received by a lawyer under these circumstances comes to the lawyer with “notice” that it does not belong to him. In that sense, it is little different than a wallet found on the street: the finder knows that it does not belong to him, and should he appropriate to himself the wallet’s contents, the finder engages in the tort of conversion.9

Moreover, under such circumstances, there really has been no “disclosure” such as to invoke the holdings of Wichita Land & Cattle and In re Sealed Case.

In reaching its decision in Wichita Land & Cattle, the District Court referred approvingly to Chubb Integrated Systems, Ltd. v. Nat. Bank of Washington, 103 F.R.D. 52 (D.D.C. 1984), which held that a disclosure of a document does not occur until some outsider to the asserted confidentiality learns the “gist” of its contents. Id. at 63.

The District Court for this District recently applied Chubb in a case in which several boxes of privileged documents were inadvertently disclosed as part of a large document discovery. Disclosing counsel discovered the inadvertence one week after the document production, and moved for their return.

The court, in order to determine whether receiving counsel could use the documents, ordered a hearing to determine whether receiving counsel had learned their gist.

In re United Mine Workers of Amer. Employee Benefit Litigation, 156 F.R.D. 507, 512 (D.D.C. 1984).

Presumably, if receiving counsel could establish that he had learned of the gist of the documents before being informed of the inadvertence of the disclosure, the court would allow their use; otherwise, it would not.

Applying this interpretation to the matter before us, there would be no “disclosure” to a receiving lawyer who has possession of a document and has not read it when the lawyer learns that the document was only inadvertently provided.

Reading the materials under these circumstances should be treated as the equivalent of a lawyer opening the closed file folder of his adversary in a conference room, while the adversary was out of the room.

Such conduct has been found in other jurisdictions to be dishonest. Cf. Lipin v. Bender, 644 N.E.2d 1300 (N.Y. 1994).10

We also ground our opinion on Rule 1.15 (Safekeeping Property). Documents (separate from the information contained in them) which are inadvertently delivered to a lawyer and which the lawyer knows are not his are the property of another and therefore subject to that Rule.

Under Rule 1.15(a), the lawyer must safeguard that property, and under Rule 1.15(b), the lawyer must notify the sending lawyer of his possession of the documents and return them (if so requested). We reached precisely this conclusion in our Opinion No. 242, concerning a lawyer’s receipt from his client of documents belonging to a third party.

This different ethical result, when the receiving lawyer does know that documents were inadvertently disclosed, also finds support elsewhere.

In Resolution Trust Corp. v. First American Bank, No. 4:94-CV-83 (W.D. Mich. 1994), a lawyer received a privileged document, known to be inadvertently disclosed. The court held that receiving counsel’s reading of such a document was improper.

ABA Formal Opinion 92-368 (Nov. 10, 1992) also addresses this issue.

The specific situation it discusses is one where the inadvertently disclosed confidential material was received “under circumstances where it is clear that the materials were not intended for the receiving lawyer.” Id. at 1.

The Opinion concludes that the receiving lawyer should not examine the materials once the inadvertence is discovered, should notify the sending lawyer of their receipt, and should abide by the sending lawyer’s instructions as to their disposition. That conclusion is in accord with ours.11

We disagree, however, with the discussion in the ABA Opinion (at pp. 4-5) that its conclusion would also apply even where the receiving lawyer did not become aware of the inadvertence until after the lawyer read the documents.

The Opinion overlooks the other important considerations that apply in such a circumstance (i.e., the fact that the information cannot be purged from the mind of the receiving lawyer, the lawyer’s obligation to his client of zealous representation, and the potential conflict of interest under Rule 1.7(b)), and may have been mistaken in its view that most courts do not treat inadvertent disclosure as a waiver of the privilege.

The courts in this jurisdiction, and several others, have reached a contrary conclusion.

***
The line we have drawn between an ethical and an unethical use of inadvertently disclosed information is based on the receiving lawyer’s knowledge of the inadvertence of the disclosure. Thus, for example, where the document has no facial or contextual indication of privilege and the receiving lawyer has not learned of its inadvertent disclosure, the receiving lawyer who reads such a document commits no breach of ethics.

At the other extreme is the document for which the inadvertence of the disclosure is actually known to the lawyer before he reads it. Such a situation would exist, for example, when a confidential letter to a lawyer’s client is inadvertently mailed to opposing counsel, and opposing counsel is specifically informed of the mailing error before the letter is delivered to his office. Opposing counsel’s reading of the letter would be unethical.

Many situations will fall somewhere between these two clear examples, i.e., there may be some indication on the document or in its context that the disclosure was inadvertent, but there may also be good reason for the receiving lawyer to conclude otherwise.12 Whether a particular set of facts and circumstances constitutes dishonesty will depend on whether it shows the requisite knowledge on the part of the receiving lawyer (see paragraph [6] in the Terminology section of the Rules for the definition of “knows”).13

Did the Inadvertent Disclosure Itself Constitute an Ethical Violation?

The facts of this opinion also raise the question of the ethical obligations of a lawyer to protect confidential documents from inadvertent disclosure. District of Columbia Rule of Professional Conduct 1.6(a) establishes the obligation of a lawyer to protect confidential and secret client information. It provides as follows:

Except when permitted under paragraph (c) or (d), a lawyer shall not knowingly:
(1) Reveal a confidence or secret of the lawyer’s client;
(2) Use a confidence or secret of the lawyer’s client to the disadvantage of the client;
(3) Use a confidence or secret of the lawyer’s client for the advantage of the lawyer or of a third person. [Emphasis added.]

Rule 1.6(a) only prohibits disclosures of client confidences and secrets made “knowingly,” a term is defined in the “Terminology” section of the Rules as denoting “actual knowledge of the fact in question. A person’s knowledge may be inferred from the circumstances.”

In a situation where the disclosure was truly inadvertent, that is, where it did not proceed from any actual knowledge that privileged material was contained in the production of discovery documents, from any actual knowledge that it was included in a mailing to opposing counsel, etc., we do not believe that Rule 1.6(a) is violated.

Thus, a negligent disclosure of confidential or secret information would not violate this Rule.

There remains, however, the question whether the inadvertent disclosure of confidential or secret information violates some other ethical provision. Where the disclosure occurred through the conduct of a subordinate lawyer or employee in the sending lawyer’s firm, a violation of Rule 1.6(e) may result. That Rule requires that:

A lawyer shall exercise reasonable care to prevent the lawyer’s employees, associates, and others whose services are utilized by the lawyer from disclosing or using confidences or secrets of a client. . . .

Where, for example, a lawyer entrusts an associate lawyer or a non-lawyer employee with a document production, and fails to use reasonable care in instructing such person about the identification or handling of confidential or secret material, such supervising lawyer may violate Rule 1.6(e) if such material is improperly disclosed. See also Rules 5.1(b) and 5.3(b).

Where, however, the disclosure is solely the product of the lawyer’s own inadvertence, Rule 1.6(e) would appear to be inapplicable. But the lawyer’s inadvertence could violate Rule 1.1 (Competence), which provides as follows:

(a) A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.

(b) A lawyer shall serve a client with skill and care commensurate with that generally afforded to clients by other lawyers in similar matters.

Because we are not in a position to determine the precise facts that led to the inadvertent disclosure in the matter presented to us, we cannot say whether it constitutes a violation of Rule 1.1.

If, for example, the disclosure occurred because counsel failed to review the documents to be made available to opposing counsel with the thoroughness and preparation required under Rule 1.1(a) or the skill and care required under Rule 1.1(b), the inadvertence could be an ethical violation.

On the other hand, the fact of an inadvertent disclosure would not itself be evidence of a violation of Rule 1.1, as such disclosure could well occur even in the presence of appropriate levels of attention and skill.

May 1995

1. We assume for the purpose of this inquiry that the disclosure of the privileged documents was truly inadvertent; that is, it was not specifically intended by plaintiff’s counsel.

2. Legal Ethics Committee opinions are limited to issues arising under the D.C. Rules of Professional Conduct.

The question of whether any particular facts and circumstance constitute a waiver of the attorney-client privilege is one under the law of evidence.

We therefore decline to respond to that part of the inquiry which seeks our opinion on whether, under the facts presented to us, there has been a waiver of the attorney-client privilege.

See Ethics Committee Rule C-5, and Ethics Opinion No. 83. See also Comment [5] to Rule 1.6 (Confidentiality of Information):

“This Rule is not intended to govern or affect judicial application of the attorney-client privilege or work product doctrine. . . .”

3. These federal court decisions are federal question cases where, under Fed. R. Evid. 501, the existence of evidentiary privileges is governed by federal law. We are aware of no reported decisions on this subject under District of Columbia law.

Many (but not all) other jurisdictions have reached the same conclusion about the consequence of an inadvertent disclosure of privileged information.

See, e.g., Granada Corp. v. First Court of Appeals, 844 S.W.2d 223 (Tex. 1992); In re Grand Jury Proceedings, 727 F.2d 1352 (4th Cir. 1984); and Aerojet-General Corp. v. Transport Indemnity Ins., 22 Cal. Rptr. 862 (Ct. App. 1993).

Cases in which the courts have examined other factors in deciding whether to find a waiver from an inadvertent disclosure include Mendenhall v. Barber-Greene Co., 531 F. Supp. 951 (N.D. Ill. 1982); and Berg Electronics, Inc. v. Molex, Inc., No. 94-470 (D. Del., Feb. 8, 1995).

4. In some jurisdictions, an inadvertent disclosure does not ipso facto waive the attorney-client privilege. See supra note 3. Were we in such a jurisdiction, our conclusion might be different.

5. Actual knowledge of the truth of a misrepresented matter is usually a defense to a claim of fraud. See, e.g., Mayer v. Oil Field Systems Corp., 803 F.2d 749 (2d Cir. 1986).

6. Ohio Supreme Court Bd. of Comm’rs on Grievances and Discipline, Op. 93-11 (Dec. 3, 1993).

7.By this conclusion, we do not imply that a lawyer must retain and/or use inadvertently disclosed materials that are not subject of ethical restraints.

As a matter of courtesy or reciprocity, a lawyer may decline to retain or use documents that the lawyer might otherwise be entitled to use, although (depending on the significance of the documents) this might be a matter on which consultation with the client may be necessary. See Rules 1.2(a) and 1.4(b).

8. In In re Shorter, 570 A.2d 760 (D.C. App. 1990), a disciplinary case, the Court of Appeals defined “dishonesty” as including “conduct evincing a lack of honesty, probity or integrity in principle; [a] lack of fairness and straightforwardness. . . . Thus, what may not legally be characterized as an act of fraud, deceit or misrepresentation may still evince dishonesty.” Id. at 768.

9. At common law, a finder of lost property, if he takes custody of it, is responsible to the owner of the property for its safekeeping and return. Cf. Costello v. Ten Eyck, 49 N.W. 152 (Mich. 1891); Fisher v. Klingenberger, 576 N.Y.S.2d 476 (Rochester City Ct. 1991). See also 1 Am. Jur. 2d Abandoned, Lost and Unclaimed Property, § 21 (1994); 36A C.J.S. Finding Lost Goods §§ 7, 8 (1961).

10. Where the lawyer knows that a document was inadvertently disclosed, Rule 1.6 (Confidentiality of Information) presents no barrier to disclosure to the sending lawyer by the receiving lawyer of the fact of receipt of the inadvertently disclosed document.

Rule 1.6(b) protects “confidences” (defined as information protected by the attorney-client privilege) and “secrets” (defined as “other information gained in the professional relationship that the client has requested be held inviolate, or the disclosure of which would be embarrassing, or would be likely to be detrimental, to the client”).

Under these circumstances, the fact of receipt of the inadvertently disclosed document is plainly not a “confidence” under Rule 1.6, as it was not part of an attorney-client communication.

Nor is it a “secret”: the client has made no request for inviolability, the disclosure would not be embarrassing to the client, and the disclosure could not be detrimental to the client, since the receiving lawyer has no right to use the information anyway.

Nor need the client be consulted about the course of action when the receiving lawyer is required to return the inadvertently disclosed documents, since such a requirement derives from an affirmative ethical obligation of the lawyer.

Client consent is not necessary for the lawyer to fulfill this ethical obligation, and the client may not insist that the lawyer not return, unread, the subject documents any more than a client may not insist that her lawyer overlook a conflict of interest that, under the Rules of Professional Conduct, require withdrawal from representation.

Of course, there is no reason why the lawyer may not inform the lawyer’s client of the fact of receipt of the documents and the lawyer’s actions in response thereto.

11. We disagree with the ABA Opinion only as to the legal basis for the conclusion that the described conduct is unethical. The ABA Opinion found no Rule or Professional Conduct governing the activity in question, and so based its conclusion on general “precepts underlying the Model Rules.” Id. at 2. We believe that Rules 8.4(c) and 1.15 govern.

12. For example, a document when created may have been marked “Confidential” or “Privileged,” without regard to whether the document was actually entitled to some legal evidentiary privilege.

A copy of document so marked in a document production would not, in many circumstances, establish the receiving lawyer’s knowledge of an inadvertent disclosure of privileged material.

Such marking, as noted, is often indiscriminately used and, therefore, of no legal significance; also, the receiving lawyer may be entitled to assume that any privilege that did exist with respect to the document was being voluntarily waived, to further the interests of the sending lawyer, by inclusion in the document production.

13. There will be, we expect, some situations in which the receiving lawyer believes that his/her right to examine a document is ambiguous, because there are conflicting indications as to inadvertence.

In such a situation, the prudent receiving lawyer would either contact the sending lawyer for instructions before examining the document, or have another person not working on the matter to which the document relates examine it to assist in clarifying its status.

Ethics Opinion 318
Disclosure of Privileged Material by Third Party

When counsel in an adversary proceeding receives a privileged document from a client or other person that may have been stolen or taken without authorization from an opposing party, Rule 1.15(b) requires the receiving counsel to refrain from reviewing and using the document if:

1) its privileged status is readily apparent on its face;

2) receiving counsel knows that the document came from someone who was not authorized to disclose it; and

3) receiving counsel does not have a reasonable basis to conclude that the opposing party waived the attorney-client privilege with respect to such document.

Receiving counsel may violate the provisions of Rule 8.4(c) by reviewing and using the document in an adversary proceeding under such circumstances and should either return the document to opposing counsel or make inquiry of opposing counsel about its status prior to determining what course of action to take.

Receiving counsel would not violate Rules 1.15(b) and 8.4(c) by reviewing and using the document whose source is unknown if:

1) its privileged status is not readily apparent on its face, or if privileged, receiving counsel has a reasonable basis to conclude that the privilege has been waived; and

2) receiving counsel did not know that the document came from someone who was not authorized to disclose it.

Rule 1.3(a)’s emphasis on zealous representation may provide support for receiving counsel to review and use the document in such a situation.

The Committee takes no position with reference to the question whether review and use of documents that are confidential but non-privileged would violate Rules 1.15(b) and 8.4(c) because it is outside the scope of the inquiry.

Counsel who created the opportunity for the disclosure or was otherwise responsible for maintaining the confidentiality of the document may violate Rules 1.1(a) and (b) and 1.6(a) and (e) by failing to exercise reasonable care to prevent the unauthorized disclosure of the client’s confidences and secrets.

Applicable Rules

Rule 1.1(a) and (b) (Competence)
Rule 1.3(a) (Diligence and Zeal)
Rule 1.6(a) and (e) (Confidentiality of Information)
Rule 1.15(b) (Safekeeping Property)
Rule 8.4(c) (Dishonesty, Fraud, Deceit, or Misrepresentation)

Inquiry

The inquirer, inside corporate counsel for an entity involved in a contested administrative proceeding, states that a temporary employee of the entity obtained a copy of an attorney-client privileged document containing client confidences and secrets either by theft or without authorization and disclosed it to the opposing party in the proceeding.

The actual manner in which the temporary employee gained access to the document is not known. The document was not marked “attorney-client privileged,” “attorney work product” or “confidential,” but the information contained at the top of the first page of the six page document makes it clear that the document was from the entity’s inside counsel, was sent to members of its management team, and addressed a number of legal questions and concerns.

Some of the legal analysis in the document was pertinent to the dispute that was the subject of the administrative proceeding.

After receiving the document, the opposing party gave it to its litigation counsel, who reviewed the document and then used it as part of a filing with the administrative tribunal without first contacting opposing counsel.

It is not known whether the receiving counsel knew the source of the document or the manner in which his client received it.

When the inquirer learned of the pleading, he challenged the admissibility of the document on grounds that it was privileged and that the privilege was not waived.

Receiving counsel filed an opposition, asserting that the document was admissible because it was relevant to an issue in the proceedings, had not been marked “confidential,” and had been “leaked” by a temporary employee to his client.

The dispute over the admissibility of the document was never resolved in the administrative proceeding because the matter was settled, but the inquirer has asked for our opinion regarding the ethical implications of its submission to the tribunal.

Discussion

In 1995, this Committee adopted Opinion No. 256, which determined that a receiving lawyer did not violate the D.C. Rules of Professional Conduct by reviewing privileged documents inadvertently delivered by opposing counsel during discovery so long as receiving counsel was unaware of the inadvertent disclosure prior to the time the documents were examined.

The Committee has now been asked to review a related issue:

Does receiving counsel violate the D.C. Rules of Professional Conduct by reviewing and using what may be a privileged document in an adversary proceeding that receiving counsel’s client or other person obtained from a third party who may have stolen the document or taken it without authorization?

This is a matter of some importance because, as Judge Royce Lamberth noted in Wichita Land & Cattle v. American Federal Bank, 148 F.R.D. 456, 458-59 (D.D.C. 1992), efforts are more commonly being used to “surreptitiously gain access to confidential communications.”

Despite some obvious differences from, situations involving inadvertent disclosures, the Committee finds that the conclusions reached in Opinion No. 256, with some modifications, apply to this inquiry as well.

The ethics rules are silent on the review and use of privileged materials which may have been stolen or otherwise acquired without permission from their rightful owners by third parties.

In the absence of precise direction from the rules, the Committee must begin its analysis by looking for guiding principles that will help shape the ways in which the ethics rules are interpreted.

The guiding principles most pertinent to our problem relate to the primacy given in the ethics rules to confidentiality, zeal, and fair dealing with opposing counsel.

To begin with, the need to protect the confidentiality of the attorney-client relationship permeates the ethics rules.

As noted in Comment [4] to Rule 1.6: “A fundamental principle in the client-lawyer relationship is that the lawyer holds inviolate the client’s secrets and confidences.” Comment [4] further reflects that knowing that this confidential relationship exists encourages a client “to communicate fully and frankly with the lawyer even as to embarrassing or legally damaging subject matter.”

Maintaining confidentiality is so essential that a lawyer is required to exercise reasonable care to prevent others with whom the lawyer works from disclosing or using a client’s confidences or secrets. Rule 1.6(e).

A lawyer is arguably also obliged to protect client confidentiality under his or her broader mandate to “serve a client with skill and care.” See Rule 1.1(b).

There clearly is a tension between these ethical and evidentiary principles and the notion that in their efforts to seek the truth, tribunals should, for the most part, have unfettered access to relevant evidence. See Wichita Land & Cattle, 148 F.R.D. at 462.

While fidelity to the principle of protecting client confidentiality is a basic tenet of the rules, so is the notion that in the exercise of professional judgment, a lawyer should act in a manner consistent with the best interests of the client. Rule 1.3(a), Comment [5].

The rules require that a lawyer represent a client zealously within the bounds of the law. Rule 1.3(a).

This may have implications for a lawyer who gains access to a document that can beneficially be used on a client’s behalf in an adversary proceeding without first being aware that it is privileged.

But such an attorney is also constrained by ethical principles of fair dealing.

Rule 1.15(b), for example, requires a lawyer who receives property in which third persons have an interest to notify these persons and promptly deliver the property to them. This is consistent with commentary to Rule 1.3 that the duty of a lawyer to represent a client wall zeal “does not militate against the concurrent obligation to treat with consideration all persons involved in the legal process and to avoid the infliction of needless harm.”

Rule 1.3, Comment (6). A lawyer who reviews and uses material that he knows is privileged may be engaging in a dishonest act in violation of Rule 8.4(c). See D.C. Ethics Opinion 256 n.8.

In its assessment of the inadvertent disclosure of privileged material to opposing counsel, the Committee previously concluded that receiving lawyers engage in no ethical violation by retaining and using those materials if they review them in good faith before the inadvertence of the disclosure is brought to their attention. D.C. Ethics Op. 256.

Under that Opinion, however, receiving lawyers must return privileged documents without reviewing them if they learn about their privileged nature before reviewing the documents.

Opinion 256 further reflects that lawyers who make the inadvertent disclosures may violate Rule 1.1 if they do so by failing to exercise diligence and care during a representation.

The conclusions reached in Opinion 256 were largely consistent with earlier ABA Formal Opinions, Formal Opinions 92-3681 and 94-382 and with case precedents in this circuit.

See In re Sealed Case, 877 F.2d 976 (D.C. Cir. 1989), and Wichita Land & Cattle v. American Federal-Bank, 148 F.R.D. 456 (D.D.C. 1992) (inadvertent disclosure of privileged documents waives the attorney-client privilege).

The question of what ethical obligations exist when privileged material may have been stolen or taken without authority is not addressed in either Opinion 256 or in ABA Formal Opinion 92-368.

ABA Formal Opinion 94-382, however, did address the issue of the unsolicited receipt of privileged or confidential materials.

It concluded that a lawyer who receives such materials of an adverse party should refrain from using them if she knows that they are privileged. The District of Columbia Circuit specifically reserved decision on the issue of the unsolicited receipt of privileged documents in In re Sealed Case when it stated that “[w]e do not face here any claim that the information was acquired by a third party despite all possible precautions, in which case there might be no waiver at all.” 877 F.2d at 980, n.5.

This issue was addressed, however, in In re Grand Jury Proceedings Involving Berkeley & Co., 466 F. Supp. 863 (D. Minn. 1979).

In Berkeley, a former employee allegedly stole corporate documents and turned them over to the government. The company argued that the documents should be returned because they were privileged. The court noted initially that it had long been assumed that the privilege was deemed waived for all involuntary disclosures of privileged documents, even those that were stolen.

This had been the position taken in Dean Wigmore’s highly respected treatise on evidence. See 8 Wigmore on Evidence §§ 2325-26 (McNaughton rev. 1961).

But Berkeley concluded that the privileged status of document should not be lost in such circumstance if “the attorney and client take reasonable precautions to ensure confidentiality.”

The approach taken in Berkeley has been largely adopted by the American Law Institute in the Restatement of the Law Governing Lawyers. Under § 129 of the Restatement, the attorney-client privilege is waived only if “the client, the client’s lawyer, or another authorized agent of the client voluntarily discloses the communication in a non-privileged communication.”

Restatement of the Law Governing Lawyers § 129 (2000). See comment g. And, in one of the illustrations interpreting § 129, the Reporter states that the privilege is not waived if a burglar steals privileged files.

The Restatement comment also adopts the same basic approach taken in our Opinion 256 and ABA Formal Opinion 92-368 with reference to inadvertent disclosures of privileged materials.

The Restatement concludes that waiver does not result from inadvertent disclosures as long as the client or any other disclosing person “took precautions reasonable in the circumstances to guard against such disclosure.” Restatement of the Law Governing Lawyers § 129, comment h.

These sources provide us with a basis for responding to this Inquiry.

First, a lawyer cannot, consistent with the Rules of Professional Conduct, solicit or otherwise encourage a client or other person to obtain privileged or documentary evidence in an unlawful or unauthorized manner.

If a lawyer receives materials that are privileged on their face, having a reasonable basis to conclude that the privilege has not been waived and that they have been obtained without authorization, he may violate Rules 1.15(b) and 8.4(c) by reviewing the material or by using it in an adversary hearing.2

This is consistent with the position taken in ABA Formal Opinion 94-382. But the ethics rules are not violated unless the receiving lawyer acts knowingly.3

Other state ethics opinions have reached contrary results. See, e.g., Maryland Bar Ass’n, Op. 89-53 (1989), Virginia Bar Ass’n Op. 1076 (1988); and Michigan Bar Ass’n, Op. CI-970 (1983).

These opinions conclude that lawyers who receive privileged materials unsolicited have no obligation to make disclosure to a tribunal or an adverse party and may review and use such materials.

But such a result is inconsistent with the conclusion reached by this Committee in Opinion 256.

The more difficult questions relate to situations in which a receiving lawyer does not have such knowledge of the document’s origin prior to conducting a review, or if the status of a document is unclear.

A lawyer may still violate the ethics rules if the source and status of documents can be inferred from circumstances at the time he received them because “knowingly” is so defined in the Terminology Section of the Rules, Definition 6.

Whether knowledge can be inferred from circumstances is fact specific. But if a lawyer receives what appears to be a privileged document under highly suspicious circumstances, such as from a client or other person who says with a wink, “don’t ask me how I got this,” the prudent receiving lawyer, would make further inquiry prior to reviewing or using the document.4

If, prior to his review, receiving counsel determines that a privileged document was obtained surreptitiously and without the knowledge or approval of the opposing party and its counsel, and has a reasonable basis to conclude that the privilege was not waived as to this document, receiving counsel should either return the document to opposing counsel, or make inquiry about its source and status prior to determining what course of action to take. This is consistent with the approach taken in ABA Formal Opinion 94-382.5

A receiving lawyer would not violate Rules 1.15(b) and 8.4(c) by reviewing and using the document whose source is unknown if:

1) its privileged status is not readily apparent on its face; and

2) receiving counsel did not know that the document came from someone who was not authorized to disclose it.

If the privileged status of the document does not become apparent to receiving counsel until after the document has been reviewed, as reflected in D.C. Opinion 256, it is too late for receiving counsel to take corrective action because the information cannot be purged from his mind and his obligation of zealous representation under Rule 1.3 at that point trumps confidentiality concerns.

The Committee takes no position with reference to the question whether review and use of documents that are confidential, but non-privileged would violate Rules 1.15(b) and 8.4(c) because it is outside the scope of the inquiry.

In the matter that is the subject of this Inquiry, there is no indication what the receiving lawyer’s client said about the document or its source at the time it was given to him.

Receiving counsel asserted in a pleading that the document was not marked “confidential” and that it was leaked to his client by a temporary employee of the opposing entity. Even though the document was not marked “attorney-client privilege,” “attorney work product,” or “confidential,” the information at the top of the first page of the document made it clear that it was from the opposing entity’s inside counsel and that counsel was analyzing legal questions and concerns for members of the management team.

The Committee concluded in Opinion 256 that a receiving attorney could reasonably presume that documents were intended for him when they are disclosed to him by opposing counsel.

This may not be the case when documents are disclosed to a lawyer by a third party. In such a situation, a receiving counsel may violate the ethics rules if be knowingly received privileged documents, had no basis to conclude that the privilege had been waived, and reviews and uses them anyway.

But again this responsibility only exists if the privileged nature of the document is apparent on its face. There is no indication in this Inquiry whether the receiving counsel knew about the nature of the document, other than that it was not marked “confidential,” at the time he received it. In the absence of additional facts, we can only reiterate the general guidance provided in Opinion 256: it would be unethical to read a document if the lawyer knew before reading it that it was privileged and that it had been sent inadvertently.

The same would be true if receiving counsel reads a document that he knows is privileged and was either stolen by a third party or taken without authorization, unless he has a reasonable basis to conclude that the privilege was waived as to that document. See also ABA Formal Opinion 94-382.

On the other hand, Opinion 256 states that a receiving lawyer commits no breach of ethics if he reads a document that “has no facial or contextual indication of privilege and the receiving lawyer has not learned of its inadvertent disclosure.” Again, the Committee reaches the same conclusion for documents improperly taken by third parties.

The determination of what a receiving lawyer knows about the source of a document and about its privileged status, as noted above, is fact specific. A document is not necessarily privileged on its face even when it is marked “privileged” or “confidential,” as markings like this often are used indiscriminately. Opinion 256 at n 12.

But a receiving attorney proceeds at his own risk if indicia of a privileged document do exist and there is not a reasonable basis to conclude that the privilege has been waived. This can often be gleaned by seeing on the face of a document the sending and receiving parties and the nature of the subject matter.

If, for example, sending and recipient parties are counsel and members of corporate management, respectively, the subject relates to the results of attorney-client communications or legal advice, and the document is marked “attorney-client privilege,” then the ethics rules are implicated.

But, where the source of the document and/or its privileged status is less clear, as indicated in ABA Formal Opinion 94-382, the prudent course for a receiving lawyer might be to contact the opposing party and raise the issue directly, have another lawyer not working on the matter assess the document separately to help determine whether it is privileged, or refrain from reviewing the materials until a definitive resolution of the proper disposition of the materials is obtained from a tribunal. For comparable suggestions, see Opinion 256 at n.13. See also ABA Formal Opinion 94-382.

It also bears repeating that internal (or outside) counsel having the responsibility for protecting privileged documents that subsequently are “leaked” may violate Rules 1.1(a) and (b) and 1.6(a) and (e) if they fail to exercise reasonable care to prevent the unauthorized disclosure of their client’s confidences and secrets.6

Again, any such determination is fact specific. There is no indication in the Inquiry what steps had been taken to protect the confidentiality of the document at issue prior to the time it was obtained by the third party.

In summary, given the importance of preserving the confidentiality of privileged documents, lawyers have an ethical responsibility to take reasonable measures to ensure that confidential documents are protected so that they do not fall into the hands of third parties.

The failure of counsel to take reasonable measures to protect a client’s confidences and secrets can both waive the privilege and result in ethics violations.

December 2002

1. Opinion 256, however, rejected the position taken in ABA Formal Opinion 92-368 that a document must be returned even if the receiving lawyer learns about the inadvertent disclosure after the document had been reviewed.

2. This Opinion does not address the question of whether all or just a portion of a particular document is privileged.

3. This requires actual knowledge of the fact in question. See definition of “knowingly” in Terminology Section of the Rules, Definition [6]. As the Definition of “knowingly” indicates, however, knowledge can be inferred from circumstances.

4. This is consistent with the admonition in Opinion 256 of what an ambivalent lawyer should do when receiving documents from another lawyer when there are conflicting indications as to whether the disclosure of privileged documents was inadvertent or not. D.C. Opin. 256 at n.13.

5. As reflected in Opinion 256, a lawyer may also decline to review or use documents that may not be the subject of ethical restraints, and that he may otherwise be entitled to use, as a matter of “courtesy.” See Opin. 256 at n.7. Depending on the significance of the documents, however, a lawyer may be required to consult with the client and Rules 1.2(a) and 1.4(b) prior to making such a determination.

6. Opinion 256 provides some general guidance on the factors to be taken into account in making such assessments. If a lawyer fails to use reasonable care in instructing those who work for him on the handling of confidential material, that lawyer may violate Rule 1.6(e), if, as a result of his failure, the confidential material falls into the hands of a third party. A lawyer may also violate Rule 1.1 if he fails to devote sufficient care and attention to the protection of privileged documents. Both of these rules may be implicated, for example, if a lawyer fails to train his employees to properly mark and file confidential documents and to avoid leaving them in areas exposed to the general public.

In re Kagan, 351 F.3d 1157 (D.C. Cir. 2003)

No. 02-8508.

Filed On: December 30, 2003.

Before: SENTELLE, HENDERSON, and ROGERS, Circuit Judges.

PER CURIAM:

ORDER

Upon consideration of the Report and Recommendation of the Committee on Admissions and Grievances, and the response thereto, which contains a request that the report be published as an addendum to National Wildlife Federation v. EPA, 286 F.3d 554 (D.C. Cir. 2002), it is ORDERED that the Committee’s Report and Recommendation that no disciplinary action be taken against respondent be adopted.

It is FURTHER ORDERED that the Report and Recommendation, without attachments, be published as an addendum to National Wildlife Federation v. EPA, 286 F.3d 554 (D.C. Cir. 2002).

Report and Recommendation of the Committee on Admissions and Grievances

This matter relates to the obligations of an attorney who, after receiving and reviewing information from a litigation adversary, realized that the information was confidential information that had been produced inadvertently.

For the reasons set forth below, the Committee concludes that the attorney in question acted responsibly at all times and with due regard for his professional responsibilities.

Accordingly, it is the unanimous recommendation of the Committee on Admissions and Grievances that no disciplinary action should be taken in this matter.

I. Introduction
This matter arises out of Neil S. Kagan, Esquire’s representation of the National Wildlife Federation and others (collectively referred to hereafter as “NWF”) in a challenge of rule-making by the Environmental Protection Agency (“EPA”). Specifically, EPA promulgated certain rules under the Clean Water Act and the Clean Air Act in connection with the regulation of the pulp and paper industry.

In doing so, EPA chose one set of regulations (“Option A”) over another (“Option B”), having concluded, among other things, that the latter option would prove too costly to the industry and would result in mill closures and the likely bankruptcy of major paper companies. EPA reached this conclusion based in part upon confidential business information (“CBI”) provided to it by various companies in the industry. Mr. Kagan, on behalf of NWF, challenged EPA’s conclusion that Option B — which provided for greater environmental protections — was too costly.

Knowing that EPA had relied upon CBI in reaching its decision — information to which Mr. Kagan did not have access because of its confidential designation — Mr. Kagan sought production of all CBI through a motion to compel. This Court denied the motion by order dated February 2, 2000, which read in pertinent part:

[T]he motion to compel . . . [is] denied. The confidential business information NWF seeks is the type of sensitive information and confidential or trade secret information that EPA can properly withhold from public view. The material contained in the public record appears sufficient for NWF to mount a challenge to EPA’s rulemaking.

See Attachment A hereto (citations omitted).

Thereafter, in late May 2000, in preparing NWF’s merits brief to be filed with this Court on June 9, 2000, Mr. Kagan printed certain spreadsheets that had been obtained from EPA nearly a year earlier via electronic mail. Mr. Kagan first reviewed the spreadsheets while working at home in the evening of May 30, 2000.

The spreadsheets had been created by EPA from CBI provided to it by members of the paper and pulp industry. One of the spreadsheets contained information that Mr. Kagan considered quite valuable in the advancement of his client’s arguments that Option B was not prohibitively expensive. When he first reviewed this spreadsheet, Mr. Kagan did not notice the letters “CBI” printed on page three of the document. Upon scrutinizing the document more closely the following day, however, he realized that the information contained in the document had been classified as “CBI” and that EPA had inadvertently produced the document to him.

Mr. Kagan immediately recognized that he was confronted with a serious ethical issue and sought to determine the appropriate course of action. The next morning he spoke to his supervisor, and, without relating the contents of the document, informed him of the inadvertent production of the CBI material and of the fact that the document was quite helpful to NWF’s case.

The supervisor then contacted NWF’s general counsel, who referred Mr. Kagan to outside counsel specializing in legal ethics. Outside counsel advised Mr. Kagan that Mr. Kagan was obliged — as a zealous advocate for his client — to utilize the document in connection with his brief to this Court. Counsel further advised Mr. Kagan that his brief should be filed under seal so that there would be no public disclosure of the information contained in the document. Finally, counsel urged Mr. Kagan to contact EPA and notify it of the inadvertent disclosure.

Ultimately, the relevant spreadsheet was not cited or appended to NWF’s brief; rather, through negotiations initiated by EPA, Mr. Kagan was supplied with an alternative citation which was used in the brief filed with the Court.

Mr. Kagan initially refused EPA’s request for the return of his printout of the spreadsheet, maintaining that he needed to retain it in the event the factual assertions in his brief were challenged. The document later was returned to EPA after EPA stipulated to the crucial information contained in the document.

The industry parties responded by filing with the Court a motion for sanctions against NWF. Rather than ruling on the motion, this Court referred Mr. Kagan to the Committee on Admissions and Grievances:

We begin and end our analysis with this Court’s Order denying NWF’s motion to compel. . . . We issued our Order in direct response to NWF’s request for CBI — the CBI it subsequently received, used, and retained. Our Order stated clearly that “[t]he confidential business information NWF seeks is the type of sensitive information and confidential or trade secret information that EPA can properly withhold from public view.”

The effect of our Order was simple: NWF requested access to the information; we denied the request. That NWF later received this information inadvertently in no way changes our designation of his material as “confidential,” “sensitive,” and similar to “trade secret information,” and in no way changes our position that NWF counsel should not have had access to it.

Because of that, we fail to understand how NWF counsel, after receiving the information and learning of the inadvertent disclosure, could justify retaining and using the information in his possession.

NWF counsel, and the attorney he consulted, relied on ethics and judicial opinions which hold that under some circumstances, a privilege is waived if inadvertently released by the privilege holder. In doing so, NWF counsel and his attorney appear to have mischaracterized the operative facts and been unaware of caselaw from this Circuit that closely resembles the question at hand: whether the inadvertent disclosure of privileged or confidential information maintained by a third party (here, EPA) constitutes waiver. See SEC v. Lavin, 111 F.3d 921 (D.C. Cir. 1997).

* * *

We understand, however, that the present situation involves an Order of this Court concerning trade secret information rather than an evidentiary privilege. The holding of Lavin then, while instructive, is not necessarily controlling. The Lavin holding does instruct us, however, to seriously question the propriety of counsel’s actions, especially when taken together with the language of our Order denying NWF access to the very information NWF now argues it was entitled to use.

For these reasons, rather than impose sanctions against NWF counsel, we refer this matter to the Committee on Admissions and Grievances for its consideration and such recommendation or petition to the Court as the Committee may see fit to present. See In re Door, 195 F.2d 766, 770 (D.C. Cir. 1952). Nat’l Wildlife Federation v. E.P.A., 286 F.3d 554, 575-76 (D.C. Cir. 2002) (emphasis in original).

II. Investigation by the Committee
The full Committee met and conferred on various occasions in connection with this matter. On July 31, 2002, it conducted a four-hour hearing at which it took sworn testimony of Mr. Kagan and the outside counsel he consulted in connection with the CBI material, David N. Webster, Esquire. No attorney-client privilege was asserted by Mr. Kagan.

The Committee also reviewed the following documents, among others:

1. NWF’s motion to compel production of CBI, the opposition thereto, and this Court’s order denying the motion to compel;

2. A redacted version of the spreadsheets inadvertently provided to Mr. Kagan;

3. The stipulation between NWF and EPA regarding the inadvertently-produced spreadsheets;

4. The motion for sanctions, and the opposition thereto;

5. The appellate briefs filed by the parties;

6. The tape recording of the oral argument before this Court;

7. Affidavits and declarations of Neil S. Kagan, David N. Webster, Carol Ann Siciliano, Paul L. Benington, Geoffrey H. Grubbs, Nicholas Bennett, Michael Grady Jackson, John E. Bonine, Eileen Morgan Johnson, Andrew P. Buchsbaum, and Peter E. Seley; and

8. Written submissions by counsel for Mr. Kagan in connection with the Committee’s hearing.

The Committee has not appended all the voluminous materials submitted in connection with the hearing; however, the Committee would be pleased to make them available to the Court should it wish to review them.

III. Factual Findings of the Committee
After hearing the testimony of Mr. Kagan and Mr. Webster, and after reviewing the other materials set forth above, the Committee credits that testimony and makes the following findings of fact:

1. On November 9, 1998, after unsuccessfully negotiating with EPA for disclosure of the CBI on which it relied in promulgating the regulations at issue in this case, Mr. Kagan filed a motion to compel EPA to disclose the CBI (Tr. 25-26).

“Tr.” refers to the transcript of the hearing held by the Committee on July 31, 2002, which is appended hereto as Attachment B.

2. In June of 1999, Mr. Kagan asked a law clerk to contact EPA and request public documents relating to “which mills were using the oxygen delignification [“OD”] technology” (Tr. 53). He needed this information in connection with establishing his client’s Article III standing (Tr. 46).

Mr. Kagan explained: “Our claim was that EPA rejected the OD technology and adopted the clust[er] rules[,], so I needed to know which mills were not using the OD technology because people living downstream of those mills would be harmed by EPA’s failure to require the OD technology as the best available technology” (Tr. 53). That is, if Mr. Kagan’s clients were located near mills using the OD process, then the clients could not claim any injury and thus did not have standing to complain about the rule-making (Tr. 53-54).

3. Also in June of 1999, EPA responded to the law clerk’s e-mail request by transmitting an e-mail entitled “Mill w/OD list” and attaching spreadsheets (Tr. 39). The law clerk, finding the document unhelpful on the issue of standing, forwarded it nonetheless to Mr. Kagan on June 15, 1999 with a notation explaining that the document was not particularly useful (Tr. 39-40). Mr. Kagan archived the e-mail on his computer without reading the attachments.

4. On February 2, 2000, the Court denied NWF’s motion to compel production of CBI material (see Attachment A hereto).

5. Settlement discussions among the parties had broken down by April/May 2000, and Mr. Kagan turned his attention to preparing NWF’s merits brief, due in this Court on June 9, 2000. Mr. Kagan directed staff members to determine “how many hardwood lines did not use [oxygen delignification technology]” (Tr. 62), in an effort to demonstrate that EPA’s rejection of Option B was erroneous because the projected cost of Option B was inflated.

6. In late May 2000, Mr. Kagan began to assemble the large number of documents already amassed during the litigation. Mr. Kagan planned to review the documents before filing his brief to ensure that no useful information had been overlooked (Tr. 65).

In doing so, Mr. Kagan opened the archived e-mail that he had originally received from his law clerk on June 15, 1999, and printed the attached document, which “contained three spreadsheets, the second of which contained CBI and included the notation `CBI’ above the spreadsheet.” Nat’l Wildlife Federation v. E.P.A., 286 F.3d 554, 574 (D.C. Cir. 2002); see also Tr. 67-68. He then placed the spreadsheets in the pile of documents he planned to review (Tr. 66).

7. May 30, 2000, while working at home in the evening, Mr. Kagan first reviewed the spreadsheets. He immediately saw that one of them provided the “number of hardwood lines that did not use [oxygen delignification]” (Tr. 87), which was the very information for which he had been searching (Tr. 87).

8. The following day, May 31, 2000, Mr. Kagan examined the document again and saw for the first time the initials “CBI” on page three of the spreadsheet in question. The Committee, having seen the document (with the CBI material itself redacted), can assure the Court that “the CBI notation was only located on the first page of the second spreadsheet [the third sheet in the document], and was in all other ways inconspicuous.” See 286 F.3d at 574. See also (Tr. 91-92).

Indeed, at the hearing held by the Committee, some members asked Mr. Kagan to point out the CBI notation, as it was not readily apparent on the printed spreadsheet itself.

The redacted spreadsheet is attached hereto as Attachment C.

9. The document had been inadvertently produced to Mr. Kagan by EPA. See Decl. of Geoffrey H. Grubbs, Director of Office of Science and Technology, Office of Water, EPA (Attachment D hereto).

10. Upon making this discovery, Mr. Kagan immediately took steps to determine the proper course of action.

a. Mr. Kagan informed his immediate supervisor and sought his advice (Tr. 94). Mr. Kagan did not disclose the confidential information to his supervisor (Tr. 95).

b. Mr. Kagan then contacted NWF’s general counsel, repeated his concerns, and again asked for advice about “the right thing to do . . . with the information, whether [he] could use it or what” (Tr. 96). He further told NWF’s general counsel that he “needed expert counsel” (Tr. 96).

c. NWF’s general counsel referred Mr. Kagan to outside counsel, David N. Webster, Esquire. Mr. Webster, a member of the District of Columbia Bar and the Maryland Bar, has considerable experience in legal ethics (Tr. 161-62). In the 1960s he served on the legal ethics committee of the District of Columbia Bar Association, including as chairman. He later served for five years on the D.C. Bar Legal Ethics Committee. He has regularly represented and advised lawyers and law firms (including his own) on legal ethics. Mr. Webster has also lectured on legal ethics at prestigious law schools.

d. Mr. Webster was already generally familiar with the issue of a lawyer’s obligation upon the receipt of confidential information inadvertently disclosed by an adversary, due to work he had done for other clients (Tr. 162, 179, 183). Mr. Webster was also familiar with D.C. Bar Legal Ethics Committee Opinion 256 (Inadvertent Disclosure of Privileged Material to Opposing Counsel) (June 1995), although Mr. Webster had not been a member of that committee at the time that opinion was issued (Tr. 183).

e. Mr. Kagan consulted with Mr. Webster, informing him of the relevant facts. Among other things, Mr. Kagan “told him there had been a Motion to Compel,” “read the language of the order denying the Motion to Compel,” and explained that the CBI information contained in the document “was essential to . . . one of the arguments in [the] case” and said that he “needed his advice on what to do with it” (Tr. 101-02, 165).

Based in large part on Opinion 256 (Tr. 170-71), Mr. Webster advised him to contact EPA and inform officials about the disclosure, and told him he should use the information in his brief, provided that the brief were filed under seal (Tr. 104).

f. After receiving outside counsel’s advice, Mr. Kagan read the ethics opinion cited to him by counsel (Tr. 128-29). He concluded that the opinion “seemed to support his advice or did support his advice because it dealt with a very analogous situation” (Tr. 129).

g. Mr. Kagan sought the advice of yet another attorney, who also recommended filing the brief under seal (Tr. 125-26).

h. Mr. Kagan then followed the advice of counsel and telephoned EPA’s counsel on that same day, May 31, informed EPA’s counsel of the inadvertent disclosure of the material, and advised her that he planned to use the information in his brief and that he planned to file the brief under seal (Tr. 129-30). Mr. Kagan also forwarded to EPA’s counsel a copy of the 1999 EPA email attaching the spreadsheets in question (Tr. 131-32).

i. On his own initiative, Mr. Kagan later placed the document in a safe deposit box “so that nobody else could see [it]” (Tr. 153-54). He also deleted the document from his hard drive and backup. See Kagan Decl. ¶ 38 (Attachment E hereto).

11. Counsel for EPA — not Mr. Kagan (Tr. 136) — then proposed that, in exchange for Mr. Kagan not citing the document in his brief, EPA would supply him with an alternative citation of a summary nature (Tr. 133, 135-36, 137). Mr. Kagan agreed to this proposal (Tr. 133).

See Decl. of Carol Ann Siciliano, EPA Office of General Counsel (Attachment F hereto) ¶ 4.

12. Counsel for EPA “regularly” requested that Mr. Kagan return the document (Tr. 139). Mr. Kagan did not do so immediately, however, for the following reasons:

I was concerned that well, first of all, I was only going on [counsel for EPA’s] word that the cite she had given me actually supported the statement that there [were] 47 hardwood lines. I had nothing without that spreadsheet to document that was a correct number. So I needed to retain it so I could prove that that was the right number if EPA or the intervenors contested the accuracy of the number. (Tr. 139-40).

13. Thereafter, EPA and NWF entered into a stipulation regarding the number of hardwood lines, and Mr. Kagan then returned the document to EPA, following the agency’s specific directions for returning the document (Tr. 154). As a result, the document was not cited or appended to NWF’s brief filed with this Court. There was never any unauthorized disclosure of the CBI, except for EPA’s inadvertent disclosure to Mr. Kagan.

IV. Conclusion
There is no dispute that EPA inadvertently disclosed confidential business information to Mr. Kagan, and the Committee credits Mr. Kagan when he says that he reviewed the contents of the document and absorbed its meaning and significance before discovering the almost imperceptible letters “CBI” on an internal page of a multi-page document.

Thus, Mr. Kagan was faced with the ethical dilemma of having unexpectedly, and initially unknowingly, gained knowledge of information that was simultaneously extremely helpful to his client and unquestionably confidential.

Having had the opportunity to observe Mr. Kagan’s demeanor over a four-hour period, to listen to his detailed description of events as they unfolded, and to hear from counsel who recommended the course of action Mr. Kagan undertook, as well as to review the affidavits of other individuals, the Committee concludes that Mr. Kagan acted entirely in good faith and made every effort to follow the rules of professional responsibility.

We nevertheless address the two concerns expressed by the Court about the manner in which Mr. Kagan chose to handle this predicament.

The Court suggested that Mr. Kagan and his counsel “appear to have mischaracterized the operative facts and been unaware of caselaw from this Circuit that closely resembles the question at hand: whether the inadvertent disclosure of privileged or confidential information maintained by a third party (here, EPA) constitutes waiver.” 286 F.3d at 575 (emphasis in original) (citing SEC v. Lavin, 111 F.3d 921 (D.C. Cir. 1997)). As for the “operative facts,” the Court’s opinion does not point to any specific facts that Mr. Kagan his counsel mischaracterized, and the Committee uncovered none during the course of the hearing.

With regard to Mr. Kagan’s and Mr. Webster’s “unawareness of the case law from this Circuit,” the Committee concludes that reasonable attorneys could differ as to the appropriate course of action to take when faced with the dilemma Mr. Kagan encountered on May 30, 2000.

As is apparent from this Court’s opinion, neither District of Columbia Bar Legal Ethics Committee Opinion 256 (1995), upon which Mr. Kagan relied, nor Lavin, cited by the Court, is squarely on point.

Opinion 256 dealt with a situation where counsel for one party inadvertently discloses privileged information to counsel for another party.

The Opinion concluded that where the receiving counsel has reason to believe the disclosure is deliberate, and is unaware that it was inadvertent, receiving counsel ethically may utilize the information.

As this Court correctly observed, Opinion 256 did not address the situation where the information inadvertently disclosed actually belonged to a third party who had taken every step to prevent disclosure of privileged information.

The Court also noted, however, that Lavin dealt with information protected by an evidentiary privilege, while the circumstances in this case involved “an Order of this Court concerning trade secret information.” 286 F.3d at 576.

Furthermore, Lavin dealt with possible waiver rather than with the ethical obligations surrounding an inadvertent disclosure. Thus, “[t]he holding of Lavin . . ., while instructive, is not necessarily controlling.” Id.

The Committee concludes that Mr. Kagan’s reliance upon Opinion 256 was reasonable under the circumstances.

The analysis of Opinion 256 may be read to apply to the facts here. The Committee notes that Opinion 256 expressly relied upon Aerojet-General Corp. v. Transp. Indem. Ins., 18 Cal.App.4th 996, 22 Cal. Rptr.2d 862 (Ct.App. 1993), wherein the court found no ethical violation in a receiving lawyer’s reading and use of a confidential document inadvertently produced by a third party.

Opinion 256 arguably was the most closely analogous authority available to Mr. Kagan.

The D.C. Bar Legal Ethics Committee has recently opined that the analysis in Opinion 265 may apply in factual contexts beyond the one presented in that opinion.

In Opinion 318 (Disclosure of Privileged Material by Third Party) (December 2002), the D.C. Bar Legal Ethics Committee appears to conclude that it would not be an ethical violation for a lawyer to use privileged information of an adversary even where the lawyer received the information in circumstances where the privilege was not waived:

“If the privileged status of the document does not become apparent to receiving counsel until after the document has been reviewed, as reflected in D.C. Opinion 256, it is too late for receiving counsel to take corrective action because the information cannot be purged from his mind and his obligation of zealous representation under Rule 1.3 at that point trumps confidentiality concerns.”

Reference to District of Columbia Bar ethical standards is appropriate given that Rule I of this Court’s Rules of Disciplinary Enforcement adopts the ethical rules adopted by the District of Columbia Court of Appeals.

Opinions of the D.C. Bar Legal Ethics Committee, while not binding on any court, provide valuable guidance to lawyers practicing the District of Columbia and it is reasonable for such lawyers to rely upon these opinions.

The Committee on Admissions and Grievances is aware that there is considerable debate and discussion in various quarters as to the obligations of lawyers receiving inadvertent disclosures under various circumstances.

This Committee does not believe that it is necessary or even appropriate for it to attempt to reconcile the various views or to resolve the debate.

The Committee is charged solely with providing its recommendation as to whether discipline is warranted on the facts presented here.

On the facts presented here, the Committee finds that Mr. Kagan acted reasonably and with due regard for his ethical obligations.

Faced with no clearly controlling ethical rule and with case law and ethics opinions that were at best analogous to the facts of this case, Mr. Kagan should not be sanctioned for relying upon a reasonable interpretation of permissible attorney conduct.

See In re Ruffalo, 390 U.S. 544, 556, 88 S.Ct. 1222, 20 L.Ed.2d 117 (1968) (White, J. concurring) (“I would hold that a federal court may not deprive an attorney of the opportunity to practice his profession on the basis of a determination after the fact that conduct is unethical if responsible attorneys would differ in appraising the propriety of that conduct.”); see also In re Polypropylene Carpet Antitrust Litig., 181 F.R.D. 680, 698 (N.D. Ga. 1998) (district court declines to impose sanction on attorney who utilized documents inadvertently produced in litigation because, in court’s view, “it is debatable whether [a certain ethics opinion] establishes an ethical rule that governs the conduct of attorneys in this circuit”) (citing Schlumberger Tech. v. Wiley, 113 F.3d 1553, 1560-61 (11th Cir. 1997)).

Mr. Kagan found himself in an ethical dilemma through no fault of his own. He handled the dilemma in a manner that was reasonable, responsible, and defensible.

Indeed, as Mr. Kagan explained at the hearing, no one offered any differing points of view during the negotiations for the return of the document, including counsel for EPA (Tr. 156-57).

This Court also viewed Mr. Kagan’s temporary retention of the document as a direct violation of the Court’s order denying the motion to compel. As a result of the hearing, however, the Committee learned that, in his very first telephone conversation with outside counsel, Mr. Kagan read the Court’s order to Mr. Webster (Tr. 102).

Thus, Mr. Webster was aware of the order denying the motion to compel when he advised Mr. Kagan. Furthermore, EPA did not take the position that this Court’s order was an independent ground for the immediate return of the document. The Committee agrees that the order denying the motion to compel does not appreciably affect the analysis of Mr. Kagan’s obligations in circumstances in which he had already reviewed the CBI through no fault of his own.

Additionally, contrary to what was posed in the motion for sanctions, it does not appear that Mr. Kagan used the document as a bargaining chip with EPA. Mr. Kagan explained to EPA’s counsel (and to the Committee) that he anticipated that the industry petitioners might challenge a factual assertion that was not supported by a record citation and felt that he should retain the document to defend any such challenge.

More importantly, it was counsel for EPA that proposed that it supply Mr. Kagan with another citation to the record in exchange for the return of the document, and the document itself was never cited to or appended to NWF’s brief filed with the Court. Thus, the Committee is satisfied that Mr. Kagan did not unethically hold the document hostage as part of his litigation strategy.

In sum, the Committee is satisfied that Mr. Kagan acted with the best of intentions, seeking legal advice in the face of an ethical dilemma, and relying on the advice of well qualified outside counsel, whose advice was supported by an opinion of the D.C. Bar Legal Ethics Committee.

The Committee does not believe that Mr. Kagan has engaged in any misconduct, and therefore the Committee does not believe that any discipline is warranted.

COMMITTEE ON ADMISSIONS AND GRIEVANCES
By: Mary Patrice Brown Committee Member Cornish F. Hitchcock Committee Member Martha Purcell Rogers Committee Member Steuart H. Tomsen Committee Member Christopher M. Curran Committee Chairperson

Dated: August 4, 2003

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