What are your ethics obligations when your client gives you documents that the client may not be entitled to have? Model Rule 4.4(b), adopted in some form by most jurisdictions, provides some guidance. Applying it, together with other principles, a New Jersey appeals court, in an unpublished ruling, recently disqualified a firm from representing the plaintiff in a wrongful termination case.
The disqualified firm’s client, Sanchez, was the former chief compliance officer at a pharmaceutical company. After receiving a disciplinary warning as a result of complaints about his “deportment” involving employees who reported to him, Sanchez told management that he had personal copies of confidential files of his employer, which he called his “burn files.” He said that he would use these “‘burn files’ to ‘f–k'” the employer “when they try to get [him].'”
Sanchez was fired two months later, and sued his employer for wrongful termination in New Jersey state court under the Garden State’s whistleblower law.
Sanchez gave the documents to his lawyers. In discovery, the employer asked for any confidential documents that Sanchez had taken. By the time Sanchez’s lawyers responded and acknowledged the “burn files,” nine months had passed. Asserting that the documents had been improperly taken, contained trade secrets and were privileged, the employer moved to preclude their use and to disqualify Sanchez’s lawyers.
The trial court granted the motion, leading to the appeal.
Careful company policies
Several policies of the employer helped the court conclude that Sanchez wrongfully took the “burn files.”
- Employees in general were required to protect the company’s confidential information and barred from “improperly possessing or using” it.
- Another policy prohibited employees from accessing confidential or secret information outside the scope of their work responsibilities, and misusing or disclosing it.
- As a high-level manager, Sanchez had also signed a contract agreeing to return documents and work-related data after leaving the company.
Interplay of discovery rules, ethics principles, other law
The court of appeals upheld the trial court’s orders, including disqualifying Sanchez’s lawyers. New Jersey’s version of Model Rule 4.4, said the court, “impose[s] an ethical obligation on attorneys to safeguard confidential information of third persons.” It provides that “a lawyer who receives a document … and has reasonable cause to believe that the document … was inadvertently sent shall not read the document … [and] shall (1) promptly notify the sender [and] (2) return the document to the sender…”
This rule, the court held, is coupled with the state’s discovery rules, which provide that a party who is notified that information produced in discovery is subject to a claim of privilege must promptly return, sequester or destroy it, and not use it until the privilege claim is resolved. (New Jersey’s rule is like those in many other jurisdictions, and Rule 26(b)(5)(B) of the federal civil rules.)
The court also analyzed the state supreme court’s 2010 multi-factor test in Quinlan v. Curtiss-Wright Corp., holding that in some circumstances employees can take and use employer confidential documents to prove claims under the state’s anti-discrimination statute. Here, though, the court of appeals agreed that Sanchez was required to return the “burn files” that he removed “through self-help, pre-litigation measures.”
This case underscores that you must consider different sources of law in working through the issues presented when your client gives you documents that the client may not be entitled to have. Both the discovery rules and ethics rules potentially apply, plus the rules on attorney-client privilege and relevant case law.
“Chaotic self-help battle”
The appeals court concluded there was reasonable cause here to believe that the documents Sanchez improperly took were privileged, and said that the judiciary must “prevent the discovery process from degenerating into a chaotic self-help battle.”
As for disqualification, the court said that having an opponent’s privileged documents weighs in favor of disqualification, because less-severe remedies “fail to adequately address both the [Rule 4.4(b)] violation and the attendant harm of access and exposure to privileged documents.”
The key to the ethics violation here, said the court of appeals, was the nine-month delay during which Sanchez’s lawyers failed to notify opposing counsel that they had the “burn files.” That was an “unreasonable delay” that “rendered futile” any attempt to mitigate the harm caused by disclosing the documents.
Don’t get burned
Rule 4.4(b) and the obligation to notify the sender extends to documents that are “inadvertently sent.” The question implicitly raised by this case is whether documents that the lawyer obtains as a result of being improperly taken by a party should be treated the same as those that are “inadvertently sent.” The court here seems to conclude that the answer is “yes,” but without any explicit analysis that would provide guidance. Nonetheless, the lawyer’s mere exposure to the opposing party’s privileged documents would apparently have been enough, in this court’s view, to mandate the remedy of disqualification.
Bottom line: be sure you consider all the sources of law that might apply, including ethics rules, when your client drops “burn files” in your lap — otherwise, you might end up getting burned with a DQ order.