Burch v. Hon. myers/hon. bassett/lund , 237 Ariz. 369 ( 2015 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
BURCH & CRACCHIOLO, P.A.; MICHELLE A. LUND; KRISTEN LUND
OLSON; KAREN PAGE, Petitioners,
v.
THE HONORABLE ROBERT D. MYERS and THE HONORABLE
EDWARD BASSETT, Judges of the SUPERIOR COURT OF THE STATE
OF ARIZONA, in and for the County of MARICOPA, Respondent Judges,
BRADFORD D. LUND, Real Party in Interest.
No. 1 CA-SA 15-0013
FILED 6-4-2015
Petition for Special Action from the Superior Court in Maricopa County
No. PB2009-002244
The Honorable Robert D. Myers, Judge Retired
The Honorable Edward W. Bassett, Judge
JURISDICTION ACCEPTED; RELIEF DENIED
COUNSEL
Osborn Maledon PA, Phoenix
By Mark I. Harrison, Chelsea Sage Durkin, Nathan Arrowsmith
Counsel for Petitioners
Shumway Law Offices PLC, Scottsdale
By Jeff A. Shumway
Counsel for Real Party in Interest
BURCH v. HON. MYERS/HON. BASSETT/LUND
Opinion of the Court
OPINION
Judge Kenton D. Jones delivered the opinion of the Court, in which
Presiding Judge John C. Gemmill and Judge Samuel A. Thumma joined.
J O N E S, Judge:
¶1 Burch and Cracchiolo (B&C), along with its clients, Michelle
Lund, Kristen Lund Olson, and Karen Page (collectively, Petitioners), bring
this special action challenging the trial court’s order disqualifying B&C
from continuing to represent Petitioners in the underlying action seeking
the appointment of a guardian and conservator for the real party in interest,
Bradford Lund. We are asked to address a question left unresolved by our
supreme court in Lund v. Myers, 232 Ariz. 309, 313, ¶ 20 (2013): whether a
party moving to disqualify opposing counsel, premised upon opposing
counsel’s knowing use of documents containing privileged information
inadvertently disclosed to him, waives the attorney-client privilege with
respect to those documents. Holding the moving party does not, we accept
jurisdiction but deny relief.
FACTS AND PROCEDURAL HISTORY
¶2 The ongoing litigation between these parties includes a
baker’s dozen of special actions, one direct appeal, and two petitions for
review. The relevant facts, however, are largely uncontested.
¶3 In February 2006, Bradford filed a petition to create a
guardianship for himself. In April 2006, the law firm of Jennings, Strouss
& Salmon (JS&S) appeared on behalf of Bradford and withdrew the
petition.
¶4 In October 2009, Petitioners, through B&C, filed the
underlying action seeking the appointment of a guardian, conservator,
guardian ad litem, and next friend for Bradford. Bradford, along with his
father and stepmother, opposed the petition.
¶5 On September 19, 2011, B&C, through attorney Bryan
Murphy, served JS&S with a subpoena duces tecum, seeking the production
of all non-privileged information relating to, among other things,
Bradford’s 2006 guardianship petition. In response to the subpoena, and
premised upon the erroneous assumption of JS&S that Murphy was taking
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over as Bradford’s counsel,1 JS&S delivered a copy of its entire client file to
Murphy the next day without first conducting a privilege review of its
contents. Upon receipt of the client file, Murphy briefly scanned the
materials, made a copy of a diagram related to a proposed trust, and turned
the file over to his paralegal.
¶6 On October 3, 2011, Jeff Shumway, Bradford’s then-current
counsel, learned of JS&S’s disclosure. He immediately emailed Murphy to
say the client file contained at least two, but possibly more, privileged
documents and to request their return. Shumway further advised he would
review the remainder of the client file to determine if it contained other
privileged materials. Murphy quickly responded that he had not “studied
the materials with an eye toward privilege issues” and would await word
from Shumway regarding any other privileged documents. Shumway
ended the email exchange by telling Murphy he believed the documents he
had identified were privileged, and would follow up with Murphy about
“any other documents once [he saw] the file.”
¶7 Nearly three weeks later, having heard nothing further from
Shumway, Murphy distributed the entire client file, including the
documents Shumway had identified as privileged, to all parties to the
action as part of a supplemental disclosure statement.2 See Ariz. R. Civ. P.
26.1(a)-(b). Murphy also used the trust diagram he had copied in support
of two separate discovery motions.
¶8 On November 14, 2011, Bradford moved to disqualify B&C
from representing Petitioners, claiming B&C had gained an unfair and
improper advantage in the litigation by reviewing and using the privileged
materials contained in the client file. Bradford also filed a motion seeking
to prevent B&C from submitting the inadvertently disclosed documents to
the trial court for an in camera review pursuant to Arizona Rule of Civil
Procedure 26.1(f)(2).
1 The trial court found this mistake resulted from excusable oversight.
2 The Discovery Special Master, discussed infra ¶ 11, specifically noted
“the ‘other parties’ in the 2009 case were basically aligned with Bradford
against the Petitioners who[m B&C] represents.” Therefore, there is no
apparent concern as to any other parties’ receipt of the privileged
documents.
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¶9 In preparation for his defense against Bradford’s motion to
disqualify, and in apparent disregard of the asserted privilege claim,
Murphy reviewed, in detail, the entire client file, making handwritten notes
and preparing an index. Meanwhile, the trial court ordered JS&S to create
and file a privilege log, briefly describing each document in the client file
believed to be privileged and the basis for each privilege claim. JS&S
ultimately identified nearly fifty documents, representing more than 100
pages of the approximately 250 pages disclosed, which were subject to a
claim of attorney-client privilege or work-product protection.3 The court
also ordered JS&S to file the specified documents with the court to facilitate
resolution of the privilege claims.
¶10 In Lund v. Myers, our supreme court held that a party
erroneously receiving documents for which a later privilege claim is made
may present the information to the court under seal to resolve the privilege
dispute. 232 Ariz. at 311-12, ¶ 13 (citing Ariz. R. Civ. P. 26.1(f)(2)). Once
filed, the court should then “determine[], as to each document, [whether] in
camera review is necessary to resolve the privilege claim. Such review may
be required if the receiving party makes a factual showing to support a
reasonable, good faith belief that the document is not privileged.” Id. at 312,
¶ 15 (citing United States v. Zolin, 491 U.S. 554, 572 (1989), and Kline v. Kline,
221 Ariz. 564, 573, ¶ 35 (App. 2009)). Therefore, on remand, the trial court
was to allow B&C to respond to the privilege log and “consider[] the
parties’ arguments regarding privilege and waiver to determine whether in
camera review was warranted for particular documents.” Id. at 312, 313,
¶¶ 18, 21. The supreme court declined to comment upon “whether, by
seeking disqualification, Bradford waived the attorney-client privilege.” Id.
at 313, ¶ 20. In the interim, and before the supreme court’s decision, B&C
returned the physical client file to JS&S, along with a compact disc
containing an electronic copy that was apparently prepared by or at the
direction of B&C.
¶11 In August 2013, JS&S filed an updated privilege log with the
trial court, and the court appointed a Special Master to determine whether
in camera review of the documents was necessary, and, if so, whether the
documents contained privileged information. See generally Ariz. R. Civ. P.
53(a)(1). The Special Master first determined Bradford’s motion to
disqualify acted as a limited waiver of privilege as to the client file that
3 Although some of the documents were protected only by the work-
product doctrine, the sole question presented in this special action is
whether the motion to disqualify waives Bradford’s ability to assert
attorney-client privilege over the documents.
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allowed the court (and its agent, the Special Master), to view the documents
and determine the merits of the motion, but concluded the motion did not
waive Bradford’s privilege as to B&C. Then, after considering the parties’
positions, the Special Master identified certain documents that did not
require in camera review because B&C had not made a proper showing “to
support a reasonable, good faith belief that [certain] document[s were] not
privileged,” id. at 312, ¶ 15, effectively sustaining the claim of privilege for
a significant number of the documents without resorting to in camera
review. Over the parties’ objections, see Ariz. R. Civ. P. 53(h), the court
adopted and affirmed the Special Master’s findings and reports.
¶12 In June 2014, the trial court transferred the motion to
disqualify to Judge Edward Bassett for ruling.4 The Special Master
conducted an initial in camera review of the documents that remained in
dispute, and in July 2014, issued his report setting forth findings of privilege
as to each document. Then, following oral argument, review of the Special
Master’s reports, and an independent review of the documents submitted
in camera, Judge Bassett found B&C had violated Arizona Rule of Civil
Procedure 26.1(f), and that its receipt and review of the documents had
prejudiced Bradford by providing it with a tactical advantage in the
litigation. Specifically, while acknowledging some of the privileged
documents did not confer any advantage to B&C, Judge Bassett concluded
the client file included notes of conversations between Bradford and his
former counsel that “contain[ed] assessments of strengths as well as
weaknesses in his litigation position,” and provided an “obvious and
significant” advantage to B&C. Judge Bassett explicitly rejected Petitioners’
argument that they were unable to defend against the prejudice claim
without further access to the documents, concluding instead that “[t]he
determination of prejudice can and should be made by the Court through
its own in camera review of the privileged documents.” Noting neither
party had identified any other adequate remedy, Judge Bassett granted
Bradford’s motion to disqualify B&C from further representation of
Petitioners in this matter. This special action followed.
4 Our supreme court stated a trial judge, at each stage, “should
consider whether another judicial officer should conduct the review [or rule
on the motion to disqualify] in light of the possibility that a review of
privileged materials may be so prejudicial as to require the judge’s recusal.”
Lund, 232 Ariz. at 312, ¶ 19.
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JURISDICTION
¶13 An appellate court’s decision to exercise special action
jurisdiction is highly discretionary. State Comp. Fund of Ariz. v. Fink, 224
Ariz. 611, 612, ¶ 4 (App. 2010) (citing Snyder v. Donato, 211 Ariz. 117, 119,
¶ 6 (App. 2005)). Here, we accept special action jurisdiction because
Petitioners have no equally plain, speedy, and adequate remedy by appeal.
See Sec. Gen. Life Ins. Co. v. Superior Court, 149 Ariz. 332, 333-34 (1986) (noting
a disqualification order is not a final, appealable order and may therefore
be appropriate for special action review).
DISCUSSION
¶14 The question before us is whether Bradford impliedly waived
his attorney-client privilege to the inadvertently disclosed client file by
bringing the motion to disqualify and using the client file documents to
support the motion. We review the trial court’s ruling upon a motion to
disqualify counsel for an abuse of discretion. Simms v. Rayes, 234 Ariz. 47,
49, ¶ 8 (App. 2014) (citing Smart Indus. Corp., Mfg. v. Bradshaw, 179 Ariz. 141,
145 (App. 1994)). But “whether a party has impliedly waived the attorney-
client privilege poses a mixed question of law and fact, which we review de
novo.” Empire W. Title Agency, L.L.C. v. Talamante ex rel. Cnty. of Maricopa,
234 Ariz. 497, 498-99, ¶ 8 (2014) (citing Twin City Fire Ins. Co. v. Burke, 204
Ariz. 251, 254, ¶ 10 (2003)).
I. Background Principles
¶15 Under Arizona Rule of Civil Procedure 26.1(f)(2), if a lawyer
or party believes privileged information has been inadvertently disclosed,
it “may notify any party that received the information of the claim [of
privilege] and the basis for it.” Once notified, a receiving party “must
promptly return, sequester, or destroy the specified information and any
copies it has made and may not use or disclose the information until the
claim is resolved.” Ariz. R. Civ. P. 26.1(f)(2). If there is a dispute between
the parties over the privilege claim, the “receiving party may promptly
present the information to the court under seal for a determination of the
claim.” Id.; Myers, 232 Ariz. at 311-12, ¶ 14.
¶16 Arizona’s ethical rules provide further guidance, directing an
attorney who receives a document he “knows or reasonably should know”
was inadvertently sent to “promptly notify the sender and preserve the
status quo for a reasonable period of time in order to permit the sender to
take protective measures.” Ariz. R. Sup. Ct. ER 4.4. At that point, the
recipient lawyer must “down tools,” which is to say he must “stop reading
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the document, . . . make no use of the document, and . . . promptly notify
the sender.” Id. cmt. 2; see also Ariz. R. Civ. P. 26.1(f)(2).
II. The Motion to Disqualify Did Not Act as an Implied Waiver of the
Attorney-Client Privilege.
¶17 The attorney-client privilege safeguards the “communication
between the attorney and client made in the course of the attorney’s
professional employment.” State v. Sucharew, 205 Ariz. 16, 21, ¶ 10 (App.
2003) (citing State v. Holsinger, 124 Ariz. 18, 22 (1979)). The privilege belongs
to the client and may not be breached without the client’s consent. Id.
(citing Holsinger, 124 Ariz. at 22); Ariz. Rev. Stat. § 12-2234(A) (2015).
Although a client’s waiver of privilege is usually explicit, State v. Cuffle, 171
Ariz. 49, 51 (1992), it may also be waived impliedly. Accomazzo v. Kemp ex
rel. Cnty. of Maricopa, 234 Ariz. 169, 172, ¶ 8 (App. 2014) (citing Elia v. Pifer,
194 Ariz. 74, 82, ¶ 40 (App. 1998)).
¶18 In State Farm Mutual Automobile Insurance Co. v. Lee, our
supreme court adopted the Hearn test for examining claims of implied
waiver of privilege:
(1) [whether the] assertion of the privilege was a result of
some affirmative act, such as filing suit, by the asserting party;
(2) [whether] through this affirmative act, the asserting party
put the protected information at issue by making it relevant
to the case; and (3) [whether] application of the privilege
would have denied the opposing party access to information
vital to his defense.
199 Ariz. 52, 56, ¶ 10 (2000) (quoting Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D.
Wash. 1975)); see also Talamante, 234 Ariz. at 499, ¶ 9 (acknowledging
adoption of Hearn test).
¶19 Essentially, Petitioners argue Bradford’s motion to disqualify
placed the documents “at issue,” and that it would be unfair to allow
Bradford to withhold documents they believe contain information vital to
their defense of that motion. Stated otherwise, Petitioners argue Bradford
may not rightfully use the privilege as both a sword in bringing the motion
and a shield in protecting the documents from Petitioner’s review. See
Ulibarri v. Superior Court, 184 Ariz. 382, 385 (App. 1995) (“The [attorney-
client] privilege may not be used as both a sword and a shield.”) (citing
Buffa v. Scott, 147 Ariz. 140, 143 (App. 1985)); see also State v. Wilson, 200 Ariz.
390, 396, ¶ 16 (App. 2001) (noting a party may not “assert[] a particular
factual position and then invok[e a] privilege” that allows him “not only to
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‘buttress such a position’ but also to prevent the opposing party from
impeaching or otherwise challenging” the factual position asserted)
(citations omitted). Although Petitioners’ basic premise is sound, it has no
application to the immediate facts.
¶20 Implied waiver can occur where a party advances a claim or
affirmative defense premised upon otherwise privileged information, such
as the reasonableness of its evaluation of the law, which directly relates to
the heart of the litigation. See State Farm, 199 Ariz. at 62, ¶ 28 (finding
insurance company impliedly waived attorney-client privilege by asserting
as a defense to bad faith litigation that it acted in good faith based upon its
interpretation of the law, where its knowledge of the law was gained, at
least in part, through communications with counsel); Cuffle, 171 Ariz. at 51-
52 (determining defendant implicitly waived attorney-client privilege by
moving to set aside a plea agreement on the basis that his attorney failed to
fully explain the nature of the offenses such that he could make a knowing
or informed decision about accepting the plea); Elia, 194 Ariz. at 81-82,
¶¶ 35-40 (finding implied waiver of attorney-client privilege regarding
communications with a subsequently retained attorney in a malpractice
action against a previous attorney where those communications were
relevant to a determination of the original attorney’s misconduct); Hearn,
68 F.R.D. at 581 (finding defendants impliedly waived attorney-client
privilege by asserting a good faith immunity defense to civil rights
violations).
¶21 As opposed to a party’s efforts to advance a substantive claim
premised upon privileged documents, a motion to disqualify neither
establishes a cause of action nor defeats a claim of liability; it is not a claim
or affirmative defense and does not have any apparent direct impact upon
the merits of the underlying litigation. Reliance upon privileged
information in support of a motion to disqualify does not place that
information “at issue relevant to the case,” as the phrase is contemplated
under Arizona law, and does not impliedly waive privilege as to the
opposing party. Petitioners cite no authority to the contrary, and we have
found none which suggests the mere filing of a motion to disqualify,
premised upon the improper review and use of inadvertently disclosed
information, constitutes an implied waiver of the attorney-client privilege.
¶22 Although Petitioners rely upon In re Marriage of Perry, 293
P.3d 170 (Mont. 2013), and O Builders & Assocs., Inc. v. Yuna Corp. of N.J., 19
A.3d 966 (N.J. 2011), to support their position that the motion for
disqualification puts the documents “at issue,” these cases are unhelpful.
In Perry, a wife moved to disqualify her husband’s attorney in a dissolution
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proceeding, asserting an appearance of impropriety and conflict of interest
arising from a divorce consultation between the attorney and wife two
years earlier. 293 P.3d at 172-73, ¶¶ 8-11. The trial court overruled the
wife’s objections to the submission by the attorney of purported attorney-
client communications in consideration of the motion, and ordered the
attorney to file, under seal, all the relevant materials generated through
communications with the wife. Id. at 173-74, ¶¶ 13-14. After reviewing the
materials, the court denied the motion, finding no attorney-client
relationship existed between the wife and attorney. Id. at 174, ¶ 14. The
Montana Supreme Court, applying the Hearn test, found no error in the trial
court’s reliance upon the documents because “[the attorney]’s defense
against [the wife]’s claim required examination of the protected
communications,” and the wife’s motion placed the communications “at
issue,” thereby waiving any attorney-client privilege. Id. at 179, ¶ 39 (citing
Dion v. Nationwide Mut. Ins. Co., 185 F.R.D. 288, 294-95 (D. Mont. 1998)).
¶23 Perry is unpersuasive for three reasons. First, the discussion
relied on is dicta, as the court had already determined the wife failed to
establish an attorney-client relationship that would give rise to a claim of
privilege. Id. at 177, ¶ 27. Second, the issue in Perry was whether the wife’s
claim of privilege prevented the court from considering the documents, id.
at 179, ¶ 36 — not whether she had waived privilege with respect to the
opposing party, who in that case had created the documents at issue. Finally,
Perry addressed a motion to disqualify based upon a purported conflict of
interest, not upon the improper use of inadvertently disclosed documents
by B&C.
¶24 O Builders also involved a motion to disqualify premised
upon an alleged conflict of interest arising from a party’s preliminary
consultation with an attorney now representing the opposing party. 19
A.3d at 968. The trial court denied the motion, finding the moving party
failed to carry her burden of proving she had provided confidential
information to the attorney or that an attorney-client relationship was
created. Id. at 971. The failure came about, at least in part, as a result of the
moving party’s refusal to articulate the confidential information she
believed the opposing attorney obtained during the consultation for fear of
disclosing the information to the opposing attorney a second time. Id. at
977-78. The New Jersey Supreme Court acknowledged the “theoretical
quandary” facing the party seeking disqualification: “in order to sustain
[her] burden seeking disqualification, [the moving party] must disclose the
very confidential information she claims not only deserves protection, but
also triggers counsel’s disqualification.” Id. at 978. It nevertheless held the
moving party could not “refuse to make those disclosures to the court for
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fear of disclosing confidential information” to the opposing side where its
disclosure was necessary to allow the court to “grapple fairly with the
issues.” Id. (emphasis added).
¶25 Even where disclosure was necessary to prove
disqualification appropriate, however, the moving party was not deemed
to have waived her privilege to the information as to the opposing party;
rather, the court specifically identified means to protect the confidentiality
of the information, including an in camera review. Id. at 978 (citations
omitted). Thus, the court in O Builders ultimately approved the very
procedure employed by the trial court here.5
¶26 Moving to disqualify based upon the improper use of
privileged materials provided to opposing counsel through an inadvertent
disclosure does not place the privileged information “at issue relevant to
the case,” and therefore does not implicate an implied waiver of privilege
as to the opposing party. However, the party seeking disqualification bears
the burden of demonstrating why the disqualification is warranted, Simms,
234 Ariz. at 50, ¶ 8 (citing Alexander v. D’Angelo, 141 Ariz. 157, 161 (1984)),
which requires a limited waiver of privileged communications to the court
so it may decide the issue of prejudice. See Part III infra.
5 Other jurisdictions have approved similar approaches in ruling
upon motions to disqualify. See Barragree v. Tri-County Elec. Coop., Inc., 950
P.2d 1351, 1361-62, 1365 (Kan. 1997) (holding party seeking disqualification
waives attorney-client privilege as to the court so the court may assess the
contents of allegedly confidential information, and the party may present
the information either in “a hearing out of the presence of the party against
whom confidentiality is to be protected or in camera inspection”); Keith v.
Keith, 140 So. 3d 1202, 1211-12 (La. Ct. App. 2014) (noting procedures for
determining a motion to disqualify should “not penalize the plaintiff for
asserting his right to the attorney-client privilege,” and directing the trial
court to use certain methods to protect privileged information including in
camera inspection, while being cognizant of the opposing side’s inability to
challenge certain evidence); Faughn v. Perez, 51 Cal. Rptr. 3d 692, 699 (Ct.
App. 2006) (noting the “present[ation of] direct evidence of facts to support
a motion to disqualify related to confidential information is constrained, of
course, by the need to avoid the disclosure of the former client’s confidences
and secrets,” and identifying, as one method for protecting confidences, the
ability “to file the documents with the court under seal for in camera
review”).
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III. Proper Approach for Determining Whether Disqualification is
Warranted When Based Upon the Improper Use of Inadvertent
Disclosure
¶27 Having determined the attorney-client privilege was not
impliedly waived, we next consider whether the trial court made improper
assumptions regarding the prejudicial nature of the disclosure in the
absence of an opportunity for B&C to “educate the trial court about the
issue of prejudice.” Because we adopt an objective test of prejudice, we find
no error in the court’s consideration of the inadvertently disclosed materials
without the benefit of Petitioners’ argument.
¶28 Generally, when ruling on a motion to disqualify opposing
counsel, the trial court is directed to consider four factors:
(1) whether the motion is being made for the purposes of
harassing the [opposing party], (2) whether the party bringing
the motion will be damaged in some way if the motion is not
granted, (3) whether there are any alternative solutions, or is
the proposed solution the least damaging possible under the
circumstances, and (4) whether the possibility of public
suspicion will outweigh any benefits that might accrue due to
continued representation.
Alexander, 141 Ariz. at 165. This test has been applied to disqualification
motions arising from an appearance of impropriety or conflict of interest.
See id. at 160; see also Gomez v. Superior Court, 149 Ariz. 223, 226 (1986); Sellers
v. Superior Court, 154 Ariz. 281, 286-90 (App. 1987). But no Arizona case has
applied Alexander in the context of disqualification based upon an opposing
party’s review of privileged materials inadvertently disclosed. In light of
the lack of direct authority, Judge Bassett turned to Florida cases addressing
similar disqualification claims — those arising from violation of an ethical
rule analogous to ER 4.4(b) — for guidance.
¶29 The Florida courts have crafted an objective two-part test for
determining whether disqualification is warranted following inadvertent
disclosure, considering (1) whether the inadvertently disclosed information
was privileged, and (2) whether the receiving party possibly gained an
“unfair” informational advantage as a result of the inadvertent disclosure.
Moriber v. Dreiling, 95 So. 3d 449, 454 (Fla. Dist. Ct. App. 2012). Where both
prongs are met, counsel should be disqualified. Id.; see also Abamar Hous. &
Dev., Inc. v. Lisa Daly Lady Décor, Inc., 724 So. 2d 572, 574 (Fla. Dist. Ct. App.
1998) (affirming disqualification after considering “the effects of the
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inadvertent disclosure, the [opposing party’s] recalcitrance in rectifying the
disclosure, and the unfair tactical advantage gained from such disclosure”).
The court thereby considered the contents of the inadvertent disclosure,
coupled with the actions of the receiving attorney, in determining “whether
any informational advantage was obtained ‘unfairly.’” Moriber, 95 So. 3d at
454.
¶30 We believe this approach appropriately addresses the
competing Alexander factors in the context of inadvertent disclosure and
strikes a proper balance between the parties’ interests. First, instead of
focusing upon actual prejudice, which is difficult to quantify, the test
requires the trial court to consider whether prejudice may occur. Id.
Limiting the discussion in such a manner both avoids the practical difficulty
in determining “how and to what extent” the receiving party “reviewed,
copied, or disseminated the inadvertent disclosure,” id., and accounts for
the public perception considerations articulated in the fourth Alexander
factor. We are persuaded by the Florida court that disqualification should
be granted sparingly, but:
Like so many other ethical considerations in the practice of
law, perceptions are of the utmost importance. Thus, how
much of an advantage, if any, one party may gain over
another we cannot measure. However, the possibility that
such an advantage did accrue warrants resort to this drastic
remedy for the sake of the appearance of justice, if not justice
itself, and the public’s interest in the integrity of the judicial
process.
General Accident Ins. Co. v. Borg-Warner Acceptance Corp., 483 So. 2d 505, 506
(Fla. Dist. Ct. 1986). We are also mindful that this approach provides relief
to a client, whose rights may have been breached through no fault of his
own, without requiring that he waive the very privilege sought to be
protected.
¶31 Further, this approach emphasizes the ethical obligation of
the receiving attorney to “down tools” when made aware, either by the
disclosing party as occurred here, or by review of the documents, that
privileged materials have been inadvertently disclosed. In proceeding in
this fashion, we simply reiterate the expectation that, when an attorney
knows or has reason to know he has received privileged materials
inadvertently, he apply the procedures articulated in ER 4.4(b) and Rule
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26.1(f)(2).6 If he does so, he cannot be disqualified for the mere receipt of
inadvertently disclosed documents. Abamar, 724 So. 2d at 574 n.2 (noting an
attorney who follows his ethical obligation to notify the party and return
inadvertently produced documents without taking any further action “will
not be subject to disqualification”); Moriber, 95 So. 3d at 454; see also State
Comp. Ins. Fund v. WPS, Inc., 82 Cal. Rptr. 2d 799, 808 (Ct. App. 1999) (“Mere
exposure to the confidences of an adversary does not, standing alone,
warrant disqualification. Protecting the integrity of judicial proceedings
does not require so draconian a rule. Such a rule would nullify a party’s
right to representation by chosen counsel any time inadvertence or devious
design put an adversary’s confidences in an attorney’s mailbox.”) (internal
quotation omitted).
¶32 In adopting the Florida approach, we reject Petitioners’
argument that the party moving to disqualify must demonstrate specific
prejudice, rather than “the mere possibility of an unfair advantage.” The
cases cited by Petitioner do not support their argument, and merely confirm
that the moving party has the burden to show disqualification is warranted,
and cannot meet that burden through unfounded allegations of harm or a
remote appearance of impropriety alone. See Gomez, 149 Ariz. at 225 (“It
does not necessarily follow that [the appearance of impropriety] must
disqualify [an attorney] in every case. Where the conflict is so remote that
there is insufficient appearance of wrongdoing, disqualification is not
required.”) (citing United States v. Washington, 782 F.2d 807, 812-13 (9th Cir.
1986)); Alexander, 141 Ariz. at 165 (vacating disqualification order where
moving party failed to show it would be damaged by continued
representation); Amparano, 208 Ariz. at 377, ¶¶ 26, 29 (affirming denial of
motion to disqualify where no evidence demonstrated a conflict of interest
and the appearance of impropriety was too remote in nature to illustrate
sufficient wrongdoing). The approach we adopt is not in conflict with this
basic premise. The movant still must demonstrate sufficient reason to
disqualify opposing counsel, Amparano, 208 Ariz. at 377, ¶ 24 (citing
Alexander, 141 Ariz. at 161), and may not do so solely upon conclusory or
6 Although the Preamble to Arizona’s ethical rules cautions that a
“violation of a[n Ethical] Rule does not necessarily warrant any other
nondisciplinary remedy, such as disqualification of a lawyer in pending
litigation[, t]he Rules are designed to provide guidance to lawyers.” Ariz.
R. Sup. Ct. 42, pmbl. ¶ 20. And Arizona courts look “to the ethical rules for
guidance on disqualification issues.” Amparano v. ASARCO, Inc., 208 Ariz.
370, 376, ¶ 22 (App. 2004) (citing Towne Dev. of Chandler, Inc. v. Superior
Court, 173 Ariz. 364, 368-69 (App. 1992)).
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Opinion of the Court
vague allegations of perceived harm, United States v. Stewart, 294 F. Supp.
2d 490, 494 (S.D.N.Y. 2013), as the mere receipt of inadvertently disclosed
documents is an insufficient basis for disqualification.
¶33 Moreover, one of the cases relied upon by Petitioners
acknowledges the moving party may meet his burden by showing only a
possibility of harm occurring in the event the disqualification motion is not
granted. See Gabianelli v. Azar, 777 P.2d 1167, 1169 (Alaska 1989) (vacating
order disqualifying counsel where the moving party failed to “demonstrate
[] at least a reasonable possibility that [counsel] acquired privileged
information . . . which could be used to [the moving party’s] disadvantage”)
(emphasis added). And Arizona courts have long recognized that the
possibility of future harm may warrant disqualification. See Bicas v. Superior
Court, 116 Ariz. 69, 74 (App. 1977) (“Where it can reasonably be said that in
the course of former representation an attorney might have acquired
information related to the subject matter of his subsequent representation,
the attorney should be disqualified.”).
¶34 To summarize, when faced with a motion to disqualify
premised upon the abuse of privileged information disclosed
inadvertently, the trial court must: (1) determine whether the documents at
issue are in fact privileged; (2) determine whether the receiving party
exercised an unfair advantage over the documents, such as reviewing,
copying, or distributing them in violation of Rule 26.1(f)(2) and ER 4.4(b);
and (3) review the privileged information objectively, in light of the context
of the case, to determine whether the receiving party possibly gained an
unfair tactical advantage over the moving party. In reviewing the
information, the court may consider certain mitigating factors, such as
whether the privileged information might have already been known by the
receiving party, see United States v. Chong, 58 F. Supp. 2d 1153, 1160 (D. Haw.
1999) (declining to order disqualification based upon inadvertent
disclosure of privileged information where the receiving party was already
in possession of the information prior to its disclosure), or whether the
information may be insignificant to the issues before the court, United States
v. Skeddle, 989 F. Supp. 890, 899 (N.D. Ohio 1997) (finding disqualification
unwarranted where review of allegedly privileged documents did not
provide the receiving party with insight into “the strategies, theories, and
tactics of the lawyers representing the [party claiming privilege]”). And
because disqualification motions are disfavored, State v. Serna, 163 Ariz.
260, 268 (1990) (citations omitted), the trial court should always consider
alternative solutions that will adequately address the purported harm,
Alexander, 141 Ariz. at 165.
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Opinion of the Court
¶35 Turning to the immediate case, the parties do not dispute the
trial court’s findings that multiple documents in the client file were
privileged and that Murphy’s actions violated Rule 26.1(f)(2). Judge Bassett
reviewed the privileged documents in camera, and determined the
advantage gained by Murphy in reviewing the client file was “obvious and
significant.” He noted that no other alternative, such as suppression of the
inadvertently disclosed documents, would provide an adequate remedy,
and disqualified B&C from representation of Petitioners. In reviewing the
record, we cannot conclude Judge Bassett abused his discretion in reaching
this ruling.
IV. No Due Process Violation Occurred Here.
¶36 Finally, Petitioners argue their due process rights were
violated by not being granted further access to the privileged documents to
defend against the motion to disqualify. Even assuming, without deciding,
that a motion to disqualify counsel in a civil case implicates due process
considerations, Petitioners received adequate due process.
¶37 Procedural due process requires a party receive notice and an
opportunity to be heard in a meaningful manner at a meaningful time.
Emmett McLoughlin Realty, Inc. v. Pima Cnty., 212 Ariz. 351, 355, ¶ 17 (App.
2006). Before the trial court’s ruling, Petitioners submitted written briefs
and participated in oral argument. Although they did not have access to
the privileged documents at the time of oral argument, Murphy had
admittedly reviewed the entirety of the client file and had taken detailed
notes. The record does not disclose whether those notes, developed for the
express purpose of defending against the motion to disqualify, were
destroyed or otherwise unavailable to the Petitioners during these
proceedings. Thus, on this record, Petitioners’ due process rights were not
violated.
CONCLUSION
¶38 Bradford did not waive the attorney-client privilege by
seeking disqualification of Petitioners’ counsel based upon B&C’s use of
inadvertently disclosed privileged materials. Thereafter, Judge Bassett
correctly reviewed the documents in camera, considered the propriety of
B&C’s decision to undertake a detailed review of the documents after
learning of Bradford’s claim of privilege, and determined, based upon the
contents of the documents, that B&C had gained a potential unfair tactical
advantage. Accordingly, we accept jurisdiction, affirm the trial court’s
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Opinion of the Court
disqualification order, and vacate the stay of the trial court proceedings
previously entered by this Court.
:ama
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