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May 2015  |  Earn one hour of MCLE Credit in Legal Ethics

How to ethically handle confidential information received inadvertently

By Richard Egger

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MCLE Self-Assessment Test

May 2015



1. An attorney may use confidential information inadvertently produced by his or her opponent as long as he or she first discloses the receipt of the material to the opponent.

2. If privileged information is provided to an attorney by a third party, rather than an opposing litigant or attorney, the receiving attorney may use the information for any purpose.

3. In California, the mining of metadata is presumptively improper.

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An attorney reviewing documents produced by opposing counsel in a hotly contested case notices a confidential communication between the opposing party and its attorney. The communication describes significant problems with the opposing side’s evidence and expresses a desire to settle the case “at any cost.” Perhaps the privileged nature of the communication is less obvious, and it is unclear whether the document was produced intentionally. Such events are increasingly common with the ease of email communications and vast volumes of electronically stored information (“ESI”) produced in today’s litigated cases.

Reading an opponent’s confidential communication can significantly change the landscape of a case. It is difficult for an attorney to ignore a crucial piece of information when vigorously representing a client. After all, if the other side’s attorney does not do his job why shouldn’t your client benefit from his carelessness? Nonetheless, it is important to respect the attorney-client privilege and work product doctrine. An attorney’s failure to correctly handle confidential information inadvertently disclosed by an opponent may result in sanctions and even disqualification.

This article addresses the ethical responsibilities of a California attorney who finds herself or himself on the receiving end of potentially confidential communications.

California courts cases set the standard

Attorneys must zealously advocate for their clients while respecting the legitimate interests of their fellow members of the bar, the judiciary and the administration of justice. (Kirsch v. Duryea (1978) 21 Cal.3d. 303, 309.) The inadvertent disclosure of an opponent’s confidential material puts those two obligations at odds. California Evidence Code section 912 addresses the waiver of the attorney-client privilege, but there is no specific California statute or rule of professional conduct that squarely addresses how an attorney must treat inadvertently disclosed confidential material. In the absence of a statute or rule of conduct, California courts set the standard.

In the case of Rico v. Mitsubishi Motors (2007) 42 Cal.4th 807, the California Supreme Court addressed the ethical requirements of a lawyer who inadvertently received privileged documents. In Rico, the plaintiffs’ attorney inadvertently obtained a defense attorney’s notes and used them during a deposition to impeach a defense expert. The Supreme Court observed that an attorney’s thoughts and impressions about a case are work product and absolutely privileged. In determining how this privileged information should be treated, the Rico court adopted the standard set forth in State Compensation Insurance Fund v. WPS Inc. (1999) 70 Cal.App.4th 644 (“the State Fund Rule”) for handling inadvertently produced confidential information.

In State Fund, the Court of Appeal held that when a lawyer receives material that “obviously appears to be” confidential and subject to a privilege, and where it is reasonably apparent that the materials were provided or made available through inadvertence, the receiving attorney must do three things:

  • Refrain from examining the materials any more than is essential to ascertain whether the materials are privileged;
  • Immediately notify the sender that he or she possesses material that appears to be privileged;
  • Proceed to resolve the situation by agreement or resort to a court for guidance with the benefit of protective orders and other judicial intervention as may be justified.

(State Comp. Ins. Fund v. WPS Inc. (1999) 70 Cal.App.4th 644, 656-657.)

In deciding to adopt the State Fund Rule, the Rico court observed that:

“[A]n attorney has an obligation not only to protect his client’s interests but also to respect the legitimate interests of fellow members of the bar, the judiciary, and the administration of justice. [citations omitted.] The State Fund rule holds attorneys to a reasonable standard of professional conduct when confidential or privileged materials are inadvertently disclosed.” (Rico, supra, 42 Cal. 4th at p. 818.)

The Rico court determined the plaintiffs’ attorney and experts, who also reviewed the notes, did not comply with the State Fund Rule, and should be disqualified from the case. Disqualification was the only appropriate way to remedy the damage because plaintiffs’ attorney and experts had reviewed the material carefully and used it at deposition. Disqualification is not automatic. ‘Mere exposure’ to an adversary’s confidences is insufficient, standing alone to warrant an attorney’s disqualification.” (Rico, supra, 42 Cal. 4th at p.817 [quoting State Fund, supra, 70 Cal. App. 4th at p. 656].) Nevertheless, depending on the extent of the review and use of confidential information, a lawyer who does not carefully follow the steps laid out in State Fund risks disqualification.

Obvious privilege

The State Fund Rule is triggered when an attorney first recognizes that the material is potentially privileged. Not all documents are obviously privileged. In State Fund, the documents were stamped with the legends “Attorney-Client Communications/Attorney-Client Work Product,” but in the Rico case, the documents had no such notation. The courts in both State Fund and Rico relied on an objective test to make the determination. “In applying the rule, courts must consider whether reasonably competent counsel, knowing the circumstances of litigation, would have concluded the materials were privileged, how much review was reasonably necessary to draw that conclusion, and when counsel’s examination should have ended.” (Rico 42 Cal.4th at 817-18 [citing State Fund 70 Cal.App.4th at 656-57].)

One Court of Appeal concluded that all that was reasonably necessary to draw a conclusion that the documents were privileged was an understanding that the documents were sent between the opposing party and its counsel. (See Clark v. Sup.Ct. (Verisign, Inc.) (2011) 196 Cal. App. 4th 37.) Once the source of the documents is determined to be between attorney and client, further review of the content of the communication is prohibited. In the Verisign case, the court held that because the receiving attorney and his experts reviewed the material carefully and used it at deposition, it was not an abuse of discretion to disqualify counsel, again highlighting the potential severe sanctions that may be imposed on an attorney who reviews and uses the other side’s confidential information.

In light of the Rico and Verisign cases, an attorney who has any concern that material constitutes communications between an opposing counsel and his client, or any other hint that material is potentially privileged, should take care to consider and apply the State Fund requirements.

Was the disclosure inadvertent?

Even if materials are “obviously privileged” they are subject to State Fund rules only where they were produced through inadvertence. (Rico, supra, 42 Cal. 4th, at p. 817 [citing State Fund, supra, 70 Cal. App. 4th, at pp. 656-657].) After all, a knowing production of a confidential document likely constitutes an intentional waiver of any confidentiality privilege. (See Cal. Evid. Code § 912(a).) Thus, the attorney must determine if the disclosure was intentional or inadvertent.

The most common circumstance is not an intentional waiver. Usually, counsel for the producing party simply makes a mistake and an otherwise privileged document is included with non-confidential materials. In both the Rico and Verisign cases, however, the privileged documents were provided by third parties to the receiving attorney, but the production was still considered inadvertent. In Rico, the documents were provided by a court reporter, and in Verisign, the documents were taken from the plaintiff’s former employer, and then provided to his lawyers for use against his former employer. Neither the Rico nor the Verisign courts treated the matter any differently. In both cases the court treated the documents as if they were inadvertently produced because they were provided by a third party without the privilege holder’s authorization.

The crime-fraud exception

Evidence Code Section 956 says no attorney-client privilege applies to communications if services were sought or obtained to enable or aid anyone to commit or plan to commit crime or fraud. (State Farm Fire and Casualty Co. v. Superior Court (1997) 54 Cal. App. 4th 625, 643.) Even if a receiving attorney suspects that the “crime-fraud” exception applies to a privileged communication, the attorney should still follow the guidance of Rico and State Fund. (Cal. State Bar Form.Opn. 2013-188.) Simply asserting the crime-fraud exception applies is not enough. The party advancing the exception has the burden of making a prima facie showing that the exception applies – based on non-privileged information. (See BP Alaska Exploration, Inc. v. Superior Court (1988) 199 Cal. App. 3d 1240, 1249.) Only after this showing can a court determine that a waiver or exception has occurred, and allow the document to be admitted as evidence. (Id.)

Based in part on the reasoning set forth in the BP case, the State Bar of California’s Standing Committee on Professional Responsibility and Conduct issued an opinion that even if inadvertently produced privileged material may be subject to the crime-fraud exception, the receiving attorney should still follow the State Fund Rule. (See State Bar Form.Opn. 2013-188, p. 5.) The opinion discusses a hypothetical in which an anonymous former employee of a corporate litigant sends the other side copies of confidential attorney-client emails between the corporation’s counsel and the corporation. The transmittal email from the anonymous source states that the email communications will show that the corporation’s lawyer was retained to assist the corporation in committing fraud. Opinion 2013-88 states that in such circumstances, the receiving attorney must still follow the State Fund Rule, should not review the material attached to the email, and if necessary seek intervention from the court about whether the crime-fraud exception applies. (State Bar Form.Opn. 2013-188, p. 5.) Thus, even when an attorney believes the crime-fraud exception may overcome any applicable privilege, the ethical course is to treat the material as privileged unless and until the matter is resolved by agreement or court intervention.

Data mining

The world of electronically stored information has created a new issue concerning inadvertently released privileged material. ESI often contains metadata, which is information embedded in electronic documents. The type of information contained in metadata varies, but it can include history of revisions, deleted text, written comments, and the names of users who have edited the document. Much of the information will have no specific legal value, but it may also reveal client confidences, litigation strategy, legal theories or analysis, attorney-work product, and other similar types of confidential information. Reviewing the metadata is called “mining” the metadata.

Often in litigation, parties agree on the exchange of certain metadata when exchanging ESI. In the absence of an agreement, however, California has no statute, rule or case which specifically addresses an attorney’s ethical obligations upon the receipt of metadata. It seems likely that a California court would apply the State Fund Rule to the mining of metadata if called upon to do so. Ethics opinions from several other state bar associations adopt a similar position.(See Arizona Bar Ass’n Form.Opn. 07-07 (2007); Alabama Bar Ass’n Form.Opn. 2007-02; D.C. Bar Ass’n Form.Opn. 341 (2007); Florida Bar Ass’n Form.Opn. 06-2 (2006).) Opinions in other jurisdictions, however, have found that metadata mining is per se improper. (See New York County Bar Ass’n Form.Opn. 738 (2008) [disclosure of metadata is presumed inadvertent; New Hampshire Bar Ass’n Ethics Comm.Opn. 2008-09/4].) The position of the ABA is that nothing in the Model Rules of Professional Conduct bars data mining. (ABA Form.Opn. 06-442.)

The wide variety of opinions on metadata mining suggests that as the storage and use of ESI in litigation evolves, lawyers will need to carefully consider how to respond ethically to the opportunities created by metadata mining.


Attorneys who make use of confidential material inadvertently disclosed by an opposing party do so at significant peril to themselves and their clients. If there are any indicia of an applicable privilege, a receiving attorney should immediately consider and apply the State Fund Rule as adopted by California’s Supreme Court. No matter how zealous an advocate, an attorney who is disqualified has not served the client well. In today’s world of vast amounts of electronic information, issues about inadvertent disclosure are bound to come up more often. California attorneys must be extremely cautious in dealing with such issues.

Richard Egger is the managing partner of the Ontario office of Best, Best & Krieger LLP and the firm’s general counsel. His practice focuses on probate and trust litigation, business and real estate litigation, and complex litigation for public entities. He is a member of the State Bar of California’s Standing Committee on Professional Responsibility and Conduct. The opinions expressed herein are his own.

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