In document-intensive litigation the risk of inadvertent production of material subject to attorney-client privilege or work product protection is a major concern for both plaintiffs and defense counsel.   A complex array of rules — ethical, evidentiary, substantive, and procedural – coupled with protective orders and claw-back agreements govern such situations.  The recent decision of the California Court of Appeals in Novartis Pharmaceuticals Corp. v. The Superior Court of San Diego County, 2021 Cal. App. Unpub. Lexis 3117 (May 13 2021), provides an excellent fact pattern for understanding the interrelationship among these standards.

In Novartis, a defective drug case, at a deposition in January, 2020, of an Novartis executive, plaintiffs’ counsel attempted to examine the witness about an email chain that included an email from Novartis’s in-house counsel.  The email was marked “CONFIDENTIAL – SUBJECT TO PROTECTIVE ORDER.”  Counsel for Novartis objected to the use of the email and directed the witness not to answer questions involving the email, and counsel for the plaintiffs complied.  Almost four months later plaintiffs’ counsel included the email in their opposition to Novartis’s motion for summary judgment.   Four weeks later Novartis’s counsel invoked the “claw-back” provision of the protective order and demanded that plaintiffs either return or confirm the destruction of the email and all copies within five days.   Plaintiffs’ counsel responded that Novartis’s failure to seek prompt return of the email for more than five months constituted waiver of the privilege.  A few days later Novartis moved to seal the email on the ground that it contained trade secret information, but the motion to seal did not include a claim of attorney-client privilege.   Plaintiffs responded to the motion to seal with various arguments, in particular that Novartis had waived any claim of privilege by its conduct, particularly its failure to promptly seek return of the email.   Novartis responded that it had not waived any claims of privilege and that plaintiffs had failed to comply with their ethical and legal obligations and their duties under the protective order by continuing to use the email, knowing that it was subject to a claim of attorney-client privilege, without seeking court authorization or a resolution of the issue with Novartis.

The Court agreed with the plaintiffs.  The court first concluded the unintentional or inadvertent disclosure by Novartis’s counsel did not constitute a waiver of the privilege.  However, Novartis was still required to act reasonably to protect the privilege so that its conduct or lack thereof did not constitute a waiver of the privilege. When Novartis learned at the deposition in January that plaintiffs’ counsel had the email which Novartis claimed was privileged and Novartis objected to the use of the email, Novartis could reasonably expect plaintiffs’ counsel to comply with their ethical obligations not to use the email. [1]  There was no need for plaintiffs’ counsel to give a further notice to Novartis.  But Novartis’ obligations did not end at that point.  Neither California law nor Rule 4.4 places the burden for further action solely on the recipient of the inadvertently sent document, in this case the plaintiffs.   Plaintiffs could have taken prompt action to return the document to Novartis, to negotiate an agreement with Novartis, or to seek a court resolution of the matter, but they were not required to do so.

The ethical obligations imposed on the receiving attorney do not eliminate the need for the sender to take reasonable steps to protect the privilege to avoid a finding of waiver:

Under these circumstances, . . .  it was incumbent on Novartis to take prompt steps to resolve the dispute over the privileged e-mail. We cannot agree it was reasonable for Novartis to wait months resting on the belief that plaintiffs would avoid using the document or seek a resolution . . . . 2021 Cal. App. Unpub. Lexis at *27.

Even if the receiving party engages in ethical misconduct, the sender may still be found to have waived the privilege if the sender engages in conduct inconsistent with the privilege.   Under California law a waiver occurs when the holder fails to assert the privilege in any proceeding in which the holder has standing and the opportunity to assert the privilege.   In this case Novartis waived the privilege both by its delay in taking action to assert the privilege and by failing to make a claim of privilege in its motion to seal the email (Novartis based the motion on trade secrecy, not privilege).

The court also discussed the effect of the protective order on its analysis.  The protective order required the plaintiffs to immediately return privileged material to Novartis and not to use if for any purpose until the issue was resolved by agreement of the parties or court order.   The protective order also provided that accidental disclosure of protected material would not constitute a waiver of the privilege if a request for return of the material was made promptly after the sender learned of the accidental disclosure.  The court concluded that any asserted violation by plaintiffs of the protective order did not eliminate Novartis’s obligation to take steps to protect the confidentiality of the email.  Because Novartis had failed to make a prompt request for return of the email and had failed to raise privilege as a basis for its motion to seal the email, Novartis had not complied with its obligations to protect the confidentiality of the email and had therefore waived the privilege.

Novartis was decided under California law; how would the case be decided under South Carolina ethics and law?

Read more here: Nathan Crystal, Inadvertent Production and Waiver of Privilege/Work Product Protection, South Carolina Lawyer 16 (July 2021)

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[1] Under California law when a lawyer receives documents that clearly appear to be privileged or otherwise confidential and where it is apparent that the documents were inadvertently provided, the lawyer should not examine the materials beyond what is necessary to determine that they are privilege, should not use the material, and shall immediately notify the sender.  The parties can then proceed to resolve the situation by agreement or resort to the court.  South Carolina Rule of Professional Conduct 4.4(b) is similar, although the California Rule specifically prohibits use, while the South Carolina rule is silent on the question of examination and use.