One of the key facets of the legal profession is the robust and ever-growing set of ethical obligations to which attorneys must adhere. Among those obligations, with which every attorney should be very familiar, is one concerning what an attorney should do if they come into possession of seemingly attorney-client privileged material belonging to another that appears to have been inadvertently transmitted.
These employment related cases require us to determine an attorney’s obligations in slightly different circumstances: an attorney receives from their client a seemingly attorney-client privileged email belonging to an opposing party; the email was originally and intentionally sent to the client when the client was an executive employed by the opposing party employer; however, unbeknownst to the employer, the email was subsequently forwarded by the executive employee to their personal email address and, following their termination, provided to their attorney for use in a lawsuit against their former employer.
Appellants Guardian Storage Centers, LLC (Guardian) and John Minar appeal from orders denying disqualification of the law firm representing respondents, Aarons Ward (Aarons), under such circumstances. They contend the trial court abused its discretion by making unsupported factual findings and applying incorrect legal standards in parts of its analysis. From their perspective, the proper analysis compels the conclusion that Aarons should be disqualified because it impermissibly conducted a detailed review of the attorney-client privileged emails, failed to notify Guardian it possessed them, refused to return them upon Guardian’s demand, and has indicated its intent to use them against Guardian and related parties in the instant litigation.
We conclude the denial of disqualification was an abuse of discretion under the circumstances. The trial court’s finding that the disputed emails are attorney-client privileged, with Guardian being the privilege holder, is supported by substantial evidence, and respondents failed to demonstrate waiver of the privilege. Although the respondents who received the emails were intended recipients at the time they were sent, the court erred in finding this factor favored denying disqualification and, thereby, implicitly rejecting application of the analytical framework set forth in State Comp. Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644 (State Fund). We find what has come to be known as the State Fund rule, which originated from a situation involving inadvertent disclosure by a party’s attorney, equally applicable to a situation in which it is reasonably apparent the privileged material was impermissibly taken from the privilege holder without authorization. Because the trial court did not analyze the circumstances through that proper legal lens, employed too limited a test for determining whether the content of the privileged emails could likely be used to Guardian’s disadvantage in the instant litigation, and made an unsupported finding related thereto, we reverse the challenged orders and remand the matter so the court may reconsider Guardian’s disqualification motions in accordance with this opinion.
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