Vol. 77, No. 12, December 2004

Upholding the Sanctity of the Attorney-Client Privilege

by Steven L. Nelson & Jane C. Schlicht

he attorney-client privilege is a long- established part of the common law in Wisconsin.¹ It also is recognized in the attorneys' oath² and embodied in the Rules of Professional Conduct,³ Wisconsin statutes,⁴ and Wisconsin case law.⁵ The policy behind the rule is based on the recognition of the value of legal advice and assistance obtained through full disclosure of the facts and the corollary that full disclosure to counsel often will be unlikely if there is fear that other persons can compel a breach of confidences. As the Wisconsin Supreme Court stated as early as 1900:

"It is essential to the ends of justice that clients should be safe in confiding to their counsel the most secret facts, and to receive advice and advocacy in the light thereof without peril of publicity. Disclosures made to this end should be as secret and inviolable as if the facts had remained in the knowledge of the client alone."⁶

Disputes have arisen, however, over whether an unauthorized disclosure by counsel of a privileged communication waives the attorney-client privilege. Most frequently these disputes arise during litigation when documents are produced during discovery. Other jurisdictions have addressed the issue applying a variety of rules.

Before the Wisconsin Supreme Court's recent decision in Harold Sampson Children's Trust v. Linda Gale Sampson 1979 Trust,⁷ it was undecided in Wisconsin whether an unauthorized disclosure of a privileged communication waived the attorney-client privilege. Well-established Wisconsin case law preceding this decision states that the privilege belongs to the client and only the client can waive the attorney-client privilege.⁸ However, the pre-Sampson cases addressed situations in which the privilege was asserted and no privileged communications were disclosed.

The Sampson decision addresses disclosure without the assertion of privilege when the client is unaware of the disclosure and the attorney discloses the information without authority. The Wisconsin Supreme Court held in Sampson that the privilege is not waived when a lawyer makes an unauthorized disclosure of a privileged communication. That holding is consistent with Wis. Stat. section 905.03, which provides:

"A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client...."

This decision is important for all Wisconsin practitioners because unauthorized disclosures can occur in a myriad of ways and have adverse consequences for the client. Counsel, when culling through documents to determine what should be produced, can overlook a privileged document due to oversight or a miscommunication between lawyer and client. A briefcase containing privileged documents can be lost or stolen. A document intended for a client can be sent to opposing counsel because the wrong fax number is used. Privileged documents can be copied for production due to a misunderstanding of copying instructions or post-it notes falling off of the privileged documents. A single mistake can have a significant impact on a client whose communications have been disclosed.

The Underlying Dispute

The Sampson case arose out of the liquidation of various properties held by trusts whose beneficiaries are members of the Sampson family. Disputes arose regarding the valuation of these properties, the accounting methods used for capital improvements and rental income, and the amount of the proceeds to be disbursed. Beth Bauer, one of the trust's beneficiaries, created a series of documents for counsel explaining the complicated transactions and disclosing her thoughts and analysis concerning liability, supporting evidence, and damages.

The Harold Sampson Children's Trust and its beneficiaries retained an attorney to represent them in a resolution of these issues. Bauer gave privileged documents to the attorney to assist in his analysis of the issues and claims and his representation of the parties. Litigation was commenced and requests for discovery from opposing counsel followed shortly thereafter.

At the attorney's request, Bauer gathered documents she believed were responsive to the document requests and put them in a box that she then delivered to the attorney. She made sure that none of the privileged documents she had created were in the box.

However, the attorney responded to the defendants' discovery requests by producing both privileged and nonprivileged documents. The attorney did not advise his clients that he had produced privileged documents. The attorney later moved to withdraw as counsel for reasons unrelated to the production of documents.

Cook & Franke S.C. ("the firm") was substituted as counsel for the attorney who withdrew. Shortly after obtaining the file, the firm discovered that attorney-client privileged documents might have been produced to opposing counsel. The firm investigated and determined that in fact privileged documents were produced without the client's consent. The attorney who had produced the privileged documents acknowledged that he had no authority to waive the attorney- client privilege and that the privilege belonged to the client.

The firm notified the defendants' counsel of its concern that privileged documents had been produced by the previous attorney. The defendants' counsel refused to return the documents or to allow access to the documents so the firm could determine if other attorney-client privileged documents were produced.

The firm filed a motion to compel seeking the return of the attorney- client privileged documents and an order precluding use of the documents. The circuit court referred the issue to a discovery master to hold an evidentiary hearing to determine if the documents were privileged and if the attorney-client privilege had been waived. At the hearing the circuit court stated "... the lawyers can't waive attorney/client privilege for their client. It has to be the client."

After taking testimony and hearing the lawyer's argument, the discovery master found the documents were privileged, that the clients did not give permission or consent to produce the attorney-client-privileged documents, and that the clients were not aware that the first attorney had produced the attorney-client-privileged documents until the new firm discovered the disclosure. Despite these findings, the discovery master determined that the privilege was waived by the attorney's intentional production of the documents.

The plaintiffs, including Bauer, filed an objection to the discovery master's findings of fact and conclusions of law, decision, and order. The circuit court adopted the discovery master's findings of fact but reversed the discovery master's legal conclusions and held that the attorney could not waive the attorney-client privilege without the consent of the client because it was undisputed that the client did not consent to waiver of the privilege. The circuit court ordered the documents returned to the plaintiffs.

The defendants filed a petition for leave to appeal a nonfinal order. The petition was granted, and the court of appeals reversed the circuit court, concluding that counsel has authority based on agency principles to waive the privilege by virtue of the delegation of discovery responsibilities to counsel. The court of appeals further concluded that the rule that waiver is an intentional relinquishment of a known right does not apply to evidentiary privileges. Judge Wedemeyer dissented on the basis that in Wisconsin only the client can waive the attorney-client privilege and the court of appeals had no authority to modify that rule.

The Wisconsin Supreme Court Decision

The Wisconsin Supreme Court reversed the court of appeals, relying on four rules: 1) Wis. Stat. section 905.03(1)(d), which defines a confidential communication; 2) Wis. Stat. section 905.03(2), which sets forth the general rule on attorney-client privilege and states that the client may refuse to disclose or prevent others from disclosing a confidential communication; 3) Wis. Stat. section 905.03(3), which states that the privilege belongs to the client; and 4) Wis. Stat. section 905.11, which governs waiver of the privilege by a voluntary disclosure.

The supreme court found that the disclosure was voluntary and not inadvertent. Because the disclosure was voluntary, the court concluded that other jurisdictions' rules relating to "inadvertent" disclosures did not apply. Based on the rules, the case law, and the policies behind the privilege, the court held that only the client may waive the privilege because the client holds and controls the privilege. The court declined to hold the client responsible for the attorney's actions under agency principles, because of the importance of protecting the integrity of the attorney-client privilege.⁹

Inadvertent Disclosures

While the supreme court did not reach the issue of inadvertent disclosures, other courts that have addressed the issue applied a "lenient" test, a "strict responsibility" test, and a "middle" or "balancing" test. The lenient test weighs heavily against waiver, while the strict test provides that any disclosure constitutes a waiver. The middle or balancing rule applies a five-factor test to determine if the privilege is waived. Those factors are: 1) the reasonableness of the precaution taken to prevent inadvertent disclosure; 2) the number of inadvertent disclosures; 3) the extent of the disclosure; 4) the promptness of measures taken to rectify the disclosure; and 5) whether the overriding interests of justice would or would not be served by relieving the party of its error.¹⁰

The majority of state courts apply the lenient test. Under this test, waiver can occur only if there is knowledge of the existence of the right and intention to relinquish the right by the party's knowing and intentional act.¹¹ Attorney-client communications are absolutely protected regardless of whether such communications are voluntarily, surreptitiously, or otherwise obtained by third parties.¹² A waiver must be express and knowing such that even if counsel discloses a confidence in the client's presence, there is no waiver unless the client expressly consents to the disclosure.¹³ Moreover, if an attorney violates the duty of confidentiality, there is no waiver of the privilege.¹⁴ The right of the client to prevent the attorney from disclosing matters covered by the attorney-client privilege arises at the inception of the relationship,¹⁵ and inadvertent disclosure cannot and does not constitute waiver of the attorney-client privilege.¹⁶ Inadvertently produced documents that are otherwise protected by attorney-client privilege remain protected.¹⁷ The lenient test finds that absent express consent, it is not within the power of the client's attorney to waive the privilege.¹⁸ Thus, the attorney-client privilege is not waived by counsel's inadvertent disclosure of a file, since the client as holder of the privilege had no opportunity to claim the privilege.¹⁹

Similarly, a variety of federal courts have adopted the lenient rule. For instance, federal courts have ruled that the mere inadvertent production by an attorney does not waive the client's privilege.²⁰ The underlying reasoning for the lenient rule is that it protects the client from an apprehension that consultations with legal advisors will be used against the client if the privileged communication is inadvertently disclosed, and the rule applies the privilege in a way that is predictable and certain.²¹ Courts have held that inadvertent disclosure by counsel does not waive the privilege because the privilege can be waived only by the client's intentional relinquishment of the privilege.²² Mere inadvertent production does not waive the privilege.²³ "If we are serious about the attorney-client privilege and its relation to the client's welfare, we should require more than such negligence by counsel before the client can be deemed to have given up the privilege."²⁴

A minority of courts apply the strict responsibility test.²⁵ Many other courts, however, have applied the middle or balancing test.²⁶

Nelson

Schlict

Steven L. Nelson, Marquette 1990, is a shareholder with Cook & Franke S.C., concentrating in complex litigation, construction disputes, architect and engineer liability, OSHA, contract disputes, Wisconsin Fair Dealership Law, and entertainment law. He is a member of the American Board of Trial Advocates – Wisconsin Chapter, Civil Trial Counsel of Wisconsin, the Wisconsin Academy of Trial Lawyers, and the American, Wisconsin, and Milwaukee bar associations. He is chair of the Make-A-Wish Foundation of Wisconsin.

Jane C. Schlicht, Marquette 1983 summa cum laude, is a shareholder with Cook & Franke S.C., concentrating in complex business and commercial disputes and intellectual property. She is a member of the Milwaukee, Wisconsin, American, 7th Circuit, and Federal Circuit bar associations and The Outstanding Lawyers of America. She is a member of the Fairchild American Inns of Court, one of the authors of Contract Law in Wisconsin (State Bar CLE Books), and a coauthor of Offers of Settlement in Wisconsin Diversity Actions: Opening the Doors to the Plaintiffs (Wis. Law., October 1996).

The authors represented the plaintiffs in Harold Sampson Children's Trust v. Linda Gale Sampson 1979 Trust.

Guidelines for Practitioners

The Sampson decision should not encourage carelessness in the review of documents before production or in the treatment of privileged communications. The holding is meant to protect the client and minimize damage by unauthorized disclosures. Even if the privilege is not waived, the problem remains that information cannot be erased from the recipient's mind.

The following practice pointers, some of which pertain to issues in Sampson, were developed as a result of the extensive research conducted during the case.

1) Documents generated by counsel that are privileged should bear a legend such as "Attorney-Client Privilege," so they can be readily identified as privileged documents.

2) Advise clients to label as an attorney-client privileged document each page of any memos, summaries of positions, or other documents that are prepared to assist the lawyer. This alerts everyone to the nature of the document and makes the document easier to identify should any documents be produced in error.

3) When feasible, attorney-client privileged documents should be segregated or maintained in a separate folder or file distinct from the balance of the documents.

4) Attorneys must thoroughly review documents to identify any documents protected by the attorney-client privilege before they are produced to a third party.

5) When an attorney meets with a client to determine what documents should be produced, the attorney should instruct clients to segregate any attorney-client privileged documents from the others. Such documents include not only communications to the attorney who is representing the client in the immediate action, but also communications with any other attorneys who previously may have been involved. Because this practice is not foolproof, counsel still must carefully review the documents after receiving them from a client.

6) If there is any uncertainty when reviewing documents, the attorney should consult with the client to determine if the documents are protected by the attorney-client privilege.

7) When producing documents pursuant to discovery requests, it is helpful if the lawyers for all parties agree before the production that, if an attorney or a staff member sees what appears to be or may be an attorney-client communication, the attorney should immediately notify the producing attorney and inquire as to whether the communication is privileged and intended to be protected. While some attorneys may think that by so agreeing they are doing the work of the producing attorney, in cases in which large quantities of documents are being produced and privileged documents can be missed, such an agreement helps all parties.

8) If the producing lawyer discovers that a privileged document was produced, the lawyer should immediately demand in writing the return of all copies of the document and the destruction of any notes or memos created concerning that document. The producing lawyer also should insist that the receiving lawyer provide written confirmation that the privileged document was returned and that any related notes and memos were destroyed.

9) If an attorney receives an unauthorized attorney-client communication, such as a document inadvertently faxed by opposing counsel or an email forwarded by opposing counsel that is intended for his or her client, the receiving attorney should notify the sender immediately and ask for direction as to what do with the document. This is consistent with ABA Formal Opinion 92-368 and with the Sampson decision.

10) The increased use of email communications presents its own challenges. Email communications between client and counsel should be limited to that group alone. There are too many opportunities for errors when selected emails are sent to individuals outside the intended group of recipients. If the client or counsel inadvertently clicks "reply to all" instead of simply replying to the client or counsel, multiple attorney-client communications could be disclosed. Unlike faxes, emails can be called back before they are opened, and this step should be attempted immediately. When emails cannot be recalled, the attorney should contact the counsel for those individuals who inadvertently received the communication, assert the attorney-client privilege, and demand immediate destruction of the email and the return of all copies of documents.

Conclusion

The Sampson decision should produce many positive results for clients, practitioners, and the Wisconsin judicial system. The decision establishes certainty that the client owns and controls the attorney-client privilege. It diminishes the harm of an unauthorized disclosure, since the attorney who receives the information must return it and may not use it. A definitive rule will reduce litigation over the waiver of the privilege. Further, the ethical principles governing lawyers are reinforced by a rule that does not promote the retention and use of information to which the receiving attorney has no right.

Endnotes

¹Continental Casualty Co. v. Pogorzelski, 275 Wis. 350, 352, 82 N.W. 183 (1957).

²SCR 40:15.

³SCR 20:1.6.

⁴Wis. Stat. § 905.03.

⁵State ex rel. Dudek v. Circuit Court, 34 Wis. 2d 559, 605, 150 N.W.2d 387 (1967); Lane v. Sharp Packaging Sys. Inc., 2002 WI 28, ¶ 33, 251 Wis. 2d 68, 640 N.W.2d 788; Swan Sales Corp. v. Joseph Schlitz Brewing Co., 126 Wis. 2d 16, 31-32, 374 N.W.2d 640 (Ct. App. 1985); Borgwardt v. Redlin, 196 Wis. 2d 342, 352-53, 355, 538 N.W.2d 581 (Ct. App. 1995).

⁶Continental Casualty Co., 275 Wis. at 353 (quoting Bruley v. Garvin, 105 Wis. 625, 81 N.W. 1038 (1900)). See also Jacobi v. Podevels, 23 Wis. 2d 152, 157, 127 N.W.2d 73 (1964).

⁷2004 WI 57, 271 Wis. 2d 610, 679 N.W. 2d 794.

⁸See cases cited supra note 5.

⁹While the court did not reach the issue of an inadvertent disclosure, based on the court's analysis it seems likely the result would be the same, namely no waiver of the attorney-client privilege.

¹⁰See, e.g., Elkton Care Center Assoc. Ltd. P'ship v. Quality Care Management Inc., 805 A.2d 1177, 1184 (Md. Ct. Spec. App. 2002).

¹¹See Blumenthal v. Kimber Mfg. Inc., 795 A.2d 1288, 1291 (Conn. Super. Ct. 2002).

¹²McKie v. State, 140 S.E. 625 (Ga. 1927).

¹³Morris v. Margulis, 718 N.E.2d 709, 720 (Ill. App. Ct. 1999), reversed on other grounds, 754 N.E.2d 314 (Ill. 2001).

¹⁴State v. Maxwell, 691 P.2d 1316, 1320 (Kan. Ct. App. 1984).

¹⁵State v. Green, 493 So. 2d 1178, 1181 (La. 1986).

¹⁶Corey v. Norman, Hanson & Detroy, 742 A.2d 933, 942 (Me. 1999)

¹⁷Leibel v. General Motors Corp., 646 N.W.2d 179, 185-87 (Mich. Ct. App. 2002).

¹⁸Lightbody v. Rust, 739 N.E.2d 840, 844 (Ohio Ct. App. 2000).

¹⁹Farm Credit Bank of St. Paul v. Huether, 454 N.W.2d 710, 719-20 (N.D. 1990).

²⁰Georgetown Manor Inc. v. Ethan Allen Inc., 753 F. Supp. 936 (S.D. Fla. 1991).

²¹Berg Electronics Inc. v. Molex Inc., 875 F. Supp. 261, 263 (D. Del. 1995).

²²Lazar v. Mauney, 192 F.R.D. 324, 330 (N.D. Ga. 2000).

²³Kansas-Neb. Natural Gas Co. Inc. v. Marathon Oil Co., 109 F.R.D. 12, 21 (D. Neb. 1985).

²⁴Mendenhall v. Barber-Greene Co., 531 F. Supp. 951, 955 (N.D. Ill. 1982).

²⁵See Texaco Puerto Rico Inc. v. Dep't Consumer Affairs, 60 F.3d 867, 883 (1st Cir. 1995); Cartes v. Gibbs, 909 F.2d 1450, 1451 (Fed. Cir. 1990); United States v. American Tel. & Tel. Co., 642 F.2d 1285, 1298 (D.C. Cir. 1980); International Digital Sys. Corp. v. Digital Equipment Corp., 120 F.R.D. 445, 450 (D. Mass. 1988) (adopting the "strict responsibility" test and holding that inadvertent disclosure always results in waiver).

²⁶See Floyd v. Coors Brewing Co., 952 P.2d 797 (Colo. App. 1997); Elkton Care Center Assoc. Ltd. P'ship, 805 A.2d 1177; Hartman v. El Paso Natural Gas Co., 763 P.2d 1144 (N.M. 1988); Gray v. Bicknell, 86 F.3d 1472 (8th Cir. 1996); Alldread v. City of Grenada, 988 F.2d 1425 (5th Cir. 1993); Hydraflow Inc. v. Enidine Inc., 145 F.R.D. 626 (W.D.N.Y. 1993).

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