LAMONT H DOZIER V JOBETE MUSIC COMPANY INC
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STATE OF MICHIGAN
COURT OF APPEALS
EDWARD J. HOLLAND, JR,
UNPUBLISHED
April 29, 2003
Plaintiff-Appellee/Cross-Appellant,
v
THE GORDY COMPANY, MOTOWN RECORD
CORPORATION, JOBETE MUSIC COMPANY,
INC., BERRY GORDY, JR., BACH LIBERMAN
WAREHOUSE ASSOCIATES, STONE
DIAMOND MUSIC CORPORATION, ROBERT
L. GORDY, ESTER G. EDWARDS, LESTER
SILL, FRANK FERENCE BANYAI, VINCENT
LOUIS PERRONE, ROBERT CRAIG
ROSENTHAL, and ERLINDA ANN BARRIOS,
No. 231183
Wayne Circuit Court
LC No. 92-233992-CK
Defendants-Appellants/CrossAppellees.
BRIAN HOLLAND,
Plaintiff-Appellee/Cross-Appellant,
v
JOBETE MUSIC COMPANY, THE GORDY
COMPANY, BERRY GORDY, ROBERT L.
GORDY, JR., ESTHER G. EDWARDS,
ERLINDA ANN BARRIOS, STONE DIAMOND
MUSIC CORPORATION, and VINCENT LOUIS
PERRONE,
Defendants-Appellants/CrossAppellees,
and
SIDNEY NOVECK and SIDNEY NOVECK &
COMPANY,
-1-
No. 231184
Wayne Circuit Court
LC No. 93-300180-CK
Defendants.
LAMONT H. DOZIER and OCTOPODA, INC.,
Plaintiffs-Appellees/CrossAppellants,
v
JOBETE MUSIC COMPANY, INC., THEE
GORDY COMPANY, BERRY GORDY, JR.,
ROBERT L. GORDY, ESTHER G. EDWARDS,
STONE DIAMOND MUSIC CORPORATION,
and, VINCENT LOUIS PERRONE,
No. 231185
Wayne Circuit Court
LC No. 92-235544-CK
Defendants-Appellants/CrossAppellees,
and
SIDNEY NOVECK and SIDNEY NOVECK &
COMPANY,
Defendants.1
Before: O’Connell, P.J., and Fitzgerald and Murray, JJ.
PER CURIAM.
Defendants appeal by leave granted the trial court’s order denying their motion for
disqualification of plaintiffs’ attorneys.2 Plaintiffs each cross-appeal from the trial court’s ruling
denying defendants’ motion for disqualification and also from the trial court’s order denying
their motion for entry of default judgment against defendants. We affirm in all respects.
I. Introduction
Unfortunately, the subject of this appeal does not concern the merits of this case. Rather,
the issues raised in the instant appeal concern professional ethics issues surrounding plaintiffs’
1
Because Sidney Noveck and Sidney Noveck & Company are not parties to this appeal, the term
“defendants” refers only to defendants-appellants.
2
For ease of reference and unless otherwise noted, we will refer to “plaintiffs” and “defendants”
collectively in these consolidated cases.
-2-
retention of defendants’ litigation files that were allegedly inadvertently produced during a
formal discovery request. The underlying suits arise from song writing contracts entered into by
plaintiffs with defendants. Plaintiffs allege that defendants defrauded them of royalties
generated from songs plaintiffs wrote. These suits were filed in 1992 and 1993 and have
required almost a decade of litigation.
At issue in this appeal is a document production that occurred on August 10, 1999,
pursuant to a formal discovery request. Defendants intentionally provided plaintiffs with access
to documents in twelve boxes. While reviewing the documents, plaintiffs obtained documents
from defendant’s confidential litigation files contained in a thirteenth box (box thirteen), which
the trial court found defendants had inadvertently placed with the twelve other boxes subject to
discovery. Defendants did not learn that plaintiffs had possession of the documents contained in
box thirteen until a deposition in October 1999 when defendants’ counsel observed copies of two
of the confidential documents attached to a fax received by plaintiffs’ counsel. Defendants
immediately wrote to plaintiffs demanding the return of those documents and any other
confidential documents in their possession. When plaintiffs did not return any of the documents,
defendants filed motions to compel the return of the documents, to compel the deposition
testimony of plaintiffs’ counsel in order to ascertain how they had obtained the documents, and
to disqualify plaintiffs’ counsel because of their unethical conduct in retaining and concealing
defendants’ privileged documents.3 At the same time, plaintiffs filed a motion for sanctions,
requesting entry of a default judgment against defendants for destroying relevant documents that
plaintiffs had previously requested during discovery.4 Following two hearings on the parties’
respective motions on November 19, 1999, and December 17, 1999, the trial court determined
that an evidentiary hearing was necessary to resolve the issues. The evidentiary hearing began
on January 18, 2000, and lasted for fifteen inconsecutive days, concluding on October 20, 2000.
II. Evidentiary Hearing Proofs
The relevant testimony concerning the document production revealed the following facts.
Plaintiff Lamont Dozier’s attorney, Thomas Bishoff of Dykema Gossett, arrived at the offices of
Dickinson Wright on August 10, 1999, in response to a discovery request in which plaintiffs
sought the production of certain documents. He was accompanied by a paralegal, Natalie Levin.
In reviewing the documents, Bishoff came across several red well folders (also referred to as red
rope files) in a separate box.5 There were twelve boxes of documents inventoried by Levin and a
3
Defendants did not learn how plaintiffs had obtained the documents until the November 19,
1999 hearing on its motion. Defendants argued that box thirteen had been inadvertently
produced and that plaintiffs committed ethical violations in copying the documents when they
knew the documents were from litigation files, failing to inform defendants about the production
of such documents, and thereafter retaining the documents even after defendants had requested
their return.
4
Plaintiffs claimed that the documents found in box thirteen conclusively established that
defendants ordered the destruction of relevant and material documents in contravention of
discovery requests and court orders. Plaintiffs further argued that under the crime fraud
exception to the attorney-client privilege or because defendants waived any privileges, they
should be allowed to retain the documents contained in box thirteen.
5
There were thirteen red-roped folders in box thirteen.
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separate box thirteen that contained the red well folders. Bishoff “flipped” through all the red
well folders and reviewed a number of documents contained in those folders. Specifically,
Bishoff made extensive notes and photocopies of a particular “internal memorandum” prepared
by defendants’ counsel, Yakub Hazzard (the memo), and a July 30, 1999, letter prepared by
defendants’ counsel Drew Breuder (the letter), both directed to defendants’ co-counsel.6 Upon
discovering the memo, Bishoff called colleagues, Ron Torbert and Craig John at Dykema to
discuss whether a copy could be made. Bishoff testified that he “was somewhat excited to find
the memo” and thought it was significant.7 John instructed Bishoff to write down in detail the
information contained in the memo and destruction guidelines that were attached to the memo
just in case the documents “would never see the light of day again.” Bishoff further testified that
in the course of reviewing the red well folders, he considered the possibility that he was looking
at his adversaries’ legal files, but at no time did he alert any of defendants’ counsel that such
materials were in the conference room for inspection.8
Before leaving Dickinson, Bishoff took a handwritten inventory of box thirteen
containing the red well folders9 and requested copies of all the documents, including box
thirteen. On returning to his office at Dykema, Bishoff faxed a copy of the memo and the letter
to plaintiffs’ co-counsel, Jeffrey Morganroth. Thereafter, Bishoff and Morganroth contacted
defendants’ counsel, Thomas McNeil at Dickinson and requested that the documents in all
thirteen boxes be copied by an outside service. On August 18, 1999, Bishoff and Morganroth
received a duplicate set of copies from Copy Corps of all the documents including those in box
thirteen.10 At some point, plaintiffs’ counsel, Clarence Tucker, received a copy of the memo, but
did not receive a complete set of copies of the documents from Copy Corps. However, prior to
the evidentiary hearing proceedings, plaintiff Brian Holland’s counsel, Hallison Young, did not
discuss the contents of box thirteen with any other counsel for plaintiffs, nor did he ever receive
or see copies of the documents.
III. The Trial Court’s Findings of Fact and Conclusions of Law
Following extensive arguments by all counsel involved, the trial court issued its opinion.
The trial court found that box thirteen contained lawyers’ litigation files and defendants had
produced it by mistake. There was no question in the court’s mind that box thirteen was
inadvertently produced. The trial court rejected plaintiffs’ arguments that they were entitled to
keep the documents because they were intentionally produced, evidenced fraud and disregard for
6
Bishoff asked the Dickinson legal assistant, who was present in the conference room
supervising the document production, to make copies of these two documents for him.
7
It appeared to Bishoff that the memo contained information regarding the location of 128 boxes
of missing documents that the parties had been feuding over and guidelines for destruction of
documents (the destruction guidelines).
8
During the telephone conversation with Torbert and John, Bishoff raised the issue of
inadvertent disclosure, but concluded that the documents were intentionally produced by
defendants, along with the entire box of files.
9
Interestingly, Bishoff’s written inventory included a verbatim copy of the memo.
10
Copy Corps delivered the copies to plaintiffs’ counsel with Bates numbers.
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court orders, or because defendants were negligent or reckless in producing them. The trial court
found it incredible that any attorney would believe their adversaries intended to produce their
litigation files for discovery, especially under the circumstances of this case where box thirteen
and the red rope files in it looked physically different from all the other boxes and contained
correspondences to clients and memorandum to the file for the benefit of co-counsel. The files
were marked as “litigation” files and a glimpse of the documents inside should have alerted
plaintiffs that box thirteen may have been inadvertently produced. The court agreed with John
that had these documents been brought to the attention of defendants, they would not “have seen
the light of day” because they were not intentionally produced. Moreover, the trial court found
that plaintiffs’ attorneys’ actions in copying the memo verbatim, requesting a copy from a
paralegal, and then requesting that copies be made from an outside source demonstrated that
plaintiffs knew that the documents were not intentionally produced.
The trial court thus concluded that because the confidential documents in this case were
clearly not intended for plaintiffs, plaintiffs were obligated to both refrain from examining the
material and to notify defendants about the documents, regardless of what impropriety may have
been contained in those documents. The trial court further concluded that the documents did not
have to be privileged for such a duty to apply, but only confidential, defining confidential in
broad terms. The trial court remarked that an attorney’s litigation files could not be more
confidential. As a result, the trial court did not reach a specific finding with regard to whether
the documents in question (the memo, the letter, and the rest of the documents in box thirteen)
were privileged under the attorney-client privilege or work-product doctrine because it was
immaterial to its analysis. The trial court noted that plaintiffs do not get to rifle through
defendants’ litigation files on the chance that they might innocently find something that is not
privileged. Because plaintiffs failed to even notify defendants, the trial court found that plaintiffs
had violated an “ABA opinion.”11 However, the trial court was hesitant to disqualify plaintiffs’
counsel, taking into account the age of the case, the practicality of such a remedy, and the fact
that defendants could be protected from any prejudice resulting from the production of box
thirteen. As a result, the trial court denied defendants’ motion to disqualify plaintiffs’ counsel,
and instead, ordered that all copies of the documents in box thirteen, including the letter and the
memo, be returned to defendants, and any memorandum of any kind recording or referring to
any of the contents of the documents be destroyed. The trial court refused to disqualify
plaintiffs’ counsel at that time, but reserved the right to change his ruling if it was later proven
wrong regarding the ability to protect defendants from the disclosure.
At the same time, the trial court denied plaintiffs’ motion for default judgment, finding
that plaintiffs had failed to establish that defendants intentionally destroyed relevant and material
documents that were ordered by the trial court to be produced. First, the trial court noted that the
destruction guidelines were written under circumstances that provided an explanation –the sale
of Jobete to EMI and the downsizing process. Second, the heart of plaintiffs’ complaint alleged
off-book transactions, which would not show up on documents anyway. Further, defendants
11
The trial court relied on Michigan ethics opinion CI-970 and an ABA opinion, which was not
cited by the trial court, but the parties cite as ABA Opinion 92-368. The trial court noted that
nothing in Michigan detracted from the ABA opinion, but rather, supported the conclusion in the
ABA opinion.
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presented evidence that plaintiffs were aware that documents were being disposed of and that the
documents were nonetheless still available on computer. Third, the court noted that it did not
order a company-wide production of documents such as the kind that was involved in the
destruction guidelines. Rather, the court ordered the production of certain documents regarding
plaintiffs, which the trial court found were not “congruent with the destruction guidelines.” Last,
the trial court found that 128 boxes were produced to plaintiffs at one time and plaintiffs failed to
look at them, supporting the conclusion that defendants did not destroy or hide evidence.
IV. Analysis
Defendants argue that the trial court erred in denying their motion for disqualification of
plaintiffs’ attorneys after concluding that plaintiffs’ attorneys had violated their ethical duties
under the rules of professional conduct in reviewing, copying, and retaining defendants’
confidential litigation files. At the same time, plaintiffs argue that the trial court erred in finding
an ethical violation and requiring plaintiffs to return and make no use of the documents in box
thirteen that conclusively establish that defendants intentionally destroyed material documents
and which documents were voluntarily produced by defendants during discovery. We disagree
with both arguments.
The trial court’s findings of fact in regard to a motion for disqualification of counsel are
reviewed for clear error. Buchanan v Flint City Council, 231 Mich App 536, 547; 586 NW2d
573 (1998). However, we review how the trial court applied the facts to the relevant law de
novo. Brandon Charter Twp v Tippett, 241 Mich App 417, 421 n 1; 616 NW2d 243 (2000).
Further, the application of “ethical norms” to a decision whether to disqualify counsel is
reviewed de novo. General Mill Supply Co, v SCA Services, Inc, 697 F2d 704, 711 (CA 6,
1982). Similarly, this Court reviews for an abuse of discretion the determination whether a
document is privileged. Franzel v Kerr Mfg Co, 234 Mich App 600, 614; 600 NW2d 66 (1999).
However, whether the attorney-client privilege or work-product doctrine applies to protect a
communication or document is a question of law that we review de novo. Leibel v General
Motors Corp, 250 Mich App 229, 236, 244; 646 NW2d 179 (2002).
After a review of the entire record, we conclude that the trial court properly determined
that plaintiffs’ counsel had committed ethical violations in reviewing defendants’ litigation files
and failing to notify defendants’ counsel of its production. The trial court also properly
determined that the contents of box thirteen should be returned to defendants and all notes and
memorandum referring to such documents be destroyed. However, we hold that the trial court
did not err in refusing to disqualify plaintiffs’ counsel under such circumstances.
A. Privileges
Defendants’ argue that disqualification is mandated by plaintiffs’ ethical misconduct.
Before addressing this argument, there are several other issues raised by plaintiffs on crossappeal that must be addressed. First is the question of whether the disputed documents were
privileged. Plaintiffs argue that they committed no misconduct because the documents reviewed,
specifically the memo and the letter, were not privileged and were subject to discovery.
MCR 2.302(B)(1) generally provides that privileged matters are not discoverable. The
trial court did not explicitly determine whether the memo, the letter, or the remaining contents of
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box thirteen were privileged. Rather, the trial court determined that such a specific finding was
unnecessary where it was clear on their face that the documents were “secret and confidential,”
invoking plaintiffs’ duty to refrain from reviewing them and notifying defendant’s counsel.
Nonetheless, because the trial court discussed the private, confidential, and privileged nature of
an attorney’s litigation files and the attorney-client privilege with regard to waiver, it is implicit
in the trial court’s ruling that it found the documents were privileged. As a result, it is disputed
on appeal whether the documents were protected under the attorney-client privilege or workproduct doctrine.
1. Attorney-Client Privilege
The following principles apply to the attorney-client privilege:
The attorney-client privilege is designed to permit a client to confide in his
attorney, knowing that his communications are safe from disclosure. The
rationale behind the privilege is that “if the client knows that damaging
information could more readily be obtained from the attorney following
disclosure than from himself in the absence of disclosure, the client would be
reluctant to confide in his lawyer and it would be difficult to obtain fully informed
legal advice.” [McCartney v Attorney General, 231 Mich App 722, 730-731; 587
NW2d 824 (1998) (citations omitted).]
The privilege attaches only to confidential communications by the client to his attorney, which
are made for the purpose of obtaining legal advice and applies only where necessary to achieve
its purpose. Id. at 731. Where a client is a organization or company, the privilege extends to
those communications between attorneys and all agents or employees of the organization
authorized to speak on its behalf in relation to the subject matter of the communication. Leibel,
supra at 236 (citations omitted).
2. Work-Product Doctrine
The second asserted privilege is the work-product doctrine. The work-product doctrine
protects from discovery any notes, working papers, memoranda or similar materials, prepared by
an attorney in anticipation of litigation. Leibel, supra at 244 (citations omitted). Under MCR
2.302(B)(3)(a), the trial court “shall protect against disclosure of the mental impressions,
conclusions, opinions, or legal theories of an attorney or other representative of a party
concerning the litigation.” Id. at 244-245 (emphasis added).
In this case, the memo and many of the documents contained in box thirteen were
privileged under either the attorney-client privilege or work-product doctrine. The Breuder
letter, which was written by attorney Breuder to co-counsel McNeil regarding the August 10,
1999 document production does not appear protected under the work-product doctrine. It
contains no legal strategy, conclusions, opinions, or communications between attorney and
client. Rather, it is a transmittal and confirmation letter between co-counsel regarding a
discovery issue. However, the Hazzard memo and destruction guidelines attached are clearly
work-product as the memo was prepared for the file and the benefit of co-counsel as part of
Hazzard’s investigation into the “missing” 128 boxes. The memo included Hazzard’s mental
impressions, opinions, and conclusions. Additionally, the guidelines are subject to the attorney-7-
client privilege because attorney Harold Noveck prepared the destruction guidelines at the
request of client, Jobete, for the purpose of obtaining legal advice. McCartney, supra. These
documents were contained within the litigation files of attorney Dan Noveck, who testified that
box thirteen contained his personal litigation files. As Noveck testified, the red rope files
contained memoranda and correspondences to and from clients and fellow attorneys that
revealed defendants’ strategies and opinions concerning the litigation, including, (1) a memo
from co-counsel Petrocelli regarding the status and strategy of the cases, (2) a memo from
Petrocelli to defendant Berry Gordy analyzing the case,12 and (3) a letter from former co-counsel
Nelson regarding the viability of the RICO count in plaintiff Edward Holland’s complaint.
Accordingly, the record supports the trial court’s conclusion that many of the documents
contained in box thirteen were confidential and an independent conclusion that many of the
documents in box thirteen were privileged. Thus, we find no abuse of discretion and no error in
the trial court’s failure to conduct an individual document inspection of all the documents
contained in box thirteen.13
3. Crime Fraud Exception
Nevertheless, plaintiffs argue that any claim of privilege in regard to the destruction
guidelines is destroyed by the crime-fraud exception. “The crime-fraud exception to the
attorney-client privilege is predicated on the recognition that where the attorney-client
relationship advances the criminal enterprise or fraud, the reasons supporting the privilege fail.”
People v Paasche, 207 Mich App 698, 705; 525 NW2d 914 (1994). However, the attorneyclient privilege ceases to operate under this exception where the advice from the attorney refers
to future, not past, wrongdoing. Id. In order for the crime-fraud exception to apply, plaintiffs
“must show that there is a reasonable basis to (1) suspect the perpetration or attempted
perpetration of a crime or fraud and (2) that the communications were in furtherance thereof.”
Id. at 707. “This showing must be made without reference to the allegedly privileged material.”
Id.
Here, plaintiffs failed to present any evidence to establish either prong. Indeed, the trial
court made no finding of wrongdoing or fraudulent conduct by defendants, which is supported
by the record. Even if the destruction guidelines could be used as evidence of a crime or fraud,
the evidence presented established that the destruction guidelines were prepared in response to
defendant Jobete’s sale to EMI and were necessary during its downsizing process when storage
facilities containing paper records had to be eliminated. There was evidence presented, and the
trial court found, that no documents relating to these plaintiffs or this case were destroyed.
12
Interestingly, this memo is labeled in bold print, “ATTORNEY WORK PRODUCT” and
“ATTORNEY-CLIENT PRIVILEGE.”
13
A different result may have been reached had plaintiffs’ counsel refrained from reviewing the
disputed documents in box thirteen, notified defendants, and brought the documents to the
attention of the trial court for an in camera determination of whether they were protected by any
privilege and whether the privilege was waived. This approach would have allowed plaintiffs to
preserve the argument of privilege and waiver, while ensuring that they satisfied their ethical
obligations. See Resolution Trust Corp v First of America Bank, 868 F Supp 217, 220 n 3 (WD
Mich, 1994). See discussion, infra.
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Further, there was no evidence presented that any documents were actually destroyed pursuant to
the destruction guidelines. Accordingly, plaintiffs failed to establish that the crime-fraud
exception applies to otherwise privileged documents. See id.
B. Waiver
Next, plaintiffs argue that any claim of privilege, either attorney-client or work-product,
was waived when the documents were voluntarily turned over to plaintiffs and where
defendants’ counsel took no precautionary measures to protect the privilege. The question of
what constitutes a waiver of such privileges is a question of law that we review de novo. Leibel,
supra at 240. Moreover, this Court grants more deference to a trial court’s decision whether the
facts of a particular case demonstrate a valid waiver of the privilege. Id. at 240 n 13. It is well
settled in Michigan that the attorney-client privilege applies where there has been an inadvertent
disclosure of privileged material and an implied waiver of privilege must be judged by standards
as stringent as for a “true waiver.” Id., quoting Franzel, supra at 615-616.14 At the very least,
waiver through inadvertent disclosure requires a finding of no intent to maintain confidentiality
or circumstances evidencing a lack of such intent. Sterling v Keidan, 162 Mich App 88, 96; 412
NW2d 255 (1987). “Thus, a document inadvertently produced that is otherwise protected by the
attorney-client privilege remains protected.” Leibel, supra at 241. Accordingly, defendants’
alleged failure to take reasonable precautions to protect the contents of box thirteen from
disclosure is not enough to find a “true waiver.” Instead, the disclosure must have been an
intentional, voluntary act. See id. at 240-241.
However, the trial court found that defendants did not intentionally or voluntarily
disclose the documents in box thirteen. In fact, the record amply supports the trial court’s
finding that the contents of box thirteen were inadvertently produced. Defendants’ counsel
testified that the documents were not intentionally produced. When defendants’ learned of the
inadvertent production, they immediately contacted plaintiffs’ counsel and requested the return
of the documents. Other than the mere fact that the documents were turned over, there is no
evidence in the record that discloses that defendants intentionally produced box thirteen.
Further, the testimony of Bishoff and John and their actions in obtaining the documents reflect
that they were aware that the documents were likely not intentionally produced. Bishoff testified
that in the course of reviewing the red well folders, he considered the possibility that he was
looking at his adversaries’ legal files and that they were likely privileged. Nonetheless, at John’s
instructions, Bishoff took extensive handwritten notes on the documents and had them copied.
Interestingly, John instructed Bishoff as such because he thought the documents would not “see
the light of day” again. Accordingly, this Court finds no clear error in the trial court’s finding
that defendants inadvertently produced box thirteen. As such, the trial court properly rejected
plaintiffs’ argument regarding waiver.
C. Ethical Misconduct
14
“A ‘true waiver’ requires ‘an intentional, voluntary act and cannot arise by implication’ or ‘the
voluntary relinquishment of a known right.’” Leibel, supra at 241.
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This brings our analysis to the propriety of the trial court’s ruling regarding plaintiffs’
ethical misconduct.15 The trial court found that plaintiffs had committed a “clear absolute
violation” of ABA Formal Opinion 92-368 when they examined and copied the documents
without notifying defendants’ counsel. On cross-appeal, plaintiffs argue that there is no basis for
the trial court’s finding of ethical violations because ABA opinion 92-368 does not apply in this
case and Michigan authority does not impose an ethical duty to notify defendants of the
voluntary production of court ordered documents or to return the documents after they have been
voluntarily produced.
In Resolution Trust Corp v First of America Bank, 868 F Supp 217 (WD Mich, 1994), the
court was presented with the defendant’s motion for a protective order, in connection with a
privileged and confidential letter inadvertently sent to the plaintiff’s attorney by the defendant’s
law firm. Id. at 218. The letter was clearly labeled on its face “privileged and confidential,” was
addressed to a senior vice president of the defendant, contained the caption of the case, and
detailed defense strategy.16 Id. The trial court found that the plaintiff’s attorney would be
required to destroy the original letter, all copies of the letter, and all notes relating to the letter,
but denied the defendant’s motion to disqualify the plaintiff’s counsel. Id. at 220-221.
In reaching its decision, the district court also relied on ABA Formal Opinion 92-368,
noting that the State of Michigan has largely drawn its Rules of Professional Conduct from the
American Bar Association Model Rules of Professional Conduct. ABA Formal Opinion 92-368
advises that
[a] lawyer who receives materials that on their face appear to be subject to the
attorney-client privilege or otherwise confidential, under circumstances where it
is clear they were not intended for the receiving lawyer, should refrain from
examining the materials, notify the sending lawyer if the sending lawyer remains
ignorant of the problem and abide the sending lawyer’s direction as to how to
treat the disposition of the confidential materials. [Id. at 219, quoting Inadvertent
Disclosure of Confidential Materials, ABA Form Op., 93-368 (emphasis added).]
Agreeing with the reasoning and conclusion in ABA Formal Opinion 92-368, the district court
found that
common sense and a high sensitivity toward ethics and the importance of
attorney-client confidentiality and privilege should have immediately caused the
plaintiff’s attorneys to notify defendant’s counsel of his office’s mistake. The
lawyers who received the document must have known by the markings and the
contents of the document that a clerk or secretary in the defendant’s lawyer’s
15
In deciding this issue, we do not include any conduct on the part of Hallison Young, counsel
for plaintiff Brian Holland, as there is no dispute that Young was never privy to these documents
nor any pre-hearing discussions about the documents.
16
Although plaintiff’s counsel reviewed the letter and concluded that the attorney-client
privilege was waived, “out of a sense of fairness,” he notified defendant’s counsel that plaintiff
had the letter. Resolution Trust, supra at 218.
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office mistakenly included the privileged letter within the documents intended for
the plaintiff’s lawyers. Thus, plaintiff’s lawyers must have known that neither the
defendant nor its lawyer intended to waive the attorney-client privilege. [Id. at
220.]
The district court added that “[w]hile lawyers have an obligation to vigorously advocate the
positions of their clients, this does not include the obligation to take advantage of a clerical
mistake in opposing counsel’s office where something so important as the attorney-client
privilege is involved.” Id. at 220.
We find Resolution Trust, supra, highly persuasive and analogous to the facts and
circumstances present in the instant appeal. Accordingly, applying the Resolution Trust
reasoning to the case at hand, we conclude that after even a cursory review of box thirteen’s
contents, plaintiffs’ counsel should have refrained from reviewing the remaining documents in
box thirteen and notified defendants that box thirteen was among the other discovery materials.
Similar to the facts in Resolution Trust, plaintiffs’ counsel should have known by the physical
appearance and initial contents of box thirteen that it was inadvertently included with the other
twelve boxes of documents assembled for the August 10, 1999 production. Box thirteen and the
red rope files within it looked physically different from the rest of the boxes. On cursory
inspection of the documents in the red folders, Bishoff was immediately aware of the possibility
that he was looking at his adversaries’ confidential legal files and had concerns regarding
whether he was entitled to make copies of them. The files were clearly labeled as
“correspondences” to clients and other defense attorneys with the caption of the particular case
on each file. The files contained letters to clients and memorandum to co-counsel in the case. In
fact, the very first document in the file, labeled “Edward Holland Correspondence 2,” which is
the first file on the stack in the box, is a memo to other counsel detailing the history of the case
and concluding with a detailed analysis of the viability of plaintiff Edward Holland’s fraud
claim.17 Further, it is implausible that plaintiffs believed that defendants’ counsel intentionally
produced an entire box of their confidential and privileged litigation files. Notably, plaintiffs’
counsel’s actions following the discovery of box thirteen do not support their contention that
they believed the documents were intentionally produced. Thus, plaintiffs’ counsel must have
known that neither defendants nor their lawyers intended to disclose the documents or waive any
applicable privilege.
Thus, because plaintiffs’ received materials that on their face appeared to be subject to
the attorney-client privilege or that were otherwise confidential, under circumstances where it
was clear they were not intended for plaintiffs, plaintiffs’ counsel should have refrained from
examining the materials, notified defendants’ counsel at Dickinson, and abided defendants’
instructions until the issue was raised and addressed by the trial court. However, as the trial
court noted, plaintiffs did not take even the first step. Consequently, we find no error in the trial
court’s decision regarding plaintiffs’ ethical misconduct, including its findings of fact or
17
It should also be noted that three documents later in the file is the memo from Petrocelli to
Noveck and midway through the file is the client letter to defendant Gordy. Thus, the privileged
and confidential nature of the files was immediately evident upon a cursory review of the first
file in the box.
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application of the law to the facts. As such, the trial court correctly found that plaintiffs’ counsel
had committed ethical violations and properly required the return of all the documents in box
thirteen and the Breuder letter to defendants and the destruction of any and all notes or
memorandum relating to the documents.
Simultaneously, for several reasons we reject plaintiffs’ arguments that even if ABA
Formal opinion did apply, it was not clear on the face of the documents that any privilege applied
or that the documents were produced under circumstances that made it clear that the documents
were not intended for plaintiffs. First, the nature and contents of many of the documents
themselves should have caused plaintiffs’ counsel to realize that they were likely not
intentionally disclosed. Second, the testimony and actions of plaintiffs’ counsel, particularly
Bishoff and John, belie such an argument. Furthermore, it is not necessary that the documents be
expressly marked “confidential” or “privileged” in order for it to be clear that a privilege may
apply. As noted, the appearance and contents of the documents in this case clearly indicated the
privileged and confidential nature of the files – letters from attorney to client, memos to other
members of the defense team. See Resolution Trust, supra at 220. Last, as plaintiffs correctly
point out, this was not a situation involving the inadvertent disclosure due to a wrong email
address or hitting the wrong number on a fax machine, but it was also not a case where plaintiffs
ran across a few privileged documents among tens of thousands of unprivileged ones. Rather,
the confidential and privileged documents in this case were roped together in red well folders in
a completely separate box apart from the twelve boxes subject to discovery. See Resolution
Trust, supra at 220. Therefore, plaintiffs’ arguments are without merit.
While challenging the applicability of ABA Formal Opinion 92-368, plaintiffs argue that
the applicable Michigan authority does not impose a duty to return the documents, specifically
the Hazzard memo and the attached destruction guidelines, in this case. Plaintiffs rely on
Michigan ethics opinion CI-970, which states:
A lawyer who comes into possession of an internal private memorandum of the
opposite party during litigation, provided that the lawyer or client did not procure
or participate in the removal of the documents, may use the memorandum at trial
to impeach the opposite party’s witness if the court permits. Mere possession by
a lawyer of the opposite party’s internal private memorandum does not require the
lawyer to withdraw from representation of the client.18
We conclude that this opinion does not apply under the circumstances of this case. Opinion CI970 contemplates a situation where the client or the lawyer innocently “comes into possession”
of an “internal private memorandum of the opposite party.” It does not distinguish a confidential
18
This opinion arose out the following fact situation:
The claimant in civil rights litigation against a county unit of government comes
into possession of an internal evaluation document of the opposing party and
advises his lawyer. Neither the client nor the lawyer has had anything to do with
the removal of the document, described as “an internal self-evaluating and critical
report by the county’s affirmative action officer.” [Michigan Ethics Opinion, CI970 (10/5/83).]
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or privileged document sent to counsel inadvertently from a document purposefully sent by an
unauthorized sender, Resolution Trust, supra at 220, nor does it specifically refer to privileged
communications. Id. Further, CI-970 applies when the lawyer or client did not procure or
participate in the removal of the document.
In our case, plaintiffs’ counsel did not obtain possession of the documents by way of an
unauthorized sender. Second, the facts of this case do not involve the intended transmission of a
single report such as an internal evaluation document prepared by defendant’s officer, but rather
the inadvertent production of an entire box of lawyer’s litigation files containing privileged
documents. More importantly, plaintiffs’ counsel procured or participated in the removal of the
documents. Indeed, plaintiffs’ counsel “rifled” through the files, took verbatim notes, and had
photocopies made, which Bishoff took with him and faxed to co-counsel. Thus, the Michigan
Opinion is distinguishable as it addresses a different scenario than does ABA Formal Opinion
92-368.19
Additionally, the unsolicited receipt of an internal private memorandum is
distinguishable from the inadvertent disclosure of confidential and privileged documents,
especially considering the vital importance of the attorney-client privilege. See Leibel, supra at
237; Inadvertent Disclosure of Confidential Materials, ABA Form Op., 93-368. Accordingly,
plaintiffs’ argument that the trial court erred in applying ABA Formal Opinion 92-368 and
requiring the return of all the disputed documents and disallowing plaintiffs from making use of
them in the proceedings must fail.20
D. Disqualification
Having determined that the trial court did not err in concluding that plaintiffs’ counsel
committed ethical violations in this case, the next question for the trial court was “what to do
19
However, there appears to be a direct conflict between Michigan Opinion CI-970 and ABA
Formal Opinion 94-382, which provides:
A lawyer who receives on an unauthorized basis materials of an adverse party that
she knows to be privileged or confidential should, upon recognizing the privileged
or confidential nature of the materials, either refrain from reviewing such
materials or review them only to the extent required to determine how
appropriately to proceed; she should notify her adversary’s lawyer that she has
such materials and should either follow instructions of the adversary’s lawyer
with respect to the disposition of the materials, or refrain from using the materials
until a definitive resolution of the proper disposition of the materials is obtained
from a court. [Unsolicited Receipt of Privileged or Confidential Materials, ABA
Form Op., 94-382.]
20
ABA Formal Opinion 92-368 may also be applicable because the ABA’s interpretations are
binding on ABA members and several of plaintiffs’ counsel are members of the ABA. See
Resolution Trust, supra at 221 (district court noted that even though there is an arguable conflict
between Michigan’s interpretation of the rules and the ABA’s interpretation, the ABA’s
interpretations are binding on ABA members).
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about it.” See Resolution Trust, supra at 220. Defendants argue that the trial court erred in
failing to disqualify plaintiffs’ counsel. Although this is a much closer question, we are not
persuaded that such a result is mandated. A rule of automatic disqualification in cases of
inadvertent disclosure or ethical misconduct can constitute a “dangerous doctrine.” Smith v ArcMation, Inc, 402 Mich 115, 188; 261 NW2d 713 (1978) (finding that if any arguable question
regarding the propriety of a lawyer continuing to appear in a case constitutes disqualification, it
puts in the hands of an adversary the ability to force an opponent to change counsel if the
adversary can advance any grounds for disqualification). Instead, a decision to disqualify must
be based on a factual inquiry of each case, which is reviewed under a clearly erroneous standard.
Kalamazoo v Michigan Disposal Service Corp, 125 F Supp 2d 219, 223 (WD Mich, 2000), aff’d
151 F Supp 2d 913 (WD Mich, 2001) (citations omitted).
The disqualification of plaintiffs’ counsel is a drastic and extraordinary measure.
“[C]ourts have been reluctant to disqualify attorneys because of the severe
consequences of a disqualification. This reluctance stems from the fact that
disqualification has an immediate adverse effect on the client by separating him
from the counsel of his choice. Also, many times such motions are made for
tactical, not substantive, reasons and will most likely cause delay in the litigation.
Thus, when deciding on a motion for disqualification, a court should proceed with
caution.” [Milford Power Ltd Partnership v New England Power Co, 896 F Supp
53, 58 (D Mass, 1995) (citations omitted).]
With these principles in mind, we hold that the trial court did not clearly err in declining
to disqualify plaintiffs’ counsel. A court has the authority and responsibility of supervising the
professional conduct of the attorneys who appear before it. Id. In some instances, “[t]he receipt
of privileged documents is grounds for disqualification of the attorney receiving the documents
based on the unfair tactical advantage such disclosure provides,” Abamar Housing and
Development, Inc v Lisa Daly Lady Décor, Inc, 724 So 2d 572, 573 (Fla 3rd DCA, 1998)
(disqualification of counsel warranted where plaintiffs’ counsel failed to rectify an inadvertent
disclosure of privileged documents, gaining an unfair tactical advantage), while in other cases,
the trial court will opt for a lesser sanction. Southeast Banking Corp v FDIC, 212 BR 386, 395
(SD Fla, 1997) (a court has the authority to preserve the integrity of its judicial proceedings and
impose reasonable and appropriate sanctions on errant attorneys practicing before it or attorneys
who show bad faith).
Here, the trial court determined that defendants could be protected from any prejudice
resulting from the disclosure of box thirteen. See Resolution Trust, supra at 220-221 (a finding
of substantial prejudice is required in cases of inadvertent disclosure). In fact, the trial court
reserved the right to change its ruling if it was later established that plaintiffs had gained a
tactical advantage by the disclosure. Moreover, discovery has been completed, which reduces
the opportunity to utilize information gained from the documents to obtain other information.
Additionally, a motion for costs and attorney fees is pending before the trial court and
presumably will be acted upon on remand. For these reasons, we conclude that the trial court
provided and will continue to provide an adequate remedy for defendants. We are confident that
the trial court will closely monitor plaintiffs’ counsel through the remainder of the proceedings in
this case and to the extent defendants establish the requisite prejudice, the trial court will disperse
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an adequate remedy. Again, as previously noted, a motion for attorney fees is pending, which
may compensate defendants for their counsel’s time in resolving this matter.
Although the conduct of plaintiffs’ counsel was egregious, we are not persuaded that
disqualification is the prudent course at this time. This case involves not only plaintiffs’
acquisition of the documents, but their conduct in concealing it from defendants, refusing to
return the documents at defendants’ request, and thereafter failing to admit to the trial court that
they possessed not just the letter and the memo, but an entire box of defendants’ litigation files.
We remind plaintiffs’ counsel of the importance of professional ethics in the practice of law:
[I]nvolved here is a matter of maintaining the highest standards of professional
conduct required to avoid the appearance of impropriety. As members of a
profession in which public reliance and trust is so essential and whose members’
integrity must be assured to maintain vital public respect, we as attorneys must
recognize the importance of a high standard by which our conduct is measured.
[GAC Commercial Corp v Mahoney Typographers, Inc, 66 Mich App 186, 191192; 238 NW2d 575 (1975).]
Plaintiffs’ counsel had an ethical duty to promptly notify defendants’ counsel of the
production of box thirteen without exercising any unfair advantage. Because they failed to
follow the dictates of the ABA ethics opinion regarding inadvertent disclosures and acted in bad
faith, the trial court’s finding of ethical misconduct is justified. However, plaintiffs’ counsel’s
ethical misconduct under the specific facts of this case does not warrant disqualification as long
as defendants can be protected from any resulting prejudice. Therefore, the trial court did not
clearly err in failing to grant the requested relief.
Plaintiff Brian Holland cross-appeals, specifically arguing that the trial court erred in
failing to exclude him from its ruling regarding defendants’ motion for disqualification when
Holland’s counsel had no knowledge of the contents of the documents contained in box thirteen
and did not receive or review such documents. We disagree, but are careful to point out that it is
not because of any improper conduct on the part of Young. Rather, although the trial court
correctly found that Young committed no ethical wrongdoing, he was still not entitled to keep
the documents or notes taken therefrom as the confidential and privileged documents were
inadvertently produced. Due to the above resolution of the issues, the trial court did not err in
concluding that Young should not be excluded from the trial court’s ruling ordering the
destruction of all notes and memorandum relating to the documents in box thirteen. Further, the
trial court did not commit any other errors with respect to plaintiff Brian Holland or his counsel.
V. Default Judgment
Last, plaintiffs argue that the trial court erred in denying their motion for sanctions and
default judgment when defendants’ failed to comply with discovery orders and intentionally
destroyed relevant and material documents requested by plaintiffs. We disagree. We review a
trial court’s decision whether to grant a default judgment as a sanction for discovery abuses for
an abuse of discretion. Frankenmuth Mut Ins Co v ACO, Inc, 193 Mich App 389, 396-397; 484
NW2d 718 (1992).
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Plaintiffs argue that the trial court erred in failing to grant its motion for sanctions,
particularly the sanction of default against defendants when defendants interfered with and
obstructed the discovery process and violated court discovery orders by intentionally destroying
relevant and material documents. The following principles apply with regard to the imposition
of a default judgment:
Default judgment is a possible sanction for discovery abuses. It is, however, a
drastic measure and should be used with caution. When the sanction of a default
judgment is contemplated, the trial court should consider whether the failure to
respond to discovery requests extends over a substantial period of time, whether
there was a court order directing discovery that has not been complied with, the
amount of time that has elapsed between the violation and the motion for default
judgment, and whether willfulness has been shown. The court must also evaluate
on the record other available options before concluding that a drastic sanction is
warranted. The sanction of default judgment should be employed only when
there has been a flagrant and wanton refusal to facilitate discovery, that is, the
failure must be conscious or intentional, not accidental or involuntary. [Id.]
In this case, the trial court did not find that defendants had committed any discovery
abuses, even in the face of the destruction guidelines, which defendants explained were created
in order to assist defendant Jobete in its downsizing process. Nor does the record support such a
finding. In fact, the record establishes that defendants produced plaintiffs’ requested documents,
some on more than one occasion, and complied with the trial court’s discovery orders. As the
trial court found in support of its decision, the testimony of Dan Noveck established that
numerous boxes of documents were made available to plaintiffs’ attorneys on more than one
occasion, but plaintiffs did not show up to review them.
Second, there is no evidence in the record that defendants willfully destroyed or
concealed documents subject to discovery with the intent to defraud plaintiffs. As previously
discussed, defendants produced numerous boxes for plaintiffs’ review, including the “128 boxes”
disputed by plaintiffs. Defendants explained the disposition of the documents requested by
plaintiffs and produced what documents existed. Indeed, defendants’ counsel explained that
several categories of documents requested by plaintiffs never existed. The evidence also
established that the documents requested by plaintiffs in the 128 boxes would not have come
within the categories of documents to be destroyed under the destruction guidelines, and
therefore, would not have been destroyed under the destruction guidelines. Further, the trial
court found that it did not order a company-wide document production encompassing the
categories of documents involved in the destruction guidelines. In any event, defendants
presented evidence that all the information contained in the documents allegedly lost or
destroyed is saved and available on computer system and can be regenerated. Accordingly, the
trial court did not abuse its discretion or otherwise err in refusing to grant plaintiffs’ motion for
sanctions.
Affirmed.
/s/ Peter D. O’Connell
/s/ E. Thomas Fitzgerald
/s/ Christopher M. Murray
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