Inadvertent disclosure waives privilege

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“The rule is necessary if the gears of the law are not to be embedded in the intractable sand of continual second-guessing and … attendant evidentiary hearings.” Judge Ralph Adam Fine Wisconsin Court of Appeals

An attorney’s volitional act of transmitting documents to another party pursuant to a discovery request waives the attorney-client privilege in those documents, the Wisconsin Court of Appeals held on June 10.

Attorney Robert L. Elliott was retained by Beth Bauer and other family members who were plaintiffs in an intrafamily dispute. During the litigation, he turned over various documents that he determined were responsive to the defendants’ discovery request.

The plaintiffs later contended that some of the documents were protected from disclosure by the attorney-client privilege. The defendants asserted that the plaintiffs had waived whatever privilege they had.

Pursuant to Rule 805.06, Mil-waukee County Circuit Court Judge Dominic S. Amato referred the dispute to a referee, Theodore J. Hodan, who concluded that the plaintiffs had waived the privilege.

The referee concluded that Bauer did not agree to turning over the documents, but did give Elliott authority to respond to discovery requests. The referee further found that release of the documents was not an inadvertent mistake, but the result of Elliott’s conclusion that the documents were not privileged.

The trial court adopted the findings of fact, but disagreed with the referee’s conclusion, holding, “Elliott could not waive the Plaintiffs’ attorney/client privilege,” as to the documents because, “the law in Wisconsin is only the client can waive attorney/client communications.”

The court of appeals accepted interlocutory review, and reversed in a decision written by Judge Ralph Adam Fine, and joined by Judge Paul Lundsten. Judge Ted Wedemeyer dissented.

Two Precepts

Concluding that the rules governing inadvertent disclosure do not apply, the court based its conclusion that the privilege was waived on two precepts. First, under ordinary attorney-client agency principles, compliance with discovery requests is something that the client delegates to the attorney.

Second, the formulation of waiver by Johnson v. Zerbst, 304 U.S. 458, 464 (1938), as the intentional relinquishment of a known right, does not apply to waiver of evidentiary privileges. The court noted that the Federal Advisory Committee notes to proposed Fed R. Evid. 511, which was adopted in Wisconsin as Rule 905.11, observed that, “once confidentiality is destroyed through voluntary disclosure, no subsequent claim of privilege can restore it, and knowledge or lack of knowledge of the existence of the privilege appears to be irrelevant.”

Agency

The court relied on the Restatement for the authority that a client is bound by his lawyer’s actions when “the client has expressly or impliedly authorized the act.” Restatement (Third) of The Law Governing Lawyers sec. 26 (1998).

The Restatement also provides, “A lawyer’s act is considered to be that of the client in proceedings before a tribunal or in dealings with a third person if the tribunal or third person reasonably assumes that the lawyer is authorized to do the act on the basis of the client’s (and not the lawyer’s) manifestations of such authorization.” Id., at sec. 27.

The court found that creation of the attorney-client relationship itself constitutes manifestation of authorization, “unless other facts apparent to the third person show that the lawyer’s authority is narrow.” Id., at sec. 27, cmt. a.

The court concluded, “Although this ‘creates a risk that a client will be bound by an act the client never intended to authorize,’ the rule is necessary if the gears of the law are not to be embedded in the intractable sand of continual second-guessing and the attendant evidentiary hearings that, as the referee here recognized, would inevitably follow. (cite omitted).”

The court also noted that the attorney-client agency rule in Wisconsin mirrors that recognized by the Restatement, citing Johnson v. Allis Chalmers Corp., 162 Wis. 2d 261, 283-284, 470 N.W.2d 859, 867-868 (1991), and quoting in part, “Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent.”

Waiver

The general rule of waiver in Wisconsin is set forth in Rule1 905.11: “A person upon whom this chapter confers a privilege against disclosure of the confidential matter or communication waives the privilege if the person or his or her predecessor, while holder of the privilege, voluntarily discloses or consents to disclosure of any significant part of the matter or communication. This section does not apply if the disclosure is itself a privileged communication.”

At issue was the meaning of the word, “voluntary.” The plaintiffs contended that the word “voluntary” was qualified by the requirement that it be both volitional and knowing — that there could be no waiver without the intentional relinquishment of a known right.

The court rejected the argument, however, again noting that Johnson v. Zerbst does not apply to the waiver of evidentiary privileges. Accordingly, the court concluded, “if the ‘holder of the privilege,’ namely the client, ‘voluntarily discloses’ a communication shielded by the attorney-client privilege, that disclosure need only be volitional. Given the attorney-client agency relationship, the same rule applies to disclosure by the client’s attorney.”

Again, the court cited the Restatement, which provides, “The disclosing person need not be aware that the communication was privileged, nor specifically intend to waive the privilege,” and “disclosure through a voluntary act constitutes a waiver even though not intended to have that effect.” Restatement sec. 79, cmts. g & h.
The court also cited federal court precedent in a similar case, where, as here, the attorney turned over documents pursuant to discovery that later were determined to be potentially privileged, In re Grand Jury Investigation of Ocean Transportation, 604 F.2d 672 (D.C. Cir. 1979) (per curiam), cert. denied sub nom Sea-Land Services, Inc. v. United States, 444 U.S. 915.

The court there held, “This must be deemed a complete waiver. Original counsel’s responsibility was to determine the privileged status of Sea-Land’s documents. Its decisions in this regard were binding on its client. Privilege claims cannot be reopened by retaining new counsel who read the privilege rules more broadly than did their predecessor.” Id., 604 F.2d at 674.

Dudek

The court then distinguished the cases of State ex rel. Dudek v. Circuit Court, 34 Wis.2d 559, 150 N.W.2d 387 (1967), and Swan Sales Corp. v. Jos. Schlitz Brewing Co., 126 Wis.2d 16, 374 N.W.2d 640 (Ct.App.1985), which explicitly hold that only the client may waive the attorney-client privilege.

The court concluded, “Neither Dudek nor Swan Sales dealt with the situation presented here: the volitional transmission of documents by a lawyer, pursuant to a discovery request, who was authorized by his client to deal with discovery matters. Moreover, in both Dudek and Swan Sales, the lawyers asserted the attorney-client privilege the moment the other side sought to invade the privilege; neither lawyer transmitted or disclosed confidential attorney-client-privilege material.”

The court of appeals dismissed the statements that only the client can waive the privilege as merely dicta, concluding, “observations that are neither essential to the opinion in which they appear nor ‘judicial acts’ by a ‘court of last resort’ should not be allowed to leak from the container of matters actually decided and affect issues not envisioned by the authors of that dicta.”

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Accordingly, the court held that the privilege was waived, and reversed.

Wedemeyer’s Dissent

Judge Wedemeyer dissented, arguing, “we must still adhere to the applicable Supreme Court precedent regardless of our disagreement with it. In addition to being obligated to follow the applicable Supreme Court precedent, this court is precluded from adopting and/or applying rules from foreign jurisdictions that contradict the Wisconsin Supreme Court precedent. (cites omitted).”

Wedemeyer concluded that the court was therefore bound by the statements in Dudek and Swan Sales that only the client has the authority to direct the attorney to waive the attorney-client privilege.

Wedemeyer found, “Clearly, Ms. Bauer, as the client, never consented to waiving her attorney-client privilege; therefore, such privilege, under the laws of the State of Wisconsin, could not have been waived.”

Wedemeyer added, “In reversing the referee’s decision, the circuit court applied the standard currently espoused by the Wisconsin Supreme Court. The circuit court correctly concluded that it is bound to follow and apply Wisconsin law. As a result, the circuit court was forced to amend the referee’s conclusions of law to accurately reflect proper Wisconsin precedent. In my opinion, we are bound to follow the existing precedent until the Wisconsin Supreme Court concludes otherwise.”

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David Ziemer can be reached by email.