Burch & Cracchiolo, P.A. v. Myers

• Decision Date: 04 June 2015
• Docket Number: No. 1 CA–SA 15–0013.,1 CA–SA 15–0013.
• Citation: 351 P.3d 376,714 Ariz. Adv. Rep. 21,237 Ariz. 369
• Parties: BURCH & CRACCHIOLO, P.A. ; Michelle A. Lund; Kristen Lund Olson; Karen Page, Petitioners, v. The Honorable Robert D. MYERS and The Honorable Edward Bassett, Judges of the Superior Court of the State of Arizona, in and for the County of Maricopa, Respondent Judges, Bradford D. Lund, Real Party in Interest.
• Court: Arizona Court of Appeals

237 Ariz. 369

351 P.3d 376

714 Ariz. Adv. Rep. 21

BURCH & CRACCHIOLO, P.A. ; Michelle A. Lund; Kristen Lund Olson; Karen Page, Petitioners

v.The Honorable Robert D. MYERS and The Honorable Edward Bassett, Judges of the Superior Court of the State of Arizona, in and for the County of Maricopa, Respondent Judges

Bradford D. Lund, Real Party in Interest.

No. 1 CA–SA 15–0013.

Court of Appeals of Arizona, Division 1.

June 4, 2015.

Osborn Maledon PA By Mark I. Harrison, Chelsea Sage Durkin, Nathan Arrowsmith, Phoenix, Counsel for Petitioners.

Shumway Law Offices PLC By Jeff A. Shumway, Scottsdale, Counsel for Real Party in Interest.

Judge KENTON D. JONES delivered the opinion of the Court, in which Presiding Judge JOHN C. GEMMILL and Judge SAMUEL A. THUMMA joined.

OPINION

JONES, Judge:

¶ 1 Burch and Cracchiolo (B & C), along with its clients, Michelle Lund, Kristen Lund Olson, and Karen Page (collectively, Petitioners), bring this special action challenging the trial court's order disqualifying B & C from continuing to represent Petitioners in the underlying action seeking the appointment of a guardian and conservator for the real party in interest, Bradford Lund. We are asked to address a question left unresolved by our supreme court in Lund v. Myers, 232 Ariz. 309, 313, ¶ 20, 305 P.3d 374 (2013) : whether a party moving to disqualify opposing counsel, premised upon opposing counsel's knowing use of documents containing privileged information inadvertently disclosed to him, waives the attorney-client privilege with respect to those documents. Holding the moving party does not, we accept jurisdiction but deny relief.

FACTS AND PROCEDURAL HISTORY

¶ 2 The ongoing litigation between these parties includes a baker's dozen of special actions, one direct appeal, and two petitions for review. The relevant facts, however, are largely uncontested.

¶ 3 In February 2006, Bradford filed a petition to create a guardianship for himself. In April 2006, the law firm of Jennings, Strouss & Salmon (JS & S) appeared on behalf of Bradford and withdrew the petition.

¶ 4 In October 2009, Petitioners, through B & C, filed the underlying action seeking the appointment of a guardian, conservator, guardian ad litem, and next friend for Bradford. Bradford, along with his father and stepmother, opposed the petition.

¶ 5 On September 19, 2011, B & C, through attorney Bryan Murphy, served JS & S with a subpoena duces tecum, seeking the production of all non-privileged information relating to, among other things, Bradford's 2006 guardianship petition. In response to the subpoena, and premised upon the erroneous assumption of JS & S that Murphy was taking over as Bradford's counsel,¹ JS & S delivered a copy of its entire client file to Murphy the next day without first conducting a privilege review of its contents. Upon receipt of the client file, Murphy briefly scanned the materials, made a copy of a diagram related to a proposed trust, and turned the file over to his paralegal.

¶ 6 On October 3, 2011, Jeff Shumway, Bradford's then-current counsel, learned of JS & S's disclosure. He immediately emailed Murphy to say the client file contained at least two, but possibly more, privileged documents and to request their return. Shumway further advised he would review the remainder of the client file to determine if it contained other privileged materials. Murphy quickly responded that he had not “studied the materials with an eye toward privilege issues” and would await word from Shumway regarding any other privileged documents. Shumway ended the email exchange by telling Murphy he believed the documents he had identified were privileged, and would follow up with Murphy about “any other documents once [he saw] the file.”

¶ 7 Nearly three weeks later, having heard nothing further from Shumway, Murphy distributed the entire client file, including the documents Shumway had identified as privileged, to all parties to the action as part of a supplemental disclosure statement.² See Ariz. R. Civ. P. 26.1(a)-(b). Murphy also used the trust diagram he had copied in support of two separate discovery motions.

¶ 8 On November 14, 2011, Bradford moved to disqualify B & C from representing Petitioners, claiming B & C had gained an unfair and improper advantage in the litigation by reviewing and using the privileged materials contained in the client file. Bradford also filed a motion seeking to prevent B & C from submitting the inadvertently disclosed documents to the trial court for an in camera review pursuant to Arizona Rule of Civil Procedure 26.1(f)(2).

¶ 9 In preparation for his defense against Bradford's motion to disqualify, and in apparent disregard of the asserted privilege claim, Murphy reviewed, in detail, the entire client file, making handwritten notes and preparing an index. Meanwhile, the trial court ordered JS & S to create and file a privilege log, briefly describing each document in the client file believed to be privileged and the basis for each privilege claim. JS & S ultimately identified nearly fifty documents, representing more than 100 pages of the approximately 250 pages disclosed, which were subject to a claim of attorney-client privilege or work-product protection.³ The court also ordered JS & S to file the specified documents with the court to facilitate resolution of the privilege claims.

¶ 10 In Lund v. Myers, our supreme court held that a party erroneously receiving documents for which a later privilege claim is made may present the information to the court under seal to resolve the privilege dispute. 232 Ariz. at 311–12, ¶ 13, 305 P.3d 374 (citing Ariz. R. Civ. P. 26.1(f)(2)). Once filed, the court should then “determine[ ], as to each document, [whether] in camera review is necessary to resolve the privilege claim. Such review may be required if the receiving party makes a factual showing to support a reasonable, good faith belief that the document is not privileged.” Id. at 312, ¶ 15, 305 P.3d 374 (citing United States v. Zolin, 491 U.S. 554, 572, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989), and Kline v. Kline, 221 Ariz. 564, 573, ¶ 35, 212 P.3d 902 (App.2009) ). Therefore, on remand, the trial court was to allow B & C to respond to the privilege log and “consider[ ] the parties' arguments regarding privilege and waiver to determine whether in camera review was warranted for particular documents.” Id. at 312, 313, ¶¶ 18, 21, 305 P.3d 374. The supreme court declined to comment upon “whether, by seeking disqualification, Bradford waived the attorney-client privilege.” Id. at 313, ¶ 20, 305 P.3d 374. In the interim, and before the supreme court's decision, B & C returned the physical client file to JS & S, along with a compact disc containing an electronic copy that was apparently prepared by or at the direction of B & C.

¶ 11 In August 2013, JS & S filed an updated privilege log with the trial court, and the court appointed a Special Master to determine whether in camera review of the documents was necessary, and, if so, whether the documents contained privileged information. See generally Ariz. R. Civ. P. 53(a)(1). The Special Master first determined Bradford's motion to disqualify acted as a limited waiver of privilege as to the client file that allowed the court (and its agent, the Special Master), to view the documents and determine the merits of the motion, but concluded the motion did not waive Bradford's privilege as to B & C. Then, after considering the parties' positions, the Special Master identified certain documents that did not require in camera review because B & C had not made a proper showing “to support a reasonable, good faith belief that [certain] document[s were] not privileged,” id. at 312, ¶ 15, 305 P.3d 374, effectively sustaining the claim of privilege for a significant number of the documents without resorting to in camera review. Over the parties' objections, see Ariz. R. Civ. P. 53(h), the court adopted and affirmed the Special Master's findings and reports.

¶ 12 In June 2014, the trial court transferred the motion to disqualify to Judge Edward Bassett for ruling.⁴ The Special Master conducted an initial in camera review of the documents that remained in dispute, and in July 2014, issued his report setting forth findings of privilege as to each document. Then, following oral argument, review of the Special Master's reports, and an independent review of the documents submitted in camera, Judge Bassett found B & C had violated Arizona Rule of Civil Procedure 26.1(f), and that its receipt and review of the documents had prejudiced Bradford by providing it with a tactical advantage in the litigation. Specifically, while acknowledging some of the privileged documents did not confer any advantage to B & C, Judge Bassett concluded the client file included notes of conversations between Bradford and his former counsel that “contain[ed] assessments of strengths as well as weaknesses in his litigation position,” and provided an “obvious and significant” advantage to B & C. Judge Bassett explicitly rejected Petitioners' argument that they were unable to defend against the prejudice claim without further access to the documents, concluding instead that “[t]he determination of prejudice can and should be made by the Court through its own in camera review of the privileged documents.” Noting neither party had identified any other adequate remedy, Judge Bassett granted Bradford's motion to disqualify B & C from further representation of Petitioners in this matter. This special action followed.

JURISDICTION

¶ 13 An appellate court's decision to exercise special action jurisdiction is highly discretionary. State Comp. Fund of Ariz. v. Fink, 224 Ariz. 611, 612, ¶ 4, 233 P.3d 1190 (App.2010) (citing Snyder v. Donato, 211 Ariz. 117, 119, ¶ 6, 118 P.3d 632 (App.2005) ). Here, we accept special action jurisdiction because Petitioners have no equally plain, speedy, and adequate remedy by appeal. See Sec. Gen. Life Ins. Co. v. Superior Court, 149 Ariz....