CHILDREN'S TRUST v. LINDA GALE SAMPSON 1979 TRUST

• Decision Date: 10 June 2003
• Docket Number: No. 02-1515.,02-1515.
• Parties: HAROLD SAMPSON CHILDREN'S TRUST, a trust maintained for the benefit of Beth Bauer, Jamie L. Sherman, and Kay Yuspeh, and each of them individually as Plaintiffs, and The Beth Bauer Trust, The Jamie L. Sherman Trust and The Kay Yuspeh Trust, Plaintiffs-Respondents, v. The LINDA GALE SAMPSON 1979 TRUST, The Steven J. Sampson 1979 Trust and The Scott A. Sampson 1979 Trust, which are the successors to the B.J. Sampson Children's Trust, a trust maintained for the benefit of Linda Gale Sampson, Scott Sampson, and Steve Sampson, and Sampson Investments, Ann Mandelman, and Nancy Simos, Defendants-Third-Party Plaintiffs-Appellants, v. Beth BAUER, Third-Party Defendant.
• Court: Wisconsin Court of Appeals

265 Wis.2d 803

2003 WI App 141

667 N.W.2d 831

HAROLD SAMPSON CHILDREN'S TRUST, a trust maintained for the benefit of Beth Bauer, Jamie L. Sherman, and Kay Yuspeh, and each of them individually as Plaintiffs, and The Beth Bauer Trust, The Jamie L. Sherman Trust and The Kay Yuspeh Trust, Plaintiffs-Respondents,¹ v. The LINDA GALE SAMPSON 1979 TRUST, The Steven J. Sampson 1979 Trust and The Scott A. Sampson 1979 Trust, which are the successors to the B.J. Sampson Children's Trust, a trust maintained for the benefit of Linda Gale Sampson, Scott Sampson, and Steve Sampson, and Sampson Investments, Ann Mandelman, and Nancy Simos, Defendants-Third-Party Plaintiffs-Appellants, v. Beth BAUER, Third-Party Defendant.

No. 02-1515.

Court of Appeals of Wisconsin.

Oral argument May 6, 2003.

Decided June 10, 2003.

On behalf of the defendants-third-party plaintiffs-appellants, the cause was submitted on the briefs of Paul S. Medved, and Scott R. Halloin of Mallery & Zimmerman, S.C., Milwaukee. There was oral argument by Scott R. Halloin.

On behalf of the plaintiffs-respondents, the cause was submitted on the brief of Jane C. Schlicht, Steven L. Nelson, and Stephanie L. Riches of Cook & Franke, S.C., Milwaukee. There was oral argument by Jane C. Schlicht.

Before Wedemeyer, P.J., Fine and Lundsten, JJ.

¶ 1. FINE, J.

We granted the petition for leave to appeal filed by the defendants.² They seek reversal of the trial court's non-final order directing them to return to the plaintiffs documents produced during discovery that the trial court held were protected by the attorney-client privilege. We reverse.

I.

¶ 2. This is an inter-family dispute over money, the specific details of which are not material to this appeal. During the litigation before the trial court, Robert L. Elliott, Esq., while he was the plaintiffs' attorney, turned over to the defendants 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 there was.

¶ 3. The trial court referred the dispute over what documents were privileged and whether that privilege was waived to a referee, designated as a "discovery master," pursuant to WIS. STAT. RULE 805.06. The referee, Theodore J. Hodan, Esq., heard thirteen hours of testimony and argument and issued a comprehensive thirty-three-page report, encompassing his findings of fact and conclusions of law. See WIS. STAT. RULE 805.06(5)(a). On review, See WIS. STAT. RULE 805.06(5)(b), the trial court adopted the referee's findings of fact, but overturned the referee's conclusion that the plaintiffs had waived the attorney-client privilege. See ibid. ("In an action to be tried without a jury the court shall accept the referee's findings of fact unless clearly erroneous."). At oral argument, the plaintiffs conceded that the referee's findings of fact were not "clearly erroneous." Thus, we accept the facts material to our decision as they were found by the referee. See WIS. STAT. RULE 805.17(2) (appellate court bound by trial court's findings of fact unless they are "clearly erroneous"). We also assume, without deciding, that the documents are within the attorney-client privilege.

¶ 4. The referee found that Elliott "is a prominent, experienced, competent, well-respected, board certified civil trial lawyer, who is known to have handled many difficult complex and high-profile civil lawsuits," and that he "dealt primarily" with the plaintiff Beth Bauer as a "`contact' person" in connection with the lawsuit during the time he was the plaintiffs' lawyer. Bauer testified that she gave the documents that are the subject of this appeal to Elliott. She also testified that the documents were produced by Elliott without her knowledge, and, as phrased by the referee, that she "did not intend, nor at any time agree that the documents in question could be or would be turned over to the defendants." She did, however, concede that Elliott had authority to respond to the discovery request.³

¶ 5. Bauer helped Elliott with the discovery request, but Elliott did the "`privileged document review'" by himself. Although he could not recall whether he had looked at the specific documents that are the subject of this appeal, Elliott testified, as found by the referee, "that it was his practice (which he believed he followed in this case) to read every page of every document and if a question (about it being privileged) came up, he would ask the clients about the document." Further, Elliott reviewed the challenged documents at the hearing before the referee and Elliott testified that he saw "no reason for him to conclude that [the documents were] privileged." ¶ 6. The referee opined however, that Elliott "should have realized that they were privileged or, at the least, realized that further information from the client regarding their creation was required prior to turning them over to the" defendants. As noted, the referee concluded that the plaintiffs had waived their attorney-client privilege in connection with the documents.

¶ 7. In reaching his decision, the referee surveyed the law dealing with the inadvertent disclosure of attorney-client privilege documents and concluded that the issue had not been addressed by an appellate court in Wisconsin. Nation-wide, he discovered, there were three approaches: lenient, strict, and intermediate. The "lenient" rule holds that "inadvertent" disclosure by an attorney of materials clothed with the attorney-client privilege does not waive the privilege. See, e.g., Mendenhall v. Barber-Greene Co., 531 F. Supp. 951, 954-955 (N.D. Ill. 1982)

. The "strict" rule holds that disclosure, whether authorized by the client or not, is waiver because, in essence, the sounds of a bell once rung cannot be recaptured. See, e.g., International Digital Sys. v. Digital Equip. Corp., 120 F.R.D. 445, 449-450 (D. Mass. 1988) (decision by a United States Magistrate Judge). The intermediate, "totality-of-the-circumstances" approach attempts to balance such amorphous elements as: the reasonableness of safeguards in-place to prevent unauthorized disclosure of attorney-client privileged material; the extent of the document production request and the attendant burdens on the party responding to that request (for example, does the request seek a few documents or a few hundred thousand); any unreasonable delay in trying to retrieve the inadvertently produced documents; the number of times the producing party or its lawyers have disclosed protected materials before; and an overall interests-of-justice, fairness calculus. See, e.g., United States ex rel. Bagley v. TRW, Inc., 204 F.R.D. 170, 174-185 (C.D. Cal. 2001) (applying federal common law) (none of the parties "challenged the appropriateness of steering the middle course between the strict rule that disclosure always constitutes a waiver and the forgiving rule that disclosure never results in a waiver unless a waiver actually was subjectively intended") (decision by a United States Magistrate Judge).

¶ 8. The referee concluded that of the three approaches, the intermediate approach was a better way of resolving the inadvertent production of privileged documents, even though it was "cumbersome, time-consuming, expensive, and in some cases, may be impracticable." The referee, however, determined that none of the approaches was applicable to this case because the documents were not produced inadvertently.⁴ The referee found:

• "Elliott, in fact, reviewed each of the documents in question and then intentionally determined that they should be turned over to opposing counsel";

• "Attorney Elliott's actions [in producing the documents] were deliberate and intentional"; and

• "Thus, Attorney Elliott's decision to turn over the documents was not `inadvertent,' it was `intentional.'"

(Emphasis by the referee.) Accordingly, the referee concluded that Elliott's production of the documents waived his clients' attorney-client privilege as to those documents. As an alternative ground for his decision, the referee applied the totality-of-the-circumstances test and determined that the defendants prevailed under it as well.

¶ 9. The trial court disagreed with the referee's conclusion, and held that "Elliott could not waive the Plaintiffs' attorney/client privilege," as to the documents because, in its view, "the law in Wisconsin is only the client can waive attorney/client communications."

II.

¶ 10. This appeal presents a very narrow issue: whether a lawyer's intentional discovery-request production to opposing counsel of documents covered by the attorney-client privilege waives that privilege when the lawyer does not recognize the privileged character of the documents. Although an excursion through the various rules courts and ethics committees have adopted in connection with the "inadvertent" production of privileged material might make an interesting journey,⁵ we agree with the referee that, based on his finding of fact, Elliott's transmission of the documents to the defendants was deliberate, intentional and not inadvertent; the rules applicable to "inadvertent" disclosure do not apply here. Rather, our decision turns on the nature of the attorney-client relationship, and what constitutes waiver under WIS. STAT. RULE 905.11.⁶

[1]

¶ 11. Our decision is based on two common precepts. First, under ordinary attorney-client agency principles, compliance with discovery requests is something that the client delegates to the attorney. The referee found that this was done here. Second, as recognized by the Federal Advisory Committee note to proposed FED. R. EVID. 511, which was adopted in Wisconsin as WIS. STAT. RULE 905.11, 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...