In Postorivo v. AG Paintball Holdings, Inc., 2008 WL 3876199 (Del. Ch., Aug. 20, 2008), read opinion here, the Chancery Court disqualified from the case (i.e., colloquially, kicked off the case) certain lawyers of the defense team due to their litigation conduct which also raised issues about their compliance with the Delaware Lawyers’ Rules of Professional Conduct. Though the court stopped short of disqualifying the entire law firm, it did award fees to the plaintiff due to the defense counsel’s conduct.
This decision in its original format is over 70-pages long, and by necessity it is factually intensive. In part due to my disinclination to bring attention to an unfortunate experience for some of the lawyers involved, I will simply highlight some of the key issues in this case primarily because it is rare that the Chancery Court disqualifies lawyers from continuing representation in a case, and the Delaware Lawyers’ Rules of Professional Conduct (DLRPC) involved are not very often addressed in Chancery Court (compared for example, with the conflict of interest Rules 1.7 to 1.10.)
The Court also addresses the "standing of a non-client" to prosecute violations of the DLRPC. In sum, it cannot be merely a "technical violation", but rather must prejudice one’s rights and "call into question the fair or efficient administration of justice".
The DLRCP Rules addressed by the Court include: Rule 4.2 (communication with witnesses represented by counsel); Rule 4.4 (regarding obtaining evidence in a way that violates rights of a third-party); Rule 8.4 (engaging in conduct prejudicial to the adminstration of justice or that involves dishonesty, fraud, deceit or misrepresentation).
Rule 4.2 was interpreted in the recent Chancery Court decision of LaPoint v. AmerisourceBergen Corp., 2006 WL 2105862 (Del. Ch. 2006). Relying in part on LaPoint, here is some guidance from the Court that would be useful for most lawyers involved in litigation:
Even when appopriate to contact a former employee ex parte, one cannot do so "without first making the former employee aware that she could not divulge attorney-client privileged information, or any other privileged, information and providing the information required in Monsanto " [Co v. Aetna Casualty & Surety Co., 593 A.2d 1013 (Del. Super. 1990).]
Additional practical guidance from the Court was provided regarding Rule 4.4 and in particular, "what to do with documents that the other side claims to be privileged"? This is especially important in the current climate where large volumes of electronic data is exchanged, and one may not have the benefit of a "clawback provision" (as discussed in a recent case summary on this blog here.) As to this situation, the Court instructs as follows:
In modern commercial litigation, it is becoming more common for outside counsel or other agents of a party to litigation to be in possession of privileged information of an adverse party. Many cases involve some form of electronic discovery, for example, and the sheer volume of documents involved often necessitates creative means to handle privileged documents. Consequently, for cost-saving or -shifting reasons, during the early stages of discovery, one side rightfully may come into possession of documents and information storage devices that contain privileged information or communications of an adverse party. It is essential to the integrity of the litigation process in such circumstances that the court and the parties can rely on counsel scrupulously to conform to their ethical obligations and to whatever treaties or agreements they work out for handling the particular discovery challenges they face. As reflected in the relatively recent amendments to the Federal Rules of Civil Procedure relating to discovery of electronically stored information, the success of that approach depends importantly on early and fulsome communications among counsel for the opposing parties about the discovery demands of their particular case. Similar communications in early 2007 in this case would have ameliorated many of the problems that arose.
Two prior Chancery Court decisions in this same case that addressed "who held the attorney/client privilege" in connection with the sale of a company in which certain assets were excluded, as well as dismissing derivative claims, and including more factual background, were summarized here.