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A litigant’s intentional disclosure of an attorney-client privileged document that helps its case constitutes a waiver of the privilege as to all confidential communications regarding the same subject matter, a federal judge in Pennsylvania has ruled. “The attorney-client privilege is a shield used to protect communications, not a sword wielded to gain an advantage in litigation,” U.S. District Judge Berle M. Schiller wrote in his 13-page opinion in Murray v. Gemplus International. “Where one party attempts to utilize the privilege as an offensive weapon, selectively disclosing communications in order to help its case, that party should be deemed to have waived the protection otherwise afforded it by the privilege it misused,” Schiller wrote. The ruling is a victory for plaintiffs’ attorneys Alan B. Epstein, David B. Picker and Paul R. Rosen of Spector Gadon & Rosen, who argued that Gemplus waived its attorney-client privilege when it turned over e-mails to and from its in-house counsel. Since Gemplus’ disclosure of the e-mails was “deliberate” and “not inadvertent,” the plaintiffs’ lawyers argued, it should be forced to turn over all other privileged documents relating to the same subject. In court papers, Gemplus’ lawyers argued that the disclosure of the privileged e-mails was inadvertent, no waiver occurred, and that the plaintiff’s lawyers should therefore be ordered to return the privileged documents. In the suit, plaintiff Joseph Murray claims that Gemplus, his former employer, has attempted to patent several of his inventions relating to so-called “smart card” technology without naming him as an inventor. The suit accuses Gemplus and lawyers from Burns Doane Swecker & Mathis in Alexandria, Va., of engaging in a scheme to misappropriate Murray’s inventions. Murray claims he was duped into becoming a Gemplus employee so that his inventions could be patented for the benefit of the company. He also claims the Burns Doane law firm duped him into believing that the firm represented him and would protect his interests so that he would divulge all of his inventions to Gemplus. In August, the plaintiff’s lawyers filed a motion that said Gemplus was improperly withholding documents, arguing that by voluntarily turning over e-mails to and from in-house counsel that were clearly privileged, “Gemplus had waived attorney-client privilege on broad subject matters.” In one e-mail, Gemplus in-house counsel Shawn Molodow told Gemplus employees that the company needed to be “absolutely sure” that the company owned all of the intellectual property relating to the smart card technology because it wanted to be “squeaky clean.” The plaintiff’s lawyers argued that the e-mail related to negotiations between Gemplus and Murray’s former employer, Hesta Corp. By turning over privileged documents that helped prove their case on that subject, the plaintiff’s lawyers argued, Gemplus waived its privilege with respect to all communications on the same subject. Schiller found that Pennsylvania’s appellate courts had never addressed the issue of waiver of the attorney-client privilege by disclosure of privileged documents. As a result, Schiller found that the leading case on the issue was the 1995 Common Pleas Court opinion in Miniatronics Corp. v. Buchanan Ingersoll in which, Schiller said, the court “thoroughly examined the various approaches to this issue taken by both Pennsylvania and out-of-state courts.” The Miniatronics court identified four lines of cases addressing the waiver of attorney-client privilege through disclosure of privileged documents. The first line of cases holds that disclosure, whether intentional or inadvertent, always constitutes a waiver vis-a-vis the disclosed documents. The second line of cases holds that disclosure constitutes a waiver only if the disclosure was intentional or counsel failed to take “prompt action” upon realization of the disclosure. The third line of cases takes a “middle approach,” applying a five-factor balancing test to determine whether the privilege has been waived, weighing the following: (1) The precautions taken by the disclosing party to prevent accidental disclosure; (2) the time taken to rectify the disclosure; (3) the scope of discovery; (4) the extent of the disclosure; and (5) equitable considerations. A fourth line stemmed from the third, the Miniatronics court noted, because courts use the five-factor test in two ways: Some courts use the test to determine whether the disclosure was, in fact, inadvertent, while others assume inadvertence and use the test to determine if the privilege has been waived thereby. Schiller distilled the legal landscape to three general holdings regarding waiver of privilege by disclosure — “automatic waiver;” waiver by “intentional disclosure only, with intent sometimes judged by the five-factor test;” and waiver of inadvertently produced documents “if such waiver is deemed appropriate under the five-factor test.” The final approach was flawed, Schiller found, because “it presents the disclosing party with a ‘no-win’ situation: If the party took great care during the document review process, any disclosed privileged document must have been produced intentionally, and therefore privilege is waived regarding the produced document; but, if the party failed to put extensive document review in place, then the party did not safeguard the privilege, which is therefore waived regarding the produced documents.” Such an analysis, Schiller found, “would thereby result in near-certain waiver of privilege as to produced documents.” Schiller also rejected the automatic waiver “approach because that approach fails to account for situations in which a truly inadvertent disclosure by a party’s counsel would jeopardize that party’s legal rights.” Instead, Schiller concluded that “only the approach in which a lawyer’s disclosure is imputed to his or her client if it is intentional strikes the proper balance between protecting client communications and preventing litigants from using selective disclosures of privileged material to gain advantages in litigation.” Applying the five-factor test, Schiller found that Gemplus’ disclosure of the privileged documents “was not inadvertent.” “Gemplus became aware of its disclosures no later than May 30, 2003, yet took absolutely no action to recover its documents until August 19, 2003 — 11 weeks after Gemplus was informed of the disclosure and one week after plaintiff filed the instant motion to compel,” Schiller wrote. Schiller found that Gemplus’ “willful decision not to seek recovery of the documents for such an extended period of time convinces the court that Gemplus wanted Plaintiff to see the privileged documents.” Schiller said he rejected Gemplus’ argument that its document review system was generally excellent and that the disclosure of the privileged e-mails was an isolated, accidental breakdown in that system. “This argument might have been convincing if the produced documents had damaged — or even been neutral to — Gemplus’s case. On the contrary, however, Gemplus seems to have produced only the documents that are most beneficial to its defense, which is a highly suspicious circumstance at best,” Schiller wrote. Schiller said his next task was to determine the scope of the waiver. “There is substantial case law supporting the position that as a matter of law, any voluntary waiver of the confidential communications waives the privilege as to all confidential communications regarding the same subject matter,” Schiller wrote. Since there are no Pennsylvania appellate cases discussing waiver of the attorney-client privilege due to a party’s intentional disclosure of privileged materials, Schiller said he turned to “persuasive authorities” and “secondary sources,” including cases from other states. “The court finds most persuasive the argument that when one party intentionally discloses privileged material with the aim, in whole or in part, of furthering that party’s case, the party waives its attorney-client privilege with respect to the subject-matter of the disclosed communications,” Schiller wrote. Having decided that Gemplus waived its attorney-client privilege regarding the subject matter of the privileged documents it disclosed, Schiller found that “determining the precise scope of that waiver is a fairly simple matter.” Gemplus disclosed the e-mails “in order to put in a positive light the motivation that went into the Gemplus-Hesta negotiations. … By doing so, Gemplus waived its privilege with regard to these negotiations.” As a result, Schiller concluded that “plaintiff must be granted the right to inspect other documents in order to determine whether and how Gemplus intended to become ‘squeaky clean.’” Gemplus is represented by attorneys Patrick Loftus, James H. Steigerwald, Kelly D. Eckel, Matthew A. Taylor, Tracy L. Schwab, Jennifer McGlinn and Julie S. Lu of Duane Morris.

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