Upon learning its former in-house counsel planned to sue for wrongful termination of employment, a company struck first by suing the former counsel for disclosing confidential and privileged information to the attorneys handling her wrongful termination case. The former inhouse counsel moved to strike the company's complaint as a SLAPP suit.
We affirm the trial court's orders denying the motions to disqualify the attorneys representing the former in-house counsel. We reverse the order denying the SLAPP motion.
FACTS AND PROCEEDINGS BELOW
From June 1996 until July 1999 Gia Paladino (Paladino) was employed under a written contract as an attorney in the legal department of Fox Searchlight Pictures, Inc. (Fox). A few months before her contract expired, Paladino's supervisor told her the contract would not be renewed. The reason given for not renewing the contract was that a film project on which Paladino had provided legal advice "did not go well." Paladino believed, however, the true reason for her termination was that Fox management was upset over her frequent use of pregnancy leave.
Believing Fox terminated her on the basis of her sex and pregnancy, Paladino consulted a law firm for legal advice as to her rights. Paladino admits, in the course of these consultations, she disclosed ostensibly confidential and privileged information pertaining to Fox.
The attorneys representing Paladino sent Fox a draft of the complaint for wrongful termination of employment which they intended to file on Paladino's behalf. In an accompanying letter Paladino's attorneys advised Fox they did not believe the draft complaint disclosed any privileged information but they wished to give Fox an opportunity to examine the complaint before it was filed and to alert them
Upon reviewing the proposed complaint Fox concluded it contained privileged and confidential information. Fox responded by filing a complaint against Paladino alleging the disclosure of its confidences to her attorneys constituted a violation of her ethical duties as well as a breach of her fiduciary duty and her employment contract with Fox.
Paladino countered with a motion to strike Fox's complaint as a SLAPP suit.
The day after filing the SLAPP motion, Paladino filed her complaint for wrongful termination. Fox reacted by seeking an ex parte order striking and sealing the complaint on the ground it disclosed privileged information. The order was denied without prejudice after Paladino agreed to rewrite the complaint to remove certain language deemed by Fox to reveal matters protected by the attorney-client privilege. The re-written complaint, however, did not completely eliminate the material to which Fox objected and another order was entered substituting a second revised complaint and placing the previous complaint under seal. In the meantime, the unredacted complaint was picked up by an internet news service and made available for downloading by the public.
Fox then moved to disqualify Paladino's attorneys on the grounds they had been exposed to confidential information concerning Fox's affairs and they had a conflict of interest with their own client.
In opposition to Paladino's SLAPP motion and in support of its own disqualification motions, Fox submitted documents under seal which purported to establish certain information contained in Paladino's complaint for wrongful termination was privileged or confidential. The trial court denied Paladino's request to inspect the sealed documents in order to respond to Fox's opposition to her motion. The court reviewed the sealed documents in ruling on the SLAPP and disqualification motions.
The trial court denied Fox's motions to disqualify Paladino's counsel and denied Paladino's motion to strike Fox's complaint as a SLAPP suit. Both parties filed timely appeals.
I. PALADINO'S COUNSEL ARE NOT SUBJECT TO DISQUALIFCATION BASED ON A COFLICT OF INTEREST.
Fox moved to disqualify Paladino's counsel from both lawsuits on the grounds they had previously represented Fox and they had a conflict of interest with their current client, Paladino. Fox failed to make the requisite showing for disqualification based on a conflict of interest.
A. Fox Failed To Establish Paladino's Attorneys Possess Relevant Confidential Material Acquired From Their Prior Representation of Fox.
A former client may disqualify a former attorney from representing an adverse party by showing the attorney presumably possesses confidential information adverse to the former client.
Fox failed in its attempt to establish a substantial relationship between any prior representation of Fox and representation of Paladino. The declarations submitted by Fox merely show Paladino's attorneys were formerly associated with a law firm, Proskauer Rose, which provided Fox with advice and counsel on "intellectual property issues," among other things. Fox provided no evidence these attorneys had, through their former employment, acquired confidential or privileged information material to the present litigation. Fox did not explain what an "intellectual property issue" is nor did any Fox employee aver Proskauer Rose handled any matter even remotely similar in law or fact to the current actions.
For their part, Paladino's counsel filed declarations denying involvement with Fox in any matter related to the present litigation. Mr. Finkel stated during his employment at Proskauer Rose he never worked on any Fox matters, never met anyone from Fox and never obtained any confidential Fox information. Mr. Cochran Bond and Mr. Connon stated the only work they did for Fox was in connection with toxic tort litigation against a film laboratory. This former representation is insufficient to justify disqualification. Possession of confidential information will not be presumed from the mere fact counsel once represented the opposing party.
Fox contends there is another way Paladino's attorneys could have obtained confidential information from Fox relevant to Paladino's wrongful termination action. Paladino herself worked for Proskauer
B. Fox Failed To Establish A Conflict Between Paladino And Her Own Attorneys.
An attorney violates the duty of loyalty to the client by assuming a position adverse or antagonistic to the client.
A motion to disqualify will not be granted when only a hypothetical conflict exists.
II. PALADINO'S ATTORNEYS ARE NOT DISQUALIFIED BY RESON OF PALADINO'S DISCLOING TO THEM CONFIDENTIAL OR PRIVILEGED INFORMATION SHE ACQUIRED WHILE COUNSEL TO FOX.
Fox contends the fact Paladino's attorneys have been exposed to Fox's confidential and privileged information provides an independent basis for disqualifying them. We disagree.
California courts have previously addressed the question whether attorneys should be disqualified after being exposed to the opposing party's confidential information by their client. In each case the court held disqualification was not warranted.
In Bell v. 20th Century Ins. Co., a case factually similar to the one before us, Bell, a former personnel officer, brought a wrongful termination action against 20th Century Insurance Company. Bell's attorneys had represented another 20th Century employee in a wrongful discharge case during the time Bell was personnel officer. In the course of the previous case, Bell had several privileged conversations with 20th Century's attorneys regarding the theories, strategies and merits of the defense. Twentieth Century moved to disqualify Bell's attorneys on the ground they could use the confidential and privileged information Bell learned while participating in the defense of the previous case to 20th Century's detriment in Bell's case. The trial court granted the disqualification motion, but the Court of Appeal reversed observing it could not see "how Ms. Bell could have improperly disclosed information to her own counsel in the prosecution of her own lawsuit."
Admittedly, Bell was a personnel officer and not an in-house counsel as was Paladino. One court has suggested this might make a difference. In Maruman Integrated Circuits, Inc. v. Consortium Co., plaintiff discovered in the course of litigation that one of its former employees had passed confidential information regarding the suit to the defendant's attorney. Affirming denial of the plaintiffs disqualification motion the appellate court remarked: "Here, the former employee was not an attorney and therefore was never in an attorney-client relationship with her former employer."
We do not believe disqualification should turn on whether the former employee was an attorney for the opposing party or served in some other capacity.
For these reasons we conclude the trial court properly denied Fox's motions to disqualify Paladino's counsel.
III. THE SLAPP STATUTE APPLIES TO THE CAUSES OF ACTION IN FOX'S COMPLAINT.
Under Code of Civil Procedure section 425.16,
As we explained in Wilcox v. Superior Court,
Fox argues its suit against Paladino does not fall within the class of suits subject to a special motion to strike under section 425.16 because: (1) the SLAPP statute does not apply to lawsuits filed to protect confidential or privileged information; (2) Paladino did not show Fox's lawsuit was intended to chill the exercise of her right to petition for the redress of grievances through litigation; and (3) each cause of action is based, in part, on Paladino's failure to return confidential and privileged documents to Fox—conduct unrelated to speech or petitioning. We reject each of these arguments.
A. The Initial Determination Whether A Lawsuit Is Subject To A Motion To Strike Under Section 4.25.16 Is Not A Determination Of The Merits Of The Suit.
Fox argues its suit does not fall within the SLAPP statute because Paladino has no First Amendment right to disclose privileged and confidential documents or to refuse to return those documents to Fox, their rightful owner. The same argument could be made by the plaintiff in a defamation suit—the defendant has no First Amendment right to
The problem with Fox's argument is that it confuses the threshold question of whether the SLAPP statute applies with the question whether Fox has established a probability of success on the merits.
B. Paladino Did Not Have To Show Fox's Suit Was Intended To Chill Her Right To Petition For Redress Of Grievances.
Fox next contends in order for Paladino to invoke the protection of the SLAPP statute she must show Fox's lawsuit was intended to chill the exercise of her right to petition for the redress of grievances through litigation. This argument is based on the preamble to the SLAPP statute in which the Legislature declared, "there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances" and the exercise of these rights "should not be chilled through abuse of the judicial process."
Foothills Townhome Assn. v. Christiansen is the only published opinion to hold the defendant's initial burden on a SLAPP motion includes showing the plaintiffs lawsuit was in fact brought to chill her First Amendment rights.
First, the opinions cited in Foothills Townhome do not support its holding. In Wilcox v. Superior Court, we observed section 425.16 "is limited to exposing and dismissing ... lawsuits `brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances'...."
Furthermore, as our Supreme Court explained in construing section 425.16, "`legislative intent is not gleaned solely from the preamble of a statute; it is gleaned from the statute as a whole, which includes the particular directives.'"
Fox attempts to engraft a motive or intent requirement not contained in the plain language of section 425.16. The legislative concern is that the cause of action "aris[e] from" an act in furtherance of the constitutional right to petition or free speech. No mention is made in the statute regarding proof of the plaintiffs motives or intent. We decline to impose a burden on the party seeking protection from the SLAPP statute of proving the plaintiff was motivated by an improper purpose. The intent and purpose of the lawsuit may be addressed by the plaintiff when it attempts to establish its ability to "prevail on the merits."
C. Fox's Prayer That Paladino Be Ordered To Turn Over Allegedly Confidential Material Does Not Immunize Its Suit From A Motion To Strike Under Section 425.16.
Finally, Fox argues Paladino's wrongful refusal to return Fox's allegedly confidential material is unrelated to her lawsuit against Fox and therefore cannot constitute an act "in furtherance of [her] right of petition or free speech."
As we explained above, whether the material in question is privileged or confidential is not relevant to the threshold issue of whether the SLAPP statute applies to Fox's complaint. Nor can we say from the record before us, as a matter of law, the maintenance of this material was not an act in furtherance of the preparation and prosecution of Paladino's suit against Fox.
For the reasons explained above, the trial court erred in ruling Fox's complaint is not subject to a motion to strike under section 425.16.
We turn now to the question whether Fox demonstrated a reasonable probability of prevailing on the merits.
IV. AN IN-HOUSE COUNSEL SING HER FORMER EMPLOYER FOR WRONGFUL TERMINATION MAY DISCLOSE TO HER ATTORNEY ALL FACTS RELEVANT TO THE TERMINATION EVEN IF THIS INCLUDES DIVULGING EMPLOYER CONFIDENCES AND PRIVILEGED COMMUNICATIONS.
Fox's suit for breach of confidence raises the narrow issue whether a former in-house counsel suing her employer for wrongful termination may divulge to her own attorney employer confidences obtained during the course of her employment. We conclude the former in-house counsel may disclose to her attorney all facts relevant to the termination, including employer confidences and privileged communications. In the present case we are not faced with, and do not decide, whether the former in-house counsel or her attorney can be held liable to the employer for the public disclosure of those confidences and communications.
Every lawyer has a duty "[t]o maintain inviolate the confidence, and at every peril to himself or herself to preserve the
On the other hand, an in-house counsel is an employee and entitled to the same legal protections afforded all employees, including the right not to be discriminated against on the basis of pregnancy, childbirth, or medical conditions related to pregnancy or childbirth.
A suit by a former in-house counsel against her employer poses the challenge of maintaining the attorney's professional obligations to the client while at the same time permitting the attorney to enjoy the legal protections afforded nonattorney employees. Courts in some jurisdictions have concluded it is impossible to meet this challenge and therefore have refused to permit such suits on the ground they pose too great a threat to the attorney-client relationship.
Our Supreme Court, however, has reached a different conclusion. In General Dynamics, the court held "there is no reason inherent in the nature of an attorney's role as in-house counsel to a corporation that in itself precludes the maintenance of a [suit for breach of contract or wrongful termination] provided it can be established without breaching the attorney-client privilege or unduly endangering the values lying at the heart of the professional relationship."
The court stressed its main concern with wrongful termination suits by in-house counsel was their potential for public disclosure of the former employer's confidences. The court suggested three ways to avoid unwarranted disclosure of privileged information. First, the court noted in-house counsel, like all attorneys, are bound by the ethical rule against disclosure of client confidences and observed "an attorney who unsuccessfully pursues a retaliatory discharge suit, and in doing so discloses privileged client confidences, may be subject to State Bar disciplinary proceedings,"
Courts following the lead of General Dynamics have also emphasized the need in such cases to avoid the unwarranted public disclosure of client confidences, but have agreed it is possible to strike a balance between protecting the employer's sensitive information and permitting the former in-house counsel to maintain her suit.
None of these cases addressed the specific issue before us in this appeal: may an attorney suing her former employer for wrongful termination disclose to her own lawyers employer-client confidences obtained during the course of her employment insofar as they are relevant to the wrongful termination action? How this question is answered will determine to a large extent whether General Dynamics represents a mere Pyrrhic victory or a "momentous step forward" for in-house counsel.
We conclude in-house counsel may disclose ostensible employer-client confidences to her own attorneys to the extent they may be relevant to the preparation and prosecution of her wrongful termination action against her former client-employer.
We base our conclusion on three grounds. The General Dynamics opinion itself contemplates that in a wrongful termination case a limited disclosure of employer-client confidences to the plaintiffs own attorney will take place. In addition, we do not believe such disclosure violates an in-house counsel's duty of confidentiality to the employer so long as the disclosure is limited to information the in-house counsel reasonably believes is necessary to her attorney's preparation and prosecution of the case. Finally, fundamental fairness to the plaintiff requires the plaintiff be allowed to make such a limited disclosure of the former employer's secrets to her own attorneys to the extent necessary to prepare a claim for wrongful discharge. We discuss each of these grounds below.
As previously noted, our Supreme Court's principal concern over permitting suits by in-house counsel against their former employers was that such suits not result in the unwarranted public disclosure of the employer's secrets. In expressing this concern the court stated: "[T]he in-house attorney who publicly exposes the client's secrets will usually find no sanctuary in the courts. Except in ... rare instances ... it is never the business of the lawyer to disclose publicly the secrets of the client."
Surely, disclosure of a former client's confidences to one's own attorney in the course of seeking advice regarding a dispute with the former client is a far cry from the facts of Dixon v. State Bar cited
In our view, when the court in General Dynamics referred to public disclosure of the employer's confidences, it had in mind disclosure in public records and proceedings. This is apparent from the court's suggestions about how the plaintiff could attempt to prove her case "while protecting from disclosure client confidences subject to the [attorney-client] privilege."
In-house counsel contemplating a wrongful termination action against her former employer clearly needs to consult with her attorneys on the issue of her former employer's confidences given the Supreme Court's warnings of dismissal and possible disciplinary action if client confidences are breached.
It necessarily follows that if the attorneys representing the in-house counsel are to assist their client in avoiding impermissible public disclosure of the employer's confidences in court proceedings, it is essential for them to have complete knowledge of all potentially confidential information known to their client and relevant to the litigation. It is only through such full disclosure the attorneys for the in-house counsel can make judgments about what is disclosable and what is not. For example, there may be a fine but critical line between the fact Paladino took positions on certain legal issues involving Fox projects and the substance of her legal opinions. Without knowing the full extent of Paladino's positions and their context, her attorneys cannot make an informed and reasoned judgment about their disclosability in the litigation. As another example, information about Fox's business practices which Paladino believes to be confidential may, upon investigation by her attorneys, turn out to be widely known in the film industry.
Thus, in General Dynamics, our Supreme Court evinced a willingness to allow limited disclosure of confidential information to the plaintiffs attorneys in prosecuting a claim of wrongful termination on behalf of a former in-house counsel.
Business and Professions Code section 6068, subdivision (e) does not prohibit such a limited disclosure. That provision states an attorney has a duty "[t]o maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client." Although the statute on its face brooks no exceptions, it must be read in conjunction with other statutes and ethical rules which specifically permit the attorney to depart from the usual rules of client confidentiality. For example, Evidence Code section 958 states the attorney-client privilege does not apply "to a communication relevant to an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyer-client relationship." This statute may come into play in the present case because, as noted above, a corporate law department cannot discriminate against its employees on the basis of sex,
If an attorney, in protecting her own rights, is entitled to introduce otherwise privileged communications at trial, a fortiori she is entitled to reveal those communications to her lawyers in advance of trial. As we explain below, if this were not the case, an attorney could successfully defend the ethics of her behavior in court only to be disciplined for unethical behavior by the State Bar.
For the preceding reasons, we conclude a lawyer does not violate Business and Professions Code section 6068, subdivision (e) when she discloses client confidences to her own attorney for the purpose of determining whether those communications are admissible evidence under an exception to the attorney-client privilege.
Finally, fundamental fairness requires the plaintiff be allowed to make a limited disclosure of her former client's ostensibly confidential information to her own attorneys for purposes of preparing and prosecuting a wrongful termination suit against the former client. If the employer can stifle even this limited disclosure, then General Dynamics is nothing more than a judicial practical joke because even if inhouse counsel succeeds in a wrongful termination action against the former client she may be sanctioned or lose her license to practice or be sued separately by the former client for breach of fiduciary duty.
While every client has the right to freely confer with and confide in his attorney in an atmosphere of trust and security,
V. PALADINO WAS ENTITLED TO REVIEW AND RESPOND TO FOX'S MATERIAL FILED UNDER SEAL IN OPPOSITION TO HER MOTION TO STRIKE.
To show its suit has a reasonable probability of success on the merits, Fox must submit admissible evidence the information Paladino divulged to her attorneys was in fact confidential or privileged and her disclosure went beyond what was reasonably necessary to permit her attorneys to prepare and prosecute a wrongful termination action on her behalf.
In opposing Paladino's SLAPP motion, Fox relied in part on Paladino's declaration admitting she disclosed confidential or privileged information regarding Fox in discussions with her attorneys and on the declaration by Rita Tuzon, Assistant Secretary of Fox, who stated Paladino "disclosed [privileged or confidential] information to third parties (i.e. her attorneys) without Fox's knowledge or consent."
As the trial court recognized, these declarations were insufficient to sustain Fox's burden of proof. Paladino's declaration would be excluded at trial as hearsay. It is not admissible under the exception for declarations against interest because, even if it met all the other conditions for the exception, Paladino presumably would not be unavailable as a witness.
This leaves only the material submitted by Fox under seal to support its opposition to the motion. The trial court found this material persuasive stating its finding of a probability of success was based "primarily [on] the in camera filing." The trial court erred in basing its ruling on this sealed material over Paladino's objection.
Under extremely limited circumstances, a party to a civil action may file documents sealed from public view.
Fox makes several arguments in support of the trial court's in camera review of Fox's confidential material. None are persuasive.
First, Fox argues there is abundant precedent for in camera review of materials submitted in connection with a motion. None of Fox's cases, however, dealt with materials going to the merits of the action. Most involved motions for the disqualification of counsel. The remainder involved discovery motions in which the court was called upon to determine whether particular documents were exempt from discovery on the basis of a privilege. Fox has cited no case in which a party was allowed to defeat a motion going to the merits of its case with secret material revealed only to the court.
Fox next contends Paladino and her lawyers demonstrated by their previous conduct in mishandling the confidential information to which they had access that they cannot be trusted with such information. This argument begs the question because the issue at the heart of Fox's lawsuit is whether Paladino improperly disclosed to her own attorneys confidential information obtained from Fox in the course of her employment. Furthermore, the trial court could have issued a protective order enforceable by contempt or other sanctions restricting dissemination of the material Fox filed under seal.
Finally, Fox maintains the sealing of records in suits between a former in-house counsel and her employer was specifically approved by our Supreme Court in the General Dynamics case. Fox takes the Supreme Court's language out of context. In discussing ways in which an in-house counsel could prove wrongful termination by her employer while still protecting confidences subject to the attorney-client privilege the court noted sealing orders "and where appropriate, in camera proceedings" were among the "measures that might usefully be explored ... as circumstances warrant."
For all of the reasons stated above, we will reverse the trial court's order denying Paladino's special motion to strike. Should Paladino refile her motion the trial court may consider sealing documents submitted by either party in connection with the motion under the standards and procedures set forth in California Rules of Court, rules 243.1 and 243.2 and issue such protective orders as it deems appropriate in the circumstances.
The order denying Fox's motions to disqualify Paladino's counsel is affirmed. The order denying Paladino's motion to strike under Code of Civil Procedure section 425.16 is reversed. The documents lodged in this court by Fox under seal are ordered not to be filed but returned to
We concur: LILLIE, P.J., and WOODS, J.