How the privilege applicable to a lawyer’s litigation hold letter may be forfeited, and the ethical dilemma it potentially triggers – the Morton’s Fork created by Major Tours v. Colorel.

October 16th, 2009 | By Steve Puiszis

Major Tours, Inc. v. Colorel, 2009 WL 2413631 (D.N.J. Aug. 4, 2009)

Wikipedia defines Morton’s Fork as “a choice between two equally unpleasant alternatives (in other words, a dilemma), or two lines of reasoning that lead to the same unpleasant conclusion. It is analogous to the expressions ‘between the devil and the deep blue sea’ or ‘between a rock and a hard place.’” Wikipedia explains that Morton’s Fork is “the opposite of the Buridan’s Ass.” It is similar to a “Catch 22” in that it involves a “no win situation,” but does not involve the use of circular logic.

What is the only area of law where a lawyer is required, under the pain of sanctions, to write a letter and provide advice to a client that potentially can be used as evidence against that client? Where else is “discovery about discovery” becoming the norm, rather than the exception? The answer is the post-Zubulake world of electronic discovery in which we now find ourselves.

Today, if a lawyer fails to issue written litigation-hold instructions, and/or then fails to take appropriate follow-up steps, the lawyer can be sanctioned if electronically stored information (“ESI”) is not properly preserved by the client. While a lawyer’s litigation-hold letters are generally considered privileged, e.g., Muro v. Target Corp. 250 F.R.D. 350, 360 (N.D.Ill. 2007), the court in Major Tours held that they must be produced when a preliminary showing of spoliation has been made. And, when that occurs, a lawyer’s litigation hold letter will invariably be used against the client as evidence that the client failed to heed the lawyers advice.

The court in Major Tours concluded that a duty to preserve was triggered by a letter sent to the New Jersey Attorney General and the Commisioner of the New Jersey Department of Transportation approximately twenty-two (22) months prior to suit being filed. A litigation hold was not issued until after suit was brought, and the court found it was “probable that relevant evidence was lost before the defendants issued their litgation hold.” Thus, in the court’s view, because a preliminary showing of spoliation had been made, the attorney’s litigation-hold letter had to be produced. In other words, the client forfeited the right to assert attorney-client privilege by failing to issue a litigation hold before the attorney’s privleged litgation hold letter was ever sent to the client.

The rationale applied in Major Tours could trigger an ethical dillemma, and the potential for a conflict for outside counsel in future cases when a duty to preserve ESI was arguably triggered before suit was filed, and the client failed to institute a litgation hold at that time. If the lawyer failed to send a litigation hold letter, the lawyer could be sanctioned. However, if the lawyer sends a hold letter and the court follows the approach taken in Major Tours, the attorney’s privileged communication potentially may become discoverable, and be used as evidence against the client. While a party may be entitled to learn what steps an opponent took to preserve ESI once a preliminary showing of spolilation occurs, finding the attorney-client privilege was forfeited in this scenario would appear to be an ill-concieved approach. It triggers for the lawyer a Morton’s Fork – a choice of protecting himself from sanctions knowing that his advice may potentially be used against the client. Thus, does Zubulake’s requirement that a lawyer issue written litgation-hold instructions inevitably create a conflict between the lawyer and his client?

Was a pre-suit duty to preserve ESI triggered?

In our recent “Top Ten” post, we discussed the fact that a duty to preserve ESI can be triggered prior to suit being filed, and the guidance which Judge Grimm in Goodman v Praxair Services attempted to provide by defining when that duty is triggered. As Judge Grimm explained in Goodman, a pre-suit letter, which identifies a dispute and invites the other side to discuss or otherwise negotiate, does not trigger a duty to preserve. However, a letter threatening to bring suit will trigger such a duty. As we explained in that post, distinguishing between an invitation to negotiate from a threat to sue can involve an exercise in “hair splitting.” Major Tours provides an example of how difficult that distinction is to apply.

The letter, which triggered a duty to preserve in Major Tours, complained that African American bus companies were being subjected to discriminatory treatment, suggested the owners were entitled to compensation for the losses they sustained, and requested a response “within two weeks in order to avoid recourse to litigation.” Contrast that letter and the court’s finding that it triggered a duty to preserve with Cache LaPoudre Feeds, discussed in our recent Top Ten post. There, a pre-suit letter notified the defendant that it was infringing on a trademark, and inquired if the defendant was willing to “determine whether the situation could be resolved without litigation and media exposure.” In Cache LaPoudre Feeds, the court held that a duty to preserve was not triggered by that pre-suit letter. 244 F.R.D. at 622. The pre-suit letters in Major Tours and Cache LaPoudre Feeds are not materially different.

It is an understatement to suggest that the standards for determining when a duty to preserve is triggered prior to suit being filed are not well defined. The “reasonable anticipation of litigation” standard is an inherently ambiguous concept. While it is understandable that courts want to encourage parties to preserve information when litigation is reasonably anticipated and when decisions addressing the issue are virtually impossible to reconcile, concluding that attorney-client privilege was forfeited in large part because a litigation hold was not implemented prior to suit significantly harms the profession. Years ago, the Supreme Court in Hunt v. Blackburn, 128 U.S. 464, 470 (1888) explained:

The rule which places the seal of secrecy upon communications between client and attorney is founded upon the necessity, in the interest and administration of justice, of the aid of person having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure.

This view of attorney-client privilege is as true now as it was then, and does not change simply because the advise deals with electronic discovery.

New Attorney-Client Privilege Forfeiture Rule

Traditionally, a party is deemed to have waived attorney-client privilege by voluntarily disclosing privileged information to third parties (outside of another privileged context), or by partially disclosing privileged information on a particular subject matter. While the advice of counsel can waive privilege when counsel’s advice is raised as a defense, that defense was not raised in Major Tours, and that was not the basis of the court’s ruling.

The court in Major Tours appears to recognize a new rule for how attorney-client privilege may be lost – by a preliminary showing that spoliation has occurred. Even more troubling is the court acknowledged that it was “difficult to know what evidence was lost during the window of time in which a litigation hold was not put in place.” So based on an inference the court reached, it negated any assertion of privilege. Perhaps the crime-fraud exception would justify the override of the privilege where the attorney’s advise was to not preserve ESI, but again, that was not the case in Major Tours.

Notably absent from the court’s opinion was any explanation for its conclusion. The court simply stated it was adopting “the prevailing view,” and cited three other district court decisions for that proposition. To suggest that a “majority approach” or a “prevailing view” can be divined from three district court decisions where it is unclear if the privilege issue was asserted, and if so how vigorously it was raised, is a statement that should not be taken at face value.

First of all, “[w]hen an issue is not argued or is ignored in a decision, such decision is not precedent to be followed in a subsequent case in which the issue arises.” Nat’l Cable Television Assoc., Inc. v. American Cinema Editors, 937 F.2d 1572, 1581 (Fed. Cir. 1991), citing Webster v. Fall, 266 U.S. 507, 511(1925). Second, while a district court opinion is entitled to respect, it binds no one other than the parties in that case, and it is simply wrong to view a district court decision as precedential. See, e.g., Gould v. Bowyer, 11 F.3d 82, 84 (7th Cir. 1993) (explaining: “And really, such a decision has no precedential effect: a district court decision binds no judge in any other case, save to the extent that doctrines of preclusion (not stare decisis) apply”). See also Colby v. J.C. Penny Co., 811 F.2d 1119, 1123-24 (7th Cir. 1987) (“[d]istrict judges … must not treat decisions by other district judges, … as controlling”).

The privilege is intended “to encourage full and frank communications between attorneys and their clients.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). How is the recognition of such a forfeiture rule consistent with the policies underlying attorney client privilege? Will such an approach advance compliance with electronic discovery rules when an attorney’s advice to the client can be lost simply because the client failed to realize a duty to preserve evidence was triggered before suit was filed? Shouldn’t we be encouraging (not discouraging) parties to seek legal advice to comply with these rules? If so, how does the court’s ruling in Major Tours advance that cause?

The federal discovery rules do “not expressly authorize discovery into the efforts a party may make to collect or preserve ESI.” In re eBay Seller Antitrust Litig., 2007 WL 2852364 at *2 (N.D.Cal. Oct. 2, 2007). However, courts have permitted a party to learn what steps an opponent has taken to preserve ESI, and isn’t such a fact based inquiry far superior approach to permitting an attorney’s advice from potentially being used against the client?

So why the picture of Tarzan in this post?

We know you have been wondering we selected the picture of Tarzan for the opening section of this post. Well, it’s not because the character Tarzan combined “the best attributes of civilized man and jungle beast” as one court described him. Rather, it has to do with Morton’s Fork. What’s the connection between the two you ask? Those of you who are copyright lawyers may remember Burroughs v. Metro-Goldwin-Mayer, Inc., 683 F.3d 610 (2d Cir. 1982), where the court discussed the dilemma of Morton’s Fork in a lawsuit brought by the heirs of Edgar Rice Burroughs who wrote the book Tarzan of the Apes. Burroughs is an eloquently written opinion, describing the case as a “literary version of the eternal triangle, the central characters [being] two films and a book.” The plaintiffs claimed that MGM’s 1981 film, Tarzan the Ape Man, infringed their copyright, and breached a 1931 license agreement under which an earlier (1932) film was made. The court in Burroughs concluded there was no infringement because the 1981 film was not substantially similar to the plaintiffs’ copyrighted work, except to the extent permitted under the 1931 agreement. In a footnote, the court commented on the plaintiff’s litigation strategy:

One might perhaps have expected the plaintiffs to contend directly, in light of the issues in this lawsuit, that the 1981 film is based on the Book. However, by mounting an indirect attack, in which the major premise is that the 1932 film is based on the Book, plaintiffs apparently hoped to impale MGM with a “Morton’s Fork”: either the 1981 film followed the 1932 film, thereby infringing the Book, or the 1981 film did not follow the 1932 film, thereby breaching the 1931 Agreement. Even if plaintiffs’ major premise were sound, which our discussion … demonstrates it is not, MGM was not necessarily forced into the dilemma that plaintiffs seek to create. Since the standard by which we judge the similarity of film to Book is not the same standard by which we must judge the similarity between the two films … the Fork is flawed by the fact that its tines are not true opposites. Thus the possibility remained that for its new remake MGM could eliminate the arguably infringing elements of the 1932 film in a way that did not substantially alter the story, thereby complying with both the copyright law and the 1931 Agreement. As it happens, this may have been the course MGM followed. Most of the specific incidents in the 1932 film that plaintiffs claim were taken from the book, i.e., Holt’s killing of the ape, Tarzan’s killing of the lion with a stranglehold, and Holt’s asking Jane if she can use a gun, are not in the 1981 film.

So if you happen to be a movie trivia buff, you can impress your friends with this tidbit about the movie Tarzan the Ape Man. But skip the part about how you learned it boning up on electronic discovery and attorney-client privilege. They may start to worry about you.

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