IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)
July 28, 2011
ROBERT M. SALLUSTIO, PLAINTIFF AND RESPONDENT,
KEMPER INDEPENDENCE INSURANCE COMPANY ET AL., DEFENDANTS AND APPELLANTS.
(Super. Ct. No. 34-2007-00882286-CU-WT-GDS)
The opinion of the court was delivered by: Butz , J.
Sallustio v. Kemper Ind. Ins.
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
In this wrongful termination action, defendant Kemper Independence Insurance Company (and two of its executives; collectively, Kemper) appeals from an order disqualifying its attorney, Littler Mendelson (Littler). (Code Civ. Proc., § 904.1, subd. (a)(6); see Derivi Construction & Architecture, Inc. v. Wong (2004) 118 Cal.App.4th 1268, 1272 [appealability of order].)
The trial court found that Littler breached its ethical duties under Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th 807 (Rico), when, in deposing a nonparty witness favorable to the plaintiff's case, it introduced the witness's confidential psychiatric records. We find no abuse of discretion by the trial court and shall affirm its disqualification order.
FACTUAL AND PROCEDURAL BACKGROUND
In December 2007, plaintiff Robert M. Sallustio, a 28-year employee of Kemper, sued Kemper for wrongful termination. Sallustio alleges that Kemper fired him in December 2006 in retaliation for complaining about Kemper's refusal to accommodate the stress-related disability of his then-estranged, now former, wife N.S., herself an 18-year Kemper veteran.
In the summer of 2006, N.S. was having trouble getting Kemper's group disability insurer, Prudential Financial (Prudential), to accept her medical records concerning her disability claim. As a result, in October 2006 N.S. accepted Kemper's offer to have its corporate Human Resources Department (HR) act only as a conduit to send certain psychiatric records from N.S.'s treating psychiatrist, Carlos Solis, M.D., to Prudential.
Unfortunately, Dr. Solis in November 2006, using the wrong fax numbers, mistakenly faxed N.S.'s psychiatric treatment notes (hereafter, the treatment notes) to Kemper's regional office in Folsom (where both Sallustio and N.S. worked) instead of to the designated person at Kemper's HR corporate office in Jacksonville, Florida.
Kemper's corporate HR director informed N.S. of this mistake, but stated that the situation was "under control," that "everything had been done to make sure the situation was contained," and that N.S. had "nothing to fear" about her private records being viewed or distributed by anyone at Kemper again. Apparently, though, "a number of" Kemper employees in Folsom handled or read the treatment notes. The faxed treatment notes were accompanied by two cover sheets: one from Dr. Solis specifying that the notes were to be sent to Prudential's (named) Disability Claims Manager and were "strictly confidential" (involving a patient) and "should be viewed only by [Prudential]"; and a form from Prudential, signed by N.S., entitled, "Authorization for Release of Psychotherapy Notes to Prudential Insurance Company."
The trial court, in Sallustio's wrongful termination lawsuit, ruled in a May 7, 2008 order that Kemper could not use or disclose a nonparty's confidential information without notice to the nonparty and an opportunity to be heard. Furthermore, in a July 14, 2008 order, the trial court granted N.S.'s motion to quash subpoenas served by Kemper on Dr. Solis and Prudential to the extent the subpoenas sought N.S.'s psychiatric information (Dr. Solis saw Sallustio and N.S. together and individually).
Kemper, while represented by Littler, deposed N.S. in Sallustio's lawsuit in October 2008. Littler introduced the treatment notes as an exhibit at this deposition and confirmed their authenticity. This prompted an objection from Sallustio's counsel (to the extent Sallustio's privacy interests were implicated), a concern from N.S.'s counsel that the notes had not been marked confidential, and the following exasperation from N.S.--"I want to know how you[, i.e., Littler,] got these in the first place." Littler then segued into another subject.
Sallustio later moved successfully to disqualify Littler, and for other discovery sanctions, based on Littler's alleged "unethical retention, use and concealment" of the treatment notes.*fn1
In disqualifying Littler, the trial court concluded: "[N.S.] did not authorize the distribution of her psychiatric records[, i.e., the treatment notes,] to [Littler], or [Littler's] later dissemination and use of those records. . . . [T]he limited extent of [N.S.'s] delivery of the psychiatric records to [Kemper] was unambiguous and there is no evidence to support any inference that any other disclosure of the records was authorized. These facts would have been readily apparent had [Littler] made even a minimal inquiry of [Kemper] when the records were delivered to [Littler]. [¶] [Littler's] use and dissemination of the records and their contents to gain a tactical advantage against [Sallustio] has caused irreversible damage. As a result, the Court finds that disqualification is the proper remedy. (Rico, supra, 42 Cal.4th at 819.)" "The damage is this. [Littler] has acquired a privileged document it had no right to acquire. It has used that document against [Sallustio] by disseminating that document at the deposition of a non-party witness, attempting to put that witness at a severe emotional disadvantage of having to respond to questions based on the most intimate confidential statements she had made to her psychotherapist. . . . [O]nly after [Sallustio's] counsel objected did [Littler] retreat from that line of questioning. [¶] . . . [Littler's] possession of that knowledge gives it an insight into the psychological vulnerability of this witness, a taint that no sanction other than disqualification can effectively remove from this case."
I. Standard of Review and Applicable Law
We review the trial court's disqualification order for abuse of discretion. (Rico, supra, 42 Cal.4th at p. 819.)
Rico sets forth the legal standard that applies here. In Rico, a car rollover injury case, the plaintiff's attorney inadvertently obtained certain notes from the defense counsel. These notes discussed the defense's litigation strategy and its expert witnesses. The plaintiff's attorney then used these notes to impeach a defense expert during his deposition. (Rico, supra, 42 Cal.4th at pp. 811-813.)
Rico articulated the applicable legal standard, quoting from State Comp. Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644 (State Fund): "'When a lawyer who receives materials that obviously appear to be subject to an attorney-client privilege or otherwise clearly appear to be confidential and privileged and where it is reasonably apparent that the materials were provided or made available through inadvertence, the lawyer receiving such materials should refrain from examining the materials any more than is essential to ascertain if the materials are privileged, and shall immediately notify the sender that he or she possesses material that appears to be privileged. The parties may then proceed to resolve the situation by agreement or may resort to the court for guidance with the benefit of protective orders and other judicial intervention as may be justified.'" (Rico, supra, 42 Cal.4th at p. 817, quoting State Fund, supra, 70 Cal.App.4th at pp. 656-657.)
Rico upheld the disqualification of the plaintiff's attorney, noting that the use of the defense notes undermined the defense experts' opinions and placed the defendants at a great disadvantage; without disqualification, irreversible damage to the defense would result. (Rico, supra, 42 Cal.4th at p. 819.)
II. The Trial Court Did Not Abuse Its Discretion in Applying Rico and Disqualifying Littler
The trial court found that Littler used the treatment notes "against [Sallustio] by disseminating [them] at the deposition of a non-party witness[, i.e., N.S.], attempting to put that witness at a severe emotional disadvantage of having to respond to questions based on the most intimate confidential statements she had made to her psychotherapist. . . . [O]nly after [Sallustio's] counsel objected did [Littler] retreat from that line of questioning." The trial court concluded: "[Littler's] possession of that knowledge gives it an insight into the psychological vulnerability of this witness, a taint that no sanction other than disqualification can effectively remove from this case."
We conclude the trial court did not abuse its discretion by ordering Littler's disqualification under the Rico standard.
When N.S. was having trouble getting Kemper's group disability insurer, Prudential, to accept her medical records for her disability claim, she accepted Kemper's HR offer, as her employer, to merely send the treatment notes to Prudential. That was the extent of N.S.'s arrangement with Kemper. She did not arrange for Kemper to retain the treatment notes or send the treatment notes to its counsel, Littler, for use in Sallustio's lawsuit. Thus, Littler came into possession of the treatment notes inadvertently (i.e., neither Sallustio nor N.S. had any intent or contemplation of sending this information to Littler).
The treatment notes were obviously confidential and privileged psychiatric records. The treatment notes did not discuss simply a physical ailment, confidential as that might be, but involved psychiatric treatment, with all the private, intimate details that includes. The treatment notes were also accompanied by two cover sheets attesting further to their confidentiality.
This is not a case of "'"[m]ere exposure"'" to an adversary's confidences, which, standing alone, is generally insufficient to warrant an attorney's disqualification. Here Littler not only failed to conduct itself as required under the Rico standard, but made "use" of the treatment notes by introducing and disseminating them without prior notice at N.S.'s deposition to disadvantage N.S. and Sallustio. (Rico, supra, 42 Cal.4th at p. 819, quoting & citing State Fund, supra, 70 Cal.App.4th at p. 657.) N.S. was an important witness in Sallustio's suit, in which he had alleged that he was wrongfully fired in retaliation for complaining about Kemper's refusal to accommodate N.S.'s stress-related disability.
Furthermore, there is evidence in the record that Littler used the treatment notes not only at N.S.'s deposition, but also at Sallustio's--Dr. Solis, in fact, had seen N.S. and Sallustio both together and individually.
Finally, Littler's use of the treatment notes at N.S.'s deposition (1) violated the letter of the trial court's May 7, 2008 order that Kemper not use or disclose a nonparty's confidential information without notice to the nonparty and an opportunity to be heard; and (2) violated the spirit of the trial court's July 14, 2008 order granting N.S.'s motion to quash subpoenas served by Kemper on Dr. Solis and Prudential to the extent the subpoenas sought N.S.'s psychiatric records.
III. Littler's Counter-arguments Do Not Persuade Us
Littler raises seven points in arguing that the trial court did abuse its discretion in disqualifying Littler from representing Kemper.
First, Littler contends that the Rico standard does not apply to the present situation, where Littler "received the documents [not inadvertently but] directly from its own client, [Kemper], who, in turn, received them at the specific direction of [N.S.], the holder of the [privilege]." Indeed, Kemper did receive the treatment notes "at the specific direction" of N.S., the privilege holder. But that "specific direction" was to act as a mere conduit and simply send the confidential-identified treatment notes to Prudential, Kemper's group disability insurer, in connection with N.S.'s employment disability claim. This "specific direction" in no way contemplated that Kemper would forward the treatment notes to its counsel for use in a lawsuit in which N.S. was not even a party.
Second, in a related argument, Littler maintains that this case is not governed by the Rico standard, but by the rule set forth in a line of decisions exemplified by Neal v. Health Net, Inc. (2002) 100 Cal.App.4th 831 (Neal). (See Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294; Bell v. 20th Century Ins. Co. (1989) 212 Cal.App.3d 194; Maruman Integrated Circuits, Inc. v. Consortium Co. (1985) 166 Cal.App.3d 443; Cooke v. Superior Court (1978) 83 Cal.App.3d 582.)
The Neal rule, which Rico did not mention, states that a party is not prohibited from disclosing confidential information to one's own counsel in the prosecution of one's own lawsuit; to conclude otherwise would defeat the purpose of the attorney-client privilege, which is to promote full and open discussions between attorney and client. Therefore, disclosure of confidential information to one's own attorney does not justify disqualification. (Neal, supra, 100 Cal.App.4th at pp. 843-844.)
The Neal rule does not apply here for four reasons:
(1) Most of the decisions comprising the Neal-line involve an employee suing a former employer, in which the employee, in the normal course of the employee's duties, acquired business- or litigation-related confidential information involving his or her now former employer. (See Neal, supra, 100 Cal.App.4th at pp. 834, 842-843.) If disqualification automatically applied in this context, it would effectively ban any litigation by the employee against his or her former employer. (Id. at p. 842.) That is not the context here. This case involves the use by an employer of a former employee's confidential psychiatric treatment information absent any litigation between the two. N.S. is a nonparty witness only; as the trial court found, she "has not courted the risks of unintended disclosures inherent in litigation." Furthermore, Kemper, notwithstanding Littler's disqualification, will still be able to adequately defend this lawsuit with new counsel not knowing of or using the treatment notes (unless some sort of disclosure or use is authorized by the trial court).
(2) The Neal rule is founded on the construct that "mere exposure to confidential information of the opposing party does not require disqualification." (Neal, supra, 100 Cal.App.4th at p. 841, italics added.) As we have seen, Littler was not merely exposed to N.S.'s confidential information, but used, or attempted to use, that information to Sallustio's disadvantage. And, the confidential information used was not that of the opposing party, but that of a nonparty witness.
(3) The Neal rule seeks to preserve the attorney-client privilege, but a pre-existing, independent document, such as the treatment notes, does not come within this privilege merely because a client gives it to his or her attorney. (See Suezaki v. Superior Court (1962) 58 Cal.2d 166, 176-177.)
(4) A specific statute intervenes here. Civil Code section 56.20 (hereafter section 56.20), as pertinent, prohibits an employer from allowing its agents to use or disclose an employee's medical information (which the employer possesses) without the employee (or a court) first authorizing such use or disclosure. (§ 56.20, subds. (c)(1), (a).)
Third, Littler maintains that it had no ethical duty to maintain N.S.'s confidences, absent Littler having any attorney-client or confidential relationship with her. But the party that obtained the attorney disqualification in Rico--Mitsubishi--did not have any prior relationship with the disqualified attorney who unethically used Mitsubishi's confidential information (the plaintiff's attorney).
Fourth, Littler contends that because it had no attorney-client or confidential relationship with either Sallustio or N.S., "there was also no standing below to assert that [Littler] allegedly violated any duty toward either of them in connection with [Littler's] receipt, review or use of Dr. Solis's treatment records." Again, Mitsubishi, in Rico, had the opposing attorney disqualified without having had any attorney-client or confidential relationship with that attorney. Furthermore, Sallustio had standing because, as the trial court found, supported by substantial evidence, the treatment notes contained confidential marital communications from Sallustio--Dr. Solis had treated Sallustio and N.S. together and individually. And obviously, the treatment notes were N.S.'s confidential medical records. (§ 56.20.)
Fifth, Littler asserts that N.S. waived any privilege that she had in the treatment notes by failing to object to their introduction at her deposition. At the deposition, N.S.'s attorney sought to ensure the confidentiality of the treatment notes, and N.S. herself, as the holder of the privilege, objected, stating, "I want to know how you[, i.e., Littler,] got [the treatment notes] in the first place." Furthermore, N.S. had explicitly used Kemper only as a conduit to send the treatment notes to Prudential (Kemper's group disability insurer), and N.S. had previously moved successfully to quash Kemper's subpoenas on Dr. Solis and Prudential for her psychiatric information. In short, N.S. has not waived her privilege.
Sixth, Littler claims it did not violate any of the trial court's discovery orders; and, in any event, its disqualification was improperly punitive rather than properly remedial. (Neal, supra, 100 Cal.App.4th at p. 844 ["the purpose of a disqualification must be prophylactic; an attorney may not be disqualified purely as a punitive or disciplinary measure"].) The trial court found, supported by substantial evidence that Littler, in deposing N.S., violated the May 7, 2008 order prohibiting the use or disclosure of nonparty confidential information without notice and hearing, and the July 14, 2008 order quashing Kemper's subpoenas on Dr. Solis and Prudential for N.S.'s psychiatric information. Substantial evidence also supports a remedial, rather than a punitive, purpose for Littler's disqualification: Littler's possession of the treatment notes, as intimate and confidential as documents can get, gave Littler an insight into the psychological vulnerability of an important nonparty witness (N.S.), a taint that no sanction other than disqualification could effectively remove.
Seventh, and finally, Littler argues that disqualification is an ineffective remedy because it would not prevent Kemper from giving new counsel the information, which would leave Sallustio in the same position as before. (See Neal, supra, 100 Cal.App.4th at p. 844.) By current legal order, the treatment notes, at this point, cannot be disclosed or used in this case. In any event, under section 56.20, Kemper is also statutorily foreclosed from revealing the treatment notes (i.e., an employee's medical records in Kemper's possession) to any of its "agents" (unless judicially authorized). (§ 56.20, subd. (c)(1).)
The disqualification order is affirmed. Sallustio is awarded his costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
We concur: RAYE , P. J. HOCH , J.