The legal system gives the parties involved in litigation broad rights to gather information from the opposing side, but there are limits to this discovery process. Communications between a husband and wife, for example, are generally considered “privileged,” or off-limits to discovery requests.
What happens when a client gives a lawyer communications between others that are covered by the spousal communication privilege and the lawyer uses those communications? That was what the California Court of Appeal was recently asked to decide in a recent case (Militello v VFARM).
The case began with a dispute among the three owners of a Los Angeles cannabis company. Shauneen Militello, Rajesh Manek, and Ann Lawrence Athey (who is referred to as “Lawrence” in court documents) were officers of Cannaco Research Corporation, or CRC.
In early 2021, Lawrence and Manek removed Militello from her positions as a CRC officer and director. In April 2021, CRC filed a lawsuit against Militello, in part claiming she had interfered with CRC's email system to exclude Lawrence and Manek from access to electronic documents.
Later that month, Militello sued Manek, Lawrence, and Lawrence’s husband, Joel Athey, alleging fraud, breach of contract, and other claims, including that Lawrence, Manek, and Athey conspired to force Militello out of the business.
Militello moved to appoint a receiver of CRC. As support for the need for a receiver, her attorney attached as exhibits emails between Lawrence and her husband, Athey, that had been on CRC's email system and were provided by Militello to her attorney.
Lawrence then made a motion to disqualify Militello’s attorney, arguing that those emails were subject to the spousal communication privilege. The trial court granted the motion to disqualify and Militello appealed.
Militello had argued that Lawrence had “no reasonable expectation” that her email communications with her husband were confidential. Often, companies have policies, such as in an employee handbook, that emails sent or received through a company account may be monitored, and that means an officer or employee has no reasonable expectation of privacy when using the company email system.
The court noted that there was no evidence CRC had such a monitoring system or that Lawrence had notice of any monitoring or that others had access to her email account.
Militello further argued that as a CRC director, she had authority under the California Corporations Code to review CRC's books and records and therefore Lawrence could not have had a reasonable expectation of privacy.
The court found that Militello had not proved she was a director when she accessed the emails, and going further, it noted that a director's right to inspect books and records under the Corporations Code did not include the "surreptitious review" of Lawrence's email account.
Militello also argued that the spousal communication privilege should not apply because the emails were related to criminal acts or fraud. In rejecting this argument, the court noted there was no evidence in the record that the purpose of the emails was to enable or aid in committing a crime or fraud.
Militello’s lawyers had already attempted to use information in Lawrence’s emails to the disadvantage of Lawrence. Although the court acknowledged a client is not expected to know if communications are privileged and should not be penalized for open communication with the client's lawyer, the issue was with the lawyer's use of the communications.
The court said a lawyer should review materials provided by the client and if he or she determines that a privilege exists, should stop reviewing and not use the materials.
Citing several earlier cases, the court said that “when deciding a motion to disqualify counsel, “[t]he paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar. The important right to counsel of one’s choice must yield to ethical considerations that affect the fundamental principles of our judicial process.”
The appellate court upheld the disqualification of Militello’s attorney.
By Rachelle Cohen