Counsel’s Disqualification Upheld Over Use of Privileged Emails

Counsel’s knowing use of the opposing side’s privileged documents, however obtained, is a ground for disqualification, a California appeals court ruled Tuesday in a dispute among cannabis company co-owners.

The 3-0 court held that a board member defendant reasonably expected her emails with her husband that were downloaded by plaintiff “were, and would remain, confidential.”

Insisting that counsel “not read purloined documents any more closely than is necessary” to determine if they are privileged, and prohibiting their use if they are, won’t inhibit legitimate attorney-client conversations, the court said. And a client whose counsel is disqualified for defying such a rule isn’t likely to repeat the violation.

“On the other hand, as the trial court ruled here, to allow continued representation of a client after counsel has been provided with, and then used, improperly obtained confidential information would undermine the public’s trust in the fair administration of justice and the integrity of the bar,” Presiding Justice Dennis M. Perluss wrote for the court.

Legal Relationship

Shauneen Militello, Ann Lawrence Athey, and Rajesh Manek are the co-owners of Cannaco Research Corp. CRC is a licensed manufacturer and distributor of cannabis products. Lawrence and Manek voted to remove Militello from her position in February 2021 and remove her from the board the next month. Militello sued in April 2021.

Militello’s multi-count complaint alleging breach of contract, breach of fiduciary duty, fraud and other torts included as a defendant Lawrence’s husband, Joel Athey, the opinion said.

Lawrence, Athey, and Militello are active California State Bar members and apparently worked together at some point at DLA Piper, where Athey and Militello represented Manek, the court said in a footnote.

Lawrence moved to disqualify Militello’s counsel, Spencer Hosie and Hosie Rice LLP, in November 2021 on the grounds that Militello impermissibly downloaded from Lawrence’s CRC email account private communications between Lawrence and her husband.

Militello moved the email accounts for CRC and the partners’ other businesses from Microsoft onto Google Workspace. The emails between Lawrence and her husband are protected by the spousal communication privilege. Militello gave the emails to her attorneys, who then used them to obtain a receivership for CRC in a parallel proceeding, the court noted.

Justices awarded Lawrence undisclosed costs. Associate Justices John L. Segal and Gail Ruderman Feuer joined the opinion.

Hosie Rice LLP represented Militello and the firm. Zweiback, Fiset & Zalduendo LLP represented Lawrence. Cohen Williams Williams LLP represents Cannaco Research Corp.

The case is Militello v. VFarm 1509, Cal. Ct. App., 2d Dist., No. B318397, opinion filed 3/21/23.