Fundamental Administrative Services, LLC v. Anderson

Filing 97

MEMORANDUM AND ORDER denying 45 MOTION to Alter/Amend Judgment or Alternatively, For Clarification by Kristi Anderson; denying 63 Supplemental MOTION to Alter/Amend Judgment or, Alternatively for Clarification as to Court's Memorandum and Preliminary Injunction by Kristi Anderson. Signed by Judge James K. Bredar on 5/1/14. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

*
*

FUNDAMENTAL ADMIN. SERVS., LLC,
Plaintiff

*

v.

*
*

KRIST! ANDERSON,

*

Defendant

*

*

*

*

*

*

MEMORANDUM
The Court now addresses
judgment

CIVIL NO. JKB-13-170S

or alternatively

Defendant

for clarification,

injunction (ECF No. 45), and Anderson's

*

*

*

*

*

*

AND ORDER
Kristi Anderson's

motion to amend or alter

as to the Court's memorandum

and preliminary

supplemental motion for the same purpose (ECF

No. 63). The motions have been thoroughly briefed by both Anderson and Plaintiff Fundamental
Administrative

Services, LLC CFAS") (ECF Nos. 55, 61, 65, 71, 82, 89), and no hearing is

required, Local Rule 105.6 (D. Md. 2011).

Anderson's motions will be denied, but the Court

will sua sponte supplement its earlier memorandum and preliminary injunction (ECF No. 41) to
address the question of security for the preliminary injunction.
Anderson raises three points in her motions: First, she contends the Court did not make
the requisite factual findings to support the preliminary injunction; second, she argues the
injunction fails to identifY specifically the conduct or activity prohibited or required; and third,
she alternatively asks the Court to clarifY.that the requirement for her to return FAS's documents
exempts her retention of copies ofF AS's documents. None of her contentions has merit.

The Court has reviewed the transcript of the preliminary injunction hearing and its
memorandum and preliminary injunction and finds therein ample factual findings to support the
preliminary injunction, and it need not repeat them here. Ander~on's contention that any factual
finding must be written in the injunction order for it to have legal effect is refuted by the Fourth
Circuit's decision in CIENA Corp. v. Jarrard, 203 F.3d 312, 321 (4th Cir. 2000) ("the district
court's findings of fact and conclusions of law, made on the record, satisfied the Rule 52(a)
requirement that such factual findings and legal conclusions be 'set forth"').

Further, the written

order, which expressly incorporated its earlier opinions, does contain factual findings.

1

See id.

("the court stated its findings 'that ClENA will suffer immediate and irreparable injury unless
Defendant is temporarily enjoined as set forth in this Order, and that the balance of hardships
favors plaintiff, who is likely to prevail on the merits"').
Although her contention that the injunction was not supported by factual findings is
unmeritorious,

the Court considers it appropriate to respond to Anderson's

relating to the first issue of factual findings.

other contentions

Anderson asserts, "The Court refused to hear any

evidence or testimony on any issue .... " (ld.) Additionally, she says, "Evidence was offered to,
and rejected by, the Court on multiple occasions during the hearing."
No.6!.)

(Def.'s Reply 10, ECF

Neither assertion is true. No evidence or testimony was offered at the hearing.

What

Anderson's counsel did do was to ask the Court if it wanted to hear from Anderson who could
state in her own words why she drafted the state court complaint as she did. (10/9/2013 T. 16,
31, 33, ECF No. 55, Ex. A.) It was clear that her lawyer was asking the Court to hear argument
trom Anderson, not sworn testimony subject to cross-examination.

Moreover, the Court's order

was not based on why she made the allegations that she did in the state court complaint;
I

Anderson's argument to the contrary, the injunctive order never "acknowledged that the facts necessary

to explain its rul.ing, and upon which the injunction was based, must be set forth in the Memorandum and Opinion."
(See DeCs Reply 7 (emphasis added).)

2

regardless of her rationale, the allegations were made in derogation of her ethical duty to
maintain FAS's confidences.
Anderson also argues that "many of the alleged disclosures that Plaintiff characterizes as
confidential information did not, in fact include confidential information."
Mem. 5.) The Court found otherwise.

(Def.'s Mot. Supp.

The Maryland Rules of Professional Conduct ("MRPC")

require an attorney to keep confidential not just "privileged" information but also "information
relating to the representation of a client." MRPC 1.6(a). Comment 3 to MRPC 1.6 explains the
breadth of that duty and the difference between volunteered disclosure and compelled disclosure:
The attorney-client privilege and work-product doctrine apply in judicial and
other proceedings in which a lawyer may be called as a witness or otherwise
required to produce evidence concerning a client. The rule of client-lawyer
confidentiality applies in situations other than those where evidence is sought
from the lawyer through compulsion of law. The confidentiality rule, for
example, applies not only to matters communicated in confidence by the client
but also to all information relating to the representation, whatever its source. A
lawyer may not disclose such information except as authorized or required by the
Maryland Lawyers' Rules of Professional Conduct or other law.
See also Newman v. Maryland, 863 A.2d 321, 331-32 (Md. 2004) ("Whereas the attorney-client
privilege addresses compelled disclosure of client secrets during judicial proceedings, client
confidentiality under Rule 1.6 of the Professional Code relates to the attorney's general duty to
maintain the confidentiality of all aspects of a client's representation."); X Corp. v. Doe, 805 F.
Supp. 1298, 1307-08 (E.D. Va. 1992) (discussing differences between attorney-client privilege
and broader ethical duty to preserve client's confidences and secrets), aff'd, Under Seal v. Under
Seal, 17 F.3d 1435 (4th Cir. 1994) (unpublished).

Anderson's counsel failed to recognize the

difference between the two when she argued at the hearing that "the only issue present today is
whether or not Ms. Anderson violated the attorney-client privilege, and whether or not she
should be enjoined from doing so." (10/9//2013 T. 23, 32.)

3

Anderson also states, "For the Court to enJOIn Ms. Anderson from making certain
assertions on the basis of an improper disclosure of confidential information, it is necessary for
the Court to make a finding of fact that Ms. Anderson has in fact already improperly disclosed
confidential

information."

(Def.'s Mot. Supp. Mem. 6.)

She offers no authority for this

proposition, nor is it logical when considered in light of the prevailing standard for preliminary
injunctive relief:
A plaintiff seeking a preliminary injunction must establish that he is likely
to succeed on the merits, that he is likely to suffer irreparable harm in the absence
of preliminary relief, that the balance of equities tips in his favor, and that an
injunction is in the public interest.
Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008). The Winter standard
is based not on proof that a defendant has already committed an act sought to be enjoined by the
plaintiff but on the likelihood that the defendant will commit the act if not enjoined. Of course,
if the defendant has already engaged in conduct for which the plaintiff is seeking an injunction,
then the plaintiffs

burden is considerably eased when asserting a likelihood of success on the

merits.
Next, Anderson argues that even if it were found that she had "disclosed privileged or
confidential information, there would still need to be an analysis and determination as to whether
she was permitted to do so under MRPC 1.6(b)(5)."

(Def's

Mot. Supp. Mem. 6.)

subsection of the rule in question permits a lawyer to "reveal information

The

relating to the

representation of a client to the extent the lawyer reasonably believes necessary to establish a
claim or defense on behalf of the lawyer in a controversy between the lawyer and the client."
The Court's findings of fact very clearly stated that her state court complaint went well beyond
what was necessary under Maryland's notice-pleading rules to state a claim for relief. Because
the rule's permission to disclose is based upon a reasonable belief, the rule thus indicates it is not
4

Anderson's

subjective belief that is at issue but whether such belief is objectively reasonable

under the circumstances.

See MRPC 1.0(j) ("'Reasonable'

or 'reasonably' when used in relation

to conduct by a lawyer denotes the conduct of a reasonably prudent and competent lawyer. "');
MRPC 1.0(k) ("'Reasonable

belief or 'reasonably believes' when used in reference to a lawyer

denotes that the lawyer believes the matter in question and that the circumstances are such that
the belief is reasonable.").

Anderson's belief that her disclosure of FAS's confidences in her

state court complaint was necessary was unreasonable.

Even if her belief had been reasonable,

which it was not, she still failed to take into account the interpretive guidance of Comment 6 to
MRPC 1.6(b) (emphasis added):

"If the disclosure will be made in connection with a judicial

proceeding, the disclosure should be made in a manner that limits access to the information to
the tribunal or other persons having a need to know it and appropriate protective orders or other
arrangements should be sought by the lawyer to the fullest extent practicable."

It is undisputed

that Anderson filed her complaint without taking any protective measures whatsoever and that
the complaint was only sealed after FAS filed a motion to seal it.
As for the second issue, Anderson contends "the injunction is invalid in that it is not
sufficiently specific and fails to identify or define the documents to be returned."

(Def.'s Mot.

Supp. Mem. 8.) The level of description in the injunctive order is comparable to that in the
injunctive order at issue in elENA v, Jarrard, which was deemed acceptable by the Fourth
Circuit.

203 F.3d at 321-22.

Anderson also claims she is placed "in an impossible 'catch 22'

•
position," indicating the injunction prevents her from presenting a document to the state court for
a ruling on confidentiality.
Furthermore,
Anderson's

(Id 6-7.) Nonsense.

This is precisely what the injunction allows.

the Court explained at the hearing what it intended to do in this regard, and
counsel did not object to the prospect of presenting issues of confidential

5

or

privileged information to the state court before the information is disclosed.

(10/9/2013 T. 36-

37.)
As to the third issue, Anderson claims "the Court did not hear oral argument with regard
to the issue of the documents allegedly in Ms. Anderson's possession."

(Def.'s Mot. Supp.

Mem. 8.) None was offered. Anderson's counsel made a full presentation to the Court but did
not address the issue of documents even though that issue was raised by FAS in its motion
papers.

Her assertion that the injunctive order was issued without any factual findings with

regard to the return of documents is premised upon what she views as a lack of facts establishing
that she, in fact, had documents to be returned. (Id 7.) It is undisputed, however, that Anderson
and her lawyer had and continue to have FAS documents.

That concession was made at the

hearing on the first request for a temporary restraining order (''IRO'')

(611412013 T. 6-10, ECF

No. 55, Ex. B) and has been fortified by her subsequent filings acknowledging her possession of
thousands of pages of documents (Def.'s Reply 10; Def.'s Supp. Reply I). No factual finding is
necessary in light of her concession.
Anderson

argues "the Court's

Order does not indicate or make clear whether Ms.

Anderson, as an attorney, is entitled to retain copies of any of the documents that are to be
produced."

She suggests she "is entitled to maintain a copy of all client files upon turning over

originals to the client, in accordance with applicable case law in this circuit." (Def.'s Mot. Supp.
Mem.8-9.)

The mandate of the injunction order is clear: Anderson "SHALL RETURN to FAS

any document, whether in electronic or paper form ....
provides no carvecout for copies.
regarding an attorney's

" (10/10/2013 Order, ~ 5.) The order

The Court has found no binding case law in this Circuit

keeping a copy of client files, particularly when the attorney was

6

in-house counsel of the client and, therefore, an employee of the c1ient.2

MRPC J.] 6(d)

mandates that an attorney shall surrender papers and property to which the client is entitled. The
documents

Anderson admits to having are documents she "collected and retained . . . In

anticipation of litigation" (Oef.'s Supp. Mot. Supp. Mem. 10), "that she identified, selected, and
culled out as part of her efforts to protect herself in the Florida litigation and in anticipation of
litigation with Plaintiff FAS" (id. 3), and that were "not created by Ms. Anderson, but, rather,
merely collected from a defined universe of documents in FAS' possession to which Ms.
Anderson had access at the time they were collected, in anticipation of litigation with FAS"
(Oef's

Supp. Reply 13). The only exception to MRPC 1.16(d) is stated therein:

may retain papers relating to the client to the extent permitted by other law."
MRPC 1.16 provides relevant interpretation:

"The la"''Yer
Comment 9 to

"The lav,yer may retain papers as security for a fee

only to the extent permitted by law, subject to the limitations in paragraph (d) of this Rule. See
Rule 1.15."

Anderson is not retaining FAS's documents as security for a fee but to gain an

advantage in litigation.
Maryland cases have uniformly found that an attorney's failure to return a client's file to
a client upon termination of representation constitutes a violation of MRPC 1.16(d). See AllY.
Grievance Comm 'n v, Edib, 4 A.3d 957, 969 (Md. 2010). See also Atty. Grievance Comm'n v.
Zimmerman. 50 A.3d 1205, 1218 (Md. 2012) (attorney still required to return client file even ifit
merely contained copies of documents former client already had).

But see Atty. Grievance

Comm 'n v. Brown, 44 A.3d 344, 359 (Md. 2012) ("When a client requests his or her file from an
attorney at the end of the representation, MLRPC 1.16(d) requires the attorney to surrender the

2 The Court acknowledges the possibility ofa different conclusion if the attorney is outside counsel and
has, in the ordinary course of representation of the client, amassed a file of documents that were either voluntarily
supplied by the client, created by the attorney, or received trom opposing parties or witnesses in the process of
discovery and litigation. The Court is not faced with that quite different factual scenario and does not opine beyond
the circumstances actually before it.

7

portions of the file (or a copy) to which the client is entitled (assuming no proper charging lien
exists).").

The only Maryland cases that have been found on this issue have dealt with outside

counsel.

The Court has been unable to find any Maryland cases discussing the same issue in

relation to former in-house counsel. As earlier noted, Anderson was an employee of FAS when
she was working as FAS's general counsel.

It would seem that a client's employee has no

independent right to possess the client's documents in the first place; therefore, without prior
legitimate possession of client documents, in-house counsel would have nothing to "return" to
the client. Despite that logic, Anderson has accumulated thousands of pages of FAS documents
and has not surrendered them to FAS, although she says she has provided copies to FAS.
(Addressed later in this opinion is whether she can refuse to provide even copies of some
documents.)

She relies upon several cases as authority for the proposition that she can make and

keep copies ofFAS's documents. The Court finds these cases unpersuasive.
Anderson places heavy reliance upon the Utah Supreme Court's decision in Spratley v.
State Farm Mut. Auto. Ins. Co., 78 P.3d 603 (Utah 2003), and claims it was "cited with
approval" by another judge of this Court in Hoffman v. Baltimore Police Dep't, 379 F. Supp. 2d
778 (D. Md. 2005).

The Spratley case approved in-house counsel's

keeping a copy of

confidential documents and materials based on Utah's Rule of Professional Conduct 1.\6(d).
Anderson fails to mention that Utah's Rule 1.\6(d) is worded in a materially different manner
from Maryland's Rule 1.16(d). Utah's rule states in relevant part: "The lawyer must provide,
upon request, the client's file to the client. The lawyer may reproduce and retain copies of the
client file at the lawyer's expense."

Given that wording, it is not surprising at all that the Utah

Supreme Court ruled "the client is entitled to possession of its original client file, but the attorney

8

is permitted to retain copies at its [sic] own expense."

78 P.3d at 611. Maryland's rule has no

comparable wording, and the Spratley opinion is, consequently, inapplicable to MRPC 1.16(d).
Anderson also states unabashedly that Judge Nickerson's opinion in Hofjman approved
the Spratley case's treatment of the issue of copies being retained by in-house counsel. (Def.'s
Mot. Supp. Mem. 9 n.2.) The Hoffman opinion only refers to Spratley in relation to a different
issue, whether and how in-house counsel could, consistent with MRPC 1.6, pursue a retaliation
claim against his former employer.

379 F. Supp. 2d at 784. Hoffman never addressed the issue

of retention of copies of documents.
Anderson additionally relies upon the opinion of X Corp. v. Doe, 805 F. Supp. 1298 (E.D.
Va. 1992). Although the undersigned agrees with that case's extensive discussion and treatment
of an attorney's ethical duty to preserve a client's confidences and secrets, no compelling reason
presents itself to adopt the second ruling made in X Corp. v. Doe as to an in-house attorney's
right to retain copies of a company's documents3

Unlike the thorough treatment of the first

issue, the second issue was decided with little accompanying analysis and with no reference at all
to the ethical duties owed by an attorney to a client upon termination of representation.

Instead,

the opinion summarily concluded the company was unlikely to suffer irreparable harm if Doe
retained X Corporation's
original documents;

document copies for three reasons:

(2) the corporation

(I) the corporation had all of the

had notice of the subject matter covered by the

documents and was reasonably able to identitY the documents Doe possessed; and (3) since the
court was granting the corporation's

request for injunctive relief to prevent Doe from making

disclosures of confidential information, the corporation "faceTd] no risk that Doe will use or
disseminate the documents in any manner detrimental to X Corp., other than in the defense of

3 This issue was not part of Doe's appeal to the Fourth Circuit. See Under Seal, 17 F.3d 1435, 1994 WL
52197, at *1.

9

this case or the prosecution of his personal claims."

ld. at 1311. Even putting aside the case's

lack of discussion of the ethical obligations, this Court has no basis for determining that FAS
possesses all of the documents that Anderson possesses or that FAS is reasonably able to identifY
the documents Anderson possesses.

Moreover, the Court is not confident that an injunction

prohibiting disclosure by Anderson of FAS's confidences is sufficient to protect FAS from
release of FAS documents.
Two other cases cited by Anderson deal with outside counsel's retention of copies of
client files, Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn, L.L.P., 689 N.E.2d 879
(N.Y. 1997), and Qualitative Fin. Strategies Inc. v. Morgan Lewis & Bock/us, LLP, 2002 WL
434380 (Pa. Com. PI. Mar. 12, 2002), and shed no additional light on the circumstances of the
instant case. Finally, the case of Schaefer v. Gen. Elec. Co., Civ. No. PCD-07-0858, 2008 WL
649189 (D. Conn. Jan. 22, 2008), only addressed whether a former in-house counsel could retain
copies of documents reflecting her personal performance while employed at GE and found such
was permissibly implicit in her right to make defensive disclosures of protected information in
dispute with her client.

Suffice it to say that documents possessed by Anderson-' in the

thousands of pages-range

far beyond any pertaining to her personal performance.

Anderson makes several more arguments. She states,
The Court's decision with regard to the documents also serves to frustrate the
Bankruptcy Proceedings .. : . [T]he Court's injunction would require Ms.
Anderson to take action that would render her unable to perform her obligations
in discovery in connection with the Bankruptcy Proceedings because she would
no longer have possession of materials that are the proper subject of discovery in
that case and are covered by the settlement and compromise and/or Bar Order.
Anderson has not shown that she was ever entitled to possess the documents outside the confines
of her employment with FAS, and whether she has to give up documents that she was never
authorized to possess perhaps should have some bearing on the bankruptcy proceedings.
10

But

however the court in the bankruptcy proceedings resolves the issues before it is not this Court's
concern.
Anderson additionally asserts the injunctive order must be clarified as to her entitlement
"to invoke attorney-client

privilege with regard to communications

between herself and her

independent counsel, Steven Leitess." (Def.'s Reply 10.) Anderson can provide a privilege log
to FAS for those documents that she believes come within her privileged communications with
her counsel.

The privilege log shall comply with the directives of Rule 45(e)(2)(A), Federal

Rules of Civil Procedure, and this Court's Local Rules, Appendix A, Guideline 10.d.

See

Neuberger Berman Real Estate Income Fund, Inc. v. Lola Brown Trust No. Ib, 230 F.R.D. 398,
406 n.l4 (D. Md. 2005); Marens v. Carrabba's Italian Grill, Inc., 196 F.R.D. 35, 38-39 & n.l
(D. Md. 2000).
Another contention
documenting

advanced by Anderson is that she "has her handwritten

certain communications

notes

held with others relating to Plaintiff or tasks to be

performed while she was counsel at FAS. Given the breadth of this Court's Order, copies of
such personal, handwritten notes were provided to Plaintiff, through counsel; however, it is
entirely unreasonable

to deprive Ms. Anderson of her own handwritten

Reply I I.) From Anderson's

notes."

(Def.'s

description, these handwritten notes appear not to be "personal"

documents but FAS documents, i.e., they were recorded by an FAS employee in relation to her
FAS employment.

Whether they were handwritten or typed or recorded in some other format is

not the test of whether they are FAS's documents.

Anderson has established no entitlement to

these documents.
In her final argument, Anderson claims work-product protection for documents that she
characterizes as her "handwritten notes of telephone calls or meetings that were generated and

11

maintained by her during the course of her employment with and representation of FAS, some of
which contain her thoughts and impressions made in anticipation of litigation with the company
or its officers," which she refers to as "Protected Notes," and "electronically stored documents
including emails and attachments to the emails," which she refers to as "Protected Documents."
(Def.'s Supp. Mot. Supp. Mem. 2-3.) Addressing the latter first, it is clear that the "Protected
Documents" are FAS documents and this Court has already determined she has no authority to
possess them. Anderson unreasonably claims that the "Protected Documents" that she "collected
and retained" from FAS, but concededly did not "create," are her work product.
claim a right of work product in FAS's documents, then it is clearly FAS.

If anyone can

Resolution Trust

Corp. v. H----, P. c., 128 F.R.D. 647, 649 (N.D. Tex. 1989) (protection afforded by work-product
doctrine is for client's benefit and cannot be used by client's own attorney against client).
Anderson did not generate the "Protected Documents" and, adversely to FAS's interests,
she seeks to claim protection for FAS's work product, to the extent the documents constitute
work product at all. Anderson's assertion of work-product protection as to documents rightly
belonging to FAS turns the traditional order of litigation processes around.

She can, in the

course of discovery, serve appropriate requests for production on FAS and then the question will
become whether FAS is required to produce certain documents to her. Resolution Trust, 128
F.R.D. at 649 (if client terminates firm's representation,

then "the firm may retrieve those

documents it feels are relevant to its defense through discovery").

She cannot subvert the

recognized order of a lawsuit's progression by seizing FAS's documents in advance of discovery
and asserting squatter's rights to them. And whether FAS also has these documents is irrelevant.
If they are FAS's documents, then FAS is solely entitled to determine who may possess themincluding copies thereof-unless

their disclosure by FAS is compelled through the normal

12

litigation processes.

As for the "Protected Notes," they may be her work product, but they must

also be included in Anderson's privilege log.
For all of the foregoing reasons, Anderson's motions will be denied. Nevertheless, the
Court inadvertently failed in its injunctive order to address the question of security pursuant to
Federal Rule of Civil Procedure 65(c), which states in pertinent part:
The court may issue a preliminary injunction or a temporary restraining order
only if the movant gives security in an amount that the court considers proper to
pay the costs and damages sustained by any party found to have been wrongfully
enjoined or restrained.
The Fourth Circuit has interpreted this provision to be "mandatory and unambiguous."

Hoechst

Dia/oil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 421 (4th Cir. 1999). Even so, "[w]here the
district court determines that the risk of harm is remote, or that the circumstances otherwise
warrant it, the court may fix the amount of the bond accordingly.

In some circumstances, a

nominal bond may suffice." Id. nJ (citing Int 'I Controls Corp. v, Vesco, 490 F.2d 1334 (2d Cir.
1974), which approved a district court's fixing a bond at zero based on absence of evidence
regarding likelihood of harm). In the instant case, the Court can perceive no likelihood of harm
to Anderson from compliance with the preliminary injunction. It only mandates her adherence to
the ethical norms to which she is already subject by virtue of her membership in the Maryland
Bar. Consequently, the bond amount is zero.
In conclusion, the Court's Memorandum and Preliminary Injunction of October 10, 2013
(ECF No. 41), is hereby modified to reflect that FAS is not required to post security. Otherwise,
Anderson's motion and supplemental motion to alter, amend, or clarify (ECF Nos. 45, 63) are
hereby DENIED.

Anderson shall immediately tum over all documents, whether they are

originals or copies, that Anderson retained from her employment with FAS, except for any
document relating to her compensation or other benefit.
13

The Court further excepts from this

requirement any performance evaluation Anderson received while employed with FAS.
document Anderson believes is protected by her personal attorney-client
communications

with her independent counselor

Any

privilege for her

is protected as her or her attorneys' work

product shall be clearly and specifically described in a privilege log pursuant to applicable rules
and case law. The privilege log shall be provided to FAS within ten days of this order.

DATED this

/

day of May, 2014.

BY THE COURT:

Q,,~~. 344
'7.(.
James K. Bredar
United States District Judge

14