Harleysville Insurance Company v. Holding Funeral Home, Inc. et al

Filing 68

MEMORANDUM OPINION. Signed by Magistrate Judge Pamela Meade Sargent on 02/09/2017. (Bordwine, Robin)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
HARLEYSVILLE INSURANCE
COMPANY,
Plaintiff/Counterclaim
Defendant
v.
HOLDING FUNERAL HOME,
INC., et al.,
Defendants/Counterclaim
Plaintiffs.

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MEMORANDUM OPINION
Case No. 1:15cv00057

This matter was heard before the undersigned on the Plaintiff’s Motion
Requesting The Disqualification of Defendants’ Counsel, (Docket Item No. 52)
(“Motion”), on January 17, 2017. Based on the reasoning set forth below, the
Motion will be denied insofar as it seeks the disqualifications of defense counsel.
Nonetheless, the undersigned finds that some sanction is appropriate and will
award plaintiff its fees and costs incurred in pursuing the Motion.
The material facts are not in dispute. Plaintiff, Harleysville Insurance
Company, (“Harleysville”), has sued the defendants seeking a declaratory
judgment that it does not owe the defendants’ fire loss claim for an October 22,
2014, loss of a funeral home in Castlewood, Virginia, based on the fire being
intentionally set, material misrepresentations and failure to cooperate. The
defendants have filed counterclaims alleging breach of insurance contract and bad
faith against Harleysville. At issue before the court is defense counsel’s access to

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Harleysville’s entire claims file, and whether the facts and circumstances
surrounding this access require the disqualification of defense counsel.
In an effort to share information electronically, Thomas Cesario, a Senior
Investigator for Nationwide Insurance Company, (“Nationwide”), which owns
Harleysville, uploaded video surveillance footage of the fire loss scene, (“Video”),
onto an internet-based electronic file sharing service operated by Box, Inc. Cesario
then sent an email containing a hyperlink to the Box, Inc., internet site, (“Box
Site”), by which Wes Rowe of the National Insurance Crime Bureau, (“NICB”),
could access the file containing the Video using the internet and download the
Video. The Video was placed on the Box Site, and the hyperlink to the Box Site
sent by email to Rowe on September 22, 2015. The email to Rowe stated: “Here
is the link to access the video” and provided the hyperlink. The email also
contained the following statement:
CONFIDENTIALITY NOTICE: This e-mail contains information
that is privileged and confidential, and subject to legal restrictions and
penalties regarding its unauthorized disclosure or other use. You are
prohibited from copying, distributing or otherwise using this
information if you are not the intended recipient. If you received this
e-mail in error, please notify me immediately by return e-mail, and
delete this e-mail and all attachments from your system.
(Docket Item No. 55-5 at 2.) Harleysville concedes that any person who used the
hyperlink to access the Box Site had access to the electronic information stored
there. The information was not password protected. Harleysville also concedes
that any person who had access to the internet could have accessed the Box Site by
simply typing in the url address in a web browser.

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After receiving the September 22, 2015, email, Rowe used the hyperlink
included to access the Box Site on two occasions, once on September 22, 2015,
and, again, subsequently, to download the Video. On the occasions that Rowe
used the hyperlink to access the Box Site, the only information contained there was
the Video.
On April 28, 2016, Cesario placed files containing Harleysville’s entire
claims file and Nationwide’s entire investigation file for the defendants’ fire loss,
(“Claims File”), on the Box Site to be accessed by Harleysville’s counsel. Cesario
then sent an email to Harleysville’s counsel with the same hyperlink he sent to
Rowe to be used by counsel to access the Box Site and retrieve a copy of the
Claims File.
Defense counsel issued a Subpoena Duces Tecum, dated May 24, 2016, to
NICB requesting NICB’s entire file related to the fire. On or about June 23, 2016,
NICB sent defense counsel electronic copies of all documents and information it
had received from Harleysville, including a copy of the September 22, 2015, email
from Cesario to Rowe containing the hyperlink to the Box Site. That same day,
defense counsel, without the knowledge or permission of Harleysville or its
counsel, used the hyperlink to gain access to the Box Site, which now contained
the Claims File. Defense counsel downloaded the Claims File and reviewed it
without ever notifying Harleysville’s counsel that they had accessed and reviewed
potentially privileged information.
On August 22, 2016, in response to a request for production of documents,
defense counsel produced a thumb drive to Harleysville’s counsel.

When

Harleysville’s counsel reviewed the information contained on the thumb drive,
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counsel discovered that it contained potentially privileged material inadvertently
produced by the defendants.

Harleysville’s counsel alerted defense counsel.

Defense counsel requested that the disclosed privileged documents be destroyed,
and Harleyville’s counsel complied. Upon further review of the information
contained on the thumb drive, Harleysville’s counsel discovered on October 27,
2016, that its Claims File was contained on the thumb drive and had been produced
by defense counsel. The Claims File was located in a computer file entitled “NICB
Video.”
On November 1, 2016, Harleysville’s counsel contacted defense counsel and
requested that defense counsel destroy their copy of the Claims File. Defense
counsel have conceded that all defense counsel of record have reviewed the
materials accessed on the Box Site and that the materials have been shared with the
defendants. Nationwide, subsequently, disabled the Box Site so it was no longer
accessible to anyone, and Harleysville filed the Motion with the court.
Harleysville’s counsel argues that defense counsel’s access to Harleysville’s
Claims File was an improper, unauthorized access to privileged information
requiring the disqualification of all defense counsel of record. Defense counsel
argue that the Motion should be denied because Harleysville waived any claim of
privilege or confidentiality by placing the information on the Box, Inc., site where
it could be accessed by anyone.
Harleysville asserts that the Claims File reviewed by defense counsel
contained information protected from disclosure by the attorney-client privilege
and the work-product doctrine. Jurisdiction in this declaratory judgment action is
based on diversity of citizenship, and the claims raised by the parties are governed
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by Virginia state law. Therefore, under Federal Rule of Evidence 501, Virginia
state law governs the applicability and waiver of any evidentiary privilege. See
Fed. R. Evid. 501. The work-product doctrine, however, it not a privilege, but
rather a qualified immunity from discovery. See Continental Cas. Co. v. Under
Armour, Inc., 537 F. Supp. 2d 761, 769-70 (D. Md. 2008) (citing 8 CHARLES ALAN
WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE: CIVIL 2d § 2023 at 335 (2d
ed. 1994)). Thus, Rule 501 does not apply, and federal law, not Virginia law,
governs the applicability and waiver of the protection available under the workproduct doctrine. See Continental Cas. Co., 537 F. Supp. 2d at 769-70.
Under Virginia law, confidential attorney-client communications are
privileged from disclosure. See Walton v. Mid–Atl. Spine Specialists, 694 S.E.2d
545, 549 (Va. 2010). “Nevertheless, the privilege is an exception to the general
duty to disclose, is an obstacle to investigation of the truth, and should be strictly
construed.” Commonwealth v. Edwards, 370 S.E.2d 296, 301 (Va. 1988). Also, the
attorney-client privilege may be expressly or impliedly waived by the client’s
conduct. See Edwards, 370 S.E.2d at 301. The proponent of the privilege has the
burden to establish that the attorney-client privilege applies to a communication
and that the privilege was not waived. See Edwards, 370 S.E.2d at 301; United
States v. Jones, 696 F.2d 1069, 1072 (4th Cir.1982).
Although it is hard to imagine that the entire Claims File would be protected
by the Virginia attorney-client privilege, the court will assume that at least a
portion of the file contains privileged information for the purpose of addressing the
parties’ arguments at issue here. See Westchester Surplus Lines Ins. Co. v. Clancy
& Theys Const. Co., 2013 WL 6058203, at *6 (E.D. N.C. Nov. 15, 2013) (
“Similar to work product, application of the attorney-client privilege can be
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complicated in the context of insurance claims). Harleysville argues that the court
should treat defense counsel’s access to its claims file as an unauthorized
involuntary disclosure or, in the alternative, as an inadvertent disclosure by
Harleysville. Defense counsel argues that Harleysville’s actions waived any claim
that the information should be protected by the attorney-client privilege.
The Virginia Supreme Court addressed the difference between involuntary
and inadvertent disclosures of privileged information in Walton. See 694 S.E.2d at
551-52.

“…[I]n the waiver context, involuntary means that another person

accomplished the disclosure through criminal activity or bad faith, without the
consent of the proponent of the privilege….” Walton, 694 S.E.2d at 551.
Inadvertent disclosure, on the other hand, includes action by the proponent of the
privilege to knowingly, but mistakenly, produce a document or to unknowingly
provide access to a document by failing to implement sufficient precautions to
maintain its confidentiality. See Walton, 694 S.E.2d at 551-52. The court further
reasoned that the determination of whether a disclosure was involuntary does not
rest on the subjective intent of the proponent of the privilege:
The … intention to maintain the attorney-client privilege does
not lead inevitably to the conclusion that the disclosure was
involuntary instead of inadvertent. If subjective intention of the
proponent of the privilege controlled, a disclosure would always be
considered involuntary. However, in the waiver context, involuntary
means that another person accomplished the disclosure through
criminal activity or bad faith, without the consent of the proponent of
the privilege.
Walton, 694 S.E.2d at 551.

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In this case, Harleysville argues that defense counsel gained access to its
claims file by their unauthorized use of the hyperlink to access the Box Site.
Therefore, Harleysville argues, the disclosure should be considered involuntary on
its part and not a waiver of its claim of privilege. Harleysville argues that the only
persons it authorized to use the hyperlink to access the Box Site and the materials
located there were the NICB, to retrieve a copy of the Video, and its own counsel,
to retrieve a copy of the Claims File. Harleysville argues that, in uploading its
Claims File to the Box Site, it did not intend to share the information with anyone
other than its own counsel. As stated above, however, the court in Walton held
that a proponent’s intention is not determinative of whether the disclosure was
involuntary or inadvertent. In this case, Harleysville has conceded that its agent,
Cesario, an employee of its parent company, intentionally and knowingly uploaded
its Claims File to the Box Site. Under these facts, I find that the disclosure was not
involuntary but, rather, was inadvertent under Virginia state law, in that
Harleysville unknowingly provided access to information by failing to implement
sufficient precautions to maintain its confidentiality.
Once a court determines that a disclosure was inadvertent, the court next
must decide whether the disclosure waived the attorney-client privilege. The
Virginia Supreme Court in Walton adopted a multi-factor analysis which requires
the court to assess whether the holder of the privilege took reasonable steps to
prevent disclosure and promptly took reasonable steps to rectify the error. Under
this approach, the court stated, the following factors should be considered:
(1) the reasonableness of the precautions to prevent inadvertent
disclosures, (2) the time taken to rectify the error, (3) the scope of the
discovery, (4) the extent of the disclosure, and (5) whether the party
asserting the claim of privilege or protection for the communication
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has used its unavailability for misleading or otherwise improper or
overreaching purposes in the litigation, making it unfair to allow the
party to invoke confidentiality under the circumstances.
Walton, 694 S.E.2d at 552.
In this case, there is no claim that the third factor -- the scope of discovery -contributed to this inadvertent disclosure.

This case does not involve the

production of a few privileged pages among voluminous pages of production.
Also, there is no claim that the fifth factor is pertinent to the court’s decision in this
case. The cases cited in Walton in support of this factor all hold that allowing a
party to disclose some potentially privileged information for its advantage, while
refusing to disclose other information, would be unfair. See Walton, 694 S.E.2d at
552. The defendants, here, are not claiming that Harleysville has disclosed the
information, or a portion of the information, to gain any advantage in this
litigation.
The remaining three factors, however, are determinative in this court’s
decision on this issue. With regard to the reasonableness of the precautions taken
to prevent the disclosure, the court has no evidence before it that any precautions
were taken to prevent this disclosure. The employee who uploaded Harleysville’s
Claims File to the Box Site had used the site previously to share information with a
third-party, the NICB. It does not matter whether this employee believed that this
site would function for only a short period of time or that the information uploaded
to the site would be accessible for only a short period of time. Because of his
previous use of the Box Site, this employee either knew – or should have known –
that the information uploaded to the site was not protected in any way and could be
accessed by anyone who simply clicked on the hyperlink. Despite this, this
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employee purposefully uploaded the Claims File to the Box Site, making it
accessible to anyone with access to the internet, thus making the extent of the
disclosure vast. Also, Harleysville has stated that the Claims File was uploaded on
April 26, 2016. The entire Claims File remained accessible on the Box Site until
sometime after October 27, 2016, the date that Harleysville’s counsel asserts that
they discovered that defense counsel had the Claims File. Harleysville concedes
that no action was taken any earlier than this date to block access to the Claims
File despite the fact that Harleysville’s counsel, themselves, used the unprotected
hyperlink to access the Box Site to download the Claims File sometime after it was
uploaded on April 26. Therefore, they, too, knew – or should have known – that
the information was accessible on the internet. The court in Walton plainly stated,
“waiver may occur if the disclosing party failed to take reasonable measures to
ensure and maintain the document’s confidentiality, or to take prompt and
reasonable steps to rectify the error.” 694 S.E.2d at 552.
Based on these facts, I find that Harleysville has waived any claim of
attorney-client privilege with regard to the information posted to the Box Site. It
has conceded that the Box Site was not password protected and that the
information uploaded to this site was available for viewing by anyone, anywhere
who was connected to the internet and happened upon the site by use of the
hyperlink or otherwise. In essence, Harleysville has conceded that its actions were
the cyber world equivalent of leaving its claims file on a bench in the public square
and telling its counsel where they could find it. It is hard to image an act that
would be more contrary to protecting the confidentiality of information than to
post that information to the world wide web.
The court believes that its decision on this issue fosters the better public
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policy. The technology involved in information sharing is rapidly evolving.
Whether a company chooses to use a new technology is a decision within that
company’s control. If it chooses to use a new technology, however, it should be
responsible for ensuring that its employees and agents understand how the
technology works, and, more importantly, whether the technology allows
unwanted access by others to its confidential information.
The court’s ruling on waiver of the attorney-client privilege under Virginia
state law, however, is not determinative of whether any claim to work-product
protection has been waived under federal law. See Continental Cas. Co., 537 F.
Supp. 2d at 769-70. As stated above, the court will assume that the Claims File
contains some information of the type that would be protected from disclosure by
the work-product doctrine. The Fourth Circuit has recognized that the inadvertent
disclosure of attorney work product, even opinion work product, can result in a
waiver of its protected status. See Martin Marietta Corp. v. Pollard, 856 F.2d 619,
626 (4th Cir. 1988); Doe v. United States, 662 F.2d 1073, 1081 (4th Cir. 1981);
Dunlap Corp. v. Deering Milliken, Inc., 540 F.2d 1215, 1223 (4th Cir. 1976). The
Fourth Circuit has held, however, that a waiver should occur only when an
attorney’s or client’s actions are “consistent with a conscious disregard of the
advantage that is otherwise protected by the work product rule.” Doe, 662 F.2d at
1081. In general, this occurs only when the disclosure occurs under circumstances
that substantially increase the possibility that an opposing party will obtain the
protected information. See Continental Cas. Co., 537 F. Supp. 2d at 772-73.
Nevertheless, the Fourth Circuit has held that “release of otherwise protected
material without an intent to limit its future disposition might forfeit work product
protection…. [T]o effect a forfeiture of work product protection by waiver,
disclosure must occur in circumstances in which the attorney cannot reasonably
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expect to limit the future use of the otherwise protected material.” Doe, 662 F.2d at
1081.
The cases cited above were decided prior to the adoption of Federal Rule of
Evidence 502. Rule 502 specifically applies to disclosures of information covered
by the “work-product protection,” which it defines as “the protection that
applicable law provides for tangible material (or its intangible equivalent) prepared
in anticipation of litigation or for trial.” FED. R. EVID. Rule 502; FED. R. EVID. Rule
502(g)(2). Rule 502(b) states that when a disclosure is made in a federal
proceeding,
the disclosure does not operate as a waiver … if:
(1) the disclosure is inadvertent;
(2) the holder of the … protection took reasonable steps to prevent
disclosure; and
(3) the holder promptly took reasonable steps to rectify the error,
including … following Federal Rule of Civil Procedure 26(b)(5)(B).
FED. R. EVID. Rule 502(b). Rule 26(b)(5)(B) states: “If information produced in
discovery is subject to a claim of privilege or of protection as trial-preparation
material, the party making the claim may notify any party that received the
information of the claim and the basis for it.” FED. R. CIV. P. 26(b)(5)(B). Also, the
party seeking the protection of Rule 502(b) bears the burden of proving that each
of it elements have been met. See Maxtena, Inc. v. Marks, 289 F.R.D. 427, 444 (D.
Md. 2012) (citing Amobi v. D.C. Dep’t of Corrs., 262 F.R.D. 45, 53 (D.D.C. 2009).
A disclosure operates as a waiver of work product protection unless Rule 502
applies. See Waste Connections of N.C., Inc., v. K.R. Drenth Trucking, Inc., 2015
WL 4647823, at *3 (W.D. N.C. Aug. 5, 2015).

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Our sister district, the Eastern District of Virginia, has recognized a scarcity
of federal law defining what is meant by an inadvertent disclosure. See ePlus Inc.
v. Lawson Software, Inc., 280 F.R.D. 247, 254-55 (E.D. Va. 2012) (citing
Francisco v. Verizon South, Inc., 756 F. Supp. 2d 705, 710–11 (E.D. Va. 2010).
Based, in part, on the Black’s Law Dictionary definition of “inadvertence” as “[a]n
accidental oversight; a result of carelessness,” In advertence, BLACK’S LAW
DICTIONARY (8th ed. 2004), the Eastern District has found that inadvertent
disclosures must be based on unintentional acts. See ePlus Inc., 280 F.R.D. at 25455 (citing New Bank of New England v. Marine Midland Realty Corp., 138 F.R.D.
479, 483 (E.D. Va. 1991)). In reaching this conclusion, the court quoted an
unpublished opinion, McCafferty’s Inc. v. Bank of Glen Burnie, Case No. MJG–
96–3656, 1998 U.S. Dist. LEXIS 12861 (Apr. 23, 1998), which states:
[A]n inadvertent waiver would occur when a document, which a
party intended to maintain as confidential, was disclosed by
accident such as a misaddressed communication to someone
outside the privilege scope or the inadvertent inclusion of a
privileged document with a group of nonprivileged documents
being produced in discovery. In contrast, when a client makes a
decision—albeit an unwise or even mistaken, decision—not to
maintain confidentiality in a document, the privilege is lost due to
an overall failure to maintain a confidence.
ePlus Inc., 280 F.R.D. at 255.
Based on this reasoning, Harleysville’s disclosure should not be considered
“inadvertent” under federal law. Harleysville has not claimed that its agent’s
posting of its Claims File to the Box Site was not an intentional act. Also, based on
my reasoning above, I cannot find that Harleysville, or its counsel, took reasonable
steps to prevent its disclosure or to rectify the situation. Therefore, I find that Rule
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502 does not apply in this situation to prevent a waiver of the work-product
doctrine. Also, under the prior precedent, the agent’s actions in posting the Claims
File where it could be accessed by anyone on the internet is certainly a release of
protected information in a way that did not limit its future use. See Craft v. S. C.
State Plastering, LLC, 2017 WL 121854 (D. S.C. Jan. 12, 2017) (work-product
protection waived when plaintiffs’ counsel shared information at meeting open to
the public); E.I. Du Pont de Nemours and Co. v. Kolon Indus., Inc., 2010 WL
1489966, at *4-5 (E.D. Va. Apr. 13, 2010); Little v. Brown & Williamson Tobacco
Corp., 1999 WL 33591437, at *3-4 (D.S.C. Oct. 25, 1999) (posting information to
internet waives claim of protection by work-product doctrine).
The conclusion that the acts of Harleysville, in hindsight, waived any claim
of privilege or work-product protection over its Claims File does not, however,
provide an answer to whether defense counsel acted properly under the
circumstances and whether any sanction should be imposed.

The conduct of

attorneys appearing before this court is governed by the Virginia Rules of
Professional Conduct as adopted by the Virginia Supreme Court. See W.D. VA.
FED. R. DISC. ENF., Nov. 4, 1992 (amended Nov. 6, 1998 & June 16, 2016).
Virginia Rule of Professional Conduct 3.4(d) states: “A lawyer shall not: … (d)
Knowingly disobey or advise a client to disregard a standing rule or a ruling of a
tribunal made in the course of a proceeding….” VA. SUP. CT. R. Rule 3.4. Both
Virginia’s and the federal rules of civil procedure address what is required of
receiving counsel when counsel is notified that an opposing party is claiming that
information produced in discovery is subject to a claim of privilege or workproduct protection.
Under the federal rules, the receiving party, after being so notified,
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… must promptly return, sequester, or destroy the specified
information and any copies it has; must not use or disclose the
information until the claim is resolved; must take reasonable steps to
retrieve the information if the party disclosed it before being notified;
and may promptly present the information to the court under seal for a
determination of the claim.
FED. R. CIV. P. 26(b)(5)(B). The Virginia Rule states:
Upon receiving such notice, any party holding a copy of the
designated material shall sequester or destroy its copies thereof, and
shall not duplicate or disseminate such material pending disposition of
the claim of privilege or protection by agreement, or upon motion by
any party. If a receiving party has disclosed the information before
being notified of the claim of privilege or other protection, that party
must take reasonable steps to retrieve the designated material.
VA. SUP. CT. R. 4.1(b)(6)(ii).
While not binding on this, or any, court, the Virginia State Bar Standing
Committee on Legal Ethics has issued at least two Legal Ethics Opinions that
address what the proper conduct should be when an attorney receives information
an opposing party may claim as privileged or protected from disclosure. Legal
Ethics Opinion, (“LEO”), No. 1702, issued November 24, 1997, addressed the
conduct required when an attorney mistakenly received privileged information by
facsimile from opposing counsel. This LEO states “once the receiving lawyer
discovers that he has a confidential document inadvertently transmitted by
opposing counsel or opposing counsel’s client, he has an ethical duty to notify
opposing counsel, to honor opposing counsel’s instructions about disposition of the
document, and not to use the document in contravention or opposing counsel’s
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instructions.” The committee noted it had considered that, under the rules of
evidence, an inadvertent disclosure might cause a loss of the attorney-client
privilege.

Nonetheless, the committee, quoting Gunter v. Va. State Bar, 385

S.E.2d 597, 600 (Va. 1989), wrote:
The lowest common denominator, binding lawyers and laymen alike,
is the statute and common law. A higher standard is imposed on
lawyers by the Code of Professional Responsibility…. [W]e
emphasize that more is required of lawyers than mere compliance
with the minimum requirements of that standard. The traditions of
professionalism at the bar embody a level of fairness, candor, and
courtesy higher than the minimum requirements of the Code of
Professional Responsibility.
While LEO No. 1702 was issued before the adoption of the Rules of Professional
Conduct, its continuing validity recently was reaffirmed by the committee. In LEO
No. 1871, issued July 24, 2013, the committee addressed an attorney’s
responsibility when a document containing privileged information was discovered
among documents produced by opposing counsel for review in discovery. The
committee opined that LEO No. 1702 required the receiving attorney to promptly
notify opposing counsel that the document had been produced. The committee also
opined that the reviewing attorney should have “either sequestered or destroyed his
copy of the [document] pending a judicial determination of whether he could use
the document.”
In this case, defense counsel have admitted that they accessed the Box Site
by the hyperlink provided in the email from Cesario to Rowe. The face of this
email contained the Confidentiality Notice, which should have provided sufficient
notice to defense counsel that the sender was asserting that the information was
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protected from disclosure. Nonetheless, defense counsel downloaded the Claims
File from the Box Site, did not reveal to Harleysville’s counsel that they had
obtained and reviewed the Claims File and further disseminated the Claims File to
their clients and to law enforcement officials. At no time prior to the filing of the
Motion, did defense counsel seek a determination from this court with regard to
whether the materials they received were privileged or protected and what, if any,
use they could make of the materials in this litigation. The only action defense
counsel claim they took in response to discovering that they had access to
Harleysville’s Claims File – calling the Virginia State Bar Ethics Hotline for
advice – belies any claim that they believed that their receipt and use of the
materials without Harleysville’s knowledge was proper under the circumstances.
This court should demand better, and the ruling here is intended not to
merely tolerate the bare minimum ethically compliant behavior, but, instead, to
encourage the highest professional standards from those attorneys who practice
before the court. The court holds that, by using the hyperlink contained in the
email also containing the Confidentiality Notice to access the Box Site, defense
counsel should have realized that the Box Site might contain privileged or
protected information. This belief should have been further confirmed when
defense counsel realized that the Box Site contained not only the Video, but
Harleysville’s Claims File. That being the case, defense counsel should have
contacted Harleysville’s counsel and revealed that it had access to this information.
If defense counsel believed that the circumstances which allowed its access to the
information waived any claim of privilege or protection, they should have asked
the court to decide the issue before making any use of or disseminating the
information. Counsel chose not to do so, however, and, therefore, the court
believes that such conduct requires some sanction.
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Based on the decision that the posting of the Claims File to the internet
waived any attorney-client privilege or any work-product protection over the
information contained in the file, I find that the disqualification of defense counsel
is not warranted in this situation. The disqualification of counsel is an extreme
sanction. See Shaffer v. Farm Fresh, Inc., 966 F.2d 142, 145 (4th Cir. 1992);
Rogers v. Pittston Co., 800 F. Supp. 350, 353 (W.D. Va. 1992). Disqualification of
counsel must be decided on a case-by-case basis with consideration of the harm
imposed should counsel’s representation continue. See Rogers, 800 F. Supp. at
353. Harleysville urges that such a sanction is necessary since all defense counsel
have reviewed the Claims File. However, even if current counsel were disqualified,
based on the court’s ruling on waiver, substitute counsel would have access to the
same information. Therefore, there can be no harm to Harleysville by allowing
defense counsel to remain in this case. See Aetna Cas. & Sur. Co. v. United States,
570 F.2d 1197, 1201 (4th Cir. 1978) (disqualification inapplicable where “practical
considerations” eliminate any real harm). Therefore, I find that the more
reasonable sanction is that defense counsel should bear the cost of the parties in
obtaining the court’s ruling on the matter.
An appropriate order will be entered.
ENTERED: February 9, 2017.

/s/

Pamela Meade Sargent

UNITED STATES MAGISTRATE JUDGE

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