State ex rel. Rogers v. Bancorp Bank

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
THE STATE OF DELAWARE, )
Plaintiff, )
)
Ex Rel. )
)
RUSSELL S. ROGERS, )
Plaintiff-Relator, )
)
v. ) C.A. No. N18C-09-240
) PRW CCLD
THE BANCORP BANK, )
INTERACTIVE COMMUNICATIONS )
INTERNATIONAL, INC., )
and INCOMM FINANCIAL )
SERVICES, INC., )
Defendants. )
Submitted: November 29, 2022
Decided: January 3, 2023
Upon Defendant InComm Financial Services’ Motion for Disqualification and
Reimbursement of Fees and Costs,
GRANTED in part, DENIED in part.
MEMORANDUM OPINION AND ORDER
Catherine A. Gaul, Esquire, Randall J. Teti, Esquire, ASHBY & GEDDES,
Wilmington, Delaware, Joshua A. Goldberg, Esquire, Jane Metcalf, Esquire, Clinton
W. Morrison, Esquire, Christina Seda-Acosta, Esquire, PATTERSON BELKNAP WEBB
& TYLER LLP. Attorneys for Defendants Interactive Communications International,
Inc. and InComm Financial Services, Inc.
Daniel C. Mulveny, Esquire, Oliver Cleary, Esquire, Deputy Attorneys General,
STATE OF DELAWARE, DEPARTMENT OF JUSTICE, Wilmington, Delaware. Attorneys
for Plaintiff State of Delaware.
Jody C. Barillare, Esquire, MORGAN, LEWIS & BOCKIUS LLP, Wilmington,
Delaware, Eric W. Sitarchuk, Esquire, Ezra D. Church, Esquire, Ryan P. McCarthy,
Esquire, Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Attorneys for
Defendant The Bancorp Bank.
Bruce E. Jameson, Esquire, Samuel L. Closic, Esquire, Mary S. Thomas, Esquire,
PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware, David Brackett, Esquire,
Benjamin E. Fox, Esquire, John E. Floyd, Esquire, BONDURANT, MIXSON &
ELMORE, LLP, Atlanta, Georgia. Attorneys for Plaintiff-Relator Russell S. Rogers.
WALLACE, J.
The Court here resolves Defendant InComm Financial Services, Inc.’s Motion
for Disqualification and Reimbursement of Fees and Costs. For the reasons set forth
below, the prayer for disqualification is GRANTED as to Benjamin E. Fox, Esquire,
but DENIED as to Bondurant, Mixson & Elmore, LLP. The application for
reimbursement of fees and costs is GRANTED, in part, and DENIED, in part.
I. PROCEDURAL BACKGROUND
The parties and the Court are well-acquainted with the factual and procedural
background of this Delaware False Claims and Reporting Act (“DFCRA”) action.1
A detailed summary of the facts is set forth more fully in the Court’s earlier Opinion
and Order Denying Defendants’ Motion to Amend the Case Management Order.2
Here, the Court provides just the procedural background necessary to the
disqualification question now posed.
To date, the parties have engaged in numerous rounds of motions and pleading
practice, with this round instigated, in part, by a court-appointed Special Master’s
Report related to a discovery issue.3
The Special Master was tasked with facilitating a discovery dispute arising
out of Relator’s counsel’s admission that his law firm, Bondurant, Mixson & Elmore
1
See State ex rel. Rogers v. Bancorp Bank, 271 A.3d 742 (Del. Super. Ct. 2022).
2
Id.3
Special Master’s Confidential Final Report, Jan. 7, 2022 (D.I. 247). See D.I. 248 for the Public
Redacted version.
-1-
LLP (“Bondurant”), was privy to sensitive and potentially privileged InComm
Financial Services, Inc. (“InComm”) materials. In an interrogatory response,
Bondurant disclosed, for the first time, that following Plaintiff-Relator’s November
2018 termination from InComm, Plaintiff-Relator gave his InComm-issued laptop
to Bondurant.4
Bondurant loaded the laptop’s entire hard drive and files onto its internal
document review platform.5 “That laptop, the parties agree, contained privileged
materials and work product.”6 Between November 2018 and January 2019,
members of Bondurant reviewed no less than 850 documents from the InComm
laptop.7 Bondurant turned over 108 of those documents to the State in support of
Plaintiff-Relator’s DFCRA claims and complaint.8
When this came to light, the Special Master was tasked with determining
whether, and to what extent, Bondurant and its lawyers had reviewed InComm’s
privileged documents that were stored on the laptop.9 The Special Master’s audit
4
State ex rel. Rogers, 271 A.3d at 744. Relator alleges this DFCRA action was filed under seal
before his employment was terminated; and to that end, he disputes any allegations that he was
fired based on his job performance. See Relator’s Answering Br. in Opp’n at 6, Mar. 1, 2022 (D.I.
264).
5
State ex rel. Rogers, 271 A.3d at 744. Once that copy was made, the physical laptop was
returned to InComm, which was made none the wiser about this diversion.
6
Id.
7
Id.
8
Id.
9
Id. at 744-45.
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revealed that 36,648 documents were copied from the InComm laptop onto
Bondurant’s DISCO database.10 And of those documents, 874 were “accessed” by
Bondurant.11
InComm then had an opportunity to review all 874 documents to determine
whether any were privileged or confidential.12 After vetting the documents,
InComm claimed attorney-client privilege over 59 of the 874 documents reviewed
by Bondurant.13 A secondary audit of the flagged 59 documents revealed that all 59
were “accessed by a single user, Benjamin Fox, a Bondurant attorney.”14
Further review of those documents’ metadata also revealed, to some degree,
a chronicled narrative of what the Bondurant document review entailed. That
narrative includes: (i) the identity of the user; (ii) when the document was uploaded
to the database; (iii) whether the document was opened in the database viewer, or
was “tagged” or downloaded in its native format, (iv) what types of “tags” were
assigned to the documents; and (v) “information from which the parties could
attempt to extrapolate for how long a particular document was open.”15 Those
details aside, however, the Special Master noted that data limitations within the
10
Special Master’s Confidential Final Report at 5.
11
Id. at 6.
12
Id.
13
Id.
14
Id. at 6-7.
15
Id.
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DISCO platform hindered the ability to reconstruct the entire scope of a user’s
interaction with any individual InComm document.16
The Special Master continues to maintain custody of the InComm documents,
thumb drives, and hard drives that Bondurant turned over.17 All data is archived on
a document review database (eMerge) but can be restored and retrieved.18
With the Special Master’s work complete, InComm filed the instant Motion
for Disqualification and Reimbursement of Fees and Costs.19 Defendant Bancorp
Bank joined InComm’s Motion the same day it was filed.20 The State of Delaware
filed a Brief in Opposition,21 as did Plaintiff-Relator Rogers.22 InComm then
submitted its Reply Brief in Further Support of its Motion.23
After that briefing, the Court held an office conference during which it asked
the parties to answer the following:
• When was Mr. Rogers officially terminated?
• What communications were had about Mr. Rogers returning the laptop?
16
See id. at 8-11 (“While the Audit Trail is helpful in reconstructing certain aspects of user
activity, it does not provide a second-by-second accounting of all user activity.”).
17
Id. at 12-13.
18
Id.
19
D.I. 250.
20
D.I. 251.
21
D.I. 263.
22
D.I. 264.
23
D.I. 265.
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• Was Mr. Rogers given a certain date to return the laptop?
• Did InComm follow-up with Mr. Rogers as to the status of the laptop’s
return when it was being copied by Bondurant?
• How long was the laptop in Bondurant’s actual possession after
Mr. Rogers was asked to return it?
• When did the State receive notice that Bondurant had made and was in
possession of the entire forensic copy of InComm’s laptop?
• Was the State ever notified that Bondurant had come into possession of the
laptop itself, and that there may be privileged or potentially privileged
materials on there?24
The Parties submitted supplemental briefing addressing these questions, 25 and then
submitted a factual stipulation concerning the timeline of events.26
The Court conducted a hearing on the Motion for Disqualification and
Reimbursement of Fees and Costs.27 The Court then allowed the parties to submit
letters addressing supplemental case citations and authorities referenced at that
hearing.28 All that being done, InComm’s motion is now ripe for decision.
24
May 17, 2022 Office Conference Tr. at 5-7 (D.I. 269).
25
D.I. 271; D.I. 272; D.I. 273.
26
Stipulated Timeline, June 7, 2022 (D.I. 277).
27
July 22, 2022 Status Conference Tr. (D.I. 295).
28
Id. at 115-16.
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II. FACTUAL BACKGROUND
Again, the Court has laid out a more fulsome factual summary in an earlier
decision.29 Here, the Court summarizes the InComm laptop’s timeline (and related
events) derived from the parties’ submissions, the Special Master’s Report, and the
hearing conducted.
On September 28, 2018, Mr. Rogers filed his Complaint against InComm
under seal.30 That Complaint was submitted to the Court by Delaware counsel
Pricket Jones & Elliott and pro hac counsel Bondurant.31 Attached to the Complaint,
which was filed in camera and under seal, were 12 exhibits ostensibly provided by
Mr. Rogers from InComm files he had access to as he was still an employee when
the sealed Complaint was filed.
On October 10, 2018, Prickett Jones requested the Prothonotary deliver the
sealed Complaint to the Delaware Department of Justice’s Fraud and Consumer
Protection Division.32
Approximately two weeks later, on October 15, 2018, InComm terminated
Mr. Rogers for reasons wholly unrelated to this litigation.33 Along with the
29
See State ex rel. Rogers, 271 A.3d 742.
30
Stipulated Timeline at 2.
31
D.I. 33.
32
D.I. 15.
33
Stipulated Timeline at 2; Relator’s Answering Br. in Opp’n at 6.
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termination notice, Mr. Rogers was sent an email with a severance agreement for
him to sign.34 That severance agreement included a demand that Mr. Rogers return
all InComm property to InComm.35 Mr. Rogers ultimately returned his InComm
laptop on October 19, 2018.36 Sometime between Mr. Roger’s termination on
October 15, 2018, and his return of the laptop, on October 19, 2018, he wisely sought
Bondurant’s counsel. Bondurant copied all files saved on the laptop and had
Mr. Rogers return it to InComm.37
Starting on November 16, 2018, Bondurant began examining the laptop’s
contents on Bondurant’s discovery platform.38
Ostensibly Bondurant’s post-complaint copying of the laptop and
examination of its contents was kept from Prickett Jones—which had been engaged
34
D.I. 273, Ex. A. Along with the severance agreement, Mr. Rogers was provided with
InComm’s Employment Agreement and Employee Handbook, which he had previously signed.
See D.I. 250, Ex. 1 (Employment Agreement) ¶ 4 (“Employee acknowledges that during
Employee’s employment he/she shall obtain property from the Company. Employee agrees to
immediately return all property of the Company in Employee’s possession or otherwise
compensate the Company for the replacement value of lost or stolen property immediately upon
termination of employment.”); id., Ex. 2 (Employee Handbook) ¶ 4 (“Employees may not directly,
indirectly or through any third person or entity disclose, inform, convey, divulge, communicate,
disseminate, advise or transfer any confidential information outside the Company without first
obtaining proper authorization.”).
35
D.I. 273, Ex. A at DETX-R00002964.
36
Stipulated Timeline at 2.
37
Id.; D.I. 182, Ex. B at 1 (Letter from Prickett Jones to Patterson Belknap Webb & Tyler LLP
dated June 16, 2020) (“Prior to returning his laptop to ICI, Mr. Rogers gave it to his Georgia
attorneys to make a copy for purposes of evidence preservation. At the direction of Georgia
counsel, a complete forensic image of his laptop’s hard drive was made, including copies of
Mr. Rogers’ email and document files saved to his laptop.”).
38
See InComm’s Mot. for Disqualification and Reimbursement, Ex. BB, Jan. 21, 2022 (D.I. 250).
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from at least the start of litigation—and from the Attorney General—who was at that
very time investigating and deciding whether to intervene.
On November 20, 2018, the Attorney General moved to extend the seal of the
Complaint and time to intervene.39 The Court granted that request.40
On May 6, 2019, the Court granted the State’s request to intervene.41 And on
May 28, 2019, the Court unsealed the Complaint.42
On June 1, 2020, in response to an interrogatory, Relator admitted he made a
digital copy of the laptop.43
Between June 2020 and the Court’s Order of Reference to the Special Master,
the parties engaged in a letter-writing campaign concerning the existence of the
InComm Laptop files, the scope of those files, and the existence of privileged
material in those files.44 During that skirmish, Prickett Jones represented only
Bondurant had access to the laptop files and insisted that possession of those files
was for preservation only.45 And Bondurant wrote to Defendant’s Counsel that it
39
D.I. 17. That Motion was submitted jointly by the Attorney General, Prickett Jones, and
Bondurant. Id.40
Id.41
Stipulated Timeline at 2.
42
Id.43
Id.44
See D.I. 182, Exs. A to P.
45
Id., Ex. B. at 2.
Since completing the Section 1203(b)(2) review, the forensic image of the laptop’s
hard drive and the laptop’s email and document files have been retained securely
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had “performed a targeted search to provide documents to the State of Delaware in
compliance with Relator’s obligations under” the Delaware False Claims Act.46 The
letter also stated that “no privileged information was reviewed or identified during
this process.”47
III. APPLICABLE LEGAL STANDARDS
A. DISQUALIFICATION OF COUNSEL IN DELAWARE
Delaware has yet to address counsel disqualification in a qui tam context. And
what guidance a Delaware trial court might otherwise avail itself of when tackling
the issue is limited,48 with most instances regarding violations of the Rules of
by Georgia counsel to avoid any destruction of evidence and preserve an intact
chain of evidence. Other than as described above, these files have not been used,
and Mr. Rogers has not personally had access to the contents of his laptop (apart
from the documents produced in this action), at any time after he returned the laptop
to ICI.
Id. The State said it was informed of Bondurant’s possession of the InComm Laptop files in
September 2020:
After receiving Ms. Metcalf’s September 18, 2020 email, the State was informed
that before the State intervened in this case, Bondurant had made a forensic copy
(“image”) of Relator’s laptop and that Mr. Fox had accessed that image using an
electronic document review platform.
State’s June 7, 2022 Letter, June 7, 2022 (D.I. 271) at 3-4 (citation omitted).
46
D.I. 182, Ex. F at 1 (Bondurant’s September 4, 2020 Letter to InComm).
47
Id. at 2.
48
See, e.g., Sequoia Presidential Yacht Gp. LLC v. FE P’rs, LLC, 2013 WL 3362056, at *1 (Del.
Ch. July 5, 2013) (deferring decision on revocation of pro hac vice admission pending Delaware
Office of Disciplinary Counsel review after finding that because the “substantive litigation”
concluded there was “little” risk of ongoing or future prejudice); Manning v. Vellardita, 2012 WL
1072233, at *3 (Del. Ch. Mar. 28, 2012) (denying disqualification in the conflict-of-interest
context where counsel had access to confidential information, after finding the “representation . .
. d[id] not confer an advantage on the Plaintiffs in such a way that the Defendants are unfairly
prejudiced in their ability to mount a defense in this case” because “at least one of the Plaintiffs .
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Professional Conduct occurring in far different circumstances.49 Even then, the
strokes are broad, cautioning that an ethical violation alone is not enough to warrant
counsel’s disqualification,50 that disqualification motions are disfavored and
extreme, and that, in any instance, relief upon motion might be allowed only when
a trial judge determines the continued “representation frustrates the fairness of the
proceedings.”51
So, as a general matter, a party moving for disqualification of opposing
counsel must show “by clear and convincing evidence, (1) either an actual violation
. . [also] had access to any information that could have been available” to the allegedly-conflicted
counsel); Crowhorn v. Nationwide Mut. Ins. Co., 2002 WL 1274052, at *1, *5 (Del. Super. Ct.
May 6, 2002) (denying motion to revoke pro hac vice admission for alleged “repeated instances
of rudeness, incivility and obstruction” because the rudeness and incivility was “an example of
children in the sandbox throwing sand at each other” and because plaintiff “submit[ted] no factual
proof” as to the obstruction allegation).
49
See, e.g., Triumph Mortg. Corp. v. Glasgow Citgo, Inc., 2018 WL 1935968, at *2 (Del. Super.
Ct. Apr. 19, 2018); see also Acierno v. Hayward, 2004 WL 1517134, at *4 (Del. Ch. July 1, 2004).
50
Dollar Tree, Inc. v. Dollar Express LLC, 2017 WL 5624298, at *5 (Del. Ch. Nov. 21, 2017)
(citing In re Appeal of Infotechnology, Inc., 582 A.2d 215, 216-17 (Del. 1990)).
51
Sanchez-Caza ex rel. Sanchez v. Est. of Whetstone, 2004 WL 2087922, at *1 (Del. Super. Ct.
Sept. 16, 2004) (citing In re Est. of Waters, 647 A.2d 1091, 1098 (Del. 1994)); accord Dollar Tree,
Inc., 2017 WL 5624298, at *5 (“[a]s a threshold matter, . . . the court must consider whether the
alleged violation of the Rules is sufficiently serious to prejudice the fairness of the proceeding. If
not, then the alleged violation falls within the jurisdiction of the Delaware Office of Disciplinary
Conduct, not this court.” (citation omitted)).
See Dunlap v. State Farm Fire and Cas. Co. Disqualification of Counsel, 2008 WL 2415043, at
*1 (Del. May 6, 2008) (“A motion to disqualify must contain clear and convincing evidence
establishing a violation of the Delaware Rules of Professional Conduct so extreme that it calls into
question the fairness or the efficiency of the administration of justice . . . vague and unsupported
allegations are not sufficient to meet this disqualification standard.” (cleaned up)); see also
Triumph Mortg. Corp., 2018 WL 1935968, at *2 (noting that when claiming a professional conflict
in representation, the non-client’s burden is to provide clear and convincing evidence that a conflict
exists and how that conflict taints the fairness of the proceedings).
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of the rules of professional conduct or litigation misconduct of counsel which
(2) threatens the legitimacy of the judicial proceedings.”52 And the Court must be
convinced that the misconduct “taints the proceeding.”53
B. DISQUALIFICATION OF COUNSEL OUTSIDE DELAWARE
Because Delaware, fortunately, has had to say so little on this topic, one might
look to other State and Federal fora for some mapping of this not-often visited
territory.54
In all circumstances, courts disfavor motions to disqualify—considering
disqualification a “drastic measure which courts should hesitate to impose except
when absolutely necessary.”55 A decision on a disqualification motion’s merits
52
Postorivo v. AG Paintball Hldgs., Inc., 2008 WL 3876199, at *14 (Del. Ch. Aug. 20, 2008);
Crowhorn, 2002 WL 1274052, at *4 (moving party must show “by clear and convincing evidence
that the behavior of [counsel] has affected the fairness of the proceedings before this Court, or that
in the future such conduct will continue”).
53
Infotechnology, 582 A.2d at 221; id. at 216-17 (noting a trial court can discipline counsel if
“the challenged conduct prejudices the fairness of the proceedings, such that it adversely affects
the fair and efficient administration of justice . . . .” (emphasis added)).
Because Mr. Fox and the Bondurant firm are before this Court on motions pro hac vice, this motion
to disqualify also implicates Superior Court Civil Rule 90.1. Under that Rule:
The Court may revoke a pro hac vice admission sua sponte or upon the motion of
a party, if it determines, after a hearing or other meaningful opportunity to respond,
the continued admission pro hac vice to be inappropriate or inadvisable.
Del. Super. Ct. Civ. R. 90.1(e) (emphasis added); see Page v. Oath, Inc., 2022 WL 162965, at *3
(Del. Jan. 19, 2022); State v. Mumford, 731 A.2d 831, 835-36 (Del. Super. Ct. 1999).
54
City of Wilm. v. Wilm. Firefighters Loc. 1590, Int’l Ass’n of Firefighters, 385 A.2d 720, 723
(Del. 1978) (“[W]e look for guidance to the procedure adopted in the Federal forums and by the
Courts and administrative tribunals in other States for dealing with such situations.”).
55
Carlyle Towers Condo. Ass’n, Inc. v. Crossland Sav., FSB, 944 F.Supp. 341, 345 (D.N.J.
1996) (citation omitted).
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requires a court to carefully balance a litigant’s right to choose his counsel against
the possibility of misuse of such application for strategic gain.56 “Close judicial
scrutiny of the facts of each case is ‘required to prevent unjust results.’”57 And
“[a]lthough doubts [in some scenarios] are to be resolved in favor of disqualification,
[even then] the party seeking disqualification must carry a ‘heavy burden’ and must
meet a ‘high standard of proof’ before a lawyer is disqualified.”58 Indeed, just as in
Delaware, it seems elsewhere the moving party shoulders a heavy burden of showing
opposing counsel’s misconduct by clear and convincing evidence.59
IV. THE PARTIES’ CONTENTIONS
A. INCOMM’S MOTION FOR DISQUALIFICATION
InComm urges the Court to disqualify and dismiss Relator’s pro hac counsel,
Mr. Benjamin Fox, and his law firm, Bondurant, from further participation in this
litigation.60
InComm argues Mr. Fox, and members of the Bondurant firm, committed
egregious ethical misconduct in the handling and reviewing of privileged and
56
United States ex rel. Thomas v. Duke Univ., 2018 WL 4211372, at *2 (M.D.N.C. Sept. 4,
2018) (citing Shaffer v. Farm Fresh, Inc., 966 F.2d 142, 146 (4th Cir. 1992)).
57
Carlyle Towers Condo. Ass’n, Inc., 944 F.Supp. at 345 (quoting Gould Inc. v. Mitsui Mining
& Smelting Co., 738 F.Supp. 1121, 1126 (N.D. Ohio 1990)).
58
Alexander v. Primerica Hldgs., Inc., 822 F.Supp. 1099, 1114 (D.N.J. 1993) (citations omitted).
59
United States ex rel. Thomas, 2018 WL 4211372, at *1 (motions to disqualify “typically
require proof of willful misconduct by clear and convincing evidence” (collecting cases)).
60
InComm’s Mot. for Disqualification and Reimbursement at 1-3.
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confidential documents copied from the InComm laptop.61 Not only did the firm fail
to implement any ethical screens or procedures to safeguard privileged materials,
but it revisited, on numerous occasions, patently obvious privileged documents, e.g.,
“emails containing advice from in-house counsel, and several attorney markups of
draft issuing bank agreements.”62 And despite the “clear indicia of privilege” on
these documents, Mr. Fox tagged them “Responsive” or “Ask Client,” suggesting
his further review and discussion of the privileged documents with Plaintiff-
Relator.63
InComm also argues disqualification is necessary because Bondurant’s
tactical decisions and strategies from when it first received InComm’s laptop have
disrupted and continues to endanger the integrity of these proceedings.64 At the
onset, when InComm terminated Mr. Rogers, it required him, pursuant to his
employment agreement, to return his company-issued laptop that “contained a trove
of confidential materials, . . . financial reports; cardholder data; proprietary
information related to InComm’s operations and cashflow; and legal analyses and
advice.”65 Mr. Rogers instead gave the laptop to Bondurant, which then copied all
61
Id. at 17-26.
62
Id. at 10-11 (citation omitted).
63
Id. at 11.
64
Id. at 17-18.
65
Id. at 4-5 (citation omitted).
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of the laptop’s 36,000+ files onto its own document management platform and failed
to implement any ethical screening processes.66 Neither Mr. Rogers nor Bondurant
informed InComm of this clandestine data transfer.67
InComm first learned of Bondurant’s possession of these documents in
response to an interrogatory almost two years after this litigation had commenced.68
Only then, and after the Court’s appointment of a Special Master, did Bondurant,
during the Special Master’s examination, finally admit to and reveal the breadth of
its review of InComm’s privileged documents.69 And even after all that, InComm
posits that Bondurant still refuses to wall itself off from Delaware counsel or remove
Mr. Fox as lead counsel.70
InComm asserts Bondurant’s actions have significantly tainted the
proceedings and disqualification is the only effective means to cure the resultant
prejudice.71 It argues Mr. Fox cannot “un-see” or “un-learn” his “ill-gotten
knowledge” from his review of the privileged materials; thus, “absent
disqualification, InComm will be forced to defend this case with the ‘nagging
66
Id. at 5-6 (citation omitted).
67
Id. at 5 (citation omitted).
68
Id. at 14 (citation omitted).
69
Id. at 14-17.
70
Id. at 20, 28.
71
Id. at 26.
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suspicion’ that its adversary has ‘benefitted from confidential information.’”72
Finally, InComm asks to be reimbursed for its fees and costs associated with
“uncovering and remedying” Bondurant’s misconduct, and to shift costs of the
Special Master to Bondurant.73 InComm posits that Bondurant alone should bear
the costs because its disingenuous conduct required the Special Master’s
involvement.74
B. THE STATE OF DELAWARE’S POSITION
The State is neither partial to one version of events nor does it take a position
on how the Court should resolve this round because it says most of the contested
factual issues occurred prior to its intervention.75 But because the State’s interest in
qui tam actions is to prosecute fraud—and it learned of Defendants’ alleged fraud
here only when Relator filed his complaint—it opposes the motion for public policy
reasons.76
Pointing to the DFCRA’s federal analog, the State emphasizes that the Act’s
purpose is intended “to discourage fraud against the government and, concomitantly,
the purpose of the qui tam provision of the Act is to encourage those with knowledge
72
Id. at 19, 22, 28 (quoting Maldonado v. N.J. ex rel. Admin. Office of Cts.-Prob. Div., 225 F.R.D.
120, 141 (D.N.J. 2004)).
73
Id. at 33-37.
74
Id.
75
State’s Answering Br. in Opp’n at 3-4, Mar. 1, 2022 (D.I. 263).
76
Id. at 3-8.
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of fraud to come forward.”77 Insisting Relator did what the DFCRA expected of
him, the State suggests a decision favoring InComm’s position will flout the Act’s
purpose.78 Should the Court adopt InComm’s position, the State argues, it “would
signal to the bar at large that anyone representing a relator bears the risk of not only
liability for breach of a confidentiality or employment agreement but also the
potential reputational effect that comes with defending against a motion for
disqualification.”79 As such, the State argues public-policy considerations require
denial of InComm’s Motion.80
And lastly, the State suggests that for InComm to succeed on its motion under
the DFCRA, their burden “to show clear and convincing evidence of actual
prejudice resulting from the exposure should be even higher” than what’s required
in typical attorney-conflict-disqualification circumstances.81
77
Id. at 5-6 (quoting United States ex rel. Head v. Kane Co., 668 F.Supp.2d 146, 152 (D.D.C.
2009) (cleaned up)).
78
Id. at 4-5.
79
Id. at 3-4, 6.
80
Id. at 5-8 (“Defendants’ Motion conflicts with the strong public policy embedded in the
DFCRA that protects Relator, and his counsel, from liability for reasonably collecting and
preserving discoverable information relevant to Defendant’s alleged fraud.” (emphasis in
original)).
81
Id. at 3-4 & n.12 (emphasis in original) (citing Sun Life Assurance Co. of Canada v. Wilm. Sav.
Fund Soc’y, FSB, 2019 WL 6998156, at *2 (Del. Super. Ct. Dec. 19, 2019) appeal dismissed,
remanded, and vacated, Sun Life Assurance Co. of Canada v. Wilm. Savs. Fund Soc’y, F.S.B.,
2021 WL 964894 (Del. Mar. 15, 2021)).
.
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C. PLAINTIFF-RELATOR RUSSELL ROGERS’ POSITION
Emphasizing the data limitations referenced in the Special Master’s Report,
Relator argues all of InComm’s contentions are speculative at best.82 In his view,
InComm has neither proved its claims with clear and convincing evidence, nor has
it established that it’s suffered actual prejudice.83 Because the DISCO audit could
not determine how long a document remained open on a user’s monitor, Relator
argues InComm’s position that Bondurant extensively or repeatedly reviewed
certain documents is contradicted by the Special Master’s Report.84
With respect to InComm’s criticism of Mr. Fox, Relator argues that
Mr. Fox carefully navigated the complicated issues common in all qui tam actions.85
Incanting Section 1203(b)(2), Relator asserts Mr. Fox copied the laptop documents
to prevent the destruction of evidence, searched all files to ensure compliance with
the statute, and in so doing, “avoided reading anything bearing indicia of possible
privilege.”86 And, Relator suggests that DFCRA requirements initially
82
Relator’s Answering Br. in Opp’n at 1.
83
Id.84
Id. at 28-33; see also id. at 13 (DISCO “does not record the duration of actions; nor does it
indicate when a document is closed from a ‘view.’ As a result, the time that a document remained
open on DISCO cannot be determined conclusively.” (citations omitted)).
85
Id. at 4 (citing John E. Clark, Ethics Issues in Qui Tam Litigation: Some Thoughts From The
Perspective of a Relator’s Counsel, ABA CENTER FOR CONTINUING LEGAL EDUC., N02CFCB
ABA-LGLED I-1, Nov. 28-20, 2001)).
86
Id. at 5.
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precluded Mr. Fox from notifying InComm of his possession of the materials
because the Complaint remained under seal until the State finished its
investigation.87
Relator also contends InComm “inflates” the number of privileged documents
potentially reviewed by Bondurant because many are duplicates—37 of the 59
documents are redlined mark-ups of contracts.88 Further broken down, Relator
asserts:
Of the 33 marked-up agreements remaining on InComm’s list, 19 are
duplicates, leaving 14 unique agreements. Of these 14, InComm asserts
privilege for 2 based on comments alone and for another 9, based on
comments and edits. But the Special Master noted that under
Bondurant’s DISCO settings, Word documents, such as these
agreements, would display redlined edits (i.e., tracked changes), but not
comments. Fox therefore never saw any of the purportedly privileged
comments.
* * *
As a result, the full scope of InComm’s allegedly privileged
information contained within documents ‘viewed,’ however briefly,
during the targeted review comprises: (a) tracked changes in at most 12
draft agreements; (b) portions of 9 email threads; and (c) a single
memorandum.89
87
Id. To that end, Plaintiff-Relator says that none of the documents Mr. Fox identified as material
and provided to the State were privileged. Id. at 9.
88
Id. at 14. “Relator was not involved in legal analysis . . . but was often asked to forward
InComm’s proposed revisions of agreements to his contacts at banks doing business with
InComm.” Id. at 14-15 (citations omitted).
89
Id. at 15-16 (internal citations omitted).
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In sum, Relator contends InComm’s Motion should be denied because
Delaware law requires a showing of clear and convincing evidence that a movant
suffered actual prejudice.90 And because InComm’s “nagging suspicion” that its
privileged documents will be used against it is speculative at best, it has failed to
carry that burden.91 Relator asks the Court to deny InComm’s Motion on that basis
as well as deny its request for costs and fees.92
V. DISCUSSION
Qui tam litigation can present some peculiar ethical and legal questions for
the attorneys involved. And no doubt, there is a certain allowance of behavior by
whistleblowers and their counsel that would never be countenanced in other types
of cases. But it is hardly the-ends-justify-any-means exercise that the Relator and
the State envisage.
Of the vast cross-circuit decisions defusing the extremes of various attorney
misconduct, the facts here fall somewhere in the middle. So, the remedy here, seeks
to strike the right balance of consistency and proportionality expected in these
circumstances.
90
Id. at 39-41 (citing In re Rehab. of Indem. Ins. Corp., RRG, 2014 WL 637872, at *1 (Del. Ch.
Feb. 19, 2014) and Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Stauffer Chem. Co., 1990 WL
140438, at *1 (Del. Super. Ct. Sept. 13, 1990)).
91
Id.92
Id. at 41.
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A. NO MATTER HOW UNACCEPTABLE THE ATTORNEY BEHAVIOR, PREJUDICE
MUST ENSUE.
A trial court can discipline counsel if “the challenged conduct prejudices the
fairness of the proceedings, such that it adversely affects the fair and efficient
administration of justice . . . .”93 In any disqualification or attorney disciplinary
action, prejudice as currently defined is a bit elusive.
Bondurant argues the Court must require InComm to present “clear and
convincing evidence” that there was “‘an actual impact on the administration of
justice . . . .’”94 And as Bondurant would have it, anything short of a decipherable
line drawn from what Mr. Fox saw that could be deemed privileged and what has
appeared in some State or Relator filing means the necessary prejudice finding
cannot be made.
For this proposition, Bondurant cites Hunt v. Court of Chancery.95 In Hunt,
the Delaware Supreme Court reviewed a trial court’s disqualification decision and
whether an unprofessional email “had an impact on the administration of justice.”96
Hunt found In re Hurley—a bar disciplinary action that addressed an attorney’s
93
Infotechnology, 582 A.2d at 216-17 (emphasis added).
94
Relator’s Suppl. Letter at 3-4, Aug. 5, 2022 (D.I. 288) (emphasis added) (quoting Hunt v. Court
of Chancery, 2021 WL 2418984, at *6 (Del. June 10, 2021)).
95
2021 WL 2418984 (Del. June 10, 2021).
96
Id. at *6.
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pattern of unkind behavior in communications with opposing counsel97—
instructive.98 In Hurley, the Court found such was not prejudicial to the
administration of justice under Professional Conduct Rule 8.4(d) because “the
evidence did not clearly show that the letters, as offensive and inappropriate as they
were, had an actual impact on the administration of justice.”99 But the Hurley Court
continued that the conduct there could be sanctionable “upon a showing that the
conduct affected the performance of opposing counsel or had some other distinct
impact on the judicial process.”100 This language, the Court finds most instructive.
A direct cause-effect type prejudice finding—which the State and Relator urge here
must equate to mining their filings for signs of direct import of language or concept
from privileged material—is not required. The Court may sanction if it finds “the
challenged conduct prejudices the fairness of the proceedings, such that it adversely
affects the fair and efficient administration of justice”101 or “adversely affect[s] the
integrity of the proceeding”102 in any consequential way.103
97
2018 WL 1319010, at *1-2 (Del. Mar. 14, 2018).
98
Hunt, 2021 WL 2418984, at *6.
99
2018 WL 1319010, at *3.
100
Id. (emphasis added); see also Hunt, 2021 WL 2418984, at *6 (wasting the court’s “valuable
time to address the sanctions request” is not enough to revoke pro hac vice counsel status).
101
Infotechnology, 582 A.2d at 216-17.
102
Crumplar v. Superior Ct. ex rel. New Castle Cty., 56 A.3d 1000, 1010 (Del. 2012).
103
Hunt, 2021 WL 2418984, at *4-6.
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B. THE DECISION WHETHER TO DISQUALIFY RELATOR’S COUNSEL TURNS ON
THE TOTALITY OF THE CIRCUMSTANCES.
The standards just mentioned have been distilled from an array of scenarios
addressing vastly different attorney conduct. Suffice it to say, this is not an instance
of name-calling in letters or sending of pugnacious emails during litigation.104 Nor
is the Court asked to pass on an alleged conflict of interest arising from an attorney’s
prior-client representation or on her alleged misdeeds in other jurisdictions.105
Here, after the action had already been commenced with the complaint’s filing,
counsel assisted a client in secreting a trove of materials—some trivial, some
confidential or proprietary, some clearly covered by a recognized privilege, but all,
no doubt, subject to another’s clearly expressed privacy and ownership interest—
from the opposing side. So, the Court turns to the treatment of similar behavior in
like cases.
In a 2012 federal qui tam action, the United States District Court for the
District of Arizona disqualified relator’s counsel after finding counsel breached their
“ethical duty to seek a ruling from the court about the privileged documents and
breached their duty to contact [the defendant] about the documents after the
104
See Hurley, 2018 WL 1319010, at *1; Hunt, 2021 WL 2418984, at *1.
105
E.g., Infotechnology, 582 A.2d at 216-17; Page, 2022 WL 162965, at *1.
-22-
complaint was unsealed.”106 In that case, a relator copied and removed over 1,300
pages of his employer’s documents, e-mails, and proprietary materials without
authorization and prior to leaving employment.107 In reviewing these documents,
relator’s counsel came across various materials bearing indicia of attorney-client
privilege or attorney work-product information.108
After the complaint was unsealed, the defendant accused relator’s counsel of
misappropriating confidential materials, violating their “ethical duties not to review,
retain, disclose, or use the privileged material that they had received from [relator,]”
and failing to either notify defendants when they received the privileged materials,
or at a minimum, seek guidance from the court.109 Relator’s counsel asserted that the
documents were not only set aside and placed into a sealed box, but none of them
were read or relied upon in preparing the complaint.110
The court was sensitive to the federal False Claims Act’s provision requiring
a complaint to remain under seal and found that qui tam counsel’s duty to notify is
not triggered until after the complaint is unsealed.111 But the court did, in the end,
106
United States ex rel. Frazier v. IASIS Healthcare Corp., 2012 WL 130332, at *15 (D. Ariz.
Jan. 10, 2012).
107
Id. at *3.
108
Id. at *5.
109
Id. at *13.
110
Id. at *6-7.
111
Id. at *15 (“Counsel will not be sanctioned for failing to inform [the defendant about the]
potentially privileged documents before the Court unsealed the complaint.”).
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disqualify relator’s counsel and awarded attorney’s fees and costs related to
recovering the privileged material.112
In another federal qui tam action, a court disqualified relators’ counsel due to
their actions both before and after exposure to the privileged materials.113 There, the
court was particularly persuaded by the following circumstances:
• Relators’ counsel quoted privileged documents in pleadings and failed to
take any “‘reasonable remedial action,’ such as consulting the court about
what to do about privilege issues.”114
• Counsel’s argument that “disqualification is inappropriate where the client
is the source of the privileged material” was unavailing because
“[a]ttorneys are not free, under the standards for proper ethical conduct
. . . to do whatever they want with the privileged documents they obtain
from their clients.”115
• The defendants were prejudiced by relators’ counsel’s “exposure” to the
privileged materials because “counsel not only used privileged materials
to craft their claims, but incorporated verbatim content from those
materials in the pleadings.”116
112
Id. The court refused to dismiss the suit altogether noting “extraordinary circumstances of bad
faith” were not shown, particularly since the privileged documents were stored in a sealed box and
not relied upon by relator’s counsel in drafting the complaint. Id.
113
United States ex rel. Hartpence v. Kinetic Concepts, Inc., 2013 WL 2278122, at *2-3 (C.D.
Cal. May 20, 2013).
114
Id. at *3.
115
Id.
116
Id. (citation omitted); see also Clark v. Superior Court, 125 Cal. Rptr. 3d 361, 374 (Cal. Ct.
App. 2011) (finding evidence existed suggesting counsel used a privileged document to craft a
claim, “which necessarily required an excessive review of [its] content . . . beyond what would be
permissible to determine [whether] the memo was privileged”).
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• The motion to disqualify was not mere tactical delay as it was promptly
filed and before any critical deadlines were due.117
• The privileged materials were transmitted by counsel to the government.118
Additionally, where other courts have considered whether counsel
disqualification is prudent, the “prejudice” inquiry has turned on “the significance
and materiality of the privileged information to the underlying litigation. Access
[alone] to inconsequential information does not support disqualification, but review
of information material to the underlying litigation weighs in favor of
disqualification.”119
117
United States ex rel. Hartpence, 2013 WL 2278122, at *3; see also Maruman Integrated
Cirs., Inc. v. Consortium Co., 212 Cal.Rptr.497, 451 (Cal. Ct. App. 1985) (explaining that “the
court properly took into consideration the possibility that plaintiff brought the motion as a tactical
device to delay the trial when it was heard the day before the trial was to commence” (emphasis
added)).
118
United States ex rel. Hartpence, 2013 WL 2278122, at *2-3.
119
In re Examination of Privilege Claims, 2016 WL 11164791, at *5 (W.D. Wash. May 20, 2016)
(citation omitted), report and recommendation adopted 2016 WL 8669870 (W.D. Wash. July 22,
2016); see also Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225, 229, 235-36 (2d Cir.
1977) ) (disqualifying firm whose lawyers had a close “working relationship” with the disqualified
attorney, thereby raising a presumption of “potentially improper disclosure” (citation omitted));
Beltran v. Avon Prods., 867 F.Supp.2d 1068, 1084 (C.D. Cal. 2012) (“Even if the [law firm] did
not, in fact, acquire confidential information, their involvement in the case would taint the
appearance of probity and fairness of the proceedings.” (citation omitted)); Richards v. Jain, 168
F.Supp.2d 1195, 1207-09 (W.D. Wash. 2001) (disqualification was warranted where law firm
reviewed “almost a thousand privileged documents”—despite obvious privilege markings, failed
to notify opposing counsel of its possession of the material, held the privileged material for eleven
months, and unsuccessfully argued “no confidences were revealed to or used by the firm”);
Ackerman v. Nat’l Prop. Analysts, Inc., 887 F.Supp.510, 518-19 (S.D.N.Y. 1993) (disqualifying
counsel and dismissing complaint prepared in reliance on improper disclosures by the opposing
party’s former counsel).
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Against this backdrop then, what circumstances must the Court treat as
dispositive? As an initial matter, a relator’s counsel’s “mere exposure” to privileged
information alone might not warrant disqualification.120 But access and exposure do
require “reasonable remedial action,”121 which could include: (1) building proper
ethical walls or utilizing a privilege team;122 (2) seeking immediate and appropriate
court guidance,123 and (3) prompt notification to opposing counsel once the
complaint is unsealed.124 None of that was done here.
C. THE PRESENT CIRCUMSTANCES REQUIRE MR. FOX’S DISQUALIFICATION.
The decision to disqualify an attorney is not one the Court either takes lightly
or relishes. But on balance, the totality of the circumstances weighs in favor of
120
See, e.g., United States ex rel. Hartpence, 2013 WL 2278122, at *3; In re Examination of
Privilege Claims, 2016 WL 11164791, at *5. That said, counsel must avoid incorporating
verbatim privileged content (or materials derived therefrom) into their pleadings and refrain from
sharing the same with the government absent court guidance. United States ex rel. Hartpence,
2013 WL 2278122, at *2-3.
121
Gomez v. Vernon, 255 F.3d 1118, 1134 (9th Cir. 2001).
122
State v. Robinson, 209 A.3d 25, 58-60 (Del. 2019) (approving the use of a taint team to cure
harm caused by prosecution’s exposure to privileged material). In State v. McGuiness, this Court
authorized the use of a filter team “to review privileged information and communications from the
seized devices . . . [because] there was a concern that the laptops contained privileged and
confidential information . . . .” 2022 WL 1580601, at *1 (Del. Super. Ct. May 18, 2022); Dollar
Tree, Inc., 2017 WL 5624298, at *2-7 (rejecting motion to disqualify counsel because law firm
took “numerous” precautions including setting up an ethical screen when it realized the internal
conflict).
123
Gomez, 255 F.3d at 1135 (noting that “for counsel facing an ethical dilemma concerning
privileged documents[,] [t]he path to ethical resolution is simple: when in doubt, ask the court”).
124
United States ex rel. Frazier, 2012 WL 130332, at *15; see United States ex rel. Hartpence,
2013 WL 2278122, at *2.
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Mr. Fox’s disqualification. No doubt, navigating the ethical snares present in the
initial stages of a qui tam action is a tall task even for the most astute and experienced
lawyer, who as one commentator has suggested must balance the “inconsistent or
conflicting obligations to, and expectations of, [her] client, the court, [and/or] the
government.”125
Given the purpose of federal and state false claims acts there is some room in
qui tam actions for covert behavior.126 And courts in qui tam actions allow evidence
that would likely be struck or precluded in other contexts.127 But none of the general
public policy considerations favoring tolerance of such at the initial or reporting
stages could be viewed as licensing what occurred here. And Mr. Fox had any
number of opportunities to course correct yet failed to do so.
In November 2018, on first review of the InComm laptop files, Mr. Fox
discovered some were attorney-client documents.128
125
See Clark, supra note 85.
126
See DEL. CODE ANN., tit. 6 § 1203(b)(2) (2018) (“The complaint shall be filed in camera and
shall remain under seal for at least 60 days.”).
127
For instance, a court may allow evidence that would otherwise violate a nondisclosure
agreement. United States ex rel. Ruhe Masimo Corp., 929 F.Supp.2d 1033, 1038-39 (C.D. Cal.
2012) (citing United States v. Cancer Treatment Centers of Am., 350 F.Supp.2d 765, 773 (N.D.
Ill. 2004)); see also United States ex rel. Gohil v. Sanofi U.S. Servs. Inc., 2016 WL 9185141, at *2
n.3 (finding that “[e]ven if the documents were ‘misappropriated,’ [relator]’s actions would not
necessarily warrant exclusion of using the documents . . . [as] [f]ederal courts recognize that there
is a strong public policy to allow relators to use corporate documents from the defendant in the
prosecution of FCA claims” (citing cases)).
128
See, e.g., InComm’s Mot. for Disqualification and Reimbursement, Ex. BB (tagging Doc
17840 as “Attorney-Client”).
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At this point, Mr. Fox could have (1) set up an ethical wall, (2) contacted the
Court as the sealed Complaint had already been filed, or (3) contacted Delaware
counsel or the Department of Justice for advice. Instead, he chose to keep his
knowledge quiet, continued reviewing InComm’s documents, and did little-to-
nothing to minimize or memorialize his actions.
At his next crossroad, on May 28, 2019, when the Complaint was unsealed,
Mr. Fox could have informed opposing counsel that he had a large cache of
InComm’s materials which he knew InComm had asked all be returned before he
copied them. He failed to do so. He instead waited until June 1, 2020, to first inform
opposing counsel through an interrogatory response.129
Incanting time and again the single phrase from § 1203(b)(2) that a DFCRA
relator should provide a “written disclosure of substantially all material evidence and
information the private party possesses” to the Delaware Department of
Justice when her complaint is filed, Bondurant and Mr. Fox insist the purloining of
their opponent’s documents and material, surreptitiously rummaging through them
at will, and keeping their copy’s existence quiet for over a year is justified. Not so.
129
State ex rel. Rogers, 271 A.3d at 744; Stipulated Timeline at 2. Mr. Fox’s alleged fail-safe
was the use of a notepad which had the names of attorneys on it. That list is now missing. And
Bondurant insists any detail concerning its construction cannot be disclosed because of work
product privilege. See InComm’s Mot. for Disqualification and Reimbursement, Ex. Q at 1-2; id.,
Ex. P at 1; July 22, 2022 Status Conference Tr. at 80-81 (D.I. 295).
-28-
Litigating a qui tam action does not mean an attorney is allowed to ignore his
regular duties to the Court and opposing counsel. Where Mr. Fox might not have
had a duty to disclose the existence of the privileged documents to opposing counsel
until the Complaint was unsealed, that did not give him license to fail to inform
opposing counsel for nearly a year after the Complaint was unsealed and fail to take
any safeguards of which there were many. This is especially true where—if
uncertain how to proceed in that unusual circumstance—resources to guide him were
quite literally a phone call, email, or in camera application away.
Moreover, what exactly Mr. Fox gleaned and incorporated from viewing those
privileged documents can never be fully determined. Bondurant insisted that
Mr. Fox “performed a targeted search to provide documents to the State of Delaware
in compliance with Relator’s obligations under” the Delaware False Claims Act.130
The Special Master’s Report demonstrates otherwise.131 And not including verbatim
130
E.g., D.I. 182, Ex. F. at 1-2.
131
Indeed, the interaction seemed far closer to that suggested by InComm:
So after that initial review, Bondurant continued to periodically search the laptop
with no restriction, did so on 16 occasions over the next year and a half. Ultimately
looking as you can see at our summary of the numbers up on the screen here at 55
privileged documents, 21 of them were looked at more than once, 19 were tagged
as either ask client or responsive, suggesting that some relevance to the case was
registered. There were notes affixed to four of the privileged documents and in total
there were 161 instances of engagement with InComm’s privileged documents.
July 22, 2022 Status Conference Tr. at 9.
-29-
excerpts from privileged materials does not mean the information therefrom did not
influence strategy or litigation conduct.
Two factors regarding his conduct weigh most heavily in favor of
disqualification—Mr. Fox’s failure to use remedial measures to ensure minimization
of exposure or use of any potential privileged material, and Mr. Fox’s failure to
disclose Bondurant’s possession of the privileged (as well as InComm’s otherwise
confidential or even irrelevant, but proprietary) material for more than a year after
the Complaint was unsealed. Mr. Fox’s insistence that the privileged information
was not used in the Complaint does not defeat disqualification because while the
advantage from that information cannot be precisely determined, a precise
determination is not necessary—in these circumstances, such conduct taints the
fairness of this proceeding.
1. Relator’s Counsel Failed to Seek Court Guidance and Failed to
Implement Remedial Measures When it was Readily Apparent He
Possessed Privileged Materials.
Bondurant took Relator’s InComm-issued laptop and made a complete
forensic copy thereof to aid in its prosecution of this then-already-initiated lawsuit.
That forensic copy gave Bondurant and Mr. Fox unlimited access to 36,648
documents, including a series of backup files, Relator’s InComm e-mail account,
and InComm documents and materials.132
132
See Special Master’s Confidential Final Report at 4-5.
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Though federal guidance says exposure alone isn’t enough to warrant
disqualification, surely Mr. Fox was acutely aware of the potential of privileged
materials lurking among the tens of thousands of documents—especially
considering the purpose he was given the laptop in the first instance. “[T]he framers
of the [False Claims] Act recognized that wrongdoers might be rewarded under the
Act, acknowledging the qui tam provisions are based upon the idea of setting a rogue
to catch a rogue.”133 Nonetheless, Mr. Fox neglected to implement any ethical screen
because he “did not believe” any privileged information “relating to this action”
would be discovered given Relator’s “operational roles” at InComm.134
What ultimately pushes Mr. Fox into disqualification territory, however, is his
continued failure to implement remedial action after it became apparent he
possessed InComm’s privileged materials.
Generally, when a lawyer encounters his adversary’s privileged materials, he
should not review them “any more than is essential” to determine whether a claim
of privilege exists.135 Mr. Fox immediately should have walled off or sealed any of
the documents he deemed “privileged” at first sight. Instead, it appears after
133
Mortgs., Inc. v. United States Dist. Ct. for the Dist. of Nev. (Las Vegas), 934 F.2d 209, 213
(9th Cir. 1991) (citation and quotation marks omitted).
134
Relator’s Answering Br. in Opp’n at 7 (emphasis added) (citation omitted).
135
Clark, 125 Cal. Rptr. 3d at 373 (citation omitted); Gomez, 255 F.3d at 1132 (finding counsel
“should refrain from examining the materials, notify the sending lawyer and abide the instructions
of the lawyer who sent them” (quoting ABA COMM. ON ETHICS AND PROF’L RESP., FORMAL OP.
368 (1992)).
-31-
“tagging” one document with the “Attorney-Client” label, he later accessed the same
document three more times.136 Similarly, he tagged an e-mail as “Attorney-Client”
only to open another e-mail within the same thread and tag it “Responsive” and “Ask
Client.”137
Equally unavailing is Relator’s counsel’s argument that InComm “inflates the
number of documents potentially at issue.”138 Counsel states that 37 of the 59
responsive privileged documents are “redlined mark-ups of contracts.”139 He also
says some of those documents are duplicates, some include margin comments, one
is a “legal memo,” and the rest are e-mail threads.140 In all, Mr. Fox characterizes
the “full scope” of his review of InComm’s privileged documents as brief at best and
only comprised “(a) tracked changes in at most 12 draft agreements; (b) portions of
9 email threads; and (c) a single memorandum.”141 Such a detailed characterization
of the documents he interacted with suggests an examination well beyond what is
reasonably necessary to make a privilege determination. Distinguishing one clean
136
InComm’s Mot. for Disqualification and Reimbursement, Ex. BB (marking Doc 34016 as
“Attorney-Client” but then revisiting document on multiple occasions); see July 22, 2022 Status
Conference Tr. at 7-10.
137
InComm’s Mot. for Disqualification and Reimbursement, Ex. BB (marking Doc 17840 as
“Attorney-Client” and marking Doc 29983 as “Responsive” and “Ask Client”); id., Ex. KK
(finding Doc 29983 to be part of the same thread as Doc 17840).
138
Relator’s Answering Br. in Opp’n at 14.
139
Id.140
Id. at 15-16.
141
Id. at 16.
-32-
document from its various “marked-up” version(s)—especially via the DISCO
“viewer” that “pre-loads only 1 document at a time” as Mr. Fox purportedly did—
no doubt requires more than a mere one-time skimming to make a privilege
determination.142
At a minimum, Mr. Fox should have implemented some form of reasonable
remedial or prophylactic measure to ensure the safeguarding of InComm’s
privileged materials. For example, (i) seeking the Court’s guidance; (ii) creating
“filters” or “search terms” within the DISCO database to exclude patently privileged
documents, e.g., those bearing labels of “attorney-client privilege” or “work-product
privilege,”143 (iii) implementing a locked-box equivalent144 of sequestering the
privileged materials; or (iv) employing a third-party vendor to conduct the initial
document vetting to ensure the exclusion of any privileged material. Mr. Fox’s
142
Id. at 14.
143
See, e.g., Sun Life Assurance Co. of Canada, 2019 WL 6998156, at *3, *6 (disqualifying firm
despite it instituting firmwide safeguards such as a “computer lock-out,” segregating paper files,
and implementing a firmwide ethics screen). That case settled on unrelated grounds and the
Delaware Supreme Court vacated the disqualification, absolving the firm from any negative
reputational effects from the trial court’s decision. In part, the vacatur was influenced by this
Court’s determination that the “attorneys individually and the firm as a whole promptly
demonstrated the vigilance appropriate to the profession, and undertook precisely those
prophylactic actions necessary to safeguard the confidences of their current and past clients.” In
re Appeal of Sun Life Assurance Co. of Canada, 2021 WL 964894, at *2 n.9 (quoting Sun Life
Assurance Co. of Canada v. Wilm. Sav. Fund. Soc’y, FSB, 2020 WL 1814758, at *6 (Del. Super.
Ct. Apr. 9, 2020)).
144
United States ex rel. Frazier, 2012 WL 130332, at *15 (holding no circumstances of bad
faith present because “counsel kept the undisputed, privileged documents in a Sealed Box”).
-33-
wholesale failure to take any of those steps falls well below that which the Court
expects of counsel dealing with any third-parties’ documents.
2. Relator’s Counsel Failed to Promptly Notify InComm When It Was
Readily Apparent He Possessed Privileged (and Other) Materials.
Almost one year after the Complaint was unsealed, InComm learned for the
first time, via discovery responses, that Relator’s counsel had a complete forensic
copy of InComm’s laptop.145
Even then, InComm didn’t learn of the full breadth of Bondurant’s
interactions with its privileged materials until after the Special Master’s Report was
filed, two years after Bondurant penned a letter to InComm denying any exposure to
privileged information,146 and almost three years after the Complaint was
unsealed.147
Bondurant argues there is no requirement counsel be notified that it has
privileged material.148 It cites two now-withdrawn ABA Opinions regarding Model
145
InComm’s Mot. for Disqualification and Reimbursement, Ex. A at 8 (Relator’s Responses to
First Set of Interrogatories, June 1, 2020) (“Relator further responds that, after the action was filed
and Relator became aware that he was being terminated from his position with Defendant ICI, a
digital copy of the emails and other files he had previously saved to his laptop was made to preserve
potential evidence of Defendants’ scheme from destruction or erasure following Relator’s return
of the device to ICI.”).
146
Id., Ex. G at 2 (Bondurant’s September 4, 2020 Letter to InComm) (“[N]o privileged
information was reviewed or identified during this process.”).
147
The Special Master’s Report was filed January 7, 2022. D.I. 247. The Complaint was filed
September 28, 2018. D.I. 1. And the Complaint was unsealed May 28, 2019. Stipulated Timeline
at 2.
148
Relator’s Suppl. Letter at 10-11.
-34-
Rule 4.4(b)—which Delaware adopted—and concludes that because the Opinions
were withdrawn, they “no longer reflect[] the requirements of ethical conduct.”149
True, Bondurant did not receive the privileged material through inadvertent
disclosure as contemplated by Rule 4.4. But under Delaware case law, disclosure is
still required.150 In Postorivo v. AG Paintball Holdings, Inc., the Court of Chancery
found that even though privileged documents were rightfully possessed, under
“reasoning analogous[] to the inadvertent production situation addressed in Rule
4.4(b),” the attorneys “had a duty, at least, to notify counsel for the [plaintiffs] about
the documents, so that they could take protective measures.”151 The Postorivo
court’s reasoning was explicit and applies with equal weight here. Explicit
notification was required at the earliest practicable instance so InComm could take
protective measures from the breaches of its privileged material.
Bondurant attempts its last defense by arguing that no actual prejudice
occurred and therefore disqualification is inappropriate.152
149
Id.150
Postorivo, 2008 WL 3876199, at *18.
151
Id. (emphasis added).
152
Relator’s Suppl. Letter at 6-8, 11-12. Bondurant also argues the source of the information is
significant, i.e., whether it was from a party or non-party. Id. at 7. But that distinction is of no
concern. In Postorivo v. AG Paintball Holdings, Inc., the Court of Chancery disqualified two
attorneys finding: “it is more likely than not that Scheff and Ziegler were exposed to privileged
client confidences . . . allowing them to continue as trial counsel would create a risk of the release
or use of confidential privileged information of NPS and Postorivo.” 2008 WL 3876199, *23
(emphasis added). So it was not the source of the information that concerned the Court of
Chancery, it was the risk of its use.
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Bondurant’s assurances that no “privileged information was publicly
disclosed, shared with others, or even used in the litigation,”153 may very well be
true, but a requirement of proof of “actual use” for disqualification in these
circumstances would be impractical. What’s more, those assurances are no license
to usurp ethical obligations or engage in dilatory discovery practices. Bondurant’s
surreptitious and protracted access to InComm’s privileged materials, coupled with
its failure to adequately and promptly notify InComm of its possession of the same,
casts “a substantial taint on any future proceedings.”154
It is impossible to fully know how the information gleaned was used. Even if
it does not appear in the Complaint, that does not mean it did not contribute to
strategy. Such an unfair advantage taints the proceedings.
3. The Totality of the Circumstances Warrants Disqualification.
Mr. Fox’s attempted detailed reconstruction of what privileged documents he
did review significantly undermines his assertion that the exposure was brief or
limited.155 It’s a far cry to suggest InComm were adequately and promptly notified
153
Relator’s Answering Br. in Opp’n at 37 (citation omitted); see also Relator’s Suppl. Letter at
8 (“Even if Mr. Fox had read privileged information, limited exposure to privileged information
is a common occurrence in modern civil litigation. And such limited exposure does not necessarily
provide a reason for disqualification.”).
154
See Richards, 168 F.Supp.2d at 1207-09 (disqualification was warranted despite counsel’s
assurances that confidences weren’t revealed or used by the firm); see also Postorivo, 2008 WL
3876199, at *16 (“Under DLRPC R. 4.4(b), a lawyer who knows or reasonably should know he
received a document inadvertently has an affirmative duty to promptly notify the sender.”).
155
See Relator’s Answering Br. in Opp’n at 14-16.
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of Bondurant’s possession of its materials—some of which were privileged; all of
which it had an expressed ownership interest in. Instead, much ink was spilled,
many hours were billed, and a pandemic came and went before InComm became
fully informed of Bondurant’s exposure to its privileged materials. This all could
have been avoided with the Court’s guidance or by leaving sharp litigation practices
at the door. And here those practices, taken as a whole, violated the professional
norm required of counsel in Delaware courts.156
The State, Relator, and Bondurant all suggest that even if there was a lapse,
there is insufficient prejudice shown. The Court cannot agree. While there may not
be the obvious references to privileged documents in pleadings, there still appears
to the Court some troubling links between strategies employed or inquiries made and
the privileged materials reviewed. As an example, InComm cites to certain of
Bondurant’s third-party deposition requests made after Mr. Fox read the privileged
attorney advice given to InComm while negotiating certain contracts with those third
parties.157 Any potential contamination of future tactical decisions or filings must
be stemmed now.
156
See, e.g., Del. Lawyers’ R. of Prof’l Conduct 4.4 (Respect for rights of third parties) cmt. 1
(“Responsibility to a client requires a lawyer to subordinate the interests of others to those of the
client, but that responsibility does not imply that a lawyer may disregard the rights of third persons.
It is impractical to catalogue all such rights, but they include legal restrictions on methods of
obtaining evidence from third persons and unwarranted intrusions into privileged relationships,
such as the client-lawyer relationship.” (emphasis added)).
157
E.g., Status Conference Tr. at 17-19.
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In sum, the Court finds clear and convincing evidence that Mr. Fox’s specific
actions in relation to the InComm laptop materials and his continued participation in
this matter will adversely affect the integrity of the proceedings in this case. And
because a court “must not hesitate to disqualify an attorney when it is satisfactorily
established that he or she wrongfully acquired an unfair advantage that undermines
the integrity of the judicial process and will have a continuing effect on the
proceedings,”158 the Court must do so here.
Accordingly, disqualification of Mr. Fox as counsel for Relator is warranted
and InComm’s motion therefor is GRANTED.
D. DISQUALIFICATION OF THE BONDURANT LAW FIRM IS NOT WARRANTED.
While vicarious disqualification is often discussed in the conflict-of-interest
context,159 courts can and have disqualified law firms because other actions by their
attorneys have tainted the entire firm.160 In a 2016 federal district court case, the
court disqualified an attorney and went on to disqualify the entire firm after finding
that because of its “small size” and because other attorneys were likely aware of the
“alleged impropriety,” disqualification was warranted.161
158
Gregori v. Bank of Am., 254 Cal. Rptr. 853, 858-59 (Cal. Ct. App. 1989).
159
See Del. Lawyers’ R. of Prof’l Conduct 1.10.
160
Bona Fide Conglomerate, Inc. v. Sourceamerica, 2016 WL 4361808, at *12 (S.D. Cal. Aug.
16, 2016); see, e.g., Gotham City Online, 2014 WL 1025120, at *3; Clark, 125 Cal. Rptr. 3d 361at 374-76.
161
Bona Fide Conglomerate, Inc., 2016 WL 4361808, at *12.
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Here, the Special Master’s Report concluded that Mr. Fox was the only
attorney who accessed the privileged information.162 And while “Bondurant
paralegals prepared the production to the State,” Bondurant insists they “conducted
no substantive review.”163 The Court accepts Bondurant at its word.
The Court is reticent to disqualify the entire Bondurant law firm on the record
before it.164 While it is clear Mr. Fox’s participation must end because of his
interaction with the InComm laptop materials, the Court is not convinced that others
at the firm, specifically attorneys, were tainted.
Accordingly, disqualification of Bondurant, Mixson & Elmore LLP is not
warranted, and that motion is DENIED.
E. DISQUALIFYING MR. FOX WILL NOT CAUSE PREJUDICE.
Finally, in considering Relator’s right to the counsel of his choice, the
disqualification of Mr. Fox will not occasion prejudice.165 For one, the State of
162
Special Master’s Confidential Final Report at 6-7.
163
Relator’s Answering Br. in Opp’n at 7 n.23 (citation omitted).
164
Bondurant, Mixson & Elmore LLP has nearly three dozen attorneys, which appears to be
substantially more than those employed at the law firm disqualified in Bona Fide Conglomerate,
Inc. v. Sourceamerica. 2016 WL 4361808, at *12; Lawyers, BONDURANT, MIXSON & ELMORE
LLP, https://www.bmelaw.com/lawyers.html.
165
Avacus P’rs, L.P. v. Brian, 1990 WL 27538, at *4 n.7 (Del. Ch. Mar. 9, 1990); see also
Gotham City Online, LLC, 2014 WL 1025120, at *2 (“a court must balance such varied interests
as a party’s right to chosen counsel, the interest in representing a client, the burden placed on a
client to find new counsel, and the possibility that tactical abuse underlies the disqualification
motion” (citation and quotation marks omitted)).
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Delaware, the real party in interest, has already intervened.166 Both parties have
acknowledged that Mr. Fox did not provide,167 and the State does not purport to have
received,168 any of the privileged documents at issue. Too, Mr. Fox’s removal from
the remainder of these proceedings neither precludes nor prohibits Relator from
continuing his attorney-client relationship with Bondurant and Delaware counsel.
F. REQUEST FOR REIMBURSEMENT OF FEES.
Delaware follows the “American Rule” with respect to fee-shifting in
litigation, which requires each party to pay his or her own fees absent express
statutory language to the contrary.169 Our courts have “accepted bad faith conduct
of a party to the litigation as a valid exception to the American Rule. Although there
is no single definition of bad faith conduct, courts have found bad faith where parties
have unnecessarily prolonged or delayed litigation, falsified records or knowingly
asserted frivolous claims.”170
166
State’s Answering Br. in Opp’n at 1 (“After completing its investigation of the . . . factual
allegations and legal contentions made in the complaint, the State intervened in May of 2019.”);
see also State ex rel. Higgins v. SourceGas, LLC, 2012 WL 1721783, at *4 (Del. Super. Ct. May
15, 2012) (“Should a private party institute a DFCRA action, as here, the Attorney General may
intervene and proceed with the action if a determination is made that there is substantial evidence
of a violation.” (citation omitted))
167
Relator’s Answering Br. in Opp’n at 9.
168
State’s Answering Br. in Opp’n at 2 n.8 (“The State understands now that these documents
came from the laptop image, and further understands that, at least for now, nobody is quarrelling
over the State receiving these documents.”).
169
Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 545 (Del. 1998).
170
Id. at 546 (internal citations omitted).
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Though Bondurant could have prophylactically done more to avoid reaching
this point in the litigation, its decisions do not rise to the level of bad faith warranting
wholesale fee-shifting. For one, the firm did not have the benefit of a bright line rule
addressing what, if any, prophylactic measures qui tam counsel should take when
dropped in the odd set of factual and procedural circumstances he faced when the
InComm laptop first came to him. But once that laptop was cracked open, the firm
and its lawyers’ obligations became much clearer.171
Mr. Fox’s professional biography on the firm’s website touts over two
decades’ worth of experience in qui tam and whistleblower litigation.172 So, on the
one hand, upon seeing these privileged materials, he should have known, at a
minimum, the immediate need for an ethical screen was paramount. That said, after
viewing the files, and determining whether any were privileged and/or immaterial,
no document subject to a claim of privilege was directly included in the pleadings
or provided to the State.
Unfortunately, because of Mr. Fox and Bondurant’s failing to expeditiously
and properly report their secreting of more than 36,000 InComm files, and their
171
See July 22, 2022 Status Conference Tr. at 7 (InComm counsel noting: “[O]n November the
20th, the very first time that Bondurant—the very first day that Bondurant was reviewing any of
these documents, it came across nine privileged documents, including a memo from a law firm
about [] analyzing various escheat issues[:] [A] [m]emo on law firm letterhead providing
InComm’s counsel advice on escheat issues.”).
172
See Benjamin E. Fox, BONDURANT, MIXSON & ELMORE, LLP,
https://www.bmelaw.com/lawyers-Ben_Fox.html.
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failing to adequately document their interactions with those files, the Court and
parties have had to endure this long discovery detour.
The Court may shift a special discovery master’s fees when justified by the
conduct of a party.173 Indeed, “Rule 37 gives the Court broad discretion to impose
sanctions and shift costs for discovery violations.”174 The Court, however, must
exercise care when imposing any sanction. Any sanction must always be tailored to
the violation and its cure. And, as the Court recently observed, the ultimate decision
on such “should always be viewed in light of the proper functions that sanctions are
intended to serve.”175
Here, Mr. Fox and Bondurant’s conduct created the need for the Special
Master’s investigation. It was not the conduct of InComm and so it should not, and
will not, shoulder the specific costs for that resource to determine the specific
interaction of opposing counsel with its materials. Accordingly, Bondurant is
ordered to pay the fees for Special Master Levine’s investigation of the InComm
laptop.
173
Dynacorp, et al. v. Underwriters at Lloyd’s, London, et al., 2014 WL 4656393, at *2 (Del.
Super. Ct. Sept. 18, 2014) (partially granting discovery master fee shifting for untimely production
without justification).
174
Id. at *3 (citations omitted); see Pencader Assocs., Inc. v. Glasgow Tr., 446 A.2d 1097, 1101
(Del. 1982) (“Imposing sanctions in discovery matters lies within the discretion of the Trial Court.”
(citation omitted)).
175
Suburban Med. Servs. v. Brinton Manor Center, 2022 WL 17688194, at *5 (Del. Super. Ct.
Dec. 15, 2022) (cleaned up).
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The uncommon question presented here “required significant work by both
sides to fully present the arguments” and the Court finds no bad faith in the actions
or arguments of either in addressing this specific disqualification issue.176 As
disqualification of Mr. Fox is already an extreme—but warranted—sanction to
protect the integrity of the remainder of these proceedings, an award of attorney’s
fees is neither necessary nor just. But payment of the Special Master’s fees incurred
to investigate and report Mr. Fox and Bondurant’s interaction with the InComm
materials is warranted.
Thus, InComm’s request for reimbursement of fees and costs associated with
the Special Master and the instant motion is GRANTED, in part, and DENIED, in
part.
V. CONCLUSION
Defendant InComm’s Motion to Disqualify Mr. Fox is GRANTED and the
Court’s previous order granting his admission pro hac vice (D.I. 57) is REVOKED.
Should Relator designate any alternate counsel, he or she shall immediately file a
declaration that he or she hasn’t reviewed or received any information about the
privileged InComm documents’ contents. Relatedly, Mr. Fox shall neither discuss
the contents of the privileged documents nor provide his work product to new or
remaining counsel.
176
Nat’l Grange Mut. Ins. Co. v. Elegant Slumming, Inc., 59 A.3d 928, 933 (Del. 2013).
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Defendant InComm’s Motion to Disqualify Bondurant, Mixson & Elmore
LLP is DENIED.
And, given the unique nature of the disqualification issue presented and the
investigation required, Defendant InComm’s Request for Reimbursement of Fees is
DENIED as to attorney’s fees and other costs, but GRANTED only as to Special
Master Levine’s fees.
IT IS SO ORDERED.
_______________________
Paul R. Wallace, Judge
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