Providence Industries v. Lularoe CA4/2

California Court of Appeal·Decided November 5, 2021·No. E075513·Unpublished

Opinion

Filed 11/5/21 Providence Industries v. Lularoe CA4/2 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO

PROVIDENCE INDUSTRIES, LLC.,

Plaintiff, Cross-Defendant and E075513 Respondent,

(Super.Ct.No. RIC1825263)

v.

OPINION

LULAROE, LLC, et al.,

Defendants, Cross-Complainants and Appellants.

APPEAL from the Superior Court of Riverside County. Jackson Lucky, Judge.

Affirmed.

Rutan & Tucker, Alejandro S. Angulo, Bradley A. Chapin, Kathryn D.Z. Domin, and Ashley Vernick, for Defendants, Cross-Complainants and Appellants.

Reed Smith, Marsha A. Houston, Christopher O. Rivas, and Kasey J. Curtis, for Plaintiff, Cross-Defendant and Respondent.

Plaintiff and respondent Providence Industries, LLC. (Providence) and defendants and appellants LuLaRoe, LLC and LLR, Inc. (collectively, LuLaRoe) are engaged in civil

litigation arising from business disputes. During the litigation, an employee of LuLaRoe’s outside counsel, acting anonymously and without authorization, sent certain documents to Providence’s outside counsel. After a series of hearings regarding whether LuLaRoe had adequately demonstrated that the documents were privileged, the trial court entered an order requiring, among other things, that Providence’s counsel return the documents and that any copies be destroyed.

At issue here is LuLaRoe’s subsequent motion to disqualify Providence’s counsel.

The trial court denied the motion, explaining in a written ruling that Providence’s counsel had complied with their duties regarding inadvertently disclosed privileged documents under State Compensation Insurance Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644 (State Fund) and Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th 807 (Rico). We find that the trial court did not abuse its discretion by its ruling, and therefore affirm.

I. FACTS

Providence’s initial complaint in this matter was filed in November 2018. The case garnered some degree of public attention, including news stories and discussion on various public websites.

On September 19, 2019, outside counsel for Providence, Reed Smith, LLP (Reed Smith) received an anonymous letter relating to the litigation. The letter was processed in the usual manner for incoming mail correspondence in the matter; it was scanned by a secretary, saved to the electronic client file, and distributed by email to the litigation team and Providence’s in-house general counsel.

A Reed Smith lawyer representing Providence, Marsha Houston, skimmed the letter and became concerned that “it appeared to possibly contain a page of confidential material that was not public.” She expressed her concern to another attorney on the litigation team, Chris Rivas. Rivas, too, skimmed the document, and he agreed with Houston that it might contain confidential material. Rivas and Houston recognized that the document appeared to be from the same source as three other anonymous communications received within the previous month. Those earlier communications had

not appeared to Houston or Rivas to contain anything confidential. Rather, they appeared

1

to be “the musings of a disgruntled person who was following the case.” Houston and

Rivas had not found the earlier anonymous communications notable, due to the relatively public nature of Providence’s dispute with LuLaRoe, which had generated other instances where nonparties had contacted them about the case.

More specifically, the four documents consisted of a total of five pages. The first of the documents that Reed Smith received was a one-page printout of an email with handwritten notes on it. The email was sent by Providence’s in-house counsel to LuLaRoe’s outside counsel and a non-attorney employee of LuLaRoe, and copied to another individual that our record does not identify (apparently a non-attorney employee

1 Neither the trial court nor this court directly reviewed the documents at issue, as they were not made part of the record. The evidence of the contents of the documents consists entirely of attorney declarations.

of Providence). The next two documents were single-page typewritten letters, sent anonymously. The fourth document included another one-page typewritten letter, as well as a one-page attachment that contained the information that caught the Reed Smith attorneys’ attention as potentially confidential.

“Within days” after September 19, 2019, Houston and Rivas consulted with Reed Smith’s in-house counsel, as well as the California State Bar’s ethics hotline. The state bar attorney suggested that they disclose the document containing potentially confidential information to opposing counsel. “In an abundance of caution,” however, the Reed Smith attorneys decided to disclose all of the anonymously received documents.

On September 25, 2019, a copy of the September 19, 2019 communication (but not the other documents) was shared with two associated attorneys in a separate, but

related matter. Our use of the passive voice here is intentional—the record does not

3

reveal who distributed the document to those attorneys.

2 In LuLaRoe’s later-created privilege log, the document is described as containing handwritten notes on a printout of an email sent by a person who is in-house counsel for Providence. The log shows the email was sent to an attorney at Floratos, Loll, and Devine, PLC (Floratos Loll) who serves as “outside general counsel” to LuLaRoe, as well as to LuLaRoe’s Chief Financial Officer. The log identifies the Floratos Loll attorney as the author of the handwritten notes. The log also shows the email was copied to another individual not identified in our record; we infer that he is most likely a non-attorney employee of Providence, perhaps a financial officer.

3 Houston and Rivas’s declarations do not discuss this distribution of the document, and nothing else in the record establishes who made the September 25, 2019 distribution to the associated attorneys. Reed Smith’s “Report Regarding Destruction of Documents” states only that the document “was provided” to those attorneys on September 25, 2019, and that Reed Smith “confirmed” that the receiving attorneys had “each deleted the electronic copies . . . from their respective Microsoft Outlook inboxes.”

In a September 30, 2019 letter to Alex Angulo, counsel for LuLaRoe, Rivas disclosed Reed Smith’s receipt of all four documents, provided copies, and expressed

concern that the most recently received document might contain confidential

4

information. Rivas stated that Reed Smith had not “carefully reviewed” any of the

documents, but observed that none of them “appear to be privileged.” Rivas demanded that, if LuLaRoe was going to claim privilege, Angulo “provide sufficient information for the Court to determine” whether a privilege applied. Rivas expressly disclaimed any “waiver of any of Plaintiff’s rights or remedies,” and stated that “Plaintiff does not concede that any of the materials . . . are privileged or confidential,” explaining that the materials were being provided “because Plaintiff may use the most recent communication in discovery” and “in the interests of full disclosure and after having consulted with the state bar ethics hotline regarding this unusual circumstance.”

In a responding letter sent October 1, 2019, Angulo asserted that the privileged nature of the documents was “obvious” upon even “a cursory review,” and demanded, among other things, that the documents be returned and all copies be destroyed. Rivas

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