© 2015 The Texas Lawbook.
By David Coale of Lynn Tillotson
(Jan. 19) – It’s a litigator’s nightmare; Jumping into a fast-paced TRO case about trade secrets, with expedited discovery requests and orders everywhere – with a new client who doesn’t tell the whole story about what he took from his former employer.
In Waste Management v. Kattler, a lawyer was caught in the crossfire of a situation like this, and the district court found him in contempt.
The Fifth Circuit reversed, offering practical guidance on several key practice points for this kind of case. No. 13-20356 (Jan. 15, 2015).
Soon afterwards, the district court ordered Kattler to produce “images of all electronic devices” that met a certain description; roughly a week later, a new order required production of more “personal devices.”
A privilege dispute arose about the broader order, and in the context of that dispute, Moore represented to the court that Kattler had never owned a “SanDisk thumb drive” as requested by Waste Management.
After that hearing, Kattler told Moore that he had in fact owned at least one SanDisk thumb drive. Moore consulted ethics counsel and then withdrew from representation of Kattler. Now represented by new counsel, Kattler became embroiled in a new dispute about restricted material on his iPad that the imaging process failed to gather.
The district court gave notice of a hearing on docket entry “#84” – Waste Managaement’s motion for Kattler to show cause about the iPad dispute – and after a hearing, found both Moore and Kattler in contempt. It concluded that it had been misled about the existence of the SanDisk drive, that a proper image of the iPad had not been produced, and the iPad itself had not been produced.
Moore appealed and the Fifth Circuit reversed. The Court observed that in the contempt context, “adequate notice typically takes the form of a show-cause order and a notice of hearing identifying each litigant who might be held in contempt.”
Here, the notice of hearing referenced only the docket number of a motion that sought relief against Kattler – not Moore. That notice was thus inadequate as to Moore and was sufficient reason to vacate the contempt finding against Moore.
The Fifth Circuit went on to address the merits. As to the SanDisk drive, it found that Moore acted prudently in consulting ethics counsel and withdrawing promptly – within three days — after he learned of the untruthfulness. While Moore did not take affirmative steps to correct the misrepresentation, new counsel made a disclosure about the drive within a week. Accordingly, Moore’s conduct “did not amount to assisting a fraudulent act’ and contempt was not appropriate as to this issue.
As to the iPad, the Court reasoned, “while Moore clearly failed to comply with the terms of the December 20 preliminary injunction by not producing the iPad image directly to [Waste Management] by December 22, this failure is excusable because the order required Moore to violate the attorney-client privilege.”
The Court also noted that the relevant order “required Kattler to produce an image of the device only, not the device itself,” which created a “degree of confusion” that excused the decision not to produce the actual iPad.
This case provides two key points for handling this kind of fast-paced, discovery-intensive litigation.
On the plaintiff’s side, the Fifth Circuit does not appear willing to imply obligations beyond the plain language of a court’s order – “image” means “image” rather than “iPad,” and “hearing on docket #84” means that motion and nothing else.
That conservative approach is consistent with two other recent opinions involving contempt findings — Oaks of Mid City Resident Council v. Sebelius, 723 F.3d 581 (5th Cir. 2013), where the Court found that an injunction stopped an ongoing process of termination, but did not bar a later termination begun with a different notice; and Hornbeck Offshore Services v. Salazar, 713 F.3d 787 (5th Cir. 2013), reaching a similar conclusion about the injunction against the drilling moratorium put in place after the Deepwater Horizon disaster.
On the defense side, Waste Management stresses prompt action and curative measures when a problem of compliance with an order or injunction arises. Moore did not simply ignore the problem and hope it went away; rather, he sought specialized advice and terminated his involvement with the problematic client. While he did not make a corrective disclosure, new counsel did so promptly (and in the process, likely avoided getting itself drawn into the contempt proceedings).
All defense counsel faced a challenging situation given their client’s misstatement about the SanDisk drive – but at least, they acted sensibly and promptly and did not make matters worse.
David Coale is a partner at Lynn Tillotson Pinker Cox in Dallas and specializes in appellate litigation. He publishes the popular blog 600camp.com about business litigation in the Fifth Circuit.
© 2015 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.
If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.