Kyko Global Inc. v. Prithvi Information Solutions Ltd.

In Kyko Global Inc., before the Court was a determination of the admissibility of materials on a computer. 2014 WL 2694236 (W.D. Washington 2014). The plaintiffs, Kyko Global Inc. and Kyko Global GMBH (“Kyko”) are in the business of fronting money to customers’ accounts receivables. In the fraud case Kyko brought against defendants, Prithvi Information System and others (“Prithvi”), it alleged that Prithvi created sham companies for the sole purpose of having Kyko forward money to Prithvi. Kyko alleged that in early 2012, Prithvi stopped paying on their invoices for the return of the advanced money, leaving a balance of $17,000, and a fraud suit ensued.

Later the plaintiffs obtained a writ of execution—a court order to enforce a judgment of possession by the plaintiff—for various items seized from the King County Sherriff’s search of the defendants’ homes. The items seized included the personal computer owned by one the defendants. The plaintiff’s attorney purchased the defendant’s computer at a public auction. Upon receiving the computer, Kyko sent it to a third party to be evaluated. Once the computer was evaluated, Kyko wanted to admit certain potentially attorney-client protected documents found on the computer. Before the Court was Kyko’s motion to have those documents admitted. Realizing that Kyko was seeking waiver of their attorney-client privilege, Prithvi motioned for sanctions on the plaintiff’s attorney and that the attorney be disqualified, contending that the attorney violated ethical rules by wrongfully obtaining the computer.

Motion to disqualify

First, in addressing the Defendant’s motion to disqualify the plaintiffs’ attorney, the Court found that while it is generally true that “when a party wrongfully obtains documents outside the normal discovery process, a court may impose sanctions,” including dismissal, monetary sanctions, and disqualification of the attorney, sanctions are only permissible when documents have been obtained wrongfully. Id. at *2. Here, the plaintiffs purchased the computer at a public auction, indeed one that the defendant had the opportunity to participate in. Therefore, the Court ruled that the computer was not obtained wrongfully and the defendants’ motion for disqualification was denied.

Waiver of the attorney-client privilege

Next, the Court turned to the Plaintiff’s argument that the defendants waived their attorney-client privilege to the extent that the computer had privileged documents because of their failure to secure the materials. Reviewing Federal Rule of Evidence 502(b), which covers inadvertent disclosure of materials, and states in essence that an inadvertent disclosure of materials does not waive the attorney-client privilege if the holder of the privilege took immediate reasonable steps to rectify the error, the Court found the rule applicable here.

The Court then turned to the factors used to determine waiver of the attorney-client privilege: “(1) the reasonableness of precautions taken to prevent disclosure, (2) the amount of time taken to remedy the error, (3) the scope of discovery, (4) the extent of the disclosure, and (5) the overriding issue of fairness.” Id. at *3.

The Court analogized this fact pattern to one in which an opposing party discovers a privileged document in the other party’s trash. If the opposing party can show that the party discarded the document without any concern to its confidentiality and privilege, then the privilege will likely be deemed waived. However, if the opposing party found the document discarded, but torn into several pieces, it is likely that the party acknowledged the confidentiality of the document and their intent was not to discard the document without concern as to whose hands it might land in.

Analogizing this unique fact pattern here the trash scenario, the Court, looking at all the evidence, found that the defendant was more closely aligned with the example of throwing away a privileged document that had been torn into pieces. The Court noted that the intent of the party is key. Here, the defendant stated that she had had someone in her office reformat the hard drive and install a new operating system. And, in fact, she believed that this prevented anyone from discovering any of the privileged materials on her computer. As such, the Court denied Kyko’s motion seeking waiver of the defendant’s attorney-client privilege.