Commercial Litigation and Arbitration

Inherent Power Sanction — Case Dismissed for Disclosing Document Produced Pursuant to “Attorneys’ Eyes Only” Agreement before Protective Order Entered — Irrelevant Whether the Document was Entitled to Protection Under Later-Entered Order

From Salmeron v. Enterprise Recovery Sys., Inc., 2009 U.S. App. LEXIS 19316 (7th Cir. Aug. 27, 2009):

On June 24, defendants USA Funds, Sallie Mae, and ERS learned that a scanned copy of the confidential document containing the Guarantee Services Agreement between Sallie Mae and USA Funds had been posted on a website known as****.

USA Funds then moved to dismiss the suit as a sanction for the disclosure of the Guarantee Services Agreement. Mark Sweet, USA Funds's counsel, signed an affidavit filed contemporaneously with the motion to dismiss asserting that Sanchez had agreed to treat the confidential documents disclosed by USA Funds during discovery as being for "attorneys' eyes only." ***

***The "attorneys' eyes only" agreement required Sanchez to treat the confidential documents of USA Funds as for "attorneys' eyes only" until such time as a protective order could be entered. That was the extent of the agreement; it was merely a stopgap until the district court entered a protective order governing USA Funds's confidential documents. While the protective order eventually entered by the district court governing discovery between Salmeron and USA Funds set forth the same procedures for determining confidentiality as the ERS protective order, Sanchez's unauthorized disclosure of the Guarantee Services Agreement occurred before that order was in place. Salmeron therefore cannot now claim that USA Funds was required to follow the provisions of an order that was not yet in place — especially because Sanchez failed to return the draft protective order with his proposed changes to USA Funds's counsel, thereby preventing the protective order from being entered in the first place.

Despite Sanchez's failure to return his modifications, Salmeron nevertheless claims that USA Funds was at fault for the absence of a protective order because, according to Salmeron, it was unreasonable for USA Funds's lawyers to wait more than 17 months for Sanchez's feedback on the draft protective order. Counsel for USA Funds had an independent obligation to its client, and Salmeron contends its lawyers should have moved for confidential protection of the Guarantee Services Agreement "promptly when it did not hear back from Mr. Sanchez." Because USA Funds's lawyers did not so move, Salmeron argues that she should not face sanctions for their failure to protect their client.

It does appear that nothing prevented USA Funds's lawyers from protecting their client's interests sooner, and perhaps they should have. But Salmeron's argument essentially boils down to faulting USA Funds's lawyers for not protecting their client from an adversary who might not be trustworthy. We cannot accept that assertion. Attorney integrity is fundamental to the judicial process.

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