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New Methods for Protecting Privilege (Part II)
Posted 10/2/08 David A. Chaumette and Andrew Biberstein, Baker & McKenzie LLP
On September 19, 2008, President Bush signed a bill adding Rule 502 to the Federal Rules of Evidence. The new Rule provides a systemic approach to the challenges associated with the management of electronic documents in discovery. Specifically, the new Rule protects against the inadvertent waiver of the attorney-client privilege and work product protection. The goal of Rule 502 is to reduce the costs of discovery and production of information in litigation.
Summary of Rule 502 Provisions
Rule 502 applies in all cases in federal court—including cases in which state law provides the rule of decision—and in state court as to disclosure previously made in federal matters, but not to disclosures made first in state court.
Under the new Rule 502, inadvertent disclosure of privileged or protected information during discovery constitutes a waiver only if the party did not take reasonable precautions to prevent disclosure and did not make reasonable and prompt efforts to rectify the error. The Rule also emphasizes that a "subject matter" waiver occurs only when the waiver is intentional and partial waiver would be misleading and unfair. Parties are not required to take extraordinary efforts to prevent disclosure of privilege and work product; nor are parties required to conduct a post-production review to determine whether any protected information has been inadvertently disclosed. Reasonable steps, however, are required both to avoid and to remedy inadvertent disclosure.
Non-Waiver Agreements
Rule 502(e) codifies the practice of party agreements designed to limit the effects of waiver by disclosure. In most circumstances, a non-waiver agreement and its inclusion in a case management order should preclude waiver of an inadvertently produced privileged or protected document. There are two types of such agreements. One is the "quick peek" agreement, under which the responding party will provide certain requested materials for initial examination without waiving privilege. The requesting party then designates the documents to be actually produced. The responding party then screens the documents actually requested and asserts privilege where necessary, as outlined in the Rules. The other type of non-waiver agreement is the "clawback agreement," which provides that production made without intent to waive privilege or protection does not waive it, so long as the responding party identifies the documents mistakenly produced, and that the documents should be returned under those circumstances. Once the parties have reached an agreement, they should have the agreement included in the court's case management order pursuant to the court's discretionary authority. Rule 502(e) states that such an agreement is only binding on the signatory parties—but not non-parties—unless incorporated into a court order.
The failure to obtain a court-approved non-waiver agreement can prove fatal. Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D. Md. 2008). In Victor Stanley, the defendants failed to identify 165 privileged documents in their review and subsequently produced those documents. As the plaintiffs found the documents, they segregated them and notified the defendants of the production of potentially privileged documents. The court held that the defendants' approach through its keyword searches was not reasonable precautions, and that the privilege was consequently waived as to those documents. In addition, the court specifically noted that a court-approved non-waiver agreement would have protected the defendants from waiver. Although this case was decided before Rule 502, the same situation might still fail the new Rule's "reasonable steps" test, demonstrating that a non-waiver agreement remains critically important in e-discovery.
Rule 502 works in conjunction with Rule 26(b)(5) of the Federal Rules of Civil Procedure, which outlines the procedure if privileged information has been produced. Under Rule 26(b)(5), if privileged information is produced in discovery, the producing party may notify any party that received the information of the privilege claim and the basis for it. After being notified of a claim of privilege or protection, the receiving party must promptly return, sequester, or destroy the specified information, and any copies it has, and may not use or disclose the information until the claim is resolved. If the receiving party disclosed it to a non-party before being notified, the party must take reasonable steps to retrieve the information. That notice must be sufficiently detailed so that the receiving party can determine whether to challenge the claim. Any receiving party may present the information to the relevant court under seal for a determination of the claim.
No Selective Waiver
Rule 502 has no language allowing for "selective waiver." Selective waiver would apply when a party has previously produced materials to a government entity performing investigatory functions and then seeks to protect that information because the information was not waived through the voluntary surrender of the information to the governmental entity. It is a doctrine that has not been broadly accepted by courts, and although language was prepared for a provision contemplating selective waiver, Congress did not choose to include it.
Closing Thoughts
Rule 26(b)(5) gave producing attorneys some direction for preserving privilege, but standing alone it did not provide any confidence or predictability that the producing parties' pre- and post-production actions would preserve privilege. New Rule 502 offers additional protection. Together, Rule 26(b)(5) and Rule 502 are critical steps towards more effective management of the costs, delays, and risks associated with producing documents in the e-discovery era. However, the adoption of these rules does not signal the end of the burdensome privilege review. Rule 502 does not resolve the "state-to-state" problem, whereby material is disclosed in a state proceeding and then offered in another state proceeding. A disclosure in state court receives the greater protection as between Rule 502 and the state privilege law when offered in a subsequent federal proceeding, but the Rule does not govern the state court disclosure offered in a subsequent state proceeding. Thus, the prudent approach in state proceedings remains a thorough privilege review. It is possible that the states will follow the federal model as many have done with the December 2006 amendments, but that has not happened at this point.
In any case, parties should discuss and enter into some type of non-waiver agreement regarding the potential for inadvertent disclosure. The parties should include these terms in any case management order. While this will not guarantee that privilege will be preserved after an inadvertent production, it will give producing parties the best chance to avoid waiving privileges and protections. Rule 502 is a useful tool in avoiding waiver of privilege or protection, but it is neither a panacea nor a substitute for caution.