Privilege Under the New Rules: New Mines in the Litigation Minefield
By David Chaumette, Esq.[i], Charles E. Griffin, Esq.[ii], Kermit L. Kendrick, Esq.[iii], and Ghillaine A. Reid, Esq. [iv]
Maintaining privilege must be at the core of the entire document production process. As one might expect, there are nuances with privilege and electronic data. For example, a court recently ruled that an employee’s use of the employer’s email system for privileged communication with his personal attorney does not necessarily constitute waiver in a bankruptcy adversarial proceeding.[1] Courts have recognized that e-mails are often internally forwarded and this does not result in waiver of the privilege.[2] This article will provide the following: an overview of (1) how the new federal rules address the assertion of privilege after production, (2) the effect of non-waiver agreements, and (3) how the Federal Rules of Evidence may provide the clarity, unity, and predictability needed in the e-discovery era.
Maintaining the Privilege During Production
Given the volume of production, there must be a protocol from the outset to minimize the number of privileged documents that are inadvertently produced. Disclosure could result in waiver of privilege for that document or, worse still, a waiver of privilege for that document and other documents on the same subject. The easiest way to handle this is to establish, early in the litigation, an agreement regarding inadvertently produced documents. Recently, the Committee on Rules of Practice and Procedure approved the recommendations of the Advisory Committee on Evidence Rules, proposing a revised Rule 502 of the Federal Rules of Evidence. Under the new rule, inadvertent disclosure of privileged or protected information during discovery would constitute 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 proposed new rule was published for public comment in August 2006 and then republished after public comment in April 2007. Unfortunately, the new proposed rule will require deliberate action from Congress and, given the numerous issues facing Congress at this time, it may be a while before the rule actually comes into play.And then there is the privilege log. Privilege logs in the e-discovery universe can be very large – several thousand entries is not unusual. As such, it is often difficult to produce privilege logs. In jurisdictions where privilege logs must be produced simultaneously with the unprivileged documents, attorneys would be well advised to negotiate a several week delay (if not several months) before any privilege log is due. Also, in terms of process, you will want to identify potentially privileged documents automatically and then have a second “high powered” team make these difficult calls. This will hopefully minimize the chance of mistakes.
The Privilege After Production
The Rule also affords the party receiving the privileged information the right to challenge the assertion. The new rule states that a party receiving a notice of claim of privilege or protection may promptly present the information to the court under seal for a determination of the claim. The producing party shall preserve the information until the claim is resolved. Accordingly, notice must be sufficiently detailed so that the receiving party can determine whether to challenge the claim. Also, if challenged, detail is needed to assist the court as to the basis of the claim.
Hopson v. Mayor of Baltimore: Required Reading
One of the more often discussed cases on these issues is Hopson v. Mayor of Baltimore.[3] In Hopson, a class action alleging race discrimination, plaintiffs served discovery requests requesting electronically stored information (among other documents). The responding party produced privileged information because it did not conduct a full privilege review. Plaintiffs filed a motion to compel additional information based on those privileged, documents.The Court examined the Rule 26(b)(2) factors to determine whether the less than full review was reasonable given the volume of electronically stored information, the time to produce it, and if full privilege review was feasible. The court also examined whether the procedures agreed to by counsel were reasonable. The Court noted that the proposed changes to Rule 26(b)(5) allow a party to raise post-production claims of privilege and work product protection for electronically stored information, and further establish a procedure for resolving disputes regarding such an assertion. However, the Court noted: “The proposed amendment does not address the substantive questions whether privilege or work product protection has been waived or forfeited.” Instead, the amendment sets up a procedure to allow the responding party to assert a claim of privilege or of work-product protection after production. Rule 26(b)(5)(2) does not address whether the privilege or protection that is asserted after production was waived by the production.
The Court described three distinct positions on the inadvertent production of privileged material: (1) the “strict accountability” approach of the Federal Circuit and the First Circuit (which almost always finds waiver, because “once confidentiality is lost, it can never be restored”); (2) the lenient “to err is human” approach of the Eighth Circuit and a handful of district courts (which views waiver as requiring intentional and knowing relinquishment of the privilege, and finds waiver only with inadvertent disclosure and gross negligence); and (3) the “balancing test” approach (which requires the court to make a case-by-case determination of whether the conduct is excusable so that it does not entail a necessary waiver).
The court concluded that, given the proposed changes to Rule 16(f), (1) “the better approach” is to assume that complete preproduction privilege review is required, unless it can be demonstrated with particularity that it would be unduly burdensome or expensive to do so; and (2) counsel have a duty to take the initiative in meeting and conferring to plan for appropriate discovery of electronically stored information at the commencement of any case in which electronic records will be sought.
Non-Waiver Agreements
It is well documented that the time, delay, and costs associated with an e-discovery privilege review are substantial. To mitigate these costs and the risk of waiver, the advisory committee appears to encourage parties, during their 26(f) meeting and conference, to enter into non-waiver agreements that become part of the Rule 26(f) order. Although helpful, these agreements are not dispositive of whether privilege has been waived. If, however, the assertion of privilege is challenged, these agreements will provide evidence that the parties did not intend to waive the privilege or protection.One such agreement is called a “quick peek” agreement. Under this type of agreement, the responding party will provide certain requested materials for initial examination without waiving any privilege. The requesting party then designates the documents it wishes to have actually produced. This is the Rule 34 request. The responding party then responds in the usual course, screening the documents actually requested and asserting privilege to those documents as outlined in Rule 26(b)(5)(A). Another type of non-waiver agreement is called a “clawback agreement.” Under a clawback agreement, the parties agree that production made without intent to waive privilege or protection should not be a waiver so long as the responding party identifies the documents mistakenly produced, and that the documents should be returned under those circumstances. Other voluntary agreements may be appropriate depending on the circumstances of the particular type of litigation. 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 under Amended Rule 16(b). According to the advisory committee, 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.
The open question under the new rule is whether the non-waiver agreement will stand up to a challenge by the receiving party. While the tone and direction of the rule is to avoid waiver, the decision as to whether a non-waiver agreement will preserve a privilege or protection is the province of the courts. Currently, there are three approaches that courts throughout the country use to determine whether a non-waiver agreement will preserve privilege: a restricted approach, a middle-of-the road approach, and a non-waiver approach. Under the restricted approach, privilege is not preserved despite the non-waiver agreement. Under the non-waiver approach, the non-waiver agreement preserves privilege or protected information, unless the conduct of the producing attorney is viewed as grossly negligent. Under the middle-of-the-road approach, the non-waiver agreement is balanced against the reasonableness of the conduct of the producing attorney. Accordingly, it is vitally important for you to know the approach, if any, to non-waiver agreements in your jurisdiction.
The Future
Although Amended Rule 26(b)(5) gives producing attorneys some direction for preserving privilege, it does not provide any confidence or predictability that the producing parties’ pre- and post-production actions will preserve privilege. More help may be on the way if the proposed amendments to the Federal Rules of Evidence are adopted. As mentioned above, proposed Rule 502(a) will offer additional protection, if approved by Congress.
Amended Rule 26(b)(5) is a step towards more effective management of the costs, delays, and risks associated with producing documents in the e-discovery era. However, by no means does its adoption signal the end of the burdensome privilege review. Until a definitive ruling has been made enforcing nonwaiver agreements, or until proposed Federal Rule of Evidence 502(a) is adopted, the wiser approach is for producing parties to engage in a complete privilege review. In addition to a full privilege review, producing parties should, as a matter of course, discuss and enter into some type of non-waiver agreement regarding inadvertent disclosure during the Rule 26(f) conference. The parties should also insist that courts, pursuant to Rule 16(b), make the non-waiver agreement part of the case management order. These actions do not guarantee that privilege will be preserved. However, at this point in the e-discovery era, compliance with amended Rule 26(b)(5) gives producing parties the best chance to avoid inadvertently waiving privileges and protections.
References
[i] David A. Chaumette, Esq., a litigation partner in the Houston office of Shook, Hardy & Bacon, has authored over fifty publications and speeches on electronic discovery, litigation management, and ethics issues. He can be contacted at 713-546- 5652.
[ii] Charles E.Griffin, Esq. is the founder of Griffin & Associates, P.L.L.C. where his practice includes insurance litigation, consumer finance litigation, products liability litigation and general commercial litigation. Mr. Griffin can be contacted at 601-354-0603.
[iii] Kermit L. Kendrick, Esq. is a partner with Burr and Forman in their Birmingham, Alabama office where he focuses on consumer finance, insurance defense, and railroad litigation. Mr. Kendrick can be reached at 205-458-5393.
[iv] Ghillaine A. Reid, Esq. is a Director in the Business & Commercial Litigation department in the New York office of Gibbons, P.C. Ms. Reid can be reached at (212) 613-2019.
[1] In re Asia Global Crossing Ltd, 322 B.R. 247 (S.D.N.Y Mar. 25, 2005).
[2] Premiere Digital Access, Inc. v. Central Telephone Co., d/b/a Sprint of Nevada, 360 F. Supp. 2d 1168 (D. Nev. 2005).
[3] 232 F.R.D. 228 (D. Md. 2005).
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