by Dennis Kiker, Esq., Director, [1] Fios Consulting, Fios, Inc.

On September 8, 2008, the U.S. House of Representatives passed Senate Bill 2450 without amendments, which adds Rule 502 to the Federal Rules of Evidence. The bill was approved by the Senate way back in February (who says Congress doesn’t act quickly?), and President Bush has officially signed Rule 502.

So what? Well, this is actually pretty good news for corporate litigants, assuming that they understand the rule and are properly prepared. Unlike the changes to Rule 26(b) implemented as part of the e-discovery amendments to the Federal Rules of Civil Procedure, the addition of Rule 502 is a change in substantive law of privilege and waiver. However, there are some outstanding questions that only time and a few judicial opinions will answer.

Here is the good news: in the federal courts, at least, there is now a uniform rule on the waiver of attorney-client privilege and work product protection as a result of inadvertent or intentional disclosure to another party. These are the basic contours of the rule:

First, the rule provides for subject matter waiver only in the case of an intentional disclosure, and only if, in fairness, the non-disclosed communications or information ought to be considered with that which was disclosed. The rule rejects subject matter waiver in the case of inadvertent disclosure. That means that, if there is a waiver, it will only apply to the particular communication or information disclosed. Formerly, in some jurisdictions, any waiver applied not only to the information disclosed, but also to any communication on the same subject. Under the new federal rule, there is no subject matter waiver unless the disclosure was intentional and fairness dictates that other undisclosed communications be produced.

Second, an inadvertent disclosure will not waive privilege or work product protection as long as the producing party took “reasonable steps to prevent disclosure” and “promptly took reasonable steps to rectify the error.” More on this later.

Third, the rule outlines the consequences of disclosures in state and federal proceedings, as follows:

• The rule is binding on state courts and federal court-mandated arbitrations proceedings where the initial disclosure is in a federal proceeding.
• Where the initial disclosure is in state court, and the waiver issue is being decided in a subsequent federal proceeding, the decision is governed either by Rule 502 or state law, whichever is most protective against waiver.
• The rule has no effect where the initial disclosure is in state court and the waiver issue is being decided in a subsequent state proceeding.

Fourth, Rule 502 gives great effect to the parties’ agreement regarding waiver, making it binding on third parties and subsequent matters if it is embodied in a court order.

Rule 502 will make litigating in federal courts that much more appealing to corporate litigants, particularly if they have taken the time to develop effective processes to identify, preserve and collect ESI. Although the rule does not specifically identify what would constitute a “reasonable” effort to prevent disclosure, and the answer will ultimately be determined case by case in the federal courts, the Advisory Committee notes do provide some guidance in the form of a series of non-determinative factors, including the number of documents that required review and time constraints for production.

Anyone engaged in a large-scale production has suffered through the post-production uncertainty that something may have slipped through the cracks.  The Advisory Committee alleviates this discomfort somewhat, noting that “[t]he rule does not require the producing party to engage in a post-production review to determine whether any protected communication or information has been produced by mistake.”  Parties are required only to “follow up on any obvious indications that a protected communication or information has been produced inadvertently.”  In addition, the Advisory Committee notes that “a party that uses advanced analytical software applications and linguistic tools in screening for privilege and work product may be found to have taken ‘reasonable steps’ to prevent inadvertent disclosure.” That should be good news for software vendors, as should the comment that “[t]he implementation of an efficient system of records management before litigation may also be relevant.”

Fed. R. Evid. 502 creates much more certainty, whereas before there was a great deal of confusion and inconsistency. And two familiar messages seem to permeate the new rule and its commentary: preparedness and collaboration are the best defenses against waiver. Parties that have consistent and predictable processes in place to identify, preserve, collect and review ESI will better be able to meet the as-yet-nebulous “reasonable steps” standard, and, in the end, the best protection is a negotiated agreement between the parties that is then incorporated into a court order.

Dennis Kiker is dedicated to helping clients prepare for and respond to the demands of litigation. As a Director in [1] Fios Consulting, Kiker leads comprehensive consulting engagements that result in repeatable processes for efficiently and defensibly managing discovery related to complex litigation and governmental investigation. He specializes in bringing together in-house counsel, business personnel and outside counsel to develop formalized response plans that lower the costs, time and risks of discovery response. Prior to joining Fios, Kiker was a shareholder at Moran Kiker Brown PC, where he served as national discovery counsel for some of the largest manufacturing companies in the country. Kiker is a frequent speaker and author and an active participant in both the Sedona Conference and Electronic Discovery Reference Model working groups. He holds a J.D., Magna Cum Laude & Order of the Coif from the University of Michigan Law School and a B.S., in Business Administration from the University of Phoenix.