Four Ways to Avoid Waiver Under FRE 502
by James D. Palmatier is a Partner at Galbraith, Palmatier & Assoc., LL
Federal Rule of Evidence 502 (“Rule 502”) was signed into law in September 2008 . According to the Advisory Committee notes to Rule 502, the Rule is designed to provide a predictable consequence for the unintentional disclosure of information protected by the attorney-client privilege and attorney work-product doctrines, and to reduce the costs associated with the discovery phase of litigation . Rule 502, related case law and recent developments in tools used for electronic document management all point to several cost effective and prudent steps that may help avoid waiver. To be successful in the discovery phase a smart, well-documented plan is necessary.
Before Rule 502, the courts were split on the determination of waiver of inadvertently produced documents. In Victor Stanley, Inc. v. Creative Pipe, Inc. , the Court discussed the three predominant approaches: the strict approach, the lenient approach and the intermediate/balanced factor approach. Previously courts used one of these approaches resulting in potentially different outcomes for similarly produced, privileged documents. Rule 502 moves toward establishing a common approach for determining waiver of inadvertently produced privileged documents in the Federal Courts.
In order to effectively avoid waiver under Rule 502, a combination of education, preparation, agreement and delegation is needed. This approach is directed to both minimize the chances of inadvertent production and to minimize the chance of a finding by the court that privilege waiver occurred due to the producer’s actions or inactions.
Early efforts and a focused approach are reasonable steps to avoid waiver where inadvertent disclosure occurs . However, as discovery counsel your first goal should be to avoid waiver by not inadvertently producing privileged information. Your second goal should be to meet the requirements of Rule 502 to provide a safety net for defending your client’s privilege protection.
I. EDUCATION
Of primary importance is the education of clients and team-members on the principles of attorney-client privilege. Even though this information is familiar, a review may help avoid a waiver. Attorney and non-attorney clients need to understand how and when they can rely on attorney-client privilege to protect communication with an attorney. Guidance should be given on how privilege is created and how it may be destroyed.
Understanding Privilege
While there are several definitions of attorney–client privilege, the Court in In re Vioxx Product Liability Litigation noted that all definitions include the elements of: “(1) an attorney, (2) a client, (3) a communication, (4) confidentiality anticipated and preserved, and (5) legal advice or assistance being the purpose of the communication .“
Determination of who is an attorney and who is a client, for purposes of protection under attorney-client privilege, may depend on the circumstances and the subject matter. The attorney may be in-house counsel, outside counsel and potentially an attorney’s agent . The client may be an individual or an organization and must be communicating with the attorney for the purpose of obtaining legal advice. The court in Vioxx, where the discussion between in-house counsel and business executives related to general business matters, found that the advice being sought from attorneys in the legal department was not legal advice but business advice because the in-house attorneys were involved in non-legal decision making and providing business advice .
Generally privilege protects communication from the client to the attorney that is required in order for the attorney to provide sound legal advice based on the client circumstances. A “client” may at times extend beyond key management. The Supreme Court in Upjohn Co. v. United States held that attorney-client privilege could protect communications between a company’s lawyer and a company employee if the lawyer needs the employee’s information to adequately advise the company .
The client is typically communicating facts and circumstances about which legal advice is sought and must anticipate the confidentiality of the information given to the attorney. The attorney and the client both have a duty to protect the confidentiality of the privileged communication. Under these circumstances the communication with the attorney may be protected under the attorney-client privilege.
Destroying Privilege
As mentioned above, attorney-client privilege is created by the communication between a client and attorney of confidential information provided for the purpose of obtaining legal advice or assistance. The privilege is waived by destroying the confidentiality of the communication. A client, as owner of the privilege, may destroy the confidentiality of the communication by disseminating the information to a third-party and thus waive the privilege protection. Clients should take care in determining who gets copied on communication containing confidential information and legal advice.
The goal of counsel in this process is to provide zealous representation of the client’s interests in protecting information and valuable rights during litigation. During litigation, as provider of information, a good understanding of the elements of the attorney-client privilege and work-product doctrine is important to protect our client’s interests. Knowledge of when attorney-client privilege attaches and how to best protect the privileged communication before and during litigation will reduce costs, as well as the likelihood of inadvertently producing privileged information. Likewise, when receiving information in discovery, counsel must examine claims of attorney-client privilege and work-product doctrine to ensure the party claiming privilege has met the requisite burden of proof. Education will help the parties understand and protect the confidential communication contained in attorney-client protected documents.
II. PREPARATION - DOCUMENT RETENTION AND DESTRUCTION POLICY
The Advisory Committee notes to Rule 502 (b) suggest that the implementation of a records management program may be evidence of reasonable efforts to protect privileged information . An effective document retention and destruction policy, coupled with a document management system, effectively reduces the quantity of documents retained, improves the availability of the documents and advances the goals of the business organization. As noted in Hobson, the sheer volume of data to be reviewed in order to comply with a discovery order exacerbates the risk of inadvertently producing privileged documents . Today the proliferation of information across individual computers, laptops and personal storage devices, as well as the disruptive impact of a discovery order can be very expensive for the producing party.
The quantity of documents continues to grow at a stunning rate. Inexpensive storage media makes it attractive to retain everything in the event that it will someday be useful. Large collections of electronically stored information are cumbersome and virtually unusable. Companies, with the assistance of outside counsel , should design and implement a justified and enforceable document retention and destruction policy that addresses three considerations:
1. Use of the information by the company,
2. Federal and state regulations and other legal requirements impacting the company, and
3. Facilitation of the demands of litigation.
The policy should minimize the impact of document hold notices, make the documents available for review and provide rationale for the destruction of documents. To be defensible, the document retention and destruction policy should be documented and include justification for each retention and destruction schedule. The court may require this documentation to show why the document retention and destruction schedule is reasonable or to counter a claim of spoliation.
A document hold notice serves to suspend any document destruction and triggers the process of identifying and preserving relevant electronic or hard copy documents. The document retention and destruction policy documents the type and location of documents and may apply an initial categorization. The policy will minimize the disruptive impact of hold notices by suspending the centralized destruction activity and allow for review from the known storage location. The release of the document hold is also implemented with minimal disruptive affect because of a centralized approach.
The document retention and destruction plan should facilitate document searching and categorization at any point in time, but particularly early on in the litigation process. An entity’s document retention policy should support an initial reasonable inquiry of available documents, such as the inquiry required by FRCP 26(g) . Furthermore, the availability of documents under the retention and destruction plan should also support the objects of the FRCP 26(f) meet and confer conference. Not only does this early effort reduce the costs of discovery, but it may also reduce the chances of an inadvertent disclosure by controlling the size of the document set. A properly designed and implemented document retention and destruction policy should provide a clear outline of the data retained and the location.
III. AGREEMENT – CLAW BACK AGREEMENT
A clawback agreement may be used to establish how each party will handle documents that are protected by the attorney-client privilege. Even before Rule 502, such agreements were used to establish procedures for handling this sensitive information. This agreement may allow the parties to predetermine between themselves how inadvertently produced privileged documents are to be handled, when privilege is waived, the steps to be followed to prevent waiver in the event of inadvertent disclosure, and the delay allowable to rectify any error. For example, in Brotech Corp. v. Thermax, the Court found that a negotiated and agreed clawback agreement, incorporated into a formal stipulation and adopted by the e-discovery master into an order of the court, was binding on the parties as dispositive of a motion to prevent inadvertent waiver . The Court in Brotech found the movant had not followed the agreed-upon procedures and therefore waived attorney-client privilege on inadvertently produced documents . Now, under FRE 502(e) an agreement by the parties, especially when incorporated in an order by the court, may help the client protect against inadvertent waiver.
Caution should be taken in drafting and entering into a clawback agreement. The agreement should be made part of a court order and should specify how inadvertently produced privileged documents may be returned to the producing party to protect the client.
IV. DELEGATION
The size and complexity of litigation today, especially with e-discovery, demands a focused and parallel effort to protect the client. Discovery counsel and IT support professionals should be retained to investigate the available documents as soon as practical when litigation is anticipated or started. Project management, initial preview of documents and keyword development needs to start while the client and litigation counsel develop strategy and prepare initial filings, motions, briefs and appearances.
Discovery counsel may help meet court expectations of an entity’s responsiveness and initial preparation. The court may consider the retention of specialized discover counsel in determining whether reasonable efforts were taken if the question of waiver due to inadvertent disclosure arises. Discovery counsel needs to focus on and document discovery procedure to meet the production schedule and prevent inadvertent disclosure of privileged material. The Courts found the producing party waived privilege in both Victor Stanley and Rhoads , and the lack of timeliness and preparation of producing counsel were both factors. Given the significance of these matters, they should be delegated to discovery counsel to protect against waiver.
Discovery counsel may help reduce the overall cost of litigation by participating early in the strategy, finding relevant and privileged documents and documenting procedures. Early discovery planning and execution by discovery counsel may also be beneficial both in terms of actual cost and in the risk of loss of confidential information contained in the inadvertently produced privileged documents. A producing party must take reasonable steps to avoid waiver of an inadvertently produced privileged document . Here, the use of dedicated discovery counsel is a reasonable step to avoid waiver by focusing attention to document production and quality control procedures.
SUMMARY
Federal Rule Of Evidence 502 is an important tool to help control costs and protect against waiver of attorney-client privilege by inadvertent production of privileged documents. A comprehensive approach to avoiding waiver during litigation involves education, planning, agreement and delegation. To summarize, four steps that may help you prevent waiver of privileged information under the new Rule 502 are:
1. Educate attorneys and clients on attorney-client privilege, including how it is created, protected and how waiver occurs.
2. Develop and enforce a written documentation retention and destruction plan that addresses the storage and use of information within the company. Be sure to consider the various types of information that must be retained to: improve operations; meet legal, federal and state regulatory requirements; and support litigation related activities.
3. Negotiate and implement a written clawback agreement that addresses the issues and procedures concerning the protection of inadvertently disclosed information. This should include: clawback procedures, specific time delays allowed, limits on access to suspected privileged documents and preservation of confidentiality.
4. Engage discovery counsel to focus on the issues specific to document production to ensure they are appropriately addressed and so litigation counsel and the client can focus on the substantive issues of the litigation.
AUTHOR
James D. Palmatier is a Partner at Galbraith, Palmatier & Assoc., LLP in Chicago and a graduate of the John Marshall Law School of Chicago.
Galbraith, Palmatier & Associates, LLP is focused on protecting client information as discovery co-counsel assisting clients and litigators with Electronic Discovery and Attorney-Client Privilege issues.
Filed under Case Law, Case Law & Rules, Federal Rules, Home Page Featured.