Failing to take prompt reasonable steps once notified of an inadvertent production results in privilege waiver – you’ve now entered the Twilight Zone

United States v. Sensient Colors, Inc., 2009 WL 2905474 (D.N.J. Sept. 9, 2009)

“You’re traveling through another dimension, a dimension not only of sight and sound, but of mind; a journey into a wondrous land whose boundaries are that of imagination – Next stop, the Twilight Zone.”

Any lawyer who inadvertently produces privileged information steps into a legal twilight zone. However, that legal twilight zone is not a “wondrous land,” but one filled with sleepless nights and many questions. How did it happen? When and how do I tell the client? How do I get the materials back? Will I lose the client, my job, my career? With ediscovery, the risk that privileged or confidential information will be inadvertently produced geometrically increases. While the use of clawback or nonwaiver agreements and FRE 502(b) lessen that risk, they do not eliminate it. Sensient Colors establishes that point.

Sensient Colors involved the electronic production of 45,000 documents totaling 135,000 pages or 450 boxes of records by the United States (“government”). Several months after that production was completed, the defendant initially returned a group of documents that were privileged. Over the ensuing months, the defendant continued to identify additional documents that the government had produced but were privileged. Ultimately, the defendant sought a ruling that the government had waived its right to assert privilege over the documents it had produced.

The court in Sensient Colors concluded the privileged documents were inadvertently produced by the government and that the requirements of FRE 502(b) were met as to the first group of documents the defendant returned. However, as to the subsequently identified privileged documents, the court ruled that the government waived its right to assert privilege under Rule 502(b) as to those documents because it had failed to promptly take reasonable steps to rectify its error after being notified of the initial inadvertent production.

The explanatory note to FRE 502 provides: “The 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.” However, the court in Sensient Colors concluded that once a party has been put on notice that privileged information has been inadvertently produced, Rule 502(b)(3) requires the producing party take “prompt and reasonable steps to reassess its document production.” The court in Sensient Colors concluded the government failed to act reasonably and diligently to correct its error and waived its privilege and work-product protection as a result.

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Failure to timely object to production format constitutes a waiver

Ford Motor Co. v. Edgewood Properties, Inc., 2009 WL 1416223 (D.N.J. May 19, 2009)

This lawsuit arose out of the distribution of contaminated concrete following the demolition of a Ford assembly plant in Edison, New Jersey. Edgewood entered into a contract with Ford to haul 50,000 cubic yards of concrete from that site which turned out to be contaminated. Ford then brought a claim against Edgewood under CERCLA and the New Jersey Spill Act for contribution and indemnification of all costs as provided under the contract.

In discovery, Edgewood demanded that Ford produce documents in their native format with accompanying metadata. Ford objected and affirmatively indicated that it would produce documents in a tagged image file format (“TIFF”) with accompanying searchable text. Apparently, the parties never agreed on a production format, and Edgewood waited approximately eight months before objecting to Ford’s production. It then waited two additional months to bring their objection to the court’s attention. This delay led the court to conclude that Edgewood had waived any objection to Ford’s production format.

Because the production of electronically stored information (ESI) can occur in various formats, Rule 34 sets up a process through which parties are supposed to resolve disputes over production. Rule 34 requires the parties to dance with one another – the requesting party specifies the format to produce the ESI, the producing party can agree or object and must then indicate the format in which it will produce the ESI, and where the parties cannot agree on a production format they are to let the court decide. We refer to it as Rule 34’s “cha-cha.” Rule 34’s dance is supposed to occur before any production occurs, and Edgewood Properties demonstrates that any misstep with Rule 34’s requirements can result in you stepping on your partner’s toes. The rule is not difficult to follow, but like high school freshmen, many parties appear reluctant to get involved in the dance.

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Clawback and quick peek agreements are no longer considered the Gold Standard for protecting against the inadvertent waiver of privilege.

On a recent flight, I read the February/April, 2009 edition of Litigation Support Today magazine. Under the banner of Best Practices, was an article: “Slashing Ediscovery Costs in a Digital Universe.” One of the author’s recommendations was to negotiate a “quick peek” agreement with opposing counsel. However, care must always be exercised with quick peek and clawback agreements.

Fed. R. Evid. 502(e) confirms that a clawback or quick peek agreement only binds the parties to the agreement “unless it is incorporated into a court order.” Clawback and quick peek agreements provide no protection as to third parties. Thus, while you may avoid a claim of waiver as to information inadvertently produced to a party who signed such an agreement, other parties in that litigation who are adverse to you, and who were not signatories to your agreement, as well as parties in other cases, can claim that your quick peek agreement is not enforceable against them. They will argue that allowing your opponent to potentially view privileged documents without taking any precautions to ensure that privileged information was not reviewed by opposing counsel (other than simply entering into the quick peek agreement) waived attorney-client privilege and the work-production protection as to them. For further insight into the use of quick peek and clawback agreements, see Hopson v. City of Baltimore, 232 F.R.D. 228, 244 (D.Md. 2005).

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Privilege waived by failing to object to deposition questions about the content of inadvertently produced documents

AHF Community Development, LLC v. City of Dallas, 2009 WL 348190 (N.D. Tex. Feb. 12, 2009).

The district court in AHF Community concluded that a party which had inadvertently produced privileged documents waived attorney-client privilege by failing to object to deposition questions which focused on the content of the privileged documents that were marked as exhibits at the deposition. The decision underscores the need for nonwaiver orders under Fed. R. Evid. 502(d), or if unavailable clawback agreements. Lurking behind the decision however, are several equally important ethical issues that should not be overlooked by attorneys when privileged information is inadvertently produced in discovery.

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