Some early court rulings’ decisions applying new federal rules about accidentally disclosing privileged legal information are giving corporate legal departments new glimpses into best practice for electronic discovery.
Federal Rule of Evidence 502, which took effect in September 2008, aims to ease fears that companies could accidentally waive attorney-client or work-product protections when they turn over reams of electronic data during litigation. The rule imposes uniform federal standards regarding such waivers. The rule was also widely touted as a way to relieve the crushing costs associated with the discovery of electronically stored information, but so far it hasn’t seemed to live up to that promise.
Lynn
Among those who say Rule 502 is already having an effect are Cecil Lynn, of counsel in the law firm Ryley Carlock & Applewhite. He says the rule “provides a level of confidence” for litigants taking reasonable steps to prevent accidental disclosure. Lynn says he’s seeing more use of search-and-retrieval technology to cull privileged data prior to lawyers’ review, which should save money, time, and resources.
Others sound more cautious notes. “Four months isn’t very long in the life of litigation, so I suspect we have not seen the full implications,” says David Alden, a partner in the law firm Jones Day.
Julie Anne Halter, a partner in the law firm K&L Gates, says the rule has provided more certainty around “quick peek” and “clawback” agreements, where one party can withdraw evidence it later finds to be protected. Such provisions were common before the rule, she says, but now reaching agreement on the terms is easier and happens earlier.
Halter
“It provides more certainty and a better ability to assess risks upfront to take measures short of a full-scale comprehensive privilege review,” she says.
Alden says he now seeks non-waiver agreements in protective orders. But, he adds, “I am not sure I would support relying on that to do ‘blind’ productions where, in reliance on a non-waiver agreement, you just produce things without a pre-production privilege review.” And even if something remains privileged or protected, Alden says, producing it “tells the other side what it says.”
Alden
Others have seen little effect at all. Eric Reed, an associate in the law firm Fox Rothschild, says litigants continue to devote enormous resources to reviewing electronic communications to determine whether they raise privilege issues. “People are taking the same level of precaution they did before,” he says.
Robert Schwinger, a partner at Chadbourne & Parke, also sees a reluctance to relax practices based on the protections provided by the new rule.
“Old habits die hard, among judges no less than the rest of us,” he says. For now, judges and counsel are still “a little bit uncomfortable with the idea … that people don’t have to conduct privilege reviews in state of high panic.”
Schwinger says more case law is needed to form “some judicial consensus” on exactly what methods companies should use to screen their electronic documents in bulk. “We need to see some sort of working definition … that says, If you do x, you’re OK,” he says. “Nobody wants to gamble on being the test case.”
Reed says the anticipated drop in discovery costs hasn’t materialized yet, and he isn’t sure when they might. “I just don’t see that in practice,” he says. “The only way to really save money is to scale back screening, and I think most prudent practitioners aren’t going to do that.”
RELION DECISION
The court issues the following order in an excerpt from Relion vs. Hydra:
… I conclude that Relion has not carried its burden of disproving waiver. Relion’s discovery documents were inspected by attorneys and support staff at Wells
St. John before they were produced to Hydra. As the incident involving the re-exam file indicates, there was no surprise or deception on the part of Hydra’s counsel. Wells St. John not only had the opportunity to inspect the documents prior to the arrival of Hydra’s counsel, it had two additional opportunities to do so after Hydra had reviewed Relion’s documents, as Hydra provided
Relion’s counsel with both hard copies and electronic, text-searchable copies of the documents Hydra had selected for copying. I conclude that Relion did not pursue all reasonable means of preserving the confidentiality of the documents produced to Hydra, and therefore that the privilege was waived. The fact that Wells St. John did not intend to produce any privileged documents is not dispositive. See Weil, 647 F.2d at 24(subjective intent of the party asserting the privilege is only one factor to be considered in determining whether waiver should be implied).
ASRC’s request for an award of attorney’s fees (doc. # 269)
is DENIED.
Relion’s motion for an order enforcing the stipulated
protective order and for an order requiring Hydra to return
sealed documents (doc. ## 279, 288) are DENIED.
IT IS SO ORDERED.
Source
Relion vs. Hydra.
Schwinger
Schwinger isn’t particularly hopeful on that front either. “There have been a number of rules over the years that, in theory, were supposed to result in cost savings and I’m not sure many of them have lived up to their promise,” he says. “Judged against that background I wouldn’t be overly optimistic.”
Depending on how further courts apply the rule, Schwinger says, the discovery process under Rule 502 could be just as expensive as it was before. “If the courts get very exacting about how to show ‘reasonable effort,’ the cost-saving promise of the rule won’t be realized,” he says.
Enter the Courts
Meanwhile, observers say some early decisions provide a sense of how courts are applying the rule, as well as some tips for how to handle—or not to handle—e-discovery requests.
A recent decision in Rhoads Industries v. Building Materials, in the Eastern District of Philadelphia, provides a detailed analysis of the factors the court considered in determining waiver questions. In a 21-page opinion, Judge Michael Baylson ruled against waiver for some privileged communications but not all, and pointedly wrote: “Although Rhoads took steps to prevent disclosure and to rectify the error, its efforts were, to some extent, not reasonable.”
In particular, he said Rhoads “failed to prepare for the segregation and review of privileged documents sufficiently far in advance of the inevitable production of a large volume of documents.”
Lynn says a lesson of the Rhoads case—and another from the Appeals Court for the District of Columbia, which upheld a ruling of contempt for the Office of Federal Housing Enterprise Oversight for failing to comply with a discovery deadline it had agreed to—is that litigants must carefully consider the volume of documents they need to review, schedule realistic timelines, and make sure they have the appropriate tools and resources in place to conduct a review.
Reed
Reed says companies would be wise to start gathering documents early, certainly no later than the date a complaint is filed. “Mistakes are born out of haste,” he says. “If you’re in a rush, you’re more likely to produce something inadvertently.”
He also suggests that for any case with any significant volume of document production, litigants hire an outside consultant.
The judge in the Rhoads case specifically noted that the company retained a consultant and used a fairly sophisticated screening device, which suggested that Rhoads substantially complied with an advisory committee note to Rule 502 saying a company that uses analytical software has taken reasonable steps to prevent accidental disclosure.
Then again, the outcome in Relion Inc. v. Hydra Fuel Cell Corp. is a reminder that litigants must take steps to avoid inadvertent production in the first place. In that case, an Oregon district court judge held that the company waived attorney-client privilege because it had three chances, but still failed to identify and remove two privileged emails.
In other words, Reed says, “You need to have quality control to make sure your screening is effective.”
One open question is how the rule will affect state courts. Provisions of Rule 502 essentially bind state courts to follow the federal standard about privilege waivers, but Alden says questions have been raised about whether the rule’s effect on state courts is constitutional.
“Given the peculiar facts and motives it would take to really litigate that, we probably won’t see decisions all that soon,” he says.
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