Inadvertently Produced Privileged Documents under the New Federal Rules of Civil Procedure:
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By Professor David Hricik, Mercer University School of Law
In December 2006, amendments to the Federal Rules of Civil Procedure came into effect. Among them were new rules designed to clarify and simplify the process for document production by allowing a party who produces a privileged document to "claw it back" from the recipient and to encourage the use of agreements to reduce or eliminate disputes over whether production of a privileged document waived privilege and, if so, to what extent. This article describes the new rules and explains why, despite the amendments, due care remains a critical aspect of document production, and agreements between parties are not always a satisfactory solution.
Litigators know that privilege must be protected, or it can be lost. Most courts hold that privilege is waived where a document is disclosed to an adversary, if the disclosure was intentional or done without taking due care. Likewise, some courts apply "subject matter waiver" and hold that, not only is privilege waived over the actual communication disclosed, but as to all communications on the same subject.
Taken together, those principles mean that at all times, but particularly during document production during discovery, parties must be extremely careful to avoid disclosure of privileged documents, lest privilege over the document itself and perhaps all communications on the "same subject matter" be waived.
In document-intensive cases, the need to protect against waiver has led parties to engage in extremely expensive "privilege reviews." Their cost can be extraordinary. As a result lawyers often made "claw back" agreements with opposing counsel that allow a party who produces a privileged document during discovery to obtain its return, to avoid subject matter waiver, or to avoid entirely the contention that production waived privilege.
It is against this background that two new provisions were added to the rules.
New Rule 26(b)(5)(B) provides a process for "clawing back" a privileged document produced during discovery:
If information is produced in discovery that is subject to a claim of privilege or of protection as trial-preparation material, the party making the claim may notify any party that received the information of the claim and the basis for it. After being notified, a party must promptly return, sequester, or destroy the specified information and any copies it has and may not use or disclose the information until the claim is resolved. A receiving party may promptly present the information to the court under seal for a determination of the claim. If the receiving party disclosed the information before being notified, it must take reasonable steps to retrieve it. The producing party must preserve the information until the claim is resolved.
Thus, a party who believes that it has produced a document that is protected by either privilege or work product protection can ask for it back. The recipient must not use the information until the "claw back" request is resolved and must take reasonable steps to retrieve any distributed copies.
Another provision was added to Rule 26(f) and encourages lawyers during that conference to discuss "any issues relating to claims of privilege or of protection as trial preparation material, including - if the parties agree on a procedure to assert such claims after production - whether to ask the court to include their agreement in an order." Fed. R. Civ. P. 26(f)(4). See also Rule 16(b)(6) (allowing district courts to include any agreement in a scheduling order).
The Advisory Committee Notes not only encourage parties to agree on privilege waiver, but provide possible terms. For example, they suggest that parties can agree that production will not waive any privilege. They even suggest that, to save money, parties agree that documents can be made available for an initial "quick peek" before any substantial privilege review, and then review only the documents actually sought by the other party for any privilege.
The Notes include his seemingly comforting statement: "In most circumstances, a party who receives information under such an arrangement cannot assert that production of the information waived a claim of privilege or of protection as trial preparation material."
Despite the implication that all is well, the Advisory Committee Notes expressly state that the rules do not (and, for obvious reasons, they cannot) control "whether the privilege or protection that is asserted after production was waived by the production." 2006 Committee Note to Rule 26(b)(5)(B). Instead of the rules, courts and parties must look to the substantive law of privilege waiver. Thus, although the rules create a procedure for seeking return of documents and encourage parties to agree that production does not waive privilege, see Hopson v. Mayor and City of Baltimore, 232 F.R.D. 228, 234 (D. Md. 2005), they cannot control whether an agreement is enforceable.
1The Notes recognize that the "courts have developed principles to determine whether, and under what circumstances, waiver results from inadvertent production of privileged or protected information."
Three distinct issues need to be addressed despite the comfort of the Advisory Committee Notes. The first has nothing to do with whether privilege will be maintained, and may be far more important than that question: does it matter that privilege will remain when client confidences have been disclosed? The second is whether any nonwaiver agreement will be enforced even between the parties. The third is whether an agreement will eliminate the ability of third parties to claim waiver.
Even though new Rule 26(b)(5)(B) requires the document be returned, and even assuming that an agreement will bind everyone (parties to the agreement, and not), the fact is that damage can be done by disclosure of privileged information, whether the information will be admissible at trial later, or not. The bell cannot be unrung: the recipient will know the content of the document, and that in and of itself could harm the client.
So, the basic obligation of lawyers to take due care during document production persists whether or not privilege will be preserved. But there are significant questions as to whether it will be, particularly against third-parties.
Many courts have upheld and encouraged nonwaiver agreements between parties, and in fact they have long been used. See Hopson, 232 F.R.D. at 234-35 (citing cases dating back to the 1950's that upheld nonwaiver agreements between counsel or parties). The Advisory Committee Notes are correct to the extent they suggest that most courts that have addressed the question have approved nonwaiver agreements.
However, not all courts have addressed them, and a few of the courts that have, rejected their enforcement in some circumstances. One court explained why: enforcement "could lead to sloppy attorney review and improper disclosure which could jeopardize clients' cases." Koch Materials Co. v. Shore Slurry Seal, Inc., 208 F.R.D. 109, 118 (D. N.J. 2002).
Thus, counsel may need to ensure that the particular court will uphold nonwaiver agreements, even as between parties, before putting too much trust in them.
Advisory Committee Note to Rule 26(b)(5)(B). Unfortunately, that law is not uniform or well-settled. Those jurisdictions which have addressed the issue (and many have not) have adopted varieties of three common approaches: strict waiver (holding that no matter how great the precautions against inadvertent production were, once disclosed privilege is waived); strict non-waiver (holding that only intentional relinquishment can waive privilege, and that inadvertence is never sufficient to do so); and a middle-ground balancing test (which looks to all of the facts to determine whether the production was made despite the exercise of due care). See 8 Wright, Miller & Marcus, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 2016(2) (2005) (canvassing the various approaches).
Basic contract law suggests that an agreement between parties to one lawsuit that the production of privileged information does not waive privilege does not impact third parties. Accordingly, production of a privileged document in a case with a clawback agreement likely will not impact the ability of a non-party to claim that such production waived privilege. See In Re Chrysler Motors Corp., 860 F.2d 844 (8th Cir. 1989). The majority view is that disclosure to an adversary waives privilege. In re Columbia/HCA Healthcare Corp., 293 F.3d 289, 296 (6th Cir. 2002) (collecting cases).
Thus, even if a party to an agreement will be unable to argue that inadvertent production waived privilege, third parties will not. Again, this indicates that the obligation to take due care persists, particularly where documents are being produced in litigation which is likely to be followed by related lawsuits.
As noted above, the best protection against harm to clients remains the exercise of due care. Obviously, however, nonwaiver provisions may provide some additional protection, but it is not yet certain to what extent they will be enforced.
Assuming it is proper in a particular case, what, exactly, should such an agreement say? Case law suggests that it should not be limited to "inadvertent" production, since that leads to litigation over what was, or was not, "inadvertence." See In re Sulfuric Acid Antitrust Litig., 235 F.R.D. 407, 418 (N.D. Ill. 2006) (litigating meaning of protective order); VLT, Inc. v. Lucent Technologies, Inc., 2003 WL 151399 (D. Mass. Jan. 21, 2003) (same); U.S. Fidelity & Guaranty Co. v. Braspetro Oil Serv. Co., 200 WL 744369 (S.D.N.Y. June 8, 2000) (same).
Although the precise language will vary depending on the case and circumstances, consider this as a model to improve from:
Production of any document that, prior to production, was subject to work product immunity or the attorney client privilege shall not constitute a waiver of the immunity or privilege, provided that the producing party comply with Fed. R. Civ. P. 26(b)(5)(B) by notifying the party that received the information of the claim and the basis for it. The foregoing applies so long as the producing party in its notice states that production had not been an intentional and knowing relinquishment of the claim of privilege.