ALM Properties, Inc.
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The Price of Privilege
The advent of electronic discovery has resulted in a number of challenges when it comes to conducting and managing document discovery. Because of the sometimes staggering burden and expense imposed by having attorneys individually review each electronic document to be produced in litigation, litigants and courts have looked for new ways to control and minimize costs and burdens, including by identifying ways to reduce the number of documents requiring individual review by attorneys.
Rules have been developed that protect litigants from accidentally waiving privilege by inadvertently producing a privileged document as part of a voluminous electronic document production. Federal Rule of Evidence 502, for example, provides that in certain circumstances the inadvertent production of a privileged document does not constitute a waiver of privilege, even for that specific document, and certainly not with respect to a broader subject-matter category. Various federal districts have promulgated similar "clawback" rules as their default standards.
The protections offered by these new rules could provide new ways of minimizing e-discovery costs by reducing the number of documents requiring individual review for privilege in an outgoing document production. Software programs can filter an electronic document database to identify documents most likely to be privileged, such as communications from outside law firms and in-house counsel. Cost-conscious litigants could use these programs to identify those documents most likely to be privileged, which could receive individual attorney review, whereas the rest of the documents could be produced without individual attorney review. Additionally, the filtering technologies could be supplemented with sample checking of the remainder of the documents to attempt to identify any holes in the filtering technologies being used.
Should a litigant choose to rely on such filtering technologies instead of having its attorneys individually review each document being produced, this reliance can result in the inadvertent production of privileged documents. This is where protective orders and clawback rules come into play. Parties can produce documents identified as nonprivileged by the reviewing software with a degree of confidence that they are protected from a broad privilege waiver, even should the filtering technology they employ fail to identify a certain number of privileged documents contained within the database.
Even if a litigant is relieved of the obligation to review every document for privilege, however, he or she may still need to engage in an individualized review of the documents in order to make confidentiality designations. Generally, both sides in litigation will agree that they wish to keep certain information private, and will therefore stipulate to a protective order limiting dissemination of that information to the parties (and sometimes only to the parties' lawyers). These protective orders typically allow the parties to designate certain documents and information as "confidential" or, in some cases, "attorneys' eyes only," and can relieve parties of the concern that their sensitive documents will be released to the opposing side and the public.
Nonetheless, these orders typically don't allow for the mass designation of documents as "confidential" or "attorneys' eyes only." The majority of protective orders require that the party designating the information review every document individually, to determine on a good-faith basis whether it contains confidential information. For example, this is the case with the Northern District of California's model order for patent cases, which specifically states that mass designations of confidentiality are prohibited.
Thus, with the advent of electronic (ESI) discovery, the need for individualized confidentiality review can impose the very same burdensome, expensive review of tens or hundreds of thousands of documents that has potentially been alleviated under the clawback rules protecting against inadvertent privilege waiver.
There are a number of possible solutions to this dilemma. One solution is for the parties to stipulate to a protective order that would allow for the mass designation of information as confidential, without an individualized review by the parties. However, courts are reluctant to approve such orders. In Gillard v. Boulder Valley School District Re.-2 , the court said, "A court may issue an umbrella protective order which designates all discovery as protected without any prior review whatsoever, by either a court or the parties. Umbrella protective orders are disfavored." Courts view such orders as limiting the public's access to litigation. In addition to that philosophical problem, however, there are practical problems with the mass designation of information as confidential.
One problem with doing so is the need to file documents and information under seal when they are relied upon in a court filing. Protective orders will typically require that the filing party bring a motion to file the confidential information under seal. A motion to seal generally requires the moving party to provide evidence or justification to support the notion that the information is confidential and that there is good cause to file it under seal. But a party may not understand why its opponent considers a particular document to be highly sensitive, and certainly does not have the same motivation as its opponent to make a convincing case to the court as to the confidential nature of the information. This creates a frustrating situation for both the parties and for the court.
Another practical problem is that there is a high standard for closing a courtroom during a trial or hearing. The standard in the federal courts is much more restrictive than the standard for designating documents as confidential. To close a courtroom completely during a civil proceeding, a party "must demonstrate that the prejudice that would result from an open proceeding is overriding," said the Southern District of New York in Barr Laboratories v. KOS Pharmaceuticals . To justify a limited closure applying to a narrow aspect of the proceeding, the party still must demonstrate at least a "substantial reason." Thus, assuming the case features public hearings, and ultimately a trial, at least some of the information that has been designated confidential will become public by virtue of being discussed at a public trial or hearing.
A second possible solution is for the parties themselves to minimize their reliance on protective orders by using them only to protect information such as source code, trade secrets, complete sets of technical documents allowing for reverse engineering of a party's products, and other information that is truly highly confidential and sensitive. In patent cases, for instance, parties could designate source code and trade secrets as confidential but avoid the designation of run-of-the-mill nonpublic business information. While parties to civil litigation will be reluctant to completely abandon their protective orders, there are myriad benefits to at least limiting the scope of such orders.
As well as saving time and money on document review, parties can avoid annoying the court with cumbersome motions to seal as an accompaniment to almost all filings, as well as limiting disputes over the legitimacy of confidentiality designations. Parties could also enter into nondisclosure agreements providing that all documents be kept confidential, or even "attorneys' eyes only," except to the extent that they are filed with the court as part of the litigation. As part of such an agreement, the parties could stipulate to exercise good faith in using each other's documents as exhibits in public filings, with a mechanism to challenge perceived excessive or bad-faith use of documents. Where the parties are competitors, this would reduce the risk of one party attempting to acquire a competitive advantage by accessing its opponents' confidential business documentsthe "attorneys' eyes only" designation would allow parties to keep the majority of their documents out of the hands of their competitors.
Of course, one of the best options in terms of limiting the costs of e-discovery is for parties to agree to limit the scope of discovery such that they may limit the number of documents that need to be reviewed prior to production. However, even if parties make good-faith attempts to limit the universe of documents that need to be reviewed, the advent of ESI has made it so that even narrowly tailored search terms, a handful of custodians, and focused discovery requests can produce enormous numbers of documents requiring review.
ESI has made the discovery process even more expensive and time-consuming. New rules that attempt to minimize the costs of e-discovery may only have a minimal impact if the parties rely on protective orders. If parties carefully weigh these two competing interests, they might find that their gain in preserving the confidentiality of certain business information fails to outweigh the expense and burden of an individualized confidentiality review. They should then consider the trade-offs between efficiency and confidentiality before stipulating to a protective order that effectively requires the individualized review of all responsive documents.
Elizabeth Iglesias is an associate in the Los Angeles office of Irell & Manella and a member of the intellectual property litigation practice group. Claire O'Sullivan is an associate in the same office, where she is a member of the firm's litigation practice group. A version of this article originally appeared in The Recorder, a sibling publication.