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Federal Rule of Evidence 502: An Oft-Unopened Gift"In this day and age when there can be literally millions of electronic files … the risk of one slipping through the cracks is very high. The fear of waiver leads to undue expense and to extravagant claims of privilege." – Senator Arlen Specter, introducing legislation to enact Federal Rule of Evidence 502
2013-01-29 12:00:00 AM
"In this day and age when there can be literally millions of electronic files … the risk of one slipping through the cracks is very high. The fear of waiver leads to undue expense and to extravagant claims of privilege." Senator Arlen Specter, introducing legislation to enact Federal Rule of Evidence 502
When Federal Rule of Evidence 502 was introduced as legislation in 2007, it was hailed by members of Congress, judges and practitioners as a solution to the ever-increasing costs associated with electronic discovery. As the first rule addressing evidentiary privilege passed since the inception of the Federal Rules of Evidence, it resolved and clarified several inconsistent decisions amongst the circuits regarding inadvertent disclosure of privileged material. Despite the potential of this rule to bring cost savings and sanity to a variety of discovery situations, however, practitioners and judges have been slow to incorporate its language into their agreements and orders. Any producing party especially in cases with any level of electronic document review should strongly consider using this gift from the judiciary and Congress as a safeguard in case of inadvertent disclosure.
The Enactment of Rule 502
As early as 1996, the advisory committee for the Federal Rules of Civil Procedure recognized that electronic discovery would rapidly change the landscape of civil litigation. Out of this committee came the new and improved Rule 26, which provided procedural rules for the inadvertent disclosure of privileged materials. Specifically, it provided that the court, "for good cause, may issue an order to protect a party" from, among other things, "undue burden or expense" in the discovery process. In order to be subject to the protections of Rule 26, however, a party must show that it promptly took reasonable steps to rectify an inadvertent disclosure.
Additionally, Rule 26 allowed for "quick peek" or "clawback" non-waiver agreements. A "quick peek" agreement allows a producing party to produce the requested material for examination without waiver of any privilege. The requesting party then designates the documents for production, and then a privilege screen is performed. A clawback agreement generally provides that the inadvertent production of a privileged document without intent to waive privilege does not serve as a waiver, as long as the responding party timely identifies the document produced.
Quick-peek agreements did not gain popularity with practitioners. It was seen as difficult to un-ring the bell once the other side had seen produced documents, and most attorneys and clients were opposed to giving the other side unfettered access to documents without a thorough review by attorneys. Clawback provisions, however, were incorporated into most confidentiality agreements.
For both types of agreements, however, a producing party still ran the risk of an inadvertent disclosure no matter how small acting as a subject matter waiver of all protected communications if it was not caught by the producing party. This, of course, greatly increased the cost of any document production, as each document had to be reviewed thoroughly to protect against waiver of the privilege. Additionally, all parties had to come to an agreement regarding the terms of the non-waiver provisions a feat often impossible in litigation. Finally, there was no enforceability of any non-waiver agreement outside of the subject action. For example, a third party could argue in a subsequent litigation that a waiver had occurred in the previous matter and seek access to the same information.
Rule 502 as a Solution
In direct response to these concerns, Rule 502 was enacted in 2008. The rule put in place certain safeguards respecting the inadvertent disclosure of privileged information that complement Rule 26 and give additional teeth to the traditional clawback agreement between parties.
First, Rule 502(a) provides that a disclosure will result in a subject matter waiver only when (1) the waiver is "intentional," and (2) the disclosed and undisclosed communications or information "ought in fairness to be considered together." Second, Rule 502(b) provides that a disclosure made inadvertently will not operate as a waiver, as long as "the holder of the privilege [both] … took reasonable steps to prevent disclosure" and "promptly took steps to rectify the error." (See Rhoads Industries v Building Materials, 254 F.R.D. 216 (E.D. Pa. 2008).)
Both of these provisions resolve conflict among the courts as to when and how disclosure constitutes waiver. Subsections (d) and (e), however, contain the most significant changes to how federal courts may treat privilege waivers.
Rule 502(d) provides that a "federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court in which event the disclosure is also not a waiver in any other federal or state proceeding." This small sentence has several important impacts. First, a court can enter into an order protecting privilege in the case of inadvertent disclosure without the agreement of the parties, which shortcuts the often drawn-out and contentious negotiations surrounding clawback provisions. Second, it solves the inherent problem with confidentiality orders that only apply to one matter an inadvertently produced document in one case will not waive privilege in another case, no matter the venue. Finally, Rule 502(d) does not require that a producing party take "reasonable" steps to protect documents, as Rule 502(b) and Rule 26 do. Indeed, the advisory committee notes make it plain that there is no waiver "irrespective of the care taken by the disclosing party."
Rule 502(e) states, "an agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order." This subsection codifies something that many attorneys have already put into practice: any confidentiality agreement between the parties must be made part of a court order to give it appropriate protection. Moreover, these two subparts, read together with the advisory committee notes, endorse and approve clawback agreements and orders.
Post-502: Are Courts Enforcing the Rule?
Even with the added protections afforded by Rule 502(d), many practitioners may still be hesitant to produce documents without the standard privilege review, which may involve several layers of attorney review, plus additional time for quality-control checks. Federal courts have not unilaterally assuaged these fears Rule 502(d) has been interpreted by very few courts since its inception, and few, if any, trends have emerged with regard to confidentiality/clawback provisions.
A few courts have chosen to enforce the provisions of Rule 502(d) with no inquiry into the traditional Rule 502(b) "reasonableness" requirements, as appears to be contemplated by the rule itself and the accompanying advisory committee notes. Some have chosen to enforce clawback provisions in stipulated protective orders and other court orders, but have at least mentioned the Rule 502(b) analysis as part of their decision. (See Kandel v. Brother Int'l, 683 F. Supp. 2d 1076 (C.D. Ca. 2010).) Still others, however, have ignored Rule 502(d) agreements in their entirety and have required compliance with Rule 502(b). For example, in ReliOn v. Hydra Fuel Cell, No. CV06-607-HU (D. Or. Dec. 4, 2008), a magistrate judge found that two produced emails in a large document production were enough to constitute waiver, despite the presence of a stipulated protective order.
It should be noted that courts have also been using Rule 502(d) sua sponte to resolve discovery disputes between the parties. For example, in the recent case of Fleisher v. Phoenix Life Insurance, No. 11 Civ. 8405 (CM) (JCF), (S.D.N.Y. Dec. 27, 2012), the defendant argued that it could not complete its document production in less than five months because of a burdensome and costly privilege review. The court entered an order under Rule 502(d) stating that Phoenix did not waive any privilege by producing the documents in their current form, thereby eliminating the defendant's justification for delay. This type of "compelled quick peek" may be used by judges with more frequency in cases where parties cannot agree on a production schedule or in cases where a piece of media, such as a hard drive, may contain both responsive and privileged materials. Several other courts have actively encouraged parties to apply for Rule 502(d) orders to assuage privilege concerns, and federal judges in the U.S. Court of Appeals for the Third Circuit and elsewhere have publicly spoken about the benefits of such agreements in litigation.
Rule 502(d) Agreements: A Producing Party's Insurance Policy
The current inconsistent application of Rule 502(d), however, does not mean that the practitioner should write off this rule until further clarification is available. Instead, it should be used as part of a belt-and-suspenders approach to enhance any stipulated protective orders currently in use. A few practice tips:
If an opponent is delaying executing a clawback agreement, consider getting an order without their consent.
Specifically reference Rule 502(d) in any confidentiality agreement/order.
Decide whether it is prudent to include a "promptness" provision in your agreement. Rule 502(d) does not require that a party assert that a production was inadvertent after a certain number of days or within a "reasonable" amount of time. However, a practitioner may want to distinguish party disclosures from other productions such as subpoena responses, where promptness may be desired by both parties.
Add language that the reasonableness requirement of Rule 502(b) is "presumed satisfied"; although courts are not required to engage in a reasonability analysis under Rule 502(d), some still choose to do so.
Specify in the agreement that any disclosure is, per se, "inadvertent" to avoid any argument that Rule 502(a) applies.
Federal Rule of Evidence 502 provides producing parties with an additional measure of comfort regarding inadvertent waiver, which may allow parties to limit the costs associated with privilege review. Moreover, it eliminates the worry of inadvertently produced documents being used in other litigation, whether at the federal or state level. Lastly, it is more in line with current trends toward technology-assisted review, because it provides a much-needed safety net to practitioners who choose to use new advances to cut document review costs. While its full impact has yet to be felt, attorneys whose cases involve electronic discovery would be wise to take the gifts given in Rule 502 and use them to enhance their current practice.
Jana M. Landon is of counsel in the Philadelphia office of Stradley Ronon Stevens & Young, where she serves as co-chair of the firm's e-discovery task force. She can be reached at 215-564-8049 or via email at email@example.com.