It has been estimated that 90 percent of documents originate in electronic form.1 As attorneys and their clients are painfully aware, much discovery in New York state and federal courts now involves the retrieval and review of electronically stored information (ESI) because it may involve matter that is potentially relevant pursuant to CPLR 3101(a) or FRCP 26(b).
Such “E-discovery,” whether engaged in through formal or informal discovery demands and exchanges, poses the possibility of the attorney doing, or failing to do, something which results in the disclosure to an opposing party of attorney-client privileged matter. For example, privileged documents may be inadvertently included in a document production involving the review of several thousand documents as a result of human mistake or computer-assisted review error; or a privileged document may be inadvertently attached to an email sent to “all counsel”; or a deleted file containing privileged documents may still be accessible through a larger folder structure which is produced.
There are two questions raised as a result of such disclosure. One, does an inadvertent disclosure of privileged matter result in a waiver of the attorney-client privilege? The other, if there is a waiver of the privilege with respect to the produced matter, does such waiver lead to a loss of the privilege for other matter that while not disclosed are related to those that were, e.g., is a subject matter waiver of the privilege effected? These issues are governed by New York’s common law as there is no provision in either CPLR Articles 31 or 45 that addresses them, and that common law is not as comprehensive as one might expect and want. While FRE 502, enacted Sept. 19, 2008, addresses these issues and places limits on waiver as a result of an inadvertent disclosure,2 it does not apply to disclosures that occur in the course of state actions.3
This column is the first of two columns that will address New York’s common law on the two above-stated attorney-client waiver issues.4 The remainder of this column will cover subject-matter waiver, and waiver by inadvertent disclosure will be addressed in the next Evidence column. In an effort to clarify New York’s common law, the pertinent provisions of FRE 502 will be discussed in the context of whether such provisions should be incorporated into New York law.
At the common law the courts in New York and other jurisdictions have uniformly held that a waiver of the attorney-client privilege may be express or implied, deliberate or unintentional.5 Thus, any form of disclosure of the privileged matter during the course of litigation to others who are not the client or the client’s attorney by the client or the client’s attorney can waive the privilege as to the matter disclosed.6 This waiver rule has emerged in order to ensure that the privilege is “strictly confined within the narrowest possible limits consistent with the logic of its principle”;7 and as well in recognition of fairness in that “when [a client's] conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not.”8
Subject Matter Waiver
As to whether such waiver is limited to the disclosed matter or extends to all other privileged matter relating to the same subject matter, two competing views exist under the common law. Early decisions held that “waiver (especially by disclosure) as to part of a privileged communication is waiver for the whole communication and that waiver as to a specific communication is waiver as to all communications on the same subject matter.”9 This broad subject matter waiver was deemed consistent with the fairness consideration underlying waiver generally since a disclosure of privileged matter—most likely matter favorable to the disclosing party’s cause—would convert the privilege from a “shield” to a “sword” and allow a misleading presentation of the evidence.10 Under this view even an inadvertent disclosure of documents during discovery will result in a subject matter waiver.11
More recent decisions have rejected this view. They adopt an approach that requires the consideration of the use made of the disclosed matter by the disclosing party and the extent to which the opposing party has been prejudiced by the partial disclosure before subject matter waiver is found to be present. Thus, when the disclosure was not used to another party’s prejudice, subject matter waiver is not deemed justified.12
But when the party making the disclosure was using it affirmatively in the litigation to achieve some strategic advantage, such as creating an incomplete picture of a relevant aspect of the litigation or precluding the adversary from inquiring into the basis or accuracy of the disclosure, subject matter waiver will be invoked.13 The latter situation represents the classic “sword” rather than “shield” situation. Whether viewed as rejecting a broad subject matter waiver rule or creating an exception to such a rule, under this approach courts retain discretion not to impose a subject matter waiver simply because of a disclosure of privileged matter.
Present New York common law is unclear as to the extent a waiver of the attorney-client privilege by disclosure extends to other privileged matter relating to the same subject matter due to the paucity of decisions and the absence of Court of Appeals precedent. At least two approaches can be discerned. Three trial court decisions—Matter of Stenovich v. Wachtell, Lipton, Rosen & Katz, 195 Misc.2d 99, 109 (Sup. Ct. N.Y. Co. 2003) (Tejada, J.); AMBAC Indemn. v. Bankers Trust, 151 Misc.2d 334, 340-341 (Sup. Ct. N.Y. Co. 1991) (Baer, J.); Matter of Baker, 139 Misc.2d 573, 576 (Surr. Ct. Nassau Co. 1988) (Radigan, J.)—provide that any voluntary disclosure of the content of attorney-client privileged matter constitutes a waiver of the privilege as to all other matter on the same subject.
On the other hand, another trial court decision—Charter One Bank v. Midtown Rochester, 191 Misc.2d 154, 163-164 (Sup. Ct. Monroe Co. 2002) (Stander, J.)—has declared a broad subject matter waiver rule to be a “broad reaching theory…not supported by common law” which “effectively undermine[s] the purpose of the attorney-client privilege for allowing free flowing information between counsel and client.” It suggests that there can never be a subject matter waiver brought about by a partial disclosure of a privileged matter. Unlike under federal common law, no reported decision has been found which holds that a court may find subject matter waiver present but only when the disclosure of an attorney-client privileged matter results in a misleading picture and/or leads to the opposing party being prejudiced.14
A Proposed Rule for New York
The lack of a standard governing the scope of a waiver of the attorney-client privilege is problematic for attorneys and their clients. Parties to litigation need to know the consequences of a disclosure of a document or communication covered by the attorney-client privilege. This issue needs to be addressed by New York’s appellate courts, or the Legislature, in the absence of any appellate ruling, should take up the issue.
Discussion of a proposal to resolve the issue must start with an analysis of FRE 502(a), as this provision resolved the conflict at the common law among the federal courts as to the scope of any waiver, and has done so in a manner which finds support, albeit limited, in New York law. This provision provides: “When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if: (1) the waiver is intentional; (2) the disclosed and undisclosed communications or information concern the same subject matter; and (3) they ought in fairness to be considered together.”
Properly read, if there has been a disclosure that waives the attorney-client privilege, a determination to be made under the common law of privilege waiver or FRE 502(b) (“inadvertent disclosure”), FRE 502(a) limits the scope of that waiver to the matter actually disclosed; and creates a broader subject matter waiver only if (1) the waiver is “intentional,” in which case the scope of that waiver extends to (2) “the disclosed and undisclosed communications or information concern[ing] the same subject matter,” but only if (3) the undisclosed communication or information “ought in fairness to be considered together” with the disclosed communication or information. FRE 502(a) has rejected case law that found subject matter waiver to be required whenever there was any disclosure, and instead has opted for the rule followed by other courts that, while it creates a presumption against subject matter waiver, gives a court discretion to impose subject matter waiver when “fairness” so requires.
Two important observations about FRE 502(a) need to be made.15 First, as shown by the provision’s Advisory Committee Note, the requirement that the waiver be “intentional,” e.g., the party intended to disclose the privileged matter knowing that it was privileged, means that an inadvertent disclosure cannot result in a subject matter waiver. Second, as also shown by the Advisory Committee Note, the further requirement that an intentional waiver will result in a subject matter only if the undisclosed privileged matter “ought in fairness” be considered together with the disclosed matter is intended to encompass the situation where the party’s disclosure results in an unfair or misleading presentation of evidence to the disadvantage of the opposing party, e.g., the “sword” use of the disclosure.
FRE 502(a) as applicable to the attorney-client privilege both clarifies and limits the effect of a disclosure of privileged matter in a manner that is consistent with the policies underlying the privilege. Thus, while retaining in part a subject matter waiver rule, such retention is surely appropriate as it is limited to the situations where the disclosure is unfair because “a garbled version of the truth is presented.”16 Allowing such a situation to occur is hardly consistent with sound policy. Furthermore, where the disclosure is inadvertent, the danger that the disclosing party is attempting to obtain an unfair litigation advantage is clearly absent, and to then find nonetheless subject matter waiver is applicable is not sensible. Preventing such a situation preserves the value of the privilege.17
Whither New York? It is urged that New York adopt a rule of evidence that is a state equivalent of FRE 502(a), whether through judicial interpretation of New York’s common law or through statutory enactment. While New York is not, nor should it be, compelled to adopt a federal rule of evidence simply for the sake of federal-state uniformity, New York should take this step because New York’s law needs clarification; FRE 502(a) provides a workable standard that is appropriate; FRE 502(a) is already the governing law in some state court proceedings (as noted in endnote 3); and most importantly, FRE 502(a) fits within existing New York law.
Thus, no decision in New York, other than the dictum in Charter One, rejects the concept of subject matter waiver. Furthermore, the “ought in fairness” requirement of FRE 502(a) finds support in New York law. In Matter of Farrow v. Allen, 194 A.D.2d 40 (1st Dept. 1993), the Appellate Division, First Department, in a carefully crafted opinion by then Justice Betty Ellerin applied such a requirement to New York’s physician-patient privilege as codified in CPLR 4504. In Farrow, an adoption proceeding, petitioner contended the privilege was waived as to all communications made during a psychiatrist’s course of treatment of the patient because of the disclosure of a letter containing otherwise privileged patient information by the psychiatrist to a clinic preparing a report in relation to a criminal investigation.
In rejecting the contention, the court noted that a broad subject matter waiver of the privilege is appropriate only where “it is unfair for the opposing party in a litigated controversy to have the patient use this privilege both as a sword and a shield, to waive when it inures to her advantage, and wield when it does not.” Id. at 45-46 (citation omitted). Farrow supports the view that subject matter waiver of the attorney-client privilege is appropriate as well only when “fairness” requires it. It also supports the view that inadvertent disclosure does not alone affect a subject matter waiver.
In sum, adopting a state equivalent of FRE 502(a) will create a much needed standard that achieves a goal which is consistent with extant New York law. The added advantage is that such an adoption provides a readily available body of case law that can be consulted when determining whether “fairness” in a given situation requires a finding of subject matter disclosure.
Michael J. Hutter is a professor at Albany Law School where he teaches Evidence and New York Practice.
1. See, Finkelthal, “Scope of Electronic Discovery and Methods of Production,” 38 Loy. L.A. L. Rev. 1591, 1591 (2005); see also, Rothstein, Fed. Judicial Ctr., Managing Discovery of Electronic Information: A Pocket Guide for Judges, p. 2 (2007).
2. Pub. L. No. 110-322, 122 Stat. 3537. It applies to both the attorney-client and work-product privileges.
3. However, FRE 502(a)(b) is binding on a state court when the disclosure occurs in a federal proceeding and the disclosed matter is in issue in a subsequent state proceeding; and FRE 502(d) allows a federal court to order that any disclosure in the pending federal court litigation is not a waiver in any other state proceeding.
4. These columns will not discuss these issues in the context of a claim that the disclosed material is protectable as “work product of an attorney” under CPLR 3101(c) or “materials…prepared in anticipation of litigation” under CPLR 3101(d)(2).
5. See generally, Barker and Alexander, Evidence in New York State and Federal Courts (2d ed) §5:10; Prince, Richardson on Evidence (Farrell 11th ed) §5-209.
6. See, Buxton v. Ruden, 12 A.D.3d 475, 477 (2d Dept. 2004); Liberty Mut. Ins v. Engels, 21 A.D.2d 808, 808 (2d Dept. 1964); see generally, Martin, Capra and Rossi, New York Evidence Handbook (2d ed) §5.1.5, at pp. 294-296.
7. 8 Wigmore, Evidence (McNaughton Rev. 1961) §2291, at p. 554.
8. Wigmore, supra, §2327 at 636.
9. Martin, supra, §5.1.4 at pp. 291-292.
10. Wigmore, supra, §2327 at 636.
11. See, In re Sealed Case, 877 F.2d 976 (D.C. Cir. 1989); Nye v. Sage Products, 98 F.R.D. 452, 453 (N.D. Ill. 1982).
12. See, e.g., In re Von Bulow, 828 F.2d 94, 102 (2d Cir. 1987); Calvin Klein Trademark Trust v. Wachner, 124 F.Supp.2d 207, 211 (S.D. N.Y. 2000); Parkway Gallery Furniture v. Kittinger/Pennsylvania House Group, 116 F.R.D. 46, 50 (M.D. N.C. 1987) (inadvertent disclosure).
13. See, e.g., In re Subpoena Duces Tecum Served on Willkie Farr & Gallagher, 1997 U.S. Dist. LEXIS 2917, at *9-10 (S.D. N.Y.); Stratagem Dev. v. Heron Int’l., 1993 U.S. Dist. LEXIS 89, *3 (S.D. N.Y.).
14. Although the court in Charter One does not expressly utilize such a rationale in declining a party’s request to find subject matter waiver based upon the brief showing by a client to an adversary during a pre-litigation settlement/negotiation discussion of an opinion letter from its counsel interpreting the lease that was the subject of the parties’ disagreement, it has been persuasively shown that the result in Charter One can be justified by such a rationale. See, Alexander, Practice Commentaries to CPLR 4503, Book 7B, McKinney’s Cons. Laws of NY, C4503:6(f).
15. For further discussion of FRE 502(a), see Grimm, Bergstron and Kraeuter, “Federal Rule of Evidence 502: Has It Lived Up to Its Potential?” 17 Rich. J.L. &. Tech 8, 19-27 (2011).
16. Martin, supra, §5.1.4 at 292.
17. See, Alexander, supra, CPLR 4503:6(d).