Attached is an article written by Steve Puiszis, DRI's State Rep to Illinois, which originally appeared on Practical Ediscovery, a blog sponsored by Hinshaw & Culbertson LLP.    

United States v. Sensient Colors, Inc., 2009 WL 2905474 (D.N.J. Sept. 9, 2009)

"You’re traveling through another dimension, a dimension not only of sight and sound, but of mind; a journey into a wondrous land whose boundaries are that of imagination – Next stop, the Twilight Zone."

Any lawyer who inadvertently produces privileged information steps into a legal twilight zone. However, that legal twilight zone is not a "wondrous land," but one filled with sleepless nights and many questions. How did it happen? When and how do I tell the client? How do I get the materials back? Will I lose the client, my job, my career? With ediscovery, the risk that privileged or confidential information will be inadvertently produced geometrically increases. While the use of clawback or nonwaiver agreements and FRE 502(b) lessen that risk, they do not eliminate it. Sensient Colors establishes that point.

Sensient Colors involved the electronic production of 45,000 documents totaling 135,000 pages or 450 boxes of records by the United States ("government"). Several months after that production was completed, the defendant initially returned a group of documents that were privileged. Over the ensuing months, the defendant continued to identify additional documents that the government had produced but were privileged. Ultimately, the defendant sought a ruling that the government had waived its right to assert privilege over the documents it had produced.

The court in Sensient Colors concluded the privileged documents were inadvertently produced by the government and that the requirements of FRE 502(b) were met as to the first group of documents the defendant returned. However, as to the subsequently identified privileged documents, the court ruled that the government waived its right to assert privilege under Rule 502(b) as to those documents because it had failed to promptly take reasonable steps to rectify its error after being notified of the initial inadvertent production.

The explanatory note to FRE 502 provides: "The Rule does not require the producing party to engage in a post-production review to determine whether any protected communication or information has been produced by mistake." However, the court in Sensient Colors concluded that once a party has been put on notice that privileged information has been inadvertently produced, Rule 502(b)(3) requires the producing party take "prompt and reasonable steps to reassess its document production." The court in Sensient Colors concluded the government failed to act reasonably and diligently to correct its error and waived its privilege and work-product protection as a result.

Carefully draft non-waiver orders and agreements

Sensient Colors demonstrates the importance of carefully drafting any non-waiver orders or agreements. The parties included two provisions in their joint discovery plan which ultimately failed to protect the government against a waiver of privilege. The first provision specifically addressed the issue of waiver and provided:

Non-waiver: By exchanging documents or information with each other, the Parties do not waive any privilege, confidentiality or other protection from production that otherwise applies to such documents or information.

The discovery plan also included a provision on inadvertent production:

The Parties agree that the inadvertent production of privileged documents or information (including ESI) shall not, in and of itself, waive any privilege that would otherwise attach to the document or information produced.

Addressing these provisions of the parties’ joint discovery plan, the court initially observed that if the non-waiver provision was applied as written, it would render the inadvertent production provision superfluous. The court did not address how the defendant could challenge the terms of the joint discovery plan or why it should be allowed to make such a challenge, once it had agreed to its terms. At one time, a lawyer’s word was his bond. Lawyers seem to have forgotten that in today’s digital era.

The court further observed that the parties discovery plan did not provide that they were excused from the requirements of Rule 502(b). Reconciling these provisions, the court ruled that by including the phrase "in and of itself" in the inadvertent production provision of their joint discovery plan, the parties were merely agreeing that the unintentional production of privileged information did not result in a waiver. The court ruled the parties intended to incorporate a "flexible" standard when determining if a waiver occurred. As support for that conclusion, the court in Sensient Colors quoted a passage from Koch Materials Co. v. Shore Slurry Seal, Inc., 208 F.R.D. 109, 118 (D.N. J. 2002), which explains that courts "generally frown upon ‘blanket’ disclosure provisions" because they essentially immunize "attorneys from negligent handling of documents, [and] could lead to sloppy attorney review and improper disclosure which could jeopardize clients’ cases."

The court in Sensient Colors also noted the absence of any clawback provision in the discovery plan. It observed that if the parties had intended to implement a clawback procedure, they would have specifically mentioned a clawback provision in their discovery plan. However, Fed. R. Civ. P. 26(b)5(B), outlines the process parties are to follow when an inadvertent production occurs. The court did not clarify whether it was suggesting that the inclusion of a clawback agreement would trump Rule 26(b)5(B)’s procedures, but it never hurts to include a clawback in any FRE 502 non-waiver order.

The entry of a Rule 502 non-waiver order generally will not obviate the requirement that the producing party take reasonable steps to prevent an inadvertent disclosure from occurring. And, the court in Sensient Colors concluded that the parties joint discovery plan did not preclude a finding that attorney client privilege or work-product protection could be waived even though the parties agreed that by exchanging documents they did not waive privilege.

Sensient Colors is an example why many general counsel believe that the passage of Fed. R. Evid 502 will not materially lessen the costs of electronic discovery.

Re-review required once on notice that privileged documents were inadvertently produced

The court in Sensient Colors had little difficulty concluding that the first two prongs of Rule 502(b) were met. The court did not question that the government’s production was inadvertent in the sense that it was "not intended." It explained, however, that subjective intent is not controlling. Whether a production inadvertently occurred within the meaning of rule 502(b) is determined by examining if the producing party took reasonable precautions to the prevent an error from occurring. The court found the government readily satisfied the requirements of Rule 502(b)(1) and (b)(2).

The court recognized that the document production was substantial and that the volume of inadvertently produced documents were relatively minor (214 documents). Additionally, the government did not erroneously produce the same document on multiple occasions. The court found that the government took reasonable steps prior to production by using twelve attorneys and paralegals from the Department of Justice to review its documents. The court further acknowledged that the government made "a commendable effort to employ a sophisticated computer program to conduct its privilege review."

So what went wrong in Sensient Colors?

After being initially notified that it had inadvertently produced privileged information, eight days later the government confirmed its error and advised the defendant that the documents were indeed privileged. That was sufficient to meet Rule 502(b)(3)’s requirement as to the first group of documents returned by the defendant. The court noted that prior to that point in time, the government was not on notice of any problem with its document production.

Regarding the subsequently identified privileged documents, the court reached the opposite conclusion. Once the government was advised that it had produced privileged information, "it was on notice that something was amiss with its document production and privilege review." Thus, the court held the government should have promptly re-assessed its procedures and re-checked its production in order to comply with Rule 502(b)(3)’s requirement that the producing party promptly take reasonable steps to rectify its error. The court in Sensient Colors relied upon Preferred Care Partners Holding Corp. v. Humana, Inc., 2009 WL 982449 *14 (S.D. Fla. April 9, 2009), for the proposition that once a party is aware that it inadvertently produced privilege information, it has an obligation "to ensure that no additional privileged documents were divulged." Because the defendant continued to identify privileged documents it had received while the government took more than three months to confirm that it had inadvertently produc
ed additional privileged documents, the court ruled that the privilege had been waived.

The court in Sensient Colors also commented on a "glaring omission" in the government’s submissions to the defendant’s waiver arguments. The court noted that the government failed to provide any meaningful details regarding the steps it took immediately after being notified that it had inadvertently produced privileged information. All the government proffered was that it began to re-review the documents returned to it for privilege. The government’s declarations were silent as to what steps it took to assure the accuracy and completeness of its entire document production, not just the documents that the defendant had flagged as inadvertently produced.

So several practical points bear mentioning. First, once a party is notified that it has produced potentially privileged documents, do not delay in responding to your opponent’s notification. The third element of Rule 502(b) requires that a prompt response be made by the producing party. The producing party should promptly confirm whether the documents are in fact privileged, and if so, assert privilege over the inadvertently produced documents and demand their return.

Second, Rule 502(b) requires the producing party establish its reasonable care both before a production occurs and after receiving notice that it has inadvertently produced privileged information. So keep track of what steps were taken by you, the client and any ediscovery vendor both before the production occurred and afterwards so that you are in a position to adequately litigate the issue of privilege waiver. Don’t forget about Rule 502(b)(3)’s requirements, and be prepared to outline in detail what steps were taken and when they were taken to insure that no other privileged documents were produced.

Finally, once you have responded to opposing counsel and have confirmed the assertion of privilege over the inadvertently produced documents, you should also consider promptly reviewing all of the documents that had been originally produced to the opposing party to determine if any other privileged documents were inadvertently produced. After Sensient Colors, you can’t necessarily rely on a non-waiver agreement with your opponent to protect you and the client. If you discover additional documents that were inadvertently produced, immediately notify opposing counsel that you are asserting privilege as to those documents and demand their return. While your immediate focus should be the return of the privileged documents or data that you know are in the possession of your opponent, Sensient Colors teaches that you also need to promptly review the previously produced documents and how you screened them for privilege.

Conclusion

I wonder if Rod Serling were still alive how he would handle the attorney’s nightmare of inadvertently produced privileged information. One of my favorite Twilight Zone episodes was "Nightmare at 20,000 Feet." In that episode, a gremlin appeared on the wing of an airplane that could only be seen by one passenger. That episode was ultimately remade into the Twilight Zone movie. Borrowing heavily from "Nightmare at 20,000 Feet" the attorney’s episode would pan to a tired and distraught attorney and the opening narration for the episode would begin:

"Portrait of a frightened attorney: thirty-seven, partner at a reputable law firm, husband, and father of three who until recently had been in charge of defending a major lawsuit where privileged information was inadvertently produced to his client’s top competitor. Tonight, beset by insomnia, and questioning how this could have happened, he returns to the office and turns on the computer used to create the database containing the privileged information in an attempt to determine why and how the mistake occurred. His ultimate destination is one of the darkest corners of the Twilight Zone."

Perhaps Mr. Serling would have the gremlin take up residence in the computer system so that it could only be seen by that attorney when he looks at his computer screen.

When a party takes reasonable steps before a production occurs and after it has been notified of an inadvertent production, Rule 502(b) should prevent that gremlin from doing anymore dirty work. However, it is easier said than done.

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