E-Discovery Law Alert : New York & New Jersey Attorneys for Electronic Discovery and Corporate Information Management Law

Even though Hamilton is not binding outside the Fourth Circuit, the opinion may nonetheless be viewed as conflicting with governing law in other states, including New Jersey. As readers of this blog may recall from our prior discussion of the decision in Stengart v. Loving Care Agency, Inc., the Supreme Court of New Jersey held that an employee’s emails with her attorney, though sent from her work computer, were protected by the attorney-client privilege and therefore did not have to be disclosed to her employer, whom she accused of discrimination. The Stengart decision may, however, be distinguished from Hamilton on several grounds. First, unlike the emails in Hamilton that were sent from the defendant’s workplace computer through his work email account, the emails in Stengart were sent from a personal, web-based, password-protected email account. Second, in contrast to the clear “no expectation of privacy” policy in Hamilton, the employer’s policy in Stengart regarding personal email accounts was obscure. Finally, the privileges at issue were different. In Stengart, the New Jersey Supreme Court opined that the public interest in attorney-client privilege is of such importance that waiver should not easily be inferred. It is possible that the New Jersey Supreme Court might not accord the marital privilege the same level of sanctity. In any event, although the Hamilton and Stengart courts reached what may be viewed as divergent conclusions, both sought to balance the terms of the employer’s policy with efforts by the employee to maintain privacy, in addition to affording deference to traditionally privileged communications, such as those between attorney and client or husband and wife.

With the proliferation of personal devices, such as smart phones and tablets, employers and employees should be aware that communication privileges can be waived when sent through non-protected media. To avoid confusion, employers ought to have in place clear, comprehensive information technology policies. Employers should also consider encouraging their employees to engage in personal communications using only personal devices rather than employer-owned equipment. If employers are successful in convincing their employees to abide by clear information technology policies, they will reduce confusion in the workplace and avoid discovery disputes in the event that litigation between employer and employee unfortunately comes to fruition.

Kevin G. Walsh is a Director in the Gibbons Business & Commercial Litigation Department. Marc D. Bianchi, an Associate in the Gibbons Business & Commercial Litigation Department, co-authored this post.

As part of the Court’s analysis, it evaluated five factors under federal Ohio law to determine whether the attorney-client privilege was waived for documents containing alleged legal communications. (The Court’s review of the e-mails suggested that attorney-client communications were implicated.)

Under the first factor, the Court found that Medex did not take reasonable precautions to prevent disclosure because it failed to provide a privilege log and failed to state “who reviewed the production . . . [and] what steps were taken to review the documents for privilege or whether the production was different in form from prior productions.” The number of inadvertent disclosures by Medex was also of concern to the Court under the second factor, given that over 4% (347/7,500) of the production represented inadvertent disclosures. Because the documents were relevant to IPI’s claims as well as not marked confidential (and not listed in a privilege log as discussed above), the Court found that the magnitude of disclosure was high under the third factor.

The fourth factor, like the previous three, favored waiver because Medex did not “follow the procedure in Federal Rule of Civil Procedure 26(b)(5)(B)” as it did not “identify any particular documents covered by the privilege, did not provide a proper privilege log and, beyond conclusory statements, Medex did not state a basis for the claimed privilege.” Under the last factor, the interests of justice, the Court relied on many of the same grounds discussed above as well as stating that Medex provided a “relatively weak response” and IPI relied on the disclosures. In sum, the Court found waiver and thus the emails produced would remain as such.

Discovery, and particularly document review, is one of the most expensive parts of litigation, and especially patent litigation. And, even with proper document review standards in place, as the name implies, inadvertent disclosures sometimes do occur. What does this all mean for practitioners?

A party needs not only to have a document review procedure in place that shows a sufficient review, but also to immediately provide a privilege log (but not a generic one), and seek to “claw back” any document(s) if inadvertent disclosure does occur. In litigation, each party is constantly working hard to discover that one document or obtain that one deposition quote or other advantage that will alter each party’s legal position vis-à-vis the other. For lawyers -- and clients -- it is tough to accept any such game changer based on something that could have been prevented with a little more factual and/or legal investigation.

Andrew P. MacArthur is an Associate in the Gibbons Intellectual Property Department. This blog post orginally appeared on the Gibbons IP Law Alert on September 7, 2012

District Judge Dickinson R. Debevoise ultimately affirmed Magistrate Judge Michael Shipp’s modification of the existing discovery order -- finding not only “good cause” to do so, but even “manifest injustice” if the order was not modified. See Waldorf v. Shuta, 142 F.3d 601, 1998 U.S. App. (3d Cir. 1998). Judge Debevoise also took the opportunity to provide guidance for parties to keep in mind when discussing and proposing search terms. In particular, the Court reasoned that the parties should have been more diligent before agreeing to the broad search terms, and listed the following factors for parties to consider when evaluating proposed search terms:

1. the scope of the documents searched and whether the search is restricted to specific computers, file systems, or document custodians;
2. any date restrictions imposed on the search;
3. whether the search terms contain proper names, uncommon abbreviations, or other terms unlikely to occur in irrelevant documents;
4. whether operators such as ‘and,’ ‘not,’ or ‘near’ are used to restrict the universe of possible results; and
5. whether the number of results obtained could be practically reviewed given the economics of the case and the amount of money at issue.

As a practical matter, litigants should pay attention to Judge Debevoise’s guideposts before agreeing to a broad set of search terms. An eagerness to agree up front to a discovery plan and avoid a fight may only delay the inevitable if the search terms picked are so broad as to result in an unduly burdensome stack of material to review. Moreover, courts have become more willing to examine “what’s at stake” in a case before ordering broad-based discovery; and seeking a more limited discovery order early in the case can avoid unnecessary expense later on.

Jennifer Marino Thibodaux is an Associate on the Gibbons E-Discovery Task Force.

The Court concluded that the six documents, or at least portions of them, were privileged. Similarly, the Court found that the production was inadvertent based upon the circumstances surrounding the production, such as the defendant’s belief that the vendor would automatically withhold all documents tagged “privileged” from the online production database, and defense counsel’s immediate objection to the use of the documents immediately at the deposition and again thereafter.

Nonetheless, the Court ultimately found that the defendant failed to take reasonable steps to prevent disclosure, resulting in a waiver of the privilege under Federal Rule of Evidence 502(b) as to those six documents. The Court noted that the screening process was unreasonable because the defendant failed to check the online production database before it was “live online” to confirm that the privileged documents were withheld, which the Court characterized as a “strong [piece of] evidence of the inadequacy of the [defendant’s] precautions.” The Court also determined that the defendant failed to remedy the inadvertent disclosure in a timely fashion. In light of those factors, the Court found the screening process to be “completely ineffective” and without any “reasonable precautions.” For other blog articles related to inadvertent disclosure and inadvertent production under Rule 502(b), click here and here.

Jennifer Marino Thibodaux is an Associate on the Gibbons E-Discovery Task Force.

Rule 502(b) addresses inadvertent disclosure and identifies the circumstances in which disclosure of protected information will operate as a waiver. According to the rule, there is no waiver so long as: (1) the disclosure was inadvertent; (2) reasonable steps were taken to prevent disclosure; and (3) prompt, reasonable steps were taken to rectify the error once it was discovered. Judge Grimm notes there has been “a surprising amount of disagreement” among courts regarding the inadvertence requirement, and he criticizes courts for injecting reasonableness into the determination of inadvertence, thereby conflating the first and second requirements. He strongly rejects this approach, commenting that production is either inadvertent or it is not. Judge Grimm also criticizes courts that have demanded extraordinary measures to satisfy the reasonableness requirement of Rule 502(b)(2). In this regard, he explains that the Rule is designed to encourage the use of cost effective computer-based analytical methods to conduct pre-production reviews for privilege and warns that requiring extraordinary measures defeats the purpose:

Rule 502 will never reach its intended goal of reducing the cost of ESI discovery and encouraging the use of computer analytical review methodology if courts demand near-perfection in pre-production precautions.

Judge Grimm concludes his article with a discussion of Rule 502(e), which allows parties to enter into binding agreements regarding the effect of disclosure of protected information. Through such agreements, parties can establish criteria for non-waiver and the claw back of documents that may be different (broader or more restrictive) than the criteria set forth in Rule 502. For example, parties can agree that documents may be clawed back regardless of whether they were intentionally or inadvertently produced and regardless of whether any precautions, reasonable or otherwise, were taken to avoid disclosure. As Judge Grimm points out, however, some courts have refused to fully enforce such agreements. Such decisions thwart the purpose of the rule and present a “sober lesson” for lawyers. Judge Grimm advises lawyers to be careful in preparing agreements under Rule 502(e), warning:

When drafting a non-waiver agreement under Rule 502(e) and Rule 26(b)(5)(B), painstaking care should be taken to ensure that the agreement clearly addresses both pre-production and post-production obligations. Otherwise, the parties run the risk that the court will make its waiver determinations in accordance with Rule 502(b)(2) and (3) instead of the non-waiver agreement.

Judge Grimm concludes his article by noting that Rule 502 is clearly written and should be sufficient to fulfill its purposes of clarifying and limiting the effect of disclosure of protected information and reducing the costs associated with pre-production review. The rule, however, “has not fulfilled it purpose, mainly because parties have overlooked it and courts have not construed it consistently with its purpose . . . .” Perhaps if courts and lawyers carefully digest Judge Grimm’s thorough exposition of the issues involved in application of Rule 502, the rule’s fundamental purpose may yet be fulfilled.

It was not until the Friday afternoon preceding the latest deadline for its production that FBR sought a confidentiality order (it never moved to quash or for a protective order), arguing that “it would be too onerous for it to conduct an adequate privilege review within the time period provided by the Court.” The court declined to enter FBR’s proposed order, which essentially would have required the Term Lenders to conduct the responsiveness and privilege review for FBR. But the court preserved FBR’s right to later file a motion to claw back privileged documents or request additional time to produce a privilege log.

Following the denial of its application for a confidentiality order, FBR basically turned over the three servers to the Term Lenders. Because FBR failed to conduct a privilege review as to two of the three servers, the court held that its disclosure of privileged information on those two servers was “voluntary,” and that it thus waived any privileges that would otherwise apply to documents on those two servers. Not surprisingly, at this late stage, FBR’s argument that complying with the subpoena would be unduly burdensome and expensive fell on deaf ears.

Significantly, the court noted that FBR did not propose a “workable solution” to the dilemma it created, which presumably might have protected its privilege claims. For example, the court suggested that FBR could have earlier sought to shift the cost of searching the servers or conducting a privilege review, or filed a motion to be relieved from complying with the court’s discovery order on the grounds that it was “financially impossible or difficult to comply.” FBR also could have attempted to negotiate an agreement pursuant to Federal Rule of Evidence 502(e), which theoretically would have protected its privilege claims even without a privilege review, if the parties consented. Instead, it did nothing. The bottom line is that if you dump data on an adversary without making some effort to protect your privilege claims, and that data includes privileged information, the disclosure of that privileged information may be deemed voluntary and thus result in the wholesale waiver of all applicable privileges.

Melissa DeHonney is Counsel to the Gibbons Business & Commercial Litigation Department and a member of the Gibbons E-Discovery Task Force.

Affirming the trial court’s decision, the Court of Appeals held that the plaintiff could not have reasonably expected that such communications would remain private in light of the company’s stated policies regarding computer use and emails. The court reasoned that communicating with her attorney by work e-mail, in light of the stated policies, was “akin to consulting her attorney in one of defendants’ conference rooms, in a loud voice, with the door open, yet unreasonably expecting that the conversation overheard by [defendant] would be privileged.” The court distinguished Quon on the grounds that Holmes did not involve any Fourth Amendment search and seizure issues and because Holmes’ employer’s explicitly stated its policies. The court found Stengart inapposite on the grounds that the plaintiff in that case used a personal e-mail account from her work computer, and the employer’s policy did not clearly cover such circumstances.

Holmes represents the evolving jurisprudence concerning personal use of company-issued electronic devices. In some jurisdictions, explicit policies coupled with fact-sensitive circumstances may lead a court to conclude that an employee cannot have a reasonable expectation of privacy when using company-issued electronic devices. Employees be warned -- use your own electronic devices for personal communications.

The E-Discovery Law Alert’s prior discussion on Stengart and Quon can be found here.

Distinguishing this case from the “usual scenario” -- in which privileged documents are inadvertently disclosed in the context of voluminous document productions -- the court addressed whether defendant and/or his counsel took reasonable steps to preserve the confidentiality of the communication. While the court found the transmission was clearly a mistake that counsel tried to immediately rectify, the court also warned that blind copying one’s client on a email sent to an adversary “gave rise to the foreseeable risk that [the client] would respond exactly as he did.” It also did not help that defense counsel left the matter unresolved until the summary judgment motion. After struggling with the issue, the Court erred on the side of protecting the almost sacrosanct attorney-client privilege, holding that, “[o]n balance, and perhaps with some indulgence for human fallibility,” defendant satisfied his burden of showing that he took reasonable steps to preserve the confidentiality of the communication.

Little solace, however, should be derived from this outcome for those less risk-averse practitioners. The court was quite clear that the defendant and his counsel should not expect similar judicial “indulgence” if this happened again. The lesson for attorneys: “Bcc’ing” clients should clearly be avoided. The few extra seconds it takes to forward a copy of the email is well worth the resulting peace of mind.

Scott J. Etish is an Associate on the Gibbons E-Discovery Task Force.

However, absent the incorporation of Rule 502’s protections in a court ordered ESI production plan, parties risk the need to engage in the more costly and more time-consuming steps outlined by Magistrate Judge Stanley in Mt. Hawley in order to avoid a finding that an important privilege has been waived. Parties therefore should meet, confer and agree early in the litigation on an ESI disclosure plan and come to some form of a Rule 502 agreement that incorporates the non-waiver provision. If the parties are unable to reach an agreement on waiver, then the dispute should be immediately submitted to the court, which is authorized under Rule 502 to impose its own waiver rules. Had the Mt. Hawley parties obtained such a court order, the documents at issue could have been immediately clawed back with no inquiry into whether “reasonable precautions” had been taken by plaintiff’s counsel.