Mt. Hawley and the Cost-Saving and Practical Benefits of Fed. R. Evid. 502

The decision in Mt. Hawley Insurance Company v. Felman Production, Inc. demonstrates the importance of a court-approved stipulation regarding the production of electronically stored information (“ESI”). The court in Mt. Hawley found that the plaintiff had waived the attorney-client privilege and work product doctrine for certain documents because counsel had failed to take “reasonable precautions” to ensure that such otherwise privileged documents were not inadvertently disclosed. Such precautions should have included, for example, sampling its production and not delaying to recover privileged documents after their production was known. Importantly, the parties had not agreed to a non-waiver provision when negotiating the production of ESI, as permitted by Fed. R. Evid. 502 (“Rule 502”). Magistrate Judge Stanley’s decision ultimately was affirmed by Judge Robert C. Chambers in Felman Productions, Inc. v. Industrial Risk Insurers.

Mt. Hawley is a good example of failing to heed the admonitions discussed in Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (2008), which discussed the reasonable precautions standard and the impetus of Rule 502. Prior to the adoption of Rule 502, attorneys expended considerable time conducting extensive privilege reviews and often asserted questionable privilege claims to avoid inadvertent waiver. This resulted in excessive costs associated not only with the privilege review itself, but also with post-production disputes regarding overbroad assertions of privilege. Rule 502 precluded automatic subject matter waivers, articulated a uniform standard for inadvertent disclosure waivers and provided a safe harbor for parties who embody non-waiver provisions in a court order.

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.