Think Before You “Data Dump” or Privileges Could Be Waived

When a party voluntarily dumps data on its adversary without first conducting a meaningful privilege review, that party may be deemed to have waived any applicable privileges, particularly where it fails to timely argue that a privilege review would be too costly. That is the lesson of In re Fontainebleau Las Vegas Contract Litig., 2011 U.S. Dist. LEXIS 4105 (S.D. Fla. Jan. 7, 2011), a cautionary tale of the dangers of data dumping. After repeatedly failing to meet court-ordered production deadlines, in response to a subpoena, Fontainebleau Resorts, LLC (“FBR”) essentially dumped on the requesting parties (the “Term Lenders”) three servers containing approximately 800 GB of data—without first conducting any meaningful privilege review. Consequently, in its January 7th decision, the court granted the Term Lenders’ motion seeking a declaration that FBR waived its privilege claims. Had FBR litigated this matter differently, it might have protected its privileged information.

Poorly positioning itself from the outset, FBR did not seek any relief in connection with the underlying subpoena until approximately six months after it was served. During this interim, FBR did not argue, other than in a “conclusory and boilerplate objection,” that conducting a privilege and responsiveness review would be unduly burdensome or expensive. Indeed, in opposing the Term Lenders’ motion to compel, rather than attacking the scope of the subpoena or seeking to shift costs, FBR attributed its production delay to “logistical and coordination difficulties” and requested additional time to review the servers. After failing to comply with the court-ordered, extended deadline to produce following the Term Lenders’ motion to compel, on the Term Lenders’ motion for sanctions, the court again afforded FBR additional time to produce responsive documents. At the hearing on the Term Lenders’ motion for sanctions, FBR for the first time made an oral request to shift the costs of the privilege review, but the court denied this informal application.

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.

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