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On 19
September 2008, President George W. Bush signed into law
Senate Bill 2450 which adds Rule 502 to the Federal
Rules of Evidence. The intent of the law, which received
broad bipartisan support in Congress, is to lower the
costs and risks associated with conducting privilege
reviews of discovery records by limiting the
circumstances in which disclosures of attorney-client
communications or attorney work product protection
material will result in a waiver of such material.
Before the amendment, an agreement among counsel that
inadvertent production of privileged records would not
result in a waiver of privilege (“claw back”
agreements), or that privileged records would be
identified after the other side had examined them before
production (“quick peek” agreements) was not necessarily
binding on other parties even if included in a court
order, especially in other jurisdictions. This
significant risk of waiver has caused considerable time
and effort to be expended in conducting privileged
reviews records before production. Many corporations had
complained that the cost of reviewing electronic records
often exceeded the value of the claims being litigated.
The
new amendment provides that if a federal court makes an
order that attorney-client privilege or attorney work
product protection is not waived by a disclosure in the
litigation, the disclosure is also not a waiver in any
other federal or state proceeding.
The
new rule also provides that in the absence of a court
order, production of attorney client or work product
material in a federal proceeding or to a federal office
or agency will not be deemed a waiver if the disclosure
is inadvertent, the holder of the privilege took
reasonable steps to prevent disclosure and the holder
promptly took reasonable steps to rectify the error
following, if applicable, the Federal Rules of Civil
Procedure.
Rule
502 applies to federal proceedings filed after the date
of the enactment and which “insofar as is just and
practicable” applies in all proceedings pending on the
date of such enactment.
If
used by litigants to reduce the level of effort
currently undertaken to identify all privileged records
before production, Rule 502 could significantly reduce
the costs of discovery. Whether this actually happens
will depend on whether litigants decide that even though
Rule 502 reduces the risk of waiver, the risk of even a
limited disclosure is so great in terms of potentially
revealing strategy that they will continue detailed,
time-consuming and, hence, expensive privileged reviews.
This may be an area where clients will have to take the
initiative to request or direct that less time and money
be spent on privilege reviews as many lawyers may be
reluctant to provide less than a
“leave-no-stone-unturned” type of representation out of
concerns for potential malpractice claims or simply
because that’s how they are accustomed to litigating. In
any event, it is ultimately up to the client to decide
how much justice it can afford.
The
new rule highlights the importance of having and
following written best practices to document that
reasonable measures were employed to prevent inadvertent
disclosure. Such documentation will go a long way in
arguing against a finding of waiver in the event that
privileged material is inadvertently disclosed in a case
without a federal court order in place.
References:
The
complete text of SB 2450:
S. 2450
Be it enacted by the Senate
and House of Representatives of the United States of
America in Congress assembled,
SECTION 1. ATTORNEY-CLIENT
PRIVILEGE AND WORK PRODUCT; LIMITATIONS ON WAIVER.
(a) IN GENERAL.—Article V of the Federal Rules of
Evidence is amended by adding at the end the following:
‘‘Rule 502. Attorney-Client
Privilege and Work Product; Limitations on Waiver
‘‘The following provisions apply, in the circumstances
set out, to disclosure of a communication or information
covered by the attorney-client privilege or work-product
protection.
‘‘(a) DISCLOSURE MADE IN A FEDERAL PROCEEDING OR TO A
FEDERAL OFFICE OR AGENCY; SCOPE OF A WAIVER.—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.
‘‘(b) INADVERTENT DISCLOSURE.—When made in a Federal
proceeding or to a Federal office or agency, the
disclosure does not operate as a waiver in a Federal or
State proceeding if:
‘‘(1) the disclosure is inadvertent;
‘‘(2) the holder of the privilege or protection took
reasonable steps to prevent disclosure; and
‘‘(3) the holder promptly took reasonable steps to
rectify the error, including (if applicable) following
Federal Rule of Civil Procedure 26(b)(5)(B).
‘‘(c) DISCLOSURE MADE IN A STATE PROCEEDING.— When the
disclosure is made in a State proceeding and is not the
subject of a State-court order concerning waiver, the
disclosure does not operate as a waiver in a Federal
proceeding if the disclosure:
‘‘(1) would not be a waiver under this rule if it had
been made in a Federal proceeding; or
‘‘(2) is not a waiver under the law of the State where
the disclosure occurred.
‘‘(d) CONTROLLING EFFECT OF A COURT ORDER.—A Federal
court may order that the privilege or protection is not
waived by disclosure connected with the litigation
pending before the court—in which event the disclosure
is also not a waiver in any other Federal or State
proceeding.
‘‘(e) CONTROLLING EFFECT OF A PARTY AGREEMENT.—An
agreement on the effect of disclosure in a Federal
proceeding is binding only on the parties to the
agreement, unless it is incorporated into a court order.
‘‘(f) CONTROLLING EFFECT OF THIS RULE.— Notwithstanding
Rules 101 and 1101, this rule applies to State
proceedings and to Federal court-annexed and Federal
court-mandated arbitration proceedings, in the
circumstances set out in the rule. And notwithstanding
Rule 501, this rule applies even if State law provides
the rule of decision.
‘‘(g) DEFINITIONS.—In this rule:
‘‘(1) ‘attorney-client privilege’ means the protection
that applicable law provides for confidential
attorney-client communications; and
‘‘(2) ‘work-product protection’ means the protection
that applicable law provides for tangible material (or
its intangible equivalent) prepared in anticipation of
litigation or for trial.’’.
(b) TECHNICAL AND CONFORMING CHANGES.— The table of
contents for the Federal Rules of Evidence is amended by
inserting after the item relating to rule 501 the
following: ‘‘502. Attorney-client privilege and
workproduct doctrine; limitations on waiver.’’.
(c) EFFECTIVE DATE.—The amendments made by this Act
shall apply in all proceedings commenced after the date
of enactment of this Act and, insofar as is just and
practicable, in all proceedings pending on such date of
enactment. |
