Federal Evidence Review

Court orders return of materials protected under the work-product doctrine after concluding disclosure was inadvertent and reasonable steps were taken to rectify the situation, in Coburn Group, LLC, v. Whitecap Advisors LLC, 640 F. Supp. 2d 1032 (N.D. Ill. Aug. 7, 2009) (Case No. 07 C 2448)

The new attorney-client privilege rule, , was enacted nearly one year ago, on September 19, 2009. See President Signs New Attorney-Client Privilege Rule (FRE 502). Since then, there have been few published cases applying the new rule. A recent decision in the Northern District of Illinois demonstrates the application of the inadvertent disclosure provision.

In the case, Coburn Group, LLC (“Coburn”) filed an action against Whitecap Advisors LLC (“Whitecap”) concerning a breach of an oral contract to pay referral fees for new investors. During discovery, Whitecap produced about 40,000 pages of documents, which were identified after approximately 72,000 pages on hard drives were reviewed. Plaintiff’s counsel recognized that one e-mail was privileged and returned it to the defense. Coburn Group, 640 F. Supp. 2d at 1035-36.

At a deposition, Whitecap employee Brian Broesder was questioned about a particular e-mail that had been provided during discovery. On the next day, Whitecap requested return of the e-mail, which it claimed was privileged and protected by the work product doctrine and inadvertently produced. After researching the issue, counsel for Coburn refused to return the e-mail and related materials. Whitecap moved to compel the return of the documents (totaling 16 pages) and to strike the deposition testimony.

U.S. Magistrate Judge Geraldine Soat Brown granted the defense motion. First, after an in camera review, the court concluded that the material was protected as work product, under Fed. R. Civ. P. 26(b)(3)(B). Second, in addressing the waiver issue, the court applied new FRE 502(b) and focused on three issues, whether:

“(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).”

Coburn Group, 640 F. Supp. 2d at 1037 (quoting FRE 502(b)).

While the terms “inadvertent disclosure” were not defined under the rule, the court concluded that FRE 502(b)(1) “essentially ask[s] whether the party intended a privileged or work-product protected document to be produced or whether the production was a mistake.” Coburn Group, 640 F. Supp. 2d at 1038 (footnote omitted). As the court explained:

“To start, the parallel structure of subparts (a)(1) and (b)(1) of Rule 502 contrasts a waiver that is intentional with a disclosure that is inadvertent. More importantly, subparts (b)(2) and (b)(3) separately address the reasonableness of the privilege holder’s steps to prevent disclosure and to rectify the error. That they are set out as separate subparts distinct from the question of inadvertent disclosure strongly suggests that the drafters did not intend the court to consider for subpart (b)(1) facts such as the number of documents produced only to repeat the consideration of those same facts for subparts (b)(2) and (b)(3).”

Coburn Group, 640 F. Supp. 2d at 1038 (footnote omitted). Applying the rule, the court determined that the disclosure was an inadvertent mistake.

On the second inquiry, reviewing any “reasonable steps to avoid disclosure,” the court noted that there was “a set of non-determinative guidelines that vary from case to case.... [C]onsiderations bearing on the reasonableness of a producing party’s efforts include the number of documents to be reviewed and the time constraints for production.” FRE 502 ACN. As one factor, the court considered the scope of the discovery, which took five weeks, and noted the 40,000 pages of discovery out of 72,000 total pages was certainly large. The court considered an affidavit for the supervising attorney on the production which noted the protocol given to two senior paralegals to review the documents. The protocol specified:

“(a) identify responsive documents by date;
(b) identify and mark for my review any correspondence between Whitecap’s general counsel and any employee at Whitecap;
(c) identify and mark as privileged any correspondence between Whitecap’s employees and White-cap’s outside counsel;
(d) identify and mark as privileged documents prepared by any employee of Whitecap in anticipation of or in preparation for litigation pursuant to request by Whitecap’s outside counsel;
(e) pursuant to a protective order entered on November 16, 2007, mark responsive documents relating to customers as ‘confidential material’ or ‘attorneys only;’ and
(f) segregate non-responsive documents, including documents relating to ‘Offshore II.’”

Coburn Group, 640 F. Supp. 2d at 1039.

The court discredited the plaintiff’s argument that paralegals were used for the document review. The use of experienced paralegals was not inappropriate given the substantial number of documents that were reviewed and the supervision by an attorney. The court expressly “decline[ed] to hold that the use of paralegals or non-lawyers for document review is unreasonable in every case.” Coburn Group, 640 F. Supp. 2d at 1039.

Further, the court noted that “the document review can not be deemed unreasonable solely because a document slipped through which in close examination and with additional information turns out to be privileged or work product. If that were the standard, Rule 502(b) would have no purpose; the starting point of the Rule 502(b) analysis is that a privileged or protected document was, in fact, turned over." Coburn Group, 640 F. Supp. 2d at 1040. The steps taken were reasonable to prevent disclosure. The court noted that “[t]he standard of Rule 502(b)(2) is not ‘all reasonable means,’ it is ‘reasonable steps to prevent disclosure.’”

Finally, the steps taken by the defendant were reasonable to rectify the error. Under FRE 502, the court considers the response to react to the disclosure after the party learns that privileged materials were produced, not the time since the production of the documents in the first instance. As the court summarized:

“In this case, there is no dispute that Whitecap was unaware that the e-mail had been produced until Coburn’s counsel asked Mr. Broesder about it, and that Whitecap’s counsel immediately objected to its use. The next day Whitecap’s counsel requested its return and followed that up with a written request. There was no delay on Whitecap’s part in trying to rectify the error once it was discovered.”

Coburn Group, 640 F. Supp. 2d at 1041. The parties also needed additional time to investigation the facts and review the situation before the motion was filed.

The court considered the final factor on whether the plaintiff has “substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.” Fed. R. Civ. P. 26(b)(3)(A)(ii). The court considered and found non-meritorious the plaintiff’s claim that the inadvertent e-mail was need to show that the company had made inconsistent statements. With regard to the plaintiff’s claim that a state bar advisory opinion held that attorneys “ have a right, indeed, perhaps a duty, to retain the e-mail in order to represent their client zealously,” FRE 502(f) clarifies that the federal rule applies even where state law supplies the substantive rule of decision. The court observed that a new state bar rule will impose a duty that an attorney who receives an inadvertent document must notify the sender.

Based on these findings, the court granted the defense motion compelling return of the protected documents and striking the deposition testimony.