For The Defense, July 2010 - DRI Today

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P R O F E S S I O N A L L I A B I L I T Ycision. Mohawk claimed that the documentswere privileged. The district court agreedwith the Carpenter’s assertion that Mohawkhad waived the privilege through its disclosurein the class action. The district courtdeclined to certify its decision for interlocutoryappeal, but, recognizing the seriousimpact of its waiver finding, stayed discoverywhile Mohawk Industries sought otherNotably missing from Fed.R. Evid. 502 is a definitiverule about “selective waiver.”72 n For The Defense n July 2010avenues of review. A collateral order appealto the Eleventh Circuit was dismissed forlack of jurisdiction, and the Supreme Courtaccepted the case.The Supreme Court concluded thatorders that deny attorneyclient privilegeprotection should not be immediatelyappealable under the collateral- order rule.The Court found that the efficient administrationof justice through the single appealrule, outweighed the “burden” that litigantsfaced when their rights were only“imperfectly reparable” on appeal. TheCourt rejected the argument by Mohawkthat since the attorneyclient privilege proscribesdisclosure, and not just the useof material at trial, appeal after the finaljudgment was no remedy at all. The Courtopined that deferring appeal would not“chill” open communication between clientsand their counsel, which is the privilege’spurpose. Accordingly, the Courtstated that the “breadth of the privilegeand the narrowness of its exceptions willthus tend to exert much greater influenceon the conduct of clients and counsel thanthe small risk that the law be misapplied,”although the Court acknowledged that itmight have decided to the contrary if facedwith some evidence of gross misapplicationof the privilege in the lower courts.The Court enumerated other avenuesfor immediate review that it believed werefeasible if a litigant confronted a “particularlyinjurious or novel privilege ruling.”First, a litigant could apply for an interlocutoryappeal if “the issue addressed a controllingquestion of law, the resolution ofwhich will advance termination of the litigation.”Alternatively, the court recommendedthat the aggrieved party simplydefy the court order and refuse disclosure,incurring court- imposed sanctions, suchas an adverse inference, preclusion fromoffering evidence on the subject, struckpleadings, or a finding of contempt. Sanctionswould then permit “a party to obtainpost- judgment review without having toreveal its privileged information” as, undermany circumstances, contempt findingsand other punitive rulings, would beimmediately appealable, as would the underlyingorder. Indeed, the Court stated,“These established mechanisms for appellatereview not only provide assurances toclients and counsel about the security oftheir confidential communications, theyalso go a long way toward addressing Mohawk’sconcern that, absent collateral orderappeals of adverse attorneyclient privilege,some litigants may, experience severe hardship.”Mohawk Industries, 130 U.S. at 608.It is unclear, however, that deliberatelycourting severe repercussions will alleviatethe hardship imposed on a party forced tochoose between waiving its attorneyclientprivilege or defying a court’s orders, bothbad alternatives.In jurisdictions that do not permit immediateinterlocutory appeals of privilegerulings, eventual reversal of an adverse privilegeruling may be a pyrrhic victory, at best.Unless a court stays discovery, the contentsof the privileged communications will bemade known to the corporation’s adversary,and potentially, the public at large, even ifthat adversary later cannot use it at a retrial.In this writer’s opinion, it borders on flippantto suggest that parties should simplydefy court orders to invite extreme sanctionsin hopes that a reviewing court will overlooktheir willful refusal to participate in discoveryand reverse the underlying ruling onprivilege. Moreover, encouraging parties todefy court orders does not seem to serve theinterests of efficient judicial administration,which is the policy elevated over attorneyclientprivilege in Mohawk Industries.Fed. R. Evid. 502 and WaiverIn 2008, the Federal Rules of Evidence wereamended to add Rule 502 limiting the inadvertentwaiver of attorneyclient privilegeand work product protection in the courseof federal litigation. The committee noteto the amendment indicates that it hadtwo major purposes, which the committeehoped would facilitate predictable, uniformstandards that parties could rely on todetermine the consequences of disclosure.First, the rule intended to resolve “longstandingdisputes” in the courts aboutwhen disclosure of attorneyclient protectedmaterial would result in subjectmatter waiver. Second, the rule intendedto respond to “widespread complaint” ofskyrocketing litigation costs incurred toidentify and segregate privileged materialin light of mandatory disclosure ande- discovery. See Fed. R. Evid. 502 CommitteeNote (citing Hobson v. City of Baltimore,232 F.R.D. 228, 224 (D. Md. 2005) (electronicdiscovery may encompass “millionsof documents” and to insist upon “recordby-record pre- production privilege review,on pain of subject matter waiver, wouldimpose upon parties costs of productionthat bear no proportionality to what is atstake in the litigation”)).Although Fed. R. Evid. 502 does notaddress the substantive law of privilege orwaiver, it significantly changes the conceptof waiver and inadvertent disclosure,which affects both federal and state practice.Before counseling your corporate clients,you should carefully review it, if youhave not already.The rule addresses disclosure made ina federal proceeding, or significantly, to afederal office or agency. A waiver both ofprivilege and protection, extends to undisclosedcommunications or informationin a separate federal or state proceedingonly if (1) the waiver is intentional; (2) thedisclosed and undisclosed informationconcern the same subject matter; and (3)the disclosed and undisclosed information“ought in fairness to be considered”together. See Fed. R. Evid. 502(a). Conversely,inadvertent disclosure will notinvoke a waiver of privilege in either federalor state proceedings when (1) the disclosureis inadvertent; (2) the holder of theprivilege took reasonable steps to preventdisclosure; and (3) the holder took reasonablesteps to rectify the error. See Fed. R.Evid. 502(b).The rule provides that disclosure in astate proceeding will not act as a waiver
in a federal proceeding if the disclosurewould not waive privilege or protectioneither under federal law or under the lawof the state where the disclosure occurred.See Fed. R. Evid. 502(c).The rule applies to both federal andstate proceedings by providing that a courtorder or an agreement by the parties thatis incorporated into an order, will preventwaiver in any ensuing federal or state proceedingand that the rule controls waiver instate proceedings and federal court mandatedarbitration, notwithstanding if statelaw otherwise constitutes the substantivelaw of privilege. See Fed. R. Evid. 502(d)–(f). See also Fed. R. Evid. 501. Finally, therule provides broad, general definitions ofattorney- client privilege and work productprotection consistent with existing legalprinciples. Fed. R. Evid. 502(g).Notably missing from Fed. R. Evid. 502is a definitive rule about “selective waiver.”Selective waiver permits a corporation tocooperate with the government by providingprivileged communications, such ascommunications about an internal investigation,without risk that an adversarywill later have the ability to discover thematerial in litigation. However, deemingthe issue too controversial, the AdvisoryCommittee deleted the original selectivewaiver provision from the rule. See SelectiveWaiver Absent From New FRE 502, FederalEvidence Review, Sept. 23, 2008, http://federalevidence.com/print/177.Codification of “Claw Back” AgreementsAnother amendment designed to respondto the burden of e- discovery in a fast-paced,legal environment was the change madeto Fed. R. Civ. P. 26(b)(5)(B) on handlingprivileged material that is inadvertentlyproduced. The provision codifies the recommendationby many that parties agreeto a mechanism through which they returninadvertently produced privileged materialto the producing party. See, e.g., The SedonaPrinciples, 2007 Annotated Version, §10(a): 156–160. As noted, by the Sedona Conference,however, Fed. R. Civ. P. 26(b)(5)(B) only provides a mechanism to identifyand return mistakenly produced privilegedmaterial, but it does not address waiver. Forthat, federal practitioners should resort toFed. R. Evid. 502 orders or so- orderedagreements.In practice, both Fed. R. Evid. 502 andFed. R. Civ. P. 26(b)(5)(b) may take someof the sting out of inadvertent disclosure,which results from the modern disclosureburden and the velocity with whichit occurs. Although, they cannot put the“genie back in the bottle,” these rules dobring some predictability to some waiverissues across different forums and geographicalboundaries.Is the Privilege in Retreat?Some believe that the attorney- corporateclient privilege has been eroded broadly.See, e.g., William R. McLucas, HowardM. Shapiro & Julie J. Song, The Decline ofthe Attorney- Client Privilege in the CorporateSetting, 96 J. Crim. L. & Criminology621 (2006); Association of CorporateCounsel, Executive Summary, Survey: Isthe Attorney- Client Privilege Under Attack,Apr. 6, 2005, available at http://www.abanet.org/buslaw/attorneyclient/publichearing20050421/testimony/hackett1.pdf; The Decline of theAttorney- Client Privilege in the CorporateContext, Survey Results (Association ofCorporate Counsel Nov. 2005), http://www.acc.com/legalresources/surveys/index.cfm; thenfollow “3”; then follow “The Decline of theAttorney- Client Privilege.”The decline has been attributed to manyfactors. For one, the first decade of thetwenty- first century witnessed some of theworst corporate scandals in American history.In response, many Americans haveconfused a corporation’s right to confidentiallegal counsel with the public need forcorporate transparency. The accompanyingpresumption has been that a corporationwould not assert privilege for communicationswith its counsel if it had nothingto hide.Also, new corporate regulations, suchas Sarbanes- Oxley and augmented auditingrequirements, have imposed new disclosurerequirements, which often applyto privileged communication. At thesame time, government investigators haveincreasingly, and according to some, tooaggressively required corporations to waivethe privilege as terms of agreement withthe government.The unpredictability erodes the abilityof corporations to confidently rely on privilegeassertion. The cost of voluminous, fastpacede- discovery may cause a corporationinadvertently to disclosure privilegedmaterial, which can require a corporationto conduct a cost- benefit analysis to determineif fighting for privilege protection isworthwhile, sometimes even when a communicationclearly was intended as confidential,and therefore, privileged. Indeed,some corporations resolve to pay in terroremsettlements in civil litigation ratherthan risk an adverse ruling and publicationof privileged material.ConclusionPrivileged communication assists corporationsto obtain meaningful legal adviceon a variety of topics, including preventingcorporate malfeasance from occurringor continuing. Maximizing privilegeprotection is particularly acute when inhousecounsel is involved. Although thesuggestions about measures that you andyour clients can implement to try to preserveattorney- corporate- client privilege isnot exhaustive, they offer a starting point.• Identify attorneyclient communicationsas such, at the outset, and make sure thatevery communication participant knowsthat these communications fall in thatcategory. If communicating verbally, anattorney should advise others with whomhe or she communicates that he or she isthe corporation’s attorney and speakingin that capacity. Label written communication“attorneyclient communication—privileged.”If privilege originateswith in-house counsel, clearly define inhousecounsel’s legal role.• An adversary may discover e-mails,tweets, blogs or other electronic media;therefore, they are subject to the sameprivilege rules that apply to traditionalcommunications. Corporations maywish to develop social media policiesthat limit employees’ use of social mediain the workplace and prohibit employeesfrom making unauthorized statementsabout corporate policies or other issuesin their personal blogs or other personalsocial media forums.• Handle all communication in a way thatdemonstrates that an attorney, or client,initially intended the communicationas confidential, and as such, privileged,and that a reasonable effort was madeto maintain the privilege. If communi-Waiver, continued on page 91For The Defense n July 2010 n 73
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