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There Are No Shortcuts in EDD
John F. Baughman and H. Christopher Boehning
New York Law Journal
March 3, 2006

The growing volume of electronic data and number of discovery demands that require production of electronic data have led to practices that are designed to ease the burdens associated with reviewing and producing vast quantities of electronic data.

One common practice -- that of entering into so-called "non-waiver agreements" designed to permit a producing party to maintain the attorney-client privilege or work product protection over documents inadvertently produced during the discovery process -- has now found its way into the proposed amendments to the Federal Rules of Civil Procedure.

The goal of the proposed amendments is to reduce the delay, burden and expense associated with extensive, preproduction privilege review, especially in cases involving vast stores of electronic data. But are these non-waiver agreements effective? That is the question raised by Hopson v. Mayor & City Council of Baltimore, 232 F.R.D. 228 (D. Md. 2005).

Hopson warns litigants against blindly following the procedures endorsed by the proposed amendments, noting that the procedures could result in waiver of the protections offered by the attorney-client privilege or work product doctrine.

The proposed amendments to the federal rules are an effort to recognize the way in which electronic discovery is changing the shape of discovery and litigation. They seek to address the burden, expense and delay that can accompany a privilege review of electronic data.

In focusing on this issue, the committee observed:

The Committee has repeatedly been advised about the discovery difficulties that can result from efforts to guard against waiver of privilege and work-product protection. ... Efforts to avoid the risk of waiver can impose substantial costs on the party producing the material and the time required for privilege review can substantially delay access for the party seeking discovery. (Rules App. C-35 at 33.)

In an effort to address these concerns, the proposed amendments now: (1) require litigants to discuss "any issues relating to claims of privilege or of protection as trial-preparation material" in the initial rule 26(f) Conference, Report to the Standing Committee on Rules of Practice and Procedure, Judicial Conference of the United States by the Advisory Committee on the Federal Rules of Civil Procedure, September 2005 at 33; (2) encourage parties to enter into voluntary agreements under which the inadvertent production of privileged or otherwise protected materials would not result in a waiver of any such privilege or protection, Id. at 34; and (3) permit post-production claims of privilege and specify a procedure to be followed in the event of such claims, Id. at 52.

But as the proposed amendments make plain, these proposals do not "address the substantive questions whether privilege or work product protection has been waived or forfeited." Hopson, 232 F.R.D. at 233.

In a thoughtful opinion addressing the proposed amendments, U.S. Magistrate Judge Paul W. Grimm does not mince words: "[a]bsent a definitive ruling on the waiver issue, no prudent party would agree to follow the procedures recommended in the proposed rule."

Grimm's decision is the first to recognize the potential problems with the proposed rules. As he observed, "this case highlights significant unresolved issues relating to the nature of privilege review that must be performed by a party producing electronically stored information, whether non-waiver agreements entered into by counsel to permit post-production assertion of privilege are permissible, and effective for their intended purpose, as well as the application of principles of substantive evidence law related to the waiver of privilege by inadvertent production."

In Hopson, an employment discrimination case, the court was confronted with requests seeking discovery of hard copy and electronic records dating back to 1992. Recognizing that the proposed rules fail to address the substantive law question "whether privilege or work product protection has been waived or forfeited [by the procedures in the proposed amendment to Rule 26(b)(5)]," Grimm's Memorandum and Order carefully analyzes the risks associated with following the suggestions found in the proposed amendments and recommends certain steps that may be appropriate to guard against the risk of waiver.

Grimm first recognized the risks associated with entering into a so-called "non-waiver agreement" without first considering the controlling law on whether inadvertent production waives the privilege or work product protection. He then highlighted three distinct approaches to the question.

On the most restrictive end of the continuum are those courts that apply the "strict accountability" approach. This approach, which is adhered to by the U.S. Court of Appeals for the Federal Circuit and 1st Circuit, "almost always finds waiver, even if production was inadvertent, because 'once confidentiality is lost, it can never be restored.'"

At the other end of the continuum is the "lenient 'to err is human' approach'," applied by the 8th Circuit and several district courts. This approach "views waiver as requiring intentional and knowing relinquishment of the privilege, and finds waiver in circumstances of inadvertent disclosure only if caused by gross negligence."

In the middle of the continuum are those federal courts, such as the 2nd Circuit, that apply a case-by-case balancing test.

"While the Second Circuit has not, to date, taken a position directly on this issue, it appears that the prevailing view at the district court level within the circuit more closely follows the intermediate position which considers a number of relevant factors." Hydraflow, Inc. v. Enidine Inc., 145 F.R.D. 626, 637 (W.D.N.Y. 1993); see also Local 851 of the Int'l Brotherhood of Teamsters v. Kuehne & Nagel Air Freight, Inc., 36 F. Supp.2d 127 (E.D.N.Y. 1999), Large v. Our Lady of Mercy Medical Center, No. 94 Civ. 5986 (JGK)THK, 1998 WL 65995 (S.D.N.Y. Feb. 17, 1998).

As the court delineated in Hydraflow, the factors taken into account by courts that apply a balancing test, include, among others: (1) the precautions taken to prevent disclosure in light of the volume of the document production; (2) the number of privileged documents disclosed to the adverse party; (3) the speed with which the disclosing party sought to rectify the situation; and (4) "whether the overriding interests of justice would or would not be served by relieving the party of its error."

A similar balancing approach has been followed in New York. See, e.g., N.Y. Times Newspaper Div. v. Lehrer McGovern Bovis, Inc., 300 A.D.2d 169, 752 N.Y.S.2d 642 (1st Dept. 2002); Kraus v. Brandstetter, 185 A.D.2d 300, 586 N.Y.S.2d 270 (2d Dept. 1992); Mfrs. & Traders Trust Co. v. Servotronics, Inc., 132 A.D.2d 392, 522 N.Y.S.2d 999 (4th Dept. 1987).

Of course, as Grimm also observed, some courts have specifically rejected so-called non-waiver agreements. These courts -- although still recognizing the possibility of inadvertent production -- believe that non-waiver agreements encourage sloppy lawyering. Koch Materials Co. v. Shore Slurry Seal Inc., 208 F.R.D. 109, 118 (D. N.J. 2002).

Recognizing that he was writing in the 4th Circuit -- a court many believe follows the "strict accountability" standard -- Grimm continued his analysis, focusing on Federal Rule of Evidence 501, proposed (but not enacted) Rule of Evidence 512 and two cases: Transamerica Computer Co. v. IBM, 573 F.2d 646 (9th Cir. 1978) and Securities and Exchange Commission v. Lavin, 111 F.3d 921 (D.C. Cir. 1997), which address the concept of compelled or involuntary disclosure.

Based on this analysis, Grimm recommends that parties assume that a "complete pre-production privilege review is required" and use the "cost-benefit balancing factors listed in Rule 26(b)(2) ... to marshal the specific facts that would justify less than a full pre-production privilege review."

He also advises that the court then evaluate the nature and extent of the electronic production and consider "whether less than full privilege review" is reasonable "given the extent of electronic discovery allowed." Following this analysis, Grimm recommends that the court issue an order approving the required level of privilege review so that a party producing documents pursuant to such an order will have a maximum protection against a claim of waiver.

Hopson is a reminder that some times there are no shortcuts. Electronic discovery can be time consuming and burdensome. But short-circuiting some of this time and burden by engaging in an incomplete preproduction privilege review can present a real risk of waiver even when the parties agree (sometimes at the court's suggestionto a "non-waiver agreement."

As Grimm observed, it is often the case that "electronic discovery is not played on a level field. The plaintiff typically has relatively few electronically stored documents, while the defendant has an immense volume."

In such cases especially, a litigant may well be pressured to enter into a non-waiver agreement and to curtail the usual preproduction privilege review. Lawyers should exercise caution, however, before agreeing to dispense with the usual privilege review. Hopson is a good starting point for any lawyer confronted with the question whether to engage in something less than the usual preproduction privilege review.

John F. Baughman and H. Christopher Boehning are litigation partners at Paul, Weiss, Rifkind, Wharton & Garrison. Aliza J. Balog, an associate at the firm, assisted in the preparation of this article.

FN1 "[T]oday by some estimates more than 90 percent of all information is created in an electronic format." The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production, 1 (Jan. 2004). One "study estimates that 'discovery of e-mail occurs in nearly 100% of federal civil ... cases and major employment disputes.'"

FN2 Zubulake v. UBS Warburg L.L.C., 216 F.R.D. 280, 290 (S.D.N.Y. 2003).