Unnecessarily Opening Doors — the Southern District of California Provides an Important Reminder of the Value of FRE 502(d) Clawback Agreements
Highlighting numerous preventable mistakes that resulted in the unintentional waiver of attorney-client privilege, a recent Southern District of California decision reinforces the importance of comprehensive clawback agreements specifically pursuant to FRE 502(d) and (e) to prevent analysis of waiver under either FRCP 26 or the common law waiver standard embodied in FRE 502(b). This blog has previously addressed the interplay between Rule 502 and parties’ clawback agreements and recently discussed the limitations of FRE 502(d) and the inability of litigants to use it to compel production of potentially privileged information without a privilege review.
In Orthopaedic Hospital v. DJO Global, Inc. and DJO Finance, LLC, the District Court found a waiver of the attorney-client privilege with respect to a privileged document introduced at deposition and the testimony elicited in connection with the privileged document due to the producing party’s failure to “promptly” rectify the inadvertent production under FRE 502(b). The court refused to find a broader subject matter waiver as a result of the introduction of this privileged document. Critically, the parties had proceeded with discovery without having negotiated, entered into, and sought Court approval of a clawback order under FRE 502(d), instead proceeding under a Rule 26 protective order that incorporated the common law clawback standard of FRE 502(b). As we have discussed in prior posts, a FRE 502(d) order could have clarified that the parties agreed to immediate and unquestioned clawback of any document, regardless of whether the production was inadvertent, and disclaimed the application of the common law clawback standards of FRE 502(b).
During the remote deposition of one of the defendants’ senior vice presidents, plaintiff’s counsel engaged in a line of questioning regarding the knowledge of a pending patent application to which the witness replied that the basis for the knowledge was advice from counsel. After a brief recess and continued questioning regarding the advice of counsel, plaintiff’s counsel then turned questioning to a 95-page document related to a licensing and product development agreement, which included the licensing agreement and a 7-page letter from counsel providing legal opinions related to the potential issuance of a new patent (“Attorney Letter”). Plaintiff’s counsel elicited four minutes of uninterrupted testimony concerning the Attorney Letter. Defendants’ counsel never objected.
Hours after the conclusion of the deposition, plaintiff’s counsel sent a letter to defendants contending all objections to the Attorney Letter’s privilege and accompanying testimony had been waived, as well as seeking the immediate production of all documents related to the subject matter of the Attorney Letter. That same day, defendant’s counsel responded by asserting privilege over the Attorney Letter, claiming it was inadvertently produced. Invoking provisions in the parties’ protective order and FRCP 26(b)(5)(B), defendants’ counsel attempted to clawback the Attorney Letter, requesting plaintiff’s counsel to destroy all copies of it. Defendants’ counsel also demanded the court reporter remove the Attorney Letter as an exhibit from the deposition transcript and strike all testimony related to its contents.
In determining the issue of privilege waiver related to the Attorney Letter, the court first looked to the protective order governing the litigation. Yet, because the protective order simply incorporated the language of FRE 502(b) and did not explicitly disclaim a FRE 502(b) analysis, the court analyzed the waiver issue under the framework of Rule 502(b)’s reasonableness requirements. Specifically, the court focused on FRE 502(b)(3) and whether the defendants “promptly took reasonable steps to rectify the error of its inadvertent disclosure.”
Under this analysis, the court held that defendants had waived attorney-client privilege over the Attorney Letter as a result of the inadvertent disclosure. Material to its determination, the court noted that defendants’ counsel did not identify the Attorney Letter as inadvertently produced until after plaintiff’s counsel claimed defendants waived the attorney-client privilege as to the Attorney Letter and all communications related to the Attorney Letter as a result of the inadvertent disclosure. The court opined that the defendants’ late clawback was done only to strengthen its opposition to plaintiff’s contention that defendants’ production of the Attorney Letter resulted in a broader subject matter waiver. The court rejected defendants’ argument that it had taken prompt steps to rectify the inadvertent disclosure in light of the remote nature of the deposition and defendants’ inability to tell whether the Attorney Letter had been intentionally produced because the testimony made it “quite clear” that the document being discussed was a privileged communication. Therefore, pursuant to FRE 502(b), defendants had an obligation to “follow up” on this “obvious indication” that the Attorney Letter had been inadvertently produced, but failed to act until after plaintiff raised the issue after the deposition. Thus, the court held that defendants had waived their privilege over the Attorney Letter and the related deposition testimony. The court, however, declined to find subject matter waiver as a result of the inadvertent disclosure because, in part, defendants had no intention of relying on an “advice of counsel” defense.
This entire analysis could have been avoided had the parties entered into a simple FRE 502(d) clawback agreement at the outset of the case. The situation in this case provides another useful reminder for litigants to avoid the FRE 502(b) waiver analysis through a specific clawback agreement under FRE 502(d). As many practitioners have learned, FRCP 26 and the common law open the door to an analysis that often leaves the producing party susceptible to challenge for issues like lack of “reasonable steps” or failure to act “promptly.” A properly worded FRE 502(d) agreement, on the other hand, can obviate this analysis, and foreclose examination of any pre- or post-production conduct of the producing party. To provide the parties the upmost protection counsel should negotiate such orders early on, specifically disclaim the applicability of FRE 502(b) within the order and seek approval and entry of the order by the Court.