United States: "Reckless" Production, Inadequate Clawback Agreement Result In Waiver Of Privilege

Last Updated: August 10 2017
Article by K&L Gates

Irth Sols. LLC v. Windstream Commc'ns LLC, No. 2:16-CV-219, 2017 WL 3276021 (S.D. Ohio Aug. 2, 2017)

In this case, despite the existence of a clawback agreement (not an order) indicating that "[i]nadvertent production of privileged documents does not operate as a waiver of that privilege," the court found that privilege was waived by the inadvertent but "completely reckless" production of privileged materials ... twice. In so concluding, the court rejected the notion that a clawback agreement always protects against waiver, regardless of its terms, and instead indicated its support for courts that have precluded protection from a clawback agreement when the disclosure was "completely reckless" and for a framework that allows a court to rely on Fed. R. Evid. 502(b) when a clawback agreement fails to provide sufficiently concrete terms.

The parties in this case "agreed that a formal court order under Fed. R. Evid. 502(d) was not necessary based on the scale of the case" but nonetheless entered into a short clawback agreement, which included a provision that "[i]nadvertent production of privileged documents does not operate as a waiver of that privilege."

Despite defense counsel's assertion that the documents were subjected to two levels of attorney review prior to production, Defendant made a late production of 2200 hundred pages which inadvertently included 43 privileged documents totaling 146 pages. 12 days later, while preparing a privilege log, defense counsel realized the mistake and immediately sought to claw the documents back. Plaintiff's counsel challenged the request and disputed the inadvertence of the production, among other things.

At the hearing on the issue, the court noted that many of the documents contained clear indicia of possible privilege (e.g., 14 of the 43 documents contained the word "legal" and several identified a previously unknown attorney as such, including by way of her signature block: "Counsel to Director of Government Contract Compliance").  Nonetheless, defense counsel reaffirmed that the documents had been reviewed for privilege.

Unfortunately, "even as the dispute ensued," Defendant produced the at-issue privileged documents a second time. In that instance, defense counsel claimed the production was the result of an attempt to re-produce the prior set in a searchable form and that a mistake by her litigation support team resulted in the re-production of the privileged materials, despite her efforts to ensure they were withheld, including conducting a "spot check" of the production prior to transmission.

Taking up the issue, the court discussed the question of what constitutes inadvertence and ultimately indicated that in this instance it would assume arguendo that Defendant had established inadvertence.  The court then turned to the "impact" of the parties' clawback agreement on the question of waiver, citing three frameworks applied by other courts: "(1) if a clawback is in place, it always trumps Rule 502(b); (2) a clawback agreement trumps Rule 502(b) unless the document production itself was completely reckless; and (3) a clawback agreement trumps Rule 502(b) only if the agreement provides concrete directives regarding each prong of Rule 502(b)" otherwise, Rule 502(b) fills "the silent gaps."

Summarizing broadly, the court rejected the first approach, reasoning in part that to approve it "would undermine the lawyer's responsibility to protect the sanctity of the attorney-client privilege" and "runs the risk of undermining contract principles."  Turning to frameworks two and three, the court reasoned it "need not choose" between them because "when taking into account the careless privilege review, coupled with the brief and perfunctory clawback agreement, following either approach leads to the same result: Defendant has waived the privilege."  Under the second framework, the court ultimately concluded that the number of privileged documents produced (more than 10% of the total production), the time taken for the review ("Defendant had months to produce the first production"), and the fact that the mistake was not "the result of a technical error or mistake born from hours and hours of review" (rather the attorneys "reviewed a limited number of documents and made critical and reckless mistakes") demonstrated a level of recklessness that supported waiver.  The court explained:

Make no mistake, the Court is sympathetic that in this day and age privileged documents will inevitably fall through the cracks and be produced inadvertently. Yet, as the "guardian" of the attorney-client privilege, it is a lawyer's responsibility to minimize the cracks through which privileged material might slip. The Court believes the second approach adequately recognizes an attorney's responsibility to guard that privilege, and holds an attorney accountable when normal cracks become chasms—as was the case here. (Citation omitted.)

Under the third framework, which the court viewed as "appreciating the power of clawback agreements but providing an analytical mechanism for the court to revert back to 502(b)'s requirements if an agreement is so perfunctory that its intentions are not clear," the court characterized the parties' agreement as "cursory" and assessed the reasonableness of Defendant's steps to prevent disclosure—the focus of Rule 502(b)(2)—and found that reasonable steps were not taken and that privilege protections were therefore waived.

A full copy of the court's opinion is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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