On Sept. 19, 2008, President Bush signed S.2450 enacting Federal Rule of Evidence 502 (FRE 502). In this time of divisive politics, the Leahy-Specter bill had broad bipartisan support, passing both the House and Senate unanimously. FRE 502 will impact the consequences of inadvertent disclosure of information subject to attorney-client privilege and work-product immunity, allowing litigants to limit or avoid waiver – even as to third parties – in the event of inadvertent disclosure. Given the volume of documents collected and produced in the digital age, and the attendant risk of protected material accidentally being disclosed to opposing parties, FRE 502 provides critical protections to litigants. As Senate Judiciary Committee Chairman Sen. Patrick Leahy (D-Vt.) said after S.2450 passed in the House: “I’m pleased the House has now passed this important legislation. The process of discovery was antiquated for the information age. … When enacted, this legislation will address the new realities of today’s lines of communication, and reduce the burdens associated with electronic discovery.”
A summary of the provisions of new FRE 502 follows.
No Subject-Matter Waiver for Inadvertent Disclosure
Subsection (a) provides that disclosure of privileged or protected information will generally not operate as a broad subject-matter waiver. Instead, the waiver will apply only to the information disclosed unless the holder has intentionally and misleadingly used privileged or protected information. Disclosure of privileged or protected information will not effect a waiver of undisclosed information unless the disclosure was intentional, and the disclosed and undisclosed information concerns the same subject matter and “ought … to be [fairly] considered together.” This reduces the risk that an inadvertent disclosure will result in a broad subject-matter waiver.
Comfort for Large-Scale Document Reviews
Subsection (b) provides that, at the federal level, an inadvertent disclosure does not act as a waiver if the holder took “reasonable steps” to prevent the disclosure and employs “reasonably prompt” measures to retrieve the information. This provision should provide comfort for parties undertaking large-scale document review because it reduces the potential damage from the inadvertent production of privileged material where the party has undertaken reasonable steps to review documents, and identify and protect privileged and protected materials. While the enactment of FRE 502 does not and cannot cure all ills caused by inadvertent production – it cannot force an opponent to unlearn privileged information – it helps to minimize the risk that the opponent will learn more privileged information or can use what he already has learned in court.
By implementing the “reasonable steps” standard in federal proceedings (and to a certain degree in state proceedings, see below), FRE 502 provides a strong incentive for every litigant to implement a thoughtful, defensible privilege review process – with appropriate quality-checking procedures – that a litigant can demonstrate to a court if a privileged document is ever accidentally disclosed. If a party cannot establish that it has taken reasonable precautions to protect its privileged materials, it may still waive its privilege even if the disclosure was inadvertent. For example, the courts are unlikely to have found FRE 502 applicable in either Victor Stanley, Inc. v. Creative Pipe, Inc., 2008 U.S. Dist. LEXIS 42025 (D. Md. May 29, 2008), and Amersham Biosciences Corp. v. PerkinElmer, Inc., 2007 U.S. Dist. LEXIS 6841 (D.N.J. Jan. 31, 2007), because those courts found that the party accidentally producing the privileged materials had not implemented the appropriate protocols and procedures.
Non-Waiver Agreement Provisions
Subsection (d) empowers the federal court to enter an order providing that any disclosure of privileged material in a litigation pending before it does not constitute a waiver. Importantly, such an order is enforceable against all persons and entities in any federal or state proceeding. This provision enhances the ability of parties to negotiate protective orders and clawback agreements under 26(b)(5)(B) since they will be confident that their agreements – if approved by the court – will not only be controlling of the parties but also as to third parties. It is important to note, however, that this subsection does not operate to allow a court to sanction in a separate proceeding so-called “selective waiver,” in which a party may voluntarily disclose otherwise privileged or protected information to one entity, but withhold it from another. For instance, if a party voluntarily discloses privileged material to a third party in one proceeding, a court order in a separate proceeding cannot prevent waiver as to other third parties.
Subsection (e) provides that parties may enter into a confidentiality agreement protecting each against waiver in the proceeding. Such an agreement is binding on the parties, but not on third parties unless incorporated into a court order.
While these provisions provide greater protection to parties, Congress has taken pains to note that these protections do not operate to change the substantive law of attorney-client privilege or work-product immunity. Proponents still bear the burden of proving that the privilege or immunity applies to the disclosed material.
Subsections (c) and (f) provide for broad applicability of FRE 502. First, these subsections address the effect of waiver in state court proceedings. State courts must honor the provisions of FRE 502 with regard to disclosure of privileged or protected information initially made in a federal proceeding. Moreover, if the disclosure is initially made in a state court proceeding, the admissibility of the information in a subsequent federal proceeding will be determined by the law (state or federal) that is least likely to find waiver. These rules apply even in the face of any application of FRE 501, 101 or 1101, and even if state law provides the law of privilege. Finally, subsection (f) provides that FRE 502 applies to federal court-annexed and court-mandated arbitration.
The text of the FRE 502 reads as follows:
Rule 502. Attorney-Client Privilege and Work Product; Limitations on Waiver
The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or workproduct protection.
(a) Disclosure made in a federal proceeding or to a federal office or agency; scope of a waiver. – When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if:
(1) the waiver is intentional;
(2) the disclosed and undisclosed communications or information concern the same subject matter; and
(3) they ought in fairness to be considered together.
(b) Inadvertent disclosure. – When made in a federal proceeding or to a federal office or agency, the disclosure does not operate as a waiver in a federal or state proceeding if:
(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 Fed. R. Civ. P. 26(b)(5)(B).
(c) Disclosure made in a state proceeding. – When the disclosure is made in a state proceeding and is not the subject of a state-court order concerning waiver, the disclosure does not operate as a waiver in a federal proceeding if the disclosure:
(1) would not be a waiver under this rule if it had been made in a federal proceeding; or
(2) is not a waiver under the law of the state where the disclosure occurred.
(d) Controlling effect of a court order. – A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court – in which event the disclosure is also not a waiver in any other federal or state proceeding.
(e) Controlling effect of a party agreement. - An agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.
(f) Controlling effect of this rule. – Notwithstanding Rules 101 and 1101, this rule applies to state proceedings and to federal court-annexed and federal courtmandated arbitration proceedings, in the circumstances set out in the rule. And notwithstanding Rule 501, this rule applies even if state law provides the rule of decision.
(g) Definitions. – In this rule:
(1) “attorney-client privilege” means the protection that applicable law provides for confidential attorney-client communications; and
(2) “work-product protection” means the protection that applicable law provides for tangible material (or its intangible equivalent) prepared in anticipation of litigation or for trial.