Oops! You mistakenly gave a privileged memo to the IRS or SEC: Is privilege lost for that memo? For other memos? What do you do?

New Rule 502, Federal Rules of Evidence, to the rescue

An inadvertent disclosure - to a federal office or agency - of a privileged communication or attorney work product no longer can waive protection for all other communications and work product that concern the same subject matter. Simply stated, in these circumstances there can be no subject-matter waiver!

More than that, even the very privileged communication or work product that is inadvertently disclosed still can be protected, provided that: (a) the holder of the privilege or protection took reasonable steps to prevent the disclosure and then (b) promptly took reasonable steps to rectify the error.

These welcome provisions come to us via Rule 502, recently added to the Federal Rules of Evidence (Pub. L. 110-322, Sept. 19, 2008). Remarkably, this rule of evidence applies not only to disclosures made during proceedings in a federal court, but also to disclosures made to any federal office or agency, such as the IRS or SEC. Further, for an inadvertent disclosure made to a federal office or agency, Rule 502 controls even when the waiver question arises in State court.

So, what do you do? Well, being forewarned, you already take great care to prevent inadvertent disclosures. For example, all privileged documents and work product are prominently labeled as such and are filed apart from ordinary business records. You also carefully review all records, even (especially!) electronic records, before producing them.

When, inevitably, a privileged communication or work product slips through, act promptly. Notify the recipient that the information is protected and that they must return or destroy it. See Rule 26(b)(5)(B), Fed. Rules of Civil Procedure.

Rule 502 also provides guidance regarding waivers attributable to intentional – as opposed to inadvertent – disclosures, and authorizes a Federal court to order that a disclosure made in litigation pending in that court is not a waiver there or in any other Federal or State proceeding.