The Federal E-Discovery Rules: New Federal Rule of Evidence 502

Amy Longo
 

On September 19, 2008, President Bush signed into law Federal Rule of Evidence 502. This new Rule changes the law regarding when the disclosure of attorney-client privileged information or attorney work product during a pending proceeding effects a waiver of privilege. According to the Explanatory Note on Evidence Rule 502 Prepared by the Judicial Conference Advisory Committee on Evidence Rules (the “Explanatory Note”), the Rule is meant to serve two main functions: 1) to create more clarity regarding when a waiver of privilege may occur; and 2) to lower the costs of discovery, especially electronic discovery.

The complete text of the bill signed by President Bush can be found here.

Rule 502 contains five key subsections:

• 502(a) limits the circumstances in which the disclosure of privileged information can result in a waiver of privilege related to the same subject-matter, a result commonly referred to as “subject-matter waiver.” According to 502(a), subject-matter waiver can only result if a party herself puts the undisclosed privileged information at issue. For example, if a party defends himself by asserting that he relied on the advice of his counsel, then he will likely have waived the privilege over his communications with his attorney regarding that subject-matter.¹ If, on the other hand, a party accidentally produces a privileged document in a production to her opponent in litigation, she will, at most, have waived the privilege over that specific document—documents regarding the same subject would still be protected. Rule 502(a) achieves this result by imposing three conditions that must be met before the privilege as to undisclosed information is waived: 1) the waiver must be intentional; 2) the disclosed and undisclosed information must “concern the same subject matter”; and 3) the disclosed and undisclosed information “ought in fairness to be considered together.” Further, the rule provides that when a disclosure occurs in a federal proceeding, the federal rules will apply in any subsequent determination regarding whether the disclosure constituted a waiver for purposes of any state proceedings.
  


• 502(b) addresses the inadvertent disclosure of privileged information. This subsection provides that the disclosure of privileged information in a Federal proceeding or to a Federal office or agency will not result in a waiver in a federal or state court 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 Federal Rule of Civil Procedure 26(b)(5)(B).
  
  This last section, 502(b)(3), refers to another federal rule recently amended to address the realities of electronic discovery. As amended on December 1, 2006, Rule 26(b)(5)(B) sets out the steps to be taken when a party inadvertently produces a document: the producing party must notify the recipient of the information that it intends to assert privilege over the inadvertently disclosed information, and must indicate the basis for the privilege.² Once on notice, the recipient must either return, sequester, or destroy the information and any copies of it. Further, the recipient may not use or disclose the information, and must take “reasonable steps” to retrieve the information if it has already been disclosed. For its part, the producing party must preserve the information until the court has determined whether a waiver has occurred.
  
  Although Rule 26(b)(5)(B) set forth the above-described steps to be taken in case an inadvertent disclosure had occurred, that rule did not affect whether a waiver had actually resulted from that disclosure. Rule 502(b) fills that gap, though litigation will surely follow regarding what constitutes “[taking] reasonable steps to prevent disclosure.”
  
  The Explanatory Note lists several factors which will be considered in determining whether a party has taken “reasonable steps”.. In addition to “the overriding issue of fairness,” those factors include:
  
  1. the reasonableness of precautions taken;
  2. the time taken to rectify the error;
  3. the scope of discovery;
  4. the extent of disclosure;
  5. the number of documents to be reviewed; and
  6. the time constraints for production.
  
  The Explanatory Note also indicates that the use of analytical software and linguistic tools may be found to constitute “reasonable steps,” “[d]epending on the circumstances.” Further, a party’s “implementation of an efficient system of records management before litigation may also be relevant.”
  
  
• 502(c) effectively extends certain of Rule 502’s protections to state proceedings, providing that a disclosure in state court will not result in a waiver for purposes of federal proceedings if 1) the disclosure would not have been a waiver under Rule 502 had it been made in federal proceedings; or 2) if it was not a waiver under the laws of the state in which it occurred. The Explanatory Note makes clear that if the state and federal laws are in conflict as to whether a waiver occurred, the federal court should “apply the law that is most protective of privilege and work product.” However, the Rule does not affect whether a disclosure in state proceedings constitutes a waiver for purposes of those or other state proceedings—that is a matter of state law, and is governed by the laws of each separate jurisdiction.



• 502(d) affirms the power of a federal court to rule that a disclosure in a proceeding pending in that court does not constitute a waiver of privilege. If a court so holds, according to 502(d), then its ruling is effective as to any state or federal proceedings. According to the Explanatory Note, this provision allows courts to not only enforce “claw-back” agreements which allow parties to reclaim inadvertently produced documents without waiving privilege—it also allows courts to give force to “quick peek” arrangements, through which parties share documents without engaging in privilege review to give the opposing side a “peek” at the data without waiving privilege. This subsection is just as notable, however, for what it does not do, as for what it does. In its Statement of Congressional Intent, Congress emphasized that “this subdivision does not provide a basis for a court to enable parties to agree to a selective waiver of the privilege.”³ For example, this rule would not allow a company under investigation by the Securities and Exchange Commission (“SEC”) to enter into an agreement that any disclosure of privileged documents to the SEC would not result in a waiver as to other parties. Rather, the Statement of Congressional Intent makes clear that this rule is aimed only at allowing parties to “conduct and respond to discovery expeditiously, without the need for exhaustive pre-production privilege reviews.”⁴



• 502(e) addresses agreements between parties, such as claw-back agreements, regarding discovery and the effects certain disclosures will have on their ability to assert privilege over documents. 502(e) reminds parties that such agreements are effective only as between them, and that third parties, including future litigants, may subsequently assert that a disclosure which was covered by a claw-back agreement in one proceeding is no longer privileged in another matter. According to 502(e), the only way for parties to ensure that such agreements will be enforced in future proceedings is to have their content incorporated into a court order.

According to Senate Bill 2450, Rule 502 applies to all proceedings commencing after the Rule’s enactment, as well as to all proceedings pending on the date of its enactment “insofar as is just and practicable.”⁵

Notes:

1. In its Statement of Congressional Intent, Congress specifically cited the advice of counsel defense as an example of when Rule 502 would permit a subject-matter waiver. See 154 Cong. Rec. H7818 (daily ed. Sept. 8, 2008) (Statement of Congressional Intent Regarding Rule 502 of the Federal Rules of Evidence).

2. According to the Explanatory Note, a party is not required to engage in a post-production review to determine whether an inadvertent production has occurred, but should follow up on “obvious indications” that privileged information was disclosed.

3. 154 Cong. Rec. H7818 (daily ed. Sept. 8, 2008) (Statement of Congressional Intent Regarding Rule 502 of the Federal Rules of Evidence).

4. Id. at H7819.

5. S. 2450, 110th Cong. § 1 (2008).