Citing the Correct Subsection of Fed.R.Evid. 502 is Important

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Published by Michael Berman at December 19, 2024

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Privilege

In In re Outpatient Medical Center Employee Antitrust Litigation, 2024 WL 4679083 (N.D. Ill. Nov. 5, 2024), the court explained the application of Subsections (b) and (d) of Fed.R.Evid. 502.

The parties proposed a Rule 502(d) order and it was entered on an agreed motion. Id. at *1.

Plaintiffs later noted the deposition of a non-party, Dr. Fanning on March 29, 2024. There had been prior criminal actions and the notice sought all ESI that Dr. Fanning had sent to the federal government. Objections were due by July 10^th.

Dr. Fanning, who had previously been employed by defendant SCA, indicated that she would produce 30,000 documents at her deposition; however, when she appeared two days later, she produced more than 100,000 documents on two thumb drives, all from when she was employed by SCA. The court wrote that: “Dr. Fanning produced these same documents to the government in connection with the Criminal Actions several years earlier, of which SCA successfully clawed back 10,719 documents on privilege grounds.”

So, if my math is correct, Dr. Fanning understated the production by 70,000 documents. Out of the 100,000 documents produced, roughly 10% were privileged SCA documents. And, SCA should have known that.

SCA was, understandably, concerned. Plaintiffs retorted that SCA “had ample notice.” Plaintiffs added that Dr. Fanning had previously produced them, which resulted in SCA clawing back ~10%. Plaintiffs said that SCA was served with a copy of the subpoena on March 27^th, two days prior to serving it on Dr. Fanning and well before the deposition. Plaintiffs contended that “SCA did nothing”—such as objecting or filing a motion to quash—since it received notice of the Subpoena.” In short, in my words, SCA allegedly did not exercise pre-production reasonable efforts.

The court also wrote that: “The parties attempted to postpone Dr. Fanning’s deposition to allow time to review the Fanning Documents, but the court denied the request.”

So, to recap, SCA had from March 27^th until July 12^th to assert privilege. Dr. Fanning produced 100,000 documents on two thumb drives on July 12^th. The parties asked for time to review the documents. The request was denied. It seems that SCA should have known all the while that its privileged documents were contained in the corpus.

On July 29^th, about two weeks after the deposition and 124 days after being served with the subpoena, SCA sprang into action, sending an email:

During her deposition on July 17, 2024, Dr. Fanning produced a thumb drive to Plaintiffs containing thousands of documents from her time working for SCA. Given the fact that Dr. Fanning acted on behalf of SCA, we believe the thumb drive may have privileged or work-product-protected communications for which SCA holds the privilege. This includes, but is not limited to, potential communications with SCA’s in-house and outside lawyers.

Please advise of your availability for a phone call with us so that we can discuss a process to ensure the protection of SCA’s privileges. In the interim, please take all appropriate steps to make sure that neither your law firms, your clients, nor any other person reviews such information pending the resolution of this issue.

Id. at *2. While I would describe that as a pretty tepid clawback notice, it worked to some degree and plaintiffs stopped reviewing the documents.

The parties met and conferred twice and SCA told plaintiffs that it would cull the privileged documents out of the Fanning production and reproduce nonprivileged documents. SCA later produced over 99,300 documents, redacted 1,813, and withheld 8,180. Plaintiffs filed a motion asking for all of them.

Plaintiffs argued privilege waiver and the court looked to Fed.R.Evid. 502.

First, the Outpatient Medical court looked at Rule 502(b) as the “default provision.”

(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 Federal Rule of Civil Procedure 26(b)(5)(B).

In short, under Subsection (b), there must be inadvertence, pre-production reasonableness, and, post-production reasonableness. The Outpatient Medical court wrote: “The point of Rule 502(b) is to protect client confidences from their lawyers’ human errors.” Id. at *3 (citation omitted; cleaned up).

Second, the Outpatient Medical court looked to Rule 502(d), which is intended to permit production “without the need for exhaustive pre-production privilege reviews.” Id. Subsection (d) provides:

(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.

The court then wrote that, while plaintiffs focused on Rule 502(b), it was Rule 502(d) that governs this dispute. It concluded that, under subsection (d), there was no waiver.

So, plaintiffs argued that SCA knew what was in the production, but waited 124 days – too long – and did not stop further dissemination by Dr. Fanning. SCA said it never intended to waive privilege or produce the documents, and it did not have the opportunity to review the 100,000 documents in advance or at the deposition.

Here is where parsing the Rule became important.

The Outpatient Medical court wrote: “If the Rule 502(b) inquiry were dispositive here, the circumstances would present a close call as to whether waiver is warranted.” SCA had a lot of time, plus prior knowledge of what would be produced. It, in my words, likely did not exercise reasonable pre- or post-production measures.

But, the court held that Rule 502(d) governed. The court wrote that it prevents waiver “regardless of whether the disclosure was inadvertent,” and regardless of pre- or post-production reasonableness. Id. at *4.

The Outpatient Medical court wrote that “some courts have limited Rule 502(d) orders where a ‘completely reckless disclosure’ has occurred, as Plaintiffs seem to suggest is the case here.” Id. at *5 (citations omitted).

However, the Outpatient Medical court also looked at the exact language of the Rule 502(d) order. It stated that production of privileged material “shall not constitute a waiver of any privilege or other protection.” The stipulated order required that a receiving party notify the producing party and that placed the burden on plaintiffs, not SCA, to protect privileged documents after a recipient was on notice of its receipt of protected information. Id. at *4. The court then explained:

While SCA could have done more to avoid the current dispute after experiencing a similar issue in the Criminal Actions and its conduct may run afoul of Rule 502(b), it does not trigger a waiver under the Rule 502(d) Order to which the parties agreed…. Indeed, Plaintiffs say they promptly began reviewing the Fanning Documents on July 17, 2024…. But they did not notify SCA that the Fanning Documents included privileged information as required by the Rule 502(d) Order.

By the time plaintiffs filed their motion, SCA had reproduced more than 85% of the documents. Within two weeks after the motion was filed, SCA provided a privilege log for nearly 10,000 documents.

The United States District Court for the District of Maryland has a proposed Rule 502(d) order in Appendix D to its Local Rules:

Whereas, the parties have stipulated, and hereby request the entry of an order providing, that the attorney-client privilege and work product protection shall not be waived under certain circumstances as specified herein;

Accordingly, it is this ____ day of ________________, ____, by the United States District Court for the District of Maryland, ORDERED:

Non-Waiver of Attorney-Client Privilege and Work Product Protection. Pursuant to Fed. R. Evid. 502(d) and (e),[1] the disclosure during discovery of any communication or information (hereinafter “Document”) that is protected by the attorney-client privilege (“Privilege” or “Privileged,” as the case may be) or work-product protection (“Protection” or “Protected,” as the case may be), as defined by Fed. R. Evid. 502(g), shall not waive the Privilege or Protection in the above-captioned case, or any other federal or state proceeding, for either that Document or the subject matter of that Document, unless there is an intentional waiver of the Privilege or Protection to support an affirmative use of the Document in support of the party’s claim or defense, in which event the scope of any such waiver shall be determined by Fed. R. Evid. 502(a)(2) and (3). The parties intend that this stipulated order shall displace the provisions of Fed. R. Evid. 502(b)(1) and (2). That is, all disclosures not made to support an affirmative use of the Document in support of a party’s claim or defense shall be regarded as “inadvertent,” and the producing party is hereby deemed to have taken “reasonable steps to prevent disclosure,” regardless of any argument or circumstances suggesting otherwise.

Return of Privileged or Protected Materials. Except when the requesting party contests the validity of the underlying claim of Privilege or Protection (including a challenge to the reasonableness of the timing or substance of the measures undertaken by the producing party to retrieve the Document(s) in question), any Document(s) the producing party claims as Privileged or Protected shall, upon written request, promptly be returned to the producing party and/or destroyed, at the producing party’s option. If the underlying claim of Privilege or Protection is contested, the parties shall comply with, and the requesting party may promptly seek a judicial determination of the matter pursuant to, Fed. R. Civ. P. 26(b)(5)(B). In assessing the validity of any claim of Privilege or Protection, the court shall not consider the provisions of Fed. R. Evid. 502(b)(1) and (2), but shall consider whether timely and otherwise reasonable steps were taken by the producing party to request the return or destruction of the Document once the producing party had actual knowledge of (i) the circumstances giving rise to the claim of Privilege or Protection and (ii) the production of the Document in question.

For purposes of paragraph 2, “destroyed” shall mean that the paper versions are shredded, that active electronic versions are deleted, and that no effort shall be made to recover versions that are not readily accessible, such as those on backup media or only recoverable through forensic means.

For purposes of paragraph 2, “actual knowledge” refers to the actual knowledge of an attorney of record or other attorney with lead responsibilities in the litigation (for example, lead counsel, trial counsel, or a senior attorney with managerial responsibilities for the litigation).

[SIGNATURES OF COUNSEL][emphasis added].