The (Broken?) Promise of Federal Rule of Evidence 502

New Federal Rule of Evidence 502 (“Rule”), enacted Sept. 19, 2008, was designed to protect parties against the inadvertent waiver of the attorney-client privilege or the work product doctrine if the holder of the privilege takes reasonable steps to prevent disclosure and to rectify the error.

As the third anniversary of Rule 502’s enactment approaches, Ronald J. Hedges suggested the time was ripe to gauge the effectiveness of the rule by posing the following three related questions to a group of e-discovery professionals:

• (1) According to the “Statement of Congressional Intent” that accompanied Rule 502, it was “designed to enable a court to enter an order, whether on motion of one or more parties or its own motion, that will allow the parties to conduct and respond to discovery expeditiously, without the need for exhaustive privilege review.” 154 Cong. Rec. H7819. Has it?
• (2) There is at least anecdotal evidence that many attorneys are not aware of Rule 502. Why?
• (3) There is also evidence that parties and judges do not avail themselves of the non-waiver provisions of Rule 502(d). Why?

The contributors’ varied responses follow.

History

Kevin Brady:

The Federal Rules of Civil Procedure were amended in December 2006 to address the problems that existed in the case law regarding electronic information and discovery. In particular, Fed. R. Civ. P. 26(b)(5)(B) was amended to prescribe a process for resolving a dispute between parties where the producing party inadvertently produced a privileged document and then wanted that document returned (the so-called “claw-back provision”).

Amy Jane Longo:

Anecdotal evidence suggests that few if any such agreements were entered into following the 2006 amendments, [which suggests] Rule 502 is not the first federal rule concerning protection of privileged materials to disappoint those who hoped that rule amendments could inspire new approaches and lower costs.

Kevin Brady:

While Rule 26(b)(5)(B) addressed the procedural aspect of waiver, the substantive topic of waiver was not addressed until Rule 502 (with commentary) was enacted.

As Judge Paul Grimm pointed out in Hopson v. City of Baltimore, 232 F.R.D. 228, 244 (D. Md. 2005), significant problems associated with the issue of waiver existed—he noted that for parties to insist upon “record-by-record pre-production privilege review, on pain of subject matter waiver, would impose upon parties costs of production that bear no proportionality to what is at stake in the litigation.” Rule 502 promised to bring clarity and balance to an area of the law that seemed to be spinning out of control for parties and lawyers.

Root Causes for Rule’s Inadequacy

Jeffrey Ritter:

As I watched the Rule 502 enactment process—in which I was neither actively engaged nor commented upon—evolve, I was struck by the proposed rule’s (and the final version’s) failure to do anything to manage the root causes for why privileged communications or protected information was ending up in the hands of opposing counsel. Today, if there are broken promises with respect to the rule, I believe they can be traced to the failures to have meaningfully addressed the root causes for the original reform process.

The two root causes are: insufficient corporate investments in effectively managing digital attorney communications and work product and the substitution of technology-driven records selection for human judgment.

First, corporate records management programs have not kept pace with the move of privileged communications, which traditionally consisted largely of confidential attorney-client conversations conducted in the sanctuary of a lawyer’s office, to messages and data exchanged in the persistent, “always-on” digital communication environment.

Second, Rule 502 does not solve the reluctance of lawyers practicing in the 21st century to actually get their hands dirty working through the digital assets of contemporary business as potential evidence of the truth.

With regard to the records management component of the problem, unlike the intelligence community, which has built segregated, secure, and purposeful IT platforms, most corporations have integrated all of their communications into their normal desktop work flow of e-mail, instant messaging, handheld devices, etc. Accordingly, privileged communications and information have landed squarely in the middle of the ever-growing haystack of unstructured data, poorly managed digital records, and redundant back-up tapes.

Thus, when e-discovery procedures are employed to identify, collect, and isolate those data assets, the processing, filtering, and analysis tools fail to operate properly. Categories, classifications, metadata—unless these are designed, built, and managed to track privileged content from inception, routine records management will simply add these assets into the daily assembly of all corporate data. As a result, mistakes happen in discovery, records slip through, and disclosures occur.

So I submit that it is the failure of corporations to invest in suitable and effective management of privileged communications that is a root cause for persisting problems. Indeed, the more inadequate the corporation’s maturity in records management, the harder it is to build and execute the “reasonable steps to prevent disclosure” when in the middle of hostile litigation. The solutions offered by e-discovery vendors and service providers merely become the patches on a more substantive problem.

Reasonable Steps

Kevin Brady:

Under Rule 502(b), there is no waiver if the producing party takes reasonable steps to prevent disclosure, the disclosure was inadvertent and the producing party promptly takes reasonable steps to rectify the error after it is discovered. Thus, the key issue under Rule 502(b) is, “How reasonably did the producing party act?” That looks like a simple straightforward standard for the parties to understand, but looks can be deceiving.

In the Commentary to the Rule, the committee did identify several factors that courts can consider in assessing “the reasonableness of a producing party’s efforts.” Those factors include:

• (1) the number of documents to be reviewed;
• (2) the time constraints for production; and
• (3) [as Jeffrey Ritter argues], the implementation of an efficient system of records management before litigation.

The Commentary also notes that, depending on the circumstances, a party that uses advanced analytical software applications and linguistic tools in screening for privilege and work product may be found to have taken reasonable steps to prevent inadvertent disclosure including (if applicable) following Rule 26(b)(5)(B).

But what does a “reasonable” standard tell the parties? Is there a low threshold to cross such as just showing that advanced analytical software applications and linguistic tools (whatever that may mean) were used? Or is a higher standard required such as one that would involve expert testimony regarding the advanced analytical software applications or the linguistic tools? Indeed, in one case, the court required the producing party to make a showing that it had that taken “all” reasonable steps. See Relion Inc. v. Hydra Fuel Cell Corp., 2008 U.S. Dist. LEXIS 98400 (D. Or. Dec. 4, 2008).

Jeffrey Ritter:

When attorneys opposing the application of Rule 502(b) to preserve a privilege ask me how to navigate a strategy, I coach them to focus on the corporation’s systemic records management and argue that the “reasonable steps” standard cannot be satisfied by the use of e-discovery filters and key word searches.

Instead, the adverse corporation must demonstrate that they conducted their records management program with suitable attention to preserving confidentiality; otherwise, the rule should not excuse the waiver of the applicable privilege merely because opposing counsel hired an e-discovery technology that did not work effectively.

Inconsistent Case Law

Amy Jane Longo:

Other possible explanations for why Rule 502 has had little impact on the nature of privilege review conducted in most cases include:

• (1) because the case law under the rule varies significantly in the degree of protection it affords;
• (2) because parties do not conduct discovery as cooperatively as the Federal Rules Committees might expect; and
• (3) because a nonwaiver rule cannot completely negate the downside of having one’s opponent receive the privileged information.

Kevin Brady:

[With regard to inconsistent case law], while the rule is meant to create a flexible standard, the lack of definition may create more confusion. Courts have struggled with what is meant by “inadvertent disclosure.” Courts have interpreted this term to include: “not intentional” and “not a mistake,” “unintended rather than mistake,” “unintentional,” and if that is not enough variety, some courts have gone to dictionaries to determine the meaning of inadvertent disclosure. That type of inconsistent review and uncertainty arising from judicial construction of Rule 502 only adds confusion and more risks for parties and counsel.

Amy Jane Longo:

Though there have been dozens of district court decisions addressing Rule 502 in the several years since it took effect, there are no appellate cases, and few clear interpretative rules have emerged—in part because of the fact-specificity of the opinions. Courts have differed widely on the two key issues for determining if an inadvertent production warrants a finding of waiver: what are reasonable steps to prevent and to rectify the disclosure?

Kevin Brady:

By all accounts, in federal court actions, Rule 502 is not uniformly understood or accepted as a staple in the e-discovery tool bag. Moreover, very few state courts have taken up the challenge to enact any similar rule to govern waiver in state court actions.

Amy Jane Longo:

On the reasonableness of steps to prevent disclosure, compare Board of Trustees, Sheet Metal Workers’ National Pension Fund v. Palladium Equity Partners LLC, 722 F. Supp. 2d 845 (E.D. Mich. 2010) (no waiver found where party inadvertently produced 284 privileged documents out of more than 50,000 produced—including several on multiple occasions—finding procedures for privilege review were reasonable), with Mt. Hawley Insurance Co. v. Felman Production Inc., 271 F.R.D. 125 (S.D. W.Va. 2010) (waiver found where party inadvertently produced 377 privileged documents out of 346 gigabytes of data produced due in part to database error, finding absence of sufficient quality control procedures for privilege review).

On the reasonableness of steps to rectify disclosure, compare Olem Shoe Corp. v. Washington Shoe Co., No. 09-23494-CIV, 2010 U.S. Dist. LEXIS 143590 (S.D. Fla. Oct. 8, 2010) (no waiver found where copy vendor erroneously produced set of privileged documents, though producing party’s paralegal failed to respond to notice of production for eight days) with Dubler v. Hangsterfer’s Laboratories, No. 09-5144 (RBK/JS), 2011 U.S. Dist. LEXIS 2403 (D.N.J. Jan. 11, 2011) (waiver found where defendant “failed to demonstrate” its purportedly reasonable steps to rectify privileged disclosure).

Kevin Brady:

The most expensive and time consuming part of the e-discovery lifecycle is privilege review and what has become the “black-hole” of all e-discovery activity, the privilege log. While disputes about privilege rarely aid in moving a case forward, the parties are generally undeterred in taking aggressive positions because of the risk/reward factor. Waiver looms large for the holder of the privilege (which is generally the producing party), and the reward of getting the privilege waived and forcing the production of privileged material is very tempting for the requesting party.

Jeffrey Ritter:

The most frequent solution is to rely on automated search tools (keywords, predictive coding, etc.) to generate the second pass that informs the production of a privilege log. We often see, in larger cases, privilege logs listing hundreds, if not thousands, of messages. But closer review demonstrates most of these never remotely qualify for serious consideration (nor adversely impact the odds of success for the holder of the privilege or protection).

More than one judge has lamented at e-discovery conferences the submission of cumbersome privilege logs for judicial review. Those logs actually betray the fact that attorneys have relied on technology, rather than human review, to qualify content to be removed for production. As a result, when there is a disclosure of content otherwise eligible for protection, what has occurred is the failure of technology to work effectively at conducting what is, in its essence, a human judgment. In these circumstances, Rule 502 actually provides counsel a basis to “back-fill” and argue their cost-containment strategies should be accepted by the court as “reasonable steps to prevent disclosure.”

Uncooperative Counsel

Amy Jane Longo:

Taking true advantage of Rule 502 (i.e., for the strongest nonwaiver agreement or for negotiated protocols on exchange of potentially privileged materials) requires a willing adversary. While many attorneys might be aware of Rule 502, it is not a given that many attorneys or their clients desire to reach cost-saving accommodations, particularly in cases where discovery burdens are not bilateral.

Jeffrey Ritter:

The exercise of traditional privilege review is in fact, welcomed by many lawyers (especially those who still print out e-mails to review their content) still reluctant to accept the extent to which the digital world has changed how lawyers and their clients communicate.

Unavoidable Consequences

Amy Jane Longo:

By far the greatest disincentive to using Rule 502 to dispense with traditional privilege review is the risk (and the result) of producing privileged information to an adversary. Even if the documents must be returned, and even if no waiver results, the prospect of the opposing side even laying eyes on what may be the most sensitive documents to any litigation presents too great a fear for most litigants to forego at least some degree of privilege review.

Kevin Brady:

In the end, what is missing is a change in attitude. Parties and their counsel (and judges too) need to think cooperatively and act proactively in addressing the issues and problems associated with privilege waiver and electronically stored information.

The Future

Kevin Brady:

The 2006 changes to the Federal Rules of Civil Procedure are clear examples of lawyers and judges being slow to change. So why should Rule 502 be any different?

Amy Jane Longo:

Again, Rule 502 is not alone among e-discovery rules in bearing unfulfilled promise. Reports from various bar associations’ studies of the issue suggest that many of the 2006 amendments to the Federal Rules Of Civil Procedure that call for engaged transparency get little attention. See, e.g., Final Report on the Joint Project of the American College of Trial Lawyers Task Force on Discovery and The Institute for the Advancement of the American Legal System (March 11, 2009), at 16 (“Unfortunately, the rules as now written do not give courts any guidance about how to deal with electronic discovery”).

Moreover, 76 percent of the respondents said that courts do not understand the difficulties parties face in providing electronic discovery. Likewise, trial counsel are often uninformed about the technical facets of electronic discovery and are ill-equipped to assist trial courts in dealing with the issues that arise.”). This may explain why more than a hundred judges endorse the Sedona Conference’s Cooperation Proclamation, which calls for, among other things, “open and forthright information sharing, dialogue (internal and external), training, and the development of practical tools to facilitate cooperative, collaborative, transparent discovery.”

Jeffrey Ritter:

It is not surprising that attorneys may be unaware of Rule 502; it is surprising that courts have not insisted that attorneys demonstrate a genuine competency in managing digital information as evidence as a condition precedent to seeking safety under its provisions. Time and again, judges have lamented at e-discovery conferences their frustration in seeing counsel try to navigate this Rule without having built even a basic digital competency with which to do so.

A recent national survey on litigation management confirmed that both law firm partners and corporate counsel view education and training as their single highest priority for investment in 2012. That training cannot merely be focused on the rules, but must expose lawyers to the technologies, records systems, and digital realities of the world around them. Only then will Rule 502(b) be a meaningful resource to justice.

Kevin Brady:

Although Rule 502 has the potential for greater cost savings and risk reductions, counsel and their clients are still reluctant to try something new. Even when faced with the opportunity to reap significant savings in the area of privilege logs and Rule 502(d) orders, counsel are reluctant to engage each other in that conversation. Something has to change and the primary driver will have to be the court. If the judges become proactive in the area of Rule 502(d) orders and make the parties take the meet and confer process seriously about entering into such an order, true progress may be the result.

Jeffrey Ritter:

Poor corporate investments in effectively managing digital attorney communications and work product and the substitution of technology-driven records selection for human judgment have not been solved by Rule 502. Obviously, the problems are entwined—effective front-end investment enables the truly protected content to be isolated from inception and, as a result, the volume required to be reviewed prior to production is significantly reduced. But, until Rule 502 (or judicial interpretations thereof) turns the focus onto these root causes, the rule merely perpetuates the challenges by providing a potential safe harbor in which to secure a judicial imprimatur for systemic failures in the management of digital communications and their analysis as potential evidence of the truth.