Atronic International GMBH v. SAI Semispecialists of America, Inc., 232 F.R.D. 160 (E.D.N.Y. 2005)
Atronic International ("Atronic") sued SAI Semispecialists of America ("SAI") in connection with a breach of contract. At the end of 2003, during initial Rule 26 disclosures, Atronic's production included two emails between an Atronic employee and international counsel. These emails were again produced on January 7, 2005 as exhibits to be used at deposition. Upon realizing that it had produced apparently privileged documents, Atronic sought an order requiring the return of the emails and barring defendant from using the information therein.
The first email, sent on November 22, 2002, was from Hartwig Schumann, an Atronic employee who dealt with the SAI contract, to Rick Trachok, international counsel. Several Atronic employees were recipients of a copy. The second email, sent on December 11, 2002, was also from Mr. Schumann to Mr. Trachok, but Atronic employee Michael Scala was also a recipient. SAI argues that these are not privileged, and even if they are found to be protected, the privilege has been waived.
Magistrate Judge Orenstein applied New York privilege law (which is similar to federal doctrine) since this matter is before the Court under diversity jurisdiction. He found that the December 11th email was privileged, but the November 22nd email might not have been since it did not appear to have been made for purposes of securing legal advice. However, he assumed that both were privileged for his analysis.
In determining whether inadvertent production resulted in waiver, Magistrate Judge Orenstein turned to United States v. Rigas, 281 F.Supp.2d 733 (S.D.N.Y. 2003), whereby the following factors are to be balanced: "(1) the reasonableness of the precautions taken by the producing party to prevent inadvertent disclosure of privileged documents; (2) the volume of discovery versus the extent of the specific disclosure issue; (3) the length of time taken by the producing party to rectify the disclosure; and (4) the overarching issue of fairness." He found that waiver had occurred.
In applying these factors, Magistrate Judge Orenstein found as follows:
-Atronic had not taken reasonable precautions. Counsel had not labeled the emails "confidential" or "privileged", thus failing to put others on notice. There was no evidence that counsel had followed a reasonable procedure for segregating privileged communications. The attorney who conducted the privilege review did not even know that Mr. Trachok was counsel in this matter, suggesting that Atronic was not concerned about protecting privilege.
-The inadvertent disclosure was not excusable based on the volume of production. Atronic claimed that it had carefully and thoroughly reviewed the two emails and the mistake occurred because the reviewing attorney did not know that Mr. Trachok was counsel for Atronic. The same mistake would have been made regardless of the size of production. This factor is also in favor of defendant.
-Atronic did attempt to promptly correct the error. It received the binder containing the emails on January 7, 2005, discovered the inadvertently produced emails the following week while preparing witnesses for deposition, and tried to correct the problem on January 13 when it notified SAI and asked that the emails be returned prior to deposition of its first witness. However, there was a six day delay for which Atronic has proffered no explanation. This factor weighs slightly in favor of plaintiff.
-Both emails go to the heart of this case, addressing the number of graphic processors that Atronic had ordered from SAI. The emails reflect that 20,000 units had been ordered, but Atronic has maintained that this number was 40,000. Defendant may be prejudiced by restoring immunity to these documents, so this factor weighs in favor of defendant.
Inasmuch as plaintiff's precautions in preventing the inadvertent disclosure of the two protected documents constitutes inexcusable carelessness, and the protected information at issue is vital to the factual claims and defenses plaintiff has advanced in this action, the Court concludes that the inadvertent production of the two e-mails has resulted in a waiver of the claim of privilege. Accordingly, the Court grants defendant's motion to retain these e-mails to use in this litigation and denies plaintiff's motion for return of the documents.
Atronic filed objections to Magistrate Judge Orenstein's Report and Recommendation, but Judge Platt adopted and affirmed it.