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Failure to Timely “Re-Assess its Procedures and Re-Check its Production” upon Notice of Inadvertent Production Results in Waiver of Later Identified Documents

Posted in CASE SUMMARIES

U.S. v. Sensient Colors, Inc., 2009 WL 2905474 (D.N.J. Sept. 9, 2009)

Defendant moved to compel the production of 214 inadvertently produced documents.  Plaintiff objected, arguing that the parties’ discovery agreement precluded the waiver of privilege as to inadvertently produced documents.  Noting courts’ general disapproval of “blanket” disclosure provisions and finding that the parties’ agreement did not in fact preclude waiver in all situations, the court analyzed the question of waiver pursuant to FRE 502.  The court identified three categories of inadvertently produced documents based upon the timing of the notice of their inadvertent production to the plaintiff.  The court found privilege was not waived as to the first category of documents (those brought to plaintiff’s attention the earliest).  However, noting that plaintiff was on notice of the deficiencies of his process as a result of the first notification of inadvertent production, and that despite such notice plaintiff failed to “re-assess” its document production, the court found the privilege had been waived as to the remaining categories.

Plaintiff inadvertently produced a total of 214 privileged documents on six occasions between May 2008 and February 2009. Per the court, those productions fell into three groups:  (1) documents identified by plaintiff on September 10, 2008, (2) documents identified by plaintiff’s November 21, 2008 letter, and (3) documents identified by plaintiff on June 25, 2009 or later.

Arguing against waiver, plaintiff claimed that the parties’ discovery plan operated to preclude waiver for inadvertently produced documents.  The court disagreed, noting the absence of any specific clawback provision and the courts’ distaste for “blanket” disclosure provisions.  Accordingly, analysis under FRE 502 was warranted.

Addressing the first category of documents as identified above, the court first laid out the appropriate analysis under FRE 502:

When deciding whether inadvertently produced documents should be returned a two-step analysis must be done.  First, it must be determined if the documents in question are privileged.  It is axiomatic that FRE 502 does not apply unless privileged or otherwise protected documents are produced.  Second, if privileged documents are produced then a waiver does not occur unless the three elements of FRE 502(b) are satisfied:  (1) the disclosure must be inadvertent, (2) the holder of the privilege or protection took reasonable steps to prevent the disclosure, and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Fed.R.Civ.P. 26(b)(5)(B).  Plaintiff, the disclosing party, has the burden to prove that the elements of FRE 502(b) have been met.  [Citations omitted.]

Finding that plaintiff had satisfied all the elements of FRE 502, the court found no waiver of privilege.  Among the reasons cited in support of the finding were the substantial size of plaintiff’s production relative to the number of documents produced and plaintiff’s privilege review protocols, which included the use of trained attorneys and paralegals and the use of a “sophisticated” review program, including computer assisted QA/QC measures.  (The inadvertent production was blamed in part on plaintiff’s use of this software, which was new.)

Regarding the subsequent inadvertent productions, there are several salient facts upon which the analysis of waiver turned:  First, plaintiff learned of its inadvertent production for the first time from the defendant on August 29, 2008.  Plaintiff responded to such notification after eight work days, on September 10, 2008, and notified defendant that Rule 26(b)(5)(B) should be followed.  The documents identified at that time constitute the fist category of documents for which privilege was found not to be waived.  The second group of documents was identified by plaintiff in a November 21, 2008 letter to the defendant.  The documents falling into the third category were identified thereafter.

Addressing the second category of documents (brought to plaintiff’s attention in a October 23, 2008 letter from defendant and confirmed in plaintiff’s November 21, 2008 letter to defendant), the court found that privilege was waived as a result of plaintiff’s failure to take reasonable precautions to rectify its error pursuant to FRE 502(b)(3).  Specifically, the court reasoned that “[a]fter plaintiff received defendant’s August 29, 2008 letter it was on notice that something was amiss with its documents production and privilege review.  Defendant’s letter should have spurred plaintiff to promptly re-assess its procedure and re-check its production.”  Further, the court noted plaintiff’s failure to identify the inadvertently produced documents until receipt of defendant’s letter, stating:  “If defendant was able to discover an error by October 23, 2008, there is no reason plaintiff could not have done the same thing.”  The court went on to note that even after receiving notice, plaintiff waited another month to confirm its error.

In further support of its conclusion that plaintiff should have re-assessed its production following notice of the deficiencies, the court cited the Note to FRE 502(b)(3) and noted that while a party is not obligated to engage in a post-production re-review to determine if privileged documents were produced in error, “the rule does require the producing party to follow up on any obvious indications that a protected communication…has been produced inadvertently.”

Finally, the court reasoned that “[i]f plaintiff had taken reasonable steps to rectify its error it would have discovered the [inadvertently produced] documents…”

For the same reasons, the court found that privilege had been waived as to all remaining inadvertently produced documents.

Accordingly, the court granted defendant’s motion to compel the inadvertently produced documents identified after September 10, 2008.