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Think Fast—But Not Too Fast: Privilege Waived for Failure to Take Reasonable Steps to Prevent Disclosure

Posted in CASE SUMMARIES

First Tech. Capital, Inc. v. JPMorgan Chase N.A., No. 5:12-CV-289-KSF-REW, 2013 WL 7800409 (E.D. Ky. Dec. 10, 2013)

In this case, the court found that privilege was waived where First Technology Capital, Inc. (“FTC”*), through counsel, failed to take reasonable steps to prevent the inadvertent disclosure of privileged materials.  The court’s determination that counsel’s efforts were unreasonable was based, in part, on the speed of the alleged page-by-page review (each document received, on average, only 9.84 seconds of review) and FTC’s failure to produce a privilege log, among other things.

Upon the defendant’s demand, FTC undertook efforts to supplement its prior production.  Those efforts were led by counsel, who collected and reviewed additional material and produced 1500 more pages.  At the time of production, there was no indication that privileged information had been identified and withheld.  During her review of the materials produced, defense counsel noticed that many documents “carried hallmarks of privilege” and thus informed FTC and the court.  Eventually, FTC asserted that 45 pages had been inadvertently produced and were protected by privilege.

The court analyzed the question of waiver pursuant to FRE 502(b).  Initially, the court determined that the production was inadvertent and also noted that the defendant had “essentially conced[ed]” that 502(b)(3) (prompt steps to rectify the error) had been satisfied.  Thus, “the case [came] down to 502(b)(2), whether FTC inadvertently disclosed but yet took ‘reasonable steps to prevent disclosure.’”  The court determined that FTC, through counsel, had not.

Beginning its analysis, the court first considered whether the actions of counsel could be imputed to FTC and determined that they could.  The court turned next to the issue of reasonable steps to prevent disclosure.  Before beginning its analysis of the facts at hand, the court made clear that more than a reasonable plan to prevent disclosure was required to satisfy the test of reasonableness:

The reasonableness of preventive steps surely includes both a design and an implementation component. Theoretical or intended measures may sound sufficient, but failure to implement such measures by reasonable execution could empty an ostensibly valid process of any real efficacy. A cross-country driver with a stated plan to obey all traffic laws, but who in actuality drives 100 mph at night with his lights off has not taken reasonable steps to prevent an accident.

In this case, counsel indicated that he conducted a page-by-page review of the materials and segregated privileged documents and that he could “only speculate” as to how the privileged documents were nonetheless produced.  Examining counsel’s representations, the court determined that on average, each document received only 9.84 seconds of review, and stated its reservations regarding the reasonableness of that approach:

Having looked at the 45 pages carefully, the Court is dubious that 9.84 seconds, about the time of an Olympic 100 meters race, is a reasonable investment within which to identify a document, consider author and recipients, appreciate subject matter, assess for discovery responsiveness, assess for KRE 503 and federal work-product application, gauge for any exception, and finally make the decision to withhold or produce. This is especially so where only parts of pages may be under protection, necessitating redaction.

The court went on to reason that the production evidenced “essentially no care in assuring” that the documents identified as privileged were not produced, noting counsel’s failure to number the pages to allow a method of tracking the documents that had been segregated and failure to create a list or index of the withheld documents (as evidenced by a lack of a privilege log).  Specifically, the court reasoned that the lack of a privilege log was “a glaring signal of a production that did not include reasonable steps against disclosure” and noted FTC’s failure, upon learning of the production of privileged materials, to quickly provide “a record of [counsel’s] contemporaneous privilege analysis”—because none existed—and counsel’s reliance on others (including opposing counsel) to identify the privileged materials at issue.  The court also cited counsel’s inability, despite overseeing the disclosure, “to show that, by any reasonable method of accounting for privilege, he could have proven a single document that he first segregated and then inadvertently produced.”

The court next noted the lack of any claimed problems with the scope of discovery, the volume of information at issue, or time pressures (not resulting from FTC’s own actions)—other traditional considerations in the privilege/502(b) analysis.

Thus, the court concluded:

Simply put, FTC does not meet its burden of proving non-waiver under Rule 502(b). FTC, by counsel, did not take reasonable steps to prevent disclosure of the 45 pages herein assessed. A page-by-page review/assessment sounds effective and reasonable, but if the facts show, as here, hasty review and no functional measures that would keep protected papers sequestered, the standard goes unmet. The inadvertent disclosure by FTC thus waived any privilege or protection as to those pages.

A copy of the court’s full opinion and order is available here.

* As in the case opinion, this summary refers to FTC and the Third-Party Defendant jointly as FTC.