Protecting Privileged ESI: Sedona Commentary

New York Law Journal 

This article discusses a recent report the reader might have missed. The insights in this report can help catalyze a lawyer’s strategic thinking to develop tactical steps useful in certain types of complex litigation. The report is The Sedona Conference’s “Commentary on Protection of Privileged ESI” issued in November 2014.¹ This is the “Public Comment Version” published by the Sedona Conference Working Group on Electronic Document Retention and Production. Space limitations here permit elaborating only brief highlights.

The Sedona Conference is a nonprofit, nonpartisan research and educational institute that allows leading jurists, lawyers, experts and academics to come together in conferences and mini-think-tanks (called Working Groups) and dialogue about moving the law forward in a reasoned and just way. The Sedona Conference publications, particularly its “Best Practices” regarding Electronic Document Production, are quite influential and frequently cited.²

The new Sedona Conference “Commentary on Protection of Privileged ESI” deals with the interface between the need to produce ESI (electronically stored information) in discovery and the lawyer’s duty to protect against disclosure of privileged materials, notably attorney-client communications and attorney work product. As most who engage in complex litigation know, disclosure of ESI poses enormous challenges to parties and their counsel.

Litigants not only have to issue timely “litigation holds” that preserve potentially relevant documents when suit is commenced or reasonably anticipated, but also have to search and produce voluminous documents and emails. Thousands, hundreds of thousands, sometimes even millions of documents (or pages) are involved. Finding and culling out from such a production trove the privileged documents can be an onerous and expensive proposition, particularly when facing aggressive discovery deadlines.

On a simple level, it is somewhat incredible that, for the pittance price of a court filing fee, a litigant, via discovery, can demand and get disclosure of the adversary’s private, confidential documents, among which may be embedded privileged communications. American pretrial discovery rules are extremely generous, indeed uniquely so in the world’s legal systems. That generosity is praised by many as enhancing the search for the truth, yet it also is criticized by many for the excesses it stimulates. Finding a balance—the key label often used is “reasonable” discovery—usually hinges on cooperation by the litigants’ counsel and fairness by the court when such agreement is elusive.

The Sedona Commentary homes in on the complications faced by disclosing parties to identify and exclude from production and then to “log” the documents that are subject to a recognized privilege. Many courts require that parties claiming privileged materials should be withheld from production must provide a document-by-document “privilege log” setting forth identifying information and specifying the privilege asserted. In complex litigation, such efforts consume much time at great expense. The logs are supposed to “enable other parties to assess” the claimed privilege and, also, to “reduce the need for in camera examination of the documents” by the court. The Sedona Commentary suggests that neither of these goals is achieved by and large.³ Not only that, say the authors, the procedure and process for protecting privileged ESI from production “is broken.”⁴

The authors advance four “Principles on Protection of Privileged ESI.” They are: Principle 1: Parties and their counsel should undertake to understand the law of privilege and its appropriate application in the context of electronically stored information. Principle 2: Parties, counsel, and courts should make use of Rule 502(d) and its state analogues. Principle 3: Parties and their counsel should follow reasonable procedures to avoid the inadvertent production of privileged information. Principle 4:Parties and their counsel should make use of protocols, processes, tools, and technologies to reduce the costs and burdens associated with the identification, logging, and dispute resolution relating to the assertion of privilege.

Each “Principle” is itself the subject of substantive “Commentary.” Within each commentary, the reader will find salient aspects of law, helpful citations and suggestions for improved practice in order to better and more efficiently protect privileged materials from disclosure, particularly via inadvertent production. Even expert litigators can benefit from points made throughout the commentaries.⁵

Professional Duties

Thus, under Principle 1, calling for counsel to understand the law of privilege and its appropriate application in the context of ESI, the reader is told about a professional obligation and an ethical duty to do so. Several provisions of the professional rules give rise to such obligations. These are the duties of “confidentiality,” “competence” and “supervision.”⁶ The first restrains the lawyer from revealing the client’s information unless the client gives informed consent. Lawyers must make “reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to information relating to the representation of a client.”

The duty of competence compels a lawyer to provide competent representation to a client. In turn, that means having the “legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” To maintain this, the lawyer must keep abreast of changes in law and practice, “including the benefits and risks associated with relevant technology.” The latter, note the authors, is most important in discharging ESI discovery obligations since technological advances have impacted ESI management state of the art.

Under the duty of “supervision,” partners, managers and supervisory lawyers (persons with managerial authority) are required to make reasonable efforts “to ensure” that the firm and its lawyers follow professional rules and, further, that lawyers must supervise the firm’s “junior members, paralegals, support staff, and any third-parties for whose work the lawyer is responsible.” The latter duty looms large in ESI disclosure projects because “crunch” work on voluminous ESI discovery demands often falls to junior lawyers and legal assistants or outside third parties. Thus, senior lawyers cannot shirk their professional duties regarding ESI simply by assigning the work to juniors. Supervision is required.

Although noting that a detailed discussion of the attorney-client privilege is beyond the scope of the commentary, the Commentary observes that “practical guidance” about identifying and protecting privileged ESI “cannot start without a basic review of the law of privilege and, in particular, what may legitimately be deemed privileged and how to avoid waiving the privilege.” So, the Commentary proceeds to review important aspects of attorney-client and work product protections.⁷ This is helpful because many of us can use a brief tutorial or a refresher survey.

This review is particularly helpful—even for optimistic know-it-alls—because, in part, it focuses on a central thrust of the Sedona Commentary, namely, creative use of Federal Rule of Evidence 502, enacted in 2008, and meant to work a substantial departure from the traditional approach to waiver of attorney-client and work product protection. The rule itself limits the scope of waiver.

Prior to Rule 502, non-waiver of privileged materials was not assured. The main recourse was procedural, i.e., to notify the adverse party under Federal Civil Procedure Rule 26(b)(5)(B) that privileged material was disclosed. That rule, however, did not dispose of the issue of waiver. Evidence Rule 502, on the other hand, specifically addresses waiver of the privilege and limits its scope, particularly in the case of inadvertent disclosures. Subsection (b) sets forth the conditions when “disclosure does not operate as a waiver.”

The creative mechanism urged by the Commentary is to use Rule 502(d) to bypass possible squabbles over whether requirements set forth in subsection (b) were met. Under Rule 502(d), the parties can request the court to issue an order that the “privilege or protection is not waived by disclosure connected with the litigation.” Indeed, the court can do so on its own. By taking away the “fear factor” of a disclosure-created privilege waiver, litigants supposedly will be induced to disclose voluminous materials more freely, thereby reducing expense and enhancing efficiency of discovery.

Further, Evidence Rule 502(d), which authorizes the court to issue an order that the privilege is not waived, gives a federal court the power to bind parties and courts in all other state and federal proceedings with respect to disclosures made in the federal proceeding in which the Rule 502(d) order was entered.⁸ A number of states have enacted Rule 502 analogues, but there are differences among the state rules. A helpful Appendix F discusses the state variants and gives citations.

Rule 502(d)

The Commentary’s focus on Rule 502 and the potential to use subdivision (d) more aggressively or proactively should be instructive even to those who think they have mastered the complex arts of privilege protection. Prior to Federal Evidence Rule 502, the attempt to alleviate the pain of inadvertent disclosure of privileged materials resided in Federal Procedure Rule 26(b)(5)’s allowance of so-called “clawback” practice by which notice of inadvertent disclosure was given to adverse counsel who then was required to “promptly return, sequester, or destroy the specified information and any copies it has” and “not use or disclose the privileged information until the claim [of privilege] was resolved.” However, Rule 26(b)(5) did not address waiver of the privilege. And, often, the contest about privilege and waiver then had to go to the judge. Perhaps even more critical, disclosure of privileged materials, even with a “clawback” feature, “forces a producing party to ring a bell that cannot be un-rung.”⁹

The Commentary seems to suggest that creative use of a Rule 502(d) order will minimize perceived prejudice from the ” un-rung bell,” i.e., the adversary’s knowledge of privileged information, by making non-waiver the order of the day, not only in the subject litigation but in other federal and state courts as well. Whether the danger truly is mooted, however, is debatable as I point out later. Nonetheless, readers should consider the Commentary’s approach with an open mind, particularly since getting a Rule 502(d) order is desirable in any event.

The Commentary’s purpose, in part, is to enhance counsel’s understanding of Evidence Rule 502 by: (1) reminding lawyers that some of the discovery problems stem from attorneys’ basic misunderstanding of the law of privilege in the context of modern document production; (2) encouraging parties, lawyers and courts to consider employing Rule 502(d) type orders in every complex civil matter; (3) in the absence of such orders, articulating a “safe harbor” standard that protects parties from claims of waiver when inadvertent production of privileged materials occurs—provided that the producer adhered to certain basic “best practices” in the context of ESI privilege review; (4) encouraging cooperation among litigants to lower the cost and burden of identifying privileged information; and (5) identifying “protocols, processes, tools, and techniques that can be used to limit the costs associated with the identification, logging and dispute resolution relating to the assertion of privileges.”¹⁰

Thus, in keeping with this objective, Principle 2 urges that counsel and courts “should make use” of Evidence Rule 502(d) and its state analogues. The rule is a “vehicle to ensure that the production of ESI does not result in waiver regardless of the circumstances of its production.”¹¹ The parties’ confidentiality agreements, protective orders or even court rulings that there was no privilege waiver can be incorporated in a Rule 502(d) order and this will control waiver issues regarding that disclosure even in other matters.

As a matter of routine practice (unless good cause is shown not to), courts should enter Rule 502(d) clawback/non-waiver orders when “parties fail to appropriately consider and agree upon the entry of such orders.” Indeed, parties should “take it upon themselves to carefully craft and submit for approval to the court a Rule 502(d) order setting forth under what circumstances the production of a privileged document will constitute a waiver. Helpfully, the Commentary sets forth a Sample Model Order in Appendix D. Additionally, several courts and pilot projects have created and published sample orders, one of which is set forth in Appendix E.¹²

Pushing Rule 502(d) agreements and orders is intended, in part, to “defeat the default operation of Rule 502(b) in order to reduce costs and expedite discovery.”¹³ Rule 502(b) deals with “inadvertent disclosures” and provides that the disclosure does not operate as a waiver of the privilege if the disclosure is inadvertent and the holder of the privilege “took reasonable steps to prevent disclosure” and reasonable steps to rectify the error (including Federal Civil Procedure Rule 26(b)(5)(B)). The problem with reliance exclusively on Evidence Rule 502(b) is that the adversaries can get into wrangling about whether “reasonable steps” were taken, whether efforts to rectify were timely, whether the disclosure could have been better protected against, and the like.

A Rule 502(d) order, on the other hand, can introduce certainty. The privilege or protection is not waived by disclosure in the pending litigation, and it also is not a waiver in any other federal or state proceeding. Additionally, Rule 502(d) protection is available not only to litigants but also to third parties who have to produce information as, for example, via a subpoena.¹⁴

Readers and litigation counsel, however, have to be realistic. Motivations to expedite discovery by creative use of Rule 502(d) agreements or orders, particularly in voluminous document productions, can result in privileged information disclosures to the other side. Such revelations could be prejudicial regardless of the non-waiver issue. After all, the adversary now has information that should not have seen the light of day. Arguably, the “bell has rung and cannot be un-rung.” There may be no erasure from the adversary’s knowledge. For example, after viewing privileged material, a party might submit a request for admission to elicit the material or tailor a deposition question to do the same. Or a party might adjust its settlement position in light of its review of the privileged information.

Further, some courts may be tempted to freely issue Rule 502(d) orders but then also enter a Federal Civil Procedure Rule 16(b) scheduling order that issues aggressive document production deadlines that do not provide the parties with sufficient time to review the documents for privilege. In such a case, a judge might caution the parties of dire consequences for missing the disclosure deadlines and, instead, encourage massive production using “quick peek” or “make available” mechanisms. The latter are consensual techniques where the party facilitates production without any privilege review “subject to assurance that privileged documents produced…will be returned without a later claim of waiver.”¹⁵  The Commentary suggests that courts should not attempt to compel such a result indirectly since it is not one intended under Rule 502(d).¹⁶

Accordingly, it may be that a particular litigant’s best approach to preserving privilege is to go via the painstaking route of examining the documents in advance for privileged communications. Nonetheless, even if that is the preference of the reader, there is much to learn from the Sedona Commentary. It is important for counsel to be knowledgeable, prepared and vigilant. Reading the report advances those objectives.

Endnotes

1.  A link to the report is https://thesedonaconference.org/publications.
2.  See, “The Sedona Principles Best Practices Recommendations & Principles Addressing Electronic Document Production” (March 2003). The Sedona website is www.thesedonaconference.org.
3.  Sedona Commentary, p. 2.
4.  Id. at 2.
5.  For example, see p. 18 of the Commentary which advises that “due process is implicated when privileged communications are required to be disclosed, even for in camera review.” (Citing United States v. Zolin, 491 U.S. 554, 572 (1989).
6.  Id. at 4.
7.  Id. at pp. 4—15.
8.  Id. at 10—15.
9.  Id. at 9, 18.
10.  Id. at 3.
11.  Id. at 14.
12.  Id. at 16 (Appendix E contains U.S. Magistrate Judge Andrew J. Peck’s Model Rule 502(d) Order (S.D.N.Y.)).
13.  Id. at 16.
14.  Id. at 10, 15—16.
15.  Id. at 17.
16.  Id. at 18—19.