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The eDiscovery Paradigm Shift

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Wednesday, June 4, 2008

Rule 26(b)(5) Clawback Caselaw Emerging

Given the enormous increase in the amount of data encumbant in todays discovery, Federal Rule of Civil Procedure 26(b)(5) includes a section covering the accidental production of privileged information. It permits organizations to retract (“clawback”) privileged information following its discovery. Potential concerns regarding privilege are supposed to be discussed during meet-and-confer sessions as part of the discovery plan.

If information deemed privileged is inadvertantly produced, the producing party can notify the recipient of this assertion and the basis for it. The requesting party must return, sequester, or destroy the information promptly, and is barred from disclosing it until the claim is resolved.

Further, if the recipient has already disclosed the privileged information prior to notification, it must take reasonable steps to retrieve it. In any event, the producing party must preserve the privileged information until the litigation is resolved. Recipients can naturally dispute claims of privilege by submitting the information to the court for a ruling. The producer must make responsible attempts to avoid such disclosures—sloppy production is not an excuse and may imply a waiver of privilege. Moreover, producers must assert claims of privilege within “reasonable time,” again requiring a handle on the data. Supposedly, courts will weigh these factors in determining whether to waive or forfeit a claim of privilege.

Given all of this as the foundation, it appears that caselaw will determine the actual parameters and application of Rule 26(b)(5).

New Federal Ruling on Clawbacks

A federal magistrate in Baltimore has ruled a company sued for infringement has no attorney-client privilege in 165 documents mistakenly turned over to its opponent in e-discovery.

The documents included several communications between the company Creative Pipe Inc. and its lawyers.

U.S. Chief Magistrate Judge Paul Grimm ruled Creative Pipe had failed to demonstrate it took reasonable precautions to prevent disclosure when it used an untested keyword search to find potentially privileged documents. Lawyers told the Maryland Daily Record the opinion provides a cautionary tale to litigants.

“All keyword searches are not created equal,” Grimm wrote in the May 29 opinion (PDF). “Any order issued now by the court to attempt to redress these disclosures would be the equivalent of closing the barn door after the animals have already run away.”

Creative Pipe had requested a clawback agreement entitling it to retain the privilege on documents inadvertently disclosed, but abandoned the request when it was allowed four additional months for discovery. The company said the time would make it possible to conduct a document-by-document privilege review, according to the opinion.

Creative Pipe’s e-discovery expert had used about 70 keywords to find documents submitted to the company’s former lawyers for a privilege review. Documents that were not text-searchable were submitted to the lawyers for individualized review, but because of time constraints, the lawyers only looked at the document titles, the opinion says. Those that appeared to raise privilege issues were then read individually. At the time, the company was represented by lawyers from Meyer, Klipper & Mohr.

Grimm wrote that the defendants were “regrettably vague” in their description of the 70 keywords and said a growing body of literature highlights the risks of unreliable keyword review. The defendants did not sample the documents produced, “the only prudent way to test the reliability of the keyword search,” Grimm wrote.

He noted that courts have used three approaches to determine waiver when e-discovery documents are inadvertently disclosed, and said Creative Pipe fails both the strictest and an intermediate test that balances a number of factors.

The intermediate test considers the reasonableness of the precautions taken to prevent disclosure, the extent of inadvertent disclosures, any delay rectifying disclosure, and the overriding interest of justice.

“In this case, the defendants have failed to demonstrate that the keyword search they performed on the text-searchable [electronic evidence] was reasonable,” Grimm wrote. “Defendants neither identified the keywords selected nor the qualifications of the persons who selected them to design a proper search; they failed to demonstrate that there was quality-assurance testing; and when their production was challenged by the plaintiff, they failed to carry their burden of explaining what they had done and why it was sufficient.”

Grimm also noted this was not a case of one document slipping through the cracks, and the privileged documents that had been disclosed included e-mail communications between the defendants and their lawyers. He also said it was noteworthy that it was the plaintiffs that brought the disclosure to the court’s attention.

Jason Baron, director of litigation at the National Archives, told the Daily Record that “what Judge Grimm has done is give a roadmap to lawyers in the United States on how to present to a court how they went about searching for relevant documents.” Baron was the editor for a Sedona Conference Best Practices Commentary on e-discovery that was cited in Grimm’s opinion.

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