Welcome to Module 3-S.

An Open Door Gives Away The Secret, But Rule 502 Attracts It Back; a Class on Clawback and Evidence Rule 502.

Pyramid at Night with the All Seeing Eye branded with the latest nonsenseA case involving the movie The Secret provides excellent analysis of Evidence Rule 502 while at the same time taking irony to new heights. Heriot v. Byrne, 2009 WL 742769 (N.D. Ill. March 20, 2009). The sarcastic potential and ironies in Heriot v. Byrne are profound. The Law of Attraction compels this exposé. Consider the facts. This is a law suit about a movie called The Secret, where one of the corporate defendants is named The Secret, LLC. All of the parties in this law suit were somehow involved in the conception and making of The Secret. The movie was a huge New Age success. The exalted spiritual masters who conceived and produced The Secret did so, or so they say, to share the secret of the ages as to how to attract success and happiness in your life. This class will reveal the secret and delve deeply into Rule 502.

Well, now the real secret is out, these special masters have indeed attracted what they deserve, they have attracted lawyers and fights over money. The plaintiffs claim to own part of The Secret. The defendants deny that and have filed counter-claims of their own. The plaintiffs’ primary goal seems to be their accounting claims where they are trying to find out how much money The Secret has made, which, so far, the defendants have kept secret.

But wait, there’s still more secrets. The defendants accidentally received some of the plaintiffs secret emails to their attorney. They received these secrets because the plaintiffs’ e-discovery vendor made a mistake. The named of the vendor is Open Door Solutions. You cannot make this stuff up. If this were a movie, you would not believe it, which, by the way, appears to have been the judge’s reaction to the movie, but we will get to that in a minute.

Back to the open-door disclosure of the plaintiffs’ secret attorney communications. When these secrets were accidentally disclosed to defense counsel, they denied that they were secrets at all. Alternatively, they said that even if they were once secrets, they were no longer secrets, because the secrets were revealed. They argued that the disclosure of the secrets by handing them over to opposing counsel waived any attorney client privilege that these secrets might have once enjoyed.

Plaintiffs tried to protect their secrets by relying on Evidence Rule 502. It protects attorney-client secrets and requires clawback of inadvertently disclosed secrets if certain conditions are met. Defendants denied clawback and the applicability of Rule 502. Defendants claimed that the plaintiffs’ disclosure of secrets was not inadvertent. Even if the disclosure was inadvertent, defendants argued that Rule 502 should still not protect the secrets because it only protects secrets where reasonable steps to prevent disclosure were taken. The claimed that the way-too-open-door handling of plaintiffs’ alleged secrets was negligent and thus not protected by Rule 502. Finally, they argued that even if these secrets were protected by Rule 502, they should still be allowed to tell these secrets, and not give them back, because of the crime-fraud exception to the attorney-client privilege. That is the rule where a client cannot keep secret any communications he may have with his attorneys about a crime or fraud that he may commit in the future. (Confidential communications about past crimes and fraud committed in the past can, however, be kept secret.)

Secret Shh!So to summarize, open door mistakes led to a battle between the masters of The Secret over the attorney-client secrets of a man who claimed to own part of The Secret and wanted its secret profits disclosed. The defendants, purported sole owners of The Secret, including one called The Secret, LLC., wanted to keep their profits secret, but disclose the plaintiffs’ secrets, claiming they were not secrets at all, or if they were, they were bad secrets not entitled to secrecy, or they were waived by a way-too-open door handling of the secrets. (Try saying that real fast.)

Magistrate Judge Martin C. Ashman attracted to himself the task of sorting out this tangled web. As mentioned, Judge Ashman was not too impressed by the movie The Secret, as he begins his opinion by noting:

This case involves a controversy over The Secret, a made-for-television documentary that purports to reveal the “most powerful law in the universe.” The Secret, http://www.thesecret.tv/ (last visited Mar. 17, 2009). As if that declaration was not grandiose enough, the website further claims that, “[b]y applying the knowledge of this law, you can change every aspect of your life.”

Although Judge Ashman did not think The Secret the parties had created was much of a secret, he did think the plaintiff’s secrets were bona fide and entitled to protection. He upheld the attorney-client privilege by applying Evidence Rule 502. He held that the open-door disclosure was a mistake, and happened in spite of the reasonable steps to prevent disclosure that had been instituted by plaintiff’s attorneys. For that reason, Judge Ashman enforced the clawback provisions of Rule 502 and required that the defendants, including The Secret, LLC., to keep the plaintiffs’ secrets secret.

Factual and Procedural Background

Open Door

This saga of secrets began innocently enough with the defendants’ request for production, including “[a]ll documents relating to United States visa applications filed by or on behalf of Heriot.” The plaintiff, Drew Heriot, happens to be a citizen of Australia, as are most of the other parties to this action.

Since all documents these days are created electronically, this triggered e-discovery, which in turn triggered the attorneys for Heriot to seek the help of an e-discovery vendor, the mentioned Open Door Solutions. Open Door provided electronic scanning, optical character recognition, and other discovery related services. Here is the court’s description of the process which Open Door (here called the “Vendor”) and Heriot’s attorneys set up for this production:

First, the Vendor created a database of the documents provided to it by Plaintiffs (“Master Database”), which Plaintiffs then could review. (Id. at 3-4.) Second, during April and May of 2008, Plaintiffs “had paralegals and other non-lawyers conduct a preliminary review [of] the documents in the Master Database,” assigning documents “general, pretrial discovery codes.” (Id. at 4.) One general code was “immigration,” which Plaintiffs “used to flag documents (primarily e[-]mails) that had anything to do with Mr. Heriot’s immigration to the United States.”(Id.) (Editors note: the misspelling of “immigration” in the Westlaw transcription was corrected as an obvious error.)

Third, Plaintiffs searched for responsive documents in their Master Database. (Id.) Fourth, once identified, these responsive documents would be “coded for subsequent copying and inclusion in the Production Database.” (Id.) Additionally, Plaintiffs would mark responsive documents “as either Confidential or Highly Confidential under the Stipulated Protective Order.”

Id. at *2.

This is a pretty standard plan of action, except that I do not see privilege review and logging specifically mentioned. To comply with the discovery request regarding Heriot’s immigration visa, plaintiffs requested and received a paper copy of the visa file from Heriot’s immigration lawyer. Next, plaintiffs gave the Heriot’s visa application to Open Door with instructions to:

(1) scan and add it to the Master Database, (2) copy the scanned versions to the Production Database, … (3) electronically stamp the application as ‘Highly Confidential’ for production[,] … [ (4) ] Bates Stamp all documents in the Production Database, and … [ (5) ] include Mr. Heriot’s visa application and other sensitive material at the front of the production.

Id.

Now we come to the mistake of Open Door. (By the way, mistakes like this can and do happen to most everyone sooner or later, but seem to happen more often to some than to others.) Frankly, from the court’s limited description of the facts in the opinion, I cannot understand exactly what the vendor did wrong that supposedly blew the privilege review, but I gather it had to do with mixing the sensitive visa related materials in with the general database and not placing them in the front of the production for review as instructed. The vague description makes me more sympathetic towards Open Door and a little suspicious about the attorneys. All we know for sure is that mistakes were made here and secret emails were unintentionally produced.

On August 25, 2008, plaintiffs produced around 1,499 documents comprised of 6,952 pages. This is a pretty small production by today’s standards. Plaintiffs did not withhold any documents for privilege and so did not produce a privilege log. That does seem odd. Two months later, on October 22, 2008, plaintiffs counsel discovered the mistake in production while preparing for a deposition scheduled for October 24, 2008. The next day, October 23rd, they notified defense counsel of the inadvertent production and demanded the return and destruction of certain documents they claimed were privileged. The defense complied, but kept one copy for use to challenge the claimed privilege protection. The defendants then promptly filed a motion to compel production, including the challenged documents, which were filed under seal. The plaintiffs opposed that motion and filed their own unrelated motions to compel.

Legal Analysis on Waiver

Judge Ashman begins the legal analysis with the following overview of the law (citations omitted):

Ordinarily, disclosure of confidential information to an unprotected third party operates as a waiver. Under FRE 502, however, disclosure of privileged information will not operate as a waiver when “(1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).” FED.R.EVID. 502(b)(1)-(3). All three elements described in FRE 502 must be satisfied to prevent a waiver. Id.

Id. at *5.

Wave byeThe court then considered the issue of whether the rule superseded prior federal common law concerning waiver of attorney-client privilege. The court basically said it did, unless the prior law (here Judson Atkinson Candies, Inc., v. Latini-Hohberger Dhimantec, 529 F.3d 371, 387-88 (7th Cir.2008)) was not conflicting. Here Judson was not conflicting (it was harmonious) and so the court used Judson to supplement its analysis and articulated the following test (footnote omitted):

This Court therefore adopts the following test. First, a court determines whether the disclosed material is privileged. If it is not, the inquiry ends. If the material is privileged, the court applies FRE 502(b). If the court concludes that disclosing party satisfied all of the elements in FRE 502(b), the privilege is not waived. If, however, the disclosing party fails to satisfy any of the FRE 502 elements, the privilege is waived. In applying FRE 502(b), the court is free to consider any or all of the five Judson factors, provided they are relevant, to evaluate whether each element of FRE 502(b) has been satisfied. This Court applies and explains the details of this test in the following sections.

Id. at *7. Judge Ashman then applied the test where he began by finding that most of the emails in question were privileged. The judge personally reviewed all of the emails and found they contained legal advice to Heriot from his immigration lawyer. A few emails included prior non-privileged communication with a third party. They were to be produced, but with redactions to protect the privileged part of the email chain. A few others had been sent to third parties and, as to them, no privilege was allowed. Id. at *8-*9.

Next the court addressed the Crime-Fraud Exception to the attorney-client privilege. Here is the court’s summary of this law:

Although communications subject to the attorney-client privilege are protected, that protection can be forfeited when, for example, “ ‘the attorney … assist[s] his client to commit a crime or a fraud.’ “ U.S. v. Al-Shahin, 474 F.3d 941, 946 (7th Cir.2007) (quoting Mattenson v. Baxter Healthcare Corp., 438 F.3d 763, 769 (7th Cir.2006)). In other words, “[t]he crime-fraud exception places communications made in furtherance of a crime or fraud outside the attorney-client privilege.” U.S. v. BDO Seidman, LLP, 492 F.3d 806, 818 (7th Cir.2007) (citing U.S. v. Zolin, 491 U.S. 554, 563, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989)).

Id. at *9. It turns out that the defendant’s arguments here were very weak and there was no basis for a claim of fraud in these emails between Heriot and his immigration attorney.

Three Part Test of Rule 502(b)

Judge Ashman then moved on to consider whether the three requirements of FRE 502(b) were met wherein disclosure of privileged information will not operate as a waiver when:

(1) the disclosure is inadvertent;

(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and

(3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).”

Rule 502(b)(1)-(3) Fed.R.Evid.

1. Inadvertence

Oops! Shit happens.The court put the burden of proof on the party claiming the privilege in accord with established case law. This is the way it should be. Judge Ashman then found that the first requirement had been met, that the disclosure had been inadvertent. This was the right result, but he labored way-too-hard to get there. In my opinion, it is hard to see how a disclosure like this could be anything but “inadvertent,” taking the normal common sense meaning of the word as “unintentional,” or “not attentive.” Defense counsel here argued in accord with case law that “inadvertent” meant something completely different, that inadvertent here means “not negligent.” The defendants main argument on this point was that the disclosure was “not-inadvertent” because, in their words “Plaintiffs’ counsel … [was] asleep at the switch.” Heriot v. Byrne, supra at *11. Judge Ashman went along with that argument, but then went to great lengths to show they were not quite as asleep as alleged and so the disclosure was inadvertent as required under the rule.

I think this misreads the rule by conflating all three criteria into the first one. This incorrectly resurrects somewhat contra case law that Rule 502 supersedes. Obviously plaintiffs’ counsel was “asleep at the switch” when the production was made and that is exactly what inadvertent means, not attentive or unintentional. For part one of Rule 502(b) three-part test, the party should only have to prove that the disclosure was not done on purpose, that it was a mistake.

Here Judge Ashman made a finding that the disclosure was inadvertent because a variety of factors were met indicating the mistake was understandable and prompt corrective action was taken. These facts are relevant to the second and third prongs of the rule, not the first prong of inadvertence. For that reason I think Judge Ashman made a harmless error in stating:

To determine whether a disclosure was inadvertent, “this Court has … look[ed] to factors such as the total number of documents reviewed, the procedures used to review the documents before they were produced, and the actions of producing party after discovering that the documents had been produced.” WunderlichMalech Sys., Inc. v. Eisenmann Corp. (Eisenmann II), No. 05-C-4343, 2007 WL 3086006, at *3 (N.D.Ill. Oct. 18, 2007) (citing Wunderlich-Malech Sys., Inc. v. Eisenmann Corp. (Eisenmann I), No. 05-C-4343, 2006 WL 3370700, at *3 (N.D.Ill. Nov. 17, 2006)). This Court can find no reason to discard these factors, which aptly address the issue of whether a party inadvertently disclosed confidential information.

Id. at *11. The plain language of the rule is good reason enough for me. The court should have disregarded these prior case law factors, at least in so far as the determination of the “inadvertence” test is concerned. All a party should have to prove to meet the first part of the test is that the disclosure was not intentional. If someone intentionally made the disclosure, and then just changed their mind for some reason, like perhaps new counsel was retained, then you would fail the first test. But if the disclosure was a mistake, an unintentional accident, then according to the normal commonsense meaning of the word, it was inadvertent, and you move on to the next two steps.

This is, by the way, the only mistake I see in this opinion, which undertakes the difficult task of interpreting and applying a rule with very little prior case law. This is otherwise a well reasoned opinion demonstrating excellent scholarship. I just hope that the many future cases that are likely to cite this decision do not make the same mistake of conflating the three criteria in Rule 502(b).

2. Reasonable Steps to Prevent

bank-vaultThe next thing to be proved under the Rule is that “the holder of the privilege or protection took reasonable steps to prevent disclosure.” Now we get into the facts and circumstances incorrectly considered by Judge Ashby in the determination of the first step. The defendants here argued that it was unreasonable for plaintiffs not to review the ESI after it was readied for production. They made this argument, even though plaintiffs’ counsel they had already reviewed the email and other documents before they were delivered to the vendor, here Open Door, for final processing and production. The defendants’ position would require either a double review, or review only after processing by a vendor. Either alternative is not acceptable in most circumstances, although I for one do not like a vendor to make direct productions, and where possible would prefer to make a final quick overview myself before production, just to be sure obvious errors were not made. Judge Ashby wisely rejected defendants contention and held:

… a pre-copy review procedure is not per se unreasonable. The procedure used here-where Plaintiffs reviewed the documents and then provided them to the Vendor for production-was reasonable; no disclosure would have occurred but for the Vendor’s error.

Id. at *14. Of course, had plaintiffs counsel made a quick inspection before turning over the CD, this error might well have been caught. But whether mistakes were made is not the issue. Of course mistakes were made, or the unintentional disclosure would not have occurred. The issue is whether there was a reasonable procedure in place. Here the judge said there was and I do not disagree.

3. Reasonable Steps to Rectify

The third and final test under Rule 502(b) is whether the party that made the unintentional disclosure “promptly took reasonable steps to rectify the error.” Here there was a two week gap between the time of the production and the time the disclosure was noticed. Plaintiffs notified defendants the very next day after the mistake was discovered, so the defendant had to argue that the two month delay was not prompt or reasonable. This means they had to argue for the necessity of a post-production review. I know that some attorneys and judges contend this is the intent of Rule 502: that you have to look again at documents already produced to verify that you caught and logged all privileged documents; that to do otherwise is not reasonable and constitutes a violation of Procedure Rule 26(b)(5), which requires that all withheld privileged documents be logged. This same people are at a loss to explain the Rules Commentary that expressly states:

The rule does not require the producing party to engage in a post-production review to determine whether any protected communication or information has been produced by mistake.

I agree with Judge Ashman who held:

Plaintiffs had no duty to re-review the documents after providing them to the Vendor. Id. That would be duplicative, wasteful, and against the spirit of FRE 502. Additionally, imposing on disclosing parties a duty to re-review would chill the use of e-vendors, which parties commonly employ to comply with onerous electronic discovery. Against this grain the Court cannot cut.

Heriot v. Byrne supra at *13.

I think it is clear that Rule 502 does not require another review after production, just to make double-sure that a mistake was not made and privileged documents inadvertently disclosed. If your preproduction steps to prevent disclosure were reasonable, then you are done and should not have to do anything more to search for privileged documents. Your only remaining duty should be to rectify, if and when you happen to discover a mistake while doing something else, like in this case, reviewing documents to prepare for a deposition, or you are advised of the mistake by opposing counsel. Many times when the later happens, opposing counsel will cooperate and just notify you of the mistake and send it back. This is especially true in circumstances where the vendor or law firm make a big mistake, like mislabeling a CD and turning over information to the wrong party. This kind of thing can easily happen despite all kinds of reasonable precautions and good intentions. When it does, most opposing counsel are very polite about, as they should be, and they tell but don’t look. After all, we all know that “Where discovery is extensive, mistakes are inevitable ….” In re Sulfuric Acid Antitrust Litig., 235 F.R.D. 407, 417 (N.D. Ill. 2006), quoted with approval in Heriot at *11.

Conclusion

This case, much like the movie, shows just how much time and money can be wasted over a few garden variety secrets. The parties would have been much better off practicing what their movie preaches. Of course, if that were true, there would have been no lawsuit and these secrets of 502 would not have been revealed. At least, not in such an ironically attractive manner.

 ___________

SUPPLEMENTAL READING: Read the opinion here and for fun watch the movie too. Also, be sure to study Rule 502, including the Commentary. I suggest you supplement your studies by locating and reading a few articles that have been written on this Evidence Code rule.

EXERCISE: Can you think of any reason not to have a clawback agreement or order? Especially a 502(d) order?

Students are invited to leave a public comment below. Insights that might help other students are especially welcome. Let’s collaborate!

Copyright Ralph Losey 2015

Ralph Losey is a practicing attorney who specializes in electronic discovery law. He is a principal in a U.S. law firm with over 50 offices & 800 lawyers where he supervises electronic discovery work and litigation support. Ralph has written over two million words on law and technology, including six books on electronic discovery. His latest books are "E-Discovery for Everyone" (ABA 2017) and "Perspectives on Predictive Coding" (ABA 2017) (ed. & contributor). His blog is widely read in the industry: "e-DiscoveryTeam.com." Ralph is the founder and principal author of "Electronic Discovery Best Practices" and "e-Discovery Team Training," a free online course covering all aspects of e-discovery. Ralph's sub-speciality is the search and review of electronic evidence using multimodal methods, including artificial intelligence. He also has a free online training program to teach these advanced methods - the "TAR Course." Ralph has devoted a month of his time each year since 2013 to research and test various AI-enhanced document review methods. In 2015 and 2016 Ralph and his Team participated in the TREC Total Recall Track experiments sponsored by the National Institute of Standards and Technology. Ralph has been involved with computers and the law since 1978. His full biography is found at RalphLosey.com. Ralph is the proud father of two children, Eva M. Losey and Adam Colby Losey, a high-tech lawyer married to another e-discovery lawyer, Cat Jackson Losey, and, best of all, Ralph has been married since 1973 to Molly Friedman Losey, a mental health counselor and life-long friend.

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