Despite the existence of a stipulated clawback agreement (that was never presented to the Court to be So Ordered) that provided “[i]nadvertent production of privileged documents does not operate as a waiver of that privilege,” the Court found defendants’ claim to privilege was waived by the inadvertent and “completely reckless” production of privileged materials. In reaching its conclusion, the Court declined to conclude a clawback agreement always protects against waiver, regardless of its terms. Rather, like the Second Circuit’s approach, the Ohio State Court held that the heightened protection provided to producing parties under a clawback agreement is lost when the party’s disclosure is “completely reckless.”
Plaintiff, Irth Solutions, LLC (“Irth”) filed this lawsuit in state court alleging contract and fraud based claims. Eventually, Defendant Windstream Communications, LLC (“Windstream”) removed the action to the District Court for the Southern District of Ohio, based upon diversity jurisdiction. Shortly after removal, Windstream advised the Court there was a discovery dispute involving an inadvertent production of privileged electronic communications.
At the heart of the decision (Irth Sols. LLC v. Windstream Commc’ns LLC, No. 2:16-CV-219, 2017 WL 3276021 [S.D. Ohio Aug. 2, 2017]) is the parties’ agreement concerning the production of electronically stored information (“ESI”) and an email memorializing that agreement. As is relevant here, the parties agreed that a formal court order under Federal Rule of Evidence 502 was not necessary given the size of the dispute but nonetheless agreed among themselves:
- If a producing party discovers that it has inadvertently produced a privileged document, the producing party will promptly notify the receiving party of the inadvertent production;
- The receiving party will promptly destroy or return all copies of the inadvertently produced document; and
- The inadvertent production of privileged documents does not operate as a waiver of the asserted privilege.
Discovery began and eventually (twenty-seven days after Irth alleges production was due) Windstream made a partial production of documents. According to Windstream, that production contained 43 inadvertently produced privileged documents. Approximately 12 days later, Windstream’s counsel realized the production issue and contacted Irth’s counsel demanding return of the privileged materials. Irth’s counsel refused to return the documents, but sequestered them pending decision by the Court. Irth’s position was that any claim of inadvertence was far-fetched given the small total production size (2200 pages), the inordinate time Defendant took to make any production of documents (3 months) and the firm’s reputation for excellence.
At the hearing on the issue, the Court noted that many of the documents contained clear indicia of potential privilege (e.g., 14 of the 43 documents contained the word “legal” and several identified the author with a signature block making plain her role as counsel: “Counsel to Director of Government Contract Compliance”). Notwithstanding these privilege flags, defense counsel reaffirmed at the hearing that the documents had been subject to a dual step review process intended to capture privilege concerns.
While the matter was pending before the Court, Windstream produced the at-issue privileged documents again. That’s right – counsel produced the very documents in dispute a second time! In that instance, defense counsel claimed the production was the result of an attempt to re-produce the prior production set, excluding the privileged materials, in a searchable format and accidentally the Firm’s litigation support team included the privileged materials, despite counsel’s efforts to ensure they were withheld.
Taking up the issue, the Court discussed the question of what constitutes inadvertence and ultimately indicated that it would assume arguendo that Defendant had established inadvertence.
The Court then turned to the “impact” of the parties’ clawback agreement on the question of waiver, citing three frameworks applied by other courts: “(1) if a clawback is in place, it always trumps Rule 502(b); (2) a clawback agreement trumps Rule 502(b) unless the document production itself was completely reckless [as embraced by the Second Circuit]; and (3) a clawback agreement trumps Rule 502(b) only if the agreement provides concrete directives regarding each prong of Rule 502(b).”
The Court rejected the first approach, reasoning in part that it “undermine[s] the lawyer’s responsibility to protect the sanctity of the attorney-client privilege” and “runs the risk of undermining contract principles.”
The Court, however, expressed approval of both the second and third frameworks and reasoned it need not choose between them because “taking into account the careless privilege review [conducted by defense counsel], coupled with the brief and perfunctory clawback agreement [the parties drafted], following either [the second or third] approach leads to the same result: Defendant has waived the privilege.” Applying the framework in this Circuit, the Court noted that “[i]nadvertent disclosure provisions in stipulated protective orders are generally construed to provide heightened protection to producing parties.” (citations omitted). However, this heightened protection is lost where a disclosure is completely reckless.
In analyzing what constitutes “complete recklessness” the Court stated that various considerations come into the calculus including: the number of privileged documents inadvertently produced, the number of documents ultimately reviewed, and the type of review process engaged in by the producing party. Applying those factors to the facts before it, the Court ultimately concluded each demonstrated a level of recklessness that supported waiver. Indeed, the number of privileged documents produced (>10% of the production), the time taken for the review (“Defendant had months to produce the first production”), and the fact that the mistake was not “the result of a technical error or mistake born from hours and hours of review” but instead was the result of critical and reckless mistakes of counsel (i.e., counsel reviewed a limited number of documents and more than 1/3 of the documents prominently featured “Counsel” and a legal signature block) each supported a determination of recklessness.*
Although the Court was sympathetic that privileged documents will inevitably fall through the cracks and be produced inadvertently in today’s world that is replete with emails, the Court in its Opinion reminded the Bar of our responsibility to safeguard the attorney-client privilege. Indeed, the Court wrote, “as the “guardian” of the attorney-client privilege, it is a lawyer’s responsibility to minimize the cracks through which privileged material might slip. The Court believes the second approach adequately recognizes an attorney’s responsibility to guard that privilege, and holds an attorney accountable when normal cracks become chasms—as was the case here.” (Citation omitted.)
There are many critical lessons to be internalized from this decision not the least of which is the importance of entering a robust and unambiguous claw back agreement that is So Ordered by the Court. However, it is equally important that any privilege review be undertaken in a deliberate and comprehensive fashion and performed by an attorney capable of assessing privilege – not necessarily the lowest billing attorney assigned to the specific matter. As the Court made clear, it is the attorney’s responsibility to hold sacred their client’s privilege. To this end, when devising a review protocol for ESI, it is imperative that a well thought out privilege protocol is designed and implemented. And, once privilege review is complete that key words and other quality control mechanisms are put in place to avoid the inadvertent production of privileged materials.
Full decision can be located here: https://www.ediscoverylaw.com/wp-content/uploads/2017/08/Irth-Opinion.pdf
* And to make matters worse, Windstream then produced the exact same documents again while asking the Court to protect its privilege.