Rule 502: Are We There Yet?


Today we tackle the vexing world of waiving privilege with ESI with two outstanding panelists and moderated by Karl Schieneman, Director of Legal Analytics and Review at JurInnov. Privilege waiver and the challenges faced with ESI have been tackled in a number of high profile cases by one of our panelists Judge Grimm and written about by Tom Allman.  

Judge Paul Grimm serves as a full time Magistrate Judge for the United States District Court for the District of Maryland. He was appointed in February 1997. Additionally, Judge Grimm is an Adjunct faculty member of the University of Maryland School of Law, where he teaches trial evidence, pretrial civil procedure, and scientific evidence. Judge Grimm is a frequent lecturer at CLE programs on issues regarding evidence and civil procedure, and has published several books and numerous articles on these topics. Mancia v. Mayflower Textile Services & the Cooperation Proclamation; Victor Stanley, Inc. v. Creative Pipe and the need to explain why search terms are being created when privileged materials were disclosed to the other side; Markel American Insurance Co on admissibility and authentication ESI; and Hopson v. Mayor of Baltimore on the complications of privilege waiver with the disclosure of privileged or work product ESI between different state jurisdictions which still need to be addressed and now have by Rule 502.

Tom Allman, a former partner at Taft, Stettinius & Hollister and, from 1993 to 2003, General Counsel of BASF Corporation, is one of the Editors of the Sedona Principles (2nd Ed. 2007) and currently co-chairs the Steering Committee of the Sedona Conference® Working Group on Electronic Discovery and Document Production. He is also one of the editors of the PLI Electronic Discovery Deskbook (2009). He was an early advocate of the need for e-discovery amendments to the Federal Rules of Civil Procedure, including what became Rule 37(e) (the safe harbor amendment). He has published numerous articles on E-discovery and Corporate Compliance and is a frequent speaker on related topics. He is a graduate of Yale Law School and resides in Cincinnati and New York City. He also has written and given presentations nationally on Rule 502. In this podcast, we cover an Overview of the Rules, Constitutional Issues, Ethical Issues for attorneys caused by the implementation of the Rule, the practical issues associated with disclosure, grey areas between state courts and federal courts, the impact on privilege, and costs issues with privilege review. Rule 502 is still a new Rule with very few decisions interpretting it on the books. However, it offers some great hope for litigants to protect themselves down the line from waiving privilege when reviewing large amounts of ESI. This was a very interesting podcast to do and I hope you find it helpful in understanding Rule 502.

[DDET Click here for the transcript]

Karl Schieneman:  Hello everyone! This is Karl Sheneman, Director of Legal Analytics and Review at Jurinnov.  Welcome to another edition of ESI Bytes where we bring together national speakers to talk about critical issues in electronic discovery and records management at a price everyone can afford, which is free and at the time when people are interested in the topic regardless of where they’re located, they could just click on the link and listen.  Today, we tackle the vexing world of waving privilege and the impact of rule 502 passed late last year in 2008 with electronically stored information and we’ve got two outstanding panelists.  Privilege waiver and the challenges based with the ESI have been tackled in a number of high profile cases by one of our panelists Judge Grimm, and written about by Tom Mole man as we waited for Rule 502 to be added to the arsenal of ESI guidance provided by the Federal Rules of civil procedures December 2006 amendments for obtaining the electronic discovery.  So now, they were in September 2009 like a young kid in the back of a car on a long trip.  I’m going to ask the panelists, are we there yet? Are we there yet? But before we attempt to answer that question, first let me introduce the panelists.  Judge Paul Grimm needs very little introduction.  He serves as a full time advisory judge for the United States District Corp. for the district of Maryland.  He was appointed in February 1997.


And additionally, Judge Grimm is an adjunct faculty member of the University of Maryland, School of Law on teacher’s trial events, pre trial civil procedure and scientific evidence.  Judge Grimm is a frequent lecture of CLA programs and issues regarding evidence in civil procedure and has published several textbooks – several books and numerous articles on these topics.  Some of his frequently cited cases include Mancia versus Mayflower Textile Services and how it relates with the cooperation proclamation.  Victor Stanley versus Creative Pipe and the need to explain why search charms are being created when privilege materials are just close to the other side.  Marco Lind, American Insurance Company on admissibility and authentication of the electronically stored information; Hopson v Mayor of Baltimore and the complications of the privilege waiver with the disclosure, a privilege or work product ESI between different stature restrictions which still needs to be addressed and now, will still needed to be addressed at that time and now has been somewhat addressed by Rule 502.


Tom Allman is a former partner of Taft Stettinius & Hollister from 1993 to 2003 with the General Council of BASF Corporation is one of the editors of the Sedona Principle Second Edition in 2007 and currently co-chairs of the steering committee of the Sedona Conference Working Group on electronic discovery and document production are working group #1.  He’s also one of the editors of the TLI Electronic Discovery Desk Book 2009.  He was an early advocate of the need for rediscovery of amendments of the federal rules of civil procedures including what became Rule 37(E) of the Safe Harbor Amendment.  He’s published numerous articles on E-Discovery and corporate compliance and is a frequent speaker on related topics.  He is a graduate of Yale Law School and resides in Cincinnati and New York City.  He’s also written and given presentations nationally on Rule 502.  So, glad to have both of you on the show here.  The first question I always like to ask; we already asked Judge Grimm on a previous show on search and retrieval, but Tom, How did you get interested in Electronic Discovery?


Tom:  In the late 1990s as a general council, I began to get a lot of complaints from my people that outrageous demands were being made by folks that interfered with the routine operation of our systems.  For example, we had judges in rural Alabama entering x-party orders that we should cease all our recycling and back up tapes and this of course was impossible to comply with and we had to get emergency relief and so on and so on.  After talking with my fellow general councils around the country, I realized that the corporate world was facing this generally speaking and I kind of took it upon myself to take the lead among the general councils that would want belong to some of these groups to take a look at it and it just took off after that.


Karl:  Okay.  Judge Grimm, I hope you don’t mind we skipped your description.  I’m trying to push the earlier podcast you see.


Judge Grimm:  That was subtle as a fire cracker.


Karl:  Okay.  Well, let’s first give a little overview of the rule and Tom if you can, can you please provide an overview of Rule 502 and its significance in the world of E-Discovery?


Tom:  Rule 502 is something that the congress enacted in September of 2008.  Its really, in some ways, can be seen as a very simple rule in the sense that it codifies in a single rule, a great deal of case we are all dealing with the innovert and production of information.  And then couple of that with some pretty strongly worded authority to accord to issue certain types of orders that govern the production of privilege and work part of information, and the consequences of both in federal and state proceedings.  I think I’m going to leave it at that.


Karl:  Okay.  Judge Grimm, after you’re often cited case Hopson versus Mayor of Baltimore and then, Victor Stanley versus Creative Pipe, which I think is incited even more.  You’ve played a role of spotting tensions in the privilege processes, that’s the new rules are being formed.  I’m going to ask you, are we there yet? Yeah, we solved privilege issues now and uncertainty with the passage of Rule 502? Are you going to be writing new opinions in this area [Indiscernible] [0:06:07]?


Judge Grimm:  Well, I don’t know that we’ve solved all the problems.  I think that every time we identify a discrete population of problems that we try and fix in a rule, we fix those and it’s like a Wack-A-Mole game at the penny arcade that others pop up.  What we have fixed is this.  We have provided a mechanism to avoid a systemic short coming in non waiver agreements.  In the sense that in Hopson, that opinion discusses the problems of waiver that can occur if two parties enter into a non waiver agreement that, that would constitute as to someone who was in the party that litigation didn’t agree could constitute waiver as to that and it also dealt with the issue of how you reconcile what may be competing law regarding privilege waiver among state courts and federal courts in different circuits.  The rules of evidence dealing with privilege Rule 501 sends you to the common law.  And the common law has not produced a single approach to certain privilege issues and with waiver of privilege associated with innovert and production; they were three schools of thought.  One that was automatically away because once you lost privilege you can’t redo it.  The intermediate approach, which 502 adopts and the lenient approach which was a distant third that required no one in intelligent waiver.  So 502 has given you some structural protections, has solved the problem between competing substantive privilege law among different federal courts and between the federal courts and state courts.  But it has not solved some of the issues, which are even though you can – that the fact that you have not waived a privilege by inadvertently producing privilege or work via protected information.  If you have engaged in reasonable activity to prevent that and have promptly taken action when you discover this and produce, you still have a tactical disadvantage and you’re adversary to no fault of his or her own has now acquired information which might be very central that it would take a particularly dull opponent not to be able to figure out a way to develop that factual information and exploit it even though privilege has not been waived and there has been no misconducts so there is no possibility of this qualification.


In addition, it has created, I think, what may be something that we will talk about later in this podcast, which would be some ethical hazards for lawyers who might rush to quickly into a non waiver agreement that could result in some disclosure of privilege information that the clients may not be excited about and the third thing is, is it creates some issues I think that Tom has been a thought leader in discussing some of the concerns about this, about whether or not, Rule 502(D) would be a vehicle for courts to impose deadlines for privilege review and production as part of civil procedure, scheduling orders that might put the parties in a position of having to move so quickly that they are increased by substantially the likelihood of privilege information being disclosed even though there’s no waiver.  So we have solved one set of problems and we have identified additional ones in the future.


Karl:  Yeah good.  So we still have work to do.  Tom, before we get into what the new rule means, let’s talk generally about what’s not in a rule, what happens to the selective waiver issue? I thought the new rule is going to address that.


Tom:  Well actually, in some of their – their drafts did, but as you probably will recall, there was kind of a mini revolt on the part of the corporate community, having released one significant and quite vocal sector of it to the effect that it was unfair and inappropriate to encourage selective waiver.  Selective waiver in that sense meant to those folks the concept of turning over information without waiver as the third parties to a federal agency under circumstances in which the federal agency retained the right to use that information pretty much at its discretion although, they coasted in language which sounded like it wasn’t allowed to discretion, but in fact it was.  And the folks were very concerned that this would foster a cultural waiver otherwise the people would tend to become much more inclined to waive the attorney client privilege.  And then in the long run, this would have a terrible effect on folks who were running compliance programs for example or giving advice to people making controversial decisions and it would slow down the – and perhaps even impede the ability of a lawyer to learn from their client exactly what the options were and what they were considering and thereby in the long run and this is pretty farther out, but on the long run, it might end up encouraging non compliance with laws suppose on encouraging it.  So what the committee did was simply – when I’m saying the committee, I’m talking about the evidence committee which we recall – recommended that it be passed by the congress.  When it transmitted it, it put on brackets and said look basically, this is a political decision for you folks to make and the final result is that it’s simply not in the text of the rule itself.  Rule 502 does not explicitly comment one way or the other, on selective waiver.


However the House of Representatives in a statement that was inserted in the congressional record, explicitly states that the rule should not be used to grant or should not be used to encourage course to authorize the use of a selective waiver process and it hangs its ruling on the concept that a party that aqui-access in an adversarial party making other use of the information is not really making an intervertent or at least nonintentional waiver and therefore, it’s not fair to grant third party protection because as the judge pointed out, the one clear thing that Rule 502 does, is provide protection against waiver decisions being a second guest by third parties and unrelated litigation and they simply say that the house said in its statement, that this should not be the case with respect to what I defined as their traditional selective way or system.  So, it’s a subtle issue and I have not yet seen any decisions, which interpret that language.  In fact, I haven’t seen anybody even mention that language except in the footnote in one or two lowery articles.


Karl:  Judge Grimm, what about the requirements to make reasonable efforts to preserve privilege on Rule 502(B).  Does this still apply when the court enters into a Rule 502(D) order protecting privilege?


Judge Grim:  That’s a 64,000-dollar question.  Just a little bit – it maybe that not everyone listening to this, it maybe that some of them, unlike myself, have a life outside rules.  However what we do for work and may not be completely conversant with all the structure of the Rule.  The 502 has five parts.  502(A) defines what it takes to constitute the waiver of privilege or work part of protected information and talks about the scope with that waiver.  502(B) talks about the consequences of inadvertent production of privilege of protected information.  502(C) deals with what happens when you have privileged information disclosed in state proceedings and then a follow on Federal Proceeding.  502(D) is the rule that says that the judge in a case and it does not require a request of council to do this so the court could do it, so the Spontae permits the court to enter and order it that, that governs the production of information and provides that if privileged or protected information is produced as a result of that order that it does not constitute a waiver and that’s binding not only on the parties through litigation, but to the world at large.  And 502(E) says that nonwaiver agreements entered into by the parties or binding as to them, but not as to third parties unless approved by a court under rule 502(D).  Now, the question that you ask is, if a judge issues a 502(D) order, what finding of reasonable conduct in advance of producing information is required to prevent a waiver.


Karl:  If any………


Judge Grim:  If any.  And I think that if you read the plain meeting that the word itself and also the advisory committee notes, I think the answer is not.  502(B) says that where there has been inadvertent production, there must be reasonable measures taken in advance.  But if the court orders the production, then it really deals with a separate distinct legal fury that I discussed in the Hopson case, which is a doctrine of compelled disclosure.  There is no waiver when you produce information at the compulsion of a court because you have no option, but to produce it.  So what happens is 502(D) stems from the common law doctrine of compulsion does not equal waiver, 502(D) addresses and harmonizes the rule on–if there has been inadvertent production, can you be spared from waiver? And the answer is yes if you behave reasonably before you do so.  So I think it’s still the wiser process to try very hard to allow in a 502(D) order a sufficient time, reasonable time, for the parties to be able to engage in reasonable activities to prevent the waiver because from the party’s position, even though they may not have waived privilege or work part of protection because they have produced something pursuant to an order of the court to do so, there is a very significant downside and risk and hazard to then to having given up privileged information that their adversary now knows and can take advantage of through separate efforts to develop that same information through ordinary discovery.


So, I think that there is a strong wisdom associated with allowing and wanting to have as part of a 502(D) ruling reasonable precautions available to the party so that they don’t have increase the possibility of waiver, but I don’t think the rule requires it.  Tom, do you have a different take on that?


Tom:  No, I don’t.  And of course, that’s the point that concerns me.  As I see rule 502(D), the committee very consciously dropped any linkage to agreement of the parties and left it entirely after the court to exercise this discretion of whether or not to issue such an order and courts are beginning to do that and this is not unusual.  I mean this has always been the case.  The courts have used this kind of technique as you suggested earlier in the IBM litigation in the 70s, specifically the Transamerica case out of the ninth circuit.  The court did hold that it would not find a waiver to have occurred what it called an extraordinary exhilarated discovery schedule was in place and the parties had no choice but to conform to it.  But, I think the judge’s point that a careful judge would still be careful and leave time for parties to choose to do at least some preproduction review.  I think it’s a wise suggestion, but I think there is a real risk and that’s the one that I brought up in my testimony when we were commenting on this rule.  There is a real risk, the judges will be highly tempted to say, “Look, I can just exhilarate the discovery schedule hereby protecting the parties while entering a 502(D) order and ignoring the potential consequences both ethical and practical that might come from it.”


Male Speaker 1:  Well, I think that if I could jump into that again, if you’re trying to identify best practice techniques, the point that Thomas raised, raised is very true issues of concern for practitioners and clients of course.  But also, parties have to be very vigilant not to increase the livelihood that a court might take that approach and that I’m aware of a specific instance in which I’ve heard about a party proposing that the privilege review would take so much time that it would be equivalent to a year’s time to produce in response to fairly standard document production request.  If you take an extreme position like that and you have not come in to say judge in the amount of time that we have here, the standard scheduling orders are 180 days, we’d like to have that extended by 60 days because we have to take the following procedures available, demonstrate that they’re not spending two hours a week, every other week to do it, but are making diligent and reasonable efforts to do so, then you’re going to increase.  It seems to me the likelihood that the court is going to say, I hear you on that and I’m going to give you extra time to work with it.  If you come in with a suggestion that is on space, it appears to be sort of foot dragging, you may well run the risk of increasing the likelihood that the court says, oh that’s your concern.  I can take care of that on a heart beat, I’m going to give you a 502(D) order and you could produce it in 30 days.


Tom:  The irony of all this of course is that for many people on the advisory committee who were involved in this in the original 2006 [Indiscernible] [0:21:48], and then subsequently worked with the evidence of the advisory committee.  To many of those folks and I’m just thinking of someone like Lee Rosenthal who chaired the advisory committee, to many of those folks one of the principal reasons for this was to help reduce, escalating, an outrageous cause, and with all very good intentions.  I mean the idea was by placing 502 into the record, and by giving accord of 502(D) power that is not depended on party agreement, it would permit some of these unique arrangements such as a quick peak arrangement whereby parties consciously accept the risk that privilege information will be disclosed to the other side and cut down on the total volume of information that must be reviewed after the other party has gone through the boxes and gone through the CDs and picked out what they thought where that relevant information.  And so there’s a lot of good reason here for having this authority in the court.  And as you just suggested, Judge Grimm, the court really is going to have–the courts are going to have to use careful analysis of what’s going on and be very frankly, be very careful on what they do.  And so far, I’ve been kind of encouraged by what I’ve seen so far.  I’ve not seen an over reaction at least by the reported decisions on it.


Karl:  Tom, what’s like of the situation where you just have an agreement between the parties? Can you have a Rule 502 agreement between the parties and force protecting against the waiver privilege if the parties did not make reasonable efforts to find their privilege material?


Tom:  Well, that’s what I was just referring to.  You can have a 502(D) agreement that doesn’t require any review whatsoever.  [Indiscernible] [0:23:39] any preproduction review and that will bind not just the parties, but also the third parties.


Karl :  But Tom, you can have a 502(E) agreement that doesn’t require any reasonable efforts either and as binding as those parties, but not third parties, would you agree with that?


Tom:  Well, there is some hunting echoes in the case law that there are some limits on those kinds of agreements between parties, if they would expressively not get a court order, I’m assuming you’re meeting without a court order?


Karl:  Yeah.  If you and I were involved in a hypothetical litigation, I call you up and I say, Tom, understand that we got to keep cross down.  My guys don’t want me to review all this stuff.  Come in and look at it, and let’s just have an agreement.  You’ll look at it.  You’ll identify what you want to use, then I’ll take a look at the privilege and we’ll see [Indiscernible] [0:24:39] and cut it all down.  And you say, that’s fine with me.  I agree.  What I have done, would not be any reasonable effort, any effort prior to you taking a look at it.  It would be a quick peek paradigm sort of quintessential quick peek paradigm.  And at least on the–if you read the rule itself and the advisory committee notes to it, it would not preclude that, I would have absolute protection against waiver as to your agreement, but against no one else if it was not then blessed by the court, it would have 502(D) order.


Judge Grimm:  I granted that 502(E), which is controlling effect of a party agreement, I agree that it could be read on its face to interpret that, but I don’t—something tells me that if some extraordinary set of circumstances happen and something changed, there could be circumstances under which if they had not gone the prior approval of the court, I’m not so sure there wouldn’t be the ability to argue waiver even with respect to that agreement.


Karl:  A filled animal house, you messed up, you trusted me.


Judge Grimm:  Very good.


Karl:  Yes.  Okay.  Thanks for helping me with the question, Judge Grimm.  Good fact scenario.  Let’s move in the constitutional issue.


Judge Grim:  Well let me just say this by the way.  Everybody does do that.  And for years and year and years, we’ve all assumed that you could make such an agreement.  And in fact, informal arrangements like that have been upheld by the courts over and over again.  For example – Let me give an example.  A typical example was where the court orders – the third party examination of a hard drive because they’re convinced that there is missing information.  Typically in the past, courts have coupled those orders with a provision that the fact that the third party looks at it does not waive that privilege and so that the authority of the courts do fluctuate that kind of thing by agreement of the parties or without it as long than I accepted.


Karl:  Okay.  Let’s move in on the constitutional issues here over the Rule 502 and they are a few here.  Tom, Rule 502 is federal over side, but the waiver of privileges was based on the commerce clause of the constitution.  However, it’s hard to see how privilege by itself, which is an intimate part of the court proceeding is really an economic issue.  That’s a fascinating overview of the constitutionality of Rule 502 found in a Larview article, new federal rule evidence 502 privileges, obligations, and opportunities found at 66 Washington Larview 673 and up at that site and the description of the show.  But, can you see parties like thinking about fact scenario here like may be special insurance groups bringing constitutional challenges on whether rule 502 is unconstitutional?


Tom:  You know, I think I’d rather refer to Judge Grimm on that when – I really don’t have a strong view on that except that—I think they’re due process issues far more stronger–whether or not congress had the authority to act as it acted to me as a non starter.  I don’t believe that’s an issue.  I recognize that my good friend, Mr. Noise had written extensively on it and I have no doubt that under some circumstances, it could be raised.  But, I think the real question is the one we were dealing with earlier whether an order that compels parties to truncate what they really want to do which is review their information for privilege whether or not that violates the due process because that is a far more important issue to me.  I think that—I do know that the constitutionality of Rule 502 was raised during the committee process when the standing committee and the rules of evidence was drafting it.  I know that Professor Dan Capra who for whom we all owe, a great data of gratitude for being the principal draftsperson of the main different drafts of this.  And his consultant who worked with him on the legal background, looked at this extensively and reached the very solid conclusion that there was congressional authority to be able to support this and I believe that it was, that there was information.  I could be wrong on this, but my recollection is that during that committee, considerations in congress that there was, that there were briefs and discussions on that.  So I tend to without having independently studied it think that Tom’s conclusion that it is the authority to enact it seems solid makes a lot of sense to me.  The notion of as applied does it raise due process issues is interesting because it is possible to foresee an instance where in a particular litigation, but a lot at stake and I mean, imagine if you had two enormously large and well funded adversaries in a—that the rank’s litigation where one commercial viability would depend upon the outcome of it and if the court ordered under 502(D) that accelerated discovery had to occur under circumstances that would enhance the possibility of a waiver and that the waiver could result in their adversary, obtaining the information that could be very confidential and from a commercial point of view, one could see that that case might come up.  But the best I think that the person who filed that motion could hope for would be a finding the as applied in that instance it might have violated new process not that there was any question as to the authority of congress to enact it or that the rule itself was [Indiscernible] [0:31:00] jeopardy.


Tom:  Awesome! I’d like your opinion on this, I mean the fact that maybe over a year to two years, a number of parties were relied on 502 as well as judges and there may have been some disclosure of confidential information.  In 10 years, I’d say the supreme court ever visited this – might have be persuasive that you have all sorts of corporations and parties, not able to sleep at night, waiting for the decision to see if there are privileges were now waived.


Grimm:  [Indiscernible] [0:31:33] Keep in mind, this was an extraordinary accomplishment because what you have and the rules enabling that is – were not widely read and frequently visited, very important rule because it was a rational statue that said that the ordinary rule making process that occurs a very standing committees in the federal system for several procedure and evidence and the other committee that are there cannot create or abrogate an evidentiary privilege to ordinary rule making.  Instead, it had to be done by congress passing essentially stand alone legislation to do so.  During a contested presidential election, you had both houses of congress pass anonymously the identical version of an act that created this that was signed by the president in the middle of this entire process where the entire country was looking elsewhere.  And that didn’t ‘occur if you had strong interest who were affected by that in opposition.  The concern that Tom made reference to that that Judge Rosenthal and other tough leaders in this area of trying to balance cause or discovery.  You know, Tom got into this game with ESI because of the implications of discovery.  Obligations and expenses that are imposed upon litigants when you have so much information that could be conceivably be within the scope of discovery and the concern is there in any number of sources about the cause of civil litigation and how you manage it.  You cannot effectively use the reasonable tools that are out there to manage litigation if you do not have 502.  You just can’t because you can’t have any kind of reasonable agreements done with the client’s permission and everything else.  If the clients want that if you can’t address the waivers and you can’t do that without 502.


So it is something that is equally positive for those who seek discovery because it gets done discovery faster and quicker, and with less delay and expense and it is equally advantageous for those who produce information because it has a series of protections that can protect against the absolute dock-wrenching consequences of waiver of privilege or production.  And so, it is a – you cannot advance it and you cannot bring these cause into control without a 502(D) or 502.  And so, I think that anyone who looks at it is going to have to keep that in mind and while it’s wonderful to sit and think of constitutional implications of law in terms of the real world where courts have to live and litigants have to live.  This is something which has to be.


Judge Grimm:  [Indiscernible] [0:34:49] from a realistic perspective the constitutional issues or red herrings that they really aren’t the real gut issues here.  I would be surprised that that would be possible to even bring a client with constitutionality than the abstract against it.


Karl:  I agree.  Alright well, since we’re on agreement on that issue, let’s go into the ethical issues caused by implementation of the rule and Tom, what do you think about the conflict between Rule 502 and it’s likely preemption of state rules to professional responsibility that imposed duties on lawyers to zealously protect their clients confidential information and to conduct this review before turning the client’s documents to the litigation adversary during discovery?


Tom:  Well, I’d love to dismiss that conflict as the red herring as well, but it’s not.  It’s a very real one.  But I don’t think – I think the courts that were involved in this in thinking about this and the folks that actually wrote it were probably correct and not dealing with the issue in the rule itself.  It does not expressively preempt any of the ethical responsibilities of the council.  There has been in the same Larview article that you referred earlier, the argument that is necessary for this to preempt two types of requirements.  One is the requirement that a party zealously represent its clients and therefore make use of inadvertently produced information almost regardless of what the rule say and then also the parallel problem that arises for the party who is producing the information and his attorney because absent and informed consent, that party is producing information that is confidential to that client and under rule 1.6, the model rules that is pretty clearly a violation.  So, some of the commentators and here I’m referring to a recent as you had on published Larview article by a very talented professor from the University of Tennessee who will be published in the Maryland Larview in the next year, in the next few months I think.  She has advocated that we amend the ethical rules themselves to make it clear what the party’s responsibilities are both on the producing end and on the receiving end.  The problem is that as it currently exist, a number of states have taken different and conflicting positions on some fairly practical issues.  For example, if you’re the receiving party of inadvertently produced information, do you have the duty to identify that as privileged information and then immediately notify the party that produced it who may have not caught the fact that it slipped through and what happens if there’s a 502(D) order and a quick peek arrangement is made and you go in there and you start looking at information and you see that some of its privilege because they have inadvertently included the legal department files within the other files that they are making available to, do you have a duty then to stop reading that information, take no notes on it, and notify the producing party and back away from it.  All of these issues are answered in different ways depending on the jurisdictions that you’re in.


So, there is a very, very real problem and then it’s even exasperated – exacerbated because of the fact that electronic information often contains embedded information or metadata that might reveal confidential or privileged information.  And if that is also inadvertently produced or eve if it is produced in a quick peek situation where you know there’s a risk there, what are your duties? I do not yet know.  I was struck by the suggestion that the American Bar Association had the responsibility to amend their model rules to clarify this.  The American Bar Association, however, is not a monolithic group and they’re always competing interest within the group, but takes forever doing the thing, I’m not sure that they would ever be a little reached agreement.  Interestingly enough, in rule 4.4 of the model rule, which has been adopted by I guess roughly half the states.  They take the position that these kinds of issues belong in the legal sphere and they refuse to deal with some of them.  I’m struck by that and I guess where I end up is saying to myself, informed consent of the producing party by their client of all the consequences that could arise by entering into these arrangements.  To me, that’s the key that you need to talk to your client.  On the receiving end, I just go back to the days in the 80s when I was doing this kind of work and I remember one case I had where there were 50 million documents and I was faxed by the other side, some of the confidential information that they wanted to convey to other lawyers on their team and I remember thinking to myself, I didn’t look at basic rules.  I just didn’t feel right having possession of obviously privileged information.


And I turned a back over to not even reading it.  To me, it’s common sense that you’re going to do that kind of thing no matter what the rules are.  But having gone to some length about this, I know Judge Grimm on that way has some strong views on it too.


Karl:  You’ve answered a lot of questions that I was going to ask you, Tom.  That’s great.


Judge Grimm:  I couldn’t agree more with Tom’s views that this is a very tough area for lawyers and clients.  The professor’s suggestion that clarification needs to come from the respected source that will trickle down is helpful, but it’s not as positive and Tom correctly pointed out that the model rules of professional responsibility that the ABA comes out with are certainly often referred to by other jurisdictions.  They’ve given a very differential review by lots.  But many states adopt a version of it and then modify it.  So on this very same issue that Tom discussed, my own state, Maryland, has adopted a version of 4.4 that says, “You do not have to notify the other side that you received it and you can then access it, read it, and take the position that there’s been waiver.  The ABA rule says you have to notify the other side if you have received information where it’s unclear as to what – that that was privilege or protectiveness unclear as to whether they intended to produce it.  But, you can read it and take the positions instead of wait.  Other individual state bars to my recollection Florida, New York, Arizona, Alabama, and then may be others have taken the position that, that is a violation and that you have to stop and not look at it, contact the adversary and follow their instructions.  And other jurisdictions such as Washington DC have said that if you have actual knowledge that they–if you do not have actual knowledge that they did not intend to produce it you can look at it and I think Pennsylvania adopted a multiple factor test.


So when you look at someone who is–if you have someone who does litigation in more than one state and if you realize that the ethical law is affected by choice of law rules, you know, it creates a tremendously hat hazard and polygonal environment for lawyers to try and figure out what their ethical obligations are.  And as Tom pointed out, no matter what you do, you can face criticism because if your client is–wait a minute, where we are, you can look at that stuff and you turn it back over and you didn’t zealously represent me? That’s an ethical violation.  On the other hand, if you’ve done what appears to be, you know, take advantage of what appears to be something that was produced and across the line and deciding the ethics law of the location that will govern says that’s unethical then you have done something unethical and that’s just a horrible dilemma what practicing attorneys and clients to be in.  And the only take away point is an absolutely essential thing and Tom, I agree with you completely is you’ve got to have informed consent.  And at the end of the day, this is going to be a very practical thing that is going to be out there and you know, we will have to see where that goes as we take these things incrementally when they come up.  But right now, the guidance that you get is far from uniform from the various state bars.  And that’s really tough for real life waivers and clients to figure out, how do we chart away through these waters?


Tom:  You know recently enough, just two weeks ago, a cord in the northern district of Illinois, Magistrate Brown dealt with these issues and actually rendered an opinion on them and the citation is Coburn versus White Cap at 2009 West Law 2424079.  It’s an August 7th decision.  The judge held that there have been no way over privilege where e-mails swift through review of pages and so on wipe to paralegals and without getting into the details of how they applied rule 502 which is very interesting, what I want to point out is that the court rejected the argument that the party had a right and perhaps even the duty to retain the e-mail in order to represent their client zealously.  And the court then went on to explain the interaction between rule 502 and the version of rule 4.4 that the ethical rule in Illinois has adopted.  Basically, the holding of the case was requiring a receiving party to notify the sending lawyer is clearly at odd with the existence of a duty on the part of the receiving lawyer to use the information for the benefit over client.


So, this is the only opinion I’ve seen.  Certainly the only post 502 opinion that actually tries to tackle this issue, but it is going to be a fascinating topic.  And the way – the course of way they tackle it is not by holding preemption on the part of 502, but by reconciling 502 with the ABA position.  It’s a little sophistic, but at least they solve the issue and they try to deal with it.


Karl:  I guess the 502 was passed to try to keep a clause down if a client objects and wants to look at everything, basically not taking advantage of rule 502, they want to pay the money.


Tom:  Well, the issue that I’ve identified and this is kind of my signature issue is what happens when the client says to you, “Look, I don’t care what the court say or what 502 says, I recognize that they want me to reduce my cause.  But I do not want to run the risk of having information revealed inadvertently to the other side and therefore, I’m willing to spend that money.”  But the court says, I don’t care what your client said.  I’m going to order a 502(D) matter here and couple it with an expedited schedule.


Karl:  That means you have to hire 47 additional people to do the privilege review and the time the court allows.


Tom:  Well, in the Fannie May case, as you know, that’s basically what happened.


Karl:  Right.  I would say it’s enormous.


Tom:  Yeah.  The court justified what I was doing in part in order to get that discovery accomplished.


Karl:  Or it’s like the federal to civil procedure, Judge Grimm, what do you think about the tension between the civil rules of procedure rule 26(G) of the council of ethical duty to make a reasonable in query to find relevant documents versus possibly not putting any eyes on the documents, so under rule 502, do you see problems of council failing to satisfy their duty under federal civil procedure 26G?


Judge Grimm:  I think that he has little bit of an apples and oranges dimension to your question.  26(G) essentially imposes bilateral obligations on producing parties and requesting parties in discovery to have made reasonable factual enquiry to justify either a discovery request or a discovery response objection or answer.  And so yes for example, the classic example in which a 26(G) issue would come out in the context of a responding – a party responding discovery would be that the requesting party says I want this information and the responding party without having done an investigation says that the request is overbroad burdensome, not calculated to lead to discoverable information that is ultimately immiscible, but the classics sort of played objections without having done an investigation to determine what information is there and what cost there would be in fact to produce it.  502(D) or 502, would not run a foul of that because it would facilitate a party coming back to say—alright well, it may well be that if I looked at every single one of these documents and it will be burdensome, but I can adopt certain procedures that would facilitate that cause or reduce the cause, produce information and protect against waiver.  So I think that there’s no disharmony between 502 and 26(G).  I think that the notion is that, you could still have something that was excessively burdensome to try to produce information where the scope was so great even if you did use message to try to reduce that expense and protect it under 502, but I don’t see any disharmony between the two rules.


Karl:  Okay.  Tom, we spoke a bit about the tension between the new rule 502 and rule to professional conduct, do you think there’s any possibility of amending the rule for personal conduct or do you pretty much think the ABA just not going to step back into that?


Tom:  I’m not close enough to their thinking to answer their question it began with you.  I’m scenically about it, but I don’t know.


Karl:  Okay.  I think actually, I had a few questions here that I think we’ve probably answered in terms of whether the court can insist production can occur on that expedited schedule.  I was going to ask that to you Tom, but Judge Grimm went into that, pretty much detail there earlier.  Let’s see.  Well Tom, do you see any problems as rule 502 only focusing on attorney client privilege waiver? I mean, what does this mean for any other privilege communication such as doctor-patient privilege, [Indiscernible] [00:51:03] clergy privilege.


Tom:  Well, before I answer you that let me rephrase your question and that is, do I see any problems with respect to confidential information that is not privilege, but is nonetheless confidential? And the answer is I see a lot of problems with that.  And I think this is one of the subtle issues that we haven’t even begun to really work through on our own mind.  For example, let’s say you have a given bulk of information.  And a lot of that information deals with patterns and a lot of it has to do with information that you really do not wish to have revealed.  This provides no protection at all for that.  If you choose for example to have a quick peek and within that information is confidential trade secrets or confidential information about your patterns, that information is not going to be subway to a 502(D).  And if the other side looks at it and you haven’t weeded it out in advance, you run some really serious risk.  So, in many ways, it can be argued that by confiding itself quiet understandably to attorney work product and to the privilege information, it doesn’t really make a difference because at least in a highly intensive business oriented case where there is trade secrets, you’re still going to have to make a pretty thorough review just to try to prevent that from occurring.


Judge Grimm:  Okay, jumping out with Tom’s point is here because there’s another issue out there which I think is not on a lot of rare scopes, there is a present pending in both the house and the senate legislation that’s been titled to sunshine in Litigation Act.  And what that would do if it was enacted, I’m giving understanding that similar litigation or legislation has been introduced in the past, but that is actually in both houses now.  It’s senate 537 and house of Representatives Bill 1508 that would – that would do is, is that it would make it more – it would enact procedural steps that had to be followed before a court could enter a protective order under rule 26(G).  Now, Tom’s point about confidential information like confidential commercial information is very important because lots of things that there is no exemption from discovery of confidential information like there is for privilege or work part for definite information.  The recourse you have to have comes from the protective order rule of 26C and that requires good cause and one of the examples under 26C deals with what has been referred to as trade secrets or confidential commercial information.  What the sunshine litigation act would require is that before – and I think the practice is that keenly for a protection enter into agreements that if they produce information, which is not privilege but confidential, that they can limit its access.  Keep it confidential, maintaining confidential.


This law as drafted, would require that before a court could approve that which I think happens routinely in far more instances and not, it would have to make specific fact findings namely that the information that was to be deemed to be confidential was not relevant to the protection of public health and safety or if it were that the public interest in disclosure of health and safety hazards did not out way the public interest in maintaining confidentiality.  And that the protections were no broader than necessary to protect the privacy interest and we’d put the burden on the party that seeks confidentiality to establish that.  That would I think, change significantly the manner in which confidentiality orders are entered into in civil litigation.  And require far more factory robust, findings to be made and potentially, some increased level of complexity to try and justify some of the routine confidentiality were provisions that are negotiated that would limit whether something could be use in a deposition or attachment exhibit or how many people could see it.  So, that this notion of where do confidential records fit into this certainly is we haven’t heard the last word yet on it.


Karl:  I wonder if I can ask you judge.  What has been your experience so far and if you had limited experience so maybe you could share what you’ve heard others say about it, with respect to 502D orders, are they being routinely requested and do you have any information as to how many of them represent attempts to actually use let’s say a quick peek approach.


Judge Grimm:  My sense of course which is completing [Indiscernible] [0:56:29] talking to lawyers and judges at COE programs or other matters like that.  I have not personally seen any litigant as for 502 the order.  And from my conversations with colleagues, I think that this is not something that they have been flooded with.  And I do not get the sense among the judges that I have chatted about this with that there is a wide spread sense that this is what we’ve been waiting for, for a long time to be able to shorten those scheduling or there’s even more.  To the contrary, I think that there’s been a fair recognition by most of the judges who have confronted what they think the impact of 502 is, they recognized that this is tricky ground for everybody on both sides the producing and the receiving side, and that it’s preferable to let the lawyers – and this by the way is consistent with the changes of the rules so, procedure affecting the ESI that came into effect in December 2006.  The best way is for the parties trying to come to what they think make sense and take it to the court for approval.  And whether it is the court things to what they’ve agreed to is not enough that they have a dialogue to be able to try and deal with it.  And I think if that’s how it’s going to most often come up.  And I think it’s likely only to be the case if one side seeks a production schedule, it is so long and potentially expensive that the adversary complains about it and then says that the court, well you know your honor what they’ve asked was unreasonable on his face and we told you why and you can certainly protect against their worries by doing a 502(D).  That’ s the likely scenario.  I can foresee you when judges are making fun with it.  But I don’t think people have been innovative with it.  The relative few number of cases that have come out talking about it, only one or two recently suggests that that’s been the experience nationwide as well.


Karl:  Okay Tom, I’m going to move a little further ahead here on some of the gray areas between state courts and federal courts.  And Tom, what do you  think of the tension of not addressing whether a subject matters has been waved in a federal litigation, then having a state court later on, find the subject matter was waived because of party voluntarily disclose the piece of information in federal courts.


Tom:  I apologize and I haven’t really thought about that issue.  Well, as you know 502(A) deals with disclosures in federal proceedings that in all fairness require you to go beyond the precise disclosure and into subject matter disclosure and it strikes me that as I look at the language of the rule, it would govern any state proceeding as well.  So whatever, I’m not sure there would be a tension.


Judge Grimm:  I think you’re right Tom.  502(A) seeks to define what it takes to waive a turning clamp privilege and work part.  I do know from having had the privilege of participating in the hearings on 502(D) up at [Indiscernible] [1:00:09] law school that a great deal of attention was spent on all aspects of the rule, but nonetheless on this as well.  But 502(A) says is the constitutional waiver either under federal or state law, the production of privileged or protected information must be intentional.  And if there is waiver, then the scope of the waiver is it is the specific communication by the written or oral was intentionally disclosed as well as all other communications whether written or oral that ought in fairness be considered in conjunction there with and that language if it sounds familiar it is, it comes right out of the evidence rule 106, which is the rule of completeness.  So it is not complete subject matter waiver.  It limits it to that which ought in fairness be considered as to the subject matter of that which was intentionally produced.  And because it has the impact that makes it apply coequally to federal proceedings, the administrator proceedings, and in judicial proceedings as well as state, I think Tom’s exactly right.  There is no conflict.


Tom:  And there is an opinion, the [Indiscernible] [1:01:22] opinion from a Texas federal court where the issue was raised by one of the parties that I’m applying a 502 order would not protect it in the state court and the court said they knew no reason why the state courts wouldn’t follow 502 requirements in this regard.


Judge Grimm:  Yeah.  That opinion was a very helpful opinion and not only relied upon 502(D), but also looked at the substantial evidentiary laws of Texas that would apply as well and conclude that it wouldn’t be a waiver.  But I’m not sure that you would even need to on the plain mean of 502 go into that specific analysis of the competing state versus federal law and privilege.


Tom:  I think 502 was intended and 502 does allow you to argue that conclusion without having gone through all that additional work.


Judge Grimm:  And to the extent there are legitimate constitutional issues.  I think that’s an area where you have some constitutional concerns, but the committee made a big effort to deal with the chief justices in the United States as part of this process to make sure that they were comfortable with this and I think that’s been pretty well been work out.


Karl:  And Judge Grimm earlier, a few minutes ago, you were saying that you’re hearing that they’re has not been a lot of activities with rule 502(D) orders.  To me would seem a lot like getting free insurance to get something like that.  Get an order in place by the court but that’s now what’s happening is…


Judge Grim:  Well, no I think – here’s what I think.  Although Tom and I have a shared fascination with this area, I still have some lingering doubts that the overwhelming majority of the bar shares hot fascination.  So I feel and think that there are a lot of people out there and completely unaware of what 502(D) is or does.  Number one, 502 does.  I think as we go forward, more and more people are going to be aware of it.  I think what’s going to happen is – is that you’re going to get a consensus among academics and judges and lawyers that if you’re going to opt for a 502(E) agreement, you ought to get the free insurance policy of a 502(D) order to bless it.  And that’s the context I think in which 502(D) is most going to be implicated when the party would ask for.  I think that as they start to get litigants and lawyers get more familiar with this and aware of it, they’re going to routinely have agreements that they enter into that they present to the court as rule 16 and 26 contemplate they will.  Their discovery agreements for the court to approve and where the parties have done so and reached agreement and have not identified time bench marks that the court disagrees with.  I think you can expect that courts will routinely find them.  I think the cases where the 502(D) has come up, in the course of litigations such as Judge [Indiscernible] [01:04:41] recent opinion out of this southern district of New York was when the party sometimes did not appear to be aware of 502 and we’re raising issues about well this is going to cause too much money for us to do and we’re afraid of the consequences of the court in a footnote say, wait a minute.  I can take care of that in a heartbeat with 502D.  So I think that in most instances, you’re not going to get a lot of shouting about this because it’s going to be negotiated by the parties submitted with consent to the court and approved by the court.  And only in the outlier condition that you’re going to see any kind of contested issues on that.


Karl:  Oh! we won’t even go into the delusional privilege because we’re not even anywhere near that yet so, let’s go on to an area where we are that the last area this program is to cause issue.  It is associated with privilege reviews.  Tom, you were an article producing that rule 502 won’t reduce the cost and the real cost reducing opportunity is a focus on the rules related to proportionality and discovery.  So is rule 502 necessary to reduce the cost of E-Discovery and should we still be looking at proportionality with privilege reviews?


Tom:  You’ve asked two questions there.  Rule 502 has lots of good reasons for being enacted and it’s really a marvelous and [Indiscernible] [1:06:09] somewhat unexpected development that they got to the House of Representatives after there was a switch and control from the democrats or republicans or vice versa and I think as the judge has already suggested the fact that happened shows how it had the unanimous virtually unanimous support of both sides of the trial bar and both sides of the political bar.  So I think it is a good thing it was passed.  Now, what is it going to do with cost? As I’ve said in my article and as I’ve said here in this program, the reality is that for other reasons that have nothing to do with 502 such as the inability to control confidential or trade secrets, the inability to fathom what the impact would be of the disclosure of privilege information on the other side even if we get it back.  For all those reasons, I think that in cases where parties have a lot of stake, I personally believe they’re not going to consciously reduce their review of information both for relevance and for privilege.  And therefore the cost benefits will not be realized.  So the better way of looking at it in my view is to take into account at the front end, at the requesting side, if the owner’s requests are made that are inappropriate because of the size of the controversy or because of the burns that are placed on parties to meet it.  Then I think that’s the time for the courts to step in and enforce the fundamental principle that things should be proportional.


Judge Grimm:  Yeah I agree with you Tom completely about that.  I think that it would be in the stake to think that 502 was envisioned as or should be argued to be a get out of jail free cards so that you didn’t have to do the hard work of dealing with the 26(G) and the 26B2C cost benefit proportionality issues.  Proportionality is the key to get into grips with the issues that are associated with discovery production and we’re going to have to make, avoid that tough work.  Discovery has to be proportional.  It has to be balanced so that the fair amount needed for both parties is done and the cause bears some relationship to what’s that issue in the case that’s challenging.  We all know what tools are necessary to do it.  You have to have willingness and the part of the court to be hands on in terms of dealing with that.  You have to have parties that have read and understand and internalize the requirements of 26(G) and 26B2C.  Clients who understand that however much they view the litigation as involving important issues to their well being that it has to be done in a framework that is, that comports with what the rules requires.  It requires lawyers to understand the proper limits of the adversary system and where adversary ends and corporation begins.  And the reason why this is all important is because all of us who are involved in the judicial process whether is lawyers or judges have been entrusted by the public with their willingness to allow their disputes to be brought to where we work and live to be resolve and if we don’t do this the right way, then we will not be worthwhile stewards of that trust.  And we can’t afford to get it wrong.  So, I don’t think 502 will ever be argued as being a bypass for doing the hard work that proportionality requires.


Tom:  And by the way 502 does also in their committee notes go a long way towards hoping educate folks about the proper rule of calling of information through a search technology…


Judge Grimm:  Absolutely.


Tom:  And it also alludes to something that can be overdone and overstated, but it’s nonetheless important and that is the management of information.  And those two twin principles are buried in the community notes.  But I think people are going to recognize that as they get into it and maybe a couple of that with proportionality.  By the way, proportionality is a very difficult concept to apply in practice.  There is a pretty one on case called the Spiker Case out of Kansas where the court tried to deal with proportionality in this issue and had some difficulties.  There’s the K beer distributing company case out of Wisconsin in June of 2009 where the court also dealt with it.  Courts are just beginning to come to groups with proportionality despite of fact that Judge Grim and I have both written extensively on it.


Judge Grimm:  This could be our next podcast.  Great.  I’m looking for more good ideas.


Karl:  Hey, I think that the final answer was a great wrap-up answer from both of you on this really interesting new topic.  So if we’ve beaten 502 not to death, but sufficiently for the last hour and 15 minutes, maybe we should call it a day on this right now unless you want to add anything else?


Tom:  No, that’s all I have to say.


Karl:  Right.  Well, this has been really a wonderful podcast.  Judge Grim and Tom Allman, thank you for joining us here on ESI Bytes.  I hope to do more shows with both of you in the future.  And to our audience, thanks for joining us for complete list of shows, feel free to visit


Tom:  You know that there is an interpretation of the title of this program that might not be very charitable.




Karl:  Okay, I’ll do a podcast on how we came up with the name, but – and it doesn’t include that [Laughter].


Tom:  Right.  Thank you very much.


Karl:  But remember to visit the ESI Bytes to learn tips about Electronic Discovery and records management for ESI bites you back.  This is Karl Schineman from Jurinnov.  Thanks a lot and have a nice day.

Recorded 09/04/2009


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