March 19, 2009

Behind the shadows of the current financial crisis and political climate, a new and important Federal Rule of Evidence addressing electronic discovery was created, which many have overlooked.  But in an age when virtually all communications and business records are created and stored electronically, the new Rule merits close attention and understanding by in-house counsel for employers and by human resource professionals.

Prior to the passage of Rule 502, the near-ubiquitous use of email, combined with widespread use of other sources of electronically stored information (“ESI”), was creating problems associated with the production of volumes of ESI in litigation. The most troublesome problems included inadvertent waiver of the attorney-client privilege and work product doctrine. Rule 502 now provides protection for employers (and others) against such inadvertent waivers, and further aims to curtail steep expenses associated with privilege reviews of electronic discovery.

Rule 502 was enacted on September 19, 2008 and is applicable in all federal actions. The new rule is designed to mitigate the risk that the inadvertent disclosure of documents otherwise protected by the attorney-client privilege or work product doctrine will result in waiver of the privilege regarding undisclosed documents covering the same subject matter – the so-called “subject matter waiver.” Under the Rule, the inadvertent disclosure of materials otherwise protected by the attorney-client privilege or work product doctrine will not constitute a waiver if:

• Disclosure is inadvertent;
  
• The holder of the privilege or protection took reasonable steps to prevent disclosure; and
  
• The holder of the privilege took reasonable steps to rectify the error.

Rule 502 provides that subject-matter waiver applies to disclosed privileged and confidential information only if the disclosure is intentional. In other words, when a party produces a privileged or confidential document, any resulting waiver does not cover other documents concerning the same subject matter as long as the disclosure was not intentional and the use of the protected document is not misleading.

One of the hallmarks of Rule 502 is the ability to obtain a court order governing the disclosure of confidential and privileged information. These court orders enforce parties’ private agreements that make electronic discovery more efficient and minimize the potential for waiver. Further, federal court orders protecting against waiver are now enforceable in any other federal or state proceeding. The effect of such orders is to significantly reduce the costs of privilege review by ensuring that the orders reliably protect against efforts to find waiver in subsequent litigation, and by providing consistency between federal and state courts. Additionally, in cases where privileged or protected material has been disclosed in a state proceeding, Rule 502 provides that federal courts will apply the most protective federal or state rule against waiver to shield litigants against adverse waiver rulings.

Notwithstanding these provisions, litigants may still enter into separate agreements in which they create broader protective conditions than would otherwise be available under the new Rule.

Although Rule 502 provides some degree of protection, the failure to properly manage electronic discovery remains a dangerous threat. Once privileged and confidential documents are exposed, the damage is difficult to mitigate. Employers should make efforts now to ensure that their privileged documents remain protected in future litigation. Implementing effective document retention policies and practices, as well as developing a workable system regarding how documents are to be produced, can help ensure that employers are prepared for the inevitable challenges of managing electronic discovery.

LeClairRyan’s Labor and Employment attorneys can help you plan and prepare for electronic discovery, as well as help you develop appropriate document retention policies and procedures.  Contact any of our labor and employment professionals for assistance.

The author, Antonio Gutierrez, can be reached at 973.491.3302 or at [email protected].