View from the Bench The Law of E-Discovery, Part II

As most of you movie goers know, the challenging part of doing a sequel is that it is usually hard to top the original. I promise I am going to do my best in Part II of the law of e-discovery after Victor Stanley v. Creative Pipe Inc. 250 FRD 251 (US Dist. Ct., D. Md., 2008). We left off pointing out that when lawyers supervise discovery in this era of electronic discovery, they are often placed in the dual role of attorney and witness; and when there is inadvertent waiver of the work product and attorney-client privilege during discovery under their watch, the results can be disastrous for both client and counsel.
Prior to Victor Stanley, Judge Grimm had decided the case of Continental Casualty Co v. Under Armour, 537 F. Supp. 2d 761 (U.S. Dist. Ct. D. Md. 2008). This was a declaratory judgment case where three insurance companies (known as CNA) sued their insured, the Under Armour Corp., seeking a ruling that under a series of insurance policies issued to the corporation they were under no obligation to defend or indemnify the company in a litigation brought by two companies against Under Armour. Judge Grimm had a series of discovery motions to decide in the case, and in one of them Under Armour asked for a ruling on what use it could make of a “pdf” file it received from its independent insurance broker which contained copies of claim notes which allegedly contained attorney-client and work product privileged information from CNA’s counsel. The file had erroneously been posted in the wrong location by a CNA claims specialist assigned to Under Armour claims on a CNA central website. Here, the court held that when documents in question qualified as both attorney-client privileged and work product protected, the court must conduct a separate analysis under each theory to determine when inadvertent production constitutes a waiver. In CNA Judge Grimm held that by disclosing the content of what was protected opinion work product to its adversary CNA had waived the privilege. “As a practical matter, no other result makes sense… Neither Under Armour nor its counsel can purge from their consciousness this information that they received not through any wrongdoing of their own but, rather, as a result of the voluntary, though inadvertent, action of CNA.” (Continental Casualty Co v. Under Armour Inc., at 773)
Last column, I mentioned that there had developed three approaches to deciding “inadvertent waiver” cases-one strict, one liberal and one intermediate. Not surprisingly, the intermediate approach has gained the most traction in the districts. Under this test, Grimm wrote in Victor Stanley II, the court must balance the following five factors in determining whether inadvertent production of attorney-client privileged materials waives the privilege. They are:1) the reasonableness of the precautions taken; 2) the number of such inadvertent disclosures; 3) the extent of the disclosures; 4) any delay in measures taken to rectify the disclosures and 5) the ever popular interests of justice. (Victor Stanley v. Creative Pipe, Inc., at 259). Recall that in Victor Stanley during discovery defense counsel had conducted a keyword search using seventy key words chosen by defendant and two attorneys. That search led to the creation of a several hundred documents, 165 of which were then inadvertently turned over during document exchange. At the hearing, the burden was on the defendant to persuade the court that the documents were protected by privilege and that privilege should not be deemed waiver by the mistake. Grimm began his inquiry with the first factor- the reasonableness of the precautions taken by the creator of the documents. According to his decision, the defendants failed to provide the court with the keywords that were used; why they were chosen; the credentials of the attorneys and client in terms of creating and executing the search; whether or not they analyzed the results of the search in order to determine its reliability, appropriateness and quality. As you read the decision you it will become clear that the decision in this case was not a difficult one for the judge. He held that the defendants had failed to demonstrate that the keyword search they utilized was reasonable, that the persons who conducted the search were qualified, and that there was any quality assurance testing. It was also significant that they had waived the court protection of a Hopson agreement as discussed above.
There is another aspect of Victor Stanley II that is important for attorneys who consider supervising discovery in cases such as this and that is the analysis Judge Grimm used in determining when the attorney-client privilege is properly asserted. The factors he considered are that the holder of the privilege is about to become a client; that the client communicated with a member of the bar and was acting as an attorney at the time; the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. (Victor Stanley v. Creative Pipe Inc., at 256).
After this decision, it is my view that an attorney who participates in electronic discovery to the extent that the attorney would be able to invoke the attorney-client privilege must be extremely careful about the manner in which that discovery is conducted. Be aware of the reasonableness test that Judge Grimm described. If you or your subordinates cannot meet that test, it is clear that the inadvertent dissemination of privileged materials will waive that privilege. See you next column.
Arthur M. Diamond is a Supreme Court Justice in Mineola. He welcomes evidence questions & comments and can be reached at