Fed. R. Evid. 502:

Congress’s Solution to Waiver of Privilege Issues in Discovery Productions

The advent and widespread adoption of electronic communication and document creation have been a boon to many businesses but a bane to many litigants. The risk of inadvertently waiving either the attorney/client or the work product privilege has always been a concern for attorneys responding to requests for production. That risk increased exponentially when document production began to include countless emails, document versions, and other electronic files. Courts, and now Congress, have attempted to address these issues. This article will examine Fed. R. Evid. 502, Congress’s attempt to address these new issues.

In response to the new, cumbersome burden posed by electronically stored information, parties have sought to enter into agreements concerning waiver of the privileges. Courts, however, were inconsistent in their acceptance of those agreements, and often invalidated them. Courts also often found them binding only as between those parties, finding a waiver by the disclosing party in litigation involving future litigants.

Federal courts slowly attempted to catch up to the changing needs and circumstances parties were facing. Federal case law developed to adapt the common law to the new realities of electronic discovery. The case law, however, differed from circuit to circuit and often, district to district.

On September 19, 2008, Senate Bill 2450 was signed into law, amending the Federal Rules of Evidence by adding Rule 502. Fed. R. Evid. 502’s enactment was an effort to allay inadvertent waiver concerns, make document production less expensive, and provide uniformity to all federal courts. While the new rule did achieve those goals to a point, it also introduced several new questions that have yet to be answered by the courts and of which attorneys should remain cognizant.

Fed. R. Evid. 502 sought to codify what Congress viewed as the best federal decisions up to that point. To that end, Fed. R. Evid. 502 contains seven subsections, five of which define when waiver occurs and two of which concern scope and definitions.

Disclosure Intentionally Made 

Often, parties must intentionally disclose materials that are protected by a privilege in order to prove their case. This is especially true when a party is called before a federal agency and must prove either compliance or attempted compliance with agency rules. In the past, parties hesitated to make such disclosures, as they were deemed a waiver of privilege, with that waiver applying to an entire subject matter. Third parties would then be free to discover any information a party maintained on that subject matter.

Fed. R. Evid. 502(a) seeks to allay those concerns. It provides that if a privileged disclosure is made in a federal proceeding or to a federal office or agency, that waiver will only extend to undisclosed information if: 1) the waiver was intentional; 2) both the disclosed and undisclosed information concern the same subject matter; and 3) in fairness, they should be considered together.

This subsection serves as assurance to a litigant or party that disclosure to a federal agency or in a federal proceeding, if a waiver, will only waive privilege as to the disclosed information. Entire subject matter waiver is governed by the third prong of the test. Only in the interest of fairness will the disclosure constitute a waiver of the entire subject matter. This relates to the shield/sword analogy many courts use in analyzing general waiver of privileges. Circumstances when fairness requires the disclosed and undisclosed information to be considered together are indicative of a party attempting to gain a tactical advantage by select disclosure and use the privilege as both a sword and shield. When a party attempts to do this, it is deemed a waiver of privilege as to the entire subject matter.

Inadvertent Disclosure

As referenced above, the sheer size and enormity of paper and electronic discovery today have rendered many litigants helpless against inadvertent disclosure. The amount of time and money a thorough and detailed privilege review requires in many cases is prohibitive and leaves litigants frozen rather than risk waiving a privilege.

Fed. R. Evid. 502(b) attempts to partially allay concerns of inadvertent disclosures. It provides that a disclosure in a federal proceeding or to a federal agency or office will not operate as a waiver of privilege in a federal or state proceeding if: 1) the disclosure was inadvertent; 2) the holder of the privilege took reasonable steps to prevent the disclosure; and 3) the holder of the privilege promptly took steps to correct the erroneous disclosure following Fed. R. Civ. P. 26(b)(5)(B).

This subsection seeks to make discovery more manageable, but it does not relieve parties of all responsibility for inadvertent disclosure. The requirement that a party take reasonable steps to prevent disclosure still requires litigants to be diligent in protecting the privilege. Reasonableness is a case by case inquiry and will be weighed in light of the size of the discovery production, the time constraints under which the production was made, and the costs related to reviewing the production. As a case by case inquiry, it does not offer definitive assurance that a party is not waiving disclosure, but, at the least, it provides the legal framework under which a party’s action will be examined. In addition, it requires the producing party to take prompt steps to correct the erroneous disclosure. According to the Advisory Committee Notes, this last prong does not require post-production analysis, but merely requires that steps be taken to correct the disclosure when there are any obvious indications that the inadvertent disclosure took place.

Disclosure in a State Proceeding

Much like parties often disclose otherwise privileged information in federal proceedings, they often have a need to make such disclosures in state proceedings. Any federal rule governing such disclosures, however, must tread lightly in order to maintain comity between courts and avoid running afoul of principles of federalism.

Fed. R. Evid. 502(c) provides that when a disclosure is made in a state proceeding and is not the subject of a state court order concerning disclosure from that state court, the disclosure does not operate as a waiver in a federal proceeding if: 1) the disclosure would not be a waiver under this rule if it had been made in a federal proceeding; or 2) the disclosure would not be a waiver under the law of the state where the disclosure was made.

This rule strikes the balance between recognizing that state law may govern but also providing federal protection for parties in continuing and subsequent federal proceedings. It allows a party to rely on Fed. R. Evid. 502 to protect nondisclosed, privileged material, and it allows a party to prevent waiver by relying on the applicable state law.

Disclosure Pursuant to Court Order

In response to the growing burdens of discovery, many courts have begun to rely on confidentiality orders. These orders contemplate “claw-back” or “quick peek” provisions and allow litigants to exchange documents without fear of inadvertently waiving privilege. The problem with such orders is many courts interpret them as only applying to the litigants before the court and find them unenforceable as to third parties. This greatly diminishes the utility of such orders.

Fed. R. Evid. 502(d) provides that a federal court may order that a privilege is not waived by disclosure of privileged information connected with the litigation pending before that court. It also provides that such non-waiver extends to any other federal or state proceeding.

This subsection addresses the decreased utility of the confidentiality orders due to their applicability to third parties. It explicitly states that such orders are applicable against all parties and protect the privilege.

Disclosure by Agreement

While subsection (d) serves to protect parties in relation to disclosure pursuant to court order, subsection (e) does the opposite.

Fed. R. Evid. 502(e) provides that an agreement concerning disclosure in a federal proceeding is only binding on the parties to the agreement, unless it is incorporated into a court order.

This subsection makes it clear to litigants that any agreement they come to with other litigants is only enforceable as to those parties and not third parties. The exception is in the case that the agreement is incorporated in a court order. This subsection almost requires that litigants seek to have any confidentiality agreement formally adopted by the court in which the action is pending.

Scope of the Rule

For the protections against waiver in Fed. R. Evid. 502 to be useful, the protections have to extend to state and other federal proceedings. To allow a party to introduce the otherwise privileged information disclosed in a federal proceeding in a separate state proceeding and then allow that party to argue that the prior disclosure in a federal proceeding (made under the protections offered by this rule) waived subject matter privilege in the state proceeding would undermine Fed. R. Evid. 502 completely.

Fed. R. Evid. 502(f) provides that, notwithstanding Rules 101 and 1101 (to the extent they speak to the applicability of the Federal Rules of Evidence in state proceedings), the protections Rule 502 offers in relation to the disclosure of privileged information will extend to future state proceedings, federal court-annexed proceedings, and federal court-mandated arbitration proceedings. In addition, notwithstanding Rule 501, Rule 502 applies even if state law provides the rule of the decision.

Finally, Fed. R. Evid. 502(g), the final subsection of the rule, points out that this rule is limited to attorney/client and work product privileges.

Conclusion

Congress’s passage of Fed. R. Evid. 502 attempts to allay the concerns of parties in large scale document productions, make discovery more manageable, and provide for uniformity in courts. With the new statute, subject matter waiver is now less of a concern. That said, however, once privileged information is disclosed, it’s almost impossible to get the toothpaste back into the tube. That’s why, irrespective of this new rule, parties should still guard privileged information closely.

By Will Helou