April 30, 2012 Articles

Are Clawback Agreements Being Used to Their Full Extent?

Clawback orders can reduce the need for parties to concern themselves over whether their conduct would pass scrutiny under a reasonableness analysis

by Jennifer F. Beltrami

In its infancy, electronic discovery was heralded as being potentially much more cost effective than discovery by the old‑fashioned method of review and production of boxes of hard-copy documents. We now know that to be far from true. The universe of documents potentially relevant to a case and the cost to review and produce such documents have exploded, caused in part by the specter of sanctions for failure to preserve and by complicated, often unwieldy search methodology. Electronic document review can escalate litigation costs by the hundreds of thousands of dollars.

Litigants have responded to such prohibitive costs by entering into "clawback" or "quick‑peek" agreements and, in some cases, seeking to memorialize such agreements in a court order. A clawback agreement or order provides that a party producing materials in discovery may "claw back" inadvertently produced privileged materials, while a quick-peek agreement or order allows litigants to produce documents before conducting a privilege review, instead reviewing a smaller set of documents once the party to whom the documents are produced selects those documents it wishes to copy. New Federal Rule of Evidence 502, which went into effect in 2008, explicitly codifies and encourages the use of such agreements and orders. And Federal Rule of Civil Procedure 26(b)(5)(B) now provides a uniform procedure for dealing with inadvertently produced privileged documents. However, clawback arrangements have by no means become universal; many litigants fail to take full advantage of the protections potentially afforded by such agreements.

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