Tips for Drafting and Using Clawback Agreements to Protect Privileged Materials

In the world in which we currently practice—a technological world requiring, in some instances, the production of terabytes of data and millions of pages of documents—everyone should be familiar with clawback agreements. Clawback agreements are commonly included within more comprehensive confidentiality agreements and/or protective orders that maintain the protection offered by the attorney-client privilege as well as other privileges in the event of inadvertent disclosure by one of the parties. In the federal system, these agreements are specifically addressed through Federal Rule of Evidence 502 (FRE 502).

Federal courts that have analyzed the issue of waiver through inadvertent production in the context of FRE 502 and the existence of a clawback agreement have developed three different approaches:

1. No waiver regardless of care (or lack thereof) in production. The existence of a clawback agreement, regardless of its scope, requires the return of inadvertently produced documents, regardless of the care taken by the producing party (see, e.g., Northrop Grumman Sys. Corp. v. U.S., 120 Fed. Cl. 436, 437 (2015)).
2. No waiver unless completely reckless. “That where there is a protective order with a clawback provision, inadvertent production of a document does not constitute waiver unless the document production process itself was completely reckless” (BNP Paribas Mortg. Corp. v. Bank of Am., N.A., 2013 WL 2322678, at *8 (S.D.N.Y. May 21, 2013)).
3. FRE 502(b) governs unless each prong of rule is addressed in clawback. “The requirements of Rule 502(b) can be superseded by a clawback agreement only to the extent such an order or agreement provides concrete directives regarding each prong of Rule 502(b), i.e., (1) what constitutes inadvertence; (2) what precautionary measures are required; and (3) what the privilege holder’s post-production responsibilities are to escape waiver” (Burd v. Ford Motor Co., 2015 WL 1650447, at *6 (S.D. W. Va. Apr. 14, 2015)).

The first thing you should analyze prior to drafting your clawback agreement is the jurisdiction in which your case is pending to determine which approach has been adopted within that jurisdiction. The governing view will likely have an impact on the level of detail required to be included within your specific agreement. Some details might include defining what would constitute inadvertence or listing the types of precautionary measures that should be taken by the parties to prevent disclosure. Once you have made that determination, crafted your clawback agreement accordingly, and the agreement has been executed by the parties, you can move to review and production of documents in your case.

Unless you are operating in a jurisdiction that adheres to the first approach described above, you will need to exercise some diligence in conducting your review of the documents to be produced and in making the production of those documents. Referring back to FRE 502(b), subsection (2) states that waiver can be avoided if “the holder of the privilege or protection took reasonable steps to prevent disclosure.” Obviously, if your clawback agreement specifies certain actions that should be taken to prevent disclosure, your pre-production process should include all of those. If your clawback agreement does not specify any such steps, you should still institute a variety of protective measures in an effort to prevent disclosure and avoid waiver, including but not limited to the use of technology to flag certain documents as potentially privileged based on custodians or key words, having reviewers trained on the key personnel, issues, and review platform being employed, and conducting second-level quality control review of certain documents or sets of documents. Most importantly, you should make a record of all steps of the review and production process utilized to support the fact that an inadvertent production was truly inadvertent and that reasonable steps were taken to try to prevent the production of privileged material.

Finally, if a situation arises in which privileged material is produced, you should act swiftly and diligently to notify opposing counsel and work to rectify the error.

Bottom line—be diligent in your crafting of clawback agreements in your cases, ensure that they are executed by all parties, and take reasonable steps to avoid production of privileged material.

For recent decisions in a case addressing these issues of clawback agreements and waivers, see Irth Sols., LLC v. Windstream Communs., LLC, Case No. 2:16-cv-00219, 2017 WL 3276021 (N.D. Ohio Aug. 2, 2017), reconsideration den., 2018 WL 575911 (N.D. Ohio Jan. 26, 2018).