How to Waive Attorney-Client Privilege Unintentionally: A Tragedy in Two Acts

A “careless privilege review, coupled with [a] brief and perfunctory clawback agreement,” may lead to waiver of attorney-client privilege under Fed. R. Civ. P. 502(b). A “reckless” privilege review will almost ensure it, as it did in Irth Solutions, LLC v. Windstream Communications LLC, 2017 WL 3276021 (S.D. Ohio Aug. 2, 2017).

Defendant Windstream produced 43 privilege documents—not once, but twice, the second time during the course of a dispute over whether the first production was inadvertent and subject to clawback. On Windstream’s request for the court to order a clawback, the court held two rounds of briefing and an evidentiary hearing. In a thorough and instructive opinion, the court found that Windstream did not meet its burden of proving all the elements required for clawback under Rule 502(b), despite the existence of a written clawback agreement. Several aspects of the opinion are worthy of mention as lessons learned for all practitioners.

The plaintiff argued that the production of privileged documents was intentional, not inadvertent. The court rejected that argument as unsupported by the evidence. The evidence supported the conclusion that Windstream’s privilege review was careless at minimum, which is a subset of inadvertence under the rule.

Nevertheless, inadvertence is only one of the elements required under Rule 502(b). A party seeking clawback under Rule 502 must also show that it “took reasonable steps to prevent disclosure” and “promptly took reasonable steps to rectify the error.” Fed. R. Civ. P. 502(b)(2) and (3). In addition, a clawback agreement can soften the standards imposed by the rule.

The court determined that Windstream had not taken reasonable steps, noting in particular that the documents were produced on two different occasions. Acknowledging that a document-by-document privilege review is impractical where—as in this case—a large volume of documents is being produced, Windstream’s attorneys should have been able to find the badges of privilege among the 43 documents by using electronic searches for the words “legal” or “counsel.”

The court next determined how to apply the party’s own clawback agreement, which Windstream argued should result in a clawback regardless of the defects in its review process. The court surveyed three different approaches followed by other courts. Under the first approach, even a cursory agreement will require clawback, no matter how careless the producing party was in its privilege review. The court rejected this approach as “inconsistent with the underpinnings of Rule 502 and the attorney-client privilege.” Under the second approach, clawback is required unless the producing party’s privilege review was “completely reckless.” Under the third approach, a clawback agreement cannot supersede Rule 502 without specific standards and directives. The court found that Windstream failed to satisfy either one of the latter two approaches. Specifically, based on the evidence of record, the court found that Windstream’s attorneys were “completely reckless” and might not have conducted any meaningful privilege review at all. The court further found that the clawback agreement was “perfunctory” and insufficient to supplant the provisions of the rule.

The opinion merits close reading, particularly by those of us who do not practice in jurisdictions that allow the more liberal application of clawback agreements. First and foremost, recognize that a meticulous clawback agreement can save a world of pain. Second, one must not only design an effective privilege review system for each case, but document the progress of that system as it is implemented. The court in this case was bothered by the lack of evidence that any privilege review actually occurred.