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The All New Rule 502: Reducing the Costs and Risks of E-Discovery

Charles S. Marion, Esq. on 12/5/2008

An important new Federal Rule of Evidence, Rule 502, was signed into law by President Bush on September 19, 2008 and took effect immediately. The Rule, entitled “Attorney-Client Privilege and Work Product; Limitations on Waiver,” is expected to help control the rising cost of e-discovery and document production by reducing the risks associated with the inadvertent production of privileged documents.

Prior to the enactment of Rule 502, litigants who inadvertently produced a single document containing privileged or protected information were at risk of being found to have waived the privilege not only as to what was produced, but as to all documents dealing with the same subject matter, and in all cases, not just the one in which the document was produced. This significant risk led litigants to conduct exhaustive and very expensive privilege reviews before producing any information. The Advisory Committee who reviewed the change also noted that the fear of waiver often led attorneys to assert extravagant claims of privilege.

Rule 502 seeks to protect a litigant from making a small, but legally disastrous mistake by inadvertently disclosing attorney work product or attorney-client privileged documents. The Rule also promotes uniformity in the application and treatment of inadvertent disclosures of privileged materials throughout the Federal courts.

There are several important subsections of Rule. First, Rule 502(a) limits the scope of a waiver when materials are inadvertently disclosed. It provides that, if a waiver is found, it only applies to the information that is disclosed. There is no broad subject matter waiver unless the holder of the privilege uses the privileged information in an intentional and misleading way. Courts are also directed to examine the fairness of the situation in determining whether any privilege was waived.

Next, Rule 502(b) provides that an inadvertent disclosure made in a Federal court proceeding does not constitute a waiver if the litigant took reasonable steps to prevent the disclosure and took reasonably prompt measures to retrieve the mistakenly disclosed information. Subsections (a) and (b) codify what is presently the rule in most jurisdictions, but remove any uncertainty on these issues.

Rule 502© provides that when a disclosure is made in a state court proceeding and is not the subject of a state court order concerning waiver, the disclosure does not operate as a waiver in a Federal proceeding if the disclosure: 1) would not be waived under Rule 502 if it had been made in the Federal proceeding; or 2) is not a waiver under the law of the state where the disclosure occurred. The Advisory Committee suggests that the Federal court considering the disclosure should apply the law that is most protective of privilege and work product.

Finally, Rule 502(d) provides that if a federal court enters an order that a disclosure does not constitute a waiver, that order is enforceable against all persons and entities in any federal or state court proceeding. This ensures that agreements entered into by the parties will be enforceable against non-parties. Additionally, Rule 502(e) provides that confidentiality agreements entered into by the parties, but which are not incorporated in or approved by court orders, are binding and enforceable against the parties themselves, but not against non-parties.

Rule 502 is largely consistent with the existing rules in the Third Circuit governing inadvertent disclosures of privileged or protected information. See, e.g., In re Teleglobe Communications Corp., 493 F.3d 345, 361 (3d Cir. Del. 2007); Westinghouse Elec. Corp. v. Republic of Phil., 951 F.2d 1414, 1426-27 (3d Cir. N.J. 1991). However, the Rule is welcome, because it brings more certainty, lessens the risks associated with inadvertent production, and should help reduce the significant costs associated with e-discovery.

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