Inadvertent Disclosure of 347 In-House Counsel Emails Waives Attorney-Client Privilege

Another federal court reminds companies and their in-house counsel that (1) the fact that in-house lawyers send or receive internal emails does not automatically render the emails privileged; and (2) the failure to take steps to prevent inadvertent disclosure will result in privilege waiver.

The federal court for the Southern District of Ohio, in Inhalation Plastics, Inc. v. Medex-Cardio-Pulmonary, Inc., 2012 WL 3731483 (S.D. Ohio Aug. 28, 2012), ruled that the attorney-client privilege covering 347 emails involving 3 in-house lawyers was waived through an inadvertent disclosure.  Medex Cardio-Pulmonary, Inc. produced 7500 documents that contained 347 emails either sent or received by in-house counsel.  When the plaintiff attempted to depose two of these lawyers based on the production, Medex asserted the attorney-client privilege and claimed the emails were inadvertently produced.

The court first questioned whether Medex met its burden of proving the emails were privileged, noting that “[t]he mere fact that [the in-house lawyer] was the sender or recipient of the documents at issue does not render them privileged.” The Court found that the burden was not met because Medex did not identify which of the 347 emails were privileged, did not provide a privilege log, and offered little factual evidence that the communications pertained to legal advice.

But the Court’s in camera review revealed that some emails were, in fact, privileged and evaluated whether the inadvertent disclosure of these documents constituted waiver. The Court considered the following 5 factors in its analysis: (1) the reasonableness of the precautions taken in view of the extent of document production; (2) the number of inadvertent disclosures; (3) the magnitude of the disclosure; (4) any measures taken to mitigate the damage of the disclosures; and (5) the overriding interests of justice.

The Court ruled that reasonable precautions were not proven because Medex did not specify who reviewed the documents pre-production or the steps taken to review for privilege, and did not provide a privilege log. The disclosure of 347 of 7500 privileged emails was significant and, although Medex acted promptly upon learning of the disclosure, it failed to comply with Fed. R. Civ. P. 26(b)(5)(B) to identify the privileged documents with specificity and explain why they are protected from disclosure.  And for these reasons, the Court found that the attorney-client privilege had been waived.

PoP Analysis.  The Inhalation Plastics decision reminds corporate and outside counsel that producing a significant number of documents requires diligent efforts on the front-end and back-end of the production.  In-house and outside counsel must not only conduct a pre-production privilege review, but must be able to specify the measures taken to prevent inadvertent disclosure. And while inadvertent disclosures may nevertheless occur in large productions, counsel must act swiftly to notify the other party and be disciplined in providing a detailed privilege log and detailing, in writing, the basis for the privilege claim.

Answer to Relatively Novel Question: Lack of Diligence in Retrieving Inadvertently Disclosed Documents Waives Deliberative Process Privilege

The U.S. Federal Court of Claims recently decided a “relatively novel question: whether a lack of diligence in asserting the deliberative process privilege to claw back previously disclosed documents can serve as a waiver of that privilege.”  In Sikorsky Aircraft Corp. v. United States, 2012 WL 4018026 (Ct. Cl. Sept. 13, 2012), the U.S. government claimed that Sikorsky violated federal regulations by improperly allocating overhead costs to government contracts. On February 17, 2011, the government inadvertently produced an email string between an auditor and his superior at the Defense Contracting Auditing Agency (DCAA). The auditor was questioned without objection during his deposition on June 20, 2011, but at the end of the deposition the government’s lawyer stated that the email string may be subject to the deliberative process privilege.  Despite this statement, the government did not formally assert the privilege until May 14, 2012–fifteen months after the email string was produced.

The court first decided that, although some courts hold otherwise, invocation of the deliberative process privilege is subject to a timeliness requirement.  The court reasoned that the privilege may be waived for other reasons, such as placing a portion of the material at issue, and there was no basis for refraining from extending the waiver to “instances of indiligence, indolence, or dawdling.”  But the court limited the timeliness waiver to the deliberative process privilege branch of the executive privilege, and indicated that a timeliness waiver may not apply to chief-executive communications, military secrets, and intelligence reports.

The court next outlined the criteria courts should apply in determining when an inadvertent disclosure constitutes a waiver.  Finding no binding precedent, the court studied Federal Rule of Evidence 502 and prior inadvertent disclosure decisions for other evidentiary privileges.  The court held that Rule 502’s inadvertent disclosure criteria should apply to inadvertent disclosures of materials subject to the deliberative process privilege.  Under this criteria, a disclosure of information protected by the deliberative process privilege will not constitute a waiver if (1) the disclosure was inadvertent; (2) the privilege’s holder took reasonable steps to prevent disclosure in the first instance; and (3) the holder promptly took reasonable steps to rectify the error.  And in this case, the court ruled that the government’s fifteen-month delay in asserting the privilege was not prompt and that the deliberative process privilege was waived.

PoP Analysis.  In an area lacking definitive authority, the Sikorsky opinion serves as persuasive authority that government agencies must assert the deliberative process privilege in a timely manner.  And the criteria to determine waiver of the privilege through inadvertent disclosure is Federal Rule of Evidence 502.  While the timeliness requirement likely will not apply to other branches of the executive privilege, most notably the presidential or chief-executive communications privilege, government lawyers must maintain diligence when protecting deliberative and pre-decisional documents protected by the deliberative process privilege.

The Sikorsky opinion is also helpful to practitioners in need of a succinct summary of the deliberative process privilege, including the substantive criteria and the procedure for invoking the privilege.  While some state courts, most recently New Mexico, refuse to recognize a deliberative process privilege, many states have not decided the issue.  And those states looking for guidance in making the decision should look to Sikorsky as authority for the substantive scope and procedural requirements for successfully asserting the privilege.