The latest decision in the DR Distributors case saga is on deck for episode 74 of Case of the Week. In this episode, Kelly Twigger discusses the latest decision from Judge Iain Johnston, this time considering whether FRE 502(d) covers documents subject to the marital privilege that were inadvertently produced.
Good morning, and welcome to episode 74 of our Case of the Week series, published in partnership with ACEDS. My name is Kelly Twigger. I am the CEO and founder of eDiscovery Assistant and the principal at ESI Attorneys. Thanks so much for joining me today. I hope you’re having a fantastic summer.
As you know, on our Case of the Week series, each week we choose a recent decision in eDiscovery that highlights key issues for litigators and those involved in the eDiscovery process, and we try to talk about the practical implications of that decision for you, your practice and for your clients.
Today we’ve got a really important decision on one of our favorite topics on Case of the Week, which is Federal Rule of Evidence 502(d). All right, let’s get into this week’s case.
Our decision this week is very recent. It comes just from last Friday, July 22nd, 2022, and is the latest decision in the eDiscovery saga that is DR Distributors versus 21 Century Smoking. This case is, of course, from Judge Iain Johnston, who’s the United States District Judge in the Northern District of Illinois, also in the Seventh Circuit (view the post from Doug Austin at eDiscovery Today who’s also written about this decision).
As we know from previous episodes on Case of the Week, Judge Johnston writes incredibly thoughtful decisions and incorporates both common sense and a sense of humor into his writing in really setting out what the facts are and how they bear on the law.
As always for our Case of the Week, we talk about how many decisions the judge has in our database, as well as the issues that have been added to that decision in the database. This is the ninth case that Judge Johnston has in our database, many of which are from the DR Distributors case. The issues for today’s decision include Federal Rule of Evidence 502(d), attorney-client privilege, redaction, clawback, privilege log, in-camera review, and waiver.
I’ve already mentioned that we frequently cover Judge Johnston’s decisions on the Case of the Week. He, of course, wrote the infamous DR Distributors case that we discussed back in February of 2021 on the Motion for Sanctions between the parties. Judge Johnston also wrote the Hollis vs. CEVA Logistics decision that I covered on episode 71 of Case of the Week. And my hat is off to Judge Johnston that he maintains his sense of humor even in what must be a very frustrating slog through the decade-long fights in this DR Distributors case in which he has referred it to in an earlier decision as the “ESI food fight of Hollywood proportions”.
I urge you to read today’s decision. As always with Judge Johnston, the facts are plentiful, and I’ve tried to parse through them to give you as much as I can to set the stage without making your eyes glaze over. But this decision has many excellent nuggets, some of them even in the footnotes, and it’s a very important case on Federal Rule of Evidence 502(d).
What are our facts here?
We are before the Court on the Plaintiff’s motion for an order deeming the marital privilege waived in production of documents. The issue for the Court to resolve is whether the Defendants waived the marital communications privilege by disclosing numerous electronic communications to the Plaintiff during discovery, and if so, to what extent the privilege has been waived. The underlying case here, if you can’t remember, involves claims by DR Distributors that 21 Century Smoking infringed on its trademark. Both parties compete in the electronic cigarette industry.
21 Century Smoking is a small company that is owned and operated by Brent Duke. Mr. Duke was front and center on the Motion for Sanctions on our previous coverage on the Case of the Week. Brent Duke’s wife, Laurie Duke, also works for the company. And many of the emails produced by the Defendant, as the Court notes, detail marital strife, specifically with regard to Laurie’s criticism of Brent’s business decisions for 21 Century Smoking and how they impact the bottom line for the business.
The Plaintiffs are interested in emails from Laurie that are criticizing Brent’s decisions and how they impacted the company performance at 21st Century Smoking because they are relevant to defend against Defendants counter claims that the Plaintiff has harmed them.
With that background, let’s look a little bit at the timeline of this case going back to some of the previous decisions. This case was originally filed in 2012. Discovery closed July 1 of 2015. Prior to the close of discovery, the Court notes that marital privilege was never an issue, and there were no privilege logs that claimed any sort of marital communication privilege prior to the close of discovery.
On May 31st and June 1st of 2018, the Defendants then produced thousands of emails after failing to do so on multiple occasions. From that production, in May and June of 2018, the former Defense Counsel withheld 16 emails and redacted 32 additional emails based on marital privilege. That is the first time in this case that marital privilege has been raised. That production also included emails that included marital communications that were not identified on the privilege log.
After these productions, Defense Counsel learned that production had not been made from a GoDaddy account and then withdrew. New counsel took over as of August 8, 2019.
Plaintiff then filed a Motion for Sanctions. Plaintiff’s brief included at least one exhibit that was an email between Laurie and Brent Duke. The new Defense Counsel then responded to the motion and also attached emails that contained marital communications to their response brief. On November 13th, 2019, two days before the hearing on the Motion for Sanctions, Defense Counsel then produced an additional 30,000 documents to the Plaintiff.
At the Motion for Sanctions hearing two days later, Plaintiff introduced exhibits that included marital communications, and at that time, Defendants made no objection to use of the documents based on the marital communications privilege.
Fast forward to October 23rd, 2000. The Court informed of the parties of its anticipated ruling on the Motion for Sanctions and told the Defendants that would have 30 days to produce to find and produce responsive documents once the order was entered, and the Court also gave the parties the opportunity to settle at that time. Parties did not settle. The Court then advised that it would enter the Sanctions Order on January 19th, 2021, and that the Defendants had had 60 days prior to that, from November to January, to know that they would have to provide and produce documents within 30 days.
The Court then issued the sanctions order on January 19th. That’s the decision that we covered on Case of the Week in February of 2021. And that started the clock for the Defendants in terms of production. Defendants did not meet their 30 day requirements. They sought an extension and subsequently produced on March 19th, 2020, thousands more documents that were previously responsive in discovery.
At that time of the March production, Defendants also withheld documents for privilege, including marital communications privilege, as well as redacted documents based on the marital communications privilege. So in that production in March, we had documents withheld for attorney-client privilege, also for marital communications privilege.
At some point after that March production, I believe in July, Defendants then sought to claw back 267 documents relevant to the motion, 148 of which were based on marital communications privilege, but the only evidence that was provided in order to claw back was a declaration from Defense Counsel. That declaration stated that Defense Counsel had inadvertently produced marital communications without the intent to waive the privilege, but did not provide any supporting facts as to why the production was inadvertent or what steps were reasonably taken to prevent the production of privileged information.
Plaintiffs then objected to the documents that were withheld on marital privilege grounds, and the Court ordered an in-camera review of the unredacted versions and withheld documents of all of those that were withheld based on marital privilege. The Court then reviewed those documents, as it noted, over an entire weekend, and found that all of the documents were covered by the marital privilege.
The Court, at the same time or at one point as we’re going along in this case in 2019, on its own, entered a Rule 502(d) order to protect the parties from inadvertent disclosure.
What’s going to be crucial here is the language and title of Rule 502, as well as the comments the Committee notes to Rule 502. Rule 502 is titled Attorney-Client Privilege and Work Product; Limitations on Waiver. That’s the full title of the rule. Rule 502 is limited to attorney-client privilege and attorney work product doctrine in terms of protection against waiver.
Further to that point is the opening language of the Rule, which states that, “The following provisions apply in the circumstances set out to the disclosure of a communication or information covered by the attorney-client privilege or work product protection”. The Committee Notes to the Rule also note that “the Rule seeks to provide a predictable, uniform set of standards under which parties can determine the consequences of a disclosure of a communication or information covered by the attorney-client privilege or work product protection.”
The Committee Notes go on to state that they are not providing guidance on other aspects or privileges that may constitute waiver. And the Court notes that in its analysis.
Those are the facts that we have before us.
The Court begins its analysis by defining the marital privilege as covering communications privately disclosed between a husband and wife in the confidence of the marital relationship. The marital communications privilege exists to ensure that spouses feel free to communicate their deepest feelings to each other without fear of eventual exposure in a court of law. That’s the language that is cited by the Court in this decision. I make no commentary on whether or not I believe the marital privilege should only be between a husband and a wife.
The Court then notes that the Defendant bears the burden of showing that no waiver occurred as a result of the inadvertent production. And the Court also notes that the marital privilege can be waived by disclosing the communication voluntarily. The Court then goes into the applicability of Rule 502(d) to this situation, and of course, that comes up because the Court sua sponte issued a Rule 502(d) order in the case.
Defendants then relied on that 502(d) order that the Court had issued in order to essentially look for a scapegoat for their inadvertent production of documents that included marital communications. And the Court says that there are really two reasons that it believes that the defendants relied on it –– one, 502(d) is a more generous standard to claw back documents, and two, it bolsters their detrimental reliance argument, essentially that this court’s order entering a 502(d) order would be applied to the fullest extent available, and cause them to be less careful.
The Court then identifies three problems with that position. First, as the plain language of Rule 502 makes clear, the rule only applies to the attorney-client privilege and the work product doctrine. It has no effect on any other evidentiary privilege, such as the vast array of governmental or other common law privileges, including the confidential marital privilege. The Court notes that the terms attorney-client privilege and work product protection are even defined in the Rule. The Court also points to the advisory committee notes that we mentioned earlier that provide the same answer that the rule is limited to the attorney-client privilege and the work product doctrine.
Second, the Court notes that the order that it entered on February 2nd, 2021, putting the 502(d) protection in place for the parties, had absolutely no effect on any documents that were produced prior to that order, including those in November 2019. Remember, we’ve got three productions here that are at issue, May and June 2018, November 2019, and March 2021.
As such, that order that was issued in February of 2021 could not have caused the inadvertent production in November 2019 because it was not in place at the time the production was made.
Third, the Court notes that assuming Rule 502 applied to the marital communications privilege, which it does not, a simple cost benefit analysis counsels against blindly relying on a Rule 502(d) order to justify the failure to implement a reasonable document review process.
The Court goes on to cite some decisions where courts have allowed parties to claw back inadvertently produced privileged materials without a showing of reasonable efforts to review privileged materials, but also cites other courts that have found that despite the existence of a 502(d) order, a completely reckless disclosure can result in waiver. (The Court also cites the SureFit products case that we covered on episode 73 of the Case of the Week, decided just two months before last Friday’s decision from Judge Johnston here.) Judge Johnston then goes on to state that other courts have gone further and explicitly rejected the notion that a 502(d) order will allow for the clawback of attorney-client privilege and work production documents, irrespective of the reasonableness of counsel’s privilege review process or if one even existed at all. He also notes that, additionally, counsel who simply dumped documents on opposing counsel without first conducting a reasonable privilege review may get in hot water with attorney regulators.
According to the Court, counsel who produce documents without a reasonable privilege review do so at their own risk, even when a 502(d) order exists:
The chances of being struck by lightning might not be great, but when it happens, the consequences are significant, so why risk walking around in a thunderstorm?
Based on all of that analysis, the Court declined to graft Rule 502 onto another common law privilege, such as the marital communications privilege, and stated that if the drafters of Rule 502 wanted the rule to apply to other privileges, they could have stated so. Instead, they specifically chose to state that the Rule does not apply to other privileges.
Now we know Rule 502 does not apply to the marital communications privilege. And since it does not apply, the Court then turns to a three-part balancing test used in the Seventh Circuit before the promulgation of Rule 502, which requires that all three elements of the balancing test be met. And those three elements are: 1) whether the document is privileged, 2) whether the disclosure of the document was inadvertent, and 3) whether the privilege was waived. Let’s go through each of those elements.
With regard to the privileged nature of the document, the Court has already reviewed all of them in-camera and found that all of the marital communications are privileged.
With regard to the next prong, which is inadvertent, the Court notes that there’s really no bright line rule for determining whether a disclosure was inadvertent, and instead, court really looked to the surrounding circumstances of the disclosure. Factors for the courts who include the number of documents produced and the care with which the pre-production document review was performed. The Court notes that the parties must use utmost care in selecting the methodology for review, reviewing documents for privilege and that simply running keyword searches may not be enough. The Court then also cites to the Sedona Conference Commentary on Privilege:
To avoid a potential waiver of privilege and to avoid the damage that can be caused by an inadvertent production, whether or not the production results in waiver, the parties and their counsel should design and implement a reasonable and auditable procedure for the identification and logging of privileged documents.
The Sedona Conference then goes on to identify several factors to consider in reviewing ESI for privilege, all of which are laid out by the Court here.
- To include steps to identify privileged ESI in the collection process.
- To create and implement a document review protocol that includes an experienced senior attorney who is charged with oversight responsibilities for implementing the protocol.
- Educate and train the review team that includes detailed discussion on the law of privilege.
- Apply an escalation process that uses more experienced counsel to resolve privilege issues.
- Segregate privileged information.
- Use quality control and sampling processes under the direction of a senior attorney.
- Use advanced analytical software applications and linguistic tools to screen for privilege.
- Contemporaneously document the privilege review process and consider disclosing the privilege review process to opposing counsel.
- Citing our colleague Phil Favro at Driven, the Court says that, “In a nutshell, counsel should design an internal privilege workflow that is consistent with an established protocol.”
And that’s an excellent way to think about it. And it’s a theme that we’ve talked about here on Case of the Week multiple times in dealing with privilege information. Going back to the decision here, those are the factors of whether or not we’ve met inadvertent under the balancing test.
The Court then looks at what the five factors are for meeting waiver under the balancing test.
- The reasonableness of precautions to prevent disclosure
- The time to rectify the error
- The scope of discovery
- The extent of the disclosure, and
- The overriding issue of fairness
With those three steps of the balancing test in place (privileged, inadvertent and waiver), the Court then analyzed the three productions made by the Defendants under those balancing test requirements. Again, we’re talking about the May, June 2018 production, the November 2019 production, and the March 2021 production.
As the Court starts its analysis of those three productions under this balancing test, it notes that:
Again, the parties have been unclear as to some critical facts, so the Court has combed through the filings to find the relevant facts to apply the factors to the three different productions that apparently resulted in the ‘inadvertent’ disclosure of ESI containing privileged communications.
That’s not what you want to hear. You don’t want to hear that you’ve failed to put any facts before the Court and required them to dig through the record and be able to set the stage for the facts in ruling on your motion.
Starting with the May, June production, the Court could not identify which documents had actually been clawed back. And the Court said that assuming the documents were privileged, that the Defendants had failed to meet their burden to show that the production was inadvertent and not waived. As a result for that production, the Defendants waived privilege with regard to any documents in that production, and the Court does not distinguish here between attorney-client privilege or marital communications in denoting that waiver.
The Court then turns to the November 13th 2019 production, and again, the Court has already determined that those documents are privileged, but again finds that the Defendants have failed to meet their burden to show inadvertence or waiver. According to the Court:
No evidence has been presented as to any aspect of this document production or the privilege review process, and Defendants did not seek to claw these documents back until June and July of 2021, more than a year later. Despite being privileged, there is no evidence that the production was ‘inadvertent’, and Defendants have failed to meet their burden, that the privilege was not waived. These communications can’t be clawed back.
The Court then turns to the last production, which is the March 19th 2020. I think I inadvertently said 2021 earlier. It was 2020. The Court notes that several of the documents in this production are sought to be clawed back, but also included third parties, and that as a result, they are not covered by the marital privilege, so they cannot be clawed back. There are remaining emails from this production that the Court finds are privileged. And then the Court turns to whether or not the Defendants have met their burden of showing inadvertence and waiver.
The Court notes with regard to this March 19th production that the only evidence that the Defendants provide is in an affidavit from Defense Counsel which says, “In the rush to properly comply, and while under the threat of sanctions for failing to comply, I inadvertently produced numerous marital communications between Brent and Laurie Duke. My production of such communications was not done with the intent to waive the marital communications privilege.”
The Defendants argue in their brief that the volume of documents involved was substantial, that Defense Counsel lacked any system to document what they reviewed and produced, and that the review and production processes were complicated, especially because they were done remotely during the pandemic. However, the Court notes the Defendants provided absolutely no affidavits or any documentary support for their propositions and that the arguments of counsel are not evidence. Simply put, there’s no information here provided by the Defendants.
And the Court notes that it has no idea what the privilege review process was or how it worked:
Here are just a few of the unanswered questions: Did Defendants use a keyword search, and if so, what were those keywords and why were they chosen? Did Defendants use technology-assisted review as part of the review process and then follow up with keyword and or manual review? Did Defendants use any advanced analytical software applications or linguistic tools as part of the review process, and if so, what were they? Who used them? How were they used, and what were the results checked for quality or audited in any way? Did Defendants used a manual privilege review and if so, how many attorneys were used? Were they? How were they trained? What was their work experience? What was their knowledge of the case, and was their work quality checked and audited, and if so, by whom?
This is fundamental information that courts need to determine the reasonableness of a privileged review process.
The Court also points to the lapses in time before counsel sought to claw back the documents, as well as the numerous examples of repeated, inconsistent, and often conflicting redactions that are strong evidence that a standardized and audited protocol was not used. Both of those facts weigh in favor of waiver.
The Court notes that the Defendant waited four months until time had passed to claw back the documents, including two months after the Plaintiff notified Defense Counsel of the issue with the marital communications.
The Court notes here that scope of discovery is consistent for an eight-figure case in civil litigation and that the defendants dawdling and responding did not help their cause. The Court also looks at the extent of disclosure and says “that weighs in favor of waiver” –– noting that the defendants disclosed hundreds of privileged documents, not just one or two. The Court called the production of privileged materials systemic and noted that the volume of disclosures, particularly when considering the substance of the disclosures, evidenced a fundamental failure in the privilege review process. So the extended disclosure also weighs in favor of the waiver.
Fairness, the next element to be considered, also weighs in favor of finding waiver:
This court used utmost fairness when in its discretion, it did not impose harsher sanctions on Defendants for their misconduct. Finally, to the extent Defendants’ Counsel misunderstood the scope of Rule 502, that’s not a fairness issue. Instead, that’s a competency issue.
That’s a really important point there to take away from this decision from Judge Johnston. It is your obligation to understand the scope of Rule 502 and be able to use it effectively for your clients and to understand its limitations. Here, however, the Court is very generous in saying that it was very fair in its 2021 sanctions decision that we covered here on Case of the Week. I think there were a number of us in the industry who were shaking our heads, scratching them about the sanctions that were issued there. And so for the Court to acknowledge here that he exercised a great deal of fairness in issuing those sanctions is very compelling.
The Court then considers, finally, the scope and consequences of the waiver here and asks what happens now that the Court has found waiver of marital communications privilege. The Plaintiff wants to argue that the waiver of the marital communications privilege means that defendants have also waived subject matter for those particular documents. The Court says no and points to three errors in the Plaintiff’s argument.
First, the Court says that the Plaintiffs have a tendency to, and have done so again, dramatically overreach in this case, and it’s been going on for the entirety of the action. Second, the Court notes that the Plaintiffs attempt to broadly define the subject matter to “communications about the operation of Defendants’ business”, and that is a really overbroad when a waiver requires a very narrow scope. Third, the Court notes that the Plaintiff mistakenly argues that Defendants are using the privilege as both a sword and a shield, and the Court is kind of miffed at this.
He notes that he’s addressed the specific issue before, and the Court states, relying on luminaries like Magistrate Judge James Francis, that for subject matter waiver to occur, there must be an affirmative attempt to use communications protected by a privilege to influence a decision-maker. In this case, the Court. The Court found that the Defendants had used only one document and then only to provide context at a sanctions hearing; that they haven’t produced those documents before 2021, so they have not tried to use them to influence the Court now, and they won’t be because they are devastating to the Defendant’s case.
Finally, the Court had already ordered that the Defendants could not use the documents in its previous sanctions order for failure to produce. So, in essence, subject matter waiver was not appropriate.
The Court’s final ruling granted Plaintiff’s motion in part and denied it in part. The Defendants cannot clawback the emails, but the Court does not find that the Defendant’s waived subject matter. Nothing in this order should be viewed in any way as an indication on the admissibility of those documents. And Defendants have not waived any objection as to admissibility.
Huge waiver of the marital communications privilege here by inadvertent production and failures to have and document a process.
As I mentioned, this decision raises the unique issue that 502(d) does not apply to privileges outside of the attorney-client privilege or the work product doctrine for the language of the rule, as well as the committee notes and its legislative history. It’s also not a get-out-of-jail-free card in all jurisdictions. You need to understand how your jurisdiction views coverage of the 502(d) order and whether it requires a showing of reasonable efforts to meet your burden of inadvertent and waiver under the balancing test that’s applied by the Court here.
Does your jurisdiction offer blanket coverage? As this court points out, there are at least three different approaches that a court can take to coverage of a 502(d) order, and you need to understand which one you’re dealing with in the jurisdiction where your case is pending.
Next, and we’ve talked about this multiple times on the Case of the Week, you need to have a plan and process in place for identifying and tagging privileged documents and the basis for privilege. If you wait until after you’ve produced your documents to focus on privilege, you have waited far too long. Privilege needs to be a consideration at the very early stages of identifying documents, collecting them, and loading them into a review platform, as well as training your review team.
If you follow those steps that are outlined by the Sedona Conference commentary that the Court lays out here, you’re going to be in a much better situation to be able to deal with an inadvertent production under 502(d), even in a jurisdiction that requires reasonable efforts.
Now, here one of the things that struck me, was that the Defendant said they had no system in place to be able to track produced documents or withheld documents. That’s something as simple as using a spreadsheet. A spreadsheet can be used to capture any of that information. And information like that can be pushed from the review platform out into an Excel spreadsheet that you can then use as a production log as a way to continuously track what’s happening and what’s happening for purposes of the case.
Many people in the industry use something as simple as spreadsheets. You don’t even need a more sophisticated piece of software to be able to track what you’re doing, what decisions are being made. Use a different tab for each one of the ones that you need, use a privilege tab for here are the decisions made on privilege, use a production log tab for here’s what the production log was, use the privilege log tab for each of the individual entries on the privilege log, date them, so that when you have multiple privilege logs, you know which one is which, and then be able to combine them for purposes of the end of the case.
Finally, and this is one of our themes, you have to put the facts before the Court to allow the Court to do the analysis. Here, the Defendants didn’t put any information to the Court on the process for identifying privileged documents. And while it may not have met the Court’s standard for reasonableness, there had to be at least some process here, because the Defendants did provide a privilege log.
By leaving out all those facts and relying solely on arguments versus affidavits, the Defendants really left the Court with little choice on the issues of inadvertence and waiver, because there were just simply no facts put forth by the Defendant to meet their burden. Lots of great information and things to think about from a practical perspective in this decision from Judge Johnston. So I encourage you to take a look at it.
All right. That’s our Case of the Week for this week. Thanks for sticking in there with me for a longer decision. We’ll be back again next week with another decision from our eDiscovery Assistant database. As always, if you are an ACEDS member and interested in using eDiscovery Assistant, you can look at your portal to determine information on trial and a discount associated with being an ACEDS member.
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Thanks so much. Stay safe and healthy out there. And I’ll see you next week.
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