E-Discovery Protocol - Federal Court

A recent case in the Eastern District of Pennsylvania, Rhoads Indus., Inc. v. Bldg. Materials Corp. of Am., 2008 WL 4916026 (E.D. Pa. Nov. 14, 2008), applied Rule 502 of the Federal Rules of Evidence (entitled Attorney-Client Privilege and Work Product; Limitations on Waiver) where the reasonableness of the producing party’s due diligence became an issue. The Court took a softer stance on the onerous requirements articulated in Victor Stanley, Inc. v. Creative Pipe, Inc, 250 F.R.D. 251 (D.Md.2008).  However, the Court cautions that parties who are warned about the accidental production of privileged materials and then fail to mitigate their own accidental production will waive the privilege (e.g. the attorney-client or attorney-work product privileges).  The Court also highlighted the importance of paying special attention to search methodologies, including the keywords used, the software used, and the statistical validity of the methods used.

Factual Background

The relevant background in the Rhoads case:

• With terms identified by the company, searches were run to identify potentially responsive documents.  A subsequent filter (search) was applied using keywords designed to identify privileged material.  Privileged material so identified was removed from the document set and these documents were not listed on the company’s privilege log;
• A construction company inadvertently produced more than 800 privileged electronic documents;
• The company produced a revised privilege log after the defendants inquired regarding a series of produced documents that appeared to include privileged communication;
• Despite notice from the defendants, the company failed to list all previously produced privileged information on the revised privilege logs; and
• The defendants moved to deem some of the company’s privilege claims waived.

Holding

The Court in Rhoads found that the company did not waive attorney-client privilege for more than 800 privileged electronic documents inadvertently produced to defendants because these documents were listed on the revised privilege log produced to the defendants following the defendants’ notification as to the existence of privileged material in company documents.  However, the Court found that the company did waive privilege with respect to documents that were inadvertently produced and were not included on the revised privilege log produced by the company in response to the defendants’ notification.

Court’s Analysis

The Court articulated the following framework:

1.       First, one must determine whether the producing party has at least minimally complied with the three factors stated in Rule 502, i.e., that the waiver was inadvertent, the party took reasonable steps to prevent disclosure, and attempted to rectify the error; and

2.       Once the producing party has shown at least minimal compliance with the three factors in Rule 502, but reasonableness is in dispute, the court should apply the traditional five factor test.

The Court under the first prong of the analysis reviewed a copious list of factors in favor or against both parties following Rule 502. Rule 502 provides three factors to be considered when evaluating the effect of an inadvertent disclosure:

• The disclosure is inadvertent;
• The holder of the privilege or protection took reasonable steps to prevent disclosure; and
• The holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).
• The Advisory Committee Note to Rule 502 summarizes the five factor test used by most courts:
• The reasonableness of precautions taken;
• The time taken to rectify the error;
• The scope of discovery;
• The extent of disclosure; and
• The overriding issue of fairness.

The Advisory Committee noted that Rule 502 does not explicitly codify that test, because the multi-factor test is a set of non-determinative guidelines that vary from case to case.  However, the Advisory Committee noted that Rule 502 is flexible enough to accommodate any of those listed factors.  The Court noted as a key consideration in citing the Advisory Committee Notes to Rule 502, that a party that uses advanced analytical software applications and linguistic tools in screening for privilege and work product may be found to have taken “reasonable steps” to prevent inadvertent disclosure.

Significantly, the Court took a less stringent view as to a producing parties obligation of due diligence then the Court in Stanley.  The Court critiqued Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D.Md.2008), in this case the defendant produced 165 electronic documents inadvertently, and the plaintiff notified defendant of the error after reviewing the materials.  In the Stanley case the Court on somewhat analogous facts reached the opposite conclusion.

Significantly, the Court in Rhoads noted:

The facts in Stanley are more similar to the facts in this case; however, I believe that Judge Grimm’s analysis reflects, to a more significant degree than I believe appropriate, application of hindsight, which should not carry much weight, if any, because no matter what methods an attorney employed, an after-the-fact critique can always conclude that a better job could have been done. (Emphasis added)

Key factors cited by the Court as evidence of non-reasonable due diligence:

• Counsel did not use all the company’s attorneys names as search terms;
• Counsel did not search the body of email messages when filtering materials;
• Counsel did not thoroughly test the software to ensure the software operate as expected (documents that should have been identified as privileged with counsel’s search were not identified); and
• Counsel did not do adequate follow-up analysis (or review) to ensure the statistical validity of the search.

Appendix – Key Factors – in Rhoads

• Counsel should design their searches using attorney names if filtering attorney privileged materials.  Counsel should be familiar with the software used, and search the entire data set including both meta data and content, and test the results of any search using a statically valid method.  One resource I find as an invaluable introduction in designing a statistically valid search is Statistics in a Nutshell A Desktop Quick Reference, by Sarah Boslaugh, Dr. Paul A. Watters (available at http://oreilly.com/catalog/9780596510497/index.html).
• Company purchased a special software program, Discovery Attender, for the purposes of complying with discovery in this litigation.
• Discovery Attender is an e-discovery tool designed to automate investigative tasks in PST files, Exchange mailboxes, public folders and common storage areas. (See www.sherpasoftware.com/DAEOverview.shtml)
• Company in error produced documents that the limited search run by the company should have caught. Company’s counsel not only failed to craft the right searches, but the searches it ran failed. Counsel has no explanation as to why the search did not work properly.
• Company’s technical consultant conducted trial searches prior to purchasing the software and was satisfied with its reliability and accuracy.
• Company’s counsel did no formal testing of the reliability or comprehensiveness of the keyword search.  As noted in Stanley, relying exclusively on a keyword search for the purpose of conducting a privilege review is improper, and proper quality assurance testing is a factor in whether precautions were reasonable.
• Company’s counsel/technical leads were experienced with the company’s computer system.
• Company’s counsel was not experienced with the computer system and how to search it.
• Company created selected keyword filter terms that would pick up all attorney-client communication.
• Company’s search for privileged documents was limited to e-mail address lines (as opposed to the e-mail body). Any potentially privileged e-mails that were subsequently forwarded outside of the company were not captured by the search.
• Company’s counsel had what they thought to be a reasonable basis to not include “privileged” or “confidential” as keyword search terms: all Rhodas e-mails use these words in the signature line at the bottom of every e-mail, and thus use of these words would have identified every Rhodas document as privileged.
• Company should have used additional search terms to weed out potentially privileged documents, especially the names of all of its attorneys. See Bensel v. Air Line Pilots Ass’n, 248 F.R.D. 177, 180 (D.N.J.2008).
• Counsel did not come up with alternative searches such as “attorney w/2 client” that would have identified attorney-client privilege e-mails.
• Counsel spent over 40 hours reviewing documents for privilege before production. Additional attorneys spent significant hours on the privilege review.
• Junior level attorney conducted privilege review.  She had no prior experience doing a privilege review and her supervising attorneys did not provide any detailed oversight.