Proposed rule FRE 502’s goal is to limit the possible waiver of privileged attorney-client and attorney work-product material, but the underlying drive behind the amendment is to reduce the cost of electronic discovery. More specifically, the bill aims to reduce the costs of pouring over each document, file and email to determine whether that data contains otherwise privileged information.  The cost of this process is enormous, and parties still end up inadvertently disclosing some privileged information. This proposed amendment will codify the common practice of limited waiver agreements between parties, but I don’t believe it will significantly reduce the overall cost burden of searching for privileged information located in discoverable material.

 

The proposed amendment 502 has three logical parts. However, I will only be focusing on subsection (b) which states that when a disclosure of privileged is made in a federal proceeding or to a federal agency, the disclosure does not constitute a waiver if (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).

 

Although rule 502 should be enacted to provide consistency among the federal jurisdictions, it is not going to save significant costs for two reasons. First, most parties already enter into agreements that effectively accomplish what 502 states.  A typical situation arises when parties both understand that they will be dealing with massive amounts of data, and both wish to relax the risk of disclosing privileged information. In fact, courts already encourage such agreements in the wake of electronic discovery. “Judges often encourage counsel to stipulate at the outset of discovery to a “nonwaiver” agreement … to “take back” inadvertently produced privileged materials…”, Hopson v. Mayor, 232 F.R.D. 228 at 232 (2005). However, these agreements are only effective between the parties to the contract, and inadvertent disclosure to third parties in the lawsuit still may result in a waiver. Chubb v. National Bank of Washington, 103 F.R.D. 52 at 68 (1984). Proposed rule 502 would apply a uniform protection from waiver of inadvertent disclosure to all parties. Regardless of the inconsistency between the agreements of today, and the uniform rule of tomorrow, the landscape of what constitutes a waiver will not change significantly. Therefore, the cost and burden of electronic discovery will persist.

 

Secondly, subsection (b)(2) of proposed rule 502 still requires the holder of the privilege to take reasonable steps to prevent disclosure. I fail to see the realistic difference in the burden of “sifting for privileged information” before and after this rule is enacted regardless of the intentions of the authors of the amendment. The Judicial Conference Committee on Rules of Practice and Procedure states that:

 

 

“The proposed new rule facilitates discovery and reduces privilege-review costs by limiting the circumstances under which the privilege or protection is forfeited, which may happen if the privileged or protected information or material is produced in discovery. The burden and cost of steps to preserve the privileged status of attorney-client information and trial preparation materials can be enormous. Under present practices, lawyers and firms must thoroughly review everything in a client’s possession before responding to discovery requests. Otherwise they risk waiving the privileged status not only of the individual item disclosed but of all other items dealing with the same subject matter. This burden is particularly onerous when the discovery consists of massive amounts of electronically stored information.”

 

 

 Again, I agree with proposing a uniform policy, but I fail to see how the this rule will save the costs of electronic discovery. After this rule, parties are still going to have to pay the price and time of going through the data to meet the burden of taking “reasonable steps to prevent disclosure.” Perhaps we will just have to see exactly how that burden is applied. Most likely, firms will relax the scrutiny in which they inspect for privileged information, and rely on their overall prudent and reasonable undertakings after the fact to prove to the judge that they took “reasonable steps to prevent disclosure”. It remains to be seen. However, I see no windfall reduction in electronic discovery costs.

 

Although the proposed rule in all fairness to the authors will provide consistency among jurisdictions from a legal policy point of view, it still doesn’t address the enormous costs of sifting through gigabytes of electronic information in search of privileged information.