Tuesday, September 23, 2008

New Federal Rule of Evidence 502 – A Modest Improvement?

This guest post was written by David B. Alden of Jones Day, who may know more about the attorney-client privilege than any other living human being. Because it's Dave's work, Beck and Herrmann are off the hook -- they claim no credit for what follows.



Both Houses of Congress have passed Senate Bill No. 2450, and President Bush signed it into law as Public Law No. 110-322 on September 19, 2008. This law creates a new evidence rule, Federal Rule of Evidence 502, limiting attorney-client privilege and work product waivers. It applies in "all proceedings commenced after" its enactment date and, "insofar as is just and practicable, in all proceedings pending" on that date. More about that in a minute, but first a little history.

A Little History

Before 1975, the law of evidence was left to the common law or, as some call it, judge-made law. The Federal Rules of Evidence (or "FRE"), which became effective in 1975, fairly comprehensively codified the law of evidence. Entire law school courses are devoted to the FRE, which have multiple, detailed rules concerning most every area of evidence law – judicial notice, presumptions, relevance, authentication, etc. For example, the FRE not only define hearsay and render it inadmissible, but have 24 exceptions for available “declarants,” 5 more for unavailable ones, and a residual exception for good measure (and creative lawyers).

Yet the FRE basically ignore a major area of evidence law – privilege. It was not supposed to be that way. The FRE, as sent to Congress, had 13 specific privilege-related rules, including rules covering the attorney-client privilege rule (proposed FRE 503), voluntary waivers (proposed FRE 511), and compelled productions of privileged materials (proposed FRE 512). But Congress objected, so we have FRE 501, which says that, unless state law applies or the Constitution or a federal statute says otherwise, federal privilege law “shall be governed by the principles of the common law.” Enough history.

What FRE 502 does

New FRE 502 does four things. First, it limits “subject matter” waivers. When there has been an intentional disclosure in a federal proceeding that waives the attorney-client privilege or work product protection, FRE 502(a) provides that the waiver extends to undisclosed privileged or protected communications on the “same subject matter” only if “they ought in fairness to be considered together.” The rule bars a waiver finding in both federal and state proceedings. This “no subject matter waiver unless fairness requires it” rule is the current rule in most (perhaps all) jurisdictions, but the new rule makes that clear.

Second, the new rule provides a “do over” for some unintentional productions. When there has been an inadvertent disclosure of privileged or protected materials in a federal proceeding, FRE 502(b) provides that there is no waiver if the privilege-holder took “reasonable steps” both to “prevent disclosure” in the first instance and “to rectify the error.” Like FRE 502(a), FRE 502(b)’s inadvertent disclosure rule bars a waiver finding in both federal and state proceedings. And again, the new rule codifies what already was the general rule, but removes any lingering uncertainty.

Third, when a disclosure is made in a state proceeding and is not subject to a state-court waiver order, FRE 502(c) provides that there is no waiver in a federal proceeding if either (a) there would be no waiver under FRE 502 if the disclosure had been made in a federal proceeding, or (b) there is no waiver under the state law where the disclosure occurred. This provides that the federal or state rule that is most protective against waiver applies. It is new.

Finally, FRE 502(d) provides that federal court non-waiver orders relating to federal proceedings bind other federal and state courts, and FRE 502(e) provides that a non-waiver agreement between parties to a federal proceeding binds only the parties unless the agreement is incorporated into a court order. FRE 502(d) is new, while FRE 502(e) is the general rule now.

What FRE 502 does not do

In the areas that FRE 502 addresses, some uncertainties remain. For example, FRE 502(a)’s “no subject matter waiver unless fairness requires it” rule will require courts to interpret and define both what is the “same subject matter” and when “fairness” requires a waiver. Similarly, FRE 502(b)’s “no waiver through inadvertent disclosure” rule neither identifies whose intent matters for purposes of determining whether the initial disclosure was “inadvertent” nor details what “reasonable steps” before and after the production are required to avoid waiver. But courts have grappled with all of these issues under the common law and presumably will be able to do so under FRE 502(a) and FRE 502(b).

There are also issues in the general area of privilege waiver that the new rule does not address. For example, corporations that have conducted internal investigations sometimes “voluntarily” disclose privileged and protected materials to government investigators and regulators as a sign of cooperation. These “voluntary” waivers became commonplace after the Justice Department’s so-called “Thompson Memo” effectively directed prosecutors to seek them. When plaintiffs pursuing other litigation against the corporation later seek the privileged and protected documents provided “voluntarily” to the government, corporate defendants have urged courts to find that there was only a “selective waiver,” which would extend to the government, but no further. Courts generally have rejected “selective waiver” claims, but early versions of FRE 502 would have permitted them. FRE 502 does not speak to “selective waivers.”

Also, there may be constitutional problems with the provisions in FRE 502(a), FRE 502(b), and FRE 502(d) that make federal privilege rules (and federal courts’ orders applying them) binding on state courts. If so and courts find that Congress could not give federal courts this power, then much of the “certainty” provided by FRE 502 will have been illusory. But that is a topic for another day, and probably for another blogger.

The net, net

Having lived with the federal common law of privilege for 33 years, we now have doubled the number of federal privilege-related evidence rules with new FRE 502. Because FRE 502(a) and FRE 502(b) largely codify major chunks of what already is the common law of attorney-client privilege and work product waiver, they should bring more predictability to an area where, currently, it does not always exist. But they really aren’t all that new and probably aren’t that big a big deal.

What is a big deal here is FRE 502(d). It provides that “[a] Federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court – in which event the disclosure is also not a waiver in any other Federal or State proceeding.” Effectively, FRE 502(d) will make a federal court non-waiver order a “trump” card in other federal courts, as well as in all state courts. Thus, so long as they have the prior blessing of a federal court order – a “no-waiver order” – litigants may (a) produce privileged and protected documents in federal proceedings with no pre- or post-production privilege review, yet (b) retain otherwise applicable attorney-client privilege and work product claims and (c) assert them when the adversary attempts to use the documents. If that is what FRE 502(d) means and producing parties elect to proceed in this manner, this could be a huge cost-savings, as privilege reviews plainly can be expensive.

But before parties rely on FRE 502(d) to eliminate the privilege review portion of their document production process, they should recognize that doing so has potential pitfalls. First, while the substance of some privileged or protected communications could hardly matter less, other communications may involve information that the privilege-holder really wants to keep confidential, particularly as against the litigation adversary to whom the production is being made. The no-privilege-review approach, although cheap, destroys this confidentiality. Thus, while FRE 502(d) will preserve the privilege-holder’s privilege and work product claims, the adversary will know the substance of the still-privileged and protected communications. The proverbial “cat” will be “out of the bag” (or Elvis will have “left the building”).

A second and related concern is that the right to raise privilege or work product claims that FRE 502(d) preserves may, as a practical matter, be of little use. A litigation adversary can “use” the document containing your privileged or protected communication in many ways that give you no opportunity to object. For example, the adversary may formulate questions or trial strategies that are based on or informed by privileged or protected documents. In that event, objecting may be either impossible or pointless. Similarly, if the adversary has fact or expert witnesses review and rely on privileged or protected documents (of course, before the claims are asserted and sustained), it will be impossible to have those witnesses “unlearn” that information and difficult to excise the resulting knowledge from their testimony or opinions.

Third, the claims of privilege or protection that FRE 502(d) preserves may conflict with and ultimately yield to other interests. Suppose, for example, that a litigation adversary claims that information in a privileged or protected document “impeaches” the privilege-holder’s witness’s testimony. How trial courts will resolve the privilege claims in that context remains to be seen.

Fourth, FRE 502(d)’s “produce now and assert later” approach may create practical problems. The current paradigm is that privileged and protected documents are reviewed and, for the most part, removed from the production process and, therefore, are unavailable to litigation adversaries. In a new “produce first, assert claims later” world, privileged and protected documents will, by assumption, be produced in substantial numbers. As a result, courts will be forced to resolve far more privilege and work product claims during depositions and at trial, where the privilege-holder presumably still would have to object to preserve the claims. My predictions are that busy courts will not like this new world and that many will respond in ways and with rules and rulings that privilege-holders will not appreciate.

For example, courts may set deadlines for privilege-holders to assert claims of privilege or protection in produced documents, either before depositions begin or before trial, which may significantly reduce any cost savings. Similarly, unless the producing party reviews and identifies privileged and protected documents after production but before depositions or trial, which defeats the cost-savings goal, each of the privilege-holder’s counsel will need to become expert at quickly spotting privileged and protected documents as the adversary uses them in any deposition or at trial and then objecting and defending the basis for those claims “on the fly.” Counsel’s inability to quickly raise and support the claims that FRE 502(d) preserved may mean that they are simply waived later through different conduct. And courts may ultimately decide that the new burdens that FRE 502(d) places on them are unwarranted and simply decline to enter FRE 502(d) “no-waiver” orders.

On balance, if a litigant’s privileged and protected documents are unimportant and voluminous, and the litigant is reviewing them before production only to avoid sweeping “subject matter” waiver claims that might reach more important communications, FRE 502 may provide real benefits in terms of cost-savings with little corresponding negative effects. But in the more typical situation where privileged and protected communications may matter or may even matter a great deal, FRE 502(d)’s “promise” to preserve privilege and work product claims for documents produced to litigation adversaries may mean little and come only at a heavy cost.

2 comments:

Cindy Courtney said...

I don't think that parties will produce documents without any sort of privilege review any time soon. In addition, courts--e.g., Judge Grimm--may not approve orders unless the parties promise to take reasonable steps to protect the privilege by conducting a review.

Drug-device-combination market said...

Good post, need to read it as I find some time, but you keep writting.