Clawback Agreements and FRE 502
Irth Sols., LLC v. Windstream Commc’ns LLC, No. 2:16-CV-219, 2017 WL 3276021 (S.D. Ohio Aug. 2, 2017).The court denied the defendant’s request to return privileged documents that it claimed it had mistakenly produced on two separate occasions. Although the parties had a clawback agreement, the court found that the defendant’s reckless and perfunctory behavior waived the privilege.
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This case originated when the plaintiff Irth Solutions (“Irth) alleged breach of contract, fraud and other claims against Windstream Communications (Windstream). The parties assented to a clawback agreement requiring that inadvertent production of privileged documents would not waive the asserted privilege.
Inadvertent Disclosure of Confidential Information
Windstream produced the first batch of documents late, including 2,200 pages, only 1,400 of which were readable, and no privilege log. Twelve days later, after Irth had “thoroughly reviewed” the documents, Windstream requested a clawback of 43 privileged documents totaling 146 pages that it claimed were provided by mistake. Windstream told the court that its counsel conducted “two levels of review” for privilege before sending the documents to Irth. However, somehow 14 of the 43 privileged documents included the word “legal.” Several more referred to Windstream’s counsel by name and title.
Any clawback agreement you write should specifically address all three prongs of Rule 502(b). It should provide “concrete directives” for what constitutes inadvertent disclosure.
While the parties were disputing this first inadvertent production, Windstream again produced the same 2,200 pages, “this time all readable.” That production again included the 43 privileged documents. Windstream’s counsel explained to the court that she believed she sent a redacted copy and “did a spot check” to confirm that redaction before personally sending the documents to Irth. As a preliminary matter, the court found the documents privileged.
The court then considered whether the defendant had waived the privilege and what role Federal Rule of Evidence 502 played in that determination. Under Rule 502(b), an inadvertent disclosure of privileged documents does not waive the privilege if the provider took “reasonable steps” to prevent the disclosure and also “promptly took reasonable steps to rectify the error.” The court noted that, “if drafted thoughtfully and then followed, clawback agreements effectuate the dual purposes of Rule 502,” providing predictable standards and controlling costs. However, “for clawback agreements to serve these purposes, lawyers must draft them with care.”
3 Approaches to Reconciling FRE 502 and Clawback Agreements
Here, the court assumed, for the sake of argument, that the productions were indeed inadvertent (albeit negligent) rather than intentional. The court then considered three different approaches to reconciling Rule 502 and conflicting clawback agreements:
- In the first approach, any clawback arrangement, “no matter how cursory,” would protect inadvertently produced documents, “regardless of the care taken” in their disclosure. The court rejected this approach, finding it “inconsistent with the underpinnings of Rule 502.”
- Under the second framework, only a “completely reckless” document production process — showing “no regard for preserving confidentiality” — would override a clawback.
- The third approach would allow Rule 502(b) to be superseded by a clawback provision only if the agreement specifically provided “concrete directives regarding each prong” of the rule.
Under all of these approaches, the court found that Windstream’s counsel had waived the privilege. The 43 privileged documents that were produced “contain[ed] obviously privileged material on their face.” More than 10% of the initial production was privileged. The court was therefore “unconvinced that any meaningful review of the documents occurred.” Nor was the court impressed by counsel’s “spot check” of the second production, which did not include a single redaction. Both productions were therefore reckless, overriding the clawback provision and waiving the privilege.
In the third approach, the court found that the parties’ clawback agreement was “so perfunctory that its intentions are not clear.” Therefore, to be in compliance with Rule 502, Windstream should have taken “reasonable steps to prevent disclosure” to maintain the privilege, but it did not. The court denied Windstream’s motion for return of the documents. Considering the “careless privilege review, coupled with the brief and perfunctory clawback agreement … [Windstream] has waived the privilege.”
Takeaways on following Rule 502(b)
Any clawback agreement you write should specifically address all three prongs of Rule 502(b). It should provide “concrete directives” for what constitutes inadvertent disclosure. Specifically, it should address what reasonable steps the parties will take to prevent such disclosure. In addition, it should outline how quickly an unintentional disclosure will be rectified.
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