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Rule 502 is a powerful but underutilized cost-cutting tool

The rule holds that inadvertent disclosure of privileged material doesn't constitute a waiver of privilege

Read InsideCounsel's May feature about the current e-discovery landscape.

Why do litigants continue to underuse a powerful tool that could cut the often-considerable costs of privilege review? Under Federal Rule of Evidence 502, a court can order (or parties can agree) that inadvertent disclosure of privileged material doesn’t constitute a waiver of privilege. Under such a Rule 502 clawback order, parties are allowed to exchange information without conducting an exhaustive (and expensive) privilege review or logging every privileged document and withholding it. The order allows accidents to happen—and they do, constantly, says Ken Withers, director of judicial education for the Sedona Conference—without being deemed a waiver.

“It’s a very powerful tool to reduce the cost of privilege review, which is one of the most expensive parts of discovery,” Withers says. “But no one uses it. Why? It’s a fairly new rule—only about three years old, so some people don’t know what it is. And second, people … have a number of reasons why they’re willing to pay out the nose for extremely extensive two- and three-tier reviews before production,” including protecting trade secrets and simply avoiding the release of embarrassing information.

In Rajala v. McGuire Woods, LLP, a federal magistrate judge for the District of Kansas in 2010 agreed to the entry of a protective order containing a clawback provision, which McGuire Wood had proposed and the plaintiff argued against. “[This] case is precisely the type of case that would benefit from a clawback provision,” wrote U.S. Magistrate Judge David Waxse. “Such a provision will permit the parties to conduct and respond to discovery in an expeditious manner, without the need for time-consuming and costly pre-production privilege reviews, and at the same time preserve the parties’ rights to assert the attorney-privilege or work product immunity.”

But in a twist, the plaintiff in the case would go on to benefit from the clawback provision after inadvertently producing a privileged communication. Waxse in February 2013 agreed with the plaintiff’s argument: “McGuire Woods cannot be allowed to disregard the clawback provision now that such order controls the analysis of issues, particularly given that Plaintiff has relied upon the provision in deciding how to perform document production and ESI productions in a time- and cost-effective manner.” Because of the protective order’s clawback provision, the production did not constitute a waiver of privilege and the plaintiff retained the ability to designate the document as protected by the attorney-client privilege.

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