Failure to take “reasonable precautions” before producing privileged communications in email leads to loss of attorney-client privilege

A federal judge in Maryland recently ruled that a company being sued for copyright infringement waived attorney-client privilege for 165 documents accidentally disclosed to opposing counsel during pre-trial discovery.

In a 43-page opinion, the court used language from the original text of proposed new Rule 502 of the Federal Rules of Evidence and held that defendant Creative Pipe Inc. failed to exercise “reasonable precautions” to ensure email communications did not contain sensitive communications before producing the email to plaintiff Victor Stanley Inc. 

Victor Stanley sued Creative Pipe for intellectual property infringement and unfair competition, claiming the company lost educational and government contracts because Creative Pipe inappropriately accessed images from its web site.  During discovery, Creative Pipe allowed an untested keyword search tool to be used to comb through its electronically stored information, uncovering 165 documents of privileged data, including e-mail between Creative Pipe and its legal team.  Creative Pipe produced privileged information commingled with non-privileged information in its email.

Unlike Victor Stanley, the text of proposed Rule 502 submitted to Congress for adoption in December 2008 relaxes the pre-production review standard and only requires parties to take “reasonable steps to prevent disclosure.”  In response to Lexakos testimony in New York in January 2007, the Committee Notes state:

Depending on the circumstances, 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. The implementation of an efficient system of records management before litigation may also be relevant.

Victor Stanley v. Creative Pipe applies a more stringent test and does not adequately take into account the parties’ pre-litigation compliance efforts.  This case is one of the first and what should be many decisions involving the intersection between e-discovery and law of inadvertent disclosure, soon to be codified as Rule 502 of the Federal Rules of Evidence. With the explosion of information in business organizations, in order to have protection and be deemed to have taken “reasonable steps to prevent disclosure,” companies need to have processes to segregate privileged communications from other routine business matters contained in email.

Click here for a copy of the court’s opinion.



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