Using clawback agreements to lessen the blow of inadvertent disclosure

Every litigator knows the anxiety of getting ready to press send on a big document production and, no matter how carefully the documents were reviewed, having that nagging concern that something is in the production that should not be there. One main risk is the inadvertent disclosure of privileged materials. Attorneys are typically well-aware of their obligation under California law to maintain the attorney-client privilege and the importance of avoiding waiver.

But even with reasonable precautions, documents can slip through the cracks. Attorneys can take preventative measures to limit the inadvertent disclosure of privileged material communications, but also can protect against the impact of inadvertent disclosure when it does occur. Below are strategies to consider in order to limit the risks.

Consider a Clawback Agreement

Inadvertent disclosure of privileged information is fairly common in modern litigation. Though some courts are sympathetic to accidental productions of privileged material, many practitioners will try to protect against the harm of an inadvertent production by using a written agreement between the parties and a court order pursuant to Federal Rule of Evidence 502.

The Federal Rules of Evidence were amended in 2008 to address the growing concern with inadvertent disclosure as discovery demands and electronic discovery increased. Fed. R. Evid. 502(d) provides: "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." In addition to protecting against waiver, the agreement and order can also identify the parties' obligations and the steps to take in the event of an inadvertent disclosure. One consideration in California is Section 2031.285, which sets forth a procedure for addressing privilege or work product claims with respect to electronically stored information produced in discovery.

Federal Rules of Civil Procedure 16 and 26 further provide that the scheduling order and discovery plan issued by the court may address the parties' agreement regarding claims of privileged material, including any agreement under Fed. R. Evid. 502.

Fed. R. Civ. P. 26(b)(5)(B) similarly provides protection for inadvertent disclosures, but does not carry the same weight as a court order confirming the parties' arrangement. A litigant violating a court order tied to Fed. R. Evid. 502(d) (such as by refusing to return or segregate an inadvertently produced document) will likely face stricter penalty than a litigant that merely violates a rule of procedure.

In amending Fed. R. Evid. 502(d), the Advisory Committee provided insight on why formal agreements are now a more common practice: "[The amendment] responds to the widespread complaint that litigation costs necessary to protect against the waiver of the attorney-client privilege or work product have become prohibitive due to the concern that any disclosure (however innocent or minimal) will operate as a subject matter waiver of all protected communications or information." Because the cost of reviewing thousands of pages can be staggering, a Rule 502 agreement and court order can be the most cost-effective route to protect attorney-client privilege.

Address at the Outset of Discovery

Because this is a relatively known risk, many litigants will seek a formal agreement and court order before the initial production of documents. It may be too late to reach an agreement after documents have been produced and a mistake has been discovered.

Once an inadvertent disclosure is uncovered, an attorney's request for a clawback agreement could appear self-serving. The perception may be that the attorney is making concessions in a post-production agreement not because it is in the client's best interest, but because the attorney must undo a mistake.

Relevant Standards

In reviewing claims of inadvertent disclosure, California courts generally hold that, if the disclosure was truly inadvertent, there is no voluntary relinquishment of a known right necessary for a finding that the privilege has been waived. See, e.g., State Compensation Insurance Fund v. WPS, 70 Cal. App. 4th 644, 653, 82 Cal. Rptr. 2d 799, 805 (1999). California courts reject the "'gotcha' theory of waiver, in which an underling's slip-up in a document production becomes the equivalent of the actual consent" necessary for a finding that the privilege is waived. See Ardon v. City of Los Angeles, 62 Cal. 4th 1176, 1187, 366 P.3d 996, 1002 (2016) (citing State Comp. Ins. Fund, 70 Cal. App. 4th at 654).

Fed. R. Evid. 502(b) also considers whether the privilege holder took reasonable steps to prevent disclosure and whether the holder took reasonable steps to rectify the inadvertent production. A variety of factors will be relevant to whether the litigant took "reasonable steps" to prevent disclosure, including the scope of discovery, the extent of the disclosure, the amount of time it took to remedy the errors, and the overriding issue of fairness. See, e.g., AdTrader, Inc. v. Google LLC, 405 F. Supp. 3d 862, 867 (N.D. Cal. 2019) (concluding that a party waived the attorney-client privilege as to an email where it failed to take "reasonable steps to assert its privilege claim" even though it was undisputed that production of the email was inadvertent).

It thus can be risky to rely solely on agreements to "claw back" documents when making a large document production. It is still important to perform sufficient due diligence both in making the initial production and in subsequently monitoring for any indication that documents may have been inadvertently produced throughout the remainder of the case, so any claim of inadvertent disclosure can be asserted in a timely manner.

The federal and state rules provide guidance to attorneys for limiting the damage of inadvertent disclosure. While the goal is to avoid any such disclosure in the first instance, with the rules in mind, attorneys can implement protective measures to limit the damage when it does occur.