Discovery and Confidential Materials

Every civil lawsuit can be broken up into a few broad stages. First there is the filing of a Complaint or similar document. Defendant then files an Answer or other response. Subsequently, the plaintiff may file a document in response. This back and forth can go on for several rounds. After this is completed, and sometimes while it is going on, the parties begin the second stage of litigation referred to as Discovery. During Discovery, the parties exchange documents and take depositions to develop the facts they need to prove their case. Once Discovery is completed, the parties move onto the trial and any post-trial actions, if applicable. This article focuses on the Discovery stage of a lawsuit and the issues of confidentiality and privilege that arise during that stage.

Privilege

Discovery in civil litigation is very broad. “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.” FRCP 26(b). This rule begs the questions: what is the privileged information that is excluded from Discovery? Typically, privileged information is information protected by attorney-client privilege or the work product doctrine.

It’s hard to imagine anyone who hasn’t heard of attorney-client privilege, but it is important to know that courts define it much more narrowly than the way it is presented in popular culture. To invoke attorney-client privilege, an individual 1) has to be, or is seeking to be, a client; 2) the person the individual speaks to is a lawyer or one of his subordinates; 3) the conversation occurred without any strangers present and was related to securing a legal opinion or services (and not for the purpose of committing a crime or tort); and 4) the individual invoked, and did not waive, the privilege. Nationwide Mutual Ins. Co. v. Flemming, 924 A.2d 1259 (Pa. Super. 2007).

The work product doctrine, on the other hand, applies to documents and communication that contain the thoughts and mental impressions of a lawyer who is preparing a case. (https://lawshelf.com/courseware/entry/the-work-product-doctrine).

There is a third category that, while not privileged, may be considered confidential and entitled to certain protections. This category includes trade secrets, commercial information, and R&D. KFC’s secret blend of 11 herbs and spices could be an example of this sort of confidential information.

The Pennsylvania Rules of Professional Ethics require a lawyer to make reasonable efforts to prevent the disclosure of this privileged and confidential information. See PA. Rules of Prof’l Conduct R. 1.6(d). However, in today’s society, so much information is generated electronically, thousands, or hundreds of thousands, of documents can be produced during Discovery. Given this amount, it is possible, even likely, that some privileged or confidential information may inadvertently be disclosed. When this happens, the courts are called upon to determine whether the producing party has waived, or given up, the protections of privilege and confidentiality, allowing the information to be used without limitation during Discovery or trial.

Waiver of Privilege

The federal rules have a three-pronged test to determine whether or not an inadvertent disclosure results in waiver. The rule states that a disclosure does not result in waiver when (1) the disclosure is inadvertent; (2) the holder of the privilege took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error. FRE 502(b). When making a determination, the courts will also consider (1) the reasonableness of the precautions taken to prevent inadvertent disclosure; (2) the number of inadvertent disclosures; (3) the extent of the disclosure; (4) any delay and measures taken to rectify the disclosure; and (5) the interests of justice. Smith v. Allstate Ins. Co., 912 F.Supp. 2d 242, 247 (W.D. Pa. 2012).

A case helps illustrate how this works in practice. In Wise v. Wash. County, 2013 U.S. Dist. LEXIS 128731 (W.D. Pa.) a temp secretary for defendant inadvertently sent over privileged documents to opposing counsel. The Court found that the defendant waived the protections of privilege as they did not take enough precautions to prevent the inadvertent disclosure. The court noted that the defendant could have asked an attorney to review the documents before they were sent out. The court also found that defendant did not promptly rectify the error, as defendant waited over a year and half to ask for the documents back. Finally, the court found that there were only 47 documents produced and therefore a review of each document was feasible.

Penalties

As Wise shows, privilege and confidentiality are not absolute and it is important for producing parties to take steps to protect privileged and confidential information during Discovery. Importantly, there are also consequences for a receiving party that does not notify opposing counsel of an inadvertent disclosure. A receiving party that does not notify the producing party of the disclosure can be barred from using the documents or, more seriously, disqualified from the litigation altogether. See Maldonado v. New Jersey, 225 F.R.D. 120 (D. N.J. 2004).

The lesson here is that parties should work together at the beginning of Discovery to hash out a plan that allows them to avoid these harsh penalties. One way this is done is through Confidentiality Agreements.

Confidentiality Agreements

Confidentiality Agreements are agreements made at the initiation of Discovery which describe what sort of documents are privileged and confidential, under what circumstances they may be used, and what happens if privileged or confidential information is inadvertently released.

At the outset it is important to understand that a Confidentiality Agreement is an extremely powerful tool that allows the parties to replace Pennsylvania law with their own agreed upon rules, as long as they are accepted by the Court. This change only applies to the parties to the agreement and ends when the litigation is resolved.

It is the position of this article that all Confidentiality Agreements should contain three key concepts to adequately protect the parties. First, any party that wishes to designate a document as confidential or privileged must provide a brief statement stating why there is good cause for this designation. Second, any inadvertent disclosures should not result in waiver, as long as the producing party promptly takes steps to have the documents returned. Third, the agreement should describe, with specificity, how a party can challenge a designation of privilege or confidentiality.

The good cause standard has a long history in Pennsylvania and requires a party to articulate a legitimate need for the privacy or confidentiality claimed. Court-Ordered Confidentiality in Discovery, Howard M. Erichson, Chicago-Kent Law Review, Volume 81. In practice, a good cause standard in a Confidentiality Agreement would require a party which designates a document or communication as confidential or privileged to briefly explain the basis and need for such a designation. This will allow a party to designate a document as they see fit, but discourages them from abusing this ability.

The good cause standard also has the added benefit of putting the receiving party on notice of why such designation has been applied. If the receiving party disagrees with the designation, or the reason for the designation, they can seek to have the privileged of confidential designation removed by the court. Thus, any Confidentiality Agreement should contain a requirement that any designation should include a brief explanation of good cause for why the document was so marked.

Second, a Confidentiality Agreement should allow a grace period for the return of confidential or privileged information without wavier of its protections. As discussed above, Discovery is so broad, and so many documents are exchanged, it is likely an inadvertent disclosure will occur. A party should not be penalized for this disclosure, if they promptly take steps to fix their mistake. The appropriate grace period will change from case to case. In some cases, like an automobile accident, the documents are few and a review of each one is feasible, thus a shorter grace period, say 10 days, is appropriate. On the other hand, a commercial litigation case may involve an enormous amount of documents and a producing party should be entitled to longer grace period, say 30 days. The point is that the parties should take steps to protect themselves from waiver when they act quickly to remedy an inadvertent disclosure.

Third, a Confidentiality Agreement should detail how a receiving party can challenge a designation of privilege or confidentiality. Our firm believes the following principles accomplish that goal. First, there should be no time limitation on a party’s ability to challenge a designation of privilege or confidentiality. Second, if the receiving party wishes to challenge opposing counsel’s designation, it should explain in writing which designation they are challenging and the reasons for the challenge. Third, the parties should attempt to resolve the issue among themselves before getting a court involved. Fourth, if the parties need to involve the court, the burden of proving the designation was appropriate always remains with the party who made the designation. Finally, all materials remain privileged or confidential until the parties agree to, or the court order, the removal of that designation. Our firm believes these guidelines both protect privileged and confidential information and provide a sufficient means to challenge that designation.

In summary, Discovery in the electronic age is fraught with pitfalls and there can be serious consequences to a party if a mistake is made. Confidentiality Agreements provide a way to control this uncertainty, and reduce the serious consequences related to a Discovery misstep. At the same time these Agreements needed to be very carefully drawn so that the attorneys can protect the interests of their clients and make sure the goals of discovery are met.

About the Author: Patrick M. Blair, Esq. is a senior associate at Pallante Law. His practice areas include Personal Injury, Workers Compensation, Bankruptcy, and Trust and Estates. Patrick is a graduate of Temple University Beasley School of Law where was an editor for the Temple Journal of Science, Technology and Environmental Law. He also worked as a mentor to incoming students through the ACE Program.

While the discussion above has mostly focused on federal law, it should be noted that the rules apply to Pennsylvania state law as well. For instance, the five factored tests developed discussed above was applied by the Pennsylvania Superior Court in Carbis Walker, LLP v. Hill, Barth, and King, LLC, 930 A.2d 573 (Pa. Super. 2007).

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