Galena Street Fund, L.P. v. Wells Fargo Bank, N.A.

Filing 133

ORDER by Magistrate Judge Boyd N. Boland on 3/10/14 re: Plaintiff Galena's Motion to Compel and Request for Ruling Pursuant to Fed. R. Civ. P. 25(b)(5)(B) 73 . The Motion to Compel is GRANTED IN PART and DENIED IN PART as follows: GRANTED with respect to Exhibits B25 and B35; and DENIED in all other respects. (Simmons, B.)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Boyd N. Boland
Civil Action No. 12-cv-00587-BNB-KMT
GALENA STREET FUND, L.P.,
Plaintiff,
v.
WELLS FARGO BANK, N.A.,
Defendant.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This matter arises on Plaintiff Galena’s Motion to Compel and Request for Ruling
Pursuant to Fed. R. Civ. P. 25(b)(5)(B) [Doc. # 73, filed 6/24/2013] (the “Motion to Compel”),
which is GRANTED with respect to Exhibits B25 and B35 and DENIED in all other respects.
Galena seeks an order that the defendant, Wells Fargo Bank (“Wells Fargo”), waived the
attorney-client privilege with respect to 1,712 documents claimed to be privileged in their
entirety and 6,615 documents subject to redactions. Galena generally does not contest that the
documents are privileged,1 but urges four grounds upon which the privilege has been waived:
(1)

The fiduciary exception to the attorney-client privilege, arguing that Wells Fargo

sought legal advice for the benefit of the Trusts and that those communications cannot be

1

At Parts I.A. (Fiduciary Exception), I.B. (At-Issue Waiver), and II. (Waiver By
Production) of its Motion to Compel, Galena does not dispute that the documents are privileged,
but it claims a waiver. At Part I.C. (Improper Assertion), however, Galena does argue that Wells
Fargo has claimed the attorney-client privilege with respect to “numerous communications that
are facially not privileged.”

withheld from trust beneficiaries;
(2)

At-issue waiver, arguing that Wells Fargo waived the privilege when it designated

WaMu as a non-party at fault;
(3)

Waiver by failing properly to assert the privilege, failing to demonstrate sufficient

grounds for the privilege, and based on Wells Fargo’s overreaching and repeated improper
assertion of the privilege; and
(4)

Waiver by producing privileged documents in discovery.

Jurisdiction is premised on both a federal question and diversity. Scheduling Order [Doc.
# 27] at Part 2. “In a civil action based upon a state cause of action, state law controls the
determination of privileges.” White v. American Airlines, Inc., 915 F.2d 1414, 1424 (10th Cir.
1990). Consequently, I look to Colorado state law in resolving the privilege issues raised in the
Motion to Compel. In particular, under Colorado law, the burden of establishing a waiver of the
attorney-client privilege “rests with the party seeking to overcome the privilege.” People v.
Madera, 112 P.3d 688, 690 (Colo. 2005).
Galena is an investor in securitized trusts holding mortgage loans known as residential
mortgage-backed securities. This action concerns two such securities--Reperforming Loan
REMIC Trust Certificates Series 2002-2, and Reperforming Loan REMIC Trust Certificates
Series 2003-R1 (the “Trusts”). Galena alleges that Wells Fargo, as Trustee of the Trusts, owes it
fiduciary duties (1) of loyalty, (2) to avoid conflicts of interest, (3) of impartiality among trust
beneficiaries, (4) of care, (5) to prevent loss of trust assets, and (6) of full disclosure. Complaint
[Doc. # 1] at ¶96. In denying Wells Fargo’s Motion to Dismiss on the claim for breach of
fiduciary duty, I found that “Galena has sufficiently alleged that Wells Fargo labored under a

2

conflict of interest when it purchased WaMu’s servicing portfolio and then functioned as both
trustee for the trusts and as servicer for many of the loans in the trusts.” Order [Doc. # 64] at p.
25.
I. Fiduciary Exception to the Attorney-Client Privilege
Under federal law, courts have recognized a “fiduciary exception” to the attorney-client
privilege. “Under that exception, which courts have applied in the context of common-law
trusts, a trustee who obtains legal advice related to the execution of fiduciary obligations is
precluded from asserting the attorney-client privilege against beneficiaries of the trust.” United
States v. Jicarilla Apache Nation, 131 S. Ct. 2313, 2319 (2011).
Galena begins by arguing that “Colorado recognizes the existence of a fiduciary
exception to attorney-client privilege,” citing Neusteter v. District Court, 675 P.2d 1 (Colo.
1984). Contrary to Galena’s assertion, however, the Colorado Supreme Court held in Neusteter
that the Colorado statutory accountant-client privilege,2 not the attorney-client privilege, cannot
be invoked to protect from disclosure communications between a corporation and its accountants
in an action by shareholders against the corporation. The Colorado high court stated:
[W]here the corporation is in suit against its stockholders on
charges of acting inimically to stockholder interests, protection of
those interests as well as those of the corporation and of the public
require that the availability of the privilege be subject to the right
of the stockholders to show cause why it should not be invoked in
the particular instance.

2

The Colorado court did analogize the attorney-client and accountant-client privileges,
stating that “[t]he statutory accountant-client privilege is analogous to the attorney-client
privilege, long established at common law and not codified. . . .” Neusteter, 675 P.2d at 5.
3

Id. at 5 (quoting Garner v. Wolfinbarger, 430 F.2d 1093, 1103-04 (5th Cir. 1970)).3
Subsequently, in Ryskamp v. Looney, 2011 WL 3861437 *11 (D. Colo. Sept. 1, 2011),
this court applied Colorado law and extended Neusteter to a dispute concerning whether the
fiduciary exception applied to the attorney-client privilege. The court recognized the exception,
but found that the plaintiff had failed to establish good cause to overcome the privilege.
I agree with the court in Ryskamp that the Colorado Supreme Court would extend the
fiduciary exception to the attorney-client privilege. In addition, I anticipate that the Colorado
Supreme Court would not limit the fiduciary exception to the corporation/shareholder context
but, instead, would apply it to an action involving a dispute between a trustee and trust
beneficiaries. However, in order for the fiduciary exception to the attorney-client privilege to
apply, the communication must concern legal advice related to the execution of fiduciary
obligations and there must be good cause justifying a finding that the privilege was waived.
Galena argues that Wells Fargo has invoked the attorney-client privilege to its
communications with ten law firms either to withhold documents altogether or to redact some of
the contents of documents. Motion to Compel [Doc. # 73] at p. 8 and n.3. Galena focuses on
only three of the law firms, however: Seward & Kissel; Jones, Bell, Abbott, Fleming &
Fitzgerald; and Hunton & Williams. The argument with respect to the remaining seven firms is
inadequately developed, requiring that I deny the Motion to Compel with respect to them.
Although Galena has attached more than 1,000 pages of exhibits to the Motion to
Compel [Doc. ## 71-1 through 71-21], it directs me to only two exhibits--Ex. E4 and Ex. E5--in
support of its argument that the withheld and redacted documents involve communications

3

Wolfinberger recognized the fiduciary exception to the attorney-client privilege.
4

concerning legal advice related to the execution of Wells Fargo’s fiduciary obligations to the
Trusts or their beneficiaries.
It is difficult to know the purpose of Ex. E5, and Galena provides no guidance in its
briefing. In addition, Ex. E5 contains 53 pages, and Galena failed to direct me with any
particularity to the portion of the exhibit upon which it relies.
Exhibit E4 is a Noteholder Consent Form which states that Wells Fargo has retained
Seward & Kissel and Jones Bell and that “the services rendered by said firms will be of benefit
to the Trustee, the Certificateholders and the Trust.” Ex. E4 [Doc. # 71-17] at p. 7, ¶5. The
Noteholder Consent Form is dated September 9, 2010.
The evidence establishes that Wells Fargo retained the law firm of Hunton & Williams
“to assist Wells Fargo in investigating Galena’s claims of improper servicing by Washington
Mutual” and that “Hunton & Williams was retained under possible threat of litigation from . . .
Galena. . . .” Declaration of William Fay [Doc. # 87-10] (the “Fay Decl.”) at ¶5. In addition,
Wells Fargo retained Seward & Kissel and Jones Bell in or after June 2009, id. at ¶¶6-7, after it
had entered into a Tolling Agreement [Doc. # 87-1] by which Galena indicated its belief that “it
has claims against the Trustee arising from, related to, or connected to the [Trusts]. . . .” Tolling
Agreement [Doc. # 87-1] at p. 2.
Colorado appellate courts have not addressed the fiduciary exception under facts similar
to those presented here. In the absence of guiding authority, I am persuaded by the reasoning of
the court in Herrmann v. Rain Link, Inc., 2012 WL 1207232 **6-7 (D. Kan. April 11, 2012), that
the fiduciary exception to the attorney-client privilege has no application where, as here, there is
no mutuality of interest between the fiduciary and the beneficiary and where the fiduciary seeks

5

legal advice for its own protection against claims by the beneficiary.
In Herrmann the court noted that the fiduciary exception to the attorney-client privilege
has two bases. First, a fiduciary seeking legal advice concerning matters related to the execution
of fiduciary obligations “is not the sole client of the attorney but is merely a proxy for the
beneficiary” and, second, “a fiduciary has a duty to keep a beneficiary informed of certain
matters.” Id. at *7. The court continued:
[W]hen there is no mutuality of interest between the fiduciary and
beneficiary, the reasons for applying the fiduciary exception fade.
For example a number of courts have noted the fiduciary exception
does not apply when fiduciaries seek legal advice for their own
protection against beneficiaries or when fiduciaries seek advice
about non-fiduciary matters. When fiduciaries seek legal advice in
this capacity, their interests are not aligned with the beneficiaries’
interests; so, it would make little sense to consider the
beneficiaries the true clients of the attorney and therefore entitled
to disclosure. Likewise, fiduciaries do not have a duty to keep
beneficiaries informed of all matters. It naturally follows that the
fiduciary exception applies only to communications involving
fiduciary matters.
Id.
Perhaps because of the scope of the waiver it urges, Galena paints with an extremely
broad brush when it argues that the fiduciary exception applies to prevent Wells Fargo from
invoking the attorney-client privilege with respect to the 8,327 disputed documents. Here, as in
Herrmann, Galena has failed to show that the documents at issue involve communications about
“fiduciary matters” that Wells Fargo was obligated to disclose to Galena. Herrmann, 2012 WL
1207232 at *7.
Galena also argues that Wells Fargo “used Trust assets to compensate the law firms” and
that “[w]hen counsel is compensated from trust assets, the presumption is that the ‘real client’ is

6

the trust itself, thus the fiduciary exception applies,” relying on United States v. Jicarilla Apache
Nation, 131 S. Ct. 2313, 2322 (2011). Motion to Compel [Doc. # 73] at p. 8.4 The Supreme
Court recognized payment as one of three factors to be considered in determining the “real
client” issue:
In cases applying the fiduciary exception, courts identify the “real
client” based on whether the advice was bought by the trust
corpus, whether the trustee had reason to seek advice in a personal
rather than a fiduciary capacity, and whether the advice could have
been intended for any purpose other than to benefit the trust.
Id. at 2326.
Here, only one of the three factors--that trust funds were used to pay the attorneys-supports a finding that the Trusts were the real clients. The other two factors indicate that the
advice was not for the benefit of the Trusts or their beneficiaries. In particular, and as noted
above, the evidence establishes that Wells Fargo retained the law firm of Hunton & Williams “to
assist Wells Fargo in investigating Galena’s claims of improper servicing by Washington
Mutual” and that “Hunton & Williams was retained under possible threat of litigation from . . .
Galena,” Fay Decl. [Doc. # 87-10] at ¶5, and that Wells Fargo retained Seward & Kissel and
Jones Bell in or after June 2009, id. at ¶¶6-7, after it had entered into a Tolling Agreement [Doc.
# 87-1] by which Galena indicated its belief that “it has claims against the Trustee [Wells Fargo]
arising from, related to, or connected to the [Trusts]. . . .” Tolling Agreement [Doc. # 87-1] at p.
2. Consequently, Wells Fargo had reasons to seek advice for its own protection against the
Trusts and their beneficiaries, and the advice was intended for purposes other than to benefit the

4

Wells Fargo does not dispute that trust funds were used to pay at least some of the
attorneys fees, but argues that it was entitled to do so under its “broad indemnification rights as
trustee.” Response [Doc. # 87] at p. 11.
7

Trust. On balance, the factors indicate that Wells Fargo, and not the Trusts or their beneficiaries,
was the real client.
II. At-Issue Waiver of the Attorney Client Privilege
Galena next argues that Wells Fargo waived the attorney-client privilege by designating
WaMu as a non-party at fault, thus putting at-issue Wells Fargo’s attorney-client
communications relating to its liability for WaMu’s servicing errors. Wells Fargo’s non-party at
fault designation states in relevant part:
Throughout the course of its Complaint, . . . Galena alleges more
specifically that WaMu failed to service the loans in the trust in a
manner consistent with the Servicing Agreement and applicable
industry standards, failed to properly make insurance claims to the
Federal Housing Administration and U.S. Department of Veteran
Affairs, made improper advances to the trust, and wrongfully
wrote down the principal balance of the loans in the trusts.
* * *
Wells Fargo has moved to dismiss Galena’s Complaint in this
action, contending, among other things, that Wells Fargo is not
liable under any of Galena’s various legal theories related to
servicing losses that occurred while WaMu was servicing the loans
in trust. If Galena is permitted to proceed on its negligence claim,
however, WaMu is liable for any and all losses alleged by Galena
arising from that claim.
* * *
. . . Galena itself has pled the elements of a negligence claim
against WaMu. In this context, where Galena nevertheless has
sued only Wells Fargo as a defendant, it is appropriate for Wells
Fargo to name WaMu as a potentially liable nonparty. To the
extent Galena is permitted by this Court to proceed with a
negligence claim, WaMu is wholly or partially at fault for any and
all damages, injuries, or losses that can be proved by Galena.
Defendant’s Amended Designation of Nonparty at Fault [Doc. # 48] (the “Non-Party
Designation”) at pp. 2-3.
I previously dismissed Galena’s negligence claim insofar as it was brought against Wells

8

Fargo in its capacity as trustee. I allowed the claim to proceed, however, insofar as it is brought
against Wells Fargo as servicer. Order [Doc. # 64] at pp. 28-29.
The Complaint alleges that Wells Fargo bought and was assigned WaMu’s servicing
rights for the Trusts as of July 17, 2006. Complaint [Doc. # 1] at ¶60. The Servicing Rights
Purchase Agreement included an Interim Servicing Agreement [Doc. # 17-6 at p. 100] by which
Wells Fargo appointed WaMu to act as Interim Servicer between the Sale Date (defined as July
31, 2006), and the Transfer Date (defined as December 1, 2006, “unless otherwise mutually
agreed in writing by the Parties”). I understand the Non-Party Designation merely to assert
Wells Fargo’s contention that WaMu is wholly or partially responsible for its own negligence as
servicer, including any negligence while it served as Interim Servicer.
Colorado courts have recognized that the attorney-client privilege is not absolute and
may be waived:
[T]he attorney-client privilege is not an absolute privilege and may
be waived by the client. Any waiver must be demonstrated by
evidence that the client, by words or conduct, has expressly or
impliedly forsaken his or her claim of confidentiality with respect
to the information in question and, thus, has consented to its
disclosure.
People v. Sickich, 935 P.2d 70, 73 (Colo. App. 1996).
The Colorado Supreme Court expressly recognized the at-issue exception to the attorneyclient privilege in Mountain States Telephone and Telegraph Co. v. DiFede, 780 P.2d 533, 543
(Colo. 1989):
Although we have not directly addressed this issue before, it is
clear from our review of cases from other states that by placing in
issue a confidential communication going directly to the claim or
defense, a party impliedly waives the attorney-client privilege with
respect to that communication.
9

More recently, in People v. Madera, 112 P.3d 688, 691-92 (Colo. 2005), the Colorado
court explained:
Courts have found implied waiver of the attorney-client privilege
when a defendant places the allegedly privileged communication at
issue in the litigation, because any other rule would enable the
client to use as a sword the protection which is awarded him as a
shield.
* * *
[W]e have adopted the following three-prong test for implied [atissue] waiver of the attorney-client privilege which asks whether:
(1) assertion of the privilege was the result of some affirmative act,
such as filing suit, by the asserting party; (2) through this
affirmative act, the asserting party put the protected information at
issue by making it relevant to the case; and (3) application of the
privilege would have denied the opposing party access to
information vital to his defense.
(Internal quotation and citation omitted.) Madera involved a criminal defendant who sought to
withdraw his guilty plea based on a claim of ineffective assistance of counsel. In particular, the
defendant claimed that his counsel failed to explain the impact of the proposed plea on the
defendant’s sentence. Id. at 692. The prosecution resisted withdrawal of the plea and argued
that the defendant waived any privilege between himself and his defense counsel by putting at
issue the adequacy of that representation. Even under these facts, the Colorado court refused to
find a blanket waiver of the attorney-client privilege and ruled instead that the privilege was
waived only “with respect to communications [the defendant] had with [defense counsel] about
the sentence he faced by pleading guilty.” Id. The court further cautioned against the excessive
application of the at-issue waiver and ruled that a party asserting waiver must “show that the
privilege exception applies to each document it [seeks] in discovery.” Id. at 690.
And in People v. Trujillo, 144 P.3d 539, 543 (Colo. 2006), the Colorado Supreme Court
explained that the at-issue waiver applies “if a client asserts a claim or defense that depends upon
10

privileged information. . . .” At-issue waiver does not occur merely because a client has received
legal advice about a matter. Such a rule would swallow the attorney-client privilege. Instead, atissue waiver applies only where the claim or defense “depends”on the privileged information. In
other words, a party cannot assert a defense that depends on privileged information and
simultaneously use the privilege to keep that information from the opposing party. Id.
Galena again paints with a broad brush in connection with the documents it claims are
subject to Wells Fargo’s alleged at-issue waiver. At times it appears to argue that the waiver
applies to all of the documents “Wells Fargo is attempting to claw-back.”5 Motion to Compel
[Doc. # 73] at p. 13. Elsewhere, it appears that Galena asserts at-issue waiver only as to Exhibits
B2, B25, B35, and B85. Id. at p. 14 n.6.
Except as to B2, B25, B35, and B85, Galena provides no meaningful explanation as to
how any of the disputed documents have been put at-issue by Wells Fargo’s Non-Party
Designation or how application of the attorney-client privilege to those documents will deny
Galena access to information vital to its defense, and I decline to make the arguments for it.
Exhibit B2 [Doc. # 71 at pp.10-11] is a two page “Issues Memo” apparently prepared by
Wells Fargo and which Wells Fargo attempts to claw back. It contains a discussion of “Wells
Fargo’s Position” with respect to servicing errors committed by WaMu both prior to and after
the Servicing Rights Purchase Agreement between Wells Fargo. Significantly, the memo
contains a section captioned “Remedy” in which Wells Fargo discusses its remedy against

5

Galena says that “Exhibit B [to the Motion to Compel] contains the documents Wells
Fargo has clawed back in their entirety. Exhibit C contains documents Wells Fargo claims
required additional redaction. . . .” Motion to Compel [Doc. # 73] at p. 4 n.2. Exhibit B appears
to contain 118 documents comprising 789 pages, and Exhibit C appears to contain 32 documents
comprising 159 pages.
11

WaMu for the alleged servicing errors. Although information concerning the remedy appears to
be relevant to Wells Fargo’s theory of WaMu’s non-party liability, Wells Fargo’s non-party
claim does not depend on that privileged information.
Exhibit B85 is 12 pages and includes (1) a document captioned “WaMu Denial Detail”;
(2) handwritten notes; (3) a chart captioned “WaMu Indemnification Tracking”; and (4) various
emails. The “WaMu Denial Detail” includes a section captioned “Claim is Denied-Per our legal
department” which demonstrates that Wells Fargo received legal advice about its rights with
respect to servicing errors, Ex. B85 [Doc. # 71-6] at p. 79, but Wells Fargo’s non-party claim
does not depend on that advice. In addition, portions of the handwritten notes concern how
WaMu processed “HUD receipts,” but Wells Fargo’s non-party claim does not depend on that
information, either. Id. at p. 89.
Exhibit B35 is an email chain containing communications between May 19, 2006, and
October 17, 2006. In the initial email, the author states:
In December 2004 . . . Washington Mutual sought guidance from
Wells Fargo to confirm the appropriate method of remitting
liquidation proceeds from the federally insured loans. . . .
Washington Mutual was directed by Wells Fargo to remit
liquidation proceeds only after both Part A and Part B proceeds
had been collected (as opposed to remitting Part A proceeds and
Part B proceeds separately following receipt). Washington Mutual
relied upon and followed Wells Fargo’s directions until
approximately January 2005, when it revised its remittance
procedures.
Ex. B35 [Doc. # 71-2] at p. 49. Wells Fargo’s non-party claim that WaMu is responsible for its
own negligence in servicing the loans depends on the underlying premise that WaMu
independently decided how to remit liquidation proceeds from the federally insured loans.
Having asserted WaMu’s conduct as the loan servicer as a sword by means of the Non-Party
12

Designation, Wells Fargo cannot use the attorney-client privilege as a shield to hide
communications that indicate that Wells Fargo directed WaMu on how to remit those proceeds.
I find that any attorney-client privilege attaching to Exhibit B35 has been put at-issue by the
Non-Party Designation and is waived.
Finally, Exhibit B25 is an email chain containing communications concerning scheduling
a telephone call. No legal advice is sought or given and the email contains no confidential
information. The communications contained in Exhibit B25 are not privileged.
III. Waiver By Improper Assertion of
the Attorney-Client Privilege
Galena seeks an order finding that Wells Fargo has waived the attorney client privilege
based on the following:
(1)

“Galena’s analysis of the documents Wells Fargo has produced, and of those it

seeks to claw back, reveal[] numerous communications that are facially not privileged,”
including for example: (a) “redacted emails that were sent to Dan Reilly, an attorney for
Galena”; (b) emails to Galena’s in-house counsel; (c) emails with counsel representing Chase
and WaMu; and (d) communications with WaMu, Countrywide, Freddie Mac, Babson Capital,
and others. Motion to Compel [Doc. # 73] at p. 17;
(2)

Many instances where communications are redacted in one copy but not in others,

including instances where the redacted material is not privileged, id. at p.18; and
(3)

Numerous errors on the privilege and redaction logs. Id. at pp. 19-20.

I am not aware of a Colorado appellate decision holding that the improper assertion of
the attorney-client privilege is grounds for imposing the wholesale waiver of the privilege, and
the parties have not directed me to any. To the contrary, the Colorado Supreme Court in Trujillo
13

stated that implied waiver had been found under only two circumstances: at-issue waiver, and
“when a client discloses privileged communications to a third party.” 144 P.3d at 543.
Wells Fargo concedes that it has withheld or redacted documents to which no privilege
applies, but it argues that the errors were “unintentional,” “inadvertent,” and the “result of
overcautious review.” Response [Doc. # 87] at pp.19-21.
The cases relied on by Galena as supporting the blanket waiver by improper assertion of
the privilege involve facts far more egregious than those presented here. For example, in
Amway Corp. v. Procter & Gamble Co., 2001 WL 1818698 (W.D. Mich. April 3, 2001), the
court found:
Procter & Gamble’s assertion of the attorney-client privilege and
work-product immunity for the withheld documents was not
substantially justified. This finding is made inevitable by the
history of Procter & Gamble’s treatment of these documents. Over
two years ago, Magistrate Judge Boyce found, after in camera
inspection, that Procter & Gamble had no basis for the assertion of
privilege or immunity. When the issue was raised by Amway in
the present litigation, Procter & Gamble insisted upon a de novo
review of the issue, but presented this court with the same
affidavits that Judge Boyce found inadequate in 1998. Even
worse, Procter & Gamble ignored this court’s order directing it to
support its claims with an affidavit for each withheld document
and it failed to produce document no 405. In essence, Procter &
Gamble was given a second chance to support its claims, but failed
to do so. As noted above, the only reasonable inference to be
drawn from these facts is that Procter & Gamble knew that its
claims were meritless but persisted in pressing them to forestall
disclosure of embarrassing and harmful, but not privileged,
material.
Id. at *9. In addition, the court noted that “[t]his is not the first time Procter & Gamble has
advanced meritless claims of privilege or immunity in this litigation,” and itemized five previous
instances of improper assertions of privilege which the court characterized, among other things,

14

as “border[ing] on fantasy.” Id.
Similarly, in Pfizer Inc. v. Ranbaxy Laboratories Ltd., 2004 WL 2323135 at **2-3 (D.
Del. Oct. 7, 2004), the court found that “Pfizer has improperly used the attorney-client privilege
and work product to evade discovery.”
I am not persuaded that Wells Fargo’s admitted over-designation of material as
privileged was an intentional attempt to evade discovery. Although there is evidence that Wells
Fargo claimed privilege on documents which clearly are not, Wells Fargo also over-disclosed
and now seeks to claw back entirely or make additional redactions to more than 900 pages of its
production. See n.5 supra. Moreover, as a result of a remedial review, see Williams’ Decl.
[Doc. # 87-11] at ¶¶14-15, Wells Fargo produced an additional 1,000 documents previously
withheld in error. Reply [Doc. # 90] at pp. 25-26. The conduct alleged here does not warrant
the severe sanction of imposing a blanket waiver of the privilege, as Galena urges. See, e.g.,
High Point SARL v. Spring Nextel Corp., 2012 WL 234024 *4 (D. Kan. Jan. 25, 2012) (finding
no evidence of bad faith or ill motive and noting that “waiver of a privilege is a harsh sanction”
not appropriate where the errors are “[m]inor procedural violations” and where “good faith
attempts at compliance and other such mitigating circumstances bear against finding a waiver”).
IV. Waiver By Producing Privileged Documents
Galena served its first set of discovery requests on Wells Fargo on August 1, 2012. In
response, Wells Fargo produced a total of 208,000 documents consisting of over 2.2 million
pages. Response [Doc. # 87] at p. 32. Specifically, Wells Fargo produced 2 million pages on
November 16, 2012, Ex. 5 [Doc. # 87-6]; an additional 107,000 pages on November 27, 2012,
Ex. 6 [Doc. # 87-7]; and 206,500 pages on December 13, 2012. Ex. 7 [Doc. # 87-8]. Of the

15

208,000 documents produced, Wells Fargo has attempted to claw back 150 privileged documents
as inadvertently produced. See n. 5 supra. Galena resists that attempt, and requests an order
finding that Wells Fargo waived the privilege by producing the documents.
The issue of waiver by inadvertent production is governed by Fed. R. Evid. 502.
Silverstein v. Federal Bureau of Prisons, 2009 WL 4949959 *9 (D. Colo. Dec. 14, 2009). Rule
502(b) provides:
(b) Inadvertent Disclosure. When made in a federal proceeding .
. . the disclosure [of attorney-client privileged communications]
does not operate as a waiver in a federal or state proceeding if:
(1) the disclosure is inadvertent;
(2) the holder of the privilege or protection took reasonable steps
to prevent disclosure; and
(3) the holder promptly took reasonable steps to rectify the error,
including (if applicable) following Federal Rule of Civil Procedure
26(b)(5)(B).
Rule 26(b)(5)(B), Fed. R. Civ. P., provides:
(B) Information Produced. If information produced in discovery is
subject to a claim of privilege . . ., the party making the claim may
notify any party that received the information of the claim and the
basis for it. After being notified, a party must promptly return,
sequester, or destroy the specified information and any copies it
has; must not use or disclose the information until the claim is
resolved; must take reasonable steps to retrieve the information if
the party disclosed it before being notified; and may promptly
present the information to the court under seal for a determination
of the claim. The producing party must preserve the information
until the claim is resolved.
However, Rule 502(b) does not remove a party’s “responsibility to take reasonable
precautions against disclosure of privileged documents and to take reasonable and immediate
actions when a disclosure of an otherwise privileged document is discovered.” Silverstein, 2009
16

WL 4949959 at *10. In addition, “[t]he burden of showing that the privilege has not been
waived remains with the party claiming the privilege.” Id.
Galena first argues that the production of the 150 disputed documents was not
inadvertent because the documents “were reviewed by attorneys and knowingly produced,”
citing Silverstein, 2009 WL 4949959 at *10. Motion to Compel [Doc. # 73] at p. 23.
The court in Silverstein held that a document produced under mistaken facts was not
inadvertently produced within the meaning of Rule 502(b), reasoning:
The . . . Document was originally examined by two lawyers
representing the BOP, “agency” lawyer Chris Synsvoll and AUSA
Marcy Cook. Both lawyers determined that someone in the office
of General Counsel had created the document and presented it to
the Director of the BOP and so noted the document as privileged
on a log produced to the plaintiff. Several months later Mr.
Synsvoll received inaccurate information about the document
causing him to mistakenly identify [it] as the Executive Staff
Information Paper, a non-privileged document. AUSA Cook,
proceeding under that mistake, produced the Document to the
plaintiff.
This court is not convinced that this type of mistake was Congress’
concern when creating Rule 502. Based on all the commentary,
the word “inadvertent” from Rule 502 mandates a remedy for an
unintended, rather than a mistaken, disclosure. . . . This is not a
case where the questioned document was part of a larger
production which went unnoticed by the producer to the opposition
party.
Silverstein, 2009 WL 4949959 at *11.
In this case, by contrast, the evidence indicates that the production of the 150 disputed
documents was unintended and that they were “part of a larger production which went unnoticed
by the producer. . . .” Id. Specifically, counsel for Wells Fargo established an elaborate protocol
for the review and production of documents responsive to Galena’s requests. Declaration of

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Marie E. Williams [Doc. # 87-11] (the “Williams Decl.”) at ¶¶4-9. Despite those efforts, the
disputed documents were produced. According to Wells Fargo’s counsel:
The errors that occurred in identifying, redacting, or withholding
potentially privileged communications were inadvertent and not
the result of a deliberate attempt to selectively produce documents
to gain Wells Fargo an advantage in this litigation.
Id. at ¶17.
In addition, Wells Fargo took reasonable steps to prevent disclosure of privileged
documents. In particular:
5. Due to the large number of documents to be reviewed, Wells
Fargo engaged a third party document vendor to perform a
privilege and relevance review prior to production.
* * *
7. The review was performed by the document review vendor
under the supervision of litigation counsel for Wells Fargo. In an
attempt to ensure privileged documents were not produced,
litigation counsel for Wells Fargo developed a privilege review
protocol. As part of the protocol, the document reviewers, who are
trained to identify privilege issues, were each provided with lists of
attorneys’ names and firms who represented Wells Fargo during
the relevant time period. . . .
8. Among other steps taken to locate and withhold privileged
materials from production, the document review vendor applied
electronic filters to the text of the documents collected. . . .
Documents that “hit” on these filters were taken out of the general
document population for closer inspection by a group of reviewers
at the document review vendor. All other documents were
reviewed by the general document review team for . . . privilege.
9. After the initial review was completed, the document review
team performed a further “quality control” review, again giving
attention to privilege and work-product issues. After the document
review vendor completed its review, litigation counsel for Wells
Fargo performed further quality control checks of the documents
before producing them to Galena.
Id. at ¶¶5, 7-9.
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Finally, Wells Fargo took reasonable steps to rectify the error, including notifying Galena
pursuant to Fed. R. Civ. P. 26(b)(5)(B) that privileged information had been inadvertently
produced. In particular, Wells Fargo became aware of its production of privileged documents in
February 2013 and engaged its document review vendor to identify the scope of the problem. Id.
at ¶10. On March 25, 2013, Wells Fargo notified Galena and invoked the protections of Rule
26(b)(5)(B). Id. at ¶11. Throughout April and May, the parties became aware of the production
of additional privileged documents, and Wells Fargo invoked the protections of Rule 26(b)(5)(B)
with respect to the additional documents on June 21, 2013. Motion to Compel [Doc. # 73] at p.
21. Wells Fargo was required to identify the privileged documents that had been produced so
that it could provide the necessary notice to Galena. In view of the scope of the production-208,000 documents consisting of over 2.2 million pages--Wells Fargo acted with reasonable
promptness when invoking Rule 26(b)(5)(B).
I find that Wells Fargo’s production of the 150 disputed documents was inadvertent
within the meaning of Fed. R. Evid. 502(b) and that there has been no waiver of the attorneyclient privilege.
For unexplained reasons, Wells Fargo withdrew its claim of inadvertent production of 24
of the disputed documents. Notice of Withdrawal [Doc. # 119, filed 1/14/2014] at ¶5.6 Those
documents no longer are at issue. See id. at ¶5 (stating that “[b]ecause Wells Fargo is no longer
claiming certain documents were inadvertently produced, Galena is withdrawing its request that
the Court resolve Wells Fargo’s inadvertent production claims” as to those documents). With

6

The documents no longer claimed as privileged are Exs. B12; B15; B18; B23; B25; B30;
B42; B43; B44; B46; B47; B48; B52; B53; B71; B73; B80; B81; B82; B90; B92; and B94.
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respect to two documents--Exs. B97 and B101--Wells Fargo does not claim that they are
privileged in their entirety but only as to portions, and has provided redacted versions of the
documents. I have found that the production of Exs. B97 and B101 was inadvertent, and Wells
Fargo is entitled to substitute redacted versions to claw back the privileged portions that were
inadvertently disclosed.
IT IS ORDERED that the Motion to Compel [Doc. # 73] is GRANTED IN PART and
DENIED IN PART as follows:
• GRANTED with respect to Exhibits B25 and B35; and
•DENIED in all other respects.
Dated March 10, 2014.
BY THE COURT:
s/ Boyd N. Boland
United States Magistrate Judge

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