U.S. Home Corporation v. Settlers Crossing, L.L.C. et al
Filing
433
MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/23/12. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
U.S. HOME CORPORATION
:
v.
:
Civil Action No. DKC 08-1863
:
SETTLERS CROSSING, LLC, et al.
:
MEMORANDUM OPINION
Presently pending and ready for review in this suit for
breach
of
contract,
fraud,
and
declaratory
judgment
are
the
objection of Defendant-Counter Claimant iStar Financial, Inc.
(“iStar”) (ECF No. 329), to Magistrate Judge Connelly’s January
18, 2012, Order on Motion for Reconsideration (ECF No. 317), and
two related motions (ECF Nos. 326, 351).
briefed,
and
necessary.
the
court
Local
Rule
now
rules,
105.6.
no
For
The issues have been
hearing
the
being
following
deemed
reasons,
iStar’s objection will be sustained, the motion for leave to
file
surreply
Corporation
filed
and
by
Plaintiff-Counter
Counter
Defendant
Defendant
Lennar
U.S.
Home
Corporation
(collectively, “Plaintiffs”) will be granted,1 and Plaintiffs’
motion to refrain from viewing the privileged documents at issue
will be denied as moot.
1
U.S. Home Corporation is a wholly-owned subsidiary of
Lennar Corporation.
I.
Background2
This case was referred to Magistrate Judge Connelly for
resolution of all discovery disputes and for determination of
non-dispositive
matters.
iStar
objects
to
one
of
Judge
Connelly’s rulings that itself reconsidered a previous ruling
regarding the potential waiver of the attorney-client privilege
and the work product protection.
Because of this complicated
procedural backdrop, a brief description of the events leading
up to this point is necessary.
On October 26, 2010, iStar notified current counsel for
Plaintiffs, the law firm of Womble Carlyle Sandridge & Rice,
PLLC (“Womble Carlyle”), that it intended to serve a subpoena on
Plaintiffs’ former counsel, the law firm of Greenberg Traurig,
LLP (“Greenberg Traurig”), regarding non-privileged materials.
(ECF No. 329-16).
According to the Declaration of Louis J.
Rouleau,3
of
notified
a
member
about
the
Womble
subpoena,
Greenberg
Traurig
to
responding
to
subpoena,”
the
Carlyle,
Mr.
determine
but
shortly
Rouleau
how
that
that
after
“reached
firm
“initial
being
out
to
planned
on
contact
with
2
A complete recitation of the underlying facts in this case
is available at U.S. Home Corp. v. Settlers Crossing, LLC, No.
DKC 2008-1863, 2010 WL 958034 (D.Md. Mar. 11, 2010).
3
iStar objects to Judge Connelly’s consideration of this
document. As will be explained, it was not contrary to law for
him to consider the document, and iStar’s objection on this
ground will be overruled.
2
Greenberg Traurig did not result in a substantive conversation”
because the subpoena had not yet been served.
Rouleau Decl., ¶ 3).
notified
Womble
On December 15, 2010, Greenberg Traurig
Carlyle
(Id. ¶ 4).4
subpoena.
(ECF No. 343-2,
that
it
had
been
served
with
the
Later that day, Mr. Rouleau telephoned
Timothy Bass of Greenberg Traurig to discuss it.
(Id.).
Mr. Rouleau describes the phone call he had with Mr. Bass
as follows:
When I spoke with Mr. Bass on December 15,
201[0], I requested to coordinate with and
assist Greenberg Traurig in regard to the
subpoena, and mentioned the need to protect
U.S. Home’s privileges.
In response, Mr.
Bass declined my offer and assured me that
Greenberg Traurig would handle the matter
properly on its own, stating something to
the effect of: “We got it.
We know how to
respond.”
(Id. ¶ 5).
Mr. Rouleau goes on to explain:
Given (i) the assurances that Mr. Bass
provided to me during our conversation on
December 15, 2010, (ii) the fact that he is
a
litigation
partner
in
a
well-known,
national law firm, and (iii) the subpoena’s
express and repeated limitation of its
requests
to
“non-privileged”
documents,
Womble Carlyle did not further request to
coordinate with and assist Greenberg Traurig
in regard to the subpoena.
(Id. ¶ 7).
4
The subpoena generally sought documents concerning Bevard
Farms, the unconsummated sale of which provides the backdrop to
this case, and earlier litigation in Virginia between the
parties. (ECF No. 211-3).
3
In
January
documents,
(See
ECF
Womble
2011,
consisting
No.
Greenberg
of
329-18).
Carlyle
that
4,199
On
it
Traurig
pages
January
had
of
25,
produced
eighty-one
material,
to
2011,
received
iStar
Greenberg
production and offered to provide a copy of it.
six
weeks
request
later,
for
a
on
cost
March
11,
estimate
2011,
for
Womble
Traurig’s
(Id.).
a
copy
production, to which iStar responded the same day.
329-19).
notified
Carlyle
getting
iStar.
Some
sent
of
a
the
(ECF No.
Womble Carlyle ultimately requested a full copy of
Greenberg Traurig’s production four days later, on March 15,
2011.
(ECF No. 329-20).
Carlyle
discovered
that
On or about April 13, 2011, Womble
certain
documents
within
Greenberg
Traurig’s production should have been withheld on the basis of
the attorney-client privilege and the work product protection.
(ECF No. 343-2 ¶ 9).
After
allegedly
several
unsuccessful
privileged
documents
attempts
without
to
court
retrieve
the
intervention,
Plaintiffs filed a motion “for enforcement of stipulated order
regarding inadvertent disclosure of privileged material” on May
20, 2011.
(ECF No. 211).
approved
agreement
Order”)
that
set
Plaintiffs sought to enforce a court-
between
forth
the
a
parties
protocol
(“the
whereby
disclosed documents could be “clawed back”:
4
Confidentiality
inadvertently
6. Non-waiver of privilege for inadvertently
disclosed materials. Pursuant to Fed. R.
Evid. 502(d), the inadvertent disclosure of
any document that is subject to a legitimate
claim that the document is subject to the
attorney-client
privilege
or
the
workproduct protection shall not waive the
protection or the privilege for either that
document or for the subject matter of that
document.
(ECF No. 113 ¶ 6).5
however,
the
Pursuant to the Confidentiality Order,
requesting
party
could
retain
a
copy
of
the
disclosed documents if it disputed the claim of privilege or
protection by the producing party:
7.
Return
of
inadvertently
disclosed
materials. Except in the event that the
requesting party disputes the claim, any
documents the producing party deems to have
been inadvertently disclosed and to be
subject to the attorney-client privilege or
the work-product protection shall be, upon
written request, promptly returned to the
producing party, or destroyed, at that
party’s option. If the claim is disputed, a
single copy of the materials may be retained
by the requesting party for the exclusive
purpose of seeking judicial determination of
the matter pursuant to Fed. R. Civ. P.
26(b)(5)(B) and Fed. R. Evid. 502.
(Id. ¶ 7).
On August 19, 2011, after conducting a motions hearing,
Judge Connelly issued an order granting in part and denying in
part Plaintiffs’ motion (“the Original Order”).
5
(ECF No. 244).
Appendix D to the Local Rules of this court contains a
form order with similar language.
5
He held that as to all but one of the documents at issue (“the
contested
documents”),
Plaintiffs
waived
privilege and work product protection.6
the
attorney-client
Judge Connelly applied
Federal Rule of Evidence 502(b),7 requiring the privilege holder8
to establish all three parts of the test for finding that a
disclosure of privileged or protected documents does not amount
to a waiver.
analyzing
the
(See id. ¶¶ 21, 23, 30-31).
conduct
of
Greenberg
He ruled that, by
Traurig,
some
of
the
disclosures were not inadvertent and the privilege holder did
not take all reasonable steps to prevent disclosure.
(See id.
6
Specifically, the contested documents are:
Bates No.
3320, Bates No. 3755-57, Bates No. 3578, Bates No. 3760-61,
Bates No. 3762-64, Bates No. 3998-4009, Bates No. 4010-21, and
Bates No. 4027-44.
It is undisputed that the contested
documents were all initially subject to the attorney-client
privilege and the work product protection.
7
Federal Rule of Evidence 502(b) provides:
(b) Inadvertent Disclosure.
When made in a
federal proceeding or to a federal office or
agency, the disclosure 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).
8
For convenience, this memorandum opinion will refer to the
holder of the attorney-client privilege and the work product
protection as simply “the privilege holder.”
6
¶¶ 32-33, 44-45).
He did find, however, by focusing on the
conduct
Carlyle,
of
Womble
that
the
privilege
holder
took
reasonable steps to rectify the error once the disclosure had
been discovered.
(See id. ¶ 54).
Plaintiffs then moved for reconsideration.
On
January
18,
2012,
based
in
part
on
the
(ECF No. 253).
new
information
presented in the Rouleau Declaration, Judge Connelly issued an
order
vacating
a
Reconsideration
portion
Order”),
of
holding
the
Original
that
all
of
Order
the
(“the
contested
documents remained privileged or protected.
(ECF No. 317).
ruled
conduct
that
Carlyle,
he
not
disclosure
should
have
Greenberg
was
focused
Traurig,
inadvertent,
and
on
the
in
deciding
that,
based
declarations, all disclosures were inadvertent.
of
He
Womble
whether
the
on
new
the
(See id. ¶ 8).
He did not, critically, analyze at all whether Womble Carlyle,
as the current agent for the privilege holder, took reasonable
steps to prevent disclosure.
iStar
329).
objects
to
this
Reconsideration
Order.
(ECF
No.
Plaintiffs opposed iStar’s objections on February 22,
2012 (ECF No. 343), and iStar replied a week later (ECF No.
349).
On March 2, 2012, Plaintiffs filed a motion for leave to
file a surreply.
(ECF No. 351).
Even though surreplies are
generally disfavored in this district, see Local Rule 105.2.a
(“Unless otherwise ordered by the Court, surreply memoranda are
7
not permitted to be filed.”), given the complexity of the legal
issues
presented
Plaintiffs’
and
request,
given
that
Plaintiffs’
iStar
motion
will
has
be
not
opposed
granted,
and
their attached surreply will be considered.9
II.
Standard of Review
Under 28 U.S.C. § 636(b)(1)(A), non-dispositive pretrial
matters may be referred to a magistrate judge for hearing and
determination.
A district judge may modify or set aside any
portion of a magistrate judge’s non-dispositive ruling “where it
has been shown that the magistrate judge’s order is clearly
erroneous
72(a).
or
contrary
to
law.”
Id.;
see
also
Fed.R.Civ.P.
As previously noted:
Under the clearly erroneous standard, the
reviewing court is not to ask whether a
finding is the best or only conclusion
permissible based on the evidence. Nor is it
to substitute its own conclusions for that
of the magistrate judge.
See Tri-Star
Airlines, Inc. v. Willis Careen Corp., 75
F.Supp.2d
835,
839
(W.D.Tenn.
1999).
Rather, the court is only required to
determine whether the magistrate judge’s
findings are reasonable and supported by the
evidence.
Id.
“It is not the function of
objections to discovery rulings to allow
wholesale relitigation of issues resolved by
the magistrate judge.”
Buchanan v. Consol.
9
Plaintiffs also filed a motion for the court to refrain
from reviewing the contested documents. (ECF No. 326). Because
the issues raised by iStar’s objection to the Reconsideration
Order can be resolved without reference to the content of any of
the contested documents, Plaintiffs’ motion will be denied as
moot.
8
Stores
2002).
Corp.,
206
F.R.D.
123,
124
(D.Md.
Int’l Ass’n of Machinists & Aerospace Workers v. Werner-Masuda,
390 F.Supp.2d 479, 485 (D.Md. 2005).
III. Analysis
iStar contends that the Reconsideration Order was clearly
erroneous or contrary to law because (1) Judge Connelly relied
on new evidence that was not previously unavailable in rendering
his decision, (2) even if that new evidence is permissible, it
does not mandate the conclusion that there was no waiver of
privilege or protection as to the contested documents, and (3)
Judge Connelly should not have “unrung the bell” by finding no
waiver of privilege or protection as to the contested documents
after
having
previously
found
waiver
in
the
Original
Order.
(ECF No. 329, at 15-16).
Even though the Reconsideration Order did not articulate a
standard for reconsideration, given the nature of the Original
Order, Rule 54 was applicable.
See Fed.R.Civ.P. 54(b) (“[A]ny
order or other decision, however designated, that adjudicates
fewer than all . . . the rights and liabilities of fewer than
all the parties does not end the action . . . and may be revised
at any time before the entry of a judgment adjudicating . . .
all the parties’ rights and liabilities.”); see also Arias v.
Dyncorp, --- F.Supp.2d ---, 2012 WL 1383116, at *3 (D.D.C. Mar.
9
28,
2012)
(“Courts
may
reconsider
any
interlocutory
decision
such as a discovery ruling ‘at any time before the entry of a
judgment
adjudicating
liabilities.’”
.
.
.
(internal
Fed.R.Civ.P. 54(b))).
all
the
parties’
citations
rights
omitted)
and
(quoting
The precise standard governing a motion
for reconsideration of an interlocutory order pursuant to Rule
54(b) is unclear, however.
Fayetteville Investors v. Commercial
Builders, Inc., 936 F.2d 1462, 1472 (4th Cir. 1991).
Courts
frequently look to the standards set forth in Rules 59(e) and
60(b)
for
guidance
in
considering
such
motions.
See
Akeva
L.L.C. v. Adidas Am., Inc., 385 F.Supp.2d 559, 565-66 (M.D.N.C.
2005) (“Courts will reconsider an interlocutory order in the
following situations:
(1) there has been an intervening change
in controlling law; (2) there is additional evidence that was
not previously available; or (3) the prior decision was based on
clear error or would work manifest injustice.”); see also Beyond
Sys.,
Inc.
v.
Kraft
Foods,
Inc.,
No.
PJM-08-409,
2010
WL
3059344, at *1-2 (D.Md. Aug. 4, 2010) (applying this three-part
test).
Importantly, the United States Court of Appeals for the
Fourth Circuit has held that the standards articulated in Rules
59(e) and 60(b) are not binding when considering a motion under
Rule 54(b).
505,
514-15
Am. Canoe Ass’n v. Murphy Farms, Inc., 326 F.3d
(4th
Cir.
2003)
(“Motions
10
for
reconsideration
of
interlocutory orders are not subject to the strict standards
applicable to motions for reconsideration of a final judgment.
This is because a district court retains the power to reconsider
and
modify
its
interlocutory
judgments,
including
partial
summary judgments, at any time prior to final judgment when such
is warranted.
Said power is committed to the discretion of the
district court . . . .” (internal citations omitted)); see also
Louers v. Lacy, No. JKS–10–2292, 2012 WL 1067876, at *2 (D.Md.
Mar. 28, 2012) (“Although these factors are the most commonly
considered when evaluating interlocutory orders, they are not
exhaustive or binding . . . .”).
courts
have
considered
For example, while rare, some
previously
available
evidence
when
resolving a motion under Rule 54(b), particularly to correct
“clear error” or to avoid “manifest injustice.”
E.g., Kimberly-
Clark Worldwide, Inc. v. First Quality Baby Prods., LLC, No.
1:09–CV–1685, 2011 WL 6887866, at *2 (M.D.Pa. Dec. 29, 2011);
Cal. Dep’t of Toxic Substances Control v. Payless Cleaners, No.
CIV. S-02-2389 LKK/DAD, 2007 WL 2712172, at *3 (E.D.Cal. Sept.
14, 2007); Lyons v. Baughman, No. CIV. S-01-412 LKK/KJM P., 2007
WL 1378022, at *3 (E.D.Cal. May 10, 2007).
A.
Previously Available New Evidence
Because
consider
it
was
previously
within
available
Judge
new
11
Connelly’s
evidence
discretion
in
to
issuing
the
Reconsideration
Order,10
the
Reconsideration
Order
cannot
be
challenged on this ground.
B.
Waiver of the Attorney-Client Privilege and Work
Product Protection
iStar’s
second
and
third
grounds
for
objecting
to
the
Reconsideration Order are related, as they both concern whether
there was a waiver of the attorney-client privilege or the work
product protection with respect to the contested documents.
The
parties primarily disagree on the proper rule that should have
been applied in resolving this issue.
iStar contends that Rule
502(b) governs and that Judge Connelly erred in neglecting to
apply that rule on reconsideration, although he had done so in
the Original Order.
(ECF No. 329, at 20-22).
In contrast,
Plaintiffs contend that the Fourth Circuit’s decision in Hanson
v. United States Agency for International Development, 372 F.3d
286 (4th Cir. 2004), is dispositive of the entire matter and that
Judge
Connelly
was
correct
in
10
relying
on
that
case
upon
Plaintiffs also submitted the declaration of Christian
Marlin in support of reconsideration, which was previously
available as well.
Although Judge Connelly briefly refers to
the Marlin Declaration in the Reconsideration Order (ECF No. 317
¶ 2), it does not appear that the declaration formed any
material basis for that decision.
The Marlin Declaration
addresses
Plaintiffs’
direct
involvement
with
Greenberg
Traurig’s production, which amounted to nothing more than a
single phone call to Greenberg Traurig after it had already been
discovered that the contested documents had been disclosed to
iStar.
12
(ECF No. 343, at 19-27).11
reconsideration.
iStar’s stance is
overall the better-reasoned position.
1.
Judge Connelly’s Finding that Rule 502(b) Governs the
Instant Dispute Was Not Clearly Erroneous or Contrary
to Law
In
a
federal
proceeding,
Rule
502
generally
applies
to
determine whether the disclosure of a privileged or protected
document
waives
the
product protection.12
attorney-client
privilege
or
the
work
Substantively enacted on September 19,
2008,13 Rule 502 reads, in part, as follows:
The following provisions apply, in the
circumstances set out, to disclosure of a
11
Plaintiffs contend that iStar conceded that Hanson
controls because iStar did not respond to their arguments either
when this issue was initially briefed or on reconsideration.
(ECF No. 343, at 13).
They further contend that iStar cannot
now dispute Hanson’s applicability in this court because iStar
did not contest this issue in front of Judge Connelly first.
(Id.).
This argument is easily dismissed.
iStar clearly took
the position before Judge Connelly that Rule 502(b) applied to
the question of waiver. (See ECF No. 265, at 9). In any event,
even if iStar had not opposed Plaintiffs on this ground, parties
cannot concede to the application of incorrect controlling law.
And as will be discussed, although Hanson is implicated in the
present case, it is not completely dispositive of the question
of waiver.
12
Prior to the enactment of Rule 502, where subject-matter
jurisdiction was founded upon diversity of citizenship and state
law generally applied to the underlying claims, “state law
govern[ed] privilege” as well. See Fed.R.Evid. 501; Cont’l Cas.
Co. v. Under Armour, Inc., 537 F.Supp.2d 761, 766 (D.Md. 2008).
Rule 502 makes clear, however, that “notwithstanding Rule 501,
[Rule 502] applies even if state law provides the rule of
decision.” Fed.R.Evid. 502(f).
13
Rule 502 has since been revised for style and clarity.
13
communication or information covered by the
attorney-client privilege or work-product
protection.
. . . .
(b) Inadvertent Disclosure. When made
in a federal proceeding or to a federal
office or agency, the disclosure 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).
Fed.R.Evid. 502(b).
Rule 502 recognizes that this basic test
may be superseded by court order or agreement of the parties.
See Fed.R.Evid. 502(d), (e).
To find that a court order or agreement under Rule 502(d)
or
(e)
supplants
the
default
Rule
502(b)
test,
courts
have
required that concrete directives be included in the court order
or agreement regarding each prong of Rule 502(b).
In other
words, if a court order or agreement does not provide adequate
detail
regarding
precautionary
what
measures
constitutes
are
required,
inadvertence,
and
what
the
what
producing
party’s post-production responsibilities are to escape waiver,
the court will default to Rule 502(b) to fill in the gaps in
controlling
Prod.,
law.
Inc.,
(following
the
See,
271
e.g.,
F.R.D.
parties’
Mt.
125,
Hawley
130,
agreement
14
Ins.
133
v.
Felman
(S.D.W.Va.
2010)
regarding
Co.
post-production
responsibilities,
but
reverting
to
Rule
502(b)(2)
regarding
required precautionary measures because the agreement was silent
on that prong), objections overruled sub nom. Felman Prod. Inc.
v.
Indus.
Risk
Insurers,
No.
3:09–0481,
2010
WL
2944777
(S.D.W.Va. July 23, 2010); Luna Gaming-San Diego, LLC v. Dorsey
& Whitney, LLP, No. 06cv2804 BTM (WMc), 2010 WL 275083, at *4
(S.D.Cal.
Jan.
13,
2010)
(applying
Rule
502(b)
despite
the
existence of a court order that provided for a general nonwaiver
of
privilege
court
order
failed
post-production
Colors,
Inc.,
for
to
inadvertent
offer
detailed
responsibilities);
No.
07–1275
disclosure
instructions
United
(JHR/JS),
because
2009
States
WL
v.
that
regarding
Sensient
2905474,
at
*2
(D.N.J. Sept. 9, 2009) (applying Rule 502(b) despite a general
non-waiver
agreement,
in
part,
because
“[n]owhere
in
the
[agreement] does it mention that the parties are excused f[ro]m
the requirements of Federal Rule of Evidence 502(b)”).
In this case, the Confidentiality Order contains a general
non-waiver provision for privileged or protected materials that
are inadvertently disclosed by the producing party.
No. 113 ¶ 6).
(See ECF
It also contains a “claw-back” provision whereby
the requesting party must return any document that the producing
party deems “inadvertently disclosed.”
(See id. ¶ 7).
The
requesting party, however, may dispute a claim of privilege or
protection regarding the inadvertently disclosed material, and
15
such disputes must be judicially resolved pursuant to “[Rule]
502.”
(See id.).14
silent
as
to
Importantly, the Confidentiality Order is
either
the
parties’
precautionary
production responsibilities to avoid waiver.
or
post-
Thus, when Judge
Connelly interpreted the Confidentiality Order as directing that
disputes over privilege or protection claims should be resolved
pursuant to Rule 502(b) (see ECF No. 244 ¶ 21), a finding that
was not vacated by the Reconsideration Order, it was not clearly
erroneous or contrary to law for him to do so.
All three prongs
of Rule 502(b) govern this dispute.15
14
During the initial briefing of the motion to enforce the
Confidentiality Order, Plaintiffs ignored this latter language
regarding dispute resolution and contended that the existence of
the claw-back provision supplanted the basic Rule 502(b) test.
(ECF No. 211-1, at 6 n.2). To that end, they argued that under
the Confidentiality Order, “the producing party may unilaterally
determine whether a production was inadvertent, and there is no
further burden that must be met to trigger the claw-back
obligations.”
(ECF No. 222, at 4).
In the Original Order,
Judge
Connelly
explicitly
rejected
this
reading
of
the
Confidentiality Order.
(ECF No. 244 ¶ 5).
When Plaintiffs
moved for reconsideration, they did not clearly raise this issue
as a basis for reconsideration.
(ECF No. 253-1).
At best,
Plaintiffs argued that Hanson “begins and ends” the inquiry such
that “there is no need to address Rule 502.” (ECF No. 253-1, at
13).
That argument is a far cry, however, from an assertion
that the Confidentiality Order supersedes Rule 502(b).
15
Furthermore, as Judge Grimm of this court observed in a
recently published article discussing Rule 502:
[A] claw-back agreement wherein a party
intends
to
produce
documents
without
complete pre-production review contemplates
purposeful, not inadvertent, production. It
16
In the opposition to iStar’s objection, Plaintiffs maintain
that Rule 502(b) is the incorrect rule for two reasons.
Plaintiffs argue that Hanson should control.
First,
They are partially
correct in that, per Hanson, an “attorney may not unilaterally
waive the privilege that his client enjoys.”
19 (citing Hanson, 372 F.3d at 294)).
(ECF No. 343, at
They are further correct
that, as a result, Greenberg Traurig could not have waived the
attorney-client privilege without Plaintiffs’ consent, and the
Rouleau Declaration established that such consent was absent.
But Hanson crucially does not address whether Plaintiffs in fact
waived privilege as to the contested documents.
F.3d
at
294
[privileged
client]
has
(“[An
document]
waived
attorney’s]
tells
its
us
right
unilateral
nothing
to
See Hanson, 372
disclosure
about
withhold
whether
the
of
a
[the
[privileged
would be a mistake to draft a claw-back
provision as part of a Rule 502(e) agreement
that states that it is intended to protect
against
“inadvertent”
disclosure
of
privileged or protected information.
Paul W. Grimm, Lisa Yurwit Bergstrom & Matthew P. Kraeuter,
Federal Rule of Evidence 502: Has It Lived Up to Its Potential?,
XVII RICH. J.L. & TECH. 8 (2011), http://jolt.richmond.
edu/v17i3/article8.pdf.
In other words, the Confidentiality
Order’s
inclusion
of
a
claw-back
provision
only
for
inadvertently produced documents necessarily contemplated that
some degree of precautionary measures be taken by the parties to
avoid waiver.
17
document].” (emphasis added)).16
As previously explained, Rule
502(b) answers that question.
Second,
Plaintiffs
argue
the
rule
cannot
apply
to
an
“unauthorized — indeed, unknown — disclosure by a third party.”
(ECF No. 343, at 26).
In other words, Plaintiffs assert that
Greenberg Traurig as a third party could not have waived their
privilege.17
In this case, however, it is not entirely clear
that Greenberg Traurig is truly a third party in the sense that
Plaintiffs
had
no
control
over
its
actions.
Indeed,
as
Plaintiffs’ former counsel, Greenberg Traurig still owed certain
16
Plaintiffs appear to read Hanson as holding that an
attorney can never waive a client’s privilege.
Hanson did not
reach such a broad conclusion.
Indeed, even Plaintiffs
implicitly admitted as much when they relied on the Rouleau
Declaration to show that Womble Carlyle did not intend to have
the contested documents disclosed.
If Hanson were as farreaching as Plaintiffs contend, Womble Carlyle’s actions would
be irrelevant.
17
In introducing this argument, Plaintiffs fumble a bit and
suggest that Rule 502(b) does not apply to the instant situation
because the disclosure of the contested documents was still
“intentional” insofar as Greenberg Traurig was concerned, and
Rule 502(b) only applies to inadvertent disclosures.
(See ECF
No. 343, at 25-26). Obviously, as Plaintiffs themselves admit,
Rule 502(b) must be considered from the point-of-view of “the
party whose privileges are at issue.”
(Id. at 26).
Thus,
Greenberg Traurig’s intent is of no moment vis-à-vis the
applicability of Rule 502(b).
Separately, it is not lost on the court that Plaintiffs
seek to treat Greenberg Traurig as counsel for purposes of
Hanson but then simultaneously argue that Greenberg Traurig is
an independent third party for purposes of Rule 502(b).
Regardless, as will be discussed, Rule 502(b) applies to
disclosures by third parties.
18
duties to them.
See, e.g., In re Criminal Investigation No.
1/296X in the Circuit Court for Anne Arundel Cnty., 336 Md. 1, 8
(1994) (“The attorney-client privilege does not cease with the
termination of the relationship.”); see also Restatement (Third)
of The Law Governing Lawyers § 46 (2000) (“On request, a lawyer
must allow a client or former client to inspect and copy any
document possessed by the lawyer relating to the representation,
unless substantial grounds exist to refuse.” (emphasis added)).
At least one court has held that Rule 502(b) governs disclosures
by former counsel, much like disclosures by current counsel.
See Cmty. Bank v. Progressive Cas. Ins. Co., No. 1:08-cv-01443WTL-JMS,
2010
WL
1435368,
at
*4
(S.D.Ind.
Apr.
8,
2010),
modified on other grounds, 2010 WL 2484306 (S.D.Ind. June 14,
2010).18
Even
completely
still
held
if
Greenberg
independent
the
Traurig
of
privilege
were
Plaintiffs’
holder
18
really
a
influence,
responsible
for
third
party
courts
have
taking
some
It may also not be precisely accurate to refer to
Greenberg Traurig as Plaintiffs’ former counsel.
Plaintiffs
concede that Greenberg Traurig still maintains a financial
relationship with Plaintiffs, as that law firm continues to
represent Plaintiffs in various litigation in other parts of the
country.
(See ECF No. 351-1, 1-3).
One court confronted with
roughly similar facts and issues has held that there is “no
satisfactory basis” for distinguishing between inadvertent
disclosure by a party and inadvertent disclosure by that party’s
attorney where the attorney represents the party in unrelated
litigation. See Cunningham v. Conn. Mut. Life Ins., 845 F.Supp.
1403, 1410 (S.D.Cal. 1994).
19
action to protect the privilege or protection at issue.
e.g.,
Cobell
(noting
v.
that
although
by
“the
the
disclosed
Norton,
213
F.R.D.
attorney-client
communications
third
parties,
69,
privilege
might
if
76-77
the
have
[is]
been
holder
(D.D.C.
of
See,
2003)
preserved,
involuntarily
the
privilege
[makes] efforts reasonably designed to protect and preserve the
privilege”); cf. SEC v. Lavin, 111 F.3d 921, 930 (D.C. Cir.
1997) (holding “waiver [of the marital privilege] occurs only
when the holder has failed to take reasonable steps to reclaim
the protected material” after involuntary disclosure by a third
party (citing United States v. de la Jara, 973 F.2d 746, 750 (9th
Cir. 1992))).19
during
massive
Indeed, in discussing accidental disclosures
discovery,
i.e.,
the
quintessential
situation
against which the law of inadvertent disclosure was meant to
protect, Judge Grimm recognized:
19
In Lavin, the appellate court observed that to protect
its privilege against disclosure by third parties, a holder of
the privilege need not “engage in a preemptive strike to prevent
further
disclosure
of
involuntarily
disclosed,
privileged
materials . . . absent a concrete threat of further disclosure.”
Here, Plaintiffs were on notice at least as of December 15,
2010, when Greenberg Traurig apprised Womble Carlyle that it had
been served with the subpoena, that privileged documents might
be disclosed.
Given that the subpoena was directed at
Plaintiffs’ former counsel, it is disingenuous for Plaintiffs to
argue that there was no potential for improper disclosure simply
because the subpoena only sought “non-privileged” materials.
Moreover, it is the rare subpoena that affirmatively seeks
privileged materials.
20
There
is
little
conceptual
difference
between the nonconsensual disclosure of
privileged material by a third party over
whom the privilege holder has no control,
and
involuntary
production
by
a
party
ordered to produce voluminous materials by
court order that requires disclosure within
a
time
frame
that,
despite
reasonable
screening, prevents unrestricted opportunity
to review for privilege. In either instance,
provided the holder of the privilege has
taken all reasonable measures under the
circumstances to prevent disclosure, but was
prevented from doing so by matters beyond
his control, a finding of waiver would be
unfair and improper.
Hopson
v.
Mayor
of
Balt.,
(emphasis added) (citing
232
F.R.D.
228,
243
(D.Md.
Lavin, 111 F.3d at 930).
2005)
Although
these cases pre-date the enactment of Rule 502, nothing in Rule
502 suggests that it was not meant to apply to circumstances
involving disclosures by third parties.
explanatory
note
(revised
11/28/2007)
See Fed.R.Evid. 502
(“The
rule
makes
no
attempt to alter federal or state law on whether a communication
or information is protected under the attorney-client privilege
or work-product immunity as an initial matter.
Moreover, while
establishing
rule
purport
to
some
exceptions
supplant
to
applicable
waiver,
waiver
the
doctrine
does
not
generally.”).
All in all, Judge Connelly’s application of Rule 502(b) under
the circumstances here was not clearly erroneous or contrary to
law.
21
2.
The Conclusion Reached in the Reconsideration Order
Was Contrary to Law
In the Reconsideration Order, Judge Connelly applied Hanson
to the Rouleau Declaration to deduce that Plaintiffs did not
intentionally disclose the contested documents to iStar.
ECF No. 317 ¶¶ 8-9).
(See
He erred, however, by extending that
conclusion to hold that there was no waiver of privilege or
protection at all.
As the Original Order itself emphasized (ECF
No. 244 ¶ 31), all three prongs of Rule 502(b) must be satisfied
to find that a disclosure of a privileged or protected document
does
not
constitute
waiver,
see
Conceptus,
Inc.
v.
Hologic,
Inc., No. C 09-02280 WHA, 2010 WL 3911943, at *1 (N.D.Cal. Oct.
5, 2010); Mt. Hawley Ins. Co., 271 F.R.D. at 136.
But the
Reconsideration Order vacated, without reanalyzing, the portions
of the Original Order addressing the second and third prongs of
Rule 502(b).
(See ECF No. 317 ¶ 10).20
By failing to consider
whether all three prongs of Rule 502(b) were met, the conclusion
reached in the Reconsideration Order was contrary to law.
See
In
707
re
Motor
Fuel
Temperature
Sales
Practices
Litig.,
F.Supp.2d 1145, 1148 (D.Kan. 2010) (“Under [the contrary to law]
standard, the Court . . . may set aside the magistrate judge
20
Regardless, in the Original Order, Judge Connelly
neglected to analyze the precautionary measures that Womble
Carlyle took to protect against inadvertent disclosures.
He
only analyzed the precautionary measures taken by Greenberg
Traurig.
22
decision if it . . . failed to consider an element of the
applicable standard.”), appeal dismissed, 641 F.3d 470 (10th Cir.
2011).
To complete the inquiry, then, the second and third prongs
of Rule 502(b) will be addressed.
Regarding the second prong,
as iStar points out, it cannot be said that Womble Carlyle’s
precautionary
measures
reasonable.21
Even
taken
to
considering
prevent
the
disclosure
Rouleau
Declaration,
were
one
would expect Plaintiffs to proffer many more details regarding
the
preventative
attorney-client
steps
Womble
privilege
and
Carlyle
work
took
product
to
protect
protection.
the
See
Williams v. Dist. of Columbia, 806 F.Supp.2d 44, 49 (D.D.C.
2011)
(holding
preventative
counsel
that
measures
“explain[ed]
defendant
were
only
failed
reasonable
that
‘[p]rior
to
in
to
establish
part
because
production,
its
its
[the
documents at issue were] reviewed by an experienced litigation
paralegal under the supervision of an attorney’”); Thorncreek
Apartments III, LLC v. Vill. of Park Forest, Nos. 08 C 1225, 08–
C–0869, 08–C–4303, 2011 WL 3489828, at *7 (N.D.Ill. Aug. 9,
2011) (questioning the reasonableness of precautionary measures
taken to protect the privilege where the only description of
21
The actions of Womble Carlyle, as Plaintiffs’ agent, are
determinative of the Rule 502(b) analysis. The record is devoid
of any evidence that Plaintiffs themselves took any reasonable,
direct action to protect their privilege or protection.
23
steps taken was contained in an email explaining that counsel
“‘spent countless hours reviewing’ a relatively large amount of
documents and marked each document either ‘responsive,’ ‘nonresponsive,’ or ‘privileged’ in the . . . database”); Amobi v.
Dist. of Columbia Dep’t of Corr., 262 F.R.D. 45, 54 (D.D.C.
2009) (finding a party’s statement that “several reviews of the
documents
to
insufficiently
privilege);
Weaver
be
disclosed
the
were
undertaken”
precautionary
see
also
Golden
Popcorn
Co.,
132
measures
Valley
F.R.D.
to
Microwave
204,
to
209
describe
protect
Foods,
the
Inc.
(N.D.Ind.
v.
1990)
(doubting the reasonableness of precautionary measures taken to
protect the privilege where “the court is left to speculate what
specific
precautions
were
taken
by
counsel
to
prevent
this
disclosure”).22
In any event, here, the Rouleau Declaration only describes
two
brief
phone
calls
—
only
one
of
which
admittedly
substantive — from Womble Carlyle to Greenberg Traurig.
minimal
efforts
unreasonable.
(D.N.J.
to
the
privilege
or
protection
Such
are
See Peterson v. Bernardi, 262 F.R.D. 424, 429
2009)
[plaintiff
secure
was
took]
(finding
to
unreasonable
protect
against
22
the
“minimal
inadvertent
steps
disclosure,”
Of course, such details may be elusive if Womble Carlyle
in fact took so few precautionary measures to protect the
privilege or protection.
24
where plaintiff’s “moving papers only mention one step that was
taken
to
prevent
an
inadvertent
error”).
Furthermore,
the
“substantive” phone call amounted to little more than a broad
abdication
of
Womble
Traurig.
Several
unreasonable.
02280
WHA,
Carlyle’s
courts
have
responsibility
found
such
to
Greenberg
delegation
to
be
See Conceptus, Inc. v. Hologic, Inc., No. C 09-
2010
WL
3911943,
at
*2
(N.D.Cal.
Oct.
5,
2010)
(finding precautions unreasonable where the disclosing plaintiff
“admitted
it
did
not
review
the
large
amount
of
documents
disclosed to defendant because it understood that prior counsel
had reviewed the documents before providing them”); Cmty. Bank,
2010 WL 1435368, at *4 (finding precautions unreasonable where
the client did not examine a document production itself but
rather relied on prior counsel to do so and to protect its
privilege);
see
also
Ciba-Geigy
Corp.
v.
Sandoz
Ltd.,
916
F.Supp. 404, 412 (D.N.J. 1995) (“[P]resent counsel’s failure to
verify
[former
counsel’s
practice
of
conducting
privilege
reviews prior to disclosure], and [its reliance] upon vague and
unspecified conversations regarding the [production], amounts to
inexcusable neglect.”).23
Thus, Womble Carlyle’s acceptance of
23
Reliance on co-counsel — even where that co-counsel is
the in-house counsel of the client — also does not excuse a
failure to take appropriate precautionary measures.
See Gragg
v. Int’l Mgmt. Grp. (UK), Inc., No. 5:03-CV-0904 (NPM/DEP), 2007
WL 1074894, at *5-6 (N.D.N.Y. Apr. 5, 2007).
25
Greenberg Traurig’s statements that they “got it” and “know how
to respond” to the subpoena does not constitute a reasonable
precaution
to
protect
product protection.24
protect
its
client
the
attorney-client
privilege
or
work
Womble Carlyle was obligated to do more to
and
to
demand
that
Plaintiffs’
interests
feature more prominently in Greenberg Traurig’s efforts.25
Finding the second prong of Rule 502(b) unmet, the third
prong
need
not
be
addressed.
See
Conceptus,
Inc.,
2010
3911943, at *1; Mt. Hawley Ins. Co., 271 F.R.D. at 136.
court
observes,
however,
that
it
is
not
clear
that
WL
The
Womble
Carlyle “promptly” took reasonable steps to rectify the error as
24
In the Original Order, Judge Connelly actually found that
“U.S. Home failed to take reasonable pre-production precautions
to ensure communications related to the litigation and generated
by attorneys other than Greenberg Traurig, were not disclosed.”
(ECF No. 244 ¶ 44).
This portion of the Original Order was
vacated by the Reconsideration Order. (ECF No. 317 ¶ 10). In
the Reconsideration Order, Judge Connelly noted that the Rouleau
Declaration “refutes the Court’s finding” on this issue. He did
not, however, discuss why this is so, nor did he make any new,
definitive finding on the issue.
25
It is insufficient for Plaintiffs to argue that they
adequately
protected
their
privilege
or
protection
by
withholding their own copies of the contested documents that
were in their specific possession in responding to iStar’s
discovery requests. (See ECF No. 343, at 29). This fact only
compounds the inference that Plaintiffs were on notice that the
documents in Greenberg Traurig’s possession may have been
privileged or protected and therefore should have reviewed them.
Moreover, such notice renders Plaintiffs’ argument that they
were not privy to any communications between Greenberg Traurig
and iStar concerning the production meaningless. Womble Carlyle
could have — and should have — taken more definitive steps to
secure the contested documents.
26
the third prong requires.26
First, over one month after Womble
Carlyle was made aware of iStar’s receipt of Greenberg Traurig’s
production, Womble Carlyle requested a copy of the production —
but only after requesting a cost estimate.
Second, it took
nearly another month for Womble Carlyle to review the production
and discover that the contested documents had been produced;
Womble Carlyle offers absolutely no explanation for this delay.
And
third,
other
than
notifying
Greenberg
Traurig
of
the
disclosures, Womble Carlyle fails to explain any other steps it
took to rectify the error, let alone when it took such steps.27
In
sum,
Judge
Connelly
should
have
prongs of Rule 502(b) upon reconsideration.
so was contrary to law.
analyzed
all
three
His failure to do
A complete analysis assessing Womble
Carlyle’s actions shows that Plaintiffs did not take reasonable
26
In the Original Order, Judge Connelly found that Womble
Carlyle “did take reasonable steps to rectify error upon
discovering the error,” but he made no finding regarding the
promptness of Womble Carlyle’s actions. (See ECF No. 244 ¶ 54).
This part of the Original Order was also vacated by the
Reconsideration Order. (ECF No. 317 ¶ 10).
27
Even if it could be said that Womble Carlyle’s contacting
Greenberg Traurig regarding the disclosures was both reasonable
and prompt, Greenberg Traurig may not have demanded that the
contested documents be returned until five days after learning
of the inadvertent disclosures. (See ECF No. 211-4, Bass Decl.,
¶ 12).
The record regarding the date of Greenberg Traurig’s
demand is somewhat unclear, however, as iStar admits on several
occasions that the demand came in the form of a letter dated
only one day after Womble Carlyle told Greenberg Traurig about
the disclosures. (See, e.g., ECF No. 211-8; ECF No. 212-6).
27
precautionary
steps
to
prevent
inadvertent
disclosure
of
the
contested documents and that they likely did not take prompt,
reasonable steps to rectify the error.
not
satisfied,
documents
the
cannot
inadvertent
be
Because Rule 502(b) is
disclosure
excused.
Plaintiffs
of
the
waived
contested
both
the
attorney-client privilege and the work product protection with
respect to these documents.28
3.
To
The Finding of Waiver in This Case Does Not Amount to
a Subject-Matter Waiver
be
clear,
the
portion
of
the
Reconsideration
Order
holding that Plaintiffs did not intentionally disclose any of
the
contested
documents
to
iStar
stands.
Accordingly,
the
waiver of the attorney-client privilege and the work product
protection as to these documents does not extend to the subject
matter of the disclosures.
See Fed.R.Evid. 502(a) (requiring,
in part, that the waiver be intentional to find subject-matter
waiver);
see
11/28/2007)
also
(“It
Fed.R.Evid.
follows
502
explanatory
note
an
inadvertent
disclosure
that
28
(revised
of
Because of this conclusion, the parties’ arguments that
certain documents such as the “Rosenberg Martin memorandum” may
potentially not be protected by both the attorney-client
privilege and the work product protection need not be addressed.
28
protected
information
can
never
result
in
a
subject
matter
waiver.”).29
IV.
Conclusion
For
the
Connelly’s
foregoing
January
18,
reasons,
2012,
iStar’s
order
objection
will
be
to
Judge
sustained.
Plaintiffs’ motion for leave to file surreply will be granted,
and Plaintiffs’ motion to refrain from viewing the privileged
documents at issue will be denied as moot.
A separate order
will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
29
The Reconsideration Order vacated the parts of the
Original Order that held that that there was a subject-matter
waiver as to certain documents.
29
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