Potomac Electric Power Co. v. United States

107 Fed. Cl. 725, 110 A.F.T.R.2d (RIA) 5957, 2012 U.S. Claims LEXIS 1146, 2012 WL 4127637
CourtUnited States Court of Federal Claims
DecidedSeptember 19, 2012
DocketNos. 12-19T, 12-23T
StatusPublished
Cited by6 cases

This text of 107 Fed. Cl. 725 (Potomac Electric Power Co. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Potomac Electric Power Co. v. United States, 107 Fed. Cl. 725, 110 A.F.T.R.2d (RIA) 5957, 2012 U.S. Claims LEXIS 1146, 2012 WL 4127637 (uscfc 2012).

Opinion

OPINION AND ORDER ON PLAINTIFF’S MOTION FOR A PROTECTIVE ORDER

WHEELER, Judge.

In this tax refund suit involving several leveraged lease transactions, Plaintiff Potomac Electric Power Company and Subsidiaries seeks a protective order with two attributes. The first is a provision that would prevent any disclosure, whether intentional or not, of privileged materials in this proceeding from operating as an equivalent waiver in any other state or federal court proceeding. The second is a “claw-back” arrangement that would allow the parties to retract any inadvertent disclosures of privileged material, as long as the retracting par[727]*727ty requested such action within ten business days of becoming aware of any such disclosure.

Defendant opposes both provisions. Although PEPCO has represented in its briefing on this motion that it does not “currently” plan to rely on an adviee-of-counsel defense, the Government contends PEPCO has signaled that the company may indeed at least partially rely on such a defense as the ease progresses. Because this is so, the Government argues that the terns of PEPCO’s proposed protective order would unfairly shift to the Government the burden of reviewing PEPCO’s production for privileged material, and also force it to guess whether any such productions were intentional. Moreover, the Government contends that should PEPCO decide to rely on an advice-of-counsel defense, any intentional waivers of privilege that would inhere in such a defense must, under applicable waiver law, apply equally to any and all future eases.

The Court agrees with the Government that the terms sought by PEPCO are not warranted under the relevant law governing privilege, waiver, and evidence. However, because a court-ordered protective order is necessary to fully protect the parties against certain potential consequences from any inadvertent disclosures of privileged materials, the Court will enter a separate order, limited to such disclosures. PEPCO’s motion for a protective order is therefore GRANTED in part and DENIED in part.

Background

Plaintiff Potomac Electric Power Company and Subsidiaries (“PEPCO”) brings its motion for a protective order pursuant to Rule of the Court of Federal Claims (“RCFC”) 26(e) and Federal Rule of Evidence (“FRE”) 502. The former provides that the Court, “for good cause, may issue an order to protect a party” from, inter alia, “undue burden or expense” in the discovery process. The latter, a 2008 addition to the FRE, was enacted in response to certain specific concerns regarding the increasing costs that parties face in guarding against the consequences that can result from the inadvertent disclosure of privileged information, especially in discovery processes involving the large-scale exchange of electronically stored information (“ESI”). See FRE 502 advisory committee’s note; Rajala v. McGuire Woods, LLP, 2010 WL 2949582, at *4 (D.Kan. July 22, 2010) (noting that FRE 502 “was enacted ... to address the conflict among courts regarding the effect of inadvertent disclosures of information protected by the attorney-client privilege or work product immunity .... [and to] validate[ ] certain clawback provisions or agreements”) (emphasis added).

In order to understand the terms and operation of FRE 502, it is useful to begin with the long-standing doctrine governing the scope of privilege waivers, once made.1 First, the “widely applied” rule is that any “waiver applies to all other communications relating to the same subject matter.” Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1349 (Fed.Cir.2005) (citing, inter alia, Genentech, Inc. v. U.S. Int’l Trade Comm’n, 122 F.3d 1409, 1416 (Fed.Cir.1997)). Secondly, and of particular importance to PEPCO’s motion, “[o]nce ... privilege has been waived, the privilege is generally lost for all purposes and in all forums.” Genentech, 122 F.3d at 1416; see also, e.g., 8 Charles Alan Wright et al., Federal Practice and Procedure § 2016.2 (3d ed. 2012) (noting that a waiver generally “applies to the entire world[,]” such that “waiver due to an interaction with one person ordinarily deprives the privilege-holder of the right to assert the privilege against anyone else”); Bittaker v. Woodford, 331 F.3d 715, 730 n. 2 (9th Cir.2003) (collecting cases) (O’Seannlain, J., concurring).

These rules are “grounded in principles of fairness.” In re Seagate Tech., LLC, 497 F.3d 1360,1372 (Fed.Cir.2007). The “subject [728]*728matter” waiver rule “serves to prevent a party from simultaneously using ... privilege as both a sword and a shield; that is, it prevents the inequitable result of a party disclosing favorable communications while asserting the privilege as to less favorable ones.” Id. (internal citation omitted). Similarly, the “all purposes, all forums” rule precludes a party from “piek[ing] and ehoos[ing] among his opponents, waiving the privilege for some and resurrecting the claim of confidentiality to obstruct others, or to invoke the privilege as to communications whose confidentiality he has already compromised for his own benefit.” In re Steinhardt Partners, L.P., 9 F.3d 230, 235 (2d Cir.1993) (quoting Permian Corp. v. United States, 665 F.2d 1214, 1221 (D.C.Cir.1981)). Neither work product nor attorney-client privilege is “designed for such tactical employment.” Permian, 665 F.2d at 1221 (discussing attorney-client privilege); see also In re Steinhardt, 9 F.3d at 235 (noting that courts have extended Permian’s reasoning to work product privilege as well).

However, in an age of litigation that, increasingly, involves the exchange of large amounts of ESI during the discovery process, the risk that inheres in these rules— namely, that “any disclosure (however innocent or minimal) [would] operate as a subject matter waiver of all protected communications or information” — began to engender “widespread complaint[s]” that the “litigation costs necessary to protect against waiver of ... privilege ... ha[d] become prohibitive[.]” FRE 502 advisory committee’s note. In direct response to these concerns, therefore, Congress enacted FRE 502 in 2008. The rule puts in place certain safeguards respecting the inadvertent disclosure of privileged information, as follows.

First, FRE 502(a) provides that a disclosure will result in a subject matter waiver

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107 Fed. Cl. 725, 110 A.F.T.R.2d (RIA) 5957, 2012 U.S. Claims LEXIS 1146, 2012 WL 4127637, Counsel Stack Legal Research, https://law.counselstack.com/opinion/potomac-electric-power-co-v-united-states-uscfc-2012.