Rhoads Industries, Inc. v. Building Materials Corp. of America

254 F.R.D. 216, 2008 U.S. Dist. LEXIS 93333, 2008 WL 4916026
CourtDistrict Court, E.D. Pennsylvania
DecidedNovember 14, 2008
DocketCivil Action No. 07-4756
StatusPublished
Cited by9 cases

This text of 254 F.R.D. 216 (Rhoads Industries, Inc. v. Building Materials Corp. of America) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rhoads Industries, Inc. v. Building Materials Corp. of America, 254 F.R.D. 216, 2008 U.S. Dist. LEXIS 93333, 2008 WL 4916026 (E.D. Pa. 2008).

Opinion

MEMORANDUM RE: WAIVER OF ATTORNEY-CLIENT PRIVILEGE

BAYLSON, District Judge.

Recently enacted Federal Rule of Evidence 502 adopts a national standard that an inadvertent disclosure of privileged information does not waive the privilege if the holder of the privilege took reasonable steps to pre[218]*218vent disclosure and to rectify the error.1 A dispute in this case requires review of the procedure used by the Plaintiff, which resulted in the inadvertent disclosure of over eight hundred documents. Should this result in a waiver of the privilege? Judges have often grappled with this issue, adjudicating disputes as to whether the allegedly inadvertent production of privileged materials was truly inadvertent, or careless, or reflected a complete absence of control over the discovery process.

In this case, Plaintiff Rhoads Industries, Inc. (“Rhoads”) admits that it produced to the Defendants over eight hundred electronic documents which were privileged and asserts that the production was inadvertent. In accordance with the provisions of Rule 26(b)(5)(B), Defendants, upon receiving notice of the inadvertent production, segregated the asserted privileged documents, provided them for in camera review by the Court, and then the parties agreed that the documents could be returned to Rhoads for logging on a privilege log and for further review.

Defendants in this case have filed a joint motion to deem certain of Plaintiff Rhoads Industries, Inc.’s (“Rhoads”) privilege claims waived (Doc. Nos. 60 and 63). The parties have engaged in extensive briefing on this issue. Rhoads has filed affidavits and supporting documents by individuals who were personally involved in its production of documents, and an evidentiary hearing was held on November 5, 2008. Further argument was held on November 13, 2008.

Defendants’ motions are based on contentions that Rhoads’ document production was careless, that Rhoads delayed too long in seeking return of the documents, that Rhoads failed to produce complete and accurate privilege logs, and that the Court should deny Rhoads’ request that the documents be returned and conclude that Rhoads waived the privilege as to those documents.2 Defendants’ motions will be granted as to the privileged communications not logged as of June 30, 2008, but otherwise will be denied.

A. Factual Background of the Case

Rhoads specializes in building large-scale construction projects. It entered into a $5.584 million contract with Defendant Building Materials Corporation of America, also known as GAF, to construct a plant in Quak-ertown, Pennsylvania. Alleging breach of contract and other claims, Rhoads instituted this suit and also named as a Defendant R.W. Cooper & Associates, Inc., asserting against it a claim of negligent misrepresentation. The case was previously assigned to Judge Diamond, who dismissed certain claims of Rhoads. Extensive discovery ensued during which the case was reassigned to me. Summary Judgment Motions are pending and have been extensively briefed, but I determined that disposition of this privilege issue should precede consideration of the Summary Judgment Motions.

B. Rule 502 and Standards for Determining Waiver bg Inadvertent Disclosure

In enacting Rule 502, Congress specified that it will apply in all proceedings commenced after the date of enactment, and “insofar as is just and practicable, in all proceedings pending” when enacted. Pub.L. 110-322, § 1(c), 122 Stat. 3537 (2008). I conclude that it would be just and practicable to apply Rule 502 in the present case because it sets a well defined standard, consistent with existing mainstream legal principles on the topic of inadvertent waiver.

This national standard, which the Committee Note states is a “middle ground” among the many precedents, provides as follows:

(b) Inadvertent disclosure.—When made in a federal proceeding or to a feder[219]*219al 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 Fed.R.Civ.P. 26(b)(5)(B).

Fed.R.Evid. 502. Our research does not disclose that the Third Circuit has stated a specific test for determining inadvertent disclosure of privileged material, but it has recognized that inadvertent disclosure does not constitute a voluntary waiver.3

The Advisory Committee Note to Rule 502 summarizes the multi-factor test used by a majority of courts:

The stated factors (none of which are dis-positive) are the reasonableness of precautions taken, the time taken to rectify the error, the scope of discovery, the extent of disclosure and the overriding issue of fairness. The rule does not explicitly codify that test, because it is really a set of non-determinative guidelines that vary from case to ease. The rule is flexible enough to accommodate any of those listed factors.

A widely cited ease setting an appropriate standard is Judge Joyner’s opinion in Fidelity & Deposit Co. of Md. v. McCulloch, 168 F.R.D. 516 (E.D.Pa.1996), which identifies the following factors as relevant on the issue of inadvertent disclosure of privileged material:

(1) The reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production.

(2) The number of inadvertent disclosures.

(3) The extent of the disclosure.

(4) Any delay and measures taken to rectify the disclosure.

(5) Whether the overriding interests of justice would or would not be served by relieving the party of its errors.

Id. at 522.

In Fidelity, Judge Joyner found that the privilege was not waived as to the initial disclosure of privileged documents based on the following factors. Id.:

• Plaintiffs precautions against disclosure were “at least minimally adequate.”

• The number of disclosures was small relative to the number of documents reviewed and produced.

• The extent of disclosure was minimal, disclosing no significant facts about the substance of any legal opinion.

• A tight discovery schedule created time pressures.

• The attorney-client privilege provides sufficient “good cause” under Rule 26(c) to grant the protective order.

• But the court noted that the Plaintiffs efforts to rectify the disclosures were not “especially vigilant.”

However, Judge Joyner found that the privilege was waived as to a second instance of disclosure of privileged documents based on the following factors. Id. at 523:

• Plaintiffs carelessness since it had reviewed the documents twice at this stage of the litigation.

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Cite This Page — Counsel Stack

Bluebook (online)
254 F.R.D. 216, 2008 U.S. Dist. LEXIS 93333, 2008 WL 4916026, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rhoads-industries-inc-v-building-materials-corp-of-america-paed-2008.