Case: Mt. Hawley Insurance Co. v. Felman Production, Inc., No. 09-00481, 2010 WL 1990555 (S.D.W.Va. May 18, 2010).
Topic: Electronic Discovery and Waiver of Attorney-Client Privilege
Robins Kaplan LLP represents the insurers/defendants in an action brought by Plaintiff Felman seeking recovery of disputed property damage and business interruption benefits. During discovery, Felman inadvertently produced an attorney-client privileged document that revealed the existence of potential fraud in conjunction with its insurance claim. United States Magistrate Judge Mary Stanley refused the plaintiff's request to "claw-back" the document, finding that Felman had failed to take sufficiently reasonable precautions to prevent the disclosure. Applying the five-factor test established in Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D. Md. 2008), the court concluded that Felman had waived its attorney client-privilege with respect to the document. Felman's failure to verify the reliability of keyword searches through quality control sampling and the large number of other inadvertent disclosures were both key factors in the court's analysis. The court also noted Felman's 30% overproduction of irrelevant information in a "massive disclosure of e-discovery,"-as well as the fact that plaintiff's counsel had served as counsel in the Victor Stanley matter-were also mentioned as influences in the court's decision. Felman has appealed the decision to the District Court Judge.
- Victor Stanley's five-factor remains the standard for determining attorney-client waiver. That test assesses: 1) the reasonableness of the precautions taken to prevent inadvertent disclosure; 2) the number of inadvertent disclosures; 3) the extent of the disclosures; 4) any delay in measures taken to rectify the disclosure; and, 5) overriding interests in justice.
- Prudence requires that a party tests the reliability of keyword searches through appropriate sampling. Without evidence that some such appropriate sampling has taken place to ensure that the established keyword categories are neither over- nor under-inclusive, other efforts intended to prevent inadvertent disclosures will have difficulty qualifying as reasonable precautions under Victor Stanley.
- Additional factors effecting the reasonableness ofa party'sefforts to prevent inadvertent production in the first place includethe volume of documents produced, any applicable time constraints, the use of analytical software applications and linguistic tools, and fairness.
Just because large scale e-discovery may have taken place under the terms of a negotiated stipulation, the courts remain the ultimate arbiter of whether or not a party's disclosure under such a stipulation constitutes a waiver of attorney-client privilege.
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